Exhibit 10.1

TAX SHARING AGREEMENT

between

MORGAN STANLEY,

on behalf of itself

and the members

of the Distributing Group,

and

DISCOVER FINANCIAL SERVICES,

on behalf of itself

and the members

of the Controlled Group

This Agreement is entered into as of the 30th day of June, 2007 between Morgan Stanley (“ Distributing ”), a Delaware corporation, on behalf of itself and the members of the Distributing Group, as defined below, and Discover Financial Services (“ Controlled ”), a Delaware corporation, on behalf of itself and the members of the Controlled Group, as defined below.

W I T N E S S E T H:

WHEREAS, pursuant to the tax laws of various jurisdictions, certain members of the Controlled Group presently file certain tax returns on an affiliated, consolidated, combined, unitary, fiscal unity or other, group basis (including as permitted by Section 1501 of the Internal Revenue Code of 1986, as amended (the “ Code ”)) with certain members of the Distributing Group;

WHEREAS, Distributing and Controlled entered into a Separation and Distribution Agreement, dated as of June 29, 2007 (the “ Separation Agreement ”), providing for the distribution by Distributing to its shareholders of all of the common stock of Controlled that is held by Distributing and certain other matters;

WHEREAS, Distributing and Controlled desire to set forth their agreement on the rights and obligations of Distributing, Controlled and the members of the Distributing Group and the Controlled Group, respectively, with respect to (A) the handling and allocation of federal, state, local and foreign taxes (other than the U.K. taxes governed by the U.K. Tax Sharing Agreement) incurred in taxable periods beginning prior to the Distribution Date, (B) taxes resulting from transactions effected in connection with the Distribution, including but not limited to the Distribution and the transactions (i) described in or contemplated by the private letter ruling requests, dated March 7, 2007, March 22, 2007 and April 12, 2007 (collectively, with all attachments, exhibits and supplements thereto

dated March 21, 2007, April 17, 2007, April 26, 2007, April 27, 2007 and May 31, 2007, the “ Ruling Request ”), submitted by Distributing to the IRS and the FTB (in each case as defined below), (ii) effected pursuant to, or otherwise described in or contemplated by, the Separation Agreement (including, but not limited to, Schedule 1 thereto) or any Ancillary Agreement and (iii) described in or otherwise contemplated by the Form 10 (such transactions described in clauses (i), (ii) and (iii) are collectively referred to as the “ Restructuring ”), and (C) various other tax matters;

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the parties agree as follows:

1. Definitions .

(a) As used in this Agreement:

“ Active Business ” shall mean an active trade or business relied upon in the Ruling Request in connection with the Restructuring or the Distribution.

“ Actually Realized ” or “ Actually Realizes ” shall mean, for purposes of determining the timing of the incurrence of any Tax liability or the realization of a Refund (or any related income tax or other Tax cost or benefit) in respect of any payment, transaction, occurrence or event, the time at which the amount of income taxes paid (or Refund realized) is increased above (or reduced below) the amount of income taxes that would otherwise have been required to be paid (or Refund that would otherwise have been realized) but for such payment, transaction, occurrence or event.

“ Affiliate ” of any Person shall mean any individual, corporation, partnership or other entity directly or indirectly owning more than 50 percent (by vote or value) of, owned more than 50 percent (by vote or value) by, or under more than 50 percent (by vote or value) common ownership with, such Person.

“ After-Tax Amount ” shall mean an additional amount necessary to reflect the hypothetical Tax consequences of the receipt or accrual of any payment, using the maximum statutory rate (or rates, in the case of an item that affects more than one Tax) applicable to the recipient of such payment for the relevant Taxable year, reflecting for example, the effect of the deductions available for interest paid or accrued and for Taxes, such as state and local income taxes.

“ AMT ” shall mean the alternative minimum tax, within the meaning of Section 55 of the Code.

“ Ancillary Agreement ” shall have the meaning ascribed to it in the Separation Agreement.

“ Code ” shall have the meaning ascribed to it in the first “whereas” clause in this Agreement.

“ Combined Apportionment Factor ” shall mean the apportionment factor reflected on the applicable consolidated, combined or unitary state or local income tax return and utilized in computing the combined, consolidated or unitary state or local income tax liability.

“ Company Proceedings ” shall mean the ongoing Tax Proceedings between Sears and Controlled.

“ Consolidated Federal Return ” shall mean a Pre-Distribution Period Return filed in respect of federal income taxes by a Consolidated Group.

“ Consolidated Group ” shall mean any group consisting of (i) at least one member of the Distributing Group that filed (or will file) any Pre-Distribution Period Return that reflects the income, assets or operations of any member of the Controlled Group or (ii) at least one member of the Controlled Group that filed (or will file) any Pre-Distribution Period Return that reflects the income, assets or operations of any member of the Distributing Group.

“ Consolidated State Return ” shall mean a Pre-Distribution Period Return filed in respect of state or local income taxes by a Consolidated Group.

“ Controlled Group ” shall mean one or more of Controlled and (i) any Person that is an Affiliate of Controlled immediately after the Distribution and (ii) to the extent not previously included by (i), any Person that was owned directly or indirectly by Controlled prior to the Distribution for such period of ownership by Controlled, including for both (i) and (ii) any predecessors thereto; provided, however, that for purposes of determining whether an entity is a member of the Controlled Group, a transfer of beneficial ownership of an entity shall be treated as a transfer of title, regardless of whether title has actually passed.

“ Distributing Group ” shall mean one or more of Distributing and its Affiliates other than those entities comprising the Controlled Group.

“ Distribution ” shall mean the distribution by Distributing of all of the common stock of Controlled that is held by Distributing to Distributing’s shareholders pursuant to the Separation Agreement.

“ Distribution Date ” shall mean the date on which the Distribution shall be effected.

“ Federal Separate Group Tax Liability ” shall mean the product of a Group’s Separate Group Taxable Income, computed for federal income tax purposes, and the highest federal income tax rate imposed under the Code on the

Taxable income of a corporation for the relevant Taxable period (or portion thereof), reduced by any Tax credits that the Group would be able to use if it were calculating its federal income Tax liability on a stand-alone basis.

“ Final Determination ” shall mean (i) with respect to federal income taxes, (A) a “determination” as defined in Section 1313(a) of the Code, or (B) the date of acceptance by or on behalf of the IRS of Form 870-AD (or any successor form thereto), as a final resolution of Tax liability for any Taxable period, except that a Form 870-AD (or successor form thereto) that reserves the right of the taxpayer to file a claim for Refund or the right of the IRS to assert a further deficiency shall not constitute a Final Determination with respect to the item or items so reserved; (ii) with respect to Taxes other than federal income taxes, any final determination of liability in respect of a Tax that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise; (iii) with respect to any Tax, any final disposition by reason of the expiration of the applicable statute of limitations; or (iv) with respect to any Tax, the payment of Tax by any member of the Distributing Group or the Controlled Group, whichever is responsible for payment of such Tax under applicable law, with respect to any item disallowed or adjusted by a Taxing Authority, provided that the provisions of Section 13 hereof have been complied with, or, if such section is inapplicable, that the party responsible under the terms of this Agreement for such Tax is notified by the party paying such Tax that it has determined that no action should be taken to recoup such disallowed item, and the other party agrees with such determination.

“ FTB ” shall mean the California Franchise Tax Board.

“ Gain Group ” shall mean a Group with Separate Group Taxable Income for the relevant Taxable period.

“ Group ” shall mean the Controlled Group or the Distributing Group, as appropriate.

“ IRS ” shall mean the Internal Revenue Service.

“ Loss Group ” shall mean a Group that incurs a Separate Group Taxable Loss for the relevant Taxable period.

“ Overpayment Rate ” shall mean the overpayment rate as set forth in Section 6621 of the Code.

“ Person ” shall have the meaning ascribed to it in Section 7701(a)(1) of the Code.

“ Post-Distribution Period ” shall mean any Taxable period (or portion thereof) beginning after the close of business on the Distribution Date.

“ Pre-Distribution Period ” shall mean any Taxable period ending on or before the close of business on the Distribution Date; provided that if a Taxable period ending after the Distribution Date contains any days which fall prior to or on the Distribution Date, only the portion of such Taxable period up to and including the Distribution Date shall be included in the Pre-Distribution Period.

“ Refund ” shall mean any refund of taxes, including any reduction in taxes by means of a credit, offset or otherwise.

“ Restructuring ” shall have the meaning ascribed to it in the third “whereas” clause in this Agreement; provided, however, that “Restructuring” shall exclude any normal business operations.

“ Return ” shall mean any Tax return, statement, report, form, election, claim or surrender (including estimated Tax returns and reports, extension requests and forms, and information returns and reports) required to be filed with any Taxing Authority.

“ Ruling Request ” shall have the meaning ascribed to it in the third “whereas” clause in this Agreement.

“ Separate Group Taxable Income ” shall mean, with respect to a Group, such Group’s Taxable income computed as if such Group were a separate consolidated, combined or unitary group, and applying such Tax principles, including limitations and carryovers (excluding limits for charitable contributions and dividends received deduction, and accounting for deferred intercompany transactions consistent with the deferral and recognition rules of Treasury Regulations Section 1.1502-13 (or any successor rule) or analogous state or local rule), that would have been applicable to such Group had such Group never been part of the Consolidated Group or any other consolidated, combined or unitary group. In the context of state and local tax, Separate Group Taxable Income shall be computed prior to the application of any apportionment formula. Additionally, to the extent a member of a Group has a net operating loss or any other tax attribute that was created prior to becoming a member of the Group but can be carried forward and used by the Group (in the context of state or local law, either before or after apportionment, as determined under applicable law), such attribute will factor into such Group’s calculation of Separate Group Taxable Income (taking into account any applicable limitations on the use thereof).

“ Separate Group Taxable Loss ” shall mean, with respect to a Group, such Group’s Taxable loss computed as if such Group were a separate consolidated, combined or unitary group, and applying such Tax principles, including limitations and carryovers (excluding limits for charitable contributions and dividends received deduction, and accounting for deferred intercompany transactions consistent with the deferral and recognition rules of Treasury

Regulations Section 1.1502-13 (or any successor rule) or analogous state or local rule), that would have been applicable to such Group had such Group never been part of the Consolidated Group or any other consolidated, combined or unitary group. In the context of state and local tax, Separate Group Taxable Loss shall be computed prior to the application of any apportionment formula. Additionally, to the extent a member of a Group has a net operating loss or any other Tax attribute that was created prior to becoming a member of the Group but can be carried forward and used by the Group (in the context of state or local law, either before or after apportionment, as determined under applicable law), such attribute will factor into the Group’s calculation of Separate Group Taxable Loss (taking into account any applicable limitations on the use thereof).

“ Separation Agreement ” shall have the meaning ascribed to it in the second “whereas” clause in this Agreement.

“ State Separate Group Tax Liability ” shall mean, with respect to a particular state or locality, the product of the Group’s Separate Group Taxable Income and the Combined Apportionment Factor and the State Tax Rate, reduced by any applicable Tax credits that the Group would be able to use if it were calculating its Tax liability on a stand-alone basis.

“ State Tax Rate ” shall mean, with respect to a particular state or locality, the highest applicable tax rate imposed under applicable law on the Separate Group Taxable Income of the Group for the relevant Taxable period (or portion thereof).

“ Tax ” (and the correlative meaning, “ Taxes ,” “ Taxing ” and “ Taxable ”) shall mean (A) any tax imposed under Subtitle A of the Code, or any net income, gross income, gross receipts, alternative or add-on minimum, sales, use, business and occupation, value-added, trade, goods and services, ad valorem, franchise, profits, license, business royalty, withholding, payroll, employment, capital, excise, transfer, recording, severance, stamp, occupation, premium, property, asset, real estate acquisition, environmental, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest and any penalty, addition to tax or additional amount imposed by a Taxing Authority; (B) any liability of a member of the Distributing Group or the Controlled Group, as the case may be, for the payment of any amounts of the type described in clause (A) for any Taxable period resulting from such member being a part of a consolidated group pursuant to the application of Treasury Regulations Section 1.1502-6 or any similar provision applicable under state, local or foreign law; or (C) any liability of a member of the Distributing Group or the Controlled Group for the payment of any amounts described in clause (A) as a result of any express or implied obligation to indemnify any other Person.

“ Tax Benefit ” shall have the meaning ascribed to it in Section 10(d) of this Agreement.

“ Tax Proceeding ” shall mean any Tax audit, dispute or proceeding (whether administrative, judicial or contractual).

“ Taxing Authority ” shall mean any governmental authority (domestic or foreign), including, without limitation, any state, municipality, political subdivision or governmental agency, responsible for the imposition of any Tax.

“ U.K. Tax Sharing Agreement ” shall mean the Supplemental Tax Sharing Agreement Relating to Direct Tax and VAT in the United Kingdom, dated as of June 30, 2007, between Distributing and Controlled.

“ Underpayment Rate ” shall mean the underpayment rate as set forth in Section 6621 of the Code.

(b) Any term used in this Agreement which is not defined in this Agreement shall, to the extent the context requires, have the meaning assigned to it in the Code or the applicable Treasury regulations thereunder (as interpreted in administrative pronouncements and judicial decisions), in comparable provisions of applicable law or in the Ruling Request.

2. Tax Sharing Agreements. Any and all existing Tax sharing agreements or arrangements, written or unwritten, between any member of the Distributing Group and any member of the Controlled Group, other than this Agreement and the U.K. Tax Sharing Agreement, shall be or shall have been terminated upon consummation of the Distribution. Upon consummation of the Distribution, neither the members of the Controlled Group nor the members of the Distributing Group shall have any further rights or liabilities thereunder, and this Agreement and the U.K. Tax Sharing Agreement shall be the only Tax sharing agreements between the members of the Controlled Group and the members of the Distributing Group. Distributing and Controlled shall act in good faith in the performance of this Agreement.

3. Federal Income Taxes.

(a) Return Filing.

(i) Distributing shall prepare and file, or cause to be prepared and filed, Consolidated Federal Returns for which the Consolidated Group is required or permitted to file a Consolidated Federal Return using, inter alia, information previously provided by Controlled. Controlled shall provide Distributing with all necessary information to file a Consolidated Federal Return not

later than 45 days before such return is due. Each member of the Consolidated Group shall execute and file such consents, elections and other documents as may be required or appropriate for the filing of such Consolidated Federal Returns. All Tax elections shall be at the sole discretion of Distributing. All income tax computations performed on a consolidated basis will be performed or approved by Distributing. To the extent reasonably practicable, Distributing shall notify and discuss with Controlled prior to the filing of a Consolidated Federal Return any potential material differences in the information provided by Controlled to be used in the preparation of such Consolidated Federal Return and the position Distributing intends to take on such Consolidated Federal Return. Not later than 15 days after filing a Consolidated Federal Return, Distributing shall inform Controlled in writing of any position taken on such Consolidated Federal Return that is materially different from the information provided by Controlled to be used in the preparation of such Consolidated Federal Return.

(ii) Distributing shall pay, or cause to be paid, and, subject to the provisions of Section 3(b), shall be responsible for, any and all federal income taxes due or required to be paid with respect to, or required to be reported on, any such Consolidated Federal Return.

(iii) In the event a Consolidated Federal Return is not filed, each relevant member of the Distributing Group and Controlled Group shall be responsible for (i) filing its own Pre-Distribution Period Return in respect of federal income taxes as a separate entity, including requests for extension, as if this Agreement were not in effect and (ii) making Tax payments (including estimated Tax payments, if necessary). Each such member filing a Return as a separate entity shall be entitled to any Tax benefit and shall be liable for any Tax burden resulting from the filing of such separate Return.

(b) Allocated Tax Charge.

(i) Each Group included in the Consolidated Federal Return shall be responsible for calculating its Separate Group Taxable Income or Separate Group Taxable Loss as if such Group filed a federal income tax Return on a stand-alone basis, and shall bear its Federal Separate Group Tax Liability, if any. For purposes of such calculation, the deduction for state and local taxes to which each Group is entitled will be determined in a manner consistent with Section 4 of this Agreement.

(ii) If the Controlled Group included in the Consolidated Federal Return incurs a Separate Group Taxable Loss, Distributing shall pay to the Controlled Group (A) the amount, if any, by which the federal income taxes payable with respect to the Consolidated Federal Return are actually reduced by reason of the Controlled Group’s Separate Group Taxable Loss and (B) any Refund of federal income taxes or other federal income tax benefit attributable to such Separate Group Taxable Loss that is Actually Realized, in each case as determined by Distributing in its sole discretion (including that any tax benefits of the Distributing Group shall be fully utilized before utilizing any tax benefits of the Controlled Group). To the extent the Controlled Group receives a payment or credit from Distributing in respect of a Separate Company Taxable Loss pursuant to this Section 3(b)(ii), such loss shall not be carried forward or carried back by the Controlled Group for purposes of determining Separate Group Taxable Income or Separate Group Taxable Loss in any other Taxable period (or portion thereof). To the extent the Controlled Group does not receive a payment or credit from Distributing in respect of a Separate Group Taxable Loss pursuant to this Section 3(b)(ii), such loss may be carried forward or carried back, subject to any applicable limitation with respect to carry forward or carry back losses, by the Controlled Group for purposes of determining Separate Group Taxable Income or Separate Group Taxable Loss in another Taxable period (or portion thereof).

(iii) If the Controlled Group included in the Consolidated Federal Return has a foreign Tax credit or other Tax credit that it is unable to use in its calculation of Federal Separate Group Tax Liability (other than an AMT credit), Distributing shall pay to the Controlled Group (A) the amount, if any, by which the federal income taxes payable with respect to the Consolidated Federal Return is actually reduced by reason of the Controlled Group’s Tax credit and (B) any Refund of federal income taxes or other federal income tax benefit attributable to such Tax credit that is Actually Realized, in each case as determined by Distributing in its sole discretion (including that any tax benefits of the Distributing Group shall be fully utilized before utilizing any tax benefits of the Controlled Group). To the extent the Controlled Group receives a payment or credit from Distributing in respect of a Tax credit pursuant to this Section 3(b)(iii), the Controlled Group’s Federal Separate Group Tax Liability will be adjusted to reflect the fact that the Controlled Group has previously received the benefit of such credit. To the extent the

Controlled Group does not receive a payment or credit from Distributing in respect of a Tax credit pursuant to this Section 3(b)(iii), such Tax credit may be carried forward or carried back , subject to any applicable limitation with respect to carry forward or carry back of Tax credits, by the Controlled Group for purposes of calculating its Separate Group Tax Liability in another Taxable period (or portion thereof).

(iv) In the event a Consolidated Group incurs an AMT liability with respect to any Taxable period (or portion thereof), Distributing shall be solely responsible for such liability. Any Tax benefit arising from the utilization of a consolidated federal AMT credit shall be for the sole benefit of Distributing.

4. State and Local Income Taxes.

(a) Return Filing.

(i) Distributing shall prepare and file, or cause to be prepared and filed, Consolidated State Returns for which a Consolidated Group is required or permitted to file a Consolidated State Return using, inter alia, information previously provided by Controlled. Controlled shall provide Distributing with all necessary information to file a Consolidated State Return not later than 21 days before such return is due. Each member of the Consolidated Group shall execute and file such consents, elections and other documents as may be required or appropriate for the filing of such Consolidated State Returns. All Tax elections shall be made at the discretion of Distributing. All Tax computations performed on a combined, consolidated or unitary basis will be performed or approved by Distributing. To the extent reasonably practicable, Distributing shall notify and discuss with Controlled prior to the filing of a Consolidated State Return any potential material differences in the information provided by Controlled to be used in the preparation of such Consolidated State Return and the position Distributing intends to take on such Consolidated Federal Return. Not later than 15 days after filing a Consolidated State Return, Distributing shall inform Controlled in writing of any position taken on such Consolidated State Return that is materially different from the information provided by Controlled to be used in the preparation of such Consolidated State Return.

(ii) Distributing shall pay, or cause to be paid, and, subject to the provisions of Section 4(b), shall be responsible for, any and all income taxes due or required to be paid with respect to, or required to be reported on, any such Consolidated State Return.

(iii) In the event a Consolidated State Return is not filed, each relevant member of the Distributing Group and Controlled Group shall be responsible for (A) filing its own Return as a separate entity, or its own Return in respect of state and local income Taxes relating to a group consisting solely of members of the Distributing Group or members of the Controlled Group, as the case may be, on behalf of the separate group, in each case including requests for extension, as if this Agreement were not in effect and (B) making Tax payments (including estimated Tax payments, if necessary). Each such member filing a Return as a separate entity shall be entitled to any Tax benefit and shall be liable for any Tax burden resulting from the filing of such separate Return.

(b) Allocated Tax Charge.

(i) Each Group included in a Consolidated State Return shall be responsible for calculating its Separate Group Taxable Income or Separate Group Taxable Loss and shall bear its State Separate Group Tax Liability, if any.

(ii) If the Controlled Group included in a Consolidated State Return incurs a Separate Group Taxable Loss, Distributing shall pay, or shall cause to be paid, to the Controlled Group (A) the amount, if any, by which the state or local income taxes reflected on such Return are actually reduced by reason of the Controlled Group’s Separate Group Taxable Loss and (B) any Refund of state or local income taxes or other state or local income tax benefit attributable to such Separate Group Taxable Loss that is Actually Realized, in each case as determined by Distributing in its sole discretion (including that any tax benefits of the Distributing Group shall be fully utilized before utilizing any tax benefits of the Controlled Group). To the extent the Controlled Group receives a payment or credit from Distributing in respect of a Separate Group Taxable Loss pursuant to this Section 4(b)(ii), such loss shall not be carried forward or carried back by the Controlled Group for purposes of determining Separate Group Taxable Income or Separate Group Taxable Loss in any other Taxable period (or portion thereof). To the extent the Controlled Group does not receive a payment or credit from Distributing in respect of a Separate Group Taxable Loss pursuant to this Section 4(b)(ii), such loss may be carried forward or

carried back, subject to any applicable limitation with respect to carry forward or carry back losses, by the Controlled Group for purposes of determining Separate Group Taxable Income or Separate Group Taxable Loss in another Taxable period (or portion thereof).

(iii) If the Controlled Group included in a Consolidated State Return has a Tax credit that it is unable to use in its calculation of State Separate Group Tax Liability, Distributing shall pay to the Controlled Group (A) the amount, if any, by which the state or local income taxes reflected on such Return is actually reduced by reason of the Consolidated Group’s Tax credit and (B) any Refund of state or local income taxes or other state or local income tax benefit attributable to such Tax credit that is Actually Realized, in each case as determined by Distributing in its sole discretion (including that any tax benefits of the Distributing Group shall be fully utilized before utilizing any tax benefits of the Controlled Group). To the extent the Controlled Group receives a payment or credit from Distributing in respect of a Tax credit pursuant to this Section 4(b)(i)(C), the Controlled Group’s State Separate Group Tax Liability will be adjusted to reflect the fact that the Controlled Group has previously received the benefit of such credit. To the extent the Controlled Group does not receive a payment or credit from Distributing in respect of a Tax credit pursuant to this Section 4(b)(iii), such Tax credit may be carried forward or carried back, subject to any applicable limitation with respect to carry forward or carry back of Tax credits, by the Controlled Group for purposes of calculating its State Separate Group Tax Liability in another Taxable period (or portion thereof).

5. Foreign Income Tax. With respect to the calculation of each Group’s Tax liability for foreign taxes, other than U.K. taxes governed by the U.K. Tax Sharing Agreement, the principles set forth in Section 4 shall apply mutatis mutandis .

6. Estimated Tax Payments.

(a) If estimated Tax payments are required with respect to a Consolidated Group for a Pre-Distribution Period, Distributing shall pay, or cause to be paid, to the IRS, and/or to each relevant state and local Taxing Authority, on behalf of the members of such Consolidated Group, those estimated Tax payments that are due on the relevant dates prescribed by applicable law. On February 15 (or the proper due date under applicable law) of the year following the current tax year, Distributing

shall pay to the IRS, and to each relevant state and local Taxing Authority, on behalf of the members of any Consolidated Group, the payment, if any, required to be made with a request for an extension of time in which to file a Consolidated Federal Return or a Consolidated State Return, as the case may be. Each Group’s share of such estimated Tax payments, and payments required to be made with a request for an extension of time in which to file a Consolidated Federal Return or a Consolidated State Return, shall be determined in a manner consistent with the methods set forth in Sections 3 and 4 of this Agreement. Reimbursement to Distributing of the Controlled Group’s share of any quarterly estimated tax payments or any payment made with a request for an extension of time in which to file a Consolidated Federal Return or a Consolidated State Return, shall be made within twenty business days after receiving notice of such liability from Distributing.

