Document:

Exhibit
      10.1

     

    Securities
      Purchase Agreement

     

    Morgan
      Stanley

    1585
      Broadway

    New
      York,
      NY 10036

    Ladies
      and
      Gentlemen:

     

    The
      undersigned investor (the “Investor”) hereby confirms its
      agreement with you as follows:

     

    1.           This
      Securities Purchase Agreement (the “Agreement”) is made as of
      December 19, 2007 between Morgan Stanley, a Delaware corporation (the
“Company”), and the Investor listed on the signature page
      hereto.

     

    2.           The
      Company is proposing to issue and sell to the Investor (the
“Offering”) its PEPS Units (the “Securities”),
      each of which is a unit with a stated amount of $1,000 initially consisting
      of
      (a) a Stock Purchase Contract relating to the common stock, par value $0.01
      per
      share, of the Company (the “Common Stock”) and (b) a trust
      preferred security of Morgan Stanley Capital Trust A, Morgan Stanley Capital
      Trust B or Morgan Stanley Capital Trust C, each a Delaware statutory
      trust.  The Securities are being offered to certain qualified
      institutional buyers (“QIBs”) within the meaning of Rule 144A
      under the Securities Act of 1933, as amended (the “Securities
      Act”), pursuant to a private placement exemption from registration
      under the Securities Act.

     

    3.           The
      Securities shall have the terms described in the offering memorandum dated
      December 19, 2007 relating to the offering of the Securities (the
“Offering Memorandum”) attached as an annex to
      the term sheet dated December 19, 2007 (the “Term Sheet”)
      attached hereto as Annex B; terms used herein and not otherwise defined are
      used
      herein as defined in the Offering Memorandum.

     

    4.           The
      Company and the Investor agree that, upon the terms and subject to the
      conditions set forth herein, the Investor will purchase from the Company and
      the
      Company will issue and sell to the Investor the aggregate stated amount of
      Securities computed as set forth in Section 2.1 of the Annex referred to below
      for the aggregate purchase price (the “Purchase Price”) equal
      to the aggregate stated amount of such Securities.  The Securities
      shall be purchased pursuant to the Terms and Conditions for Purchase of
      Securities attached hereto as Annex A and incorporated herein by reference
      as if
      fully set forth herein.  The Securities purchased by the Investor will
      be in the form of three or more global certificates registered in the name
      of
      the Investor or its nominee as designated by the Investor.  The
      Securities will be countersigned by The Bank of New York, as stock purchase
      contract agent (the “Stock Purchase Contract Agent”), at the
      written request of the Company.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

     

    Please
      confirm that the foregoing correctly sets forth the agreement between us by
      signing in the space provided below for that purpose.

     

    

    
      	
              AGREED
                AND ACCEPTED: 

            	 	Name
              of Investor: Best Investment Corporation, a limited liability company
              incorporated in Beijing under the Chinese laws	 
	 	 	 	 	 	 
	
              Morgan
                Stanley,

              a
                Delaware corporation 

            	 	 	 	 
	 	 	 	 	 	 
	By:
              	/s/
              T.C. Kelleher	 	By:	/s/
              Gao Xiqing	 
	
              Name:
                

              Title:
                

            	
              T.C.
                Kelleher

              Chief
                Financial Officer

            	 	
              Name:

              Title:

            	Mr.
              Gao Xiqing 
              Executive
                Director and President

            	 
	 	 	 	 	 	 
	 	 	 	
              Address: Suite
                936, No. 2 Building, No. 1 Complex, Nao Shi Kou Da Jie, Xicheng District,
                Beijing, P.R. China

              Contact
                Name: Mr. Gao Xiqing

              Telephone:
                (86-10) 5836 5880

              Email
                Address: xqg@china-inv.cn

               

              Copies
                to:

               

              Contact
                Name:  Hong Zhang

               

              Telephone:
                (86-10) 5836 5903

               

              Email
                Address: zhanghong@china-inv.cn

            	 

    

    

    China
      Investment Corporation hereby (a) represents and warrants that the
      representations and warranties of the Investor contained in this Agreement
      are
      true and correct, (b) agrees to the agreements of the Guarantor contained in
      this Agreement and (c) unconditionally and irrevocably guarantees the full
      performance by the Investor of all of its obligations under this Agreement,
      including the payment of the Purchase Price.

     

     

    China
      Investment Corporation

     

    
      
        	
                By:

              	
                /s/ Lou
                  Jiwei

              	 
	Name:
                	Mr.
                Lou Jiwei	 
	Title: 
                	Chairman
                and CEO	 

      

    

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    ANNEX
      A TO THE SECURITIES PURCHASE AGREEMENT

     

    TERMS
      AND
      CONDITIONS FOR PURCHASE OF SECURITIES

     

    
      
        	
                1.

              	
                Authorization
                  and Sale of Securities.  The Company is proposing to sell a
                  stated amount of Securities determined as provided in Section 2.1
                  below.

              

      

       

      2.    Agreement
        to Sell and Purchase the Securities.

       

      
        	
              	
                2.1.

              	
                Upon
                  the terms and subject to the conditions hereinafter set forth,
                  at the
                  Closing (as defined in Section 3), the Company will sell to the
                  Investor,
                  and the Investor will purchase from the Company, at the Purchase
                  Price, a
                  stated amount of Securities calculated promptly after the Maximum
                  Settlement Rate is determined (as contemplated in the Offering
                  Memorandum)
                  so that the Ownership Percentage for the Investor and China Investment
                  Corporation (the “Guarantor”) as of the Closing Date will
                  equal 9.90%.  The term “Ownership Percentage”
                  means a fraction (i) the numerator of which is the sum of (a) the
                  Maximum
                  Settlement Rate multiplied by the aggregate stated amount of Securities
                  to
                  be purchased by the Investor divided by $1,000 and (b) all other
                  shares of
                  Common Stock (including any shares of Common Stock underlying any
                  securities convertible into or exchangeable for Common Stock) then
                  held by
                  the Investor and the Guarantor and any of their respective Controlled
                  Affiliates, and (ii) the denominator of which is the sum of (c)
                  the
                  numerator (excluding any shares that are already outstanding and
                  therefore
                  covered by the following clause (d)) and (d) the total shares outstanding
                  of the Company’s Common Stock on November 30, 2007.

                 

                Notwithstanding
                  the foregoing, if on the Closing Date, the Investor and the Guarantor,
                  and
                  any of their respective Controlled Affiliates, directly or indirectly
                  own
                    any shares of Common Stock or any securities convertible into
                  or
                  exchangeable for Common Stock (any such shares or securities,
                  “Other Securities”), then the Investor and the Guarantor
                  shall take such actions necessary to reduce the amount of Other
                  Securities
                  directly or indirectly owned by the Investor, the Guarantor and
                  their
                  Controlled Affiliates on or before January 31, 2008, which date
                  shall
                  constitute an additional Closing Date hereunder on which the Investor
                  shall purchase, and the Company shall sell, an additional amount
                  of
                  Securities at the aggregate Purchase Price therefor (plus accrued
                  and
                  unpaid contract adjustment payments and distributions on the trust
                  preferred securities from the initial Closing Date), such that
                  the
                  Ownership Percentage for the Investor and the Guarantor as of that
                  additional Closing Date is 9.9% and the Ownership Percentage Underlying
                  The PEPS is at least 9.75%.  The term “Ownership
                  Percentage Underlying The PEPS” means a fraction (i) the
                  numerator of which is the Maximum Settlement Rate multiplied by
                  the
                  aggregate stated amount of Securities to be purchased by the Investor
                  divided by $1,000 and (ii) the denominator of which is the sum
                  of the
                  numerator and the total shares outstanding of the Company’s Common Stock
                  on November 30, 2007 or such later date as the Company determines
                  is
                  practicable.

                 

                At
                  the additional Closing Date as contemplated in the preceding paragraph,
                  the condition referred to in Section 3.3(d) shall be deemed to
                  read:

              

      

       

       

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

       

       

      The
        representations and warranties of the Company contained in Sections 4.1,
        4.2,
        4.3, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16
        of
this Agreement shall be true and correct on and as of the date hereof
        and
        on and as of the Closing Date as if made on and as of the Closing Date, and
        the
        Investor shall have received a certificate of a senior officer of the
        Company, dated as of the Closing Date, certifying to that fact.

       

      If
        any
        Securities are issued at any additional Closing Date, they shall after issuance
        be treated for purposes of the Stock Issuance Agreements and Transaction
        Agreements as though they had been issued at the initial Closing
        Date.

       

      
        	
              	
                2.2.

              	
                The
                  Company and the Investor agree for United States tax purposes (in
                  the
                  absence of an administrative pronouncement or judicial ruling to
                  the
                  contrary):

              

      

       

      
        	
                 

              	
                (i)

              	
                to
                  treat the acquisition of a Security as an acquisition of the trust
                  preferred security and the stock purchase contract constituting
                  such
                  Security;

              

      

      

      
        	
                 

              	
                (ii)

              	
                to
                  allocate 100% of the purchase price of a Security to the trust
                  preferred
                  security;

              

      

      

      
        	
                 

              	
                (iii)

              	
                to
                  treat the junior subordinated debentures as indebtedness of the
                  Company
                  for U.S. federal income tax purposes which is not subject to the
                  contingent payment debt regulations;
                  and

              

      

      

      
        	
                 

              	
                (iv)

              	
                to
                  treat the Investor as the beneficial owner of (a) the junior subordinated
                  debenture or applicable ownership interest in the treasury portfolio
                  that
                  is part of a Corporate Unit owned by the Investor or (b) the qualifying
                  treasury security that is a part of a Treasury Unit owned by the
                  Investor.

              

      

      

      3.    Closings
        and Delivery of Securities and Funds.

       

      
        	
              	
                3.1

              	
                The
                  completion of the purchase and sale of the Securities (the
                  “Closing”) shall occur on December 28, 2007 (the
                  “Closing Date”), or as soon thereafter as the conditions
                  to Closing can be satisfied, at the offices of the Company’s
                  counsel.  At the Closing, (i) the Company shall cause the Stock
                  Purchase Contract Agent to deliver to the Investor the stated amount
                  of
                  Securities computed as set forth in Section 2.1, and (ii) the Purchase
                  Price for such Securities shall be delivered by or on behalf of
                  the
                  Investor to the Company.

              

      

       

      
        	
              	
                3.2

              	
                Payment
                  by the Investor for the Securities shall be made by wire transfer
                  of
                  immediately available funds to the Company and the Company shall
                  instruct
                  the Stock Purchase Contract Agent to release the corresponding
                  Securities
                  to the Investor.

              

      

       

      
        	
              	
                3.3

              	
                The
                  obligation of the Investor to pay the Purchase Price pursuant to
                  this
                  Agreement shall be subject to the performance by the Company of
                  its
                  obligations hereunder and to the following additional
                  conditions:

              

      

       

      
        	
                 

              	
                a.

              	
                The
                  Investor shall have received an opinion, dated the Closing Date,
                  of Davis
                  Polk & Wardwell, counsel for the Company, substantially in the form
                  set forth in Exhibit 

              

      

       

       

      
        
          
          

        

        
          A-2

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	
                 

              	
                A-1
                  to this Agreement, an opinion of Richards, Layton & Finger,
                  substantially in the form set forth in Exhibit A-2 to this Agreement,
                  and
                  an opinion from internal counsel at the Company, in a form customary
                  for
                  transactions of this nature, to the effect that the transactions
                  contemplated hereby do not contravene other agreements binding
                  on the
                  Company and its subsidiaries.

              

      

       

      
        	
                 

              	
                b.

              	
                On
                  the Closing Date, the Investor shall have received a registration
                  rights
                  agreement (the “Registration Rights Agreement”),
                  including customary representations, warranties, covenants, black-outs
                  and
                  expense and indemnification provisions, relating to the resale
                  of the
                  Securities and any Common Stock issuable upon settlement of the
                  Securities
                  executed by the Company, in form and substance reasonably satisfactory
                  to
                  the Investor.

              

      

       

      
        	
                 

              	
                c.

              	
                The
                  shares of Common Stock issuable upon settlement of the Stock Purchase
                  Contracts shall have been duly authorized for listing, subject
                  to official
                  notice of issuance, on the New York Stock
                  Exchange.

              

      

       

      
        	
                 

              	
                d.

              	
                The
                  representations and warranties of the Company contained in this
                  Agreement
                  shall be true and correct on and as of the date hereof and on and
                  as of
                  the Closing Date as if made on and as of the Closing Date, and
                  the
                  Investor shall have received a certificate of a senior officer
                  of the
                  Company, dated as of the Closing Date, certifying to that
                  fact.

              

      

       

      
        	
                 

              	
                e.

              	
                Any
                  approvals or authorizations of, filings and registrations with,
                  and
                  notifications to, all governmental or regulatory authorities
                  (collectively, “Governmental Entities”) required for the
                  Closing shall have been obtained or made and shall be in full force
                  and
                  effect and all waiting periods required by law shall have expired;
                  and no
                  provision of any applicable law or regulation and no judgment,
                  injunction,
                  order or decree shall prohibit the Closing, and no Governmental
                  Entity
                  shall have instituted an investigation or proceeding that could
                  result in
                  such a judgment, injunction, order or
                  decree.

              

      

       

      
        	
                 

              	
                f.

              	
                Insofar
                  as the Offering Memorandum and the Term Sheet describe the Securities
                  Issuance Agreements (as defined below), such agreements accurately
                  reflect, in all material respects, such description and are, to
                  the extent
                  not so described, in form and substance reasonably satisfactory
                  to the
                  Investor.

              

      

       

      
        	
              	
                3.4

              	
                The
                  Company’s obligation to issue and sell Securities to the Investor shall
                  be
                  subject to the following conditions, any one or more of which may
                  be
                  waived by the Company: (a) the accuracy of the representations
                  and
                  warranties made by the Investor and the fulfillment of those undertakings
                  of the Investor to be fulfilled prior to the Closing and (b) any
                  approvals
                  or authorizations of, filings and registrations with, and notifications
                  to, all Governmental Entities required for the Closing shall have
                  been
                  obtained or made and shall be in full force and effect and all
                  waiting
                  periods required by law shall have expired; and no provision of
                  any
                  applicable law or regulation and no judgment, injunction, order
                  or decree
                  shall prohibit the Closing, and no Governmental Entity shall have
                  instituted an investigation or proceeding that could result in
                  such a
                  judgment, injunction, order or
                  decree.

              

      

       

       

      
        
          
          

        

        
          A-3

          
            

          

        

        
          
          

        

      

       

      
        	
                3.5

              	
                The
                  Investor shall remit by wire transfer the amount of funds equal
                  to the
                  Purchase Price for the Securities being purchased by such Investor
                  to an
                  account designated by the Company prior to the Closing
                  Date.

              

      

       

      4.     Representations,
        Warranties and Covenants of the Company.  The Company hereby
        represents and warrants to, and covenants with, the Investor, that, except
        as
        otherwise disclosed in the Company’s Annual Report on Form 10-K for the
        fiscal year ended November 30, 2006 or its other reports and forms filed
        with
        the Securities and Exchange Commission (the “Commission”) under
        Sections 12, 13, 14 or 15(d) of the Securities Exchange Act of 1934 (the
“Exchange Act”) after November 30, 2006 (excluding disclosures
        of risks included in any forward-looking statement disclaimers or other
        statements that are similarly non-specific and are predictive and
        forward-looking in nature) (the “SEC Reports”) and before the
        date of this Agreement:

       

      
        	
              	
                4.1

              	
                Organization,
                  Authority and Significant Subsidiaries.  The Company has
                  been duly incorporated and is validly existing as a corporation
                  in good
                  standing under the laws of the State of Delaware, with corporate
                  power and
                  authority to own its properties and conduct its business as currently
                  conducted, and, except as would not be reasonably likely to have
                  a
                  Material Adverse Effect, has been duly qualified as a foreign corporation
                  for the transaction of business and is in good standing under the
                  laws of
                  each other jurisdiction in which it owns or leases properties,
                  or conducts
                  any business so as to require such qualification; each subsidiary
                  of the
                  Company that is a “significant subsidiary” within the meaning of Rule
                  1-01(w) of Regulation S-X under the Securities Act (individually
                  a
                  “Significant Subsidiary” and collectively the
                  “Significant Subsidiaries”) has been duly organized and
                  is validly existing in good standing under the laws of its jurisdiction
                  of
                  organization.

              

      

       

      
        	
              	
                4.2

              	
                Capitalization.  As
                  of August 31, 2007: (1) the Company has 3,500,000,000 authorized
                  shares of
                  Common Stock; (2) the Company has 1,062,450,986 issued
                  and  outstanding shares of Common Stock; (3) all of the issued
                  shares of capital stock of the Company have been duly and validly
                  authorized and issued and are fully paid and non-assessable; and
                  (4) all
                  of the issued shares of capital stock of each Significant Subsidiary have
                  been duly and validly authorized and issued, are fully paid and
                  non-assessable, and are owned directly or indirectly by the Company,
                  free
                  and clear of all liens, encumbrances, equities or claims.  As of
                  November 30, 2007, the Company has 1,056,289,659 issued and outstanding
                  shares of Common Stock.

              

      

       

      
        	
              	
                4.3

              	
                Authorization,
                  Enforceability of Securities Issuance Agreements and Transaction
                  Documents.  The Company has the power and authority to enter
                  into the Securities Issuance Agreements and Transaction Documents
                  and to
                  carry out its obligations hereunder and thereunder.  The
                  execution, delivery and performance of the Securities Issuance
                  Agreements
                  and Transaction Documents by the Company and the consummation of
                  the
                  transactions contemplated hereby and thereby have been duly authorized
                  by
                  all necessary corporate action on the part of the Company.

                 

                As
                  of the date of execution of the Securities Issuance Agreements
                  and the
                  Transaction Documents, as the case may be, neither the execution,
                  delivery
                  and performance by the Company hereof and thereof, nor the consummation
                  of
                  the transactions contemplated 

              

      

       

      

      
        
          
          

        

        
          A-4

          
            

          

        

        
          
          

        

      

       

       

      
        	 	 	hereby
                and thereby, nor compliance by the Company with any of the provisions
                thereof, will (1) violate, conflict with, or result in a breach of
                any provision of, or constitute a default (or an event which, with
                notice
                or lapse of time or both, would constitute a default) under, or result
                in
                the termination of, or accelerate the performance required by, or
                result
                in a right of termination or acceleration of, or result in the creation
                of, any lien, security interest, charge or encumbrance upon any of
                the
                properties or assets of the Company or any Significant Subsidiary
                under
                any of the terms, conditions or provisions of (A) its certificate of
                incorporation or by-laws or (B) any note, bond, mortgage, indenture,
                deed of trust, license, lease, agreement or other instrument or obligation
                to which the Company or any Significant Subsidiary is a party or
                by which
                it may be bound, or to which the Company or any Significant Subsidiary
                or
                any of the properties or assets of the Company or any Significant
                Subsidiary may be subject, or (C) subject to compliance with the
                statutes and regulations referred to in the next paragraph, violate
                any
                statute, rule or regulation or any judgment, ruling, order, writ,
                injunction or decree applicable to the Company or any Significant
                Subsidiary or any of their respective properties or assets except,
                in the
                case of clauses (B) and (C), for those occurrences that, individually
                or
                in the aggregate, could not reasonably be expected to result in a
                Material
                Adverse Effect.
                 

                Other
                  than in connection or in compliance with the provisions of the
                  Securities
                  Act and the securities or blue sky laws of the various states,
                  to the best
                  knowledge of the Company, no notice to, filing with, exemption
                  or review
                  by, or authorization, consent or approval of, any Governmental
                  Entity is
                  necessary for the consummation of the transactions contemplated
                  by the
                  Transaction Documents.

                 

                As
                  used herein, (a) the term “Securities Issuance
                  Agreements” refers collectively to (i) the trust agreement that
                  will govern the Trusts, (ii) the indentures, and supplements thereto,
                  that
                  will govern each series of the Company’s junior subordinated debt
                  securities held by the Trusts, (iii) the junior subordinated debentures,
                  (iv) the Stock Purchase Contracts pursuant to which the Company will
                  sell the Common Stock to the Investor and (v) the purchase contract
                  and pledge agreements pursuant to which the Trust Preferred Securities
                  will be held as collateral in favor of the Company and (b) the
                  term
                  “Transaction Documents” refers collectively to this
                  Agreement and the Registration Rights
                  Agreement.

              

        	 	 	 

        	
              	
                4.4

              	
                Company
                  Financial Statements.   The consolidated financial
                  statements of the Company and its consolidated subsidiaries included
                  or
                  incorporated by reference in the SEC Reports present fairly in
                  all
                  material respects the consolidated financial position of the Company
                  and
                  its consolidated subsidiaries as of the dates indicated therein
                  and the
                  consolidated results of their operations for the periods specified
                  therein; and except as stated therein, such financial statements
                  were
                  prepared in conformity with GAAP applied on a consistent basis
                  (except as
                  may be noted therein).

                 

                Deloitte
                  & Touche LLP, who have certified certain financial statements of
                  the
                  Company and its subsidiaries, are independent public accountants
                  as
                  required by the Act and the rules and regulations of the
                  Commission.

              

      

       

       

      
        
          
          

        

        
          A-5

          
            

          

        

        
          
          

        

      

       

      
        	 	 	The
                Company and its subsidiaries do not have any liabilities or obligations
                (accrued, absolute, contingent or otherwise), other than liabilities
                or
                obligations (i) reflected on, reserved against, or disclosed in the
                notes to, the Company’s consolidated balance sheet included in the
                Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended
                August 31, 2007, (ii) disclosed in the Company’s Current Reports on Form
                8-K filed on November 8, 2007 and November 9, 2007 or in the press
                release
                and related financial supplement referred to in Section 17 below
                or
                (iii)  that could not, individually or in the aggregate, reasonably
                be expected to have a
                Material  Adverse  Effect.

        	 	 	 

        	
              	
                4.5

              	
                No
                  Material Adverse Effect.  Since August 31, 2007 and except
                  as described in the SEC Reports and the press release being issued
                  on the
                  date hereof as contemplated by Section 17 hereof, no event or circumstance
                  has occurred that, individually or in the aggregate, has had or
                  could
                  reasonably be expected to have a Material Adverse
                  Effect.

              

      

       

      
        	
              	
                4.6

              	
                Proceedings.  Except
                  as disclosed in the SEC Reports, there are no litigation or similar
                  proceedings pending or, to the Company’s knowledge, threatened to which
                  the Company or any of its subsidiaries is a party or of which any
                  property
                  of the Company or any of its subsidiaries is the subject which,
                  individually or in the aggregate, could reasonably be expected
                  to have a
                  Material Adverse Effect.

              

      

       

      
        	
              	
                4.7

              	
                Compliance
                  with Laws; Permits.   The Company and each of its
                  Significant Subsidiaries have conducted their businesses in compliance
                  with all applicable federal, state and foreign laws, regulations
                  and
                  applicable stock exchange requirements, except where (i) the failure
                  to be
                  in compliance could not reasonably be expected to have, individually
                  or in
                  the aggregate, a Material Adverse Effect or (ii) the necessity
                  of
                  compliance, or the failure to comply, therewith is being contested
                  in good
                  faith by appropriate proceedings.

                 

                The
                  Company and each of its Significant Subsidiaries have all permits,
                  licenses, authorizations, orders and approvals of, and have made
                  all
                  filings, applications and registrations with, any Governmental
                  Entities
                  that are required in order to carry on their business as presently
                  conducted, except where the failure to have such permits, licenses,
                  authorizations, orders and approvals or the failure to make such
                  filings,
                  applications and registrations, individually or in the aggregate,
                  could
                  not reasonably be expected to have a Material Adverse Effect; and
                  all such
                  permits, licenses, certificates of authority, orders and approvals
                  are in
                  full force and effect and, to the knowledge of the Company, no
                  suspension
                  or cancellation of any of them is threatened, and all such filings,
                  applications and registrations are current, except  where such
                  absence, suspension or cancellation, individually or in the aggregate,
                  could not reasonably be expected to have a Material  Adverse
                  Effect.

              

      

       

      
        	
              	
                4.8

              	
                Authorization
                  of Stock Purchase Contracts and Common Stock.   As of
                  the Closing Date, the Stock Purchase Contracts will be duly authorized
                  by
                  all necessary corporate action on the part of the Company and will
                  be
                  valid and binding obligations of the Company enforceable against
                  the
                  Company in accordance with their respective terms, except as the
                  same may
                  be limited by applicable bankruptcy, insolvency, reorganization,
                  moratorium or similar laws affecting the enforcement of creditors’ rights
                  generally and

              

      

       

       

      
        
          
          

        

        
          A-6

          
            

          

        

        
          
          

        

      

       

      
        	 	 	general
                equitable principles, regardless of whether such
                enforceability is considered in a proceeding at law or in equity
                (“Bankruptcy Exceptions”).
                 

                The
                  issuance of the shares of the Common Stock underlying the Stock
                  Purchase
                  Contracts has been duly authorized by all necessary corporate action
                  on
                  the part of the Company and upon the issuance of the Common Stock
                  underlying the Stock Purchase Contracts, such shares of Common
                  Stock will
                  (A) be duly authorized by all necessary corporate action on the
                  part of
                  the Company, (B) be validly issued, fully paid and nonassessable,
                  (C) not
                  have been issued in violation of any preemptive or other similar
                  right,
                  and (D) if such shares are treasury shares, be free of any adverse
                  claim.

              

        	 	 	 

        	
              	
                4.9

              	
                Authorization
                  of the Securities.  As of the Closing Date, the Securities
                  will be duly authorized by all necessary corporate action on the
                  part of
                  the issuing parties; and when executed and delivered by the issuing
                  parties, will constitute the valid and binding obligations of the
                  issuing
                  parties, enforceable against each of the issuing parties in accordance
                  with their terms, except as the enforcement thereof may be limited
                  by the
                  Bankruptcy Exceptions.

              

      

       

      
        	
              	
                4.10

              	
                The
                  Trusts.  As of the Closing Date:

                 

                (1)    Each
                  of the Trusts will be duly created as a statutory trust and will
                  be
                  validly existing in good standing under the laws of the State of
                  Delaware;
                  each Trust will be classified as a grantor trust and will not be
                  classified as an association taxable as a corporation for United
                  States
                  federal income tax purposes; each Trust will have the power and
                  authority
                  necessary to own or hold its properties and to conduct the businesses
                  in
                  which such Trust is engaged.

                 

                (2)    The
                  trust agreement for each Trust will have been duly authorized by
                  the
                  Company and will have been duly executed and delivered by the Company,
                  as
                  sponsor and depositor, and, assuming due authorization, execution
                  and
                  delivery of each trust agreement by the applicable trustees, each
                  trust
                  agreement will be a valid and binding obligation of the Company,
                  enforceable against the Company in accordance with its terms, except
                  to
                  the extent that enforcement thereof may be limited by Bankruptcy
                  Exceptions.

                 

                (3)    The
                  trust preferred securities of each Trust will have been duly authorized
                  by
                  such Trust and, when issued and delivered against payment of the
                  consideration described in this Agreement, will be validly issued
                  and
                  fully paid and non-assessable undivided beneficial interests in
                  the assets
                  of such Trust, will be entitled to the benefits of each applicable
                  trust
                  agreement and will conform in all material respects to the descriptions
                  thereof contained in the Offering Memorandum; the issuance of the
                  trust
                  preferred securities of each Trust will not be subject to preemptive
                  or
                  other similar rights; and the Investor will be entitled to the
                  same
                  limitation of personal liability under Delaware law as extended
                  to
                  stockholders of private corporations for profit.

                 

                (4)    The
                  common securities issuable by each Trust to
                  the

              

      

       

       

      
        
          
          

        

        
          A-7

          
            

          

        

        
          
          

        

      

       

       

      
        	 	 	Company
                will have been duly authorized by the Trust and, when issued and
                delivered
                by each Trust to the Company will be validly issued and (subject
                to the
                terms of the relevant trust agreement) fully paid undivided beneficial
                interests in the assets of each Trust; the issuance by each Trust
                of
                common securities is not subject to preemptive or other similar rights;
                and upon consummation of the Closing all of the issued and outstanding
                common securities of each Trust will be directly or indirectly owned
                by
                the Company free and clear of any security interest, mortgage, pledge,
                lien, encumbrance, claim or equity.

        	 	 	 

        	
              	
                4.11

              	
                Authorization
                  of the Junior Subordinated Indentures.  As of the Closing
                  Date, each junior subordinated indenture of the Company, and each
                  supplement thereto under which a junior subordinated debt security
                  is
                  delivered to a Trust, will have been duly authorized, executed
                  and
                  delivered by the Company and will constitute a valid and legally
                  binding
                  obligation of the Company, enforceable against the Company in accordance
                  with its terms, except to the extent that enforcement thereof may
                  be
                  limited by the Bankruptcy
                  Exceptions.

              

      

       

      
        	
              	
                4.12

              	
                Authorization
                  of Junior Subordinated Debt Securities.  As of the Closing
                  Date, each junior subordinated debt security delivered to a Trust
                  will
                  have been duly authorized by the Company and duly executed and
                  delivered
                  by the Company to a Trust, and when authenticated, issued and delivered
                  in
                  the manner provided for in each applicable junior subordinated
                  indenture
                  or supplement thereto, will constitute a valid and legally binding
                  obligation of the Company, enforceable against the Company in accordance
                  with its terms, except to the extent that the enforcement thereof
                  may be
                  limited by the Bankruptcy Exceptions, and will be in the form contemplated
                  by, and entitled to the benefits of, the applicable indenture or
                  supplement thereto.

              

      

       

      
        	
              	
                4.13

              	
                Authorization
                  of Guarantee Agreements.  As of the Closing Date, each
                  guarantee agreement of the Company with respect to trust preferred
                  securities of a Trust will have been duly authorized by the
                  Company,  and will have been duly executed and delivered by the
                  Company and, assuming due authorization, execution and delivery
                  by the
                  applicable guarantee trustee, will constitute a valid and legally
                  binding
                  obligation of the Company, enforceable against the Company in accordance
                  with its terms, except to the extent that enforcement thereof may
                  be
                  limited by the Bankruptcy
                  Exceptions.

              

      

       

      
        	
              	
                4.14

              	
                Authorization
                  of the Purchase Contract and Pledge Agreements.  As of the
                  Closing Date, each purchase contract and pledge agreement entered
                  into by
                  the Company with respect to the Stock Purchase Contracts will have
                  been
                  duly authorized by the Company, will be validly executed and delivered
                  by
                  the Company and assuming due authorization, execution and delivery
                  of such
                  purchase contract and pledge agreement by the other parties thereto,
                  will
                  constitute a valid and binding obligation of the Company, enforceable
                  against the Company in accordance with its terms, except to the
                  extent
                  that the enforcement thereof may be limited by the Bankruptcy
                  Exceptions.

              

      

       

      
        	
              	
                4.15

              	
                Authorization
                  of the Registration Rights Agreement.  As of the Closing
                  Date, the Registration Rights Agreement will have been duly authorized
                  by
                  the Company, and will be validly executed and delivered by the
                  Company and
                  assuming due authorization, execution and delivery of such agreement
                  by
                  the other party thereto, will constitute a

              

      

       

       

      
        
          
          

        

        
          A-8

          
            

          

        

        
          
          

        

      

       

      
        	 	 	valid
                and binding obligation of the Company, enforceable against the Company
                in
                accordance with its terms, except to the extent that the enforcement
                thereof may be limited by the Bankruptcy Exceptions and except as
                rights
                to indemnification and contribution under the Registration Rights
                Agreement may be limited under applicable law.

        	 	 	 

        	
              	
                4.16

              	
                Authorization
                  of this Agreement.  This Agreement has been duly authorized,
                  validly executed and delivered by the Company, and assuming due
                  authorization, execution and delivery of this Agreement by the
                  Investor,
                  constitutes a valid and binding obligation of the Company, enforceable
                  against the Company in accordance with its terms, except to the
                  extent
                  that the enforcement thereof may be limited by the Bankruptcy
                  Exceptions.

              

      

       

      
        	
              	
                4.17

              	
                Reports.  Since
                  November 30, 2005, the Company has timely filed all documents required
                  to
                  be filed with the Commission pursuant to Sections 13(a), 14(a)or
                  15(d) of
                  the Exchange Act, except where the failure to so file could not
                  reasonably
                  be expected to have a Material Adverse Effect.

                 

                The  SEC
                  Reports, when they became effective or were filed with the Commission,
                  as
                  the case may be, conformed in all material respects to the requirements
                  of
                  the Securities Act or the Exchange Act, as applicable, and the
                  rules and
                  regulations of the Commission thereunder, and none of such documents
                  contained an untrue statement of a material fact or omitted to
                  state a
                  material fact required to be stated therein or necessary to make
                  such
                  statements, in the light of the circumstances in which they were
                  made, not
                  misleading.

                 

                Since
                  November 30, 2005, the Company and each subsidiary have filed all
                  material
                  reports, registrations and statements, together with any required
                  amendments thereto, that it was required to file with any applicable
                  federal or state securities or banking authorities, except where
                  the
                  failure to file any such report, registration or statement, individually
                  or in the aggregate, could not reasonably be expected to have a
                  Material
                  Adverse Effect.   As of their respective dates, each of the
                  foregoing reports complied with all applicable rules and regulations
                  promulgated by applicable foreign, federal or state securities
                  or banking
                  authorities, as the case may be, except for any failure that, individually
                  or in the aggregate, could not reasonably be expected to have a
                  Material
                  Adverse Effect.

                 

                The
                  records, systems, controls, data and information of the Company
                  and the
                  subsidiaries are recorded, stored, maintained and operated under
                  means
                  (including any electronic, mechanical or photographic process,
                  whether
                  computerized or not) that are under the exclusive ownership and
                  direct
                  control of the Company or the subsidiaries or their accountants
                  (including
                  all means of access thereto and therefrom). The Company (i) has
                  implemented and maintains disclosure controls and procedures (as
                  defined
                  in Rule 13a-15(e) under the Exchange Act) to ensure that material
                  information relating to the Company, including its subsidiaries,
                  is made
                  known to the chief executive officer and the chief financial officer
                  of
                  the Company by others within those entities, and (ii) has disclosed,
                  based
                  on its most recent evaluation prior to the date hereof, to the
                  Company’s
                  outside auditors and the audit committee of the Company’s board of
                  directors (A) any significant deficiencies and material weaknesses
                  in the
                  design or 

              

      

       

      
         

        
          
            
            

          

          
            A-9

            
              

            

          

          
            
            

          

        

         

        
          	 	 	operation
                  of internal controls over financial reporting (as defined in Rule
                  13a-15(f) under the Exchange Act) that, individually or in the
                  aggregate,
                  could reasonably be expected to adversely affect the Company’s ability to
                  record, process, summarize and report financial information and
                  (B) any
                  fraud, whether or not material, that involves management or other
                  employees who have a significant role in the Company’s internal controls
                  over financial reporting. As of the date hereof, to the knowledge
                  of the
                  Company, there is no reason that its outside auditors and its chief
                  executive officer and chief financial officer will not be able
                  to give the
                  certifications and attestations required pursuant to the rules
                  and
                  regulations adopted pursuant to Section 404 of the Sarbanes-Oxley
                  Act of
                  2002, without qualification, when next
                  due.

          	 	 	 

          	
                	
                  4.18

                	
                  
                    Subprime
                      Exposure. After giving effect to the write downs described in the
                      press release and related financial supplement referred to
                      in Section 17
                      below, as of November 30, 2007, the aggregate remaining total
                      U.S. ABS
                      CDO/Subprime Net Exposure of the Company and its subsidiaries
                      was $1.8
                      billion.  As used in this paragraph, “Net Exposure”
                      means the potential loss to the Company in the event of a 100%
                      default,
                      assuming zero recovery, over a period of time.

                    

                    As
                      used in this Article IV, “Material Adverse Effect” means
                      any fact, circumstance, event, change, effect or occurrence
                      that,
                      individually or in the aggregate with all other facts, circumstances,
                      events, changes, effects, or occurrences, has a material adverse
                      effect on
                      (i) the business, assets, liabilities, results of operation
                      or financial
                      condition of the Company and its subsidiaries taken as a whole
                      or (ii) the
                      ability of the Company to consummate the transactions contemplated
                      by this
                      Agreement, other than, in each case, any adverse effect resulting
                      from the
                      announcement of the transactions contemplated by this
                      Agreement.

                  

                

        

      

      

      5.     Representations,
        Warranties and Covenants of the Investor.

       

      The
        Investor and the Guarantor each hereby represents and warrants to, and covenants
        with, the Company that:

       

      
        	
              	
                5.1.

              	
                (1)
                  It is (a) a QIB and is an “accredited investor” within the meaning of Rule
                  501 of Regulation D promulgated under the Securities Act, (b) aware
                  that
                  the sale to it is being made in reliance on a private placement
                  exemption
                  from registration under the Securities Act and (c) acquiring the
                  Securities for its own account or for the account of a QIB.

