Document:

Exhibit 10a

Execution Copy

                              EMPLOYMENT AGREEMENT

     THIS  AGREEMENT is made  effective  as of the 13th day of March,  2003 (the
"Effective  Date"), by and between CAPITOL BANCORP LTD., a Michigan  corporation
(the "Company") and Joseph D. Reid (the "Executive").

                                   BACKGROUND

     The Board of Directors of the Company (the "Board") has determined  that it
is in the best  interests  of the  Company  and its  shareholders  to employ the
Executive.  The Company and the Executive established an employment relationship
pursuant to an  Employment  Agreement  dated  February 21, 1989, as amended (the
"Original Employment Agreement").

     The Company and the Executive  desire to enter into this Agreement to amend
and restate the terms and  conditions of such  employment  relationship  and the
Original Employment Agreement in their entirety.

     This  Agreement  shall  represent  the entire  understanding  and agreement
between the parties with respect to the Executive's employment with the Company.

     NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  terms  and
conditions set forth herein, the parties agree as follows:

                              TERMS AND CONDITIONS

     1. EMPLOYMENT  PERIOD.  The Company hereby agrees to continue the Executive
in its employ,  and the  Executive  hereby agrees to remain in the employ of the
Company  subject  to the  terms  and  conditions  of  this  Agreement,  for  the
Employment Period.  The "Employment  Period" shall mean the period commencing on
the date  hereof  and  ending  on the  third  anniversary  of the  date  hereof;
provided,  however,  that commencing on the date one year after the date hereof,
and on  each  annual  anniversary  of such  date  (such  date  and  each  annual
anniversary  thereof shall be  hereinafter  referred to as the "Renewal  Date"),
unless  previously  terminated,  the  Employment  Period shall be  automatically
extended so as to terminate three years from such Renewal Date,  unless at least
60 days prior to the Renewal Date the Company shall give notice to the Executive
that the Employment Period shall not be so extended.

     2. TERMS OF EMPLOYMENT.

          (a) POSITION AND DUTIES.

               (i) During the Employment  Period,  the Executive  shall serve as
          the  President  and Chief  Executive  Officer of the Company and shall
          have such duties and  responsibilities  as are  assigned to him by the
          Board.  The Company shall  nominate the Executive as a director at the
          relevant  meeting of  shareholders  held for the election of directors
          until such time as the Executive resigns, is terminated,  or until the
          Executive's death or Disability. The Company shall cause the Executive
          to  continue  to be elected to the  position  of Chairman of the Board
          during the Employment Period.
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               (ii) During the Employment  Period,  and excluding any periods of
          vacation  and sick  leave to which  the  Executive  is  entitled,  the
          Executive agrees to devote reasonable attention and time during normal
          business  hours to the business and affairs of the Company and, to the
          extent  necessary to discharge  the  responsibilities  assigned to the
          Executive hereunder, to use the Executive's reasonable best efforts to
          perform faithfully and efficiently such  responsibilities.  During the
          Employment  Period it shall not be a violation of this  Agreement  for
          the Executive to (A) serve on corporate, civic or charitable boards or
          committees,  (B) deliver  lectures,  fulfill  speaking  engagements or
          teach at educational institutions and (C) manage personal investments,
          so long as such  activities do not  significantly  interfere  with the
          performance of the Executive's  responsibilities as an employee of the
          Company in accordance with this Agreement.  It is expressly understood
          and  agreed  that to the  extent  that any such  activities  have been
          conducted by the Executive  prior to the Effective Date, the continued
          conduct of such  activities  (or the conduct of activities  similar in
          nature and scope  thereto)  subsequent to the Effective Date shall not
          thereafter  be  deemed  to  interfere  with  the  performance  of  the
          Executive's responsibilities to the Company.

          (b) COMPENSATION.

               (i) BASE SALARY.  During the  Employment  Period,  the  Executive
          shall  receive an annual base salary  ("Annual  Base  Salary"),  which
          shall be paid at a monthly  rate,  at least equal Nine  Hundred  Forty
          Thousand  Dollars  ($940,000),  which shall be paid in accordance with
          the Company's  normal  payroll  practices for senior  executives as in
          effect from time to time.  During the  Employment  Period,  the Annual
          Base Salary  shall be  reviewed no more than 12 months  after the last
          salary  increase  awarded to the Executive prior to the Effective Date
          and thereafter at least  annually.  Any increase in Annual Base Salary
          shall  not  serve to limit  or  reduce  any  other  obligation  to the
          Executive  under  this  Agreement.  Annual  Base  Salary  shall not be
          reduced  after any such  increase and the term "Annual Base Salary" as
          utilized  in this  Agreement  shall  refer to Annual Base Salary as so
          increased.

               (ii) ANNUAL  BONUS.  In addition to Annual Base Salary,  for each
          fiscal year ending during the Employment  Period,  the Executive shall
          be eligible for an annual cash bonus (the "Annual Bonus") in an amount
          specified  on Exhibit A attached  hereto  pursuant to the terms of the
          Company's  Management  Incentive  Plan,  as  amended  ("MIP")  (or any
          predecessor  or  successor   plan  thereof),   as  determined  by  the
          Compensation  Committee of the Board, upon complete achievement of the
          targets set forth on Exhibit A attached hereto. Each such Annual Bonus
          shall be paid no later  than the end of the third  month of the fiscal
          year next  following  the fiscal  year for which the  Annual  Bonus is
          awarded, unless the Executive shall elect to defer the receipt of such
          Annual Bonus. The amount of any Annual Bonus which exceeds the maximum
          bonus  payable  pursuant  to the MIP in any one fiscal  year,  if any,
          shall be carried over (on a "first-in,  first-out" basis) and added to
          the Annual Bonus (if any)  determined for any of the next

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          three  fiscal  years,  whether  or not any one or more of such  fiscal
          years ends before or after the end of the Employment Period.

               (iii)  LONG-TERM  INCENTIVE  COMPENSATION.  During the Employment
          Period,  the Executive shall be awarded stock options on the terms and
          conditions  set forth on Exhibit B attached  hereto and  otherwise  in
          accordance with the applicable stock plan. The Executive shall also be
          entitled to receive a special long term incentive  bonus in the amount
          and on the date set forth on  Exhibit B  attached  hereto  and in such
          amounts and on such future  dates as  determined  by the  Compensation
          Committee of the Board.

               (iv) WELFARE  BENEFIT PLANS.  During the Employment  Period,  the
          Executive and/or the Executive's  family, as the case may be, shall be
          eligible for  participation  in and shall  receive all benefits  under
          welfare benefit plans,  practices,  policies and programs  provided by
          the  Company  and  its  affiliated   companies   (including,   without
          limitation, medical, prescription,  dental, disability, employee life,
          group life,  accidental death and travel accident  insurance plans and
          programs) to the extent  available  generally to other peer executives
          of  the  Company  and  its  affiliated  companies.  As  used  in  this
          Agreement,  the term "affiliated  companies" shall include any company
          controlled by, controlling or under common control with the Company.

               (v) EXPENSES.  During the Employment  Period, the Executive shall
          be  entitled  to  receive  prompt  reimbursement  for  all  reasonable
          expenses  incurred  by the  Executive  in  accordance  with  the  most
          favorable plans,  practices,  policies and programs of the Company and
          its affiliated  companies to the extent applicable  generally to other
          peer executives of the Company and its affiliated companies.

               (vi) FRINGE BENEFITS. During the Employment Period, the Executive
          shall be entitled to fringe benefits,  including,  without limitation,
          tax and financial  planning  services,  payment of club dues,  and, if
          applicable,  use of an automobile and payment of related expenses,  in
          accordance  with the most  favorable  plans,  practices,  policies and
          programs of the Company and its affiliated companies in effect for the
          Executive at any time during the 120-day period immediately  preceding
          the  Effective  Date or, if more  favorable  to the  Executive,  as in
          effect  generally  at any time  thereafter  with respect to other peer
          executives of the Company and its affiliated companies.

               (vii) OFFICE AND SUPPORT STAFF. During the Employment Period, the
          Executive shall be entitled to an office or offices of a size and with
          furnishings  and  other   appointments,   and  to  exclusive  personal
          secretarial and other assistance, at least equal to the most favorable
          of the  foregoing  provided  to the  Executive  by the Company and its
          affiliated companies at any time during the 120-day period immediately
          preceding the Effective  Date or, if more  favorable to the Executive,
          as provided  generally  at any time  thereafter  with respect to other
          peer executives of the Company and its affiliated companies.

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               (viii)  VACATION.  During the  Employment  Period,  the Executive
          shall  be  entitled  to paid  vacation  in  accordance  with  the most
          favorable plans,  practices,  policies and programs of the Company and
          its  affiliated  companies as in effect for the  Executive at any time
          during the 120-day period immediately preceding the Effective Date or,
          if more favorable to the Executive, as in effect generally at any time
          thereafter  with respect to other peer  executives  of the Company and
          its affiliated companies.

          (c)  OTHER   AGREEMENTS.   Notwithstanding   the  provisions  of  this
               Agreement, the Company and the Executive acknowledge and agree to
               the following:

               (i) Section 4(c) of the Original Employment Agreement shall apply
          to the share exchanges set forth on Exhibit C attached hereto;

               (ii) that certain  Securities  Repurchase  Agreement  between the
          Company and the  Executive  (the  "Securities  Repurchase  Agreement")
          shall continue in full force and effect;

               (iii)  the  Executive  shall  prepay  the  outstanding  principal
          balance of that  certain  promissory  note in the  original  principal
          amount of  $1,819,151  (the  "Note") to the Company on or before April
          30, 2003, the Company  acknowledges  that such  prepayment of the Note
          will be made five (5) years before the Note's due date; and

               (iv) as soon as practicable after the Effective Date, the Company
          shall enter into an indemnification agreement with the Executive which
          is intended to maximize the  indemnification  coverage for the benefit
          of the Executive.

     3. TERMINATION OF EMPLOYMENT.

          (a) DEATH OR DISABILITY.  The Executive's  employment  shall terminate
automatically  upon the Executive's  death during the Employment  Period. If the
Company  determines  in good  faith that the  Disability  of the  Executive  has
occurred during the Employment  Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 9(b) of this  Agreement of its  intention to terminate  the  Executive's
employment.  In such event,  the  Executive's  employment with the Company shall
terminate  effective  on the  30th  day  after  receipt  of such  notice  by the
Executive (the "Disability  Effective Date"),  provided that, within the 30 days
after  such  receipt,  the  Executive  shall  not  have  returned  to  full-time
performance  of  the  Executive's   duties.  For  purposes  of  this  Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time  basis for 180  consecutive  business  days as a
result of incapacity due to mental or physical illness which is determined to be
total and  permanent by a physician  selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.

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          (b) CAUSE. The Company may terminate the Executive's employment during
the Employment  Period for Cause. For purposes of this Agreement,  "Cause" shall
mean:

               (i) the willful and continued failure of the Executive to perform
          substantially  the  Executive's  duties with the Company or one of its
          affiliated  companies  (other  than any such  failure  resulting  from
          incapacity due to physical or mental illness),  after a written demand
          for substantial performance is delivered to the Executive by the Board
          which  specifically  identifies the manner in which the Board believes
          that the Executive  has not  substantially  performed the  Executive's
          duties, or

               (ii) the willful  engaging by the Executive in illegal conduct or
          gross misconduct which is materially and demonstrably injurious to the
          Company.

          For purposes of this provision,  no act or failure to act, on the part
          of the Executive,  shall be considered "willful" unless it is done, or
          omitted  to be  done,  by  the  Executive  in  bad  faith  or  without
          reasonable  belief that the Executive's  action or omission was in the
          best interests of the Company.  Any act, or failure to act, based upon
          authority  given pursuant to a resolution duly adopted by the Board or
          based upon the advice of counsel for the Company shall be conclusively
          presumed to be done,  or omitted to be done,  by the Executive in good
          faith and in the best  interests  of the  Company.  The  cessation  of
          employment of the Executive shall not be deemed to be for Cause unless
          and until there shall have been delivered to the Executive a copy of a
          resolution  duly  adopted  by the  affirmative  vote of not less  than
          three-quarters  of the entire  membership of the Board  (excluding the
          vote of the  Executive)  at a meeting of the Board called and held for
          such purpose (after reasonable notice is provided to the Executive and
          the Executive is given an  opportunity,  together with counsel,  to be
          heard before the Board),  finding  that,  in the good faith opinion of
          the Board, the Executive is guilty of the conduct described in clauses
          (i) or (ii) above, and specifying the particulars thereof in detail.

          (c) GOOD REASON.  The Executive's  employment may be terminated by the
Executive for Good Reason.  For purposes of this Agreement,  "Good Reason" shall
mean:

               (i) the assignment to the Executive of any duties inconsistent in
          any material respect with the Executive's position,  authority, duties
          or responsibilities as contemplated by Section 2(a) of this Agreement,
          excluding for this purpose an isolated,  insubstantial and inadvertent
          action  not taken in bad faith and which is  remedied  by the  Company
          promptly after receipt of notice thereof given by the Executive;

               (ii) failure by the Company to comply with any of the  provisions
          of  Section   2(b)  of  this   Agreement,   other  than  an  isolated,
          insubstantial  and inadvertent  failure not occurring in bad faith and
          which is  remedied  by the Company  promptly  after  receipt of notice
          thereof given by the Executive;

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               (iii) the  Company's  requiring  the  Executive  to reside at any
          specific  location,  it being understood that the Executive  maintains
          multiple  residences  and  offices,  or the  Company's  requiring  the
          Executive  to travel on  Company  business  to a greater  extent  than
          required  immediately prior to the Effective Date or in the event of a
          Change of  Control  (as such term is  defined  in  Exhibit D  attached
          hereto),  the Company's  requiring the Executive to travel in a manner
          inconsistent with current practice in effect immediately preceding the
          Change of Control date;

               (iv)  failure by the Company to comply  with and satisfy  Section
          8(c) of this Agreement; or

               (v) upon a Change of Control.

