Filed
Pursuant to Rule 424(b)(5)
Registration No.
333-153121
Registration
No. 333-151111 and 333-151111-04
Prospectus
Supplement
CAPITOL TRUST
XII
2,000,000
shares of
10.50%
Trust Preferred Securities
(liquidation
amount $10 per security)
fully
and unconditionally guaranteed by
Warrants
to Purchase up to 2,000,000 Shares of Common Stock of Capitol Bancorp
Ltd.
This
prospectus relates to the sale of Trust Preferred Securities issued by Capitol
Trust XII, a Delaware statutory trust (the
“
Trust
”
), from
time to time that may be offered for resale by certain affiliates of Capitol
Bancorp Ltd. named in this prospectus and the persons to whom such selling
securityholders may transfer their Trust Preferred Securities. Each
Trust Preferred Security represents an undivided beneficial interest in the
Trust. The only assets of the Trust are the 10.50% Junior
Subordinated Debentures due 2038 issued by Capitol Bancorp Ltd., which
Capitol refers to as the “Debentures.” The Trust Preferred Securities
were originally purchased by the selling securityholders from the Trust in an
underwritten registered offering. This prospectus will be used by
selling securityholders to resell the Trust Preferred Securities held by
them.
As used
in this prospectus, except as otherwise specified, the terms “Capitol,” “we,”
“us” and “our” refer to Capitol Bancorp Ltd. and its subsidiaries.
Capitol
is also offering warrants to purchase up to 2,000,000 shares of its common
stock in this offering (and the shares of common stock issuable from time to
time upon exercise of these warrants). Investors purchasing the Trust
Preferred Securities will be issued a warrant to purchase one share of Capitol’s
common stock for each share of the Trust Preferred Securities purchased by such
investor. The Trust Preferred Securities and warrants are immediately
separable and will be issued separately.
The
selling securityholders may sell all or a portion of the Trust Preferred
Securities beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or
agents. If the Trust Preferred Securities are sold through
underwriters or broker-dealers or agents, the selling securityholders will be
responsible for paying any underwriting discounts or commissions or agent’s
commissions. The Trust Preferred Securities may be sold in one or
more transactions at fixed prices, at prevailing market prices at the time of
the sale, at varying prices determined at the time of sale, at negotiated prices
or any combination of the foregoing. Capitol will not receive any
proceeds from these resales. Capitol has agreed to pay all expenses
in connection with the registration of the Trust Preferred
Securities. Capitol provides more information about how the selling
securityholders may sell their Trust Preferred Securities in the section titled
“Plan of Distribution” on page S-55.
The Trust
Preferred Securities are currently traded on the New York Stock Exchange
(“NYSE”) under the trading symbol “CBC PB.” On February 25, 2009
the last reported sales price for the Trust Preferred Securities was $5.90 per
security. Capitol’s common stock is listed on the NYSE under the
symbol “CBC.” On February 25, 2009, the closing price of Capitol’s common stock
reported by NYSE was $4.69 per share.
Capitol’s
subsidiaries will receive proceeds if they sell their Trust Preferred
Securities. Holders of the Trust Preferred Securities may offer the Trust
Preferred Securities for sale at any time at market prices prevailing at the
time of sale or at privately negotiated prices.
See
“
Risk Factors
”
beginning on page S-16 of this prospectus supplement to read about factors
you should consider before buying the Trust Preferred Securities.
Neither
the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved of these securities or passed on the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is February 27, 2009.
*
Applications have been filed with bank regulatory agencies to consolidate
Charters. See Recent Developments.
PROSPECTUS
SUPPLEMENT
|
Page
|
|
|
INFORMATION
CONTAINED IN THIS PROSPECTUS
|
S-1
|
ABOUT
THIS PROSPECTUS
|
S-1
|
FORWARD
LOOKING STATEMENTS
|
S-2
|
SUMMARY
INFORMATION
|
S-3
|
THE
OFFERING
|
S-5
|
CAPITOL
BANCORP LTD.
|
S-12
|
THE
TRUST
|
S-13
|
REGULATORY
CONSIDERATIONS
|
S-14
|
ACCOUNTING
AND REGULATORY TREATMENT
|
S-15
|
RISK
FACTORS
|
S-15
|
DESCRIPTION
OF THE TRUST PREFERRED SECURITIES AND RELATED INSTRUMENTS
|
S-27
|
DESCRIPTION
OF DEBENTURES
|
S-37
|
DESCRIPTION
OF THE GUARANTEE
|
S-45
|
RELATIONSHIP
AMONG THE TRUST PREFERRED SECURITIES, DEBENTURES
|
S-48
|
BOOK-ENTRY
SYSTEM
|
S-49
|
USE
OF PROCEEDS
|
S-55
|
SELLING
SECURITYHOLDERS
|
S-55
|
PLAN
OF DISTRIBUTION
|
S-58
|
CERTAIN
LEGAL MATTERS
|
S-59
|
EXPERTS
|
S-59
|
WHERE
YOU CAN FIND MORE INFORMATION
|
S-59
|
DOCUMENTS
INCORPORATED BY REFERENCE
|
S-60
|
PROSPECTUS
|
Page
|
|
|
ABOUT
THIS PROSPECTUS
|
3
|
WHERE
YOU CAN FIND MORE INFORMATION
|
4
|
DOCUMENTS
INCORPORATED BY REFERENCE
|
4
|
FORWARD
LOOKING STATEMENTS
|
5
|
PROSPECTUS
SUMMARY
|
7
|
RISK
FACTORS
|
9
|
CAPITOL
BANCORP LTD.
|
9
|
USE
OF PROCEEDS
|
9
|
RATIO
OF EARNINGS TO FIXED CHARGES
|
10
|
REGULATORY
CONSIDERATIONS
|
10
|
DESCRIPTION
OF CAPITAL STOCK
|
11
|
DESCRIPTION
OF COMMON STOCK WE MAY OFFER
|
11
|
DESCRIPTION
OF WARRANTS WE MAY OFFER
|
13
|
DESCRIPTION
OF PURCHASE CONTRACTS WE MAY OFFER
|
14
|
DESCRIPTION
OF UNITS WE MAY OFFER
|
14
|
LEGAL
OWNERSHIP AND BOOK-ENTRY ISSUANCE
|
16
|
PLAN
OF DISTRIBUTION
|
21
|
CERTAIN
LEGAL MATTERS
|
22
|
EXPERTS
|
22
|
INFORMATION
CONTAINED IN THIS PROSPECTUS
You
should rely only on the information contained in or incorporated by reference
into this prospectus or any applicable prospectus supplement. Capitol
has not, and the selling securityholders have not, authorized anyone to provide
you with different information. Neither Capitol nor the selling
securityholders are making an offer to sell or seeking an offer to buy the Trust
Preferred Securities under this prospectus or any applicable prospectus
supplement in any jurisdiction where the offer or sale is not
permitted. The information contained in this prospectus, any
applicable prospectus supplement and the documents incorporated by reference
herein and therein are accurate only as of their respective dates, regardless of
the time of delivery of this prospectus or any sale of a
security. Capitol’s business, financial condition, results of
operations and prospects may have changed since that date.
