Compensation

COMPENSATION COMMITTEE CHARTER

The board of directors (the " Board") of Capitol Bancorp Ltd. (the " Company") has adopted and approved this Charter, setting forth the purpose, membership requirements, authority, and responsibilities of its Compensation Committee.

PURPOSE

The purpose of the Compensation Committee is to discharge the responsibilities set forth below relating to the Company's compensation plans and the compensation of the directors and certain officers of the Company.

MEMBERSHIP

The Compensation Committee shall be comprised of not less than three members of the Board, the exact number to be determined by the Board. Each member of the Compensation Committee shall be (a) "independent" as defined from time to time under The New York Stock Exchange, Inc. (the " NYSE") listing standards and any other applicable regulatory standards, (b) a "non-employee director" as that term is defined under Securities and Exchange Commission (the " SEC") Rule 16b-3 and any other applicable SEC or NYSE regulation, and (c) an "outside director" as that term is defined for the purpose of Internal Revenue Code Section 162(m).

The members of the Compensation Committee shall be appointed by the Board. Compensation Committee members may be replaced by the Board. Members of the Compensation Committee serve at the pleasure of the Board.

STRUCTURE AND MEETINGS

The Compensation Committee shall meet at such times as the Compensation Committee shall consider appropriate to fulfill its duties and responsibilities, but no less frequently than annually.

The Chair of the Compensation Committee will preside at each meeting and, in consultation with the other members of the Compensation Committee, will set the agenda for each meeting.

The Compensation Committee may, in its discretion, form and delegate all or a portion of its authority and responsibilities to a subcommittee of the Compensation Committee when appropriate, as permitted by applicable law and the rules of the SEC and NYSE.

AUTHORITY AND RESPONSIBILITIES

The Compensation Committee shall have the following authority and direct responsibilities:

  1. At least annually, to review and approve corporate goals and objectives relevant to the compensation of the Company's chief executive officer (the " CEO"), evaluate the CEO's performance in light of those goals and objectives, determine and approve the CEO's compensation level based on this evaluation, and recommend the CEO's compensation for ratification by the independent directors of the Board. In determining the long-term incentive component of the CEO's compensation, the Compensation Committee shall consider, among other factors, the Company's performance and relative shareholder return, the value of similar incentive awards to CEO's at comparative companies, awards given to the Company's CEO in prior years, and the Compensation Committee's assessment of the CEO's current and expected contribution to the Company's success.

  2. At least annually, to review and approve the compensation levels for members of the Company's executive management team (senior executive officers of the Company who report directly to the CEO or the Executive Committee of the Board) and any employee-directors of the Company. In reviewing and approving such executive's and employee-director's compensation, the Compensation Committee shall take into account (but shall not be bound by) recommendations made by the CEO and the Executive Committee of the Board.

  3. To make recommendations to the Board with respect to incentive compensation plans and equity-based plans.

  4. To oversee the administration of the compensation, incentive and equity-based benefit plans of the Company which have been, or may in the future be, adopted by the Board and, in connection therewith, to approve grants, awards and payouts under the Company's stock option plans and the Company's Management Incentive Plan.

  5. To review periodically, and approve or recommend for Board approval (as applicable) any changes to, the Company's incentive, equity-based and other compensation plans.

  6. To review periodically, director and Board committee compensation levels and practices and recommend to the Board changes in such compensation levels and practices in accordance with the principles set forth in the Company's Corporate Governance Guidelines.

The Compensation Committee may perform any other activities consistent with this Charter, the Company's by-laws and governing law as the Compensation Committee or the Board deems appropriate.

REPORTS; PERFORMANCE EVALUATION

The Compensation Committee shall produce an annual Report of the Compensation Committee on Executive Compensation for inclusion in the Company's annual proxy statement in accordance with applicable SEC rules and regulations.

The Compensation Committee shall report periodically to the Board at regularly scheduled Board meetings.

The Compensation Committee shall conduct and present to the Board an annual performance evaluation of the Compensation Committee.

At least annually, the Compensation Committee shall review the adequacy of this Charter and recommend any proposed changes to the Board for approval.

COMMITTEE RESOURCES

The Compensation Committee shall have the sole authority to retain and terminate any compensation consultant to be used to assist in the evaluation of director, CEO or senior executive compensation and shall have sole authority to approve the consultant's fees and other retention terms. The Compensation Committee shall also have authority to obtain advice and assistance from internal or external legal, accounting or other advisors.

As approved by the Board of Directors on February 3, 2005.