DISCRETIONARY NEW HIRE AWARD TERM SHEET

EXHIBIT 10.3

February 14, 2008

Mr. Kenneth deRegt

[Address redacted]

Dear Ken:

I am pleased to extend to you an offer of employment at Morgan Stanley (collectively with Morgan Stanley’s subsidiaries and affiliates, “Morgan Stanley” or the “Firm”). You will be employed by Morgan Stanley & Co. Incorporated. Your position will be that of Managing Director in the Office of the Chairman and you will serve as a member of the Firm’s Operating Committee.

For fiscal 2008, beginning December 1, 2007, your Total Reward will consist of an annual base salary of $300,000, pro-rated from the date you commence employment, paid in semi-monthly installments plus a year-end bonus that is payable partially in cash and, as determined by a committee of the Board of Directors (the “Committee”), partially in the form of long-term incentive compensation, which may consist of an equity-based award (such as Morgan Stanley restricted stock units or other equity-based awards in effect at the time) under one of the Firm’s compensation plans and will be consistent with awards to other Operating Committee members. All components of your Total Reward are contingent upon satisfactory performance and conduct and that you remain employed through, and not give or receive notice of termination of your employment prior to, November 30, 2008. Payment of your Total Reward is contingent upon your execution of the Firm’s standard sign-on agreement (the “Sign-On Agreement”), which is attached to this letter (see description below). All payments are subject to applicable withholdings and deductions.

In addition, the Firm will grant you a one-time award of Morgan Stanley restricted stock units (“the Sign-on Award”) with a value of $1,000,000 which will be granted effective as of your employment commencement date. The number of Morgan Stanley restricted stock units you receive will be determined by dividing the value of your Morgan Stanley restricted stock unit award by the volume weighted average price of Morgan Stanley common stock on your employment commencement date. Subject to satisfactory and continued employment, your restricted stock units will vest and convert to shares on the following schedule: 50% will vest and convert to shares on the second anniversary of your start date and 50% on the third anniversary of your start date. The attached term sheet sets forth the terms, including settlement schedule and any provision for accelerated settlement, of your Morgan Stanley restricted stock units. This Sign-on Award will not constitute part of your Total Reward.

The foregoing awards and their terms are subject to approval by the Committee and are subject to the same cancellation provisions, sales restrictions and other terms (except as specifically provided herein) as are in effect at the time for similar equity-based awards (for example, your equity award, even if vested, is subject to cancellation under specified circumstances). The foregoing awards and their terms are also subject to the terms and conditions of the award certificate and the equity compensation plan under which the awards are issued. The Management Committee Equity Ownership Commitment will apply to any Morgan Stanley common stock you own and any equity-based award that may be granted to you. This Commitment requires that you retain 75% of common stock and equity awards (net of tax and exercise cost) held when you become subject to the commitment and subsequently awarded to you.

Since you had achieved Full Career Retirement status during your prior employment with the Firm, you will be provided Full Career Retirement for purposes of any annual long-term incentive award granted to you during your employment at Morgan Stanley, provided that such award otherwise contains provisions for Full Career Retirement. Full Career Retirement status currently provides that so long as you do not engage in any conduct that constitutes a cancellation event under the relevant long-term incentive award, such long-term incentive award will vest upon your termination of employment. Transfer restrictions on shares and cancellation provisions will lift, and the long-term incentive award will be settled, on schedule. The award will remain subject to all terms and conditions approved by the Committee for such award, including without limitation, the cancellation of the award under certain specified circumstances stated in the applicable award agreement.

The foregoing awards are offered by the Firm and are accepted by you as fully satisfying any loss that you may suffer, including as a result of any former employer forfeiting or otherwise cancelling, as a result of your termination of employment from your former employer, any stock, stock units, stock options (including the loss of any time value in stock options) or other long-term incentive awards or other investment right (contingent or actual) that you may currently enjoy by reason of that employment.

