Document:

exhibit10_3.htm

    EXHIBIT
10.3

     

     

    
      

      

    

     

    

    

    

    

    

    

    

    

    

    

    

    

    EMPLOYEE
MATTERS AGREEMENT

     

    by
and between

     

    Capitol
Bancorp Ltd.

     

    and

     

    Michigan
Commerce Bancorp Limited

     

    Dated
_________, 2009

     

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

     

    
      

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Table
of Contents

     

     

    Page

     

    
      
        
          	
                   
      

                	
                  ARTICLE 1 DEFINITIONS
      AND INTERPRETATION

                	
                  1

                

        

      

       

      
        
          	
                   
      

                	
                  Section
      1.1  Definitions.

                	
                  1

                

        

      

      
        
          	
                   
      

                	
                  Section
      1.2  References;
      Interpretation.

                	
                  5

                

        

      

       

      
        
          	
                   
      

                	
                  ARTICLE 2 GENERAL
      PRINCIPLES

                	
                  5

                

        

      

       

      
        
          	
                   
      

                	
                  Section
      2.1  Transfer of
      Employees.

                	
                  5

                

        

      

      
        
          	
                   
      

                	
                  Section
      2.2  Assumption and
      Retention of Liabilities.

                	
                  6

                

        

      

      
        
          	
                   
      

                	
                  Section 2.3 
      Spinco
      Employee Participation in Parent Benefit Plans.

                	
                  6

                

        

      

      
        
          	
                   
      

                	
                  Section
      2.4  Service
      Credit.

                	
                  7

                

        

      

      
        
          	
                   
      

                	
                  Section 2.5 
      Approval
      of Spinco Plans by Parent as Majority
    Shareholder.

                	
                  7

                

        

      

       

      
        
          	
                   
      

                	
                  ARTICLE 3 RETIREMENT
      PLANS

                	
                  7

                

        

      

       

      
        
          	
                   
      

                	
                  Section
      3.1  Parent and Spinco
      401(k) Plans.

                	
                  7

                

        

      

      
        
          	
                   
      

                	
                  Section 3.2 
      Spinco
      Notice to Parent of Terminations of Employment.

                	
                  8

                

        

      

       

      
        
          	
                   
      

                	
                  ARTICLE 4 HEALTH AND
      WELFARE PLANS

                	
                  9

                

        

      

       

      
        
        

      

      
        
          	 	

                  Section
      4.1  Spinco Welfare
      Plans.

                	
                  9

                
	
                   
      

                	
                  Section 4.2 
      Health
      and Dependent Care Reimbursement Plans.

                	
                  9

                

        

      

      
        
          	
                   
      

                	
                  Section 4.3  COBRA and
      HIPAA.

                	
                  10

                

        

      

      
        
          	
                   
      

                	
                  Section 4.4  Liabilities.

                	
                  10

                

        

      

      
        
          	
                   
      

                	
                  Section 4.5  Vacation and Other
      Time-Off Benefits.

                	
                  11

                

        

      

      
        
        

      

      
        
          	 	

                  Section 4.6  Advancements or
      Reimbursements.

                	
                  11

                
	
                   
      

                	
                  Section 4.7  Workers’ Compensation
      Liabilities.

                	
                  11

                

        

      

       

      
        
          	
                   
      

                	
                  ARTICLE 5 LONG-TERM
      INCENTIVE AWARDS

                	
                  11

                

        

      

       

      
        
          	
                   
      

                	
                  Section
      5.1  Treatment of
      Outstanding Parent Options.

                	
                  11

                

        

      

      
        
          	
                   
      

                	
                  Section 5.2  Parent
      ESOP.

                	
                  12

                

        

      

      
        
          	
                   
      

                	
                  Section 5.3  Cooperation.

                	
                  12

                

        

      

      
        
          	
                   
      

                	
                  Section 5.4  SEC
      Registration.

                	
                  12

                

        

      

      
        
          	
                   
      

                	
                  Section 5.5  Savings
      Clause.

                	
                  12

                

        

      

       

      
        
          	
                   
      

                	
                  ARTICLE 6 ADDITIONAL
      COMPENSATION MATTERS

                	
                  13

                

        

      

       

      
        
          	
                   
      

                	
                  Section
      6.1  Annual Incentive
      Awards.

                	
                  13

                

        

      

      
        
          	
                   
      

                	
                  Section
      6.2  Parent Individual
      Arrangements.

                	
                  13

                

        

      

      
        
          	
                   
      

                	
                  Section
      6.3  Severance
      Benefits.

                	
                  14

                

        

      

      
        
        

      

      
        
        

      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        
          	
                	
                  Section 6.4 
      Relocation Expenses;
      Talent Acquisition/Retention Agency Fees.

                	
                  14

                

        

        
          
            	
                     
      

                  	
                    Section
      6.5  Tax
      Matters.

                  	
                    14

                  

          

        

         

      

      
        
          	
                   
      

                	
                  ARTICLE 7
      INDEMNIFICATION

                	
                  15

                

        

      

       

      
        
          	
                   
      

                	
                  ARTICLE 8 GENERAL AND
      ADMINISTRATIVE

                	
                  15

                

        

      

       

      
        
          	
                   
      

                	
                  Section
      8.1  Sharing of
      Information.

                	
                  15

                

        

      

      
        
          	
                   
      

                	
                  Section
      8.2  Reasonable
      Efforts/Cooperation.

                	
                  16

                

        

      

      
        
          	
                   
      

                	
                  Section
      8.3  Employer
      Rights.

                	
                  16

                

        

      

      
        
          	
                   
      

                	
                  Section
      8.4  Effect on
      Employment.

                	
                  16

                

        

      

      
        
          	
                   
      

                	
                  Section
      8.5  Consent of Third
      Parties.

                	
                  16

                

        

      

      
        
          	
                   
      

                	
                  Section 8.6 
      Beneficiary
      Designation/Release of Information/Right to
      Reimbursement.

                	
                  16

                

        

      

      
        
          	
                   
      

                	
                  Section
      8.7  Not a Change in
      Control.

                	
                  17

                

        

      

      
        
          	
                   
      

                	
                  Section
      8.8  Fiduciary
      Matters.

                	
                  17

                

        

      

       

      
        
          	
                   
      

                	
                  ARTICLE 9
      MISCELLANEOUS

                	
                  17

                

        

      

       

      
        
          	
                   
      

                	
                  Section
      9.1  Effect if Distribution
      Does not Occur.

                	
                  17

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.2  Relationship of
      Parties.

                	
                  17

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.3  Affiliates.

                	
                  17

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.4  Notices.

                	
                  17

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.5  Entire
      Agreement.

                	
                  18

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.6  Waivers.

                	
                  18

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.7  Amendments.

                	
                  18

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.8  Termination.

                	
                  19

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.9  Governing
      Law.

                	
                  19

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.10  Dispute
      Resolution.

                	
                  19

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.11  Titles and
      Headings.

                	
                  19

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.12  Counterparts.

                	
                  19

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.13  Assignment.

                	
                  19

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.14  Severability.

                	
                  19

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.15  Exhibits and
      Schedules.

                	
                  20

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.16  Specific
      Performance.

                	
                  20

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.17  Waiver of Jury
      Trial.

                	
                  20

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.18  Authorization.

                	
                  20

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.19  No Third-Party
      Beneficiaries.

                	
                  20

                

        

      

      
        
          	
                   
      

                	
                  Section
      9.20  Construction.

                	
                  20

                

        

      

      

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    Employee Matters
Agreement

     

    THIS EMPLOYEE MATTERS
AGREEMENT (the “Agreement”)
is entered into ____________, 2009, by and between Capitol Bancorp Ltd., a
Michigan corporation (“Parent”),
and Michigan Commerce Bancorp Limited, a Michigan corporation (“Spinco”)
(each a “Party” and
together the “Parties”),
to be effective as of the Distribution Date (as defined below).

     

     

    RECITALS

     

    WHEREAS,
Parent, acting through its direct and indirect subsidiaries, currently conducts
several businesses in the banking industry;

     

    WHEREAS,
the Board of Directors of Parent has determined that it is appropriate,
desirable and in the best interests of Parent and its shareholders to separate
Parent into two separate, independent, publicly traded companies by creating
Spinco and distributing a portion of Parent’s banking business to
Spinco;

     

    WHEREAS,
the remainder of the Parent businesses will continue to be owned and conducted,
directly or indirectly, by Parent;

     

    WHEREAS,
to effectuate the distribution, the Parties entered into that certain Separation
Agreement and Plan of Distribution dated as of ___________, 2009 (the “Separation
Agreement”); and

     

    WHEREAS,
pursuant to the Separation Agreement, Parent and Spinco have agreed to enter
into this Agreement for the purpose of allocating between and among them assets,
liabilities and responsibilities with respect to employee compensation and
benefit plans and arrangements.

     

    NOW,
THEREFORE, in consideration of the foregoing premises, the mutual promises and
covenants hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, agree as follows:

     

    ARTICLE
1

    DEFINITIONS
AND INTERPRETATION

     

    1.1    Definitions. 
Capitalized
terms used but not defined herein shall have the meanings assigned to such terms
in the Separation Agreement.  The following terms shall have the
following meanings:

     

    “Adjusted Parent
Performance-Vested RSU” shall have the meaning assigned thereto in
Section 5.3(a) of this Agreement.

     

    “Adjusted Spinco
Performance-Vested RSU” shall have the meaning assigned thereto in
Section 5.3(b) of this Agreement.

     

    
      
        
        

      

      
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    “Agreement”
shall have the meaning assigned thereto in the preamble to this
Agreement.

     

    “Benefit
Plan” means, with respect to an entity, each plan, program, policy,
on-going arrangement, agreement, payroll practice, contract, trust, insurance
policy or commitment that is an employment, consulting, non-competition or
deferred compensation agreement, or an executive compensation, incentive bonus
or other bonus, employee pension, profit-sharing, savings, retirement,
supplemental retirement, stock option, stock purchase, performance units,
restricted stock, other equity-based compensation, severance pay, salary
continuation, life, health, hospitalization, sick leave, vacation pay,
disability or accident insurance plan, corporate-owned or key-person life
insurance or other employee benefit plan, program, arrangement, agreement or
commitment that covers employees, including any “employee benefit plan” (as
defined in ERISA Section 3(3)) sponsored or maintained by such entity (or
to which such entity contributes or is required to contribute).

     

    “COBRA”
means the continuation coverage requirements for “group health plans” under
Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and as codified in Code Section 4980B and ERISA Sections 601
through 608, together with all regulations and other regulatory and legislative
guidance in effect thereunder.

     

    “Code”
means the Internal Revenue Code of 1986, as amended, including any proposed,
temporary or final regulation and other regulatory guidance in force under that
provision.

     

    “Distribution”
means the distribution to the holders of Parent Common Stock and Parent
Preferred Stock of all of the outstanding shares of Spinco Common
Stock.

     

    “Distribution
Date” means the date upon which the Distribution shall be
effective.

     

    “DOL” means
the United States Department of Labor.

     

    “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, including
any proposed, temporary or final regulation and other regulatory guidance in
force under that provision.

     

    “HIPAA”
means the health insurance portability and accountability requirements for
“group health plans” under the Health Insurance Portability and Accountability
Act of 1996, as amended.

     

    “IRS” means
the United States Internal Revenue Service.

     

    “Parties”
shall have the meaning assigned thereto in the preamble to this
Agreement.

     

    “Parent”
shall have the meaning assigned thereto in the preamble to this
Agreement.

     

    “Parent 401(k)
Plan” means the Capitol Bancorp Ltd. 401(k) Plan.

     

    “Parent Benefit
Plan” means any Benefit Plan sponsored, maintained or contributed to by
any member of the Parent Group as such Group is constituted on or after the
Distribution Date.

     

    
      
        
        

      

      
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    “Parent Common
Stock” means the outstanding shares of common stock, no par value per
share, of Parent.

     

    “Parent
Compensation Committee” means the Compensation Committee of Parent’s
Board of Directors.

     

    “Parent Dependent Care
Reimbursement Plan” means the Capitol
Bancorp Ltd. Dependent Care Reimbursement Plan.

     

    “Parent
Employee” means any individual who, at the relevant time, is employed by
or will be employed by Parent or any member of the Parent Group, including
active employees and employees on vacation and approved leave of absence
(including maternity, paternity, family, sick leave, qualified military service
under the Uniformed Services Employment and Reemployment Rights Act of 1994,
short- or long-term disability leave, leave under the Family Medical Leave Act
and other approved leave).

     

    “Parent Equity
Incentive Plan” means the Capitol Bancorp Ltd. 2007 Equity Incentive
Plan.

     

    “Parent
ESOP” means the
Capitol Bancorp Ltd. Employee Stock Ownership Plan.

     

    “Parent Excess
Investment Plan” shall have the meaning assigned thereto in
Section 3.2(a) of this Agreement.

     

    “Parent Final
Price” means the closing price of Parent Common Stock immediately prior
to the Distribution as reported on the New York Stock Exchange.

     

    “Parent Health
Care Reimbursement Plan” means the Capitol
Bancorp Ltd. Health Care Reimbursement Plan.

     

    “Parent Management
Incentive Plan” means the Capitol Bancorp Ltd. 2003 Management Incentive
Plan.

     

    “Parent
Option” means an option to purchase shares of Parent Common Stock granted
pursuant to one of the Parent Stock Plans.

     

    “Parent
Participant” means any individual who, following the Distribution Date,
is (i) a Parent Employee, (ii) a former Parent Employee who is not a
Spinco Employee, or (iii) a beneficiary, dependent or alternate payee of
any of the foregoing.

     

    “Parent Preferred
Stock” means the outstanding shares of Series A Noncumulative Convertible
Perpetual Preferred Stock, no par value per share, of Parent.

     

    “Parent Retiree
Medical Coverage” shall have the meaning assigned thereto in
Section 4.3 of this Agreement.

     

    
      
        
        

      

      
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    “Parent Service
Programs/Policies” means, collectively, the Parent vacation program,
short-term disability program and other Parent programs and policies to the
extent eligibility for or the level of benefits thereunder depends on length of
service.

     

    “Parent Stock
Plans” means,
collectively, the Capitol Bancorp Ltd. 2003 Management Incentive Plan, the
Capitol Bancorp Ltd. 2007 Equity Incentive Plan, the Capitol Bancorp Ltd.
Employee Stock Option Plan and any other stock option, restricted stock or stock
incentive compensation plan or arrangement maintained before the Distribution
Date for employees, officers, or non-employee directors of Parent or its
Affiliates, as amended.

     

    “Parent Welfare
Plan” means the Capitol Bancorp Ltd. Welfare Benefit Plan.

     

    “Separation
Agreement” shall have the meaning assigned thereto in the recitals to
this Agreement.

     

    “Spinco”
shall have the meaning assigned thereto in the preamble to this
Agreement.

     

    “Spinco 401(k)
Plan” shall have the meaning assigned thereto in Section 3.1(a) of
this Agreement.

     

    “Spinco Annual
Incentive Plan” means the Michigan Commerce Bancorp Limited Omnibus
Incentive and Equity Plan.

     

    “Spinco Benefit
Plan” means any Benefit Plan sponsored, maintained or contributed to by
any member of the Spinco Group as such Group is constituted on or after the
Distribution Date.

     

    “Spinco Common
Stock” means the outstanding shares of common stock, no par value per
share, of Spinco.

     

    “Spinco
Employee” means any individual who, as of the Effective Time, is employed
by or will be employed by Spinco or any member of the Spinco Group, including
active employees and employees on vacation and approved leave of absence
(including maternity, paternity, family, sick leave, qualified military service
under the Uniformed Services Employment and Reemployment Rights Act of 1994,
short- or long-term disability leave, leave under the Family Medical Leave Act
and other approved leave).

     

    “Spinco Excess
Investment Plan” shall have the meaning assigned thereto in
Section 3.2(b) of this Agreement.

     

    “Spinco Dependent
Care Reimbursement Plan” means the Michigan Commerce Bancorp Limited
Dependent Care Reimbursement Plan.

     

    “Spinco Health
Care Reimbursement Plan” means the Michigan Commerce Bancorp Limited
Health Care Reimbursement Plan.

     

    “Spinco
Option” shall have the meaning assigned thereto in Section 5.1(a) of
this Agreement.

     

    
      
        
        

      

      
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    “Spinco
Participant" means any individual who, following the Distribution Date,
is a Spinco Employee or a beneficiary, dependent or alternate payee of a Spinco
Employee.

     

    “Spinco Service
Programs/Policies” means, collectively, the Spinco vacation program,
short-term disability program and other Michigan Commerce Bancorp Limited
programs and policies to the extent eligibility for or the level of benefits
thereunder depends on length of service.

