Capitol Bancorp S4 Registration of securities issued in business combination transactions

The Board of Directors for each of the CDBLs is using this proxy statement/prospectus to solicit proxies from the holders of common stock of the CDBLs for use at the shareholders’ meetings.

At the special shareholders’ meetings to be held on _________, 2009, each of the CDBLs’ common shareholders will be asked to approve the Agreement and Plan of Merger. The Agreement and Plan of Merger provides for the merger of the CDBLs with and into Capitol with Capitol as the surviving corporation. Upon consummation of the merger, the CDBLs’ common shareholders will receive units, with each unit consisting of shares of the Trust-Preferred Securities and the Series A Preferred in exchange for their shares of common stock in the CDBLs.

Background of the Merger

The concept of a potential merger transaction for each of the CDBLs with and into Capitol has been considered from time to time from the beginning of each CDBL’s operations. The objectives of the potential merger would be to enable shareholders of each CDBL to achieve liquidity in their investment, a reasonable return on their investment in the form of a ‘premium’ and to accomplish such a transaction on a tax-free basis. Without the merger, shareholders of the CDBLs will continue to hold shares of common stock which have no market and are illiquid.

The Boards of Directors of each of the CDBLs have not solicited or received any other proposals for the potential exchange or sale of such CDBL’s shares of common stock. If other proposals were under consideration for sale or exchange of a CDBL’s shares to an entity other than Capitol, Capitol would be permitted to vote its Class A common shares of the CDBL. In addition, Capitol has no intentions of selling its shares of Class A common stock in the CDBLs. Hence, the only proposal under consideration is the merger proposal with Capitol.

On June 24, 2009, the Boards of the CDBLs unanimously approved the Agreement and Plan of Merger and agreed to call special shareholder meetings for a shareholder vote to approve the Agreement and Plan of Merger.

The CDBLs’ Reasons for the Merger

In reaching its decision to adopt and approve the merger agreement and recommend the merger to its common shareholders, the CDBL’s board of directors considered a number of factors, including:

·	The value of the consideration the CDBLs’ common shareholders will receive relative to the original investment amount per share of the CDBLs’ common stock;

·	Certain information concerning the financial condition, results of operations and business prospects of Capitol;

·	The projected value of shares of the Trust-Preferred Securities and the Series A Preferred offered to the CDBLs’ shareholders in relation to the estimated market value, book value and earnings per share of the CDBL’s common stock;

·	The financial performance and condition, assets, liabilities, business operations, capital levels and prospects of each of the CDBLs and Capitol and their superior potential future values on a combined basis as compared to the potential future values of the CDBLs;

·	The alternatives to the merger, including remaining independent enterprises; and

·	The competitive and regulatory environment for financial institutions generally.

The foregoing information and factors considered by each of the CDBLs’ boards of directors is not exhaustive, but includes all material factors that the CDBLs’ boards of directors considered and discussed in approving and recommending the merger proposal. In view of the wide variety of factors considered and discussed by the CDBLs’ boards of directors in connection with its evaluation of the merger proposal and the complexity of these factors, the boards of directors did not consider it practical to, nor did they attempt to, quantify, rank, or otherwise assign any specific or relative weights to the specific factors that they considered in reaching their decisions. Rather, they considered all of the factors as a whole. It should be noted that this explanation of the reasoning of the CDBLs’

boards of directors and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “A Cautionary Statement Regarding Forward-Looking Statements” on page _____.

In summary, the CDBLs’ boards of directors believe that the common shareholders of a CDBL will be best served by the merger in order to maximize their shareholder value and to provide them: (a) better protection through diversification geographically and by customer base through Capitol’s subsidiary banks rather than dependence upon the resources of a single CDBL’s few subsidiary banks; and (b) the CDBLs’ common shareholders will receive publicly traded shares, providing them liquidity as opposed to the common stock in each CDBL for which there is no market. The CDBL shareholders who choose to do so may continue to hold shares of the Series A Preferred they receive in the merger without being forced to have their investment reduced by the immediate recognition of a capital gains tax.

The CDBLs’ boards of directors believe the merger is in the best interests of the CDBLs and their common shareholders. The CDBLs’ boards of directors recommend that the CDBLs’ common shareholders vote “FOR” the approval of the merger proposal and the consummation of the transactions contemplated thereby.

Capitol’s Reasons for the Merger

Capitol believes that the profitability of the CDBLs’ banks and other subsidiaries will increase over time. As noted elsewhere in this proxy statement/prospectus, while the CDBLs’ assets are reported as part of Capitol’s assets for purposes of its consolidated financial statements, the CDBLs’ income or losses are attributed to Capitol only in the percentage which Capitol owns of the relevant CDBL’s common stock. Capitol desires to acquire the remainder of the CDBLs’ common stock so that Capitol can include 100% of the CDBLs’ results in Capitol’s consolidated income statement.

Terms of the Merger

Terms of the merger are set forth in the Agreement and Plan of Merger. The Agreement and Plan of Merger is included as Appendix A to this proxy statement/prospectus. You should review the Agreement and Plan of Merger in its entirety.

Upon completion of the merger, each CDBL will be merged with and into Capitol and each share of a CDBL’s common stock will be converted into units as set out in the Agreement and Plan of Merger.

Each CDBL’s common shareholders will receive one unit in exchange for each share of his, her or their common stock in accordance with the following table. Any fractional shares will be paid in cash.

One Share Common Stock of	Shares of the Trust-Preferred Securities	Shares of the Series A Preferred	Estimated Merger Consideration vs Original Investment Amounts
CDBL III	41.64	11.811	159.750%
CDBL IV	40.47	11.478	155.250%
CDBL V	39.29	11.146	150.750%
CDBL VI	37.29	10.577	143.056%

Conditions to the Merger

The respective obligation of each party to effect the merger shall be subject to the satisfaction at or prior to the effective time of the merger of the following conditions:

·	a majority of the common stock of each of the CDBLs shall have been voted to approve and adopt the merger agreement at the special shareholders’ meeting of the applicable CDBL;

·	the SEC shall have declared effective the Registration Statement of which this proxy statement/prospectus is part registering the units to be issued in the merger;

·	not more than an aggregate of one half of one percent (.50%) of the issued and outstanding shares of the CDBLs’ common stock shall have perfected their dissenter rights under Sections 761 -774 of the MBCA; and

Honigman Miller Schwartz and Cohn LLP, shall have issued its tax opinion that: (i) the merger will constitute a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended; and (ii) the merger will not be a taxable event to the shareholders of the CDBLs (except to the extent of the value of the Trust-Preferred Securities received and cash received in lieu of fractional shares).

Fractional Shares

No fractional shares of the Series A Preferred will be issued to any holder of common stock in the merger. For each fractional share that would otherwise be issued, Capitol will pay cash in an amount equal to the share fraction multiplied by $[ ], the value upon which the fixed stock exchange ratio for this transaction was established. No interest will be paid or accrued on cash payable in lieu of fractional shares.

The CDBL Board Recommendations

In determining whether to recommend the Agreement and Plan of Merger to the CDBLs’ common shareholders, the CDBLs’ board considered the matters discussed in “The CDBLs’ Reasons for the Merger”. In addition, the CDBLs’ board considered the following: (a) no other merger proposals would be offered either by Capitol or unaffiliated parties; (b) Capitol has had discussions and preliminary negotiations concerning the potential sale of affiliate banks owned by the CDBLs and it is possible that prior to or after the completion of the proposed merger Capitol and/or a CDBL may enter into a definitive agreement to sell one or more of its affiliate banks; (c) there is no assurance Capitol would repeat or improve its merger proposal at any time in the future; and (d) absent any potential alternatives other than rejecting Capitol’s proposal, which could result in the CDBLs’ common shareholders having no future opportunities to exchange, sell or otherwise dispose of their shares of common stock.

THE BOARDS OF EACH OF THE CDBLs HAS DETERMINED THAT THE PROPOSED MERGER IS FAIR TO AND IN THE BEST INTERESTS OF EACH SUCH CDBL AND SUCH CDBLs SHAREHOLDERS, HAVE APPROVED THE AGREEMENT AND PLAN OF MERGER AND RECOMMENDS THAT THE COMMON SHAREHOLDERS VOTE “FOR” APPROVAL OF THE AGREEMENT AND PLAN OF MERGER.

Accounting Treatment

Capitol expects the merger to be treated as an equity transaction consisting of the acquisition of noncontrolling interests.

Pro Forma Data

Because each CDBL is already a controlled subsidiary of Capitol, it is already included in Capitol’s consolidated financial statements. Unaudited pro forma consolidated financial information is presented in this document, adjusted for the proposed merger, which will be accounted for as an acquisition of noncontrolling interests, as if it had occurred effective March 31, 2009 (shown on page [27]) [and at the beginning of 2008 (shown on page 29)], using the aggregate merger consideration, and does not give effect to the potential conversion of the Series A preferred. The accompanying notes to the unaudited pro forma consolidated financial statements are an integral part of the unaudited pro forma financial information. The unaudited pro forma results of operations for the three months ended [March 31], 2009 and year ended December 31, 2008 are not necessarily indicative of results for any subsequent period thereafter.

Material U.S. Federal Income Tax Consequences of the Mergers

The following discussion summarizes the material U.S. federal income tax considerations of the mergers that are expected to apply generally to U.S. Holders (as defined below) of a CDBL’s common stock upon an exchange of their CDBL stock for a unit in the merger of each CDBL with and into Capitol. This summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the “Code”), existing Treasury Regulations promulgated thereunder, and current administrative rulings and court decisions, all of which are subject to change. Any change, which may or may not be retroactive, could alter the tax consequences to Capitol, the Capitol shareholders, the CDBLs, or the holders of CDBL stock as described in this summary.

This discussion addresses only CDBL stockholders who are U.S. Holders and hold CDBL stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). It does not address all aspects of U.S. federal income taxation that may be relevant to a particular CDBL stockholder in light of that stockholder’s individual circumstances or to a CDBL stock holder who is subject to special treatment under U.S. federal income tax law, including, without limitation:

·	dealers in securities, foreign persons, mutual funds, regulated investment companies, real estate investment trusts, insurance companies, banks or other financial institutions or tax-exempt entities;

·	a U.S. expatriate;

·	an entity or arrangement treated as a partnership for U.S. federal income tax purposes or an investor in such partnership;

·	a holder who has a functional currency other than the U.S. dollar;

·	a holder who is subject to the alternative minimum tax provisions of the Code;

·	a trader in securities who elects to apply a mark-to-market method of accounting;

·	a holder who holds CDBL stock as part of a hedge, straddle, constructive sale or conversion transaction or any other risk reduction strategy;

·	a holder whose shares constitute qualified small business stock with the meaning of Section 1202 of the Code; or

·	a holder who acquired CDBL stock in connection with a stock option, warrant or stock purchase plans or in other compensatory transactions.

For purposes of this discussion, “U.S. Holder” means a beneficial owner of CDBL stock who is:

·	an individual who is a citizen or resident of the United States;

·	a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any subdivision thereof;

·	an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or

a trust (other than a grantor trust) if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) it has a valid election in place to be treated as a U.S. person.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds CDBL stock, the tax treatment of a partner in such entity will generally depend upon the status of the partner and the activities of the partnership. A partner in a partnership holding CDBL stock should consult its tax advisor regarding the tax consequences of the mergers.

·	In addition, the following discussion does not address the tax consequences of the mergers under state, local and foreign tax laws.

HOLDERS OF A CDBL’S COMMON STOCK ARE ADVISED AND EXPECTED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS IN LIGHT OF THEIR PERSONAL CIRCUMSTANCES AND THE CONSEQUENCES OF THE TRANSACTION UNDER STATE, LOCAL AND FOREIGN TAX LAWS.

The mergers have been structured to qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to the consummation of the mergers that Honigman Miller Schwartz and Cohn LLP, tax counsel to Capitol, render a tax opinion to Capitol to the effect that the mergers will each qualify as a reorganization pursuant to Section 368(a) of the Code. The tax opinion of Honigman Miller Schwartz and Cohn LLP, tax counsel to Capitol, discussed in this section is conditioned upon certain assumptions stated in such tax opinion and certain customary representations being delivered by Capitol and the CDBLs. If any such representation or assumption is inaccurate, the tax consequences of the mergers to holders of CDBL stock could differ materially from those described below.

No ruling from the IRS has been or will be requested in connection with the mergers. In addition, shareholders of the CDBLs should be aware that the tax opinions discussed in this section are not binding on the IRS, the IRS could adopt a contrary position, and a contrary position could be sustained by a court.

The mergers were each structured to qualify as, and Capitol and the CDBLs intend that the mergers will each be treated, as a reorganization pursuant to Section 368(a) of the Code. The discussion below assumes that each of the mergers qualifies as a reorganization within the meaning of Section 368(a) of the Code.

Exchange of CDBL Stock for a Unit. Except as discussed below under “Cash in Lieu of Fractional Shares of Series A Preferred” and “Cash in Satisfaction of Dissenter Rights,” a CDBL shareholder generally will recognize gain (but not loss) equal to the lesser of:

·	the fair market value of the Trust Preferred Securities that it receives pursuant to the mergers; and

·	the excess of the fair market value of the Trust Preferred Securities and the fair market value of Series A Preferred received by such shareholder over such shareholder’s tax basis in the CDBL stock surrendered.

To the extent a CDBL shareholder holds various blocks of CDBL stock with varying bases, the amount of recognized gain may vary depending on the allocation of the consideration received in exchange for such stock. Additionally, gain or loss must be calculated separately for each identifiable block of shares surrendered in the exchange, and a loss realized on one block of shares may not be used to offset a gain realized on another block of shares. Therefore, each CDBL shareholder should consult with its own tax advisor with respect to the manner in which cash, Trust Preferred Securities, and shares of the Series A Preferred should be allocated among different blocks of CDBL stock held by such shareholder.