          Within one hundred  eighty (180) days after the  Executive  has actual
          knowledge of the occurrence of an event or  circumstances  which would
          give him reason to believe  constitute Good Reason, the Executive must
          give sixty (60) days prior  written  notice of his intent to terminate
          his employment for Good Reason, which notice shall set forth the event
          or circumstances  believed to constitute Good Reason.  Upon receipt of
          such  notice,  the  Company  shall  have  sixty  (60) days to cure its
          conduct, to the extent such cure is possible. This notice period shall
          not be  required  after a Change  of  Control  nor  serve to limit the
          Executive's  right to terminate for Good Reason at any time during the
          remaining term of this Agreement.

          (d) NOTICE OF  TERMINATION.  Any termination by the Company for Cause,
or by the  Executive  for  Good  Reason,  shall be  communicated  by  Notice  of
Termination  to the other party hereto given in accordance  with Section 9(b) of
this Agreement.  For purposes of this Agreement, a "Notice of Termination" means
a written notice which sets forth (i) the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable,  in reasonable detail, the
facts and  circumstances  claimed  to  provide a basis  for  termination  of the
Executive's employment under the provision so indicated and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies  the  termination  date (which date shall be not more than thirty (30)
days after the giving of such notice).  The failure by either party to set forth
in the Notice of Termination  any fact or  circumstance  which  contributes to a
showing of Good Reason or Cause  shall not waive the right of either  party from
asserting such fact or circumstance in enforcing its rights hereunder.

          (e)  DATE OF  TERMINATION.  "Date  of  Termination"  means  (i) if the
Executive's  employment  is  terminated  by the  Company  for  Cause,  or by the
Executive for Good Reason,  the date of receipt of the Notice of  Termination or
any later date specified  therein,  as the case may be, (ii) if the  Executive's
employment is terminated by the Company other than for Cause or Disability,  the
Date of  Termination  shall  be the  date on  which  the  Company  notifies  the
Executive  of such  termination  and  (iii)  if the  Executive's  employment  is
terminated by reason of death or Disability,  the Date of  Termination  shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.

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     4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

          (a) GOOD REASON;  OTHER THAN FOR CAUSE OR DISABILITY PRIOR TO A CHANGE
OF CONTROL.  If, during the Employment  Period,  the Company shall terminate the
Executive's employment other than for Cause or Disability or the Executive shall
terminate employment for Good Reason prior to a Change of Control:

               (i) the Company shall pay to the Executive, in a lump sum in cash
          within 90 days after the Date of  Termination,  the  aggregate  of the
          following amounts:

                    A. the sum of (1) the Executive's Annual Base Salary through
               the Date of Termination to the extent not  theretofore  paid, (2)
               the product of (x) the higher of (I) the most recent Annual Bonus
               (which   shall  not  include  the   long-term   incentive   bonus
               contemplated by Section 2(b)(iii)) and (II) the Annual Bonus paid
               or payable, including any bonus or portion thereof which has been
               earned  but  deferred  (and   annualized   for  any  fiscal  year
               consisting  of less than twelve  full months or during  which the
               Executive was employed for less than twelve full months), for the
               most recently completed fiscal year during the Employment Period,
               if any (such  higher  amount  being  referred to as the  "Highest
               Annual Bonus") and (y) a fraction,  the numerator of which is the
               number of days in the  current  fiscal  year  through the Date of
               Termination,  and the  denominator  of which is 365,  and (3) any
               compensation  previously deferred by the Executive (together with
               any  accrued  interest  or  earnings  thereon)  and  any  accrued
               vacation  pay,  in each case to the extent not  theretofore  paid
               (the sum of the amounts  described in clauses  (1),  (2), and (3)
               shall be hereinafter  referred to as the "Accrued  Obligations");
               and

                    B. the amount  equal to the  product of (1) three  times the
               sum of (x) the Executive's Annual Base Salary and (y) the Highest
               Annual Bonus;

               (ii) for three years after the  Executive's  Date of Termination,
          or  such  longer  period  as  may be  provided  by  the  terms  of the
          appropriate  plan,  program,  practice or policy,  the  Company  shall
          continue  welfare  benefits to the  Executive  and/or the  Executive's
          family at least equal to those which would have been  provided to them
          in  accordance  with  the  plans,  programs,  practices  and  policies
          described in Section  2(b)(iv) of this  Agreement  if the  Executive's
          employment  had not  been  terminated  or,  if more  favorable  to the
          Executive,  as in effect generally at any time thereafter with respect
          to other peer  executives of the Company and its affiliated  companies
          and their families,  provided,  however, that if the Executive becomes
          reemployed with another employer and is eligible to receive medical or
          other welfare  benefits  under another  employer  provided  plan,  the
          medical and other welfare benefits described herein shall be secondary
          to

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          those provided under such other plan during such applicable  period of
          eligibility. For purposes of determining eligibility (but not the time
          of  commencement  of benefits) of the Executive  for retiree  benefits
          pursuant  to  such  plans,  practices,   programs  and  policies,  the
          Executive  shall be considered to have remained  employed  until three
          years after the Date of  Termination  and to have  retired on the last
          day of such period; and

               (iii) to the extent not theretofore paid or provided, the Company
          shall  timely  pay or provide to the  Executive  any other  amounts or
          benefits  required to be paid or provided  or which the  Executive  is
          eligible  to receive  under any plan,  program,  policy or practice or
          contract or  agreement  of the Company  and its  affiliated  companies
          (such other amounts and benefits shall be  hereinafter  referred to as
          the "Other Benefits").

          (b) DEATH.  If the  Executive's  employment is terminated by reason of
the  Executive's  death  during the  Employment  Period,  this  Agreement  shall
terminate without further  obligations to the Executive's legal  representatives
under this Agreement, other than for (x) payment of Accrued Obligations, (y) the
timely payment or provision of Other Benefits and (z) the Company's  obligations
under the Securities Repurchase Agreement.  Accrued Obligations shall be paid to
the  Executive's  estate or  beneficiary,  as applicable,  in a lump sum in cash
within 30 days of the Date of  Termination.  With  respect to the  provision  of
Other  Benefits,  the term Other Benefits as utilized in this Section 4(b) shall
include,  without  limitation,  and the Executive's estate and/or  beneficiaries
shall be  entitled to  receive,  benefits  at least equal to the most  favorable
benefits  provided by the Company and  affiliated  companies  to the estates and
beneficiaries  of peer executives of the Company and such  affiliated  companies
under such plans,  programs,  practices and policies relating to death benefits,
if any.

          (c) DISABILITY.  If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further  obligations to the Executive,  other than for payment
of Accrued  Obligations  and the timely payment or provision of Other  Benefits.
Accrued  Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of  Termination.  With  respect  to the  provision  of Other
Benefits,  the term  Other  Benefits  as  utilized  in this  Section  4(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive,  disability  and other benefits at least equal to the most favorable
of those  generally  provided  by the Company and its  affiliated  companies  to
disabled  executives  and/or  their  families  in  accordance  with such  plans,
programs, practices and policies relating to disability, if any.

          (d)  CAUSE,  ETC.;  OTHER  THAN FOR GOOD  REASON.  If the  Executive's
employment  during the Employment Period shall be terminated for Cause or if the
Executive  voluntarily  terminates  employment  during  the  Employment  Period,
excluding a termination for Good Reason,  this Agreement shall terminate without
further  obligations  to the Executive  other than the  obligation to pay to the
Executive (x) his Annual Base Salary  through the Date of  Termination,  (y) the
amount of any compensation  previously deferred by the Executive,  and (z) Other
Benefits,  in each case to the extent  theretofore  unpaid.  In such  case,  the
amounts contemplated by (x) and (y) shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination.

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          (e) GOOD REASON;  OTHER THAN FOR CAUSE OR DISABILITY  WITHIN TWO YEARS
AFTER A CHANGE OF CONTROL.  If, during the Employment  Period, the Company shall
terminate the Executive's  employment  other than for Cause or Disability or the
Executive shall terminate  employment for Good Reason within two (2) years after
a Change of Control:

               (i) the Company shall pay to the Executive, in a lump sum in cash
          within 30 days after the Date of  Termination,  the  aggregate  of the
          following amounts:

                    A. the Accrued Obligations;

                    B. the amount  equal to the  product of (1) three  times the
               sum of (x) the  Executive's  Annual Base Salary,  (y) the Highest
               Annual  Bonus,  and  (z) the  aggregate  amount  of the  employer
               contributions  made with respect to the most  recently  completed
               plan  year  before  the Date of  Termination  to the  Executive's
               account(s) in any qualified  defined  contribution plan sponsored
               by the Company or any of its  affiliated  companies  in which the
               Executive participated and any related non-qualified plans; and

                    C. an  amount  equal  to the  excess  of (a)  the  actuarial
               equivalent of the benefit under the Company's  qualified  defined
               benefit   retirement  plan  (the  "Retirement  Plan")  (utilizing
               actuarial  assumptions  no less  favorable to the Executive  than
               those in effect under the Company's  Retirement Plan  immediately
               prior to the Effective  Date),  and any  non-qualified  excess or
               supplemental   defined  benefit  retirement  plan  in  which  the
               Executive participates (together, the "SERP") which the Executive
               would receive if the Executive's  employment  continued for three
               years after the Date of  Termination  assuming  for this  purpose
               that (x) all accrued benefits are fully vested, (y) the Executive
               is three years older and (z) the Executive is credited with three
               more  years  of  service,  and,  assuming  that  the  Executive's
               compensation  in each of the  three  years  is that  required  by
               Section  2(b)(i) and  Section  2(b)(ii),  over (b) the  actuarial
               equivalent of the  Executive's  actual benefit (paid or payable),
               if any, under the Retirement  Plan and the SERP as of the Date of
               Termination;

               (ii) for three years after the  Executive's  Date of Termination,
          or  such  longer  period  as  may be  provided  by  the  terms  of the
          appropriate  plan,  program,  practice or policy,  the  Company  shall
          continue  welfare  benefits to the  Executive  and/or the  Executive's
          family at least equal to those which would have been  provided to them
          in  accordance  with  the  plans,  programs,  practices  and  policies
          described in Section  2(b)(iv) of this  Agreement  if the  Executive's
          employment  had not  been  terminated  or,  if more  favorable  to the
          Executive,  as in effect generally at any time thereafter with respect
          to other peer  executives of the

                                       9
<PAGE>
          Company and its  affiliated  companies and their  families,  provided,
          however,  that  if  the  Executive  becomes  reemployed  with  another
          employer and is eligible to receive medical or other welfare  benefits
          under another  employer  provided  plan, the medical and other welfare
          benefits  described  herein shall be secondary to those provided under
          such other plan  during such  applicable  period of  eligibility.  For
          purposes of determining  eligibility (but not the time of commencement
          of benefits) of the  Executive for retiree  benefits  pursuant to such
          plans,  practices,  programs  and  policies,  the  Executive  shall be
          considered to have remained  employed until three years after the Date
          of Termination and to have retired on the last day of such period;

               (iii) for all  purposes  of the  vesting  and  exercisability  of
          equity-based  awards under the Company's stock incentive plans and the
          award agreements thereunder,  the Executive shall be deemed to be on a
          leave of absence  from the  Company  for three years after the Date of
          Termination  and the  Executive's  termination of employment  from the
          Company shall be deemed to occur on the third  anniversary of the Date
          of Termination; and

               (iv) the Company  shall pay and/or  provide to the  Executive the
          Other Benefits to the extent theretofore unpaid.

               (v) The Company's obligation to make the payments provided for in
          this  Agreement  and  otherwise to perform its  obligations  hereunder
          shall  not be  affected  by  any  set-off,  counterclaim,  recoupment,
          defense or other  claim,  right or action  which the  Company may have
          against the  Executive or others.  In no event shall the  Executive be
          obligated to seek other  employment or take any other action by way of
          mitigation of the amounts  payable to the  Executive  under any of the
          provisions  of this  Agreement  and such amounts  shall not be reduced
          whether or not the  Executive  obtains other  employment.  The Company
          agrees to pay as  incurred,  to the full extent  permitted by law, all
          legal fees and expenses which the Executive may reasonably  incur as a
          result of any  contest  (regardless  of the  outcome  thereof)  by the
          Company, the Executive or others of the validity or enforceability of,
          or liability  under,  any provision of this Agreement or any guarantee
          of  performance  thereof  (including as a result of any contest by the
          Executive about the amount of any payment pursuant to this Agreement),
          plus, in each case,  interest on any delayed payment at the applicable
          Federal  rate  provided for in Section  7872(f)(2)(A)  of the Internal
          Revenue Code of 1986, as amended (the "Code").

     5.  NON-EXCLUSIVITY  OF RIGHTS.  Nothing in this Agreement shall prevent or
limit the  Executive's  future  participation  in any plan,  program,  policy or
practice  provided by the  Company or any of its  affiliated  companies  and for
which the Executive may qualify.  Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan,  policy,  practice or
program  of or  any  contract  or  agreement  with  the  Company  or  any of its
affiliated  companies  at or  subsequent  to the  Date of  Termination  shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.

