Document:

exv4w2

Exhibit
4.2

POLYMEDIX, INC.

SERIES B WARRANT TO PURCHASE CAPITAL STOCK

To Purchase [                    ] Shares of Preferred Stock or [                    ] Shares of Common Stock

Date of Issuance:                     , 2008

VOID AFTER [                                                                    ], 2013

     THIS CERTIFIES THAT, for value received, [                    ], or permitted registered assigns (the
“Holder”), is entitled to subscribe for and purchase at the Exercise Price (defined below) from
PolyMedix, Inc., a Delaware corporation (the “Company”), either (a) up to [               ] shares
(“Preferred Warrant Shares”) of Series 2008 Convertible Preferred Stock of the Company, par value
$0.001 per share (“Preferred Stock”), or (b) if, at the time this Warrant is exercised (in whole or
in part) the Preferred Stock has been converted into shares of the common stock of the Company, par
value $0.001 per share (the “Common Stock”), up to [               ] shares of Common Stock (“Common
Warrant Shares”). This warrant is one of a series of warrants issued by the Company as of the date
hereof (individually a “Warrant”, collectively, “Company Warrants”) pursuant to a series of
securities purchase agreements dated as of                     , 2008, each between the Company and the
investor named therein (the “Securities Purchase Agreement”).

     1. DEFINITIONS. Capitalized terms used herein but not otherwise defined herein shall
have their respective meanings as set forth in the Securities Purchase Agreement. As used herein,
the following terms shall have the following respective meanings:

          (a) “Conversion Date” shall mean the date of effectiveness of the Amendment to the Company’s
Charter.

          (b) “Exercise Period” shall mean the period commencing with the date that is the earlier of
(i) six months after the Closing Date or (ii) the Conversion Date, unless sooner terminated as a
result of a Fundamental Transaction pursuant to Section 7 below, and ending on the fifth
anniversary of the Closing Date.

          (c) “Exercise Price” shall mean $10.00 per share with respect to the Preferred Warrant Shares
if this Warrant is exercisable for Preferred Warrant Shares and $1.00 per share with respect to the
Common Warrant Shares if this Warrant is exercisable for Common Warrant Shares, in either case
subject to adjustment pursuant to Section 5 below.

          (d) “Trading Day” shall mean (i) any day on which the Common Stock is listed or quoted on its
primary trading market, (ii) if the Common Stock is not then listed or quoted and traded on any
eligible market (meaning any of the New York Stock Exchange, American Stock Exchange (“AMEX”) or
The NASDAQ Global Market), then a day on which trading occurs on the OTC Bulletin Board (or any
successor thereto), or (iii) if trading does not occur on the OTC Bulletin Board (or any successor
thereto), any business day.

 

 

          (e) “Warrant Shares” shall mean the shares of Common Stock or Preferred Stock, as applicable,
issuable upon exercise of this Warrant.

     2. EXERCISE OF WARRANT.

          2.1 TYPE OF WARRANT SHARES. This Warrant shall be exercisable only for Preferred
Warrant Shares unless and until the Preferred Stock is converted into Common Stock pursuant to the
Designations, after which this Warrant shall be exercisable only for Common Warrant Shares.

          2.2 EXERCISE MECHANICS. The rights represented by this Warrant may, subject to Section
6 below, be exercised in whole or in part at any time during the Exercise Period, by delivery of
the following to the Company at its address set forth on the signature page hereto (or at such
other address as it may designate by notice in writing to the Holder):

          (a) An executed Notice of Exercise in the form attached hereto; and

          (b) Payment of the Exercise Price either in cash or by check or, if applicable, in accordance
with Section 4, (subject to the limitations in Section 2.3 below.

     Execution and delivery of the Notice of Exercise shall have the same effect as cancellation of
the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining
number of Warrant Shares, if any. If requested by the Company, Holder agrees to provide this
Warrant, or an affidavit of lost security, to the Company within a reasonable period after the
delivery of the Notice of Exercise.

     Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the
Company to the Holder by crediting the account of the Holder’s prime broker with the Depository
Trust Company through its Deposits and Withdrawal at Custodian (DWAC) system if the Company is a
participant in such system, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise within three business days from the delivery to the Company of the
Notice of Exercise, surrender of this Warrant and payment of the aggregate Exercise Price as set
forth above. This Warrant shall be deemed to have been exercised on the date the Exercise Price is
received by the Company. The Warrant Shares shall be deemed to have been issued, and Holder or any
other person so designated to be named therein shall be deemed to have become a holder of record of
such shares for all purposes, as of the date this Warrant has been exercised by payment to the
Company of the Exercise Price. In the event that this Warrant is exercisable for Common Warrant
Shares, if by the close of the third Trading Day after delivery of a Notice of Exercise, the
Company fails to deliver to the Holder a certificate representing the required number of Common
Warrant Shares in the manner required pursuant to this Section 2, and such failure to
deliver the Common Warrant Shares is caused by the Company’s failure to use commercially reasonable
efforts to comply with this Section 2 and/or the covenants in Section 3 herein, and
if after such third Trading Day and prior to the receipt of such Common Warrant Shares, the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Common Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company shall, within three Trading Days after
the Holder’s request and in the

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Holder’s sole discretion, either (i) pay in cash to the Holder an amount equal to the Holder’s
total purchase price (including brokerage commissions, if any) for the shares of Common Stock so
purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate
(and to issue such Common Warrant Shares) shall terminate or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such Common Warrant Shares and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of Common Warrant Shares, times (B) the closing bid price on the date of the
event giving rise to the Company’s obligation to deliver such certificate.

     The person in whose name any Warrant Shares are to be issued upon exercise of this Warrant
shall be deemed to have become the holder of record of such shares on the date on which this
Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of
delivery of such certificate or certificates, except that, if the date of such surrender and
payment is a date when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the next succeeding
date on which the stock transfer books are open.

     To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares
in accordance with the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any person or entity or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other person or entity of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other person or entity, and irrespective
of any other circumstance which might otherwise limit such obligation of the Company to the Holder
in connection with the issuance of Warrant Shares. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing the Warrant Shares upon exercise of this
Warrant as required pursuant to the terms hereof.

          2.3 ISSUANCE OF NEW WARRANTS. Upon any partial exercise of this Warrant, the Company,
at its expense, will forthwith and, in any event within five business days, issue and deliver to
the Holder a new warrant or warrants of like tenor, registered in the name of the Holder,
exercisable, in the aggregate, for the balance of the number of the Warrant Shares remaining
available for purchase under this Warrant.

          2.4 EXERCISE LIMITATIONS; HOLDER’S RESTRICTIONS. A Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent
that after giving effect to such issuance after exercise, such Holder (together with such Holder’s
affiliates), as set forth on the applicable Notice of Exercise, would beneficially own in excess of
9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to
such issuance, unless the Holder of this Warrant elects to waive the provisions of this Section
2.4 upon not less than 61 days’ prior notice to the Company. For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by such Holder and its affiliates
shall include the number of shares of Common Stock

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issuable upon exercise of this Warrant if this Warrant is exercisable for Common Warrant
Shares with respect to which the determination of such sentence is being made, but shall exclude
the number of shares of Common Stock which would be issuable upon (a) exercise of the remaining,
non-exercised portion of this Warrant beneficially owned by such Holder or any of its affiliates
and (b) exercise or conversion of the unexercised or non-converted portion of any other securities
of the Company (including, without limitation, any other shares of Common Stock or Warrants)
subject to a limitation on conversion or exercise analogous to the limitation contained herein
beneficially owned by such Holder or any of its affiliates. Except as set forth in the preceding
sentence, for purposes of this Section 2.4, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act, it being acknowledged by a Holder that the
Company is not representing to such Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be
filed in accordance therewith. To the extent that the limitation contained in this Section
2.4 applies, the determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which a portion of this Warrant is exercisable shall be in
the sole discretion of a Holder, and the submission of a Notice of Exercise shall be deemed to be
each Holder’s determination of whether this Warrant is exercisable (in relation to other securities
owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to
such aggregate percentage limitation, and the Company shall have no obligation to verify or confirm
the accuracy of such determination. For purposes of this Section 2.4, in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case
may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company
or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm
orally and in writing to such Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including this Warrant, by such Holder or
its affiliates since the date as of which such number of outstanding shares of Common Stock was
reported.

     3. COVENANTS OF THE COMPANY.

          3.1 DUE AUTHORIZATION. The Company covenants and agrees that all Warrant Shares that
may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be
validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof.

          3.2 FILING OF CERTIFICATE OF AMENDMENT. Subject to the Stockholders Approval, the
Company shall file the Certificate of Amendment pursuant to Section 4.5(b) of the Securities
Purchase Agreement.