Tax Basis and Holding Period. The tax basis of Series A Preferred received by a CDBL shareholder in the mergers will be equal to such shareholder’s tax basis in the CDBL stock surrendered therefor reduced by the fair market value of the Trust Preferred Securities received and increased by any gain recognized by such shareholder (including any portion of the gain that is treated as a dividend but excluding any gain or loss resulting from the deemed receipt and redemption of a fractional share interest described below) in the mergers. The holding period of the Series A Preferred received by a CDBL shareholder in the mergers will be equal to such shareholder’s holding period in the CDBL stock exchanged therefor. If a CDBL shareholder owns multiple blocks of CDBL stock, such shareholder should consult its tax advisor with respect to the proper allocation of the tax basis and holding periods of its CDBL stock among the Series A Preferred and the Trust Preferred Securities received in the mergers.

Character of Gain. Any gain that a CDBL shareholder recognizes from the receipt of the Trust Preferred Securities generally will be treated as capital gain. Any capital gain with respect to a particular block of CDBL stock will constitute long-term capital gain so long as the CDBL shareholder’s holding period in that particular block of its CDBL stock is more than one year as of the consummation of the mergers. Currently, long-term capital gains are generally subject to U.S. federal income tax at a maximum rate of 15% in the hands of certain U.S. Holders such as individuals.

In some cases, however, the consideration received in exchange for CDBL stock in the mergers could be treated as having the effect of the distribution of a dividend, under the rules set forth in Section 302 of the Code, in which case such gain would be treated as dividend income. These rules are complex and dependent upon the specific factual circumstances particular to each holder of CDBL stock. Consequently, each holder of CDBL stock that may be subject to those rules should consult its tax advisor as to the application of these rules to the particular facts relevant to such holder.

Cash in Lieu of Fractional Shares of Series A Preferred. If a CDBL shareholder receives cash instead of a fractional share of the Series A Preferred, such shareholder will be treated as having received such fractional share in the merger and then as having received cash in exchange for such fractional share. Gain or loss generally will be recognized based on the difference between the amount of cash received in lieu of the fractional share and the portion of such shareholder’s aggregate adjusted tax basis of the surrendered CDBL stock that is allocable to such fractional share. Such gain or loss generally will be long-term capital gain or loss if such shareholder’s holding period for the CDBL stock is more than one year as of the effective date of the merger.

Cash in Satisfaction of Dissenter Rights. If a CDBL shareholder properly exercises dissenter rights and receives a cash payment for its CDBL common stock, such shareholder will generally recognize gain or loss measured by the difference between the amount of cash received and such shareholder’s tax basis in such stock.

Treatment of Capitol, Capitol Shareholders and the CDBLs. No gain or loss will be recognized by Capitol, Capitol shareholders, or the CDBLs solely as a result of the merger.

Reporting Requirements. Certain CDBL shareholders may be required to attach a statement to their tax returns for the year in which the merger is consummated that contains the information listed in Treasury Regulation Section 1.368-3(b), if applicable. Shareholders of the CDBLs are urged to consult their own tax advisors with respect to the applicable reporting requirements.

Backup Withholding. Any cash payments to CDBL shareholders in connection with the merger may be subject to backup withholding on a holder’s receipt of cash, unless such holder furnishes a correct taxpayer identification number and certifies that he or she is not subject to backup withholding or such shareholder is otherwise exempt from backup withholding. Any amount withheld under the backup withholding rules will generally be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS TO U.S. HOLDERS AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS OF THE MERGERS. SHAREHOLDERS OF THE CDBLS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGERS,

INCLUDING TAX RETURN REPORTING REQUIREMENTS AND THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER APPLICABLE TAX LAWS.

Public Trading

An application will be filed to list shares of the Series A Preferred to be issued in the proposed merger on the NASDAQ Capital Market, if the Agreement and Plan of Merger is approved (the application will request listing under the symbol “CBCP.P”). Accordingly, the shares of the Series A Preferred to be issued in exchange for the CDBLs’ common stock will be publicly tradable upon consummation of the merger. There will be no restriction on the ability of a former CDBL shareholder to sell in the open market the shares of the Series A Preferred received (unless the CDBL shareholder is also an officer, director or affiliate of either the applicable CDBL or Capitol, in which case Rule 144 and Rule 145 issued by the SEC do impose certain restrictions on the sale of the shares of the Series A Preferred). Shares of the Trust-Preferred Securities are listed on the NYSE under the symbol “CBC PrB.”

Capitol may sell affiliate banks owned by the CDBLs prior to or after the proposed merger

Rights of Dissenting Shareholders

If the merger agreement is approved and adopted by the required vote of the CDBLs’ shareholders and is not abandoned or terminated, holders of common stock in a CDBL who did not vote in favor of the merger may, by complying with Sections 761 through 774 of the Michigan Business Corporation Act, be entitled to dissenters’ rights as described therein. The record holders of the shares of each CDBL’s common stock that are eligible to, and do, exercise their dissenters’ rights with respect to the merger are referred to herein as “dissenting shareholders,” and the shares of common stock with respect to which they exercise dissenters’ rights are referred to herein as “dissenting shares”.

The following discussion is not a complete statement of the law pertaining to dissenters’ rights under the Michigan Business Corporation Act and is qualified in its entirety by reference to Sections 761 through 774 of the Michigan Business Corporation Act, the full text of which are attached to this proxy statement/prospectus as Appendix B and incorporated herein by reference. Appendix B should be reviewed carefully by any CDBL common shareholder who wishes to exercise dissenters’ rights or who wishes to preserve the right to do so, since failure to comply with the procedures of the relevant statute will result in the loss of dissenters’ rights.

ANY HOLDER OF CDBL COMMON STOCK WISHING TO EXERCISE DISSENTERS’ RIGHTS IS URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.

Holders of shares of a CDBL’s common stock must satisfy each of the following requirements to be entitled to exercise dissenter’s rights under Michigan law: (a) the dissenting shares must have been outstanding on the applicable record date for the special shareholders’ meeting; (b) the holder of such common dissenting shares must have acquired such shares before the date of the first announcement to the news media or the shareholders of the terms of the merger; and (c) the holder of the dissenting shares must deliver to the CDBL before the vote is taken written notice of his or her intent to demand payment for the dissenting shares if the merger is effectuated and must not vote the dissenting shares in favor of the merger.

A vote by proxy or in person against the merger does not in and of itself constitute a demand for payment for the dissenting shares under Michigan law.

Pursuant to Sections 761 through 774 of the Michigan Business Corporation Act, holders entitled to dissenters’ rights may require Capitol to repurchase their dissenting shares at a price equal to the fair value of such shares determined as of immediately before the effective date of the merger, excluding any appreciation or depreciation in anticipation of the merger, unless exclusion would be inequitable, plus interest from the effective date of the merger until the date of payment.

Within ten days following effective date of the merger, Capitol is required to mail a dissenters’ notice to each person who properly filed notice of their intent to demand payment for dissenting shares and did not vote the dissenting shares in favor of the merger. The dissenters’ notice must contain the following: (a) a statement of where the payment demand must be sent and where and when certificates for shares represented by certificates must be deposited; (b) information to the holders of shares without certificates as to what extent transfer of the shares will be restricted after the payment demand is received; (c) a form for the payment demand that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and

requires that the person asserting dissenters’ rights certify whether he or she acquired beneficial ownership of the dissenting shares before the date; and (d) the date by which the corporation must receive the payment demand, which date may not be fewer than 30 nor more than 60 days after the date the dissenters’ notice is delivered.

A dissenting shareholder sent a dissenters’ notice must, on or before the due date set forth in the dissenters’ notice: (a) demand payment; (b) certify whether he or she acquired beneficial ownership of the dissenting shares before the date the merger was first announced, as set forth in the dissenters’ notice; and (c) deposit the dissenting share certificates in accordance with the terms of the dissenters’ notice.

Capitol is required to pay a dissenting shareholder within 7 days after the merger is effective or a payment demand is received, whichever occurs later, the amount Capitol estimates to be the fair value of the dissenting shares, plus accrued interest. The dissenting shareholder has thirty (30) days from the date of payment to notify Capitol that the dissenting shareholder believes that the amount paid is less than the fair value of the dissenting shares or that the interest due was incorrectly calculated.

If Capitol and the dissenting shareholder cannot agree on the amount due to the dissenting shareholder, then Capitol shall commence a proceeding within sixty (60) days after receiving the payment demand and petition the court to determine the fair value of the dissenting shares and accrued interest. If Capitol does not commence the court proceeding within the sixty (60) day period, then Capitol is required to pay the dissenting shareholder the amount demanded by the dissenting shareholder.

Federal Securities Laws Consequences; Stock Transfer Restrictions

This proxy statement/prospectus does not cover any resales of shares of the Series A Preferred and the Trust-Preferred Securities you will receive in the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any such resale.

All shares of the Series A Preferred and the Trust-Preferred Securities you will receive in the merger will be freely transferable, except that if you are deemed to be an ‘affiliate’ of Capitol or a CDBL under the Securities Act of 1933 at the time of the special shareholders’ meetings, you may resell those shares only in transactions permitted by Rule 145 under the Securities Act or as otherwise permitted under the Securities Act. Persons who may be affiliates of Capitol or a CDBL for those purposes generally include individuals or entities that control, are controlled by, or are under common control with, Capitol or a CDBL, and would not include shareholders who are not officers, directors or principal shareholders of Capitol or one of the CDBLs.

The affiliates of Capitol or one of the CDBLs may not offer, sell or otherwise dispose of any of the shares of the Series A Preferred or shares of the Trust-Preferred Securities issued to that affiliate in the merger or otherwise owned or acquired by that affiliate: (a) for a period beginning 30 days prior to the merger and continuing until financial results covering at least 30 days of post-merger combined operations of Capitol and the CDBLs have been publicly filed by Capitol; or (b) in violation of the Securities Act.

New York Stock Exchange and NASDAQ Capital Market Listings

Capitol’s common stock is listed on the New York Stock Exchange (“NYSE”) under the trading symbol “CBC.” The Trust-Preferred Securities are listed on the NYSE under the trading symbol “CBC PrB.” Capitol will make an application to list on the NASDAQ Capital Market shares of the Series A Preferred that Capitol will issue pursuant to the proposed merger under the trading symbol “CBCP.P”.

THE CLOSING

Effective Time

The merger will be effective as soon as possible after the votes at the special meetings of the CDBLs’ shareholders. If the Agreement and Plan of Merger is approved at those special meetings of the CDBLs’ shareholders, as of the effective time, each outstanding share of a CDBL’s common stock will be automatically converted into the right to receive units as described in the proxy statement/prospectus.

Class A Common Shares Held by Capitol

Shares of each CDBLs’ Class A common stock that are held by Capitol will be canceled and retired and shall cease to exist. Those shares will not be exchanged for any securities of Capitol or other consideration.

Procedures for Surrender of Certificates; Fractional Shares

As soon as reasonably practicable after the effective date of the merger, Capitol or its transfer agent will send you a letter of transmittal. The letter of transmittal will contain instructions with respect to the surrender of your CDBL stock certificates. YOU SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

Commencing immediately after the effective time of the merger, upon surrender by you of your stock certificates representing a CDBL’s shares of common stock in accordance with the instructions in the letter of transmittal, you will be entitled to receive units into which your CDBL common shares will have been converted, together with a cash payment in lieu of fractional shares of the Series A Preferred, if any.

After the effective date, each certificate that previously represented shares of a CDBL’s common stock will represent only the right to receive the units into which shares of CDBL’s common stock were converted in the merger, and the right to receive cash in lieu of fractional shares of the Series A Preferred as described below.

Until your CDBL common stock certificates are surrendered to Capitol or Capitol’s agent, you will not be paid any dividends or distributions on shares of the Trust-Preferred Securities or the Series A Preferred into which your CDBL shares of common stock have been converted with a record date after the merger, and you will not be paid cash in lieu of a fractional share. When those certificates are surrendered, any unpaid dividends and any cash in lieu of fractional shares of the Series A Preferred payable as described below will be paid to you without interest.

The CDBLs’ transfer books will be closed at the effective date of the merger and no further transfers of shares will be recorded on its transfer books. If a transfer of ownership of a CDBL’s stock that is not registered in the records of the CDBL has occurred, then, so long as the CDBL’s stock certificates are accompanied by all documents required to evidence and effect the transfer, as set forth in the transmittal letter and accompanying instructions, a certificate representing the proper number of shares of the Trust-Preferred Securities will be issued to a person other than the person in whose name the certificate so surrendered is registered, together with a cash payment in lieu of fractional shares, if any, and payment of dividends or distributions, if any.

No fractional shares of the Series A Preferred will be issued upon surrender of certificates previously representing a CDBL’s shares.

Fees and Expenses

Whether or not the merger is completed, Capitol and the CDBLs will each pay their own costs and expenses incurred in connection with the merger, including the costs of (a) the filing fees in connection with Capitol’s Form S-4 registration statement and this proxy statement/prospectus, (b) the filing fees in connection with any filing, permits or approvals obtained under applicable state securities and ‘blue sky’ laws, (c) the expenses in connection with printing and mailing of the Capitol Form S-4 registration statement and this proxy statement/prospectus, and (d) all other expenses.

Stock Market Listing

Capitol will promptly prepare a listing application with respect to the maximum number of shares of the Series A Preferred issuable to the CDBLs’ shareholders in the merger, and Capitol must use reasonable best efforts to obtain approval for the listing of shares of the Series A Preferred on the NASDAQ Capital Market.

Amendment And Termination

Capitol and the CDBLs may amend or terminate the merger at any time before or after shareholder approval of the Agreement and Plan of Merger. After shareholder approval of the merger, it may not be further amended without the approval of the shareholders.

PROPOSAL NO. 2—AUTHORIZATION TO ADJOURN

At each special meeting, shareholders of the CDBLs are being asked to consider and vote on a proposal to authorize management to adjourn the meeting to allow time for the further solicitation of proxies if there are insufficient votes present at the meeting, in person or by proxy, to approve the merger.