                                       10
<PAGE>
     6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

          (a) Anything in this  Agreement to the contrary not  withstanding  and
except as set forth below,  in the event it shall be determined that any payment
or distribution  by the Company to or for the benefit of the Executive  (whether
paid or payable or  distributed or  distributable  pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 6) (a "Payment")  would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the  Executive  with respect to such excise tax (such excise tax,  together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise  Tax"),  then the  Executive  shall be entitled to receive an additional
payment (a  "Gross-Up  Payment")  in an amount  such that  after  payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such  taxes),  including,  without  limitation,  any  income  taxes  (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up  Payment,  the Executive  retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 6(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment,  but that the Payments do not exceed 110% of the
greatest amount (the "Reduced  Amount") that could be paid to the Executive such
that the  receipt of  Payments  would not give rise to any Excise  Tax,  then no
Gross-Up  Payment  shall  be made to the  Executive  and  the  Payments,  in the
aggregate, shall be reduced to the Reduced Amount.

          (b) Subject to the  provisions  of Section  6(c),  all  determinations
required to be made under this Section 6, including  whether and when a Gross-Up
Payment is required and the amount of such Gross-Up  Payment and the assumptions
to be utilized in arriving at such  determination,  shall be made by BDO Seidman
LLP or such other certified  public  accounting firm as may be designated by the
Executive  (the  "Accounting  Firm")  which shall  provide  detailed  supporting
calculations  both to the Company and the  Executive  within 15 business days of
the receipt of notice from the Executive that there has been a Payment,  or such
earlier time as is requested  by the Company.  In the event that the  Accounting
Firm is serving as  accountant  or auditor for the  individual,  entity or group
effecting the Change of Control,  the Executive shall appoint another nationally
recognized accounting firm to make the determinations  required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the  Accounting  Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by
the Company to the Executive  within five days of the receipt of the  Accounting
Firm's determination.  Any determination by the Accounting Firm shall be binding
upon the  Company  and the  Executive.  As a result  of the  uncertainty  in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting  Firm hereunder,  it is possible that Gross-Up  Payments which
will not have been made by the Company  should have been made  ("Underpayment"),
consistent with the  calculations  required to be made  hereunder.  In the event
that  the  Company  exhausts  its  remedies  pursuant  to  Section  6(c) and the
Executive  thereafter  is  required  to make a payment  of any Excise  Tax,  the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such  Underpayment  shall be promptly  paid by the Company to or for the
benefit of the Executive.

                                       11
<PAGE>
          (c) The Executive  shall notify the Company in writing of any claim by
the Internal  Revenue Service that, if successful,  would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable  but no later than ten business days after the Executive is informed
in  writing of such claim and shall  apprise  the  Company of the nature of such
claim and the date on which such claim is  requested to be paid.  The  Executive
shall not pay such claim prior to the expiration of the 30-day period  following
the date on which it gives such notice to the Company  (or such  shorter  period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:

               (i) give the Company any information  reasonably requested by the
          Company relating to such claim,

               (ii) take such action in connection with contesting such claim as
          the Company  shall  reasonably  request in writing  from time to time,
          including,  without  limitation,  accepting legal  representation with
          respect  to such  claim  by an  attorney  reasonably  selected  by the
          Company,

               (iii)   cooperate  with  the  Company  in  good  faith  in  order
          effectively to contest such claim, and

               (iv)  permit  the  Company  to  participate  in  any  proceedings
          relating to such claim; provided, however, that the Company shall bear
          and pay directly all costs and expenses (including additional interest
          and  penalties)  incurred in  connection  with such  contest and shall
          indemnify and hold the Executive harmless,  on an after-tax basis, for
          any Excise Tax or income tax  (including  interest and penalties  with
          respect  thereto)  imposed  as a  result  of such  representation  and
          payment of costs and  expenses.  Without  limitation  on the foregoing
          provisions  of this  Section  6(c),  the  Company  shall  control  all
          proceedings  taken in  connection  with such  contest and, at its sole
          option,  may  pursue  or  forgo  any and all  administrative  appeals,
          proceedings,  hearings and  conferences  with the taxing  authority in
          respect of such claim and may, at its sole option,  either  direct the
          Executive  to pay the tax  claimed and sue for a refund or contest the
          claim in any permissible manner, and the Executive agrees to prosecute
          such contest to a determination before any administrative tribunal, in
          a court of initial  jurisdiction and in one or more appellate  courts,
          as the Company shall determine; provided, however, that if the Company
          directs  the  Executive  to pay such  claim and sue for a refund,  the
          Company shall advance the amount of such payment to the Executive,  on
          an  interest-free  basis and shall  indemnify  and hold the  Executive
          harmless,  on an  after-tax  basis,  from any Excise Tax or income tax
          (including  interest or penalties with respect  thereto)  imposed with
          respect to such  advance or with  respect to any  imputed  income with
          respect to such  advance;  and further  provided that any extension of
          the  statute  of  limitations  relating  to  payment  of taxes for the
          taxable year of the  Executive  with  respect to which such  contested
          amount  is  claimed  to be due is  limited  solely  to such  contested
          amount.  Furthermore,  the  Company's  control of the contest shall be

                                       12
<PAGE>
          limited to issues with  respect to which a Gross-Up  Payment  would be
          payable  hereunder  and the  Executive  shall be entitled to settle or
          contest,  as the case may be, any other issue  raised by the  Internal
          Revenue Service or any other taxing authority.

          (d) If, after the receipt by the  Executive  of an amount  advanced by
the Company pursuant to Section 6(c), the Executive  becomes entitled to receive
any refund  with  respect to such claim,  the  Executive  shall  (subject to the
Company's  complying with the  requirements of Section 6(c)) promptly pay to the
Company the amount of such refund  (together  with any interest paid or credited
thereon after taxes applicable thereto).  If, after the receipt by the Executive
of an amount  advanced by the Company  pursuant to Section 6(c), a determination
is made that the  Executive  shall not be entitled to any refund with respect to
such  claim and the  Company  does not notify  the  Executive  in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such  determination,  then  such  advance  shall be  forgiven  and  shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

     7.  CONFIDENTIAL  INFORMATION.  The  Executive  shall  hold in a  fiduciary
capacity for the benefit of the Company all secret or confidential  information,
knowledge or data  relating to the Company or any of its  affiliated  companies,
and their respective businesses, which shall have been obtained by the Executive
during  the  Executive's  employment  by the  Company  or any of its  affiliated
companies and which shall not be or become public  knowledge (other than by acts
by the  Executive  or  representatives  of the  Executive  in  violation of this
Agreement).  After  termination of the Executive's  employment with the Company,
the Executive shall not,  without the prior written consent of the Company or as
may otherwise be required by law or legal  process,  communicate  or divulge any
such  information,  knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted  violation of the  provisions of
this  Section 7  constitute a basis for  deferring  or  withholding  any amounts
otherwise payable to the Executive under this Agreement.

     8. SUCCESSORS.

          (a) This  Agreement is personal to the Executive and without the prior
written  consent  of the  Company  shall  not  be  assignable  by the  Executive
otherwise than by will or the laws of descent and  distribution.  This Agreement
shall  inure to the  benefit  of and be  enforceable  by the  Executive's  legal
representatives.

          (b) This  Agreement  shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

          (c)  The  Company  will  require  any  successor  (whether  direct  or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially  all of the  business  and/or  assets  of the  Company  to  assume
expressly and agree to perform this Agreement in the same manner and to the same
extent  that the Company  would be required to perform it if no such  succession
had taken place. As used in this Agreement,  "Company" shall mean the Company as
hereinbefore  defined  and  any  successor  to its  business  and/or  assets  as
aforesaid  which  assumes and agrees to perform  this  Agreement by operation of
law, or otherwise.

                                       13
<PAGE>
     9. MISCELLANEOUS.

          (a) This  Agreement  shall be governed by and  construed in accordance
with the laws of the State of  Michigan,  without  reference  to  principles  of
conflict of laws.  The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.  This  Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.

          (b) All notices and other communications hereunder shall be in writing
and shall be given by hand  delivery  to the  other  party or by  registered  or
certified mail, return receipt requested, postage prepaid, addressed as follows:

          If to the Executive: One Business & Trade Center
                               200 Washington Square
                               Lansing, Michigan 48933

          If to the Company:   Capitol Bancorp Ltd.
                               One Business & Trade Center
                               200 Washington Square
                               Lansing, Michigan 48933
                               Attention: General Counsel

or to such other  address as either  party shall have  furnished to the other in
writing in accordance  herewith.  Notice and  communications  shall be effective
when actually received by the addressee.

          (c)  The  invalidity  or  unenforceability  of any  provision  of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

          (d) The  Company may  withhold  from any  amounts  payable  under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.

          (e) The  Executive's  or the  Company's  failure to insist upon strict
compliance  with any  provision  of this  Agreement or the failure to assert any
right the  Executive  or the  Company  may have  hereunder,  including,  without
limitation,  the right of the Executive to terminate  employment for Good Reason
pursuant to Section  3(c)(i)-(v) of this Agreement,  shall not be deemed to be a
waiver  of such  provision  or right  or any  other  provision  or right of this
Agreement.

          (f)  This  Agreement,  and  all  agreements,  documents,  instruments,
schedules,  exhibits or certificates prepared in connection herewith,  represent
the entire  understanding  and agreement between the parties with respect to the
subject matter hereof,  supersede all prior  agreements or negotiations  between
such parties,  including the Original Employment Agreement,  and may be amended,
supplemented  or changed only by an agreement  in writing  which makes  specific
reference to this  Agreement or the  agreement  or document  delivered

                                       14
<PAGE>
pursuant  hereto,  as the case may be, and which is signed by the party  against
whom enforcement of any such amendment, supplement or modification is sought.

     IN WITNESS  WHEREOF,  the Executive has hereunto set the  Executive's  hand
and, pursuant to the authorization from its Board of Directors,  the Company has
caused  these  presents to be executed in its name on its behalf,  all as of the
31st day of March, 2003.

                                        /s/ Joseph D. Reid
                                        ----------------------------------------
                                        Joseph D. Reid

                                        CAPITOL BANCORP LTD.,
                                        a Michigan corporation

                                        By: /s/ Lee W. Hendrickson
                                            ------------------------------------

                                        Its: Chief Financial Officer

                                        AND

                                        /s/ David O'Leary
                                        ----------------------------------------
                                        David O'Leary, Secretary of the Board of
                                        Directors of Capitol Bancorp Ltd.

                                       15
<PAGE>
                                    EXHIBIT A

                         ANNUAL BONUS PERFORMANCE GOALS

Executive:            Joseph D. Reid.

Company:              Capitol Bancorp Ltd.

Plan:                 Capitol Bancorp Ltd. Management Incentive Plan.

Target Annual Bonus:  2%  of  Net  Income  of  Capitol   Bancorp  Ltd.  for  the
                      immediately    preceding   fiscal   year   upon   complete
                      achievement of the performance goals set forth below.

Performance Goals:    The Annual Bonus  contemplated  in this Exhibit A shall be
                      subject  to  the  Company's  complete  achievement  of the
                      following performance goals:

                      1.  Growth of the  Company's  Earnings  Per Share  ("EPS")
                      equal to or greater than 10% for the immediately preceding
                      fiscal year,  PROVIDED,  HOWEVER,  in determining  the EPS
                      growth  rate  new  affiliated  institutions  shall  not be
                      included in the EPS  computation for the first twelve (12)
                      months  of  their  operation  nor  shall  special  charges
                      associated  with  the  acquisition  of a bank,  a  holding
                      company or a  controlling  interest in a bank or a holding
                      company be included in the EPS computation; and

                      2. Growth of the Company's  total assets,  as reflected on
                      the Company's year-end audited financial statements, equal
                      to or  greater  than  10%  for the  immediately  preceding
                      fiscal year.

Net Income:           Means,  with  reference to any period,  the net income (or
                      loss) of the Company and its  subsidiaries for such period
                      (taken as a cumulative whole), as determined in accordance
                      with generally accepted accounting principles and reported
                      on  the  year-end  audited  financial  statements  of  the
                      Company.

                                      A-1
<PAGE>
                                    EXHIBIT B

                            LONG-TERM INCENTIVE BONUS

I.   STOCK OPTIONS:

Executive:            Joseph D. Reid.

Company:              Capitol Bancorp Ltd.

Plan:                 Capitol  Bancorp  Ltd.  2003 Stock Plan or any other stock
                      option plan adopted by the Company in which the  Executive
                      may participate.

Target Award:         An  option to  purchase  30,000  shares  of the  Company's
                      common stock at an exercise price equal to the fair market
                      value of the  Company's  common  stock on the date of such
                      grant for (i) each new bank or holding  company  formed or
                      opened by the Company or any of its  affiliated  companies
                      during  the term of this  Agreement,  and (ii) each  bank,
                      holding  company  or  controlling  interest  in a bank  or
                      holding  company  acquired  by the  Company  or any of its
                      affiliated  companies  and banks by  purchase  transaction
                      during the term of this Agreement.

II.  CASH:

Executive:            Joseph D. Reid.

Company:              Capitol Bancorp Ltd.

Target Annual Bonus:  Two times (2X) the Executive's  Annual Base Salary paid to
                      the Executive during the 5th year of this Agreement.