                 

                (2)  It
                  understands and agrees on behalf of itself and on behalf of any
                  investor
                  account for which it is purchasing Securities, and each subsequent
                  holder
                  of a Security or shares of Common Stock issued upon settlement
                  of the
                  Stock Purchase Contracts by its acceptance thereof will be deemed
                  to
                  agree, that the Securities and Common Stock issuable upon settlement
                  of
                  the Stock Purchase Contracts are being offered in a transaction
                  not
                  involving any public offering within the meaning of the Securities
                  Act,
                  that the Securities and Common Stock issuable upon settlement of
                  the Stock
                  Purchase Contracts have not been and, except as described in the
                  Offering
                  Memorandum or contemplated by the Registration Rights Agreement,
                  will not
                  be registered under the Securities Act and that, unless the Securities
                  are
                  sold in a registered offering under the Securities Act, (a) it
                  may offer,
                  sell, pledge or otherwise transfer any of the Securities only to
                  a person
                  whom the 

              

      

       

       

      
        
          
          

        

        
          A-10

          
            

          

        

        
          
          

        

      

       

      
         

        
          	
                	
                   

                	
                  
                    seller
                      reasonably believes is a QIB in a transaction not involving
                      a public
                      offering and (b) if prior to the expiration of the applicable
                      holding
                      period specified in Rule 144(k) of the Securities Act (or any
                      successor
                      provision) it decides to offer, resell, pledge or otherwise
                      transfer any
                      of the Common Stock issued upon settlement of the Securities,
                      such Common
                      Stock may be offered, resold, pledged or otherwise transferred
                      only (i) to
                      a person whom the seller reasonably believes is a QIB in a
                      transaction not
                      involving a public offering, (ii) pursuant to an exemption
                      from
                      registration under the Securities Act provided by Rule 144
                      thereunder (if
                      available), (iii) pursuant to an effective registration statement
                      under
                      the Securities Act, or (iv) to the Company or one of its subsidiaries,
                      in
                      each of cases (i) through (iv) in accordance with any applicable
                      securities laws of any State of the United States, and that
                      (c) it will,
                      and each subsequent holder is required to, notify any subsequent
                      purchaser
                      of the Securities or Common Stock from it of the resale restrictions
                      referred to in (a) and (b) above, as applicable, and will provide
                      the
                      Company and the transfer agent such certificates and other
                      information as
                      they may reasonably require to confirm that the transfer by
                      it complies
                      with the foregoing restrictions, if applicable.

                     

                    (3)  It
                      understands that, unless the Securities are registered under
                      the
                      Securities Act, (a) the Securities and (b) until the expiration
                      of the
                      applicable holding period set forth in Rule 144(k) of the Securities
                      Act
                      (or any successor provision), unless sold pursuant to a registration
                      statement that has been declared effective under the Securities
                      Act or in
                      compliance with Rule 144, the Common Stock issued upon settlement
                      of the
                      Securities will bear a legend substantially to the following
                      effect:

                     

                    THIS
                      SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
                      EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
                      ACT OF 1933,
                      AS AMENDED, (THE “SECURITIES ACT”), AND THIS SECURITY MAY NOT BE OFFERED,
                      SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
                      OR AN
                      APPLICABLE EXEMPTION THEREFROM.

                     

                    THE
                      HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY
                      THAT (A)
                      THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
                      TRANSFERRED,
                      ONLY (I) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
                      A QUALIFIED
                      INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES
                      ACT) IN
                      A TRANSACTION NOT INVOLVING A PUBLIC OFFERING, (II) PURSUANT
                      TO ANY OTHER
                      EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
                      ACT,
                      INCLUDING RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
                      SUBJECT TO THE
                      ISSUER’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
                      TO
                      CLAUSE (II) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
                      CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT,
                      (III) PURSUANT
                      TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
                      ACT OR (IV) TO
                      THE COMPANY OR ANY OF ITS SUBSIDIARIES, IN EACH OF CASES (I)
                      THROUGH (IV)
                      IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
                      OF THE
                      UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
                      HOLDER IS
                      REQUIRED TO, NOTIFY ANY SUBSEQUENT

                  

                

        

         

      

       

      
        
          
          

        

        
          A-11

          
            

          

        

        
          
          

        

      

       

      
        
           

          
            	
                  	
                     

                  	
                    
                      PURCHASER
                        OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED
                        TO IN (A)
                        ABOVE.

                       

                      (4)           It:

                       

                      (a)
                        is able to fend for itself in the transactions contemplated
                        by the
                        offering memorandum referred to below;

                       

                      (b)
                        has such knowledge and experience in financial and business
                        matters as to
                        be capable of evaluating the merits and risks of its prospective
                        investment in the Securities; and

                       

                      (c)
                        has the ability to bear the economic risks of its prospective
                        investment
                        and can afford the complete loss of such investment.

                       

                      (5)           It
                        has received a copy of the Offering Memorandum and acknowledges
                        that (a)
                        it has conducted its own investigation of the Company and
                        the terms of the
                        Securities, (b) it has had access to the Company’s public filings with the
                        Securities and Exchange Commission and to such financial
                        and other
                        information as it deems necessary to make its decision to
                        purchase the
                        Securities, and (c) has been offered the opportunity to ask
                        questions of
                        the Company and received answers thereto, as it deemed necessary
                        in
                        connection with the decision to purchase the Securities.

                       

                      (6)           It
                        understands that the Company will rely upon the truth and
                        accuracy of the
                        foregoing representations, acknowledgements and agreements
                        and agrees that
                        if any of the representations and acknowledgements deemed
                        to have been
                        made by it by its purchase of the Securities is no longer
                        accurate, it
                        shall promptly notify the Company.  If it is acquiring
                        Securities as a fiduciary or agent for one or more investor
                        accounts, it
                        represents that is has sole investment discretion with respect
                        to each
                        such account and it has full power to make the foregoing
                        representations,
                        acknowledgements and agreements on behalf of such
                        account.

                    

                  

          

        

      

       

      
        	
              	
                5.2.

              	
                Each
                  of the Investor and the Guarantor acknowledges that the Common
                  Stock is
                  listed on the New York Stock Exchange and the Company is required
                  to file
                  reports containing certain business and financial information with
                  the
                  Securities and Exchange Commission pursuant to the reporting requirements
                  of the Securities Exchange Act of 1934, as amended, and that it
                  is able to
                  obtain copies of such reports.

              

      

       

      
        	
              	
                5.3.

              	
                Each
                  of the Investor and the Guarantor acknowledges that no action has
                  been or
                  will be taken in any jurisdiction outside the United States by
                  the Company
                  that would permit an offering of the Securities, or possession
                  or
                  distribution of offering materials in connection with the issue
                  of the
                  Securities, in any jurisdiction outside the United States where
                  action for
                  that purpose is required.  Each such person outside the United
                  States will comply with all applicable laws and regulations in
                  each
                  foreign jurisdiction in which it purchases, offers, sells or delivers
                  Securities or has in its possession or distributes any offering
                  material,
                  in all cases at its own expense.

              

      

       

      
        	
              	
                5.4.

              	
                Each
                  of the Investor and the Guarantor has full right, power, authority
                  and
                  capacity to enter into this Agreement and to consummate the transactions
                  contemplated hereby and 

              

      

       

       

      
        
          
          

        

        
          A-12

          
            

          

        

        
          
          

        

      

       

      
        	 	 	has
                taken all necessary action to authorize the execution, delivery and
                performance of this Agreement.

        	 	 	 

        	
              	
                5.5.

              	
                Each
                  of the Investor and the Guarantor understands that nothing in the
                  Offering
                  Memorandum, this Agreement, the Company’s public filings with the
                  Securities and Exchange Commission or any other materials presented
                  to the
                  Investor in connection with the purchase and sale of the Securities
                  constitutes legal, tax or investment advise.  Each of the
                  Investor and the Guarantor has consulted such legal, tax and investment
                  advisors as it, in its sole discretion, has deemed necessary or
                  appropriate in connection with its purchase of the Securities and
                  has made
                  its own assessment and has satisfied itself concerning the relevant
                  tax
                  and other economic considerations relevant to its investment in
                  the
                  Securities.

              

      

       

      
        	
              	
                5.6

              	
                To
                  the best of each of its knowledge, after reasonable inquiry, as
                  of the
                  date hereof, neither the Investor nor the Guarantor, nor any of
                  their
                  respective Controlled Affiliates, directly or indirectly owns,
                  controls or
                  has the power to vote any voting securities of the Company or any
                  securities convertible into or exercisable or exchangeable for
                  voting
                  securities of the Company.  As of the additional Closing Date,
                  if any, pursuant to Section 2.1, neither the Investor nor the Guarantor,
                  nor any of their respective Controlled Affiliates, will directly
                  or
                  indirectly own, control or have the power to vote any voting securities
                  of
                  the Company or any securities convertible into or exercisable or
                  exchangeable for voting securities of the Company in excess of
                  0.15% of
                  the total shares outstanding of the Company’s Common Stock on November 30,
                  2007 or such later date as relevant under Section 2.1, excluding
                  for
                  purposes of this calculation the Securities purchased pursuant
                  to this
                  Agreement.  The term “Controlled Affiliate”
                  means, when used with reference to a specified Person, any Person
                  directly
                  or indirectly controlling or controlled by or under direct or indirect
                  common control with the Person specified or with the power, directly
                  or
                  indirectly, to direct the management or policies of such Person
                  or to vote
                  25 percent or more of any class of voting securities of such Person,
                  as
                  interpreted by the Federal Deposit Insurance Corporation for purposes
                  of
                  the Change in Bank Control Act, 12 U.S.C. §1817(j), or 12 C.F.R. Part 303,
                  Subpart E.

              

      

       

      
        	
              	
                5.7

              	
                In
                  addition to the transfer restrictions set forth in Section 5.1,
                  (a) the
                  Investor shall not offer, sell, pledge or otherwise transfer any
                  of the
                  Securities or the Common Stock issued upon settlement of the Securities
                  or
                  Hedge its exposure to the Common Stock prior to the first anniversary
                  of
                  the Closing Date and (b) on or after the first anniversary of the
                  Closing
                  Date until the first anniversary of the last date on which the
                  Investor
                  receives Common Stock in settlement of its Securities, the Investor
                  shall
                  not, within any period of three months, offer, sell, pledge or
                  otherwise
                  transfer Securities or Common Stock issued upon settlement of the
                  Securities or Hedge its exposure to Common Stock, in one transaction
                  or a
                  series of transactions involving the Securities or the Common Stock,
                  having an aggregate value exceeding $2.5 billion, in each case,
                  other than
                  (i) to Affiliates controlled by the Investor or the Guarantor that
                  agree
                  to be bound by the provisions of this Agreement or (ii) as may
                  be required
                  by order or decree of any Governmental Entity having jurisdiction
                  over the
                  Investor or in the reasonable discretion of the Investor to comply
                  with
                  any applicable statute, rule or regulation.  The
                  

              

      

       

       

      
        
          
          

        

        
          A-13

          
            

          

        

        
          
          

        

      

       

      
        	 	 	Investor
                shall immediately notify the Company if it engages in any of the
                transactions referred to in this Section.

        	 	 	 

        	 	 	
                “Hedge”
                  means, in respect of the Common Stock, to enter into any swap or
                  any other
                  agreement or any transaction that hedges or transfers, in whole
                  or in
                  part, directly or indirectly, the economic consequence of ownership
                  of
                  such Common Stock, whether any such transaction or swap described
                  is to be
                  settled by delivery of securities, in cash or
                  otherwise.

              

        	 	 	 

        	
              	
                5.8.

              	
                Neither
                  the Investor nor the Guarantor will, and neither will permit any
                  of its
                  Controlled Affiliates to, purchase or otherwise acquire, or agree
                  or offer
                  to purchase or otherwise acquire, ownership, control or the power
                  to vote
                  any voting securities of the Company or any securities convertible
                  into or
                  exercisable or exchangeable for voting securities of the Company,
                  including without limitation Mandatorily Convertible Securities,
                  if, after
                  giving effect thereto, the Investor and the Guarantor, together
                  with their
                  respective Controlled Affiliates, would, directly or indirectly,
                  own,
                  control or have the power to vote more than 9.90% of all voting
                  securities
                  of the Company.  For purposes of this paragraph, the number of
                  shares of Common Stock underlying convertible or exchangeable securities
                  on any date will be determined on a fully converted basis and,
                  for
                  purposes of the Securities, deemed to be the number of shares the
                  Investor
                  would receive upon an early settlement at the Settlement Rate of
                  the
                  Securities as a result of a Cash
                  Merger.

              

      

      

      
        	
              	
                5.9

              	
                The
                  Investor will remain a Controlled Affiliate of the Guarantor for
                  so long
                  as the Investor owns any
                  Securities.

              

      

      

      6.     Survival
        of Representations, Warranties and Agreements.  Notwithstanding
        any investigation made by any party to this Agreement, all covenants,
        agreements, representations and warranties made by the Company, the Investor
        and
        the Guarantor herein shall survive the execution of this Agreement, the delivery
        to the Investor of the Securities being purchased and the payment
        therefor.

       

      7.     Notices.  All
        notices, requests, consents and other communications hereunder shall be in
        writing, shall be delivered (A) if within the domestic United States, by
        first-class registered or certified mail, or nationally recognized overnight
        express courier, postage prepaid, or by facsimile, or (B) otherwise by
        International Federal Express or facsimile, and shall be deemed given (i)
        if
        delivered by first-class registered or certified mail, three business days
        after
        so mailed, (ii) if delivered by a nationally recognized overnight carrier,
        one
        business day after so mailed, (iii) if delivered by International Federal
        Express, two business days after so mailed and (iv) if delivered by facsimile,
        upon electronic confirmation of receipt and shall be delivered as addressed
        as
        follows:

       

      
        	
                 

              	
                (a)

              	
                if
                  to the Company, to:

              

      

      
        	
                 

              	
                Morgan
                  Stanley

              

      

      
        	
                 

              	
                Attention:
                  Chief Financial Officer

              

      

      
        	
                 

              	
                1585
                  Broadway

              

      

      
        	
                 

              	
                New
                  York, NY 10036

              

      

       

       

      
        
          
          

        

        
          A-14

          
            

          

        

        
          
          

        

      

       

       

      
        	
                 

              	
                (b)

              	
                if
                  to the Investor or the Guarantor, at its address on the signature
                  page
                  hereto, or at such other address or addresses as may have been
                  furnished
                  to the Company in writing.

              

      

       

      8.     Changes.  Except
        as contemplated herein, this Agreement may not be modified or amended except
        pursuant to an instrument in writing signed by the Company and the
        Investor.

       

      9.     Headings.  The
        headings of the various sections of this Agreement have been inserted for
        convenience or reference only and shall not be deemed to be part of this
        Agreement.

       

      10.   Severability.  In
        case any provision contained in this Agreement should be invalid, illegal
        or
        unenforceable in any respect, the validity, legality and enforceability of
        the
        remaining provisions contained herein shall not in any way be affected or
        impaired thereby.

       

      11.   Integration.  This
        Agreement supersedes all prior agreements and understandings (whether written
        or
        oral) between the Company and the Investor and the Guarantor, or either of
        them,
        with respect to the subject matter hereof.

       

      11.   Applicable
        Law and Submission to Jurisdiction.

       

      
        	
                (a)

              	
                This
                  Agreement will be governed by and construed in accordance with
                  the laws of
                  the State of New York applicable to contracts made and to be performed
                  within the State of New York.

              

      

       

      
        	
                (b)

              	
                Each
                  of the Investor and the Guarantor irrevocably submits to the non-exclusive
                  jurisdiction of any New York State or United States Federal court
                  sitting
                  in The City of New York over any suit, action or proceeding arising
                  out of
                  or relating to this Agreement or the transactions contemplated
                  thereby.  Each of The Investor and the Guarantor irrevocably
                  waives, to the fullest extent permitted by law, any objection which
                  it may
                  now or hereafter have to the laying of venue of any such suit,
                  action or
                  proceeding brought in such a court and any claim that any such
                  suit,
                  action or proceeding brought in such a court has been brought in
                  an
                  inconvenient forum.  To the extent that the Investor or the
                  Guarantor has or hereafter may acquire any immunity (on the grounds
                  of
                  sovereignty or otherwise) from the jurisdiction of any court or
                  from any
                  legal process with respect to itself or its property, it irrevocably
                  waives, to the fullest extent permitted by law, such immunity in
                  respect
                  of any such suit, action or
                  proceeding.

              

      

       

      12.   Counterparts.  This
        Agreement may be signed in one or more counterparts, each of which shall
        constitute an original and all of which together shall constitute one and
        the
        same agreement.

       

      13.   Preemptive
        Rights.

       

      (a)   Company
        Sale of Covered Securities.

       

      If
        the
        Company offers to sell Covered Securities in a Qualified Offering, the Investor
        shall be afforded the opportunity to acquire from the Company, for the same
        price and on the same terms as such Covered Securities are offered, in the
        aggregate up to the amount of Covered Securities required to enable it to
        maintain its then-current Investor Percentage Interest; provided,
        however, that this Section 13 shall not apply to any Qualified Offering the
        gross proceeds of which, together with the aggregate gross 

       

       

      
        
          
          

        

        
          A-15

          
            

          

        

        
          
          

        

      

       

       

      proceeds
        of any other Qualified Offering of Covered Securities after the date hereof,
        do
        not exceed $500,000,000.

       

      (b)   Notice.

       

      (1)  In
        the event the Company intends to make a Qualified Offering of Covered Securities
        that is an underwritten public offering or a private offering made to Qualified
        Institutional Buyers (as such term is defined in Rule 144A under the Securities
        Act) for resale pursuant to Rule 144A under the Securities Act, the Company
        shall give the Investor written notice of its intention (including, in the
        case
        of a registered public offering and to the extent possible, a copy of the
        prospectus included in the registration statement filed in respect of such
        offering), describing, to the extent then known, the anticipated amount of
        securities, price and other material terms upon which the Company proposes
        to
        offer the same.  The Investor shall have one Business Day from the
        date of receipt of any such notice to notify the Company in writing that
        it
        intends to exercise such preemptive purchase rights and as to the amount
        of
        Covered Securities the Investor desires to purchase, up to the maximum amount
        calculated pursuant to Section 13(a) (the “Designated
        Securities”).  Such notice shall constitute a non-binding
        indication of interest of Investor to purchase the Designated Securities
        so
        specified at the range of prices and other terms set forth in the Company’s
        notice to it.  The failure to respond during such one Business Day
        period shall constitute a waiver of preemptive rights in respect of such
        offering.  To the extent the Company shall give the Investor notice of
        any such offer prior to the public announcement thereof, the Investor shall
        agree to confidentiality and restriction on trading terms reasonably acceptable
        to the Company.  The failure of the Investor to agree to such terms
        within one Business Day after the date of receipt of the Company’s notice as
        described in this clause shall constitute a waiver of the Investor’s preemptive
        rights in respect of such offering.

       

      (2)  If
        the Company proposes to make a Qualified Offering of Covered Securities that
        is
        not an underwritten public offering or Rule 144A offering (a
“Private Placement”), the Company shall give the Investor
        written notice of its intention, describing, to the extent then known, the
        anticipated amount of securities, price and other material terms upon which
        the
        Company proposes to offer the same.  The Investor shall have one
        Business Day from the date of receipt of the notice required by the immediately
        preceding sentence to notify the Company in writing that it intends to exercise
        such preemptive purchase rights and as to the amount of Designated Securities
        the Investor desires to purchase, up to the maximum amount calculated pursuant
        to Section 13(a).  Such notice shall constitute a non-binding
        indication of interest of Investor to purchase the amount of Designated
        Securities so specified (or a proportionately lesser amount if the amount
        of
        Covered Securities to be offered in such Private Placement is subsequently
        reduced) upon the price and other terms set forth in the Company’s notice to
        it.  The failure of the Investor to respond during the one Business
        Day period referred to in the second preceding sentence shall constitute
        a
        waiver of the preemptive rights in respect of such offering.  To the
        extent the Company shall give the Investor notice of any such offer prior
        to the
        public announcement thereof, the Investor shall agree to confidentiality
        and
        restriction on trading terms reasonably acceptable to the
        Company.  The failure of the Investor to agree to such terms within
        one Business Day after the date of receipt of the Company’s notice as described
        in this clause shall constitute a waiver of the Investor’s preemptive rights in
        respect of such offering.

       

       

      
        
          
          

        

        
          A-16

          
            

          

        

        
          
          

        

      

       

      (c)   Purchase
        Mechanism.

       

      (1)  If
        the Investor exercises its preemptive purchase rights provided in
        Section 13(b)(1), the Company shall offer the Investor, if such
        underwritten public offering or Rule 144A offering is consummated, the
        Designated Securities (as adjusted to reflect the actual size of such offering
        when priced) at the same price as the Covered Securities are offered to the
        investors in such offering and shall provide written notice of such price
        to the
        Investor as soon as practicable prior to such
        consummation.  Contemporaneously with the execution of any
        underwriting agreement or purchase agreement entered into between the Company
        and the underwriters or initial purchasers of such underwritten public offering
        or Rule 144A offering, the Investor shall, if it continues to wish to
        exercise its preemptive rights with respect to such offering, enter into
        an
        instrument in form and substance reasonably satisfactory to the Company
        acknowledging the Investor’s binding obligation to purchase the Designated
        Securities to be acquired by it and containing representations, warranties
        and
        agreements of the Investor that are customary in private placement transactions
        and, in any event, no less favorable to the Investor than any underwriting
        or
        purchase agreement entered into by the Company in connection with such offering,
        and the failure to enter into such an instrument at or prior to such time
        shall
        constitute a waiver of preemptive rights in respect of such
        offering.  Any offers and sales pursuant to this Section 13 in
        the context of a registered public offering shall be also conditioned on
        reasonably acceptable representations and warranties of the Investor regarding
        its status as the type of offeree to whom a private sale can be made
        concurrently with a registered offering in compliance with applicable securities
        laws.

       

      (2)  If
        the Investor exercises its preemptive rights provided in Section 13(b)(2),
        the closing of the purchase of the Covered Securities with respect to which
        such
        right has been exercised shall be conditioned on the consummation of the
        Private
        Placement giving rise to such preemptive purchase rights and shall take place
        simultaneously with the closing of the Private Placement or on such other
        date
        as the Company and the Investor shall agree in writing; provided that
        the actual amount of Covered Securities to be sold to the Investor pursuant
        to
        its exercise of preemptive rights hereunder shall be reduced if the aggregate
        amount of Covered Securities sold in the Private Placement is reduced and,
        at
        the option of the Investor (to be exercised by delivery of written notice
        to the
        Company within five business days of receipt of notice of such increase),
        shall
        be increased if such aggregate amount of Covered Securities sold in the Private
        Placement is increased.  In connection with its purchase of Designated
        Securities, Investor shall, if it continues to wish to exercise its preemptive
        rights with respect to such offering, execute an agreement containing
        representations, warranties and agreements of Investor that are substantially
        similar in all material respects to the agreements executed by other purchasers
        in such Private Placement.

       

      (d)   Cooperation.  The
        Company and the Investor shall cooperate in good faith to facilitate the
        exercise of the Investor’s preemptive rights hereunder, including securing any
        required approvals or consents, in a manner that does not jeopardize the
        timing,
        marketing, pricing or execution of any offering of the Company’s
        securities.

       

      (e)   Limitation
        of Rights.  Notwithstanding the above, nothing set forth in this
        Section 13 shall confer upon the Investor the right to purchase any securities
        of the Company other than Designated Securities.

       

       

      
        
          
          

        

        
          A-17

          
            

          

        

        
          
          

        

      

       

      (f)    Termination
        of Preemptive Rights.  Anything to the contrary in this Section 13
        notwithstanding, the preemptive right to purchase Covered Securities granted
        by
        this Section 13 shall not be available for any offering that commences at
        any
        time after the earlier of (i) the Stock Purchase Date or (ii) the date on
        which
        the Investor offers, sells, pledges or otherwise transfers any of the Securities
        that it acquired on the Closing Date or the Common Stock issued upon settlement
        of the Securities, or Hedges its exposure to the Common Stock, except as
        contemplated by Section 5.7(b)(i) or (ii).  The Investor shall
        immediately notify the Company if it engages in any of the transactions referred
        to in this Section.

       

      (g)   For
        purposes of this Section 13:

       

      (1)  “Business
        Day” means any day other than a Saturday or Sunday, or a day on which
        banking institutions in The City of New York or Beijing, China are authorized
        or
        required by law, regulation or executive order to remain closed.

       

      (2)  “Covered
        Securities” means the Common Stock and any securities convertible into
        or exercisable or exchangeable for Common Stock that are not Excluded
        Securities.

       

      (3)
        “Excluded Securities” means any securities that are (A) issued
        by the Company pursuant to any employment contract, employee or benefit plan,
        stock purchase plan, stock ownership plan, stock option or equity compensation
        plan or other similar plan where stock is being issued or offered to a trust,
        other entity or otherwise, to or for the benefit of any employees, potential
        employees, officers or directors of the Company, (B) issued by the Company
        in
        connection with a business combination or other merger, acquisition or
        disposition transaction, (C) issued with reference to the Common Stock of a
        subsidiary (i.e., a carve-out transaction) or (D) issued in connection
        with a dividend investment or stockholder purchase plan;

       

      (4)  “Investor
        Percentage Interest” means as of any date, the percentage equal to (i)
        the aggregate number of shares of Common Stock beneficially owned by the
        Investor (treating the Securities and other convertible securities of the
        Company that are beneficially owned by the Investor or its Affiliates as
        fully
        converted into the underlying Common Stock) divided by (ii) the total number
        of
        outstanding shares of Common Stock after giving effect to the issuance to
        the
        Investor of all Shares described in clause (i).  For purposes of this
        paragraph, the number of shares of Common Stock into which the Securities
        are
        convertible on any date will be deemed to be the number of shares the Investor
        would receive upon an early settlement at the Settlement Rate of the Securities
        as a result of a Cash Merger.

       

      (5)  “Qualified
        Offering” means a public or nonpublic offering of Covered Securities
        (other than Excluded Securities) solely for cash.

       

      14.   Threshold
        Appreciation Price Reset Provisions.

       

      (a)           If
        during the period commencing on the date of this Agreement and ending on
        the 12
        month anniversary of the Closing Date (the “Reset Test
        Period”) the Company sells any Reset
        Triggering Securities and the aggregate gross proceeds from all such sales
        of
        Reset Triggering Securities during such period exceeds $1 billion (such
        occurrence a “Reset Event”), then, no later than the Amendment
        Deadline, the Company shall amend the Stock Purchase
        Contracts held by the Investor named this in this
        Agreement (the 

       

       

      
        
          
          

        

        
          A-18

          
            

          

        

        
          
          

        

      

       

      “Affected
        Stock Purchase Contracts”) as provided in the remainder of this
        Section 14.  To the extent any such amendment shall require the
        consent of such Investor as holder of the Stock Purchase Contracts pursuant
        to
        the terms of the Securities, the Investor hereby agrees to give such consent
        as
        necessary to effect such amendment (it being understood, for the avoidance
        of
        doubt, that this sentence will not otherwise create or give the Investor
        any
        such right to consent).

       

      (b)           If
        a Reset Event occurs and the Reset Triggering Securities include shares of
        Common Stock, then the Company shall amend each Affected Stock Purchase Contract
        so that the Threshold Appreciation Price as adjusted equals (x) the Applicable
        Stock Price multiplied by (y) 1.20.

       

      (c)           If
        a Reset Event occurs and the Reset Triggering Securities include Optionally
        Convertible Securities or Mandatorily Convertible Securities, then the Company
        shall amend each Affected Stock Purchase Contract so that the Threshold
        Appreciation Price as adjusted equals the Applicable Conversion or Threshold
        Appreciation Price for any of such securities.

       

      (e)           If
        in connection with the occurrence of a Reset Event the Company has issued
        Reset
        Triggering Securities triggering adjustments under both of the preceding
        two
        paragraphs, then the Company shall, in lieu of the adjustments contemplated
        in
        such paragraphs, amend each Stock Purchase Contract so that the Threshold
        Appreciation Price as adjusted equals the lowest Threshold Appreciation Price
        calculated pursuant to those paragraphs.

       

      (f)           If
        any provision of this Section 14 would (in the absence of this sentence)
        result
        in an adjusted Threshold Appreciation Price that is less than the Reference
        Price, the adjusted Threshold Appreciation Price shall instead be the Reference
        Price.  No adjustment shall be made to the Threshold Appreciation
        Price if that would result in an increase in the Threshold Appreciation
        Price.

       

      (g)           It
        is understood and agreed that if any anti-dilution adjustments are made to
        the
        Stock Purchase Contracts pursuant to the terms thereof, appropriate changes
        will
        be made to the adjustments and related definitions set forth in this Section
        14
        to preserve the economic intent of this Section 14 and without any duplication
        to any such adjustment set forth in the Stock Purchase Contracts.

       

      (h)           Anything
        to the contrary in this Section 14 notwithstanding, the provisions of this
        Section 14 shall not apply, and no adjustment shall made to the Threshold
        Appreciation Price or otherwise pursuant to this Agreement, if a Reset Event
        occurs on or after the date on which the Investor (i) offers, sells, pledges
        or
        otherwise transfers any of the Securities that it acquired on the Closing
        Date
        or the Common Stock issued upon settlement of the Securities, or Hedges its
        exposure to the Common Stock, or (ii) settles any of the Stock Purchase
        Contracts pursuant to the terms of the Securities, in each case except as
        contemplated by Section 5.7(b)(i) or (ii).  The Investor shall
        immediately notify the Company if it engages in any of the transactions referred
        to in this Section.

       

      (i)           For
        purposes of this Section 14:

       

      “Adjusted
        Conversion or Threshold Appreciation Price” means, for any Optionally
        Convertible Securities or Mandatorily Convertible Securities, the conversion
        price or threshold appreciation price for such securities; provided,
        however, if  the aggregate 

       

       

      
        
          
          

        

        
          A-19

          
            

          

        

        
          
          

        

      

       

      stated
        yield for such securities is greater than 9.0%, the Company and the Investor
        entitled to an adjustment pursuant to this Section will attempt in good faith
        to
        mutually agree on a hypothetical conversion price or threshold appreciation
        price that would preserve the same fair market value for such securities
        assuming such securities had borne an aggregate stated yield of
        9.0%.  If the Company and such Investor cannot mutually agree on such
        hypothetical conversion price or threshold appreciation price, they will
        appoint
        an independent investment bank of national standing to do the calculation
        for
        them and the cost of that bank will be divided between the parties.

       

      “Amendment
        Deadline” means the date that is the earliest to occur of (i) the day
        before the Stock Purchase Date under the Stock Purchase Contracts, (ii) the
        day
        before any Early Settlement Date (whether pursuant to a cash merger or
        otherwise) under any of the Stock Purchase Contracts and (iii) the date of
        any
        sale of the Securities by the Investor in accordance with the terms of the
        Securities and this Agreement (but in the case of this clause (iii), in no
        event
        earlier than 5 Business Days following the last day of the Reset Test
        Period).

       

      “Applicable
        Conversion or Threshold Appreciation Price” means, with respect to
        Reset Triggering Securities consisting of Optionally Convertible Securities
        or
        Mandatorily Convertible Securities sold during the Reset Test Period, the
        lower
        of (i) the weighted average Adjusted Conversion or Threshold Appreciation
        Price
        for such securities and (ii) the lowest Adjusted Conversion or Threshold
        Appreciation Price for any such securities sold in any single offering with
        gross proceeds of more than $100 million.

       

      “Applicable
        Stock Price” means, with respect to Reset Triggering Securities
        consisting of Common Stock sold during the Reset Test Period, the lower of
        (i)
        the weighted average price per share at which shares of such Common Stock
        are
        sold and (ii) the lowest price per share at which shares of Common Stock
        are
        sold in any single offering with gross proceeds of more than $100
        million.

       

      “Mandatorily
        Convertible Securities” means additional PEPS or any
        other securities (including securities consisting of units that are a
        combination of securities) that are mandatorily convertible into or exchangeable
        for common equity of the Company.

       

      “Optionally
        Convertible Securities” means securities that are convertible into
        or exchangeable for common equity of the Company at the option of the holder
        thereof.

       

      “Reference
        Price” means the reference price referred to in the Offering
        Memorandum.

       

      “Reset
        Triggering Securities” means any one or more of the following that are
        not Excluded Securities (as defined in Section 13):

       

      (1)           Common
        Stock sold at a price per share less than the Reference Price and

       

      (2)           Optionally
        Convertible Securities or Mandatorily Convertible Securities having an Adjusted
        Conversion or Threshold Appreciation Price that is less than the Threshold
        Appreciation Price;

       

      provided,
        however, any Security issued upon exercise of rights issued in a rights
        offering to shareholders with respect to which an adjustment was effected
        in the
        Stock Purchase Contracts shall not constitute a Reset Triggering
        Security.

       

       

      
        
          
          

        

        
          A-20

          
            

          

        

        
          
          

        

      

       

       “Threshold
        Appreciation Price” means the threshold appreciation price referred to
        in the Offering Memorandum (as it may be adjusted pursuant to this
        Agreement).

       

      15.  
        Taxes:

       

      (a)     Payments
        to Exempt
        Holders.

      

      All
        payments made by the Company and any
        trust with respect to the Securities, the treasury units, the stock purchase
        contract, the trust preferred securities, the junior subordinated debentures,
        the subordinated notes, the qualifying treasury securities and the treasury
        portfolio and any other payment made on, or with respect to, the Securities
        (the
“Payments”)
        shall be made free and clear of, and
        without deduction or withholding for or on account of, any United States
        federal, state and local withholding taxes, stamp or other taxes, levies,
        imposts, duties, charges, fees or deductions, hereafter imposed, levied,
        collected, withheld or assessed by any governmental authority (the “Taxes”),
provided
        that the Company or
        its paying agent has received in respect of such Payments an unexpired, complete
        and executed IRS Form W-8EXP (or appropriate substitute form) from the holders
        of the Securities, treasury units, the trust preferred securities, the
        subordinated notes, or the junior subordinated debentures, as applicable
        (an
“Exempt Holder”). If as a result
        of a change in law (or
        administrative guidance) any Taxes are deducted or withheld (or required
        to be
        deducted or withheld) from any Payments to an Exempt Holder, the amounts
        so
        payable shall be increased to the extent necessary to yield (after payment
        of
        Taxes) Payments at the rates and in the amounts specified in the Offering
        Memorandum. It being understood that the increased amounts shall also be
        payable
        to any holder that would have been entitled to provide the Company or the
        paying
        agent with a complete and executed IRS Form W-8EXP but for such
        change in law
        (unless a holder is the holder of any Security, stock purchase contract,
        trust
        preferred security, subordinated notes or junior subordinated debenture,
        at
        least 3 months prior to such change in law and would have been entitled to
        provide the Company or the paying agent with a complete and executed IRS
        Form W-8EXP prior to such change
        in law but did not so provide). Notwithstanding the preceding two sentences,
        the
        Company, the trust and their paying agents shall not be required to increase
        the
        Payments if the holder purchased the Securities in a registered
        offering.

      

      (b)     Payments
        to Non-Exempt
Holders.

      

      A.           Contract
Adjustment
Payments.
        Absent a change in law, the Company
        and the Investor agree to treat contract adjustment payments on the stock
        purchase contract as a purchase price adjustment to the price of the common
        stock to be purchased under the stock purchase contract. Notwithstanding
        the
        above, the Company intends to withhold federal income tax with respect to
        all
        contract adjustment payments on the stock purchase contract that are made
        to any
        holder of Securities that is not an Exempt Holder (a “Non-Exempt
        Holder”).

      

      B.           Interest.
        Except as required by law, the Company
        and the trust will not withhold any Taxes with respect to payments made on
        the
        trust preferred securities, the subordinated notes, the junior subordinated
        debentures and the qualifying treasury securities and the treasury portfolio
        that are part of the Securities (the “Debt
        Instruments”).  If as a result
        of a
        repeal or amendment of the portfolio interest exemption under the Internal
        Revenue Code, the Company, the trust or their paying agents withhold (or
        are
        required to withhold) any Tax on payment of interest on the Debt Instruments,
        then the amounts so payable shall be increased to 

       

       

      
        
          
          

        

        
          A-21

          
            

          

        

        
          
          

        

      

       

      the
        extent necessary to yield (after
        payment of such Taxes) payments on the Debt Instruments at the rates and
        in the
        amounts specified in the Offering Memorandum. Notwithstanding the preceding
        sentence, the Company, the trust and their paying agents shall not be required
        to increase the payments on the Debt Instruments if the holder purchased
        the
        Debt Instruments in a registered offering.

      

      C.           Recharacterization.
        Notwithstanding subparagraphs A and B above, if the Securities are
        recharacterized or treated by the Internal Revenue Service, or by any
        governmental or judicial authority having jurisdiction with respect to Taxes
        (the “Taxing Authority”), as anything other than an ownership
        interest in a stock purchase contract and one or more debt instruments that
        are
        separable from the stock purchase contract, and the Company or the trust
        withhold (or are required to withhold) Tax (that is subject to the jurisdiction
        of such Taxing Authority) on Payments, then the amounts so payable shall
        be
        increased to the extent necessary to yield (after payment of such Taxes)
        Payments at the rates and in the amounts specified in the Offering Memorandum;
        provided that the Company, the trust or their paying agents shall not
        be required to increase the Payment in respect of any Tax with respect to
        (i)
        Payments under the stock purchase contract, if the Company establishes, based
        on
        explicit judicial authority that such Tax would have been imposed as of the
        date
        hereof absent the recharacterization described above, and (ii) all other
        Payments, if the Company establishes, based on explicit statutory or regulatory
        authority, that such Tax would have been imposed as of the date hereof absent
        the recharacterization described above. Notwithstanding the preceding sentence,
        the Company, the trust and their paying agents shall not be required to increase
        the Payments if the holder purchased the Securities in a registered offering.
        Any exclusion from the payment of additional amounts in respect of any Taxes
        (other than U.S. federal income taxes) under (i) and (ii) of this subsection
        C
        shall apply only to holders that are not described in section D below, and
        any
        exclusion from the payment of additional amounts under (i) and (ii) of this
        subsection C shall be limited to the amount of Tax that would have been imposed
        as of the date hereof absent the recharacterization described
        above.