THE BOARD OF DIRECTORS OF EACH CDBL RECOMMENDS A VOTE “FOR” THE PROPOSAL TO AUTHORIZE MANAGEMENT TO ADJOURN THE SPECIAL MEETING OF SHAREHOLDERS TO ALLOW TIME FOR THE FURTHER SOLICITATION OF PROXIES TO APPROVE THE MERGER AGREEMENT.

INFORMATION ABOUT CAPITOL

About Capitol

Capitol is a $5.8 billion national community bank company, with a current network of 56 separately chartered banks and bank operations in 17 states. Capitol is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, with principal executive offices located at the Capitol Bancorp Center, 200 Washington Square North, Fourth Floor, Lansing, Michigan 48933. Capitol’s telephone number is 517-487-6555. Capitol also has executive offices located at 2777 East Camelback Road, Suite 375, Phoenix, Arizona 85016 (telephone number 602-955-6100).

Capitol’s operating strategy is to provide transactional, processing and administrative support and mentoring to aid in the effective growth and development of its banks. It provides access to support services and management with significant experience in community banking. These administrative and operational support services do not require a direct interface with the bank customer and therefore can be consolidated more efficiently without affecting the bank customer relationship. Capitol’s subsidiary banks have full decision-making authority in structuring and approving loans and in the delivery and pricing of other banking services.

Additional information about Capitol and its subsidiaries is included in documents incorporated by reference in this document. See “Where You Can Find More Information.”

Recent Developments

Consolidation of Four Arizona Bank Affiliates. On February 13, 2009, Capitol announced its plans to consolidate four Arizona affiliate banks. Pending regulatory approval, Arrowhead Community Bank, Camelback Community Bank, Mesa Bank and Sunrise Bank of Arizona will consolidate and operate as one charter, Sunrise Bank of Arizona.

Consolidation of Nine Michigan Bank Affiliates. Effective March 31, 2009, Capitol merged nine of its wholly-owned Michigan bank charters into one bank, subsequently named Michigan Commerce Bank. On March 31, 2009, after receiving regulatory approvals, Michigan Commerce Bank commenced operation resulting from the merger of Ann Arbor Commerce Bank, Brighton Commerce Bank, Detroit Commerce Bank, Grand Haven Bank, Kent Commerce Bank, Macomb Community Bank, Muskegon Commerce Bank, Oakland Commerce Bank and Portage Commerce Bank.

Retention of Keefe, Bruyette & Woods as Financial Advisor to Evaluate Current Affiliate Divestiture Opportunities. On April 23, 2009, Capitol announced the retention of Keefe, Bruyette & Woods as a financial advisor to Capitol for the evaluation of current affiliate divestiture opportunities including affiliate banks owned by the CDBLs. Capitol is currently having discussions and negotiations concerning the potential sale of affiliate banks owned by the CDBLs. As of the date of this proxy statement/prospectus, neither Capitol nor any CDBL has entered into any definitive agreements to sell any affiliate banks owned by the CDBLs. It is likely however, that prior to or after the completion of the proposed merger Capitol and/or a CDBL will enter into a definitive agreement to sell one or more of its affiliate banks.

Suspension of Dividends on Common Stock and Distributions on Trust-Preferred Securities. On April 17, 2009, Capitol announced that it had elected to defer regularly scheduled interest payments on Capitol’s junior subordinated debentures. The debentures are owned by Capitol Trust I through XII and were funded by the trusts’ issuance of trust-preferred securities. The total estimated annual interest that would be payable on the debentures and the underlying trust-preferred securities, if not deferred, is approximately $14 million. The terms of the debentures and trust indentures allow for Capitol to defer payment of distributions on the trust-preferred securities at any time or from time to time for up to 20 consecutive quarters , or five years, provided no event of default (as defined in the indentures) has occurred and is continuing. Capitol is not in default with respect to the indentures, and the deferral of interest does not constitute an event of default under the indentures. While Capitol defers the payment of interest, it will continue to accrue the interest obligation at the applicable interest rate. Upon the termination of the deferral period, all accrued and unpaid interest is due and payable. During the deferral period, Capitol may not declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (subject to certain exceptions). Suspension of the common stock dividend will conserve an additional $3.5 million on an annualized basis.

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INFORMATION ABOUT CDBL III

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations for the periods ended March 31, 2009 and 2008 and years ended December 31, 2008, 2007 and 2006 are included in this proxy statement/prospectus as part of Appendix C-1.

Audited financial statements of CDBL III as of December 31, 2008 and 2007 and each of the three years in the period ended December 31, 2008 are included in this proxy statement/prospectus as part of Appendix C-1. Unaudited interim financial statements of CDBL III as of March 31, 2009 and for the three months ended March 31, 2009 and 2008 are included in this proxy statement/prospectus as part of Appendix C-1.

Executive Officers and Directors of CDBL III

The directors of CDBL III are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2005	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2005	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL III

As of June 30, 2009, CDBL III had 15,745 shares of common stock outstanding, which were held by 100 holders of record. CDBL III’s board of directors have agreed with Capitol that they will vote to approve the plan of merger.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL III’s common stock, (ii) each of CDBL III’s Directors, (iii) each of CDBL III’s executive officers and (iv) all of CDBL III’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL III Common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	0	1,000	6.35%
DeVisser Properties 151 Central Ave, Ste 220 Holland, MI 49423	1,000	0	1,000	6.35%
R & M Hamrick Family Trust 1500 Castlewall St. Las Vegas, NV 89117	800	0	800	5.08%
Michael R. Hourani 3120 N. Cambridge Lansing, MI 48911	1,000	0	1,000	6.35%

CDBL III’s Directors and Executive Officers:
Bruce Ash	100	0	100	0.64%
James H. Hile	0	0	0	--
L. Douglas Johns	0	0	0	--
Mark Kerrins	0	100	100	0.64%
David McSherry	0	100	100	0.64%
Cristin K. Reid	0	65	65	0.41%

Total of CDBL III shares held by Directors and Executive Officers	100	265	365	2.32%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL III are not included unless otherwise indicated. CDBL III and the directors and officers of CDBL III disclaim beneficial ownership of shares held by CDBL III in fiduciary capacities.

(3)

These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL III are not included unless otherwise indicated. The directors and executive officers of CDBL III, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL III to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL III and their associates were customers of, and had transactions with, CDBL III’s bank subsidiaries and or affiliates in the ordinary course of business since CDBL III’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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INFORMATION ABOUT CDBL IV

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Audited financial statements of CDBL IV as of December 31, 2008 and 2007 are included in this proxy statement/prospectus as part of Appendix C-2. Unaudited interim financial statements of CDBL IV as of March 31, 2009 and for the three months ended March 31, 2009 and 2008 are included in this proxy statement/prospectus as part of Appendix C-2.

Executive Officers and Directors of CDBL IV

The directors of CDBL IV are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2005	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2005	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL IV

As of June 30, 2009, CDBL IV had 15,243 shares of common stock outstanding, which were held by 92 holders of record. CDBL IV’s board of directors have agreed with Capitol that they will vote to approve the plan of merger.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL IV’s common stock, (ii) each of CDBL IV’s Directors, (iii) each of CDBL IV’s executive officers and (iv) all of CDBL IV’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL IV Common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	--	1,000	6.56%
Sam X. Eyde and Judith A. Eyde JT TEN 2800 Bryon Circle Lansing, MI 48912	1,000	0	1,000	6.56%
HSL RE Holdings, LLC 3901 E. Broadway Blvd. Tucson, AZ 85711	1,000	0	1,000	6.56%
B.G. Wetherington Farms L.P. P.O. Box 456 Hahira, GA 31632	900	0	900	5.90%

CDBL IV’s Directors and Executive Officers:
Bruce Ash	125	100	225	1.48%
James H. Hile	0	0	0	--
L. Douglas Johns	0	30	30	0.20%
Mark Kerrins	0	200	200	1.31%
David McSherry	0	0	0	--
Cristin K. Reid	0	0	0	--

Total of CDBL IV shares held by Directors and Executive Officers	125	330	455	2.98%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL IV are not included unless otherwise indicated. CDBL IV and the directors and officers of CDBL IV disclaim beneficial ownership of shares held by CDBL IV in fiduciary capacities.


(3)	These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL IV are not included unless otherwise indicated. The directors and executive officers of CDBL IV, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL IV to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL IV and their associates were customers of, and had transactions with, CDBL IV’S bank subsidiaries and or affiliates in the ordinary course of business since CDBL IV’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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INFORMATION ABOUT CDBL V

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations for the periods ended March 31, 2009 and 2008 and December 31, 2008, 2007 and 2006 are included in this proxy statement/prospectus as part of Appendix C-3.

Audited financial statements of CDBL V as of December 31, 2008 and 2007 are included in this proxy statement/prospectus as part of Appendix C-3. Unaudited interim financial statements of CDBL V as of March 31, 2009 and for the three months ended March 31, 2009 and 2008 are included in this proxy statement/prospectus as part of Appendix C-3.

Executive Officers and Directors of CDBL V

The directors of CDBL V are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2006	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2006	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL V

As of June 30, 2009, CDBL V had 15,518 shares of common stock outstanding, which were held by 116 holders of record. CDBL V’s board of directors have agreed with Capitol that they will vote to approve the plan of merger.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL V’s common stock, (ii) each of CDBL V’s Directors, (iii) each of CDBL V’s executive officers and (iv) all of CDBL V’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL V common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	--	1,000	6.44%
DeVisser Properties, LLC 151 Central Ave., Ste 220 Holland, MI 49423	1,000	0	1,000	6.44%
HSL RE Holdings, LLC 3901 E. Broadway Tucson, AZ 85716	1,500	0	1,500	9.67%

CDBL V’s Directors and Executive Officers:
Bruce Ash	100	250	350	2.26%
James H. Hile	720	0	720	4.64%
L. Douglas Johns	0	0	0	--
Mark Kerrins	0	0	0	--
David McSherry	0	0	0	--
Cristin K. Reid	0	35	35	0.23%

Total of CDBL V shares held by Directors and Executive Officers	820	285	1,105	7.12%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL V are not included unless otherwise indicated. CDBL V and the directors and officers of CDBL V disclaim beneficial ownership of shares held by CDBL V in fiduciary capacities.

(3)	These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL V are not included unless otherwise indicated. The directors and executive officers of CDBL V, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL V to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL V and their associates were customers of, and had transactions with, CDBL V’s bank subsidiaries and or affiliates in the ordinary course of business since CDBL V’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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INFORMATION ABOUT CDBL VI

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Audited financial statements of CDBL VI as of December 31, 2008 and 2007 are included in this proxy statement/prospectus as part of Appendix C-4. Unaudited interim financial statements of CDBL VI as of March 31, 2009 and for the three months ended March 31, 2009 and 2008 are included in this proxy statement/prospectus as part of Appendix C-4.

Executive Officers and Directors of CDBL VI

The directors of CDBL VI are as follows:

Director Name	Age	Director Since	Present Principal Occupation, Business Experience, and Certain Other Information
Bruce Ash	57	2009	Mr. Ash is the President & CEO of Paul Ash Management Company, LLC. He also serves as a member of the Board of Directors of Bank of Tucson, an affiliate of Capitol.
James H. Hile	65	2009	Mr. Hile is the current owner of JHile Group, which offers consulting in the areas of management, quality systems, sales and marketing. He previously served as General Manager of IBM for 24 years, and as President, CEO and majority shareholder for Fakespace Corp. for 5 years. He was also a Captain and Vietnam Company Commander in the U.S. Army.
L. Douglas Johns	65	2006	Mr. Johns is the President of Mid-Michigan Investment Company. He is a member of the Board of Directors of Capitol Bancorp Ltd. and formerly served as a member of the Board of Directors of Capitol’s affiliate, Nevada Community Bancorp Limited, which was merged with and into Capitol. Mr. Johns serves as Secretary of Capitol Development Bancorp Limited III, IV, V, VI, VII and VIII.
Mark Kerrins	57	2009	Mr. Kerrins has been employed by the Michigan Chamber of Commerce for 35 years. He currently serves as Senior Manager of Membership Development. He also has 30 years of real estate investment experience in residential, commercial and industrial development and rental.
David McSherry	71	2009	Mr. McSherry currently serves as General Partner of Northwind Investment Company. He is the past President of MPI School & Instructional Supply. Mr. McSherry is a member of the Board of Directors of McLaren Health Care System and the Ingham Regional Medical Center, and formerly served on the Board of Directors of First California Bancorp, which was merged with and into Capitol.
Cristin K. Reid	40	2006	Ms. Reid is the Corporate President of Capitol and currently serves as Chairman and Chief Executive Officer of CDBL III, IV, V, VI, VII and VIII. She was previously Chief Operating Officer, Chief Administrative Officer, Executive Vice President, General Counsel and has served in other various executive capacities at Capitol since 1997. Ms. Reid was appointed to Capitol’s Board of Directors in 2001. She formerly served on the Board of Capitol’s affiliates Nevada Community Bancorp Limited, which was merged with and into Capitol, Camelback Community Bank, Portage Commerce Bank and Ann Arbor Commerce Bank. She is currently the Chairman of Capitol’s affiliate, Capitol National Bank.

Securities Ownership of Certain Beneficial Owners and Management of CDBL VI

As of June 30, 2009, CDBL VI had 16,825 shares of its common stock outstanding, which were held by 89 holders of record. CDBL VI’s board of directors have agreed with Capitol that they will vote to approve the plan of merger.

Except as otherwise set forth below, the following table sets forth information as of June 30, 2009, with respect to the number of shares of common stock owned by (i) each person known by Capitol to be a beneficial owner of more than 5% of CDBL VI’s common stock, (ii) each of CDBL VI’s Directors, (iii) each of CDBL VI’s executive officers and (iv) all of CDBL VI’s Directors and executive officers as a group.