Performance Goals:    The Long-Term  Cash Bonus  contemplated  in this Exhibit B
                      shall be subject to the Company's complete  achievement of
                      the following performance goals:

                      1.  Average  Growth of the  Company's  Earnings  Per Share
                      ("EPS")  equal  to or  greater  than  15% for the  Initial
                      Measuring Period,  PROVIDED,  HOWEVER,  in determining the
                      EPS growth rate newly affiliated institutions which become
                      operative during the Initial Measuring Period shall not be
                      included in the EPS  computation for the first twelve (12)
                      months of their  respective  operation  nor shall  special
                      charges  associated  with  the  acquisition  of a bank,  a
                      holding  company or a controlling  interest in a bank or

                                      B-1
<PAGE>
                      a holding company during the Initial  Measuring  Period be
                      included in the EPS computation; and

                      2.  Average  Growth  of the  Company's  total  assets,  as
                      reflected  on the  Company's  year-end  audited  financial
                      statements for fiscal year ending December 31, 2007, equal
                      to or greater than 15% for the Initial Measuring Period.

Initial Measuring
Period:               The five year  period  beginning  on  January  1, 2003 and
                      ending on December 31, 2007.

Date Paid:            No later than March 31, 2008,  unless the Executive  shall
                      elect to defer the receipt or a portion of such bonus.

                                      B-2
<PAGE>
                                    EXHIBIT C

               SHARE EXCHANGES THAT REMAIN SUBJECT TO SECTION 4(C)
                      OF THE ORIGINAL EMPLOYMENT AGREEMENT

1. Desert Community Bank

2. Red Rock Community Bank

3. Black Mountain Community Bank

4. Goshen Community Bank

5. Elkhart Community Bank

6. Arrowhead Community Bank

7. Yuma Community Bank

8. Sunrise Bank of Albuquerque

                                      C-1
<PAGE>
                                    EXHIBIT D

                                CHANGE OF CONTROL

For the purpose of this Agreement, a "Change of Control" shall mean:

          (a) The  acquisition  by any  individual,  entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities  Exchange Act of 1934,
as amended (the "Exchange  Act")) (a "Person") of beneficial  ownership  (within
the meaning of Rule 13d-3  promulgated under the Exchange Act) of 20% or more of
either  (i) the then  outstanding  shares of common  stock of the  Company  (the
"Outstanding  Company  Common  Stock") or (ii) the combined  voting power of the
then outstanding  voting securities of the Company entitled to vote generally in
the  election  of  directors  (the  "Outstanding  Company  Voting  Securities");
provided,  however,  that for purposes of this  subsection  (a),  the  following
acquisitions  shall not  constitute  a Change of  Control:  (i) any  acquisition
directly  from the  Company,  (ii) any  acquisition  by the  Company,  (iii) any
acquisition  by any  employee  benefit  plan (or  related  trust)  sponsored  or
maintained by the Company or any corporation controlled by the Company, (iv) any
acquisition  by any  corporation  pursuant to a transaction  which complies with
clauses  (i),  (ii) and  (iii) of  subsection  (c) of this  Section 2 or (v) any
acquisition of shares of the Company's stock owned by the Executive; or

          (b) Individuals who, as of the date hereof,  constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided,  however, that any individual becoming a director subsequent to
the date hereof whose  election,  or  nomination  for election by the  Company's
shareholders,  was  approved by a vote of at least a majority  of the  directors
then  comprising  the  Incumbent  Board  shall  be  considered  as  though  such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose,  any such  individual  whose  initial  assumption of office occurs as a
result of an actual or threatened  election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

          (c) Consummation of a reorganization,  merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business   Combination"),   in  each  case,  unless,  following  such  Business
Combination,  (i) all or  substantially  all of the individuals and entities who
were the beneficial  owners,  respectively,  of the  Outstanding  Company Common
Stock  and  Outstanding  Company  Voting  Securities  immediately  prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively,  the then  outstanding  shares  of common  stock and the  combined
voting  power  of the  then  outstanding  voting  securities  entitled  to  vote
generally in the election of directors,  as the case may be, of the  corporation
resulting  from such Business  Combination  (including,  without  limitation,  a
corporation  which as a result of such  transaction  owns the  Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries)  in  substantially   the  same  proportions  as  their  ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and  Outstanding  Company Voting  Securities,  as the case may be, (ii) no
Person  (excluding any corporation  resulting from such Business  Combination or
any employee  benefit plan (or related trust) of the Company or such corporation
resulting  from  such  Business  Combination)  beneficially  owns,  directly  or
indirectly, 20% or more of, respectively,  the then outstanding shares of common
stock

                                      D-1
<PAGE>
of the  corporation  resulting  from such Business  Combination  or the combined
voting  power of the then  outstanding  voting  securities  of such  corporation
except  to the  extent  that  such  ownership  existed  prior  to  the  Business
Combination,  and  (iii) at least a  majority  of the  members  of the  board of
directors of the  corporation  resulting  from such  Business  Combination  were
members  of the  Incumbent  Board at the time of the  execution  of the  initial
agreement,  or  of  the  action  of  the  Board,  providing  for  such  Business
Combination; or

          (d)  Approval  by  the  shareholders  of  the  Company  of a  complete
liquidation or dissolution of the Company.

                                      D-2
<PAGE>
                        AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT is made effective as of the 22nd day of April,  2003, by and
between Joseph D. Reid (the  "Executive")  and CAPITOL  BANCORP LTD., a Michigan
corporation (the "Company").

                                   BACKGROUND

     On March 31, 2003, the Company and the Executive entered into an Employment
Agreement  dated  effective  March 13, 2003 (the  "Employment  Agreement").  The
Company and the Executive now wish to amend the Employment Agreement as provided
herein.

     NOW,  THEREFORE,  in  consideration  of the  foregoing  and the  terms  and
conditions set forth below, the parties agree as follows:

                              TERMS AND CONDITIONS

     1. AMENDMENT TO SECTION 2(C).  Section 2(c) of the Employment  Agreement is
hereby deleted in its entirety and amended to read as follows:

          "(c)  OTHER  AGREEMENTS.   Notwithstanding   the  provisions  of  this
     Agreement,  the  Company  and the  Executive  acknowledge  and agree to the
     following:

               (i) Section 4(c) of the Original Employment Agreement shall apply
     to the share exchanges set forth on Exhibit C attached hereto;

               (ii) that certain  Securities  Repurchase  Agreement  between the
     Company and the Executive (the  "Securities  Repurchase  Agreement")  shall
     continue in full force and effect;

               (iii)  the  Executive  shall  prepay  the  outstanding  principal
     balance of that certain promissory note in the original principal amount of
     $1,819,151  (the "Note") to the Company on or before  April 30,  2003,  the
     Company acknowledges that such prepayment of the Note will be made five (5)
     years before the Note's due date;

               (iv) as soon as practicable after the Effective Date, the Company
     shall enter into an  indemnification  agreement with the Executive which is
     intended to maximize  the  indemnification  coverage for the benefit of the
     Executive;

               (v) on or before  May 9, 2003,  the  Company  shall  grant to the
     Executive an award of 214,169  restricted  shares of the  Company's  common
     stock (the  "Restricted  Stock").  The Restricted Stock shall be subject to
     such  vesting  and  forfeiture  conditions  that  are  satisfactory  to the
     Company; and

                                       1
<PAGE>
               (vi) on or before April 30, 2003,  the Executive  shall  exercise
     outstanding  options  to  purchase  shares of the  Company's  common  stock
     currently  held by the Executive  which are  exercisable  for not less than
     598,000 shares of the Company's common stock and have an average  remaining
     exercise period of at least three (3) years."

     2. AMENDMENT TO EXHIBIT B. Exhibit B of the Employment  Agreement is hereby
deleted in its entirety and amended to read as Exhibit B attached hereto.

     3. CONSTRUCTION.  Unless otherwise defined herein,  capitalized terms shall
have the  meanings  set  forth in the  Employment  Agreement.  The terms of this
Amendment amend and modify the Employment Agreement as if fully set forth in the
Employment Agreement. If there is any conflict between the terms, conditions and
obligations  of this Amendment and the Employment  Agreement,  this  Amendment's
terms,  conditions and obligations  shall control.  All other  provisions of the
Employment Agreement not specifically modified by this Amendment are preserved.

     IN WITNESS  WHEREOF,  this Amendment has been made effective as of the date
first set forth above.

THE EXECUTIVE:                          /s/ Joseph D. Reid
                                        ----------------------------------------
                                        Joseph D. Reid

THE CORPORATION:                        CAPITOL BANCORP LTD.,
                                        a Michigan corporation

                                        By: /s/ Lee W. Hendrickson
                                            ------------------------------------

                                        Its: Chief Financial Officer

                                        AND

                                        /s/ David O'Leary
                                        ----------------------------------------
                                        David O'Leary, Secretary of the Board of
                                        Directors of Capitol Bancorp Ltd.

                                       2
<PAGE>
                                    EXHIBIT B

                            LONG-TERM INCENTIVE BONUS

I.   STOCK OPTIONS/RESTRICTED STOCK /CASH:

Executive:            Joseph D. Reid.

Company:              Capitol Bancorp Ltd.

Plan:                 Capitol Bancorp Ltd. 2003 Stock Plan, Capitol Bancorp Ltd.
                      2003  Management  Incentive Plan or any other plan adopted
                      by the Company in which the Executive may participate.

Target Bonus &
Performance Goals:    During  the  term of this  Agreement,  the  Company  shall
                      grant,  issue  or  deliver  to  the  Executive  one of the
                      following:  (A) an option to purchase 30,000 shares of the
                      Company's  common stock at an exercise  price equal to the
                      fair market  value of the  Company's  common  stock on the
                      date of such grant,  (B) a restricted stock grant equal to
                      the value of the option  referred to in (A)  utilizing the
                      Black-Scholes model, or (C) cash in an amount equal to the
                      value  of the  option  referred  to in (A)  utilizing  the
                      Black-Scholes  model,  for each  (i) new  bank or  holding
                      company  formed or opened for  business  by the Company or
                      any of its affiliated companies or (ii) holding company or
                      separate bank directly acquired (including the acquisition
                      of a controlling  interest  therein) by the Company or any
                      of  its   affiliated   companies   or  banks  by  purchase
                      transaction. The Company shall have the sole discretion to
                      elect the method of payment set forth in (A),  (B) and (C)
                      above.

II.  CASH:

Executive:            Joseph D. Reid.

Company:              Capitol Bancorp Ltd.

Plan:                 Capitol  Bancorp  Ltd.  2003  Management  Incentive  Plan,
                      Capitol  Bancorp  Ltd.  2003  Stock Plan or any other plan
                      adopted  by  the  Company  in  which  the   Executive  may
                      participate.

Target Bonus:         Two times (2X) the Executive's  Annual Base Salary paid to
                      the Executive during the 5th year of this Agreement.

                                      B-1
<PAGE>
Performance Goals:    The Long-Term  Cash Bonus  contemplated  in this Exhibit B
                      shall be subject to the Company's complete  achievement of
                      the following performance goals:

                      1.  Average  Growth of the  Company's  Earnings  Per Share
                      ("EPS")  equal  to or  greater  than  15% for the  Initial
                      Measuring Period,  PROVIDED,  HOWEVER,  in determining the
                      EPS growth rate newly affiliated institutions which become
                      operative during the Initial Measuring Period shall not be
                      included in the EPS  computation for the first twelve (12)
                      months of their  respective  operation  nor shall  special
                      charges  associated  with  the  acquisition  of a bank,  a
                      holding  company or a controlling  interest in a bank or a
                      holding  company  during the Initial  Measuring  Period be
                      included in the EPS computation; and

                      2.  Average  Growth  of the  Company's  total  assets,  as
                      reflected  on the  Company's  year-end  audited  financial
                      statements for fiscal year ending December 31, 2007, equal
                      to or greater than 15% for the Initial Measuring Period.

Initial Measuring
Period:               The five year  period  beginning  on  January  1, 2003 and
                      ending on December 31, 2007.

Date Paid:            No later than March 31, 2008,  unless the Executive  shall
                      elect to defer the receipt or a portion of such bonus.