      

      D.           Non-U.S.
Federal
        Income Taxes. If any Taxes,
        other than U.S. federal
        income taxes, are deducted or withheld (or required to be deducted or withheld)
        from any Payments to a holder of any Security, stock purchase contract, trust
        preferred security, subordinated note, or junior subordinated debenture,
        and
        such Taxes are imposed by a Taxing Authority in a jurisdiction with which
        such
        holder has no nexus, then the amounts so payable shall be increased to
        the extent necessary to yield (after payment of such Taxes) Payments at the
        rates and in the amounts specified in the Offering Memorandum.

      

      (c)     
        This section 15 is expressly
        intended to be for the benefit of and, enforceable by, the holders of the
        Securities, treasury units and Debt Instruments from time to
        time.

       

      16.  
        Information.  The Company agrees to cooperate in good faith
        with any request by the Investor to furnish the Investor with all information
        concerning itself, its subsidiaries, directors, officers and stockholders
        and
        such other matters as may be reasonably necessary in connection with any
        statement, filing, notice or application made by or on behalf of the Investor
        or
        any of its subsidiaries to any Governmental Entity in connection with the
        Purchase.

       

       

      
        
          
          

        

        
          A-22

          
            

          

        

        
          
          

        

      

      

      17.  
        Publicity.  On the date hereof. the Company shall issue a press
        release and related financial supplement substantially in the form of Exhibit
        B
        hereto.  No other written public release or written announcement
        concerning the transactions contemplated hereby shall be issued by any party
        without the prior written consent of the other party (which consent shall
        not be
        unreasonably withheld), except as such release or announcement may be required
        by law or the rules or regulations of any securities exchange, in which case
        the
        party required to make the release or announcement shall, to the extent
        reasonably practicable, allow the other party reasonable time to comment
        on such
        release or announcement in advance of such issuance.  The provisions
        of this Section shall not restrict the ability of a party to summarize or
        describe the transactions contemplated by this Agreement in any prospectus
        or
        similar offering document so long as the other party is provided a reasonable
        opportunity to review such disclosure in advance.  

       

      18.  
        Termination.  This Agreement may be terminated at any time
        prior to the Closing:

      

      
        	
                (a)  

              	
                by
                  either the Investor or the Company if the Closing shall not have
                  occurred
                  by the 60th calendar day following the date of this Agreement;
                  provided,
                  however, that the right to terminate this Agreement under this
                  Section
                  shall not be available to any party whose failure to fulfill any
                  obligation under this Agreement shall have been the cause of, or
                  shall
                  have resulted in, the failure of the Closing to occur on or prior
                  to such
                  date;

              

      

      

      
        	
                (b)  

              	
                by
                  either the Investor or the Company in the event that any Governmental
                  Entity shall have issued an order, decree or ruling or taken any
                  other
                  action restraining, enjoining or otherwise prohibiting the transactions
                  contemplated by this Agreement and such order, decree, ruling or
                  other
                  action shall have become final and nonappealable;
                  or

              

      

      

      
        	
                (c)  

              	
                by
                  the mutual written consent of the Investor and the
                  Company.

              

      

       

      In
        the
        event of termination of this Agreement as provided in this Section, this
        Agreement shall forthwith become void and there shall be no liability on
        the
        part of either party hereto except that nothing herein shall relieve either
        party from liability for any breach of this Agreement.

      

      
        
          
          

        

        
          A-23

          
            

          

        

        
          
          

        

      

    

     

    
      ANNEX
        B TO THE SECURITIES PURCHASE AGREEMENT

       

      SUMMARY
        TERM SHEET FOR PEPSSM
        UNITS

      dated
        December 19, 2007

      

      The
        terms
        of the Securities will be substantially as set forth in the “Description of the
        Premium Equity Participating Security Units – PEPSSM Units”
attached
        as
        Exhibit I hereto, as supplemented by the terms set forth below. In the case
        of
        any inconsistency between the terms set forth below and the terms described
        in
        Exhibit I, the terms set forth below shall control. Terms used but not defined
        below shall have the meanings set forth in the Securities Purchase Agreement
        or
        in Exhibit I hereto.

       

      
        	
                Aggregate
                  Stated Amount of Corporate Units to be issued by Morgan Stanley
                  

                and
                  each Morgan Stanley Trust

              	
                On
                  each closing date contemplated
                  in the Securities Purchase Agreement, Morgan Stanley and the Morgan
                  Stanley Trusts will issue three series of Corporate Units. The
                  stated
                  amount of Corporate Units to be issued by Morgan Stanley and each
                  Morgan
                  Stanley Trust will be allocated among the trusts in equal thirds,
                  adjusted
                  as necessary such that the stated amount of Corporate Units issued
                  by
                  Morgan Stanley and each Morgan Stanley Trust will be an integral
                  multiple
                  of $1,000.

              
	
                First
                  Issue Date

              	
                December
                  28, 2007, or as soon as practicable thereafter.

              
	
                Second
                  Issue Date

              	
                If
                  there is a second issue date of the Corporate Units, as contemplated
                  by
                  the Securities Purchase Agreement, Morgan Stanley and each Morgan
                  Stanley
                  Trust will issue additional Corporate Units in the amount specified
                  in the
                  Securities Purchase Agreement, with the stated amount of such additional
                  Corporate Units allocated among the trusts in equal thirds, adjusted
                  as
                  necessary so that the stated amount of Corporate Units issued by
                  each
                  trust will be an integral multiple of $1,000.

              
	
                Initial
                  Interest Rate on Junior Subordinated Debentures and Initial Distribution
                  Rate of the Related Trust Preferred Securities

              	
                6%
                  per annum.

              
	
                Rate
                  of Contract Adjustment Payments 

                on
                  Stock Purchase Contracts

              	
                3%
                  per annum.

              
	
                Distribution
                  Payment Dates

              	
                Distribution
                  payments will accrue
                  from the First Issue Date and be payable quarterly in arrears on
                  each
                  February 17, May 17, August 17 and November 17 occurring prior
                  to and
                  including the date of a successful remarketing, commencing February
                  17,
                  2008.

              
	
                Remarketing
                  Periods

              	
                Five
                  consecutive business days beginning on the seventh business day
                  prior to
                  each of August 17, 2010, November 17, 2010, February 17, 2011,
                  May 17,
                  2011 and August 17, 2011.

              
	
                Reference
                  Price

              	
                $48.07

              
	
                Threshold
                  Appreciation Price

              	
                The
                  “threshold appreciation price” will equal 120% of the reference
                  price.

              
	
                Maturity
                  of Junior Subordinated Debentures

              	
                February
                  17, 2042 (subject to change in connection with a remarketing of
                  the
                  related trust preferred securities or junior subordinated
                  debentures).

              

      

    

     

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    
      EXHIBIT
        I TO TERM SHEET

       

      CONFIDENTIAL
        OFFERING MEMORANDUM

      DATED
        DECEMBER 19, 2007

       

      DESCRIPTION
        OF THE PREMIUM EQUITY PARTICIPATING SECURITY UNITS—PEPSSM
        UNITS

       

      The
        following is a summary of the terms of the PEPS Units. This summary, together
        with the summary of some of the provisions of the related documents described
        below, contains a description of all of the material terms of the PEPS UNITS
        but
        is not necessarily complete.

       

      General

       

      We
        will
        issue three separate series of PEPS Units in connection with the purchase
        contract and pledge agreements (the “purchase contract and pledge agreements”)
        between us and the holders of a series of PEPS Units, acting through the
        Bank of
        New York, which we refer to as the “stock purchase contract agent” or the
“collateral agent” as applicable. The PEPS Units of each series may be either
        Corporate Units or Treasury Units. Unless indicated otherwise, “PEPS Units” will
        include both Corporate Units and Treasury Units. The PEPS Units of each series
        initially will consist of Corporate Units, each with a stated amount of
        $1,000.

       

      Corporate
        Units

       

      Each
        Corporate Unit will consist of a unit composed of:

       

      
        	
                 

              	
                (a)

              	
                a
                  stock purchase contract under
                  which:

              

      

       

      
        	
                 

              	
                (1)

              	
                you
                  will agree to purchase from us, and we will agree to sell to you,
                  on the
                  stock purchase date, for $1,000 in cash, a number of shares of
                  our common
                  stock equal to the settlement rate described under “Description of the
                  Stock Purchase Contracts—Purchase of Common Stock”, “—Early Settlement” or
                  “—Early Settlement Upon Cash Merger”, as the case may be. The stock
                  purchase date is expected to be August 17, 2010 (or, if such day
                  is not a
                  business day, the next business day), but, unless the stock purchase
                  contract terminates prior to such date as described under “Description of
                  the Stock Purchase Contracts—Termination,” could be (i) moved to an
                  earlier date in the circumstance described below under “Description of the
                  Stock Purchase Contracts—Early Settlement” or “—Early Settlement Upon Cash
                  Merger,” or (ii) deferred for quarterly periods until as late as August
                  17, 2011 (or, if such day is not a business day, the next business
                  day) if
                  the prior remarketing attempts are not successful, as described
                  below
                  under “Description of the Trust Preferred
                  Securities—Remarketing”;

              

      

       

      
        	
                 

              	
                (2)

              	
                we
                  will pay to you quarterly contract adjustment payments at an annual
                  rate
                  of 3% of the stated amount of $1,000 per stock purchase contract,
                  subject
                  to our right to defer these payments;
                  and

              

      

       

      
        	
                 

              	
                (b)

              	
                a
                  remarketable trust preferred security of Morgan Stanley Capital
                  Trust A,
                  Morgan Stanley Capital Trust B or Morgan Stanley Capital Trust
                  C (each a
                  “Morgan Stanley Trust” and collectively, the “Morgan Stanley Trusts) with
                  an initial liquidation amount of $1,000. Each trust preferred security
                  represents an undivided beneficial ownership interest in the assets
                  of the
                  relevant Morgan Stanley Trust. The property trustee of each of
                  the Morgan
                  Stanley Trusts will hold legal title to the assets. The assets
                  of each of
                  the Morgan Stanley Trusts consist solely of one of three separate
                  series
                  (one series per Morgan Stanley Trust) of our junior subordinated
                  debentures due 2042, which we refer to as the “junior subordinated
                  debentures.” Until the remarketing settlement date with respect to a
                  series of trust preferred securities, unless we otherwise defer
                  such
                  payments, we will make quarterly interest payments on each outstanding
                  series of the junior subordinated debentures that relate to the
                  trust
                  preferred securities for which a remarketing settlement date has
                  not
                  occurred, at the annual rate of 6% per year, and each Morgan Stanley
                  Trust
                  will pass through such interest payments when received as distributions
                  on
                  the trust preferred securities. Upon a successful remarketing,
                  interest on
                  the related series of junior subordinated debentures will be reset
                  and
                  will accrue at a Reset Rate as described
                  below.

              

      

       

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      Unless
        otherwise specified, all references in this offering memorandum to a “trust
        preferred security” or “trust preferred securities” shall be to each of the
        trust preferred securities issued by the three Morgan Stanley
        Trusts.

       

      Unless
        otherwise specified, all references in this offering memorandum to a “junior
        subordinated debenture” or “junior subordinated debentures” shall be to each
        series of junior subordinated debentures held by the three Morgan Stanley
        Trusts.

       

      The
        purchase price of each Corporate Unit will be allocated between the related
        stock purchase contract and the related trust preferred securities in proportion
        to their respective fair market values at the time of issuance. We expect
        that,
        at the time of issuance, the fair market value of each trust preferred security
        will be $1,000 and the fair market value of each stock purchase contract
        will be
        $0.

       

      This
        allocation generally will be binding on each beneficial owner of each PEPS
        Unit
        but not on the Internal Revenue Service.

       

      As
        long as
        a PEPS Unit is in the form of a Corporate Unit, the related trust preferred
        securities and their proceeds forming a part of such Corporate Units will
        be
        pledged to us through the collateral agent, to secure your obligation to
        purchase our common stock under the related stock purchase
        contract.

       

      Creating
        Treasury Units

       

      Unless
        the
        treasury portfolio (as defined under “Description of the Trust Preferred
        Securities — Redemption”) has replaced the trust preferred securities as a
        component of Corporate Units and other than during the periods described
        below,
        you will have the right to substitute qualifying treasury securities (as
        defined
        below) for the related trust preferred securities held by the collateral
        agent,
        in each case, having an aggregate principal amount at maturity equal to the
        liquidation amount of the trust preferred securities for which they are
        substituted. Upon any such exchange, you will receive $1,000 stated amount
        of
        Treasury Units and the related trust preferred securities free of the pledge
        to
        secure your obligations under the stock purchase contract, and you will be
        able
        to trade them separately.

       

      You
        will
        be able to exercise this right (i) on any business day until the second business
        day before the beginning of the first remarketing period in August, 2010
        and
        (ii) after the first remarketing period, on any business day until the stock
        purchase date for the related stock purchase contract, other than (1) on
        a day
        in November, 2010, February, 2011, May, 2011 or August, 2011 that is on or
        after
        the second day of the month through the sixteenth day of the month (or the
        next
        business day if the last day is not a business day) or (2) from 3:00 P.M.,
        New
        York City time, on the second business day before the beginning of any
        remarketing period and until the business day after the end of that remarketing
        period. For any Corporate Unit, you will also not be able to exercise this
        right
        at any time after a successful remarketing of the trust preferred security
        that
        is a component of such Corporate Unit. We refer to periods during which
        exchanges are permitted as “exchange periods.”

       

      Each
        “Treasury Unit” will be a unit consisting of:

       

      
        	
                •  

              	
                a
                  stock purchase contract; and

              

      

       

      
        	
                •  

              	
                a
                  qualifying treasury security (as defined
                  below).

              

      

       

      A
        “qualifying treasury security” means (i) for any business day prior to August
        17, 2010, a zero-coupon U.S. treasury security with a principal amount at
        maturity of $1,000 that matures at least one business day prior to August
        17,
        2010 and (ii) at any time after August 17, 2010, if there has not been an
        earlier successful remarketing, a treasury security having a principal amount
        of
        $1,000 and maturing at least one business day prior to the next succeeding
        November 17, February 17, May 17 or August 17 (each such date a “quarterly
        date”).

       

      On
        each
        distribution date (or as promptly thereafter as the collateral agent and
        the
        paying agent determine to be practicable), each holder of Treasury Units
        will
        receive a contract adjustment payment (unless we have chosen to defer such
        payments).

       

      To
        create
        the Treasury Units, you must deposit with the collateral agent $1,000 principal
        amount of qualifying treasury securities for each $1,000 liquidation amount
        of
        Corporate Units to be exchanged, transfer your Corporate Units to the transfer
        agent and deliver the required notice, as described below under “—Exchange
        Procedures.”

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      o  Qualifying
        Treasury Securities After the First Remarketing Period

       

      In
        the
        event the first remarketing period results in a failed remarketing (as defined
        below) with respect to any series of trust preferred securities, in order
        to
        determine what U.S. treasury security is the qualifying treasury security
        during
        any exchange period after the first remarketing period for such series, the
        issuer or the collateral agent will, for each quarterly date, commencing
        on
        August 17, 2010 and ending on the stock purchase date for the related stock
        purchase contracts or the earlier termination of such stock purchase contracts,
        or if any such day is not a business day, the immediately succeeding business
        day, identify:

       

      
        	
                •  

              	
                the
                  13-week treasury bill that matures at least one but not more than
                  six
                  business days prior to that quarterly date;
                  or

              

      

       

      
        	
                •  

              	
                if
                  no 13-week treasury bill that matures on at least one but more
                  than six
                  business days prior to that quarterly date is or is scheduled to
                  be
                  outstanding or is available in a sufficient principal amount on
                  the
                  immediately preceding quarterly date, the 26-week treasury bill
                  that
                  matures at least one but not more than six business days prior
                  to that
                  quarterly date; or

              

      

       

      
        	
                •  

              	
                if
                  neither of such treasury bills is or is scheduled to be outstanding
                  or is
                  available in a sufficient principal amount on the immediately preceding
                  quarterly date, any other treasury security (which may be a zero
                  coupon
                  treasury security) that is outstanding on the immediately preceding
                  quarterly date, is highly liquid and matures at least one business
                  day
                  prior to that quarterly date; provided that any treasury security
                  identified pursuant to this clause shall be selected in a manner
                  intended
                  to minimize the cash value of the security
                  selected.

              

      

       

      A
“failed
        remarketing” with respect to any series of trust preferred securities will be
        deemed to have occurred for each of the first four remarketing periods if
        the
        remarketing agent is unable to remarket such trust preferred securities for
        settlement on or before August 17, 2010, November 17, 2010, February 17,
        2011 or
        May 17, 2011 (or if any such day is not a business day, the next business
        day),
        as applicable.

       

      In
        the
        event the first remarketing period results in a failed remarketing with respect
        to any series of trust preferred securities, the issuer or
        the  collateral agent shall use commercially reasonable efforts to
        identify the security meeting the foregoing criteria for each quarterly date
        promptly after the Department of the Treasury makes the schedule for upcoming
        auctions of U.S. treasury securities publicly available and shall, to the
        extent
        that a security previously identified with respect to any quarterly date
        is no
        longer expected to be outstanding on the immediately preceding quarterly
        date,
        identify another security meeting the foregoing criteria for such quarterly
        date. The security most recently identified by the issuer or the collateral
        agent with respect to any quarterly date shall be the qualifying treasury
        security with respect to the period from and including the date it is identified
        as a qualifying treasury security (or if later, the date of maturity of the
        qualifying treasury security with respect to the immediately preceding quarterly
        date) to but excluding its date of maturity, and the issuer’s or the collateral
        agent's identification of a security as a qualifying treasury security for
        such
        period shall be final and binding for all purposes absent manifest error.
        You
        will be able to obtain the issue date, the maturity date and, when available,
        the CUSIP number of the treasury bills or other U.S. treasury securities
        that
        are qualifying treasury securities for the current exchange period from the
        issuer or the collateral agent by calling  (212) 762-8131. Since this
        information is subject to change from time to time, the holders should confirm
        this information prior to purchasing or delivering U.S. treasury securities
        in
        connection with any exchange of Corporate Units for Treasury Units after
        a
        failed remarketing.

       

      Each
        qualifying treasury security delivered to the collateral agent in connection
        with any exchange of Corporate Units and qualifying treasury securities for
        Treasury Units and trust preferred securities will be pledged to us through
        the
        collateral agent to secure your obligation to purchase shares of our common
        stock under the corresponding stock purchase contracts. In purchasing qualifying
        treasury securities after a failed remarketing, the collateral agent will
        solicit offers from at least three U.S. government securities dealers, one
        of
        which may be The Bank of New York or an affiliate of The Bank of New York,
        which
        also acts as our collateral agent, and will accept the lowest offer so long
        as
        at least two offers are available. The collateral agent shall have no liability
        to the Morgan Stanley Trusts, any trustee or any holder of the PEPS Units
        in
        connection with the purchase of qualifying treasury securities in the absence
        of
        gross negligence or willful misconduct.

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      o  Exchange
        Procedures

       

      To
        exchange Corporate Units and qualifying treasury securities for Treasury
        Units
        and trust preferred securities, for each Corporate Unit you must:

       

      
        	
                •  

              	
                deposit
                  with the collateral agent U.S. treasury securities that are qualifying
                  treasury securities on the date of deposit, in a principal amount
                  of
                  $1,000, which you must purchase on the open market at your expense
                  unless
                  you already own them;

              

      

       

      
        	
                •  

              	
                transfer
                  the Corporate Units to the stock purchase contract agent, accompanied
                  by a
                  notice stating that you are (1) depositing the appropriate qualifying
                  treasury securities with the collateral agent and (2) requesting
                  the
                  delivery to you of Treasury Units and trust preferred
                  securities.

              

      

       

      Upon
        the
        deposit, and receipt of an instruction from the stock purchase contract agent,
        the collateral agent will release the trust preferred securities corresponding
        to the exchanged Corporate Units from the pledge under the purchase contract
        and
        pledge agreement, free and clear of our security interest. You will own the
        related trust preferred securities released to you unencumbered by the security
        interest created under the purchase contract and pledge agreement and they
        may
        be traded separately from the resulting Treasury Units.

       

      Recreating
        Corporate Units

       

      If
        you
        hold Treasury Units you will have the right, at any time during an exchange
        period, to recreate Corporate Units by substituting for the related qualifying
        treasury securities held by the collateral agent trust preferred securities
        having a liquidation amount equal to the aggregate principal amount at stated
        maturity of the qualifying treasury securities for which substitution is
        being
        made.

       

      Each
        of
        these substitutions will recreate Corporate Units, and the applicable qualifying
        treasury securities will be released to the holder unencumbered by the security
        interest created under the purchase contract and pledge agreement and may
        be
        traded separately from the Corporate Units.

       

      To
        recreate a Corporate Unit, you must:

       

      
        	
                •  

              	
                deposit
                  with the collateral agent trust preferred securities with a $1,000
                  liquidation amount, which you must purchase at your expense unless
                  otherwise owned by you; and

              

      

       

      
        	
                •  

              	
                transfer
                  Treasury Unit certificates to the stock purchase contract agent;
                  accompanied by a notice stating that you are (1) depositing trust
                  preferred securities with a $1,000 liquidation amount with the
                  collateral
                  agent in substitution for the pledged treasury securities and (2)
                  requesting the release to you of the pledged treasury security
                  relating to
                  the Treasury Units.

              

      

       

      Upon
        the
        deposit and receipt of an instruction from the stock purchase contract agent,
        the collateral agent will release the related qualifying treasury securities
        from the pledge under the purchase contract and pledge agreement, free and
        clear
        of our security interest, to the stock purchase contract agent. The stock
        purchase contract agent will then cancel the Treasury Units, transfer the
        related treasury security to you, and deliver the recreated Corporate Units
        to
        you.

       

      The
        substituted trust preferred securities and their proceeds will be pledged
        to us
        through the collateral agent to secure your obligation to purchase shares
        of our
        common stock representing the preferred stock under the related stock purchase
        contracts.

       

      Current
        Payments

       

      Subject
        to
        the deferral provisions described below, until the stock purchase date for
        any
        stock purchase contracts, holders of the related Corporate Units will be
        entitled to receive quarterly contract adjustment payments payable by us
        at an
        annual rate of 3% on the stated amount of $1,000 per Corporate Unit and
        distributions from the Morgan Stanley Trusts calculated at an annual rate
        of 6%
        on the related trust preferred securities.

       

      Subject
        to
        the deferral provisions described below, until the stock purchase date for
        any
        series of stock purchase contracts, holders of the related series of Treasury
        Units will be entitled to receive quarterly contract adjustment 

       

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      payments
        payable by us at the annual rate of 3% on the stated amount of $1,000 per
        Treasury Unit. For as long as they hold the separate trust preferred securities,
        the holders of such series of Treasury Units will continue to receive the
        scheduled quarterly distribution on the trust preferred securities that were
        released to them when the Treasury Units were created, subject to our right
        to
        defer interest payments on the junior subordinated debentures underlying
        the
        trust preferred securities.

       

      Holders
        of
        not less than $1,000,000 aggregate stated amount of a series of PEPS Units
        shall
        be entitled to receive current payments by wire transfer in immediately
        available funds on the applicable date of payment.

       

      We
        may
        defer the contract adjustment payments until no later than the stock purchase
        date for any stock purchase contracts as described below under “Description of
        the Purchase contracts—Option to Defer Contract Adjustment
        Payments.”

       

      Deferred
        contract adjustment payments will accrue interest until paid, compounded
        on each
        distribution date, at 9% per annum. All accrued and unpaid contract adjustment
        payments on the stock purchase contracts, including deferred contract adjustment
        payments and interest thereon, that we do not pay in cash on the stock purchase
        date (the “unpaid contract adjustment payment amount”), will be paid in the form
        of additional subordinated notes with a principal amount equal to the unpaid
        contract adjustment payment amount.

       

      We
        may
        also defer cash payments of interest on the junior subordinated debentures
        that
        are owned by the Morgan Stanley Trusts, provided that prior to the related
        stock
        purchase date, we will not defer the payment of interest with respect to
        any
        series of junior subordinated debentures without deferring the payment of
        interest with respect to all series of junior subordinated debentures, in
        which
        case the deferred amounts will accrue additional interest at the applicable
        rate
        then borne by the related junior subordinated debentures. As a consequence,
        the
        Morgan Stanley Trusts will accumulate corresponding distributions on the
        related
        trust preferred securities during the deferral period. Deferred distributions
        to
        which you are entitled will accrue interest, compounded quarterly, from the
        relevant distribution date for distributions during any deferral period,
        at the
        rate borne by the junior subordinated debentures at such time, to the extent
        permitted by applicable law. After we give notice of any deferral of contract
        adjustment payments or interest on the junior subordinated debentures and
        during
        any period that we are deferring contract adjustment payments or interest
        on the
        junior subordinated debentures (and, accordingly, the Morgan Stanley Trusts
        are
        accumulating distributions on the trust preferred securities) that are otherwise
        payable in cash, we will be restricted from making certain payments, including
        declaring or paying any dividends or making any distributions on shares of
        our
        capital stock, or redeeming, purchasing, acquiring or making a liquidation
        payment with respect to, shares of our capital stock, as described under
        “Description of the Junior Subordinated Debentures—Restrictions on Certain
        Payments.”

       

      Our
        obligation to pay contract adjustment payments will be subordinate and junior
        in
        right of payment to all our senior debt, to the same extent as our obligations
        under our junior subordinated debentures, as described under “Description of the
        Junior Subordinated Debentures.” The ability of the Morgan Stanley Trusts to
        make the distributions on the trust preferred securities is dependent solely
        upon the receipt of corresponding payments from us on the related junior
        subordinated debentures. Our obligations under the junior subordinated
        debentures are similarly subordinate and junior in right of payment to all
        our
        senior debt.

       

      Absence
        of Rights with Respect to Common Stock

       

      Holders
        of
        stock purchase contracts forming part of the Corporate Units or Treasury
        Units,
        in their capacities as holders of those securities, will have no voting or
        other
        rights (including any rights to receive dividends or other distributions
        on our
        common stock for which the record date occurs prior to the stock purchase
        date)
        in respect of our common stock until the stock purchase date.

       

      Listing
        of the Securities

       

      We
        will
        not apply to list the PEPS Units on any stock exchange.  We will list
        the shares of common stock that we deliver upon settlement of the stock purchase
        contacts on the stock exchange or market on which our outstanding shares
        of
        common stock are then listed.

       

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Miscellaneous

       

      We
        or our
        affiliates may from time to time purchase any PEPS Units that are then
        outstanding by tender, in the open market or by private agreement.

       

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      DESCRIPTION
        OF THE STOCK PURCHASE CONTRACTS

       

      The
        following is a summary of some of the terms of the stock purchase contracts
        and
        the purchase contract and pledge agreement. This summary, together with the
        summary of some of the provisions of the related documents described below,
        contains a description of the material terms of the stock purchase contracts
        and
        the purchase contract and pledge agreement but is not necessarily
        complete.

       

      Purchase
        of Common Stock

       

      Each
        stock
        purchase contract that is a part of a Corporate Unit or a Treasury Unit will
        obligate its holder to purchase, and us to sell, on the “stock purchase date”
for any stock purchase contract, which we expect to be August 17, 2010 but
        may
        be an earlier date in the event of an early settlement described under “—Early
        Settlement” or in the event of a cash merger described under “—Early Settlement
        Upon Cash Merger,” (unless the stock purchase contract terminates prior to that
        date), or a date as late as August 17, 2011 due to a deferral for quarterly
        periods if the prior remarketing attempts are not successful, a number of
        shares
        of our common stock equal to the settlement rate, for $1,000 in cash. The
        number
        of shares of our common stock issuable upon settlement of each stock purchase
        contract on the stock purchase date for such stock purchase contract (which
        we
        refer to as the “settlement rate”) will be determined as follows, subject to
        adjustment as described under “—Anti-dilution Adjustments” below:

       

      
        	
              	
                (1)

              	
                If
                  the applicable market value of our common stock is equal to or
                  greater
                  than the “threshold appreciation price” (as defined below), the settlement
                  rate will be the number of shares of our common stock equal to
                  the stated
                  amount divided by the threshold appreciation price (such settlement
                  rate
                  being referred to as the “minimum settlement rate”).

                 

                Accordingly,
                  if the market price for the common
                  stock increases between the date of this offering memorandum and
                  the
                  period during which the applicable market value is measured and
                  the
                  applicable market price is greater than the threshold appreciation
                  price,
                  the aggregate market value of the shares of common stock issued
                  upon
                  settlement of each stock purchase
                  contract will be higher than the stated amount, assuming that the
                  market
                  price of the common stock on the stock purchase date is the same
                  as the
                  applicable market value of the common stock. If the applicable
                  market
                  price is the same as the threshold appreciation price, the aggregate
                  market value of the shares issued upon settlement will be equal
                  to the
                  stated amount, assuming that the market price of the common stock
                  on the
                  stock purchase date is the same as the applicable market value
                  of the
                  common stock.

              

      

       

      
        	
              	
                (2)

              	
                If
                  the applicable market value of our common stock
                  is less than the threshold appreciation price but greater than
                  the
                  “reference price” (as defined below), the settlement rate will be a number
                  of shares of our common stock equal to $1,000 divided by the applicable
                  market value.

                 

                Accordingly,
                  if the market price for the common
                  stock increases between the date of this offering memorandum and
                  the
                  period during which the applicable market value is measured, but
                  the
                  market price does not exceed the threshold appreciation price,
                  the
                  aggregate market value of the shares of common stock issued upon
                  settlement of each stock purchase
                  contract will be equal to the stated amount, assuming that the
                  market
                  price of the common stock on the stock purchase date is the same
                  as the
                  applicable market value of the common
                  stock.

              

      

       

      
        	
              	
                (3)

              	
                If
                  the applicable market value of our common stock
                  is less than or equal to the reference price, the settlement rate
                  will be
                  the number of shares of our common stock equal to the stated amount
                  divided by the reference price (such settlement rate being referred
                  to as
                  the “maximum settlement
                  rate”).

              

      

       

      Accordingly,
        if the market price for the common stock
        decreases between the date of this offering memorandum and period during
        which
        the adjusted applicable market value is measured and the market price is
        less
        than the reference price, the aggregate market value of the shares of common
        stock issued upon settlement of each stock purchase contract will be less
        than
        the stated amount, assuming that the market price 

       

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

       

      on
        the stock purchase date is the same as the applicable
        market value of the common stock. If the market price of the common stock
        is the
        same as the reference price, the aggregate market value of the shares will
        be
        equal to the stated amount, assuming that the market price of the common
        stock
        on the stock purchase date is the same as the applicable market value of
        the
        common stock.

       

      If
        you elect to settle your stock purchase contract
        early in the manner described under “—Early Settlement,” the number of shares of
        our common stock issuable upon settlement of such stock purchase contract
        will
        be the minimum settlement rate, subject to adjustment as described under
        “Anti-dilution Adjustments.” We refer to the minimum settlement rate and the
        maximum settlement rate collectively as the “fixed settlement
        rates.”

       

      The
“applicable
        market value” means the arithmetic
        average of the VWAP for each of the 20 consecutive trading days, subject
        to
        adjustment as described below, beginning on and including the twenty-second
        scheduled trading day immediately preceding August 17, 2010 (we refer to
        this
        period as the “observation period”); provided, however,
        that if we enter into a reorganization event (as
        defined under “—Anti-dilution Adjustments” below), the applicable market value
        will mean the value of an exchange property unit (as defined under
“—Anti-dilution Adjustments—Reorganization Events” below). Following the
        occurrence of any such event, references herein to the purchase or issuance
        of
        shares of our common stock will be construed to be references to settlement
        into
        exchange property units. For purposes of calculating the exchange property
        unit
        value, (x) the value of any common stock included in the exchange property
        unit
        shall be determined using the arithmetic average of the VWAP for each of
        the 20
        consecutive trading days, subject to adjustment as described below, beginning
        on
        and including the twenty-second scheduled trading day immediately preceding
        August 17, 2010 (or, if the reorganization event shall not have occurred
        prior
        to such date, the related stock purchase date for such stock purchase contract)
        and (y) the value of any other property, including securities other than
        common
        stock included in the exchange property unit, shall be the value of such
        property on the first trading day of the observation period, or if the
        reorganization event shall not have occurred prior to such date, the
        twenty-second scheduled trading day prior to the related stock purchase date
        for
        such stock purchase contract (as determined in good faith by our board of
        directors, whose determination shall be conclusive and described in a Board
        resolution).

       

      The
        term “reference price” means
        $48.07.

       

      The
        term
“threshold appreciation price” means 120% of the reference price.

       

      The
        term “trading day” means a business day on which the
        relevant exchange or quotation system is scheduled to be open for business
        on
        which the shares of our common stock:

       

      
        	
                ·  

              	
                are
                  not suspended from trading on any national or
                  regional securities exchange or association or over-the-counter
                  market for
                  any period or periods aggregating one half hour or longer;
                  and

              

      

       

      
        	
                ·  

              	
                have
                  traded at least once on the national or
                  regional securities exchange or association or over-the-counter
                  market
                  that is the primary market for the trading of the shares of our
                  common
                  stock.

              

      

       

      The
        term “scheduled trading day” means a day that is
        scheduled to be a trading day.

       

      The
        term “VWAP” means, for the relevant measurement day,
        the per share volume-weighted average price as displayed under the heading
        Bloomberg VWAP on Bloomberg page MS AQR (or its equivalent successor if such
        page is not available) in respect of the period from the scheduled open of
        trading on the relevant trading day until the scheduled close of trading
        on the
        relevant trading day (or if such volume-weighted average price is unavailable,
        the market price of one share of Morgan Stanley common stock on such trading
        day
        determined using a volume-weighted average method, by a nationally recognized
        independent investment banking firm retained by us for this
        purpose).

       

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      If
        a scheduled trading day during the observation period
        is not a trading day, we will notify investors of that fact on such scheduled
        trading day.  If 20 trading days for our common stock have not
        occurred during the observation period prior to the third business day
        immediately prior to August 17, 2010 or any earlier applicable stock purchase
        date, as the case may be, all remaining trading days will be deemed to occur
        on
        that third business day and the VWAP for each of the remaining trading days
        will
        be the VWAP on such third business day or if such day is not a trading day,
        the
        VWAP as determined in its reasonable discretion by a nationally recognized
        independent investment banking firm retained by Morgan Stanley for this
        purpose.

       

      We
        will not issue any fractional shares of our common
        stock upon settlement of a stock purchase
        contract. Instead of a fractional share, the holder will receive an amount
        of
        cash equal to such fraction multiplied by the applicable market value. If,
        however, a holder surrenders for settlement at one time more than one
stock purchase contract, then the number
        of
        shares of our common stock issuable pursuant to such stock purchase contracts will be computed
        based upon the
        aggregate number of stock purchase
        contracts surrendered.

       

      Unless:

       

      
        	
                ·  

              	
                a
                  holder has settled early the related
                  stock purchase contracts by delivery
                  of cash to the stock purchase
                  contract agent in the manner described under “—Early Settlement” or
                  “—Early Settlement Upon Cash
                  Merger;”

              

      

       

      
        	
                ·  

              	
                a
                  holder of Corporate Units has settled the
                  related stock purchase contracts with
                  separate cash in the manner described under “—Notice to Settle with Cash;”
                  or

              

      

       

      
        	
                ·  

              	
                an
                  event described under “—Termination” has
                  occurred,

              

      

       

      then,
        on the stock purchase date for a stock purchase
        contract,

       

      
        	
                ·  

              	
                in
                  the case of Corporate Units where there has
                  been a successful remarketing, $1,000 per Corporate Unit of the
                  proceeds
                  from such remarketing will automatically be applied to satisfy
                  in full the
                  holder’s obligations to purchase our common stock under the related
                  stock purchase contracts and any
                  excess proceeds will be delivered to the stock purchase contract agent for
                  the benefit of the
                  holders of Corporate Units;

              

      

       

      
        	
                ·  

              	
                in
                  the case of Corporate Units where there has not
                  been a successful remarketing in the final remarketing period,
                  unless
                  holders of Corporate Units elect not to exercise their put right
                  described
                  under “Description of the Trust Preferred Securities—Remarketing” by
                  delivering cash to settle their stock purchase contracts, such
                  holders will be deemed to
                  have elected to apply the put price to satisfy in full their obligations
                  to purchase our common stock under the related stock purchase contracts and we
                  will deliver to such
                  holders our common stock pursuant to the related stock purchase
                  contracts.
                  We will issue additional subordinated notes in the amount of any
                  accrued
                  and unpaid interest on the junior subordinated debentures (including
                  deferred interest) as of the stock purchase date for such stock
                  purchase
                  contracts to the Morgan Stanley Trusts, which will in turn distribute
                  such
                  notes to the holders of Corporate Units and any separate trust
                  preferred
                  securities and we will pay the unpaid contract adjustment payment
                  amount
                  in additional subordinated notes that will be delivered to the
                  holders of
                  PEPS Units;

              

      

       

      
        	
                ·  

              	
                in
                  the case of Corporate Units where the treasury
                  portfolio has replaced the trust preferred securities as a component
                  of
                  the Corporate Units, proceeds of the appropriate applicable ownership
                  interests in the treasury portfolio when paid at maturity equal
                  to the
                  stated amount of $1,000 per Corporate Unit will automatically be
                  applied
                  to satisfy in full the holder’s obligation to purchase common stock under
                  the related stock purchase contracts
                  and any 

              

      

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      
        	 	excess
                proceeds will be delivered to the stock purchase contract agent for
                the
                benefit of the holders of Corporate Units; and

        	 	 

        	
                ·  

              	
                in
                  the case of Treasury Units, the net cash
                  proceeds, when paid at maturity, of the qualifying treasury securities
                  forming part of the Treasury Units or their proceeds automatically
                  will be
                  applied to satisfy in full the holder’s obligation to purchase our common
                  stock under the related stock purchase contracts.