	Amount and Nature of Beneficial Owner of CDBL VI common Stock (1) (2)

Name and Address of Beneficial Owner	Sole Voting or Dispositive Power(4)	Shared Voting or Dispositive Power (3)	Total Beneficial Ownership (4)	Percent of Total
Capitol Bancorp Ltd. Capitol Bancorp Center 200 Washington Square North, 4th Floor Lansing, Michigan 48933	1,000	--	1,000	5.94%
Donnelly Penman Financial Services Fund LP 17160 Kercheval Ave. Grosse Pointe, MI 48230	1,000	0	1,000	5.94%
Joel I. Ferguson Trust Dtd 2/11/1999 1223 Turner St., Ste 300 Lansing, MI 48906	3,000	0	3,000	17.83%

CDBL VI’s Directors and Executive Officers:
Bruce Ash	150	0	150	0.89%
James H. Hile	0	0	0	--
L. Douglas Johns	0	0	0	--
Mark Kerrins	0	200	200	1.19%
David McSherry	0	0	0	--
Cristin K. Reid	0	0	0	--

Total of CDBL VI shares held by Directors and Executive Officers	150	200	350	2.08%

(1)	The information shown in this table is based upon information known by Capitol or otherwise furnished to Capitol by the individuals named in the table as of June 30, 2009.

(2)	The number of shares stated are based on information furnished by each person listed and include shares personally owned of record by that person and shares that under applicable regulations are considered to be otherwise beneficially owned by that person. Under these regulations, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power or dispositive power with respect to the security. Voting power includes the power to vote or direct the voting of the security. Dispositive power includes the power to dispose or direct the disposition of the security. A person is also considered the beneficial owner of a security if the person has a right to acquire beneficial ownership of the security within 60 days. Shares held in fiduciary capacities by CDBL VI are not included unless otherwise indicated. CDBL VI and the directors and officers of CDBL VI disclaim beneficial ownership of shares held by CDBL VI in fiduciary capacities.

(3)	These numbers include shares as to which the listed person is legally entitled to share voting or dispositive power by reason of joint ownership, trust or other contract or property right, and shares held by spouses and minor children over whom the listed person may have influence by reason of relationship. Shares held in fiduciary capacities by CDBL VI are not included unless otherwise indicated. The directors and executive officers of CDBL VI, by reason of their positions, may be in a position to influence the voting or disposition of shares held in trust by CDBL VI to some degree, but disclaim beneficial ownership of these shares.

Directors and officers of CDBL VI and their associates were customers of, and had transactions with, CDBL VI’s bank subsidiaries and or affiliates in the ordinary course of business since CDBL VI’s inception. All loans and commitments included in such transactions were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavorable features.

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COMPARISON OF SHAREHOLDER RIGHTS

As a result of the merger, holders of shares of a CDBL’s common stock will become holders of shares of the Series A Preferred which are convertible into shares of Capitol’s common stock. Capitol and each of the CDBLs are organized under the laws of the State of Michigan. The following is a summary of the material differences between (a) the current rights of the CDBLs’ common shareholders under Michigan law and the applicable articles of incorporation and bylaws, each as amended to date and (b) the current rights of shares of the Series A Preferred and common stock under Michigan law and Capitol’s articles of incorporation and bylaws. The following summary is not a complete statement of the rights of shareholders of the companies or a complete description of the specific provisions referred to below. For additional information which may be relevant, see the Michigan Business Corporation Act and Capitol and the CDBLs’ constituent documents, which the CDBLs’ common shareholders should read. Copies of Capitol’s constituent documents have been filed with the SEC. Copies of the CDBLs’ constituent documents are available upon written request from the CDBLs. To find out where copies of these documents can be obtained, see “Where You Can Find More Information.”

	CDBL Common Stock	Capitol Series A Preferred Stock	Capitol Common Stock
Authorized Capital Stock	51,000 shares of Common Stock 36,000 shares of Class A Voting 15,000 shares of Class B Non-Voting (CDBL III,-V) 15,825 shares of Class B Non-Voting (CDBLVI)	[ ]	50,000,000
Voting Rights	Class B Common Stock (limited voting rights) Class A Common Stock (full voting rights)	None, except as required by Michigan law	50,000,000
Preemptive Rights	None	None	None
Quorum Requirements	Majority	Majority	Majority
Annual Meetings of Shareholders	Called by Board (for purposes of the Class A Common Stock)	Called by CEO, majority of the Board or shareholders representing 25% of the shares entitled to vote	Called by the Board
Stockholder Action by Written Consent	Yes, by the holders of shares having not less than the minimum number of votes that would be necessary to authorize or take action at a shareholder meeting	No	Yes, if unanimous
Inspection of Voting List of Shareholders	Inspector may be appointed by the Board, by the person presiding at shareholders’ meeting or by the request of a shareholder	Not Applicable	Inspector may be appointed by the Board, by the person presiding at shareholders’ meeting or by the request of a shareholder
Classification of the Board of Directors	No	No	Yes
Election of the Board of Directors	Elected Annually by the holders of shares of the Class A Common Stock	Nonvoting	One class is elected annually by shareholders to serve a term of three years; the board is divided into three classes
Cumulative Voting	No	No	No
Number of Directors	1-25	5-25	5-25
Removal of Directors	By a majority of the outstanding shares of stock entitled to vote	By a majority of the outstanding shares of stock entitled to vote	By a majority of the outstanding shares of stock entitled to vote
Vacancies on the Board of Directors	May be filled by a majority of the Board of Directors	Nonvoting	May be filled by shareholders or by a majority of the Board of Directors
Liability of Directors	Eliminated to the fullest extent provided by law	Eliminated to the fullest extent provided by law	Eliminated to the fullest extent provided by law
Indemnification of Directors, Officers, Employees or Agents	Yes	Yes	Yes
Amendments to Articles of Incorporation	By a majority of the outstanding shares of the Class A Common Stock	Nonvoting	By a majority of the outstanding shares of stock entitled to vote
Amendments to Bylaws	By a majority of the outstanding shares entitled to vote or a majority of directors	Nonvoting	By majority of the outstanding shares or a majority of directors

DESCRIPTION OF THE CAPITAL STOCK OF CAPITOL

Capitol’s Articles of Incorporation, as amended, authorize the issuance of up to 50,000,000 shares of common stock, no par value, and 20,000,000 shares of preferred stock 666,830 of which are designated as Series A Noncumulative Convertible Perpetual Preferred Stock. Capitol’s Articles of Incorporation do not authorize the issuance of any other class of stock. As of March 31, 2009, 17,290,623 shares of common stock were outstanding, no shares of Series A Preferred were outstanding or other shares of preferred stock were outstanding. BNY Mellon Shareowner Services serves as transfer agent and registrar for Capitol’s common stock.

Preferred Stock

Capitol’s board of directors is authorized to issue preferred stock in one or more series, from time to time, with full or limited voting powers, or without voting powers, and with all designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions upon the preferred stock, as may be provided in the resolution or resolutions adopted by Capitol’s board of directors. The authority of Capitol’s board of directors includes, but is not limited to, the determination or fixing of the following with respect to shares of any class or series of preferred stock:

·	the number of shares (up to the number of shares authorized) and designation of any series of preferred stock;

·	the dividend rate and whether dividends are to be cumulative;

·	whether shares are to be redeemable, and, if so, whether redeemable for cash, property or rights;

·	the rights to which the holders of shares shall be entitled, and the preferences, if any, over any other series;

·	whether the shares shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, upon what conditions;

·	whether the shares will be convertible into or exchangeable for shares of any other class or of any other series of any class of capital stock and the terms and conditions of the conversion or exchange;

·	the voting powers, full or limited, if any, of the shares;

·	whether the issuance of any additional shares, or of any shares of any other series, will be subject to restrictions as to issuance, or as to the powers, preferences or rights of any of these other series; and

·	any other preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions.

The actual effect of the issuance of any shares of the preferred stock upon the rights of holders of common stock cannot be stated until the board of directors determines the specific rights of any shares of the preferred stock. However, the effects might include, among other things, restricting dividends on the common stock, diluting the voting power of the common stock, reducing the market price of the common stock or impairing the liquidation rights of the common stock without further action by the shareholders. Holders of Capitol’s common stock will not have preemptive rights with respect to the preferred stock.

Although Capitol may consider issuing shares of the preferred stock in the future for purposes of raising additional capital or in connection with acquisition transactions, there are currently no binding agreements or commitments with respect to the issuance of the preferred stock.

Series A Preferred

Holders of shares of the Series A Preferred will generally have no voting rights, except as specifically required by Michigan law. If the shares of the Series A Preferred are converted into shares of Capitol’s common stock, the common stock will have the same voting rights as all other shares of Capitol’s common stock.

If declared by Capitol’s board of directors, cash dividends at an annual rate of 8.0% will be paid quarterly in arrears on the last day of March, June, September and December commencing December 31, 2009. Dividends will not be paid on Capitol common stock

in any quarter until the dividend on the shares of the Series A Preferred has been paid for such quarter; however, there is no requirement that Capitol’s board of directors declare any dividends on the shares of the Series A Preferred and any unpaid dividends shall not be cumulative. The shares of the Series A Preferred also will participate on an as-if-converted basis in any dividends or distributions on Capitol’s common stock.

Each share of the Series A Preferred is convertible at the option of the holder into 6.25 shares of Capitol common stock, subject to adjustment upon certain corporate events. The initial conversion rate is equivalent to an initial conversion price of $16.00 per share of Capitol common stock. At the option of CBC, on and after December 31, 2013, at any time and from time to time, some or all of the shares of the Series A Preferred may be converted into shares of CBC common stock at the then-applicable conversion rate. As of July 6, 2009, the closing price of Capitol’s common stock was $2.18 as reported by NYSE.

The Series A Preferred will rank senior to Capitol’s common stock and any other stock that is expressly made junior to the Series A Preferred as to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up of Capitol. Upon the occurrence of certain reorganization events, each share of the Series A Preferred outstanding immediately prior to such reorganization event will, without the consent of the holders of the Series A Preferred, become convertible into the kind and amount of securities, cash and other property receivable in such reorganization event (without any interest thereon, and without any right to dividends or distribution thereon which have a record date that is prior to the applicable conversion date) per share of Capitol common stock by a holder of Capitol common stock.

Capitol will apply to list the shares of the Series A Preferred on the NASDAQ Capital Market under the symbol “CBCP.P.”

Common Stock

Michigan law allows Capitol’s board of directors to issue additional shares of stock up to the total amount of common stock authorized without obtaining the prior approval of the shareholders. Capitol’s board of directors has authorized the issuance of the shares of common stock upon future conversion of Series A Preferred as described in this proxy statement/prospectus. All shares of common stock offered will be, when issued, fully paid and nonassessable.

The following description of the terms of the common stock of Capitol may not contain all of the information relevant to you. For additional information, please see Capitol’s articles of incorporation, as amended, and its bylaws, each of which have been previously filed with the SEC, and the Michigan Business Corporation Act (the “MBCA”). To find out where copies of these documents can be obtained, see “Where You Can Find More Information.”

Rights of Common Stock

All voting rights are vested in the holders of shares of common stock. Each share of common stock is entitled to one vote. The shares of common stock do not have cumulative voting rights, which means that a shareholder is entitled to vote each of his or her shares once for each director to be elected at any election of directors and may not cumulate shares in order to cast more than one vote per share for any one director. The holders of the common stock do not have any preemptive, conversion or redemption rights. Holders of common stock are entitled to receive dividends if and when declared by Capitol’s board of directors out of funds legally available. Under the MBCA, dividends may be legally declared or paid only if after the distribution the corporation can pay its debts as they come due in the usual course of business and the corporation’s total assets equal or exceed the sum of its liabilities. In the event of liquidation, the holders of common stock will be entitled, after payment of amounts due to creditors and senior security holders, to share ratably in the remaining assets.

Shares Available for Issuance

The availability for issuance of a substantial number of shares of common stock at the discretion of the board of directors provides Capitol with the flexibility to take advantage of opportunities to issue additional stock in order to obtain capital as consideration for possible acquisitions and for other purposes (including, without limitation, the issuance of additional shares through stock splits and stock dividends in appropriate circumstances). There are, at present, no plans, understandings, agreements or arrangements concerning the issuance of additional shares of common stock, except as described in this proxy statement/prospectus and for the shares of common stock reserved for issuance under Capitol’s stock option program.

Uncommitted authorized but unissued shares of common stock may be issued from time to time to persons and in amounts the board of directors of Capitol may determine and holders of the then outstanding shares of common stock may or may not be given the opportunity to vote thereon, depending upon the nature of those transactions, applicable law and the judgment of the board of directors of Capitol regarding the submission of an issuance to or vote by Capitol’s shareholders. As noted, Capitol’s shareholders have no preemptive rights to subscribe to newly issued shares.

Moreover, it will be possible that additional shares of common stock would be issued for the purpose of making an acquisition by an unwanted suitor of a controlling interest in Capitol more difficult, time consuming or costly or would otherwise discourage an attempt to acquire control of Capitol. Under such circumstances, the availability of authorized and unissued shares of common stock may make it more difficult for shareholders to obtain a premium for their shares. Such authorized and unissued shares could be used to create voting or other impediments or to frustrate a person seeking to obtain control of Capitol by means of a merger, tender offer, proxy contest or other means. Such shares could be privately placed with purchasers who might cooperate with the board of directors of Capitol in opposing such an attempt by a third party to gain control of Capitol. The issuance of new shares of common stock could also be used to dilute ownership of a person or entity seeking to obtain control of Capitol. Although Capitol does not currently contemplate taking that action, shares of Capitol common stock could be issued for the purposes and effects described above, and the board of directors reserves its rights (if consistent with its fiduciary responsibilities) to issue shares for such purposes.