(b) Notwithstanding the provisions of Section 6(a), if Distributing requests in writing an advance reimbursement from the Controlled Group of the Controlled Group’s share of a quarterly estimated Tax payment or any payment required to be made with a request for an extension of time in which to file a Consolidated Federal Return or a Consolidated State Return, which request shall be not more than ten business days and not less than 5 business days prior to the due date of such payment, the Controlled Group shall reimburse Distributing not later than the due date of such estimated Tax payment.

(c) If the Controlled Group is a Loss Group and if such net operating loss would decrease overall consolidated, combined or unitary Taxable income in respect of the Consolidated Group, Distributing shall pay to the Controlled Group an amount equal to the difference between the Tax liability of the Distributing Group and the amounts paid to the respective Taxing Authorities 5 business days after all such payments are due to the Taxing Authorities.

7. Settlement Procedures; Certain Other Payments.

(a) Distributing shall calculate settlement of the final federal, state, local and foreign Tax liability for all Pre-Distribution Periods, and notify the Controlled Group of such settlement. Subject to Section 21 of this Agreement (relating to dispute resolution procedures), the Controlled Group shall pay to Distributing its share of such Tax liability, as determined under Sections 3, 4 and 5 of this Agreement, within twenty business days after receiving notice of such Tax liability from Distributing. Any amounts paid by any member of the Controlled Group pursuant to Section 6 and any amounts receivable by the Controlled Group in respect of a Separate Group Taxable Loss or Tax credit shall be included in

determining the payments due from the Controlled Group. If the sum of any payments by the Controlled Group pursuant to Section 6, and any amounts receivable by the Controlled Group in respect of a Separate Group Taxable Loss or Tax credit exceed its Tax liability, such excess shall be refunded to the Controlled Group. Interest will be due on any underpayment or overpayment of Tax, computed from the date on which a final Return is filed, (i) if owed by the Controlled Group to Distributing on an underpayment, at the Underpayment Rate and (ii) if owed by Distributing to the Controlled Group on an overpayment, the Overpayment Rate.

(b) If a portion or all of an unused loss or Tax credit is allocated to a member of the Consolidated Group, pursuant to Treasury Regulations Section 1.1502-21(b) or Treasury Regulations Section 1.1502-79, and is carried back or forward to a Taxable year in which such member filed a separate Return or consolidated, combined or unitary Return with an affiliated group that is not a Consolidated Group, any Refund or reduction in Tax liability arising from such carry back or carryover shall be retained by such member, subject to future audit adjustments. Notwithstanding the foregoing, Distributing, in its sole discretion, shall determine whether an election shall be made to relinquish the entire carry back period with respect to part or all of a consolidated net operating loss for any Pre-Distribution Period in accordance with Treasury Regulations Section 1.1502-21(b)(3).

(c) Notwithstanding Section 7(b) above, no member of the Controlled Group shall make any election to carry back any Tax item from a Post-Distribution Period to a Pre-Distribution Period without Distributing’s consent. In the event that Distributing consents to the carry back of any Tax item by a member of the Controlled Group from a Post-Distribution Period to a Pre-Distribution Period or in the event that a member of the Controlled Group is required by applicable law to carry back a Tax item from a Post-Distribution Period to a Pre-Distribution Period, Distributing shall currently compensate the Controlled Group only for a Tax item that is carried back which does not result in the loss or deferral of any Tax attribute of any member of the Distributing Group. In the event that such item of a member of the Distributing Group is only deferred, Distributing shall make a payment to the Controlled Group in respect of such deferred item at the time the Distributing Group Actually Realizes the deferred Tax attribute. To the extent the Distributing Group suffers a permanent loss of such Tax attribute, no payment shall be made to the Controlled Group.

(d) Controlled and Distributing hereby acknowledge and agree that Sections 6 and 7(a) are applicable only with respect to Pre-Distribution Periods for which no final Return has been filed prior to the date hereof.

(e) In accordance with the past practice of Controlled and Distributing, Controlled shall continue to make payments to Distributing in respect of the exercise of options on Distributing stock and the conversion of restricted Distributing stock units (i) prior to the Distribution, by employees of Controlled and the members of the Controlled Group, and (ii) after the Distribution, by former employees of Controlled and the members of the Controlled Group.

8. Other Taxes. All federal, state, local, foreign and other Taxes that are not otherwise expressly dealt with herein or in the U.K. Tax Sharing Agreement, and the filing of any Returns with respect to such Taxes, shall be the responsibility of the Person who is liable for such Taxes or is responsible for filing such Returns under applicable law.

9. Certain Representations and Covenants.

(a) Controlled Representations. Controlled and each member of the Controlled Group represents that as of the date hereof, and covenants that on the Distribution Date, there is no plan or intention:

(i) to liquidate Controlled or to merge or consolidate Controlled, or any member of the Controlled Group conducting an Active Business, with any other person subsequent to the Distribution,

(ii) to sell or otherwise dispose of any asset of Controlled or any member of the Controlled Group subsequent to the Distribution, in a manner that would result in any increased Tax liability or reduction of any Tax asset of the Distributing Group or any member thereof,

(iii) to take any action inconsistent with the written information and representations furnished to the IRS or the FTB in connection with the Ruling Request, or to counsel in connection with any opinion being delivered by counsel with respect to the Distribution or the Restructuring, regardless of whether such information and representations were included in the ruling issued by the IRS or FTB or in the opinion of counsel,

(iv) to repurchase stock of Controlled in a manner contrary to the requirements of IRS Revenue Procedure 96-30, as modified by IRS Revenue Procedure 2003-48, or in a manner contrary to the representations made in the Ruling Request,

(v) to take any action that management of Controlled knows, or should have known, is reasonably likely to contravene any agreement with a Taxing Authority entered into prior to the Distribution Date to which any member of the Controlled Group or the Distributing Group is a party, or

(vi) to enter into any negotiations, agreements, or arrangements with respect to transactions or events (including stock issuances, pursuant to the exercise of options or otherwise, option grants, the adoption of, or authorization of shares under, a stock option plan, capital contributions, or acquisitions, but not including the Distribution) which may cause the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly Controlled stock representing a “50-percent or greater interest” within the meaning of Section 355(d)(4) of the Code.

(b) Controlled Covenants. Controlled covenants to Distributing that, without either (i) the prior written consent of Distributing, (ii) a supplemental private letter ruling issued by the IRS, or (iii) an unqualified written opinion of tax counsel selected by Distributing (in the case of (ii) and (iii), satisfactory to Distributing in its sole discretion):

(i) during the twelve-month period following the Distribution Date, neither Controlled, nor any member of the Controlled Group conducting an Active Business, will liquidate, merge or consolidate with any other Person,

(ii) during the two-year period following the Distribution Date, Controlled will not sell, exchange, distribute or otherwise dispose of its assets or those of any member of the Controlled Group in a manner that would result in any increased Tax liability or reduction of any Tax asset of the Distributing Group or any member thereof,

(iii) following the Distribution, Controlled will, for a minimum of twelve months, continue each Active Business,

(iv) Controlled will not, nor will it permit any member of the Controlled Group to, take any action inconsistent with the information and representations furnished to the IRS or the FTB in connection with the Ruling Request, or to counsel in connection with any opinion being delivered by counsel with respect to the Distribution or the Restructuring, regardless of whether such information and representations were included in the ruling issued by the IRS or FTB or in the opinion of counsel,

(v) Controlled will not take any action that management of Controlled knows, or should have known, is reasonably likely to contravene any agreement with a Taxing Authority entered into prior to the Distribution Date to which any member of the Controlled Group or the Distributing Group is a party,

(vi) during the two-year period following the Distribution Date, Controlled will not repurchase stock of Controlled in a manner contrary to the requirements of IRS Revenue Procedure 96-30, as modified by IRS Revenue Procedure 2003-48, or in a manner contrary to the representations made in the Ruling Request,

(vii) other than to the extent such action is required by the Separation Agreement, on or after the Distribution Date, Controlled will not, nor will it permit any member of the Controlled Group to, make or change any accounting method, amend any Return or take any Tax position on any Return, take any other action or enter into any transaction that results in any increased Tax liability or reduction of any Tax asset of the Distributing Group or any member thereof in respect of any Pre-Distribution Period, and

(viii) during the two-year period following the Distribution Date, Controlled will not enter into any transaction or make any change in its equity structure (including stock issuances, pursuant to the exercise of options or otherwise, options grants, the adoption of, or authorization of shares under, a stock option plan, capital contributions, or acquisitions, but not including, the Distribution) which may cause the Distribution to be treated as part of a plan (or series of related transactions) pursuant to which one or more Persons acquire directly or indirectly Controlled stock representing a “50-percent or greater interest” within the meaning of Section 355(d)(4) of the Code.

Controlled agrees that, regardless of whether Distributing consents to, or receives a ruling or opinion with respect to, any action referred to in this Section 9(b), Distributing is to have no liability for any Tax resulting from any such action and Controlled agrees to indemnify and hold harmless the Distributing Group against any such Tax. Controlled shall also bear all costs incurred by Distributing in connection with obtaining any opinion of

counsel, a supplemental private letter ruling or in connection with Distributing’s determination of whether or not to grant any written consent required under this Section 9(b).

10. Indemnities.

(a) Controlled Indemnity. Controlled and each member of the Controlled Group will jointly and severally indemnify Distributing and the members of the Distributing Group against, and hold them harmless from:

(i) any income tax liability of the Controlled Group as determined in accordance with this Agreement;

(ii) any liability or damage resulting from a breach by Controlled or any member of the Controlled Group of any representation or covenant made by Controlled herein;

(iii) any income tax liability (a) resulting from the Distribution or any portion of the Restructuring that is intended to qualify as tax free to Distributing or its shareholders under Sections 355 and/or 368(a)(1)(D) of the Code (or similar provisions of state law) from failing to so qualify and (b) that is attributable to any action of Controlled or any member of the Controlled Group, other than any action required by the Separation Agreement or any Ancillary Agreement (including any exhibits or schedules thereto), without regard to whether Distributing has consented to such action;

(iv) any Taxes imposed on Distributing or any member of the Distributing Group in respect of the Special Dividend to the extent Controlled or any member of the Controlled Group has received a Refund with respect to such Taxes; and

(v) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys’ fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any income tax liability or damage described in (i), (ii), (iii) or (iv), including those incurred in the contest in good faith in appropriate proceedings relating to the imposition, assessment or assertion of any such income tax, liability or damage.

(b) Distributing Indemnity. Distributing and each member of the Distributing Group will jointly and severally indemnify Controlled and the members of the Controlled Group against, and hold them harmless from:

(i) any income tax liability of the Consolidated Group, other than any such liabilities described in Section 10(a);

(ii) any Taxes imposed on Controlled or any member of the Controlled Group under Treasury Regulation 1.1502-6 (or similar provision of state, local or foreign law) solely as a result of Controlled or any such member being or having been a member of a Consolidated Group to the extent payment is first sought by a Taxing Authority from a member of the Controlled Group;

(iii) any liability or damage resulting from a breach by Distributing or any member of the Distributing Group of any representation or covenant made by Distributing herein; and

(iv) all liabilities, costs, expenses (including, without limitation, reasonable expenses of investigation and attorneys’ fees and expenses), losses, damages, assessments, settlements or judgments arising out of or incident to the imposition, assessment or assertion of any income tax liability or damage described in (i), (ii) or (iii) including those incurred in the contest in good faith in appropriate proceedings relating to the imposition, assessment or assertion of any such income tax, liability or damage.

If a member of the Distributing Group ceases to be an Affiliate of Distributing as a result of a sale of its stock to a third party (whether or not treated as a sale or exchange of stock for Tax purposes), such member of the Distributing Group shall be released from its obligations under this Agreement upon such sale and neither Distributing nor any member of the Distributing Group shall have any obligation to indemnify Controlled or any member of the Controlled Group under Section 10(b)(iii) for any liability or damage attributable to actions taken by such Affiliate after such sale.

(c) Discharge of Indemnity. Controlled, Distributing and the members of the Controlled Group and Distributing Group, respectively, shall discharge their obligations under Sections 10(a) and 10(b) hereof, respectively, by paying the relevant amount within 30 days of demand therefor. Any such demand shall include a statement showing the amount due under Section 10(a) or 10(b), as the case may be. Items described in Section 10(a)(i) and 10(b)(i) shall be calculated as set forth in Sections 3 and 4. Notwithstanding the foregoing, if either Controlled, Distributing or any member of the Controlled Group or Distributing Group disputes in

good faith the fact or the amount of its obligation under Section 10(a) or Section 10(b), then no payment of the amount in dispute shall be required until any such good faith dispute is resolved in accordance with Section 21 hereof; provided, however, that any amount not paid within 30 days of demand therefor shall bear interest as provided in Section 14.

(d) Tax Benefits. If an indemnification obligation of any member of the Distributing Group or any member of the Controlled Group, as the case may be, under this Section 10 with respect to a Consolidated Group arises in respect of an adjustment that makes allowable to a member of the Controlled Group or a member of the Distributing Group, respectively, any deduction, amortization, exclusion from income or other allowance (a “ Tax Benefit ”) which would not, but for such adjustment, be allowable, then any payment by any member of the Distributing Group or any member of the Controlled Group, respectively, pursuant to this Section 10 shall be an amount equal to (x) the amount otherwise due but for this subsection (d), minus (y) the present value of the product of the Tax Benefit multiplied (i) by the maximum applicable federal, foreign, state or local, as the case may be, corporate Tax rate in effect at the time such Tax Benefit becomes allowable to a member of the Controlled Group or a member of the Distributing Group (as the case may be) or (ii) in the case of a credit, by 100 percent. The present value of such product shall be determined by discounting such product from the time the Tax Benefit becomes allowable at a rate equal to the Prime Rate as published in the Wall Street Journal , Eastern Edition .

11. Guarantees. Distributing or Controlled, as the case may be, shall guarantee or otherwise perform the obligations of each member of the Distributing Group or the Controlled Group, respectively, under this Agreement.

12. Communication and Cooperation.

(a) Consult and Cooperate. Controlled and Distributing shall consult and cooperate (and shall cause each member of the Controlled Group or the Distributing Group, respectively, to cooperate) fully at such time and to the extent reasonably requested by the other party in connection with all matters subject to this Agreement. Such cooperation shall include, without limitation,

(i) the retention, and provision on reasonable request, of any and all information including all books, records, documentation or other information pertaining to Tax matters relating to the Distributing Group and the Controlled Group, any necessary explanations of information, and access to personnel, until one year after the expiration of the applicable statute of limitation (giving effect to any extension, waiver, or mitigation thereof);

(ii) the execution of any document that may be necessary (including to give effect to Section 13) or helpful in connection with any required Return or in connection with any audit, proceeding, suit or action; and

(iii) the use of the parties’ best efforts to obtain any documentation from a governmental authority or a third party that may be necessary or helpful in connection with the foregoing.

(b) Provide Information. Distributing and Controlled shall keep each other fully informed with respect to any material development relating to the matters subject to this Agreement.

(c) Tax Attribute Matters. Distributing and Controlled shall promptly advise each other with respect to any proposed Tax adjustments relating to a Consolidated Group, which are the subject of an audit or investigation, or are the subject of any proceeding or litigation, and which may affect any Tax liability or any Tax attribute of Distributing, Controlled, the Distributing Group, the Controlled Group or any member of the Controlled Group or the Distributing Group (including, but not limited to, basis in an asset or the amount of earnings and profits).

(d) In the event that any Taxes are imposed or threatened to be imposed on Distributing or any member of the Distributing Group in respect of the Special Dividend, Controlled shall, at the written request of Distributing, use its reasonable best efforts to obtain a Refund of any Taxes paid by Controlled or a member of the Controlled Group with respect to amounts received by Controlled or a member of the Controlled Group that give rise to a payment of the Special Dividend.

13. Audits and Contest.

(a) Distributing or Controlled shall promptly notify the other in writing upon the receipt of any notice of Tax Proceeding from the relevant Taxing Authority that could reasonably result in an indemnity obligation of a party under this Agreement; provided, that a party’s right to indemnification under this Agreement shall not be limited in any way by a failure to so notify, except to the extent that the indemnifying party is materially prejudiced by such failure.

(b) Notwithstanding anything in this Agreement to the contrary, Distributing shall have full control over all matters relating to any Return or any Tax Proceeding relating to any Tax matters of at least one member

of the Distributing Group. Except as provided in Section 13(c), Distributing shall have absolute discretion with respect to any decisions to be made, or the nature of any action to be taken, with respect to any matter described in the preceding sentence. Distributing shall act in good faith in the performance of this Section 13(b). Controlled may, at its own expense, participate in any such Tax Proceeding.

(c)

(i) Upon request, during the course of any Tax Proceeding relating to a Tax liability or damage described in Section 10(a), Controlled shall from time to time furnish Distributing with evidence reasonably satisfactory to Distributing of Controlled’s ability to pay the amount for which it could reasonably be expected to be responsible pursuant to Section 10(a). If at any time during such Tax Proceeding Distributing determines that Controlled could not pay such amount, then Controlled shall be required to furnish a guarantee or performance bond satisfactory to Distributing in an amount equal to the amount for which Controlled could reasonably be expected to be responsible pursuant to Section 10(a).

(ii) Notwithstanding anything to the contrary in this Agreement, in the event a Tax Proceeding involves an issue that is common to both the Distributing Group and the Controlled Group, Distributing shall use its best efforts to settle such issues on behalf of the Distributing Group and the Controlled Group on a consistent basis.

(iii) Notwithstanding anything to the contrary in this Agreement, with respect to any Tax Proceeding involving issues relating solely to a Tax liability of one or more members of the Controlled Group (taking into account the parties’ obligations under Section 10), Controlled shall have control over such Tax Proceeding.

(d) The indemnified party agrees to give notice to the indemnitor of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought hereunder within 30 days of such assertion or commencement, or such earlier time that would allow the indemnitor to timely respond to such claim, suit action or proceeding.

(e) With respect to Returns relating to Taxes solely attributable to one or more members of the Controlled Group (taking into account the

parties’ obligations under Section 10), Controlled and the members of the Controlled Group shall have full control over all matters relating to any Tax Proceeding in connection therewith. Controlled and the members of the Controlled Group shall have absolute discretion with respect to any decisions to be made, or the nature of any action to be taken, with respect to any matter described in the preceding sentence.

(f) Controlled and Distributing shall jointly control the conduct of the Company Proceedings. Controlled shall not agree to any settlement in respect of the Company Proceedings without the consent of Distributing, which consent shall not be unreasonably withheld.

14. Payments.

(a) Mechanics. All payments to be made hereunder shall be made in immediately available funds. Except as otherwise provided, all payments required to be made pursuant to this Agreement will be due 30 days after the receipt of notice of such payment or, where no notice is required, 30 days after the fixing of liability or the resolution of a dispute. Payments shall be deemed made when received. Any payment that is not made by the Distributing Group when due shall bear interest at Overpayment Rate for each day until paid. Any payment that is not made by the Controlled Group when due shall bear interest at the Underpayment Rate for each day until paid. If, pursuant to a Final Determination, any amount paid by Distributing or the members of the Distributing Group or Controlled or the members of the Controlled Group, as the case may be, pursuant to this Agreement results in any increased Tax liability or reduction of any Tax asset of Controlled or any member of the Controlled Group or Distributing or any member of the Distributing Group, respectively, then Distributing or Controlled, as appropriate, shall indemnify the other party and hold it harmless from any interest or penalty attributable to such increased Tax liability or the reduction of such Tax asset and shall pay to the other party, in addition to amounts otherwise owed, the After-Tax Amount. With respect to any payment required to be made or received under this Agreement, Distributing has the right to designate, by written notice to Controlled, which member of the Distributing Group will make or receive such payment.

(b) Tax Treatment. The parties agree that payments made pursuant to this Agreement shall be treated for all Tax purposes as adjustments to the amount contributed by Distributing to Controlled in connection with the Restructuring immediately prior to the Distribution, or, if appropriate, as distributions from Controlled to MSDCI and, except as otherwise required by law, none of the parties shall take any position inconsistent with such treatment.

15. Notices. Any notice, demand, claim, or other communication under this Agreement shall be in writing and shall be deemed to have been given upon the delivery or mailing, thereof, as the case may be, if delivered personally or sent by certified mail, return receipt requested, postage prepaid, to the parties at the following addresses (or at such other address as a party may specify by notice to the other):

If to Distributing or the Distributing Group, to:

Morgan Stanley

1585 Broadway

New York, NY 10036

Attn: Harvey B. Mogenson, Global Head of Tax

Facsimile: (212) 507-3643

With a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY 10017

Attn: Paul Kingsley, Esq./Jeffrey Small, Esq.

Facsimile: (212) 450-3277/(212) 450-3500

If to Controlled or the Controlled Group, to:

Discover Financial Services

2500 Lake Cook Road

Riverwoods, IL 60015

Attn: General Counsel - Contracts

Facsimile: (224) 405-4584

16. Costs and Expenses.

(a) Except as expressly set forth in this Agreement, each party shall bear its own costs and expenses incurred pursuant to this Agreement. For purposes of this Agreement, costs and expenses shall include, but not be limited to, reasonable attorneys’ fees, accountant fees and other related professional fees and disbursements. Notwithstanding anything to the contrary in this Agreement, each of the Controlled Group and the Distributing Group will be responsible for its allocable portion, as determined by Distributing, of (i) all costs and expenses attributable to filing any Return that reflects the income, assets or operations of the Controlled Group or the Distributing Group, respectively, and any Return

required to be filed in connection with the Restructuring, and (ii) all costs and expenses incurred by Distributing or Controlled, respectively, in complying with the provisions of Section 12 of this Agreement.

(b) With respect to all Tax Proceedings, including any pending litigation with any Taxing Authority, costs shall be allocated in good faith by Distributing. Each party hereto shall be liable for its allocable portion of such costs as provided in Section 10.

17. Effectiveness; Termination and Survival. This Agreement shall become effective upon the consummation of the Distribution. All rights and obligations arising hereunder shall survive until they are fully effectuated or performed and, provided, further, that notwithstanding anything in this Agreement to the contrary, this Agreement shall remain in effect and its provisions shall survive for one year after the full period of all applicable statutes of limitation (giving effect to any extension, waiver or mitigation thereof) and, with respect to any claim hereunder initiated prior to the end of such period, until such claim has been satisfied or otherwise resolved.

18. Section Headings. The headings contained in this Agreement are inserted for convenience only and shall not constitute a part hereof or in any way affect the meaning or interpretation of this Agreement.

19. Entire Agreement; Amendments and Waivers.

(a) Entire Agreement. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein. No alteration, amendment, modification, or waiver of any of the terms of this Agreement shall be valid unless made by an instrument signed by an authorized officer of each of Distributing and Controlled, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b) Amendments and Waivers. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver hereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege. This Agreement shall not be waived, amended or otherwise modified except in writing, duly executed by all of the parties hereto.

20. Governing Law and Interpretation. This Agreement shall be construed and enforced in accordance with the laws of the State of New York without giving, effect to laws and principles relating to conflicts of law.

21. Dispute Resolution. In the event of any dispute relating to this Agreement, including but not limited to whether a transaction is part of the

Restructuring and whether a Tax liability is a liability of the Distributing Group or the Controlled Group, the parties shall work together in good faith to resolve such dispute within 30 days. If the parties are unable to resolve such dispute within 30 days, such dispute shall be resolved by an accounting firm whose selection shall be reasonably satisfactory to both parties and whose fees and costs shall be shared equally by Distributing and Controlled.

22. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.

23. Assignments; Third Party Beneficiaries. Except as provided below, this Agreement shall be binding upon and shall inure only to the benefit of the parties hereto and their respective successors and assigns, by merger, acquisition of assets or otherwise (including but not limited to any successor of a party hereto succeeding to the Tax attributes of such party under applicable law). This Agreement is not intended to benefit any person other than the parties hereto and such successors and assigns, and no such other person shall be a third party beneficiary hereof. If, during the period beginning on the Distribution Date and ending upon the expiration of the survival period set forth in Section 17, any Person becomes an Affiliate of Controlled, such Affiliate shall be bound by the terms of this Agreement and Controlled shall provide evidence to Distributing of such Affiliate’s agreement to be bound by the terms of this Agreement.

24. Authorization, etc. Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of each such party, and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision or law or of its charter or bylaws or any agreement, instrument or order binding on such party.

[ Remainder of page intentionally left blank. ]

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the day and year first written above.

