MORGAN STANLEY 2009 REPLACEMENT EQUITY INCENTIVE COMPENSATION PLAN FOR MORGAN STANLEY SMITH BARNEY EMPLOYEES

1.          Purpose.    The primary purpose of the Morgan Stanley 2009 Replacement Equity Incentive Compensation Plan for Morgan Stanley Smith Barney Employees is to induce employees employed by the Smith Barney or Quilter businesses of Citigroup, employees of Citigroup (or its affiliates), and consultants or other persons who perform services for Citigroup or any of its affiliates, to commence employment with the Company or the MS Group, as applicable, in connection with the Transaction and to contribute to the growth and profits of the Company.

2.          Definitions.   Except as otherwise provided in an applicable Award Document, the following capitalized terms shall have the meanings indicated below for purposes of the Plan and any Award:

“ Administrator ” means the individual or individuals to whom the Committee delegates authority under the Plan in accordance with Section 5(b).

“ Award ” means any award of Restricted Stock, Stock Units, Options, SARs or Other Awards (or any combination thereof) made under and pursuant to the terms of the Plan.

“ Award Date ” means the date specified in a Participant’s Award Document as the grant date of the Award.

“ Award Document ” means a written document (including in electronic form) that sets forth the terms and conditions of an Award.  Award Documents shall be authorized in accordance with Section 12(e).

“ Board ” means the Board of Directors of Morgan Stanley.

“ Citigroup ” means Citigroup Inc., a Delaware corporation.

“ Code ” means the Internal Revenue Code of 1986, as amended, and the applicable rulings, regulations and guidance thereunder.

“ Committee ” means the Compensation, Management Development and Succession Committee of the Board, any successor committee thereto or any other committee of the Board appointed by the Board to administer the Plan or to have authority with respect to the Plan, or any subcommittee appointed by such Committee.

“ Company ” means MSSB and all of its Subsidiaries.

“ Eligible Individuals ” means the individuals described in Section 6 who are eligible for Awards.

“ Employee Trust ” means any trust established or maintained by the MS Group in connection with an employee benefit plan (including the Plan) under which current and former employees of the Company or the MS Group constitute the principal beneficiaries.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.

“ Fair Market Value ” means, with respect to a Share, the fair market value thereof as of the relevant date of determination, as determined in accordance with a valuation methodology approved by the Committee.

“ Incentive Stock Option ” means an Option that is intended to qualify for special federal income tax treatment pursuant to Sections 421 and 422 of the Code, as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is so designated in the applicable Award Document.

“ Morgan Stanley ” means Morgan Stanley, a Delaware corporation.

“ MS Group ” means Morgan Stanley and its Subsidiaries.

“ MSSB ” means Morgan Stanley Smith Barney Holdings LLC, a Delaware Limited Liability Company.

“ Option ” or “ Stock Option ” means a right, granted to a Participant pursuant to Section 9, to purchase one Share.

 “ Other Award ” means any other form of award authorized under Section 11 of the Plan, including any such Other Award the receipt of which was elected pursuant to Section 12(a).

“ Participant ” means an individual to whom an Award has been made.

“ Plan ” means the Morgan Stanley 2009 Replacement Equity Incentive Compensation Plan for Morgan Stanley Smith Barney Employees, as amended from time to time in accordance with Section 15(e) below.

“ Restricted Stock ” means Shares granted or sold to a Participant pursuant to Section 7.

“ SAR ” means a right, granted to a Participant pursuant to Section 10, to receive upon exercise of such right, in cash or Shares (or a combination thereof) as authorized by the Committee, an amount equal to the increase in the Fair Market Value of one Share over a specified exercise price.

“ Section 409A ” means Section 409A of the Code (or any successor provisions thereto).

“ Shares ” means shares of Stock.

“ Stock ” means the common stock, par value $0.01 per share, of Morgan Stanley.

“ Stock Unit ” means a right, granted to a Participant pursuant to Section 8, to receive one Share or an amount in cash equal to the Fair Market Value of one Share, as authorized by the Committee.

“ Subsidiary ” means (i) a corporation or other entity with respect to which either MSSB or Morgan Stanley (as applicable), directly or indirectly, has the power, whether through the ownership of voting securities, by contract or otherwise, to elect at least a majority of the members of such corporation’s board of directors or analogous governing body, or (ii) any other corporation or other entity in which either MSSB or Morgan Stanley (as applicable), directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for purposes of the Plan.  For purposes of the Plan, the Company shall not be deemed to be a Subsidiary of Morgan Stanley.

“ Transaction ” means the transactions contemplated pursuant to the Joint Venture Contribution and Formation Agreement, dated as of January 13, 2009, as it may be amended, by and between Morgan Stanley and Citigroup.

3.          Effective Date and Term of Plan.

(a)        Effective Date .  The Plan shall become effective upon the later of its adoption by the Board and the consummation of the Transaction.

(b)        Term of Plan.   No Awards may be made under the Plan after the date that is five years from the Plan’s effective date.

4.        Stock Subject to Plan.

(a)         Overall Plan Limit .  The total number of Shares that may be delivered pursuant to Awards shall be 5,000,000 as calculated pursuant to Section 4(c).  The number of Shares available for delivery under the Plan shall be adjusted as provided in Section 4(b).  Shares delivered under the Plan may be authorized but unissued shares or treasury shares that Morgan Stanley acquires in the open market, in private transactions or otherwise.