          3.3 AVAILABLE SHARES. The Company covenants and agrees that the Company will at all
times during the Exercise Period, have authorized and reserved, free from preemptive rights, a
sufficient number of shares of Preferred Stock or Common Stock, as applicable, to provide for the
exercise of the rights represented by this Warrant. During the Exercise Period, the number of
authorized but unissued shares of Preferred Stock or Common

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Stock, as applicable, shall not be sufficient to permit exercise of this Warrant into the
applicable Warrant Shares, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of Preferred Stock or
Common Stock, as applicable, to such number of shares as shall be sufficient for such purposes.

          3.4 REGISTRATION STATEMENT. From and after the effective date of the Registration
Statement, the Company shall use commercially reasonable efforts to keep the Registration Statement
(which shall register the issuance and sale of the Common Warrant Shares to the Holder, or such
Holder’s valid assignee) in effect during the Exercise Period or such shorter period that will
terminate when this Warrant has been exercised, and during such time period shall use commercially
reasonable efforts to obtain the prompt withdrawal of any stop order suspending the effectiveness
of any such Registration Statement. At any time during which the Common Warrant Shares are
included in a then-effective Registration Statement, the Company may suspend the ability of the
Holder to exercise this Warrant in any manner contemplated by this Warrant, for a reasonable period
or periods (a “Black-out Period”), in the event that (a)(i) an event occurs and is continuing as a
result of which the Registration Statement including the Common Warrant Shares, any related
prospectus or any document incorporated therein by reference as then amended or supplement would,
in the Company’s good faith judgment, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (ii) the Company determined in its
good faith judgment that the disclosure of such event at such time would be to the detriment of the
business, operations or prospects of the Company or the disclosure otherwise relates to a business
transaction, operations or other material event which has not yet been publicly disclosed, or (b)
the Registration Statement is no longer effective and the Holder is not permitted to sell Common
Warrant Shares pursuant to any other registration statement or an exemption to the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”); provided, however,
that in the event that a Black-out Period occurs subsequent to the one year anniversary of the Date
of Issuance, this Warrant shall be exercised during such Black-out Period subject to the terms and
conditions of Section 4. Notwithstanding the foregoing provisions of this Section
3, (x) if a Holder is not able to exercise this Warrant because the Company has implemented a
Black-out Period, then the Exercise Period shall be extended for the number of calendar days
covered by such Black-out Period, (y) the Company will use commercially reasonable efforts to
ensure that the aggregate number of days covered by Black-out Periods shall not last for more than
twenty (20) consecutive days or exceed sixty (60) in a particular calendar year; provided, however,
that the Holder may not receive any penalties, cash payments or any other liquidated damages for
failure to deliver registered Common Warrant Shares so long as the Company has used commercially
reasonable efforts to deliver the Holder the Common Warrant Shares as contemplated in Section 2
herein or otherwise complies with the covenants in this Section 3, and (z) if the Black-out
Period is required because the Registration Statement is no longer effective and the Holder is not
permitted to sell Common Warrant Shares pursuant to any other registration statement or an
exemption to the registration requirements of the Securities Act of 1933, then the Exercise Period
shall be extended until such Holder may sell such Common Warrant Shares.

          3.5 NO IMPAIRMENT. Except and to the extent as waived or consented to by each holder
of Company Warrants, the Company will not, by amendment of its Certificate of

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Incorporation or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed hereunder by the Company,
but will at all times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may be necessary or appropriate in order to protect
the exercise rights of the Holder against impairment.

     4. CASHLESS EXERCISE. If (a) this Warrant is exercisable for Common Warrant Shares and
(b) at the time of any exercise of this Warrant (in whole or in part) there is no effective
Registration Statement registering, or no current prospectus available for, the issuance and sale
of Common Warrant Shares upon such exercise, then this Warrant may also be exercised at such time
by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate
for the number of Common Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:

	 	(A)	=	the VWAP on the Trading Day immediately preceding the date of
such election;
	 
	 	(B)	=	the Exercise Price of this Warrant, as adjusted; and
	 
	 	(X)	= 	the number of Common Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise.

“VWAP” means, for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume
weighted average price of the Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted for trading as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York
City time); (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average
price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board;
(c) if the Common Stock is not then quoted for trading on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar
organization or agency succeeding to its functions of reporting prices), the most recent bid price
per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected in good faith by the
Investors of a majority in interest of the Common Warrant Shares then outstanding and reasonably
acceptable to the Company, the fees and expenses of which shall be paid by the Company.

