Document:

Exhibit
4.1

     

    
      FORM
OF FLOATING RATE SENIOR NOTE

       

      
        	
                REGISTERED

              	
                REGISTERED

              
	
                No.
      FLR-1

              	
                U.S.
      $

              
	 
      	
                CUSIP:
      617483615

              

      

      

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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      MORGAN
STANLEY

      FLOATING
RATE SENIOR NOTE

      SENIOR
GLOBAL MEDIUM-TERM NOTE, SERIES F

      

      PROTECTED
ABSOLUTE RETURN BARRIER NOTE DUE MARCH 20, 2011

      BASED
ON THE VALUE OF THE S&P 500®
INDEX

      
        	
                BASE
      RATE: None

              	
                ORIGINAL
      ISSUE DATE:

              	
                MATURITY
      DATE:

                See  “Maturity
      Date” below.

              
	
                INDEX
      MATURITY: N/A

              	
                INTEREST
      ACCRUAL DATE: N/A

              	
                INTEREST
      PAYMENT DATE(S): N/A

              
	
                SPREAD
      (PLUS OR MINUS): N/A

              	
                INITIAL
      INTEREST RATE: N/A

              	
                INTEREST
      PAYMENT PERIOD: N/A

              
	
                SPREAD
      MULTIPLIER: N/A

              	
                INITIAL
      INTEREST RESET DATE: N/A

              	
                INTEREST
      RESET PERIOD: N/A

              
	
                REPORTING
      SERVICE: N/A

              	
                MAXIMUM
      INTEREST RATE: N/A

              	
                INTEREST
      RESET DATE(S): N/A

              
	
                INDEX
      CURRENCY: N/A

              	
                MINIMUM
      INTEREST RATE: N/A

              	
                CALCULATION
      AGENT: See “Calculation Agent” below.

              
	
                EXCHANGE
      RATE AGENT: N/A

              	
                INITIAL
      REDEMPTION DATE: N/A

              	
                SPECIFIED
      CURRENCY:

                U.S.
      dollars

              
	
                APPLICABILITY
      OF MODIFIED PAYMENT UPON ACCELERATION: See “Alternate Exchange Calculation
      in Case of an Event of Default” below.

              	
                INITIAL
      REDEMPTION PERCENTAGE: N/A

              	
                IF
      SPECIFIED CURRENCY OTHER THAN U.S. DOLLARS, OPTION TO ELECT PAYMENT IN
      U.S. DOLLARS: N/A

              
	 
      	
                ANNUAL
      REDEMPTION PERCENTAGE REDUCTION: N/A

              	
                DESIGNATED
      CMT REUTERS PAGE: N/A

              
	 
      	
                OPTIONAL
      REPAYMENT DATE(S): N/A

              	
                DESIGNATED
      CMT MATURITY INDEX: N/A

              
	 
      	
                REDEMPTION
      NOTICE PERIOD: N/A

              	 
      
	 
      	
                TAX
      REDEMPTION AND PAYMENT OF ADDITIONAL AMOUNTS: NO

              	 
      
	 
      	
                IF
      YES, STATE INITIAL OFFERING DATE: N/A

              	
                OTHER
      PROVISIONS: See below.

              

      

      

       

      
        	
                Maturity
      Date

              	 
      	
                March
      20, 2011, subject to extension if the Valuation Date is postponed in
      accordance with the definition thereof.  If the Valuation Date
      is postponed so that it falls less than two scheduled Trading Days prior
      to the scheduled Maturity Date, the Maturity Date shall be the second
      scheduled Trading Day following the Valuation Date as
      postponed.

              

      

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

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

              
	 	 	 
	
                Observation
      Period

              	 
      	
                The
      period of regular trading hours on each Index Business Day on which there
      is no Market Disruption Event with respect to the Index, beginning on, and
      including, the Index Business Day following the Pricing Date and ending
      on, and including, the Valuation Date.

              
	 	 	 
	
                Pricing
      Date

              	 
      	 
      
	 	 	 
	
                Authorized
      Denominations

              	 
      	
                $10
      and integral multiples thereof

              
	 	 	 

      

      
        	
                Stated
      Principal Amount

              	 
      	
                $10
      per Note

              
	 	 	 
	
                Index

              	 
      	
                S&P
      500®
      Index

              
	 	 	 
	
                Payment
      at Maturity

              	 
      	
                At
      maturity, upon delivery of this Note to the Trustee, the Issuer shall pay
      with respect to the Stated Principal Amount an amount in cash equal to $10
      plus the Supplemental Redemption Amount, if any, as determined by the
      Calculation Agent.

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

         

      

      
        	 
      	 
      	
                The
      Payment at Maturity per Stated Principal Amount shall not be less than the
      Stated Principal Amount of $10.

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

              
	 	 	 
	
                Supplemental
      Redemption Amount

              	 
      	
                The
      Supplemental Redemption Amount with respect to the Stated Principal Amount
      shall equal:

              
	 	 	 
	 
      	 
      	
                if
      at all times
      during the Observation Period the Index Value is within the Index Range,
      $10 times the
      Absolute Index Return; or

              
	 	 	 
	 
      	 
      	
                if
      at any time on any
      day during the Observation Period the Index Value is outside the
      Index Range, $0.

              
	 	 	 
	 
      	 
      	
                The
      Supplemental Redemption Amount shall not be less than
  $0.

              
	 	 	 
	 
      	 
      	
                The
      Calculation Agent shall calculate the Supplemental Redemption Amount on
      the Valuation Date.

              
	 	 	 
	
                Index
      Value

              	 
      	
                The
      Index Value at any time on any day during the Observation Period shall
      equal the value of the Index published at such time on such day on
      Bloomberg page “SPX” or any successor page, or in the case of any
      Successor Index (as defined below), the Bloomberg page or successor page
      for any such Successor Index.

              
	 	 	 
	
                Index
      Range

              	 
      	
                The
      Index Range includes any value of the Index that is:

              
	 	 	 
	 
      	 
      	
                (i)
      greater than or equal to the Initial Index Value times           %
      and

              
	 	 	 
	 
      	 
      	
                (ii)
      less than or equal to the Initial Index Value times           %.

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      
        	 
      	 
      	
                The
      Index Range can also be expressed as follows:

              
	 	 	 
	 
      	 
      	
                Index
      Range =

              
	 	 	 
	 
      	 
      	
                >
      (Initial Index Value
      x           );

              
	 	 	 
	 
      	 
      	
                and

              
	 	 	 
	 
      	 
      	
                < (Initial Index Value
      x           )

              
	 	 	 
	
                Absolute
      Index Return

              	 
      	
                The
      Absolute Index Return is the absolute value of the following
      formula:

              
	 	 	 
	 	 	
                Final Index Value –
      Initial Index Value

                
                  Initial
      Index Value

                

              
	 	 	 

      

    

    
      	
              Initial
      Index Value

            	 
      	 
      
	 	 	 
	
              Index
      Closing Value

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

            
	 	 	 
	
              Final
      Index Value

            	 
      	
              The
      Index Closing Value on the Valuation Date, as determined by the
      Calculation Agent.

            
	 	 	 
	
              Valuation
      Date

            	 
      	
              The
      Valuation Date shall be March 17, 2011, subject to adjustment for Market
      Disruption Events as described in the following
  paragraph.

            
	 	 	 
	 
      	 
      	
              If
      a Market Disruption Event with respect to the Index occurs on the
      scheduled Valuation Date, or if such Valuation Date is not an Index
      Business Day, the Index Closing Level on such date shall be determined on
      the immediately succeeding Index Business Day on which no Market
      Disruption Event shall have occurred; provided that the Final
      Index Value shall not be determined on a date later than the fifth
      scheduled Index Business Day after the scheduled Valuation Date, and if
      such date is not an Index Business Day or if there is a Market Disruption
      Event on such date, the Calculation Agent shall determine the Final Index
      Value on such date in accordance with the formula for calculating the
      Index last in effect prior to the 

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    
      	 	 	
              commencement
      of the Market Disruption Event (or prior to the non-Index Business Day),
      without rebalancing or substitution, using the closing price (or, if
      trading in the relevant securities has been materially suspended or
      materially limited, its good faith estimate of the closing price that
      would have prevailed but for such suspension, limitation or non-Index
      Business Day) on such date of each security most recently constituting the
      Index.

            
	 	 	 
	
              Index
      Business Day

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

            
	 	 	 
	
              Trading
      Day

            	 
      	
              Trading
      Day means a day, as determined by the Calculation Agent, on which trading
      is generally conducted on the New York Stock Exchange, The NASDAQ Stock
      Market LLC, the Chicago Mercantile Exchange and the Chicago Board of
      Options Exchange and in the over-the-counter market for equity securities
      in the United States.

            
	 	 	 
	
              Calculation
      Agent

            	 
      	
              Morgan
      Stanley & Co. Incorporated and its successors (“MS &
      Co.”)

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

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

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

    

    
      	 	 	
              rounded
      to the nearest cent, with one-half cent rounded upward.

            
	 	 	 
	
              Market
      Disruption Event

            	 
      	
              Market
      Disruption Event means, with respect to the Index:

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

            
	 	 	 
	 
      	 
      	
              (ii)
      a determination by the Calculation Agent in its sole discretion that any
      event described in clause (i) above materially interfered with the
      Issuer’s ability or the ability of any of the Issuer’s affiliates to
      unwind or adjust all or a material portion of the hedge position with
      respect to the Protected Absolute Return Barrier Note due March 20, 2011
      Based on the Value of the S&P 500®
      Index.

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

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    
      	 	 	
              each
      case immediately before that suspension or limitation.

            
	 	 	 
	 
      	 
      	
              For
      the purpose of determining whether a Market Disruption Event has
      occurred:  (1) a limitation on the hours or number of days of
      trading shall not constitute a Market Disruption Event if it results from
      an announced change in the regular business hours of the Relevant Exchange
      or market, (2) a decision to permanently discontinue trading in the
      relevant futures or options contract or exchange traded fund shall not
      constitute a Market Disruption Event, (3) a suspension of trading in
      futures, options contracts or exchange traded funds on the Index by the
      primary securities market trading in such contracts or funds by reason of
      (a) a price change exceeding limits set by such securities exchange or
      market, (b) an imbalance of orders relating to such contracts or funds or
      (c) a disparity in bid and ask quotes relating to such contracts or funds
      shall constitute a suspension, absence or material limitation of trading
      in futures, options contracts or exchange traded funds related to the
      Index and (4) a “suspension, absence or material limitation of trading” on
      any Relevant Exchange or on the primary market on which futures, options
      contracts or exchange traded funds related to the Index are traded shall
      not include any time when such securities market is itself closed for
      trading under ordinary circumstances.

            
	 	 	 
	
              Relevant
      Exchange

            	 
      	
              Relevant
      Exchange means, with respect to the Index or any Successor Index (as
      defined below), the primary exchange or market of trading for (i) any
      security then included in the Index, or any Successor Index, and (ii) any
      futures or options contracts related to the Index, or any Successor Index,
      or to any security then included in the Index, or any Successor
      Index.

            
	 	 	 
	
              Alternate
      Exchange Calculation

            	 
      	 
      
	
              in
      Case of an Event of Default

            	 
      	
              In
      case an event of default with respect to this Note shall have occurred and
      be continuing, the amount declared due and payable per Stated Principal
      Amount upon any acceleration of this Note (the “Acceleration Amount”)
      shall be equal to $10 plus the Supplemental Redemption Amount, if any,
      determined as though the Observation Period ended at 4:00 p.m. on the date
      of

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    
      	 	 	
              acceleration
      and using the Index Closing Value on the date of such acceleration as the
      Final Index Value.