     

    “Spinco
Service-Vested RSU” shall have the meaning assigned thereto in
Section 5.2(a) of this Agreement.

     

    “Spinco Stock
Fund” means the fund consisting of Michigan Commerce Bancorp Limited
Common Stock

     

    “Spinco Stock
Plan” means the Michigan Commerce Bancorp Limited Omnibus Incentive and
Equity Plan.

     

    “Spinco Welfare
Plan” means the Michigan Commerce Bancorp Limited Welfare Benefit
Plan.

     

    1.2    References;
Interpretation.  References
in this Agreement to any gender include references to all genders, and
references to the singular include references to the plural and vice
versa.  Unless the context otherwise requires, the words “include”,
“includes” and “including” when used in this Agreement shall be deemed to be
followed by the phrase “without limitation.” Unless the context otherwise
requires, references in this Agreement to Articles, Sections, Annexes, Exhibits
and Schedules shall be deemed to be references to Articles and Sections of, and
Annexes, Exhibits and Schedules to, this Agreement.  Unless the
context otherwise requires, the words “hereof”, “hereby” and “herein” and words
of similar meaning when used in this Agreement refer to this Agreement in its
entirety and not to any particular Article, Section or provision of this
Agreement.

     

    ARTICLE
2

    GENERAL
PRINCIPLES

     

    2.1    Transfer
of Employees.  For the
avoidance of doubt, effective as of the Distribution Date, only those Parent
Employees associated with the Spinco business who are actively at work,
including those Parent Employees on vacation, on such date shall terminate with
Parent and be transferred to Spinco. Parent Employees associated with the Spinco
business who are on an approved leave of absence (including maternity,
paternity, family, sick leave, qualified military service under the Uniformed
Services Employment and Reemployment Rights Act of 1994, short-term or long-term
disability leave, leave under the Family Medical Leave Act and other approved
leave) as of the Distribution Date shall not terminate with Parent and such
Parent Employees shall only become Spinco Employees unless and until they return
to work or are able to return to work.  Such termination or transfer
shall not be treated as a separation from service for purposes of any Parent
Benefit Plan or agreement (or any benefit thereunder) which is subject to the
provisions of Section 409A of the Code.  Any Parent Employee
associated with the Spinco business who does not timely return to work following
an approved leave of absence that 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    began
prior to the Distribution Date shall be terminated by Parent or the Parent Group
and any Liabilities associated with such termination shall be the responsibility
of Spinco or the Spinco Group, including, but not limited to, the Liabilities
set forth in Section 6.3.

     

    2.2    Assumption
and Retention of Liabilities.

     

    (a)    As of the
Effective Time, except as otherwise expressly provided for in this Agreement or
any other agreement by and between the Parties and/or their Affiliates, Parent
shall, or shall cause one or more members of the Parent Group to, retain and
Parent hereby agrees to pay, perform, fulfill and discharge, in due course in
full: (i) all Liabilities under all Parent Benefit Plans; and (ii) any
other Liabilities or obligations expressly assigned to Parent or any of its
Affiliates under this Agreement.

     

    (b)    As of the
Effective Time, except as otherwise expressly provided for in this Agreement, or
any other agreement by and between the Parties and/or their Affiliates, Spinco
shall, or shall cause one or more members of the Spinco Group to, assume
sponsorship of the Spinco Benefit Plans and retain or assume and Spinco hereby
agrees to pay, perform, fulfill and discharge, in due course in full:
(i) all Liabilities under all Spinco Benefit Plans; and (ii) any other
Liabilities or obligations expressly assigned to Spinco or any of its Affiliates
under this Agreement.

     

    (c)    From time
to time after the Distribution Date, Spinco shall promptly reimburse Parent,
upon Parent’s reasonable request and the presentation by Parent of such
substantiating documentation as Spinco shall reasonably request, for the cost of
any obligations or Liabilities satisfied or assumed by Parent or its Affiliates
that are, or that have been made pursuant to this Agreement, the responsibility
of Spinco or any of its Affiliates.  Except as otherwise provided in
this Agreement, any such request for reimbursement must be made by Parent not
later than the first anniversary of the Distribution Date, unless the
obligations and Liabilities extend beyond the first anniversary.

     

    (d)    From time
to time after the Distribution Date, Parent shall promptly reimburse Spinco,
upon Spinco’s reasonable request and the presentation by Spinco of such
substantiating documentation as Parent shall reasonably request, for the cost of
any obligations or Liabilities satisfied or assumed by Spinco or its Affiliates
that are, or that have been made pursuant to this Agreement, the responsibility
of Parent or any of its Affiliates.  Except as otherwise provided in
this Agreement, any such request for reimbursement must be made by Spinco not
later than the first anniversary of the Distribution Date, unless the
obligations and Liabilities extend beyond the first anniversary.

     

    2.3    Spinco
Employee Participation in Parent Benefit Plans.  Except as
otherwise expressly provided for in this Agreement or as otherwise expressly
agreed to in writing between the Parties, effective on or before the
Distribution Date each Spinco Employee and any other Spinco service provider
(including any individual who is an independent contractor, temporary employee,
temporary service worker, consultant, freelancer, agency employee, leased
employee, on-call worker, incidental worker, or non-payroll worker of any member
of the Spinco Group or in any other employment, non-employment, or retainer
arrangement, or relationship with any member of the Spinco Group) shall cease to
actively participate in, be covered by,

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

      accrue
benefits under, be eligible to contribute to or have any rights as an active
participant under any Parent Benefit Plan.

    

     

    2.4    Service
Credit.  Spinco
(acting directly or through its Affiliates) shall cause the Spinco Service
Programs/Policies to provide each Parent Employee who becomes a Spinco Employee
credit for purposes of eligibility, vesting, determination of benefit levels,
and, to the extent applicable, benefit accruals under the Spinco Service
Programs/Policies for such Spinco Employee’s service with any member of the
Parent Group to the same extent such service was recognized by the applicable
Parent Service Programs/Policies; provided that such service shall not be
recognized to the extent that such recognition would result in the duplication
of benefits.

     

    2.5    Approval
of Spinco Plans by Parent as Majority Shareholder.  Effective
as of the Distribution Date, Spinco shall adopt a Spinco plan which will permit
the issuance of cash and equity awards.  The Spinco Stock Plan shall
be approved prior to the Distribution Date by Parent as Spinco’s sole
shareholder.

     

    ARTICLE
3

    RETIREMENT
PLANS

     

    3.1    Parent
and Spinco 401(k) Plans.

     

    (a)    Spinco 401(k) Plan. Effective
on or before the Distribution Date, Spinco may have a defined contribution
retirement plan and trust for the benefit of Spinco Participants (the “Spinco 401(k)
Plan”).  Spinco shall be responsible for taking all necessary,
reasonable and appropriate action to establish, maintain and administer the
Spinco 401(k) Plan so that it is qualified under Code Section 401(a) and
the trust thereunder is exempt under Code Section 501(a).  Spinco
(acting directly or through its Affiliates) shall be responsible for any and all
Liabilities and other obligations with respect to the Spinco 401(k)
Plan.

     

    (b)    Transfer of Parent 401(k) Plan
Assets. Within a reasonable period of time on or before the Distribution
Date, Parent shall cause the accounts (including any outstanding loan balances
and any qualified domestic relations orders (“QDROs”))
in the Parent 401(k) Plan attributable to Spinco Participants who are employed
by Spinco as of the transfer date and all of the assets in the Parent 401(k)
Plan trust related thereto to be transferred (based on the investments,
including Parent Common Stock, in place on or as soon as administratively
practicable before the transfer date) to the Spinco 401(k) Plan, and Spinco
shall cause the Spinco 401(k) Plan and trust to accept such transfer of accounts
and underlying assets, loans and QDROs and, effective as of the date of such
transfer, to assume and to fully perform, pay and discharge all obligations of
the Parent 401(k) Plan relating to the accounts of Spinco Participants as of the
transfer date, to the extent the assets, liabilities, loans and QDROs related to
those accounts are actually transferred from the Parent 401(k) Plan to the
Spinco 401(k) Plan and the Spinco 401(k) Plan shall satisfy all protected
benefit requirements under the Code, ERISA and applicable law with respect to
the transferred accounts.  The transfer of assets shall be conducted
in accordance with Code Section 414(l), Treasury Regulation
Section 1.414(1)-1, and ERISA Section 208.  When the
accounts and underlying assets have been (i) transferred from the Parent
401(k) Plan to the Spinco 401(k) Plan and (ii) the Parties have reviewed
and approved the transaction, which review and approval shall not be
unreasonably withheld or delayed, the Parent

     

    
      
        
        

      

      
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      401(k)
Plan shall be relieved of any responsibility and liability for the transferred
accounts and amounts.  The Parent 401(k) Plan accounts of individuals
who become Spinco Participants after the Spinco 401(k) Plan is established that
are not transferred to the Spinco 401(k) Plan pursuant to the procedure
described above shall be governed by the terms of the Parent 401(k)
Plan.

    

     

    (c)    Continuation of Elections. The
Spinco 401(k) Plan will recognize and maintain Parent 401(k) Plan elections or
designations, including participant deferral elections (to the extent possible),
investment elections, beneficiary designations, and the rights of alternate
payees under qualified domestic relations orders with respect to Spinco
Participants, to the extent such elections or designations are available under
the Spinco 401(k) Plan and continued pursuant to procedures adopted under the
Spinco 401(k) Plan.  With respect to Spinco Participant elections to
invest in Parent Common Stock, the Spinco 401(k) Plan will invest new deferral
amounts covered by such elections in the appropriate default fund under the
Spinco 401(k) Plan and Spinco Participants may change the investment of such
amounts in accordance with Spinco 401(k) Plan procedures.  The Parent
Common Stock investment alternative shall remain available under the Spinco
401(k) Plan for sale purposes only for up to one year (subject to further
determination by the Spinco 401(k) Plan fiduciaries in their sole discretion)
only with respect to accounts transferred from the Parent 401(k) Plan as
described in paragraph (b) above and only to the extent that such accounts
are invested in Parent Common Stock at the time of the transfer.  The
Spinco Stock Fund under the Parent 401(k) Plan will accept the Spinco dividend
on the Distribution Date; the Spinco Stock Fund under the Spinco 401(k)
Plan will only be available for additional purchases if and when activated by
the Trustee in its sole discretion. Between the time when the assets are
transferred from the Parent 401(k) Plan to the Spinco 401(k) Plan and the Spinco
Stock Fund is activated, if at all, Spinco Participants may only sell Spinco
shares, if possible.

     

    (d)    Contributions through the
Distribution Date. All contributions, including employer matching
contributions, payable to the Parent 401(k) Plan through the Distribution Date
with respect to employee deferrals and contributions for Parent Employees who
become Spinco Employees as of the Distribution Date, determined in accordance
with the terms and provisions of the Parent 401(k) Plan, ERISA and the Code,
shall be paid by Parent (or its affiliate) to the Parent 401(k) Plan prior to
the date of the asset transfer described in paragraph
(b) above.

     

    3.2    Spinco
Notice to Parent of Terminations of Employment.  For
purposes of Parent benefits administration for the nonqualified Parent plans
affected by Code Section 409A, the Spinco Group agrees to provide each
affected Spinco Employee written notice that (i) upon the termination of
the employment of any Spinco Employee, such employee must promptly notify the
Parent Human Resources Department of any such termination; and (ii) any
failure to do so could result in substantial penalties to the employee under
Code Section 409A, similar state laws or any other laws that may affect
such distributions. The notice package shall include a written acknowledgement
of receipt of such notice that must be executed by the employee and returned to
Spinco.  Spinco shall maintain a copy of each such notice and executed
acknowledgement in its Human Resources/Benefits records and shall make them
available to the Parent Group upon request.

     

    
      
        
        

      

      
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    ARTICLE
4

    HEALTH AND WELFARE
PLANS

     

    4.1    Spinco
Welfare Plans.  

     

    (a)    Establishment of Spinco Welfare
Plans. Effective on or before the Distribution Date, Spinco will have
health and welfare benefit plans for the benefit of eligible Spinco Participants
(the “Spinco Welfare
Plans”), who immediately prior to the Distribution Date are participants
in the Parent health and welfare benefit plans (the “Parent Welfare
Plans”).

     

    (b)    Terms of Participation in Spinco
Welfare Plans. All Spinco Welfare Plans will (i) waive all
limitations as to preexisting conditions, exclusions, and service conditions
with respect to participation and coverage requirements applicable to Spinco
Employees, other than limitations that were in effect with respect to
participants as of the Distribution Date under the Parent Welfare Plans,
(ii) waive any waiting period limitation or evidence of insurability
requirement that would otherwise be applicable to a Spinco Employee following
the Distribution Date to the extent such Spinco Participant had satisfied any
similar limitation under the analogous Parent Welfare Plan, and (iii) honor
any deductibles, out-of-pocket maximums and co-payments incurred by Spinco
Employees under the corresponding Parent Welfare Plan in satisfying the
applicable deductibles, out-of-pocket expenses or co-payments under such Parent
Welfare Plan for calendar year 2009.

     

    (c)    Immediately
after the Distribution Date, all Liabilities in respect of or relating to Spinco
Employees under the Parent Welfare Plans shall cease to be Liabilities of any
member of the Parent Group or the Parent Welfare Plans and any and all such
Liabilities shall be assumed by Spinco and the Spinco Welfare
Plans.

     

    Except
for the account balances described in Section 4.2, nothing in this
Agreement shall require Parent, any Parent Group member or any Parent Welfare
Plan to transfer assets or reserves with respect to the Parent Welfare Plans to
Spinco, any Spinco Group member or the Spinco Welfare Plans.

     

    4.2    Health
and Dependent Care Reimbursement Plan.

     

    (a)    Spinco Health and Dependent Care
Reimbursement Plans. Effective on or before the Distribution Date, Spinco
will have the Spinco Health Care Reimbursement Plan and the Spinco Dependent
Care Reimbursement Plan.  The Spinco Health Care Reimbursement Plan
shall reimburse medical expenses incurred by the Spinco Employees at any time
during the Parent Health Care Reimbursement Plan’s plan year (including claims
incurred prior to the Distribution Date but unpaid prior to the Distribution
Date), up to the amount of the Parent Participants’ election under the Parent
Health Care Reimbursement Plan and reduced by amounts previously reimbursed by
the Parent Health Care Reimbursement Plan.  The debit and credit
account balances, if any, under the Parent Health and Dependent Care
Reimbursement Plans of any Spinco Employee who transfers to employment with the
Spinco Group directly from employment with the Parent Group on or before the
Distribution Date shall be transferred within a reasonable period to the Spinco
Health and Dependent Care Reimbursement Plans on behalf of 

     

    
      
        
        

      

      
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      that
Parent Participant and shall thereafter be administered in accordance with the
terms of the Spinco Health and Dependent Care Reimbursement Plans.  If
a Spinco Employee whose health reimbursement account is transferred to the
Spinco Health and Dependent Care Reimbursement Plans has received health
reimbursements that exceed the amount he or she has contributed to the Parent
health reimbursement account as of the transfer date, Spinco (or its affiliate)
shall collect that Spinco Employee’s payroll contributions in accordance with
the Spinco Health and Dependent Care Reimbursement Plans procedures and remit
them on a monthly basis to Parent until Parent has recouped the total health
reimbursements paid to or for that Parent Participant under the Parent Health
and Dependent Care Reimbursement Plans for the year; provided that such
contributions and remittances will cease upon the Spinco Employee’s cessation of
participation in the Spinco Health and Dependent Care Reimbursement
Plans.  The Parent Health and Dependent Care Reimbursement Plans
balances of any Parent Participant who transfers to employment with the Spinco
Group after the Distribution Date will not be transferred to Spinco and will be
handled in accordance with the terms and procedures of the Parent Health and
Dependent Care Reimbursement Plans.

    

     

    (b)    Parent Health and Dependent Care
Reimbursement Plan.  Parent shall retain the Liability for
administering under the Parent Health and Dependent Care Reimbursement Plans all
reimbursement claims of Parent Participants (including Parent Participants who
participate in the Parent Health and Dependent Care Reimbursement Plans before
becoming Spinco Employees) incurred through the Distribution Date, subject to
the terms of transfer set forth in Section 4.2(a) above.