     5. ADJUSTMENT OF EXERCISE PRICE AND SHARES.

          5.1 STOCK DIVIDENDS, SPLIT-UPS, RECAPITALIZATIONS, ETC. In the event of changes in the
outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations,
reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations,
consolidation, acquisition of the Company (whether through merger or acquisition of substantially
all the assets or stock of the Company), or the like,

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the number, class and type of shares available under this Warrant in the aggregate and the
Exercise Price shall be correspondingly adjusted to give the Holder of this Warrant, on exercise
for the same aggregate Exercise Price, the total number, class, and type of shares or other
property as the Holder would have owned had this Warrant been exercised prior to the event and had
the Holder continued to hold such shares until the event requiring adjustment. The form of this
Warrant need not be changed because of any adjustment in the number of Warrant Shares subject to
this Warrant.

          5.2 ADDITIONAL STOCK, SECURITIES, AND PROPERTY. If at any time or from time to time
the holders of Common Stock of the Company (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefor,

          (a) Common Stock or any shares of stock or other securities which are at any time directly or
indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe
for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution
(other than a dividend or distribution covered in Section 5.1 above);

          (b) any cash paid or payable otherwise than as a cash dividend; or

          (c) Common Stock or additional stock or other securities or property (including cash) by way
of spinoff, split-up, reclassification, combination of shares or similar corporate rearrangement
(other than shares of Common Stock pursuant to Section 5.1 above),

then and in each such case, the Holder hereof will, upon the exercise of this Warrant, be entitled
to receive, in addition to the number of applicable Warrant Shares receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock and other securities
and property, as applicable, (including cash in the cases referred to in clauses (b) and (c) above)
which such Holder would hold on the date of such exercise had such Holder been the holder of record
of such Warrant Shares as of the date on which holders of Common Stock received or became entitled
to receive such shares or all other additional stock and other securities and property.

          5.3 CERTIFICATE OF ADJUSTMENT. Upon the occurrence of each adjustment pursuant to this
Section 5, the Company at its expense will, at the written request of the Holder, promptly
compute such adjustment in accordance with the terms of this Warrant and prepare a certificate
setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as
applicable), describing the transactions giving rise to such adjustments and showing in detail the
facts upon which such adjustment is based. Upon written request, the Company will promptly deliver
a copy of each such certificate to the Holder and to the Company’s transfer agent.

     6. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of this
Warrant as a consequence of any adjustment pursuant hereto. All Warrant Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining
whether the exercise would result in the issuance of any fractional share. If, after

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aggregation, the exercise would result in the issuance of a fractional share, the Company
shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such
fraction a sum in cash equal to the product resulting from multiplying the then current Fair Market
Value of an Exercise Share by such fraction. “Fair Market Value” of one share of: (i) Common Stock
shall mean (a) the average of the closing sales prices for the shares of Common Stock on AMEX or
other trading market where such security is listed or traded as reported by Bloomberg Financial
Markets (or a comparable reporting service of national reputation selected by the Company and
reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales
prices of such security) (collectively, “Bloomberg”) for the ten (10) consecutive trading days
immediately preceding such date, or (b) if AMEX is not the principal trading market for the shares
of Common Stock, the average of the reported sales prices reported by Bloomberg on the principal
trading market for the Common Stock during the same period, or, if there is no sales price for such
period, the last sales price reported by Bloomberg for such period, (c) if neither of the foregoing
applies, the last sales price of such security in the over-the-counter market on the pink sheets or
bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for
such security, the last bid price of such security as reported by Bloomberg or (d) if Fair Market
Value cannot be calculated as of such date on any of the foregoing bases, the Fair Market Value
shall be as determined by the Board of Directors of the Company in the exercise of its good faith
judgment and (ii) Preferred Stock shall be as determined by the Board of Directors of the Company
in the exercise of its good faith judgment.