              

      

       

      In
        any event, the common stock will then be issued and
        delivered to you or your designee, upon presentation and surrender of the
        certificate evidencing the Corporate Units or Treasury Units, and payment
        by you
        of any transfer or similar taxes payable in connection with the issuance
        of the
        common stock to any person other than you.

       

      Prior
        to the settlement of a stock purchase contract, the shares of our
        common stock
        underlying each stock purchase contract
        will not be outstanding, and the holder of the stock purchase contract will not have any
        voting rights,
        rights to dividends or other distributions or other rights of a holder of
        our
        common stock by virtue of holding such stock purchase contract.

       

      By
        purchasing a Corporate Unit or a Treasury Unit, a
        holder will be deemed to have, among other things:

       

      
        	
                ·  

              	
                irrevocably
                  appointed the stock purchase contract agent
                  as its attorney-in-fact
                  to enter into and perform the stock purchase contract and the
                  related purchase
                  contract and pledge agreement in the name of and on behalf of such
                  holder;
                  and

              

      

       

      
        	
                ·  

              	
                agreed
                  to be bound by the terms and provisions of
                  the Corporate Units and Treasury Units and perform its obligations
                  under
                  the purchase contract and pledge
                  agreement.

              

      

       

      In
        addition, each beneficial owner of a PEPS Unit, by
        acceptance of the beneficial interest therein, will be deemed to have agreed
        (i)
        to treat the acquisition of a PEPS Unit as an acquisition of the related
        trust
        preferred security and the related stock purchase contract constituting such
        PEPS Unit, (ii) to allocate 100% of the purchase price of a PEPS Unit to
        the
        related trust preferred security, (iii) to treat for U.S. federal income
        tax
        purposes itself as the owner of the related junior subordinated debenture,
        applicable ownership interests in the treasury portfolio or the qualifying
        treasury securities, as the case may be, and (iv) to treat the junior
        subordinated debentures as our indebtedness for all U.S. federal income tax
        purposes which is not subject to the contingent payment debt
        regulations.

       

      Early
        Settlement

      

      Subject
        to the conditions described below, a holder of
        Corporate Units or Treasury Units may settle the related stock purchase contracts at any time prior
        to 5:00 p.m., New
        York City time, on the second business day immediately preceding the first
        day
        of the first remarketing period, in the case of Corporate Units, or the second
        business day immediately preceding the scheduled stock purchase date for
        the
        first remarketing period, in the case of Treasury Units. If the treasury
        portfolio has replaced the trust preferred securities as a component of the
        Corporate Units, holders of Corporate Units may settle early only in integral
        multiples of 200 Corporate Units at any time prior to 5:00 p.m., New York
        City
        time, on the second business day immediately preceding the scheduled stock
        purchase date for the first remarketing period. We refer to this right as
        the
“early settlement right.” In order to settle stock purchase contracts early, a holder
        of PEPS Units must
        deliver to the stock purchase contract
        agent (1) a completed “Election to Settle Early” form, along with the Corporate
        Unit or Treasury Unit certificate, if they are in certificated form, and
        (2) a
        cash payment in immediately available funds in an amount equal to (i) $1,000
        times the number of stock purchase
        contracts being settled plus (ii) if the delivery is made with respect to
        stock purchase contracts during the period
        from the close of business on any record date next preceding any distribution
        date to the opening of business on such distribution date, an

       

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      amount
        equal to the contract adjustment payments payable
        on the distribution date with respect to the stock purchase contracts.

       

      So
        long as you hold PEPS Units as a beneficial interest
        in a global security deposited with the depositary, procedures for early
        settlement will also be governed by standing arrangements between the depositary
        and the stock purchase contract
        agent.

       

      In
        order to exercise your early settlement right, you
        must give us written notice of your intention to exercise this right at least
        61
        days prior to the date of exercise.

       

      Upon
        early settlement, (1) the holder will receive a
        number of shares of our common stock per PEPS Unit equal to the minimum
        settlement rate, subject to adjustment under the circumstances described
        under
“—Anti-dilution Adjustments” below, (2) the related trust preferred securities,
        junior subordinated debentures, applicable interests in the treasury portfolio
        or qualifying treasury securities, as the case may be, underlying the PEPS
        Units
        and securing such stock purchase contracts
        will be released from the pledge under the purchase contract and pledge
        agreement, and delivered within three business days following the early
        settlement date, in each case to the stock purchase contract agent for delivery
        to the holder, (3)
        the holder’s right to receive future contract adjustment payments and any
        accrued and unpaid contract adjustment payments for the period since the
        most
        recent quarterly payment will terminate, except that the holder will receive
        any
        accrued and unpaid contract adjustment payments if the early settlement date
        falls after a record date next preceding any distribution date and prior
        to
        opening of business on such distribution date and (4) no adjustment will
        be made
        to or for the holder on account of any accrued and unpaid contract adjustment
        payments referred to in (3) above.

       

      If
        the stock
        purchase contract agent receives a completed “Election to Settle Early” form,
        along with the Corporate Unit or Treasury Unit certificate, if they are in
        certificated form, and payment of $1,000 for each stock purchase contract being settled prior
        to 5:00 p.m., New
        York City time, on any business day and all conditions to early settlement
        have
        been satisfied, then that day will be considered the early settlement date
        with
        respect to such stock purchase contracts. If the stock purchase contract agent receives the
        foregoing on or
        after 5:00 p.m., New York City time, on any business day or at any time on
        a day
        that is not a business day, then the next business day will be considered
        the
        early settlement date with respect to such stock purchase
        contracts.

       

      Early
        Settlement Upon Cash
        Merger

       

      Prior
        to the first scheduled remarketing date, if we are
        involved in a consolidation, acquisition or merger, or a sale of all or
        substantially all of our assets that is scheduled to close not later than
        eight
        business days prior to such remarketing settlement date, in each case in
        which
        at least 10% of the consideration received by holders of our common stock
        consists of consideration that is not common equity, which we refer to as
        a
“cash merger,” then following the cash merger, each holder of a stock
purchase contract will have the right
        to
        accelerate and settle such stock purchase
        contract early at the settlement rate in effect immediately prior to the
        effective date of such transaction, calculated as described below. We refer
        to
        this right as the “cash merger settlement right.”

       

      The
        foregoing paragraph includes a phrase relating to a
        sale of all or substantially all of our assets. There is no precise, established
        definition of the phrase “substantially all” under applicable law. Accordingly,
        your right to accelerate and settle such stock purchase contract early as a result
        of a sale of
        substantially all of our assets may be uncertain.

       

      We
        will provide each of the holders with a notice of the
        completion of a cash merger within five business days thereof. The notice
        will
        specify a cash merger early settlement date, which shall be at least ten
        business days after the date of the notice but no later than the earlier
        of 20
        business days after the date of such notice or two business days prior to
        the
        first day of the next remarketing period, by which each holder’s cash merger
        settlement right must be exercised. The notice will set forth, among other
        things, the settlement rate, the stock purchase date for the early
        settlement  and the amount of the cash, securities and other
        consideration receivable 

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      by
        the holder upon settlement. To exercise the cash
        merger settlement right, you must deliver to the stock purchase contract agent, no later than
        4:00 p.m., New
        York City time, on the third business day before the specified cash merger
        early
        settlement date, the certificate evidencing your Corporate Units or Treasury
        Units if they are held in certificated form, and payment of the applicable
        purchase price in immediately available funds less
        the
        amount of any accrued and unpaid contract adjustment
        payments.

       

      So
        long as the PEPS Units are evidenced by one or more
        global securities deposited with the depositary, procedures for early settlement
        upon a cash merger will also be governed by standing arrangements between
        the
        depositary and the stock purchase contract
        agent.

       

      If
        you exercise the cash merger settlement right, we
        will deliver to you on the specified cash merger early settlement date the
        kind
        and amount of securities, cash or other property that you would have been
        entitled to receive if you had settled the stock purchase contract immediately before
        the effective date
        of the cash merger and received shares of our common stock at the settlement
        rate then in effect.  The settlement rate then in effect will be the
        settlement rate described above under “—Purchase of Common Stock,” except that
        the observation period for determining the applicable market value will be
        the
        20 consecutive trading days ending on the third trading day immediately
        preceding the effective date of the cash merger. You will also receive the
        trust
        preferred securities, junior subordinated debentures, applicable interest
        in the
        treasury portfolio or qualifying treasury securities underlying the Corporate
        Units or Treasury Units, as the case may be. If you do not elect to exercise
        your cash merger settlement right, your Corporate Units or Treasury Units
        will
        remain outstanding and subject to normal settlement on the stock purchase
        date
        for equity property units, as defined below under “Anti-dilution Adjustments –
Reorganization Events.”

       

      Notice
        to Settle with
        Cash

      

      Unless
        the treasury portfolio has replaced the trust
        preferred securities as a component of the Corporate Units, a holder of
        Corporate Units may settle the related stock purchase contract with separate cash
        by delivering the
        Corporate Unit certificate, if in certificated form, to the offices of the
        stock purchase contract agent with the
        completed “Notice to Settle with Cash” form prior to 5:00 p.m., New York City
        time, on the second business day immediately preceding the beginning of any remarketing period.

       

      The
        holder must also deliver to the collateral agent the
        required cash payment in immediately available funds. Such payment must be
        delivered prior to 5:00 p.m., New York
        City time, on the first business day
        immediately preceding the beginning of a remarketing period.

       

      Upon
        receipt of the cash payment, the related trust
        preferred security will be released from the collateral arrangement and
        transferred to the stock purchase contract
        agent for distribution to the holder of the related Corporate Units. The
        holder
        of the Corporate Units will then receive the applicable number of shares
        of our
        common stock on the stock purchase date for such stock purchase
        contracts.

       

      If
        a holder of Corporate Units that has given notice of
        its intention to settle with cash fails to deliver the cash by the applicable
        time and date specified above, the trust preferred securities underlying
        such
        holder’s Corporate Units will automatically be remarketed, or if there is a
        failed final remarketing (as defined in “—Remarketing”, below) such trust
        preferred securities will be put to us, as described under “—Remarketing”
below.

       

      Any
        cash received by the collateral agent upon cash
        settlement will be invested promptly in permitted investments, as defined
        in the
        purchase contract and pledge agreement, and an amount equal to $1,000 times
        the
        number of stock purchase contracts settled
        with cash will be paid to us on the stock purchase date for such stock purchase
        contracts. Any funds received by the collateral agent in respect of the
        investment earnings from such investments in excess of such amount will be
        distributed to the stock purchase contract
        agent for payment to the holders who settled with cash.

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Remarketing

       

      Unless
        a
        special event redemption or a termination event has occurred, or all the
        stock
        purchase contracts have settled early as a result of an early settlement
        or an
        early settlement upon a cash merger, or all of the outstanding PEPS Units
        are
        held in the form of Treasury Units and none of the holders of the related
        trust
        preferred securities has elected to participate in the remarketing, as described
        under “Description of the Trust Preferred Securities—Remarketing,”
        or
        all of the holders of PEPS Units have settled their stock purchase contracts
        with separate cash, as described above
        under “—Notice to Settle with
        Cash,” and none of the holders of the
        related trust preferred securities has elected to participate in the
        remarketing, we, through the remarketing agent, will attempt to remarket
        the trust preferred securities (or, if the junior subordinated debentures
        are no
        longer held by the Morgan Stanley Trusts, the junior subordinated debentures)
        in
        a process we call “remarketing.” The periods during which a remarketing will be
        attempted, or “remarketing periods,” will each consist of five consecutive
        business days beginning on the seventh business day prior to each of August
        17,
        2010, November 17, 2010, February 17, 2011, May 17, 2011 and August 17, 2011
        (or
        if any such day is not a business day, the immediately succeeding business
        day)
        and such remarketings will continue to be attempted until the earlier to
        occur
        of the fifth such period or the earlier settlement of a successful remarketing
        for such series of trust preferred securities (or junior subordinated
        debentures). A successful remarketing for a series will settle on the date,
        or
“remarketing settlement date,” that is the third business day after the last day
        of the relevant remarketing period. If a successful remarketing occurs with
        respect to a series, the stock purchase date related to such series will
        occur
        on the remarketing settlement date. For a detailed description of the
        remarketing procedures, see “Description of the Junior Subordinated
        Debentures—Remarketing.”

       

      On
        any day
        other than the last day of a remarketing period, we will have the right,
        in our
        absolute discretion and without prior notice to the holders of the PEPS Units,
        to postpone the remarketing until the following business day.

       

      If
        the
        remarketing agent is unable to remarket a series of trust preferred securities
        for settlement on or before August 17, 2011 (or if such day is not a business
        day, the immediately succeeding business day), a “failed final remarketing” will
        be deemed to have occurred for such series. In that case:

       

      
        	
                •  

              	
                If
                  you hold trust preferred securities as a component of Corporate
                  Units, and
                  unless you elect not to exercise your put right by delivering cash
                  to
                  settle your stock purchase contracts, you will be deemed to have
                  elected
                  to apply the put price to satisfy in full your obligations to purchase
                  our
                  common stock under the related stock purchase
                  contracts;

              

      

       

      
        	
                •  

              	
                We
                  will issue additional subordinated notes in the amount of any accrued
                  and
                  unpaid interest on the junior subordinated debentures (including
                  deferred
                  interest) as of the stock purchase date to Morgan Stanley Trust,
                  which
                  will in turn distribute such notes to the holders of Corporate
                  Units and
                  we will issue additional subordinated notes in the amount of the
                  unpaid
                  contract adjustment payment amount to the stock purchase contract
                  agent
                  for distribution to the holders of the PEPS
                  Units.

              

      

       

      We
        will
        notify you of any failed remarketings and of a failed final
        remarketing.

       

      We
        will
        covenant in the purchase contract and pledge agreement to use our commercially
        reasonable efforts to effect the remarketing of the trust preferred securities
        as described in this offering memorandum.

       

      Contract
        Adjustment Payments

       

      We
        will
        make periodic contract adjustment payments, or “contract adjustment payments,”
on the stock purchase contracts at the rate of 3% per annum of the stated
        amount
        of $1,000 per stock purchase contract. Contract adjustment payments will
        be
        calculated on the basis of a 360-day year consisting of twelve 30-day months.
        Contract adjustment payments will accrue from the original issue date of
        the
        Corporate Units and, subject to our right to defer contract adjustment payments
        described below, will be payable on each distribution date through the stock
        purchase date. If any distribution date is not a business day, then payment
        of

       

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      the
        contract adjustment payments payable on that date will be made on the next
        business day, and no interest or payment will be paid in respect of the
        delay.

       

      Contract
        adjustment payments will be payable to the holders of stock purchase contracts
        as they appear on the books and records of the stock purchase contract agent
        at
        the close of business on the relevant record dates, which will be on the
        first
        day of the month in which the relevant distribution date falls. These
        distributions will be paid through the stock purchase contract agent, who
        will
        hold amounts received in respect of the contract adjustment payments for
        the
        benefit of the holders of the PEPS Units.

       

      Our
        obligations with respect to contract adjustment payments will be subordinate
        and
        junior in right of payment to our obligations under any of our senior debt
        to
        the same extent as the junior subordinated debentures. The stock purchase
        contracts do not limit our incurrence of indebtedness, including senior debt.
        No
        contract adjustment payments may be made if there shall have occurred and
        be
        continuing a default in any payment with respect to senior debt or an event
        of
        default with respect to any senior debt resulting  in the acceleration
        of the maturity thereof, or if any judicial proceedings are pending with
        respect
        to any such default.

       

      Absent
        a
        change in law, you and we agree to treat contract adjustment payments on
        the
        stock purchase contracts as a purchase price adjustment to the price of the
        common stock to be purchased under the stock purchase contracts. Notwithstanding
        the above, we intend to withhold federal income tax with respect to all contract
        adjustment payments on the stock purchase contracts that are made to any
        non-U.S. holder of a stock purchase contract, unless such holder is entitled
        to
        an exemption from withholding and has provided us with an unexpired, complete
        and properly executed certification that such holder is exempt from withholding,
        as required by law.

       

      Option
        to Defer Contract Adjustment Payments

       

      We
        may, at
        our option, and will at the direction of any then applicable regulatory
        authority, defer contract adjustment payments on the corresponding stock
        purchase contracts at any time or from time to time. If we defer contract
        adjustment payments we will provide prior written notice to holders of PEPS
        Units and the stock purchase contract agent. We may elect to defer contract
        adjustment payments on more than one occasion. Deferred contract adjustment
        payments will accrue interest until paid, compounded on each distribution
        date
        at the rate of 9% per annum. We may pay any deferred contract adjustment
        payments and accrued interest thereon in cash on any distribution date following
        the beginning of the deferral period that falls on or prior to the stock
        purchase date. Any contract adjustment payments (including any deferred contract
        adjustment payments and accrued interest thereon), not paid in cash on the
        stock
        purchase date will be paid in additional subordinated notes, as described
        under
“Description of the Junior Subordinated Debentures – Option to Defer Interest
        Payments”. If the stock purchase contracts are terminated upon the occurrence of
        certain events of bankruptcy, insolvency or reorganization with respect to
        us,
        your right to receive contract adjustment payments, including any deferred
        contract adjustment payments, also will terminate.

       

      If
        we
        elect or are directed by any then applicable regulatory authority to defer
        contract adjustment payments, then, until the deferred contract adjustment
        payments have been paid in cash or any additional subordinated notes we issue
        in
        respect of deferred contract adjustment payments have been repaid in full,
        we
        will not make any of the payments that we would be prohibited from making
        during
        a deferral of interest payments on the junior subordinated debentures as
        described under “Description of the Junior Subordinated Debentures—Restrictions
        on Certain Payments.”

       

      Termination

       

      The
        purchase contract and pledge agreement provides that the stock purchase
        contracts and the obligations and rights of us and of the holders of Corporate
        Units and Treasury Units thereunder (including the holders’ obligation and right
        to purchase and receive shares of our common stock and to receive accrued
        and
        unpaid contract adjustment payments) will immediately and automatically
        terminate upon the occurrence of certain events of bankruptcy, insolvency
        or
        reorganization with respect to Morgan Stanley.

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      Upon
        any
        termination, the collateral agent will release the related interests in the
        trust preferred securities, applicable ownership interests in the treasury
        portfolio, or qualifying treasury securities, as the case may be, from the
        pledge arrangement and transfer such interests in the trust preferred
        securities, applicable ownership interests in the treasury portfolio or
        qualifying treasury securities to the purchase contract agent for distribution
        to the holders of Corporate Units and Treasury Units. If a holder would
        otherwise have been entitled to receive less than $1,000 principal amount
        at
        maturity of any treasury security upon termination of the stock purchase
        contract, the stock purchase contract agent will dispose of the security
        for
        cash and pay cash to the holder. Upon any termination, however, such release
        and
        distribution may be subject to a delay.  In the event that Morgan
        Stanley becomes the subject of a case under the U.S. Bankruptcy Code, such
        delay
        may occur as a result of the automatic stay under the U.S. Bankruptcy Code
        and
        continue until such automatic stay has been lifted. We expect any such delay
        to
        be limited. Moreover, claims arising out of the trust preferred securities
        will
        be subject to the equitable jurisdiction and powers of the bankruptcy court.
        For
        example, although we do not believe such an argument would prevail, following
        the termination of the stock purchase contracts, a party in interest in the
        bankruptcy proceeding might argue that the holders of the trust preferred
        securities should be treated as equity holders, rather than creditors, in
        the
        bankruptcy proceeding.

       

      Pledged
        Securities and the Purchase Contract and Pledge Agreement

       

      Your
        trust
        preferred securities, your applicable ownership interest in the treasury
        portfolio and the qualifying treasury securities, also referred to as the
        “pledged securities,” will be pledged to the collateral agent for our benefit,
        pursuant to the purchase contract and pledge agreement, to secure your
        obligations to purchase shares of our common stock under the stock purchase
        contracts. Your rights to the pledged securities will be subject to our security
        interest created by the purchase contract and pledge agreement. The aggregate
        liquidation amount of pledged trust preferred securities, the principal amount
        of the applicable ownership interests in the treasury portfolio and the
        principal amount of the qualifying treasury securities constituting pledged
        securities, must always equal at least the purchase price of our common stock
        under the stock purchase contracts. Accordingly, you may not withdraw pledged
        securities from the pledge arrangement except:

       

      
        	
                •  

              	
                to
                  substitute qualifying treasury securities for trust preferred securities
                  in connection with an exchange of Corporate Units for Treasury
                  Units and
                  trust preferred securities, as provided for under “Description of the PEPS
                  Units—Creating Treasury Units”;

              

      

       

      
        	
                •  

              	
                to
                  substitute trust preferred securities for qualifying treasury securities
                  in connection with an exchange of Treasury Units and trust preferred
                  securities for Corporate Units, as provided for under “Description of the
                  PEPS Units—Recreating Corporate Units”;
                  or

              

      

       

      
        	
                •  

              	
                upon
                  the termination of the stock purchase
                  contracts.

              

      

       

      Subject
        to
        the security interest and the terms of the purchase contract and pledge
        agreement, each holder of Corporate Units will be entitled through the stock
        purchase contract agent and the collateral agent to all of the proportional
        rights of the related trust preferred securities, including voting and
        redemption rights, and their proceeds. Each holder of Treasury Units will
        retain
        beneficial ownership of the related qualifying treasury securities pledged
        in
        respect of the related stock purchase contracts. We will have no interest
        other
        than our security interest in the pledged securities.

       

      Except
        as
        described in “Certain Other Provisions of the Purchase Contract and Pledge
        Agreement,” the collateral agent will, upon receipt, if any, of payments on the
        pledged securities, distribute the payments to the stock purchase contract
        agent, which will in turn distribute those payments to the persons in whose
        names the related PEPS Units are registered at the close of business on the
        record date immediately preceding the date of payment. Holders of not less
        than
        $1 million aggregate stated amount of PEPS Units of a series shall be entitled
        to receive such payments by wire transfer in immediately available funds
        on the
        applicable date of payment.

       

      By
        acceptance of the PEPS Units, you will be deemed to have:

       

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      
        	
                •  

              	
                irrevocably
                  agreed to be bound by the terms and provisions of the related stock
                  purchase contracts and the purchase contract and pledge agreement
                  and to
                  have agreed to perform your obligations thereunder for so long
                  as you
                  remain a holder of the PEPS Units,
                  and

              

      

       

      
        	
                •  

              	
                duly
                  appointed the stock purchase contract agent as your attorney-in-fact
                  to
                  enter into and perform the related stock purchase contracts and
                  pledge
                  agreement on your behalf and in your
                  name.

              

      

       

      In
        addition, as a beneficial owner of the PEPS Units, by acceptance of the
        beneficial interest therein, you will be deemed to have agreed for all U.S.
        federal income tax purposes:

       

      
        	
                •  

              	
                to
                  treat the acquisition of a PEPS Unit as an acquisition of the related
                  trust preferred security and the related stock purchase contract
                  constituting such PEPS Unit;

              

      

       

      
        	
                •  

              	
                to
                  allocate 100% of the purchase price of a PEPS Unit to the trust
                  preferred
                  security;

              

      

       

      
        	
                •  

              	
                to
                  treat yourself as the owner of the stock purchase contracts and
                  the
                  related trust preferred securities, applicable ownership interests
                  in the
                  treasury portfolio or the qualifying treasury securities, as the
                  case may
                  be, and

              

      

       

      
        	
                •  

              	
                to
                  treat the junior subordinated debentures as our indebtedness for
                  all U.S.
                  federal income tax purposes, which is not subject to the contingent
                  payment debt regulations.

              

      

       

      Anti-dilution
        Adjustments

       

      Each
        of
        the fixed settlement rates will be subject to the following
        adjustments:

       

      (1)
        Stock Dividends. If we pay or make a dividend or other distribution on all
        or substantially all of our common stock in common stock, each fixed settlement
        rate in effect at the opening of business on the day following the date fixed
        for the determination of stockholders entitled to receive such dividend or
        other
        distribution shall be increased by dividing:

       

      
        	
                ·  

              	
                each
                  fixed settlement rate by

              

      

       

      
        	
                ·  

              	
                a
                  fraction of which the numerator shall be the number of shares of
                  our
                  common stock outstanding at the close of business on the date fixed
                  for
                  such determination and the denominator shall be the sum of such
                  number of
                  shares and the total number of shares constituting such dividend
                  or other
                  distribution.

              

      

       

      (2)
        Stock Purchase Rights. If we issue to all or substantially all holders of
        our common stock rights, options or warrants entitling them to subscribe
        for or
        purchase shares of our common stock for a period expiring within 60 days
        from
        the date of issuance of such rights, options or warrants at a price per share
        of
        our common stock less than the current market price on the date fixed for
        the
        determination of stockholders entitled to receive such rights, options or
        warrants, each fixed settlement rate in effect at the opening of business
        on the
        day following the date fixed for such determination shall be increased by
        dividing:

       

      
        	
                ·  

              	
                each
                  fixed settlement rate by

              

      

       

      
        	
                ·  

              	
                a
                  fraction, the numerator of which shall be the number of shares
                  of our
                  common stock outstanding at the close of business on the date fixed
                  for
                  such determination plus the number of shares of our common stock
                  which the
                  aggregate consideration expected to be received by us upon the
                  exercise,
                  or exchange of such rights, options or warrants would purchase
                  at such
                  current market price and the denominator of which shall be the
                  number of
                  shares of our common stock outstanding at the close of business
                  on the
                  date fixed for such determination plus the number of shares of
                  our common
                  stock so offered for subscription or purchase, either directly
                  or
                  indirectly.

              

      

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (3)
        Stock Splits; Reverse Splits; and Combinations. If outstanding shares of
        our common stock shall be subdivided, split or reclassified into a greater
        number of shares of common stock, each fixed settlement rate in effect at
        the
        opening of business on the day following the day upon which such subdivision,
        split or reclassification becomes effective shall be proportionately increased,
        and, conversely, in case outstanding shares of our common stock shall each
        be
        combined or reclassified into a smaller number of shares of common stock,
        each
        fixed settlement rate in effect at the opening of business on the day following
        the day upon which such combination or reclassification becomes effective
        shall
        be proportionately reduced.

       

      (4)
        Debt, Asset or Security Distributions. If we, by dividend or otherwise,
        distribute to all or substantially all holders of our common stock evidences
        of
        our indebtedness, assets or securities (but excluding any rights, options
        or
        warrants referred to in paragraph (2) above, any dividend or distribution
        paid
        exclusively in cash referred to in paragraph (5) below or any dividend of
        shares
        of capital stock of any class or series, or similar equity interests, of
        or
        relating to a subsidiary or other business unit in the case of a spin-off
        referred to below, or any dividend or distribution referred to in paragraph
        (1)
        above), each fixed settlement rate in effect immediately prior to the close
        of
        business on the date fixed for the determination of stockholders entitled
        to
        receive such distribution shall be increased by dividing:

       

      
        	
                ·  

              	
                each
                  fixed settlement rate by

              

      

       

      
        	
                ·  

              	
                a
                  fraction, the numerator of which shall be the current market price
                  on the
                  date fixed for such determination less the then fair market value
                  of the
                  portion of the assets or evidences of indebtedness so distributed
                  applicable to one share of our common stock and the denominator
                  of which
                  shall be such current market price.

              

      

       

      In
        the
        case of the payment of a dividend or other distribution on our common stock
        of
        shares of capital stock of any class or series, or similar equity interests,
        of
        or relating to a subsidiary or other business unit of ours, which we refer
        to as
        a “spin-off,” each fixed settlement rate in effect immediately before the close
        of business on the record date fixed for determination of stockholders entitled
        to receive that distribution will be increased by dividing:

       

      
        	
                ·  

              	
                each
                  fixed settlement rate by

              

      

       

      
        	
                ·  

              	
                a
                  fraction, the numerator of which is the average VWAP over the 10
                  trading
                  days from and including the third trading day after the date on
                  which
                  “ex-distribution trading” commences for such dividend or distribution on
                  the NYSE or such other national or regional exchange or market
                  on which
                  our common stock is then listed or quoted, except as described
                  below, and
                  the denominator of which is such average VWAP plus the fair market
                  value,
                  determined as described below, of those shares of capital stock
                  or similar
                  equity interests so distributed applicable to one share of common
                  stock.

              

      

       

      The
        adjustment to each fixed settlement rate under the preceding paragraph will
        occur on the date that is the earlier of:

       

      
        	
                ·  

              	
                the
                  close of business on the 10th trading day after the third trading
                  day
                  after the date on which “ex-distribution trading” commences for such
                  dividend or distribution on the NYSE or such other national or
                  regional
                  exchange or market on which our common stock is then listed or
                  quoted;
                  and

              

      

       

      
        	
                ·  

              	
                the
                  date of the securities being offered in the initial public offering
                  of the
                  spin-off, if that initial public offering is effected simultaneously
                  with
                  the spin-off.

              

      

       

      For
        purposes of this section, “initial public offering” means the first time
        securities of the same class or type as the securities being distributed
        in the
        spin-off are offered to the public for cash.

       

      In
        the
        event of a spin-off that is not effected simultaneously with an initial public
        offering of the securities being distributed in the spin-off, the fair market
        value of the securities to be distributed to holders of our 

       

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      common
        stock means the average VWAP of those securities over the first 10 trading
        days
        from and including the third trading day after the date on which trading
        commences for such securities on the NYSE or such other national or regional
        exchange or market on which such securities are then listed or
        quoted.

       

      If,
        however, an initial public offering of the securities being distributed in
        the
        spin-off is to be effected simultaneously with the spin-off, the fair market
        value of the securities being distributed in the spin-off means the initial
        public offering price, while the current market price of our common stock
        means
        the VWAP of our common stock on the trading day on which the initial public
        offering price of the securities being distributed in the spin-off is
        determined.

       

      (5)
        Cash Distributions. If we, by dividend or otherwise, make distributions to
        all or substantially all holders of our common stock exclusively in cash
        during
        any quarterly period (excluding any cash that is distributed in a reorganization
        event to which the provisions described below under “—Reorganization Events”
apply or as part of a distribution referred to in paragraph (4) above) in
        an
        amount that exceeds $0.27 per share per quarter of our common stock (such
        per
        share amount being referred to at the “reference dividend”), immediately after
        the close of business on the date fixed for determination of the stockholders
        entitled to receive such distribution, each fixed settlement rate shall be
        increased by dividing:

       

      
        	
                ·  

              	
                each
                  fixed settlement rate by

              

      

       

      
        	
                ·  

              	
                a
                  fraction, the numerator of which shall be equal to the current
                  market
                  price on the date fixed for such determination less the per share
                  amount
                  of the distribution and the denominator of which shall be equal
                  to such
                  current market price minus the reference
                  dividend.

              

      

       

      The
        reference dividend is subject to adjustment on an inversely proportional
        basis
        whenever the fixed settlement rates are adjusted, provided that no adjustment
        will be made to the reference dividend for any adjustment made to the fixed
        settlement rates pursuant to this clause (5).

       

      (6)
        Tender and Exchange Offers. In the case that a tender offer or exchange
        offer made by us or any subsidiary for all or any portion of our common stock
        shall expire and such tender or exchange offer (as amended through the
        expiration thereof) shall require the payment to stockholders (based on the
        acceptance (up to any maximum specified in the terms of the tender offer
        or
        exchange offer) of purchased shares) of an aggregate consideration having
        a fair
        market value per share of our common stock that exceeds the VWAP on the trading
        day next succeeding the last date on which tenders or exchanges may be made
        pursuant to such tender offer or exchange offer, then, immediately prior
        to the
        opening of business on the second business day after the date of the last
        time
        (which we refer to as the “expiration time”) tenders or exchanges could have
        been made pursuant to such tender offer or exchange offer (as amended through
        the expiration thereof), each fixed settlement rate shall be increased by
        dividing:

       

      
        	
                ·  

              	
                each
                  fixed settlement rate immediately prior to the close of business
                  on the
                  date of the expiration time by

              

      

       

      
        	
                ·  

              	
                a
                  fraction (A) the numerator of which shall be equal to (x) the product
                  of
                  (i) the current market price on the date of the expiration time
                  and (ii)
                  the number of shares of common stock outstanding (including any
                  tendered
                  or exchanged shares) on the date of the expiration time less (y)
                  the
                  amount of cash consideration plus the fair market value of the
                  aggregate
                  non-cash consideration payable to stockholders pursuant to the
                  tender
                  offer or exchange offer (assuming the acceptance, up to any maximum
                  specified in the terms of the tender offer or exchange offer, of
                  purchased
                  shares), and (B) the denominator of which shall be equal to the
                  product of
                  (x) the current market price on the date of the expiration time
                  and (y)
                  the result of (i) the number of shares of our common stock outstanding
                  (including any tendered or exchanged shares) on the date of the
                  expiration
                  time less (ii) the number of all shares validly tendered, not withdrawn
                  and accepted for payment on the date of the expiration time (such
                  validly
                  tendered or exchanged shares, up to any such maximum, being referred
                  to as
                  the “purchased shares”).

              

      

       

       

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      The
        “current market price” per share of our common stock or any other security on
        any day means the average VWAP for the 20 consecutive trading days preceding
        the
        earlier of the day preceding the day in question and the day before the “ex
        date” with respect to the issuance or distribution requiring such computation.
        For purposes of this paragraph, the term “ex date,” when used with respect to
        any issuance or distribution, means the first date on which our common stock
        or
        such other security, as applicable, trades, regular way, on the principal
        U.S.
        securities exchange or quotation system on which our common stock or such
        other
        security, as applicable, is listed or quoted at that time, without the right
        to
        receive the issuance or distribution.

       

      Reorganization
        Events. The following events are defined as “reorganization
        events”:

       

      
        	
                ·  

              	
                any
                  consolidation or merger of Morgan Stanley with or into another
                  person or
                  of another person with or into Morgan Stanley;
                  or

              

      

       

      
        	
                ·  

              	
                any
                  sale, transfer, lease or conveyance to another person of the property
                  of
                  Morgan Stanley as an entirety or substantially as an entirety;
                  or

              

      

       

      
        	
                ·  

              	
                any
                  statutory share exchange of Morgan Stanley with another person
                  (other than
                  in connection with a merger or acquisition);
                  or

              

      

       

      
        	
                ·  

              	
                any
                  liquidation, dissolution or termination of Morgan
                  Stanley

              

      

       

      in
        each
        case in which holders of our common stock would be entitled to receive cash,
        securities or other property for their shares of common stock.

       

      Upon
        a
        reorganization event, each stock purchase contract shall thereafter, in lieu
        of
        a variable number of shares of our common stock, be settled by delivery of
        exchange property units. An “exchange property unit” represents the right to
        receive the kind and amount of securities, cash and other property receivable
        in
        such reorganization event (without any interest thereon, and without any
        right
        to dividends or distribution thereon which have a record date that is prior
        to
        the applicable settlement date) per share of our common stock by a holder
        of
        common stock that is not a person with which we are consolidated or into
        which
        we are merged or which merged into us or to which such sale or transfer was
        made, as the case may be (we refer to any such person as a “constituent
        person”), or an affiliate of a constituent person to the extent such
        reorganization event provides for different treatment of common stock held
        by
        our affiliates and non-affiliates. In the event all holders of our common
        stock
        (other than any constitutent person and affiliates thereof) do not receive
        the
        same form of consideration to be received in such transaction, the exchange
        property unit that holders of the Corporate Units or Treasury Units will
        be
        entitled to receive will be deemed to be the weighted average of the types
        and
        amounts of consideration received by the holders of our common stock that
        affirmatively make an election (or of all such holders if none make an
        election).

       

      In
        the
        event of such a reorganization event, the person formed by such consolidation,
        or merger or the person which acquires our assets shall execute and deliver
        to
        the transfer agent an agreement providing that the holder of each PEPS Unit
        that
        remains outstanding after the reorganization event (if any) shall have the
        rights described in the preceding paragraph. Such supplemental agreement
        shall
        provide for adjustments to the amount of any securities constituting all
        or a
        portion of an exchange property unit which, for events subsequent to the
        effective date of such reorganization event, shall be as nearly equivalent
        as
        may be practicable to the adjustments provided for in this “—Anti-dilution
        Adjustments” section. The provisions described in the preceding two paragraphs
        shall similarly apply to successive reorganization events.

       

      Holders
        have the right to settle their obligations under the PEPS Units early in
        the
        event of certain cash mergers as described above under “—Early Settlement Upon
        Cash Merger.”

       

      You
        may be
        treated as receiving a constructive distribution from us with respect to
        the
        stock purchase contract if under applicable Treasury regulations (1) the
        settlement rate is adjusted (or fails to be adjusted) and, 

       

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

       

      as
        a
        result of the adjustment (or failure to adjust), your proportionate interest
        in
        our assets or earnings and profits is increased, and (2) the adjustment (or
        failure to adjust) is not made pursuant to a bona fide, reasonable anti-dilution
        formula. Thus, under certain circumstances, an increase in (or a failure to
        decrease) the settlement rate might give rise to a taxable dividend to you
        even
        though you will not receive any cash in connection with the increase in (or
        failure to decrease) the settlement rate. In addition, non-U.S. holders of
        PEPS
        Units may, in certain circumstances, be deemed to have received a distribution
        subject to U.S. federal withholding tax.