                                      B-2<PAGE>
                                                                   Exhibit 10.7

                        DATED                     2003

                        (1)   BAE SYSTEMS MARINE LIMITED

                        (2)   BAM ENTERTAINMENT LIMITED

                             ----------------------

                                      LEASE

                             ----------------------

           Relying to Office on the Second floor Upper Borough Court,
                               Barton Court, Bath

                                    EVERSHEDS

                                  Senator House
                            85 Queen Victoria Street
                                 London EC4V 4JL
                               Tel: 020 7919 4500
                               Fax: 020 7919 4919

                                       1
<PAGE>
                                    CONTENTS

<TABLE>
<CAPTION>
CLAUSE                                                                       PAGE
<S>                                                                          <C>
1.    DEFINED TERMS AND INTERPRETATION ...................................     1
   1.3.     Completion of Consents .......................................     4
   1.4.     Third Parties ................................................     4
   1.5.     Consents .....................................................     4
   1.6.     Superior Landlord ............................................     5
   1.7.     Rights and reservations ......................................     5
   1.8.     Lessee's Covenants ...........................................     5
   1.9.     Effect of this Lease .........................................     5
2.    DEMISE, TERM AND RENT ..............................................     5
   2.1.     Rent .........................................................     6
   2.2.     Insurance Rent ...............................................     6
   2.3.     Service Rent .................................................     6
   2.4.     Service Charge ...............................................     6
   2.5.     Additional Rents .............................................     6
3.    LESSEE'S COVENANTS .................................................     7
   3.1.     Payment of Rent ..............................................     7
   3.2.     Outgoings ....................................................     7
   3.3.     Repair .......................................................     7
   3.4.     Statutory Compliance .........................................     8
   3.5.     Common Parts Expenditure .....................................     8
   3.6.     Yielding Up ..................................................     9
   3.7.     Re-Entry .....................................................     9
   3.8.     Landlord's Right to Carry Out Works ..........................    10
   3.9.     Costs ........................................................    10
   3.10.       User ......................................................    10
   3.11.       Alterations ...............................................    11
   3.12.       Signage ...................................................    12
   3.13.       Television and other works ................................    12
   3.14.       Planning ..................................................    12
   3.15.       Provision of Notices to Lessor ............................    12
   3.16.       Dangerous Substances ......................................    13
   3.17.       Re-betting ................................................    13
   3.18.       Refuse ....................................................    13
   3.19.       Alienation ................................................    14
   3.20.       Plate Glass ...............................................    15
   3.21.       Easements and encroachments ...............................    15
   3.22.       Cost of consents ..........................................    16
   3.23.       Superior Lease ............................................    16
4.    LESSOR'S COVENANTS .................................................    16
   4.1.     Pay rents ....................................................    16
   4.2.     Superior Lease ...............................................    16
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                          <C>
   4.3.     Lessor's insurance ...........................................    16
   4.4.     Insurance rent ...............................................    17
   4.5.     Superior Landlord's issuance .................................    17
5.    PROVISOS ...........................................................    17
   5.1.     Interest .....................................................    18
   5.2.     Forfeiture ...................................................    18
   5.3.     Rent cesser ..................................................    19
   5.4.     Court Order ..................................................    20
6.    RENT REVIEW ........................................................    20
7.    NOTICES ............................................................    20
8.    VALUE ADDED TAX ....................................................    21
Schedules
</TABLE>

                                       ii
<PAGE>
THIS LEASE made the __day of __________________, 20__

BETWEEN

(1)      BAE SYSTEMS MARINE LIMITED (CRN:00229770) whose registered office is at
         Warwick House, PO Box 87, Farnborough Aerospace Centre, Farnborough,
         Hampshire, GU14 6YU (hereinafter called "the Lessor")

(2)      BAM ENTERTAINMENT LIMITED (CRN:4112030) whose registered office is at
         3rd Floor, Upper Borough Court, Upper Borough Walls, Bath (hereinafter
         called "the Lessee")

WITNESSETH as follows:

1.       DEFINED TERMS AND INTERPRETATION

         1.1.     IN THESE PRESENTS WHERE THE CONTEXT SO ADMITS THE FOLLOWING
                  EXPRESSIONS SHALL HAVE THE FOLLOWING MEANINGS:

            "ADDITIONAL RENTS"                a fair and proper proportion, to
                                              be determined by the Lessor acting
                                              reasonably, of all sums reserved
                                              as rent under the Superior Lease
                                              excluding the Head Rent

            "ADJOINING OR NEIGHBOURING        includes the Building other than
            PREMISES"                         the Premises

            "THE COMMON PARTS"                means any entrances entrance halls
                                              lifts (including lift shafts)
                                              stairs passageways landings
                                              lavatory accommodation and other
                                              parts of the Building available or
                                              intended to be available for use
                                              in common by two or more of the
                                              Lessor's or Superior Landlord's
                                              lessees of the Building

            "CONDUCTING MEDIA"                means tanks pipes wires cables
                                              meters drains sewers gutters and
                                              other things of a like nature for
                                              the passage of electricity gas
                                              water soil and other services

            "THE COURT ORDER"                 An Order of the Mayor's and City
                                              of London Court made under section
                                              38(4) of the Landlord and Tenant
                                              Act 1954as amended dated under
                                              Claim Number

            "HEAD RENT"                       the yearly rent from time to time
                                              payable under the Superior Lease

                                       1
<PAGE>

            "THE INSURANCE RENT"              means 36% of the insurance rent
                                              reserved by CLAUSE 2.1 hereof in
                                              the Superior Leases and described
                                              in more detail in the Superior
                                              Lease

            "THE INSURED RISKS"               means fire (including lightning
                                              and thunderbolt) explosion
                                              aircraft impact storm burst pipes
                                              and such further or other risks or
                                              perils (if any) as the Superior
                                              Landlord Lessor may from time to
                                              tune deem it prudent to insure and
                                              have insured the Premises (with or
                                              without other premises) against

            "THE LANDLORD'S PREMISES"         Those premises let to the Landlord
                                              under the Superior Lease known as
                                              Second Floor, Upper Borough Court,
                                              Barton Court, Bath

            "THE LESSOR"                      includes the person or persons for
                                              the time being entitled to the
                                              reversion immediately expectant on
                                              the Term

            "THE LESSEE"                      includes the successors in title
                                              and assigns of the Lessee

            "THE PLANNING ACTS"               means and include the Town and
                                              Country Planning Acts 1962 to 1977

            "THE PREMISES"                    means ALL THOSE the premises
                                              situate on the second floor and
                                              being part of the Building at 1/9
                                              New Bond Street and 1/9 Upper
                                              Borough Walls Bath (hereinafter
                                              called "the BUILDING") as the same
                                              are shown hatched in blue on the
                                              plan attached hereto including the
                                              interior faces and surfaces of the
                                              floors walls and ceilings thereof
                                              and the interior and exterior of
                                              window frames the window glazing
                                              the door frames and the doors (so
                                              far as such floors do not form
                                              part of the Structure or the
                                              Common Parts) together with the
                                              appurtenances the buildings and
                                              other structures and landlord's
                                              fixtures and fittings from time to
                                              time thereof thereon or therein
                                              and any each and every part
                                              thereof respectively and including
                                              all alterations,

                                       2
<PAGE>

                                              additions and improvements made to
                                              them whether before the date of
                                              this Lease or during the Term

            "THE RENT"                        means the rent reserved by CLAUSE
                                              2.1 hereof at the rate from time
                                              to time payable hereunder as
                                              therein and in CLAUSE 6 hereof
                                              provided

            "THE SERVICE CHARGE"              Means 36% service charge rent
                                              RESERVED BY CLAUSE 2.4 HEREOF in
                                              the Superior Lease and described
                                              in more detail in the Superior
                                              Lease

            "THE SERVICE RENT"                Means 36% the service rent
                                              reserved by CLAUSE 2.3 hereof in
                                              the Superior Leases and described
                                              in more detail in the Superior
                                              Lease

            "THE STRUCTURE"                   means the exterior and main
                                              structure of the Building
                                              including the foundations roofs
                                              main walls joists beams timbers
                                              the ceilings and floors thereof
                                              but excluding any false ceilings
                                              all internal plaster and other
                                              finishes of walls or ceilings
                                              (save where internal any Common
                                              Parts) and any floorboards and
                                              floor coverings all window frames
                                              the window glazing the door frames
                                              and doors (both internal and
                                              external)

         1.2.     Reference (whether general or specific) to any act of
                  Parliament means such Act of Parliament as for the time being
                  amended modified or replaced by statute and includes all
                  Orders Directions and Regulations for the time being in force
                  made or issued thereunder

                  1.2.1    Words importing the masculine gender shall include
                           the feminine gender and vice versa and words
                           importing the singular shall include the plural and
                           vice versa and words importing persons and all
                           references to persons shall include companies
                           corporations and firms and vice versa

                  1.2.2    if at any time two or more persons are including in
                           the expression on "the Lessee" then covenants herein
                           contained or implied by or on the part of the Lessee
                           shall be deemed to be and shall be construed as
                           covenants entered into by and binding on such persons
                           jointly and severally

                                       3
<PAGE>

            "SUPERIOR LANDLORD"               the landlord of the Superior
                                              Lease, successors in title as
                                              landlord of Lease from time to
                                              time

            "SUPERIOR LANDLORD'S              the obligations, conditions `and
            COVENANTS"                        covenants in he Superior Lease to
                                              be complied with by the Superior
                                              Landlord

            "THE SUPERIOR LEASE"              a lease dated 2 February 1984 and
                                              made between Haslemere Estates
                                              Public Limited Company (1) and
                                              Warship Design Services Limited
                                              (2) and includes all deeds and
                                              documents varying or supplemental
                                              or ancillary to that Lease

            "SUPERIOR TENANT'S COVENANTS"     the obligations, conditions and
                                              covenants in the Superior Lease to
                                              be complied with by the tenant of
                                              the Superior Lease from time to
                                              time

            "THE TERM"                        means the term commencing on and
                                              including the up to an including
                                              25 September 2008

         1.3.     COMPLETION OF CONSENTS

                  Where the consent of the Landlord is required for any
                  assignment, underletting, change of use or alterations, that
                  consent may be given only by the completion of a license
                  executed as a deed containing the terms of the consent agreed
                  between the parties unless the Landlord elects in writing to
                  waive this requirement.

         1.4.     THIRD PARTIES

                  The parties to this Lease do not intend that any of its terms
                  will be enforceable by virtue of the Contracts (Rights of
                  Third Parties) Act 1999 by any person not a party to it.

         1.5.     CONSENTS

                  Without prejudice to the terms of this Lease, where the
                  consent or approval of the Lessor is required to any act or
                  thing:

                  1.5.1    it will be a condition precedent to the grant of that
                           consent or approval that, if required under the
                           Superior Lease, the consent or approval of Superior
                           Landlord is first obtained; and

                                       4
<PAGE>

                  1.5.2    where the Lessor is under an obligation under this
                           Lease not unreasonably to withhold or delay its
                           consent or approval, the Lessor is, at the cost of
                           the Lessee on a full indemnity basis, to apply for
                           and use all reasonable endeavors to obtain the
                           consent or approval of the Superior Landlord where
                           this is required under the Superior Lease.

         1.6.     SUPERIOR LANDLORD

                  References, however expressed, in this Lease:

                  1.6.1    to any matter which is required to be carried out to
                           the satisfaction or with the approval of the Lessor
                           are to be read as including a requirement that the
                           matter is also to be carried out to the satisfaction
                           or with the approval of the Superior Landlord where
                           this is required under the Superior Lease;

                  1.6.2    to an obligation on the Lessee to pay any costs, fees
                           and expenses incurred by the Lessor in relation to
                           any matter are to be read as including an obligation
                           also to pay all costs, fees and expenses incurred in
                           respect of that matter by the Superior Landlord; and

                  1.6.3    to any indemnity given to the Lessor are to be read
                           as including a separate indemnity to the Superior
                           Landlord.

         1.7.     RIGHTS AND RESERVATIONS

                  Rights of entry and other rights reserved to the Lessor under
                  this Lease may also be exercised by the Superior Landlord and
                  any persons authorized by the Superior Landlord under the
                  Superior Lease.

         1.8.     LESSEE'S COVENANTS

                  Any covenant in this Lease by the Lessee not to do any act
                  matter or thing to the prejudice of or adversely to affect the
                  Lessor is to be read as including an obligation not to do any
                  such act matter or thing to the prejudice of or adversely to
                  affect any Superior Landlord.

         1.9.     EFFECT OF THIS LEASE

                  Nothing in this Lease imposes any obligation on the Superior
                  Landlord to act reasonably in granting any consent or approval
                  or expressing its opinion as to whether any act of the Lessee
                  has been carried out to its satisfaction.

2.       DEMISE, TERM AND RENT

         The Lessor HEREBY DEMISES unto the Lessee ALL THOSE the Premises
         TOGETHER with the particular rights set forth in the FIRST SCHEDULE
         hereto so far as the Lessor has power to grant the same BUT EXCEPT AND
         RESERVED AND SUBJECT to the particular rights and matters set forth in
         the SECOND SCHEDULE hereto

                                       5
<PAGE>

         AND SUBJECT ALSO to such other rights easements quasieasements and
         privileges as are enjoyed by any adjoining or neighbouring premises in
         any manner affecting the Premises TO HOLD the Premises unto the Lessee
         (together with but except and reserved and subject as aforesaid) for
         the Term (subject to earlier determination as hereinafter provided)
         YIELDING AND PAYING therefor unto the Lessor during the Term and so in
         proportion for any less time than a year without any deductions
         therefrom whatsoever (except only such (if any) as may from time to
         time be required by or under any Act of Parliament) the following rents
         namely:-

         2.1.     RENT

                  The yearly rent of Forty seven thousand two hundred and fifty
                  pounds (L47,250) and such rent or such higher yearly rent as
                  may become payable pursuant to review under CLAUSE 6 hereof by
                  equal quarterly payments in advance on the four usual quarter
                  days in each year of, which the first payment (being the due
                  proportion for the period from the 1st day of November 2002
                  and ending on the usual quarter day hereafter) shall be paid
                  on or before the date hereof and

         2.2.     INSURANCE RENT

                  Throughout the Term sums equal to a just proportion fairly
                  attributable to the Premises of the total amounts which the
                  Superior Landlord shall from time to time expend by way o f
                  premium (including the whole of any increase in the premium
                  from time to time as a result of or arising out of the manner
                  or the purposes in or for which the P remises are kept used
                  and occupied) in effecting and maintaining the several
                  insurances referred to in CLAUSE 4.1 hereof each such sum to
                  be paid on the usual quarter day immediately following demand
                  and in the event of any dispute as to any such sum the same
                  shall be determined by the Superior Landlord's surveyor
                  (acting as an independent expert and not as an arbitrator)
                  whose determination shall be final and binding on the parties