ABOUT
THIS PROSPECTUS
This
prospectus relates to the resale of up to 2,000,000 Trust Preferred Securities
purchased by the selling securityholders in a registered offering on July 7,
2008 by certain affiliates of Capitol Bancorp Ltd. and warrants to purchase up
to 2,000,000 shares of Capitol Bancorp Ltd.’s common stock.
Unless
otherwise mentioned or unless the context requires otherwise, all references in
this prospectus supplement to “Capitol,” “we,” “us,” “our” or similar
references mean Capitol Bancorp Ltd. and its subsidiaries, and references
to the “Trust” mean Capitol Trust XII.
This
prospectus constitutes part of the registration statement of Form S-3 filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the
“
Securities
Act
”
),
utilizing a “shelf” registration or continuous offering process. It
omits some of the information contained in the registration statement and
reference is made to the registration statement for further information with
regard to Capitol and the securities being offered by the selling
securityholders. Any statement contained in the prospectus concerning the
provisions of any document filed as an exhibit to the registration statement or
otherwise filed with the Securities and Exchange Commission is not necessarily
complete, and in each instance, reference is made to the copy of the document
filed
.
This
document consists of two parts. The first part is the prospectus supplement,
which describes the specific terms of this offering. The second part is the
prospectus, which describes more general information, some of which may not
apply to this offering. You should read both this prospectus supplement and the
accompanying prospectus, together with additional information described below
under the heading “Where You Can Find More Information.”
If
the information set forth in this prospectus supplement differs in any way from
the information set forth in the accompanying prospectus, you should rely on the
information set forth in this prospectus supplement.
You should rely only on the
information contained in or incorporated by reference in this prospectus
supplement and the accompanying prospectus. This prospectus supplement may be
used only for the purpose for which it has been prepared. No one is authorized
to give information other than that contained in this prospectus supplement and
the accompanying prospectus and in the documents referred to in this prospectus
supplement and the accompanying prospectus and which are made
availab
le to the
public. Capitol has
not, and the underwriters have not,
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it.
Capitol
is not, and the selling securityholders are not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should not assume that the information appearing in this prospectus supplement
or any document incorporated by reference is accurate as of any date other than
the date of the applicable document. Our business, financial condition, results
of operations and prospects may have changed since that date. Neither this
prospectus supplement nor the accompanying prospectus constitutes an offer, or
an invitation on Capitol’s behalf or on behalf of the selling securityholders,
to subscribe for and purchase, any of the securities and may not be used for or
in connection with an offer or solicitation by anyone, in any jurisdiction in
which such an offer or solicitation is not authorized or to any person to whom
it is unlawful to make such an offer or solicitation.
FORWARD-LOOKING
STATEMENTS
Some of
the statements contained or incorporated by reference in this annual report on
Form 10-K that are not historical facts may constitute forward-looking
statements. Those forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995, are subject to known and
unknown risks, uncertainties and other factors which may cause the actual future
results, performance or achievements of Capitol and/or its subsidiaries and
other operating units to differ materially from those contemplated in such
forward-looking statements. The words "intend," "expect," "project,"
"estimate," "predict," "anticipate," "should," "will," "may," "believe" and
similar expressions also identify forward-looking
statements. Important factors which may cause actual results to
differ from those contemplated in such forward-looking statements include, but
are not limited to: (i) the results of Capitol's efforts to implement its
business strategy, (ii) changes in interest rates, (iii) legislation or
regulatory requirements adversely impacting Capitol's banking business and/or
strategy, (iv) adverse changes in business conditions or inflation, (v) general
economic conditions, either nationally or regionally, which are less favorable
than expected and that result in, among other things, a deterioration in credit
quality and/or loan performance and collectability, (vi) competitive pressures
among financial institutions, (vii) changes in securities markets, (viii)
actions of competitors of Capitol's banks and Capitol's ability to respond to
such actions, (ix) the cost of capital, which may depend in part on Capitol's
asset quality, prospects and outlook, (x) changes in governmental regulation,
tax rates and similar matters, (xi) availability of funds under the U.S.
Treasury's Capital Purchase Program, (xii) changes in management and (xiii)
other risks detailed in Capitol's other filings with the Securities and Exchange
Commission. If one or more of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect, actual outcomes may
vary materially from those indicated. The preparation of consolidated
financial statements in conformity with generally accepted accounting principles
in the United States of America requires management to make certain estimates
and assumptions, many of which are based on assumptions relating to the
above-stated forward-looking statements, that affect the reported amounts of
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results will differ from those estimates because of
the inherent subjectivity and inaccuracy of any estimation. All
subsequent written or oral forward-looking statements attributable to Capitol or
persons acting on its behalf are expressly qualified in their entirety by the
foregoing factors. Investors and other interested parties are
cautioned not to place undue reliance on such statements, which speak as of the
date of such statements. Capitol undertakes no obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
unanticipated events.
SUMMARY
INFORMATION
This summary highlights information
contained elsewhere, or incorporated by reference, in this prospectus
supplement. As a result, it does not contain all of the information that may be
important to you or that you should consider before investing in the Trust
Preferred Securities. You should read this entire prospectus supplement and
accompanying prospectus, including the “Risk Factors” section and the documents
incorporated by reference.
CAPITOL
BANCORP LTD.
Capitol
is a $5.7 billion national community bank company, with a network of 64
separately chartered banks with operations in 17 states. Capitol is
the holder of the largest number of individual bank charters in the
country. Capitol mentors new community banks through their stages of
development and provides efficient back-office services to its network of
community banks. Capitol’s community banks have local decision-making authority
and are typically managed by an on-site president under the direction of a local
board of directors, composed of business leaders from the bank’s
community. Founded in 1988, Capitol has executive offices in Lansing,
Michigan, and Phoenix, Arizona. At December 31, 2008, Capitol had
total assets of $5.7 billion, deposits of $4.5 billion and
stockholders’ equity of $353.8 million.
Through
its subsidiary banks and other affiliates, Capitol’s banks provide their
customers with relationship-based banking, trust and other financial services
and products. Capitol’s banks provide a full range of
customer-focused banking services to individuals, businesses and other customers
located in the bank’s community, including commercial lending, equipment
leasing, trust services, brokerage and investment advisory services, property
and casualty insurance, brokerage services, life insurance and annuity products
and portfolio management services.