Capitol’s Trust-Preferred Securities

Capitol has issued debentures to Capitol Trust I and Capitol Trust XII, Delaware business trust subsidiaries of Capitol. Capitol Trust I and Capitol Trust XII purchased the debentures with the proceeds of preferred securities (which are traded on the New York Stock Exchange under the symbol “CBCPrA” and “CBCPrB”, respectively). Capitol also has additional trust-preferred securities which were privately placed. Capitol has guaranteed the preferred securities. The documents governing these securities, including the indenture under which the debentures were issued, restrict Capitol’s right to pay a dividend on its common stock under certain circumstances and give the holders of the preferred securities preference on liquidation over the holders of Capitol’s common stock. Specifically, Capitol may not declare or pay a cash dividend on its common stock if (a) an event of default has occurred as defined in the indenture, (b) Capitol is in default under its guarantee, or (c) Capitol has exercised its right under the debentures and the preferred securities to extend the interest payment period. In addition, if any of these conditions have occurred and until they are cured, Capitol is restricted from redeeming or purchasing any shares of its common stock except under very limited circumstances. Capitol’s obligation under the debentures, the preferred securities and the guarantee approximates [$170. 8] million (excluding trust-preferred securities held by subsidiaries of Capitol) at an average interest rate currently approximating [6.3%] per annum, payable quarterly.

Anti-Takeover Provisions

In addition to the utilization of authorized but unissued shares as described above, the MBCA contains other provisions which could be utilized by Capitol to impede efforts to acquire control of Capitol. Those provisions include the following:

Fair Price Act. Certain provisions of the MBCA establish a statutory scheme similar to the supermajority and fair price provisions found in many corporate charters. The act provides that a super majority vote of 90% of the shareholders and no less than two-thirds of the votes of non-interested shareholders must approve a “business combination.” The act defines a “business combination” to encompass any merger, consolidation, share exchange, sale of assets, stock issue, liquidation, or reclassification of securities involving an “interested shareholder” or certain “affiliates.” An “interested shareholder” is generally any person who owns 10% or more of the outstanding voting shares of the company. An “affiliate” is a person who directly or indirectly controls, is controlled by, or is under common control with a specified person.

As of February 9, 2009 Capitol’s directors and executive officers beneficially owned (including immediately exercisable stock options and warrants) control of approximately 26.77% of Capitol’s outstanding common stock. It is now unknown what percentage will be owned by management upon completion of the merger. If management’s shares are voted as a block, management will be able to prevent the attainment of the required supermajority approval.

The supermajority vote required by the act does not apply to business combinations that satisfy certain conditions. These conditions include, among others, that: (i) the purchase price to be paid for the shares of the company is at least equal to the greater of (a) the market value of the shares or (b) the highest per share price paid by the interested shareholder within the preceding two-year period or in the transaction in which the shareholder became an interested shareholder, whichever is higher; and (ii) once a person has become an interested shareholder, the person must not become the beneficial owner of any additional shares of the company except as part of the transaction which resulted in the interested shareholder becoming an interested shareholder or by virtue of proportionate stock splits or stock dividends.

The requirements of the act do not apply to business combinations with an interested shareholder that the Board of Directors has approved or exempted from the requirements of the act by resolution at any time prior to the time that the interested shareholder first became an interested shareholder.

DESCRIPTION OF THE TRUST-PREFERRED SECURITIES AND RELATED INSTRUMENTS

The following description summarizes the material provisions of the Trust-Preferred Securities and the amended and restated trust agreement, which is sometimes referred to herein as the trust agreement. This description is not complete and is subject to, and is qualified in its entirety by reference to, the amended and restated trust agreement. Whenever particular defined terms of the amended and restated trust agreement are referred to in this proxy statement/prospectus, those defined terms are incorporated in this proxy statement/prospectus.

Pursuant to the terms of the trust agreement, the Trust sold the Trust-Preferred Securities to the public and common securities to Capitol. The Trust-Preferred Securities represent preferred beneficial interests in the Trust. Holders of the Trust-Preferred Securities will be entitled to receive distributions and amounts payable on redemption or liquidation pro-rata with the holders of the common securities unless there is an event of default under the trust agreement resulting from an event of default under the indenture, in which case payments to the holders of the Trust-Preferred Securities will have priority. See “—Subordination of Common Securities.” Holders of the Trust-Preferred Securities will also be entitled to other benefits as described in the trust agreement.

The Trust-Preferred Securities rank on a parity, and payments on them will be made pro rata, with the common securities of the Trust except as described under “—Subordination of Common Securities.” Legal title to the Debentures are held and administered by the property trustee in trust for the benefit of the holders of the Trust-Preferred Securities and common securities.

The guarantee agreement executed by Capitol for the benefit of the holders of the Trust-Preferred Securities is a guarantee on a subordinated basis with respect to the Trust-Preferred Securities but does not guarantee payment of distributions or amounts payable on redemption or liquidation of the Trust-Preferred Securities when the Trust does not have funds on hand available to make the payments. See “Description of the Guarantee.”

Distributions

Distributions on the Trust-Preferred Securities will be cumulative, will accumulate from the date of original issuance, scheduled to be payable quarterly in arrears on the last calendar day of March, June, September and December of each year, commencing on September 30, 2008. In the event that any date on which distributions are payable is not a business day, payment of that distribution will be made on the next business day (and without any interest or other payment in connection with this delay) except that, if the next business day falls in the next calendar year, payment of the distribution will be made on the immediately preceding business day, in either case with the same force and effect as if made on the original distribution date. Each date on which distributions are payable in accordance with the previous sentence is referred to as a “distribution date.” A “business day” means any day other than a Saturday or a Sunday, or a day on which federal banking institutions in the City of New York are authorized or required by law, executive order or regulation to remain closed or a day on which the corporate trust office of the property trustee or the indenture trustee, as applicable, is closed for business.

The Trust-Preferred Securities represent preferred beneficial interests in the Trust, and the distributions on each Trust-Preferred Security will be payable at a rate equal to 10.50% per annum of the liquidation amount, however such payments are currently being deferred.

When a deferral period occurs with respect to the Debentures, distributions on the Trust-Preferred Securities will be correspondingly deferred (but will continue to accumulate additional distributions at a rate of 10.50% per annum). See “Description of the Debentures—Option to Defer Interest Payments.”

The revenue of the Trust available for distribution to holders of the Trust-Preferred Securities will be limited to payments under the Debentures, which the Trust will acquire with the proceeds from the issuance and sale of its Trust-Preferred Securities and common securities. See “Description of the Debentures.” If Capitol does not make interest payments on the Debentures, the property trustee will not have funds available to pay distributions on the Trust-Preferred Securities. The payment of distributions (if and to the extent the Trust has funds legally available for the payment of distributions and cash sufficient to make payments) is guaranteed by Capitol on a limited basis as described under the heading “Description of the Guarantee.”

Distributions on the Trust-Preferred Securities will be payable to the holders of the Trust-Preferred Securities as they appear on the register of the Trust at the close of business on the relevant record date, which, as long as the Trust-Preferred Securities remain in global form, will be one business day prior to the distribution date. Subject to any applicable laws and regulations and the provisions of the trust agreement, each such payment will be made as described under the heading “Book-Entry System.” In the event any Trust-Preferred Securities are not in global form, the relevant record date for such Trust-Preferred Securities will be the 15th day of March, June, September or December for distributions payable on the last calendar day of the respective month.

Redemption or Exchange

Mandatory Redemption

Upon the repayment or redemption, in whole or in part, of the Debentures, whether at maturity or upon earlier redemption as provided in the indenture, the proceeds from the repayment or redemption will be applied by the property trustee to redeem a like amount of the Trust-Preferred Securities and common securities, upon not less than 30 nor more than 60 days notice, at a redemption price equal to the aggregate liquidation amount of those Trust-Preferred Securities and common securities plus accumulated but unpaid distributions to the date of redemption. See “Description of the Debentures—Redemption.” If less than all of the Debentures are to be repaid or redeemed on a redemption date, then the proceeds from the repayment or redemption will be allocated to the redemption, pro rata, of the Trust-Preferred Securities and the common securities based upon the liquidation amounts of these classes. The amount of premium, if any, paid by Capitol upon the redemption of all or any part of the Debentures to be repaid or redeemed on a redemption date will be allocated to the redemption pro rata of the Trust-Preferred Securities and the common securities. The redemption price will be payable on each redemption date only to the extent that the Trust has funds then on hand and available in the payment account for the payment of the redemption price.

Optional Redemption

Capitol will have the right to redeem the Debentures:

·	on or after September 30, 2013, in whole at any time or in part from time to time, or

·	at any time, in whole or in part, upon the occurrence of a capital treatment event, tax event or investment company event (as described below),

in each case in accordance with the indenture and subject to receipt of prior approval by the Federal Reserve Board if then required under applicable capital guidelines or policies of the Federal Reserve Board.

Distribution of the Debentures

Subject to Capitol’s having received prior approval of the Federal Reserve Board to do so if such approval is then required under applicable capital guidelines or policies of the Federal Reserve Board, Capitol has the right at any time to terminate the Trust and, after satisfaction of the liabilities of creditors of the Trust as provided by applicable law, cause the Debentures in respect of the Trust-Preferred Securities and common securities issued by the Trust to be distributed to the holders of the Trust-Preferred Securities and common securities in liquidation of the Trust.

Capital Treatment Event, Tax Event or Investment Company Event Redemption

If a capital treatment event, tax event or investment company event in respect of the Trust-Preferred Securities and common securities has occurred and is continuing, Capitol has the right to redeem the Debentures in whole or in part and thereby cause a mandatory redemption of the Trust-Preferred Securities and common securities in whole or in part within 180 days following the occurrence of the capital treatment event, tax event or investment company event. If a capital treatment event, tax event or investment company event has occurred and is continuing in respect of the Trust-Preferred Securities and common securities and Capitol does not elect to redeem the Debentures and thereby cause a mandatory redemption of the Trust-Preferred Securities or to liquidate the Trust and cause the Debentures to be distributed to holders of the Trust-Preferred Securities and common securities in liquidation of the Trust as described above, those Trust-Preferred Securities will remain outstanding and additional sums (as defined below) may be payable on the Debentures. See “Description of the Debentures—Redemption.”

The term “additional sums” means the additional amounts as may be necessary in order that the amount of distributions then due and payable by the Trust on the outstanding Trust-Preferred Securities and common securities of the Trust will not be reduced as a result of any additional taxes, duties and other governmental charges to which the Trust has become subject as a result of a tax event.

The term “liquidation amount” means the stated amount per Trust-Preferred Security and common security of $10.

After the liquidation date is fixed for any distribution of Debentures for the Trust-Preferred Securities:

·	the Trust-Preferred Securities will no longer be deemed to be outstanding;

·	The Depository Trust Company, commonly referred to as DTC, or its nominee, as the record holder of the Trust-Preferred Securities, will receive a registered global certificate or certificates representing the Debentures to be delivered upon the distribution; and

any Trust-Preferred Securities certificates not held by DTC or its nominee will be deemed to represent the Debentures having a principal amount equal to the liquidation amount of the Trust-Preferred Securities, and bearing accrued and unpaid interest in an amount equal to the accrued and unpaid distributions on the Trust-Preferred Securities until the certificates are presented to the administrative trustees or their agent for transfer or reissuance.

Any distribution of Debentures to holders of Trust-Preferred Securities will be made to the applicable record holders as they appear on the register for the Trust-Preferred Securities on the relevant record date, which will be not more than 45 business days prior to the liquidation date.

There can be no assurance as to the market prices for the Trust-Preferred Securities or the Debentures that may be distributed in exchange for Trust-Preferred Securities if a dissolution and liquidation of the Trust were to occur. Accordingly, the Trust-Preferred Securities that an investor may purchase, or the Debentures that the investor may receive on dissolution and liquidation of the Trust, may trade at a discount to the price that the investor paid to purchase the Trust-Preferred Securities being offered in connection with this proxy statement/prospectus.

Redemption Procedures

Trust-Preferred Securities redeemed on each redemption date will be redeemed at the redemption price with the applicable proceeds from the contemporaneous redemption of the Debentures. Redemptions of the Trust-Preferred Securities will be made and the redemption price will be payable on each redemption date only to the extent that the Trust has funds on hand available for the payment of the redemption price. See also “—Subordination of Common Securities.”

Subject to applicable law (including, without limitation, U.S. federal securities law), Capitol or its subsidiaries may at any time and from time to time purchase outstanding Trust-Preferred Securities by tender, in the open market or by private agreement.

Payment of the redemption price on the Trust-Preferred Securities and any distribution of Debentures to holders of Trust-Preferred Securities will be made to the applicable record holders as they appear on the register for the Trust-Preferred Securities on the relevant record date.

If less than all of the Trust-Preferred Securities and common securities issued by the Trust are to be redeemed on a redemption date, then the aggregate liquidation amount of the Trust-Preferred Securities and common securities to be redeemed will be allocated pro rata to the Trust-Preferred Securities and the common securities based upon the relative liquidation amounts of these classes. The particular Trust-Preferred Securities to be redeemed will be selected on a pro rata basis not more than 60 days prior to the redemption

date by the property trustee from the outstanding Trust-Preferred Securities not previously called for redemption, by a customary method that the property trustee deems fair and appropriate and which may provide for the selection for redemption of portions (equal to $10 or an integral multiple of $10) of the liquidation amount of Trust-Preferred Securities or a denomination larger than $10. The property trustee will promptly notify the securities registrar in writing of the Trust-Preferred Securities selected for redemption and, in the case of any Trust-Preferred Securities selected for partial redemption, the liquidation amount to be redeemed. For all purposes of the trust agreement, unless the context otherwise requires, all provisions relating to the redemption of Trust-Preferred Securities will relate, in the case of any Trust-Preferred Securities redeemed or to be redeemed only in part, to the portion of the aggregate liquidation amount of Trust-Preferred Securities which has been or is to be redeemed.

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Trust-Preferred Securities and common securities to be redeemed at its registered address. Unless Capitol defaults in payment of the redemption price on the Debentures, on and after the redemption date interest will cease to accrue on Debentures or portions thereof (and distributions will cease to accrue on the Trust-Preferred Securities or portions thereof) called for redemption.