Exhibit 10.2

EXECUTION COPY

U.S. EMPLOYEE MATTERS AGREEMENT

by and between

MORGAN STANLEY

and

DISCOVER FINANCIAL SERVICES

Dated as of June 30, 2007

TABLE OF CONTENTS

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U.S. EMPLOYEE MATTERS AGREEMENT

THIS U.S. EMPLOYEE MATTERS AGREEMENT dated as of June 30, 2007 between Morgan Stanley, a Delaware corporation (“ Morgan Stanley ”), and Discover Financial Services, a Delaware corporation (“ Discover ”) (collectively, the “ Parties ”).

RECITALS

WHEREAS, Morgan Stanley and Discover have entered into a Separation and Distribution Agreement of even date herewith (the “ Distribution Agreement ”) pursuant to which Morgan Stanley will distribute on a pro rata basis to the holders of Morgan Stanley’s Common Stock, par value $0.01 per share (“ Morgan Stanley Common Stock ”), without any consideration being paid by such holders, all of the outstanding shares of Common Stock, par value $0.01 per share of Discover (“ Discover Common Stock ”) then owned by Morgan Stanley (the “ Distribution ”).

WHEREAS, in connection with the Distribution, Morgan Stanley and Discover desire to enter into this U.S. Employee Matters Agreement as a complement to the Distribution Agreement.

NOW THEREFORE, in consideration of the mutual covenants contained herein and in the Distribution Agreement, the Parties hereto agree as follows:

ARTICLE 1

S COPE AND D EFINITIONS

Section 1.01 . Scope. Notwithstanding anything to the contrary contained herein (i) this Agreement shall not apply with respect to any Employee whose primary employer within the Morgan Stanley Group or Discover Group is or was an entity domiciled in the United Kingdom, except that this Agreement shall apply with respect to the employees listed on Schedule 1.01(i) solely to the extent relevant with respect to the appropriate treatment of the benefits of such employees addressed herein and not addressed in the U.K. Employee Matters Agreement and (ii) the terms of this Agreement shall apply only to the extent relevant with respect to the appropriate treatment of any Employee whose primary employer within the Morgan Stanley Group or Discover Group is or was an entity domiciled in a country other than the United Kingdom or the U.S. or in Puerto Rico. For the avoidance of doubt, any relevant portions of this Agreement shall apply with respect to the Employees listed on Schedule 1.01(ii) hereof (who are Employees who are or have been located outside the U.S., but are or have been covered under U.S. compensation and benefit plans and arrangements). However,

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this Agreement shall not apply with respect to the Employees listed on Schedule 1.01(iii) hereof (who are Employees who are, as of the date hereof, located within the U.S. but are employed by U.K. entities and covered under U.K. compensation arrangements and benefit plans and arrangements).

Section 1.02 . Definitions. Unless otherwise defined herein, each capitalized term shall have the meaning specified for such term in the Distribution Agreement. As used in this Agreement:

“ Agreement ” means this U.S. Employee Matters Agreement together with those parts of the Distribution Agreement referenced herein, all Schedules hereto and all amendments, modifications and changes hereto and thereto.

“ Business Day ” means any day, other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized or obligated by law to close.

“ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Part 6 of Subtitle B of Title I of ERISA and at Section 4980B of the Code, as amended.

“ Code ” means the U.S. Internal Revenue Code of 1986, as amended.

“ Conversion Ratio ” means the closing price of Morgan Stanley common stock immediately prior to the Distribution divided by the opening price of Discover common stock immediately following the Distribution, in each case as reported on the New York Stock Exchange.

“ Discover Business Employee ” means any individual who is, immediately prior to the Distribution, employed by Morgan Stanley, Discover or any of their respective Subsidiaries and has employment duties primarily related to the Discover Business, as reasonably agreed by the Parties consistent with the foregoing description. A Discover Business Employee may not be a Morgan Stanley Business Employee.

“ Discover Equity Plans ” shall mean one or more plans adopted by Discover and approved by Morgan Stanley, as shareholder of Discover, under the authority of which the Discover equity awards described in Article 3 shall be issued.

“ Discover Initial Price ” shall mean the opening price of Discover common stock immediately following the Distribution as reported on the New York Stock Exchange.

“ Discover Non-ERISA U.S. Benefit Arrangement ” means any Non-ERISA U.S. Benefit Arrangement sponsored or maintained by Discover.

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“ Discover Pension and Welfare Benefit Plan ” means any Pension Plan or Welfare Plan sponsored or maintained by Discover or a Discover Subsidiary.

“ Discover RSU ” shall mean a right, issued in accordance with Section 3.02, representing the contractual entitlement to receive one share of Discover Common Stock in accordance with the terms and conditions of the award and the Discover Equity Plans under which the Discover RSU is granted.

“ Discover Stock Option ” shall mean a right, issued in accordance with Section 3.01, representing the contractual entitlement to purchase one share of Discover Common Stock in accordance with the terms and conditions of the award and the Discover Equity Plans under which the Discover Stock Option is granted.

“ Discover Subsidiary ” means any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are expected to be directly or indirectly owned by Discover immediately after the Distribution.

“ Employee ” means any Morgan Stanley Business Employee or Former Morgan Stanley Employee or Discover Business Employee or Former Discover Employee.

“ ERISA ” means the U.S. Employee Retirement Income Security Act of 1974, as amended.

“ FMLA ” means the U.S. Family Medical Leave Act, as amended.

“ Former Discover Employees ” has the meaning set forth in Section 2.02(c).

“ Former Morgan Stanley Employees ” has the meaning set forth in Section 2.02(b).

“ HIPAA ” means the U.S. Health Insurance Portability and Accountability Act, as amended.

“ IRS ” means the U.S. Internal Revenue Service.

“ Morgan Stanley Business Employee ” means any individual who is, immediately prior to the Distribution, employed by Morgan Stanley or any of its Subsidiaries or Affiliates and is not a Discover Business Employee.

“ Morgan Stanley CMDS Committee ” shall mean the Compensation, Management Development and Succession Committee of the Board of Directors of Morgan Stanley.

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“ Morgan Stanley Equity Plans ” shall mean any plan or arrangement under the authority of which Morgan Stanley has granted compensatory stock options, restricted stock units or any other compensatory awards based on Morgan Stanley Common Stock, which awards are outstanding on the Distribution Date.

“ Morgan Stanley ESPP ” means the Morgan Stanley Employee Stock Purchase Plan.

“ Morgan Stanley Final Price ” shall mean the closing price of Morgan Stanley common stock immediately prior to the Distribution as reported on the New York Stock Exchange.

“ Morgan Stanley Non-ERISA U.S. Benefit Arrangement ” means any Non-ERISA U.S. Benefit Arrangement sponsored or maintained by Morgan Stanley.

“ Morgan Stanley Pension and Welfare Benefit Plan ” means any Pension Plan or Welfare Plan sponsored or maintained by Morgan Stanley or a Morgan Stanley Subsidiary.

“ Morgan Stanley RSU ” shall mean a right representing a contractual entitlement to one share of Morgan Stanley Common Stock, in accordance with the terms of the relevant award and the Morgan Stanley Equity Plans under which the Morgan Stanley RSU is granted.

“ Morgan Stanley Subsidiary ” means any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are expected to be directly or indirectly owned by Morgan Stanley immediately after the Distribution.

“ Morgan Stanley Stock Option ” shall mean a right representing the contractual entitlement to purchase one share of Morgan Stanley Common Stock in accordance with the terms of the relevant award and the Morgan Stanley Equity Plans.

“ MS 401(k) Plan ” means the Morgan Stanley 401(k) Plan (f/k/a the Morgan Stanley DSP/START Plan).

“ MS ESOP ” means the Morgan Stanley Employee Stock Ownership Plan.

“ MS Excess Plan ” means the Morgan Stanley & Co. Incorporated Excess Benefit Plan.

“ MS Pension Plan ” means the Morgan Stanley Employees Retirement Plan.

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“ MS Retiree Medical Plan ” means that portion of the Morgan Stanley Health and Welfare Benefits Plan that provides post-employment medical benefits beyond those required to be provided pursuant to COBRA.

“ MS SERP ” means the Morgan Stanley Supplemental Executive Retirement Plan.

“ Non-ERISA U.S. Benefit Arrangement ” means any contract, agreement, policy, practice, program, plan, trust or arrangement, other than a Pension Plan or Welfare Plan, providing for benefits, perquisites or compensation of any nature to any Employee, or to any family member, dependent or beneficiary of any such Employee, including, without limitation, disability, severance, health, dental, life, accidental death and dismemberment, travel and accident, tuition reimbursement, supplemental unemployment, vacation, sick, personal or bereavement days, holidays, retirement, deferred compensation, profit sharing, bonus, stock-based compensation or other forms of incentive compensation.

“ Pension Plan ” means any pension plan as defined in Section 3(2) of ERISA, without regard to Section 4(b)(4) or 4(b)(5) of ERISA.

“ Welfare Plan ” means any employee welfare plan as defined in Section 3(1) of ERISA, without regard to Section 4(b)(4) of ERISA.

“ WARN ” means the U.S. Workers Adjustment Retraining and Notification Act, as amended.

Section 1.03 . Interpretation. In this Agreement, unless the context clearly indicates otherwise:

(a) words used in the singular include the plural and words used in the plural include the singular;

(b) references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and a reference to such Person’s “Affiliates” shall be deemed to mean such Person’s Affiliates following the Distribution;

(c) references to any gender include the other gender;

(d) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”;

(e) references to any Article, Section or Schedules mean such Article or Section of, or such Schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause mean such clause of such Section or definition;

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(f) the words “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof;

(g) references to any agreement, instrument or other document mean such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Agreement;

(h) references to any law (including statutes and ordinances) mean such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(i) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including”;

(j) accounting terms used herein shall have the meanings historically ascribed to them by Morgan Stanley and its Subsidiaries, including Discover, in its and their internal accounting and financial policies and procedures in effect prior to the date of this Agreement;

(k) if there is any conflict between the provisions of the Distribution Agreement and this Agreement, the provisions of this Agreement shall control with respect to the subject matter hereof; if there is any conflict between the provisions of the body of this Agreement and the Schedules hereto, the provisions of the body of this Agreement shall control unless explicitly stated otherwise in such Schedule;

(l) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement;

(m) any portion of this Agreement obligating a Party to take any action or refrain from taking any action, as the case may be, shall mean that such Party shall also be obligated to cause its relevant Affiliates to take such action or refrain from taking such action, as the case may be; and

(n) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States.

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ARTICLE 2

A SSIGNMENT OF E MPLOYEES

Section 2.01 . Active Employees.

(a) Discover Business Employees . Except as otherwise set forth in this Agreement, effective not later than the Distribution Date, the employment of each Discover Business Employee who is employed by Morgan Stanley or a Morgan Stanley Subsidiary shall be assigned and transferred to Discover or a Discover Subsidiary. As of the Distribution Date, Discover shall and shall cause each Discover Subsidiary to continue the employment of each Discover Business Employee who is employed by Discover or a Discover Subsidiary. Discover shall, or shall cause the appropriate Discover Subsidiary to, honor any legal right of any Discover Business Employee or Former Discover Employee in a leave or other non-working status to return to work by providing such employee employment on terms that comply with such right.

(b) Morgan Stanley Business Employees . Effective not later than the Distribution Date, the employment of each Morgan Stanley Business Employee who is employed by Discover or a Discover Subsidiary shall be assigned and transferred to Morgan Stanley or a Morgan Stanley Subsidiary. As of the Distribution Date, Morgan Stanley shall and shall cause each Morgan Stanley Subsidiary to continue the employment of each Morgan Stanley Business Employee who is employed by Morgan Stanley or a Morgan Stanley Subsidiary. Morgan Stanley shall, or shall cause the appropriate Morgan Stanley Subsidiary to, honor any legal right of any Morgan Stanley Business Employee or Former Morgan Stanley Employee in a leave or other non-working status to return to work by providing such employee employment on terms that comply with such right.

(c) At-Will Status . Notwithstanding the above or any other provision of this Agreement, nothing in this Agreement shall create any obligation on the part of Morgan Stanley, Discover or any of their respective Affiliates to continue the employment of any employee for any definite period following the Distribution Date or to change the employment status of any employee from “at will.”

(d) Employee Secondment . Concurrently with the execution of this Agreement, the parties are entering into one or more Transition Services Agreements pursuant to which Morgan Stanley has agreed to provide certain services relating to the subject matter of this Agreement. In addition, and notwithstanding the foregoing, if and only to the extent necessary to preserve payroll, benefits, or other legal entitlements with respect to any employees (whether inside or outside the United States), a Discover Subsidiary and a Morgan Stanley Subsidiary may enter into one or more agreements whereby one such subsidiary may lease employees from another for a period of not more than three

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calendar months following the Distribution Date. Any such agreement(s) shall require the company benefiting from the services of such employee(s) to fully reimburse the leasing company for the full cost of the employee(s) remuneration and shall contain other terms and conditions consistent with an arm’s length commercial relationship between the leasing entity and the service recipient.

(e) Severance . Neither the Distribution nor any of the assignment, transfer or continuation of the employment of employees in connection therewith shall be deemed a severance of employment of any employee for purposes of any plan, policy, practice or arrangement of Morgan Stanley, Discover or any of their respective Subsidiaries, except as otherwise provided herein.

Section 2.02 . Former Employees.

(a) General Principal. Except as otherwise provided in this Agreement, each former employee of Morgan Stanley or any Morgan Stanley Subsidiary or Discover or any Discover Subsidiary as of the Distribution Date will be considered a former employee of the business as to which his or her duties were primarily related immediately prior to his or her termination of employment with all of Morgan Stanley, Discover and their respective Affiliates.

(b) Former Morgan Stanley Employees . For these purposes, former employees of Morgan Stanley and the Morgan Stanley Subsidiaries shall be deemed to include (i) all employees who, as of their last day of employment with all of Morgan Stanley, Discover and their respective Affiliates, had employment duties primarily related to the Morgan Stanley Business and (ii) without limiting the foregoing, (x) all employees who, as of their last day of employment with all of Morgan Stanley, Discover and their respective Affiliates were employed by Morgan Stanley entities providing institutional or asset management services, including, without limitation, Van Kampen Funds Inc., Miller Anderson & Sherrard, LLP, Discover Brokerage Direct, Barra, Inc. and any other former Affiliate of the Dean Witter or Morgan Stanley Asset Management or Morgan Stanley Institutional Securities group and (y) all former employees of Morgan Stanley Credit Corporation (“ MSCC ”) whose last day of employment with MSCC and its Affiliates was on or after January 1, 2006 (collectively, the “ Former Morgan Stanley Employees ”).

(c) Former Discover Employees . Former employees of Discover and the Discover Subsidiaries shall be deemed to include (i) all employees who, as of their last day of employment with all of Morgan Stanley, Discover and their respective Affiliates, had employment duties primarily related to the Discover Business and (ii) without limiting the foregoing, (x) all employees who, as of their last day of employment with all of Morgan Stanley, Discover and their respective Affiliates were employed by Sears Roebuck and Co./Sears Holdings Corporation, The Allstate Corporation, Coldwell Banker Real Estate Corporation, Sears

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Mortgage Corporation/Sears Mortgage Banking Group, Sears Savings Bank, any other former Sears Affiliate (other than an entity in the Dean Witter or Morgan Stanley Asset Management or Morgan Stanley Institutional Securities lines of business), former employees of SPS Payment Systems, Inc. and former employees of PULSE EFT Association LP and (y) all former employees of MSCC whose last day of employment with MSCC and its Affiliates was prior to January 1, 2006 (collectively, the “ Former Discover Employees ”).

Section 2.03 . Employment Law Obligations.

(a) WARN Act . Morgan Stanley and the Morgan Stanley Subsidiaries shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any Morgan Stanley Business Employee. Discover and the Discover Subsidiaries shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any Discover Business Employee; provided , however , that Morgan Stanley and the Morgan Stanley Subsidiaries shall be responsible for providing any necessary WARN notice (and any similar state law notice requirements) to any Discover Business Employee or any governmental authority in connection with any transfer of the employment of any Discover Business Employee from a Morgan Stanley Group entity to a Discover Group entity in contemplation of the Distribution.

(b) Compliance With Employment Laws. On and after the Distribution Date (i) Morgan Stanley and the Morgan Stanley Subsidiaries shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the Morgan Stanley Business Employees and the treatment of the Former Morgan Stanley Employees in respect of their former employment with Morgan Stanley and its Affiliates and (ii) Discover and the Discover Subsidiaries shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the Discover Business Employees and the treatment of the Former Discover Employees in respect of their former employment with Morgan Stanley, Discover and their respective Affiliates. Without limiting the generality of the foregoing (i) Morgan Stanley and the Morgan Stanley Subsidiaries shall be responsible for administering compliance with the Morgan Stanley Group employee leave policies and the FMLA (and any similar applicable state law) as relates to Morgan Stanley Business Employees following the Distribution Date and (ii) Discover and the Discover Subsidiaries shall be responsible for administering compliance with the Discover Group employee leave policies and the FMLA (and any similar applicable state law) as relates to Discover Business Employees following the Distribution Date.

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Section 2.04 . Employee Records.

(a) Records Relating to Morgan Stanley Business Employees and Former Morgan Stanley Employees. All records and data in any form relating to Morgan Stanley Business Employees and Former Morgan Stanley Employees shall be the property of Morgan Stanley, except that data pertaining to such an employee and relating to any period that such employee was employed by Discover or a Discover Subsidiary shall be jointly owned by Morgan Stanley and Discover.

(b) Records Relating to Discover Business Employees and Former Discover Employees. All records and data in any form relating to Discover Business Employees and Former Discover Employees shall be the property of Discover, except that data pertaining to such an employee and relating to any period that such employee was employed by Morgan Stanley, Discover or any of their respective Subsidiaries prior to the Distribution shall be jointly owned by Morgan Stanley and Discover.

(c) Sharing of Records. The Parties shall provide each other such records and information only as necessary or appropriate to carry out their obligations under law, this Agreement or any other Distribution Document, or for the purposes of administering their respective employee benefit plans and policies. Records and data described in Section 2.04(b) available to Morgan Stanley, which are reasonably requested by Discover shall be provided to Discover as soon as reasonably practicable upon such request; provided Morgan Stanley shall use its reasonable best efforts to provide to Discover before the Distribution Date the records and data available to Morgan Stanley and listed on Schedule 2.04(c) hereof; and provided further that Discover shall reimburse Morgan Stanley for the reasonable costs and expenses associated with the provision of such records and data (including a reasonable allocable share of any compensation and overhead expense of personnel deployed to assist in the provision of such records and data, except to the extent that such cost is insignificant). Subject to applicable law, all information and records regarding employment and personnel matters of Discover Business Employees and Former Discover Employees shall be accessed, retained, held, used, copied and transmitted after the Distribution Date by Discover in accordance with all laws and policies relating to the collection, storage, retention, use, transmittal, disclosure and destruction of such records.

(d) Access to Records. To the extent consistent with this Agreement, access to such records after the Distribution Date will be provided to Morgan Stanley and Discover in accordance with the Distribution Agreement. In addition, notwithstanding anything to the contrary, Morgan Stanley shall retain reasonable access to those records necessary for Morgan Stanley’s continued administration of any plans or programs on behalf of Employees after the Distribution Date, provided that such access shall be limited to individuals who have a job-related

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need to access such records. Morgan Stanley shall also retain copies of all confidentiality and non-compete agreements with any Discover Business Employee or Former Discover Employee in which Morgan Stanley has a valid business interest.

(e) Maintenance of Records. With respect to retaining, destroying, transferring, sharing, copying and permitting access to all such information, Morgan Stanley and Discover shall each comply with all applicable laws, regulations and internal policies, and each Party shall indemnify and hold harmless the other Party from and against any and all liability, claims, actions, and damages that arise from a failure (by the indemnifying party or its agents) to so comply with all applicable laws, regulations and internal policies applicable to such information.

(f) No Access to Computer Systems or Files. Except as set forth in the Distribution Agreement or any Transition Services Agreement(s), no provision of this Agreement shall give either Party direct access to the computer systems or other files, records or databases of the other Party, unless specifically permitted by the owner of such systems, files, records or databases.

(g) Relation to Distribution Agreement. The provisions of this Section 2.04 shall be in addition to, and not in derogation of, the provisions of the Distribution Agreement governing Confidential Information and access to and use of employees, information and records, including Sections 5.01 and 5.05 of the Distribution Agreement.

Section 2.05. Morgan Stanley Executive Compensation Website.

(a) For a period of 12 months after the Distribution Date (the “ Services Term ”), Discover Business Employees and Former Discover Employees shall be afforded access to the Morgan Stanley Executive Compensation Website (the “ Website ”) in respect of equity awards relating to Discover shares. During such period, Discover shall not, and shall not allow any third party to:

(i) edit, modify, truncate, filter or change the order of the information contained on the Website including any Results Page or Destination Page, as such terms are defined below;

(ii) frame, obscure or modify the Website or any Results Page or Destination Page including (A) inserting any of Discover’s Brand Features, as such terms are defined below, on the Website or any Results Page or Destination Page, (B) displaying any other material or content in connection with the Website or any Results Page or Destination Page other than such material or content provided by Morgan Stanley in connection therewith or (C) providing a version of any Results Page or Destination Page different from the page an employee would access by going directly to the Results Page or Destination Page;

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(iii) display any information contained on the Website, including any Results Page or Destination Page, to any third parties other than the employee accessing such Website;

(iv) minimize, remove or otherwise inhibit the full and complete display of the Website or any Results Page or Destination Page;

(v) modify, adapt, translate, prepare derivative works from, decompile, reverse engineer, disassemble or otherwise attempt to derive source code from the Website or any other Morgan Stanley technology, content, data, routines, algorithms, methods, ideas, design, user interface techniques, software, materials, and documentation; or

(vi) remove, deface, obscure, or alter Morgan Stanley’s copyright notice, trademarks or other proprietary rights notices affixed to or displayed on the Website or any Results Page or Destination Page, or any other Morgan Stanley technology, software, materials and documentation;

(b) Morgan Stanley and Discover agree that, as between them (i) Morgan Stanley shall own all right, title and interest, including without limitation all Intellectual Property Rights, as such term is defined below, relating to the Website, including any Results Page or Destination Page (and any derivative works or enhancements thereof), and its Brand Features, including but not limited to, all software, technology, information, content, materials, guidelines and documentation provided in connection therewith; (ii) Discover shall not acquire any right, title, or interest therein, except for the limited use rights expressly set forth in this Section 2.05, and (iii) any rights not expressly granted herein are deemed withheld and reserved to Morgan Stanley.

(c) Subject to the terms and conditions of this Section 2.05, Morgan Stanley grants to Discover a limited, nonexclusive, nontransferable and nonsublicensable license during the Services Term to access the Website and display Morgan Stanley’s Brand Features in connection therewith, but in each case solely as provided in this Section 2.05.

(d) For purposes of this Section 2.05, the following terms shall have the meanings set forth below:

(i) “ Brand Features ” means the trade names, trademarks, service marks, logos, domain names, and other distinctive brand features of each party, respectively, as secured by such party from time to time.

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(ii) “ Destination Page ” means any web page on the Website which may be accessed by clicking on any link on the Website or any Results Page.

(iii) “ Intellectual Property Rights ” means any trademark, service mark, trade name, mask work, invention, patent, copyright, trade secret, know-how, software (including any goodwill associated therewith) or any other similar type of proprietary intellectual property right and all applications, renewals, extensions, restorations and re-instatements thereof, now or hereafter in force and effect worldwide.

(iv) “ Results Page ” means the web page on which the results of the employee’s query are displayed.

ARTICLE 3

E QUITY C OMPENSATION P LANS

Section 3.01 . Stock Options. Morgan Stanley and Discover shall take any and all action as shall be necessary or appropriate, so that each award of Morgan Stanley Stock Options issued and currently outstanding under any Morgan Stanley Equity Plan held at the time of the Distribution Date by a Discover Business Employee shall be adjusted, pursuant to the terms of the Morgan Stanley Equity Plans and the Morgan Stanley Stock Options, by converting such options into Discover Stock Options on the first trading day immediately following the Distribution. Such adjustment shall be effected by replacing such Morgan Stanley Stock Options with substitute Discover Stock Options in a manner such that on the first trading day immediately following the Distribution, (i) each such holder of a Morgan Stanley Stock Option will receive a number of substitute Discover Stock Options equal to the Conversion Ratio multiplied by the number of Morgan Stanley Stock Options held by such holder, and (ii) the per share option exercise price of each such Discover Stock Option will be determined by dividing the exercise price of the original Morgan Stanley Stock Option by the Conversion Ratio, and such adjustment shall be effected in a manner intended to satisfy requirements of Section 424 of the Code and avoid treatment of the Discover Stock Options as non-qualified deferred compensation subject to Section 409A of the Code. Such substituted Discover Stock Options will in the sole and absolute judgment of the Morgan Stanley CMDS Committee preserve the aggregate intrinsic value of the original Morgan Stanley Stock Options for which they are substituted and the ratio in the original option of the exercise price to the fair market value of the stock by adjusting the number of shares purchasable and the exercise price, based on a comparison of the Morgan Stanley Final Price and the Discover Initial Price. Fractional shares shall be adjusted or compensated by Morgan Stanley as appropriate in the sole discretion of the Morgan Stanley CMDS Committee. Such substitute Discover Stock Options will take into

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account all employment with both Morgan Stanley and Discover, and their respective Subsidiaries and Affiliates, for purposes of determining when the Discover Stock Options will become exercisable and/or vest.