Capitol’s
Strategy
Bank
Development.
Bank development has been part of Capitol’s
growth strategy in the past. Historically, Capitol has started
independent banks based on the following key ingredients:
·
|
A
bank president candidate with a significant background in the future
bank’s business community, who is capable of attracting customer
relationships and other banking
professionals;
|
·
|
An
office address from which to operate a bank, optimally located in the
center of commerce within the applicable business
community;
|
·
|
A
dynamic and diverse group of potential board members, drawn from the local
business community, to oversee the future bank’s activities and assist in
business development; and
|
·
|
Availability
of capital from community investors seeking to invest up to 49% in the
required start-up equity of the future
bank.
|
Each
new bank has typically started as a single-location office. The bank
is led by a president and a team of banking professionals with significant local
experience, overseen by an independent board of directors composed of business
leaders drawn from that local community. Each bank has on-site
authority to make decisions which directly affect the customer, such as credit
approval and the pricing and structure of loan and deposit products. Capitol’s
strategy is to foster an environment where its banking professionals focus on
meeting and exceeding customers’ needs, as opposed to transaction-oriented
financial institutions which only focus on selling financial products to
customers and emphasizing market share.
Notably,
“market size” is not a significant factor in Capitol’s approach to bank
development. Rather, the key is people. Capitol has
recognized from its beginning that its banking focus always has been, and always
will be, a people business. As a result, Capitol’s banks are often
small in market size, which facilitates an emphasis on personalized banking
relationships.
Plans
for new bank development were terminated in mid-2008, as a means to improve
efficiency, reduce expenses and improve financial performance; Capitol plans to
merge nine banks into one charter and four banks
located
in Phoenix, Arizona into one charter, subject to regulatory
approval. See Recent Developments.
“Incubation” of Young
Community Banks.
New banks, just like most start-up businesses, are
rarely profitable from the outset. Each of Capitol’s new bank
subsidiaries have been provided with sufficient capital to absorb early period
losses and to support balance-sheet growth. During these early
periods of operation, Capitol’s management works closely with the
de novo
bank’s president and management team in providing
guidance and assistance to help achieve the bank’s goals and objectives as it
navigates toward future profitability. When a
de novo
bank achieves certain
developmental milestones (such as age, cumulative profitability, return on
equity or other measures), Capitol may offer the bank’s community investors (up
to 49% of the bank’s start-up capital) an opportunity to exchange their bank
investment for shares of Capitol’s common stock, at a multiple of the bank’s
then current book value. The associated exchange offer (which Capitol is not
contractually obligated to offer) is generally subject to approval by the bank’s
shareholders. When the exchange offer is made, the bank is often
‘turning the corner’ on cumulative profitability. If the shareholders
elect to enter into the share exchange transaction, the bank’s shareholders can
achieve both a return on their original investment in the bank and liquidity in
the form of marketable shares of Capitol’s common stock. In 2007,
Capitol completed one share-exchange transaction, and two share-exchange
transactions were completed in 2006. Currently, a share exchange
proposal is pending regarding Bank of Auburn Hills.
Monitoring
and Managing Capitol’s Investments in Community Banks.
The
concept of bank development goes beyond nurturing new banks. At Capitol, it also
means nurturing middle-stage and mature bank affiliates to help them maximize
their potential. Capitol monitors and manages its investments in
community banks through regional presidents, supported by Capitol’s bank
financial analysis group. Capitol’s bank financial analysis group
assists its bank subsidiaries in the development of detailed budgets, assists
with asset/liability management strategies, monitors progress with the banks’
business plans and reviews monthly operating results for each bank. In addition
to the monitoring of operating results, Capitol assists its banks in managing
capital, including funding supplemental capital when needed to support bank
growth.
Capitol’s
unique relationship with its banks is multidimensional: as an investor, mentor
and service provider. As investor, Capitol closely monitors the financial
performance of its bank subsidiaries. Capitol’s mentoring role of providing
assistance and guidance when and where necessary to help enhance bank
performance is most important for its newest bank subsidiaries, where guidance
is needed during their early formative stages. Capitol also provides efficient
back-office support services which can be conducted centrally or regionally for
all of its bank subsidiaries and which do not involve a direct interface with
the bank customer. These services include:
·
|
Human
resources administration;
|
Diversification
Strategy.
Capitol continues to expand geographically to
minimize a concentration of assets in any particular region. During the past ten
years, Capitol has specifically expanded its geographic presence by entering new
markets, such as California, Colorado, Nevada, Texas and the Southeast
regions.
Recent
Developments
TARP
Application.
In October 2008, Capitol filed an application
with its primary federal regulator and the FDIC pursuant to the U.S. Treasury’s
Capital Purchase Program (
“CPP”
). As
of February
__,
2009, Capitol’s application remains pending and there can be no assurance that
Capitol will be approved for CPP funds or, if approved, whether Capitol will
accept an investment by the U.S. Treasury.
Consolidation of
Nine Michigan Bank Affiliates.
In late December 2008, Capitol filed
applications with the FDIC and the Michigan Office of Financial and Insurance
Regulation for permission to merge nine of its wholly-owned Michigan bank
charters into one bank.
2008 Year-End
Results.
On January 29, 2009, Capitol announced its year-end 2008
operating results, reporting a net loss of $28.6 million ($1.67 per share) and
net income of $1.1 million ($0.06 per diluted share) for the three months ended
December 31, 2008.
Common
Stock Dividend.
On February 6, 2009, Capitol
announced a quarterly dividend of $0.05 per share, payable March 2, 2009, to
shareholders of record as of February 16, 2009.
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.
THE
OFFERING
Securities
Offered:
|
2,000,000
Trust Preferred Securities and warrants.
|
|
|
Warrants:
|
Warrants
to purchase up to 2,000,000 shares of Capitol’s common stock. Investors
purchasing the Trust Preferred Securities will be issued a warrant to
purchase one share of Capitol’s common stock for each share of the Trust
Preferred Securities purchased. The warrants will be separable
from the Trust Preferred Securities and exercisable during the period
commencing six months after the date of original issuance and ending five
years from the date of such issuance at an exercise price of $10.00 per
warrant. This prospectus also relates to the offering of the shares of
common stock issuable upon exercise of the warrants.
|
|
|
Trust
Preferred Securities Outstanding:
|
3,805,000,
as of February, 2009.
|
|
|
Use
of Proceeds:
|
The
proceeds from the sale of the Trust Preferred Securities offered by this
prospectus will go directly to the selling shareholders, which may include
but is not limited to Capitol’s Bank affiliates and
Capitol.