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

            
	
              Discontinuance
      of the Index;

            	 
      	 
      
	
              Alteration
      of Method of Calculation

            	 
      	
              If
      Standard & Poor’s, a Division of The McGraw-Hill Companies, Inc.
      (“S&P”) discontinues publication of the Index and S&P or another
      entity (including MS & Co.) publishes a successor or substitute index
      that MS & Co., as the Calculation Agent, determines, in its sole
      discretion, to be comparable to the discontinued Index (such index being
      referred to herein as a “Successor Index”), then any subsequent Index
      Value shall be determined by reference to the published value of such
      Successor Index at any time, and any subsequent Index Closing Value shall
      be determined by reference to the published value of such Successor Index
      at the regular weekday close of trading on any Index Business Day that the
      Index Closing Value is to be determined.

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

            
	 	 	 
	 
      	 
      	
              If
      S&P discontinues publication of the Index prior to, and such
      discontinuance is continuing on, the Valuation Date, any Index Business
      Day (on which determination need be made as to whether the Index Value is
      outside of the Index Range) or the date of acceleration and MS & Co.,
      as the Calculation Agent, determines, in its sole discretion, that no
      Successor Index is available at such time, then the Calculation Agent
      shall determine the Index Closing Value for such date.  The
      Index Closing Value shall be computed by the Calculation Agent in
      accordance with the formula for calculating the Index last in effect prior
      to such discontinuance, using the closing price (or,
  if

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    
      	 	 	
              trading
      in the relevant securities has been materially suspended or materially
      limited, its good faith estimate of the closing price that would have
      prevailed but for such suspension or limitation) at the close of the
      principal trading session of the Relevant Exchange on such date of each
      security most recently constituting the Index without any rebalancing or
      substitution of such securities following such
      discontinuance.  Following any such determination, the
      Calculation Agent shall not compute the Index Value on any Index Business
      Day and shall instead rely on the Index Closing Value as computed by the
      Calculation Agent for the purpose of determining whether the Index Value
      is outside the Index Range.

            
	 	 	 
	 
      	 
      	
              If
      at any time the method of calculating the Index or a Successor Index, or
      the value thereof, is changed in a material respect, or if the Index or a
      Successor Index is in any other way modified so that such index does not,
      in the opinion of MS & Co., as the Calculation Agent, fairly represent
      the value of the Index or such Successor Index had such changes or
      modifications not been made, then, from and after such time, the
      Calculation Agent shall, at the close of business in New York City on each
      date or during such day on which the Index Closing Value or Index Value,
      respectively, is to be determined, make such calculations and adjustments
      as, in the good faith judgment of the Calculation Agent, may be necessary
      in order to arrive at a value of a stock index comparable to the Index or
      such Successor Index, as the case may be, as if such changes or
      modifications had not been made, and the Calculation Agent shall calculate
      the Final Index Value or Index Values with reference to the Index or such
      Successor Index, as adjusted.  Accordingly, if the method of
      calculating the Index or a Successor Index is modified so that the value
      of such index is a fraction of what it would have been if it had not been
      modified (e.g.,
      due to a split in the index), then the Calculation Agent shall adjust such
      index in order to arrive at a value of the Index or such Successor Index
      as if it had not been modified (e.g., as if such split
      had not occurred).

            

    

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Morgan
Stanley, a Delaware corporation (together with its successors and assigns, the
“Issuer”), for value
received, hereby promises to pay to CEDE & CO., or registered assignees, the
amount of cash, as determined in accordance with the provisions set forth under
“Payment at Maturity” above, due with respect to the principal sum of U.S.
$                  (UNITED
STATES
DOLLARS                            )
on the Maturity Date specified above (except to the extent redeemed or repaid
prior to maturity) and to pay interest thereon from and including the Interest
Accrual Date specified above at a rate per annum equal to the Initial Interest
Rate specified above or determined in accordance with the provisions specified
on the reverse hereof until the Initial Interest Reset Date specified above, and
thereafter at a rate per annum determined in accordance with the provisions
specified on the reverse hereof until the principal hereof is paid or duly made
available for payment. Unless such rate is otherwise specified on the face
hereof, the Calculation Agent shall determine the Initial Interest Rate for this
Note in accordance with the provisions specified on the reverse hereof. The
Issuer will pay interest in arrears weekly, monthly, quarterly, semiannually or
annually as specified above as the Interest Payment Period on each Interest
Payment Date (as specified above), commencing with the first Interest Payment
Date next succeeding the Interest Accrual Date specified above, and on the
Maturity Date (or any redemption or repayment date); provided, however, that if the Interest
Accrual Date occurs between a Record Date, as defined below, and the next
succeeding Interest Payment Date, interest payments will commence on the second
Interest Payment Date succeeding the Interest Accrual Date to the registered
holder of this Note on the Record Date with respect to such second Interest
Payment Date; and provided,
further, that if an Interest Payment Date (other than the Maturity Date
or redemption or repayment date) would fall on a day that is not a Business Day,
as defined on the reverse hereof, such Interest Payment Date shall be the
following day that is a Business Day, except that if the Base Rate specified
above is LIBOR or EURIBOR and such next Business Day falls in the next calendar
month, such Interest Payment Date shall be the immediately preceding day that is
a Business Day; and provided,
further, that if the Maturity Date or redemption or repayment date would
fall on a day that is not a Business Day, such payment shall be made on the
following day that is a Business Day and no interest shall accrue for the period
from and after such Maturity Date or redemption or repayment date.

     

    Interest
on this Note will accrue from and including the most recent date to which
interest has been paid or duly provided for, or, if no interest has been paid or
duly provided for, from and including the Interest Accrual Date, until but
excluding the date the principal hereof has been paid or duly made available for
payment.  The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
described herein, be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on the date 15
calendar days prior to such Interest Payment Date (whether or not a Business
Day) (each such date, a “Record
Date”); provided, however, that interest
payable at maturity (or any redemption or repayment date) will be payable to the
person to whom the principal hereof shall be payable.

     

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

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

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

     

    DATED:

    
       

      
        	
                MORGAN
      STANLEY

              	 
	 	 	 	 
	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

      

       

       

    

    TRUSTEE’S
CERTIFICATE

    OF
AUTHENTICATION

     

    This is
one of the Notes referred

    to in the within-mentioned

    Senior Indenture.

     

    THE BANK
OF NEW YORK MELLON,

    as Trustee

     

    
      	By:	 	 
	 	
              Authorized
      Signatory

            	 

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

       

    

    FORM
OF REVERSE OF SECURITY

     

    SENIOR
GLOBAL MEDIUM-TERM NOTES, SERIES F

     

    This Note
is one of a duly authorized issue of Senior Global Medium-Term Notes, Series F
(the “Notes”), of the
Issuer.  The Notes are issuable under a Senior Indenture, dated as of
November 1, 2004, between the Issuer and The Bank of New York Mellon, a New York
banking corporation (as successor Trustee to JPMorgan Chase Bank, N.A. (formerly
known as JPMorgan Chase Bank)), as Trustee (the “Trustee,” which term includes
any successor trustee under the Senior Indenture) as supplemented by a First
Supplemental Senior Indenture dated as of September 4, 2007, a Second
Supplemental Senior Indenture dated as of January 4, 2008, a Third Supplemental
Senior Indenture dated as of September 10, 2008 and a Fourth Supplemental Senior
Indenture dated as of December 1, 2008 (as the same may be further amended or
supplemented from time to time, the “Senior Indenture”), to which
Senior Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties and
immunities of the Issuer, the Trustee and holders of the Notes and the terms
upon which the Notes are, and are to be, authenticated and
delivered.  The Issuer has appointed The Bank of New York Mellon (as
successor to JPMorgan Chase Bank, N.A.), at its corporate trust office in The
City of New York as the paying agent (the “Paying Agent,” which term
includes any additional or successor Paying Agent appointed by the Issuer) with
respect to the Notes.  The terms of individual Notes may vary with
respect to interest rates, interest rate formulas, issue dates, maturity dates,
or otherwise, all as provided in the Senior Indenture.  To the extent
not inconsistent herewith, the terms of the Senior Indenture are hereby
incorporated by reference herein.

     

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

     

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

     

    If so
indicated on the face of this Note, this Note will be subject to repayment at
the option of the holder on the Optional Repayment Date or Dates specified on
the face hereof on the terms set forth herein.  On any Optional
Repayment Date, this Note will be repayable in whole or in part in

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    increments
of $1,000 or, if this Note is denominated in a Specified Currency other than
U.S. dollars, in increments of 1,000 units of such Specified Currency (provided
that any remaining principal amount hereof shall not be less than the minimum
authorized denomination hereof) at the option of the holder hereof at a price
equal to 100% of the principal amount to be repaid, together with interest
accrued and unpaid hereon to the date of repayment.  For this Note to
be repaid at the option of the holder hereof, the Paying Agent must receive at
its corporate trust office in the Borough of Manhattan, The City of New York, at
least 15 but not more than 30 calendar days prior to the date of repayment, (i)
this Note with the form entitled “Option to Elect Repayment” below duly
completed or (ii) a telegram, telex, facsimile transmission or a letter
from a member of a national securities exchange or the Financial Industry
Regulatory Authority, Inc. or a commercial bank or a trust company in the United
States setting forth the name of the holder of this Note, the principal amount
hereof, the certificate number of this Note or a description of this Note’s
tenor and terms, the principal amount hereof to be repaid, a statement that the
option to elect repayment is being exercised thereby and a guarantee that this
Note, together with the form entitled “Option to Elect Repayment” duly
completed, will be received by the Paying Agent not later than the fifth
Business Day after the date of such telegram, telex, facsimile transmission or
letter; provided, that
such telegram, telex, facsimile transmission or letter shall only be effective
if this Note and form duly completed are received by the Paying Agent by such
fifth Business Day.  Exercise of such repayment option by the holder
hereof shall be irrevocable.  In the event of repayment of this Note
in part only, a new Note or Notes for the amount of the unpaid portion hereof
shall be issued in the name of the holder hereof upon the cancellation
hereof.

     

    If the
face hereof indicates that this Note is subject to “Tax Redemption and Payment
of Additional Amounts,” this Note may be redeemed, as a whole, at the option of
the Issuer at any time prior to maturity, upon the giving of a notice of
redemption as described below, at a redemption price equal to 100% of the
principal amount hereof, together with accrued interest to the date fixed for
redemption, if the Issuer determines that, as a result of any change in or
amendment to the laws (including a holding, judgment or as ordered by a court of
competent jurisdiction), or any regulations or rulings promulgated thereunder,
of the United States or of any political subdivision or taxing authority thereof
or therein affecting taxation, or any change in official position regarding the
application or interpretation of such laws, regulations or rulings, which change
or amendment occurs, becomes effective or, in the case of a change in official
position, is announced on or after the Initial Offering Date hereof, the Issuer
has or will become obligated to pay Additional Amounts, as defined below, with
respect to this Note as described below.  Prior to the giving of any
notice of redemption pursuant to this paragraph, the Issuer shall deliver to the
Trustee (i) a certificate stating that the Issuer is entitled to effect
such redemption and setting forth a statement of facts showing that the
conditions precedent to the right of the Issuer to so redeem have occurred, and
(ii) an opinion of independent legal counsel satisfactory to the Trustee to
such effect based on such statement of facts; provided that no such notice
of redemption shall be given earlier than 60 calendar days prior to the earliest
date on which the Issuer would be obligated to pay such Additional Amounts if a
payment in respect of this Note were then due.