     7. FUNDAMENTAL TRANSACTIONS. If, at any time while this Warrant is outstanding, (a)
the Company effects any merger or consolidation of the Company with or into another entity, in
which the shareholders of the Company as of immediately prior to the transaction own less than a
majority of the outstanding stock of the surviving entity, (b) the Company effects any sale of all
or substantially all of its assets in one or a series of related transactions, (c) any tender offer
or exchange offer (whether by the Company or another person or entity) is completed pursuant to
which holders of Common Stock are permitted to tender or exchange their shares for other
securities, cash or property, or (d) the Company effects any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than as a result of a subdivision or
combination of shares of Common Stock covered by Section 5 above) (each, a “Fundamental
Transaction”), then the Holder shall have the right thereafter to receive, upon exercise of this
Warrant, the same amount and kind of securities, cash or property, as applicable, as it would have
been entitled to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of the number of Common Warrant
Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”)
regardless of whether this Warrant is actually exercisable for Common Warrant Shares. Following
any transaction contemplated by this Section 5, the term Common Warrant Shares shall be
deemed to refer to the shares for which this Warrant is thereafter exercisable in accordance with
the provisions hereof. In addition, if holders of Common Stock are given a choice as to the
securities, cash (which shall be treated in accordance with the preceding paragraph) or property to
be received in a Fundamental Transaction (including a right to elect to receive any particular one
or combination of more than one of the foregoing), then the Holder shall be given the same choice
of consideration upon any exercise of this Warrant following such Fundamental Transaction, which
choice of consideration can be made at the time of exercise at any time prior to the expiration of
the Exercise Period.

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     8. NO STOCKHOLDER RIGHTS. This Warrant in and of itself shall not entitle the Holder
to any voting rights or other rights as a stockholder of the Company.

     9. TRANSFER OF WARRANT. Subject to compliance with any applicable laws, this Warrant
and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney,
upon delivery of this Warrant and the form of assignment attached hereto to any transferee
designated by the Holder. The transferee shall sign an investment letter in form and substance
reasonably satisfactory to the Company and its counsel.

     10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen,
mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may
reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof),
issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen, mutilated or
destroyed. Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.

     11. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b)
when sent by confirmed telex, electronic transmission or facsimile if sent during normal business
hours of the recipient, if not, then on the next business day, (c) five days after having been sent
by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after
deposit with a nationally recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the address listed on
the signature page hereto and to the Holder at the applicable address set forth on the applicable
signature page to the Securities Purchase Agreement or at such other address as the Company or the
Holder may designate by ten (10) days advance written notice to the other parties hereto.

     12. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of
and agreement to all of the terms and conditions contained herein.

     13. GOVERNING LAW. This Warrant shall be governed by, and construed in accordance
with, the laws of the State of Delaware. The Holder hereby submits to the non-exclusive
jurisdiction of the Federal and state courts in the City of Wilmington, Delaware in any suit or
proceeding arising out of or relating to this Agreement or the transactions contemplated thereby.
The Holder irrevocably and unconditionally waives any objection to the laying of venue of any suit
or proceeding arising out of or relating to this Warrant in Federal and state courts in the City of
Wilmington, Delaware and irrevocably and unconditionally waives and agrees not to plead or claim in
any such court that any such suit or proceeding in any such court has been brought in an
inconvenient forum.

     14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or waived (either generally
or in a particular instance and either retroactively or prospectively) with the written consent of
the Company and the holders of Company Warrants representing at least two-thirds of the number of
Warrant Shares then subject to outstanding Company Warrants, except that the amendment or waiver of
any provision of Sections 4 or 7 shall require the written consent of the Company and the holders
of Company Warrants representing at least 90% of the

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number of Warrant Shares then subject to outstanding Company Warrants. Notwithstanding the
foregoing, (a) this Warrant may be amended and the observance of any term hereunder may be waived
without the written consent of the Holder only in a manner which applies to all Company Warrants in
the same fashion and (b) the number of Warrant Shares subject to this Warrant and the Exercise
Price of this Warrant may not be amended, and the right to exercise this Warrant may not be waived,
without the written consent of the Holder. The Company shall give prompt written notice to the
Holder of any amendment hereof or waiver hereunder that was effected without the Holder’s written
consent. No waivers of any term, condition or provision of this Warrant, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.

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     IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized
officer as of                             , 2008.

	 	 	 	 	 
	 	POLYMEDIX, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

170 N. Radnor-Chester Road

Suite 300

Radnor, Pennsylvania 19087

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NOTICE OF EXERCISE

TO: POLYMEDIX, INC.

     (1) The undersigned hereby elects to purchase shares of capital stock, par value $0.001 per
share of POLYMEDIX, INC. pursuant to the terms of the attached Warrant, and tenders herewith
payment of the applicable exercise price in full, together with all applicable transfer taxes, if
any, subject to the limitations set forth in Section 2.4 of the Warrant.