|
|
|
Risk
Factors:
|
Investing
in the Trust Preferred Securities involves a high degree of
risk. See the Section below under the heading “Risk Factors,”
Capitol’s Annual Report on Form 10-K for the fiscal year ended December
31, 2007 in Item 1A under “Risk Factors” and as updated in any future
filings Capitol makes with the SEC that are incorporated by reference
herein.
|
|
|
NYSE
Symbol for Trust Preferred Securities:
|
CBC
PB.
|
|
|
NYSE
Symbol for Common Stock:
|
CBC.
|
The
selling securityholders may sell the Trust Preferred Securities subject to this
prospectus from time to time and may also decide not to sell all of the Trust
Preferred Securites they are allowed to sell under this
prospectus. The selling securityholders will act independently in
making decisions with respect to the timing, manner and amount of each
sale. Furthermore, the selling securityholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
Trust Preferred Securities in the course of hedging in positions they
assume. The selling securityholders may also sell the Trust Preferred
Securities short and deliver the Trust Preferred Securities covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling securityholders may
also loan or pledge the Trust Preferred Securities to broker-dealers that in
turn may sell such Trust Preferred Securities.
CAPITOL
TRUST XII
The
Trust is a statutory trust formed under Delaware law pursuant to:
·
|
an
amended and restated trust agreement executed by Capitol, as depositor of
the Trust, the Administrative trustees and the Delaware trustee of the
Trust; and
|
·
|
a
certificate of trust filed with the Delaware Secretary of
State.
|
The
Trust exists for the exclusive purposes of:
·
|
issuing
the Trust Preferred Securities and common securities representing
undivided beneficial interests in the
Trust;
|
·
|
investing
the proceeds from the sale of the Trust Preferred Securities and common
securities in the Debentures; and
|
·
|
engaging
in only those activities convenient, necessary or incidental to these
purposes.
|
The
Trust’s business and affairs is conducted by its trustees. The
trustees are Wells Fargo Bank, N.A. as the “property trustee,” Wells Fargo
Delaware Trust Company as the “Delaware trustee,” and three individual trustees,
or “administrative trustees,” who are employees or officers of or affiliated
with Capitol.
The
principal executive office of the Trust is c/o Capitol Bancorp Ltd.,
Capitol Bancorp Center, 200 Washington Square North, Fourth Floor,
Lansing, Michigan 48933 Attention: Administrative Trustees of Capitol Trust
XII, and the Trust’s telephone number is (517) 487-6555.
THE
TRUST PREFERRED SECURITIES
Each
Trust Preferred Security represents an undivided beneficial interest in the
Trust.
The
Trust sold the Trust Preferred Securities to the public (including affiliates of
Capitol) and its common securities to Capitol. The Trust used the
proceeds from those sales to purchase $39,226,820 aggregate principal amount of
10.50% Junior Subordinated Debentures due 2038 of Capitol, which Capitol refers
to in this prospectus supplement as the “Debentures.” Capitol will
pay interest on the Debentures at the same rate and on the same dates as the
Trust makes payments on the Trust Preferred Securities. The Trust
will use the payments it receives on the Debentures to make the corresponding
payments on the Trust Preferred Securities.
Distributions
If
you purchase Trust Preferred Securities, you will be entitled to receive
periodic distributions on the stated liquidation amount of $10 per Trust
Preferred Security (the
“liquidation
amount”
) on the same payment dates and in the same amounts as Capitol
pays interest to the Trust on a principal amount of Debentures equal to the
liquidation amount of such Trust Preferred Security. Distributions
will accumulate from July 7, 2008. The Trust
will make
distribution payments on the Trust Preferred Securities 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. If, as described
below, Capitol defers payment of interest on the Debentures, distributions by
the Trust on the Trust Preferred Securities will also be deferred.
Deferral
of Distributions
Capitol
has the right, on one or more occasions, so long as no event of default under
the Debentures has occurred and is continuing, to defer the payment of interest
on the Debentures for one or more consecutive interest periods that do not
exceed 20 consecutive quarters, without giving rise to an event of default under
the terms of the Debentures or the Trust Preferred
Securities. However, no interest deferral may extend beyond the
maturity date of the Debentures.
If
Capitol exercises its right to defer interest payments on the Debentures, the
Trust will also defer paying a corresponding amount of distributions on the
Trust Preferred Securities during that period of deferral.
Although
neither Capitol nor the Trust will be required to make any interest or
distribution payments during a deferral period, interest on the Debentures will
continue to accrue during deferral periods and, as a result, distributions on
the Trust Preferred Securities will continue to accumulate at the interest rate
of 10.50% on the Debentures, compounded on each distribution date.
Following
the end of a deferral period, Capitol will be required to calculate and pay all
interest accrued and unpaid on the Debentures, and then the applicable amounts
will be paid with respect to the Trust Preferred Securities. During a deferral
period, Capitol will be restricted from taking certain actions. See
“—Certain Payment Restrictions Applicable to Capitol” below.
If
Capitol defers payments of interest on the Debentures, the Debentures will be
treated as being issued with original issue discount for United States federal
income tax purposes. This means that you must include interest income
with respect to the deferred distributions on your Trust Preferred Securities in
your gross income for United States federal income tax purposes, even though
neither Capitol nor the Trust will make actual payments on the Debentures, or on
the Trust Preferred Securities, as the case may be, during the relevant deferral
period. See “Certain United States Federal Income Tax
Consequences—United States Holders—Interest Income and Original Issue
Discount.”
Redemption
of Trust Preferred Securities
The
Trust will use the proceeds of any repayment or redemption of the Debentures to
redeem, on a proportionate basis, an equal amount of Trust Preferred Securities
and common securities. See “Description of the Trust Preferred
Securities and Related Instruments—Redemption or Exchange.”
For
a description of Capitol’s rights to redeem the Debentures, see “Description of
the Debentures—Redemption or Exchange.”
Liquidation
of the Trust and Distribution of Debentures to Holders
Subject
to Capitol having received prior approval of the Board of Governors of the
Federal Reserve System (which Capitol refers to in this prospectus supplement as
the Federal Reserve Board), 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 and liquidate the Trust and, after satisfaction
of the liabilities of creditors of the Trust as provided by applicable law,
cause the Debentures issued by the Trust to be distributed to the holders of the
Trust Preferred Securities and common securities in liquidation of the
Trust.
Book-Entry
The
Trust Preferred Securities are represented by one or more global securities
registered in the name of and deposited with The Depository Trust Company (
“DTC”
) or
its nominee. This means that you will not receive a certificate for
your Trust Preferred Securities, and Trust Preferred Securities will not be
registered in your name, except under certain limited circumstances described
below in “Book-Entry System.”