     

    4.3    COBRA
and HIPAA.  Effective
on or before the Distribution Date, the Spinco Welfare Plan will assume
responsibility for compliance with the health care continuation coverage
requirements of COBRA with respect to Spinco Employees who, prior to the
Distribution Date, were covered under a Parent Welfare Plan pursuant to
COBRA.  Parent (acting directly or through its Affiliates) shall be
responsible for administering compliance with any certificate of creditable
coverage requirements of HIPAA or Medicare applicable to the Parent Welfare Plan
with respect to Spinco Employees incurred while they were participants in the
Parent Welfare Plan.  The Parties hereto agree that neither the
Distribution nor any transfers of employment directly from the Parent Group to
the Spinco Group that occur on or before the Distribution Date shall constitute
a COBRA qualifying event for purposes of COBRA.

     

    4.4    Liabilities.

     

    (a)    Insured
Benefits.  With respect to employee welfare and fringe benefits
that are provided through the purchase of insurance, (i) Parent (acting
directly or through its Affiliates) shall cause the Parent Welfare Plan, through
the appropriate insurers, to fully perform, pay and discharge, within the
timeframes applicable under the relevant plan, all claims that are incurred
under the Parent Welfare Plan through the Distribution Date, and
(ii) Spinco (acting directly or through its Affiliates) shall cause the
Spinco Welfare Plan, through the appropriate insurers, to fully perform, pay and
discharge, within the timeframes applicable under the relevant plan, all claims
that are incurred under the Spinco Welfare Plan from and after the Distribution
Date.

     

    
      
        
        

      

      
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    (b)    Self-Insured
Benefits.  With respect to employee welfare benefits that are
provided on a self-insured basis, (i) Parent (acting directly or through
its Affiliates) shall fully perform, pay and discharge, within the timeframes
applicable under the Parent Welfare Plan, all claims that are incurred under the
Parent Welfare Plan through the Distribution Date, and (ii) Spinco (acting
directly or through its Affiliates) shall fully perform, pay and discharge,
within the timeframes applicable under the relevant Spinco Welfare Plan, all
claims that are incurred under the Spinco Welfare Plan from and after the
Distribution Date.

     

    (c)    Incurred Claim
Definition.  For purposes of this Section 4.5, a claim or
Liability is deemed to be incurred (i) with respect to medical, dental,
vision and/or prescription drug benefits, upon the rendering of health services
giving rise to such claim or Liability; (ii) with respect to disability
benefits, upon the date of an individual’s disability, as determined by the
disability benefit insurance carrier or claim administrator, giving rise to such
claim or Liability; and (iii) with respect to a period of continuous
hospitalization, upon the date of admission to the hospital.

     

    4.5    Vacation
and Other Time-Off Benefits.  Spinco
(or its Affiliate) shall credit each individual who becomes a Spinco Employee on
or before the Distribution Date with the amount of accrued but unused vacation
time (including banked vacation time) and other time-off benefits as such Spinco
Employee had with the Parent Group on or before the Distribution Date or, if
later, his or her date of transfer from the Parent Group to the Spinco
Group.  The Spinco Employees for whom Spinco (or its Affiliate)
provides vacation and other time-off credits as described above shall not have a
right to a cash payment for their accrued but unused vacation time (including
banked vacation time) or other time-off benefits upon their transfer from the
Parent Group to the Spinco Group as a result of the Distribution.

     

    4.6    Workers’
Compensation Liabilities.  Spinco
Liabilities shall include, but not be limited to, any Liabilities relating to,
arising out of, or resulting from any worker’s compensation claims made by a
Spinco Employee, regardless of when said claims were made, incurred or become
manifest.  Pursuant to Section 2.2(c), Spinco shall reimburse
Parent for a commutation amount, mutually agreed upon by the Parties in good
faith, intended to represent the present value as of the Distribution Date of
any Liabilities that resulted from an accident or from an occupational disease
which was incurred or becomes manifest, as the case may be, before the
Distribution Date for a Spinco Employee.  Parent, each Parent Group
member, Spinco and each Spinco Group member shall cooperate with respect to any
notification to appropriate governmental agencies of the disposition and the
issuance of new, or the transfer of existing, workers’ compensation insurance
policies and claims handling contracts.

     

    ARTICLE
5

    LONG-TERM INCENTIVE
AWARDS

     

    5.1    Treatment
of Outstanding Parent Options.

     

    (a)    Adjustment of All Parent Options of
Spinco Employees.  Except as otherwise provided herein or
otherwise agreed in writing by the Parties, each Parent Option held by a Spinco
Employee that is outstanding immediately prior to the Distribution Date shall,
be converted into an option to purchase shares of Spinco Common Stock (a “Spinco
Option”) in a 

     

    
      
        
        

      

      
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      manner
intended to preserve the relative value of each such option in accordance with
the applicable tax law requirements, and that generally preserves the remaining
terms of such options.  The Spinco Options will be adjusted based on a
formula determined by the Parent Compensation Committee in accordance with the
pertinent terms of the applicable Parent Stock Plan and described in Exhibit
A attached hereto.  Such adjustment may involve an adjustment
of the Parent Option exercise price, the number of underlying shares, and/or
other adjustments permitted by the applicable Parent Stock
Plan.  Those Parent Employees who remain employed with Parent will
continue to maintain their Parent Options subject to an adjustment of the Parent
Option exercise price, the number of underlying shares, and/or other adjustments
permitted by the applicable Parent Stock Plan.  Effective as of the
Distribution Date, Spinco Options shall become subject to the terms and
conditions of the Spinco Stock Plan, which shall incorporate such options, and
the individual agreements associated with such awards.

    

     

    (b)    Vesting of Spinco
Options.  Spinco Options held by Spinco Employees that have not
fully vested or have not been exercised or forfeited shall remain in effect and
continue to vest following the Distribution Date based on the optionee’s service
with the Spinco Group.

     

    (c)    Exercise of Spinco
Options.  Upon the exercise of a Spinco Option, regardless of
the holder thereof, the exercise price shall be paid in accordance with the
terms of the Spinco Option.  Spinco shall administer the Spinco Stock
Plan and award agreements in accordance with their terms and, to the extent that
any tax withholding or reporting is required, Spinco shall collect the
withholding amount and remit it and the pertinent information to the entity with
the withholding and reporting obligation.

     

    5.2    Cooperation. 
Spinco
shall establish an appropriate administration system to handle, in an orderly
manner, exercises of Spinco Options and the settlement of Spinco Service-Vested
RSUs and Adjusted Performance-Vested RSUs.  The Parties will work
together to unify and consolidate all indicative data and payroll and employment
information on regular timetables and make certain that each applicable entity’s
data and records in respect of such awards are correct and updated on a timely
basis.  The foregoing shall include employment status and information
required for tax withholding/remittance, compliance with trading windows and
compliance with the requirements of the Exchange Act and other applicable
Laws.

     

    5.3    SEC
Registration.  The
Parties mutually agree to use commercially reasonable efforts to maintain
effective registration statements with the SEC with respect to the long-term
incentive awards described in this Article 5, to the extent any such
registration statement is required by applicable Law.  To the extent
that a registration requirement applies to a Parent Stock Plan, Parent shall be
responsible for SEC rule compliance.  To the extent that a
registration requirement applies to a Spinco Stock Plan on or after the
Distribution Date, Spinco shall be responsible for SEC rule
compliance.

     

    5.4    Savings
Clause.  The
Parties hereby acknowledge that the provisions of this Article 5 are intended to
achieve certain tax, legal and accounting objectives and, in the event such
objectives are not achieved, the Parties agree to negotiate in good faith
regarding such other actions that may be necessary or appropriate to achieve
such objectives.

     

    
      
        
        

      

      
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    ARTICLE
6

    ADDITIONAL COMPENSATION
MATTERS

     

    6.1    Annual
Incentive Awards.

     

    (a)    Parent
Employees directly associated with the Spinco business who become Spinco
Employees on the Distribution Date shall receive their annual incentive awards
for the full 2009 calendar year from either the Spinco Stock Plan or the Spinco
Annual Incentive Plan, as applicable.

     

    (b)    Annual Incentive
Liability.  Except as otherwise provided in this
Section 6.1, including but not limited to Section 6.1(a), Parent shall
retain responsibility for all Liabilities to the Distribution Date, when such
obligations become due, relating to any 2009 annual incentive awards under any
Parent Annual Incentive Plan for Parent Employees who are not directly
associated with the Spinco business prior to the Distribution Date and who
transfer to Spinco on the Distribution Date.

     

    (i)    The
Spinco Group shall be responsible for and pay the 2009 annual incentive awards
of Parent Employees who are not directly associated with the Spinco business
prior to the Distribution Date and who become Spinco Employees on the
Distribution Date.  Parent shall reimburse Spinco for Parent’s portion
of the 2009 annual incentive, if earned, pursuant to
Section 2.2(d).

     

    (ii)    For the
avoidance of doubt and by way of example, Section 6.1(b) would apply to a
Parent Employee who worked in the Parent law department prior to the
Distribution Date (assumed to be ______________, 2009) and transferred to
Spinco on the Distribution Date.  Parent would be responsible for
[___]/12 or
approximately [___]% of
the employee’s 2009 incentive award, if earned, and Spinco would be responsible
for [__]/12 or
approximately [___]% of
the employee’s 2009 annual incentive award, if earned.

     

    (iii)    If a
Spinco Employee transfers to Parent on the Distribution Date and thereby becomes
a Parent Employee, Parent shall be responsible for and pay the 2009 annual incentive award,
if earned, of such employee under the Parent Annual Incentive
Plan.  Spinco shall reimburse Parent, pursuant to Section 2.2(c),
for Spinco’s portion of the 2009 annual incentive award
(January 1 through the Distribution Date), if earned, calculated consistent with
the above example.

     

    (c)    Establishment of Spinco Annual
Incentive Plan.  Effective on the Distribution Date, Spinco (or
its affiliate) will have an annual incentive plan for the 2009 fiscal year that permits
the issuance of annual incentive awards on terms and conditions substantially
comparable to those under the Parent Annual Incentive Plan, provided that the
payment amounts and individual performance criteria shall be established in the
discretion of the Spinco Board of Directors or the Compensation Committee
thereof.

     

    6.2    Parent
Individual Arrangements.  Parent
acknowledges and agrees that, except as otherwise provided herein, Parent (or
its affiliate) shall have full responsibility with respect to any Liabilities
and the payment or performance of any obligations arising out of or

     

    
      
        
        

      

      
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      relating
to any employment, consulting, non-competition, retention or other compensatory
arrangement previously provided by any member of the Parent Group to any Parent
Participant, including life insurance policies not held in any trust and
covering any Parent Participant.  The Parties shall transfer or
assign, and shall use commercially reasonable efforts to cause their respective
employees to consent to the transfer or assignment, to Spinco or the Spinco
Group the rights and Liabilities arising under any agreements entered into prior
to the Distribution Date between Parent and Spinco Employees that do not
terminate on or before the Distribution Date.

    

     

    6.3    Severance
Benefits.  Parent
and Spinco acknowledge and agree that the transactions contemplated by the
Separation Agreement will not constitute a termination of employment for
purposes of any policy, plan, program or agreement of Parent or any member of
the Parent Group that provides for the payment of severance, separation pay,
salary continuation or similar benefits in the event of a termination of
employment, including, but not limited to _________, ___________, ___________,
and any change in control agreement between Parent and a Spinco
Employee.  Spinco Liabilities shall include, but not be limited to,
any Liabilities under applicable Parent Benefit Plans related to the termination
of any Parent Employees primarily associated with the Spinco
business.  Following the Distribution Date, Spinco shall reimburse
Parent monthly for any such Liabilities as provided in
Section 2.2(c).  Such termination Liabilities shall include, but
are not limited to, severance, COBRA and outplacement.

     

    (a)    Parent
shall continue to provide the COBRA coverage and any other associated
termination benefits (such as outplacement) under the applicable Parent Benefit
Plan;

     

    (b)    Spinco
shall provide the severance payments remaining as of the Distribution Date under
any existing severance agreements related to Spinco employees, as applicable;
and

     

    (c)    Spinco
shall reimburse Parent monthly for any termination Liabilities associated with
the coverages or benefits provided in Section 6.3(a), as provided in
Section 2.2(c).  Such termination Liabilities shall include, but
are not limited to, COBRA (any subsidized amounts) and outplacement
costs.  The outplacement costs would relate to any employee working in
the asset management or related business before the Effective Time who is
terminated prior to or as of the Effective Time, but elects outplacement
coverage on or after the Effective Time.

     

    6.4    Relocation
Expenses; Talent Acquisition/Retention Agency Fees.  Following
the Distribution Date, Spinco shall reimburse Parent periodically, as invoices
are received from Parent’s relocation vendor or talent acquisition/retention
vendor, for any (a) relocation expenses (including home sale/purchase
program expenses) provided under the applicable relocation policy/program and
any individual agreement/offer letter that addressed any aspect of relocation
and (b) talent acquisition/retention agency fees, both as related to any
employees who, as of the Distribution Date, are Spinco Employees or Parent
Employees associated with the Spinco business.

     

    6.5    Tax
Matters.

     

    
      
        
        

      

      
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    (a)    Tax Deductions in
General.  Subject to the provisions of Section 6.5(b), the
Parties agree to take the actions that are necessary or desirable to enable the
Party responsible for any payment under this Agreement to receive, to the extent
possible, the benefit of any tax deduction related to such
payment.  If one party receives a tax benefit as a result of any
payment or benefit funded by the other party under this Agreement, the first
party shall reimburse the other party for that tax benefit at the time and to
the extent that such tax benefit is realized.  If the reimbursement to
the other party is considered taxable income to the other party, the first party
shall gross-up the reimbursement amount to the other party for
taxes.

     

    (b)    Equity-Based Compensation
Deductions.  Notwithstanding the provisions of
Section 6.5(a), the Parties agree that, to the extent permitted by law, tax
deductions for equity-based compensation described in Sections 5.1, 5.2, and 5.3
shall be allocated to and claimed by the entity or entities within the
respective Parent Group or Spinco Group that employed the individual receiving
the compensation during the relevant vesting period based on the number of
months of such individual’s employment with such entity or
entities.  The entity claiming the deduction shall be responsible for
any tax reporting obligations, including but not limited to the filing of any
required form W-2, and payment of any taxes imposed upon the employer in respect
of the corresponding amounts, in proportion to the amount claimed as a
deduction.  The Party in control of the payment of any such amounts
shall be responsible for effecting the withholding of any applicable income and
employment tax withholding required to be effected from any such
payment.  The Parties shall cooperate with each other to facilitate
any required tax reporting obligations, including sharing, as relevant,
information regarding amounts withheld from the payments to the
employees.  To the extent deductions cannot be claimed in the manner
referenced in this Section 6.5(b), or are disallowed or adjusted on audit,
the entity that receives the tax benefit shall reimburse the entity that would
have received such tax benefit pursuant to the preceding sentence as and when
realized.  To the extent such reimbursement is treated as taxable
income, the reimbursing party shall gross-up the reimbursement amount for
taxes.

     

    (c)    Code
Section 409A.  Notwithstanding anything in this Agreement
to the contrary, the Parties agree to cooperate to minimize the loss of
deductions and to utilize commercially reasonable best efforts to have the
applicable plans, programs and arrangements comply with Section 409A of the
Code.

     

    ARTICLE
7

    INDEMNIFICATION

     

    Any claim
for indemnification under this Agreement shall be governed by, and be subject
to, the provisions of Article 6 of the Separation Agreement, which provisions
are hereby incorporated by reference into this Agreement, and any references to
“Agreement” in such Article 6 as incorporated herein shall be deemed to be
references to this Agreement.

     

    ARTICLE
8

    GENERAL AND
ADMINISTRATIVE

     

    8.1    Sharing
of Information.  Parent
and Spinco (acting directly or through their respective Affiliates) shall
provide to the other and their respective agents and vendors all

     

    
      
        
        

      

      
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      Information
as the other may reasonably request to enable the requesting Party to administer
efficiently and accurately each of its Benefit Plans and to determine the scope
of, as well as fulfill, its obligations under this Agreement.  Such
information shall, to the extent reasonably practicable, be provided in the
format and at the times and places requested, but in no event shall the Party
providing such information be obligated to incur any out-of-pocket expenses not
reimbursed by the Party making such request or make such Information available
outside of its normal business hours and premises.  Any Information
shared or exchanged pursuant to this Agreement shall be subject to the
confidentiality requirements set forth in Article 8 of the Separation
Agreement.  With respect to personal health information (“PHI”) as
defined in the Privacy Rule under HIPAA, the Parties agree to comply with the
regulations under the Privacy Rule and the Security Standards, including, but
not limited to, entering into any business associate agreements that may be
required for the sharing of PHI.