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

       

    

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

     

    
      	
            	
              ·  

            	
              any
      present or future tax, assessment or other governmental charge that would
      not have been so imposed but for

            

    

     

    
      	
            	
              o  

            	
              the
      existence of any present or former connection between the beneficial owner
      of an interest in this Note, or between a fiduciary, settlor, beneficiary,
      member or shareholder of the beneficial owner, if the beneficial owner is
      an estate, a trust, a partnership or a corporation for U.S. federal income
      tax purposes, and the United States, including, without limitation, the
      beneficial owner, or the fiduciary, settlor, beneficiary, member or
      shareholder, being or having been a citizen or resident of the United
      States or being or having been engaged in the conduct of a trade or
      business or present in the United States or having, or having had, a
      permanent establishment in the United States;
or

            

    

     

    
      	
            	
              o  

            	
              the
      presentation by or on behalf of the beneficial owner of an interest in
      this Note for payment on a date more than 15 days after the date on which
      payment became due and payable or the date on which payment of this Note
      is duly provided for, whichever occurs
later;

            

    

     

    
      	
            	
              ·  

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

            

    

     

    
      	
            	
              ·  

            	
              any
      tax, assessment or other governmental charge imposed by reason of the
      beneficial owner’s past or present status as a controlled foreign
      corporation or passive foreign investment company with respect to the
      United States or as a corporation that accumulates earnings to avoid U.S.
      federal income tax or as a private foundation or other tax-exempt
      organization;

            

    

     

    
      	
            	
              ·  

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

            

    

     

    
      	
            	
              ·  

            	
              any
      tax, assessment or other governmental charge required to be withheld by
      any Paying Agent from any payment of principal of, or interest on, this
      Note, if payment can be made without withholding by at least one other
      Paying Agent;

            

    

     

    
      	
            	
              ·  

            	
              any
      tax, assessment or other governmental charge imposed solely because the
      beneficial owner of an interest in this Note (1) is a bank purchasing this
      Note in the ordinary course

            

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

       

      
        of its
lending business or (2) is a bank that is neither (A) buying this Note for
investment purposes nor (B) buying this Note for resale to a third party that
either is not a bank or holding this Note for investment purposes
only;

      

       

    

    
      	
            	
              ·  

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

            

    

     

    
      	
            	
              ·  

            	
              any
      tax, assessment or other governmental charge imposed by reason of the
      beneficial owner’s past or present status as the actual or constructive
      owner of 10% or more of the total combined voting power of all classes of
      stock entitled to vote of the issuer or as a direct or indirect subsidiary
      of the issuer; or

            

    

     

    
      	
            	
              ·  

            	
              any
      combination of the items listed
above.

            

    

     

    In
addition, the Issuer will not be required to make any payment of Additional
Amounts with respect to any interest in this Note presented for
payment:

     

    
      	
            	
              ·  

            	
              where
      such withholding or deduction is imposed on a payment to an individual and
      is required to be made pursuant to any law implementing or complying with,
      or introduced in order to conform to, any European Union Directive on the
      taxation of savings; or

            

    

     

    
      	
            	
              ·  

            	
              by
      or on behalf of a beneficial owner who would have been able to avoid such
      withholding or deduction by presenting this Note or the relevant coupon to
      another Paying Agent in a member state of the European
    Union.

            

    

     

    Nor will
the Issuer pay Additional Amounts with respect to any payment with respect to
any interest in this Note to a U.S. Alien who is a fiduciary or partnership or
other than the sole beneficial owner of the payment to the extent the payment
would be required by the laws of the United States (or any political subdivision
of the United States) to be included in the income, for tax purposes, of a
beneficiary or settlor with respect to the fiduciary or a member of the
partnership or a beneficial owner who would not have been entitled to the
Additional Amounts had the beneficiary, settlor, member or beneficial owner held
its interest in this Note directly.

     

    This Note
will bear interest at the rate determined in accordance with the applicable
provisions below by reference to the Base Rate shown on the face hereof based on
the Index Maturity, if any, shown on the face hereof (i) plus or minus the
Spread, if any, and/or (ii) multiplied by the Spread Multiplier, if any,
specified on the face hereof. Commencing with the Initial Interest Reset Date
specified on the face hereof, the rate at which interest on this Note is payable
shall be reset as of each Interest Reset Date specified on the face hereof (as
used herein, the term “Interest Reset Date” shall include the Initial Interest
Reset Date). For the purpose of determining the Initial Interest Rate,
references in this paragraph, the next succeeding paragraph and, if applicable,
clauses (i) and (ii) under “Determination of EURIBOR” below to Interest Reset
Date shall be deemed to mean the Original Issue Date. The determination of the
rate of

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    interest
at which this Note will be reset on any Interest Reset Date shall be made on the
Interest Determination Date (as defined below) pertaining to such Interest Reset
Dates. The Interest Reset Dates will be the Interest Reset Dates specified on
the face hereof; provided, however, that (a) the interest rate in effect for the
period from the Interest Accrual Date to the Initial Interest Reset Date will be
the Initial Interest Rate and (b) unless otherwise specified on the face hereof,
the interest rate in effect for the ten calendar days immediately prior to
maturity, redemption or repayment will be that in effect on the tenth calendar
day preceding such maturity, redemption or repayment date. If any Interest Reset
Date would otherwise be a day that is not a Business Day, such Interest Reset
Date shall be postponed to the next succeeding day that is a Business Day,
except that if the Base Rate specified on the face hereof is LIBOR or EURIBOR
and such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding Business Day. As used herein,
“Business Day” means any day, other than a Saturday or Sunday, (a) that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close (x) in The City of New York or (y) if
this Note is denominated in a Specified Currency other than U.S. dollars, euro
or Australian dollars, in the principal financial center of the country of the
Specified Currency, or (z) if this Note is denominated in Australian dollars, in
Sydney and (b) if this Note is denominated in euro, that is also a day on which
the Trans-European Automated Real-time Gross Settlement Express Transfer payment
system (“TARGET”), which utilizes a single shared platform and was launched on
November 19, 2007, is open for the settlement of payment in euro (a “TARGET
Settlement Day”).

     

    The
Interest Determination Date pertaining to an Interest Reset Date for Notes
bearing interest calculated by reference to the Federal Funds Rate, Federal
Funds (Open) Rate and Prime Rate shall be on the Business Day prior to the
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for Notes bearing interest calculated by reference to the CD Rate,
Commercial Paper Rate and CMT Rate will be the second Business Day prior to such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for Notes bearing interest calculated by reference to EURIBOR (or to
LIBOR when the Index Currency is euros) shall be the second TARGET Settlement
Day prior to such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for Notes bearing interest calculated by
reference to LIBOR (other than for LIBOR Notes for which the Index Currency is
euros) shall be the second London Banking Day prior to such Interest Reset Date,
except that the Interest Determination Date pertaining to an Interest Reset Date
for a LIBOR Note for which the Index Currency is pounds sterling will be such
Interest Reset Date. As used herein, “London Banking Day” means any day on which
dealings in deposits in the Index Currency (as defined herein) are transacted in
the London interbank market. The Interest Determination Date pertaining to an
Interest Reset Date for Notes bearing interest calculated by reference to the
Treasury Rate shall be the day of the week in which such Interest Reset Date
falls on which Treasury bills normally would be auctioned. Treasury Bills are
normally sold at auction on Monday of each week, unless that day is a legal
holiday, in which case the auction is normally held on the following Tuesday,
except that the auction may be held on the preceding Friday; provided, however,
that if an auction is held on the Friday of the week preceding such Interest
Reset Date, the Interest Determination Date shall be such preceding Friday; and
provided, further, that if an auction shall fall on any Interest Reset Date,
then the Interest Reset Date shall instead be the first Business Day following
the date of such auction. The Interest Determination Date pertaining to an
Interest Reset Date for Notes bearing interest calculated by

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

    reference
to two or more base rates will be the latest Business Day that is at least two
Business Days before the Interest Reset Date for the applicable Note on which
each base rate is determinable.

     

    Unless
otherwise specified on the face hereof, the “Calculation Date” pertaining to an
Interest Determination Date, including the Interest Determination Date as of
which the Initial Interest Rate is determined, will be the earlier of (i) the
tenth calendar day after such Interest Determination Date or, if such day is not
a Business Day, the next succeeding Business Day, or (ii) the Business Day
immediately preceding the applicable Interest Payment Date or Maturity Date (or,
with respect to any principal amount to be redeemed or repaid, any redemption or
repayment date), as the case may be.

     

    Determination
of CD Rate. If the Base Rate specified on the face hereof is the “CD Rate,” for
any Interest Determination Date, the CD Rate with respect to this Note shall be
the rate on that date for negotiable U.S. dollar certificates of deposit having
the Index Maturity specified on the face hereof as published by the Board of
Governors of the Federal Reserve System in “Statistical Release H.15(519),
Selected Interest Rates,” or any successor publication of the Board of Governors
of the Federal Reserve System (“H.15(519)”) under the heading “CDs (Secondary
Market).”

     

    The
following procedures shall be followed if the CD Rate cannot be determined as
described above:

     

    (i) If
the above rate is not published in H.15(519) by 3:00 p.m., New York City time,
on the Calculation Date, the CD Rate shall be the rate on that Interest
Determination Date set forth in the daily update of H.15(519), available through
the world wide website of the Board of Governors of the Federal Reserve System
at http://www.federalreserve.gov/releases/h15/update, or any successor site or
publication (“H.15 Daily Update”) for the Interest Determination Date for
certificates of deposit having the Index Maturity specified on the face hereof,
under the caption “CDs (Secondary Market).”

     

    (ii) If
the above rate is not yet published in either H.15(519) or the H.15 Daily Update
by 3:00 p.m., New York City time, on the Calculation Date, the Calculation Agent
shall determine the CD Rate to be the arithmetic mean of the secondary market
offered rates as of 10:00 a.m., New York City time, on that Interest
Determination Date of three leading nonbank dealers in negotiable U.S. dollar
certificates of deposit in The City of New York, which may include the initial
dealer and its affiliates, selected by the Calculation Agent (after consultation
with the Issuer), for negotiable U.S. dollar certificates of deposit of major
U.S. money center banks of the highest credit standing in the market for
negotiable certificates of deposit with a remaining maturity closest to the
Index Maturity specified on the face hereof in an amount that is representative
for a single transaction in that market at that time.

     

    “Initial
dealer” with respect to this Note means Morgan Stanley & Co.
Incorporated.

     

    (iii) If
the dealers selected by the Calculation Agent are not quoting as set forth
above, the CD Rate for that Interest Determination Date shall remain the CD Rate
for the immediately preceding Interest Reset Period, or, if there was no
Interest Reset Period, the rate of interest payable shall be the Initial
Interest Rate.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    Determination
of Commercial Paper Rate. If the Base Rate specified on the face hereof is the
“Commercial Paper Rate,” for any Interest Determination Date, the Commercial
Paper Rate with respect to this Note shall be the Money Market Yield (as defined
herein), calculated as described below, of the rate on that date for U.S. dollar
commercial paper having the Index Maturity specified on the face hereof, as that
rate is published in H.15(519), under the heading “Commercial Paper —
Nonfinancial.”