The
Trust Preferred Securities were accepted for clearance by DTC. Beneficial
interests in the global securities will be shown on, and transfers thereof will
be effected only through, the book-entry records maintained by DTC and its
direct and indirect participants. Owners of beneficial interests in
the Trust Preferred Securities will receive all payments relating to their Trust
Preferred Securities in U.S. dollars.
THE
DEBENTURES
Interest
The
Debentures will bear interest at the annual rate of 10.50% from the original
date of issuance. Capitol will pay that interest quarterly in arrears
on March 31, June 30, September 30 and December 31 of each
year (Capitol refers to these dates as
“interest
payment dates”
), commencing on September 30, 2008, subject to
Capitol’s right to defer interest payments as described above.
In
the event any interest payment date is not a business day, the interest payment
will be made on the following business day without adjustment, provided that if
the next business day is in the next succeeding calendar year, the interest
payment will be made on the immediately preceding business day without
adjustment.
Subordination
The
Debentures are unsecured and subordinated upon Capitol’s liquidation, including
all of Capitol’s existing and future senior and subordinated indebtedness, but
will rank equally upon liquidation with Capitol’s outstanding trust preferred
securities, and with debt that by its terms does not rank senior upon Capitol’s
liquidation to the Debentures and with Capitol’s trade creditors, and will be
effectively subordinated to all liabilities of Capitol’s subsidiaries. As of
December 31, 2008, Capitol’s indebtedness for money borrowed ranking senior to
the Debentures upon liquidation, on an unconsolidated basis, totaled
approximately $20 million and Capitol’s subsidiaries’ direct borrowings and
deposit liabilities that would effectively rank senior to the Debentures totaled
approximately $4.9 billion. See “Description of the
Debentures—Subordination of the Debentures” for the definition of “senior and
subordinated indebtedness.”
Certain
Payment Restrictions Applicable to Capitol
If
there has occurred an event that would constitute an event of default under the
Debentures, if Capitol is in default under its obligations pursuant to the
Guarantee (see “—Guarantee by Capitol” below) or if Capitol has given notice of
its election to defer payment of interest on the Debentures or any such deferral
period is continuing, 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 corresponding
junior subordinated 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 corresponding junior
subordinated debentures; or
|
·
|
redeem,
purchase or acquire less than all of the outstanding Debentures or any of
the Trust Preferred Securities.
|
Limitation
on Additional Junior Indebtedness
The
indenture governing the Debentures restricts Capitol, as well as Capitol’s
affiliates, from incurring certain additional junior indebtedness, other
than:
·
|
indebtedness
that is expressly junior and subordinated to the Debentures;
and
|
·
|
indebtedness
that is pari passu with the Debentures, unless the specified financial
ratio is satisfied.
|
See
“Description of the Debentures—Limitation on Additional Junior
Indebtedness.”
Maturity
and Redemption of Debentures
Unless
Capitol elects to accelerate the maturity date as provided below, the principal
amount of the Debentures, together with accrued and unpaid interest, is due and
payable on September 30, 2038. At any time after September 30, 2013,
but before the date which is 90 days before September 30, 2038,
Capitol may elect to shorten the maturity date of the Debentures, provided that
Capitol has received the prior approval of the Federal Reserve Board if then
required under the applicable capital guidelines, policies or regulations of the
Federal Reserve Board.
Capitol
may elect to redeem any or all of the Debentures at any time on or after
September 30, 2013, to the extent Capitol owns any Trust Preferred
Securities or, subject to having received the prior approval of the Federal
Reserve Board if then required under the capital guidelines, policies or
regulations of the Federal Reserve Board, if certain changes occur relating to
the capital treatment or tax treatment of the Debentures or investment company
laws, which Capitol sometimes refers to as special events. The
redemption price of the Debentures will be equal to their principal amount, plus
accrued and unpaid interest thereon to the date of redemption. For a description
of the special events that would permit redemption of the Debentures, see
“Description of the Debentures—Redemption.”
Events
of Default
The
following events are “events of default” with respect to the
Debentures:
·
|
default
in the payment of interest on any Debentures and such default continues
for a period of 30 days; provided that a valid deferral of an
interest payment will not constitute a default in the payment of
interest;
|
·
|
default
in the payment of principal of the Debentures when due and
payable;
|
·
|
failure
to observe any covenants or agreements with respect to the Debentures for
a period of 90 days after Capitol receives notice of such default by
the indenture trustee or requisite number of holders of Trust Preferred
Securities;
|
·
|
the
bankruptcy of Capitol; and
|
·
|
certain
circumstances leading to the dissolution, winding up or termination of the
Trust.
|
Except
in the case of the bankruptcy of Capitol (in which case automatic acceleration
will occur), if an event of default under the indenture occurs and continues,
the indenture trustee or the holders of at least 25% in aggregate
principal
amount of the outstanding Debentures may declare the entire principal and all
accrued but unpaid interest of all Debentures to be due and payable immediately.
If the indenture trustee or the holders of Debentures do not make such
declaration and the Debentures are beneficially owned by the Trust or trustee of
the Trust, the property trustee or the holders of at least 25% in aggregate
liquidation amount of the Trust Preferred Securities shall have such right. In
calculating the 25% threshold, the Trust Preferred Securities held by Capitol’s
affiliates will be treated as if they were not outstanding.
GUARANTEE
BY CAPITOL
Capitol
will fully and unconditionally guarantee payment of amounts due under the Trust
Preferred Securities on a subordinated basis, but only to the extent the Trust
has funds available for payment of those amounts. Capitol refers to this
obligation as the “guarantee.” However, the guarantee does not cover payments if
the Trust does not have sufficient funds to make the distribution payments,
including, for example, if Capitol has failed to pay to the Trust amounts due
under the Debentures.
As
issuer of the Debentures, Capitol is also obligated to pay the expenses and
other obligations of the Trust, other than its obligations to make payments on
the Trust Preferred Securities.
WARRANTS
The
warrants offered in this offering will be issued pursuant to a subscription
agreement between each of the purchasers and Capitol. You should review a copy
of the form of subscription agreement and the form of warrant, each of which has
been filed by Capitol as an exhibit to a Current Report on Form 8-K filed
with the SEC in connection with this offering, for a complete description of the
terms and conditions applicable to the warrants. The following is a brief
summary of the material terms of the warrants and is subject in all respects to
the provisions contained in the warrants.