In addition, if any provision of this agreement fails to comply with Section 409A of the Internal Revenue Code or any regulations or Treasury guidance promulgated thereunder, or would result in your recognizing income for United States federal income tax purposes with respect to any amount payable under this agreement before the date of payment, or to incur interest or additional tax pursuant to Section 409A, the Firm reserves the right to reform such provision without seeking or obtaining your consent; provided that the Firm shall maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A.

Each calendar year you work for Morgan Stanley you will be eligible for 6 weeks of vacation.

Included in your package is a summary of the Firm’s benefit plans. We will provide you with an extensive overview of the Benefits Enrollment Package and assist you in the enrollment process. Health and welfare benefits (medical, dental, vision, life, accident and disability insurance) are generally available retroactive to the date you commence employment and must be elected within your 31-day enrollment period, as indicated on your Enrollment package.

If you wish, you may review your options and enroll in coverage on the Benefit Center website [website address redacted] approximately three days following your hire date. To log on you will need your Social Security Number and Personal Identification Number (“PIN”). Your initial PIN is [redacted]. If you do not contact the Benefit Center within your 31-day enrollment period, you will receive the health and welfare coverage as indicated in the Enrollment Guide and on your Summary Chart on the Benefit Center website.

Generally, your prior service with Morgan Stanley is considered in determining your service under the Morgan Stanley benefit plans including the Excess and SERP retirement plans. Also, upon your date of hire you will be eligible to contribute to the Morgan Stanley 401(k) Plan and receive a Company Match.

As a Managing Director with the Firm, you will be uniquely positioned to advance the Firm’s business interests. As a result, the Firm requires certain commitments of you in the event your employment with the Firm terminates, so that the Firm can protect those business interests and ensure an orderly transition of business, responsibilities, and business relationships for the benefit of the Firm, our clients and customers and our other employees. In summary, these commitments include that you: (i) give the Firm

advance written notice of your intention to terminate your employment of at least (a)180 days if you are a member of the Morgan Stanley Operating Committee (or a successor or equivalent committee) at the time of notice of resignation, (b) 90 days if you are a Managing Director (or equivalent title) at the time of notice of resignation or (c) 60 days if you are an Executive Director (or equivalent title) at the time of notice of resignation; (ii) refrain from soliciting or hiring certain Firm employees for 180 days after the termination of your employment and from soliciting certain clients and customers for 90 days after the termination of your employment (180 days member of the Morgan Stanley Operating Committee at the time of your notice of termination); and (iii) abide by the obligations of confidentiality as set forth in the Firm’s Code of Conduct, as amended from time to time (the “Code of Conduct”). These provisions are more fully set forth in the attached Sign-On Agreement and the Code of Conduct, both of which you will be required to acknowledge in connection with commencing employment. The Sign-On Agreement constitutes a material part of the Firm’s offer of employment to you, which will not be deemed accepted unless and until you return an executed original of the Sign-On Agreement to us. Therefore, this offer of employment, including payment of your Total Reward and your receipt of any benefits described herein, is contingent upon your execution of the attached Sign-On Agreement. In addition, we remind you that this offer is contingent upon a number of additional steps in the employment process including, but not limited to, background and reference checking. Enclosed is a new hire kit that contains forms that you will be required to complete.

You are also required to show appropriate proof of authorization to commence work in the United States. We ask that you complete Part 1 of the Form I-9, on or before your first day of work (see, in the attached packet, a list of the type of documentation we will need.). This is a requirement of the Immigration Reform and Control Act of 1986. If you are not legally able to work for the Firm in the United States in the position offered you, or if any part of the screening process proves unsatisfactory to the Firm or you are unable to complete Part 1 of the Form I-9, the Firm reserves the right to rescind any outstanding offer of employment or terminate your employment without notice or severance benefits and rescind any long-term incentive or equity-based awards described herein. Further, this offer is contingent on your obtaining and retaining all licenses and registrations from the NASD, exchanges, state securities commissions and other regulatory bodies as Morgan Stanley shall determine necessary for your position. You must also bring with you a government-issued photo identification, in a form acceptable to Morgan Stanley (such as a valid passport or a driver’s license.) Also in the enclosed packet, please find personnel forms that need to be completed and brought with you on your first day of work.