Section 3.02 . Restricted Stock Units. Morgan Stanley and Discover shall take any and all action as shall be necessary or appropriate so that Discover Business Employees who hold Morgan Stanley RSUs will have each of their awards of Morgan Stanley RSUs adjusted pursuant to the terms of the Morgan Stanley Equity Plans and Morgan Stanley RSUs, by converting such Morgan Stanley RSUs into Discover RSUs on the first trading day immediately after the Distribution. Such adjustment shall be effected by replacing such Morgan Stanley RSUs with substitute Discover RSUs in a manner such that on the first trading day immediately following the Distribution each such holder of a Morgan Stanley RSU will receive a number of substituted Discover RSUs equal to the Conversion Ratio multiplied by the number of Morgan Stanley RSUs held by such holder. Such substituted Discover RSUs will take into account all employment with both Morgan Stanley and Discover, and their respective Subsidiaries and Affiliates, for purposes of determining when the Discover RSUs will vest and/or be paid. Such adjustment and replacement shall be conducted in a manner intended not to modify the treatment of the Discover RSUs under Section 409A of the Code from the treatment that would otherwise apply with respect to the corresponding Morgan Stanley RSU award. Fractional shares shall be adjusted or compensated by Morgan Stanley as appropriate in the sole discretion of the Morgan Stanley CMDS Committee.

Section 3.03 . Approval and Terms of Equity Awards. Morgan Stanley, acting as the sponsor of the Morgan Stanley Equity Plans and as sole shareholder of Discover shall, and shall cause Discover to, take such actions and give or obtain such approvals as are necessary or desirable to ensure that the issuance of the Discover awards provided for in this Article 3 shall comply with all applicable tax, securities law and stock exchange requirements. The parties intend that each Discover Stock Option and Discover RSU (each, a “ Discover Adjustment Award ”) shall be (i) granted pursuant to governing plan terms of a Discover Equity Plan which are substantially similar to the plan terms of the relevant Morgan Stanley Equity Plan under which the relevant predecessor award was granted and (ii) subject to the terms of the applicable award agreement under which the relevant predecessor award was granted (as such plan and award documents may have been duly amended from time to time), except to the extent that the terms of such Discover Adjustment Award shall be varied pursuant to the terms of this Agreement or by any action of Discover.

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Section 3.04 . Responsibility For Tax Withholding, Reporting, And Social Insurance Contributions .

(a) Morgan Stanley and Discover agree that, unless prohibited by applicable law, Discover shall be responsible for all tax withholding and reporting obligations and shall pay the employer’s share of any social insurance tax obligations that arise in connection with the grant, vesting, exercise, transfer or other settlement of the adjusted replacement awards held by Discover Business Employees. Morgan Stanley and Discover further agree that, unless prohibited by applicable law, Morgan Stanley shall be responsible for all tax withholding and reporting obligations and shall pay the employer’s share of any social insurance tax obligations that arise in connection with the grant, vesting, exercise, transfer or other settlement of the equity awards held by Morgan Stanley Business Employees and Former Morgan Stanley Business Employees.

(b) With respect to equity awards held by Former Discover Employees, Morgan Stanley and Discover further agree that Discover shall be responsible for all tax withholding and reporting obligations and shall pay the employer’s share of any social insurance tax obligations that arise in connection with the exercise, transfer or other settlement of such awards, and that Morgan Stanley shall transfer to Discover, on a timely basis after such event, to the extent that such event gives rise to tax withholding or reporting obligations for Discover, the amount in cash of any income tax withholding and employee’s share of social insurance tax obligations, as well as any information regarding such event that Discover is obligated to report to the IRS, arising in connection therewith. For a period of two years following the Distribution Date, Morgan Stanley shall act as the agent of Discover for purposes of withholding income and payroll taxes and reporting and remitting such amounts to the IRS arising from or in connection with the exercise or settlement of equity awards held by such Former Discover Business Employees in accordance with the terms of this Section 3.04(b) and the agreements referred to in paragraph (c) below; provided, however that Morgan Stanley’s role as agent hereunder shall not extend to services which Morgan Stanley reasonably determines cannot practicably be performed by it, in light of applicable legal requirements and procedures of federal and state tax authorities. Without limiting the generality of the foregoing, during the second year of such two year period, Morgan Stanley shall not file or be responsible for filing Forms 940 or 941 on behalf of Discover, but in accordance with this Section 3.04(b) and with paragraph (c) below shall cooperate with Discover as necessary to timely provide the information needed by Discover for such forms in connection with the exercise and settlement of such equity awards. In addition, Morgan Stanley will remit to Discover for distribution through Discover payroll channels, all dividend equivalent amounts owing to Former Discover Business Employees in respect of outstanding Morgan Stanley equity awards. The agency and other services to be provided by Morgan Stanley pursuant to this Section 3.04 will be deemed to be “Services” being provided by Morgan Stanley as the “Provider” within the

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meaning of such terms as set forth in the Transition Services Agreement by and between Morgan Stanley and Discover dated as of June 30, 2007 (the “ Transition Services Agreement ”), and such Services will be provided in accordance with and governed by the terms of such agreement.

(c) Morgan Stanley and Discover agree to enter into any necessary agreements, including but not limited to the Transition Services Agreement, regarding the subject matter of this Section 3.04 to enable them to fulfill their respective obligations hereunder, including but not limited to compliance with all applicable laws and regulations regarding the reporting, withholding or remitting of income and social insurance taxes.

Section 3.05 . No Change of Control. For the avoidance of doubt, the Distribution will not constitute a “change of ownership” or a “change in control” or a termination of the employment of any employee for purposes of Morgan Stanley equity awards which are outstanding as of the Distribution Date.

ARTICLE 4

E MPLOYEE S TOCK P URCHASE P LAN

Section 4.01 . ESPP. Discover Business Employees and Former Discover Employees shall be treated for purposes of the Morgan Stanley ESPP as terminated Morgan Stanley employees as of and after the Distribution Date and shall be entitled to receive benefits in accordance with the provisions of the ESPP; provided, however, that Morgan Stanley may take such actions as it deems appropriate with respect to the shares of Discover Common Stock received by participant accounts under the Morgan Stanley ESPP as a result of the Distribution, including, without limitation, modification of the plan and notification to plan participants to facilitate (i) the retention of such shares within the participant’s accounts under the plan in lieu of an automatic distribution of such shares to participants and/or (ii) an election by participants to receive distribution of such shares or direct the sale of such shares and the distribution of the proceeds of such sale to the participant; provided, further that Discover Business Employees shall not, as a result of any such changes, be treated any less favorably under the ESPP than similarly situated Morgan Stanley Business Employees. Discover Business Employees shall not contribute to the Morgan Stanley ESPP after the Distribution Date, unless they shall become employed by Morgan Stanley following the Distribution Date.

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ARTICLE 5

G ENERAL P RINCIPLES FOR A LLOCATION OF L IABILITIES

Section 5.01 . General Principle.

(a) Cessation of Participation in Morgan Stanley Pension and Welfare Benefit Plans and Non-ERISA U.S. Benefit Arrangements . Morgan Stanley and Discover shall take any and all action as shall be necessary or appropriate so that participation in Morgan Stanley Pension and Welfare Benefit Plans and Morgan Stanley Non-ERISA U.S. Benefit Arrangements by all Discover Business Employees and Former Discover Employees shall terminate in connection with the Distribution as and when provided under this Agreement (or if not specifically provided under this Agreement, as of the close of business on the Distribution Date) and Discover and each Discover Subsidiary shall cease to be a participating employer under the terms of such Morgan Stanley Pension and Welfare Benefit Plans and Morgan Stanley Non-ERISA U.S. Benefit Arrangements as of such time.

Except as otherwise agreed below, Discover shall have all liabilities and all assets relating to employee benefits for Discover Business Employees and Former Discover Employees and Morgan Stanley shall have all liabilities and all assets relating to employee benefits for Morgan Stanley Business Employees and Former Morgan Stanley Employees.

(b) Assumption of Certain Obligations by Discover Group . Except as otherwise provided in this Agreement, effective as of the close of business on the Distribution Date, Discover shall assume or continue the sponsorship of, and none of Morgan Stanley or any Morgan Stanley Subsidiary shall have any further liability for or under, the following agreements, obligations and liabilities, and Discover shall indemnify Morgan Stanley and the Morgan Stanley Subsidiaries, and the officers, directors, and employees of each, and hold them harmless with respect to such agreements, obligations or liabilities:

(i) Agreements entered into between Morgan Stanley, its Subsidiaries or Affiliates and Discover Business Employees and Former Discover Employees;

(ii) Agreements entered into between Morgan Stanley, its Subsidiaries or Affiliates and independent contractors providing services primarily to the Discover Business;

(iii) All collective bargaining agreements, collective agreements, trade union, or works council agreements entered into between Morgan Stanley, its Subsidiaries or Affiliates and any union, works council, or other body representing only Discover Business Employees and Former Discover Employees;

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(iv) All wages, salary, incentive compensation, commissions, bonuses and results share payable to Discover Business Employees and Former Discover Employees on or after the Distribution Date, without regard to when such wages, salary, incentive compensation, commissions, bonuses and results share are or may have been earned;

(v) All moving expenses and obligations related to relocation, repatriation, transfers, or similar items incurred by or owed to Discover Business Employees and Former Discover Employees;

(vi) All immigration-related, visa, work application, or similar rights, obligations and liabilities related to Discover Business Employees and Former Discover Employees; and

(vii) All liabilities and obligations whatsoever of the Discover Business with respect to claims made by or with respect to Discover Business Employees and Former Discover Employees or any other persons who at any time prior to the Distribution Date had employment duties primarily related to the Discover Business relating to any employee benefit plan, program or policy not otherwise retained or assumed by Morgan Stanley pursuant to this Agreement, including such liabilities relating to actions or omissions of or by Discover or any officer, director, employee or agent thereof prior to the Distribution Date.

Section 5.02 . Establishment of Discover Plans. Except as otherwise provided in this Agreement, sponsorship of Morgan Stanley benefit plans that cover solely Discover Business Employees and Former Discover Employees shall be transferred to Discover no later than the Distribution Date. Morgan Stanley benefit plans that cover Discover Business Employees and Former Discover Employees and that also cover Morgan Stanley Business Employees and/or Former Morgan Stanley Employees shall be split into two separate plans, one covering Discover Business Employees and Former Discover Employees and one covering Morgan Stanley Business Employees and/or Former Morgan Stanley Employees, and sponsorship of the plans covering Discover Business Employees and Former Discover Employees shall be transferred to Discover immediately prior to the Distribution Date.

Section 5.03 . Transfer of Assets and Liabilities. To the extent necessary to effectuate the foregoing, Discover and Morgan Stanley shall, in compliance with applicable law, transfer assets (if any) and liabilities of any such benefit plans to each other, including under the following plans:

(i) the MS Pension Plan;

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(ii) the MS 401(k) Plan;

(iii) the MS ESOP;

(iv) MS Excess Plan; and

(v) MS SERP.

Section 5.04 . Exceptions. Notwithstanding Section 5.02, Section 5.03, or any other provision of this Agreement to the contrary, the following plans in which both Morgan Stanley and Discover participate shall not be split:

(i) health, welfare and wellness plans described below in Section 8.01;

(ii) the MS ESPP; and

(iii) fringe benefit plans.

In addition, no transfer of assets or liabilities shall be made with respect to such plans.

Section 5.05 . Cooperation. Discover and Morgan Stanley and their respective Affiliates shall cooperate to share data necessary for each other to administer their respective benefit plans. Except as provided under any Transition Services Agreement(s) or in any secondment agreement that may be entered into in accordance with Section 2.01(d), neither Discover nor Morgan Stanley shall charge the other any fee for such cooperation. Except as set forth in the Distribution Agreement or any Transition Services Agreement(s), this provision shall not require Discover or Morgan Stanley to provide the other with direct access to such company’s databases or records. This provision shall continue in effect as long as necessary.

Section 5.06 . Service Credit.

(a) Service for Eligibility and Vesting. Except as otherwise provided in any other provision of this Agreement (i) for purposes of participation eligibility and vesting under the Discover Pension and Welfare Benefit Plans, Discover shall, and shall cause the Discover Subsidiaries to, give to each Discover Business Employee and Former Discover Employee service credit for any employment with Morgan Stanley or any Morgan Stanley Affiliate prior to the Distribution Date to the extent that such service is taken into account pursuant to the terms of the comparable Morgan Stanley plan and (ii) for purposes of participation eligibility and vesting under the Morgan Stanley Pension and Welfare Benefit

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Plans, Morgan Stanley shall, and shall cause the Morgan Stanley Subsidiaries to, give to each Morgan Stanley Business Employee and Former Morgan Stanley Employee service credit for any employment with Discover or any Discover Affiliate prior to the Distribution Date, except under the MS SERP and MS Excess Plan; and provided, further, that the foregoing vesting service credit under any plan subject to Section 401(a) of the Code will be limited to the minimum amount of service credit required to fully vest the employee under the relevant plan.

(b) Service for Benefit Purposes. Except as otherwise provided in any other provision of this Agreement (i) for purposes of benefit levels and accruals, post-retirement welfare benefit contribution rates and benefit commencement entitlements under the Discover Pension and Welfare Benefit Plans, Discover shall, and shall cause the Discover Subsidiaries to, give to each Discover Business Employee and Former Discover Employee service credit for any employment with Morgan Stanley or any Morgan Stanley Affiliate prior to the Distribution Date to the extent that such service is taken into account pursuant to the terms of the comparable Morgan Stanley plan and (ii) for purposes of benefit levels and accruals, post-retirement welfare benefit contribution rates and benefit commencement entitlements under the Morgan Stanley Pension and Welfare Benefit Plans, Morgan Stanley shall, and shall cause the Morgan Stanley Subsidiaries to, give to each Morgan Stanley Business Employee and Former Morgan Stanley Employee service credit for any employment with Discover or any Discover Affiliate prior to the Distribution Date (including under the MS Retiree Medical Plan and for determining the level of retirement credits under the post-July 1, 2007 retirement design under the MS Pension Plan).

(c) Evidence of Prior Service. Notwithstanding anything to the contrary, but subject to applicable law, upon reasonable request by one Party to the other Party, the first Party will provide to the other copies of any records available to the first Party to document such service, plan participation and membership and cooperate with the first Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to such Discover Business Employees and Former Discover Employees.

Section 5.07 . Plan Administration.

(a) Transition Services. Morgan Stanley will administer Discover’s benefit programs for a transitional period under the terms of the applicable Transition Services Agreement, which will include appropriate provisions relating to HIPAA.

(b) Administration. Discover shall, and shall cause the Discover Subsidiaries to, administer its benefit plans in a manner that does not jeopardize

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the tax favored status of the tax favored benefit plans maintained by Morgan Stanley and the Morgan Stanley Subsidiaries. Morgan Stanley shall, and shall cause the Morgan Stanley Subsidiaries to, administer its benefit plans in a manner that does not jeopardize the tax favored status of the tax favored benefit plans maintained by Discover and the Discover Subsidiaries.

(c) Participant Elections and Beneficiary Designations. All participant elections and beneficiary designations made under any Morgan Stanley plan prior to the date as of which assets or liabilities relating to that plan are transferred to Discover shall continue in effect under any plan maintained by Discover or any Discover Subsidiary to which liabilities are transferred pursuant to this Agreement until such time as the participant changes his or her elections or beneficiary designations in accordance with the procedures of the relevant plan, as the case may be.

ARTICLE 6

U.S. P ENSION P LAN S PIN - OFF

Section 6.01 . General Principle. Effective on or before the Distribution Date, Discover shall establish and adopt a defined benefit pension benefit plan and trust (the “ Discover Pension Plan ”) intended to be qualified under Code Section 401(a) and containing provisions that will provide to each Discover Business Employee and Former Discover Employee (and each alternate payee or beneficiary of such person) (the “ Discover Pension Beneficiaries ”) benefits identical to those accrued with respect to such person under the MS Pension Plan as of December 31, 2006 (the “ Pension Measurement Date ”). On or before the Distribution Date, Morgan Stanley shall (i) determine the Initial Transfer Amount (as defined below) and (ii) cause assets equal to the Initial Transfer Amount (adjusted as provided below) to be transferred to the trust under the Discover Pension Plan in the form described below (the “ Initial Transfer ”). As of the date of such transfer of the Initial Transfer Amount (the “ Initial Transfer Date ”), Discover shall commence making the required benefit payments under the terms of the Discover Pension Plan and shall assume all liabilities with respect to the payment of benefits previously accrued by the Discover Pension Beneficiaries under the MS Pension Plan. A Discover Business Employee shall not accrue benefits under the MS Pension Plan after the date on which such employee becomes eligible to participate under the Discover Pension Plan, unless such Discover Pension Beneficiary shall become employed by Morgan Stanley or a Morgan Stanley Subsidiary after such date. A Morgan Stanley Business Employee shall not accrue benefits under the Discover Pension Plan, unless such Morgan Stanley Business Employee shall become employed by Discover or a Discover Subsidiary. For purposes of the provisions in the MS Pension Plan bridging service for breaks in service of less than 12 months, a break in the

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service of an employee which includes a period of service as a Discover Business Employee or Former Discover Employee following the Distribution shall not be counted as a bridgeable break in service. Following the Initial Transfer Date (i) an enrolled actuary appointed by Morgan Stanley (the “ MS Actuary ”) shall determine the Final Pension Transfer Amount (as defined below) and (ii) a True-Up Adjustment shall be made with respect to the MS Pension Plan and the Discover Pension Plan, as provided below. The Parties shall use reasonable best efforts to cause the determination of the Final Pension Transfer Amount and the True-Up Adjustment to be completed as reasonably promptly as practicable, subject to the time frames established under Section 6.03, but in no event later than December 31, 2007. Before or promptly after the date hereof, Morgan Stanley and Discover shall file requests with the IRS for qualification determination letters under Code Section 401(a) with respect to the MS Pension Plan and the Discover Pension Plan and shall take any and all reasonable action, including the adoption of any amendments requested by the IRS, as shall be necessary to obtain such determination letters. The transfers hereunder shall occur prior to, but subject to the subsequent receipt of, favorable determination letters issued by the IRS with respect to the MS Pension Plan and Discover Pension Plan, copies of which shall be shared among Morgan Stanley and Discover promptly upon issuance.

Section 6.02 . Determination and Transfer of Initial Transfer Amount . On or before the Distribution Date, with the assistance of the MS Actuary, Morgan Stanley shall establish and communicate to Discover the amount equal to 95% of the amount carried on Morgan Stanley pension plan books as attributable to benefits accrued by Discover Pension Beneficiaries under the MS Pension Plan as of the Pension Measurement Date, adjusted for contributions, distributions, trust gains and losses, payments and other appropriate items as of the Initial Transfer Date, all as estimated in good faith by Morgan Stanley (the “ Initial Transfer Amount ”). Following the determination of the Initial Transfer Amount by Morgan Stanley, Morgan Stanley shall cause to be transferred from the trust under the MS Pension Plan to the trust under the Discover Pension Plan assets having an aggregate Value (as defined below) equal to the Initial Transfer Amount. Such assets shall be in the form of cash, securities and other property, determined in accordance with the provisions below.

Section 6.03 . Determination of the Final Pension Transfer Amount.

(a) Calculation of the MS Actuary. Following the Distribution Date, the MS Actuary shall determine the Final Pension Transfer Amount, which shall be equal to the amount required to be transferred from the MS Pension Plan to the Discover Pension Plan in respect of the assumption by the Discover Pension Plan of the benefit obligations of the MS Pension Plan for benefits accrued by the Discover Pension Beneficiaries as of the Pension Measurement Date plus any additional pension obligations in respect of benefits accrued by the Discover

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Pension Beneficiaries under the MS Pension Plan between the Pension Measurement Date and the Distribution Date, as determined in accordance with Section 414(l) of the Code and the regulations thereunder and the actuarial assumptions and methods set forth in Schedule 6.03 hereof, as appropriately adjusted to reflect the following amounts arising after the Pension Measurement Date and before the True-Up Adjustment: (A) any distributions and contributions made in respect of the Discover Pension Beneficiaries, (B) administrative expenses of the MS Pension Plan reasonably allocable to the Discover Pension Beneficiaries, (C) earnings realized by the MS Pension Plan, (D) the net gain or loss (realized and unrealized) of the MS Pension Plan and (E) other appropriate items (the “ Final Pension Transfer Amount ”). Morgan Stanley and Discover shall each cause the appropriate amount of assets to be contributed to the MS Pension Plan prior to the Distribution Date so that the MS Pension Plan is deemed to be fully funded as of December 31, 2006 and no ERISA Section 4044 allocation is required. Promptly upon determination of the Final Pension Transfer Amount, Morgan Stanley shall cause the MS Actuary to provide to Discover a written statement of the Final Pension Transfer Amount, a summary of the calculation of such amount (the “ Pension Statement ”) and a written statement that the sum of the Initial Transfer Amount and the Final Transfer Amount satisfies the requirements of Section 414(l) of the Code.

(b) Resolution of Differences. Morgan Stanley shall provide Discover with all information reasonably necessary to review the calculation of the Final Pension Transfer Amount in all material respects and to verify that such calculations have been performed in a manner consistent with the terms of this Agreement. The determination of the Final Pension Transfer Amount by the MS Actuary shall be final, conclusive and binding for all purposes under this Agreement, unless Discover provides to Morgan Stanley, within thirty (30) days after receipt of the Pension Statement, a written objection prepared by an enrolled actuary retained by Discover setting forth in detail a reasonable basis for the conclusion that the Final Pension Transfer Amount set forth in the Pension Statement is understated by an amount in excess of 5%. Upon receipt of such objection, Morgan Stanley and Discover shall make a good faith attempt to resolve their dispute as to the Final Pension Transfer Amount. Should such dispute remain unresolved for more than thirty (30) days, Morgan Stanley and Discover shall promptly select and appoint a third enrolled actuary who is mutually satisfactory to both Parties. The third actuary shall recalculate the Final Pension Transfer Amount and if such recalculated amount exceeds the Final Pension Transfer Amount set forth in the Pension Statement by more than 5%, then such recalculated amount shall serve as the Final Pension Transfer Amount for all purposes under this Agreement. If such recalculated amount does not exceed the Final Pension Transfer Amount set forth in the Pension Statement by more than 5%, then for all purposes under this Agreement the Final Pension Transfer Amount shall be the Final Pension Transfer Amount as set forth in the

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Pension Statement. The recalculation of such third party actuary shall be completed within thirty (30) days of the retention of such third party actuary and shall be conclusive as to any dispute with respect to the Final Pension Transfer Amount, except as set forth in Section 6.06 below. The cost of such third party actuary shall be divided equally between Morgan Stanley and Discover. Each Party shall be responsible for the cost of its own actuary.

Section 6.04 . True-Up Adjustment. The following transfer shall be made promptly after the date that the Final Pension Transfer Amount is determined as set forth above: (A) if the Final Pension Transfer Amount exceeds the Initial Transfer Amount, Morgan Stanley shall promptly cause to be transferred from the MS Pension Plan trust to the Discover Pension Plan trust assets having a Value equal to such excess and (B) if the Initial Transfer Amount exceeds the Final Pension Transfer Amount, Discover shall promptly cause to be transferred from the Discover Pension Plan trust to the MS Pension Plan trust assets having a Value equal to such excess.