     (2) Please issue the certificate for shares of Common Stock or Preferred Stock, as applicable,
in the name of, and pay any cash for any fractional share to:

	 	 	 	 	 
	 

	 	 

Print or type name
	 	 
	 
	 	 	 	 
	 

	 	 

Social Security or other Identifying Number
	 	 
	 
	 	 	 	 
	 

	 	 

Street Address
	 	 
	 
	 	 	 	 
	 

	 	 

City, State, Zip Code
	 	 

     (3) If such number of shares shall not be all the shares purchasable upon the exercise of the
Warrants evidenced by this Warrant, a new warrant certificate for the balance of such Warrants
remaining unexercised shall be registered in the name of and delivered to:

     Please insert Social Security or other identifying number:                                                             

(Please print name and address)

	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 
	 

	 	 

(Date)
	 	 	 	 

(Signature)
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

(Print Name)
	 	 

12

 

ASSIGNMENT FORM

     (To assign the foregoing Warrant, execute this form and supply required information. Do not
use this form to purchase shares.)

     FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned
to

	 	 	 	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	(Please Print)	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	(Please Print)	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Dated:
	 	 	,	2007	 	 
	 

	 	 	 	 

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Holder’s Signature:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Holder’s Address:	 	 	 	 	 	 
	 	 	 	 	 	 	 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant.

13Exhibit
No. 4.1 

         

        
          
            FORM
OF FIXED RATE SENIOR NOTE

          

           

          
            	
                    REGISTERED

                  	
                    REGISTERED

                  
	
                    No.
      FXR-1

                  	
                    U.S.
      $

                  
	 
      	
                    CUSIP:
      617483888

                  

          

           

        

      

    

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

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      MORGAN
STANLEY

      SENIOR
GLOBAL MEDIUM-TERM NOTES, SERIES F

      (Floating
Rate)

      

      PROTECTED
ABSOLUTE RETURN BARRIER NOTE DUE MARCH 20, 2010

      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 TELERATE 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, 2010, subject to extension if the Index Valuation Date is postponed in
      accordance with the definition thereof.  If the Index Valuation
      Date is postponed so that it falls less than two scheduled Business Days
      prior to the scheduled Maturity Date, the Maturity Date shall be the
      second scheduled 

                

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

      

       

      
        	
                 

              	 
    	
                Business
      Day following the Index Valuation Date as postponed.

              
	 	 	 
	 
    	 
    	
                In
      the event that the Maturity Date of this Note is postponed due to
      postponement of the Index Valuation Date, as described in the immediately
      preceding paragraph, the Issuer shall give notice of such postponement
      and, once it has been determined, of the date to which the Maturity Date
      has been rescheduled (i) to the holder of this 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 Index Valuation Date and (ii) with respect to notice of the
      date to which the Maturity Date has been rescheduled, the Business Day
      immediately following the actual Index Valuation Date.

              
	 	 	 
	
                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 Index 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

              

      

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	 	 	Amount
      an amount in cash equal to $10 plus the Supplemental Redemption Amount, if
      any, as determined by the Calculation Agent.
	 	 	 
	 
    	 
    	
                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 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 Index 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

              

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

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

              
	 	 	 
	 
    	 
    	
                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 Index Valuation Date, as determined by the
      Calculation Agent.

              
	 	 	 
	
                Index
      Valuation Date

              	 
    	
                The
      Index Valuation Date shall be March 18, 2010, 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
      Index Valuation Date, or if such Index 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 Index Valuation Date, and
      if such date is not an Index Business Day or if there is a Market
      Disruption Event

              

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	 	 	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 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.

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

              
	 	 	 
	
                Market
      Disruption Event

              	 
    	
                Market
      Disruption Event means, with respect to the
  Index:

              

      

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          
 

      

      
        	 
    	 
    	
                

                  (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, 2010
      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 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

        

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

          
          

           

          
            	 	 	

                    a
      Market Disruption Event if it results from an announced change in the
      regular business hours of the Relevant Exchange or market, (2) a decision
      to permanently discontinue trading in the relevant futures or options
      contract or exchange traded fund shall not constitute a Market Disruption
      Event, (3) limitations pursuant to the rules of any Relevant Exchange
      similar to NYSE Rule 80A (or any applicable rule or regulation enacted or
      promulgated by any other self-regulatory organization or any government
      agency of scope similar to NYSE Rule 80A as determined by the Calculation
      Agent) on trading during significant market fluctuations shall constitute
      a suspension, absence or material limitation of trading, (4) a suspension
      of trading in futures, 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 (5) 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 

                  

          

        

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

          
            
            

             

            
              	 	 	Observation Period
      ended at 4:00 p.m. on the date of 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
      Closing Value shall be determined by reference to the published value of
      such Successor Index at the regular weekday close of trading on the Index
      Business Day that any Index Closing Value is to be determined.    