         2.3.     SERVICE RENT

                  Throughout the Term the sums equal to a just proportion fairly
                  attributable to the Premises of the costs and expenses from
                  time to time incurred or to be incurred by the Superior Lessor
                  in providing the items and thugs specified in PART I of the
                  THIRD SCHEDULE of the Superior Lease

         2.4.     SERVICE CHARGE

                  Throughout the Term the Service Charge defined in PART II of
                  the THIRD SCHEDULE of the Superior Lease at the times and in
                  manner therein specified

         2.5.     ADDITIONAL RENTS

                  Throughout the Term the Additional Rents from and including
                  the date of this Lease or, if earlier, the date on which the
                  Lessee first took occupation of the Premises, to be paid on
                  demand

                                       6
<PAGE>
3.       LESSEE'S COVENANTS

         The Lessee to the intent that the obligations hereby created shall
         continue throughout the whole of the Term HEREBY COVENANTS with the
         Lessor as follows:-

         3.1.     PAYMENT OF RENT

                  To pay the Rent and Insurance Rent the Service Rent, the
                  Service Charge and the Additional Rents at the times and in
                  the manner aforesaid

         3.2.     OUTGOINGS

                  To pay and keep the Lessor fully indemnified from and against
                  all liability for all general and other rates of whatever
                  nature or kind and all taxes charges duties levies assessments
                  impositions and outgoings whatever (whether parliamentary
                  parochial local or of any other description) which are now or
                  may become rated taxed charged levied assessed or imposed upon
                  the Premises or the owner landlord tenant or occupier thereof
                  and whether or not required to be paid by the Lessee himself

         3.3.     REPAIR

                  (Damage by the Insured Risks always excepted unless the policy
                  or policies of insurance effected by the Lessor or Superior
                  Landlord against them shall be rendered void or payment of the
                  insurance moneys thereunder be refused in whole or in part by
                  reason of or arising out of any act omission neglect or
                  default by the Lessee or other person under the control of the
                  Lessee and to keep the Premises and Conducting Media forming
                  part of and serving the Premises ill good and substantial
                  repair and well and substantially amended renewed maintained
                  supported and upheld and in good decorative and clean
                  condition with the glass therein (both inside and outside)
                  together with any external or projecting signs cleaned at
                  least once a month and with any lifts central heating air
                  conditioning ventilation and hot water boilers apparatus and
                  installations and sanitary and water apparatus for the time
                  being of and exclusively serving the Premises in good and
                  substantial repair and clean condition and at all times in
                  good and safe working condition and (without prejudice to the
                  generality of the foregoing obligations of the Lessee):-

                  3.3.1    In a good and workmanlike manner and to the
                           reasonable satisfaction of the Lessor

                           3.3.1.1  in the year 2006 to paint with at least two
                                    coats of good quality paint in colors of the
                                    Lessee's own choice and

                           3.3.1.2  in the last three months of the Term
                                    (however and whenever it may terminate) to
                                    paint with at least two coats of good
                                    quality paint in colors first approved by
                                    the Lessor

                                       7
<PAGE>

                           all interior parts of the Premises together with the
                           exterior of the window frames door frames and doors
                           which have previously been or ought to be painted and
                           grain varnish paper or otherwise suitably decorate or
                           treat with good quality materials as circumstances
                           may require all parts of the interior of the Premises
                           which have previously been or ought to be so dealt
                           with

                  3.3.2    To enter into contracts for the periodic and regular
                           inspection servicing and maintenance of any such
                           lights central heating air conditioning ventilation
                           and hot water boilers apparatus and installations and
                           sanitary, and water apparatus by Contractors first
                           approved in writing by the Lessor (such approval not
                           to be unreasonably withheld) and thereafter keep the
                           same on foot and observe and perform the Lessee's
                           obligations thereunder and produce to the Lessor on
                           demand from time to time such contracts and evidence
                           that any payments due from the Lessee thereunder are
                           fully paid up to date

         3.4.     STATUTORY COMPLIANCE

                  To observe and perform to the extent that the Lessee is
                  entitled so to do all requirements of any Act of Parliament
                  local act or bye-law and notices issued thereunder or by any
                  public local or other competent authority (whether or not
                  required of the Lessee himself) in any way affecting the
                  Premises or any thing in or any activity carried on by persons
                  resorting to or working , or employed at the Premises or the
                  use and occupation thereof within the time limited by law or
                  the notice requiring the same (or if time is not so limited
                  then within a reasonable time) to the reasonable satisfaction
                  of the Lessor and to indemnify and keep the Lessor fully
                  indemnified against all such requirements and all actions
                  proceedings costs claims demands expenses and liability
                  whatever arising out of or in connection with non-observance
                  or non-performance thereof

         3.5.     COMMON PARTS EXPENDITURE

                  On receipt of a written demand from or on behalf of the Lessor
                  forthwith to pay a just proportion fairly attributable to the
                  Premises of all expenses of making maintaining upholding
                  repairing rebuilding renewing scouring and cleansing any party
                  walls fences gates and railings and any roads paths ways yards
                  external means of escape in case of fire or other emergency
                  and Conducting Media which are available for enjoyment and use
                  by the occupiers of the Premises jointly with. the occupiers
                  of any adjoining or neighbouring premises such proportion if
                  in dispute to be determined by the Superior Landlord's
                  Surveyor (acting as independent expert and not as an
                  arbitrator) whose determination shall be final and binding
                  upon the parties

                                       8
<PAGE>

         3.6.     YIELDING UP

                  3.6.1    Quietly to surrender and yield up the Premises to the
                           Lessor or as the Lessor may direct at the end or
                           sooner determination of the Term in a state and
                           condition in all respects in accordance with the
                           Lessee's covenants herein contained

                  3.6.2    Before the expiration or sooner determination of this
                           Lease to remove from the Premises all goods refuse
                           litter and other things not the property of the
                           Lessor or Superior Landlord and to leave the Premises
                           in a clean and tidy condition it being agreed that
                           the Lessor or Superior Landlord may sell or otherwise
                           dispose of any such thing not removed by the Lessee
                           without giving notice thereof to the Lessee and may
                           retain the proceeds of any such sale in reimbursement
                           of his time trouble and expense in connection
                           therewith and that the Lessee will further reimburse
                           the Lessor for all the expenses so incurred in
                           rendering the Premises clean and tidy so far as they
                           are not covered by the proceeds of any such sale

         3.7.     RE-ENTRY

                  3.7.1    To permit the Superior Landlord, the Lessor and
                           others authorized by the Lessor after at least three
                           working days' prior notice (except ill an emergency
                           when no notice need be given) to enter upon the
                           Premises to view and inspect the Premises and
                           ascertain how the same are being used and occupied
                           and the state and condition thereof and to take
                           schedules o f all landlord's fixtures and fittings
                           and to estimate the current value of the Premises for
                           insurance mortgage or other purposes

                  3.7.2    Whenever on any such inspection anything is found
                           which constitutes a breach non-performance or
                           non-observance of the Lessee's covenants herein
                           contained and of which the Lessor gives notice to the
                           Lessee to commence to remedy and make good the same
                           within one month of the date of such notice (or
                           sooner if necessary) and thereafter proceed
                           diligently with the requisite Works but if the Lessee
                           shall fail so to do to permit the Lessor if it so
                           desires (the Lessor being under no obligation so to
                           do) without prejudice to the Lessor's right of
                           re-entry hereinafter contained or any other right or
                           remedy of the Lessor to enter upon the Premises With
                           contractors workmen and others and all necessary
                           equipment tools and materials and to execute or
                           complete such works and to pay to the Lessor on
                           written demand either during or on completion of such
                           works as the Lessor may require the costs and
                           expenses thereby incurred by the Lessor together with
                           all Solicitors' Surveyors' and other professional
                           fees and expenses incurred by the lessor in relation
                           to such works

                                       9
<PAGE>

         3.8.     LANDLORD'S RIGHT TO CARRY OUT WORKS

                  To permit the Superior Landlord, the Lessor and others
                  authorized by the Lessor and the tenants owners or occupiers
                  from time to time of any adjoining or neighbouring premises
                  and their respective agents and contractors to enter upon the
                  Premises with workmen and others and all necessary equipment
                  tools and materials after at least seven days' prior notice
                  (except in an emergency when no prior notice need be given) in
                  order to carry out repairs alterations additions decorations
                  or any other works to or of any adjoining or neighbouring
                  premises which cannot reasonably be carried out without entry
                  on to the Premises PROVIDED ALWAYS that the persons so
                  entering shall cause thereby as little inconvenience as
                  possible to the Lessee or other the occupiers of the Premises
                  and shall with the minimum of delay make good all damage
                  thereby caused to the Premises

         3.9.     COSTS

                  To pay all proper costs charges and expenses (including
                  Solicitors' costs and Architects' and Surveyors' fees) payable
                  by the Lessor for the purposes of and incidental to the
                  preparation service and enforcement (whether by proceedings or
                  otherwise) of:-

                  3.9.1    Any notice under Sections 146 or 147 of the Law of
                           Property Act 1925 requiring the Lessee to remedy a
                           breach of any of the Lessee's obligations hereunder
                           notwithstanding forfeiture for any such breach shall
                           be avoided otherwise than by relief granted by the
                           Court

                  3.9.2    Any notice to repair and/or schedule of dilapidations
                           accrued at or prior to the end or sooner
                           determination of the Term whether or not served
                           during the Term

         3.10.    USER

                  3.10.1   The Premises shall be kept used and occupied only as
                           high class business commercial or professional
                           offices (but not as diplomatic offices or as a
                           betting office or bookmaker's office) and not in any
                           other manner or for any other purpose or for any
                           immoral or unlawful purpose or for any sale or
                           auction PROVIDED ALWAYS and it is hereby agreed and
                           acknowledged by the Lessee that notwithstanding the
                           foregoing provisions as to user the Lessor does not
                           thereby make or give and has not at any time made or
                           given to the Lessee or to any person on behalf of the
                           Lessee any representation or warranty that such use
                           or any other use of the Presses is or may become or
                           remain the permitted use thereof under the planning
                           Acts and that notwithstanding such use may not now or
                           at any time hereafter be such permitted use as
                           aforesaid the Lessee shall not be entitled to any
                           relief or compensation whatsoever in respect thereof
                           from the Lessor

                                       10
<PAGE>
                  3.10.2   Neither the Lessee nor any person under the control
                           of the Lessee shall overload any floor of the
                           Premises or pass or leave anything of a harmful
                           nature through or in the basins or water-closets of
                           or any Conducting Media in or serving the Premises
                           (whether exclusively or jointly with other premises)
                           or the Common Parts or do anything at the Premises or
                           the Common parts which shall be or may become a
                           nuisance (whether indictable or not) or which shall
                           cause any damage or disturbance to the Lessor o r
                           Superior Landlord or the owners tenants or occupiers
                           from time to time of any adjoining or neighbouring
                           premises

         3.11.    ALTERATIONS

                  3.11.1   There shall be no reconstruction or rebuilding or
                           carrying out of any structural alterations additions
                           or other works (whether external or internal) of or
                           to the Premises nor any cutting maiming or injuring
                           of the foundations roofs main walls joists beams
                           timbers ceilings and floors of or to the Premises nor
                           any erecting of any new buildings or erections
                           thereon

                  3.11.2   Any non-structural internal alteration addition or
                           other works of or to the Premises shall be carried
                           out only after there has first been obtained the
                           written consent thereto of the Lessor and Superior
                           Landlord and all necessary approvals consents
                           licenses permits or permissions of any competent
                           authority body or person therefor and then only
                           strictly in accordance with the terms and conditions
                           thereof and such drawings and specifications of the
                           relevant alteration addition or other works as the
                           Lessor and Superior Landlord shall require and
                           previously have approved in writing PROVIDED THAT the
                           Lessee shall be entitled t o carry out the erection
                           and removal of internal non-structural demountable
                           partitioning without the aforesaid consents but
                           provided further that the Lessee shall forthwith make
                           good any damage caused to the Premises or the
                           fixtures and fittings therein in such erection or
                           removal and shall if required by the Lessor remove
                           the partitioning at the end of the Term

                  3.11.3   To permit the Superior Landlord, the Lessor and
                           others authorized by the Lessor after at least three
                           working days prior notice to enter upon the Premises
                           at reasonable hours during the daytime for the
                           purpose of seeing that all alterations additions or
                           other works thereto are being or have been carried
                           out in all respects in conformity with this clause
                           3.11 and immediately upon being required to do so to
                           remove any alteration addition or other works of or
                           to the Premises which do not so conform or in respect
                           of which any such approvals consents licenses permits
                           or permissions of the competent authority body or
                           person has been withdrawn or has lapsed and thereupon
                           make good all damage thereby caused to the premises
                           and restore and reinstate all parts of the Premises
                           affected thereby to the reasonable satisfaction of
                           the Lessor

                                       11
<PAGE>

         3.12.    SIGNAGE

                  No fascia sign name plate bill notice placard advertisement or
                  similar device shall be affixed to or displayed in or on any
                  part of the Premises so as to be visible from the exterior
                  thereof save such as indicate the name of any occupier for the
                  time being and his business and as have (with the positioning
                  thereof) been previously approved by the Superior Landlord and
                  Lessor in writing and when requested in writing by the Lessor
                  immediately to remove at the Lessee's own expense any sign
                  notice announcement or advertisement which is on or is visible
                  from the outside of the Premises and was displayed without the
                  consent of the Landlord and make good any resultant damage

         3.13.    TELEVISION AND OTHER WORKS

                  No television or wireless or other form of mast or aerial nor
                  any flagpole shall be affixed to any part of the exterior of
                  the Premises