(b)         Adjustments for Certain Transactions .  In the event of a stock split, reverse stock split, stock dividend, recapitalization, reorganization, merger, consolidation, extraordinary dividend or distribution, split-up, spin-off, combination, reclassification or exchange of shares, warrants or rights offering to purchase Stock at a price substantially below Fair Market Value or other change in corporate structure or any other event that affects Morgan Stanley’s capitalization, the Committee shall equitably adjust (i) the number and kind of shares authorized for delivery under the Plan, including the maximum number of Incentive Stock Options as provided in Section 4(d), and (ii) the number and kind of shares subject to any outstanding Award and the exercise or purchase price per share, if any, under any outstanding Award.  In the discretion of the Committee, such an adjustment may take the form of a cash payment to a Participant.  The Committee shall make all such adjustments, and its determination as to what adjustments shall be made, and the extent thereof, shall be final.  Unless the Committee determines otherwise, such adjusted Awards shall be subject to the same vesting schedule and restrictions to which the underlying Award is subject.

(c)        Calculation of Shares Available for Delivery .  In calculating the number of Shares that remain available for delivery pursuant to Awards at any time, the following rules shall apply (subject to the limitation in Section 4(d)):

1.      The number of Shares available for delivery shall be reduced by the number of Shares subject to an Award and, in the case of an Award that is not denominated in Shares, the number of Shares actually delivered upon payment or settlement of the Award.

2.      The number of Shares tendered (by actual delivery or attestation) or withheld from an Award to pay the exercise price of the Award or to satisfy any tax withholding obligation or liability of a Participant shall be added back to the number of Shares available for delivery pursuant to Awards.

3.      The number of Shares in respect of any portion of an Award that is canceled or that expires without having been paid or settled by the Company or the MS Group shall be added back to the number of Shares available for delivery pursuant to Awards to the extent such Shares were counted against the Shares available for delivery pursuant to clause (1).

4.      If an Award is settled or paid by the Company or the MS Group in whole or in part through the delivery of consideration other than Shares, or by delivery of fewer than the full number of Shares that was counted against the Shares available for delivery pursuant to clause (1), there shall be added back to the number of Shares available for delivery pursuant to Awards the excess of the number of Shares that had been so counted over the number of Shares (if any) actually delivered upon payment or settlement of the Award.

(d)         ISO Limit .  The full number of Shares available for delivery under the Plan may be delivered pursuant to Incentive Stock Options, except that in calculating the number of Shares that remain available for Awards of Incentive Stock Options the rules set forth in Section 4(c) shall not apply to the extent not permitted by Section 422 of the Code.

5.        Administration.

(a)        Committee Authority Generally .  The Committee shall administer the Plan and shall have full power and authority to make all determinations under the Plan, subject to the express provisions hereof, including without limitation: (i) to select Participants from among the Eligible Individuals; (ii) to make Awards; (iii) to determine the number of Shares subject to each Award or the cash amount payable in connection with an Award; (iv) to establish the terms and conditions of each Award, including, without limitation, those related to vesting, cancellation, payment, exercisability, and the effect, if any, of certain events on a Participant’s Awards, such as the Participant’s termination of employment with the Company or the MS Group; (v) to specify and approve the provisions of the Award Documents delivered to Participants in connection with their Awards; (vi) to construe and interpret any Award Document delivered under the Plan; (vii) to prescribe, amend and rescind rules and procedures relating to the Plan; (viii) to make all determinations necessary or advisable in administering the Plan and Awards, including without limitation determinations as to whether (and if so as of what date) a Participant has commenced, or has experienced a termination of, employment; provided , however , that to the extent full or partial payment of any Award that constitutes a deferral of compensation

subject to Section 409A is made upon or as a result of a Participant’s termination of employment, the Participant will be considered to have experienced a termination of employment if, and only if, the Participant has experienced a separation from service with the Participant’s employer for purposes of Section 409A; (ix) to vary the terms of Awards to take account of securities law and other legal or regulatory requirements of jurisdictions in which Participants work or reside or to procure favorable tax treatment for Participants; and (x) to formulate such procedures as it considers to be necessary or advisable for the administration of the Plan.

(b)        Delegation .  To the extent not prohibited by applicable laws or rules of the New York Stock Exchange, the Committee may from time to time delegate some or all of its authority under the Plan to one or more Administrators consisting of one or more members of the Committee as a subcommittee or subcommittees thereof or of one or more members of the Board who are not members of the Committee or one or more officers of the Company or the MS Group (or of any combination of such persons).  Any such delegation shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation or thereafter.  The Committee may at any time rescind all or part of the authority delegated to an Administrator or appoint a new Administrator.  At all times, an Administrator appointed under this Section 5(b) shall serve in such capacity at the pleasure of the Committee.  Any action undertaken by an Administrator in accordance with the Committee’s delegation of authority shall have the same force and effect as if undertaken directly by the Committee, and any reference in the Plan to the Committee shall, to the extent consistent with the terms and limitations of such delegation, be deemed to include a reference to an Administrator.

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