    

     

    8.2    Reasonable
Efforts/Cooperation.  Each of
the Parties hereto will use its commercially reasonable efforts to promptly
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws and regulations to
consummate the transactions contemplated by this Agreement, including adopting
plans or plan amendments.  Each of the Parties hereto shall provide
reasonable cooperation on any issue relating to the transactions contemplated by
this Agreement for which the other Party seeks a determination letter or private
letter ruling from the IRS, an advisory opinion from the DOL or any other
filing, consent or approval with respect to or by a Governmental
Entity.

     

    8.3    Employer
Rights.  Nothing
in this Agreement shall prohibit Spinco or any of its Affiliates from amending,
modifying or terminating any Spinco Benefit Plan at any time within its sole
discretion after the Distribution Date.  In addition, other than as
expressly provided in Article 3, Article 4, Article 5, or Article 6, nothing in
this Agreement shall prohibit Parent or any Parent Affiliate from amending,
modifying or terminating any Parent Benefit Plan at any time within its sole
discretion.

     

    8.4    Effect
on Employment.  Except as
expressly provided in this Agreement, the occurrence of the Distribution alone
shall not cause any employee to be deemed to have incurred a termination of
employment that entitles such individual to the commencement of benefits under
any of the Parent Benefit Plans.  Furthermore, nothing in this
Agreement is intended to confer upon any employee or former employee of Parent,
Spinco or any of their respective Affiliates any right to continued employment,
or any recall or similar rights to an individual on layoff or any type of
approved leave.

     

    8.5    Consent
of Third Parties.  If any
provision of this Agreement depends on the consent of any third party and such
consent is withheld, the Parties shall use commercially reasonable efforts to
implement the applicable provisions of this Agreement to the fullest extent
practicable.  If any provision of this Agreement cannot be implemented
due to the failure of such third party to consent, the Parties shall negotiate
in good faith to implement the provision in a mutually satisfactory
manner.

     

    8.6    Beneficiary
Designation/Release of Information/Right to Reimbursement.  To the
extent permitted by applicable Law and except as otherwise provided for in this
Agreement, all beneficiary designations, authorizations for the release of
information

     

    
      
        
        

      

      
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      and
rights to reimbursement made by or relating to Spinco Employees under Parent
Benefit Plans shall be transferred to and be in full force and effect under the
corresponding Spinco Benefit Plans until such beneficiary designations,
authorizations or rights are replaced or revoked by, or no longer apply to, the
relevant Spinco Employee.

    

     

    8.7    Not
a Change in Control.  The
Parties hereto acknowledge and agree that the transactions contemplated by the
Separation Agreement and this Agreement do not constitute a “change in control”
for purposes of any Parent Benefit Plan, Parent Stock Plan, Spinco Stock Plan or
Spinco Benefit Plan.

     

    8.8    Fiduciary
Matters.  Parent
and Spinco each acknowledge that the transfer of account balances and assets
from any Parent Benefit Plan to any Spinco Benefit Plan will be subject to
fiduciary duties or standards of conduct under ERISA or other applicable law,
and no Party shall be deemed to be in violation of this Agreement if it fails to
comply with any provisions hereof based upon its good faith determination (as
supported by advice from counsel experienced in such matters) that to do so
would violate such a fiduciary duty or standard.  Each Party shall be
responsible for taking such actions as are deemed necessary and appropriate to
comply with its own fiduciary responsibilities.

     

    ARTICLE
9

    MISCELLANEOUS

     

    9.1    Effect
if Distribution Does not Occur.  Notwithstanding
anything in this Agreement to the contrary, if the Separation Agreement is not
executed or if it terminates prior to the Effective Time, then all actions and
events that are, under this Agreement, to be taken or occur effective prior to,
as of or following the Distribution Date, or otherwise in connection with the
Distribution, shall not be taken or occur except to the extent specifically
agreed to in writing by Parent and Spinco and neither Party shall have any
Liability or further obligation to the other Party under this
Agreement.

     

    9.2    Relationship
of Parties.  Nothing
in this Agreement shall be deemed or construed by the Parties or any third party
as creating the relationship of principal and agent, partnership or joint
venture between the Parties, it being understood and agreed that no provision
contained herein, and no act of the Parties, shall be deemed to create any
relationship between the Parties other than the relationship set forth
herein.

     

    9.3    Affiliates. 
Each of
Parent and Spinco shall cause to be performed, and hereby guarantees the
performance of, all actions, agreements and obligations set forth in this
Agreement to be performed by each of their Affiliates,
respectively.

     

    9.4    Notices. 
All
notices and communications under this Agreement shall be in writing and shall be
deemed to have been given (a) when received, if such notice or
communication is delivered by facsimile, hand delivery or overnight courier, or
(b) three (3) business days after mailing if such notice or
communication is sent by United States registered or certified mail, return
receipt requested, first class postage prepaid.  All notices and
communications, to be effective, must be properly addressed to the party to whom
they are directed at its address as follows:

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    To
Parent:                     
Capitol Bancorp Limited

    Capitol Bancorp Center

    200 Washington Square North, Fourth
Floor

    Lansing,
MI  48933

    Attention: General Counsel

    Fax: (517) 374-2546

    

    With
copies
to:             Honigman
Miller Schwartz and Cohn LP

    444 West Michigan Avenue

    Kalamazoo,
MI  49007

    Attention: Phillip D. Torrence,
Esq.

    Fax: (269) 337-7703

    

    If to
Spinco,
to:             Michigan
Commerce Bancorp Limited

    Capitol Bancorp Center

    200 Washington Square North, Fourth
Floor

    Lansing,
MI  48933

    Attention: John C. Smythe

    Fax: (517) [_________]

    

    With
copies
to:             ____________________

    ____________________

    ____________________

    Attention: ____________

    Fax: _________________

    

     

    Either
Party may, by written notice delivered to the other Party in accordance with
this Section 9.4, change the address to which delivery of any notice shall
thereafter be made.

     

    9.5    Entire
Agreement.  This
Agreement, the Separation Agreement, and each other Ancillary Agreement,
including any Annexes, Schedules and Exhibits hereto and thereto, as well as any
other agreements and documents referred to herein and therein, shall constitute
the entire agreement between the Parties with respect to the subject matter
hereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter.  In the event of any
inconsistency between this Agreement and any Exhibit or Schedule hereto, the
Exhibit or Schedule shall prevail.

     

    9.6    Waivers. 
No waiver
of any terms, provision or condition of or failure to exercise or delay in
exercising any rights or remedies under this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision, condition, right or remedy or as a waiver of
any other term, provision or condition of this Agreement.

     

    9.7    Amendments. 
Subject
to the terms of Section 9.8 of this Agreement, this Agreement may not be
modified or amended except by an instrument in writing signed by both of the
Parties.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    9.8    Termination. 
If
permitted by the Separation Agreement, this Agreement (including Article 7
hereof (Indemnification)) may be terminated and abandoned at any time prior to
the Distribution Date by and in the sole discretion of Parent without the
approval of Spinco or the shareholders of Parent, and it shall be deemed
terminated if and when the Separation Agreement is terminated.  In the
event of such termination, neither Party shall have any liability of any kind to
the other Party or any other Person.  After the Distribution Date,
this Agreement may not be terminated except by an agreement in writing signed by
both Parties; provided, however, that Article 7 shall not be terminated after
the Distribution Date in respect of any Parent Indemnitee or Spinco Indemnitee
without the consent of such Person.

     

    9.9    Governing
Law; Consent to Jurisdiction.  This
Agreement shall be construed in accordance with, and governed by, the laws of
the State of Michigan, without regard to the conflicts of law rules of such
state. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of the courts of the State of Michigan or any federal
court with subject matter jurisdiction located in the Western District of
Michigan (and any appeals court therefrom) in the event any dispute arises out
of this Agreement or any transaction contemplated hereby, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, and (c) agrees that it will
not bring any action relating to this Agreement or any transaction contemplated
hereby in any court other than such courts.

     

    9.10    Dispute
Resolution.  The
dispute resolution provisions in Section 9.15 of the Separation
Agreement shall apply to this Agreement, except for any disputes regarding the
Benefit Plans which are governed by the Benefit Plans’ claim
procedures.

     

    9.11    Titles
and Headings.  Titles
and headings to sections herein are inserted for the convenience of reference
only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.

     

    9.12    Counterparts. 
This
Agreement may be executed in more than one counterpart, each of which shall be
deemed an original instrument and all of which together shall be considered one
and the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the Parties and delivered to the other
Parties.

     

    9.13    Assignment. 
Neither
of the Parties hereto may assign its rights or delegate any of its duties under
this Agreement without the prior written consent of the other Party or as
otherwise provided in the Separation Agreement.  This Agreement shall
be binding upon, and shall inure to the benefit of, the Parties and their
respective successors and permitted assigns.  Nothing contained in
this Agreement, express or implied, is intended to confer any benefits, rights
or remedies upon any Person other than members of the Parent Group and the
Spinco Group.

     

    9.14    Severability. 
In the
event that any one or more of the provisions contained in this Agreement is held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.  The Parties shall
endeavor in good-faith negotiations to replace the 

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

      invalid,
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

    

     

    9.15    Exhibits
and Schedules.  The
Exhibits and Schedules shall be construed with and as an integral part of this
Agreement to the same extent as if the same had been set forth verbatim
herein.

     

    9.16    Specific
Performance.  The
Parties agree that irreparable damage would occur in the event that the
provisions of this Agreement were not performed in accordance with their
specific terms.  Accordingly, it is hereby agreed that the Parties
shall be entitled to (a) an injunction or injunctions to enforce
specifically the terms and provisions hereof in any arbitration in accordance
with Section 9.10 of this Agreement, (b) provisional or temporary
injunctive relief in accordance therewith in any court of the United States, and
(c) enforcement of any such award of an arbitral tribunal or any court of
the United States, or any other any other tribunal sitting in any state of the
United States or in any foreign country that has jurisdiction, this being in
addition to any other remedy or relief to which they may be
entitled.

     

    9.17    Waiver
of Jury Trial.  SUBJECT
TO SECTION 9.10 AND SECTION 9.16 OF THIS AGREEMENT, EACH OF THE PARTIES HEREBY
WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH OF THE PARTIES
HEREBY (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(b) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.17.

     

    9.18    Authorization. 
Each of
the Parties 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 of law or of its
charter or bylaws or any material agreement, instrument or order binding on such
Party.

     

    9.19    No
Third-Party Beneficiaries.  This
Agreement is solely for the benefit of the Parties and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to this
Agreement.

     

    9.20    Construction. 
The
Parties have participated jointly in the negotiation and drafting of this
Agreement.  This Agreement shall be construed without regard to any

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        
presumption
or rule requiring construction or interpretation against the party drafting or
causing any instrument to be drafted.

    

     

     

     

    Signatures
on the Following Page

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
Parties have caused this Employee Matters Agreement to be duly executed as of
the day and year first above written.

     

    

    CAPITOL
BANCORP LTD.

     

    By:           _______________________

    Name:      _______________________

    Title:        _______________________

    

    MICHIGAN
COMMERCE BANCORP LIMITED

    

    By:           _______________________

    Name:      _______________________

    Title:        _______________________

    

    

    

    

     

     

    
      
        
          Signature
Page to Employee Matters Agreement

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    EQUITY
CONVERSION

     

    1. Parent
Options For Spinco Employees.  Parent and Spinco shall take any
and all action as shall be necessary or appropriate, so that each award of
Parent Options issued and currently outstanding under any Parent Stock Plan held
at the close of business on the Distribution Date by a Spinco Employee shall be
adjusted, pursuant to the terms of the Parent Stock Plans and the Parent
Options, by converting such options into Spinco Options. Such adjustment shall
be effected by replacing such Parent Options with substitute Spinco Options in a
manner such that immediately following the Distribution, (i) each such
holder of a Parent Option will receive a number of substitute Spinco Options
equal to the Spinco Conversion Ratio multiplied by the number of Parent Options
held by such holder, and (ii) the per share option exercise price of each
such Spinco Option will be determined by dividing the exercise price of the
original Parent Option by the Spinco Conversion Ratio, and such adjustment shall
be effected in a manner intended to satisfy requirements of Code
Section 424 and avoid treatment of the Spinco Options as non-qualified
deferred compensation subject to Code Section 409A. Such substituted Spinco
Options will in the sole and absolute judgment of the Parent Compensation
Committee preserve the aggregate intrinsic value of the original Parent 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 Parent
Final Price and the Spinco Initial Price. Such substitute Spinco Options will
take into account all employment with both Parent and Spinco, and their
respective subsidiaries and affiliates, for purposes of determining when the
Spinco Options will become exercisable and/or vest. All of the calculations
described above shall be applied using the rounding conventions determined in
the sole discretion of Parent to carry out the purposes of this Exhibit
A.

     

    2. Parent
Service—Vested
RSUs
for Spinco Employees.  Parent and Spinco shall take any and all
action as shall be necessary or appropriate so that Spinco Employees who hold
Parent Service-Vested RSUs will have each of their awards of Parent
Service-Vested RSUs adjusted pursuant to the terms of the Parent Stock Plans and
Parent Service-Vested RSUs, by converting such Parent Service-Vested RSUs into
Spinco Service-Vested RSUs. Such adjustment shall be effected by replacing such
Parent Service-Vested RSUs with substitute Spinco Service-Vested RSUs in a
manner such that immediately following the Distribution each such holder of a
Parent Service-Vested RSU will receive a number of substituted Spinco
Service-Vested RSUs equal to the Spinco Conversion Ratio multiplied by the
number of Parent Service-Vested RSUs held by such holder. Such substituted
Spinco Service-Vested RSUs will take into account all employment with both
Parent and Spinco, and their respective subsidiaries and affiliates, for
purposes of determining when the Spinco Service-Vested 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 Spinco Service-Vested RSU under Code
Section 409A from the treatment that would otherwise apply with respect to
the corresponding Parent Service-Vested RSU. The calculation described above
shall be applied using the rounding conventions determined in the sole
discretion of Parent to carry out the purposes of this Exhibit
A.

     

    3. Parent
Performance – Vested RSUs subject
to Parent Performance Metric for Spinco Employees. Parent and Spinco shall
take any and all action as shall be

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    necessary
or appropriate so that Spinco Employees who hold Parent Performance-Vested RSUs
that are contingent on a Parent Performance metric will have each of their
awards adjusted pursuant to the terms of the Parent Stock Plans and Parent
Performance-Vested RSUs, by (1) pro-rating each such award based on a
factor equal to the number of months between the beginning of the performance
period for each award and the Distribution Date (counting partial months as
whole months) divided by thirty-six months, and (2) converting such
pro-rated Parent Performance-Vested RSUs into Adjusted Parent Performance-Vested
RSUs by replacing such pro-rated Parent Performance-Vested RSUs with substitute
Adjusted Parent Performance-Vested RSUs in a manner such that immediately
following the Distribution each such holder of a pro-rated Parent
Performance-Vested RSU will receive a number of substituted Adjusted Parent
Performance-Vested RSUs equal to the Parent Conversion Ratio multiplied by the
number of pro-rated Parent Performance-Vested RSUs held by such holder. Such
substituted Adjusted Parent Performance-Vested RSUs will take into account all
employment with both Parent and Spinco, and their respective subsidiaries and
affiliates, for purposes of determining when the cash equivalent of the Adjusted
Parent Performance-Vested RSUs will vest and/or be paid, and the determination
of applicable performance results shall be made with respect to the results of
the original, full, and non-pro-rated performance period. Such adjustment and
replacement shall be conducted in a manner intended not to modify the treatment
of the Adjusted Parent Performance-Vested RSUs under Code Section 409A from
the treatment that would otherwise apply with respect to the corresponding
Parent Performance-Vested RSU award. All of the calculations described above
shall be applied using the rounding conventions determined in the sole
discretion of Parent to carry out the purposes of this Exhibit
A.

     

    4. Parent
Performance-Vested RSUs subject
to Spinco Performance Metric for Spinco Employees.  Parent and
Spinco shall take any and all action as shall be necessary or appropriate so
that Spinco Employees who hold Parent Performance-Vested RSUs that are
contingent on a Spinco Performance metric will have each of their awards
adjusted pursuant to the terms of the Parent Stock Plans and Parent
Performance-Vested RSUs, by converting such Parent Performance-Vested RSUs into
Adjusted Spinco Performance-Vested RSUs. Such adjustment shall be effected by
replacing such Parent Performance-Vested RSUs with substitute Adjusted Spinco
Performance-Vested RSUs in a manner such that immediately following the
Distribution each such holder of a Parent Performance-Vested RSU will receive a
number of substituted Adjusted Spinco Performance-Vested RSUs equal to the
Spinco Conversion Ratio multiplied by the number of Parent Performance-Vested
RSUs held by such holder. Such substituted Adjusted Spinco Performance-Vested
RSUs will take into account all employment with both Parent and Spinco, and
their respective subsidiaries and affiliates, for purposes of determining when
the Adjusted Spinco Performance-Vested 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 Adjusted Spinco Performance-Vested RSUs under Code
Section 409A from the treatment that would otherwise apply with respect to
the corresponding Parent Performance-Vested RSU award. The calculation described
above shall be applied using the rounding conventions determined in the sole
discretion of Parent to carry out the purposes of this Exhibit
A.