Subordination of Common Securities

Payment of distributions on, and the redemption price of, the Trust-Preferred Securities and common securities, as applicable, will be made pro rata based on the liquidation amount of the Trust-Preferred Securities and common securities; provided, however, that if on any distribution date, redemption date or liquidation date a debenture event of default has occurred and is continuing as a result of any failure by Capitol to pay any amounts in respect of the Debentures when due, no payment of any distribution on, or redemption price of, or liquidation distribution in respect of, any of the Trust’s common securities, and no other payment on account of the redemption, liquidation or other acquisition of the common securities, will be made unless payment in full in cash of all accumulated and unpaid distributions on all of the Trust’s outstanding Trust-Preferred Securities for all distribution periods terminating on or prior to that date, or in the case of payment of the redemption price the full amount of the redemption price on all of the Trust’s outstanding Trust-Preferred Securities then called for redemption, or in the case of payment of the liquidation distribution the full amount of the liquidation distribution on all outstanding Trust-Preferred Securities, has been made or provided for, and all funds available to the property trustee must first be applied to the payment in full in cash of all distributions on, or redemption price of, or liquidation distribution in respect of, the Trust-Preferred Securities then due and payable. The existence of an event of default does not entitle the holders of the Trust-Preferred Securities to accelerate the maturity thereof.

In the case of any event of default under the trust agreement resulting from a debenture event of default, Capitol as holder of the Trust’s common securities will have no right to act with respect to the event of default until the effect of all events of default with respect to the Trust-Preferred Securities have been cured, waived or otherwise eliminated. Until any events of default under the trust agreement with respect to the Trust-Preferred Securities have been cured, waived or otherwise eliminated, the property trustee will act solely on behalf of the holders of the Trust-Preferred Securities and not on behalf of Capitol as holder of the Trust’s common securities, and only the holders of the Trust-Preferred Securities will have the right to direct the property trustee to act on their behalf.

Liquidation Distribution Upon Dissolution

Pursuant to the trust agreement, the Trust will terminate on the first to occur of:

·	the expiration of its term;

·	certain events of bankruptcy, dissolution or liquidation of the holder of the common securities;

the distribution of a like amount of the Debentures to the holders of its Trust-Preferred Securities, if Capitol, as depositor, has given written direction to the administrative trustees and property trustee to terminate the Trust (subject to Capitol receiving prior approval of the Federal Reserve Board if then required under applicable capital guidelines or policies). Such written direction by Capitol is optional and solely within Capitol’s discretion;

·	redemption of all of the Trust-Preferred Securities as described under “—Redemption or Exchange;” and

·	the entry of an order for the dissolution of the Trust by a court of competent jurisdiction.

If an early dissolution occurs as described in the second, third and fifth bullet points above, the Trust will be liquidated by the trustees as expeditiously as the administrative trustees determine to be possible by instructing the property trustee to deliver, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to the holders of the Trust-Preferred Securities and common securities a like amount of the Debentures in exchange for their Trust-Preferred Securities and common securities, unless the distribution is determined not to be practical, in which event the holders will be entitled to receive out of the assets of the Trust

available for distribution to holders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to, in the case of holders of Trust-Preferred Securities, the aggregate of the liquidation amount plus accrued and unpaid distributions to the date of payment (an amount referred to as the “liquidation distribution” ). If the liquidation distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate liquidation distribution, then the amounts payable directly by the Trust on its Trust-Preferred Securities will be paid on a pro rata basis. The holder of the Trust’s common securities will be entitled to receive distributions upon any liquidation pro rata with the holders of its Trust-Preferred Securities, except that if a debenture event of default has occurred and is continuing as a result of any failure by Capitol to pay any amounts in respect of the Debentures when due, the Trust-Preferred Securities will have a priority over the common securities.

Events of Default; Notice

The following events will be “events of default” with respect to Trust-Preferred Securities issued under the trust agreement:

·	any debenture event of default (see “Description of the Debentures—Events of Default”);

·	default for 30 days by the Trust in the payment of any distribution;

·	default by the Trust in the payment of any redemption price of any Trust-Preferred Security or common security;

failure by the Trust trustees for 60 days in performing, in any material respect, any other covenant or warranty in the trust agreement after the holders of at least 25% in aggregate liquidation amount of the outstanding Trust-Preferred Securities of the Trust give written notice to Capitol and the Trust trustees; or

·	bankruptcy, insolvency or reorganization of the property trustee and the failure by Capitol to appoint a successor property trustee within 60 days.

Within 30 days after the occurrence of any event of default actually known to the property trustee, the property trustee will transmit notice of the event of default to the holders of the Trust-Preferred Securities, the administrative trustees and Capitol, unless the event of default has been cured or waived.

Capitol, as depositor, and the administrative trustees on behalf of the Trust are required to file annually with the property trustee a certificate as to whether or not they are in compliance with all the conditions and covenants applicable to them under the trust agreement.

If a debenture event of default has occurred and is continuing, the Trust-Preferred Securities will have a preference over the common securities as described above. See “—Liquidation Distribution Upon Dissolution.” The existence of an event of default does not entitle the holders of Trust-Preferred Securities to accelerate the maturity of the Trust-Preferred Securities; provided that the holders of Trust-Preferred Securities are entitled, under certain circumstances, to accelerate the maturity of the Debentures.

Removal of Trust Trustees

Unless a debenture event of default has occurred and is continuing, any Trust trustee may be removed at any time by the holder of the common securities. If a debenture event of default has occurred and is continuing, the property trustee and the Delaware trustee may be removed by the holders of a majority in liquidation amount of the outstanding Trust-Preferred Securities. In no event will the holders of the Trust-Preferred Securities have the right to vote to appoint, remove or replace the administrative trustees. Such voting rights are vested exclusively in Capitol as the holder of the common securities. No resignation or removal of a trustee and no appointment of a successor trustee will be effective until the acceptance of appointment by the successor trustee in accordance with the provisions of the trust agreement.

Co-Trustees and Separate Property Trustee

Unless an event of default has occurred and is continuing, at any time or from time to time, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the trust property may at the time be located, the Depositor will have power to appoint one or more persons approved by the property trustee either to act as a co-trustee, jointly with the property trustee, of all or any part of the trust property, or to act as separate trustee of any trust property, in either case with the powers specified in the instrument of appointment, and to vest in the person or persons in this capacity any property, title, right or power deemed necessary or desirable, subject to the provisions of the trust agreement.

Merger or Consolidation of Trustees

Any person into which the property trustee or the Delaware trustee may be merged or converted or with which it may be consolidated, or any person resulting from any merger, conversion or consolidation to which the property trustee or the Delaware trustee is a party, or any person succeeding to all or substantially all the corporate trust business of the property trustee or the Delaware trustee, will automatically become the successor of the trustee under the trust agreement, provided the person is otherwise qualified and eligible.

Mergers, Consolidations, Amalgamations or Replacements of the Trust

The Trust may not merge with or into, convert into, consolidate, amalgamate, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other person, except as described below. The Trust may, at Capitol’s request, with the consent of the administrative trustees, but without the consent of the holders of the Trust-Preferred Securities, the Delaware trustee or the property trustee, merge with or into, convert into, consolidate, amalgamate, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to a trust organized under the laws of any state, provided that:

·	the successor entity either:

·	expressly assumes all of the obligations of the Trust with respect to the Trust-Preferred Securities; or

substitutes for the Trust-Preferred Securities other securities having substantially the same terms as the Trust-Preferred Securities (referred to as the “successor Trust-Preferred Securities”) so long as the successor Trust-Preferred Securities rank the same as the Trust-Preferred Securities in priority with respect to distributions and payments upon liquidation, redemption and otherwise;

·	Capitol expressly appoints a trustee of the successor entity possessing the same powers and duties as the property trustee and as the holder of the Debentures;

·	the successor Trust-Preferred Securities are listed or traded on a national securities exchange or other organization on which the Trust-Preferred Securities are then listed;

·	the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Trust-Preferred Securities (including any successor Trust-Preferred Securities) in any material respect;

·	the successor entity has a purpose substantially identical to that of the Trust;

·	prior to the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease, Capitol has received an opinion of independent counsel to the Trust experienced in such matters to the effect that:

·	the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Trust-Preferred Securities (including any successor Trust-Preferred Securities) in any material respect; and

·	following the merger, conversion, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Trust nor the successor entity will be required to register as an investment company under the Investment Company Act of 1940, as amended; and

Capitol or any permitted successor or assignee owns all of the common securities of the successor entity and guarantees the obligations of the successor entity under the successor Trust-Preferred Securities at least to the extent provided by the related guarantee, Debentures, trust agreement and expense agreement.

For the purposes of the foregoing, any consolidation, conversion, merger, sale, conveyance, transfer or other disposition involving Capitol, the result of which Capitol is not the surviving entity and the surviving entity is not both the obligor in respect of the Debentures and the guarantee, shall be deemed to constitute a replacement trust, unless the parent company of such surviving entity is a bank holding company or other regulated holding company that provides the same guaranty as Capitol did before such transaction.

Notwithstanding the foregoing, the Trust may not, except with the consent of holders of 100% in liquidation amount of the Trust-Preferred Securities, consolidate, convert, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, convert, amalgamate, merge with or into, or replace it if the consolidation, conversion, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified as other than a grantor trust for U.S. federal income tax purposes.

There are no provisions that afford holders of any Trust-Preferred Securities protection in the event of a sudden and dramatic decline in credit quality resulting from any highly leveraged transaction, takeover, merger, recapitalization or similar restructuring or change in control of Capitol, nor are there any provisions that require the repurchase of any Trust-Preferred Securities upon a change in control of Capitol.

Voting Rights; Amendment of Trust Agreement

Except as provided below and under “Description of the Guarantee—Amendments and Assignment” and as otherwise required by law and the trust agreement, the holders of the Trust-Preferred Securities will have no voting rights or the right to in any manner otherwise control the administration, operation or management of the Trust.

The trust agreement may be amended from time to time by the property trustee, the administrative trustees and the Depositor without the consent of the holders of the Trust-Preferred Securities:

to cure any ambiguity, correct or supplement any provisions in the trust agreement that may be inconsistent with any other provision, or to make any other provisions with respect to matters or questions arising under the trust agreement, which will not be inconsistent with the other provisions of the trust agreement; or

·	to modify, eliminate or add to any provisions of the trust agreement as necessary to ensure that the Trust:

·	will be classified for U.S. federal income tax purposes as a grantor trust or as other than an association taxable as a corporation at all times that any Trust-Preferred Securities or common securities are outstanding; and

·	will not be required to register as an “investment company” under the Investment Company Act; or

·	to effect a split or reverse split of the Trust-Preferred Securities for the purpose of maintaining their eligibility for listing or quoting on an exchange or quotation system;

provided that:

·	no such amendment may adversely affect in any material respect the rights of the holders of the Trust-Preferred Securities; and

·	any such amendment will become effective when notice of the amendment is given to the holders of Trust-Preferred Securities and common securities.

The trust agreement may be amended by the property trustee, the administrative trustees and the Depositor with:

·	the consent of holders representing at least a majority (based upon liquidation amounts) of the outstanding Trust-Preferred Securities and common securities; and

receipt by the Trust trustees of an opinion of counsel to the effect that the amendment or the exercise of any power granted to the Trust trustees in accordance with the amendment will not cause the Trust to be taxable as a corporation or affect the Trust’s status as a grantor trust for U.S. federal income tax purposes or the Trust’s exemption from status as an “investment company” under the Investment Company Act,

provided that, without the consent of each holder of Trust-Preferred Securities and common securities, the trust agreement may not be amended to:

·	change the amount or timing of any distribution on the Trust-Preferred Securities or common securities or otherwise adversely affect the amount of any distribution required to be made in respect of the Trust-Preferred Securities or common securities as of a specified date; or

·	restrict the right of a holder of Trust-Preferred Securities or common securities to institute suit for the enforcement of any such payment on or after such date.

So long as the Debentures are held by the property trustee on behalf of the Trust, the property trustee may not:

·	direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee, or executing any trust or power conferred on the indenture trustee with respect to the Debentures;

·	waive any past default that is waivable under the indenture;

·	exercise any right to rescind or annul a declaration that the principal of all the Debentures will be due and payable; or

·	consent to any amendment, modification or termination of the indenture or the Debentures, where this consent is required, without, in each case, obtaining the prior approval of the holders of a majority in aggregate liquidation amount of all outstanding Trust-Preferred Securities;

provided, however, that where a consent under the indenture would require the consent of each holder of Debentures affected, no such consent will be given by the property trustee without the prior consent of each holder of the Trust-Preferred Securities. The property trustee will not revoke any action previously authorized or approved by a vote of the holders of the Trust-Preferred Securities except by subsequent vote of the holders of those Trust-Preferred Securities. The property trustee will notify each holder of Trust-Preferred Securities of any notice of default with respect to the Debentures. In addition to obtaining the foregoing approvals of the holders of the Trust-Preferred Securities, prior to taking any of the foregoing actions, the property trustee must obtain an opinion of counsel to the effect that:

·	the Trust will not be classified as an association taxable as a corporation for U.S. federal income tax purposes on account of the action; and

·	the action will not cause the Trust to be classified as other than a grantor trust for U.S. federal income tax purposes.

Any required approval of holders of Trust-Preferred Securities may be given at a meeting of holders of Trust-Preferred Securities convened for that purpose or pursuant to written consent. The property trustee will cause a notice of any meeting at which holders of Trust-Preferred Securities are entitled to vote, or of any matter upon which action by written consent of those holders is to be taken, to be given to each holder of record of Trust-Preferred Securities in the manner set forth in the trust agreement.

No vote or consent of the holders of Trust-Preferred Securities will be required for the Trust to redeem and cancel its Trust-Preferred Securities in accordance with the trust agreement.

Notwithstanding that holders of Trust-Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Trust-Preferred Securities that are owned by Capitol, the Trust trustees or any affiliate of Capitol (including Capitol’s bank subsidiaries) or any Trust trustees, will, for purposes of that vote or consent, be treated as if they were not outstanding.