       

      In
        addition, we may increase the settlement rate if our board of directors deems
        it
        advisable to avoid or diminish any income tax to holders of our common stock
        resulting from any dividend or distribution of shares (or rights to acquire
        shares) or from any event treated as a dividend or distribution for income
        tax
        purposes or for any other reasons.

       

      Adjustments
        to the settlement rate will be calculated to the nearest 1/10,000th of a
        share.
        No adjustment in the settlement rate will be required unless the adjustment
        would require an increase or decrease of at least one percent in the settlement
        rate. If any adjustment is not required to be made because it would not change
        the settlement rate by at least one percent, then the adjustment will be
        carried
        forward and taken into account in any subsequent adjustment, provided that
        effect shall be given to anti-dilution adjustments not later than the stock
        purchase date for a PEPS Unit.

       

      No
        adjustment to the settlement rate need be made if holders may participate
        in the
        transaction that would otherwise give rise to an adjustment, so long as the
        distributed assets or securities the holders would receive upon settlement
        of
        the PEPS Units, if convertible, exchangeable, or exercisable, are convertible,
        exchangeable or exercisable, as applicable, without any loss of rights or
        privileges for a period of at least 60 days following settlement of the PEPS
        Units.

       

      The
        fixed
        settlement rates will not be adjusted:

       

      
        	
                ·  

              	
                upon
                  the issuance of any shares of our common stock pursuant to any
                  present or
                  future plan providing for the reinvestment of dividends or interest
                  payable on our securities and the investment of additional optional
                  amounts in shares of our common stock under any
                  plan;

              

      

       

      
        	
                ·  

              	
                upon
                  the issuance of any shares of our common stock or options or rights
                  to
                  purchase those shares pursuant to any present or future employee,
                  director
                  or consultant benefit plan or program of or assumed by us or any
                  of our
                  subsidiaries;

              

      

       

      
        	
                ·  

              	
                upon
                  the issuance of any shares of our common stock pursuant to any
                  option,
                  warrant, right or exercisable, exchangeable or convertible security
                  outstanding as of the date the PEPS Units were first
                  issued;

              

      

       

      
        	
                ·  

              	
                for
                  a change in the par value or no par value of the common stock;
                  or

              

      

       

      
        	
                ·  

              	
                for
                  accumulated and unpaid dividends.

              

      

       

      We
        will be
        required, as soon as practicable after the settlement rate is adjusted, to
        provide written notice of the adjustment to the holders of PEPS
        Units.

       

      If
        an
        adjustment is made to each fixed settlement rate pursuant to paragraphs (1)
        through (6) of this “— Anti-dilution Adjustments” section, a corresponding
        adjustment also will be made to the applicable market value solely to determine
        which of the clauses of the definition of settlement rate will be applicable
        on
        the stock purchase date or any cash merger early settlement date, but there
        will
        be no adjustment to the applicable market value as such term is used as the
        denominator in the fraction described in clause (2) of the definition of
        settlement rate set forth in “— Purchase of Common Stock,” provided that if an
        event requiring an adjustment occurs on any trading day during the observation
        period, the VWAP calculated for each trading day before the 

       

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

       

      event
        requiring an adjustment occurs will be adjusted in a manner inversely
        proportional to the adjustment to the fixed settlement rates.

       

      To
        the
        extent that we have a rights plan in effect upon a settlement of a purchase
        contract, you will receive, in addition to our common stock, the rights under
        the rights plan, unless, prior to the settlement of a purchase contract,
        the
        rights have separated from the common stock, in which case each fixed settlement
        rate will be adjusted at the time of separation as if we made a distribution
        to
        all holders of our common stock as described in clause (4) above, subject
        to
        readjustment in the event of the expiration, termination or redemption of
        such
        rights.

       

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      

       

      CERTAIN
        OTHER PROVISIONS OF THE PURCHASE CONTRACT AND PLEDGE
        AGREEMENT

       

      The
        following is a summary of certain other provisions of the purchase contract
        and
        pledge agreement. This summary, together with the summary of some of the
        provisions of the related documents described below, contains a description
        of
        certain other provisions of the purchase contract and pledge agreement but
        is
        not necessarily complete.

       

      No
        Consent to Assumption

       

      Holders
        of
        PEPS Units, by acceptance of PEPS Units, will under the terms of the purchase
        contract and pledge agreement for the relevant series of PEPS Units expressly
        withhold any consent to the assumption (i.e., affirmance) of the stock purchase
        contracts and the PEPS Units, as applicable, by us or our trustee if we become
        the subject of a case under the U.S. Bankruptcy Code or other similar state
        or
        federal law provision for reorganization or liquidation.

       

      Consolidation,
        Merger, Sale or Conveyance

       

      We
        covenant in the purchase contract and pledge agreement for a series of PEPS
        Units that we will not merge or consolidate with, or transfer or lease all
        or
        substantially all of our assets to, any person or entity, unless:

       

      
        	
                •  

              	
                we
                  will be the continuing corporation;
                  or

              

      

       

      
        	
                •  

              	
                the
                  successor corporation or person that acquires all or substantially
                  all of
                  our assets:

              

      

       

      
        	
                o  

              	
                will
                  be a corporation organized under the laws of the United States,
                  a state of
                  the United States or the District of Columbia;
                  and

              

      

       

      
        	
                o  

              	
                will
                  expressly
                  assume all of our obligations under the stock
                  purchase
                  contracts, the purchase contract and pledge agreement, the trust
                  agreement, the junior subordinated indenture, the junior subordinated
                  debentures, the guarantee and the remarketing agreement;
                  and

              

      

       

      
        	
                •  

              	
                immediately
                  after the merger, consolidation, sale, lease or conveyance, we,
                  that
                  person or that successor corporation will not be in default in
                  the
                  performance of the covenants and conditions applicable to us under
                  the stock purchase contracts, the purchase contract and pledge
                  agreement, the trust agreement, the junior subordinated indenture,
                  the
                  junior subordinated debentures, the guarantee or the remarketing
                  agreement.

              

      

       

      Modification

       

      Each
        purchase contract and pledge agreement will contain provisions permitting
        us,
        the stock purchase contract agent or the collateral agent, as the case may
        be,
        to modify the purchase contract and pledge agreement without the consent
        of the
        holders for any of the following purposes:

       

      
        	
                •  

              	
                to
                  evidence the succession of another person to our
                  obligations,

              

      

       

      
        	
                •  

              	
                to
                  add to the covenants for the benefit of holders or to surrender
                  any of our
                  rights or powers under those
                  agreements,

              

      

       

      
        	
                •  

              	
                to
                  evidence and provide for the acceptance of appointment of a successor
                  stock purchase contract agent or a successor collateral agent or
                  securities intermediary,

              

      

       

      
        	
                •  

              	
                to
                  cure any ambiguity or to correct or supplement any provisions that
                  may be
                  inconsistent, and

              

      

       

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      
        	
                •  

              	
                to
                  make any other modifications that do not adversely affect the interest
                  of
                  the holders in any material
                  respect.

              

      

       

      Each
        purchase contract and pledge agreement will contain provisions permitting
        us and
        the stock purchase contract agent and the collateral agent, with the consent
        of
        the holders of not less than a majority of the stock purchase contracts included
        in the relevant series of PEPS Units at the time outstanding, to modify the
        terms of such stock purchase contracts or such purchase contract and pledge
        agreement. However, no such modification may, without the consent of the
        holder
        of each outstanding stock purchase contract affected by the
        modification,

       

      
        	
                •  

              	
                change
                  any distribution date,

              

      

       

      
        	
                •  

              	
                change
                  the amount or type of pledged securities related to the stock purchase
                  contract, impair the right of the holder of any pledged securities
                  to
                  receive distributions on the pledged securities or otherwise adversely
                  affect the holder's rights in or to the pledged
                  securities,

              

      

       

      
        	
                •  

              	
                reduce
                  any contract adjustment payments or change the place or currency
                  of
                  payment,

              

      

       

      
        	
                •  

              	
                impair
                  the right to institute suit for the enforcement of the stock purchase
                  contract or payment of any contract adjustment
                  payments,

              

      

       

      
        	
                •  

              	
                reduce
                  the number of shares of our common stock purchasable under the
                  stock
                  purchase contract, increase the price to purchase shares of our
                  common
                  stock upon settlement of the stock purchase contract or change
                  the stock
                  purchase date (except as contemplated by the purchase contract
                  and pledge
                  agreement), or

              

      

       

      
        	
                •  

              	
                reduce
                  the above-stated percentage of outstanding stock purchase contracts
                  the
                  consent of the holders of which is required for the modification
                  or
                  amendment of the provisions of the stock purchase contracts or
                  the
                  purchase contract and pledge
                  agreement.

              

      

       

      If
        any
        amendment or proposal referred to above would adversely affect only the
        Corporate Units or the Treasury Units of a series of PEPS Units, then only
        the
        affected class of holders will be entitled to vote on the amendment or proposal,
        and the amendment or proposal will not be effective except with the consent
        of
        the holders of not less than a majority of the affected class or of all of
        the
        holders of the affected classes, as applicable.

       

      Title

       

      We,
        the
        stock purchase contract agent and the collateral agent may treat the registered
        owner of any PEPS Units as the absolute owner of the PEPS Units for the purpose
        of making payment and settling the related stock purchase contracts and for
        all
        other purposes.

       

      Replacement
        of Certificates

       

      The
        PEPS
        Units will be issued initially in certificated, registered form. Any mutilated
        PEPS Unit certificate will be replaced by us at the expense of the holder
        upon
        surrender of the certificate to the stock purchase contract agent. PEPS Unit
        certificates that become destroyed, lost or stolen will be replaced by us
        at the
        expense of the holder upon delivery to us and the stock purchase contract
        agent
        of evidence of their destruction, loss or theft satisfactory to us and the
        stock
        purchase contract agent. In the case of a destroyed, lost or stolen PEPS
        Unit
        certificate, an indemnity satisfactory to the stock purchase contract agent
        and
        us may be required at the expense of the holder of the PEPS Units evidenced
        by
        the certificate before a replacement will be issued.

       

      Notwithstanding
        the foregoing, we will not be obligated to issue any PEPS Unit certificates
        on
        or after the business day immediately preceding the earliest of any early
        settlement 

       

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

       

      date,
        any
        cash merger early settlement date, the stock purchase date for any stock
        purchase contracts or after the stock purchase contracts have terminated.
        The
        purchase contract and pledge agreement will provide that, in lieu of the
        delivery of a replacement PEPS Unit certificate following any of these dates,
        the stock purchase contract agent, upon delivery of the evidence and indemnity
        described above, will deliver the shares of our common stock issuable pursuant
        to the stock purchase contracts included in the PEPS Units evidenced by the
        certificate or, if the stock purchase contracts have terminated prior to
        the
        stock purchase date, transfer the pledged securities included in the PEPS
        Units
        evidenced by the certificate.

       

      Information
        Concerning the Stock Purchase Contract Agent

       

      The
        Bank
        of New York initially will be the stock purchase contract agent under each
        purchase contract and pledge agreement. The stock purchase contract agent
        will
        act as the agent for the holders of each series of PEPS Units from time to
        time.
        The purchase contract and pledge agreement will not obligate the stock purchase
        contract agent to exercise any discretionary powers in connection with a
        default
        under the terms of the PEPS Units or the purchase contract and pledge
        agreement.

       

      Each
        purchase contract and pledge agreement will contain provisions limiting the
        liability of the stock purchase contract agent. Each purchase contract and
        pledge agreement will contain provisions under which the stock purchase contract
        agent may resign or be replaced. Any such resignation or replacement would
        be
        effective upon the acceptance of appointment by a successor.

       

      Information
        Concerning the Collateral Agent and Securities
        Intermediary

       

      The
        Bank
        of New York initially will be the collateral agent and securities intermediary
        under the purchase contract and pledge agreements.

       

      In
        its
        capacity as collateral agent, The Bank of New York will act solely as our
        agent
        and will not assume any obligation or relationship of agency or trust for
        or
        with any of the holders of the PEPS Units, except for the obligations owed
        by a
        pledgee of property to the owner of the property under the relevant purchase
        contract and pledge agreement and applicable law.

       

      All
        property delivered to the securities intermediary pursuant to each purchase
        contract and pledge agreement will be credited to a collateral account
        established by the securities intermediary for the collateral agent. The
        securities intermediary will treat the stock purchase contract agent as entitled
        to exercise all rights relating to any financial asset credited to such
        collateral account, subject to the provisions of such purchase contract and
        pledge agreement.

       

      Each
        purchase contract and pledge agreement will contain provisions limiting the
        liability of the collateral agent and securities intermediary and provisions
        under which they may resign or be replaced. This resignation or replacement
        would be effective upon the acceptance of appointment by a
        successor.

       

      Governing
        Law

       

      Each
        purchase contract and pledge agreement and the stock purchase contracts will
        be
        governed by, and construed in accordance with, the laws of the State of New
        York.

       

      Miscellaneous

       

      Should
        you
        elect to substitute the related pledged securities, create Treasury Units
        or
        recreate Corporate Units, you will be responsible for any commissions, fees
        or
        other expenses incurred in acquiring the pledged securities to be substituted,
        and we will not be responsible for any of those fees or expenses.

       

      Each
        purchase contract and pledge agreement will provide that we will pay all
        fees
        and expenses related to the offering of the relevant series of PEPS Units,
        including the fees and expenses of the stock purchase contract 

       

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      agent
        and
        the fees and expenses relating to the enforcement by the stock purchase contract
        agent of the rights of the holders of the PEPS Units of such
        series.

       

      Each
        purchase contract and pledge agreement will provide that we will pay all
        fees
        and expenses related to the retention of the collateral agent and securities
        intermediary.

       

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      DESCRIPTION
        OF THE MORGAN STANLEY CAPITAL TRUSTS

       

      Morgan
        Stanley Capital Trust A, Morgan Stanley Capital Trust B and Morgan Capital
        Trust
        C (each a “Morgan Stanley Trust” and collectively, the “Morgan Stanley Trusts”)
        will be formed as Delaware statutory trusts. The Morgan Stanley Trusts will
        exist solely to:

       

      
        	
                •  

              	
                issue
                  and sell their common securities to Morgan
                  Stanley;

              

      

       

      
        	
                •  

              	
                issue
                  and sell their trust preferred securities as part of this
                  offering;

              

      

       

      
        	
                •  

              	
                use
                  the proceeds from the sale of their common securities and trust
                  preferred
                  securities to purchase junior subordinated debentures from Morgan
                  Stanley;
                  and

              

      

       

      
        	
                •  

              	
                engage
                  in other activities that are necessary, convenient or incidental
                  to these
                  purposes.

              

      

       

      The
        name
        and address of the Delaware trustee for each Morgan Stanley Trust will be
        The
        Bank of New York (Delaware), White Clay Center, Route 273, Newark, Delaware
        19711, and the name and address of the property trustee, the guarantee trustee
        and the indenture trustee for each Morgan Stanley Trust will be The Bank
        of New
        York, 101 Barclay Street, Floor 8 West, New York, New York 10286. The principal
        offices and telephone number of each Morgan Stanley Trust are 1585 Broadway,
        New
        York, New York 10036 and (212) 761-4000.

       

      We,
        as
        holder of the common securities of each Morgan Stanley Trust, intend to select
        our employees, officers or affiliates to serve as administrators of the Morgan
        Stanley Trusts. Only we, as direct or indirect owner of the common securities,
        can remove or replace the administrators. In addition, we can increase or
        decrease the number of administrators. Also, we, as direct or indirect holder
        of
        the common securities of the Morgan Stanley Trusts, will generally have the
        sole
        right to remove or replace the property trustee and Delaware trustee. However,
        if a default with respect to the junior subordinated debentures occurs, then,
        so
        long as that default is continuing, the holders of a majority in liquidation
        amount of the outstanding trust preferred securities of the Morgan Stanley
        Trusts may remove and replace the property trustee and Delaware trustee for
        the
        Morgan Stanley Trusts at any time.

       

      We
        will
        pay all fees and expenses related to the organization of each Morgan Stanley
        Trust and the offering of the trust preferred securities. We will also pay
        all
        ongoing costs and expenses of the Morgan Stanley Trusts, except obligations
        under the common securities and trust preferred securities.

       

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      DESCRIPTION
        OF THE TRUST PREFERRED SECURITIES

       

      The
        following is a summary of some of the terms of the trust preferred securities.
        This summary, together with the summary of some of the provisions of the
        related
        documents described below, contains a description of the material terms of
        the
        trust preferred securities but is not necessarily complete.

       

      General

       

      The
        Morgan
        Stanley Trusts will issue the trust preferred securities under the terms
        of the
        trust agreements. The trust agreements will be deemed to be qualified under
        the
        Trust Indenture Act. The Bank of New York will act as the property trustee
        for
        purposes of complying with the Trust Indenture Act. The terms of the trust
        preferred securities will include those stated in the trust agreements and
        the
        Delaware Statutory Trust Act and those made part of the trust agreements
        by the
        Trust Indenture Act.

       

      The
        trust
        preferred securities will have an initial stated amount of $1,000 per trust
        preferred security and will be mandatorily redeemable for their liquidation
        amount upon the redemption or maturity of the related junior subordinated
        debentures (initially February 17, 2042, but subject to change as described
        below under “—Redemption”).

       

      The
        trust
        preferred securities will rank equal to, and payments will be made on the
        trust
        preferred securities on a proportional basis with, the common securities,
        as
        such term is described under “The Morgan Stanley Capital Trusts.” However, the
        trust preferred securities will rank prior to the common securities as to
        payment if there occurs with respect to the junior subordinated debentures
        an
        event of default or a default as a result of a failure to pay amounts under
        the
        junior subordinated debentures when due as described under “Description of Trust
        Preferred Securities—Liquidation Distribution Upon Dissolution.” Please note,
        however, that the aggregate liquidation amount of the common securities for
        each
        Morgan Stanley Trust is only $10,000. The trust agreements do not permit
        the
        Morgan Stanley Trusts to issue any securities other than the common securities
        and the trust preferred securities or to incur any indebtedness.

       

      Morgan
        Stanley will register each series of the junior subordinated debentures in
        the
        name of the applicable Morgan Stanley Trust. The property trustee will hold
        the
        junior subordinated debentures in trust for the benefit of the holders of
        the
        trust preferred securities and the common securities.

       

      Distributions

       

      Subject
        to
        the deferral provisions described below, interest on each series of the junior
        subordinated debentures, and, accordingly, distributions on the related trust
        preferred securities, will be cumulative and will be fixed initially at an
        annual rate of 6% of the stated amount. Distributions on the trust preferred
        securities will accumulate from the date of issuance of the PEPS Units and
        will
        be payable quarterly in arrears on each February 17, May 17, August 17 and
        November 17 occurring prior to and including the date of a successful
        remarketing, commencing February 17, 2008, and when, as and if funds are
        available for distributions. We may, however, in connection with a successful
        remarketing, elect to change the distribution dates effective from and after
        the
        remarketing settlement date, including an election to pay distributions
        semi-annually.

       

      The
        rate
        on any series of junior subordinated debentures will be reset in connection
        with
        the remarketing of such series as described below under “Description of the
        Junior Subordinated Debentures—Remarketing.” In addition, the frequency of
        interest payments of any series of junior subordinated debentures may be
        changed
        in connection with the remarketing of any series of trust preferred securities
        as described under “Description of the Junior Subordinated
        Debentures—Remarketing.”

       

      We
        may at
        our option, and will if so directed by any then applicable regulatory authority,
        defer cash payments of interest on any series of junior subordinated debentures
        at any time or from time to time provided that we will not defer cash payments
        of interest with respect to any series of junior subordinated debentures
        without
        deferring cash payments of interest with respect to all remaining series
        of
        junior subordinated debentures. We may not defer interest payments with respect
        to any series of junior subordinated debentures 

       

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

       

      for
        any
        period of time that (i) exceeds 20 consecutive interest payment dates (or
        the
        equivalent if interest periods are not at the time quarterly), or (ii) extends
        beyond the stated maturity date or any redemption date of such series of
        junior
        subordinated debentures. Any deferred payments of interest will accrue
        additional interest at the applicable rate then borne by such series of junior
        subordinated debentures. As a consequence, each Morgan Stanley Trust will
        accumulate corresponding distributions on the related series of trust preferred
        securities. Accumulated distributions will accumulate as interest on the
        junior
        subordinated debentures, from the relevant distribution date during any deferral
        period, at the rate originally applicable to the junior subordinated debentures
        compounded on each distribution date with respect to the trust preferred
        securities, to the extent permitted by applicable law.

       

      We
        covenant that, if, with respect to any series of junior subordinated debentures,
        we defer interest on any interest payment date on or prior to the stock purchase
        date for such series, we will notify any then applicable regulatory authority
        and, if we have elected to defer interest with respect to a series of junior
        subordinated debentures and there is a failed final remarketing with respect
        to
        such series, then we will pay the holders the deferred interest in additional
        subordinated notes, which will be distributed by the relevant Morgan Stanley
        Trust to the holders of the related series of trust preferred securities.
        If we
        issue any additional subordinated notes, the foregoing covenant will also
        apply
        to the payment of interest on and principal of these notes.

       

      After
        we
        give notice of any deferral of contract adjustment payments or interest on
        any
        series of junior subordinated debentures and during any period that we are
        deferring interest on such series of junior subordinated debentures (and,
        accordingly, the relevant Morgan Stanley Trust is accumulating distributions
        on
        the related series of trust preferred securities) or have issued but not
        yet
        repaid in full additional subordinated notes in respect of deferred interest,
        we
        will be restricted, subject to certain exceptions, from making certain payments,
        including declaring or paying any dividends or making any distributions on,
        or
        redeeming, purchasing, acquiring or making a liquidation payment with respect
        to, shares of our capital stock, as described under “Description of the Junior
        Subordinated Debentures—Restrictions on Certain Payments.”

       

      Each
        Morgan Stanley Trust will make distributions on the related series of trust
        preferred securities on the relevant distribution dates to the extent that
        it
        has funds available therefor. The trust funds available for distribution
        to you
        as a holder of a series of trust preferred securities will be limited to
        payments received from us on the related series of junior subordinated
        debentures held by each Morgan Stanley Trust. We will guarantee the payment
        of
        distributions on the trust preferred securities out of moneys held by the
        relevant Morgan Stanley Trust to the extent of available trust funds held
        by the
        applicable Morgan Stanley Trust, as described under “Description of the
        Guarantee.” Our obligations under the junior subordinated debentures are
        subordinate and junior in right of payment to all our senior debt.

       

      When
        a
        distribution date is not a business day, the Morgan Stanley Trusts will make
        the
        distribution on the next business day without interest. The term “distribution”
includes any interest payable on unpaid distributions unless otherwise
        stated.

       

      Distributions
        made for periods prior to the stock purchase date will be calculated on the
        basis of a 360-day year consisting of twelve 30-day months, and distributions
        for periods beginning on or after such date will be calculated on the same
        basis
        as the reset interest rate on the junior subordinated debentures is
        calculated.

       

      Payment
        of Distributions

       

      Distributions
        on the trust preferred securities will be payable to holders, including the
        collateral agent, as they appear on the books and records of the Morgan Stanley
        Trusts on the relevant record dates. The record dates will be the first day
        of
        the month in which the relevant distribution date falls.

       

      The
        Morgan
        Stanley Trusts will pay distributions through the property trustee. The property
        trustee will hold amounts received from the junior subordinated debentures
        in
        the payment account for the benefit of the holders of the related series
        of
        trust preferred securities and the related series of common
        securities.

       

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

       

      If
        a
        distribution is payable on a day that is not a business day, then that
        distribution will be paid on the next day that is a business day, and without
        any interest or other payment for any delay, with the same force and effect
        as
        if made on the distribution date.

       

      A
        business
        day is a day other than (a) a Saturday or Sunday, and (b) a day on which
        banking
        institutions in The City of New York, New York are authorized or required
        by law
        or executive order to close.

       

      Remarketing

       

      Unless
        a
        special event redemption or a termination event has occurred, or all the
        stock
        purchase contracts have settled early as a result of an early settlement
        or an
        early settlement upon a cash merger, or all of the outstanding PEPS Units
        are
        held in the form of Treasury Units and none of the holders of the related
        trust
        preferred securities has elected to participate in the remarketing, as described
        under “Description of the Trust Preferred Securities—Remarketing,”
        or
        all of the holders of PEPS Units have settled their stock purchase contracts
        with separate cash, as described above under “—Notice to Settle with Cash,”
        and none of the
        holders of the related trust preferred securities have elected to participate
        in
        the remarketing, we, through the remarketing agent, will attempt to
        remarket the trust preferred securities in a process we call “remarketing.” All
        of the outstanding trust preferred securities held as part of Corporate Units
        will be remarketed in the remarketing other than those the holders of which
        have
        elected (i) not to participate in the remarketing and (ii) to settle the
        related
        stock purchase contract with separate cash, whether or not the remarketing
        is
        successful. See “Description of the Stock Purchase Contracts—Notice to Settle
        with Cash.” If you hold trust preferred securities separately and not as part of
        the Corporate Units, your trust preferred securities will not be remarketed
        unless you elect to participate in the remarketing. After any successful
        remarketing, the interest rate, interest payment dates and other terms of
        each
        series of the underlying junior subordinated debentures may change, as a
        result
        of which the distribution rate on and certain other terms of all of the related
        trust preferred securities may also change, even those that were not included
        in
        the remarketing. See “Description of the Junior Subordinated
        Debentures—Remarketing.”

       

      Under
        the
        remarketing agreement, on or prior to 5:00 p.m., New York City time, on the
        second business day immediately preceding the beginning of any remarketing
        period holders of the trust preferred securities not held as part of the
        related
        series of Corporate Units may elect to have their trust preferred securities
        included in the remarketing and remarketed in the same manner and at the
        same
        price as the trust preferred securities held as part of the Corporate Units
        by
        delivering their trust preferred securities along with a notice to the
        collateral agent. The collateral agent will hold these trust preferred
        securities or their proceeds, as the case may be, in an account separate
        from
        the collateral account in which the securities pledged to secure the obligations
        of the holders of Corporate Units under the stock purchase contracts will
        be
        held. Holders of the trust preferred securities electing to have their trust
        preferred securities remarketed will also have the right to withdraw that
        election on or prior to 5:00 p.m., New York City time, on the second business
        day immediately preceding the beginning of any remarketing period. If the
        remarketing agent cannot remarket a series of trust preferred securities
        during
        any remarketing period, the remarketing agent will promptly return such trust
        preferred securities not held as part of Corporate Units to the collateral
        agent
        for release to the holders.

       

      If
        the
        remarketing of any series of trust preferred securities is successful, the
        remarketing agent will remit to the collateral agent the proceeds of such
        remarketing for payment to such participating holders of trust preferred
        securities not held as part of Corporate Units.

       

      Redemption

       

      When
        Morgan Stanley repays or redeems a series of the junior subordinated debentures,
        whether at the final maturity date or upon earlier redemption, the property
        trustee will apply the proceeds from the repayment or redemption to redeem
        the
        related trust preferred securities and common securities having an aggregate
        liquidation amount equal to that portion of the principal amount of such
        series
        of junior subordinated debentures being repaid or redeemed. The redemption
        price
        per trust preferred security will equal the $1,000 liquidation amount, plus
        accrued and unpaid distributions to but excluding the redemption date for
        such
        trust 

       

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      preferred
        securities, provided that, in the case of an early redemption in
        connection with a special event (as defined below), the redemption price
        per
        security will be the redemption amount determined as described below plus
        the
        amount of deferred interest (including compound interest thereon) through
        the
        date of redemption.

       

      In
        the
        case of an early redemption in connection with a special event prior to the
        remarketing settlement date for a series of trust preferred securities, the
        redemption price payable in respect of all junior subordinated debentures
        included in PEPS Units of the related series will be distributed to the
        collateral agent, which in turn will apply an amount equal to the redemption
        amount (as defined below) of such redemption price to purchase the treasury
        portfolio on behalf of the holders of the PEPS Units of such series and remit
        the remaining portion (net of fees and expenses, if any), if any, of such
        redemption price to the stock purchase contract agent for payment to the
        holders
        of such series of PEPS Units. Thereafter, the applicable ownership interests
        in
        the treasury portfolio will be substituted for such series of junior
        subordinated debentures and will be pledged to us through the collateral
        agent
        to secure the related PEPS Unit holders’ obligations to purchase shares of our
        common stock under the related stock purchase contracts. Holders of junior
        subordinated debentures of such series that are not part of PEPS Units will
        directly receive proceeds from the redemption of the junior subordinated
        debentures.

       

      If
        less
        than all of the junior subordinated debentures of a series are to be repaid
        or
        redeemed, then the aggregate liquidation amount of the related trust preferred
        securities and related common securities to be redeemed will be allocated
        in
        proportion to their respective aggregate liquidation amounts, except in the
        case
        of an event of default or a default under such junior subordinated debentures
        as
        a result of any failure by Morgan Stanley to pay any amounts under such junior
        subordinated debentures when due. Please note, however, that the aggregate
        liquidation amount of the common securities of each Morgan Stanley Trust
        is only
        $10,000.

       

      Subject
        to
        obtaining any then required regulatory approval, Morgan Stanley may redeem
        the
        junior subordinated debentures included in a series of Corporate
        Units:

       

      
        	
                ·  

              	
                in
                  whole or in part, on one or more occasions, at any time on or after
                  the
                  date (the “first optional redemption date” that is the later of (a) August
                  17, 2012 if the relevant stock purchase date is on August 17, 2010
                  (or if
                  such day is not a business day, the next succeeding business day)
                  and the
                  third anniversary of the relevant stock purchase date if such date
                  is
                  after August 17, 2010 (or if such day is not a business day, the
                  next
                  succeeding business day) and (b) if we are deferring interest on
                  the
                  related junior subordinated debentures on the applicable stock
                  purchase
                  date, the date that is five years after the beginning of the relevant
                  deferral period; and

              

      

       

      
        	
                ·  

              	
                in
                  whole, but not in part, at any time prior to the remarketing settlement
                  date for the related series of trust preferred
                  securities:

              

      

       

      
        	
                ·  

              	
                within
                  90 days following the occurrence and continuation of a tax event,
                  accounting event or an investment company event, each as defined
                  below,

              

      

       

      
        	
                ·  

              	
                following
                  the occurrence and continuation of a regulatory event, rating agency
                  event
                  or property trustee event, each as defined
                  below.

              

      

       

      If
        then
        required under the rules and regulations of any applicable regulatory authority,
        Morgan Stanley will obtain the prior approval of such applicable regulatory
        authority before exercising its redemption rights described in this offering
        memorandum.

       

      A
        redemption of the junior subordinated debentures will cause a mandatory
        redemption of the related series of the trust preferred securities and the
        common securities. See “Description of Junior Subordinated
        Debentures—Redemption.”

       

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      “Special
        event” means a tax event, an accounting event, an investment company event, a
        regulatory event, a rating agency event or a property trustee
        event.

       

      “Tax
        event” means the receipt by Morgan Stanley of an opinion of counsel experienced
        in such matters, who is not an officer or employee of Morgan Stanley or any
        of
        its affiliates, to the effect that as a result of:

       

      
        	
                ·  

              	
                any
                  amendment to, or change, including any announced prospective change,
                  in
                  the laws, or any regulations thereunder, of the United States or
                  any
                  political subdivision thereof or taxing authority therein affecting
                  taxation which is effective on or after the date of this offering
                  memorandum;

              

      

       

      
        	
                ·  

              	
                any
                  official or administrative pronouncement or action or judicial
                  decision
                  interpreting or applying such laws or regulations which is announced
                  on or
                  after the date of this offering memorandum;
                  or

              

      

       

      
        	
                ·  

              	
                any
                  threatened challenge asserted in connection with an audit of a
                  Morgan
                  Stanley Trust, Morgan Stanley or Morgan Stanley’s subsidiaries, or a
                  threatened challenge asserted in writing against any other taxpayer
                  that
                  has raised capital through the issuance of securities that are
                  substantially similar to the junior subordinated debentures or
                  the PEPS
                  Units, which challenge becomes publicly known or otherwise becomes
                  widely
                  known to tax practitioners on or after the date of this offering
                  memorandum;

              

      

       

      there
        is
        more than an insubstantial increase in the risk that:

       

      
        	
              	
                (1)

              	
                a
                  Morgan Stanley Trust is, or will be within 90 days of the delivery
                  of the
                  opinion of counsel, subject to U.S. federal income tax with respect
                  to
                  income received or accrued on the junior subordinated
                  debentures;

              

      

       

      
        	
              	
                (2)

              	
                interest
                  payable by Morgan Stanley on the junior subordinated debentures
                  is not, or
                  will not be within 90 days of the delivery of the opinion of counsel,
                  deductible by Morgan Stanley, in whole or in part, for U.S. federal
                  income
                  tax purposes; or

              

      

       

      
        	
              	
                (3)

              	
                a
                  Morgan Stanley Trust is, or will be within 90 days of the delivery
                  of the
                  opinion of counsel, subject to more than a de minimis amount of
                  taxes, duties or other governmental
                  charges.

              

      

       

      If
        any
        Morgan Stanley Trust is the holder of all the junior subordinated debentures
        and
        any of the events referred to in clause (1) or (3) above shall occur, Morgan
        Stanley will pay any additional sums required so that distributions on the
        trust
        preferred securities will not be reduced by any additional taxes, duties
        or
        other governmental charges payable by such Morgan Stanley Trust as a result
        of
        the tax event. See “Description of Junior Subordinated Debentures—Additional
        Sums.”

       

      “Accounting
        event” means the receipt by the audit committee of our Board of Directors of a
        written report in accordance with Statement on Auditing Standards (“SAS”) No.
        97, “Amendment to SAS No. 50— Reports on the Application of Accounting
        Principles,” from our independent auditors, provided at the request of
        management, to the effect that, as a result of a change in accounting rules
        after the date of original issuance of the junior subordinated debentures,
        we
        must either (a) account for the stock purchase contracts as derivatives under
        SFAS 133 (or otherwise mark-to-market or measure the fair value of all or
        any
        portion of the stock purchase contracts with changes appearing in our income
        statement) or (b) account for PEPS Units using the if-converted method under
        SFAS 128, and that such accounting treatment will cease to apply upon redemption
        of the relevant series of junior subordinated debentures.

       

      “Investment
        company event” means the receipt by Morgan Stanley of an opinion of counsel
        experienced in such matters, who is not an officer or employee of Morgan
        Stanley
        or any of its affiliates, to the effect that, as a result of the occurrence
        of a
        change in law or regulation or a written change, including any announced
        prospective change, in interpretation or application of law or regulation
        by any
        legislative body, court, governmental agency or regulatory authority, there
        is
        more than an insubstantial risk that the Morgan Stanley 

       

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

       

      Trusts
        are
        or will be considered an “investment company” that is required to be registered
        under the Investment Company Act, which change or prospective change becomes
        effective or would become effective, as the case may be, on or after the
        date of
        this offering memorandum.

       

      “Property
        trustee event” means the occurrence of certain events of bankruptcy or
        insolvency with respect to the property trustee or all or substantially all
        of
        its property if a successor property trustee has not been appointed within
        90
        days of the event.

       

      “Regulatory
        event” means the determination by Morgan Stanley, based on the opinion of
        counsel experienced in such matters, who may be an employee of Morgan Stanley
        or
        any of its affiliates, that as a result of:

       

      
        	
                ·  

              	
                any
                  amendment to, clarification of or change (including any announced
                  prospective change) in applicable laws or regulations or official
                  interpretations thereof or policies with respect thereto,
                  or

              

      

       

      
        	
                ·  

              	
                any
                  official administrative pronouncement or judicial decision interpreting
                  or
                  applying such laws or regulations,

              

      

       

      which
        amendment, clarification, change, pronouncement or decision is effective
        or
        announced on or after the date of this offering memorandum, there is more
        than
        an insubstantial risk that the PEPS Units will no longer constitute tier
        1 (or
        its equivalent) capital of Morgan Stanley or any holding company of which
        Morgan
        Stanley is a subsidiary for the purposes of the capital adequacy guidelines
        or
        policies of any applicable regulatory body or governmental
        authority.

       

      “Rating
        agency event” means the determination by Morgan Stanley of a change by any
        nationally recognized statistical rating organization within the meaning
        of
        Section 3(a)(62) of the Securities Exchange Act of 1934, as amended (the
        “Exchange Act”), that currently publishes a rating for Morgan Stanley (a “rating
        agency”) in the equity credit criteria for securities such as the PEPS Units
        resulting in a lower equity credit to Morgan Stanley than the equity credit
        assigned by such rating agency to the PEPS Units on the date of this offering
        memorandum.

       

      “Redemption
        amount” means, for each junior subordinated debenture, prior to the remarketing
        settlement date for such junior subordinated debenture, the product of the
        principal amount of such junior subordinated debenture and a fraction, the
        numerator of which is the treasury portfolio purchase price, as defined below,
        and the denominator of which is the applicable principal amount, as defined
        below; provided that in no event shall the redemption amount for any junior
        subordinated debenture be less than the principal amount of such junior
        subordinated debenture.

       

      “Treasury
        portfolio purchase price” means the lowest aggregate ask-side price quoted by a
        primary U.S. government securities dealer to the quotation agent, as defined
        below, between 9:00 a.m. and 11:00 a.m., New York City time on the third
        business day immediately preceding the special event redemption date for
        the
        purchase of the treasury portfolio described below for settlement on the
        special
        event redemption date.