     

    5. Approval
and Terms of Equity Awards.  Parent, acting as the sponsor of
the Parent Stock Plans and as majority shareholder of Spinco shall, and shall
cause Spinco to, take such actions and give or obtain such approvals as are
necessary or desirable to ensure that the 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    issuance
of the Spinco awards provided for in this Exhibit
A shall comply with all applicable tax, securities law and stock exchange
requirements. The parties intend that each Spinco Option and Spinco
Service-Vested RSU and Adjusted Spinco Performance-Vested RSU (each, a “Spinco
Adjustment Award”) shall be (i) granted pursuant to governing plan
terms of a Spinco Stock Plan which are substantially similar to the plan terms
of the relevant Parent Stock 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 Spinco Adjustment Award shall be varied pursuant to the
terms of this Agreement or by any action of Spinco.exhibit10_4.htm

    EXHIBIT
10.4

    
 

    
      

      

    

     

    

    

    

    

    

    

    

    

    

    

    

    

    

    ADMINISTRATIVE
AND TECHNOLOGY SERVICES AGREEMENT

     

    by
and between

     

     

    Capitol
Bancorp Ltd.

     

     

    and

     

     

    Michigan
Commerce Bancorp Limited

     

    

    

    

    

    

    

    

    

    
      

      

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    TABLE
OF CONTENTS

     

    
      
        	
                 
      

              	
                ARTICLE
      1 DEFINITIONS

              	
                1

              

      

    

     

    
      	
               
      

            	
              1.1

            	
              Definitions.

            	
              1

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      2 TERM OF AGREEMENT

              	
                2

              

      

    

     

    
      	
               
      

            	
              2.1

            	
              Term.

            	
              2

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      3 SERVICES

              	
                2

              

      

    

     

    
      	
               
      

            	
              3.1

            	
              Administrative
      Services.

            	
              2

            

    

     

    
      	
               
      

            	
              3.2

            	
              Technology
      Services.

            	
              3

            

    

     

    
      	
               
      

            	
              3.3

            	
              Term
      of Services.

            	
               3

            

    

     

    
      	
               
      

            	
              3.4

            	
              Termination
      of Administrative Services.

            	
               4

            

    

     

    
      	
               
      

            	
              3.5

            	
              Excluded
      Services.

            	
              4

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      4 ADDITIONAL AGREEMENTS

              	
                4

              

      

    

     

    
      	
               
      

            	
              4.1

            	
              Relationships
      Between Capitol and MCBL; Non-Exclusivity.

            	
              4

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      5 CHARGES AND SET-OFF

              	
                4

              

      

    

     

    
      	
               
      

            	
              5.1

            	
              Charges
      for Services.

            	
               4

            

    

     

    
      	
               
      

            	
              5.2

            	
              Set-off.

            	
               4

            

    

     

    
      	
               
      

            	
              5.3

            	
              Settlement.

            	
              5

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      6 TERMINATION

              	
                5

              

      

    

     

    
      	
               
      

            	
              6.1

            	
              Termination;
      Effect of Expiration or Termination; Survival.

            	
              5

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      7 PERSONNEL, FACILITIES AND ACCESS

              	
                5

              

      

    

     

    
      	
               
      

            	
              7.1

            	
              Personnel.

            	
              5

            

    

     

    
      	
               
      

            	
              7.2

            	
              Facilities.

            	
              5

            

    

     

    
      	
               
      

            	
              7.3

            	
              Changes.

            	
              5

            

    

     

    
      	
               
      

            	
              7.4

            	
              Capitol
      Access.

            	
              5

            

    

     

    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              7.5

            	
              MCBL
      Access.

            	
              5

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      8 RELATIONSHIP BETWEEN THE PARTIES

              	
                6

              

      

    

     

    
      
        	
                 
      

              	
                ARTICLE
      9 SUBCONTRACTORS

              	
                6

              

      

    

     

    
      	
               
      

            	
              9.1

            	
              Subcontractors.

            	
               6

            

    

     

    
      	
               
      

            	
              9.2

            	
              Assignment.

            	
               6

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      10 INTELLECTUAL PROPERTY

              	
                6

              

      

    

     

    
      	
               
      

            	
              10.1

            	
              Allocation
      of Rights by Ancillary Agreements.

            	
              7

            

    

     

    
      	
               
      

            	
              10.2

            	
              Existing
      Ownership Rights Unaffected.

            	
              7

            

    

     

    
      	
               
      

            	
              10.3

            	
              Third
      Party Software.

            	
              7

            

    

     

    
      	
               
      

            	
              10.4

            	
              Termination
      of Licenses.

            	
              7

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      11 NO OBLIGATION

              	
                7

              

      

    

     

    
      
        	
                 
      

              	
                ARTICLE
      12 CONFIDENTIALITY

              	
                7

              

      

    

     

    
      	
               
      

            	
              12.1

            	
              Confidentiality.

            	
               7

            

    

     

    
      	
               
      

            	
              12.2

            	
              Confidential
      Information.

            	
              7

            

    

     

    
      	
               
      

            	
              12.3

            	
              Permitted
      Purpose.

            	
              8

            

    

     

    
      	
               
      

            	
              12.4

            	
              Disclosure.

            	
              8

            

    

     

    
      	
               
      

            	
              12.5

            	
              Custody.

            	
              8

            

    

     

    
      	
               
      

            	
              12.6

            	
              Expiration
      of Confidentiality Provisions.

            	
              8

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      13 LIMITATION OF LIABILITY AND INDEMNIFICATION

              	
                8

              

      

    

     

    
      	
               
      

            	
              13.1

            	
              Indemnification.

            	
               8

            

    

     

    
      	
               
      

            	
              13.2

            	
              Limitation
      of Liability.

            	
              10

            

    

     

    
      	
               
      

            	
              13.3

            	
              Provisions
      Applicable with respect to Indemnification Obligations.

            	
              10

            

    

     

    
      	
               
      

            	
              13.4

            	
              Survival.

            	
              10

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      14 DISPUTE RESOLUTION

              	
                10

              

      

    

     

    
      
        	
                 
      

              	
                ARTICLE
      15 ASSIGNMENT

              	
                10

              

      

    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              15.1

            	
              Prohibition
      of Assignment.

            	
              10

            

    

     

    
      	
               
      

            	
              15.2

            	
              Assignment
      to Capitol Group.

            	
              10

            

    

     

    
      
        	
                 
      

              	
                ARTICLE
      16 MISCELLANEOUS

              	
                11

              

      

    

     

    
      	
               
      

            	
              16.1

            	
              Notices.

            	
              11

            

    

     

    
      	
               
      

            	
              16.2

            	
              Governing
      Law; Consent to Jurisdiction.

            	
              11

            

    

     

    
      	
               
      

            	
              16.3

            	
              Judgment
      Currency.

            	
              11

            

    

     

    
      	
               
      

            	
              16.4

            	
              Entire
      Agreement.

            	
              11

            

    

     

    
      	
               
      

            	
              16.5

            	
              Conflicts.

            	
              11

            

    

     

    
      	
               
      

            	
              16.6

            	
              Force
      Majeure.

            	
              11

            

    

     

    
      	
               
      

            	
              16.7

            	
              Amendment
      and Waiver.

            	
              12

            

    

     

    
      	
               
      

            	
              16.8

            	
              Further
      Assurances.

            	
              12

            

    

     

    
      	
               
      

            	
              16.9

            	
              Severability.

            	
              12

            

    

     

    
      
        	 	
                16.10

              	
                Counterparts.

              	
                12

              

      

    

    

    

     

    SCHEDULES

     

    SCHEDULE
3.1 – Administrative Services

    SCHEDULE
3.2 – Technology Services

    SCHEDULE
3.3 – Excluded Activities

    SCHEDULE
5.1 – Fee Schedule

     

     

    EXHIBITS

     

    EXHIBIT 1
– Subleases

     

    

     

    
      
         

      

      
        iii

        
          

        

      

      
         

      

    

    ADMINISTRATIVE
AND TECHNOLOGY SERVICES AGREEMENT

     

    THIS
ADMINISTRATIVE AND TECHNOLOGY SERVICES AGREEMENT (“Agreement”)
is made and entered into as of _______, 2009 (the “Effective
Date”) by and between CAPITOL BANCORP LTD., a Michigan corporation
(together with its affiliated companies, “Capitol”),
and MICHIGAN COMMERCE BANCORP LIMITED, a Michigan corporation (together with is
affiliated companies, “MCBL”).  MCBL
and Capitol are each individually referred to herein as a “Party,”
and collectively, as the “Parties.”

     

     

    RECITALS

     

    WHEREAS,
Capitol and MCBL have entered into a Separation Agreement and Plan of
Distribution, dated _____________, 2009, pursuant to which the Parties set out
the terms and conditions relating to the separation of MCBL Business (such that
MCBL Business is to be held, as at the Effective Time, directly or indirectly,
by MCBL (such agreement, as amended, restated or modified from time to time, the
“Separation
Agreement”).

     

    WHEREAS,
in connection therewith, Capitol and the other members of Capitol Group, on the
one hand, and MCBL and the other members of MCBL Group, on the other hand, will
provide certain administrative services to each other following the Distribution
Date, subject to the terms and conditions of this Agreement.

     

    NOW,
THEREFORE, in consideration of the foregoing premises and the mutual agreements
and covenants contained in this Agreement and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:

     

    ARTICLE
1

    DEFINITIONS

     

     1.1    Definitions.    The
capitalized terms set forth shall have the following meanings:

     

    “Administrative
Services” has the meaning set forth in Section 3.1.

     

    “Affiliate”
means, with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person, and the term “control” (including the terms
“controlled
by” and “under common
control with”) means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or
otherwise.

     

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

     

    “Business
Day” means any day other than a Saturday, Sunday or other day on which
banking institutions in the State of Michigan are authorized or required by law
to close.

     

    “Capitol”
has the meaning set forth in the preamble.

     

    “Commercially
Reasonable Efforts” means the efforts that a reasonable and prudent
Person desirous of achieving a business result would use in similar
circumstances to ensure that such result is achieved as expeditiously as
possible in the context of commercial relations of the type envisaged by this
Agreement; provided, however, that an
obligation to use Commercially

     

    
      
        
        

      

      
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      Reasonable
Efforts under this Agreement does not require the Person subject to that
obligation to assume any material obligations or pay any material amounts to a
Third Party.

    

    
       

             
“Distribution”
has the meaning set forth in the recitals.

    

     

    “Dollars” or
“$” means the lawful currency of the United States of
America

     

    “Effective
Date” has the meaning set forth in the preamble.

     

    “Facilities”
has the meaning set forth in Section 7.2.

     

    “MCBL” has
the meaning set forth in the preamble.

     

    “Force
Majeure” has the meaning set forth in Section 16.6.

     

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

     

    “Personnel”
means the employees, or if applicable, agents, subcontractors or representatives
of Capitol or its Affiliates who provide any Services under this
Agreement.

     

    “Privacy
Policy” means the privacy policies of a Party or agreements or promises
with other Persons regarding privacy.

     

    “Services”
means the Administrative Services and the Technology Services.

     

    “Technology
Services” has the meaning set forth in Section 3.2.

     

    “Term” has
the meaning set forth in Section 2.1.

     

    ARTICLE
2

    TERM OF
AGREEMENT

     

     2.1    Term. 
The term
(the “Term”) of
this Agreement shall commence on the Effective Date and will terminate on
December 31, 2010, unless terminated earlier pursuant to the terms of Article VI
hereof.  This Agreement shall automatically renew for additional terms
of three (3) year unless either Party gives at least one hundred and twenty
(120) days notice of its intent not to renew.

     

    ARTICLE
3

    SERVICES

     

     3.1    Administrative
Services.

     

    (a)    Scope of Administrative
Services.  During the Term of this Agreement, Capitol agrees to
provide or cause its Affiliates to provide to MCBL the services set forth on
Schedule 3.1
which is attached hereto and made a part hereof for all purposes (the “Administrative
Services”).  Administrative Services shall be provided in
accordance with Capitol’s customary practices in effect at or immediately prior
to the Effective Date, subject to:  (a) any limitations imposed by
applicable laws; (b) professional standards and policies adopted by Capitol
and/or MCBL in their reasonable discretion; and (c) the limitations set forth in
this Agreement.  MCBL shall own all right, title and interest in all
data generated in connection with the Administrative Services.

     

    
      
        
        

      

      
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    (b)    Change in Volume or Nature of
Administrative Services.  At any time during the Term of this
Agreement, MCBL may submit to Capitol a request that an Administrative Service
described on Schedule
3.1 that has not otherwise terminated in accordance with this Agreement
be provided to MCBL in the aggregate at a volume or nature materially different
than the volume or nature of services provided by Capitol in respect of MCBL on
or immediately prior to the Effective Date.  Provided MCBL has
submitted to Capitol any information required by Capitol, within a reasonable
period of time following receipt of such request, Capitol shall use Commercially
Reasonable Efforts to provide MCBL with such requested services and shall
provide MCBL with an estimated price and a schedule for any such change in
volume or nature of services.  If MCBL is in agreement with such
estimated price and schedule, MCBL shall so notify Capitol in writing within ten
(10) Business Days of receipt of such estimate from Capitol, and Capitol shall
thereafter make Commercially Reasonable Efforts to accommodate MCBL’s request
for a change in volume or nature of services in accordance with such estimated
price and schedule as soon as reasonably possible.

     

     3.2    Technology
Services.

     

    (a)    Scope of Technology
Services.  During the Term of this Agreement, Capitol agrees to
provide or cause its Affiliates and their respective employees to provide to
MCBL the services set forth on Schedule 3.2 which is
attached hereto and made a part hereof for all purposes (the “Technology
Services”).  Technology
Services shall be provided in a manner consistent with the provision of such
Technology Services at or immediately prior to the Effective Date, subject
to:  (a) any limitations imposed by applicable laws; (b) professional
standards and policies adopted by Capitol and/or MCBL in their reasonable
discretion; and (c) the limitations set forth in this Agreement.  MCBL
shall own all right, title and interest in all data generated in connection with
the Technology Services.

     

    (b)    Change in Volume or Nature of
Technology Services.  At any time during the Term of this
Agreement, MCBL may submit to Capitol a request that Technology Services
described on Schedule
3.2 be provided to MCBL in the aggregate at a volume or nature materially
different than the volume or nature of services provided on or immediately prior
to the Effective Date.  Provided MCBL has submitted to Capitol any
information required by Capitol, within a reasonable period of time following
receipt of such request, Capitol shall use Commercially Reasonable Efforts to
provide MCBL with such requested services and shall provide MCBL with an
estimated price and a schedule for any such change in volume or nature of
services.  If MCBL is in agreement with such estimated price and
schedule, MCBL shall so notify Capitol in writing within ten (10) Business Days
of receipt of such estimate from Capitol, and Capitol shall thereafter make
Commercially Reasonable Efforts to accommodate MCBL’s request for a change in
volume or nature of services in accordance with such estimated price and
schedule as soon as reasonably possible

     

     3.3    Term
of Services.   Unless
this Agreement is earlier terminated as provided herein, during the Term of said
Agreement including any renewal term, Capitol shall provide or 

     

    
      
        
        

      

      
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    cause to
be provided all Services, other than any Administrative or Technology Services
that are earlier terminated as provided herein.

     

     3.4    Termination
of Administrative Services.   MCBL
may terminate any Administrative or Technology Service by giving Capitol at
least ninety (90) days prior written notice of such termination, in which case,
with respect to such terminated Administrative or Technology Service: (a)
Capitol shall be responsible for providing such Service only through the
effective time of such termination; and (b) MCBL shall be responsible for paying
only the amounts described in Section 6.3 plus any costs incurred by Capitol as
a result of such early termination, including without limitation, any
termination fees, wind-down costs, fees associated with disentanglement services
or any other costs, fees or expenses actually incurred by Capitol as a result of
early termination of such Service.

     

     3.5    Excluded
Services.  The
Services hereunder shall exclude any Excluded Activities (as defined in Schedule
3.5).  In furtherance of the foregoing, Capitol shall not
engage in and MCBL shall not request that Capitol engage in, any of the Excluded
Activities in the course of providing Services hereunder.

