EXHIBIT 10.5

EMPLOYMENT AGREEMENT

     This Employment Agreement (this “Agreement”) is made and entered into as of
July 22, 2004, by MetroCorp Bancshares, Inc. a national bank holding company
(the “Employer”), and George M. Lee, an individual resident in Houston, Harris
County, Texas (the “Executive”).

R E C I T A L S

     The Employer desires the Executive’s employment with the Employer, and the
Executive wishes to accept such employment, upon the terms and conditions set
forth in this Agreement.

AGREEMENT

     The parties, intending to be legally bound, agree as follows:

     1. DEFINITIONS

     For the purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1.

     “Agreement"—this Employment Agreement.

     “Basic Compensation"—Salary and Benefits.

     “Benefits"—as defined in Section 3.1(b).

     “Board of Directors"—the board of directors of the Employer.

     “Change of Control"–as defined in Section 6.4.

     “Confidential Information"—any and all:

     (a) trade secrets concerning the business and affairs of the Employer,
financial records, management systems, policies or procedures, including the
content of related forms and manuals, salary, bonuses and other personnel
information, and any other information, however documented, that is a trade
secret within the meaning of law of the State of Texas; and

     (b) information concerning the business and affairs of the Employer (which
includes historical financial statements, financial projections and budgets,
historical and projected income, capital spending budgets and plans, the names
and backgrounds of key personnel, personnel training and techniques and
materials, however documented); and

     (c) notes, analysis, compilations, studies, summaries, and other material
prepared by or for the Employer containing or based, in whole or in part, on any
information included in the foregoing.

     “Disability"—as defined in Section 6.2.

     “Effective Date"–shall be July 22, 2004.

     “Employment Period"—the term of the Executive’s employment under this
Agreement.

     “Fiscal Year"—the Employer’s fiscal year, as it exists on the Effective
Date or as changed from time to time.

     “For Cause"—as defined in Section 6.3.

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     “Incentive Compensation"—as defined in Section 3.2.

     “Person"—any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, or governmental body.

     “Proprietary Items"—as defined in Section 7.2(d).

     “Salary"—as defined in Section 3.1(a).

     2. EMPLOYMENT TERMS AND DUTIES

2.1 EMPLOYMENT

     The Employer hereby employs the Executive, and the Executive hereby accepts
employment by the Employer, upon the terms and conditions set forth in this
Agreement.

2.2 TERM

     Subject to the provisions of Section 6, the term of the Executive’s
employment under this Agreement will be three (3) years, beginning on the
Effective Date and ending on the third anniversary of the Effective Date. Prior
to the second anniversary of this Agreement, both parties hereto may agree in
writing to extend the term of this Agreement for an additional year. Following
the initial extension of the term, both parties may agree in writing to extend
the term for one (1) additional year period prior to the expiration thereof.

2.3 DUTIES

     The Executive will have such duties as are assigned or delegated to the
Executive by the Board of Directors, and will initially serve as Chief Executive
Officer of MetroBank, N.A., a national banking association (“Bank”) and as
President of Employer. The Executive will devote his entire business time,
attention, skill, and energy exclusively to the business of the Employer, will
use his best efforts consistent with the industry standards to promote the
success of the Employer’s business, and will cooperate fully with the Board of
Directors in the advancement of the best interests of the Employer. If the
Executive is elected as a director or officer of any of its affiliates, the
Executive will fulfill his duties as such director or officer without additional
compensation.

     3. COMPENSATION

3.1 BASIC COMPENSATION

     (a) Salary. The Executive will be paid an annual salary of $250,000,
subject to adjustment as provided below (the “Salary”), which will be payable in
equal periodic installments according to the Employer’s customary payroll
practices, but no less frequently than monthly. The Salary will be reviewed by
the Board of Directors not less frequently than annually, and may be adjusted
upward in the sole discretion of the Board of Directors, but in no event will
the Salary be less than $250,000 per year.

     (b) Benefits. The Executive will, during the Employment Period, be
permitted to participate in such pension, profit sharing, bonus, life insurance,
hospitalization, major medical, and other employee benefit plans of the Employer
that may be in effect from time to time, to the extent the Executive is eligible
under the terms of those plans (collectively, the “Benefits”).