         3.14.    PLANNING

                  3.14.1   Without prejudice to the generality of clause 3.4
                           hereof fully to observe and perform all the
                           requirements of the Planning Acts in respect of the
                           Premises or the use thereof and all the requirements
                           of ally approval consent license permit or permission
                           granted thereunder which remain lawfully enforceable
                           and affect the Premises and to indemnify and keep the
                           Lessor fully indemnified from and against all actions
                           proceedings costs claims demands expenses and
                           liability whatsoever arising out of or in connection
                           with any non-observance or non-performance thereof

                  3.14.2   No application shall be made for any approval consent
                           license permit permission certificate or
                           determination under the Planning Acts in respects of
                           the Premises without the prior written consent of the
                           Superior Landlord and the Lessor

                  3.14.3   Unless the lessor shall otherwise direct in writing
                           to carry out to the reasonable satisfaction of the
                           Lessor during the Term (however and whenever it may
                           terminate) all works to the Premises which as a
                           condition of any such approval consent license permit
                           or permission obtained by or on behalf of the Lessee
                           are required to be carried out at the Premises by a
                           date after the end of the Term (however and wherever
                           it may terminate)

         3.15.    PROVISION OF NOTICES TO LESSOR

                  To give the Lessor a copy of every notice of whatsoever nature
                  affecting or likely to affect the Premises made given or
                  issued by or on behalf of the local planning authority or any
                  other authority body or person having lawful jurisdiction
                  within seven days of its receipt by the Lessee and to produce
                  the original thereof to the Lessor on written request and to
                  take all reasonable and necessary steps to comply with every
                  such notice and if so required in writing by or on behalf of
                  the Lessor

                                       12
<PAGE>

                  to make or join with the Lessor and any other persons for the
                  time being interested in the Premises or any adjoining or
                  neighbouring premises affected thereby in making such
                  objections or representations against or in respect of any
                  such notice as aforesaid as the Lessor may reasonably require

         3.16.    DANGEROUS SUBSTANCES

                  3.16.1   Nothing of a noxious dangerous explosive or
                           inflammable nature shall be stored placed or kept or
                           remain on the Premises nor shall any other thing be
                           done in or about the Premises which does or may
                           invalidate or render void or voidable or cause any
                           increased premium to be payable for any policy of
                           insurance maintained by the Lessor in respect of the
                           Premises or any adjoining or neighbouring premises

                  3.16.2   If the Premises or any other premises shall be
                           destroyed or damaged as a result of breach of clause
                           3.16.1 hereof or as a result of any act omission
                           neglect or default by or on the part of the Lessee or
                           any person under the control of the Lessee whereby
                           any policy of insurance maintained by the Lessor is
                           rendered void or payment of the insurance money
                           thereunder is refused in whole or in part to pay to
                           the Lessor on written demand or otherwise make good
                           to the Lessor all loss damage and expense thereby
                           incurred and to indemnify the Lessor against all
                           actions proceedings costs claims demands and
                           liability whatsoever resulting therefrom or arising
                           thereout including the cost of rebuilding reinstating
                           replacing and making good

                  3.16.3   To repay to the Lessor upon written demand as part of
                           the Insurance Rent an amount equal to any such
                           increased premium as may become so payable

         3.17.    RE-LETTING

                  To permit the Lessor during the period of six months
                  immediately preceding the end or sooner determination of the
                  Term (and at any time during the Term in the event of any
                  proposed disposal by the Lessor of its interest in the
                  Premises) to affix and retain on any part of the Premises (but
                  not so as thereby materially to interfere with any trade or
                  business carried on thereat or with reasonable access of light
                  and air thereto) notices and boards relating to any proposed
                  disposal by the Lessor of its interest in the Premises or for
                  reletting or otherwise dealing with the same and to permit all
                  persons with written authority from the Lessor or the Lessor's
                  agents to inspect and view the Premises at reasonable times of
                  the day by previous appointment

         3.18.    REFUSE

                  To keep all used containers refuse scrap and other discarded
                  matter in a suitable receptacle or in an otherwise tidy safe
                  and inoffensive condition and to arrange for its removal at
                  frequent intervals

                                       13
<PAGE>

         3.19.    ALIENATION

                  3.19.1   Save as hereinafter provided not to assign transfer
                           mortgage charge sublet or in any other manner part
                           with possession of part only or the whole of the
                           Premises

                  3.19.2   The Lessee shall not assign or transfer or in any
                           other manner part with possession of the whole of the
                           Premises PROVIDED THAT:-

                           3.19.2.1 In the case of such a proposed assignment or
                                    transfer if before or at the same time as
                                    any such assignment or transfer shall be
                                    effected the proposed assignee or transferee
                                    thereof shall enter into direct covenants
                                    with the Lessor in such form as the Lessor
                                    shall require to pay the Rent and Insurance
                                    Rent and Service Rent and Service Charge and
                                    Additional Rents and to observe and perform
                                    all the covenants and agreements on the part
                                    of the Lessee and the stipulations and
                                    conditions herein contained during the
                                    unexpired residue of the Term and (if the
                                    assignee or transferee shall be a private
                                    limited company or a company limited by
                                    guarantee and the Lessor shall so require)
                                    at least one director or other person
                                    acceptable to the Lessor as guarantor shall
                                    guarantee such direct covenants as well
                                    after as before any disclaimer and also
                                    covenant to take up a new Lease of the
                                    premises for d1e residue of the Term at the
                                    Rent and Insurance Rent and Service Rent and
                                    Service Charge and Additional Rent and
                                    otherwise (mutatis mutandis) in the same
                                    form as these presents if the Lessor shall
                                    so require within 3 months of receipt by the
                                    Lessor of notice of disclaimer of this Lease
                                    by a trustee in bankruptcy or liquidator

                           3.19.2.2 if the Superior Landlord requires it:

                  (i)      the Lessee gives an authorized guarantee agreement to
                           the Superior Landlord under section 16 Landlord and
                           Tenant (Covenants) Act 1995 on such terms as the
                           Superior Landlord may reasonably require to guarantee
                           the obligations of the assignee of this Lease; and

                  (ii)     any guarantor of the Lessee gives the Superior
                           Landlord an independent guarantee of the Lessee's
                           authorized guarantee agreement given pursuant to
                           clause 3.19.2.2(i);

                           3.19.2.3 the assignee gives a direct covenant to the
                                    Superior Landlord to comply with the terms
                                    of this Lease for so long as the assignee
                                    remains liable to do so under the Landlord
                                    and Tenant (Covenants) Act 1995; and

                                       14
<PAGE>

                           3.19.2.4 any guarantor of the assignee gives the
                                    Superior Landlord a guarantee of the
                                    assignee's obligations under this Lease in
                                    such form as the Superior Landlord may
                                    require.

                           THEN subject to the prior written consent (which
                           consent shall not be unreasonably withheld) of the
                           Superior Lessors and the Lessor to such assignment or
                           transfer or subletting of the whole of the Premises
                           the Lessee may effect the same

                  3.19.3   Within 21 days of every assignment or transfer (
                           whether by deed will or otherwise) and every mortgage
                           or charge and every subtenancy of the Premises and
                           upon every other disposition or transmission or
                           devolution of the Premises (including all Orders of
                           Court Probates and Letters of administration) notice
                           thereof shall be given to the Lessor's Solicitors
                           stating the date and short particulars thereof and
                           the names and addresses of every party thereto and at
                           the same time a certified copy of the deed document
                           or instrument creating or evidencing the same shall
                           be produced (showing the said document to have been
                           properly stamped if required to be stamped) to the
                           Lessor's Solicitors for registration (with a her copy
                           thereof for retention by the Lessor) together with
                           the Lessor's and the Superior Lessors' Solicitors'
                           reasonable fee for such registration]

         3.20.    PLATE GLASS

                  To insure and keep insured the plate glass windows of the
                  Premises against all usual risks in the full replacement value
                  thereof in an insurance office of repute and to pay all
                  premiums necessary for the above purpose within seven days
                  aver the same shall become due and payable AND to produce to
                  the Lessor or its agents on demand the policy or policies of
                  such insurance and the receipt for each such payment and to
                  cause all moneys received by virtue of such insurance to be
                  forthwith laid out in reinstating the said windows and to make
                  up airy deficiency out of its own moneys PROVIDED ALWAYS that
                  if the Lessee shall at any time fail to keep such insurance on
                  foot the Lessor may do all things necessary to effect and
                  maintain such insurance and any moneys expended by the lessor
                  for that purpose shall be recoverable from the Lessee on
                  demand PROVIDED FURTHER that the foregoing requirements shall
                  be in addition to and without prejudice to the repairing
                  obligations on the part of the Lessee hereinbefore contained

         3.21.    EASEMENTS AND ENCROACHMENTS

                  3.21.1   Neither the Lessee shall effect authorize or permit
                           any encroachment upon or acquisition of any right
                           easement quasi-right quasi-easement or privilege
                           adversely affecting the Premises or any closing or
                           obstruction of the access of light or air to any
                           windows or openings of the Premises nor shall the
                           Lessee give any acknowledgment to any third party
                           that the enjoyment of access of light or air thereto
                           is by the consent of such third

                                       15
<PAGE>

                           party or give any consideration to any third party or
                           enter into any agreement with any third party for the
                           purpose of inducing or binding such third party to
                           abstain from obstructing the access of light or air
                           thereto

                  3.21.2   If any such encroachment or acquisition or closing or
                           obstruction shall be threatened or attempted to give
                           notice thereof to the Lessor as soon as the same
                           comes to the knowledge of the Lessee and upon request
                           by the Lessor to take immediate steps (in conjunction
                           with the Lessor and other interested persons if the
                           Lessor shall so require) and to adopt all such lawful
                           means and do all such lawful things as the Lessor may
                           reasonably deem appropriate for preventing any such
                           encroachment or acquisition

         3.22.    COST OF CONSENTS

                  To pay all costs and expenses (including Surveyors' fees and
                  Solicitors' charges and all stamp duties and other
                  disbursements) incurred or payable by the Lessor in respect of
                  every application to the Superior Lessor and Lessor for any
                  consent or approval hereunder whether or not such consent or
                  approval is grated or refused or the application for same is
                  withdrawn

         3.23.    SUPERIOR LEASE

                  The Lessee is to comply with the Superior Tenant's Covenants
                  so far as they are applicable to the letting of the Premises
                  and are not the responsibility of the Lessor under this Lease

4.       LESSOR'S COVENANTS

         The Lessor HEREBY COVENANTS with the Lessee as follows:-

         4.1.     PAY RENTS

                  pay the rents reserved by the Superior Lease; and

         4.2.     SUPERIOR LEASE

                  at the request and cost of the Lessee on a full indemnity
                  basis, including reasonable security for costs paid in
                  advance, use all reasonable endeavors to procure that the
                  Superior Landlord complies with the Superior Landlord's
                  Covenants.

         4.3.     LESSOR'S INSURANCE

                  The Lessor may insure in an insurance office of good repute
                  and through such agency as the Lessor may from time to time
                  determine or through underwriters at Lloyd's:

                                       16
<PAGE>

                  4.3.1    three years' loss of yearly rents receivable in
                           respect of the Premises to the extent that they
                           exceed the Head Rent, taking into account the
                           Lessor's reasonable estimate of any increase in the
                           yearly rents on any rent review; and

                  4.3.2    its public liability and employer's liability in
                           respect of the premises.

         4.4.     INSURANCE RENT

                  The Lessee is to pay to the Lessor on demand as additional
                  rent a fair and proper proportion, to be determined by the
                  Lessor acting reasonably, of the costs incurred by the Lessor
                  if it puts in place any policy or policies of insurance under
                  clause 4.3.

         4.5.     SUPERIOR LANDLORD'S ISSUANCE

                  If the Superior Landlord does not insure the Premises in
                  accordance with the terms of the Superior Lease or the Lessor
                  wishes to insure additional risks not insured by the Superior
                  Landlord under the Superior Lease:

                  4.5.1    the Lessor may, but without being under an obligation
                           to do so, insure the Premises on the terms set out in
                           the Superior Lease as if it were the Superior
                           Landlord and insure such additional risks not insured
                           under the Superior Lease as the Lessor may reasonably
                           require in each case subject to such exceptions and
                           excesses imposed by the insurers; and

                  4.5.2    if the Lessor does so:

                           4.5.2.1  the Lessor will seek to ensure that any
                                    policy exclusions and excesses fall within
                                    normal commercial practice in the United
                                    Kingdom insurance market for properties
                                    similar to the Building and in the same area
                                    as the Building; and

                           4.5.2.2  the Lessee is to pay to the Lessor as
                                    additional rent on demand a fair and proper
                                    proportion, to be determined by the Lessor
                                    acting reasonably, of the amount expended by
                                    the Lessor in insuring the Premises together
                                    with any other sums expended by the Lessor
                                    which would have been payable as insurance
                                    rent under the Superior Lease if the
                                    Superior Landlord had complied with its
                                    insurance obligations.