     

    ARTICLE
4

    ADDITIONAL
AGREEMENTS

     

     4.1    Relationships
Between Capitol and MCBL; Non-Exclusivity.

     

    (a)    Capitol
acknowledges that maintenance of the relationship between itself and its
Affiliates, on the one hand, and MCBL, on the other hand, is a non-exclusive
arrangement and that MCBL is free to negotiate marketing and services agreements
with other entities to promote the business objectives of MCBL.

     

    (b)    Notwithstanding
any other provision of this Agreement to the contrary, during the Term of said
Agreement, MCBL shall not be obligated to purchase from Capitol any particular
Service or any amount of Services, and may terminate any such services pursuant
to Section 3.5 and purchase such services from one or more third
parties.

     

    (c)    MCBL and
Capitol shall negotiate in good faith if either Party desires to amend the
definition of Administrative Services or Technology Services for purposes of
this Agreement or enter into any new agreements between MCBL and
Capitol.

     

    ARTICLE
5

    CHARGES AND
SET-OFF

     

     5.1    Charges
for Services.  During
the Term of this Agreement, Capitol shall charge MCBL, and MCBL shall pay, the
mutually agreed upon amounts set forth on Schedule 5.1 (which
is attached hereto and made a part hereof for all purposes) for all Services
provided in accordance with the terms of said Agreement.

     

     5.2    Set-off. 
During
the Term of this Agreement, MCBL shall have the right to set off any amounts due
to MCBL from Capitol under any other Ancillary Agreement (as defined in the
Separation Agreement).

     

    
      
        
        

      

      
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    5.3    Settlement. 
During
the Term of this Agreement, MCBL shall remit to Capitol (or to one or more of
its Affiliates as designated by Capitol) by electronic funds transfer, the
amount due to Capitol for the Services provided under this Agreement, which
shall be equal to the amounts payable by MCBL in accordance with the attached
Schedule 5.1,
reduced by any amounts due to MCBL under Section 5.2 and increased by any
amounts of MCBL operating expenses paid by Capitol Accounts Payable, Tax, or
Payroll Departments.  Such settlement of the inter-company account
balance shall occur each month prior to the end of the succeeding
month.

     

    ARTICLE
6

    TERMINATION

     

     6.1    Termination;
Effect of Expiration or Termination; Survival.  MCBL
shall have the right to terminate this Agreement at any time upon one hundred
and twenty (120) days notice to
Capitol.  Capitol shall have the right to terminate this Agreement
immediately upon (i) a sale, transfer or other disposition of all or
substantially all of the assets of MCBL (including by way of merger,
liquidation, consolidation, corporate reorganization or similar transaction); or
(ii) a liquidation of MCBL.  In addition,  Capitol shall
have the right to terminate this Agreement if MCBL shall have breached or failed
to perform in any material respect any of its obligations, covenants or
agreements under this Agreement and such breach or failure is not cured within
90 days after Capitol has given MCBL written notice identifying such breach or
failure.  Upon expiration or termination of this Agreement: (a)
neither Party shall be relieved of any liability for the breach of any provision
of this Agreement; and (b) any amounts owed hereunder by one Party to another
Party shall be immediately due and payable and shall be made by wire transfer of
immediately available funds.

     

    ARTICLE
7

    PERSONNEL, FACILITIES AND
ACCESS

     

     7.1    Personnel.  Except
as otherwise provided in Schedules 3.1 and
3.2, Services may be provided by such Personnel as Capitol deems
appropriate in its reasonable discretion, subject to any required approval by
applicable governmental authority.

     

     7.2    Facilities. 
Subject
to Schedules 3.1 and
3.2, Services may be provided by Capitol using furniture, fixtures, and
equipment and other items or materials owned, licensed or leased by Capitol or
its Affiliates (collectively, the “Facilities”).  MCBL
acknowledges and agrees that MCBL shall not have any right, title, or interest
in or to the Facilities.

     

     7.3    Changes. 
MCBL
shall not change any procedure or method of operation that adversely affects
Capitol’s performance of its obligations under this Agreement without Capitol’s
prior written consent, which consent shall not be unreasonably withheld or
delayed.

     

     7.4    Capitol
Access.  To the
extent permitted by applicable laws, upon reasonable notice, MCBL shall provide
Capitol with all reasonable access to and right to use MCBL’s Facilities and any
other assets of MCBL (including all records in physical or electronic form) as
Capitol reasonably deems necessary to provide the Services and to perform its
obligations under this Agreement.

     

     7.5    MCBL
Access.  To the
extent permitted by applicable laws, upon reasonable notice, Capitol shall
provide MCBL with all reasonable access to and right to use Capitol’s

     

    
      
        
        

      

      
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      Personnel,
Facilities and any other assets of Capitol (including all records in physical or
electronic form) as MCBL reasonably deems necessary to MCBL to perform its
obligations under this Agreement.

    

     

    ARTICLE
8

    RELATIONSHIP BETWEEN THE
PARTIES

     

    Capitol
is and will remain at all times an independent contractor in the performance of
all Services hereunder.  In all matters relating to this Agreement,
Capitol will be solely responsible for the acts of its employees and agents, and
employees or agents of Capitol shall not be considered employees or agents of
MCBL.  Except as otherwise provided herein, Capitol will not have any
right, power or authority to create any obligation, express or implied, on
behalf of MCBL nor shall Capitol act or represent or hold itself out as having
authority to act as an agent or partner of MCBL, or in any way bind or commit
MCBL to any obligations.  Nothing in this Agreement is intended to
create or constitute a joint venture, partnership, agency, trust or other
association of any kind between the Parties or Persons referred to herein, and
each Party shall be responsible only for its respective obligations as set forth
in this Agreement.  Neither Capitol nor its employees shall be
considered an employee or agent of MCBL for any purpose, except as expressly
agreed by the Parties.  Capitol shall have sole responsibility for the
supervision, daily direction and control, payment of salary (including
withholding of income taxes and deductions at source), worker’s compensation,
disability benefits and the like of its employees.

     

    ARTICLE
9

    SUBCONTRACTORS

     

     9.1    Subcontractors.  
Capitol
may, subject to Section 9.2, engage a “Subcontractor”
to perform all or any portion of Capitol’s duties under this Agreement, provided that any
such Subcontractor agrees in writing to be bound by confidentiality obligations
at least as protective as the terms of Section [  ] of the
Separation Agreement regarding confidentiality and non-use of information, and
provided
further that Capitol remains responsible for the performance of such
Subcontractor and for paying the Subcontractor.  As used in this
Agreement, “Subcontractor”
will mean any Person or entity engaged to perform hereunder, other than
employees of Capitol or its Affiliates.

     

     9.2    Assignment. 
In the
event of any subcontracting by Capitol to a non-Affiliate of Capitol of all or
any portion of Capitol’s duties under this Agreement, Capitol shall assign and
transfer to MCBL the full benefit of all such non-Affiliate subcontractor’s
performance covenants, guarantees, warranties or indemnities (if any), to the
extent same are transferable or assignable, in respect of the portion of the
Services provided to MCBL pursuant to such subcontracting; and if any such
guarantees, warranties, indemnities and benefits are not assignable, Capitol
shall use Commercially Reasonable Efforts to procure the benefit of same for
MCBL through other legal permissible means.  Capitol will also
reasonably endeavor to permit the assignment of any Subcontractor engagement to
MCBL or its Affiliates at the request of MCBL upon termination of Service
hereunder.

     

    ARTICLE
10

    INTELLECTUAL
PROPERTY

    
      
        
        

      

      
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     10.1    Allocation
of Rights by Ancillary Agreements.  This
Agreement and the performance of this Agreement will not affect the ownership of
any patent, trademark or copyright or other intellectual property rights
allocated in the Separation Agreement or any of the Ancillary
Agreements.

     

     10.2    Existing
Ownership Rights Unaffected.  Neither
Party will gain, by virtue of this Agreement, any rights of ownership of
copyrights, patents, trade secrets, trademarks or any other intellectual
property rights owned by the other.

     

    MCBL
agrees to reimburse Capitol for any reasonable out-of-pocket expenses arising
out of the obligations under this Section 10.2.  Capitol hereby
waives, and shall cause its employees to waive, the whole of its and their
rights to any copyright material developed under this Agreement.

     

     10.3    Third
Party Software.  In
addition to the consideration set forth elsewhere in this Agreement, MCBL shall
also pay any amounts (and applicable sales and use taxes) that are required to
be paid to any licensors of software that is used by Capitol (other than as a
part of its normal operations), to the extent that such software is used in
connection with the provision of any Service hereunder, and any amounts (and
applicable Sales Taxes) that are required to be paid by Capitol to any such
licensors to obtain the Consent of such licensors to allow Capitol to provide
any of the Services hereunder.  Subject to the immediately preceding
sentence and to the terms of the Separation Agreement, Capitol will use
Commercially Reasonable Efforts to obtain any Consent that may be required from
such licensors in order to provide any of the transition Services
hereunder.

     

     10.4    Termination
of Licenses.  Any
license granted hereunder by Capitol shall terminate ipso facto upon the
expiration or early termination of this Agreement.

     

    ARTICLE
11

    NO
OBLIGATION

     

    Neither
Party assumes any responsibility or obligation whatsoever, other than the
responsibilities and obligations expressly set forth in this Agreement
(including the exhibits and schedules hereto), in the Separation Agreement or in
a separate written agreement between the Parties.

     

    ARTICLE
12

    CONFIDENTIALITY

     

     12.1    Confidentiality. 
The terms
of the Confidentiality provisions set forth in Section [  ] of the
Separation Agreement shall apply to all confidential information disclosed in
the course of the Parties’ interactions under this Agreement.  This
Article 12 of the Agreement sets out additional requirements regarding
confidential information for the purposes of this Agreement.

     

     12.2    Confidential
Information.  The term
“Confidential
Information” means all business or operational information concerning
MCBL (including (i) earnings reports and forecasts,
(ii) macro-economic reports and forecasts, (iii) business and
strategic plans, (iv) general market evaluations and surveys,
(v) litigation presentations and risk assessments,

     

    
      
        
        

      

      
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      (vi) budgets,
(vii) financing and credit-related information, (viii) specifications,
ideas and concepts for products and services, (ix) quality assurance
policies, procedures and specifications, (x) customer information,
(xi) software, (xii) training materials and information, and
(xiii) all other know-how, methodology, procedures, techniques and trade
secrets related to design, development and operational processes) which, prior
to or following the Effective Time, has been disclosed by such MCBL to Capitol,
in written, oral (including by recording), electronic, or visual form to, or
otherwise has come into the possession of, Capitol (except to the extent that
such information can be shown to have been (i) in the public domain through
no action of Capitol, (ii) lawfully acquired from other sources by Capitol
to which it was furnished or (iii) independently developed by Capitol;
provided, however, in the case
of clause (ii) that, to the knowledge of Capitol, such sources did not
provide such information in breach of any confidentiality
obligations).

    

     

     12.3    Permitted
Purpose.  The term
“Permitted
Purpose” means the provision of a Service by Capitol to MCBL under this
Agreement.

     

     12.4    Disclosure. 
Capitol
may use Confidential Information in connection with a Permitted Purpose, provided that for
purposes of this Agreement, Confidential Information shall not be used by
Capitol for any purpose other than a Permitted Purpose or in any way that is
detrimental to MCBL.  In particular,

     

    (a)    Capitol
shall not disclose any Confidential Information to any employee of Capitol who
does not have a need to know such Confidential Information in order to perform
the Permitted Purpose; and

     

    (b)    Capitol
shall not use the Confidential Information other than for such purposes as shall
be expressly permitted under this Agreement.

     

     12.5    Custody. 
The
Confidential Information, including any derivative documents prepared by
Capitol, will be held in safe custody and kept confidential on the terms set
forth in this Agreement.  Each employee of Capitol who is authorized
to have or be aware of Confidential Information will store that information in
his possession in separate paper and/or electronic files.

     

     12.6    Expiration
of Confidentiality Provisions.  The
obligations of the Parties under this Article 12 shall survive the expiration or
earlier termination of this Agreement; provided, however, that in any
event, the obligations of the Parties under this Article 12 shall expire on the
fifth anniversary of the expiration or earlier termination of this
Agreement.

     

    ARTICLE
13

    LIMITATION OF LIABILITY AND
INDEMNIFICATION

     

     13.1    Indemnification. 
Capitol
shall indemnify, defend and hold harmless MCBL, each other member of MCBL Group
and each of their respective directors, officers and employees, and each of the
heirs, executors, trustees, administrators, successors and assignors of any of
the foregoing (collectively, the “MCBL Indemnified
Parties”), from and against any and all Liabilities of MCBL Indemnified
Parties incurred by, borne by or asserted against any of them relating to,
arising out of or resulting from any of the following items (without
duplication):

     

    
      
        
        

      

      
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    (a)    the
breach or the failure of performance by Capitol of any of the covenants,
promises, undertakings or agreements which it is obligated to perform under this
Agreement;

     

    (b)    death of
or injury of any person whomsoever, including but not limited to directors,
officers, employees, servants or agents of MCBL, of another member of MCBL Group
or contractors, resulting from the acts or omissions of Capitol or its
Affiliates under or in connection with this Agreement, to the extent that such
Liabilities are not covered by worker’s compensation;

     

    (c)    loss of,
or damage to, or destruction of any property whatsoever, including without
limitation, property of MCBL or of another member of MCBL Group, resulting from
the acts or omissions of Capitol or its Affiliates under or in connection with
this Agreement, to the extent such liabilities are not covered by insurance;
or

     

    (d)    any claim
or assertion that the execution or performance by MCBL of its obligations under
this Agreement violates or interferes with any contractual or other right or
obligation or relationship of Capitol to or with any other Person, caused by,
arising out of, or in any way related to this Agreement, but subject however to
the limitations of liability provided in Section 13.2 of this
Agreement.

     

    MCBL
shall indemnify, defend and hold harmless Capitol, each other member of Capitol
Group and each of their respective directors, officers and employees, and each
of the heirs, executors, trustees, administrators, successors and assignors of
any of the foregoing (collectively, the "Capitol
Indemnified Parties"), from and against any and all Liabilities of
Capitol Indemnified Parties incurred by, borne by or asserted against any of
them relating to, arising out of or resulting from any of the following items
(without duplication):

     

    (a)    the
breach or the failure of performance by MCBL of any of the covenants, promises,
undertakings or agreements which it is obligated to perform under this
Agreement;

     

    (b)    death of
or injury of any person whomsoever, including but not limited to directors,
officers, employees, servants or agents of Capitol, of another member of Capitol
Group or contractors, resulting from the acts or omissions of MCBL or its
Affiliates under or in connection with this Agreement, to the extent that such
Liabilities are not covered by worker’s compensation;

     

    (c)    loss of,
or damage to, or destruction of any property whatsoever, including without
limitation, property of Capitol or of another member of Capitol Group, resulting
from the acts or omissions of MCBL or its Affiliates under or in connection with
this Agreement, to the extent such liabilities are not covered by insurance;
or

     

    (d)    any claim
or assertion that the execution or performance by Capitol of its obligations
under this Agreement violates or interferes with any contractual or other right
or obligation or relationship of MCBL to or with any other Person, caused by,
arising out of, or in any way related to this Agreement, but subject however to
the limitations of liability provided in Section 13.2 of this
Agreement.

     

    
      
        
        

      

      
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    13.2    Limitation
of Liability.  Notwithstanding
the provisions of Section 13.1, the total aggregate liability of a Party to
the other Party for all events, acts or omissions of such Party under or in
connection with this Agreement or the Services provided by such Party hereunder,
whether based on an action or claim in contract, warranty, equity, negligence,
tort or otherwise, shall not exceed an amount equal to the value of the Services
payable by such Party to the other Party under this Agreement; provided that the
foregoing limit shall not apply with respect to any liability arising out of or
relating to such Party’s gross negligence or willful misconduct or the gross
negligence or willful misconduct of its personnel, contractors, subcontractors
or agents or other Persons for which it is responsible under Applicable
Law.

     

    In no
event shall any member of Capitol Group or MCBL Group be liable to any member of
the other Group for any special, consequential, indirect, collateral, incidental
or punitive damages, lost profits, or failure to realize expected savings, or
other commercial or economic loss of any kind, however caused and on any theory
of liability (including negligence), arising in any way out of this Agreement,
whether or not such Person has been advised for the possibility of any such
damages; provided, however, that the
foregoing limitations shall not limit either Party’s indemnification obligations
for liabilities to with respect to Third Party Claims as set forth in Article 6
of the Separation Agreement.

     

     13.3    Provisions
Applicable with respect to Indemnification Obligations.  Article
6 of the Separation
Agreement shall apply mutatis
mutandis  with respect to any Liability subject to
indemnification or reimbursement pursuant to Article 13 of this
Agreement.