3.2 INCENTIVE COMPENSATION

     Beginning with the effective date, the Board of Directors of Employer will
provide on, a pro-rata basis, Executive with a formal Incentive Compensation
Plan (“Incentive Compensation”) that allows Executive to earn up

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to 100% of Base Salary as Incentive Compensation based on certain predetermined
performance measures set forth in such Plan. Performance at expected or budgeted
performance consistent with opportunities in the market place will result in
Incentive Compensation of 50% of Base Salary, while maximum Incentive
Compensation will be earned for superior performance results. The performance
criteria may include, but not be limited to, EPS Growth, Asset Growth, Operating
Efficiency, Return on Equity, Loan Concentration, Asset Durability and Overall
Performance Evaluation by the Board of Directors.

3.3 STOCK OPTIONS

     The Compensation Committee of the Board of Directors, will award Executive
100,000 incentive stock options on Employer’s common stock with an option price
of $15.01 (the closing price on the effective date of this Agreement of July 22,
2004). The options described hereunder will be granted by the Compensation
Committee of the Board of Directors pursuant to the Employer’s 1998 Stock
Incentive Plan and the Stock Option Agreement containing such terms and in the
form attached hereto as Exhibit A. Additionally the Employer shall grant to
Executive 10,000 to 20,000 stock options annually based on performance of
Executive and Employer. In all events, Executive shall receive not less than
10,000 stock options per year during the term hereof. Performance at expected or
budgeted performance consistent with opportunities in the market place will
result in the award of 20,000 stock options annually. The performance criteria
may include, but not be limited to EPS growth, asset growth, operating
efficiency, return on equity, loan concentration, asset durability and overall
performance evaluation by the Board of Directors. In the event of any conflict
between the terms of this Agreement and any other oral or written representation
regarding stock options, on the one hand, and the terms of the stock option
agreement or the stock option plan, the terms of the latter two documents shall
govern. Moreover, at termination of Employee’s employment, Employer has the
option but not the obligation to repurchase the stock granted under the Stock
Option Agreement.

3.4 ADDITIONAL COMPENSATION

The Executive will receive $50,000 as payment for any and all items and
consideration related to the acceptance of this Agreement.

     4. FACILITIES AND EXPENSES

4.1 GENERAL

     The Employer will furnish the Executive office space, equipment, supplies,
and such other facilities and personnel, as the Employer deems necessary or
appropriate for the performance of the Executive’s duties under this Agreement.
The Employer will pay the Executive’s dues in such professional societies and
organizations, as the Compensation Committee deems appropriate, and will pay on
behalf of the Executive (or reimburse the Executive for) reasonable expenses
incurred by the Executive at the request of, or on behalf of, the Employer in
the performance of the Executive’s duties pursuant to this Agreement, and in
accordance with the Employer’s employment policies, including reasonable
expenses incurred by the Executive in attending conventions, seminars, and other
business meetings, in appropriate business entertainment activities, and for
promotional expenses. The Executive must file expense reports with respect to
such expenses in accordance with the Employer’s policies.

4.2 AUTOMOBILE

     The Employer will provide the Executive a $500.00 per month automobile
allowance. The Executive will own his own automobile, and maintain and insure it
at his own expense, for his business use in connection with his employment under
this Agreement. The Executive will at his own expense maintain liability
insurance on any automobile used in connection with the Employer’s business.
Executive will furnish proof of insurance to the Employer as requested by the
Employer. Applicable federal income tax withholding on such automobile allowance
will be deducted.

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     5. VACATIONS AND HOLIDAYS

     The Executive will be entitled to four (4) weeks’ paid vacation each Fiscal
Year in accordance with the vacation policies of the Employer in effect for its
executive officers from time to time. The Executive must take vacation at such
time or times as approved by the Chairman of the Board. The Executive will also
be entitled to the paid holidays set forth in the Employer’s policies. Vacation
days and holidays during any Fiscal Year that are not used by the Executive
during such Fiscal Year may not be used in any subsequent Fiscal Year.

     6. TERMINATION

6.1 EVENTS OF TERMINATION

     The Employment Period, the Executive’s Basic Compensation and Incentive
Compensation, and any and all other rights of the Executive under this Agreement
or otherwise as an employee of the Employer will terminate (except as otherwise
provided in this Section 6):

     (a) upon the death of the Executive;

     (b) upon the disability of the Executive (as defined in Section 6.2)
immediately upon notice from either party to the other;

     (c) for cause (as defined in Section 6.3), immediately upon notice from the
Employer to the Executive, or at such later time as such notice may specify; or

     (d) on Change of Control (as defined in Section 6.4).