Section 6.05 . Form and Selection of Assets to be Transferred. The assets to be transferred in the Initial Transfer and the True-Up Adjustment Assets will be transferred in-kind or in cash pro rata from each investment manager under the transferring plan in a manner that represents, as closely as commercially practical, a pro rata portion of each asset and position held by the manager as of the date of such transfer, except that reasonable adjustments shall be made where Morgan Stanley determines such transfers cannot reasonably be made by the MS Pension Plan due to investment manager account minimums or where other considerations prevent such pro rata transfers or render such pro rata transfers impractical. Notwithstanding the foregoing, in respect of long duration fixed income investments to be transferred from the MS Pension Plan to the Discover Pension Plan (i) a combination of cash and in-kind fixed income assets will be transferred from the MS Pension Plan to the Discover Pension Plan, (ii) such in-kind fixed income assets shall be transferred under accounts managed by State Street Global Advisors (no assets shall be transferred from other fixed income managers under the MS Pension Plan) and (iii) the Discover Pension Plan shall be entitled to an added amount equal to 50% of the investment transaction expenses associated with the initial investment of the cash transferred in respect of the fixed income component. For purposes of the Agreement, the “ Value ” of all pension assets shall be the value of such assets as determined in good faith by Morgan Stanley based on all relevant information known to Morgan Stanley at the time of such determination, including the most recent account statements or schedules of asset values provided to Morgan Stanley by any service providers maintaining or overseeing any such assets or any investment vehicles which represent or hold the relevant plan assets. Morgan Stanley shall select the assets to be transferred and provide a schedule of such assets to Discover 14 days prior to the transfer of such assets. Discover shall communicate to Morgan Stanley any objection to the schedule of the assets to be transferred promptly, and upon receipt by Morgan

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Stanley of such objection, Morgan Stanley and Discover shall make a good faith attempt to resolve their dispute as to the assets to be transferred within the period remaining prior to the transfer of the assets. Should such dispute remain unresolved upon the asset transfer date, the assets shall be transferred in accordance with the schedule provided by Morgan Stanley. Any assets that are liquidated prior to transfer shall be reduced by the asset liquidation expenses actually incurred.

Section 6.06. Adjustment Payment for Data Errors . If, after the completion of the True-Up Adjustment, critical data used in the determination of the Final Pension Transfer Amount, the True-Up Adjustment or the Value of assets for purposes of the transfers under this Article 6 are determined to have been erroneous, the Final Pension Transfer Amount and True-Up Adjustment shall be recalculated using corrected data (but otherwise applying the same methodologies used to determine the Final Pension Transfer Amount) and upon completion of the recalculation Discover shall pay to Morgan Stanley, or Morgan Stanley shall pay to Discover, as the case may be, an amount necessary to reflect the corrected data; provided that no such correction payment shall be made unless the aggregate of all such correction adjustments is greater than 1% of the Final Pension Transfer Amount used for purposes of the original True-Up Adjustment. Any payment under this Section 6.06 shall be made by wire transfer in readily available funds. Notwithstanding the foregoing provisions of this Section 6.06, no payment or corrective adjustment shall be made by either Party with respect to an error unless the Party seeking such payment or adjustment has provided written notice identifying the specific error to the other Party prior to June 30, 2008.

ARTICLE 7

U.S. 401( K ) P LAN AND ESOP

Section 7.01 . General Principle. Effective on or before the Distribution Date, Discover shall establish and adopt a qualified employee cash or deferred arrangement under Code Section 401(k) (the “ Discover 401(k) Plan ”) containing a Discover common stock fund intended to be an employee stock ownership plan and a Morgan Stanley common stock fund, and intended to be qualified under Code Section 401(a) and containing provisions that will provide benefits for each Discover Business Employee and Former Discover Employee (and each beneficiary and alternate payee of such person) (the “ Discover DC Plan Beneficiaries ”) with equivalent benefit levels and forms of distribution to those in effect for the Discover DC Plan Beneficiaries as of the date of transfer of assets and liabilities with respect to such plans (as described below). Before or as soon as practicable after the Distribution Date, the assets and liabilities relating to the Discover DC Plan Beneficiaries under the MS 401(k) Plan and the MS ESOP shall be transferred to the Discover 401(k) Plan. Discover Business Employees

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shall not make or receive additional contributions under the MS 401(k) Plan and the MS ESOP after the effective date of the Discover 401(k) Plan, unless such Discover Business Employee shall become employed by Morgan Stanley or a Morgan Stanley Subsidiary after such date. A Morgan Stanley Business Employee shall not participate in the Discover 401(k) Plan after the effective date of the Discover 401(k) Plan, unless such Morgan Stanley Business Employee shall become employed by Discover or a Discover Subsidiary after such date.

Section 7.02 . Transfer of Accounts. Effective before or as soon as practical following the Distribution Date, but in no event later than six months following the Distribution Date, Morgan Stanley shall cause to be transferred from trusts under the MS 401(k) Plan and the MS ESOP to the trust under the Discover 401(k) Plan the aggregate amount that is credited to the accounts of the Discover DC Plan Beneficiaries (disregarding any participant loans from the plans) as of the date of transfer, but not less than or more than permitted by law, as determined by Morgan Stanley. The transfer shall be an in-kind transfer, subject to fund substitutions agreed between the relevant plan representatives and any other substitutions made by Morgan Stanley subject to the reasonable consent of the trustee of the Discover 401(k) Plan and shall include the transfer of the aggregate assets held in the accounts relating to each Discover DC Plan Beneficiary under the MS 401(k) Plan and MS ESOP and any participant loan notes held under such plans. Any assets that are liquidated prior to transfer shall be reduced by the asset liquidation expenses, such as commissions or early withdrawal penalties, actually incurred. Morgan Stanley shall cause the Discover 401(k) Plan to allocate the portion of any forfeiture account under the MS 401(k) Plan that relates to forfeitures by Former Discover Employees consistent with Morgan Stanley’s past practice regarding allocation of forfeitures under the MS 401(k) Plan. Before or promptly after the date hereof, Morgan Stanley and Discover shall file requests with the IRS for qualification determination letters under Code Section 401(a) and 401(k) (as applicable) with respect to the MS 401(k) Plan, MS ESOP and Discover 401(k) Plan and shall take any and all reasonable actions, including the adoption of amendments requested by the IRS, as shall be necessary to obtain such determination letters. The transfers under this Section 7.02 shall occur prior to, but subject to the subsequent receipt of favorable determination letters issued by the IRS with respect to the MS 401(k) Plan, MS ESOP, Discover 401(k) Plan, copies of which shall be shared among Morgan Stanley and Discover promptly upon issuance.

Section 7.03 . Funding of 2007 Matching Contribution. Discover shall fund and allocate the full amount of any 2007 matching contribution accrued under the terms of the MS 401(k) Plan and MS ESOP to eligible Discover DC Plan Beneficiaries under the Discover 401(k) Plan within the time permitted by law (determined based on the terms of the MS 401(k) Plan and MS ESOP immediately prior to the transfer to the Discover 401(k) Plan as if the transfer to the Discover 401(k) Plan did not occur, but paid and contributed by Discover to the Discover 401(k) Plan).

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Section 7.04 . Continuing Obligations Regarding Proxy Statement, Tender Offers and Similar Rights and Restrictions. Discover shall provide all proxy materials to the trustee of the MS 401(k) Plan and MS ESOP to the extent necessary to pass through the voting rights on any Discover shares held in the MS 401(k) Plan and MS ESOP. Morgan Stanley shall provide all proxy materials to participants in the Discover 401(k) Plan to the extent necessary to pass through the voting rights on any Morgan Stanley shares held in the Discover 401(k) Plan.

ARTICLE 8

U.S. W ELFARE B ENEFIT P LANS

Section 8.01 . General Principle and Exceptions .

(a) General Principle . Except as provided below and in Section 8.02, on or about May 31, 2007, liabilities relating to Discover Business Employees and Former Discover Employees shall be transferred to newly established Discover welfare benefit plans that shall contain the same benefit provisions as in effect for Discover Business Employees and Former Discover Employees immediately prior to such date, and Discover Business Employees and Former Discover Employees shall cease to participate in the Morgan Stanley welfare benefit plans. No assets shall be transferred on account of any such plans. Welfare benefit plans include health, welfare, and wellness benefits plans (including, medical, dental, prescription drug and vision benefits, life insurance, accidental death and disability insurance, business travel accident insurance, disability (STD and LTD), long term care, flexible spending accounts, severance, Employee Assistance Plan, wellness and similar types of plans). Discover Business Employees and Former Discover Employees shall not participate in Morgan Stanley welfare benefit plans following the effective date of the Discover plans described in this section, unless they shall become employed by Morgan Stanley after such date. Morgan Stanley Business Employees and Former Morgan Stanley Employees shall not participate in any Discover welfare benefit plans following the effective date of such plans, unless they shall become employed by Discover after such date.

(b) Exceptions . The following provisions shall supersede the provisions of Section 8.01(a) to the extent that the provisions of Section 8.01(a) are inconsistent with the following provisions:

(i) Discover Business Employees and Former Discover Employees shall continue to be covered under the Mayo Clinic and Medical Decision Support wellness plans (except Harris Health Trends, which coverage shall terminate on or about May 31, 2007);

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(ii) Discover Business Employees and Former Discover Employees who participate in the Winged Keel portion of the Morgan Stanley LTD plan as of May 31, 2007 shall be permitted to continue those policies and maintain them on an individual basis;

(iii) Discover Business Employees and Former Discover Employees shall cease to be covered under the Morgan Stanley executive disability and life insurance plans on or about May 31, 2007, except that employees already contributing to an executive disability or life insurance policy shall be permitted to continue such policy on an individual basis;

(iv) Discover Business Employees and Former Discover Employees shall cease to be covered under the Morgan Stanley severance plan as of the Distribution Date;

(v) Morgan Stanley Business Employees and Former Morgan Stanley Employees shall cease to be covered under the Morgan Stanley SelectHealth Medical Option no later than the Distribution Date, the CMO contract for which shall be transferred to Discover effective no later than the Distribution Date;

(vi) Discover Business Employees and Former Discover Employees shall cease to be covered under the Morgan Stanley Kaiser Medical Options as of the Distribution Date; and

(vii) Discover Business Employees and Former Discover Employees shall cease to be covered under the Morgan Stanley VEBA as of the Distribution Date.

Section 8.02 . Establishment of Discover Plans.

(a) General Rule . Subject to the provisions of 8.01 and this 8.02, Discover Business Employees and Former Discover Employees shall cease to participate in the Morgan Stanley welfare benefit plans on or about May 31, 2007. Discover shall indemnify Morgan Stanley for any liability relating to Discover Business Employees or Former Discover Employees on account of any such plan.

(b) Treatment of Claims Incurred . Morgan Stanley shall retain the liability for payment of all covered claims (including medical, dental, life insurance and long-term disability) and expenses incurred by any Discover Business Employee and beneficiaries thereof under the Morgan Stanley Welfare Plans and Morgan Stanley Non-ERISA U.S. Benefit Arrangements, and Discover shall not assume nor shall it be responsible for any liability with respect to any such claims or expenses. Discover shall have the liability only for covered claims incurred under the terms of the Discover Welfare Plans and Discover Non-ERISA U.S. Benefit Arrangements.

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(c) Credit for Deductibles and Other Limits . With respect to each Discover Business Employee and Former Discover Employee, and each covered dependent, beneficiary, or other related party of such individual (the “ Discover Welfare Plan Participants ”), the Discover welfare benefit plans will give credit in the year of the Distribution Date for any amount paid under the comparable type Morgan Stanley plan by such Discover Welfare Plan Participant in the year of the Distribution Date toward deductibles, out-of-pocket maximum, or other, similar limitations to the extent such amounts are taken into account under the comparable type Morgan Stanley plan. For purposes of any life-time maximum out-of-pocket limit on expenses paid by a covered participant, the Discover welfare plans will recognize any expenses incurred by a Discover Welfare Plan Participant prior to the Distribution to the same extent such expenses would be recognized in respect of an active plan participant under the comparable type Morgan Stanley plan.

(d) COBRA . Effective as of the date of cessation of participation in the Morgan Stanley welfare benefit plans by the Discover Business Employees and Former Discover Employees (as provided above), Discover shall assume and satisfy all requirements under COBRA with respect to all Discover Business Employees and Former Discover Employees and their qualified beneficiaries, including for individuals who are already receiving benefits as of such date under COBRA.

(e) Disabled Persons. The Parties intend that any Employee who has, prior to the Distribution Date, become eligible to receive any long-term disability benefits pursuant to any third-party insurance policy applicable under any welfare benefit plan shall continue to be eligible to receive such benefits in accordance with the terms of such plan and policy.

Section 8.03 . No Transfer of Assets . No assets held in the Morgan Stanley VEBA, the Morgan Stanley short term disability trust or any other trust, account or other funding vehicle shall be transferred between or on account of the Discover and Morgan Stanley welfare benefit plans, unless any such trust, account or funding vehicle shall have material net assets as of the Distribution Date, in which case the Parties shall negotiate in good faith to determine an equitable allocation of such assets.

Section 8.04 . Insurance Contracts . To the extent any Morgan Stanley welfare benefit plan is funded through the purchase of an insurance contract, Morgan Stanley and Discover will cooperate and use their reasonable best efforts to “clone” such insurance contracts for Discover and to maintain any pricing discounts or other preferential terms for both Morgan Stanley and Discover

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through the end of the term of the applicable Transition Services Agreement. Morgan Stanley shall not be liable for failure to obtain such pricing discounts or other preferential terms for Discover. The cost of “cloning”, including any increases in premiums, charges or administrative fees relating to Discover Business Employees and Former Discover Employees shall be the obligation of Discover.

Section 8.05. Third Party Vendors . Except as provided below, to the extent any Morgan Stanley welfare benefit plan is administered by a third-party vendor, Morgan Stanley and Discover will cooperate and use their best efforts to “clone” any contract with such third-party vendor for Discover and to maintain any pricing discounts or other preferential terms for both Morgan Stanley and Discover. Morgan Stanley shall not be liable for failure to obtain such pricing discounts or other preferential terms for Discover. The cost of “cloning”, including any increases in premiums, charges or administrative fees relating to Discover Business Employees and Former Discover Employees shall be the obligation of Discover. Notwithstanding the foregoing, the record keeping and administration contract between Morgan Stanley and ACS and the consulting agreements between Morgan Stanley and Mercer HR Consulting shall not be cloned.

ARTICLE 9

F RINGE B ENEFIT A ND O THER U.S. P LANS A ND P ROGRAMS

Section 9.01. General Principle and Exceptions .

(a) General Principle . Except as otherwise provided under this Agreement, effective on or about May 31, 2007, Discover Business Employees and Former Discover Employees shall not be eligible to participate in any of the following Morgan Stanley fringe benefit plans:

(i) the Morgan Stanley baby spoon program;

(ii) the Morgan Stanley service award program;

(iii) the Morgan Stanley adoption assistance program;

(iv) the Morgan Stanley commuter benefits plan;

(v) the Morgan Stanley legal assistance plan; and

(vi) any other plan, policy or arrangement of Morgan Stanley or a Morgan Stanley Subsidiary providing fringe benefits to employees or former employees.

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Section 9.02. Transition of Coverage Under Plans and Programs .

(a) Commuter Benefit Plan . Effective as of June 1, 2007, Discover shall adopt a commuter benefits plan for Discover Business Employees with substantially the same terms as in effect as of May 31, 2007 under the Morgan Stanley commuter benefits plan. No Morgan Stanley commuter benefits will paid to Discover Business Employees in respect of commutation occurring after the Distribution Date.

(b) Legal Assistance Plan . Legal assistance benefits will not be provided to Discover Business Employees under the Morgan Stanley legal assistance program in respect of legal services after the Distribution Date; provided, however, that if a Discover Business Employee has begun a representation under the Morgan Stanley legal assistance program on or prior to May 31, 2007, such representation shall be covered under the Morgan Stanley legal assistance program through December 31, 2007 in accordance with the terms of that program.

(c) Service Award Program . Discover Business Employees who have reached their milestone anniversary on or prior to the date of the Distribution Date shall be entitled to receive a gift under the Morgan Stanley Service Award Program. Discover shall reimburse Morgan Stanley for the cost of providing such benefit in an amount determined consistently with the cost allocation method in effect prior to the Distribution Date. Discover Business Employees who reach their milestone anniversary after the Distribution Date shall not be eligible to receive a gift under the Morgan Stanley Service Award Program.

(d) Adoption Assistance Program . Discover Business Employees who have completed an adoption that is eligible under the Morgan Stanley Adoption Assistance Program on or prior to the Distribution Date shall be entitled to benefits under that program. Discover shall reimburse Morgan Stanley for the cost of providing such benefits in an amount determined consistently with the cost allocation method in effect prior to the Distribution Date. Discover Business Employees who complete an adoption after the Distribution Date shall not be eligible to receive benefits under the Morgan Stanley adoption assistance program.

(e) Baby Spoon Program . Discover Business Employees who are employed as of Distribution Date and have given birth to a baby or completed an eligible adoption prior to the Distribution Date shall be entitled to receive a baby spoon under the Morgan Stanley baby spoon program. Discover shall reimburse Morgan Stanley for the cost of providing such benefit in an amount determined consistently with the cost allocation method in effect prior to the Distribution Date. Discover Business Employees who give birth or complete adoption of a child after the Distribution Date shall not be eligible to receive a baby spoon under the Morgan Stanley baby spoon program.

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ARTICLE 10

W ORKERS C OMPENSATION A ND U NEMPLOYMENT C OMPENSATION

Section 10.01 . Allocation of Workers Compensation and Unemployment Claims. Discover shall have and assume the obligations for all claims and liabilities relating to workers compensation and unemployment compensation benefits for all Discover Business Employees and Former Discover Employees. Morgan Stanley shall have and assume the obligations for all claims and liabilities relating to workers compensation and unemployment compensation benefits for all Morgan Stanley Business Employees and Former Morgan Stanley Employees. Discover and Morgan Stanley shall make reasonable efforts to provide that workers compensation and unemployment insurance costs are not adversely affected for either of them by reason of the Distribution.

ARTICLE 11

C OMPENSATION M ATTERS AND G ENERAL B ENEFIT AND E MPLOYEE M ATTERS

Section 11.01 . Restrictive Covenants in Employment and Other Agreements. To the fullest extent permitted by the agreements and applicable law, Morgan Stanley hereby assigns, for and on behalf of itself and its Affiliates, to Discover or its appropriate Affiliate as designated by Discover all agreements containing restrictive covenants (including but not limited to confidentiality and non-competition provisions) between Morgan Stanley (or a Morgan Stanley Affiliate) and a Discover Business Employee, effective as of the Distribution Date. To the extent that assignment of such agreements is not permitted, following the Distribution, Discover and its Subsidiaries and Affiliates shall be considered to be successors to Morgan Stanley and its Subsidiaries and Affiliates for purposes of, and third-party beneficiaries with respect to, all agreements containing restrictive covenants (including but not limited to confidentiality and non-competition provisions) between Morgan Stanley (or a Morgan Stanley Subsidiary or Affiliate) and Discover Business Employees and between Morgan Stanley (or a Morgan Stanley Subsidiary or Affiliate) and Morgan Stanley Employees whom Discover reasonably determines have substantial knowledge of the Discover Business, such that each of Morgan Stanley, Discover and their respective Subsidiaries and Affiliates shall all enjoy the rights and benefits under such agreements (including, without limitation, rights and benefits as a third-party beneficiary), with respect to such Party’s and its respective Subsidiaries’ and Affiliates’ business operations; provided , however , that (a) in no event shall Morgan Stanley be permitted to enforce the restrictive covenant agreements against Discover Business Employees for action taken in their capacity as employees of Discover or its Subsidiaries, and (b) in no event shall Discover be permitted to enforce the restrictive covenants agreements of Morgan Stanley Business Employees for action taken in their capacity as employees of Morgan Stanley or its Subsidiaries.

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Section 11.02 . Non-Solicitation of Employees. For a period of eighteen months following the Distribution (i) neither Discover nor any Discover Subsidiary shall employ or knowingly solicit for employment any individual who is, or was within the six-month period prior to the solicitation, an employee of Morgan Stanley or any Morgan Stanley Affiliate, without the written consent of Morgan Stanley and (ii) neither Morgan Stanley nor any Morgan Stanley Subsidiary shall employ or knowingly solicit for employment any individual who is, or was within the six-month period prior to the solicitation, an employee of Discover or any Discover Affiliate, without the written consent of Discover. The foregoing shall not apply (a) to any individual whose employment was involuntarily terminated by the relevant former employer or (b) with respect to general solicitations made through print, media or internet advertisements that are not directed or focused on such individuals and any resulting employment.

Section 11.03 . Severance. (a) Effective as of the Distribution Date, Discover may establish one or more severance plans and policies with respect to Discover Business Employees as Discover deems appropriate in its discretion. Morgan Stanley shall have no liability or obligation under any Morgan Stanley severance plan or policy with respect to Discover Business Employees who remain employed or whose employment terminates on or after the Distribution Date.

(b) Following the Distribution Date, Morgan Stanley shall continue to be responsible for administering all payments and benefits under the applicable Morgan Stanley severance policies or any termination agreements with Former Discover Employees whose employment has terminated prior to the Distribution Date for an eligible reason under such policies or in accordance with such agreements; provided that Discover shall reimburse, and shall indemnify Morgan Stanley, and its Subsidiaries and Affiliates, for any amounts payable to Former Discover Employees under such policies, and Discover shall be charged for the continuation of welfare plan benefits to such Former Discover Employees and their dependents on and after the Distribution Date on terms consistent with the methodology specified in the appropriate costs and reimbursement provisions of the applicable Transition Services Agreement.

(c) Morgan Stanley agrees to indemnify Discover against any loss or liability resulting from Morgan Stanley’s gross negligence, willful misconduct or bad faith in the administration of its severance policies or any termination agreement with a Discover Business Employee.

(d) It is not intended that any Discover Business Employee will be eligible for termination or severance payments or benefits from Morgan Stanley or its Subsidiaries or Affiliates as a result of the transfer or change of employment from Morgan Stanley to Discover or their respective Subsidiaries or Affiliates. Notwithstanding the preceding sentence, in the event that any such termination or

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severance payments or benefits become payable on account of such transfer, change or the refusal of a Discover Business Employee to accept employment with Discover, Discover shall indemnify Morgan Stanley, and its Subsidiaries and Affiliates, for the amount of such termination or severance payments or benefits.

Section 11.04 . Accrued Vacation Days Off. Discover shall recognize and assume all liability for all vacation, holiday, sick leave, flex days, personal days and Paid-Time Off, including banked time, accrued by Discover Business Employees as of the Distribution Date and Discover shall credit each Discover Business Employee with such accrual.

Section 11.05 . Leaves of Absence. Discover will continue to apply the leave of absence policies maintained by Morgan Stanley to inactive Discover Business Employees who are on an approved leave of absence as of the Distribution Date. Leaves of absence taken by Discover Business Employees prior to the Distribution Date shall be deemed to have been taken as employees of Discover.

Section 11.06 . Morgan Stanley Assets. Except as otherwise set forth herein, Morgan Stanley shall retain all reserves, bank accounts, trust funds or other balances maintained with respect to Morgan Stanley Non-ERISA U.S. Benefit Arrangements.

Section 11.07 . Morgan Stanley Deferred Compensation Plans. (a) For purposes of this Section 11.07, “ Discover Deferred Compensation Accounts ” shall mean, with respect to all Morgan Stanley non-qualified cash-based deferred compensation plans, the account balances under all such plans, as of June 30, 2007, of each Discover Business Employee and each Former Discover Employee who is a participant in any such plan. Morgan Stanley shall cause the Discover Deferred Compensation Accounts under any of such plans to be fully vested, for purposes of the respective plans, immediately prior to the Distribution Date. The aggregate employer liability in respect of the Discover Deferred Compensation Accounts shall be transferred to and assumed by Discover, except for any portion thereof that was credited to such account in respect of a period during which such employee was providing services to Morgan Stanley or to a Morgan Stanley affiliate other than Discover and its Subsidiaries.

(b) Beginning on the Distribution Date and continuing through the date of payment described herein, the return credited to the Discover Deferred Compensation Accounts shall be based exclusively on LIBOR, as determined by Morgan Stanley, reset monthly. On January 15, 2008, or as soon as administratively practicable thereafter, Morgan Stanley and Discover, as applicable, shall remit such account balances to the respective Discover Business Employees and Former Discover Employees.

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ARTICLE 12

G ENERAL P ROVISIONS

Section 12.01 . Preservation of Rights to Amend. The rights of Morgan Stanley or Discover to amend or terminate any plan, program, or policy referred to herein shall not be limited in any way by this Agreement.

Section 12.02 . Confidentiality. Each Party agrees that the specific terms and conditions of this Agreement and any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith are confidential and are subject to the terms of the confidentiality provisions set forth in the Distribution Agreement.