     

     13.4    Survival. 
The
rights and obligations of the Parties under this Article 13 shall survive the
expiration or earlier termination of this Agreement.

     

    ARTICLE
14

    DISPUTE
RESOLUTION

     

    The
Separation Agreement with respect to Dispute Resolution, effective as of the
Effective Time, among the Parties and other parties thereto shall govern all
disputes, controversies or claims (whether arising in contract, delict, tort or
otherwise) between the Parties that may arise out of, or relate to, or arise
under or in connection with, this Agreement or the transactions contemplated
hereby (including all actions taken in furtherance of the transactions
contemplated hereby), or the commercial or economic relationship of the Parties
relating hereto or thereto.

     

    ARTICLE
15

    ASSIGNMENT

     

     15.1    Prohibition
of Assignment.  Neither
Party shall assign or transfer this Agreement, in whole or in part, or any
interest or obligation arising under this Agreement except as permitted by
Section 7.7(a), Article 9 and Section 15.2, without the prior written
consent of the other Party.

     

     15.2    Assignment
to Capitol Group.  Capitol
may elect to have one or more of the members of Capitol Group assume the rights
and obligations of Capitol under this Agreement.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    ARTICLE
16

    MISCELLANEOUS

     

     16.1    Notices. 
All
notices and other communications hereunder shall be given in the manner set
forth in Section 9.2 of the Separation
Agreement.

     

     16.2    Governing
Law; Consent to Jurisdiction.  This
Agreement shall be construed in accordance with, and governed by, the laws of
the State of Michigan, without regard to the conflicts of law rules of such
state. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of the courts of the State of Michigan or any federal
court with subject matter jurisdiction located in the Western District of
Michigan (and any appeals court therefrom) in the event any dispute arises out
of this Agreement or any transaction contemplated hereby, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, and (c) agrees that it will
not bring any action relating to this Agreement or any transaction contemplated
hereby in any court other than such courts

     

     16.3    Judgment
Currency.  The
obligations of a Party to make payments hereunder shall not be discharged by an
amount paid in any currency other than Dollars, whether pursuant to a court
order or judgment or arbitral award or otherwise, to the extent that the amount
so paid upon conversion to Dollars and transferred to an account indicated by
the Party to receive such funds under normal banking procedures does not yield
the amount of Dollars due; and each Party hereby, as a separate obligation and
notwithstanding any such judgment, agrees to indemnify each other Party against,
and to pay to such Party on demand, in Dollars, any difference between the sum
originally due in Dollars and the amount of Dollars received upon any such
conversion and transfer.

     

     16.4    Entire
Agreement.  This
Agreement, the other Ancillary Agreements, the Separation Agreement and
exhibits, schedules and appendices hereto, including the Transition Services
Schedules, and thereto and the specific agreements contemplated herein or
thereby, contain the entire agreement between the Parties with respect to the
subject matter hereof and supersedes all previous agreements, negotiations,
discussions, writings, understandings, commitments and conversations with
respect to such subject matter.  No agreements or understandings exist
between the Parties other than those set forth or referred to herein or
therein.

     

     16.5    Conflicts. 
In case
of any conflict or inconsistency between this Agreement and the Separation
Agreement, this Agreement shall prevail.  In case of any conflict or
inconsistency between the terms and conditions of this Agreement (excluding, for
the purpose of this Section 16.5, any Transition Service Schedule thereto)
and the terms of any Transition Service Schedule, the provisions of the
Transition Service Schedule shall prevail.

     

     16.6    Force
Majeure.  No Party
shall be deemed in default of this Agreement to the extent that any delay or
failure in the performance of its obligations under this Agreement results from
superior force (“Force
Majeure”) or any act, occurrence or omission beyond its reasonable
control and without its fault or negligence, such as fires, explosions,
accidents, strikes, lockouts or labor disturbances, floods, droughts,
earthquakes, epidemics, seizures of cargo, wars (whether

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

      or not
declared), civil commotion, acts of God or the public enemy, action of any
government, legislature, court or other Governmental Authority, action by any
authority, representative or organization exercising or claiming to exercise
powers of a government or Governmental Authority, compliance with Applicable
Law, blockades, power failures or curtailments, inadequacy or shortages or
curtailments or cessation of supplies of raw materials or other supplies,
failure or breakdown of equipment of facilities or, in the case of computer
systems, any failure in electrical or air conditioning equipment (a “Force Majeure
Event”).   If a Force Majeure Event has occurred and its
effects are continuing, then, upon notice by the Party who is delayed or
prevented from performing its obligations to the other Party, (i) the
affected provisions or other requirements of this Agreement shall be suspended
to the extent necessary during the period of such disability, (ii) the
Party which is delayed or prevented from performing its obligations by a Force
Majeure Event shall have the right to apportion its Services in an equitable
manner to all users and (iii) such Party shall have no liability to the
other Party or any other Person in connection therewith.  The Party
which is delayed or prevented from performing its obligations by the Force
Majeure Event shall resume full performance of this Agreement as soon as
reasonably practicable following the cessation of the Force Majeure Event (or
the consequences thereof).

    

     

     16.7    Amendment
and Waiver.  This
Agreement may not be altered or amended, nor may any rights hereunder be waived,
except by an instrument in writing executed by the Parties.  No waiver
of any terms, provision or condition of or failure to exercise or delay in
exercising any rights or remedies under this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision, condition, right or remedy or as a waiver of
any other term, provision or condition of this Agreement.

     

     16.8    Further
Assurances.  Each
Party agrees to use Commercially Reasonable Efforts to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the relations contemplated
hereby.  Without limiting the foregoing and the provisions of the
Separation Agreement, each Party shall make available during normal business
hours for inspection and copying by the other Party and such other Persons as
the other Party shall designate in writing, all books and records in the
possession which relate to the Services and which are necessary to confirm the
said Party’s compliance with its obligations under this Agreement.

     

     16.9    Severability. 
The
provisions of this Agreement are severable and should any provision hereof be
void, voidable or unenforceable under any applicable law, such provision shall
not affect or invalidate any other provision of this Agreement, which shall
continue to govern the relative rights and duties of the Parties as though such
void, voidable or unenforceable provision were not a part hereof.

     

     16.10    Counterparts. 
This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original instrument, but all of which together shall constitute but
one and the same Agreement.

     

    

     

    Signatures
on the following page

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the Parties, having caused this Agreement to be executed, do
hereby warrant and represent that their respective signatories, whose signatures
appear below, have been and are on the date of this document officers duly
authorized by all necessary and appropriate corporate action to execute this
Agreement.

     

    

     

    CAPITOL
BANCORP LTD.

    

    

    By:_________________________________

    

     

    Its:__________________________________

    

     

    

     

    MICHIGAN
COMMERCE BANCORP LIMITED

    

    

    By:___________________________________

    

    Its:____________________________________

    

     

    
      
        
          Signature
Page to Administrative Services Agreement

        

         

      

      
         

        
          

        

      

      
         

      

    

     

     

    SCHEDULE
3.1

     

    ADMINISTRATIVE
SERVICES

     

    1.    Provision
of Office Space to MCBL. Capitol
shall sublease to MCBL or its affiliates general office space, utilities, mail,
and other related services within offices located at 222 Washington Square North
and 200 Washington Square North, Lansing Michigan at the exact same terms and
conditions as are in place between Capitol and lessor.

     

    2.    Administrative
Services. Capitol
shall provide or cause to be provided to MCBL the services set forth in this
Schedule 3.1 at the same service level and type as Capitol provides for its own
account.

     

    3.    Legal
Services.  Capitol will provide the following legal and
compliance services to MCBL:

     

    
      	
              ·  

            	
              Review
      loan and other transaction documents, when
  needed.

            

    

     

    
      	
              ·  

            	
              Review
      of contracts.

            

    

     

    
      	
              ·  

            	
              Assist
      in litigation.

            

    

     

    
      	
              ·  

            	
              Review
      and assist in negotiations of leases and real estate purchase
      agreements.

            

    

     

    
      	
              ·  

            	
              Assist
      in employment related contracts or
litigation.

            

    

     

    
      	
              ·  

            	
              Assist
      in M&A activities.

            

    

     

    
      	
              ·  

            	
              Assist
      in insurance negotiations and
procurement.

            

    

     

    
      	
              ·  

            	
              Assist
      with adverse loan collection matters, foreclosures and other real estate
      owned.

            

    

     

    
      	
              ·  

            	
              Manage
      any external legal counsel engagements.  MCBL to pay charges
      incurred.

            

    

     

    
      	
              ·  

            	
              Provide
      legal counsel and advice on an as-needed
basis.

            

    

     

    4.    Finance
Services.  Capitol  will provide the following
finance, accounting and tax services to MCBL:

     

    
      	
              ·  

            	
              Provide
      general ledger system and transaction support
  services.

            

    

     

    
      	
              ·  

            	
              Maintain
      budget and financial reporting system
software.

            

    

     

    
      
        
        

      

      
        SCHEDULE
3.1 

        
          

        

      

      
        
        

      

    

     

    
      	
              ·  

            	
              Provide
      bill payment services, including employee expense reimbursement, and
      related tax reporting services (Use and Sales Tax and 1099
      reporting).

            

    

     

    
      	
              ·  

            	
              Preparation
      and filing of Regulatory Reports (call reports, FR2900,
    etc.).

            

    

     

    
      	
              ·  

            	
              Preparation
      of monthly financial reporting package for Board of
    Directors.

            

    

     

    
      	
              ·  

            	
              Remit
      backup withholding and file periodic IRS
  returns.

            

    

     

    
      	
              ·  

            	
              Maintain
      fixed asset and prepaids software and
records.

            

    

     

    
      	
              ·  

            	
              Assist
      in the computation of risk-based capital
ratios.

            

    

     

    
      	
              ·  

            	
              Provide
      financial analysis requested by MCBL consistent with customary
      practice.

            

    

     

    
      	
              ·  

            	
              Oversee
      the preparation of all federal, state and local corporate
      income/franchise/property tax filings and related estimated tax payments
      not covered by the Tax Separation Agreement effective ______________
      between Capitol and MCBL.

            

    

     

    
      	
              ·  

            	
              Provide
      SEC and NASDAQ reporting services, including Forms 10Q, 10K, S-3, S-4 and
      8-K.  Maintain files for insider ownership of
    stock.

            

    

     

    
      	
              ·  

            	
              Assist
      in the preparation of press releases and handling of inquiries from
      shareholders or analyst.

            

    

     

    
      	
              ·  

            	
              Assist
      with correspondence to shareholders, transfer agent, Reg O officers and
      other related items.

            

    

     

    5.    human
resource services.  Capitol  will
provide the following human resource services to MCBL:

     

    
      	
              ·  

            	
              Provide
      candidate screening including, credit check, criminal records search,
      motor vehicle record review, drug testing, prior employment references,
      educational review, personal reference check and administration of
      pre-employment testing.

            

    

     

    
      	
              ·  

            	
              Assist
      with compliance with EEOC regulations and employment
  law.

            

    

     

    
      	
              ·  

            	
              Maintain
      employee files.

            

    

     

    
      	
              ·  

            	
              Administer
      the process of bi-weekly payrolls, maintain electronic time keeping system
      and maintain the Human Resource Information System provided by third-party
      vendor.  MCBL is responsible for direct cost from third-party
      vendor.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
      	
              ·  

            	
              Provide
      consulting services to managers and supervisors on employee performance
      issues, dispute resolution, job specific training, compensation analysis,
      and market studies on compensation related
  practices.

            

    

     

    
      	
              ·  

            	
              Manage
      employee benefit programs, including all health related, 401k ESOP and
      ESPP.  This includes assistance in the negotiations with
      third-party vendors on the cost of such programs, open enrollment,
      employee education and claims resolution
  services.

            

    

     

    
      	
              ·  

            	
              Coordinate
      regulatory audits of employee benefit plans and
  programs.

            

    

     

    6.    Miscellaneous.  The
listing above may not be an all inclusive list of the Administrative Services
that Capitol will provide to MCBL during the normal course of
business.  Any minor services that have been omitted will be provided
at no incremental cost.

     

    
       

      
        3

        
          

        

      

      
         

      

    

    

     

    SCHEDULE
3.2

     

    TECHNOLOGY
SERVICES

     

    

     

          1.   Technology
services. Capitol
shall provide or cause to be provided to MCBL and affiliate banks (such
affiliates, collectively, “Bank”)
the services set forth in this Schedule 3.2 at the same service level and type
as Capitol provides for its own account.

     

     

        Data
& Proof Processing Services.  Capitol
agrees to provide Bank with the following services; provided that, in addition
to any further services listed herein and except as specifically provided to the
contrary in this Agreement, the parties intend for Capitol to provide the Bank
with the same or similar services it did under the Original
Agreement:

    

       a.           Repetitive
Services.  Exhibit A attached to this
schedule defines the Data Processing Services which Capitol shall provide to
Bank, and, when applicable, the due in and due out schedules for such Data
Processing Services.

    

       b.           Change in Data or Proof
Processing Services.  The intent of this agreement is to
continue to provide Technology Services to the Bank consistent with past
practice and consistent with the other Banks processed by
Capitol.  Capitol may be required by its vendors or choose to add new
services, change existing services or eliminate obsolete services during the
Term (“Change in
Service”).  Capitol shall provide advance written notice prior
to any material change in Data and/or Proof Processing Services and such change
shall be subject to approval by the Bank. Upon a Change in Service, the parties
to this Agreement may renegotiate the payment terms of this
Agreement.  Such renegotiation shall be conducted by both parties in
good faith.

    

    Capitol
does not intend to make changes to its Technology Services, including but not
limited to; adding systems, technology, applications, interfaces, supporting new
vendors, or having processes and procedures, that are dedicated only to support
the Bank.  Notwithstanding anything to the contrary, Bank acknowledges
and agrees to the conversion of its online banking systems from Digital Insight
to Jack Henry Net Teller.  Accordingly, Bank agrees to pay any and all
third-party costs associated with this conversion.

    

       c.           Obligations of
Bank.  In order to provide the Data Processing Services
contracted for under this Agreement, the Bank shall provide the information and
data set forth on Exhibit
B to Capitol in the frequency and manner as provided for in such Exhibit B.  The
information and data shall be conveyed to Capitol in a manner determined by
Capitol in its sole and absolute discretion.

    

       d.           Proof Processing.
Exhibit C attached to
this Agreement defines the Proof Processing Services which Capitol shall provide
to Bank.

    

    
      
        
        

      

      
        SCHEDULE
3.2

        
          

        

      

      
        
        

      

    

     

                      
e.           Technology and Security
Services.  In consideration for the Transaction Processing
Services outlined herein and the Technology Services (i.e. network and internet
connectivity, e-mail and other such technology systems), it is agreed
that:

    

        i)           Capitol
may implement network and other system isolation of the Bank from the Capitol
network as it deems advisable in its sole and absolute discretion;

    

        ii)           During
the Term, the Bank shall not make any changes to the technology infrastructure
maintained by Capitol or used to access Capitol systems;

    

        iii)           During
the Term, the Bank will not add equipment to the Capitol network or connect the
existing equipment to any other network; and

    

        iv)           During
the Term, the Bank will not change any vendor that could affect any interfaces
or operational processes.

    

       f.           Transportation and Condition
of Data and Programs.  Specifications, documentation, tapes,
disks, forms, data, equipment/hardware, systems and programs submitted by the
Bank to Capitol shall be
transported at the Bank’s expense between the Bank’s premises and Capitol, and must
be correct, complete and compatible with Capitol’s equipment
and systems and in good condition.  If late, incorrect, incomplete or
incompatible, Bank shall pay the rates in effect at the time for the additional
work performed by Capitol to correct,
complete or render compatible such data and to reschedule and process the Bank’s
work as promptly as possible, but the Bank agrees to extend and schedule for
this purpose.  All specifications, documentation, systems and programs
supplied by Bank to Capitol for use by
Capitol in
providing the services herein may be reviewed, documented and/or tested at the
Bank’s expense to determine and/or establish compatibility with Capitol equipment
and documentation standards.  Capitol shall provide appropriate
specifications and otherwise relevant information to Bank to facilitate Bank’s
compliance with its requirement to furnish Data and Programs as contemplated
herein.

    

       g.           Verification of Data and
Programs.  If Bank has not furnished controls to Capitol to permit
verification or checking of data and programs, Bank agrees to accept the
obtained results as complete and satisfactory performance by Capitol.