5.       PROVISOS

         PROVIDED ALWAYS AND IT IS HEREBY EXPRESSLY AGREED as follows:

                                       17
<PAGE>

         5.1.     INTEREST

                  Whenever the Rent or Insurance Rent or Service Rent or Service
                  Charge or Additional Rents (whether formally or legally
                  demanded or not) or any other monies which may become payable
                  hereunder by the Lessee to the Lessor or any part thereof
                  shall remain unpaid for 14 days after becoming due and payable
                  then the amount thereof or the balance for the time being
                  unpaid shall (without prejudice to the Lessor's right of
                  re-entry hereinafter contained or any other right or remedy of
                  the Lessor) as from the date for payment thereof or such
                  subsequent date on which it is quantified and until the same
                  is duly paid bear and carry interest thereon (as well after as
                  before any judgment) at the rate of Four per centum per annum
                  above the base rate for the time being of National Westminster
                  Bank plc or such other joint stock bank as the Lessor may from
                  time to time notify the Lessee in writing AND the Lessee
                  accordingly HEREBY COVENANTS with the Lessor that in every
                  such case the Lessee will pay such interest thereon to the
                  Lessor in addition to the Rent Insurance Rent Service Rent
                  Service Charge and Additional Rents and other monies as
                  aforesaid (as well after as before any judgment) at the
                  aforesaid rate

         5.2.     FORFEITURE

                  If the Rent the Insurance Rent the Service Rent the Service
                  Charge or Additional Rents (whether formally or legally
                  demanded or not) or any other conies which may become payable
                  hereunder by the Lessee to the Lessor or any part thereof
                  shall at any time or times remain unpaid for twenty-one days
                  after becoming due and payable or if any of the covenants on
                  the part of the Lessee or any of the agreements stipulations
                  and conditions herein contained and on the Lessee's part to be
                  performed and observed shall not be performed and observed as
                  required hereunder or if the Lessee shall make any composition
                  or arrangement with or assignment for the benefit of the
                  Lessee's creditors or shall suffer any distress or process of
                  execution to be levied on the Lessee's goods or chattels or if
                  the Lessee (being a company) shall go into liquidation or be
                  wound up whether voluntarily or compulsorily (save for
                  purposes of amalgamation or reconstruction without insolvency)
                  or shall have a Receiver appointed or if the Lessee (being an
                  individual) shall be adjudicated bankrupt or commit any act of
                  bankruptcy or if the Lessee by act or omission puts the
                  Superior Lease at risk of being forfeited by the superior
                  Landlord then and in every such case it shall be lawful for
                  the Lessor at any time thereafter to re-enter upon the
                  Premises or any part thereof in the name of the whole and
                  thereupon this demise and the Term and everything herein
                  contained shall immediately cease and determine but without
                  prejudice to any right of action or remedy of the Lessor in
                  respect of the Rent the Insurance Rent the Service went the
                  Service Charge or other monies due or any antecedent breach or
                  non-performance or non-observance of any of the covenants or
                  agreements on the part of the Lessee or the stipulations and
                  conditions herein contained

                                       18
<PAGE>

         5.3.     RENT CESSER

                  If the Building or any material part thereof shall at any time
                  or times be destroyed or damaged by any of the Insured Risks
                  so as to render the Premises it for occupation or use then and
                  in ever such case unless as provided in clause 4.1.1 hereof)
                  the Rent or a fair and just proportion thereof according to
                  the nature and extent of the damage sustained (as agreed
                  between the Lessor and the Lessee in sting within one month of
                  such destruction or damage) shall for a period of two years
                  four the date of such damage or destruction or (if earlier)
                  until the Premises have been rebuilt or reinstated and made
                  fit for occupation and use be suspended and cease to be
                  payable and failing such agreement or in case any dispute
                  shall arise as to the amount of such suspension and/or such
                  period the same shall be referred for determination to an
                  independent Surveyor who shall:-

                  5.3.1    Be a person who has for at least five years prior to
                           his appointment been a fellow of the Royal
                           Institution of Chartered Surveyors and in general
                           practice in and experienced in the assessment of rent
                           for office and shop premises in the general region of
                           Bath and Bristol

                  5.3.2    Be appointed jointly by the Lessor and the Lessee or
                           (if either of them shall neglect for seven days after
                           being requested by the other of them to concur in an
                           appointment) by the President or Vice President for
                           the time being of such Institution on the application
                           of whichever of the Lessor and the Lessee shall first
                           so apply

                  5.3.3    Act as an expert and not as an arbitrator

                  5.3.4    On his appointment serve written notice thereof on
                           the Lessor and the Lessee

                  5.3.5    Consider any written representations by or on behalf
                           of the Lessor or the Lessee which are received by him
                           within 21 days of such service but otherwise have an
                           unfettered discretion to determine the reference to
                           him

                  5.3.6    Serve notice of such determination on the Lessor and
                           the Lessee as soon as he has made it

                  5.3.7    Be paid his proper fee and expenses in connection
                           with such determination by the Lessor and the Lessee
                           in equal shares or such shares as he may determine

                  And any such determination shall be final and binding on the
                  Lessor and the Lessee and the Surety Provided that if and
                  whenever any person so appointed shall die be adjudged
                  bankrupt or become of unsound mind or if both the Lessor and
                  the Lessee shall serve upon such person written notice that in
                  their opinion he has unreasonably delayed making such
                  determination such person shall ipso facto be discharged and
                  be. entitled only t o his reasonable expenses prior to such

                                       19
<PAGE>

                  discharge and another such independent Surveyor shall be
                  appointed to act in his place as aforesaid

         5.4.     COURT ORDER

                  Sections 24 to 28 of the Landlord and Tenant Act 1954 do not
                  apply to this Lease. This Agreement has been authorized by the
                  Court Order.

6.       RENT REVIEW

         IT IS ALSO HEREBY EXPRESSLY AGREED AND DECLARED between the parties
         hereto as follows:-

         6.1.     IN THIS CLAUSE:-

                  "The Review Date" means each of the rent review dates defined
                  in the Superior Lease which fall after the date of this Lease

         6.2.     THE RENT PAYABLE HEREUNDER AS FROM A REVIEW DATE (HEREINAFTER
                  CALLED "THE REVIEWED RENT") SHALL BE INCREASED TO THE GREATER
                  OF

                  6.2.1    the Rent payable under this Lease immediately before
                           the relevant Review Date; or

                  6.2.2    a sum equal to 36% of the Head Rent once determined
                           or agreed

         6.3.     IF THE REVIEWED RENT SHALL NOT BE ASCERTAINED BY THE REVIEW
                  DATE THIN UNTIL IT HAS BEEN ASCERTAINED THE LESSEE SHALL
                  CONTINUE TO PAY THE CURRENT RENT UNTIL THE QUARTER DAY AFTER
                  IT HAS BEEN ASCERTAINED ON WHICH QUARTER DAY THE LESSEE SHALL
                  PAY THE LESSOR AN ADDITIONAL SUM EQUAL TO THE EXCESS (IF ANY)
                  OF THE REVIEWED RENT OVER THE CURRENT RENT FOR THE PERIOD FROM
                  THE REVIEW DATE TO SUCH QUARTER DAY

         6.4.     A MEMORANDUM OF THE MARKET RACK RENT SHALL BE ENDORSED ON S
                  LEASE AND ON THE COUNTERPART HEREOF IN SUCH TERMS AS THE
                  LESSOR SHALL REASONABLY REQUIRE

         6.5.     TIME SHALL BE DEEMED TO BE OF THE ESSENCE IN RESPECT OF THE
                  SAID RESPECTIVE PERIODS FOR SERVICE OF THE LESSOR'S NOTICE AND
                  THE LESSEE'S NOTICE

7.       NOTICES

         These p resents shall incorporate the provisions as to notices
         contained in Section 196 of the Law of Property Act 1925 as amended by
         the Recorded Delivery Service Acct 1962 and every notice required to be
         given hereunder shall be in writing

                                       20
<PAGE>

8.       VALUE ADDED TAX

         Sums payable by the Lessee hereunder which are for the time being
         subject to Value Added Tax shall be considered to be tax exclusive sums
         and the Value Added Tax at the appropriate rate f or the time being
         shall be payable by the Lessee in addition thereto

IN WITNESS whereof the Lessor and the Lessee have caused their respective Common
Seals to be hereunto affixed the day and year first before written

                                       21
<PAGE>

                                   SCHEDULE 1

1.       The right in common with the Lessor the Superior Landlord and the offer
         lessees and occupiers of the building to use the Common Parts for all
         reasonable purposes in connection with the use and enjoyment of the
         Premises

2.       The right of passage of gas electricity water and soil drainage and air
         from and to the Premises through the Conducting Media passing along
         through over or upon the Premises

3.       The right in case of fire or other like emergency to use any part of
         the Common Parts so designated as a means of escape

4.       The right of support and protection for such parts of the Premises as
         require the same from any other part of the building capable of
         providing such support and protection

                                       22
<PAGE>

                                   SCHEDULE 2

Unto the Lessor and all persons claiming throughout under the Lessor and unto
all others enjoying similar rights or to whom similar rights may be granted
there are expressly EXCEPTED AND RESERVED out of this demise throughout the
whole of the Term:-

1.       The full and free right at any time or times to demolish develop build
         or rebuild add to alter or otherwise deal with and use any adjoining or
         neighboring premises in such manner to such extent and to such height
         and for such poses as may be desired notwithstanding in all or any of
         such cases any inconvenience which may thereby be caused to the Lessee
         or the other occupiers from time to time of the Premises or any
         interference which may thereby be occasioned to the access of light or
         air to the Premises but (without prejudice to the foregoing) in
         relation to the exercise of all or any of such rights by the Lessor or
         by any person claming through or under the Lessor the Lessor shall not
         do or permit to be done anything which shall materially interfere with
         reasonable access of light or air to the presses or render the Premises
         substantially incapable of being used for the purpose authorized by
         these presents

2.       The full free and uninterrupted right of running and passage of air gas
         electricity water and soil to and from any, adjoining or neighbouring
         premises by and through all Conducting Media which now are or which at
         anytime during the Term may be in over under passing through or
         attached to or forming part of the Premises

3.       The right after at least seven days' prior notice (except in an
         emergency when no prior notice need be given) to enter upon the
         Premises with or without contractors and others and all necessary
         equipment tools and materials (i) in order to connect up to any such
         Conducting Media or to inspect the same or to carry out any necessary
         repairs renewals additions alterations or other works thereto (ii) for
         the purpose of repairing maintaining or rebuilding any adjoining
         property the persons(degree) entering causing thereby the minimum of
         inconvenience to the Lessee or the other occupiers of the Premises and
         making good all damage thereby caused to the premises

4.       The right at all times of the day or night (but only in case of fire or
         other extreme emergency) to pass from any adjoining or neighbouring
         premises over into and/or through the Premises and thence into the
         street or other place of safety by any means of emergency escape
         (whether now existing or hereafter to be constructed) which may jointly
         serve or be capable of jointly serving the Premises as well as any
         adjoining or neighbouring premises

5.       The right to construct and affix to the Premises in such position and
         manner as the Lessor may reasonably require or the Fire Authority may
         direct such structures as may be necessary to provide appropriate means
         of escape in the event of fire or other extreme emergency from any
         adjoining or neighbouring buildings or premises over into and/or
         through the Premises PROVIDED THAT such right shall not be exercised
         until the Lessor shall have first given to the Lessee not less than
         fourteen days' notice of the intended exercise of such right specifying
         in such notice which parts of the Premises are

                                       23
<PAGE>

         to be affected thereby and brief particulars of the works necessary
         therefor and the Lessee shall have been provided with full details of
         any proposed requirements of the Fire Authority and given an
         opportunity of making representations in respect of those to which it
         may object

6.       The right after at least three days' prior notice (except in an
         emergency when no prior notice need be given) to enter upon the
         Premises with or without contractors and others and all necessary
         equipment tools and materials in order:-

         6.1      to connect up to any such Conducting Media as are mentioned in
                  paragraph 2 of this Schedule and

         6.2      to carry out such works to or on the Premises as are mentioned
                  in paragraph 4 of this Schedule and as shall be reasonably
                  necessary to enable the Lessor and the owners tenants and
                  occupiers of adjoining or neighbouring premises to exercise
                  the right referred to in paragraph 3 of this Schedule and

         6.3      to inspect such Conducting Media and such works as aforesaid
                  or to carry out any necessary repairs renewals additions
                  alterations or other works thereto the party or parties so
                  entering for any such purposes causing thereby the minimum of
                  inconvenience to the Lessee or other the occupiers of the
                  Premises and making good with the minimum of delay all damage
                  thereby caused to the Premises

7.       All mineral waters or springs of mineral water (if any) at the date of
         this Lease arising or flowing or which may during the Term arise or
         flow in through or under the Premises with power for the Superior
         Lessor the Lessor their agents contractors or workmen to enter upon any
         part of the Premises to preserve protect and secure the use and
         enjoyment of any such waters or springs and to make on or under any
         part of the Premises any tanks conduits pipes or other works for the
         purposes of securing and conveying away any such waters provided that
         the person so entering for this purpose shall make good any damage
         resulting from the exercise of this right and also pay compensation to
         the Lessee for any loss actually caused to it by any such damage.

                                       24
<PAGE>
8.       The right to support and protection by the Premises for such other
         parts of the building or any extension thereof as require such support
         and protection

GIVEN UNDER THE COMMON                      )
SEAL of BAE SYSTEMS MARINE                  )
LIMITED                                     )

/S/ SIGNATURE ILLEGIBLE                     Director

/S/ SIGNATURE ILLEGIBLE                     Director/Secretary

SIGNED AS A DEED by                         )
BAM ENTERTAINMENT LIMITED                   )
Acting by a director and a director/its
Secretary

/S/ SIGNATURE ILLEGIBLE                     Director

/S/ SIGNATURE ILLEGIBLE                     Director/Secretary

                                       25

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