Section 12.03 . Administrative Complaints/Litigation. Except as otherwise provided in this Agreement, as of and after the Distribution Date, Discover shall assume, and be solely liable for, the handling, administration, investigation and defense of actions, including, without limitation, ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights and unemployment compensation claims, asserted at any time against Morgan Stanley, or Discover or their respective Affiliates by any Discover Business Employee or Former Discover Employee (including any dependent or beneficiary of any such Employee) or any other person, to the extent such actions or claims arise out of or relate to employment or the provision of services (whether as an employee, contractor, consultant, or otherwise) to or with the Discover Business. To the extent that any legal action relates to a putative or certified class of plaintiffs, which includes both Morgan Stanley Business Employees (or Former Morgan Stanley Employees) and Discover Business Employees (or Former Discover Employees) and such action involves employment or benefit plan related claims, reasonable costs and expenses incurred by the Parties in responding to such legal action shall be allocated among the Parties equitably in proportion to a reasonable assessment of the relative proportion of Morgan Stanley Business Employees (or Former Morgan Stanley Employees) and Discover Business Employees (or Former Discover Employees) included in or represented by the putative or certified plaintiff class. The procedures contained in the indemnification and related litigation cooperation provisions of the Distribution Agreement shall apply with respect to each Party’s indemnification obligations under this Section 12.03.

Section 12.04 . Reimbursement and Indemnification. The Parties hereto agree to reimburse each other, within 30 days of receipt from the other Party of reasonable verification, for all costs and expenses which each may incur on behalf of the other as a result of any of the Welfare Plans, Pension Plans and Non-ERISA U.S. Benefit Arrangements and, as contemplated by Section 11.03, any termination or severance payments or benefits. All liabilities retained, assumed or indemnified against by Discover pursuant to this Agreement, and all liabilities

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retained, assumed or indemnified against by Morgan Stanley pursuant to this Agreement, shall in each case be subject to the indemnification provisions of the Distribution Agreement. Notwithstanding anything to the contrary, no provision of this Agreement shall require Discover or any Discover Subsidiary to pay or reimburse to Morgan Stanley or any Morgan Stanley Affiliate any benefit-related cost item that Discover or any Discover Subsidiary has previously paid or reimbursed to Morgan Stanley or any Morgan Stanley Affiliate.

Section 12.05. Costs of Compliance with Agreement. Except as otherwise provided in this Agreement or any other Distribution Document, each Party shall pay its own expenses in fulfilling its obligations under this Agreement.

ARTICLE 13

M ISCELLANEOUS

Section 13.01 . Notices. Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, or mail, to the following addresses:

Morgan Stanley

1585 Broadway

New York, NY 10036

Attn: Martin M. Cohen, Director of Company Law

Facsimile: (212) 507-3334

with a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY 10017

Attn: Paul Kingsley, Esq./Jeffrey Small, Esq.

Facsimile: (212) 450-3277/(212) 450-3500

Discover Financial Services

2500 Lake Cook Road

Riverwoods, IL 60015

Attn: General Counsel—Contracts

Facsimile: (224) 405-4584

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or to such other addresses or telecopy numbers as may be specified by like notice to the other Party. All such notices, requests and other communications shall be deemed given, (a) when delivered in person or by courier or a courier services, (b) if sent by facsimile transmission (receipt confirmed) on a Business Day prior to 5 p.m. in the place of receipt, on the date of transmission (or, if sent after 5 p.m., on the following Business Day) or (c) if mailed by certified mail (return receipt requested), on the date specified on the return receipt.

Section 13.02 . Amendments; No Waivers . From and after the Distribution, any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Morgan Stanley and Discover, or in the case of a waiver, by the Party against whom the waiver is to be effective.

(a) No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 13.03 . Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns; provided that neither Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other Party hereto. If any Party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such Party shall assume all of the obligations of such Party under the Distribution Documents.

Section 13.04 . Governing Law . This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to the conflicts of laws rules thereof.

Section 13.05 . Counterparts; Effectiveness; Third-Party Beneficiaries . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall

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have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication). Neither this Agreement nor any provision hereof is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and permitted assigns. No Employee or other current or former employee of Morgan Stanley or Discover or any Subsidiary or Affiliate of either (or his/her spouse, dependent or beneficiary), or any other person not a party to this Agreement, shall be entitled to assert any claim hereunder. Without limiting the foregoing, the provisions of this Agreement are not intended to, nor shall they confer upon any Person other than the Parties hereto any right or expectation as to the adoption, amendment, maintenance, continuation, operation or funding of any employee benefit plan, policy or arrangement.

Section 13.06 . Entire Agreement . This Agreement and the other Distribution Documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof. No representation, inducement, promise, understanding, condition or warranty not set forth herein or in the other Distribution Documents has been made or relied upon by any party hereto. Regardless of anything else contained herein, the parties do not intend for this Agreement to amend any employee benefit plans or arrangements.

Section 13.07 . Jurisdiction . Any Action seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in the United States District Court for the Southern District of New York or any other New York State court sitting in New York County, and each of the Parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that service of process on such Party as provided in Section 13.01 shall be deemed effective service of process on such Party.

Section 13.08 . WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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Section 13.09. Severability . If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a declaration, the Parties shall modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

Section 13.10. Survival . All covenants and agreements of the Parties contained in this Agreement shall survive the Distribution Date indefinitely, unless a specific survival or other applicable period is expressly set forth herein.

Section 13.11. Captions . The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

Section 13.12. Specific Performance . Each Party to this Agreement acknowledges and agrees that damages for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and irreparable harm would occur. In recognition of this fact, each Party agrees that, if there is a breach or threatened breach, in addition to any damages, the other nonbreaching Party to this Agreement, without posting any bond, shall be entitled to seek and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, attachment, or any other equitable remedy which may then be available to obligate the breaching Party (i) to perform its obligations under this Agreement or (ii) if the breaching Party is unable, for whatever reason, to perform those obligations, to take any other actions as are necessary, advisable or appropriate to give the other Party to this Agreement the economic effect which comes as close as possible to the performance of those obligations (including, but not limited to, transferring, or granting liens on, the assets of the breaching Party to secure the performance by the breaching Party of those obligations).

Section 13.13 . Limited Liability. Notwithstanding any other provision of this Agreement, no individual who is a stockholder, director, employee, officer, agent or representative of Discover or Morgan Stanley, nor any individual employed or previously employed by Discover or Morgan Stanley or their respective Affiliates and serving or previously serving as a fiduciary of any benefit plan of Discover or Morgan Stanley or their respective Affiliates (or any body consisting of such individuals), in his, her or its capacity as such, shall have any liability in respect of or relating to the covenants or obligations of Discover or Morgan Stanley under this Agreement and, to the fullest extent legally

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permissible, each of Discover and Morgan Stanley, for itself and its respective stockholders, directors, employees, officers and Affiliates, waives and agrees not to seek to assert or enforce any such liability that any such Person otherwise might have pursuant to applicable law.

Section 13.14 . Mutual Drafting. This Agreement shall be deemed to be the joint work product of Morgan Stanley and Discover and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.

Section 13.15. Implementation.

(a) The parties shall use an operating committee (the “ Operating Committee ”) to implement the terms of this Agreement. Each of Morgan Stanley and Discover shall appoint an equal number of employees to the Operating Committee, such number to be as Morgan Stanley and Discover shall agree as appropriate. The Operating Committee will oversee the implementation and ongoing operation of this Agreement and shall attempt in good faith to resolve disputes between the parties. Each of the parties shall have the right to replace one or more of its Operating Committee members at any time with employees or officers with comparable knowledge, expertise and decision-making authority.

(b) The Operating Committee shall act by a majority vote of its members. If the Operating Committee fails to make a decision, resolve a dispute or agree upon any necessary action, the unresolved matter shall be referred to a Senior Officer of each of Morgan Stanley and Discover notified to the other party for such purpose from time to time, who shall attempt in good faith within a period of 14 days to conclusively resolve any such matter.

(c) During the term of this Agreement, the full Operating Committee shall meet at such times as it considers appropriate. Meetings of the Operating Committee may be in person or via teleconference and shall be convened and held in accordance with such procedures as the Operating Committee may determine from time to time.

Section 13.16 . Effect if Distribution Does Not Occur. Notwithstanding anything in this Agreement to the contrary, if the Distribution Agreement is terminated prior to the Distribution Date, this Agreement shall be of no further force and effect.

Section 13.17 . Corporate Authorization. The officers of Morgan Stanley and Discover are hereby authorized, empowered and directed, in the name and on behalf of each of Morgan Stanley and Discover, respectively, to take or cause to be taken all such further action, to execute and deliver or cause to be executed and delivered all such further agreements, certificates, instruments and documents, to

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make or cause to be made all such filings with governmental or regulatory authorities, and to pay or cause to be paid all such fees and expenses, in each case which shall in such officers’ judgment be deemed necessary, proper or advisable to effect and carry out the intent of this Agreement, such determination to be evidenced conclusively by such officers’ execution and delivery thereof or taking of action in respect thereto.

[ Remainder of page intentionally left blank ]

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.

Exhibit 10.3

TRANSITION SERVICES AGREEMENT

by and between

MORGAN STANLEY

and

DISCOVER FINANCIAL SERVICES

Dated as of June 30, 2007

TABLE OF CONTENTS

i

ii

TRANSITION SERVICES AGREEMENT

This Transition Services Agreement (this “ Agreement ”) is entered into as of June 30, 2007 by and between Morgan Stanley, a Delaware corporation (“ Morgan Stanley ”), and Discover Financial Services, a Delaware corporation (“ Discover ”).

RECITALS

WHEREAS, Morgan Stanley and Discover have entered enter into a Separation and Distribution Agreement (as defined below) providing for the distribution by Morgan Stanley to its shareholders of all of the common stock of Discover that is held by Morgan Stanley;

WHEREAS, Morgan Stanley has heretofore directly or indirectly provided certain services to members of the Discover Group (as defined below); and

WHEREAS, Discover has heretofore directly or indirectly provided certain services to the Morgan Stanley Group (as defined below).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Morgan Stanley and Discover, for themselves, their successors and permitted assigns, hereby agree as follows:

ARTICLE 1

D EFINITIONS

Section 1.01 . Definitions. (a) As used in this Agreement, the following terms shall have the following meanings, applicable both to the singular and the plural forms of the terms described:

“ Actions ” has the meaning set forth in Section 5.03.

“ Affiliate ” has the meaning set forth in the Separation and Distribution Agreement; provided that the Affiliates of each party for purposes of this Agreement shall be determined after giving effect to the consummation of the Distribution.

“ Agreement ” has the meaning set forth in the preamble hereto.

“ Applicable Law ” means, with respect to any Person, any federal, state, local or foreign law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling, directive, guidance, instruction, direction, permission, waiver, notice,

condition, limitation, restriction or prohibition or other similar requirement enacted, adopted, promulgated, imposed, issued or applied by a Governmental Authority that is binding upon or applicable to such Person, its properties or assets or its business or operations, as amended unless expressly specified otherwise.

“ Baseline Period ” has the meaning set forth in Section 2.04.

“ Business Day ” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

“ Change of Control ” means, with respect to Morgan Stanley or Discover, (i) the direct or indirect acquisition (by merger, consolidation, business combination or otherwise) by any Person or group of Persons of beneficial ownership (as defined in Rule 13d-1 and Rule 13d-5 under the Securities Exchange Act of 1934) of 50% or more of the Total Voting Power of Morgan Stanley or Discover, as applicable, (ii) any merger, consolidation or other business combination of Morgan Stanley or Discover, as applicable, or a Subsidiary of Morgan Stanley or Discover, as applicable, with any Person after giving effect to which (x) the shareholders of Morgan Stanley or Discover, as applicable, immediately prior to such transaction do not own at least 50% of the Total Voting Power of the ultimate parent entity of the parties to such transaction or (y) individuals who were directors of Morgan Stanley or Discover, as applicable, immediately prior to such transaction (or their designees) do not constitute a majority of the board of directors of such ultimate parent entity, and (iii) the direct or indirect acquisition by any Person or group of Persons of all or substantially all of the assets of Morgan Stanley or Discover, as applicable.

“ Confidential Information ” has the meaning set forth in Section 7.01.

“ Data Protection Laws ” means the European Commission Data Protection Directive (95/46/EC) or Data Protection Act 1998 or any implementing or related legislation of any member state in the European Economic Area.

“ Delaware Commissioner ” means the Office of the Delaware State Bank Commissioner or any successor thereto.

“ Discover ” has the meaning set forth in the preamble hereto.

“ Discover Entity ” means any member of the Discover Group.

“ Discover Group ” means Discover and its Subsidiaries as of and after the Distribution Date.

“ Discover Systems ” means any computer software program or routine or part thereof owned, licensed or provided by any Discover Entity or its suppliers on

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any Discover Entity’s behalf, each as modified, maintained or enhanced from time to time by any Discover Entity, any Morgan Stanley Entity or any third party.

“ Distribution ” has the meaning set forth in the Separation and Distribution Agreement.

“ Distribution Date ” has the meaning set forth in the Separation and Distribution Agreement.

“ FDIC ” means the Federal Deposit Insurance Corporation or any successor thereto.

“ force majeure ” has the meaning set forth in Section 8.05.

“ FSA ” means the United Kingdom Financial Services Authority or any successor thereto.

“ Governmental Authority ” means any multinational, foreign, federal, state, local or other governmental, statutory or administrative authority, regulatory body or commission or any court, tribunal or judicial or arbitral authority which has any jurisdiction or control over either party (or their Affiliates), including without limitation the FSA, FDIC and the Delaware Commissioner.

“ Gramm-Leach-Bliley Act ” means the Gramm-Leach-Bliley Act of 1999, or any successor federal statute thereto, and the rules and regulations thereunder, as may be amended or supplemented from time to time.

“ Group ” means the Discover Group or Morgan Stanley Group as applicable.

“ Insolvency Event ” means with respect to either party, as applicable, (i) the making by such party of any assignment for the benefit of creditors of all or substantially all of its assets or the admission by such party in writing of its inability to pay all or substantially all of its debts as they become due; (ii) the adjudication of such party as bankrupt or insolvent or the filing by such party of a petition or application to any tribunal for the appointment of a trustee or receiver for such party or any substantial part of the assets of such party; or (iii) the commencement of any voluntary or involuntary bankruptcy proceedings (and, with respect to involuntary bankruptcy proceedings, the failure to be discharged within 60 days), reorganization proceedings or similar proceeding with respect to such party or the entry of an order appointing a trustee or receiver or approving a petition in any such proceeding.

“ Invoice Date ” has the meaning set forth in Section 3.03(a).

“ Morgan Stanley ” has the meaning set forth in the preamble hereto.

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“ Morgan Stanley Entity ” means any member of the Morgan Stanley Group.

“ Morgan Stanley Group ” means Morgan Stanley and its Subsidiaries (other than any Subsidiary or member of, or other entity in, the Discover Group) as of and after the Distribution Date.

“ Morgan Stanley Systems ” means any computer software program or routine or part thereof owned, licensed or provided by any Morgan Stanley Entity or its suppliers on any Morgan Stanley Entity’s behalf, each as modified, maintained or enhanced from time to time by any Morgan Stanley Entity, any Discover Entity or any third party.

“ Non-Compliance Notice ” has the meaning set forth in Section 5.08.

“ Payer ” has the meaning set forth in Section 3.02(c).

“ Payee ” has the meaning set forth in Section 3.02(c).

“ Payment Date ” has the meaning set forth in Section 3.03(b).

“ Person ” means individual, corporation, limited liability company, partnership, association, trust or other entity or organization, including a governmental or political subdivision or an agency or instrumentality thereof.

“ Personal Information ” means personally identifiable information as defined under applicable Data Protection Laws of either party which the other party receives or to which the other party otherwise has access.

“ Prior Agreements ” has the meaning set forth in Section 8.01.

“ Provider ” has the meaning set forth in Section 2.01.

“ Provider Entity ” means any member of the Provider Group.

“ Provider Group ” means, as the context requires, the Discover Group or the Morgan Stanley Group.

“ Provider Indemnified Person ” has the meaning set forth in Section 5.02.

“ Recipient ” has the meaning set forth in Section 2.01.

“ Recipient Entity ” means any member of the Recipient Group.

“ Recipient Group ” means, as the context requires, the Discover Group or the Morgan Stanley Group.

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“ Recipient Indemnified Person ” has the meaning set forth in Section 5.04.

“ Schedule ” means a Schedule attached hereto forming part of this Agreement and “Schedules” shall have a corresponding meaning.

“ Separation and Distribution Agreement ” means the Separation and Distribution Agreement dated as of June 29, 2007, by and between Morgan Stanley and Discover.

“ Service Costs ” has the meaning set forth in Section 3.01.

“ Services ” has the meaning set forth in Section 2.01.

“ Subsidiary ” means, with respect to any Person, any other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; provided that for the purposes of Sections 2.02, 2.03 and 4.01, shall be limited to those Subsidiaries of a Person as at the Distribution Date only and any Subsidiaries formed in connection with any internal reorganization of such Person.

“ Supplier ” has the meaning set forth in Section 3.02(b).

“ Supply Recipient ” has the meaning set forth in Section 3.02(b).

“ Supported Companies ” means Goldfish Bank Limited, Goldfish Card Services Limited, Goldfish Credit Enhancing, Inc., Goldfish Credit Servicing, Inc. and Goldfish Procurement, Inc.

“ Systems ” means the Morgan Stanley Systems or the Discover Systems, individually, or the Morgan Stanley Systems and the Discover Systems, collectively, as the context may indicate or require.

“ Tax ” means any tax, levy, impost, duty or other similar charge (including any penalty or interest payable in connection with any failure to pay or delay in paying the same).

“ Total Voting Power ” means, with respect to any Person, the total combined voting power of all securities of such Person entitled to vote generally in the election of directors of such Person.

“ UK Transfer Regulations ” means the Transfer of Undertakings (Protection of Employment) Regulations 2006, as amended or superseded from time to time.

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“ VAT ” means value added tax implemented by member states of the European Union pursuant to Directive 2006/112/EC and legislation supplemental thereto, and any tax of a similar nature imposed under the laws of any jurisdiction which is not a member state of the European Union.

ARTICLE 2

P URCHASE A ND S ALE O F S ERVICES

Section 2.01 . Purchase and Sale of Services. On the terms and subject to the conditions of this Agreement and in consideration of the Service Costs described below, each of Morgan Stanley and Discover (each in its capacity as provider of Services, “ Provider ”) agrees to provide to the other party (in its capacity as recipient of Services, “ Recipient ”), or procure the provision to Recipient of, and Recipient agrees to purchase from Provider, the transition services (the “ Services ”) as set forth on the Schedules.

Section 2.02 . Subsidiaries. It is understood that (i) except as provided in this Section 2.02, the Services to be provided to Recipient under this Agreement shall, at Recipient’s request, be provided to any Person that is a Subsidiary of Recipient and (ii) Provider may satisfy its obligation to provide or procure Services hereunder by causing one or more of its Subsidiaries to provide or procure such Services. With respect to Services provided to, or procured on behalf of, any Subsidiary of Recipient, Recipient agrees to pay on behalf of such Subsidiary all amounts payable by or in respect of such Services pursuant to this Agreement. Recipient agrees that Provider shall only be required to provide the Services specified in Schedules UKM25 to UKM45 and UKM58 to UKM60 to the relevant Supported Companies. The immediately preceding sentence shall not be deemed to limit the rights of the Supported Companies to receive any additional Services in accordance with Section 2.03.

Section 2.03 . Additional Services . Except for the Services expressly contemplated to be provided in accordance with Section 2.01 and this Section 2.03, Provider shall have no obligation under this Agreement to provide any services to the Recipient Group. Provider agrees to (i) consider in good faith (but shall have no obligation to accept) any requests by Recipient for the provision of any continued or additional services that Recipient considers are reasonably necessary to accommodate normal growth in Recipient’s business and (ii) use reasonable efforts in good faith to provide continued or additional services that Recipient considers are reasonably necessary to transfer responsibility for the provision of any Services from Provider to Recipient or any third party as Recipient may designate during the term of this Agreement, and upon termination or expiration of any Service or of this Agreement, including as to data migration. Any such continued or additional services will be on such terms and conditions (including pricing) as the parties shall mutually agree.

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Section 2.04 . Services Provided by Recipient . If it is necessary for Recipient to provide any services or resources to Provider or any third party regarding any aspect of the Recipient Group business or Services (the “ Recipient Services ”) so that Provider, any Subsidiary of Provider or third party provider may provide or have provided the Services hereunder, Recipient shall provide such services or resources (i) in a timely and effective manner; (ii) without cost to Provider, any Subsidiary of Provider or any third party and (iii) in a manner that ensures that the nature, quality and standard of care of the Recipient Services provided shall be substantially the same as have been provided by the Recipient Group’s business during the twelve months prior to the date hereof (such twelve-month period, the “ Baseline Period ”).

Section 2.05. Third Party Licenses and Consents . Provider and Recipient shall use commercially reasonable efforts to obtain all governmental or third party licenses and consents required for the provision of any Service by Provider in accordance with the terms of this Agreement; provided that the costs relating to obtaining any such licenses or consents shall be borne by Recipient; provided further that Provider shall not be required to provide such Service (x) unless and until the required licenses and/or consents have been obtained or (y) in the event the required licenses and/or consents are terminated or revoked.

ARTICLE 3

S ERVICE C OSTS ; O THER C HARGES

Section 3.01 . Service Costs Generally . Unless any Schedule hereto indicates otherwise or the parties shall agree in writing to a different arrangement, for each period in which Recipient receives a Service hereunder, Recipient shall pay Provider such fees and costs as set forth in Exhibit A hereto (“ Service Costs ”) which costs shall be adjusted appropriately in the event of the termination of any Service or as otherwise contemplated by this Agreement.

Section 3.02 . Taxes. (a) Recipient shall pay all applicable sales or use taxes incurred with respect to provision of the Services. These taxes shall be incremental to other payments or charges identified in this Agreement.

(b) All amounts to be paid under this Agreement shall be exclusive of VAT, if any. Where, under this Agreement, any person (the “ Supplier ”) makes or is deemed to make a supply to another person (the “ Supply Recipient ”) for VAT purposes and VAT is or becomes chargeable in respect of such supply, the Supply Recipient shall pay to the Supplier an amount equal to such VAT: (i) where the consideration for such supply consists wholly of money, at the same time as paying such consideration; or (ii) where the consideration does not consist wholly of money, on or before the later of the date which is 30 days after the date on

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which such VAT is demanded in writing or when the supply is made; provided that the Supply Recipient shall first have received an invoice in respect of such supply.

(c) Where this Agreement requires any party (the “ Payer ”) to reimburse another party (the “ Payee ”) for any costs or expenses, the Payer shall also at the same time pay and indemnify the Payee against all VAT incurred by the Payee in respect of the costs or expenses to the extent that the Payee determines that neither it, nor any other member of any group of which it is a member for VAT purposes, is entitled to credit or repayment from the relevant tax authority in respect of VAT.

(d) All sums payable under this Agreement shall be paid free and clear of all deductions or withholdings unless the deduction or withholding is required by law, in which event the amount of the payment due from the party required to make such payment (other than amounts of interest) shall be increased to an amount which after any withholding or deduction leaves an amount equal to the payment which would have been due if no such deduction or withholding had been required.

Section 3.03 . Invoicing and Settlement of Costs . (a) Unless any Schedule hereto indicates otherwise or the parties shall agree in writing to a different arrangement, Provider shall invoice or notify in writing on a monthly basis (not later than the 15th day of each month) an officer of Recipient designated by Recipient from time to time for such purpose (the date of delivery of such invoice being referred to herein as the “ Invoice Date ”).

(b) Recipient agrees to pay on or before the date (each, a “ Payment Date ”) that is 45 days after the Invoice Date by wire transfer of immediately available funds payable to the order of Provider all amounts invoiced by Provider pursuant to Section 3.03(a). If Recipient fails to pay any monthly payment on or before the relevant Payment Date, Recipient shall be obligated to pay, in addition to the amount due on such Payment Date, to the extent permitted by Applicable Law, interest on such amount at the rate of 6% per annum compounded monthly from the relevant Payment Date through the date of payment.

ARTICLE 4

T HE S ERVICES

Section 4.01 . Standards of Service . (a) The level or volume of any specific Service required to be provided to Recipient hereunder shall not exceed the level or volume of such Service as historically utilized by the Recipient Group during the Baseline Period. In providing any Service, Provider shall have no obligation to allocate human, equipment or other resources in excess of the level of resources historically allocated to the provision to the Recipient Group of such Service by Provider during the Baseline Period.

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(b) The manner, nature, quality and standard of care applicable to the delivery by Provider of the Services hereunder shall be substantially the same as that of similar services which Provider provides from time to time throughout its business.

(c) Provider agrees that all Services it provides or causes to be provided will be provided in compliance with Applicable Law.

(d) If any member of the Recipient Group shall purchase, lease or otherwise acquire any business, assets or properties or rights in respect thereof, Provider shall have no obligation to provide any Services hereunder in respect of such acquired business, assets or properties.