You acknowledge that in the course of your employment with the Firm, you are not permitted to make any unauthorized use of documents or other information that are the confidential, trade secret or proprietary information of another individual or company (“Confidential Information”). Likewise, you may not bring onto Firm premises any Confidential Information, whether documents or other tangible forms, relating to your prior employers’ business.

You understand and agree that as a condition of employment, you must, upon the commencement of employment, transfer any outside brokerage/securities accounts to Morgan Stanley unless you are granted a waiver in writing by the Compliance Department. Nothing in this letter should be construed as a guarantee of any particular level of benefits, of your participation in any benefit plan, or of continued employment for any period of time. You should understand that your employment will be “at will,” which means that the Firm may terminate your employment for any reason, with or without cause, and at any time (subject to the Sign-On Agreement). During your employment, subject to applicable law and in accordance with Morgan Stanley’s Drug, Alcohol and Controlled Substance Usage Policy, you may be subject to drug testing, including for reasonable suspicion of use of controlled

substances. Morgan Stanley reserves the right to amend, modify or terminate, in its sole discretion, all benefit and compensation plans in effect from time to time. This offer letter and the Sign-On Agreement constitute the entire understanding and contain a complete statement of all agreements between you and Morgan Stanley and supersede all prior or contemporaneous verbal or written agreements, understandings or communications (including, without limitation, any term sheet or other summary writing relating to your employment). You acknowledge that you have not relied on any assurance or representation not expressly stated in this offer letter. If there is any conflict with the benefit information included in this letter or any verbal representation and the Plan documents or insurance contracts, the Plan documents or insurance documents control.

With the formalities covered, we are looking forward to you joining Morgan Stanley. As stated, we will meet with you to walk through your benefits in more detail and to walk through any remaining new hire paperwork. If you have any questions, please feel free to call Karen Jamesley at [redacted].

We ask that you confirm your acceptance by signing and dating this offer letter in the area designated below and returning this letter to Karen Jamesley at [redacted]. Your signature below confirms that you are subject to no contractual or other restriction or obligation that is inconsistent with your accepting this offer of employment and performing your duties. Please also sign, date and return the attached Sign-On Agreement to Karen Jamesley in the Human Resources Department. Please retain the additional copy of this offer letter and an additional signed copy of the Sign-On Agreement for your reference.

Very truly yours,

Offer Accepted and Agreed To:

Name: Kenneth deRegt

Title: Managing Director in the Office of the Chairman

DISCRETIONARY NEW HIRE AWARD TERM SHEET

The following is an abbreviated general description of the terms and conditions of the 2008 award granted to you under the Employee Equity Accumulation Plan. This summary does not address all 2008 award features. Your 2008 Award Certificate provides a full explanation of the terms and conditions of your 2008 award, which may differ from the description in this summary. Unless otherwise defined herein, all capitalized terms shall have the meaning set forth in your 2008 Award Certificate. If there is any conflict between the terms of this summary and those in your 2008 Award Certificate, the latter will control. You will also be provided with a prospectus and tax supplement that contains important information about these awards.

TERMS OF NEW HIRE STOCK UNIT AWARD

Until conversion, stock units constitute a contingent and unsecured promise of the Firm to pay the unit holder shares of Morgan Stanley common stock.

Notwithstanding the other provisions of the award, the conversion of your vested stock units will be deferred if, at the time scheduled for conversion, Morgan Stanley considers you to be one of its executive officers and your compensation may not be fully deductible by virtue of Section 162(m) of the Internal Revenue Code. This deferral will continue until your “Separation from Service” under Section 409A, and your vested stock units will convert into Morgan Stanley common stock upon your Separation from Service. If, however, Morgan Stanley considers you to be one of its “specified employees” as defined in Section 409A at the time of your Separation from Service, conversion of your stock units will be delayed until the first business day following the date that is six months after your Separation from Service (subject to earlier conversion in the event of your death or your employment at a Governmental Employer under the circumstances described below).