Exercisability
Holders
may exercise the warrants beginning on the date that is six months after the
date of original issuance and at any time up to the date that is five years
after such date of issuance. The warrants will be exercisable, at the option of
each holder, in whole or in part by delivering to Capitol a duly executed
exercise notice accompanied by payment in full for the number of shares of
Capitol’s common stock purchased upon such exercise (except in the case of a
cashless exercise as discussed below). Unless otherwise specified in the
applicable warrant, the holder will not have the right to exercise any portion
of the warrant if the holder (together with its affiliates) would beneficially
own in excess of 9.9% of the number of shares of our common stock outstanding
immediately after giving effect to the exercise, as such percentage ownership is
determined in accordance with the terms of the warrants. Any holder (together
with its affiliates) beneficially owning in excess of 9.9% of the number of
shares of our common stock outstanding on the date of issuance would not be
subject to the foregoing limitation on exercisability unless such holder
(together with its affiliates) thereafter beneficially owns 9.9% (or a lesser
percentage) of the number of shares of our common stock
outstanding.
Cashless
Exercise
If at any
time during the warrant exercisability period the fair market value of Capitol’s
common stock exceeds the exercise price of the warrants, Capitol may, at its
sole discretion, permit the holders to effect a cashless exercise of the
warrants (in whole or in part) by surrendering the warrants to Capitol together
with delivery of a duly executed exercise notice, by canceling a portion of the
warrant in payment of the purchase price payable in respect of the number of
shares of our common stock purchased upon such exercise.
Exercise
Price
The
exercise price per share of common stock purchasable upon exercise of the
warrants is $10.00 per share of common stock being purchased. The exercise price
is subject to appropriate adjustment in the event of stock dividends and
distributions, stock splits, stock combinations, reclassifications or similar
events affecting our common stock.
Transferability
Subject
to applicable laws and the restriction on transfer set forth in the subscription
agreements, the warrants may be transferred at the option of the holders upon
surrender of the warrants to us together with the appropriate instruments of
transfer.
Exchange
Listing
Capitol
does not plan on making an application to list the warrants on The NYSE, The
NASDAQ Global Market, any national securities exchange or other nationally
recognized trading system.
Fundamental
Transactions
In the
event of any fundamental transaction, as described in the warrants and generally
including any capital reorganization, reclassification of Capitol’s capital
stock, consolidation or merger with another entity in which Capitol is not the
survivor, or the sale, transfer or other disposition of all or substantially all
of our assets to another entity, then Capitol will use commercially reasonable
efforts to ensure that the holders of the warrants will thereafter have the
right to receive upon exercise of the warrants such shares of stock, securities
or assets as would have been issuable or payable with respect to or in exchange
for a number of shares of Capitol’s common stock equal to the number of shares
of common stock issuable upon exercise of the warrants immediately prior to the
fundamental transaction, had the fundamental transaction not taken place, and
appropriate provision will be made so that the provisions of the warrants
(including, for example, provisions relating to the adjustment of the exercise
price) will thereafter be applicable, as nearly equivalent as may be practicable
in relation to any share of stock, securities or assets deliverable upon the
exercise of the warrants after the fundamental transaction.
Rights
as a Shareholder
Except as
otherwise provided in the warrants or by virtue of such holder’s ownership of
shares of Capitol’s common stock, the holders of the warrants do not have the
rights or privileges of holders of common stock, including any voting rights,
until they completly the exercise their warrants or a portion
thereof.
Waivers
and Amendments
Any term
of the warrants may be amended or waived only with Capitol’s written consent and
the written consent of the holders of warrants representing at least two-thirds
of the number of shares of Capitol’s common stock then subject to outstanding
warrants, provided that such amendment or waiver applies to all warrants in the
same fashion. However, in no event may the exercise price of or the number of
shares of Capitol’s common stock subject to any warrant be amended, nor may the
right to exercise that warrant be waived, without the written consent of the
holder of that warrant.
THE
OFFERING
Securities
Offered:
|
2,000,000
Trust Preferred Securities and warrants.
|
|
|
Warrants:
|
Warrants
to purchase up to 2,000,000 shares of Capitol’s common stock. Investors
purchasing the Trust Preferred Securities will be issued a warrant to
purchase one share of Capitol’s common stock for each share of the Trust
Preferred Securities purchased. The warrants will be separable
from the Trust Preferred Securities and exercisable during the period
commencing six months after the date of original issuance and ending five
years from the date of such issuance at an exercise price of $10.00 per
warrant. This prospectus also relates to the offering of the shares of
common stock issuable upon exercise of the warrants.
|
|
|
Trust
Preferred Securities Outstanding:
|
3,805,000,
as of February - 2009.
|
|
|
Use
of Proceeds:
|
The
proceeds from the sale of the Trust Preferred Securities offered by this
prospectus will go directly to the selling shareholders, which may include
but is not limited to Capitol’s Bank affiliates and
Capitol.
|
|
|
Risk
Factors:
|
Investing
in the Trust Preferred Securities involves a high degree of
risk. See the Section below under the heading “Risk Factors,”
Capitol’s Annual Report on Form 10-K for the fiscal year ended December
31, 2007 in Item 1A under “Risk Factors” and as updated in any future
filings Capitol makes with the SEC that are incorporated by reference
herein.
|
|
|
NYSE
Symbol for Trust Preferred Securities:
|
CBC
PB.
|
|
|
NYSE
Symbol for Common Stock:
|
CBC.
|
The
selling securityholders may sell the Trust Preferred Securities subject to this
prospectus from time to time and may also decide not to sell all of the Trust
Preferred Securites they are permitted to sell under this
prospectus. The selling securityholders will act independently in
making decisions with respect to the timing, manner and size of each
sale. Furthermore, the selling securityholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
Trust Preferred Securities in the course of hedging in positions they
assume. The selling securityholders may also sell the Trust Preferred
Securities short and deliver the Trust Preferred Securities covered by this
prospectus to close out short positions and to return borrowed shares in
connection with such short sales. The selling securityholders may
also loan or pledge the Trust Preferred Securities to broker-dealers that in
turn may sell such Trust Preferred Securities.
CAPITOL
BANCORP LTD.
About
Capitol Bancorp Ltd.
Capitol
is a $5.7 billion national community banking company, with a network of 64
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 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
is a uniquely structured affiliation of community banks. Each of
Capitol’s banks is viewed by its management as being a separate business from
the perspective of monitoring performance and allocation of financial resources.
Capitol uses a unique strategy of bank ownership and development.
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. Subsidiary banks have 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
TARP
Application.
In October 2008, Capitol filed its application
with its primary federal regulator and the FDIC pursuant to the U.S. Treasury’s
Capital Purchase Program (
“CPP”
). As
of February 27
,
2009, Capitol’s application remains pending and it there can be no assurance
that Capitol will be approved for CPP funds or, if approved, whether Capitol
will accept an investment by the U.S. Treasury.
Consolidation of
Nine Michigan Bank Affiliates.
In late December 2008, Capitol filed
applications with the FDIC and the Michigan Office of Financial and Insurance
Regulation for permission to merge nine of its wholly-owned Michigan bank
charters into one bank.