Section 4.02 . Changes to the Services. It is understood and agreed that Provider may from time to time modify, change or enhance the manner, nature, quality and/or standard of care of any Service provided to Recipient to the extent Provider is making a similar change in the performance of such services for the Provider Group and provided that any such modification, change or enhancement will not reasonably be expected to have a material adverse effect on such Service. Provider shall furnish to Recipient substantially the same notice (in content and timing), if any, as Provider furnishes to its own organization with respect to such modifications, changes or enhancements. Any incremental expense incurred by Provider in making any such modification, change or enhancement to the Services performed hereunder or in providing such Services on an ongoing basis shall be taken into account in the calculation of Service Costs as contemplated by Section 2.01.

Section 4.03 . Management of Services By Provider. Except as may otherwise be expressly provided in this Agreement, the management of and control over the provision of the Services by Provider shall reside solely with Provider and notwithstanding anything to the contrary Provider shall be permitted to choose the methodology, systems and applications it utilizes in the provision of such Services. The provision, use of and access to the Services shall be subject to (i) any technical and operational changes that may be required to manage any restrictions imposed by Provider in respect of data access; (ii) Providers’ business, operational and technical environment, standards, policies and procedures as may be modified from time to time; (iii) any Recipient Services and/or other third party services, resources or dependencies; (iv) any Applicable Law; and (v) the terms of this Agreement.

Section 4.04 . Operating Committee. (a) The parties shall use an operating committee (the “ Operating Committee ”) to implement the terms of this Agreement. Each of Morgan Stanley and Discover shall appoint an equal number of employees to the Operating Committee, such number to be as Morgan Stanley and Discover shall agree as appropriate from time to time. The Operating

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Committee will oversee the implementation and ongoing operation of this Agreement and shall attempt in good faith to resolve disputes between the parties. Each of the parties shall have the right to replace one or more of its Operating Committee members at any time with employees or officers with comparable knowledge, expertise and decision-making authority.

(b) The Operating Committee shall act by a majority vote of its members. If the Operating Committee fails to make a decision, resolve a dispute or agree upon any necessary action, the unresolved matter shall be referred to a senior officer of each of Morgan Stanley and Discover notified to the other party for such purpose from time to time, who shall attempt in good faith within a period of 14 days to conclusively resolve any such matter.

(c) During the term of this Agreement, the full Operating Committee shall meet at such times as it considers appropriate. Meetings of the Operating Committee may be in person or via teleconference and shall be convened and held in accordance with such procedures as the Operating Committee may determine from time to time.

Section 4.05. Disaster Recovery and BCP. Each party will maintain and operate and shall use reasonable efforts to ensure that all material subcontractors shall maintain and operate contingency, business continuity and disaster recovery facilities and procedures for the purposes of performing its obligations under this Agreement consistent with the facilities and procedures maintained and operated by such party in respect of its business generally.

ARTICLE 5

D ISCLAIMER , L IABILITY A ND I NDEMNIFICATION

Section 5.01 . EXCLUSION OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE SERVICES ARE PROVIDED “AS-IS” WITH NO WARRANTIES, AND PROVIDER EXPRESSLY EXCLUDES AND DISCLAIMS ANY WARRANTIES UNDER OR ARISING AS A RESULT OF THIS AGREEMENT, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE, NON-INFRINGEMENT OR ANY OTHER WARRANTY WHATSOEVER.

Section 5.02. Limitation of Liability . (a) Recipient agrees that none of the members of the Provider Group and their respective directors, officers, agents, and employees (each, a “ Provider Indemnified Person ”) shall have any liability, whether direct or indirect, in contract or tort or otherwise, to any Recipient Entity or any other Person for or in connection with the Services rendered or to be

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rendered by or on behalf of any Provider Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any actions or inactions by or on behalf of Provider Indemnified Person in connection with any such Services or transactions, except (i) to the extent any damages have been finally determined by a court of competent jurisdiction to have resulted from such Provider Indemnified Person’s gross negligence or willful misconduct in connection with any such Services, actions or inactions or (ii) as contemplated by Section 7.05(d).

(b) Notwithstanding the provisions of Section 5.02(a), none of the members of the Provider Group shall be liable for any special, indirect, incidental, consequential or punitive damages of any kind whatsoever in any way due to, resulting from or arising in connection with any of the Services or the performance of or failure to perform Provider’s obligations under this Agreement. This disclaimer applies without limitation (i) to claims arising from the provision of the Services or any failure or delay in connection therewith, (ii) to claims for lost profits, (iii) regardless of the form of action, whether in contract, tort (including negligence), strict liability, or otherwise, and (iv) regardless of whether such damages are foreseeable or whether any member of the Provider Group has been advised of the possibility of such damages.

(c) None of the members of the Provider Group shall have any liability to any Recipient Entity or any other Person for failure to perform Provider’s obligations under this Agreement or otherwise, where such failure to perform is not caused by the gross negligence or willful misconduct of the Provider Entity providing such Services and such failure to perform similarly affects the Provider Group receiving such Services and does not have a disproportionately adverse effect on the Recipient Group, taken as a whole.

(d) In addition to the foregoing, Recipient agrees that it shall, in all circumstances, use commercially reasonable efforts to mitigate and otherwise minimize its damages and those of the other Recipient Entities, whether direct or indirect, due to, resulting from or arising in connection with any failure by Provider to comply fully with its obligations under this Agreement.

Section 5.03. Indemnification of Provider by Recipient . Recipient agrees to indemnify and hold harmless each Provider Indemnified Person from and against any damages, and to reimburse each Provider Indemnified Person for all reasonable expenses as they are incurred in investigating, preparing, pursuing, or defending any claim, action, proceeding, or investigation, whether or not in connection with pending or threatened litigation and whether or not any Provider Indemnified Person is a party (collectively, “ Actions ”), arising out of or in connection with Services rendered or to be rendered by or on behalf of any Provider Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any actions or inactions by or on behalf of any Provider Indemnified Person in connection with any such Services or transactions; provided

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that Recipient shall not be responsible for any damages of any Provider Indemnified Person to the extent such damages have been finally determined by a court of competent jurisdiction to have resulted from such Provider Indemnified Person’s gross negligence or willful misconduct in connection with any of such Services, actions or inactions (it being understood and agreed that the provision by any Provider Entity of any of the Services without obtaining the consent of any party to any contract or agreement to which any Provider Entity is a party as of the date hereof shall not constitute gross negligence or willful misconduct by any Provider Entity; provided that the relevant Provider Entity has used commercially reasonable efforts to obtain the relevant consent).

Section 5.04. Indemnification of Recipient by Provider . Provider agrees to indemnify and hold harmless each member of the Recipient Group and their respective directors, officers, agents, and employees (each, a “ Recipient Indemnified Person ”) from and against any damages, and shall reimburse each Recipient Indemnified Person for all reasonable expenses as they are incurred in investigating, preparing, or defending any Action, to the extent such damages have been finally determined by a court of competent jurisdiction to have arisen out of the gross negligence or willful misconduct of any Provider Indemnified Person in connection with the Services rendered or to be rendered pursuant to this Agreement.

Section 5.05 . Taxes. If a party is required to make any payment under Section 5.03 or 5.04, it shall upon demand pay to the Person receiving such payment an amount equal to any loss, liability or cost which the receiving Person determines will or has been (directly or indirectly) suffered or incurred on account of Tax by the receiving Person in respect of such payment, net of any Tax benefit arising in respect of the damages giving rise to such payment.

Section 5.06 . Indemnification as Exclusive Remedy. Except for the termination rights provided under Sections 6.02(b) and 6.02(c), the indemnification provisions of this Article 5 shall be the exclusive remedy for breach of the Agreement.

Section 5.07 . Conduct of Proceedings. Any proceedings relating to indemnification under Section 5.03 or 5.04 or Clause (b) of Exhibit B shall be conducted in accordance with the procedures set forth in Section 7.03 of the Separation and Distribution Agreement.

Section 5.08. Notice of Certain Matters . If Recipient at any time believes that Provider is not in full compliance with its obligations under Sections 4.01(a), 4.01(b) or 4.01(c), Recipient shall so notify Provider in writing promptly (but not later than 15 days) after becoming aware of such possible non-compliance by Provider. Such notice (a “ Non-Compliance Notice ”) shall set forth in reasonable detail the basis for Recipient’s belief as well as Recipient’s view as to the steps to

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be taken by Provider to address the possible non-compliance. For the 30 days after receipt of such a notice, the members of the Operating Committee (or, if so determined by them, other representatives of Provider and Recipient) shall work in good faith to develop a plan to resolve the matters referred to in the Non-Compliance Notice. In the event such matters are not resolved through such discussions, the matter shall be referred for resolution as contemplated by Section 4.04(b). If such matters are not resolved pursuant to Section 4.04(b) Recipient may elect, by notice delivered within 14 days following completion of the time period contemplated by Section 4.04(b), to terminate Provider’s obligation to provide or procure, and its obligation to purchase, the Service or Services referred to in its Non-Compliance Notice in accordance with Section 6.02. In the event such matters are resolved through such discussions or, notwithstanding the failure to resolve such matters Recipient does not elect to terminate such Service or Services within such 14-day period, Recipient shall not be entitled to deliver another Non-Compliance Notice or pursue other remedies with respect to same or any substantially similar matter so long as, in the event of a resolution, Provider complies in all material respects with the terms of such resolution. In no event shall any termination of any Service or Services pursuant to this Section 5.08 limit or affect Recipient’s right to seek remedies in respect of any breach by Provider of any of its obligations under this Agreement prior to such termination, subject to the limitations set forth in this Article 5.

ARTICLE 6

T ERM AND T ERMINATION

Section 6.01. Term . Except as otherwise provided in this Article 6, in Section 8.05, or in any Schedule or as otherwise agreed in writing by the parties, the term of this Agreement with respect to each Service shall commence as of the Distribution Date or, if later, the date on which such Service is added as a Schedule, and shall cease as of the applicable date set forth in the applicable Schedule or such earlier date as determined in accordance with Section 6.02. This Agreement shall terminate in its entirety upon the expiration of the terms (as determined pursuant to the preceding sentence) of all Services; provided that the provisions of Articles 5, 6, 7 and 8 shall survive any such termination indefinitely.

Section 6.02. Termination . (a) Except as otherwise provided in any Schedule hereto, Recipient may from time to time terminate this Agreement with respect to one or more of the Services it receives, in whole or in part, upon giving at least 60 days’ prior notice to Provider.

(b) Provider may terminate any Service or any part thereof it provides at any time if (i) a related Service or a third party service pursuant to which Provider provides such Service to Recipient has been terminated or (ii) Recipient shall have failed to perform any of its material obligations under this Agreement relating to

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any such Service, Provider has notified Recipient in writing of such failure and such failure shall have continued for a period of 60 days after receipt by Recipient of written notice of such failure. For the avoidance of doubt, the failure by Recipient to pay the full amount of any invoice when due shall be considered a breach of Recipient’s material obligation under this Agreement. With respect to clause (i) of this Section 6.02(b), if Provider receives written notice from any third party service provider that such Person intends to terminate such service, Provider and Recipient shall use commercially reasonable efforts to secure the continued provision of that service from such third party or an alternative service provider; provided that any costs incurred in doing so shall be borne by Recipient.

(c) Recipient may terminate any Service it receives as provided in the applicable Schedule or at any time if Provider shall have failed to perform any of its material obligations under this Agreement relating to any such Service, Recipient has notified Provider in writing of such failure, and such failure shall have continued for a period of 30 days after receipt by Provider of written notice of such failure.

(d) At any time following announcement of a transaction involving a Change of Control of Recipient, Provider may elect, by delivery of notice in writing to Recipient, to terminate any or all Services hereunder, such termination to take effect, subject to Section 6.02(a), on the date or dates specified by Provider in such notice; provided that without the written consent of Recipient, no such termination of Service shall occur prior to the closing of such Change of Control transaction.

(e) Upon completion of the sale or other disposition of any portion of the Recipient Group’s business, assets or properties, Provider’s obligation to provide any Service in respect of the business, assets or properties so disposed shall terminate automatically and without any notice or other action by Provider, and the aggregate level or volume of such Service required to be provided to the Recipient Group and (if applicable) the Service Costs payable by Recipient in respect thereof shall be reduced appropriately.

(f) Either party may terminate this Agreement at any time with immediate effect upon serving written notice upon the other party if the other party suffers an Insolvency Event.

Section 6.03. Effect of Termination . (a) Other than as required by law, upon termination of any Service pursuant to Section 6.02, Provider shall have no further obligation to provide the terminated Service and Recipient shall have no obligation to pay any fees relating to such Services; provided that notwithstanding such termination, (i) Recipient shall remain liable to Provider for fees owed and payable in respect of Services provided prior to the effective date of the termination, and (ii) Provider shall continue to charge Recipient for administrative

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and program costs relating to benefits paid after but incurred prior to the termination of any Service and other services required to be provided after the termination of such Service and Recipient shall be obligated to pay such expenses in accordance with the terms of this Agreement.

(b) Termination of this Agreement as provided for herein shall not prejudice or affect any rights or remedies which shall have accrued or shall thereafter accrue to either party.

(c) Following notice of termination of any Service, Provider and Recipient agree to cooperate in providing for an orderly transition of such Service to Recipient or a successor service provider. Provider agrees to (i) provide promptly, and in any event no later than 60 days following termination of such Service, copies in a usable format then in existence designated by Provider, of all records relating directly or indirectly to benefit determinations of Recipient employees, including but not limited to compensation and service records (to the extent relevant to such Service), correspondence, plan interpretative policies, plan procedures, administrative guidelines, minutes, or any data or records required to be maintained by law and (ii) cooperate reasonably with Recipient in developing a transition schedule. Recipient shall promptly reimburse Provider, upon request, for any and all reasonable costs and expenses incurred by Provider or any of its Subsidiaries arising out of or in connection with the performance of its obligations under this Section 6.03(c). For the avoidance of doubt, this Section 6.03(c) is subject to the provisions of Section 2.03.

ARTICLE 7

A DDITIONAL A GREEMENTS

Section 7.01. Confidential Information . The parties hereby covenant and agree to maintain confidential all Confidential Information relating to the other party or any of such other party’s Subsidiaries. Without limiting the generality of the foregoing, each party shall cause its employees and agents to exercise the same level of care with respect to Confidential Information relating to the other party or any of its Subsidiaries as it would with respect to proprietary information, materials and processes relating to itself or any of its Subsidiaries. “ Confidential Information ” shall mean all information, materials and processes relating to a party or any Subsidiary of such party obtained by the other party or any Subsidiary of such other party at any time (whether prior to or after the date hereof) in any format whatsoever (whether orally, visually, in writing, electronically or in any other form) relating to, arising out of or in connection with the Services rendered or to be rendered hereunder and shall include, but not be limited to, economic and business information or data, business plans, computer software and information relating to employees, vendors, customers, products, financial performance and projections, processes, strategies and systems but shall not include (i) information

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which becomes generally available to the public other than by release in violation of the provisions of this Section 7.01, (ii) information which becomes available on a non-confidential basis to a party from a source other than the other party to this Agreement, provided the party in question reasonably believes that such source is not or was not bound to hold such information confidential and (iii) information acquired or developed independently by a party without violating this Section 7.01 or any other confidentiality agreement with the other party. Except with the prior written consent of the other party, each party will use the other party’s Confidential Information only in connection with the performance of its obligations hereunder and each party shall use commercially reasonable efforts to restrict access to the other party’s Confidential Information to those employees of such party requiring access for the purpose of providing Services hereunder. Notwithstanding any provision of this Section 7.01 to the contrary, a party may disclose such portion of the Confidential Information relating to the other party to the extent, but only to the extent, the disclosing party reasonably believes that such disclosure is required under law or the rules of a Governmental Authority; provided that the disclosing party first notifies the other party hereto of such requirement and allows such party a reasonable opportunity to seek a protective order or other appropriate remedy to prevent such disclosure. The parties acknowledge that money damages would not be a sufficient remedy for any breach of the provisions of this Section 7.01 and that the non-breaching party shall be entitled to equitable relief in a court of law in the event of, or to prevent, a breach or threatened breach of this Section 7.01.

Section 7.02 . Ownership of Assets. (a) Morgan Stanley Systems and any and all enhancements thereof or improvements thereto are and shall remain the sole exclusive property of the Morgan Stanley Entities and their suppliers. From and after the creation of any and all such Morgan Stanley Systems or enhancements thereof or improvements thereto by Discover or by any contractor, Affiliate or other third party on Discover’s behalf, in each case, pursuant to this Agreement, Discover agrees to assign and hereby assigns to Morgan Stanley or the applicable Morgan Stanley Entity, any and all right, title and interest that Discover or such contractor, Affiliate or third party may have in such Morgan Stanley Systems or enhancements thereof or improvements thereto.

(b) Discover Systems and any and all enhancements thereof or improvements thereto are and shall remain the sole exclusive property of the Discover Entities and their suppliers. From and after the creation of any and all such Discover Systems or enhancements thereof or improvements thereto by Morgan Stanley or by any contractor, Affiliate or third party on Morgan Stanley’s behalf, in each case, pursuant to this Agreement, Morgan Stanley agrees to assign and hereby assigns to Discover or the applicable Discover Entity, any and all right, title and interest that Morgan Stanley or such contractor, Affiliate or third party may have in such Discover Systems or enhancements thereof or improvements thereto.

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(c) From the date hereof until the termination of this Agreement, each party grants to the other and its suppliers a non-exclusive, royalty-free right and license to use the Morgan Stanley Systems or the Discover Systems, as applicable, solely to provide the Services contemplated hereunder. Notwithstanding anything to the contrary hereunder, each party agrees to cooperate with the other (and shall cause its suppliers to so cooperate) to cause the orderly return of the other party’s Systems and property upon the termination of this Agreement or upon written request, whichever is earlier.

(d) With respect to any Systems that a Morgan Stanley Entity or a Discover Entity, as applicable, is required to maintain or enhance hereunder, as between Morgan Stanley and Discover, all right, title and interest in and to such enhancements and any related documentation, whether created by the party that provides the Service or any contractor, Affiliate or supplier on such party’s behalf, shall be owned exclusively by and vested exclusively in the party by whom the applicable System is owned, licensed or provided.

(e) As between any Morgan Stanley Entity, on the one hand, and any Discover Entity, on the other hand, all right, title and interest in and to all data processed hereunder shall be owned exclusively by the Morgan Stanley Entity or Discover Entity that originally supplied it to the other. Morgan Stanley and Discover hereby assign to the other, and shall cause any of its or their contractors, Affiliates or suppliers to assign to the other, as applicable, all right, title and interest that Morgan Stanley or Discover, as applicable, may have in the other’s data.

(f) Each party shall have written agreements with its employees consistent with past practices, and shall cause any contractor, Affiliate or third party performing Services on its behalf pursuant to this Agreement to also have written agreements with its employees that are consistent with its obligations hereunder, including the obligations to disclose and assign all right, title and interest in intellectual property rights as contemplated in Sections 7.01 and 7.02. Each party agrees not to voluntarily terminate or to amend or modify such agreements with respect to the provisions described above without providing at least 30 days prior written notice thereof and further agrees that any such amendments or modifications to such agreements shall be prospective only.

Section 7.03 . Security. (a) Each member of the Recipient Group and its employees, authorized agents and subcontractors shall only use or access Services and/or any of Provider’s Systems, premises or data such Person is authorized by Provider to use or access. In no event shall any member of the Recipient Group and its employees, authorized agents and subcontractors access any Services and/or any of Provider’s Systems, premises or data without Provider’s prior written consent. Each member of the Recipient Group and its employees, authorized agents and subcontractors shall comply with Provider’s policies and procedures in relation to the use and access of the Services and Provider’s Systems.

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(b) In connection with the provision of Services hereunder, to the extent either party has access to or acquires Personal Information such party will, and will cause the relevant member of its Group to, comply with, as applicable, Title V of Gramm-Leach-Bliley Act, the Data Protection Laws and any other laws concerning Personal Information. Without limiting the generality of the foregoing, both parties agree to comply with the covenants set forth in Exhibit B .

Section 7.04 . Access To Information. (a) The provisions of Section 5.01 of the Separation and Distribution Agreement shall apply to matters arising in connection with, or otherwise relating to, the provision of Services hereunder.

(b) For the avoidance of doubt, if requested by Recipient, Provider will permit Recipient such access to Provider’s books, records, accountants, accountants’ work papers, personnel and facilities with respect to the Services as is reasonably necessary to enable the management of Recipient to demonstrate compliance with the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations of the Securities Exchange Commission promulgated thereunder. In connection with the foregoing, if at any time Recipient shall identify any material deficiencies in the processes utilized by Provider in the provision of Services hereunder, Provider and Recipient will cooperate in good faith to develop and implement commercially reasonable action plans and timetables to remedy such deficiencies and/or implement adequate compensating controls.

Section 7.05 . Labor Matters. (a) All labor matters relating to employees of Provider and its Subsidiaries (including, without limitation, employees involved in the provision of Services to any Recipient Entity) shall be within the exclusive control of Provider, and Recipient shall not take any action affecting such matters. Nothing in this Agreement is intended to transfer the employment of employees engaged in the provision of any Service from one party to the other, whether pursuant to the European Union Acquired Rights Directive, UK Transfer Regulations or otherwise. All employees and representatives of a party and any of its Affiliates will be deemed for all compensation, employee benefits, tax and social security contribution purposes to be employees or representatives of such party or its Affiliates (or their subcontractors) and not employees or representatives of the other party or any of its Affiliates (or their subcontractors). In providing the Services, such employees and representatives will be under the direction, control and supervision of Provider or its Affiliates (or their subcontractors) and not of Recipient.

(b) Recipient shall notify Provider within seven days of any employee or former employee of the Provider Group claiming or asserting that the

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termination of the provision of all or any of the Services constitutes the transfer of an undertaking or part thereof, or a service provision change, within the meaning of the UK Transfer Regulations, such that their contract of employment transfers or will transfer from Provider to Recipient.

(c) Provider shall within 14 days of being so informed by Recipient, at its sole discretion be entitled to offer employment to the employee on terms and conditions which are in all material respects (except as to occupational pension arrangements) not less favorable than those which he or she enjoyed immediately before the date of the termination or intended termination, such offer to remain open for acceptance for 14 days.

(d) In the event that the offer referred to in Section 7.05(c) above is not made or such an offer is made and not accepted by the employee within 14 days, (i) Recipient shall be entitled to terminate such employee’s provision of all or any of the Services and therefore dismiss such employee and (ii) Provider shall indemnify Recipient in respect of the following:

(A) any costs, liabilities and expenses that Recipient incurs as a result of a claim or threatened claim by such employee (or part of such claim) that relates to facts or events occurring prior to the alleged transfer date in relation to his/her employment with Provider;

(B) any costs, liabilities and expenses that Recipient incurs as a result of a claim or threatened claim that Provider or Recipient failed to comply with their obligations under Regulation 13 of the UK Transfer Regulations in respect of such employee;

(C) Recipient’s reasonable legal costs incurred in dealing with such termination;

(D) any notice pay payable to such employee; and

(E) any severance payment made to such employee, up to a maximum of three weeks’ salary per year of service.

(e) In the event that a claim within the scope of Section 7.05(b) is made or alleged, Recipient and Provider shall give to each other such assistance as may reasonably be required by the other in relation to the claim. Where any such claim is one in respect of which the indemnity in Section 7.05 (d) applies, Provider shall be entitled to have the conduct of the claim, at its own expense.

(f) The provisions of Sections 7.05(b) to 7.05(e) shall not apply to claims brought or asserted by any of: Mandhir Mandair, Maurice Varcoe, Adam Greenbaum, Suniti Dhupelia, Anna Satchell, Jaini Gudhka and Cheng Fang Liang.

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ARTICLE 8

M ISCELLANEOUS

Section 8.01 . Prior Agreements . In the event there is any conflict between the provisions of this Agreement, on the one hand, and provisions of prior services agreements among any Provider Entity and any Recipient Entity (the “ Prior Agreements ”), on the other hand, the provisions of this Agreement shall govern.

Section 8.02. Other Agreements . In the event there is any inconsistency between the provisions of this Agreement, on the one hand, and the provisions of the Separation and Distribution Agreement, on the other hand, the provisions of the Separation and Distribution Agreement shall govern.

Section 8.03. No Agency; Independent Contractor Status . Nothing in this Agreement shall constitute or be deemed to constitute a partnership or joint venture between the parties hereto or constitute or be deemed to constitute any party the agent or employee of the other party for any purpose whatsoever and neither party shall have authority or power to bind the other or to contract in the name of, or create a liability against, the other in any way or for any purpose. The parties hereto acknowledge and agree that Provider is an independent contractor in the performance of each and every part of this Agreement and nothing herein shall be construed to be inconsistent with this status. Provider shall have the authority to select the means, methods and manner by which any Service is performed.