       

      “Applicable
        principal amount” means the aggregate principal amount of the applicable series
        of junior subordinated debentures on the special event redemption
        date.

       

      “Treasury
        portfolio” means as of any date a portfolio of U.S. Treasury securities (or
        principal or interest strips thereof) that mature on or prior to the second
        business day immediately preceding the remarketing settlement date for the
        next
        remarketing period in an aggregate amount at maturity equal to the applicable
        principal amount and with respect to each scheduled interest payment date
        on the
        junior subordinated debentures that occurs after the special event redemption
        date, to and including such remarketing settlement date, U.S. Treasury
        securities (or principal or interest strips thereof) that mature on or prior
        to
        the business day immediately preceding such scheduled interest payment date
        in
        an aggregate amount at maturity equal to the 

       

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

       

      aggregate
        interest payment (assuming no reset of the interest rate) that would be due
        on
        the applicable principal amount of the junior subordinated debentures on
        such
        date.

       

      “Quotation
        agent” means any primary U.S. government securities dealer selected by
        us.

       

      Redemption
        Procedures

       

      Each
        Morgan Stanley Trust may the related series of redeem trust preferred securities
        only in an amount equal to the funds it has on hand and legally available
        to pay
        the redemption price.

       

      The
        property trustee will mail written notice of the redemption of the trust
        preferred securities to the registered holders at least 15 but not more than
        30
        days before the date fixed for redemption. If a Morgan Stanley Trust gives
        a
        notice of redemption, then, by 12:00 noon, New York City time, on the date
        of
        redemption, if the funds are available for payment, the property trustee
        will,
        for trust preferred securities held in book-entry form:

       

      
        	
                •  

              	
                irrevocably
                  deposit with DTC funds sufficient to pay the applicable redemption
                  price;
                  and

              

      

       

      
        	
                •  

              	
                give
                  DTC irrevocable instructions and authority to pay the redemption
                  price to
                  the holders of the related series of trust preferred
                  securities.

              

      

       

      With
        respect to trust preferred securities not held in book-entry form, if funds
        are
        available for payment, the property trustee will:

       

      
        	
                •  

              	
                irrevocably
                  deposit with the paying agent funds sufficient to pay the applicable
                  redemption price; and

              

      

       

      
        	
                •  

              	
                give
                  the paying agent irrevocable instructions and authority to pay
                  the
                  redemption price to the holders of trust preferred securities upon
                  surrender of their certificates evidencing the trust preferred
                  securities.

              

      

       

      Notwithstanding
        the above, distributions payable on or prior to the date of redemption for
        any
        trust preferred securities called for redemption will be payable to the holders
        of the trust preferred securities on the relevant record dates.

       

      Once
        notice of redemption is given and funds are deposited, then all rights of
        the
        holders of the trust preferred securities called for redemption will terminate,
        except the right to receive the redemption price, but without any interest
        or
        other payment for any delay in receiving it. If notice of redemption is given
        and funds deposited as required, the trust preferred securities then will
        cease
        to be outstanding.

       

      If
        any
        date fixed for redemption is not a business day, then payment of the redemption
        price will be made on the next day that is a business day, without any interest
        or other payment for the delay.

       

      If
        payment
        of the redemption price for the trust preferred securities called for redemption
        is improperly withheld or refused and not paid either by the relevant Morgan
        Stanley Trust or by Morgan Stanley under the guarantee, then distributions
        on
        those trust preferred securities will continue to accumulate at the then
        applicable rate, from and including the date of redemption to but excluding
        the
        date of actual payment. In this case, the actual distribution date will be
        the
        date fixed for redemption for purposes of calculating the redemption
        price.

       

      Subject
        to
        the above and applicable law, including United States federal securities
        laws,
        Morgan Stanley or its affiliates may at any time and from time to time purchase
        outstanding trust preferred securities by tender, in the open market or by
        private agreement, and may resell trust preferred securities.

       

      If
        less
        than all the trust preferred securities and common securities are redeemed,
        then
        the aggregate liquidation amount of the trust preferred securities and the
        common securities to be redeemed normally will be 

       

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      allocated
        in proportion to their respective aggregate liquidation amounts. However,
        if
        there has occurred with respect to a series of junior subordinated debentures
        an
        event of default or a default as a result of any failure by Morgan Stanley
        to
        pay any amounts under such junior subordinated debentures when due, holders
        of
        the related series of trust preferred securities will be paid in full before
        any
        payments are made to holders of the related series of common securities.
        Please
        note, however, that the aggregate liquidation amount of the common securities
        for any Morgan Stanley Trust is only $10,000. The property trustee will select
        the particular trust preferred securities to be redeemed on the pro
        rata basis described above not more than 30 days prior to the date of
        redemption by any method the property trustee deems fair and appropriate
        or, if
        the trust preferred securities are then held in book-entry form, in accordance
        with DTC’s customary procedures. For federal income tax purposes, unless
        otherwise prevented, we and the trusts intend to treat such partial redemption,
        and in purchasing the PEPS Units or the related trust preferred securities,
        the
        holders agree to treat such partial redemption, as an in kind distribution
        of
        the related series of junior subordinated debentures to the holders of such
        trust preferred securities in redemption of such trust preferred securities
        chosen to be redeemed immediately followed by a cash redemption by us of
        the
        related series of junior subordinated debentures held by such
        holders.

       

      Liquidation
        Distribution upon Dissolution

       

      The
        amount
        payable on the trust preferred securities in the event of any liquidation
        of the
        related Morgan Stanley Trust is the liquidation amount of $1,000 per trust
        preferred security plus accumulated but unpaid distributions, subject to
        certain
        exceptions, which may be paid in the form of a distribution of the related
        series of junior subordinated debentures.

       

      Morgan
        Stanley may at any time dissolve a Morgan Stanley Trust, subject to obtaining
        any then required regulatory approval. If a Morgan Stanley Trust dissolves
        and
        it has paid or made reasonable provision to pay, in accordance with Section
        3808(e) of the Delaware Statutory Trust Act, the liabilities owed to its
        creditors, the related series of junior subordinated debentures may be
        distributed to the holders of the related series of trust preferred securities
        and common securities.

       

      The
        trust
        agreements each state that the relevant Morgan Stanley Trust will dissolve
        automatically on February 17, 2048, or earlier upon:

       

      
        	
              	
                (1)

              	
                the
                  bankruptcy, dissolution or liquidation of Morgan
                  Stanley;

              

      

       

      
        	
              	
                (2)

              	
                written
                  direction by Morgan Stanley to the property trustee to dissolve
                  a Morgan
                  Stanley Trust and distribute the related series of junior subordinated
                  debentures to the holders of the related series of trust preferred
                  securities, which direction, subject to the foregoing restrictions,
                  is
                  optional and wholly within the discretion of Morgan
                  Stanley;

              

      

       

      
        	
              	
                (3)

              	
                the
                  redemption of all the trust preferred securities of a series in
                  connection
                  with the redemption of all the junior subordinated debentures of
                  such
                  series or the maturity of such series of junior subordinated debentures;
                  or

              

      

       

      
        	
              	
                (4)

              	
                the
                  entry of an order for the dissolution of a Morgan Stanley Trust
                  by a court
                  of competent jurisdiction.

              

      

       

      If
        a
        Morgan Stanley Trust dissolves as described in clauses (1), (2) or (4) above,
        after the trust pays all amounts owed to creditors, holders of the related
        series of trust preferred securities and the related series of common securities
        will be entitled to receive:

       

      
        	
                •  

              	
                junior
                  subordinated debentures of such series having a principal amount
                  equal to
                  the liquidation amount of the related series of trust preferred
                  securities
                  and related series of common securities of the holders; or, if
                  this is not
                  practical,

              

      

       

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      
        	
                •  

              	
                a
                  cash amount equal to, in the case of holders of such series of
                  trust
                  preferred securities, the aggregate liquidation amount plus accumulated
                  but unpaid distributions to but excluding the date of
                  payment.

              

      

       

      If
        a
        Morgan Stanley Trust cannot pay the full amount due on the related series
        of
        trust preferred securities and the related series of common securities because
        it has insufficient assets for payment, then the amounts such Morgan Stanley
        Trust owes on such series of trust preferred securities will be proportionately
        allocated. The holders of the related series of common securities will be
        entitled to receive distributions upon any liquidation on a pro rata basis
        with
        the holders of the related series of trust preferred securities, except that
        if
        there occurs with respect to the related series of junior subordinated
        debentures an event of default or a default as a result of a failure by Morgan
        Stanley to pay any amounts in respect of such series of junior subordinated
        debentures when due, such Morgan Stanley Trust will pay the total amounts
        due on
        the related series of trust preferred securities before making any distribution
        on the related series of common securities.

       

      After
        the
        liquidation date is fixed for any distribution of junior subordinated
        debentures, upon dissolution of a Morgan Stanley Trust:

       

      
        	
                •  

              	
                the
                  related series of trust preferred securities and the related series
                  of
                  common securities will no longer be deemed to be
                  outstanding;

              

      

       

      
        	
                •  

              	
                DTC
                  or its nominee, as the registered holder of the related series
                  of trust
                  preferred securities, will receive a registered global certificate
                  or
                  certificates representing such series of junior subordinated debentures
                  to
                  be delivered upon distribution with respect to the related series
                  of trust
                  preferred securities held by DTC or its nominee;
                  and

              

      

       

      
        	
                •  

              	
                any
                  certificates representing the related series of trust preferred
                  securities
                  not held by DTC or its nominee will be deemed to represent junior
                  subordinated debentures having an aggregate principal amount equal
                  to the
                  liquidation amount of the trust preferred securities, and bearing
                  accrued
                  but unpaid interest equal to accumulated but unpaid distributions
                  on such
                  trust preferred securities, until the holder of those certificates
                  presents them to the securities registrar for the trust preferred
                  securities for transfer or
                  reissuance.

              

      

       

      Trust
        Preferred Securities Events of
        Default

       

      Any
        one of
        the following events constitutes an event of default under the trust agreements,
        which we refer to as trust preferred securities event of default, regardless
        of
        the reason for the trust preferred securities event of default and whether
        it is
        voluntary or involuntary or effected by operation of law or pursuant to any
        judgment, decree or order of any court or any order, rule or regulation of
        any
        administrative or governmental body:

       

      
        	
                •  

              	
                the
                  occurrence of a default with respect to the junior subordinated
                  debentures
                  in which the proceeds from the sale of the common securities and
                  trust
                  preferred securities have been
                  invested;

              

      

       

      
        	
                •  

              	
                default
                  by a Morgan Stanley Trust or the property trustee in the payment
                  of any
                  distribution on the related series of trust preferred securities
                  when it
                  becomes due and payable, and continuation of the default for a
                  period of
                  30 days;

              

      

       

      
        	
                •  

              	
                default
                  by a Morgan Stanley Trust or the property trustee in the payment
                  of any
                  redemption price of any common security or trust preferred security
                  issued
                  pursuant to its trust agreement when it becomes due and
                  payable;

              

      

       

      
        	
                •  

              	
                default
                  in the performance, or breach, in any material respect, of any
                  covenant or
                  warranty of the applicable property trustee and Delaware trustee
                  (other
                  than a covenant or warranty described above dealing with default
                  in the
                  payment of any distribution or redemption price) and continuation
                  of such
                  default or breach for a period of 60 days after written notice
                  has been
                  given, by registered or certified mail, to the applicable property
                  trustee
                  and Delaware trustee and us by the holders of at least 25% in
                  

              

      

       

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      
        	 	aggregate
                liquidation amount of the related series of trust preferred securities
                outstanding, which notice must specify the default or breach, demand
                it be
                remedied and state that it is a Notice of Default under the applicable
                trust agreement; or 

        	 	 

        	
                •  

              	
                the
                  occurrence of certain events of bankruptcy or insolvency with respect
                  to
                  the property trustee or all or substantially all of its property
                  if a
                  successor property trustee has not been appointed within 90 days
                  of the
                  event.

              

      

       

      Within
        ten
        business days after the occurrence of any trust preferred securities event
        of
        default actually known to the property trustee, the property trustee will
        transmit notice of the event of default to the holders of the applicable
        common
        securities or trust preferred securities and the administrators, unless the
        trust preferred securities event of default has been cured or waived. In
        addition, the property trustee will notify each holder of the trust preferred
        securities of any notice of default received by it with respect to the junior
        subordinated debentures. We, as depositor, and the administrators are required
        to file annually with the property trustee a certificate as to whether or
        not
        the Morgan Stanley Trusts are in compliance with all the conditions and
        covenants under their trust agreements.

       

      The
        existence of a trust preferred securities event of default does not entitle
        the
        holders of trust preferred securities to accelerate the maturity
        thereof.

       

      An
        event
        of default under the junior subordinated indenture entitles the property trustee,
        as sole
        holder of the junior subordinated debentures, and the holders of the related
        series of trust preferred securities to declare the junior subordinated
        debentures due and payable
        under the junior subordinated indenture. The only events of default under
        the
        junior subordinated indenture are (i) Morgan Stanley’s failure to pay
        interest for 30 days after deferral for 20 or more consecutive quarterly
        interest periods or the equivalent thereof, in the event that interest periods
        are other than quarterly and (ii) the occurrence of certain events of bankruptcy
        or insolvency of Morgan Stanley, whether voluntary or not.

       

      Voting
        Rights

       

      Except
        as described under “Description of
        the Guarantees—Amendments
        and Assignments” and “Description
        of the Junior Subordinated
        Debentures—Modification
        of Indentures” or as otherwise required
        by law or the
        trust agreements, as an owner of trust preferred securities, you will be
        entitled to vote only on the following matters:

       

      
        	
                •  

              	
                removal
                  of the property trustee or the Delaware
                  trustee:

              

      

       

      
        	
                o  

              	
                when
                  there is a default under the related series of junior subordinated
                  debentures; or

              

      

       

      
        	
                o  

              	
                when
                  holders of a majority in liquidation value of the outstanding trust
                  preferred securities of such series decide to remove either of
                  the
                  trustees for cause;

              

      

       

      
        	
                •  

              	
                certain
                  modifications to the terms of such series of trust preferred securities
                  and the guarantee that would adversely affect the rights of the
                  holders of
                  such trust preferred securities;
                  and

              

      

       

      
        	
                •  

              	
                the
                  exercise of rights as holder of the junior subordinated debentures
                  by the
                  Morgan Stanley Trust that corresponds to your trust preferred
                  securities.

              

      

       

      The
        trustees are authorized and directed
        to conduct the affairs of and to operate the Morgan Stanley Trusts
        in such a way that
        it will not be characterized as other than one or more grantor trusts or
        agency
        arrangements for U.S.
        federal income tax
        purposes.

       

      In
        this regard, we and the trustees are
        authorized to take any action, not inconsistent with applicable
        law, the certificate
        of trust of the Morgan Stanley Trusts or the Declarations of Trust, that
        we and
        the trustees 

       

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

      determine
        to be necessary or desirable
        to achieve such end, as long as such action does not adversely affect the
        interests
        of the holders of the trust preferred
        securities.

       

       

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

       

      DESCRIPTION
        OF THE JUNIOR SUBORDINATED DEBENTURES

       

      The
        following describes material terms of the junior subordinated debentures.
        You
        should also read the Junior Subordinated Indenture, dated as of October 1,
        2004,
        between Morgan Stanley and The Bank of New York, as indenture trustee (the
        “junior subordinated indenture”)

       

      Under
        circumstances involving the dissolution of any Morgan Stanley Trust or, at
        the
        election of Morgan Stanley, such Morgan Stanley Trust may distribute the
        junior
        subordinated debentures to the holders of the trust preferred securities
        and the
        common securities in liquidation of such Morgan Stanley Trust. See “Description
        of Trust Preferred Securities—Liquidation Distribution upon
        Dissolution.”

       

      General

       

      The
        junior
        subordinated debentures are unsecured, subordinated obligations of Morgan
        Stanley. The junior subordinated debentures to be acquired by each Morgan
        Stanley Trust will be limited in aggregate principal amount to $2,000,010,000
        in
        the case of Morgan Stanley Trust A, $2,000,010,000 in the case of Morgan
        Stanley
        Trust B and $1,579,153,000 in the case of Morgan Stanley Trust C. Each such
        amount will be limited to the sum of:

       

      
        	
                •  

              	
                the
                  aggregate stated liquidation amount of the PEPS Units issued by
                  the
                  relevant Morgan Stanley Trust; and

              

      

       

      
        	
                •  

              	
                the
                  amount of capital contributed by Morgan Stanley to the relevant
                  Morgan
                  Stanley Trust in exchange for the common
                  securities.

              

      

       

      The
        junior subordinated debentures and
        the guarantee will be
        unsecured and will rank subordinate and junior in right of payment to all
        of
        Morgan Stanley’s
        current and future senior indebtedness
        (as defined below). The junior subordinated debentures will be effectively
        subordinated to all indebtedness and other liabilities
        of Morgan Stanley’s
        subsidiaries. The junior
        subordinated debentures and related guarantee will rank pari passu with
        the junior subordinated debt of Morgan Stanley underlying the existing capital
        securities of Morgan Stanley Capital Trust III, Morgan Stanley Capital Trust
        IV,
        Morgan Stanley Capital Trust V and Morgan Stanley Capital Trust VI
        (collectively, the “Parity Trusts”) and guarantees by Morgan Stanley of the
        capital securities issued by the Parity Trusts, respectively. The junior
        subordinated debentures and the guarantee will rank senior to the
        junior subordinated debt of Morgan Stanley underlying the existing capital
        securities of Morgan Stanley Capital Trust VII and Morgan Stanley Capital
        Trust
        VIII (collectively, the “junior trusts”) and the guarantee by Morgan Stanley of
        the capital securities issued by the junior trusts and may rank junior to, senior
        to or
pari
        passu with junior
        subordinated debentures and guarantees underlying capital securities to be
        issued in the future by trusts similar to the Morgan
        Stanley Trusts or
        other junior subordinated securities to be issued in the future by Morgan
        Stanley. For information on the subordination of the junior subordinated
        debentures, see “— Subordination” and “Description of Guarantees — Status of the
        Guarantees” for a more detailed explanation.

       

      The
        junior
        subordinated debentures included in a series of Corporate Units will have
        terms
        substantially similar to the terms of the trust preferred securities included
        in
        such series, except that the junior subordinated debentures will not be
        remarketed at any time (unless the junior subordinated debentures are
        distributed directly to holders of the trust preferred securities). Instead,
        upon a successful remarketing, as described below under “—Remarketing,” the
        coupon on the junior subordinated debentures will be correspondingly reset
        to
        match the corresponding distribution rate on the trust preferred
        securities.

       

      Interest
        Rate and Maturity

       

      The
        junior
        subordinated debentures will mature on February 17, 2042 (subject to change
        in
        connection with a remarketing of the trust preferred securities) and will
        bear
        interest accruing from the date of issuance, at the rate of 6% per annum,
        payable quarterly in arrears on each February 17, May 17, August 17 and November
        17, commencing February 17, 2008 subject to the deferral provisions described
        under “—Option to Defer 

       

       

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

       

      Interest
        Payments” below and subject to the reset of the interest rate in connection with
        a remarketing described under “—Remarketing” below.

       

      The
        amount
        of interest payable for any period will be computed on the basis of a 360-day
        year consisting of twelve 30-day months. In the case that any date on which
        interest is payable on the junior subordinated debentures is not a business
        day,
        then payment of the interest payable on that date will be made on the next
        succeeding day that is a business day. However, no interest or other payment
        shall be paid in respect of the delay.

       

      In
        connection with a remarketing of each series of trust preferred securities
        described below in “—Remarketing,” the remarketing agent may reset the rate and
        the interest payment frequency (including a change from quarterly to semi-annual
        interest payments) on the related series of junior subordinated debentures
        to a
        new fixed rate and/or payment frequency that will apply to all outstanding
        junior subordinated debentures of any series and will become effective on
        the
        remarketing settlement date for such series.

       

      Option
        to Defer Interest Payments

       

      We
        will
        have the right under the subordinated indenture to defer, and will defer
        if
        directed to do so by any then applicable regulatory authority, the payment
        of
        interest on the junior subordinated debentures at any time or from time to
        time.
        We may not defer interest payments for any period of time that (i) exceeds
        20
        consecutive interest payment dates (or the equivalent if interest periods
        are
        not at the time quarterly), or (ii) extends beyond the stated maturity date
        or
        any redemption date of the junior subordinated debentures. Any deferral period
        must end on an interest payment date. Prior to the termination of any deferral
        period, we may extend such deferral period, provided such extended deferral
        period complies with these limitations. No interest will be due and payable
        during a deferral period except at the end thereof. At the end of a deferral
        period, we must pay all interest then accrued and unpaid, together with any
        interest on the accrued and unpaid interest, to the extent permitted by
        applicable law. Upon the termination of any deferral period, and the payment
        of
        all amounts then due, we may begin a new deferral period, subject to the
        limitations described above. Subject to the foregoing, there is no limitation
        on
        the number of times that we may begin or extend a deferral period.

       

      We
        may pay
        any deferred interest on the junior subordinated debentures, including
        additional interest accrued thereon, in cash on any interest payment date
        following the beginning of the deferral period.  If on the stock
        purchase date we elect not to pay any accrued and unpaid deferred interest
        on
        the junior subordinated debentures and there is a successful remarketing,
        we
        will pay such deferred interest out of the proceeds of the successful
        remarketing.

       

      If
        we
        exercise our right to defer payments of interest on the junior subordinated
        debentures, we intend to treat the junior subordinated debentures as reissued,
        solely for U.S. federal income tax purposes, with original issue discount,
        and
        you would generally be required to accrue such original issue discount as
        ordinary income using a constant yield method prescribed by Treasury
        regulations. As a result, the income that you would be required to accrue
        would
        exceed the interest payments that you would actually receive.

       

      If
        we are
        deferring interest on the junior subordinated debentures and there is a failed
        final remarketing, then on the stock purchase date we will pay the holders
        of
        Corporate Units deferred interest on the junior subordinated debentures in
        “additional subordinated notes” that have a principal amount equal to the
        aggregate amount of deferred interest as of the stock purchase date, mature
        on a
        maturity date determined at the time of their issuance but in no event earlier
        than the later of August 17, 2012 and the date that is five years following the
        commencement of the deferral period, bear interest at a rate per annum equal
        to
        the rate of interest originally in effect on the junior subordinated debentures,
        are subordinate and rank junior in right of payment to all of our senior
        debt on
        the same basis as the junior subordinated debentures, and are redeemable
        by us
        at any time prior to their stated maturity at their principal amount plus
        accrued and unpaid interest through the redemption date.

       

       

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

       

      If
        the
        property trustee is the sole holder of the junior subordinated debentures,
        Morgan Stanley will give the property trustee and the Delaware trustee written
        notice of its selection of a deferral period no more than 15 business days
        before the next succeeding date on which the distributions on the PEPS Units
        are
        payable. If such selection is made prior to the stock purchase date, the
        property trustee will give notice of Morgan Stanley’s selection of a deferral
        period to the holders of the Corporate Units.

       

      If
        the
        property trustee is not the sole holder, or is not itself the holder, of
        the
        junior subordinated debentures, Morgan Stanley will give the holders of the
        junior subordinated debentures and the property trustee written notice of
        its
        selection of a deferral period at least 10 business days before the earlier
        of:

       

      
        	
                •  

              	
                the
                  next interest payment date; and

              

      

       

      
        	
                •  

              	
                the
                  date Morgan Stanley is required to give notice to holders of the
                  junior
                  subordinated debentures of the record or payment date for the related
                  interest payment.

              

      

       

      Morgan
        Stanley has no present intention of exercising its right to defer payments
        of
        interest on the junior subordinated debentures.

       

      Additional
        Sums

       

      If,
        at any
        time while the property trustee is the holder of the junior subordinated
        debentures, any Morgan Stanley Trust is subject to U.S. federal income tax
        with
        respect to income received or accrued on the junior subordinated debentures
        or
        subject to more than a de minimis amount of taxes, duties or other
        governmental charges (other than taxes withheld in respect of distributions
        to,
        or for the account of, any holder of a Corporate Unit or trust preferred
        security), Morgan Stanley will pay as additional interest on the junior
        subordinated debentures any additional amounts (“additional sums”) that are
        required so that the distributions paid by such Morgan Stanley Trust will
        not be
        reduced as a result of any of those taxes, duties or governmental
        charges.

       

      Restrictions
        on Certain Payments

       

      Morgan
        Stanley will not, nor will it permit any of its subsidiaries to:

       

      
        	
                •  

              	
                declare
                  or pay any dividends or any distributions on, or redeem, purchase,
                  acquire
                  or make a liquidation payment on, any shares of Morgan Stanley’s capital
                  stock;

              

      

       

      
        	
                •  

              	
                make
                  any payment of principal of, or interest or premium, if any, on,
                  or repay,
                  repurchase or redeem debt securities of Morgan Stanley that rank
                  equal or
                  junior to the junior subordinated debentures, other than (i) any
                  payment
                  of current or deferred interest on securities that rank equally
                  with the
                  junior subordinated debentures that is made pro rata to the amounts
                  due on
                  such securities (including the junior subordinated debt securities),
                  and
                  (ii) any payments that, if not made, would cause us to violate
                  the terms
                  of the instrument governing such debt securities;
                  or

              

      

       

      
        	
                •  

              	
                make
                  any guarantee payments on any guarantee of debt securities of any
                  of
                  Morgan Stanley’s subsidiaries if the guarantee ranks equal or junior to
                  the junior subordinated debentures,

              

      

       

      if
        at such
        time Morgan Stanley has given notice of its election of a deferral period
        and
        has not rescinded this notice, or the deferral period, or any extension thereof,
        is continuing.

       

      The
        restrictions listed above do not apply to:

       

      
        	
                •  

              	
                repurchases,
                  redemptions or other acquisitions of shares of capital stock of
                  Morgan
                  Stanley in connection with (1) any employment contract, benefit
                  plan or
                  other similar arrangement with or for the benefit of any one or
                  more
                  employees, officers, directors or consultants, (2) a dividend reinvestment
                  or stockholder stock purchase plan, or (3) the issuance of capital
                  stock
                  of Morgan 

              

      

       

       

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

       

      
        	 	Stanley,
                or securities convertible into or exercisable for such capital stock,
                as
                consideration in an acquisition transaction entered into prior to
                the
                deferral period;

        	 	 

        	
                •  

              	
                an
                  exchange, redemption, reclassification or conversion of any class
                  or
                  series of Morgan Stanley’s capital stock, or any capital stock of a
                  subsidiary of Morgan Stanley, for any class or series of Morgan
                  Stanley’s
                  capital stock, or of any class or series of Morgan Stanley’s indebtedness
                  for any class or series of Morgan Stanley’s capital
                  stock;

              

      

       

      
        	
                •  

              	
                the
                  purchase of fractional interests in shares of Morgan Stanley’s capital
                  stock under the conversion or exchange provisions of the capital
                  stock or
                  the security being converted or
                  exchanged;

              

      

       

      
        	
                •  

              	
                any
                  declaration of a dividend in connection with any stockholders’ rights
                  plan, or the issuance of rights, stock or other property under
                  any
                  stockholders’ rights plan, or the redemption or repurchase of rights
                  pursuant to the plan;

              

      

       

      
        	
                •  

              	
                any
                  dividend in the form of stock, warrants, options or other rights
                  where the
                  dividend stock or the stock issuable upon exercise of such warrants,
                  options or other rights is the same stock as that on which the
                  dividend is
                  being paid or ranks equal or junior to that
                  stock;

              

      

       

      
        	
                •  

              	
                payments
                  by Morgan Stanley under the guarantee of the trust preferred securities;
                  or

              

      

       

      
        	
                •  

              	
                the
                  ability of Morgan Stanley & Co. Incorporated, or any of our other
                  affiliates, to engage in any market-making transactions in our
                  securities
                  or the securities of any of our
                  affiliates.

              

      

       

      In
        addition, as long as any Morgan Stanley Trust holds any of the junior
        subordinated debentures, Morgan Stanley agrees:

       

      
        	
                •  

              	
                to
                  continue to hold, directly or indirectly, 100% of the common securities
                  of
                  such Morgan Stanley Trust, provided that certain successors that
                  are permitted under the junior subordinated indenture may succeed
                  to
                  Morgan Stanley’s ownership of the common
                  securities;

              

      

       

      
        	
                •  

              	
                as
                  holder of the common securities, not to voluntarily dissolve, windup
                  or
                  liquidate such Morgan Stanley Trust, other than (1) as part of
                  the
                  distribution of the junior subordinated debentures to the holders
                  of the
                  Corporate Units or separate trust preferred securities in accordance
                  with
                  the terms of the Corporate Units or trust agreement, as the case
                  may be,
                  or (2) as part of a merger, consolidation or amalgamation which
                  is
                  permitted under the trust agreement;
                  and

              

      

       

      
        	
                •  

              	
                to
                  use its reasonable efforts, consistent with the terms and provisions
                  of
                  the trust agreement, to cause the trust to continue not to be taxable
                  as a
                  corporation for United States federal income tax
                  purposes.

              

      

       

      Redemption

       

      Subject
        to
        obtaining any then required regulatory approval, Morgan Stanley may redeem
        each
        series of junior subordinated debentures as described above under “Description
        of the Trust Preferred Securities—Redemption.”

       

      Subordination

       

      Holders
        of
        the junior subordinated debentures should recognize that contractual provisions
        in the junior subordinated indenture may prohibit Morgan Stanley from making
        payments on these securities. The junior subordinated debentures are subordinate
        and junior in right of payment, to the extent and in the manner stated in
        the
        junior subordinated indenture and the junior subordinated debentures, to
        all of
        Morgan Stanley’s senior indebtedness and certain junior
        indebtedness.

       

       

      
        
          
          

        

        
          41

          
            

          

        

        
          
          

        

      

       

      For
        purposes of the junior subordinated debentures, “senior indebtedness” includes
        (i) obligations of, or guaranteed or assumed by, Morgan Stanley for borrowed
        money or evidenced by bonds, debentures, notes or similar instruments, including
        obligations with respect to securities issued under Morgan Stanley’s senior
        indentures or senior subordinated indentures, and amendments, renewals,
        extensions, modifications and refundings of any of that indebtedness or of
        those
        obligations, (ii) capitalized lease obligations of Morgan Stanley, (iii)
        obligations of Morgan Stanley issued or assumed as the deferred purchase
        price
        of property, (iv) obligations of Morgan Stanley in respect of interest rate,
        foreign exchange rate and commodity forward contracts, options and swaps
        and
        similar arrangements and (v) all obligations of the type referred to in clauses
        (i) through (iv) of other persons which Morgan Stanley has guaranteed or
        is
        responsible or liable for as obligor or otherwise. The junior subordinated
        debentures will rank pari passu with the junior subordinated debt of
        Morgan Stanley underlying the Parity Trusts and the guarantees by Morgan
        Stanley
        of the capital securities issued by the Parity Trusts and may rank junior to, senior
        to or
pari
        passu with junior
        subordinated debentures and guarantees underlying capital securities to be
        issued in the future
        by
        trusts similar to the Morgan Stanley Trusts or other junior subordinated
        securities to be issued in the future by Morgan Stanley. For the avoidance
        of
        doubt, the junior subordinated debentures will rank pari passu
        with the claims of Morgan Stanley’s
        trade creditors.

       

      The
        indenture does not restrict our
        ability to issue senior indebtedness.

       

      The
        indenture provides that, unless all
        principal of and any premium or interest on the senior indebtedness has been
        paid in full, or provision has been made to make
        these payments in
        full, no payment of principal of, or any premium or interest on, any series
        of
        junior subordinated debentures may be made in the event:

       

      
        	
                •  

              	
                of
                  any insolvency or bankruptcy proceedings, or any receivership,
                  liquidation, reorganization or other similar proceedings involving
                  us or a
                  substantial part of our property;

              

      

       

      
        	
                •  

              	
                that
                  (a) a default has occurred in the payment of principal, any premium,
                  interest or other monetary amounts due and payable on any senior
                  indebtedness or (b) there has occurred any other event of default
                  concerning senior indebtedness, that permits the holder or holders
                  of the
                  senior indebtedness to accelerate the maturity of the senior indebtedness,
                  with notice or passage of time, or both, and that event of default
                  has
                  continued beyond the applicable grace period, if any, and that
                  default or
                  event of default has not been cured or waived or has not ceased
                  to exist;
                  or

              

      

       

      
        	
                •  

              	
                that
                  the principal of and accrued interest on any junior subordinated
                  debentures has been declared due and payable upon an event of default
                  under the junior subordinated indenture and that declaration has
                  not been
                  rescinded and annulled as provided under that junior subordinated
                  indenture.

              

      

       

      Remarketing

       

      Unless
        a
        special event redemption or a termination event has occurred, or all the
        stock
        purchase contracts have settled early as a result of an early settlement
        or an
        early settlement upon a cash merger, or all of the outstanding PEPS Units
        are
        held in the form of Treasury Units and none of the holders of the related
        trust
        preferred securities has elected to participate in the remarketing, as described
        under “Description of the Trust Preferred Securities—Remarketing,” or all of the
        holders of PEPS Units have settled their stock purchase contracts with separate
        cash, as described above under “—Notice to Settle with Cash,” and none of the
        holders of the related trust preferred securities has elected to participate
        in
        the remarketing, we, through Morgan Stanley & Co. Incorporated as our
“remarketing agent”, will attempt to remarket the trust preferred securities
        (or, if the junior subordinated debentures are no longer held by the relevant
        Morgan Stanley Trust, the junior subordinated debentures) in a process we
        call
“remarketing.” The periods during which a remarketing will be attempted, or
“remarketing periods,” will each consist of five consecutive business days
        beginning on the seventh business day prior to August 17, 2010, November
        17,
        2010, February 17, 2011, May 17, 2011 and August 17, 2011 (or if any such
        day is
        not a business day, the immediately succeeding business day), and such
        remarketings will continue to be attempted until the earlier to occur of
        the
        fifth such period or the earlier settlement of a successful remarketing for
        such
        series of trust preferred securities (or junior subordinated 

       

       

      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

      

       

       

      debentures).
        On any day other than the last day of a remarketing period, we will have
        the
        right, in our absolute discretion and without prior notice to the holders
        of the
        PEPS Units, trust preferred securities or junior subordinated debentures,
        to
        postpone the remarketing until the following business day. A successful
        remarketing will settle on the date, or “remarketing settlement date,” that is
        the third business day after the last day of the relevant remarketing
        period.

       

      If
        in the
        judgment of our counsel or counsel to the remarketing agent a registration
        statement is required to effect the remarketing of the trust preferred
        securities, we will use our commercially reasonable efforts to ensure that
        a
        registration statement covering the full principal amount of the trust preferred
        securities to be remarketed will be effective in a form that will enable
        the
        remarketing agent to rely on it in connection with the remarketing process
        or we
        will effect such remarketing pursuant to Rule 144A under the Securities Act,
        if
        available, or any other available exemption from applicable registration
        requirements under the Securities Act.

       

      The
        proceeds of trust preferred securities sold in a successful remarketing will
        be
        applied towards satisfying your obligation to purchase the shares of our
        common
        stock under the related stock purchase contracts. Any remaining proceeds
        will be
        remitted to holders of trust preferred securities.

       

      Pursuant
        to the remarketing agreement, the remarketing agent will use its commercially
        reasonable efforts to obtain a price for the trust preferred securities to
        be
        remarketed that results in proceeds of at least 100% of their remarketing
        value.
        The “remarketing value” for each series of trust preferred securities will be
        equal to 100% of its liquidation amount, unless the remarketing period falls
        during a period in which we are deferring interest payments on the related
        junior subordinated debentures. In that case, the “remarketing value” of such
        trust preferred securities will be equal to 100% of their liquidation amount
        plus accrued and unpaid distributions payable thereon, including any deferred
        distributions and any interest thereon, unless we elect to pay all accrued
        and
        unpaid distributions, including any deferred distributions and any interest
        thereon, in cash on such distribution date, in which case the remarketing
        value
        of such trust preferred securities will be equal to 100% of their liquidation
        amount. We will pay the fees of the remarketing agent directly. Such fees
        will
        not be included in the calculation of the remarketing value.

       

      To
        obtain
        that value, the remarketing agent may reset the interest rate on the underlying
        junior subordinated debentures and, accordingly, distributions on such trust
        preferred securities to a new fixed rate that will apply to all such outstanding
        trust preferred securities, whether or not included in the remarketing, and
        will
        become effective on the remarketing settlement date. The distribution rate
        on
        such trust preferred securities will reflect the interest rate on the underlying
        junior subordinated debentures as and when it is reset. If the interest rate
        is
        reset, such junior subordinated debentures will bear interest and, accordingly,
        such trust preferred securities will provide distributions, at that rate,
        or
“Reset Rate,” from and after the remarketing settlement date. Such junior
        subordinated debentures will bear interest at the new rate from and after
        the
        remarketing settlement date, which will be a distribution date.

       

      The
        Reset
        Rate will be equal to the interest rate determined to result in proceeds
        from
        the remarketing of the trust preferred securities of at least 100% of the
        remarketing value; provided that the Reset Rate may not exceed the Reset
        Cap in
        connection with the first four remarketing periods. For this purpose, the
“Reset
        Cap” is the prevailing market yield, as determined by the remarketing agent, of
        the benchmark U.S. treasury security having a remaining maturity that most
        closely corresponds to the period from such date until the earliest date
        on
        which the junior subordinated debentures may be redeemed at our option in
        the
        event of a successful remarketing, plus 350 basis points, or 3.50%, per
        annum.