                    
	 	 	 
	 	 	

                      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 Index 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.  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

                    

            

          

        

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        
          	 	 	whether
      the Index Value is outside the Index Range.  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 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.
	 	 	 
	 	 	
                  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 the 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

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      Manhattan,
The City of New York, or at such other paying agency as the Issuer may
determine, in U.S. dollars.  U.S. dollar payments of interest, other
than interest due at maturity or 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 

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      quoting
dealer of the Specified Currency for U.S. dollars for settlement on such payment
date in the amount of the Specified Currency payable in the absence of such an
election to such holder 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

       

      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 to JPMorgan Chase Bank, N.A. (formerly known
as JPMorgan Chase Bank)), as Trustee (the “Trustee,” which term includes
any successor trustee under the Senior Indenture) (as may be amended or
supplemented from time to time, the “Senior Indenture”), to which
Senior Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights, limitations of rights, duties and
immunities of the Issuer, the Trustee and holders of the Notes and the terms
upon which the Notes are, and are to be, authenticated and
delivered.  The Issuer has appointed The Bank of New York Mellon, at
its corporate trust office in The City of New York as the paying agent (the
“Paying Agent,” which
term includes any additional or successor Paying Agent appointed by the Issuer)
with respect to the Notes.  The terms of individual Notes may vary
with respect to interest rates, interest rate formulas, issue dates, maturity
dates, or otherwise, all as provided in the Senior Indenture.  To the
extent not inconsistent herewith, the terms of the Senior Indenture are hereby
incorporated by reference herein.

       

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

       

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

       

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

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      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.

       

      If the
face hereof indicates that this Note is subject to “Tax Redemption and Payment
of Additional Amounts,” the Issuer will, subject to certain exceptions and
limitations set forth below, pay such additional amounts (the “Additional Amounts”) to the
holder of this Note who is a U.S. Alien as may be necessary in order that every
net payment of the principal of and interest on this Note and any other amounts
payable on this Note, after withholding or deduction 

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      for or on
account of any present or future tax, assessment or governmental charge imposed
upon or as a result of such payment by the United States, or any political
subdivision or taxing authority thereof or therein, will not be less than the
amount provided for in this Note to be then due and payable.  The
Issuer will not, however, make any payment of Additional Amounts to any such
holder who is a U.S. Alien for or on account of:

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

         

      

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

       

      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 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 System (“TARGET”) is operating (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 

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      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 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 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 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 

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      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 either Morgan Stanley & Co.
Incorporated or Morgan Stanley DW Inc., as applicable.

       

      (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.

       

      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 

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      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:

       

      
        	
                Money
      Market Yield =    

              	
                D x
      360

              	
                 
      x 100

              
	
                360
      – (D x M)

              

      

       

      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 Moneyline Telerate, or any successor
service, on page 248 or any other page as may replace page 248 on that service
(“Telerate
Page 248”) 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 

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      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, the EURIBOR rate for that Interest Determination Date shall remain
the 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
Moneyline Telerate, or any successor service, on page 120 or any other page
as may replace page 120 on that service (“Telerate
Page 120”).

       

      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).”

       

      (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
Moneyline Telerate, or any successor service, on page 5 or any other page as may
replace page 5 on that service, (“Telerate Page
5”).

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

         

      

      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:

       

      (i)      
As of the Interest Determination Date, LIBOR shall be either (a)  if
“LIBOR Reuters” is
specified as the Reporting Service on the face hereof, 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, that appear on the
Designated LIBOR Page, as defined below, 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; except that if the specified Designated LIBOR Page, by
its terms provides only for a single rate, that single rate shall be used; or
(b) if “LIBOR Telerate”
is specified as the Reporting Service on the face hereof, the rate 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 appears on the Designated LIBOR Page at
approximately 11:00 a.m., London time, on that Interest Determination
Date.

       

      (ii)      If
(a) fewer than two offered rates appear and LIBOR Reuters is specified on the
face hereof, or (b) no rate appears and the face hereof specifies either (x)
LIBOR Telerate or (y) LIBOR Reuters 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 

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      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.