2008 Year End
Results.
On January 29, 2009, Capitol announced its year-end 2008
operating results, reporting a net loss of $28.6 million ($1.67 per share) and
net income of $1.1 million ($0.06 per diluted share) for the three months ended
December 31, 2008.
Common
Stock Dividend.
On February 6, 2009, Capitol
announced a quarterly dividend of $0.05 per share, payable March 2, 2009, to
shareholders of record as of February 16, 2009.
Consolidation of
Four Arizona Bank Affiliates.
On February 13, 2009, Capitol
filed applications with the FDIC and the Arizona Department of Banks to
consolidate four Arizona affiliate banks. Pending regulatory approval, Arrowhead
Community Bank, Camelback Community Bank, Mesa Bank and Sunrise Bank of Arizona
will be consolidated and operate as one charter, Sunrise Bank of
Arizona.
THE
TRUST
The
following is a summary of some of the terms of the Trust. This
summary, together with the summary of some of the provisions of the related
documents described below, contains a description of the material terms of the
Trust but is not necessarily complete. Capitol refers you to the
documents referred to in the following description, copies of which are
available upon request as described above under “Where You Can Find More
Information.”
Capitol
Trust XII, or the
“Trust,”
is a statutory trust organized under Delaware law pursuant to a trust agreement,
signed by Capitol, as sponsor of the Trust, and the Delaware trustee and the
administrative trustees and the filing of a certificate of trust with the
Delaware Secretary of State. The trust agreement was amended and restated in its
entirety by Capitol, the Delaware trustee, the property trustee and the
administrative trustees before the issuance of the Trust Preferred
Securities. Capitol refers to the trust agreement, as so amended and
restated, as the
“Trust
Agreement.”
The Trust Agreement was qualified as an indenture
under the Trust Indenture Act of 1939, as amended, or
“Trust Indenture
Act.”
The
Trust was established solely for the following purposes:
·
|
issuing
the Trust Preferred Securities and common securities representing
undivided beneficial interests in the
Trust;
|
·
|
investing
the gross proceeds of the Trust Preferred Securities and the common
securities in the Debentures; and
|
·
|
engaging
in only those activities convenient, necessary or incidental
thereto.
|
Capitol
owns all of the Trust’s common securities, either directly or indirectly. The
common securities rank equally with the Trust Preferred Securities and the Trust
will make payment on its trust securities pro rata, except that upon certain
events of default under the Trust Agreement relating to payment defaults on the
Debentures, the rights of the holders of the common securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Trust Preferred
Securities.
The
Trust’s business and affairs is conducted by its trustees, each appointed by
Capitol as sponsor of the Trust. The trustees are Wells Fargo Bank, N.A. as the
“property trustee,” Wells Fargo Delaware Trust Company as the “Delaware trustee”
and three or more individual trustees, or “administrative trustees,” who are
employees or officers affiliated with Capitol. The property trustee acts as sole
trustee under the Trust Agreement for purposes of compliance with the Trust
Indenture Act and also acts as trustee under the guarantee and the indenture.
See “Description of the Guarantee.”
Unless
an event of default under the indenture has occurred and is continuing at a time
that the Trust owns any Debentures, the holders of the Trust’s common securities
are entitled to appoint, remove or replace the property trustee and/or the
Delaware trustee. Holders of a majority in liquidation amount of the Trust
Preferred Securities are entitled to appoint, remove or replace the property
trustee and/or the Delaware trustee if an event of default under the indenture
has occurred and is continuing.
The
right to vote to appoint, remove or replace the administrative trustees is
vested exclusively in Capitol, as the sole holder of the Trust’s common
securities, and in no event will the holders of the Trust Preferred Securities
have such right.
The
Trust is a “finance subsidiary” of Capitol within the meaning of Rule 3-10
of Regulation S-X under the Securities Act. As a result, no
separate financial statements of the Trust are included in this prospectus
supplement, and Capitol does not expect that the Trust will file reports with
the SEC under the Securities Exchange Act of 1934, as amended (the “
Exchange
Act
”).
The
Trust is perpetual, but may be dissolved earlier as provided in the Trust
Agreement.
REGULATORY
CONSIDERATIONS
Capitol
is extensively regulated under both federal and state law. Capitol is a bank
holding company under the Bank Holding Company Act of 1956 (the
“Bank Holding
Company Act”
), as amended and Regulation Y thereunder. As such, the
Board of Governors of the Federal Reserve System (the
“Federal Reserve
Board”
) regulates, supervises and examines Capitol. Capitol’s banking
subsidiaries have deposit insurance provided by the Federal Deposit Insurance
Corporation through its Deposit Insurance Fund. For a discussion of the material
elements of the regulatory framework applicable to bank holding companies and
their subsidiaries and specific information relevant to Capitol, please refer to
Capitol’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007 and any subsequent reports Capitol files with the SEC,
which are incorporated by reference in this prospectus supplement.
This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. As a result of this regulatory framework, Capitol’s operating results
are affected by actions of the Federal Deposit Insurance Corporation, which
insures the deposits of Capitol’s banking subsidiaries within certain limits, of
certain other federal and state regulatory agencies that regulate Capitol and
its bank subsidiaries and the SEC.
Capitol’s
operating results are also affected by general economic conditions, Capitol’s
management policies and legislative action. In addition, there are numerous
governmental requirements and regulations that affect Capitol’s business
activities. A change in applicable statutes, regulations or regulatory policy
may have a material effect on Capitol’s business.
Neither
the Federal Reserve Board nor any other federal or state regulatory agency has
approved or disapproved of the purchase of the Trust Preferred Securities by
Capitol’s bank subsidiaries or other affiliates in this offering.
Depository
institutions, like Capitol’s bank subsidiaries, are also affected by various
federal and state laws, including those relating to consumer protection and
similar matters. Capitol also has other subsidiaries regulated, supervised and
examined by the Federal Reserve Board, as well as other relevant state and
federal regulatory agencies and self-regulatory organizations, including,
without limitation, the Office of the Comptroller of the Currency (“OCC”), the
Office of Thrift Supervision (“OTS”) and the NYSE. Capitol’s nonbank
subsidiaries may be subject to other laws and regulations of the federal
government or the various states in which they do business.
ACCOUNTING
AND REGULATORY CAPITAL TREATMENT
The
Trust is not consolidated on Capitol’s balance sheet as a result of the
accounting changes reflected in Financial Accounting Standards Board
Interpretation No. 46, “Consolidation of Variable Interest Entities,” as
amended and revised. Accordingly, for balance-sheet purposes, Capitol
recognizes the aggregate principal amount, net of discount, of the Debentures
Capitol issues to the Trust as a liability and the amount Capitol invests in the
Trust’s common securities as an asset. The interest paid on the
Debentures is recorded as interest expense on Capitol’s statement of
operations.