6.2 DEFINITION OF DISABILITY

     For purposes of Section 6.1, the Executive will be deemed to have a
“disability” if, for physical or mental reasons, the Executive is unable to
perform the essential functions of the Executive’s duties under this Agreement
for 120 consecutive days, or 180 days during any twelve month period, as
determined in accordance with this Section 6.2. A medical doctor selected by
written agreement of the Employer and the Executive upon the request of either
party by notice to the other will determine the disability of the Executive. If
the Employer and the Executive cannot agree on the selection of a medical
doctor, each of them will select a medical doctor and the two medical doctors
will select a third medical doctor who will determine whether the Executive has
a disability. The determination of the medical doctor selected under this
Section 6.2 will be binding on both parties. The Executive must submit to a
reasonable number of examinations by the medical doctor making the determination
of disability under this Section 6.2, and the Executive hereby authorizes the
disclosure and release to the Employer of such determination and all supporting
medical records. If the Executive is not legally competent, the Executive’s
legal guardian or duly authorized attorney-in-fact will act in the Executive’s
stead, under this Section 6.2, for the purposes of submitting the Executive to
the examinations, and providing the authorization of disclosure, required under
this Section 6.2.

6.3 DEFINITION OF “FOR CAUSE”

     For purposes of Section 6.1, the phrase “for cause” means: (a) the
Executive’s material breach of this Agreement or failure to materially carry out
the duties assigned by the Board of Directors (following ten (10) days notice of
such failure and Executive’s failure to cure such breach); (b) the Executive’s
failure to adhere to any written Employer policy if the Executive has been given
a reasonable opportunity to comply with such policy or cure his failure to
comply (which reasonable opportunity must be granted during the ten-day period
preceding termination of this Agreement); (c) the appropriation (or attempted
appropriation) of a material business opportunity of the Employer, including
attempting to secure or securing any personal profit in connection with any
transaction entered into on behalf of the Employer; (d) the Executive’s acting
in a grossly negligent manner, or has engaged in reckless or willful misconduct
with respect to Employer which results or could have resulted in material harm
to Employer and Bank’s standing among customers, suppliers, employees and other
business relationships; (e) the misappropriation (or attempted misappropriation)
of any of the Employer’s funds or property; or (f) the conviction

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of, the indictment for (or its procedural equivalent), or the entering of a
guilty plea or plea of no contest with respect to, a felony, the equivalent
thereof.

6.4 DEFINITION OF “CHANGE OF CONTROL”

     For purposes of Section 6.1, the phrase “Change of Control” means the
following: (a) the occurrence of a transaction whereby the Bank or the Employer
shall not be the surviving entity in any merger or consolidation (or survives
only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of Employer); (b) the Bank or the Employer sells, leases or exchanges
or agrees to sell, lease or exchange all or substantially all of its assets to
any other persons or entities (other than to a wholly-owned subsidiary of
Employer); or (c) the total sale or dissolution of the Employer or Bank.

6.5 TERMINATION PAY

     Effective upon the termination of this Agreement for the reasons set forth
in this Agreement, the Employer will be obligated to pay the Executive (or, in
the event of his death, his designated beneficiary as defined below) only such
compensation as is provided in this Section 6.5, and in lieu of all other
amounts and in settlement and complete release of all claims the Executive may
have against the Employer for termination pursuant to Section 6 hereof. For
purposes of this Section 6.5, the Executive’s designated beneficiary will be
such individual beneficiary or trust, located at such address, as the Executive
may designate by notice to the Employer from time to time or, if the Executive
fails to give notice to the Employer of such a beneficiary, the Executive’s
estate. Notwithstanding the preceding sentence, the Employer will have no duty,
in any circumstances, to attempt to open an estate on behalf of the Executive,
to determine whether any beneficiary designated by the Executive is alive or to
ascertain the address of any such beneficiary, to determine the existence of any
trust, to determine whether any person or entity purporting to act as the
Executive’s personal representative (or the trustee of a trust established by
the Executive) is duly authorized to act in that capacity, or to locate or
attempt to locate any beneficiary, personal representative, or trustee.

     (a) Termination by Change of Control. Upon the happening of a “Change of
Control,” after the date of signing this Agreement, the Employer will pay the
Executive (i) the Executive’s Salary for the remainder, if any, of the calendar
month in which such termination is effective and for twenty-four
(24) consecutive calendar months thereafter, and (ii) an amount equal to the
Executive’s Incentive Compensation for the previous Fiscal Year times two (2).
In addition, Employer will pay for medical and life insurance for one (1) year
following termination hereunder.

     (b) Termination by the Employer for Cause or Voluntary Resignation by
Executive. If the Employer terminates this Agreement for cause or the Executive
voluntarily resigns, the Executive will be entitled to receive his Salary only
through the date such termination is effective, and will not be entitled to any
Incentive Compensation for the Fiscal Year during which such termination occurs
or any subsequent Fiscal Year.