       

      In
        connection with a remarketing, we may also elect:

       

      
        	
                •  

              	
                to
                  change the date after which each series of junior subordinated
                  debentures
                  will be redeemable at our option to any date on or after the first
                  optional redemption date and to change the redemption price, provided
                  that
                  no redemption price may be less than the principal plus accrued
                  and unpaid
                  interest, including deferred interest (if any), on such junior
                  subordinated debentures; and/or

              

      

       

       

      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

      

       

      
        	
                •  

              	
                to
                  change the maturity date of each series of junior subordinated
                  debentures,
                  but not earlier than the first optional redemption date nor later
                  than the
                  original maturity date.

              

      

       

      In
        connection with a remarketing, we may also elect to distribute each series
        of
        junior subordinated debentures out of any Morgan Stanley Trust and remarket
        such
        junior subordinated debentures as our senior, unsecured obligations, provided
        that we may make such election only if such change in the priority of such
        junior subordinated debentures will not result in a change in payment
        expectations under such junior subordinated debentures. We will be required
        to
        remarket the debentures as our senior, unsecured obligations, if the remarketing
        agent concludes that such change in the priority of such junior subordinated
        debentures is necessary in order for the remarketing to be successful. If
        we
        elect or are required to remarket such junior subordinated debentures as
        our
        senior, unsecured obligations, we will also eliminate the interest deferral
        features of the securities being remarketed.

       

      If
        the
        remarketing agent cannot remarket the related trust preferred securities
        during
        any of the first four remarketing periods at a price that results in proceeds,
        net of any remarketing fee, equal to 100% of the remarketing value of such
        trust
        preferred securities to be remarketed, then:

       

      
        	
                •  

              	
                the
                  stock purchase date will be deferred until the next remarketing
                  settlement
                  date;

              

      

       

      
        	
                •  

              	
                the
                  interest rate on the related junior subordinated debentures will
                  not be
                  reset; and

              

      

       

      
        	
                •  

              	
                the
                  remarketing agent will thereafter attempt to establish a new Reset
                  Rate
                  meeting the requirements described above and remarket the trust
                  preferred
                  securities during subsequent remarketing periods, which will begin
                  on the
                  seventh business day immediately preceding each of November 17,
                  2010,
                  February 17, 2011, May 17, 2011 and August 17, 2011 (or if any
                  such day is
                  not a business day, the immediately succeeding business
                  day).

              

      

       

      Any
        subsequent remarketing will be subject to the conditions and procedures
        described above, and will settle (if successful) on the corresponding
        remarketing settlement date, provided that if a successful remarketing has
        not
        previously occurred and, as a result, the remarketing agent attempts a
        remarketing during the fifth remarketing period, then the Reset Rate for
        that
        remarketing will not be subject to the Reset Cap.

       

      In
        the
        case of a failed final remarketing, the stock purchase date will be the
        distribution date immediately following the remarketing period and:

       

      
        	
                •  

              	
                On
                  the stock purchase date, holders of all trust preferred securities
                  will
                  have the right to put their trust preferred securities to us for
                  an amount
                  equal to the liquidation amount of their trust preferred securities.
                  A
                  holder of Corporate Units will be deemed to have automatically
                  exercised
                  this put right with respect to the trust preferred securities underlying
                  such Corporate Units unless, prior to 5:00 p.m., New York City
                  time, on
                  the second business day immediately prior to the stock purchase
                  date, the
                  holder provides written notice of an intention to settle the related
                  stock
                  purchase contracts with separate cash and on or prior to the business
                  day
                  immediately preceding the stock purchase date delivers to the collateral
                  agent $1,000 in cash per stock purchase contract. Unless a holder
                  of
                  Corporate Units has settled the related stock purchase contracts
                  with
                  separate cash on or prior to the stock purchase date, the holder
                  will be
                  deemed to have elected to apply the put price against such holder’s
                  obligations to us under the related stock purchase contracts, thereby
                  satisfying such obligations in full, and we will deliver to the
                  holder our
                  common stock pursuant to the related stock purchase
                  contracts.

              

      

       

      
        	
                •  

              	
                The
                  interest rate on the junior subordinated debentures underlying
                  the trust
                  preferred securities will not be reset and they will continue to
                  accrue
                  interest at the interest rate that would otherwise apply. In the
                  event of
                  a final failed remarketing, we may move up the stated maturity
                  of the
                  junior subordinated debentures and, accordingly, the mandatory
                  redemption
                  date of the trust preferred securities, to any date on or after
                  the date
                  that is the later of (a) two years after the remarketing settlement
                  date
                  and (b) 

              

      

       

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

       

      
        	 	if
                we are deferring interest on the junior subordinated debentures at
                the
                time of the remarketing, the date that is five years after the beginning
                of the relevant deferral period.

        	 	 

        	
                •  

              	
                We
                  will issue additional subordinated notes in the amount of any accrued
                  and
                  unpaid (or deferred) interest on the junior subordinated debentures
                  as of
                  the stock purchase date to each Morgan Stanley Trust, which will
                  in turn
                  distribute such notes to the holders of Corporate Units and any
                  separate
                  trust preferred securities and we will pay any unpaid contract
                  adjustment
                  payment amount in additional subordinated notes that will be delivered
                  to
                  the holders of PEPS Units.

              

      

       

      We
        will
        give the stock purchase contract agent and the property trustee, who in turn
        will give holders of the PEPS Units and holders of the trust preferred
        securities not held as part of Corporate Units, notice of remarketing at
        least
        21 calendar days prior to the first day of any remarketing period. Such notice
        will set forth:

       

      
        	
                •  

              	
                the
                  beginning and ending dates of the remarketing period and the applicable
                  remarketing settlement date and stock purchase date in the event
                  the
                  remarketing is successful;

              

      

       

      
        	
                •  

              	
                the
                  applicable distribution dates and record dates for cash distributions
                  on
                  the trust preferred securities;

              

      

       

      
        	
                •  

              	
                any
                  change to the stated maturity of the junior subordinated debentures,
                  and,
                  if applicable, the date on and after which each Morgan Stanley
                  Trust will
                  have the right to redeem the trust preferred
                  securities;

              

      

       

      
        	
                •  

              	
                whether
                  the junior subordinated debentures underlying the trust preferred
                  securities, and our guarantee of the trust preferred securities
                  will no
                  longer be subordinated to our senior
                  indebtedness;

              

      

       

      
        	
                •  

              	
                the
                  procedures you must follow if you hold trust preferred securities
                  held as
                  part of Corporate Units to elect not to participate in the remarketing
                  and
                  the date by which such election must be made;
                  and

              

      

       

      
        	
                •  

              	
                the
                  procedures you must follow if you hold trust preferred securities
                  separately to elect to participate in the remarketing as described
                  under
                  “Description of the Trust Preferred Securities—Remarketing” and the date
                  by which such election must be
                  made.

              

      

       

      We
        will
        notify the holders of PEPS Units of any failed remarketing.

       

      Events
        of Default, Defaults and the
        Rights of PEPS
        Unit Holders to Take Action
        Against Morgan Stanley

       

      Under
        the
        junior subordinated debentures, only (i) Morgan Stanley’s failure to
        pay interest for 30 days after deferral for 20 or more consecutive quarterly
        interest periods or the equivalent thereof, in the event that interest periods
        are other than quarterly and (ii) the occurrence of certain events of bankruptcy
        or insolvency of Morgan Stanley, whether voluntary or not, results in an
        event
        of default which would allow for the relevant series of junior subordinated
        debentures to be accelerated.

       

      So
        long as
        any Morgan Stanley Trust holds the junior subordinated debentures of a series,
        the property trustee and the holders of the trust preferred securities will
        have
        the following rights under the junior subordinated indenture with respect
        to an
        event of default or a default:

       

      
        	
                •  

              	
                upon
                  the occurrence and continuation of an event of default, the property
                  trustee or the holders of not less than 25% in aggregate liquidation
                  amount of the trust preferred securities may declare the principal
                  and
                  interest accrued thereon of the junior subordinated debentures
                  of such
                  series due and payable immediately;

              

      

       

      
        	
                •  

              	
                upon
                  the occurrence of a default, there is no right of acceleration
                  except for
                  those defaults that are also events of default; if a default in
                  the
                  payment of principal of, or any interest on, such series of junior
                  subordinated debentures occurs and is continuing and Morgan Stanley
                  fails
                  to pay the full amount 

              

      

       

       

      
        
          
          

        

        
          45

          
            

          

        

        
          
          

        

      

       

      
        	 	then
                due and payable with respect to the junior subordinated debentures
                of such
                series immediately upon the demand of the indenture trustee, the
                indenture
                trustee is entitled to institute an action or proceeding to collect
                the
                amount due and unpaid; if any default occurs and is continuing, the
                indenture trustee may pursue legal action to enforce the performance
                of
                any provision in the junior subordinated indenture to protect the
                rights
                of the indenture trustee and the holders of the junior subordinated
                debentures of such series;

        	 	 

        	
                •  

              	
                if
                  all defaults have been cured or waived, the consent of the holders
                  of more
                  than 50% in aggregate liquidation amount the of corresponding series
                  of
                  trust preferred securities is required to annul a declaration by
                  the
                  indenture trustee, the applicable Morgan Stanley Trust or the holders
                  of
                  the trust preferred securities of such series that the principal
                  of the
                  junior subordinated debentures is due and payable
                  immediately;

              

      

       

      
        	
                •  

              	
                unless
                  the default is cured, the consent of each holder of trust preferred
                  securities of such series is required to waive a default in the
                  payment of
                  principal, premium or interest with respect to the junior subordinated
                  debentures of such series or a default in respect of a covenant
                  or
                  provision that cannot be modified or amended without the consent
                  of the
                  holder of each outstanding junior subordinated debenture of such
                  series;
                  and

              

      

       

      
        	
                •  

              	
                unless
                  the default is cured, the consent of the holders of more than 50%
                  in
                  aggregate liquidation amount of the trust preferred securities
                  of such
                  series is required to waive any other
                  default.

              

      

       

      The
        indenture trustee shall be under no obligation to exercise any of the rights
        or
        powers vested in it by the junior subordinated indenture at the request or
        direction of any of the holders pursuant to the junior subordinated indenture,
        unless such holders shall have offered to the indenture trustee reasonable
        security or indemnity against the costs, expenses and liabilities which might
        be
        incurred by it in compliance with such request or direction.

       

      If
        the
        event of default or default under the junior subordinated debentures is
        attributable to the failure of Morgan Stanley to pay any amounts payable
        on the
        junior subordinated debentures when due, then a registered holder of trust
        preferred securities of the corresponding series may bring a legal action
        against Morgan Stanley directly for enforcement of payment to such holder
        of
        amounts owed on the junior subordinated debentures with a principal amount
        equal
        to the aggregate liquidation amount of the trust preferred securities held
        by
        such holder (a “direct action”). Morgan Stanley may not amend the junior
        subordinated debentures to remove this right to bring a direct action without
        the prior written consent of the registered holders of all the trust preferred
        securities of the relevant Morgan Stanley Trusts. Morgan Stanley may reduce
        its
        payments then due under the junior subordinated debentures of a series by
        any
        corresponding payments it has made to holders of the corresponding trust
        preferred securities in connection with a direct action.

       

      The
        holders of the trust preferred securities will not be able to exercise directly
        any remedies available to the holders of the junior subordinated debentures
        except under the circumstance described in the preceding paragraph. See
“Description of Trust Preferred Securities—Trust Preferred Securities Events of
        Default”.

       

      Modification
        of Subordinated Indenture

       

      If
        any of
        the PEPS Units of a series are outstanding:

       

      
        	
                •  

              	
                no
                  modification may be made to the junior subordinated indenture that
                  materially adversely affects the holders of such PEPS
                  Units;

              

      

       

      
        	
                •  

              	
                no
                  termination of the junior subordinated indenture may occur;
                  and

              

      

       

      
        	
                •  

              	
                no
                  waiver of any event of default or default under the junior subordinated
                  debentures of such series may be
                  effective,

              

      

       

       

      
        
          
          

        

        
          46

          
            

          

        

        
          
          

        

      

       

      without
        the prior consent of the holders of at least a majority of the aggregate
        liquidation amount of the outstanding PEPS Units of such series unless and
        until
        the principal of and premium, if any, on the junior subordinated debentures
        included in such series of PEPS Units and all accrued and unpaid interest
        thereon have been paid in full and certain other conditions are
        satisfied.

       

      In
        addition, if any of the PEPS Units of a series are outstanding, all holders
        of
        such PEPS Units must consent if Morgan Stanley wants to amend the junior
        subordinated indenture to:

       

      
        	
                •  

              	
                impair
                  the rights of holders of such PEPS Units to institute a direct
                  action;

              

      

       

      
        	
                •  

              	
                remove
                  any obligation to obtain the consent of holders of such PEPS Units;
                  or

              

      

       

      
        	
                •  

              	
                change
                  the percentage of holders of the PEPS Units of such series required
                  to
                  amend or waive any provision of the junior subordinated
                  indenture.

              

      

       

      So
        long as
        Morgan Stanley complies with the terms of the junior subordinated debentures
        and
        the junior subordinated indenture, Morgan Stanley may defer interest payable
        on
        the junior subordinated debentures, as described in this offering memorandum,
        without the consent of Morgan Stanley Trust or the holders of the PEPS
        Units.

       

      Notwithstanding
        the foregoing, neither Morgan Stanley nor Morgan Stanley Trust may amend
        the
        terms of the junior subordinated debentures or the junior subordinated indenture
        to add events of default or acceleration events.

       

      Merger,
        Consolidation, Sale, Lease or Conveyance

       

      The
        junior
        subordinated indenture provides that we will not merge or consolidate with
        any
        other person and will not sell, lease or convey all substantially all or
        our
        assets to any other person, unless:

       

      
        	
                •  

              	
                we
                  will be the continuing corporation;
                  or

              

      

       

      
        	
                •  

              	
                the
                  successor corporation or person that acquired all or substantially
                  all of
                  our assets;

              

      

       

      
        	
                o  

              	
                will
                  be a corporation organized under the laws of the United States,
                  a state of
                  the United States or the District of Columbia;
                  and

              

      

       

      
        	
                o  

              	
                will
                  expressly assume all of our obligations under the junior subordinated
                  indenture and the junior subordinated debentures issued under that
                  junior
                  subordinated indenture; and

              

      

       

      
        	
                •  

              	
                immediately
                  after the merger, consolidation, sale, lease or conveyance, we,
                  that
                  person or that successor corporation will not be in default in
                  the
                  performance of the covenants and conditions of the junior subordinated
                  indenture.

              

      

       

      There
        are
        no covenants or other provisions in the indenture that would afford holders
        of
        junior subordinated debentures additional protection in the event of a
        recapitalization transaction, a change of control of Morgan Stanley or a
        highly
        leveraged transaction. The merger covenant described above would only apply
        if
        the recapitalization transaction, change of control or highly leveraged
        transaction were structured to include a merger or consolidation of Morgan
        Stanley or a sale, lease or conveyance of all or substantially all of our
        assets.

       

      Registration,
        Denomination and Transfer

       

      Morgan
        Stanley will register each series of junior subordinated debentures in the
        name
        of the related Morgan Stanley Trust. The property trustee will hold the junior
        subordinated debentures in trust for the benefit 

       

       

      
        
          
          

        

        
          47

          
            

          

        

        
          
          

        

      

       

      of
        the
        holders of the PEPS Units and the common securities. The junior subordinated
        debentures will be issued in denominations of $1,000 and integral multiples
        thereof.

       

      If
        the
        junior subordinated debentures are issued in certificated form, payments
        of
        principal and interest will be payable, the transfer of the junior subordinated
        debentures will be registrable, and junior subordinated debentures will be
        exchangeable for junior subordinated debentures of other authorized
        denominations of a like aggregate principal amount. However, payment of interest
        may be made at the option of Morgan Stanley by check mailed to the address
        of
        the holder entitled to the payment. Upon written request to the paying agent
        not
        less than 15 calendar days prior to the date on which interest is payable,
        a
        holder of $1 million or more in aggregate principal amount of junior
        subordinated debentures of a series may receive payment of interest, other
        than
        payments of interest payable at maturity or on any date of redemption or
        repayment, by wire transfer of immediately available funds.

       

      Junior
        subordinated debentures may be presented for registration of transfer, exchange,
        redemption or payment with an endorsed form of transfer, or a duly executed
        and
        satisfactory written instrument of transfer, at the securities registrar’s
        office in New York, New York or the office of any transfer agent selected
        by
        Morgan Stanley without service charge and upon payment of any taxes and other
        governmental charges as described in the junior subordinated indenture. Morgan
        Stanley will appoint the indenture trustee as securities registrar under
        the
        junior subordinated indenture. Morgan Stanley may at any time designate
        additional transfer and paying agents with respect to the junior subordinated
        debentures.

       

      In
        the
        event of any redemption, Morgan Stanley and the indenture trustee will not
        be
        required to:

       

      
        	
                •  

              	
                register
                  the transfer of or exchange junior subordinated debentures during
                  a period
                  beginning 15 calendar days before the first mailing of the notice
                  of
                  redemption; or

              

      

       

      
        	
                •  

              	
                register
                  the transfer of or exchange any junior subordinated debentures
                  selected
                  for redemption, except, in the case of any junior subordinated
                  debentures
                  being redeemed in part, any portion not to be
                  redeemed.

              

      

       

      At
        the
        request of Morgan Stanley, funds deposited with the indenture trustee or
        any
        paying agent held for Morgan Stanley for the payment of principal, interest
        and
        premium, if any, on any junior subordinated debenture which remain unclaimed
        for
        two years after the principal, interest and premium, if any, has become payable
        will be repaid to Morgan Stanley and the holder of the junior subordinated
        debenture will, as a general unsecured creditor, look only to Morgan Stanley
        for
        payment thereof.

       

      Distribution
        of Junior Subordinated Debentures

       

      As
        described above, a series of junior
        subordinated debentures may be distributed in exchange for the corresponding
        series of trust preferred securities upon dissolution and liquidation of the relevant
        Morgan Stanley
        Trust, after satisfaction of such Morgan Stanley Trust’s
        liabilities to its creditors. See
“Description of Trust
        Preferred Securities—Liquidation
        Distribution Upon
        Dissolution”
        above.

       

      If
        a
        series of the junior subordinated debentures have been distributed in exchange
        for the corresponding series of trust preferred securities, the holders of
        not
        less than 25% in aggregate principal amount of such junior subordinated
        debentures will have the right upon the occurrence and continuation of an
        event
        of default, unless the principal of all such junior subordinated debentures
        has
        already become due and payable, to declare the principal and interest accrued
        thereon due and payable immediately.

       

       

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

       

      DESCRIPTION
        OF THE GUARANTEE

       

      The
        following is a description of the material terms of the guarantee. You should
        read the guarantee, to be dated as of December 28, 2007, between Morgan Stanley
        and The Bank of New York, as guarantee trustee, and the Trust Indenture
        Act.

       

      General

       

      Morgan
        Stanley will irrevocably and unconditionally agree to pay in full, to the
        extent
        set forth in the guarantee, the guarantee payments to the holders of the
        trust
        preferred securities covered by the guarantee, as and when due, regardless
        of
        any defense, right of set-off or counterclaim that a Morgan Stanley Trust
        may
        have or assert other than the defense of payment.

       

      The
        following payments on the trust preferred securities (the “guarantee payments”),
        if not fully paid by the applicable Morgan Stanley Trust, will be paid by
        Morgan
        Stanley under the guarantee, without duplication:

       

      
        	
                •  

              	
                any
                  accumulated and unpaid distributions required to be paid on the
                  trust
                  preferred securities, to the extent the applicable Morgan Stanley
                  Trust
                  has funds available to make the
                  payment;

              

      

       

      
        	
                •  

              	
                the
                  redemption price for any trust preferred securities called for
                  redemption,
                  if the applicable Morgan Stanley Trust has funds available to make
                  the
                  payment; and

              

      

       

      
        	
                •  

              	
                upon
                  a voluntary or involuntary dissolution, winding-up or liquidation
                  of the
                  applicable Morgan Stanley Trust, other than in connection with
                  a
                  distribution of the applicable junior subordinated debentures to
                  the
                  holders of PEPS Units, the lesser
                  of:

              

      

       

      
        	
              	
                (1)

              	
                the
                  aggregate of the $1,000 per trust preferred security liquidation
                  amount
                  and all accumulated and unpaid distributions on the relevant series
                  of
                  trust preferred securities to the date of payment, if the relevant
                  Morgan
                  Stanley Trust has funds available to make the payment;
                  and

              

      

       

      
        	
              	
                (2)

              	
                the
                  amount of assets of the relevant Morgan Stanley Trust remaining
                  available
                  for distribution to holders of the PEPS Units upon liquidation
                  of such
                  Morgan Stanley Trust.

              

      

       

      Morgan
        Stanley’s obligation to make a guarantee payment may be satisfied by direct
        payment of the required amounts by Morgan Stanley to the holders of the trust
        preferred securities or by causing the applicable Morgan Stanley Trust to
        pay
        the amounts to the holders.

       

      If
        we do
        not make payments on the junior subordinated debentures owned by a Morgan
        Stanley Trust, such Morgan Stanley Trust will not be able to pay any amounts
        payable in respect of the trust preferred securities issued by it and will
        not
        have funds legally available for that purpose. In that event, holders of
        such
        series of trust preferred securities would not be able to rely upon the
        guarantee for payment of those amounts. The guarantee will have the same
        ranking
        as the junior subordinated debentures owned by such Morgan Stanley Trust.
        No
        guarantee will limit the incurrence or issuance of other secured or unsecured
        debt of Morgan Stanley.

       

      Status
        of the Guarantees

       

      The
        guarantee will constitute an unsecured obligation of Morgan Stanley and will
        rank equal to the junior subordinated debentures owned by the Morgan Stanley
        Trusts.

       

      The
        guarantee will constitute a guarantee of payment and not of collection. Any
        holder of trust preferred securities covered by the guarantee may institute
        a
        legal proceeding directly against us to enforce its rights under the guarantee
        without first instituting a legal proceeding against any other person or
        entity.
        The guarantee will be held by the guarantee trustee for the benefit of the
        holders of the trust preferred securities. The guarantee will not be discharged
        except by payment of the guarantee payments in full to the extent not

       

       

      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

      

       

      paid
        by or
        on behalf of the Morgan Stanley Trusts or, if applicable, distribution to
        the
        holders of the trust preferred securities of the junior subordinated debentures
        owned by the Morgan Stanley Trusts.

       

      Amendments
        and Assignment

       

      Except
        with respect to any changes that do not materially adversely affect the rights
        of holders of the trust preferred securities issued by the Morgan Stanley
        Trusts, in which case no approval will be required, the guarantee may not
        be
        amended with respect to a Moan Stanley Trust without the prior approval of
        the
        holders of at least a majority of the aggregate liquidation amount of the
        outstanding trust preferred securities of the related series. All guarantees
        and
        agreements contained in the guarantee will bind the successors, assigns,
        receivers, trustees and representatives of Morgan Stanley and will inure
        to the
        benefit of the holders of the then outstanding trust preferred
        securities.

       

      Events
        of Default

       

      An
        event
        of default under the guarantee with respect to a Morgan Stanley Trust will
        occur
        upon the failure of Morgan Stanley to perform any of its payment obligations
        under the guarantee with respect to such Morgan Stanley Trust, or to perform
        any
        non-payment obligation if the non-payment default remains unremedied for
        30
        days. If an event of default under the guarantee occurred and is continuing,
        the
        guarantee trustee will enforce the guarantee for the benefit of the holders
        of
        the related series of trust preferred securities. The holders of a majority
        in
        aggregate liquidation amount of a series of outstanding trust preferred
        securities have the right to direct the time, method and place of conducting
        any
        proceeding for any remedy available to the guarantee trustee in respect of
        the
        guarantee or to direct the exercise of any right or power conferred upon
        the
        guarantee trustee under the guarantee.

       

      Any
        holder
        of trust preferred securities may institute a legal proceeding directly against
        Morgan Stanley to enforce its rights under the guarantee without first
        instituting a legal proceeding against the related Morgan Stanley Trust,
        the
        guarantee trustee or any other person or entity.

       

      Information
        Concerning the Guarantee Trustee

       

      The
        guarantee trustee, other than during the occurrence and continuance of an
        event
        of default under the guarantee, undertakes to perform only those duties as
        are
        specifically set forth in the guarantee and, after the occurrence of an event
        of
        default with respect to the guarantee that has not been cured or waived,
        must
        exercise the rights and powers vested in it by the guarantee using the same
        degree of care and skill as a prudent person would exercise or use in the
        conduct of his or her own affairs. Subject to this provision, the guarantee
        trustee is under no obligation to exercise any of the rights or powers vested
        in
        it by the guarantee at the request of any holder of the trust preferred
        securities unless it is offered reasonable indemnity, including reasonable
        advances requested by it, against the costs, expenses and liabilities that
        might
        be incurred in complying with the request or direction.

       

      Termination
        of the Guarantee

       

      The
        guarantee will terminate upon full payment of the redemption price of all
        of the
        trust preferred securities covered by the guarantee, upon full payment of
        the
        amounts payable with respect to the trust preferred securities upon liquidation
        of the Morgan Stanley Trusts or upon distribution of the junior subordinated
        debentures owned by the Morgan Stanley Trusts to the holders of all the trust
        preferred securities covered by the guarantee. The guarantee will continue
        to be
        effective or will be reinstated, as the case may be, if at any time any holder
        of the trust preferred securities covered by the guarantee must repay any
        sums
        with respect to the trust preferred securities or the guarantee.

       

      Governing
        Law

       

      The
        guarantee will be governed by, and construed in accordance with, the laws
        of the
        State of New York.

       

       

      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

      

       

       RELATIONSHIP
        AMONG THE TRUST PREFERRED SECURITIES,

      THE
        JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE

       

      Morgan
        Stanley will guarantee payments of distributions and redemption and liquidation
        payments payable by the Morgan Stanley Trusts on the PEPS Units to the extent
        the relevant Morgan Stanley Trust has funds available for such payment, as
        described under “Description of Guarantee” above. No single document executed by
        Morgan Stanley will provide for the full, irrevocable and unconditional
        guarantee of the PEPS Units. It is only the combined operation of the guarantee,
        the trust agreements and the junior subordinated indenture that has the effect
        of providing a full, irrevocable and unconditional guarantee of the Morgan
        Stanley Trusts’ obligations under the PEPS Units.

       

      As
        long as
        Morgan Stanley pays interest and other payments when due on each series of
        junior subordinated debentures, those payments will be sufficient to cover
        distributions and redemption and liquidation payments due on the related
        series
        of PEPS Units, primarily because:

       

      
        	
                •  

              	
                the
                  aggregate principal amount of the junior subordinated debentures
                  will be
                  equal to the sum of the aggregate liquidation amount of the PEPS
                  Units and
                  the common securities;

              

      

       

      
        	
                •  

              	
                the
                  interest rate and interest and other distribution dates on the
                  junior
                  subordinated debentures will match the distribution rate and distribution
                  and other distribution dates for the PEPS
                  Units;

              

      

       

      
        	
                •  

              	
                Morgan
                  Stanley will, pursuant to an expense agreement, pay for any and
                  all costs,
                  expenses and liabilities of the Morgan Stanley Trusts, except withholding
                  taxes and the Morgan Stanley Trusts’ obligations to holders of the PEPS
                  Units and the common securities;
                  and

              

      

       

      
        	
                •  

              	
                the
                  trust agreements provide that the Morgan Stanley Trusts will not
                  engage in
                  any activity that is not consistent with the limited purposes of
                  the
                  Morgan Stanley Trusts.

              

      

       

      The
        only
        events of default applicable to the PEPS Units that may result in acceleration
        of the related series of junior subordinated debentures are: (i) Morgan Stanley’s failure to
        pay interest for 30 days after deferral for 20 or more consecutive quarterly
        interest periods or the equivalent thereof, in the event that interest periods
        are other than quarterly and (ii) the occurrence of certain events of bankruptcy
        or insolvency of Morgan Stanley, whether voluntary or not. However, in the
        event
        of payment defaults under, or acceleration of, senior indebtedness (as defined
        above), the junior subordinated indenture provides that no payments may be
        made
        on the junior subordinated debentures until such senior indebtedness has
        been
        paid in full or any payment default under the such indebtedness has been
        cured
        or waived. See “Description of Junior Subordinated Debentures.”

       

      Limited
        Purpose of Morgan Stanley Trust

       

      The
        trust
        preferred securities represent preferred undivided beneficial interests in
        the
        assets of the Morgan Stanley Trusts.  The Morgan Stanley Trusts exist
        for the sole purpose of:

       

      
        	
                •  

              	
                issuing
                  and selling the trust preferred securities and common
                  securities;

              

      

       

      
        	
                •  

              	
                investing
                  the proceeds from the sale of the trust preferred securities and
                  common
                  securities in the junior subordinated debentures;
                  and

              

      

       

      
        	
                •  

              	
                engaging
                  in only those other activities necessary, convenient or incidental
                  to
                  these purposes.

              

      

       

      A
        principal difference between the rights of a holder of a trust preferred
        security and a holder of a junior subordinated debenture is that a holder
        of a
        junior subordinated debenture is entitled to receive from Morgan Stanley
        payments on junior subordinated debentures held by the holder, while a holder
        of
        trust preferred securities is entitled to receive distributions or other
        amounts
        payable with respect to the trust preferred securities from the relevant
        Morgan
        Stanley Trust or from Morgan Stanley under the guarantee only if and to the
        extent such Morgan Stanley Trust has funds available for the payment of those
        distributions.

       

       

      
        
          
          

        

        
          51

          
            

          

        

        
          
          

        

      

       

      Rights
        upon Dissolution

       

      The
        holders of the trust preferred securities are entitled to receive, out of
        assets
        held by the Morgan Stanley Trusts, a distribution in cash upon any voluntary
        or
        involuntary dissolution, winding-up or liquidation of the relevant Morgan
        Stanley Trust that does not involve the distribution of the related series
        of
        junior subordinated debentures, after Morgan Stanley Trust has paid or made
        reasonable provision to pay, in accordance with Section 3808(e) of the Delaware
        Statutory Trust Act, the liabilities owed to its creditors as required by
        applicable law. See “Description of Capital Securities—Liquidation Distribution
        upon Dissolution.”

       

      In
        the
        event of any voluntary or involuntary liquidation or bankruptcy of Morgan
        Stanley, the Morgan Stanley Trusts, as registered holder of the junior
        subordinated debentures, would be a subordinated creditor of Morgan Stanley,
        subordinated and junior in right of payment to all Morgan Stanley’s senior
        indebtedness, but entitled to receive payment in full of all amounts payable
        with respect to the junior subordinated debentures before any stockholders
        of
        Morgan Stanley receive payments or distributions. Since Morgan Stanley is
        the
        guarantor under the guarantee and has agreed to pay for all costs, expenses
        and
        liabilities of the Morgan Stanley Trusts (other than withholding taxes and
        the
        Morgan Stanley Trusts’ obligations to the holders of the trust preferred
        securities and common securities), the positions of a holder of the trust
        preferred securities and a holder of the junior subordinated debentures relative
        to other creditors and to stockholders of Morgan Stanley in the event of
        liquidation or bankruptcy of Morgan Stanley are expected to be substantially
        the
        same.

       

      

       

      
        
          
          

        

        
          52

          
            

          

        

        
          
          

        

      

      

        Exhibit
          A-2

         

        Opinion
          of Davis Polk & Wardwell

         

        Based
          upon
          the foregoing, and subject to the limitations, qualifications and assumptions
          set forth herein, we are of the opinion that:

         

        1.           The
          Company has been duly incorporated, is validly existing as a corporation
          in good
          standing under the laws of the State of Delaware, has the corporate power
          and
          authority to own its property and to conduct its business.

         

        2.           Each
          of Morgan Stanley & Co. Incorporated and Morgan Stanley International
          Holdings Inc. (the “Material Subsidiaries”) is validly existing
          as a corporation in good standing under the laws of the jurisdiction of
          its
          incorporation, has the corporate power and authority to own its property
          and to
          conduct its business.

         

        3.           The
          Agreement and the Registration Rights Agreement has been duly authorized,
          executed and delivered by the Company. This Agreement and is a valid and
          binding
          agreements of the Company, enforceable in accordance with their terms,
          subject
          to applicable bankruptcy, insolvency and similar laws affecting creditors’
rights generally and equitable principles of general applicability and
          except as
          rights to indemnification and contribution under the Registration Rights
          Agreement may be limited under applicable law.

         

        4.           The
          Company has the requisite corporate power and authority to execute, deliver
          and
          perform its obligations under the Securities Issuance Agreements and Transaction
          Documents.

         

        5.           The
          stock purchase contracts, the purchase contract and pledge agreement and
          the
          junior subordinated indenture have been duly authorized, executed and delivered
          by the Company and are valid and binding agreements of the Company, enforceable
          in accordance with their terms, subject to applicable bankruptcy, insolvency
          and
          similar laws affecting creditors’ rights generally and equitable principles of
          general applicability.

         

        6.           The
          junior subordinated debentures have been duly authorized by the Company
          and,
          when executed and authenticated in accordance with the provisions of the
          stock
          purchase contracts, the purchase contract and pledge agreement and the
          junior
          subordinated indenture, and delivered to and paid for by the purchasers
          in
          accordance with the terms of this Agreement, will be entitled to the benefits
          of
          the stock purchase contracts, the purchase contract and pledge agreement
          and the
          junior subordinated indenture, and will be valid and binding obligations
          of the
          Company, enforceable in accordance with their terms, subject to applicable
          bankruptcy, insolvency and similar laws affecting creditors’ rights generally
          and equitable principles of general applicability.

         

        7.           The
          Guarantee has been duly authorized, executed and delivered by the Company
          and is
          a valid and binding obligation of the Company enforceable in accordance
          

         

         

        
          
            
            

          

          
            A-1-1

            
              

            

          

          
            
            

          

        

         

         

        with
          its
          terms, subject to applicable bankruptcy, insolvency and similar laws affecting
          creditors’ rights generally and equitable principals of general
          applicability.

         

        8.           The
          shares of Common Stock initially issuable upon exercise of the stock purchase
          contracts have been duly authorized and reserved and, when issued upon
          exercise
          of the stock purchase contracts in accordance with the terms of the stock
          purchase contracts, will be validly issued, fully paid and non-assessable,
          and
          the issuance of such shares will not be subject to any statutory or preemptive
          rights under the Delaware General Corporation Law or the Company’s Charter or
          Bylaws.

         

        9.           The
          Company has taken all necessary corporate action to authorize the execution,
          delivery and performance of its obligations under the
          Securities.  When the Securities are executed by the Company,
          authenticated by the Trustee in accordance with the terms of the stock
          purchase
          contracts, the purchase contract and pledge agreement and the junior
          subordinated indenture, and issued and delivered to and paid for by the
          Investor
          pursuant to the Agreement on the Closing Date, such Securities will constitute
          valid and binding obligations of the Company, enforceable against the Company
          in
          accordance with their terms, subject to applicable bankruptcy, insolvency
          and
          similar laws affecting creditors’ rights generally and equitable principles of
          general applicability.  The stock purchase contracts, the purchase
          contract and pledge agreement and the junior subordinated indenture conform
          in
          all material respects to the descriptions thereof, contained in the Offering
          Memorandum under the captions “Description of the Stock Purchase Contracts,”
“Certain Other Provisions of the Purchase Contract and Pledge Agreement” and
“Description of the Junior Subordinated Debentures.”

         

        10.           Based
          on the representations, warranties and agreements of the Company and the
          Investor in the Agreements and compliance with the statements set forth
          in the
          Offering Memorandum under the caption “Transfer Restrictions,” it is not
          necessary in connection with the offer, sale and delivery of the Securities
          to
          the Investor, in the manner provided for by the Agreements and the Offering
          Memorandum, to register the Securities under the Securities Act or to qualify
          the Junior Subordinated Indenture under the Trust Indenture Act of 1939,
          as
          amended.  We express no opinion, however, as to when or under what
          circumstances any Securities initially sold by the Company may be reoffered
          or
          resold.

         

        11.           The
          execution and delivery by the Company of each Agreement, the stock purchase
          contracts, the purchase contract and pledge agreement and the junior
          subordinated indenture, and the Securities and the performance by the Company
          of
          its obligations thereunder do not contravene any provision of the certificate
          of
          incorporation or the bylaws of the Company.

         

        12.           The
          Company is not, and after receipt of payment for the Securities and the
          application of the proceeds thereof will not be, an “investment company” as
          defined in the Investment Company Act of 1940, as amended.

         

         

        
          
            
            

          

          
            A-1-2

            
              

            

          

          
            
            

          

        

         

        13.           The
          execution and delivery by the Company of, and the performance by the Company
          of
          its obligations under, the Securities Issuance Agreements will not contravene
          any provision of the laws of the State of New York or any federal law of
          the
          United States of America that in our experience is normally applicable
          to
          general business corporations in relation to transactions of the type
          contemplated by the Securities Issuance Agreements, or the General Corporation
          Law of the State of Delaware; provided, however, that we express no opinion
          as
          to (i) federal or state securities laws or (ii) whether the purchase of
          the
          Capital Securities and the Guarantee constitutes a “prohibited transaction”
under Section 406 of the Employee Retirement Income Security Act of 1974,
          as
          amended, or Section 4975 of the Internal Revenue Code of 1986, as
          amended.