       

      (iii)     If
at least two quotations are provided, LIBOR determined on that Interest
Determination Date shall be the arithmetic mean of those
quotations.  If fewer than two quotations are provided, LIBOR shall be
determined for the applicable Interest Reset Date as the arithmetic mean of the
rates quoted at approximately 11:00 a.m., London time, 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, the LIBOR rate for that Interest Determination Date shall remain the
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
either: (a) if LIBOR Reuters is designated as the Reporting Service on the
face hereof, the display on the Reuters Money 3000 Service for the purpose of
displaying the London interbank rates of major banks for the applicable Index
Currency or its designated successor, or (b) if LIBOR Telerate is designated as
the Reporting Service on the face hereof, the display on Moneyline Telerate, or
any successor service, on the page specified on the face hereof, 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.

       

      If neither
LIBOR Reuters nor LIBOR Telerate is specified on the face hereof, LIBOR for the
applicable Index Currency shall be determined as if LIBOR Telerate were
specified, and, if the U.S. dollar is the Index Currency, as if Page 3750 had
been specified.

       

      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.”

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

         

      

      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, then 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 Screen
USPRIME 1 Page, 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 Screen USPRIME 1 Page 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 Screen USPRIME 1
Page” means the display designated as page “USPRIME 1” on the
Reuters Money 3000 Service, or any successor service, or any other page as may
replace the USPRIME 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 Moneyline Telerate, or any successor
service, on page 56 or any other page as may replace page 56 on that
service (“Telerate
Page 56”) or page 57 or any other page as may replace
page 57 on that service (“Telerate Page 57”);
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 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 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: 

         

        
          	
                  Bond
      Equivalent Yield =    

                	
                  D x
      N

                	
                   
      x 100

                
	
                  360
      – (D x M)

                

        

      

      
      

       

      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 the
rate displayed on the Designated CMT Telerate 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 Telerate
Page is 7051; 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 Telerate
Page is 7052.

       

      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 Maturity rate for the
Designated CMT Maturity Index as published in the relevant
H.15(519).

       

      (ii)      If
the above rate 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 Maturity Rate for the Designated CMT Maturity Index or
other U.S. Treasury rate for the Designated CMT Maturity Index on the Interest
Determination 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 Telerate Page and published in the relevant
H.15(519).

       

      (iii)    
If the information set forth 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 Telerate Page”
means the display on Moneyline Telerate, 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 page is specified on the face hereof, the
Designated CMT Telerate Page shall be 7052, 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 in the applicable pricing
supplement 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 

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

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

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      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 modify or
amend the provisions for 

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      conversion
of any currency into any other currency, or modify or amend the provisions for
conversion or exchange of the debt security for securities of the Issuer or
other entities or for other property or the cash value of the property (other
than as provided in the antidilution provisions or other similar adjustment
provisions of the debt securities or otherwise in accordance with the terms
thereof), or impair or affect the rights of any holder to institute suit for the
payment thereof or (ii) reduce the aforesaid percentage in principal amount of
debt securities the consent of the holders of which is required for any such
supplemental indenture.

       

      Except as
set forth below, if the principal of, premium, if any, or interest on, this Note
is payable in a Specified Currency other than U.S. dollars and such Specified
Currency is not available to the Issuer for making payments hereon due to the
imposition of exchange controls or other circumstances beyond the control of the
Issuer or is no longer used by the government of the country issuing such
currency or for the settlement of transactions by public institutions within the
international banking community, then the Issuer will be entitled to satisfy its
obligations to the holder of this Note by making such payments in U.S. dollars
on the basis of the Market Exchange Rate on the date of such payment or, if the
Market Exchange Rate is not available on such date, as of the most recent
practicable date; provided, however, that if the euro has been substituted for
such Specified Currency, the Issuer may at its option (or shall, if so required
by applicable law) without the consent of the holder of this Note effect the
payment of principal of 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 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 

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      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 or a foreign estate or trust or (iv) a
foreign partnership one or more members of which 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.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

        
          

           

          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.

           

          _______________________

           

          
            
              
              

            

            
              33

              
                

              

            

            
              
              

            

          

           

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

           

          
            	
                     

                  
	
                    [PLEASE
      INSERT SOCIAL SECURITY OR OTHER

                  
	
                    IDENTIFYING
      NUMBER OF ASSIGNEE]

                  

          

           

          
            	
                     

                  
	
                     

                     

                  
	
                     

                     

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

                  

          

           

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

           

          
            	
                    Dated:

                  	
                     

                  

          

          

          
            	
                    NOTICE:

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

                  

          

          

          

          
            
              
              

            

            
              34

              
                

              

            

            
              
              

            

          

           

          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.

                  

          

           

           

           35

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