     

    The
following procedures shall be followed if the Commercial Paper Rate cannot be
determined as described above:

     

    (i) If
the above rate is not published by 3:00 p.m., New York City time, on the
Calculation Date, then the Commercial Paper Rate shall be the Money Market Yield
of the rate on that Interest Determination Date for commercial paper of the
Index Maturity specified on the face hereof as published in the H.15 Daily
Update, or other recognized electronic source used for the purpose of displaying
the applicable rate, under the heading “Commercial
Paper—Nonfinancial.”

     

    (ii) If
by 3:00 p.m., New York City time, on that Calculation Date the rate is not yet
published in either H.15(519) or the H.15 Daily Update, or other recognized
electronic source used for the purpose of displaying the applicable rate, then
the Calculation Agent shall determine the Commercial Paper Rate to be the Money
Market Yield of the arithmetic mean of the offered rates as of 11:00 a.m., New
York City time, on that Interest Determination Date of three leading dealers of
U.S. dollar commercial paper in The City of New York, which may include the
initial dealer and its affiliates, selected by the Calculation Agent (after
consultation with the Issuer), for commercial paper of the Index Maturity
specified on the face hereof, placed for an industrial issuer whose bond rating
is “Aa,” or the equivalent, from a nationally recognized statistical rating
agency.

     

    (iii) If
the dealers selected by the Calculation Agent are not quoting as set forth in
(ii) above, the Commercial Paper Rate for that Interest Determination Date shall
remain the Commercial Paper Rate for the immediately preceding Interest Reset
Period, or, if there was no Interest Reset Period, the rate of interest payable
shall be the Initial Interest Rate.

     

    The
“Money Market Yield” shall be a yield calculated in accordance with the
following formula:

     

    

    

    where “D”
refers to the applicable per year rate for commercial paper quoted on a bank
discount basis and expressed as a decimal and “M” refers to the actual number of
days in the interest period for which interest is being calculated.

    

    Determination
of EURIBOR. If the Base Rate specified on the face hereof is “EURIBOR,” for any
Interest Determination Date, EURIBOR with respect to this Note shall be the rate
for deposits in euros as sponsored, calculated and published jointly by the
European Banking Federation and ACI — The Financial Market Association, or any
company established by the joint sponsors for purposes of compiling and
publishing those rates, for the Index Maturity specified on the face hereof as
that rate appears on the display on Reuters 3000 Xtra Service

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (“Reuters”),
or any successor service, on page EURIBOR01 or any other page as may replace
page EURIBOR01 on that service (“Reuters Page EURIBOR01”) as of 11:00 a.m.,
Brussels time.

     

    The
following procedures shall be followed if the rate cannot be determined as
described above:

     

    (i) If
the above rate does not appear, the Calculation Agent shall request the
principal Euro-zone office of each of four major banks in the Euro-zone
interbank market, as selected by the Calculation Agent (after consultation with
the Issuer), to provide the Calculation Agent with its offered rate for deposits
in euros, at approximately 11:00 a.m., Brussels time, on the Interest
Determination Date, to prime banks in the Euro-zone interbank market for the
Index  Maturity specified on the face hereof commencing on the
applicable Interest Reset Date, and in a principal amount not less than the
equivalent of U.S.$1 million in euro that is representative of a single
transaction in euro, in that market at that time. If at least two quotations are
provided, EURIBOR shall be the arithmetic mean of those quotations.

     

    (ii) If
fewer than two quotations are provided, EURIBOR shall be the arithmetic mean of
the rates quoted by four major banks in the Euro-zone interbank market, as
selected by the Calculation Agent (after consultation with the Issuer), at
approximately 11:00 a.m., Brussels time, on the applicable Interest Reset Date
for loans in euro to leading European banks for a period of time equivalent to
the Index Maturity specified on the face hereof commencing on that Interest
Reset Date in a principal amount not less than the equivalent of U.S.$1 million
in euro.

     

    (iii) If
the banks so selected by the Calculation Agent are not quoting as set forth
above, EURIBOR for that Interest Determination Date shall remain EURIBOR for the
immediately preceding Interest Reset Period, or, if there was no Interest Reset
Period, the rate of interest payable shall be the Initial Interest
Rate.

     

    “Euro-zone”
means the region comprised of Member States of the European Union that adopt the
single currency in accordance with the relevant treaty of the European Union, as
amended.

     

    Determination
of the Federal Funds Rate. If the Base Rate specified on the face hereof is the
“Federal Funds Rate,” for any Interest Determination Date, the Federal Funds
Rate with respect to this Note shall be the rate on that date for U.S. dollar
federal funds as published in H.15(519) under the heading “Federal Funds
(Effective)” as displayed on Reuters, or any successor service, on page
FEDFUNDS1 or any other page as may replace the applicable page on that service
(“Reuters Page FEDFUNDS1”).

     

    The
following procedures shall be followed if the Federal Funds Rate cannot be
determined as described above:

     

    (i) If
the above rate is not published by 3:00 p.m., New York City time, on the
Calculation Date, the Federal Funds Rate shall be the rate on that Interest
Determination Date as published in the H.15 Daily Update, or other recognized
electronic source used for the purpose of displaying the applicable rate, under
the heading “Federal Funds (Effective).”

     

    
      
        
        

      

      
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    (ii) If
the above rate is not yet published in either H.15(519) or the H.15 Daily
Update, or other recognized electronic source used for the purpose of displaying
the applicable rate, by 3:00 p.m., New York City time, on the Calculation Date,
the Calculation Agent shall determine the Federal Funds Rate to be the
arithmetic mean of the rates for the last transaction in overnight U.S. dollar
federal funds prior to 9:00 a.m., New York City time, on that Interest
Determination Date, by each of three leading brokers of U.S. dollar federal
funds transactions in The City of New York, which may include the initial dealer
and its affiliates, selected by the Calculation Agent (after consultation with
the Issuer).

     

    (iii) If
the brokers selected by the Calculation Agent are not quoting as set forth in
(ii) above, the Federal Funds Rate for that Interest Determination Date shall
remain the Federal Funds Rate for the immediately preceding Interest Reset
Period, or, if there was no Interest Reset Period, the rate of interest payable
shall be the Initial Interest Rate.

     

    Determination
of Federal Funds (Open) Rate. If the Base Rate specified on the face hereof is
the “Federal Funds (Open) Rate”, for any Interest Determination Date, the
Federal Funds (Open) Rate with respect to this Note shall be the rate on that
date for U.S. dollar federal funds as published in H.15(519) under the heading
“Federal Funds (Open)” as displayed on Reuters, or any successor service, on
page 5 or any other page as may replace the applicable page on that service
(“Reuters Page 5”).

     

    The
following procedures shall be followed if the Federal Funds (Open) Rate cannot
be determined as described above:

     

    
      	
            	
              ·  

            	
              If
      the above rate is not published by 3:00 p.m., New York City time, on the
      Calculation Date, the Federal Funds (Open) Rate will be the rate on that
      Interest Determination Date as published in the H.15 Daily Update, or
      other recognized electronic source used for the purpose of displaying the
      applicable rate, under the heading “Federal Funds
  (Open).”

            

    

     

    
      	
            	
              ·  

            	
              If
      the above rate is not yet published in either H.15(519) or the H.15 Daily
      Update, or other recognized electronic source used for the purpose of
      displaying the applicable rate, by 3:00 p.m., New York City time, on the
      Calculation Date, the Calculation Agent will determine the Federal Funds
      (Open) Rate to be the arithmetic mean of the rates for the last
      transaction in overnight U.S. dollar federal funds (based on the Federal
      Funds (Open) Rate) prior to 9:00 a.m., New York City time, on that
      Interest Determination Date, by each of three leading brokers of U.S.
      dollar federal funds transactions in The City of New York, which may
      include the agent and its affiliates, selected by the Calculation Agent,
      after consultation with the Issuer.

            

    

     

    
      	
            	
              ·  

            	
              If
      the brokers selected by the Calculation Agent are not quoting as set forth
      above, the Federal Funds (Open) Rate for that Interest Determination Date
      shall remain the Federal Funds (Open) Rate for the immediately preceding
      Interest Reset Period, or, if there was no Interest Reset Period, the rate
      of interest payable will be the Initial Interest
  Rate.

            

    

     

    Determination
of LIBOR. If the Base Rate specified on the face hereof is “LIBOR,” LIBOR with
respect to this Note shall be based on London Interbank Offered Rate. The
Calculation Agent shall determine LIBOR for each Interest Determination Date as
follows:

     

    
      
        
        

      

      
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    (i) LIBOR
means, for any Interest Determination Date, the arithmetic mean of the offered
rates for deposits in the Index Currency having the Index Maturity designated on
the face hereof, commencing on the second London Banking Day immediately
following that Interest Determination Date or, if pounds sterling is the Index
Currency, commencing on that Interest Determination Date, that appear on the
Designated LIBOR Page as of 11:00 a.m., London time, on that Interest
Determination Date, if at least two offered rates appear on the Designated LIBOR
Page (as defined below), provided that if the specified Designated LIBOR Page by
its terms provides only for a single rate, that single rate shall be
used.

     

    (ii) If
(a) fewer than two offered rates appear or (b) no rate appears and the
Designated LIBOR Page by its terms provides only for a single rate, then the
Calculation Agent shall request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, after consultation with the Issuer, to provide the
Calculation Agent with its offered quotation for deposits in the Index Currency
for the period of the Index Maturity specified on the face hereof commencing on
the second London Banking Day immediately following the Interest Determination
Date or, if pounds sterling is the Index Currency, commencing on that Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 a.m., London time, on that Interest Determination Date and
in a principal amount that is representative of a single transaction in that
Index Currency in that market at that time. If at least two quotations are
provided, LIBOR determined on that Interest Determination Date shall be the
arithmetic mean of those quotations.

     

    (iii) If
fewer than two quotations are provided, as described in the prior paragraph,
LIBOR shall be determined for the applicable Interest Reset Date as the
arithmetic mean of the rates quoted at approximately 11:00 a.m., or some other
time specified on the face hereof, in the applicable principal financial center
for the country of the Index Currency on that Interest Reset Date, by three
major banks in that principal financial center selected by the Calculation Agent
(after consultation with the Issuer) for loans in the Index Currency to leading
European banks, having the Index Maturity specified on the face hereof and in a
principal amount that is representative of a single transaction in that Index
Currency in that market at that time.

     

    (iv) If
the banks so selected by the Calculation Agent are not quoting as set forth
above, LIBOR for that Interest Determination Date shall remain LIBOR for the
immediately preceding Interest Reset Period, or, if there was no Interest Reset
Period, the rate of interest payable shall be the Initial Interest
Rate.

     

    The
“Index Currency” means the currency specified on the face hereof as the currency
for which LIBOR shall be calculated, or, if the euro is substituted for that
currency, the Index Currency shall be the euro. If that currency is not
specified on the face hereof, the Index Currency shall be U.S.
dollars.

     

    “Designated
LIBOR Page” means the display on Reuters, or any successor service, on page
LIBOR01, or any other page as may replace that page on that service, for the
purpose of displaying the London interbank rates of major banks for the
applicable Index Currency.

     

    Determination
of Prime Rate. If the Base Rate specified on the face hereof is “Prime Rate,”
for any Interest Determination Date, the Prime Rate with respect to this Note
shall be the rate on that date as published in H.15(519) under the heading “Bank
Prime Loan.”

     

    
      
        
        

      

      
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    The
following procedures shall be followed if the Prime Rate cannot be determined as
described above:

     

    (i) If
the above rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date, then the Prime Rate shall be the rate on that Interest
Determination Date as published in the H.15 Daily Update under the heading “Bank
Prime Loan.”