    

       
h.           Disposition of Data and
Programs.  Specifications, documentation, tapes, disks, forms,
data, equipment/hardware, systems and programs furnished to Capitol by Bank
pursuant to this Agreement may be retained by Capitol until the
services provided hereunder are complete and paid for.  In the event
of termination of this Agreement, Capitol shall
advise Bank of the property held for Bank and, unless otherwise instructed in
writing within thirty (30) days of such advice, Capitol may dispose
of such property and charge any expense incurred in disposing of such property
to the Bank.

    

       i.           Ownership of Data and
Programs.  Each party warrants and represents to the other
party that all specifications, documentation, tapes, discs, forms, data,
equipment/hardware, systems and programs provided by it which are used to
process data 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    supplied
by Bank are held with good and complete title or are used under valid licenses
which authorize use in processing data supplied by Bank either for its benefit
or benefit of third parties.  Each party also covenants that it shall
defend in any threatened action and otherwise hold the other party free of any
liability for expense, including reasonable attorney’s fees, to any third party
or governmental body for the use of said programs and systems. All
specifications, documentation, tapes, discs, forms, data, equipment/hardware,
systems and programs furnished by Bank, or developed by Capitol for Bank at
Bank’s expense, are and shall remain the property of Bank.  All
specifications, documentation, tapes, discs, forms, data, equipment/hardware,
systems and programs furnished by Capitol, or developed and utilized by Capitol
in connection with this Agreement, other than the aforementioned specifications,
documentation, tapes, discs, forms, data, equipment/hardware, systems and
programs are and shall remain the property of Capitol.

    

       j.           Delivery.  Capitol
will be responsible for timely delivery, in accordance with the customary past
practices of Capitol and the Bank, of all input and output data to the Bank’s
facilities necessary to provide the services contemplated in this Schedule
3.2.

    

       k.           Third Party
Contracts. Bank recognizes that Capitol may contract with many third
parties who provide some of the services contemplated in this Schedule
3.2.  When applicable, these service providers are also subject to
performance standards.  Upon request and notice as provided herein,
Bank may review all such agreements, for any reason related to the business of
the Bank, including, but not limited to, determining the Bank’s or satisfaction
with the third party service providers’ performance standards.

    

       l.           Corrections.  Capitol
agrees to promptly correct any errors made by Capitol in the processing of any
of Bank’s data, including the rebuilding of any data files damages or destroyed
due to Capitol’s error.  Any such corrections or rebuilding will be
without charge to Bank, unless caused by the nature or lack of timeliness of
data submitted by Bank, in which case Bank will pay Capitol its reasonable
expenses and charges.

    

              m.           Malfunction.  Capitol
shall not be responsible or liable for any losses, direct or indirect, or any
consequential damages arising from any malfunction of processing equipment due
to Acts of God, natural disasters, power failures, third party processors or
equipment malfunction, causing the processing of services contemplated in this
Schedule 3.2 to Bank to be delayed.  Capitol warrants that it will
take all reasonable steps to avoid such interruptions, and shall make every
reasonable attempt to restore services contemplated in this Schedule 3.2 as
quickly as possible following any such interruptions.

     

                   n.           De-Conversion.  In
the event that MCBL chooses another Technology partner to provide the services
listed in this Schedule 3.2, Capitol agrees to work in good faith with MCBL in
the conversion of the services from Capitol’s system to MCBL’s new
system.  Additionally, Capitol agrees to provide such reasonable
assistance as requested by MCBL in furtherance of such
conversion.  The cost for any Capitol services used for the conversion
will be separately negotiated between the parties.  Cost incurred by
Capitol from third-party conversion service provider will be reimbursed by MCBL
within a reasonable time period after its receipt of such
documentation.  Upon the Conversion Date, Capitol agrees to maintain
and/or deliver to 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Bank any
and all pre-Effective Date data, materials and information related to Bank and
its customers.  The risk of loss of such data, materials and
information, if delivered to Bank, shall remain with Capitol until delivered to
Bank, at which point the Bank will assume such risk. Notwithstanding the above
provision, in the event that an isolated system and/or process is not
practicable to convert, or the parties otherwise agree not to convert a
particular system and/or process, Capitol agrees to provide research services to
the Bank at Capitol’s published research rates (not to exceed $35.00 per
hour).  Such systems and/or processes may include, but are not limited
to, report storage/COLD storage archives, check archives and other record
retention based systems.

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

     

    EXHIBIT
A

    

    Repetitive
Services

    

    

    
      	
              1.

            	
              Proof
      Transaction Capture.

            

    

     

    
      	
               
      

            	
              a.

            	
              Image
      and balance transactions as they are presented into the Vertex teller
      system at each teller station.

            

    

     

    
      	
               
      

            	
              b.

            	
              Centralized
      location for remote check processing operation for additional review, if
      needed, and host system posting and
clearing.

            

    

     

    
      	
               
      

            	
              c.

            	
              Retrieval
      of items via eVision.

            

    

     

    

    
      	
              2.

            	
              Deposit
      Processing Systems.

            

    

     

    
      	
                   

            	
              a.    SilverLake
      Deposits - Demand Deposit and
Savings.

            

    

     

    
      
        	 	
                i.

              	
                Processing
      of all daily transactional
data.

              

      

    

     

    
      	
               
      

            	
              ii.

            	
              Calculation
      of daily interest accruals, services charges and sweep 

                    transactions.

              

            	
               

               

            

    

     

    
      
        	 	
                iii.

              	
                Creation
      of all customer notices.

              

      

    

     

    
      
        	 	
                iv.

              	
                Creation
      of periodic customer
Statements.

              

      

    

     

    
      
        	 	
                v.

              	
                Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

              

      

    

     

    
      
        	 	
                b.

              	
                SilverLake
      Time Deposits - Certificate of Deposits and Retirement
      Accounts

              

      

    

     

    
      
        	 	
                i.

              	
                Processing
      of all daily transactional
data.

              

      

    

     

    
      
        	 	
                ii.

              	
                Calculation
      of daily interest accruals, penalties and interest

                    payments.

              	
                 

              

      

    

     

    
      
        	 	
                iii.

              	
                Creation
      of all customer notices.

              

      

    

     

    
      
        	 	
                iv.

              	
                Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

              

      

    

     

    

     

    
      	
              3.

            	
              General
      Ledger

            

    

     

    
      
        	 	
                a.

              	
                Processing
      of all daily transactional
data.

              

      

    

     

    
      
        	 	
                b.

              	
                Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

              

      

    

     

    
      
        	
                 4.

              	
                Loan
      Processing Systems

              

      

    

     

    
      	
               
      

            	
              a.

            	
              SilverLake
      Loan System

            

    

     

    
      
        	 	
                 
      

              	
                i.

              	
                Processing
      of all daily transactional
data.

              

      

    

     

    
      	
               
      

            	
              ii.

            	
              Calculation
      of daily interest accruals, penalties and interest
    payments.

            	
               

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              iii.

            	
              Creation
      of all customer notices.

            

    

     

    
      	
               
      

            	
              iv.

            	
              Creation
      of billing notices.

            

    

     

    
      	
               
      

            	
              v.

            	
              Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

            

    

     

    
      	
               5.

            	
              
                Platform
      Automation Systems

              

            	
               

            

    

     

    
      	
               
      

            	
              a.

            	
              Streamline
      Deposit Interface System & LaserPro Online Interface System (where
      applicable)

            

    

     

    
      	
               
      

            	
              i.

            	
              Supply
      interface between platform tools and core software to allow for single
      throughput of data.

            

    

     

    
      	
               
      

            	
              ii.

            	
              Centralized
      updates for both the documents and
software.

            

    

     

    
      	
               
      

            	
              b.

            	
              Wire
      transfer platform.

            

    

     

    
      	
               6.

            	
              
                Automated
      Teller and Point of Sale Transaction Support

              

            	
               

            

    

     

    
      	
               
      

            	
              a.

            	
              Processing
      of all daily transactional data received from third party
      Processor.

            

    

     

    
      	
               
      

            	
              b.

            	
              Transmitting
      of positive balance file to third party
  Processor

            

    

     

    
      	
               
      

            	
              c.

            	
              Creation
      of daily, weekly, monthly, quarterly and year end
  reports

            

    

     

    
      	
              
                7.

              

            	
              
                Automated
      Clearing House (ACH)

              

            	
               

            

    

     

    
      	
               
      

            	
              a.

            	
              Multiple
      daily updates of all ACH daily transactional files received from EPN,
      third party processor.

            

    

     

    
      	
               
      

            	
              b.

            	
              Creation
      and transmission of daily origination files to third party
      processor.

            

    

     

    
      	
               
      

            	
              c.

            	
              Warehousing
      of future dated transactions.

            

    

     

    
      	
               
      

            	
              d.

            	
              Creation
      of daily reports.

            

    

     

    
      	
              8.

            	
              
                Customer
      Information File (CIF)

              

            	
               

            

    

     

    
      	
               
      

            	
              a.

            	
              Processing
      of all daily entry and maintenance
files.

            

    

     

    
      	
               
      

            	
              b.

            	
              Creation
      of all CIF notices.

            

    

     

    
      	
               
      

            	
              c.

            	
              Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

            

    

     

    
      	
              
                9.

              

            	
              
                Electronic
      Report Storage (COLD)

              

            	
               

            

    

     

    
      	
               
      

            	
              a.

            	
              Interface
      between creation of reports and optical storage of those
      reports.

            

    

     

    
      	
               
      

            	
              b.

            	
              Centralized
      permanent storage of all daily, weekly, monthly, quarterly and year end
      reports.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
      	
               
      

            	
              c.

            	
              Online
      and near line access to all reports and
notices

            

    

     

    
      	
              
                10.

              

            	
              
                Lock
      Box

              

            	
               

            

    

     

    
      	
               
      

            	
              a.

            	
              Processing
      of all daily transactional data.

            

    

     

    
      	
               
      

            	
              b.

            	
              Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

            

    

     

    
      	
              11.

            	
              Safe
      Deposit Box

            

    

     

    
      
        	 	
                a.

              	
                Processing
      of all daily transactional
data.

              

      

    

     

    
      
        	 	
                b.

              	
                Calculation
      of payments, annual fees and late
notices.

              

      

    

     

    
      
        	 	
                c.

              	
                Creation
      of all SDB customer notices.

              

      

    

     

    
      
        	 	
                d.

              	
                Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

              

      

    

     

    
      	
              12.

            	
              Remote
      Merchant Capture

            

    

     

    
      
        	 	
                a.

              	
                Processing
      of all daily transactional
data.

              

      

    

     

    
      
        	 	
                b.

              	
                Creation
      of daily, weekly, monthly, quarterly and year end
  reports.

              

      

    

     

    
      	
              13.

            	
              Year
      End reporting

            

    

     

    
      	
               
      

            	
              a.

            	
              Creation
      of all appropriate year end notification, including but not limited to
      1098s, 1099s, INT-Notices, EE-bonds & IRA
    notifications.

            

    

     

    
      	
               
      

            	
              b.

            	
              Annual
      reporting of data to IRS for the various year end
      notifications.

            

    

     

    
      	
               
      

            	
              c.

            	
              Timely
      sensitive reporting of year end information to
  customers.

            

    

     

    
      	
               
      

            	
              d.

            	
              Storage
      of year end data for a minimum of 7
years.

            

    

     

    
      	
              14.

            	
              Data
      backups for Business Resumptions.

            

    

     

    
      
        	 	
                a.

              	
                Off
      site, secure storage of application and system
  data.

              

      

    

     

    
      
        	 	
                i.

              	
                Daily
      backup of Host Based application
data

              

      

    

     

    
      
        	 	
                ii.

              	
                Incremental
      Backup of User Data on
Servers

              

      

    

     

    
      
        	 	
                iii.

              	
                Incremental
      Backup of System Information

              

      

    

     

    
      
        	 	
                b.

              	
                Annual
      Business Resumption testing.

              

      

    

     

    
      	
              15.

            	
              Centralized
      user setups for both AS400 and Network
IDs.

            

    

     

    
      
        	 	
                a.

              	
                New
      user setup

              

      

    

     

    
      
        	 	
                b.

              	
                Changes
      to users IDs

              

      

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
      
        	 	
                c.

              	
                Deletion
      of user IDs

              

      

    

     

    
      
        	 	
                d.

              	
                Semi-Annual
      user audits.

              

      

    

     

    

    16.          Electronic Banking
Services. Certain electronic customer banking services (“Service”)
such as Internet Banking, Bill Pay, ATM access and Cash Management, are
contracted with third party providers for use by the banks’
customers.  In these cases Capitol will facilitate the interface
between the core banking systems and such providers, allowing information to be
transferred from the Service to or from the customer account.

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
EXHIBIT
B

    

    Processing
Schedule

    

    Except
for those conditions state in the agreement, the following processing schedule
will apply to bank processing:

    

    
      	
              1.

            	
              Capitol
      will celebrate a holiday only if all user institutions celebrate the same
      holiday.  MCBL will provide Capitol with their holiday schedule
      no later than October 1st of each year for the following calendar
      year.

            

    

    

    
      	
              2.

            	
              Bank
      application systems will be available to the banks for on-line access, no
      later than 7:30 AM (LOCAL TIME), Monday through
  Friday.

            

    

    

    
      	
              3.

            	
              The
      systems will be closed for on-line access when the nightly processing
      begins at 7:00 PM (LOCAL TIME) Monday through
  Friday.

            

    

    

    
      	
              4.

            	
              The
      final batch of transaction items for proof capture must arrive at the
      Capitol processing center no later than 7:00 PM (LOCAL
    TIME).

            

    

    

    
      	
              5.

            	
              Normal
      processing priorities are to run the incoming cash letters as they arrive,
      and process the teller proof items in the evening after the bank lobbies
      close within a reasonable time to meet the cash letter deadlines for funds
      availability.  If evening proof processing is delayed in an
      emergency until the following day, then the teller proof would take
      precedence over the next day’s incoming cash letter until normal
      scheduling was again resumed.

            

    

    

    
      	
              6.

            	
              If
      normal batch posting is interrupted by emergency conditions, the Demand
      Deposits would receive first priority for recovery since customers draw
      upon these funds daily. Other depository transactions would follow and the
      loan posting would be third since these payments can be backdated to the
      correct posting date with little long-term customer
      interruption.

            

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    EXHIBIT
C

    

    Proof
Processing

    

    

    Proof
services will be provided on a routine basis each Monday through Friday.
Exceptions to this processing schedule will occur on days where the institution
chooses to be closed for business or as otherwise noted in the
agreement.

    

    Services
provided are as follows:

    

    1.           
Proof document input

    2.           
Balancing of proof transactions

    3.           
In-clearing processing

    4.           
Deposit corrections

    5.           
Cash letter adjustments

    6.           
Returned deposit items

    7.           
On-line exception item system

    8.           
Unposted items handling

    9.           
Suspense item handling

    10.          Stop
payments

    11.          High
dollar notices

    12.          ACH
returns and NOC’s

    13.          Reconciliations

    14.          Customer
Account large research projects

    15.          Check
filing as needed

    16.          Customer
statement preparation and mailing

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

     

    SCHEDULE
3.3

     

    EXCLUDED
ACTIVITIES

     

    Notwithstanding
anything to the contrary contained in this Agreement, the Services shall not
include the following activities (the “Excluded Activities”):

     

    
      	
              (a)  

            	
                  Entry
      by MCBL into any new line of
business;

            

    

     

    
      	
              (b)  

            	
                  Entry
      by MCBL into any new geographical
markets;

            

    

     

    
      	
              (c)  

            	
                  Request
      by MCBL for a capital contribution from any stockholder of MCBL;
      or

            

    

     

    
      	
              (d)  

            	
                  Sale or
      issuance by MCBL of any equity or debt instruments (whether to
      stockholders of MCBL or to a third
party).

            

    

     

    

     

    
      
         

      

      
        SCHEDULE
3.3

        
          

        

      

      
         

      

    

     

     

    SCHEDULE
5.1

     

    FEE
SCHEDULE

     

    Effective _______,
20__

     

    

     

    The
following fee schedule is in place from the Effective Date until changed by
mutual agreement by the Parties:

     

    Fees
Payable to Capitol by MCBL for Administrative Services as described in Schedule
3.1:

     

    
    

    Department /
Capitol                                                Monthly Fee        

    
      	Legal 	 	[_______] 
	Finance	 	[_______] 
	Human
      Resources	 	[_______] 
	 	 	 
	Total Monthly
      Fees 	 	[_______] 
	 	 	 
	 	 	 
	Fees Payable to
      Capitol by MCBL for Technology Services as described in Schedule 3.2: 	 	 
	 	 	[_______] 
	Total Monthly
      Fee 	 	 
	 	 	 
	 	 	 
	 	 	 

    

     

    

     

    

    
      
         

      

      
        SCHEDULE
5.1

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