     (c) Termination upon Disability. If this Agreement is terminated by either
party as a result of the Executive’s disability, as determined under
Section 6.2, the Employer will pay the Executive his Salary through the
remainder of the calendar month during which such termination is effective and
for the lesser of (i) three (3) consecutive months thereafter, or (ii) the
period until disability insurance benefits commence under the disability
insurance coverage furnished by the Employer to the Executive.

     (d) Termination upon Death. If this Agreement is terminated because of the
Executive’s death, the Executive will be entitled to receive his Salary through
the end of the calendar month in which his death occurs, and that part of the
Executive’s Incentive Compensation, if any, for the Fiscal Year during which his
death occurs, prorated through the end of the calendar month during which his
death occurs.

     (e) Benefits. The Executive’s accrual of, or participation in plans
providing for, the Benefits will cease at the effective date of the termination
of this Agreement, and the Executive will be entitled to accrued Benefits
pursuant to such plans only as provided in such plans. The Executive will not
receive, as part of his termination pay pursuant to this Section 6, any payment
or other compensation for any vacation, holiday, sick leave, or other leave
unused on the date the notice of termination is given under this Agreement.

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     7.  NON-DISCLOSURE COVENANT

7.1 ACKNOWLEDGMENTS BY THE EXECUTIVE

     The Executive acknowledges that (a) during the Employment Period and as a
part of his employment, the Executive will be afforded access to Confidential
Information; (b) public disclosure of such Confidential Information could have
an adverse effect on the Employer and its business; and (c) the provisions of
this Section 7 are reasonable and necessary to prevent the improper use or
disclosure of Confidential Information.

7.2 AGREEMENTS OF THE EXECUTIVE

     In consideration of the compensation and benefits to be paid or provided to
the Executive by the Employer under this Agreement, the Executive covenants as
follows:

     Confidentiality.

     (a) During and following the Employment Period, the Executive will hold in
confidence the Confidential Information and will not disclose it to any person
except with the specific prior written consent of the Employer or except as
otherwise expressly permitted by the terms of this Agreement.

     (b) Any trade secrets of the Employer will be entitled to all of the
protections and benefits under the trade secret laws of the State of Texas and
any other applicable law. If any information that the Employer deems to be a
trade secret is found by a court of competent jurisdiction not to be a trade
secret for purposes of this Agreement, such information will, nevertheless, be
considered Confidential Information for purposes of this Agreement. The
Executive hereby waives any requirement that the Employer submits proof of the
economic value of any trade secret or post a bond or other security.

     (c) None of the foregoing obligations and restrictions applies to any part
of the Confidential Information that the Executive demonstrates was or became
generally available to the public other than as a result of a disclosure by the
Executive, any Confidential Information known to Executive prior to his
employment hereunder or any Confidential Information required to be disclosed by
legal process.

     (d) The Executive will not remove from the Employer’s premises (except to
the extent such removal is for purposes of the performance of the Executive’s
duties at home or while traveling, or except as otherwise specifically
authorized by the Employer) any document, record, notebook, plan, model,
component, device, or computer software or code, whether embodied in a disk or
in any other form (collectively, the “Proprietary Items”). The Executive
recognizes that, as between the Employer and the Executive, all of the
Proprietary Items, whether or not developed by the Executive, are the exclusive
property of the Employer. Upon termination of this Agreement by either party, or
upon the request of the Employer during the Employment Period, the Executive
will return to the Employer all of the Proprietary Items in the Executive’s
possession or subject to the Executive’s control, and the Executive shall not
retain any copies, abstracts, sketches, or other physical embodiment of any of
the Proprietary Items.

7.3 DISPUTES OR CONTROVERSIES

     The Executive recognizes that should a dispute or controversy arising from
or relating to this Agreement be submitted for adjudication to any court,
arbitration panel, or other third party, the preservation of the secrecy of
Confidential Information may be jeopardized. All pleadings, documents,
testimony, and records relating to any such adjudication during the pendency of
such proceeding will be maintained in secrecy and will be available for
inspection by the Employer, the Executive, and their respective attorneys and
experts, who will agree, in advance and in writing, to receive and maintain all
such information in secrecy, except as may be limited by them in writing.