     

    (ii) If
the above rate is not published in either H.15(519) or the H.15 Daily Update by
3:00 p.m., New York City time, on the Calculation Date, the Calculation Agent
shall determine the Prime Rate to be the arithmetic mean of the rates of
interest publicly announced by each bank that appears on the Reuters Page US
PRIME 1, as defined below, as that bank’s Prime Rate or base lending rate as in
effect for that Interest Determination Date.

     

    (iii) If
fewer than four rates for that Interest Determination Date appear on the Reuters
Page US PRIME 1 by 3:00 p.m., New York City time, on the Calculation Date, the
Calculation Agent shall determine the Prime Rate to be the arithmetic mean of
the Prime Rates quoted on the basis of the actual number of days in the year
divided by 360 as of the close of business on that Interest Determination Date
by at least three major banks in The City of New York, which may include
affiliates of the initial dealer, selected by the Calculation Agent (after
consultation with the Issuer).

     

    (iv) If
the banks selected by the Calculation Agent are not quoting as set forth above,
the Prime Rate for that Interest Determination Date shall remain the Prime Rate
for the immediately preceding Interest Reset Period, or, if there was no
Interest Reset Period, the rate of interest payable shall be the Initial
Interest Rate.

     

    “Reuters
Page US PRIME 1” means the display designated as page “US PRIME 1” on Reuters,
or any successor service, or any other page as may replace the US PRIME 1 page
on that service for the purpose of displaying prime rates or base lending rates
of major U.S. banks.

     

    Determination
of Treasury Rate. If the Base Rate specified on the face hereof is “Treasury
Rate,” the Treasury Rate with respect to this Note shall be:

     

    (i) the
rate from the Auction held on the applicable Interest Determination Date (the
“Auction”) of direct obligations of the United States (“Treasury Bills”) having
the Index Maturity specified on the face hereof as that rate appears under the
caption “INVESTMENT RATE” on the display on Reuters, or any successor service,
on page USAUCTION10 or any other page as may replace page USAUCTION10 on that
service (“Reuters Page USAUCTION10”), or on page USAUCTION11 or any other page
as may replace page USAUCTION11 on that service (“Reuters Page USAUCTION11”);
or

     

    (ii) if
the rate described in (i) above is not published by 3:00 p.m., New York City
time, on the Calculation Date, the Bond Equivalent Yield of the Auction rate for
the applicable Treasury Bills as published in the H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying the applicable
rate, under the caption “U.S. Government Securities/Treasury Bills/Auction
High”; or

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

       

    

    (iii) if
the rate described in (ii) above is not published by 3:00 p.m., New York City
time, on the related Calculation Date, the Bond Equivalent Yield of the Auction
rate of the applicable Treasury Bills, announced by the United States Department
of the Treasury; or

     

    (iv) if
the rate described in (iii) above is not announced by the United States
Department of the Treasury, or if the Auction is not held, the Bond Equivalent
Yield of the Auction rate on the applicable Interest Determination Date of
Treasury Bills having the Index Maturity specified on the face hereof published
in H.15(519) under the caption “U.S. Government Securities/Treasury
Bills/Secondary Market”; or

     

    (v) if
the rate described in (iv) above is not so published by 3:00 p.m., New York City
time, on the related Calculation Date, the rate on the applicable Interest
Determination Date of the applicable Treasury Bills as published in the H.15
Daily Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption “U.S. Government
Securities/Treasury Bills/Secondary Market”; or

     

    (vi) if
the rate described in (v) above is not so published by 3:00 p.m., New York City
time, on the related Calculation Date, the rate on the applicable Interest
Determination Date calculated by the Calculation Agent as the Bond Equivalent
Yield of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on the applicable Interest
Determination Date, of three primary U.S. government securities dealers, which
may include the initial dealer and its affiliates, selected by the Calculation
Agent, for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity specified on the face hereof; or

     

    (vii) if
the dealers selected by the Calculation Agent are not quoting as described in
(vi), the Treasury Rate for the immediately preceding Interest Reset Period, or,
if there was no Interest Reset Period, the rate of interest payable shall be the
Initial Interest Rate.

     

    The “Bond
Equivalent Yield” means a yield calculated in accordance with the following
formula and expressed as a percentage:

     

    

     

    where “D”
refers to the applicable per annum rate for Treasury Bills quoted on a bank
discount basis, “N” refers to 365 or 366, as the case may be, and “M” refers to
the actual number of days in the interest period for which interest is being
calculated.

    

    Determination
of CMT Rate. If the Base Rate specified on the face hereof is the “CMT Rate,”
for any Interest Determination Date, the CMT Rate with respect to this Note
shall be any of the following rates displayed on the Designated CMT Reuters Page
(as defined below) under the caption “. . . Treasury Constant Maturities . . .
Federal Reserve Board Release H.15. . . Mondays Approximately 3:45 p.m.,” under
the column for the Designated CMT Maturity Index, as defined below,
for:

     

    (1) the
rate on that Interest Determination Date, if the Designated CMT Reuters Page is
FRBCMT; and

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

       

    

    (2) the
week or the month, as applicable, ended immediately preceding the week in which
the related Interest Determination Date occurs, if the Designated CMT Reuters
Page is FEDCMT.

     

    The
following procedures shall be followed if the CMT Rate cannot be determined as
described above:

     

    (i) If
the above rate is no longer displayed on the relevant page, or if not displayed
by 3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate shall be the Treasury Constant Maturities rate for the Designated CMT
Maturity Index as published in the relevant H.15(519).

     

    (ii) If
the rate described in (i) above is no longer published, or if not published by
3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate shall be the Treasury Constant Maturities Rate for the Designated CMT
Maturity Index or other U.S. Treasury rate for the Designated CMT Maturity Index
on the Interest Determination Date for the related Interest Reset Date as may
then be published by either the Board of Governors of the Federal Reserve System
or the United States Department of the Treasury that the Calculation Agent
determines to be comparable to the rate formerly displayed on the Designated CMT
Reuters Page and published in the relevant H.15(519).

     

    (iii) If
the rate described in (ii) above is not provided by 3:00 p.m., New York City
time, on the related Calculation Date, then the Calculation Agent shall
determine the CMT Rate to be a yield to maturity, based on the arithmetic mean
of the secondary market closing offer side prices as of approximately 3:30 p.m.,
New York City time, on the Interest Determination Date, reported, according to
their written records, by three leading primary U.S. government securities
dealers (“Reference Dealers”) in The City of New York, which may include the
initial dealer or its affiliates, selected by the Calculation Agent as described
in the following sentence. The Calculation Agent shall select five Reference
Dealers (after consultation with the Issuer) and shall eliminate the highest
quotation or, in the event of equality, one of the highest, and the lowest
quotation or, in the event of equality, one of the lowest, for the most recently
issued direct noncallable fixed rate obligations of the United States (“Treasury
Notes”) with an original maturity of approximately the Designated CMT Maturity
Index, a remaining term to maturity of no more than 1 year shorter than that
Designated CMT Maturity Index and in a principal amount that is representative
for a single transaction in the securities in that market at that time. If two
Treasury Notes with an original maturity as described above have remaining terms
to maturity equally close to the Designated CMT Maturity Index, the quotes for
the Treasury Note with the shorter remaining term to maturity shall be
used.

     

    (iv) If
the Calculation Agent cannot obtain three Treasury Notes quotations as described
in (iii) above, the Calculation Agent shall determine the CMT Rate to be a yield
to maturity based on the arithmetic mean of the secondary market offer side
prices as of approximately 3:30 p.m., New York City time, on the Interest
Determination Date of three Reference Dealers in The City of New York, selected
using the same method described in (iii) above, for Treasury Notes with an
original maturity equal to the number of years closest to but not less than the
Designated CMT Maturity Index and a remaining term to maturity closest to the
Designated CMT Maturity Index and in a principal amount that is representative
for a single transaction in the securities in that market at that
time.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

       

    

    (v) If
three or four, and not five, of the Reference Dealers are quoting as described
in (iv) above, then the CMT Rate for that Interest Determination Date shall be
based on the arithmetic mean of the offer prices obtained and neither the
highest nor the lowest of those quotes shall be eliminated.

     

    (vi) If
fewer than three Reference Dealers selected by the Calculation Agent are quoting
as described in (iv) above, the CMT Rate for that Interest Determination Date
shall remain the CMT Rate for the immediately preceding Interest Reset Period,
or, if there was no Interest Reset Period, the rate of interest payable shall be
the Initial Interest Rate.

     

    “Designated
CMT Reuters Page” means the display on Reuters, or any successor service, on the
page designated on the face hereof or any other page as may replace that page on
that service for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no Reuters page is specified on the face hereof, the
Designated CMT Reuters Page shall be FEDCMT, for the most recent
week.

     

    “Designated
CMT Maturity Index” means the original period to maturity of the U.S. Treasury
securities, which is either 1, 2, 3, 5, 7, 10, 20 or 30 years, as specified on
the face hereof, for which the CMT Rate shall be calculated. If no maturity is
specified on the face hereof, the Designated CMT Maturity Index shall be two
years.

     

    Notwithstanding
the foregoing, the interest rate hereon shall not be greater than the Maximum
Interest Rate, if any, or less than the Minimum Interest Rate, if any, specified
on the face hereof. The Calculation Agent shall calculate the interest rate
hereon in accordance with the foregoing on or before each Calculation Date. The
interest rate on this Note will in no event be higher than the maximum rate
permitted by New York law, as the same may be modified by United States Federal
law of general application.

     

    At the
request of the holder hereof, the Calculation Agent will provide to the holder
hereof the interest rate hereon then in effect and, if determined, the interest
rate that will become effective as of the next Interest Reset Date.

     

    Unless
otherwise indicated on the face hereof, interest payments on this Note shall be
the amount of interest accrued from and including the Interest Accrual Date or
from and including the last date to which interest has been paid or duly
provided for to but excluding the Interest Payment Dates or the Maturity Date
(or any earlier redemption or repayment date), as the case may be. Accrued
interest hereon shall be an amount calculated by multiplying the face amount
hereof by an accrued interest factor. Such accrued interest factor shall be
computed by adding the interest factor calculated for each day in the period for
which interest is being paid. The interest factor for each such date shall be
computed by dividing the interest rate applicable to such day (i) by 360 if the
Base Rate is CD Rate, Commercial Paper Rate, EURIBOR, Federal Funds Rate,
Federal Funds (Open) Rate, Prime Rate or LIBOR (except if the Index Currency is
pounds sterling); (ii) by 365 if the Base Rate is LIBOR and the Index Currency
is pounds sterling; or (iii) by the actual number of days in the year if the
Base Rate is the Treasury Rate or the CMT Rate. All percentages resulting from
any calculation of the rate of interest on this Note will be rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point with
(.000005% being rounded up to .00001%) and all U.S. dollar amounts used in or
resulting from such calculation on this Note will be rounded to the nearest
cent, with one-half cent rounded

     

    
      
        
        

      

      
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    upward.
All Japanese Yen amounts used in or resulting from such calculations will be
rounded downwards to the next lower whole Japanese Yen amount. All amounts
denominated in any other currency used in or resulting from such calculations
will be rounded to the nearest two decimal places in such currency, with .005
being rounded up to .01. The interest rate in effect on any Interest Reset Date
will be the applicable rate as reset on such date. The interest rate applicable
to any other day is the interest rate from the immediately preceding Interest
Reset Date (or, if none, the Initial Interest Rate).