Global Trust-Preferred Securities

The Trust-Preferred Securities are represented by fully registered global certificates issued as global Trust-Preferred Securities that were deposited with, or on behalf of, a depositary with respect to that series instead of paper certificates issued to each individual holder. The depositary arrangements that will apply, including the manner in which principal of and premium, if any, and interest on Trust-Preferred Securities and other payments will be payable, are discussed in more detail under the heading “Book-Entry System.”

Payment and Paying Agency

Payments in respect of Trust-Preferred Securities will be made to DTC. If any Trust-Preferred Securities are not represented by global certificates, payments will be made by check mailed to the address of the holder entitled to them as it appears on the register. The paying agent will initially be the property trustee and any co-paying agent chosen by the property trustee and reasonably acceptable to the administrative trustees and Capitol. The paying agent will be permitted to resign as paying agent upon 30 days’ written notice to the administrative trustees, the property trustee and Capitol. In the event that the property trustee is no longer the paying agent, the administrative trustees will appoint a successor (which will be a bank or trust company acceptable to the property trustee and Capitol) to act as paying agent.

Registrar and Transfer Agent

The property trustee, Wells Fargo Bank, N.A., will act as registrar and transfer agent for the Trust-Preferred Securities.

Registration of transfers of Trust-Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment of any tax or other governmental charges that may be imposed in connection with any transfer or exchange. The Trust will not be required to register or cause to be registered the transfer of Trust-Preferred Securities after the Trust-Preferred Securities have been called for redemption.

Information Concerning the Property Trustee

The property trustee, other than during the occurrence and continuance of an event of default, undertakes to perform only those duties specifically set forth in the trust agreement and, after an event of default, must also exercise any rights and powers imposed on it under applicable law. The property trustee is under no obligation to exercise any of the powers vested in it by the trust agreement at the request of any holder of Trust-Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred as a result. If no event of default has occurred and is continuing and the property trustee is required to decide between alternative causes of action, construe ambiguous provisions in the trust agreement or is unsure of the application of any provision of the trust agreement, and the matter is not one on which holders of Trust-Preferred Securities are entitled under the trust agreement to vote, then the property trustee will take such action as is directed by Capitol and if not so directed, will take such action as it deems advisable and in the best interests of the holders of the Trust-Preferred Securities and common securities and will have no liability except for its own bad faith, negligence or willful misconduct.

Miscellaneous

The administrative trustees and the property trustee are authorized and directed to conduct the affairs of and to operate the Trust in such a way that the Trust will not be (1) deemed to be an “investment company” required to be registered under the Investment Company Act or (2) classified as an association taxable as a corporation or as other than a grantor trust for U.S. federal income tax purposes and so that the Debentures will be treated as indebtedness of Capitol for U.S. federal income tax purposes. In addition, Capitol, the administrative trustees and the property trustee are authorized to take any action not inconsistent with applicable law, the certificate of trust of the Trust or the trust agreement, that Capitol and the administrative trustees determine in their discretion to be necessary or desirable for such purposes as long as such action does not materially adversely affect the interests of the holders of the Trust-Preferred Securities.

Holders of the Trust-Preferred Securities have no preemptive or similar rights.

The Trust may not borrow money or issue debt or mortgage or pledge any of its assets.

DESCRIPTION OF THE DEBENTURES

The following description summarizes the material provisions of the indenture and the 10.50% Junior Subordinated Debentures (the “Debentures”) issued under the indenture. This description is not complete and is qualified in its entirety by reference to the indenture and the Trust Indenture Act. The indenture was qualified under the Trust Indenture Act and has been incorporated by reference as an exhibit to Capitol’s registration statement to which this proxy statement/prospectus relates. Whenever particular defined terms of the indenture are referred to in this proxy statement/prospectus, those defined terms are incorporated in this proxy statement/prospectus by reference.

The Debentures were issued under the indenture, entered into between Capitol and Wells Fargo Bank, N.A., as indenture trustee. The Debentures are unsecured and subordinate and junior in right of payment to the extent and in the manner set forth in the indenture to all of Capitol’s senior and subordinated indebtedness, including any senior debt securities and any subordinated debt securities. Because Capitol is a holding company and a legal entity separate and distinct from Capitol’s subsidiaries, Capitol’s right to participate in any distribution of assets of a subsidiary upon its liquidation, reorganization or otherwise, and the holders of the Debentures’ ability to benefit indirectly from that distribution, would be subject to prior creditor’s claims, except to the extent Capitol may ourselves be recognized as a creditor of that subsidiary. Accordingly, the Debentures will be effectively subordinated to all existing and future liabilities of Capitol’s subsidiaries, and holders of Debentures should look only to Capitol’s assets for payments on the Debentures. The indenture does not limit the incurrence or issuance of other secured or unsecured debt of Capitol, including senior debt, whether under any existing indenture or any other indenture that Capitol may enter into in the future or otherwise, except that it does limit Capitol’s right to incur additional junior indebtedness that is equal in right of payment to the Debentures. See “—Limitation on Additional Junior Indebtedness” and “—Subordination of the Debentures.”

The Debentures are limited in aggregate principal amount to $39,226,820. This amount represents the sum of the aggregate stated liquidation amounts of the Trust-Preferred Securities and common securities. The Debentures bear interest at the rate of 10.50% per annum. The interest will be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on September 30, 2008, to the person in whose name such Debenture is registered at the close of business on the record date for such interest installment, which will be the 15th day of the last month of each calendar quarter.

The amount of interest payable for any period ending on or prior to March 31, 2038 will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period commencing on or after March 31, 2038 will be computed on the basis of a 360-day year and the actual number of days elapsed during the relevant period. In the event that any date on which interest is payable on the Debentures is not a business day, then payment of interest payable on such date will be made on the next succeeding day which is a business day (and without any interest or other payment in respect of any such delay) except that, if such business day is in the next succeeding calendar year, such payment will be made on the immediately preceding business day (and without any reduction of interest or any other payment in respect of any such acceleration), in each case with the same force and effect as if made on the date such payment was originally payable.

The Debentures will mature on September 30, 2038, the stated maturity date. Capitol may at any time before the day which is 90 days before the stated maturity date and after September 30, 2013, shorten the maturity date only once, provided that Capitol receives prior approval of the Federal Reserve Board, if then required under applicable capital guidelines, policies or regulations of the Federal Reserve Board.

Capitol will give notice to the indenture trustee and the holders of the Debentures at least 35 days and no more than 180 days prior to the effectiveness of any change in the stated maturity date; provided, however, in accordance with the indenture, Capitol retains the right to redeem all or a portion of the Debentures at such time or times on or after September 30, 2013, or at any time upon the occurrence of a “capital treatment event,” a “tax event” or an “investment company event.” See “—Redemption” for a description of what constitutes a “capital treatment event,” a “tax event” or an “investment company event.”

Principal and interest, if any, on the Debentures will be payable, and the Debentures will be transferable, at the office of the indenture trustee, which will be the initial paying agent, except that interest may be paid at Capitol’s option by check mailed to the address of the holder entitled to it as it appears on the security register.

The indenture does not contain any provisions that would provide protection to holders of the Debentures against any highly leveraged or other transaction involving Capitol that may adversely affect holders of the Debentures.

The indenture allows Capitol to merge or consolidate with another company, or to sell all or substantially all of Capitol’s assets to another company. If these events occur, the other company will be required to assume Capitol’s responsibilities relating to the Debentures, and Capitol will be released from all liabilities and obligations. See “—Consolidation, Merger, Sale of Assets and Other Transactions” below for a more detailed discussion. The indenture provides that Capitol and the indenture trustee may change certain of Capitol’s obligations or certain rights of holders of the Debentures. However, to change the amount or timing of principal, interest or other payments under the Debentures, every holder in the series must consent. See “—Modification of the Indenture” below for a more detailed discussion.

Denominations, Registration and Transfer

The Debentures are issued only in registered form, without coupons, in denominations of $10 and any integral multiple thereof. Subject to restrictions relating to Debentures represented by global securities, the Debentures will be exchangeable for other debentures in denominations of integral multiples of $10, of a like aggregate principal amount, of the same original issue date and stated maturity and bearing the same interest rate.

Subject to restrictions relating to Debentures represented by global securities, the Debentures may be presented for exchange as provided above, and may be presented for registration of transfer (with the form of transfer endorsed thereon, or a satisfactory written instrument of transfer, duly executed) at the office of the appropriate securities registrar or at the office of any transfer agent designated by Capitol for such purpose without service charge and upon payment of any taxes and other governmental charges as described in the indenture. The registrar for the purpose of registering and transferring Debentures shall initially be the indenture trustee.

In the event of any redemption, neither Capitol nor the indenture trustee will be required to:

·	issue, register the transfer of or exchange the Debentures during the period beginning at the opening of business 15 days before the day of selection for redemption of the Debentures and ending at the close of business on the day of mailing of the relevant notice of redemption; or

·	transfer or exchange any of the Debentures so selected for redemption, except, in the case of any Debentures being redeemed in part, any portion thereof not being redeemed.

Option to Defer Interest Payments

So long as no debenture event of default (as defined below) has occurred and is continuing, Capitol will have the right at any time and from time to time during the term of the Debentures to defer payment of interest for up to 20 consecutive quarters, referred to as an “extension period.” During the extension period, no interest will be due and payable, and no extension period may extend beyond the maturity date of the Debentures or end on a date other than an interest payment date. To the extent permitted by applicable law, interest, the payment of which has been deferred because of the extension period, will bear interest at a rate of 10.50% compounded quarterly for each quarter of the extension period. At the end of the extension period, Capitol must calculate and pay all interest accrued and unpaid on the Debentures, including any additional interest and compounded interest. Upon the termination of any extension period and upon the payment of all interest then due, Capitol may commence a new extension period, subject to the foregoing requirements. No interest will be due and payable during an extension period, except at the end thereof.

As a consequence of any such deferral, distributions on the Trust-Preferred Securities would be deferred (but would continue to accumulate additional distributions at a rate of 10.50% per annum) by the Trust during the extension period. During any applicable extension period, Capitol may not:

·	declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of Capitol’s capital stock other than:

·	dividends or distributions in Capitol’s common stock or a declaration of a non-cash dividend in connection with implementing a shareholder rights plan, or the issuance or redemption of stock pursuant to a shareholder rights plan,

·	purchases of Capitol’s common stock under officer, director or employee benefit plans, or

·	as a result of reclassifying Capitol’s stock;

make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any of Capitol’s debt securities that rank on a parity in all respects with or junior in interest to the Debentures, or make any payment under a guarantee of any subsidiary’s securities if the guarantee ranks on a parity in all respects with or junior in interest to the Debentures; or

·	acquire any of the Trust-Preferred Securities or redeem or acquire less than all of the Debentures.

The above prohibitions will also apply if the Debentures are held by the Trust and:

·	an event of default under the indenture with respect to the Debentures occurs, or

On April 17, 2009, Capitol announced that it had elected to defer regularly scheduled interest payments on its junior subordinated debentures, including the Debentures.

Redemption

The Debentures will not be subject to any sinking fund.

Capitol may, at its option and subject to receipt of prior approval by the Federal Reserve Board if such approval is then required under applicable capital guidelines or policies, redeem the Debentures in whole or in part, from time to time, on or after September 30, 2013. If the Debentures are only partially redeemed, the Debentures will be redeemed pro rata or by lot or in such other manner as the indenture trustee deems appropriate and fair in its discretion. Unless otherwise indicated in the form of security, Debentures in denominations larger than the liquidation amount may be redeemed in part but only in integral multiples of the liquidation amount. The redemption price for any Debenture will equal any accrued and unpaid interest (including any additional interest) to the redemption date, plus 100% of the principal amount.

In addition, Capitol has the right to redeem Debentures at any time and from time to time in a principal amount equal to the liquidation amount of Trust-Preferred Securities purchased and beneficially owned by Capitol, plus an additional principal amount of Debentures equal to the liquidation amount of that number of common securities that bears the same proportion to the total number of common securities then outstanding as the number of Trust-Preferred Securities to be redeemed bears to the total number of Trust-Preferred Securities then outstanding.

If a partial redemption of the Debentures would result in the delisting of the Trust-Preferred Securities from the New York Stock Exchange or any other national securities exchange or other organization on which the Trust-Preferred Securities are then listed or quoted, Capitol will not be permitted to effect such partial redemption and may only redeem the Debentures in whole.

If a tax event (as defined below), a capital treatment event (as defined below) or an investment company event (as defined below) has occurred and is continuing, Capitol may, at its option and subject to receipt of prior approval by the Federal Reserve Board if such approval is then required under applicable capital guidelines or policies, redeem the Debentures in whole or in part at any time within 180 days following the occurrence of the tax event, capital treatment event or investment company event, at a redemption price equal to 100% of the principal amount of the Debentures then outstanding plus accrued and unpaid interest to the date fixed for redemption.

A “capital treatment event” means, in respect of the Trust, the receipt by Capitol and the Trust of an opinion of counsel, experienced in such matters, to the effect that as a result of:

any amendment to or change, including any announced prospective change, in the laws, or any rules or regulations under the laws, of the United States or of any political subdivision of or in the United States, if the amendment or change is effective on or after the date the Trust-Preferred Securities of the Trust are issued; or

·	any official or administrative pronouncement or action or any judicial decision interpreting or applying such laws or regulations, if the pronouncement, action or decision is announced on or after the date the Trust-Preferred Securities of the Trust are issued;

there is more than an insubstantial risk that Capitol will not be entitled to treat the liquidation amount of the Trust-Preferred Securities as “Tier 1 Capital” for purposes of the applicable Federal Reserve risk-based capital adequacy guidelines as then in effect.