Section 8.04. Subcontractors . (a) Provider may hire or engage one or more subcontractors to perform all or any of its obligations under this Agreement; provided that, subject to Section 5.02, Provider shall in all cases remain primarily responsible for ensuring that obligations with respect to the standards of services set forth in this Agreement are satisfied with respect to any Service provided by a subcontractor hired or engaged by Provider.

(b) If Recipient terminates any Service prior to its scheduled expiration and as a result of such termination any Provider Indemnified Person suffers or incurs any liability or damages arising out of or in connection with any third party contract pursuant to which Recipient had received the relevant Service, such Provider Indemnified Person shall be entitled to indemnification in accordance with Section 5.03.

Section 8.05. Force Majeure . (a) For purposes of this Section 8.05, “ force majeure ” means an event beyond the reasonable control of either party, which by its nature could not have been foreseen by such party, or, if it could have been foreseen, was unavoidable, and includes without limitation, acts of God, storms, floods, riots, fires, sabotage, civil commotion or civil unrest, interference by civil or military authorities, threat, declaration, continuation, escalation or acts of war (declared or undeclared) or acts of terrorism, failure or shortage of energy sources,

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raw materials or components, strike, walkout, lockout or other labor trouble or shortage, delays by unaffiliated suppliers or carriers, and acts, omissions or delays in acting by any Governmental Authority or the other party.

(b) Without limiting the generality of Section 5.02(a), neither party shall be under any liability for failure to fulfill any obligation under this Agreement, so long as and to the extent to which the fulfillment of such obligation is prevented, frustrated, hindered, or delayed as a consequence of circumstances of force majeure; provided that such party shall have used commercially reasonable efforts to minimize to the extent practicable the effect of force majeure on its obligations hereunder; provided further that nothing in this Section 8.05 shall be construed to require the settlement of any strike, walkout, lockout or other labor dispute on terms which, in the reasonable judgment of the affected party, are contrary to its interests. It is understood that the settlement of a strike, walkout, lockout or other labor dispute will be entirely within the discretion of the affected party. The party affected by the force majeure event shall notify the other party of that fact as soon as practicable.

Section 8.06. Entire Agreement . This Agreement (including the Schedules constituting a part of this Agreement) and any other writing signed by the parties that specifically references this Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof. This Agreement is not intended to confer upon any Person other than the parties hereto, their Affiliates and their respective successors and permitted assigns any rights or remedies hereunder.

Section 8.07. Information . Subject to Applicable Law and privileges, each party hereto covenants and agrees to provide the other party with all information regarding itself and transactions under this Agreement that the other party reasonably believes are required to comply with all applicable federal, state, county and local laws, ordinances, regulations and codes, including, but not limited to, securities laws and regulations.

Section 8.08. Notices . Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, or mail, to the following addresses:

Morgan Stanley

1585 Broadway

New York, NY 10036

Attn: Martin M. Cohen, Director of Company Law

Facsimile: (212) 507-3334

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with a copy to:

Davis Polk & Wardwell

450 Lexington Avenue

New York, NY 10017

Attn: Paul Kingsley, Esq./Jeffrey Small, Esq.

Facsimile: (212) 450-3277/(212) 450-3500

Discover Financial Services

2500 Lake Cook Road

Riverwoods, IL 60015

Attn: General Counsel - Contracts

Facsimile: (224) 405-4584

or to such other addresses or telecopy numbers as may be specified by like notice to the other parties. All such notices, requests and other communications shall be deemed given, (a) when delivered in person or by courier or a courier services, (b) if sent by facsimile transmission (receipt confirmed) on a Business Day prior to 5 p.m. in the place of receipt, on the date of transmission (or, if sent at or after 5 p.m. at the place of receipt, on the following Business Day) or (c) if mailed by certified mail (return receipt requested), on the date specified on the return receipt.

Section 8.09. Governing Law . This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to the conflicts of laws rules thereof.

Section 8.10 . Jurisdiction. Any Action seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or any other New York State court sitting in New York County, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 8.08 shall be deemed effective service of process on such party.

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Section 8.11. WAIVER OF JURY TRIAL . THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 8.12. Severability . If any provision of this Agreement or any part thereof shall be invalid or unenforceable, such invalidity or unenforceability shall not render the entire Agreement invalid. Rather, the Agreement shall be construed as if not containing the particular invalid or unenforceable provision, and the rights and obligations of each party shall be construed and enforced accordingly.

Section 8.13. Amendments and Waivers . (a) Any provision of this Agreement (including the Schedules hereto) may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.

(b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 8.14. Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the written consent of the other party hereto.

Section 8.15. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one agreement.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

B. Discover to Morgan Stanley

Discover will provide to Morgan Stanley certain services in each of the areas listed below. Morgan Stanley will provide these service for terms not exceeding 12 months, except as otherwise indicated.

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Discover agrees to furnish supplementally to the Securities and Exchange Commission a copy of the schedules to this agreement upon the request of the Securities and Exchange Commission in accordance with Item 601(b)(2) of Regulation S-K.

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Exhibit 10.4

TRANSITIONAL TRADE MARK LICENCE AGREEMENT

Agreement by and between Morgan Stanley & Co. International PLC, a United Kingdom corporation with offices at 25 Cabot Square, Canary Wharf, London E14 4QA, United Kingdom (“Licensor”) and Goldfish Bank Limited, a United Kingdom corporation with offices at 2 Hertsmere House, Canary Wharf, London, E14 4AB, United Kingdom (“Licensee”) made this 30th day of June, 2007 (the “Licence”) (collectively, the “parties”, individually, a “party”).

1. DEFINITIONS . The following terms shall have the following definitions when used in this Licence:

1.1 “ Change of Control ” shall mean (i) the direct or indirect acquisition (by merger, consolidation, business combination or otherwise) by any Person or group of Persons of beneficial ownership (as defined in Rule 13d-1 and Rule 13d-5 under the Securities Exchange Act of 1934) of 50% or more of the Total Voting Power of Licensee, (ii) any merger, consolidation or other business combination of Licensee or an affiliate of Licensee with any Person after giving effect to which (x) the shareholders of Licensee immediately prior to such transaction do not own at least 50% of the Total Voting Power of the ultimate parent entity of the parties to such transaction or (y) individuals who were directors of Licensee immediately prior to such transaction (or their designees) do not constitute a majority of the board of directors of such ultimate parent entity, and (iii) the direct or indirect acquisition by any Person or group of Persons of all or substantially all of the assets of Licensee.

1.2 “ Effective Date ” shall mean the date written hereinabove.

1.3 “ Parent Licence Agreement ” shall mean that agreement between Licensor and Morgan Stanley which authorizes Licensor to sublicense the Mark.

1.4 “ Mark ” shall mean the marks MORGAN STANLEY and MORGAN STANLEY and Design, and the registrations therefor in the European Union and the United Kingdom, as shown on Exhibit 1 to this Licence and the Domain Names.

1.5 “ Marketing Partner ” shall mean any third party to whom Licensee has previously granted the right to use the Mark solely in connection with the Services and any third party to whom Licensee grants the right to use the Mark during the Term solely in connection with the Services.

1.6 “ Person ” shall mean means individual, corporation, limited liability company, partnership, association, trust or other entity or organization, including a governmental or political subdivision or an agency or instrumentality thereof.

1.7 “ Related Company ” shall mean any company which is wholly owned, either directly or indirectly, by Morgan Stanley (with respect to Licensor Related Companies) or Discover Financial Services (with respect to Licensee Related Companies), at the time of this Licence and only so long as it remains wholly owned, either directly or indirectly, by either Morgan Stanley or Discover Financial Services, as applicable. For the avoidance of doubt, the companies listed in Exhibit 2 shall be Licensee’s Related Companies at the time of this Licence.

1.8 “ Services ” shall mean services relating to Licensee’s, or Related Companies’, credit card business and such services as are related and ancillary thereto including the offering of reward programmes, loans and insurance products.

1.9 “ Standards of Quality ” shall mean substantially the same standards of quality, service and other standards that have been observed as of the Effective Date by Licensee and/or Related Companies and/or Marketing Partners in the development, marketing, advertising, performance and sale of any Services offered under the Mark in the Territory.

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1.10 “ Territory ” shall mean the United Kingdom and the Internet (solely for purposes of promoting the Services to residents of the United Kingdom and providing the Services to existing customers).

1.11 “ Total Voting Power ” shall mean, with respect to any Person, the total combined voting power of all securities of such Person entitled to vote generally in the election of directors of such Person.

2. GRANT. Subject to the terms and condition of this Licence and pursuant to the Parent Licence Agreement:

2.1 Licensor hereby grants to Licensee a limited, non-transferable, royalty-free Licence to use the Mark in the Territory in connection with the Services as described in this Licence, including in connection with the advertising and promotion of the Services (“Advertising”), with the right to sublicense such right, but only to Related Companies and/or Marketing Partners (collectively, “Sublicensees”) in connection with the Services, provided that Licensee shall procure that such Sublicensees are likewise subject to all the terms and conditions of this Licence. Licensee shall cause its Sublicensees to comply with all the terms and conditions of the Licence and shall be responsible to Licensor for ensuring compliance by the Sublicensees with the terms and conditions of this Licence.

2.2 During the Term, Licensee and its Related Companies, but not its Marketing Partners, may use the Mark as part of their corporate names, trading names and/or assumed names.

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2.3 During the Term, Licensee and its Sublicensees may use the domain names listed in Exhibit 3 hereto (“Domain Names”) in connection with the Services offered under the Mark. In particular, but without limitation to the foregoing, the Licensee and its Related Companies shall be entitled to exercise the technical and administration rights in relation to the Domain Names and to create URLs within the Domain Names. Licensor shall make such Domain Names available to Licensee for its exclusive use (for the first two (2) years of the Term, unless this Licence is terminated earlier), or shared use with other Licensor Related Companies, as set forth in Exhibit 3. Licensor shall ensure that the Domain Names are managed as part of the domain name portfolio management services provided by VeriSign Inc. and shall provided three nominated users of the Licensee with online review-only access to the Domain Names in such VeriSign account.

2.3.1 For those Domain Names listed in Exhibit 3 as exclusive to Licensee, Licensee shall insert a prominently placed (e.g., “above the fold”) icon or other reference to Licensor (or its Related Companies) as reasonably requested by Licensor that links a user to a Licensor (or Related Company) website. The parties shall reasonably agree on the size, content and manner of any such reference.

2.3.2 For those Domain Names listed in Exhibit 3 as shared between the parties, and for those domains in Section 2.3.1 during the last year of the Term, the parties shall reasonably agree to the layout and content of such webpages associated with these Domains Names in a manner that directs the user to select a further Licensee or Licensor (or Related Company) website.

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2.3.3 Licensee agrees that as marketing and promotional material inventories are replenished during the Term, Licensee shall make commercially reasonable efforts to replace reference to any Domain Names with a domain name not containing or incorporating the Marks.

2.4 During the Term, the Licensee and its Sublicensees may use the phrase “Formerly known as the Morgan Stanley Credit Card” or such other similar phrase as has been approved in writing by Licensor, in its advertising, promotion and performance of the Services under the New Mark, provided that any such phrases shall not be used on the credit or debit cards directly.

2.5 During the Term, in relation to search keyterms regarding the Services that include the Mark or such other similar terms as has been approved in writing by Licensor, Licensee may procure such keyterms on google.co.uk and other search engines where the searcher is from a United Kingdom IP address .

2.6 Notwithstanding any rights granted herein, Licensee and its Sublicensee shall make commercially reasonable efforts to minimize the use of the mark “Morgan Stanley Dean Witter” and shall have no right to use such mark on any advertising or promotional materials.

2.7 Any and all rights not granted to Licensee are specifically reserved by Licensor.

2.8 Subject to clauses 2.6 and 2.7, Licensee and its Sublicensees shall only use the Mark in connection with any products and services offered or provided in relation to the Services, immediately prior to the Effective Date, by Licensee and/or its Sublicensees in the Territory (“Existing Products”).

2.9 If Licensee desires to use (or desires that a Sublicensee may use) the Mark in conjunction with any products and services which are (i) not Existing Products; and (ii) not covered by clause 2.7:

2.9.1 it shall make such request to Licensor in writing;

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2.9.2 Licensor shall, in its reasonable discretion, determine whether it will allow such use, and shall notify Licensee of such decision in writing within a reasonable time; and

2.9.3 if Licensor decides to allow such use, the parties shall negotiate a separate, royalty-bearing licence which shall also require that Licensee pay reasonable expenses for any additional trade mark or service mark registrations required if the Mark is not registered for use in the appropriate class of goods or services relating to such product or service.

2.10 During the Term, Licensee and its Sublicensees shall be entitled to offer and provide new products and/or services in the Territory under the Mark only to existing customers of Licensee and its Sublicensees who hold a credit card bearing the Mark in connection with loans and insurance products and associated services including travel services.

2.11 For the avoidance of doubt and notwithstanding any other provision of this Licence, the Licensee shall determine the specification, features, pricing and other terms and conditions of any and all Services in its sole discretion, provided that (i) any specifications, features, pricing or other terms and conditions of the Services does not bring Licensor or its affiliates into disrepute, and (ii) Licensee shall use its best endeavours to ensure that any marketing material containing the Mark is accurate and not false or misleading or deceptive or contain any statements which are derogatory or defamatory of any person or likely to bring the Licensor and its affiliates into disrepute.

3. TERM AND TERMINATION.

3.1 The purpose of this Licence is to allow for the smooth transition of the business of the Services conducted under the Mark in the Territory to a new trade mark (the “New Mark”). Therefore, the term of this Licence shall be for a maximum of three (3) years from the

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date of this Licence (the “Term” ), provided however, that Licensee uses reasonable commercial endeavours to select, develop and begin using the New Mark, as soon as practical, which New Mark shall not contain either the term “Morgan” or “Stanley” or any similar terms. Licensee shall inform Licensor in writing each calendar quarter of the then-current number of outstanding credit cards bearing the Mark under the Licence hereunder and shall provide a copy of its plan to migrate from the Mark to the New Mark to the Licensor.

3.2 With regard to a sublicense to a Related Company, such sublicense shall immediately terminate without notice if such company ceases to be a Related Company. With regard to a sublicense to a Marketing Partner, such sublicense shall immediately terminate without notice if such company ceases to be a Marketing Partner.

3.3 At any time following announcement of a transaction involving a Change of Control of Licensee, Licensor may elect, by delivery of notice in writing to Licensee, to terminate the Licence, such termination to take effect on the date specified in the notice; provided that without the written consent of Licensee, no such termination shall occur prior to thirty (30) days’ after the closing of such Change of Control transaction.

3.4 Licensor may terminate the Licence at any time with immediate effect upon serving written notice upon the Licensee if the Licensee suffers an Insolvency Event. For purposes of this Licence, “Insolvency Event” shall mean (i) the making by Licensee of any assignment for the benefit of creditors of all or substantially all of its assets or the admission by Licensee in writing of its inability to pay all or substantially all of its debts as they become due; (ii) the adjudication of Licensee as bankrupt or insolvent or the filing by Licensee of a petition or application to any tribunal for the appointment of a trustee or receiver for Licensee or any substantial part of the assets of Licensee; or (iii) the commencement of any voluntary or

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involuntary bankruptcy proceedings (and, with respect to involuntary bankruptcy proceedings, the failure to be discharged within sixty (60) days), reorganization proceedings or similar proceeding with respect to Licensee or the entry of an order appointing a trustee or receiver or approving a petition in any such proceeding.

3.5 Licensor may elect, by delivery of notice in writing to Licensee, to terminate the Licence, such termination to take effect on the date specified in the notice, if Licensee shall have failed to perform any of its material obligations under this Licence, Licensor has notified Licensee in writing of such failure and such failure shall have continued for a period of sixty (60) days after receipt by Licensee of written notice of such failure.

3.6 Upon termination of this Licence by Licensor, Licensee shall (and shall procure that its Sublicensees shall) cease any and all use of the Mark and the Domain Names.

4. QUALITY CONTROL.

4.1 All use of the Mark by Licensee and the Sublicensees shall be in compliance with the Standards of Quality. Licensee shall (and shall procure that its Sublicensees shall) not use nor permit the Mark and Domain Names to be used in any manner which, as a direct result of such use of the Mark, is likely to (i) subject Licensor to unfavorable regulatory action; (ii) violate any law; (iii) violate the rights of any person or entity (other than rights directly relating to the Mark); or (iv) subject Licensor to liability for any reason (other than as directly relating to the Mark). Any and all uses of the Mark and Domain Names shall be in accordance with all applicable national, European Union, local or other laws and regulations.

4.2 In order to promote adherence to the Standards of Quality and for the purpose of protecting and maintaining the goodwill associated with the Mark and the reputation of the Licensor, Licensor shall have the right to:

4.2.1 Obtain from Licensee reasonable information as to the nature and quality of the Services and the Advertising and the manner in which the Mark is used in connection with the Services and the Advertising.

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4.2.2 Itself or through an authorised representative, at any reasonable time or times during regular business hours on reasonable advanced written notice, visit the offices and facilities of Licensee where the Services are developed, designed, marketed, promoted, sold, serviced or rendered (i) up to two (2) times per calendar year; and (ii) additionally, if Licensor notifies Licensee in writing that it believes that the Services are not conforming to the Standards of Quality or other requirements of this Licence, which notice shall provide a description of the nonconformity that is reasonable under the circumstances and, if appropriate and available to Licensor, include copies of any documentation relating to such nonconformity. Licensee shall use all reasonable endeavours to procure that its Sublicensees shall also provide such access to Licensor on the terms set out in this clause 4.2.2. Licensor may conduct a reasonable inspection and examination of such offices and facilities in order to satisfy itself that the Services are conforming to the Standards of Quality and the other requirements of this Licence provided that Licensor or its authorised representative shall comply with all codes of conduct and similar policies notified to Licensor by Licensee at all times while visiting the offices and facilities of Licensee and its Sublicensees.

4.2.3 In conducting any such inspection or examination, Licensor shall take all steps reasonably required by Licensee or its Sublicensees to minimize disruption to Licensee’s or Sublicensees’ business and to avoid disclosure of any confidential and proprietary information and materials, including, but not limited to, executing nondisclosure agreements, provided that such steps and agreements shall not prevent Licensor from pursuing any claims that it may have in connection with this Licence.

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4.2.4 Licensee agrees to furnish Licensor, from time to time as reasonably requested by Licensor but in any event no more than quarterly, representative samples of credit cards, invoices, advertising and promotional materials to which the Mark is affixed and representative samples showing other uses of the Mark, as well as any other particular uses of the Mark reasonably requested by Licensor.

4.3 If at any time the Services rendered or its Advertising fail, in the reasonable judgment of Licensor, to conform to the Standard of Quality in any material respect, Licensor shall notify Licensee of such failure in writing (which notice shall provide a description of the nonconformity that is reasonable under the circumstances and, if appropriate and available to Licensor, include samples of any nonconforming Advertising and copies of any documentation relating to such nonconformity). Licensee shall take all necessary steps to bring the Services and Advertising into conformity within thirty (30) days (or such other time period mutually agreed upon by the parties) after Licensee’s receipt of written notice of the nonconformity. Notwithstanding the foregoing, in the event Licensor and Licensee do not agree as to (i) whether a nonconformity exists, (ii) a remedy for the nonconformity, or (iii) the date by which the nonconformity will be corrected, the parties shall engage senior management of each party’s parent company to resolve such dispute.

5. INTELLECTUAL PROPERTY.

5.1 Licensee acknowledges that Licensor is the owner of the Mark, any marks which contain the Mark and the Domain Names. It is understood and agreed that nothing in this agreement will be deemed in any way to constitute an assignment by Licensor of the Mark

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and the Domain Names or of any rights therein, or to give Licensee or its Sublicensees any right, title or interest in and to the Mark or the Domain Names (except the right to make use thereof as provided for in this Licence).

5.2 Licensor shall maintain registrations for the Mark in the United Kingdom and CTM during the Term which protect the right of the Licensee to use the Mark as set out in this Licence.

5.3 Licensee shall (and shall procure that its Sublicensees shall) not register or apply to register in any trade mark office in any jurisdiction the Mark or any mark which contains the Mark. Licensee shall (and shall procure that its Sublicensees shall) also not register any domain name which contains the Mark or which is confusingly similar to the Mark in any gTLD or ccTLD. If Licensee or such Sublicensee registers or applies to register any such marks or domain names, Licensee shall (or Licensee shall procure that Sublicensee shall) assign such registration or application or domain name to Licensor.

5.4 Licensee shall (and Licensee shall procure that any Related Company which uses the Mark as part of its corporate, trading or assumed name shall) change such corporate, trading and/or assumed name prior to the end of the Term or earlier if the Licence is terminated hereunder.

5.5 Licensee shall (and shall procure that its Sublicensees shall) cooperate with Licensor with regard to the prosecution and maintenance of any applications, registration and registered user agreements with regard to the Mark and similar activities in relation to the application and registration of the Mark, including the supplying of specimens of use and executing any documents requested by Licensor for such purposes.

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5.6 Licensee shall (and shall procure that its Sublicensees shall) promptly notify Licensor of any infringement of the Mark in relation to the Services or any matter which Licensee reasonably believes does or is likely to adversely affect the goodwill of the Mark in relation to the Services and which comes to the attention of Licensee, provided that failure to so notify (other than due to wilful default) shall not constitute a breach of this Licence.

5.7 Subject to clause 5.8, Licensor shall retain all rights to bring all actions and proceedings in connection with infringement or misuse of the Mark at its sole discretion, provided that should Licensor not take action and proceedings against any person whom Licensee believes is committing an infringement or misuse of the Mark in relation to the Services, Licensee may escalate such decision to senior management at Licensor and Licensee for resolution.

5.8 Licensee shall be entitled to require Licensor to take action and proceedings against any person whom Licensee believes is committing an infringement of the Marks in a domain name solely through a UDRP arbitration proceeding or similar proceeding, in which event all costs so incurred (including without limitation any costs associated with Licensor’s involvement in such action) and recoveries made shall be for the account of Licensee.

5.9 Licensee shall (and shall procure that its Sublicensees shall) fully cooperate with Licensor in any action in relation to the Services which Licensor may take against an infringer of the Mark in the Territory or in any Domain Name dispute.

5.10 All costs incurred and recoveries made in relation to all actions and proceedings in connection with infringement or misuse of the Mark and the Domain Names shall, to such extent:

5.10.1 be for the account of Licensee if the actions and proceedings directly relate to a domain name,

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5.10.2 be for the account of Licensee if the actions and proceedings directly relate to the Services and Licensor has not granted a licence of the Mark to any third party,

5.10.3 be apportioned between Licensee and the relevant third party according to an agreed upon basis of apportionment if the actions and proceedings directly relate to the Services and Licensor has granted a licence to any third party for use of the Mark in relation to the Services, and

5.10.4 be for the account of Licensor if the actions and proceedings are outside the scope of the Services.

5.11 Licensor shall indemnify, defend and hold harmless Licensee and Sublicensees and their directors, officers, employees and agents from any third party claim, demand, or action for infringement of a third party trade mark arising out of or in connection with Licensor’s rights to the Mark and all costs, losses, damages, expenses (including legal expenses) and liabilities arising therefrom provided Licensee’s use (and, if applicable, the use by the affected Sublicensee) of the Mark is in compliance with this Licence.

5.12 Subject to clause 5.11, Licensee shall indemnify, defend and hold harmless Licensor and its affiliates and their directors, officers, employees and agents from any third party claim, demand or action in relation to its use, and the use by any of its Sublicensees, of the Mark in connection with the Services.

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6. USE OF MARK

6.1 Licensee shall (and shall procure that its Sublicensees shall) comply with the standards and guidelines with respect to the appearance and manner of use of the Mark set out in Exhibit 4.

7. MISCELLANEOUS

7.1 Governing Law . This Licence shall be governed by and construed in accordance with the laws of England, without regard to its choice of law principles. The parties hereby irrevocably consent to the exclusive jurisdiction of, and venue in, any court of competent jurisdiction located in England for the purposes of adjudicating any matter arising from or in connection with this Licence.

7.2 Relief . Each party acknowledges that a breach of its obligations under this Agreement may, as determined by a court of competent jurisdiction, result in irreparable and continuing damage to the other party for which monetary damages would not be sufficient, and agrees that the other party will be entitled to seek, in addition to its other rights and remedies hereunder or at law, injunctive and/or other equitable relief, and such further relief as may be proper from a court of competent jurisdiction.