     

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

     

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

     

    The
Trustee has been appointed registrar for the Notes (the “Registrar,” which term
includes any successor registrar appointed by the Issuer), and the Registrar
will maintain at its office in The City of New York a register for the
registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Registrar by surrendering this Note for cancellation,
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Registrar and duly executed by the registered holder hereof in
person or by the holder’s attorney duly authorized in writing, and thereupon the
Registrar shall issue in the name of the transferee or transferees, in exchange
herefor, a new Note or Notes having identical terms and provisions and having a
like aggregate principal amount in authorized denominations, subject to the
terms and conditions set forth herein; provided, however, that the Registrar
will not be required (i) to register the transfer of or exchange any Note that
has been called for redemption in whole or in part, except the unredeemed
portion of Notes being redeemed in part, (ii) to register the transfer of or
exchange any Note if the holder thereof has exercised his right, if any, to
require the Issuer to repurchase such Note in whole or in part, except the
portion of such Note not required to be repurchased, or (iii) to register the
transfer of or exchange Notes to the extent and during the period so provided in
the Senior Indenture with respect to the redemption of Notes. Notes are
exchangeable at said office for other Notes of other authorized denominations of
equal aggregate principal amount having identical terms and provisions. All such
exchanges and transfers of Notes will be free of charge, but the Issuer may
require payment of a sum sufficient to cover any tax or other governmental
charge in connection therewith. All Notes surrendered for exchange shall be
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Registrar and executed by the registered holder in person or by
the holder’s attorney duly

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    authorized
in writing. The date of registration of any Note delivered upon any exchange or
transfer of Notes shall be such that no gain or loss of interest results from
such exchange or transfer.

     

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

     

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

     

    The
Senior Indenture permits the Issuer and the Trustee, with the consent of the
holders of not less than a majority in aggregate principal amount of the debt
securities of all series issued under the Senior Indenture then outstanding and
affected (voting as one class), to execute supplemental indentures adding any
provisions to or changing in any manner the rights of the holders of each series
so affected; provided that the Issuer and the Trustee may not, without the
consent of the holder of each outstanding debt security affected thereby, (i)
extend the final maturity of any such debt security, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption thereof, or change the
currency of payment thereof, or reduce the amount of any original
issue

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    discount
security payable upon acceleration or provable in bankruptcy, or modify or amend
the provisions for conversion of any currency into any other currency, or modify
or amend the provisions for conversion or exchange of the debt security for
securities of the Issuer or other entities or for other property or the cash
value of the property (other than as provided in the antidilution provisions or
other similar adjustment provisions of the debt securities or otherwise in
accordance with the terms thereof), or alter certain provisions of the Senior
Indenture relating to debt securities not denominated in U.S. dollars or impair
or affect the rights of any holder to institute suit for the payment thereof or
(ii) reduce the aforesaid percentage in principal amount of debt securities of
any series the consent of the holders of which is required for any such
supplemental indenture.

     

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

     

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

     

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

     

    So long
as this Note shall be outstanding, the Issuer will cause to be maintained an
office or agency for the payment of the principal of and premium, if any, and
interest on this Note as

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    As used
herein, the term “U.S. Alien” means any person who is, for U.S. federal income
tax purposes, (i) a non-resident alien individual, (ii) a foreign corporation,
(iii) a non-resident alien fiduciary of a foreign estate or trust or (iv) a
foreign partnership one or more members of which

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

       

    

    is, for
U.S. federal income tax purposes, a non-resident alien individual, a foreign
corporation or a non-resident alien fiduciary of a foreign estate or
trust.

     

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

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    
      ABBREVIATIONS

       

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

            

        
          
            
              	
                       

                    	
                      TEN
      COM

                    	
                      –

                    	
                      as
      tenants in common

                    

            

             

          

          
            
              	
                       

                    	
                      TEN
      ENT

                    	
                      –

                    	
                      as
      tenants by the entireties

                    

            

             

          

          
            	
                     

                  	
                    JT
      TEN

                  	
                    –

                  	
                    as
      joint tenants with right of survivorship and not as tenants in
      common

                  

          

           

          
            
              	
                        
      UNIF GIFT MIN

                        
      ACT

                    	 
      	
                      Custodian

                    	 
      	 
	 
      	
                      (Minor)

                    	 
      	
                      (Cust)

                    	 

            

          

           

          
            
              	
                      Under
      Uniform Gifts to

                      Minors
      Act

                    	 
      	 
	 
      	
                      (State)

                    	 

            

             

          

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

           

          _______________________

           

           

          
            
              
              

            

            
              34

              
                

              

            

            
              
              

            

          

           

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

           

          ____________________________________________

          [PLEASE
INSERT SOCIAL SECURITY OR OTHER

          IDENTIFYING
NUMBER OF ASSIGNEE]

           

           

          
            
              	 
	 
	 

            

          

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

           

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

          

           

          Dated:_______________________

           

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

            

          

                              

          
            
              
              

            

            
              35

              
                

              

            

            
              
              

            

          

           

          OPTION
TO ELECT REPAYMENT

           

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

           

          
            	 
	 
	 

          

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

           

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

           

          
            	
                    Dated:

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

          

          

           

          36<PAGE>

                                                                   Exhibit 10.21

                                ESCROW AGREEMENT

     ESCROW AGREEMENT, dated as of September 29, 2006 (the "Agreement"), by and
among ATX Communications, Inc., a Delaware corporation (the "Company"). LUK CLEC
LLC, a Delaware limited liability company, in its capacity as the agent,
representative and attorney-in-fact of the Sellers (as hereinafter defined) (the
"Sellers' Representative"). Broadview Networks Holdings, Inc. (the "Buyer"), a
Delaware corporation, and JPMorgan Chase Bank, N.A., a National Banking
Association, as escrow agent (the "Escrow Agent"). Defined terms used herein but
not defined herein shall have the meanings ascribed to such terms in the
Purchase Agreement (as defined below).

                                    RECITALS:

     WHEREAS, Buyer and the stockholders of the Company listed on Schedule 1
hereto (collectively, the "Sellers") are parties to a Stock Purchase Agreement,
dated as of June 26, 2006 (the "Purchase Agreement"), pursuant to which Buyer
will purchase, and Sellers will sell, all of the outstanding shares of capital
stock of the Company (the "Shares"), upon the terms more fully set forth in the
Purchase Agreement;

     WHEREAS, Section 9.8 of the Purchase Agreement provides for the payment by
Sellers of certain liabilities of the Company which arose in connection with the
Company's reorganization under Chapter 11 of the United States Bankruptcy Code;

     WHEREAS, Section 12 of the Purchase Agreement provides for the
indemnification of Buyer by Sellers for certain losses that may be incurred by
Buyer;

     WHEREAS, pursuant to Section 11 of the Purchase Agreement, LUK CLEC LLC was
appointed as the Sellers' Representative in connection with the Purchase
Agreement and this Agreement, and LUK CLEC LLC agreed to act as the Sellers'
Representative; and

     WHEREAS, this Agreement is an essential part of the consideration for which
Buyer is willing to enter into the Purchase Agreement and to consummate the
transactions contemplated thereby.

     NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, it is hereby agreed as follows:

     1. Appointment of Escrow Agent; Escrow Account.

     (a) Buyer and the Sellers' Representative hereby designate and appoint the
Escrow Agent as escrow agent to act in accordance with the terms of this
Agreement, and the Escrow Agent agrees to act as such escrow agent on the terms,
conditions and provisions provided in this Agreement.

<PAGE>

     (b) Simultaneously with the execution of this Agreement, Buyer has
deposited $3,240,863.17 (the "Escrow Amount") with the Escrow Agent in a
separate account to be maintained by the Escrow Agent (the "Escrow Account").

     (c) The Escrow Amount and any interest earned in the Escrow Account, as may
be reduced from time to time in accordance with this Agreement, shall be
hereinafter referred to as the "Escrow Account Balance." The Escrow Agent shall
hold, invest, reinvest, manage, administer, distribute and dispose of the Escrow
Account Balance in accordance with the terms and conditions of this Agreement.

     2. Investment of Escrow Account Balance. Until the termination of this
Agreement, the Escrow Account Balance shall be fully invested and reinvested in
a JPMorgan Chase Bank Money Market Account, or as otherwise mutually instructed
by Buyer and the Sellers' Representative and acceptable to the Escrow Agent, by
the Escrow Agent, who shall have the authority to liquidate any investment as
required to administer its duties hereunder. The parties acknowledge that the
Escrow Agent shall not be responsible for any diminution in value of the Escrow
Account Balance due to losses resulting from authorized investments made
pursuant to this Agreement.

     3. Payments From Escrow. The Escrow Agent shall hold the Escrow Account
Balance in accordance with this Agreement and shall make payments from the
Escrow Account Balance only as provided by Sections 3, 4 and 12 hereof or as
further directed in writing by both Buyer and the Sellers' Representative:

     (a) In the event the Escrow Agent is duly instructed to disburse funds out
of the Escrow Account Balance to any party under the terms of this Agreement,
the Escrow Agent shall disburse such funds in one of the following manners (as
specified in such instruction): (i) by mailing a check to such party at the
address set forth in the instruction; or (ii) by wire transfer of immediately
available funds to the account specified in such instruction; provided that if
the Escrow Agent is instructed to transfer funds from the Escrow Account to any
bank for the account of any party, the Escrow Agent may require the party
issuing the instruction to agree to appropriate security procedures to verify
that the instruction is that of such issuing party.

     (b) Buyer shall be paid such amounts as are authorized to be paid to Buyer
pursuant to Section 4 below.

     (c) Within two (2) banking days of the Escrow Agent's having received a
copy of a Final Determination for an Open Claim, the amount, if any, payable to
Buyer under the Final Determination for such Open Claim shall be paid to Buyer
from the Claim Reserve for such Open Claim and the balance of such Claim Reserve
shall be returned to the Escrow Account, except as described in Section 4(e) or
Section 5, less amounts payable to the Escrow Agent pursuant to Section 12
below.

                                       2

<PAGE>

     (d) All payments to be made to Sellers' Representative pursuant to this
Agreement shall be made to:

                            [Intentionally Omitted]

     4. Buyer Claims. The procedure for payments from the Escrow Account shall
be as follows:

     (a) From time to time but subject to Section 4(e) below, as Buyer
determines that it is entitled to an indemnification payment under Section 12 of
the Purchase Agreement or a payment with respect to Chapter 11 Claims under
Section 9.8 of the Purchase Agreement, Buyer may request payment from the Escrow
Account Balance by giving written notice of its claim in substantially the form
of Exhibit 1 to the Escrow Agent and the Sellers' Representative, certifying in
such notice the nature of the claim, the amount of Damages, the provisions in
the Purchase Agreement on which the claim is based and a certification that such
request for payment is required to be made by any Sellers pursuant to Section
9.8 of the Purchase Agreement or Section 12 of the Purchase Agreement and being
made in good faith (a "Claim Notice").

     (b) If the Escrow Agent has not received written objection to a Claim
Notice given by Buyer in accordance with the preceding Section 4(a) from the
Sellers' Representative within 15 banking days after receipt by the Escrow Agent
and Sellers' Representative of the Claim Notice from Buyer, the claim stated in
such Claim Notice shall be conclusively deemed to be approved by the Sellers'
Representative and the Escrow Agent shall promptly thereafter pay to Buyer, in
the manner specified in the Claim Notice, from the Escrow Account Balance the
amount of such claim to the extent of the Escrow Account Balance, plus any
interest accrued on such amount through the date of payment. The Escrow Agent
shall have no responsibility to verify that Buyer has complied with the
provisions of the preceding Section 4(a), but instead may assume that upon
receipt of the request from Buyer, the provisions of Section 4(a) have been so
complied with.