The special provisions that apply if your Employment terminates for death, Disability, Full Career Retirement, Governmental Service Termination or Qualifying Termination, are described below.

If you die after your termination of Employment but prior to the applicable Scheduled Conversion Date, vested stock units that you held as of the date of your death will convert and be paid to your beneficiary or estate upon your death, provided that your estate or beneficiary notifies the Firm of your death within 60 days following your death.

Full Career Retirement is defined as a termination not involving any cancellation event (and other than due to death, Disability, Governmental Service Termination or Qualifying Termination).

If your Employment terminates other than in a Governmental Service Termination and not involving a cancellation event and, following your termination of Employment, you accept employment with a Governmental Employer, then, provided that you sign an agreement satisfactory to the Firm relating to your repayment obligations summarized below, your outstanding vested stock units will convert to shares upon your commencement of such employment, provided you present the Firm with satisfactory evidence that the divestiture of your continued interest in Morgan Stanley equity awards or continued ownership of Morgan Stanley common stock is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer.

“Governmental Service Termination” means the termination of your Employment and your commencement of employment at a Governmental Employer; provided that you have presented the Firm with satisfactory evidence demonstrating that as a result of such new employment, the divestiture of your continued interest in Morgan Stanley equity awards or continued ownership of Morgan Stanley common stock is reasonably necessary to avoid the violation of U.S. federal, state or local or foreign ethics law or conflicts of interest law applicable to you at such Governmental Employer.

“Governmental Employer” means a governmental department or agency, self-regulatory agency or other public service employer.

“Qualifying Termination” means your termination of Employment within eighteen (18) months following a Change in Control, under either of the following circumstances: (a) the Firm terminates your employment under circumstances not involving any cancellation event; or (b) you resign from the Firm due to (i) a materially adverse alteration in your position or in the nature or status of your responsibilities from those in effect immediately prior to the Change in Control or (ii) the Firm requiring your principal place of employment to be located more than 75 miles from the location where you were principally employed at the time of the Change in Control (except for required travel on the Firm’s business to an extent substantially consistent with your business travel obligations in the ordinary course of business prior to the Change in Control).

In addition all vested and unvested stock units will be subject to cancellation if, without the consent of the Firm:

“Proprietary Information” means any information that may have intrinsic value to the Firm, the Firm’s clients or other parties with which the Firm has a relationship, or that may provide the Firm with a competitive advantage, including,

without limitation, any trade secrets; inventions (whether or not patentable); formulas; flow charts; computer programs; access codes or other systems information; algorithms; technology and business processes; business, product, or marketing plans; sales and other forecasts; financial information; client lists or other intellectual property; information relating to compensation and benefits; and public information that becomes proprietary as a result of the Firm’s compilation of that information for use in its business; provided that such Proprietary Information does not include any information which is available for use by the general public or is generally available for use within the relevant business or industry other than as a result of your action. Proprietary Information may be in any medium or form, including, without limitation, physical documents, computer files or discs, videotapes, audiotapes, and oral communications.

You will be deemed to have made “Unauthorized Comments” about the Firm if you, while Employed or following termination of Employment make, directly or indirectly, any negative, derogatory or disparaging comment, whether written, oral or in electronic format, to any reporter, author, producer or similar person or entity or to any general public media in any form (including, without limitation, books, articles or writings of any other kind, as well as film, videotape, audio tape, computer/Internet format or any other medium) that concerns directly or indirectly the Firm, its business or operations, or any of its current or former agents, employees, officers, directors, customers or clients.

“Cause” means:

Please refer to your award certificate for definitions of terms used herein