A “tax event” means the receipt by Capitol and the Trust of an opinion of counsel, experienced in such matters, to the effect that, as a result of any amendment to or change, including any announced prospective change, in the laws or any regulations under the laws of the United States or of any political subdivision or taxing authority of or in the United States effective or announced on or after the date the Debentures are issued, or as a result of any official administrative pronouncement or any judicial decision interpreting or applying such laws or regulations effective or announced on or after the date the Debentures are issued, there is more than an insubstantial risk that any of the following will occur:

·	the Trust is, or will be within 90 days of the delivery of the opinion of counsel, subject to U.S. federal income tax on income received or accrued on the Debentures;

·	interest payable by Capitol on the Debentures is not, or within 90 days of the delivery of the opinion of counsel will not be, deductible by Capitol, in whole or in part, for U.S. federal income tax purposes; or

·	the Trust is, or will be within 90 days of the delivery of the opinion of counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

An “investment company event” means the receipt by Capitol and the Trust of an opinion of counsel experienced in such matters to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority and, the Trust is or will be considered an “investment company” that is required to be registered under the Investment Company Act of 1940, as amended, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the issuance of the Trust-Preferred Securities.

Notice of any redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of the Debentures to be redeemed at its registered address. Unless Capitol defaults in payment of the redemption price, on and after the redemption date interest will cease to accrue on the Debentures or portions thereof called for redemption.

Modification of the Indenture

From time to time Capitol and the indenture trustee may, without the consent of the holders of the Debentures, amend, waive or supplement the provisions of the indenture for specified purposes, including, among other things, curing ambiguities, defects or inconsistencies (provided that any such action does not materially adversely affect the interests of the holders of the Debentures or, in the case of the Debentures, the holders of the Trust-Preferred Securities so long as they remain outstanding) and qualifying, or maintaining the qualification of, the indenture under the Trust Indenture Act. The indenture contains provisions permitting Capitol and the indenture trustee, with the consent of the holders of not less than a majority in principal amount of the Debentures affected, to modify the indenture in a manner adversely affecting the rights of the holders of the Debentures in any material respect; provided, that no such modification may, without the consent of the holder of each outstanding Debenture so affected:

·	extend the fixed maturity of the Debentures, reduce their principal amount or reduce the amount or extend the time for payment of interest; or

·	reduce the above-stated percentage of outstanding Debentures necessary to modify or amend the indenture.

Where an amendment or supplement requires the consent of a majority of the outstanding Debentures, it will not be effective until it is consented to by a majority in liquidation preference of the Trust-Preferred Securities. Where an amendment or supplement requires the consent of each holder of the Debentures, it will not be effective until consented to by each holder of the Trust-Preferred Securities.

Events of Default

The following events will be “debenture events of default” with respect to the Debentures:

·	the consent of holders representing at least a majority (based upon liquidation amounts) of the outstanding Trust-Preferred Securities and common securities;

·	default for 30 days in interest payment upon any of the Debentures, including any additional interest (subject to the deferral of any due date in the case of an extension period);

·	default in any principal payment on the Debentures at the stated maturity, upon redemption, by declaration or otherwise;

·	failure by Capitol for 90 days in performing any other covenant or agreement in the indenture after:

§	Capitol is given written notice by the indenture trustee; or

§	the holders of at least 25% in aggregate principal amount of the outstanding Debentures give written notice to Capitol and the indenture trustee;

§	Capitol’s bankruptcy, insolvency or reorganization; or

the Trust dissolves, winds up its business or otherwise terminates its existence, except in connection with the distribution of Debentures to holders of Trust-Preferred Securities or common securities in liquidation of their interests, the redemption of all of the Trust’s outstanding Trust-Preferred Securities and common securities or certain permitted mergers, consolidations or amalgamations.

The holders of a majority in aggregate outstanding principal amount of the Debentures have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee. The principal will become due and payable immediately upon a debenture event of default resulting from Capitol’s bankruptcy, insolvency or reorganization. The indenture trustee or the holders of at least 25% in aggregate outstanding principal amount of the Debentures may declare the principal due and payable immediately upon any other debenture event of default. Should the indenture trustee or the holders of such Debentures fail to make this declaration, the holders of at least 25% in aggregate liquidation amount of the Trust-Preferred Securities will have the right to make this declaration. The holders of a majority in aggregate outstanding principal amount of the Debentures may annul the declaration and waive the default, provided all defaults have been cured and all payment obligations have been made current. Should the holders of such Debentures fail to annul the declaration and waive the default, the holders of a majority in aggregate liquidation amount of the Trust-Preferred Securities will have the right to do so. In the event of Capitol’s bankruptcy, insolvency or

reorganization, the Debentures holders’ claims would fall under the broad equity power of a federal bankruptcy court, and to that court’s determination of the nature of those holders’ rights.

The holders of a majority in aggregate outstanding principal amount of the Debentures affected may, on behalf of the holders of all the Debentures, waive any default, except a default in the payment of principal or premium, if any, or interest (including any additional interest) (unless the default has been cured and a sum sufficient to pay all matured installments of interest (including any additional interest) and principal due otherwise than by acceleration has been deposited with the indenture trustee) or a default in respect of a covenant or provision which under the indenture cannot be modified or amended without the consent of the holder of each outstanding Debenture. Should the holders of such Debentures fail to waive the default, the holders of a majority in aggregate liquidation amount of the Trust-Preferred Securities will have the right to do so. Capitol is required to file annually with the indenture trustee a certificate as to whether or not Capitol is in compliance with all the conditions and covenants applicable to Capitol under the indenture.

In case a debenture event of default has occurred and is continuing as to the Debentures, if neither the indenture trustee nor the holders of the Debentures accelerate the Debentures, the holders of the Trust-Preferred Securities will have the right to declare the principal of and the interest on the Debentures, and any other amounts payable under the indenture, to be immediately due and payable and to enforce their other rights as creditors with respect to the Debentures.

Enforcement of Certain Rights by Holders of Trust-Preferred Securities

If a debenture event of default has occurred and is continuing and the event is attributable to Capitol’s failure to pay interest or principal on the Debentures on the date the interest or principal is due and payable, a holder of the Trust-Preferred Securities may institute a legal proceeding directly against Capitol for enforcement of payment to that holder of the principal of or interest (including any additional interest) on the Debentures having a principal amount equal to the aggregate liquidation amount of the Trust-Preferred Securities of that holder (a “direct action”). Capitol may not amend the indenture to remove this right to bring a direct action without the prior written consent of the holders of all of the Trust-Preferred Securities outstanding. If the right to bring a direct action is removed, the Trust may become subject to reporting obligations under the Exchange Act. Capitol will have the right under the indenture to set-off any payment made to the holder of the Trust-Preferred Securities by Capitol in connection with a direct action.

The holders of Trust-Preferred Securities will not be able to exercise directly any remedies other than those set forth in the preceding paragraph available to the holders of the Debentures unless there has occurred an event of default under the trust agreement. See “Description of the Trust-Preferred Securities and Related Instruments—Events of Default; Notice.”

Consolidation, Merger, Sale of Assets and Other Transactions

The indenture allows Capitol to consolidate or merge with or into another corporation or to sell, convey, transfer or otherwise dispose of its property as an entirety, or substantially as an entirety, to another corporation. In the indenture, however, Capitol covenants and agrees that:

upon any such consolidation, merger, sale, conveyance, transfer or other disposition, the due and punctual payment of the principal of and premium, if any and interest on all of the Debentures, and the due and punctual performance and observance of all of Capitol’s covenants under the indenture, will be expressly assumed by the entity formed by the consolidation or into which Capitol is merged, or by the entity that acquires Capitol’s property, and, if applicable, the ultimate parent entity of the successor entity will expressly assume Capitol’s obligations under the related guarantee;

·	the successor will be organized under the laws of the United States or any state or the District of Columbia; and

·	immediately after giving effect to the transaction, no debenture event of default, and no event which, after notice or lapse of time or both, would become a debenture event of default, will have occurred and be continuing.

The general provisions of the indenture do not afford holders of the Debentures protection in the event of a highly leveraged or other transaction involving Capitol that may adversely affect holders of the Debentures.

Satisfaction and Discharge

The indenture provides that when, among other things, all Debentures not previously delivered to the indenture trustee for cancellation:

·	have become due and payable;

·	will become due and payable at their stated maturity within one year; or

·	are to be called for redemption within one year under arrangements satisfactory to the indenture trustee for the giving of notice of redemption by the indenture trustee;

and Capitol deposits or causes to be deposited with the indenture trustee funds, in trust, for the purpose and in an amount in the currency or currencies in which the Debentures are payable sufficient to pay and discharge the entire indebtedness on the Debentures not previously delivered to the indenture trustee for cancellation, for the principal, premium, if any, and interest (including any additional interest) to the date of the deposit or to the stated maturity, as the case may be, then the indenture will cease to be of further effect (except as to Capitol’s obligations to pay all other sums due under the indenture and to provide the officers’ certificates and opinions of counsel described therein), and Capitol will be deemed to have satisfied and discharged the indenture.

Subordination of the Debentures

The Debentures will be subordinate in right of payment, to the extent set forth in the indenture, to all of Capitol’s senior and subordinated indebtedness. As used in this proxy statement/prospectus with respect to the Debentures, the term “senior and subordinated indebtedness” means:

senior debt, which means all debt (as defined in the indenture) incurred before or after the date of the indenture unless the instrument evidencing the debts provides that it is not superior in right of payment to the Debentures or to other debt which ranks equally with, or is subordinate to, the Debentures, except that senior debt does not include:

·	non-recourse debt;

·	debt Capitol owes to its subsidiaries;

·	debt Capitol owes to any employee;

·	debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business; or

·	subordinated debt (as defined below);

·	subordinated debt, which means debt incurred before or after the date of the indenture which is by its terms expressly provided to be junior and subordinate to Capitol’s senior debt (other than the Debentures), except that subordinated debt does not include:

·	non-recourse debt;

·	debt Capitol owes to its subsidiaries;

·	debt Capitol owes to any employee;

·	debt which by its terms is subordinated to trade accounts payable or accrued liabilities arising in the ordinary course of business;

·	senior debt (as defined above); and

debt under debt securities (and guarantees in respect of these debt securities) initially issued to any trust, partnership or other entity affiliated with Capitol that is, directly or indirectly, Capitol’s financing vehicle in connection with the issuance by that entity of Trust-Preferred securities or other securities which are intended to qualify for Tier 1 capital treatment; and

additional senior obligations, which means all of Capitol’s indebtedness incurred before or after the date of the indenture for claims in respect of derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements, except that additional senior obligations do not include:

·	claims in respect of senior debt or subordinated debt; or

·	obligations which, by their terms, are expressly stated to be not superior in right of payment to the Debentures or to rank pari passu in right of payment with the Debentures.

If Capitol defaults in the payment of any principal, premium, if any, or interest, if any, or any other amount payable on any senior or subordinated indebtedness when it becomes due and payable, whether at maturity or at a date fixed for redemption or by declaration of acceleration or otherwise, then Capitol may not make any payment on the Debentures. With some limitations, if the indenture trustee receives a prohibited payment, it must pay it over to the holders of senior or subordinated indebtedness.

In any distribution to creditors upon Capitol’s dissolution or winding-up or liquidation or reorganization, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all senior or subordinated indebtedness must first be paid in full before Capitol makes any payment of the principal (and premium, if any) or interest on the Debentures. Upon any such dissolution or winding-up or liquidation or reorganization, any payment by Capitol, or distribution of Capitol’s assets to which the holders of Debentures or the indenture trustee would be entitled to receive must instead be paid by Capitol or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other person making the payment or distribution, or by the holders of the Debentures or the indenture trustee if received by them, directly to the holders of Capitol’s senior or subordinated indebtedness to the extent necessary to pay the senior or subordinated indebtedness in full before any payment or distribution is made to the holders of the Debentures or the indenture trustee.

The indenture places no limitation on the amount of additional senior or subordinated indebtedness that may be incurred by Capitol. Capitol expects from time to time to incur additional indebtedness constituting senior or subordinated indebtedness.

Limitation on Additional Junior Indebtedness

Under the indenture, Capitol agreed not to issue or incur, directly or indirectly, any additional junior indebtedness that is equal in right of payment to the Debentures unless: the pro forma sum of all outstanding debt issued by Capitol or any of Capitol’s subsidiaries in connection with any Trust-Preferred securities issued by any of Capitol’s financing subsidiaries, including the Debentures and the maximum liquidation amount of the additional Trust-Preferred or similar securities that Capitol or its financing subsidiaries are then issuing, plus Capitol’s total long-term debt, excluding any long-term debt which, by its terms, is expressly stated to be junior and subordinate to the Debentures, is less than 60% of the sum of Capitol’s equity, any perpetual preferred stock and minority interest, calculated in accordance with applicable capital adequacy guidelines, plus any long-term debt which, by its terms, is expressly stated to be junior and subordinate to the Debentures, in each case on a consolidated basis at the time of issuance.

Trust Expenses

Pursuant to the guarantee and the expense agreement, entered into between Capitol and the Trust, Capitol, as borrower, agreed to pay all debts and other obligations (other than with respect to the Trust-Preferred Securities) and all costs and expenses of the Trust (including costs and expenses relating to the organization of the Trust, the fees and expenses of the trustees of the Trust and the cost and expenses relating to the operation of the Trust) and to pay any and all taxes and all costs and expenses with respect thereto (other than United States withholding taxes) to which the Trust might become subject.

Governing Law

The indenture and the Debentures is governed by and construed in accordance with the laws of the State of New York.

Information Concerning the Indenture Trustee

The indenture trustee has, and be subject to, all the duties and responsibilities specified with respect to an indenture trustee under the Trust Indenture Act. Subject to these provisions, the indenture trustee is under no obligation to exercise any of the powers vested in it by the indenture at the request of any holder of Debentures, unless offered reasonable indemnity by that holder against the costs, expenses and liabilities which might be incurred thereby. The indenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the indenture trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it.

DESCRIPTION OF THE GUARANTEE

The following description summarizes the material provisions of the guarantee. This description is not complete and is subject to, and is qualified in its entirety by reference to, all of the provisions of the guarantee, including the definitions therein, and the Trust Indenture Act. The form of the guarantee has been filed as an exhibit to Capitol’s registration statement to which this proxy

statement/prospectus relates. Whenever particular defined terms of the guarantee are referred to in this proxy statement/prospectus, those defined terms are incorporated in this proxy statement/prospectus by reference.