     (c) If within said 15 banking days the Escrow Agent shall have received
from the Sellers' Representative a written objection to the claim by Buyer,
certifying the nature of and grounds for such objection and that such objection
is being made in good faith (a copy of which shall in each case be sent to Buyer
by the Sellers' Representative in accordance with the provisions of Section 16
below), then such claim shall be deemed to be an "Open Claim" and the Escrow
Agent shall reserve within the Escrow Account an amount of the Escrow Account
Balance equal to the amount of the Open Claim (which amount for each Open Claim,
together with any amounts earned pursuant to Section 2 after the date of receipt
of the Claim Notice with respect to the amount stated in the Claim Notice, is
referred to herein as the "Claim Reserve"). Such Open Claim shall be resolved in
accordance with Section 4(d) of this Agreement.

                                       3

<PAGE>

     (d) The amount constituting the Claim Reserve for each Open Claim shall be
paid by the Escrow Agent from the Escrow Account Balance to Buyer only either
(i) in accordance with a joint written instruction by Buyer and the Sellers'
Representative or (ii) if and to the extent consistent with a copy of a final
determination, finding, order, judgment and/or award from a court or other
agreed upon arbiter of competent jurisdiction and authority pertaining to the
Open Claim, sent to the Escrow Agent and the Sellers' Representative by Buyer
(each a "Final Determination"), and any portion of the Claim Reserve for such
Open Claim not so required to be paid to Buyer shall be returned to the Escrow
Account.

     (e) Upon the date that is 24 months after the date hereof, the Escrow
Account Balance shall be paid to the Sellers' Representative less (i) any amount
as to which a Final Determination has been made in favor of Buyer but which has
not yet been paid to Buyer and (ii) any amounts that have been identified by
Buyer in a Claim Notice but as to which a Final Determination has not yet been
made. Notwithstanding this Section 4(e), (i) any amounts as to which a Final
Determination has been made in favor of Buyer shall be paid to Buyer in
accordance with Section 3(c) and (ii) any amounts that have been identified by
Buyer in a Claim Notice as to which a Final Determination has not yet been made
shall remain in the Escrow Account until a Final Determination has been made and
shall be released to Buyer or the Sellers' Representative, as applicable, in
accordance with such Final Determination and shall be paid in the manner
specified in this Agreement. Any release of the Escrow Account Balance to the
Sellers' Representative shall not be deemed or construed as a release of Sellers
or Sellers' Representative, by Buyer, from any liability relating to the
Purchase Agreement or this Agreement.

     5. Termination, (a) This Agreement shall terminate on the earliest to occur
of:

          (i)  the date on which the Escrow Agent shall have been notified in
               writing by both Buyer and the Sellers' Representative that this
               Agreement shall be terminated; or

          (ii) the date on which the Escrow Agent shall have delivered the
               entire Escrow Account Balance to Buyer and/or the Sellers'
               Representative in accordance with the provisions of Section 3 or
               Section 4 of this Agreement.

     In the event of a termination pursuant to clause (i) above, the Escrow
Account Balance shall be delivered to such party or parties as are indicated in
the written notice from Buyer and the Seller's Representative.

     (b) Upon termination of this Agreement as set forth in this Section 5, the
Escrow Agent shall be discharged from all further obligations or
responsibilities hereunder.

     6. Duties of Escrow Agent. The instructions of the parties set forth herein
are irrevocable, and the Escrow Agent shall act only in accordance with such
instructions and instructions contained in any amendment or amendments to this
Agreement executed by all parties hereto and not in accordance with any contrary
instructions from any third person. The

                                        4

<PAGE>

duties and obligations of the Escrow Agent shall be determined solely by the
express provisions of this Agreement, and the Escrow Agent shall not be liable
except for the performance of its duties and obligations as are specifically set
forth herein.

     The Escrow Agent shall provide to the Sellers' Representative and Buyer
monthly statements reflecting the Escrow Account Balance and the income earned
thereon.

     7. Liability of Escrow Agent. In order to induce the Escrow Agent to act as
escrow agent hereunder, the parties hereto agree that:

     (a) the Escrow Agent shall not in any way be bound or affected by any
amendment or modification of this Agreement, unless the same shall have been
agreed to in writing by the Escrow Agent;

     (b) the Escrow Agent shall not be under any duty to give the property held
hereunder any greater degree of care than it gives its own similar property, but
in no event shall the Escrow Agent give the property held hereunder anything
less than reasonable care;

     (c) the Escrow Agent may act in reliance upon, and shall incur no liability
for or in respect of any action taken or omitted to be taken or anything
suffered by it in reliance upon, any notice, direction, consent, certificate,
affidavit, statement or other paper or document reasonably believed by the
Escrow Agent to be genuine and to have been presented or signed by the proper
party or parties;

     (d) the Escrow Agent shall not at any time be under any duty or
responsibility to make a determination of any facts contained in any certificate
delivered pursuant hereto or to make any independent verification of the
statements or signatures in such certificate or amounts delivered thereby. The
Escrow Agent shall not be responsible for any failure by Buyer, the Sellers'
Representative or Sellers to comply with any of their respective covenants
contained in this Agreement, the Purchase Agreement or any other agreement;

     (e) the Escrow Agent shall be under no duty or obligation to take any legal
action in connection with this Agreement or to enforce, through the institution
of legal proceedings or otherwise, any of its rights as Escrow Agent hereunder
or any rights of any other party hereto pursuant to this Escrow Agreement or any
other agreement, nor shall it be required to defend any action or legal
proceeding which, in its opinion, would or might involve the Escrow Agent in any
cost, expense, loss or liability;

     (f) the Escrow Agent may engage or be interested in any financial or other
transaction with the parties hereunder as freely as if it were not the Escrow
Agent hereunder;

     (g) the Escrow Agent shall be entitled to rely upon advice of counsel (the
reasonable cost of which shall be borne by Buyer and Sellers) of its choosing in
reference to any matter connected herewith, and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder in
good faith and in accordance with the opinion of such counsel and shall not be
liable for any mistake of fact or error of judgment, or for any acts or
omissions of any kind, unless caused by its willful misconduct or gross
negligence;

                                        5

<PAGE>

     (h) notwithstanding anything to the contrary contained herein, if the
Escrow Agent shall be uncertain as to its duties or rights hereunder, shall
receive any notice, advice, direction, or other document from any other party
with respect to this Agreement which, in its opinion, is in conflict with any of
the provisions of this Agreement, or should be advised that a dispute has arisen
with respect to the payment, ownership, or right of possession of or to the
Escrow Account Balance or any part thereof (or as to the delivery, non-delivery,
or content of any notice, advice, direction or other document), the Escrow Agent
shall be entitled (but not obligated), without liability to anyone, to refrain
from taking any action other than to use its best efforts to keep safely the
Escrow Account Balance until the Escrow Agent shall be directed otherwise in
writing by the other parties hereto or by an order, decree or judgment of a
court of competent jurisdiction which has been finally affirmed on appeal or
which by lapse of time or otherwise is no longer subject to appeal, but the
Escrow Agent shall be under no duty to institute or to defend any proceedings,
although it may institute or defend such proceedings;

     (i) Buyer and the Sellers' Representative hereby authorize the Escrow
Agent, if the Escrow Agent is threatened with litigation or is sued, to
interplead all interested parties in any court of competent jurisdiction and to
deposit the Escrow Account Balance with the clerk of that court; and

     (j) this Agreement sets forth exclusively the duties of the Escrow Agent
with respect to any and all matters pertinent hereto and no implied duties or
obligations shall be read into this Agreement against the Escrow Agent.

     8. Indemnification. Buyer and the Sellers' Representative on behalf of
Sellers each covenant and agree to jointly and severally indemnify and hold
harmless the Escrow Agent against any costs or expenses (including attorneys'
fees and expenses), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to this Agreement, and
in the event of any such claim, action, suit, proceeding or investigation: (a)
Buyer, on the one hand, and the Sellers' Representative on behalf of Sellers, on
the other hand, shall each pay the reasonable fees and expenses of counsel
selected by the Escrow Agent, promptly as statements therefor are received; and
(b) Buyer and the Sellers' Representative on behalf of Sellers will cooperate in
the defense of any such matter; except that Buyer and the Sellers'
Representative on behalf of Sellers shall not have any obligation to indemnify
the Escrow Agent against any cost, expense, judgment, fine, loss, claim, damage,
liability or settlement amount arising out of or pertaining to this Agreement
arising from the Escrow Agent's own gross negligence or willful misconduct. The
obligations of Buyer and the Sellers' Representative under this paragraph shall
survive: (i) the delivery of the Escrow Account Balance pursuant to this
Agreement; (ii) the termination of this Agreement; and (iii) the resignation or
removal of the Escrow Agent, In the event that Buyer or the Sellers'
Representative makes any payment pursuant to this Section 8, the party making
the payment shall have the right to seek contribution from the other party (or
parties in the case of Sellers) in the aggregate amount of 50% of the amount so
paid; provided, however, that in the event of a dispute between Buyer and the
Sellers' Representative, the prevailing party in such proceeding shall be
entitled to recover from the other party those costs and expenses of the Escrow
Agent incurred under this Section 8 in connection with such proceeding, in
addition to such other costs and expenses as may be applicable in such
proceeding. The parties hereby grant the Escrow Agent a lien on, right of
set-off against and security interest in the Escrow Fund

                                        6

<PAGE>

for the payment of any claim for indemnification, compensation, expenses and
amounts due hereunder, without limiting the obligations of the Buyer and
Sellers' Representative, on behalf of the Sellers, hereunder.

     9. Taxes. Buyer, on the one hand, and the Sellers' Representative on behalf
of Sellers, on the other hand, jointly and severally agree to assume any and all
obligations imposed now or hereafter by any applicable tax law with respect to
the payment of the Escrow Account Balance under this Agreement. Buyer and the
Sellers' Representative undertake to instruct the Escrow Agent in writing with
respect to the Escrow Agent's responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting in connection with its acting as Escrow Agent under this Agreement. To
the extent the Escrow Agent complies with such instructions, Buyer, on the one
hand, and the Sellers' Representative on behalf of Sellers, on the other hand,
jointly and severally agree to indemnify and hold the Escrow Agent harmless from
any liability on account of the failure to withhold or deduct taxes or the
failure to obtain proper certifications or to properly report to governmental
authorities to which the Escrow Agent may be or become subject in connection
with or which arises out of this Agreement, including costs and expenses
(including reasonable legal fees), interest and penalties.

     Anything in this Escrow Agreement to the contrary notwithstanding, in no
event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.

     10. Resignation. The Escrow Agent may at any time resign as Escrow Agent by
mailing written notice to Buyer and the Sellers' Representative of such
intention on its part, specifying the date on which its desired resignation
shall become effective. Upon receiving such notice of resignation, Buyer and the
Sellers' Representative shall promptly appoint a successor escrow agent by
written instrument signed on behalf of Buyer and the Sellers' Representative,
one copy of which shall be delivered to each of the resigning Escrow Agent and
the successor escrow agent. If Buyer and the Sellers' Representative shall fail
to make such appointment within a period of 30 days after they have been
notified in writing of such resignation by the resigning Escrow Agent, then the
resigning Escrow Agent may apply to any court of competent jurisdiction in the
State of New York for the appointment of a successor escrow agent. Such
resignation shall become effective upon the acceptance of the appointment by the
successor escrow agent as provided in this Section 9. Upon resignation, the
Escrow Agent shall be entitled to payment by Buyer and the Sellers'
Representative of any amounts then due it hereunder. Any successor escrow agent
shall have all the rights, obligations and immunities of the Escrow Agent set
forth herein.