         

        

        
          
            
            

          

          
            A-1-3

            
              

            

          

          
            
            

          

           

        

        Exhibit
          A-2

         

        Opinion
          of Richards, Layton & Finger

         

        1.  Each
          of the Trusts has been duly created and is validly existing in good standing
          as
          a statutory trust under the Delaware Statutory Trust Act and, under the
          Delaware
          Statutory Trust Act and the applicable Trust Agreement, has the trust power
          and
          authority to conduct its business, all as described in the Offering
          Memorandum.

         

        2.  Each
          Trust Agreement is a legal, valid and binding agreement of the Company,
          the
          Administrators and the Trustees, and is enforceable against the Company,
          the
          Administrators and the Trustees, in accordance with its terms.

         

        3.  Under
          each Trust Agreement and the Delaware Statutory Trust Act, the execution
          and
          delivery of the transaction documents by the applicable Trust, and the
          performance by such Trust of its obligations thereunder, have been duly
          authorized by all necessary trust action on the part of such Trust.

         

        4.  The
          trust preferred securities have been duly authorized by the applicable
          Trust
          Agreement and are duly and validly issued and, subject to the qualifications
          set
          forth herein, will be fully paid and nonassessable undivided beneficial
          interests in the assets of the applicable Trust.  The Holders of trust
          preferred securities, as beneficial owners of the Trust, will be entitled
          to the
          same limitation of personal liability extended to stockholders of private
          corporations for profit organized under the General Corporation Law of
          the State
          of Delaware.  We note that the Holders of trust preferred securities
          may be obligated, pursuant to the applicable Trust Agreement, to (i) provide
          indemnity and security in connection with and pay taxes or governmental
          charges
          arising from transfers of certificates of the trust preferred securities
          and the
          issuance of replacement certificates of trust preferred securities,
          (ii) provide security and indemnity in connection with requests of or
          directions to the property trustee to exercise its rights and powers under
          such
          Trust Agreement, and (iii) undertake as a party litigant to pay costs in
          any
          suit for the enforcement of any right or remedy under such Trust Agreement
          or
          against the property trustee, to the extent provided in such Trust
          Agreement.

         

        5.  The
          common securities have been duly authorized by the applicable Trust Agreement
          and are duly and validly issued undivided beneficial interests in the assets
          of
          the  applicable Trust.

         

        6.  The
          issuance of the trust preferred securities and common securities is not
          subject
          to preemptive rights under the applicable Trust Agreement or the Delaware
          Statutory Trust Act.

         

        7.  The
          issuance and sale by each Trust of the trust preferred securities and common
          securities, the execution, delivery and performance by each Trust of the
          transaction documents, the consummation by each Trust of the transactions
          contemplated therein and 

         

         

        
          
            
            

          

          
            A-2-1

            
              

            

          

          
            
            

          

        

         

         

        the
          compliance by each Trust with its obligations thereunder do not violate
          (A) the
          Certificate or the applicable Trust Agreement, or (B) any applicable Delaware
          law or Delaware administrative regulation.

         

        8.  After
          due inquiry, limited to, and solely to the extent reflected on a day prior
          to
          closing, the results of computer searches of the court dockets for active
          cases
          of the Court of Chancery of the State of Delaware in and for New Castle
          County,
          Delaware, of the Superior Court of the State of Delaware in and for New
          Castle
          County, Delaware, and of the United States District Court sitting in the
          State
          of Delaware, we do not know of any legal or governmental proceeding pending
          against any of the Trusts.

         

        9.  No
          authorization, approval, consent or order of any Delaware court or Delaware
          governmental authority or Delaware agency is required to be obtained by
          any
          Trust solely in connection with the issuance and sale of the trust preferred
          securities and common securities.

         

        10.  The
          Holders of the trust preferred securities (other than those Holders who
          reside
          or are domiciled in the State of Delaware) will have no liability for income
          taxes imposed by the State of Delaware solely as a result of their participation
          in the applicable Trust, and no Trust will not be liable for any income
          tax
          imposed by the State of Delaware.

         

         

        
          
            
            

          

          
            A-2-2

            
              

            

          

          
            
            

          

        

         

        Exhibit
          B

         

        Press
          Release and Related Financial SupplementEX-4.5

 

Exhibit 4.5

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is entered into as of the
27th day of November 2007, by and among Global Consumer Acquisition Corp., a Delaware
corporation (the “Company”), and the undersigned parties listed under Investors on the signature
page hereto (each, an “Investor” and collectively, the “Investors”).

     WHEREAS, the Investors currently hold all of the issued and outstanding securities of the
Company; and

     WHEREAS, the Investors and the Company desire to enter into this Agreement to provide the
Investors with certain rights relating to the registration of (i) shares of Common Stock; (ii)
Warrants; and (iii) shares of Common Stock underlying Warrants.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

     I DEFINITIONS. The following capitalized terms used herein have the following
meanings:

     “Agreement” means this Agreement, as amended, restated, supplemented, or otherwise modified
from time to time.

     “Commission” means the Securities and Exchange Commission, or any other federal agency then
administering the Securities Act or the Exchange Act.

     “Common Stock” means the common stock, par value $0.0001 per share, of the Company.

     “Company” is defined in the preamble to this Agreement.

     “Demand Registration” is defined in Section 2.1.1.

     “Demanding Holder” is defined in Section 2.1.1.

     “Effective Date” means the date on which the initial public offering of securities of the
Company is declared effective by the Commission.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission promulgated thereunder.

     “Form S-3” is defined in Section 2.3.

     “Indemnified Party” is defined in Section 4.3.

     “Indemnifying Party” is defined in Section 4.3.

     “Investor” is defined in the preamble to this Agreement.

 

 

     “Investor Indemnified Party” is defined in Section 4.1.

     “Majority-in-interest” of Registrable Securities means a majority of the shares of Common
Stock and shares of Common Stock underlying the Warrants included in the Registrable Securities.

     “Maximum Number of Shares” is defined in Section 2.1.4.

     “Notices” is defined in Section 6.3.

     “Piggy-Back Registration” is defined in Section 2.2.1.

     “Register,” “registered” and “registration” mean a registration effected by preparing and
filing a registration statement or similar document in compliance with the requirements of the
Securities Act, and the applicable rules and regulations promulgated thereunder, and such
registration statement becoming effective.

     “Registrable Securities” mean all of (i) the shares of Common Stock owned or held by
Investors; (ii) the Warrants; and (iii) the shares of Common Stock issuable upon exercise of the
Warrants. Registrable Securities include any warrants, shares of capital stock or other securities
of the Company issued as a dividend or other distribution with respect to or in exchange for or in
replacement of such Registrable Securities. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect
to the sale of such securities shall have become effective under the Securities Act and such
securities shall have been sold, transferred, disposed of or exchanged in accordance with such
Registration Statement; (b) such securities shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer shall have been delivered by the Company
and subsequent public distribution of them shall not require registration under the Securities Act;
(c) such securities may be sold by the Investor without restriction; (d) such securities shall have
ceased to be outstanding; or (e) the Commission makes a definitive determination to the Company
that the Registrable Securities are saleable under Rule 144(k).

     “Registration Statement” means a registration statement filed by the Company with the
Commission in compliance with the Securities Act and the rules and regulations promulgated
thereunder for a public offering and sale of Common Stock (other than a registration statement on
Form S-4 or Form S-8, or any successor forms, or any registration statement covering only
securities proposed to be issued in exchange for securities or assets of another entity).

     “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations
of the Commission promulgated thereunder, all as the same shall be in effect at the time.

     “Underwriter” means a securities dealer who purchases any Registrable Securities as principal
in an underwritten offering and not as part of such dealer’s market-making activities.

 

 

     “Warrants” means the warrants to purchase an aggregate of 8,500,000 shares of Common Stock
issued by the Company to certain Investors prior to the close hereof in connection with a private
placement pursuant to (1) Warrant Subscription Agreement dated as of October 1, 2007 between the
Company and Scott LaPorta and (2) Warrant Subscription Agreement dated as of July 19, 2007 between
the Company and Hayground Cove Asset Management LLC, as amended.

     II REGISTRATION RIGHTS.

          A Demand Registration.

          1 Request for Registration. At any time and from time to time beginning on or
after the Effective Date, the holders of a Majority-in-interest of the Registrable
Securities held by the Investors or the transferees of the Investors, may make a written
demand for registration under the Securities Act of all or part of their Registrable
Securities (a “Demand Registration”). Any demand for a Demand Registration shall specify the
number and type of Registrable Securities proposed to be sold and the intended method(s) of
distribution thereof. The Company will notify all holders of Registrable Securities of the
demand, and each holder of Registrable Securities who wishes to include all or a portion of
such holder’s Registrable Securities in the Demand Registration (each such holder including
Registrable Securities in such Demand Registration, a “Demanding Holder”) shall so notify
the Company within fifteen (15) days after the receipt by the holder of the notice from the
Company. Upon any such request, the Demanding Holders shall be entitled to have their
Registrable Securities included in the Demand Registration, subject to Sections 2.1.3, 2.1.4
and 3.4 and the provisos set forth in Section 3.1.1. The Company shall not be obligated to
effect more than an aggregate of two (2) Demand Registrations under this Section 2.1.1 in
respect of Registrable Securities.

          2 Effective Registration. A registration will not count as a Demand
Registration until the Registration Statement filed with the Commission with respect to such
Demand Registration has been declared effective and the Company has complied with all of its
obligations under this Agreement with respect thereto; provided, however, that, if after
such Registration Statement has been declared effective, the offering of Registrable
Securities pursuant to a Demand Registration is interfered with by any stop order or
injunction of the Commission or any other governmental agency or court, the Registration
Statement with respect to such Demand Registration will be deemed not to have been declared
effective, unless and until (i) such stop order or injunction is removed, rescinded or
otherwise terminated, and (ii) a Majority-in-interest of the Demanding Holders thereafter
elect to continue the offering; provided, further, that the Company shall not be obligated
to file a second Registration Statement until a Registration Statement that has been filed
is counted as a Demand Registration or is terminated.

          3 Underwritten Offering. If a Majority-in-interest of the Demanding Holders so
elect and such holders so advise the Company as part of their written demand for a Demand
Registration, the offering of such Registrable Securities pursuant to such

 

 

Demand Registration shall be in the form of an underwritten offering. In such event,
the right of any holder of Registrable Securities to include its Registrable Securities in
such registration shall be conditioned upon such holder’s participation in such underwriting
and the inclusion of such holder’s Registrable Securities in the underwriting to the extent
provided herein. All Demanding Holders proposing to distribute their securities through such
underwriting shall enter into an underwriting agreement in customary form with the
Underwriter or Underwriters selected for such underwriting by a Majority-in-interest of the
holders initiating the Demand Registration.

          4 Reduction of Offering. If the managing Underwriter or Underwriters for a
Demand Registration that is to be an underwritten offering advises the Company and the
Demanding Holders in writing that the dollar amount or number of Registrable Securities
which the Demanding Holders desire to sell, taken together with all other shares of Common
Stock or other securities which the Company desires to sell and the shares of Common Stock
or other Securities, if any, as to which registration has been requested pursuant to written
contractual piggy-back registration rights held by other securityholders of the Company who
desire to sell, exceeds the maximum dollar amount or maximum number of securities that can
be sold in such offering without adversely affecting the proposed offering price, the
timing, the distribution method, or the probability of success of such offering (such
maximum dollar amount or maximum number of securities as determined by the Company in its
sole discretion, as applicable, the “Maximum Number of Shares”), then the Company shall
include in such registration: (i) first, the Registrable Securities as to which Demand
Registration has been requested by the Demanding Holders (pro rata in accordance with the
number of shares of Registrable Securities which such Demanding Holder has requested be
included in such registration, regardless of the number of Registrable Securities held by
each Demanding Holder) that can be sold without exceeding the Maximum Number of Shares; (ii)
second, to the extent that the Maximum Number of Shares has not been reached under the
foregoing clause (i), the shares of Common Stock or other securities that the Company
desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii)
third, to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i) and (ii), the shares of Common Stock or other securities for the
account of other persons that the Company is obligated to register pursuant to written
contractual arrangements (including, without limitation, any piggy-back registration rights)
with such persons and that can be sold without exceeding the Maximum Number of Shares; and
(iv) fourth, to the extent that the Maximum Number of Shares has not been reached under the
foregoing clauses (i), (ii), and (iii), the shares of Common Stock or other securities that
other securityholders desire to sell that can be sold without exceeding the Maximum Number
of Shares.

          5 Withdrawal. If a Majority-in-interest of the Demanding Holders disapprove of
the terms of any underwriting or are not entitled to include all of their Registrable
Securities in any offering, such Majority-in-interest of the Demanding Holders may elect to
withdraw from such offering by giving written notice to the Company and the Underwriter or
Underwriters of their request to withdraw prior to the effectiveness of the Registration
Statement filed with the Commission with respect to such Demand Registration. In such event,
the Company need not seek effectiveness of

 

 

such Registration Statement for the benefit of other Investors, unless otherwise
required to do so. If the Majority-in-interest of the Demanding Holders withdraws from a
proposed offering relating to a Demand Registration, then such registration shall not count
as a Demand Registration provided for in Section 2.1.1.

          B Piggy-Back Registration.

          1 Piggy-Back Rights. If at any time on or after the Effective Date the Company
proposes to file a Registration Statement under the Securities Act with respect to an
offering of equity securities, or securities or other obligations exercisable or
exchangeable for, or convertible into, equity securities, by the Company for its own account
or for securityholders of the Company for their accounts (or by the Company and by
securityholders of the Company including, without limitation, pursuant to Section 2.1),
other than a Registration Statement (i) filed in connection with any employee stock option
or other benefit plan, (ii) for an exchange offer or offering of securities solely to the
Company’s existing securityholders, (iii) for an offering of debt that is convertible into
equity securities of the Company or (iv) for a dividend reinvestment plan, then the Company
shall (x) give written notice of such proposed filing to the holders of Registrable
Securities as soon as practicable but in no event less than fifteen (15) days before the
anticipated filing date, which notice shall describe the amount and type of securities to be
included in such offering, the intended method(s) of distribution, and the name of the
proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the
holders of Registrable Securities in such notice the opportunity to register the sale of
such number of shares of Registrable Securities as such holders may request in writing
within five (5) days following receipt of such notice (a “Piggy-Back Registration”). The
Company shall cause such Registrable Securities to be included in such registration and
shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed
underwritten offering to permit the Registrable Securities requested to be included in a
Piggy-Back Registration to be included on the same terms and conditions as any similar
securities of the Company and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method(s) of distribution thereof. All holders of
Registrable Securities proposing to distribute their securities through a Piggy-Back
Registration that involves an Underwriter or Underwriters shall enter into an underwriting
agreement in customary form with the Underwriter or Underwriters selected for such
Piggy-Back Registration.

          2 Reduction of Offering. If the managing Underwriter or Underwriters for a
Piggy-Back Registration that is to be an underwritten offering advises the Company and the
holders of Registrable Securities in writing that the dollar amount or number of shares of
Common Stock or other securities which the Company desires to sell, taken together with
            shares of Common Stock or other securities, if any, as to which registration has been
demanded pursuant to written contractual arrangements with persons other than the holders of
Registrable Securities hereunder, the Registrable Securities as to which registration has
been requested under this Section 2.2, and the shares of Common Stock or other securities,
if any, as to which registration has been requested pursuant to the written contractual
piggy-back registration rights of other

 

 

securityholders of the Company, exceeds the Maximum Number of Shares, then the Company
shall include in any such registration:

          i
If the registration is undertaken for the Company’s account: (A) first, the shares of Common Stock or other securities that the Company desires to sell that can
be sold without exceeding the Maximum Number of Shares; (B) second, to the extent
that the Maximum Number of Shares has not been reached under the foregoing clause
(A), the shares of Common Stock and other securities, if any, including the
Registrable Securities, as to which registration has been requested pursuant to
written contractual piggy-back registration rights of security holders (pro rata in
accordance with the number of shares of Common Stock and other securities which each
such person has actually requested to be included in such registration, regardless
of the number of shares of Common Stock and other securities with respect to which
such persons have the right to request such inclusion) that can be sold without
exceeding the Maximum Number of Shares; and

          ii If the registration is a “demand” registration undertaken at the demand of
persons other than the holders of Registrable Securities pursuant to written
contractual arrangements with such persons, (A) first, the shares of Common Stock
and other securities for the account of the demanding persons that can be sold
without exceeding the Maximum Number of Shares; (B) second, to the extent that the
Maximum Number of Shares has not been reached under the foregoing
clause (A), the shares of Common Stock or other securities that the Company desires to sell that can
be sold without exceeding the Maximum Number of Shares; and (C) third, to the extent
that the Maximum Number of Shares has not been reached under the foregoing clauses
(A) and (B), the Registrable Securities as to which registration has been requested
under this Section 2.2 (pro rata in accordance with the number of shares of
Registrable Securities which each such person has actually requested to be included
in such registration, regardless of the number of shares of Common Stock and other
securities with respect to which such persons have the right to request such
inclusion by such holder); and (D) fourth, to the extent that the Maximum Number of
Shares has not been reached under the foregoing clauses (A), (B) and (C), the shares
of Common Stock or other securities that other securityholders desire to sell that
can be sold without exceeding the Maximum Number of Shares.

          3 Withdrawal. Any holder of Registrable Securities may elect to withdraw such
holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by
giving written notice to the Company of such request to withdraw prior to the effectiveness
of the Registration Statement. The Company (whether on its own determination or as a result
of the withdrawal by persons making a demand pursuant to written contractual obligations)
may also elect to withdraw a registration statement at any time prior to the effectiveness
of the Registration Statement. Notwithstanding any such withdrawal, the Company shall pay
all expenses incurred by the holders of Registrable Securities in connection with such
Piggy-Back Registration as provided in Section 3.3.

 

 

          C Registrations on Form S-3. The holders of Registrable Securities may at any time
and from time to time beginning on or after the Effective Date, request in writing that the
Company register the resale of any or all of such Registrable Securities on Form S-3 or any
similar short-form registration which may be available at such time (“Form S-3”); provided,
however, that the Company shall not be obligated to effect such request through an underwritten
offering. Upon receipt of such written request, the Company will promptly give written notice of
the proposed registration to all other holders of Registrable Securities, and, as soon as
practicable thereafter, effect the registration of all or such portion of such holder’s or
holders’ Registrable Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any other holder or holders joining in such request as
are specified in a written request given within five (5) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be obligated to effect
any such registration pursuant to this Section 2.3: (i) if Form S-3 is not available for such
offering; or (ii) if the holders of the Registrable Securities, together with the holders of any
other securities of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities at any aggregate price to the public of less
than $500,000. Registrations effected pursuant to this Section 2.3 shall not be counted as
Demand Registrations effected pursuant to Section 2.1.

          D No Net Cash Settlement Value. In no event will the holders of Registrable
Securities be entitled to receive a net cash settlement or other consideration in lieu of
physical settlement in shares of Common Stock, regardless of whether the Common Stock (or Common
Stock underlying the Registrable Securities) is registered pursuant to an effective Registration
Statement.

     III REGISTRATION PROCEDURES.

          A Filings; Information. Whenever the Company is required to effect the
registration of any Registrable Securities pursuant to Section 2, the Company shall use its best
efforts to effect the registration and sale of such Registrable Securities in accordance with
the intended method(s) of distribution thereof as expeditiously as practicable, and in
connection with any such request:

          1 Filing Registration Statement. The Company shall, as expeditiously as
possible and in any event within sixty (60) days after receipt of a request for a Demand
Registration pursuant to Section 2.1, prepare and file with the Commission a Registration
Statement on any form for which the Company then qualifies or which counsel for the Company
shall deem appropriate and which form shall be available for the sale of all Registrable
Securities to be registered thereunder in accordance with the intended method(s) of
distribution thereof, and shall use its best efforts to cause such Registration Statement to
become and remain effective for the period required by Section 3.1.3; provided, however,
that the Company shall have the right to defer any Demand Registration for up to thirty (30)
days, and any Piggy-Back Registration for such period as may be applicable to deferment of
any demand registration to which such Piggy-Back Registration relates, in each case if the
Company shall furnish to the holders a certificate signed by the Chief Executive Officer of
the Company stating that, in the good faith judgment of the Board of Directors of the
Company, it would be materially detrimental to

 

 

the Company and its stockholders for such Registration Statement to be effected at such
time; provided further, however, that the Company shall not have the right to exercise the
right set forth in the immediately preceding proviso more than once in any 365-day period in
respect of a Demand Registration hereunder.

          2 Amendments and Supplements. The Company shall prepare and file with the
Commission such amendments, including post-effective amendments, and supplements to such
Registration Statement and the prospectus used in connection therewith as may be necessary
to keep such Registration Statement effective and in compliance with the provisions of the
Securities Act until all Registrable Securities and other securities covered by such
Registration Statement have been disposed of in accordance with the intended method(s) of
distribution set forth in such Registration Statement (which period shall not exceed the sum
of one hundred eighty (180) days plus any period during which any such disposition is
interfered with by any stop order or injunction of the Commission or any governmental agency
or court) or such securities have been withdrawn.

          3 Notification. After the filing of a Registration Statement, the Company
shall promptly, and in no event more than two (2) business days after such filing, notify
the holders of Registrable Securities included in such Registration Statement of such
filing, and shall further notify such holders promptly and confirm such advice in writing in
all events within two (2) business days of the occurrence of any of the following: (i) when
such Registration Statement becomes effective; (ii) when any post-effective amendment to
such Registration Statement becomes effective; (iii) the issuance or threatened issuance by
the Commission of any stop order (and the Company shall take all actions required to prevent
the entry of such stop order or to remove it if entered); and (iv) any request by the
Commission for any amendment or supplement to such Registration Statement or any prospectus
relating thereto or for additional information or of the occurrence of an event requiring
the preparation of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of the securities covered by such Registration Statement, such
prospectus will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein not
misleading, and promptly make available to the holders of Registrable Securities included in
such Registration Statement any such supplement or amendment.

          4 State Securities Laws Compliance. The Company shall use its best efforts to
register or qualify the Registrable Securities covered by the Registration Statement under
such securities or “blue sky” laws of such jurisdictions in the United States as the holders
of Registrable Securities included in such Registration Statement (in light of their
intended plan of distribution) may request.

          5 Agreements for Disposition. The Company shall enter into customary
agreements (including, if applicable, an underwriting agreement in customary form) and take
such other actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities. The representations, warranties and covenants of
the Company in any underwriting agreement which are made to or for

 

 

the benefit of any Underwriters, to the extent applicable, shall also be made to and
for the benefit of the holders of Registrable Securities included in such registration
statement. No holder of Registrable Securities included in such registration statement shall
be required to make any representations or warranties in the underwriting agreement except,
if applicable, with respect to such holder’s organization, good standing, authority, title
to Registrable Securities, lack of conflict of such sale with such holder’s material
agreements and organizational documents, and with respect to written information relating to
such holder that such holder has furnished in writing expressly for inclusion in such
Registration Statement. Holders of Registrable Securities shall agree to such covenants and
indemnification and contribution obligations for selling stockholders as are customarily
contained in agreements of that type. Further, such holders shall cooperate fully in the
preparation of the registration statement and other documents relating to any offering in
which they include securities pursuant to Section 2 hereof; provided, however, that such
cooperation shall be limited to furnishing to the Company such information regarding itself,
the Registrable Securities held by such holder and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of the
Registrable Securities.

          6 Cooperation. The principal executive officer of the Company, the principal
financial officer of the Company, the principal accounting officer of the Company and all
other officers and members of the management of the Company shall cooperate fully in any
offering of Registrable Securities hereunder, which cooperation shall include, without
limitation, the preparation of the Registration Statement with respect to such offering and
all other offering materials and related documents, and participation in meetings with
Underwriters, attorneys, accountants and potential investors.

          7 Records. The Company shall make available for inspection by the holders of
Registrable Securities included in such Registration Statement, any Underwriter
participating in any disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by any holder of Registrable Securities included
in such Registration Statement or any Underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, as shall be necessary to enable
them to exercise their due diligence responsibility, and cause the Company’s officers,
directors and employees to supply all information reasonably requested by any of them in
connection with such Registration Statement.

          8 Opinions and Comfort Letters. The Company shall furnish to each holder of
Registrable Securities included in any Registration Statement a signed counterpart,
addressed to such holder, of (i) any opinion of counsel to the Company delivered to any
Underwriter, and (ii) any comfort letter from the Company’s independent public accountants
delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter,
the Company shall furnish to each holder of Registrable Securities included in such
Registration Statement, at any time that such holder elects to use a prospectus, an opinion
of counsel to the Company to the effect that the Registration Statement containing such
prospectus has been declared effective and that no stop order is in effect.

 

 

          9 Listing. The Company shall use its best efforts to cause all Registrable
Securities included in any registration to be listed on such exchanges or otherwise
designated for trading in the same manner as similar securities issued by the Company are
then listed or designated or, if no such similar securities are then listed or designated,
in a manner satisfactory to the holders of a Majority-in-interest of the Registrable
Securities included in such registration.

          B Obligation to Suspend Distribution. Upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a
resale registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by the
Company, pursuant to a written insider trading compliance program adopted by the Company’s Board
of Directors, of the ability of all “insiders” covered by such program to transact in the
Company’s securities because of the existence of material non-public information, each holder of
Registrable Securities included in any registration shall immediately discontinue disposition of
such Registrable Securities pursuant to the Registration Statement covering such Registrable
Securities until such holder receives the supplemented or amended prospectus contemplated by
Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in the Company’s
securities is removed, as applicable, and, if so directed by the Company, each such holder will
deliver to the Company all copies, other than permanent file copies then in such holder’s
possession, of the most recent prospectus covering such Registrable Securities at the time of
receipt of such notice.

          C Registration Expenses. The Company shall bear all costs and expenses incurred in
connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration
pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.3, and
all expenses incurred in performing or complying with its other obligations under this
Agreement, whether or not the Registration Statement becomes effective, including, without
limitation: (i) all registration and filing fees; (ii) fees and expenses of compliance with
securities or “blue sky” laws (including fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the
Company’s internal expenses (including, without limitation, all salaries and expenses of its
officers and employees); (v) the fees and expenses incurred in connection with the listing of
the Registrable Securities as required by Section 3.1.9; (vi) Financial Industry Regulatory
Authority, Inc. fees; (vii) fees and disbursements of counsel for the Company and fees and
expenses for independent certified public accountants retained by the Company (including the
expenses or costs associated with the delivery of any opinions or comfort letters requested
pursuant to Section 3.1.8); (viii) the fees and expenses of any special experts retained by the
Company in connection with such registration; and (ix) the fees and expenses of one legal
counsel selected by the holders of a Majority-in-interest of the Registrable Securities included
in such registration. The Company shall have no obligation to pay any underwriting discounts or
selling commissions attributable to the Registrable Securities being sold by the holders
thereof, which underwriting discounts or selling commissions shall be borne solely by such
holders. Additionally, in an underwritten offering, all selling securityholders and the Company
shall bear the expenses of the underwriter pro rata in proportion to the respective dollar
amount of securities each is selling in such offering.

 

 

          D Information. The holders of Registrable Securities shall provide such
information as may reasonably be requested by the Company, or the managing Underwriter, if any,
in connection with the preparation of any Registration Statement, including amendments and
supplements thereto, in order to effect the registration of any Registrable Securities under the
Securities Act pursuant to Section 2 and in connection with the Company’s obligation to comply
with federal and applicable state securities laws.

          E Holder Obligations. No holder of Registrable Securities may participate in any
underwritten offering pursuant to this Section 3 unless such holder (i) agrees to sell only such
holder’s Registrable Securities on the basis reasonably provided in any underwriting agreement,
and (ii) completes, executes and delivers any and all questionnaires, powers of attorney,
custody agreements, indemnities, underwriting agreements and other documents reasonably required
by or under the terms of any underwriting agreement or as reasonably requested by the Company.

     IV INDEMNIFICATION AND CONTRIBUTION.

          A Indemnification by the Company. The Company agrees to indemnify and hold harmless
each Investor and each other holder of Registrable Securities, and each of their respective
officers, employees, affiliates, directors, partners, members, attorneys and agents, and each
person, if any, who controls an Investor and each other holder of Registrable Securities (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an
“Investor Indemnified Party”), from and against any expenses, losses, judgments, claims, damages
or liabilities, whether joint or several, arising out of or based upon any untrue (or allegedly
untrue) statement of a material fact contained in any Registration Statement under which the
sale of such Registrable Securities was registered under the Securities Act, any preliminary
prospectus, free writing prospectus, final prospectus or summary prospectus contained in the
Registration Statement, or any amendment or supplement to such Registration Statement, or
arising out of or based upon any omission (or alleged omission) to state a material fact
required to be stated therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation promulgated thereunder
applicable to the Company and relating to action required of the Company in connection with any
such registration; and the Company shall promptly reimburse the Investor Indemnified Party for
any reasonable legal and any other reasonable expenses incurred by such Investor Indemnified
Party in connection with defending any such expense, loss, judgment, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case to the extent
that any such expense, loss, claim, damage or liability arises out of or is based upon any
untrue statement or allegedly untrue statement or omission or alleged omission made in such
Registration Statement, preliminary prospectus, free writing prospectus, final prospectus, or
summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with
information furnished to the Company, in writing, by such selling holder expressly for use
therein.

          B Indemnification by Holders of Registrable Securities. Each selling holder of
Registrable Securities will, in the event that any registration is being effected under the
Securities Act pursuant to this Agreement of any Registrable Securities held by such selling

 

 

holder, indemnify and hold harmless the Company, each of its directors and officers and
each underwriter (if any), and each other person, if any, who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, against any losses, claims, judgments, damages or liabilities, whether joint or several,
insofar as such losses, claims, judgments, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of a
material fact contained in any Registration Statement under which the sale of such Registrable
Securities was registered under the Securities Act, any preliminary prospectus, final prospectus
or summary prospectus contained in the Registration Statement, or any amendment or supplement to
the Registration Statement, or arise out of or are based upon any omission or the alleged
omission to state a material fact required to be stated therein or necessary to make the
statement therein not misleading, if the statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company by such selling holder expressly
for use therein, and shall reimburse the Company, its directors and officers, and each such
controlling person for any legal or other expenses reasonably incurred by any of them in
connection with investigation or defending any such loss, claim, damage, liability or action.
Each selling holder’s indemnification obligations hereunder shall be several and not joint and
shall be limited to the amount of any net proceeds actually received by such selling holder in
connection with the sale of the Registrable Securities by such selling holder pursuant to the
Registration Statement containing such untrue statement or allegedly untrue statement.

          C Conduct of Indemnification Proceedings. Promptly after receipt by any person of
any notice of any loss, claim, damage or liability or any action in respect of which indemnity
may be sought pursuant to Section 4.1 or 4.2, such person (the “Indemnified Party”) shall, if a
claim in respect thereof is to be made against any other person for indemnification hereunder,
promptly notify such other person (the “Indemnifying Party”) in writing of the loss, claim,
judgment, damage, liability or action; provided, however, that the failure by the Indemnified
Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and
solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the
Indemnified Party is seeking indemnification with respect to any claim or action brought against
the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such
claim or action, and, to the extent that it elects, jointly with all other Indemnifying Parties,
to assume control of the defense thereof with counsel satisfactory to the Indemnified Party.
After notice from the Indemnifying Party to the Indemnified Party of its election to assume
control of the defense of such claim or action, the Indemnifying Party shall not be liable to
the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense thereof other than reasonable costs of investigation;
provided, however, that in any action in which both the Indemnified Party and the Indemnifying
Party are named as defendants, the Indemnified Party shall have the right to employ separate
counsel (but no more than one such separate counsel) to represent the Indemnified Party and its
controlling persons who may be subject to liability arising out of any claim in respect of which
indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees
and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written
opinion of counsel of such Indemnified Party, representation of both parties by the same counsel
would be

 

 

inappropriate due to actual or potential differing interests between them. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, consent to entry of
judgment or effect any settlement of any claim or pending or threatened proceeding in respect of
which the Indemnified Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such judgment or settlement includes an
unconditional release of such Indemnified Party from all liability arising out of such claim or
proceeding.

          D Contribution.

          1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is
unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or
action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, claim, damage, liability or action in such proportion as is
appropriate to the relative fault of the Indemnified Parties and the Indemnifying Parties in
connection with the actions or omissions which resulted in such loss, claim, damage,
liability or action, as well as any other relevant equitable considerations. The relative
fault of any Indemnified Party and any Indemnifying Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to information supplied by
such Indemnified Party or such Indemnifying Party and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or
omission.

          2 The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 4.4 were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations referred to in the
immediately preceding Section 4.4.1. The amount paid or payable by an Indemnified Party as a
result of any loss, claim, damage, liability or action referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the provisions of this
Section 4.4, no holder of Registrable Securities shall be required to contribute any amount
in excess of the dollar amount of the net proceeds (after payment of any underwriting fees,
discounts, commissions or taxes) actually received by such holder from the sale of
Registrable Securities which gave rise to such contribution obligation. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

       V OTHER COVENANTS.

          A Rule 144. The Company covenants that it shall file any reports required to be
filed by it under the Securities Act and the Exchange Act and shall take such further action as
the holders of Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holders to sell Registrable Securities without

 

 

registration under the Securities Act within the limitation of the exemptions provided by
Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar
Rule or regulation (but not Rule 144A) hereafter adopted by the Commission.

VI MISCELLANEOUS.

     A Assignment; No Third Party Beneficiaries. This Agreement and the rights, duties and
obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in
part. This Agreement and the rights, duties and obligations of the holders of Registrable
Securities hereunder may be freely assigned or delegated by such holder of Registrable Securities
in conjunction with and to the extent of any transfer of Registrable Securities by any such holder
in accordance with applicable law. This Agreement and the provisions hereof shall be binding upon
and shall inure to the benefit of each of the parties and their respective successors and the
permitted assigns of the Investor or holder of Registrable Securities or of any assignee of the
Investor or holder of Registrable Securities. This Agreement is not intended to confer any rights
or benefits on any persons that are not party hereto other than as expressly set forth in Article 4
and this Section 6.1.

     B Notices. All notices, demands, requests, consents, approvals or other communications
(collectively, “Notices”) required or permitted to be given hereunder or which are given with
respect to this Agreement shall be in writing and shall be personally served, sent by registered or
certified mail, return receipt requested, or sent by reputable air courier service with charges
prepaid, addressed as set forth below, or to such other address as such party shall have specified
most recently by written notice provided in accordance with this Section 6.2. Notice shall be
deemed given on the date of service if served personally, on the third business day after
registration or certification, if sent by registered or certified mail, or on the next business day
following timely delivery of such notice to a reputable air courier service with an order for
next-day delivery, if sent by such courier service.

     If to the Company:

     Global Consumer Acquisition Corp.

     1370 Avenue of the Americas

     28th Floor

     New York, New York 10019

     Attn: Chief Executive Officer

     Fax: (212) 445-7800

     with a copy to:

 

 

     Proskauer Rose LLP

     1585 Broadway

     New York, New York 10036

     Attn: Jeffrey Horwitz, Esq.

     Fax: (212) 969-2900

     If to an Investor, to the attention of the Investor at the address set forth opposite his,
her or its respective name on the signature page hereto.

          C Severability. This Agreement shall be deemed severable, and the invalidity or
unenforceability of any term or provision hereof shall not affect the validity or enforceability
of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such
invalid or unenforceable term or provision, the parties hereto intend that there shall be added
as a part of this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.

          D Counterparts; Facsimile Signatures. This Agreement may be executed in one or more
counterparts, all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the
other party, it being understood that all parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission or by e-mail delivery of a
“.pdf” format data file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.

          E Entire Agreement. This Agreement (including all agreements entered into pursuant
hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute
the entire agreement of the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written.

          F Modifications and Amendments. No amendment, modification or termination of this
Agreement shall be binding upon any party unless executed in writing by such party.

          G Titles and Headings. Titles and headings of sections of this Agreement are for
convenience only and shall not affect the construction of any provision of this Agreement.

          H Waivers and Extensions. Any party to this Agreement may waive any right, breach
or default which such party has the right to waive, provided that such waiver will not be
effective against the waiving party unless it is in writing, is signed by such party,

 

 

and specifically refers to this Agreement. Waivers may be made in advance or after the
right waived has arisen or the breach or default waived has occurred. Any waiver may be
conditional. No waiver of any breach of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or
provision herein contained. No waiver or extension of time for performance of any obligations or
acts shall be deemed a waiver or extension of the time for performance of any other obligations
or acts.

          I Governing Law. This Agreement shall be governed by, interpreted under, and
construed in accordance with the internal laws of the State of New York applicable to agreements
made and to be performed within the State of New York, without giving effect to any
choice-of-law provisions thereof that would compel the application of the substantive laws of
any other jurisdiction.

          J Waiver of Trial by Jury. Each party hereby irrevocably and unconditionally waives
the right to a trial by jury in any action, suit, counterclaim or other proceeding (whether
based on contract, tort or otherwise) arising out of, connected with or relating to this
Agreement, the transactions contemplated hereby, or the actions of any Investor in the
negotiation, administration, performance or enforcement hereof.

[The remainder of this page intentionally left blank. Signature pages to follow.]

 

 

     IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed
and delivered by their duly authorized representatives as of the date first written above.

	 	 	 	 	 	 	 
	 	 	GLOBAL CONSUMER ACQUISITION CORP., a	 	 
	 	 	Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

	 	/s/ Scott LaPorta
 

	 	 
	 

	 	
Name:
	 	
Scott LaPorta
	 	 
	 

	 	Its
	 	Chief Executive Officer

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