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     8. GENERAL PROVISIONS

8.1 INJUNCTIVE RELIEF AND ADDITIONAL REMEDY

     The Executive acknowledges that the injury that would be suffered by the
Employer as a result of a breach of the provisions of this Agreement (including
any provision of Section 7) would be irreparable and that an award of monetary
damages to the Employer for such a breach would be an inadequate remedy.
Consequently, the Employer will have the right, in addition to any other rights
it may have, to obtain injunctive relief to restrain any breach or threatened
breach or otherwise to specifically enforce any provision of this Agreement, and
the Employer will not be obligated to post bond or other security in seeking
such relief.

8.2 COVENANTS OF SECTION 7 ARE ESSENTIAL AND INDEPENDENT COVENANTS

     The covenants by the Executive in Section 7 are essential elements of this
Agreement, and without the Executive’s agreement to comply with such covenants,
the Employer would not have entered into this Agreement. The Employer and the
Executive have independently consulted their respective counsel and have been
advised in all respects concerning the reasonableness and propriety of such
covenants, with specific regard to the nature of the business conducted by the
Employer.

     The Executive’s covenants in Section 7 are independent covenants and the
existence of any claim by the Executive against the Employer under this
Agreement or otherwise, will not excuse the Executive’s breach of any covenant
in Section 7.

     If the Executive’s employment hereunder expires or is terminated, this
Agreement will continue in full force and effect as is necessary or appropriate
to enforce the covenants and agreements of the Executive in Section 7.

8.3 REPRESENTATIONS AND WARRANTIES BY THE EXECUTIVE

     The Executive represents and warrants to the Employer that the execution
and delivery by the Executive of this Agreement do not, and the performance by
the Executive of the Executive’s obligations hereunder will not, with or without
the giving of notice or the passage of time, or both: (a) violate any judgment,
writ, injunction, or order of any court, arbitrator, or governmental agency
applicable to the Executive; or (b) conflict with, result in the breach of any
provisions of or the termination of, or constitute a default under, any
agreement to which the Executive is a party or by which the Executive is or may
be bound.

8.4 OBLIGATIONS CONTINGENT ON PERFORMANCE

     The obligations of the Employer hereunder, including its obligation to pay
the compensation provided for herein, are contingent upon the Executive’s
performance of the Executive’s obligations hereunder.

8.5 WAIVER

     The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by either party in exercising
any right, power, or privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement.

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8.6 BINDING EFFECT; DELEGATION OF DUTIES PROHIBITED

     This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their respective successors, assigns, heirs, and legal
representatives, including any entity with which the Employer may merge or
consolidate or to which all or substantially all of its assets may be
transferred. The duties and covenants of the Executive under this Agreement,
being personal, may not be delegated.

8.7 NOTICES

     All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand (with written confirmation of receipt), (b) sent by
facsimile (with written confirmation of receipt), provided that a copy is mailed
by registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and facsimile
numbers set forth below (or to such other addresses and facsimile numbers as a
party may designate by notice to the other parties):

     
     If to Employer:
  MetroCorp Bancshares, Inc.

  9600 Bellaire Blvd., Suite 252

  Houston, Texas 77036

  Attention: May P. Chu
 
   
     If to Executive:
  George M. Lee

  MetroCorp Bancshares, Inc.

  9600 Bellaire Blvd., Suite 252

  Houston, Texas 77036

8.8 ENTIRE AGREEMENT; AMENDMENTS

     This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof. This Agreement may not be amended orally, but only by an
agreement in writing signed by the parties hereto.

8.9 GOVERNING LAW

     This Agreement will be governed by the laws of the State of Texas without
regard to conflicts of laws principles.

8.10 JURISDICTION

     Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against either of the
parties in the courts of the State of Texas, County of Harris, or, if it has or
can acquire jurisdiction, in the United States District Court for the Southern
District of Texas, and each of the parties consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on either
party anywhere in the world.

8.11 SECTION HEADINGS, CONSTRUCTION

     The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
“Section” or “Sections” refer to the corresponding Section or Sections of this
Agreement unless otherwise specified. All words used in this Agreement will be
construed to be of such gender or number, as the circumstances require. Unless
otherwise expressly provided, the word “including” does not limit the preceding
words or terms.

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8.12 SEVERABILITY

     If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

8.13 COUNTERPARTS

     This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.

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

             
 
      EMPLOYER:
 
      METROCORP BANCSHARES, INC.
 
           
DATE:
  September 3, 2004   By:   /s/ Don J. Wang

           
 
          Don J. Wang
 
          Chairman of the Board

         

      EXECUTIVE:
 
       
DATE:
  September 2, 2004   /s/ George M. Lee

       

      George M. Lee

      Executive Vice Chairman

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