     11. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but except as set forth in Section 9, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties, not to be unreasonably withheld or delayed, nor is this
Agreement intended to confer upon any other person except the parties hereto any
rights or remedies hereunder.

                                        7

<PAGE>

     12. Banking Days. If any date on which the Escrow Agent is required to make
an investment or a delivery pursuant to the provisions hereof is not a banking
day, then the Escrow Agent shall make such investment or delivery on the next
succeeding banking day. A banking day shall be any day on which the Escrow
Agent's offices in New York, NY are open for business.

     13. Escrow Costs. The fees, costs and expenses payable to the Escrow Agent
hereunder, including those identified on the Fee Schedule attached hereto, shall
be paid (a) one- half by Buyer and (b) one-half by the Sellers' Representative
on behalf of Sellers. The Escrow Agent shall be entitled to withhold from any
payment to be made hereunder to any party hereunder amounts due from such party
pursuant to this Agreement.

     The Escrow Agent acknowledges and agrees that it is holding the Escrow
Account (and all amounts on deposit therein) in its capacity as escrow agent and
that it has no right to apply amounts (including any investments) in the Escrow
Account against any obligations of the other parties to this Agreement that do
not arise under this Agreement.

     14. Taxpayer Identification Number and Withholding. Upon execution of this
Agreement, Buyer and the Sellers' Representative on behalf of Sellers shall
provide the Escrow Agent with a fully executed W-8 or W-9 IRS form, as
applicable, which shall include Buyer's and Sellers' respective Taxpayer
Identification Numbers ("TIN") assigned by the Internal Revenue Service. In
addition, all interest or other income earned under the Escrow Agreement shall
be allocated and/or paid pursuant to the terms of this Agreement.
Notwithstanding the terms of this Agreement, the Escrow Agent shall report and,
as required, withhold any taxes as it determines may be required by any law or
regulation in effect at the time of the distribution.

     15. Tax Treatment. Buyer and the Sellers' Representative (on behalf of the
Sellers) agree that the funds that are transferred to the Escrow Account shall
be treated as an installment obligation for purposes of Section 453 of the
Internal Revenue Code of 1986, as amended. Buyer and the Sellers' Representative
(on behalf of the Sellers) hereby agree to treat the Escrow Account Balance as
owned by the Buyer and not received by the Sellers' Representative, in all cases
to the extent not paid to the Sellers' Representative pursuant hereto, and to
file all Tax Returns on a basis consistent with such treatment. All investment
income earned or realized on the amounts in the Escrow Account Balance shall be
accounted for by the Escrow Agent separately from the amount originally
deposited in the Escrow Account and such investment income shall be treated as
having been received by the Buyer for United States federal and state income tax
purposes. Unless otherwise required by law, Buyer and the Sellers'
Representative (on behalf of the Sellers) hereby agree that, for United States
federal and state income tax purposes, Buyer shall report investment income as
its income and shall report related expenses as its expenses.

     16. Notices. All notices and other communications pursuant to or in
connection with this Agreement shall be in writing and shall be deemed to have
been given and received when actually hand delivered, two banking days after
dispatch by recognized overnight delivery service, or seven days after mailing
by certified or registered mail with proper postage affixed and return receipt
requested, in each case to the address of the party set forth below (or to

                                        8

<PAGE>

any changed address provided by any party to the other parties by notice given
as provided herein):

     If to Buyer:                Broadview Networks Holdings, Inc.
                                 800 Westchester Avenue
                                 5th Floor - Suite N501
                                 Rye Brook, NY 10573
                                 Attn: General Counsel
                                 Telecopy: (914)742-5818

     Copy to:                    Willkie Farr & Gallagher LLP
                                 787 Seventh Avenue
                                 New York, New York 10019
                                 Attn: Jeffrey R. Poss, Esq.
                                 Telecopy: (212) 728-9536

     And to:                     MCG Capital Corporation
                                 1100 Wilson Boulevard
                                 Suite 3000
                                 Arlington, VA 22209
                                 Attn: Samuel G. Rubenstein, General Counsel
                                 Telecopy: (703) 247-7545

     If to any Seller (or the
     Sellers' Representative):   LUK CLEC LLC
                                 315 Park Avenue South
                                 New York, New York 10010
                                 Attn: Joseph S. Steinberg, President
                                 Telecopy: (212) 598-4869

     Copy to:                    Weil, Gotshal & Manges LLP
                                 767 Fifth Avenue
                                 New York, NY 10153
                                 Attn: Andrea Bernstein, Esq.
                                 Telecopy: (212)310-8007

     If to Escrow Agent:         JPMorgan Chase Bank, N.A.
                                 4 New York Plaza, 21st Floor
                                 New York, New York 10004
                                 Attn: Audrey Mohan
                                 Telecopy: 212-623-6168

     17. Security Procedures. In the event that fund transfer instructions are
given (other than in writing at the time of execution of this Escrow Agreement),
the Escrow Agent is authorized to seek confirmation of such instructions by
telephone call-back to the person or persons designated on Schedule 2 hereto
("Schedule 2"), and the Escrow Agent may rely upon the confirmation of anyone
purporting to be the person or persons so designated. The persons

                                        9

<PAGE>

and telephone numbers for call-backs may be changed only in writing actually
received and acknowledged by the Escrow Agent. If the Escrow Agent is unable to
contact any of the authorized representatives identified in Schedule 2, the
Escrow Agent is hereby authorized to seek confirmation of such instructions by
telephone call-back to any one or more of the relevant party's executive
officers ("Executive Officers"), which shall include the titles of President and
Chief Financial Officer, as the Escrow Agent may select. The Escrow Agent may
rely upon the confirmation of anyone purporting to be any such officer. The
Escrow Agent and the beneficiary's bank in any funds transfer may rely solely
upon any account numbers or similar identifying numbers provided by Buyer or the
Sellers' Representative to identify (i) the beneficiary, (ii) the beneficiary's
bank or (iii) an intermediary bank. The Escrow Agent may apply any of the
escrowed funds for any payment order it executes using any such identifying
number, even when its use may result in a person other than the beneficiary
being paid or the transfer of funds to a bank other than the beneficiary's bank
or an intermediary bank designated. The parties to this Escrow Agreement
acknowledge that these security procedures are commercially reasonable.

     18. Account Opening Information. To assist the government in preventing the
funding of terrorism and money laundering activities, pursuant to federal law
the Escrow Agent is required to obtain, verify and record certain information
that identifies each person or entity opening an escrow account. As such,
concurrently with the execution of this Agreement, each of the Company, the
Sellers' Representative, the Sellers, and Buyer shall provide any information
requested by the Escrow Agent that will allow the Escrow Agent to identify each
of the parties to this Agreement.

     19. Amendment and Modification; Waiver. This Agreement may be amended,
modified or supplemented only by written agreement of each of the parties hereto
(it being agreed that the Escrow Agent shall execute such amendment,
modification or supplement unless such amendment, modification or supplement
adversely affects the Escrow Agent or imposes additional duties or obligations
on it hereunder).

     Any of the terms, covenants, representations, warranties or conditions
hereof may be waived by a written instrument executed by the party or parties
waiving compliance. Any waiver by any party of any condition, or of the breach
of any provision, term, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall not be deemed to be nor construed
as a further or continuing waiver of any such condition, or of the breach of any
other provision, term, covenant, representation or warranty of this Agreement
and, except as otherwise expressly provided herein, no failure or delay by a
party hereto in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, and no single or partial exercise thereof shall preclude
any right of further exercise or the exercise of any other right, power or
privilege.

     20. Governing Law. This Agreement shall be governed by the laws of the
State of New York (regardless of the laws that might otherwise govern under
applicable New York principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies, and such operating circulars of any Federal Reserve Bank, federal laws
and regulations, funds transfer system rules and general commercial bank
practices applicable to funds transfer and related activities.

                                       10

<PAGE>

     21. Sellers' Representative. All references to Sellers in this Agreement
may be treated by Escrow Agent and, if applicable, Buyer as references to
Sellers' Representative. Any action taken by the Sellers' Representative,
including, without limitation, the execution of any amendment or modification of
this Agreement pursuant to Section 18, shall be deemed to have been taken by
each of the Sellers. Escrow Agent and, if applicable, Buyer are hereby relieved
from any liability to Sellers for any acts done by Escrow Agent or Buyer in
accordance with any decision, act, consent or instruction of Sellers'
Representative.

     22. Not Exclusive Remedy. Sellers acknowledge and agree that the remedies
provided for herein (including the disbursements from the Escrow Account) shall
not be Buyer's exclusive remedy in respect of any indemnification or other claim
that Buyer may have in connection with the consummation of the transactions
contemplated by the Purchase Agreement, and that Buyer shall, notwithstanding
its execution and delivery of this Agreement, retain all of its rights and
remedies that are provided for in the Purchase Agreement.

     23. Severability. In the event that any part of this Agreement is declared
by any court or other judicial or administrative body to be null, void or
unenforceable, said provision shall survive to the extent it is not so declared,
and all of the other provisions of this Agreement shall remain in full force and
effect.

     24. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument. Any
counterpart may be executed by facsimile signature, and such facsimile signature
shall be deemed an original.

     25. Interpretation. The section headings contained in this Agreement are
solely for the purpose of reference, are not part of this Agreement and shall
not in any way affect the meaning or interpretation of this Agreement.

     26. Entire Agreement. This Agreement, and, as among the Company, the
Sellers' Representative, the Sellers, and the Buyer, the Purchase Agreement,
including the schedules and exhibits attached hereto and thereto, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter hereof. There are no restrictions, promises, representations,
warranties, covenants or undertakings regarding this subject matter, other than
those expressly set forth or referred to herein or therein.

     27. Force Majeure. No party to this Escrow Agreement is liable to any other
party for losses due to, or if it is unable to perform its obligations under the
terms of this Escrow Agreement because of, acts of God, fire, floods, strikes,
equipment or transmission failure, or other causes reasonably beyond its
control.

                  [Remainder of page intentionally left blank.]

                                       11
<PAGE>

     IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.

                                        COMPANY:

                                        ATX COMMUNICATIONS, INC.

                                        By: /s/ David Larsen
                                            ------------------------------------
                                        Name: David Larsen
                                        Title: President

                                        As Seller's Representative:

                                        SELLERS' REPRESENTATIVE:

                                        LUK-CLEC LLC

                                        By: /s/ Joseph A. Orlando
                                            ------------------------------------
                                        Name: Joseph A. Orlando
                                        Title: Vice President

                                        BUYER:

                                        BROADVIEW NETWORKS HOLDINGS, INC.

                                        By: /s/ Corey Rinker
                                            ------------------------------------
                                        Name: Corey Rinker
                                        Title: CFO

                      [Signature Page to Escrow Agreement]

<PAGE>

                                        ESCROW AGENT:

                                        JPMORGAN CHASE BANK. N. A.

                                        By: /s/ SAVERIO A. LUNETTA
                                            ------------------------------------
                                        Name: SAVERIO A. LUNETTA
                                        Title: VICE PRESIDENT

                      [Signature Page to Escrow Agreement]

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