On
March 1, 2005, the Federal Reserve adopted amendments to its risk-based
capital guidelines. Among other things, the amendments confirm the continuing
inclusion of outstanding and prospective issuances of trust-preferred securities
in the Tier 1 capital of bank holding companies, but make the qualitative
requirements for trust-preferred securities issued on or after April 15,
2005 more restrictive in certain respects and make the quantitative limits
applicable to the aggregate amount of trust-preferred securities and other
restricted core capital elements that may be included in Tier 1 capital of
bank holding companies more restrictive. Capitol believes that the Trust
Preferred Securities will qualify as regulatory capital, unless owned by any of
Capitol’s consolidated subsidiaries.
RISK
FACTORS
An investment in the Trust Preferred
Securities and Warrants is subject to the risks described below, which may
affect the value of the Trust Preferred Securities, the Warrants and the shares
of Capitol’s Common Stock issuable upon the exercise of the warrants. In
addition, Capitol’s business, financial condition and results of operations are
subject to various risks, uncertainties and other factors, including those
discussed below and elsewhere in the prospectus, this prospectus supplement and
the documents incorporated by reference therein.
You should carefully review the
following risk factors and other information, including the section entitled
“Forward-Looking Statements,” contained in this prospectus supplement, in the
documents incorporated by reference in this prospectus supplement and in the
accompanying prospectus before deciding whether this investment is suited to
your particular circumstances. In addition, because each Trust Preferred
Security sold in this offering will represent a beneficial interest in the
Trust, the only assets of which will be Capitol’s Debentures, you are also
making an investment decision with regard to the Debentures, as well as
Capitol’s guarantee of the Trust’s obligations. You should carefully review all
the information in this prospectus supplement about all of these
securities.
Risks
Relating to Capitol’s Business
Capitol’s
Business May Be Adversely Affected by Conditions in the Financial Markets and
Economic Conditions Generally
Since
December 2007, the United States has been in a recession. Business activity
across a wide range of industries and regions is greatly reduced and local
governments and many businesses are in serious difficulty due to the lack of
consumer spending and the lack of liquidity in the credit markets. Unemployment
has increased significantly.
Since
mid-2007, and particularly during the second half of 2008, the financial
services industry and the securities markets generally were materially and
adversely affected by significant declines in the values of nearly all
asset
classes and by a serious lack of liquidity. This was initially triggered by
declines in home prices and the values of subprime mortgages, but spread to all
mortgage and real estate asset classes, to leveraged bank loans and to nearly
all asset classes, including equity securities. Global markets have been
characterized by substantially increased volatility, short-selling and an
overall loss of investor confidence, initially in financial institutions, but
more recently in companies in a number of other industries and in the broader
markets.
Market
conditions have also led to the failure or merger of a number of prominent
financial institutions. Financial institution failures or near-failures have
resulted in further losses as a consequence of defaults on securities issued by
them and defaults under contracts entered into with such entities as
counterparties. Furthermore, declining asset values, defaults on mortgages and
consumer loans, and the lack of market and investor confidence, as well as other
factors, have all combined to increase credit default swap spreads, to cause
rating agencies to lower credit ratings, and to otherwise increase the cost and
decrease the availability of liquidity, despite very significant declines in
Federal Reserve borrowing rates and other government actions. Some banks and
other lenders have suffered significant losses and have become reluctant to
lend, even on a secured basis, due to the increased risk of default and the
impact of declining asset values on the value of collateral. The foregoing has
significantly weakened the strength and liquidity of some financial institutions
worldwide. In 2008, the U.S. government, the Federal Reserve Board and other
regulatory agencies have taken numerous steps to increase liquidity and to
restore investor confidence, including investing approximately $200 billion
in the equity of other banking organizations, but asset values have continued to
decline and access to liquidity continues to be very limited.
Capitol’s
financial performance generally, and in particular the ability of its banks’
borrowers to pay interest on and repay principal of outstanding loans and the
value of collateral securing those loans, is highly dependent on the business
environment in the markets where Capitol operates and in the United States as a
whole. The current recession is characterized by declines in economic
growth, business activity or investor or business confidence; limitations on the
availability or increases in the cost of credit and capital; falling commercial
and residential real estate values; inactive or nonexistent markets for the sale
of real estate; or a combination of these or other factors.
Overall,
during 2008, the business environment has been adverse for many households and
businesses in the United States and worldwide. The business
environment in Texas and several other markets in which Capitol operates has
been less adverse than in the United States generally but continues to
deteriorate. It is expected that the business environment in the United States
and worldwide will continue to deteriorate for the foreseeable
future. There can be no assurance that these conditions will improve
in the near term. Such conditions could adversely affect the credit quality of
Capitol’s loans, results of operations and financial condition.
Newly
formed banks are likely to incur significant operating losses that could
negatively affect the availability of earnings to support future
growth.
Many
of Capitol’s bank subsidiaries are less than three years old. Those
operating losses can be significant and can occur for longer periods than
planned depending upon the ability to control operating expenses and generate
net interest income, which could affect the availability of earnings retained to
support future growth or to fund dividends to Capitol, which could impact its
ability to make payments on the Debentures. Recently formed banks are
expected to incur operating losses in their early periods of operation because
of an inability to generate sufficient net interest income to cover operating
costs. Newly formed banks may never become profitable. Continued
economic challenges may extend the period of time that it will take a newly
formed bank to generate income.
If
Capitol is unable to manage its growth, Capitol’s ability to provide quality
services to customers could be impaired and cause Capitol’s customer and
employee relations to suffer.
Capitol
has rapidly and significantly expanded its operations in recent periods.
Capitol’s rapid growth has placed significant demands on its management and
other resources. To manage its growth, Capitol will need to attract, hire and
retain highly skilled and motivated officers and employees and improve existing
systems and/or implement new systems for:
·
|
transaction
processing;
|
·
|
operational
and financial management; and
|
·
|
training,
integrating and managing Capitol’s employee
base.
|
Capitol’s
banks’ small size may make it difficult to compete with larger institutions
because Capitol is not able to compete with large banks in the offering of
significantly larger loans.
Capitol
endeavors to capitalize its newly formed banks with a moderate dollar amount
permitted by regulatory agencies. As a result, the legal lending limits of
Capitol’s banks severely constrain the size of loans that those banks can make.
In addition, many of the banks’ competitors have significantly larger
capitalization and, hence, an ability to make significantly larger loans. The
inability to offer larger loans limits the revenues that can be earned from
interest amounts charged on larger loan balances.
Capitol’s
banks are intended to be small in size. Many operate from single locations. They
are small relative to the dynamic markets in which they operate. Each of those
markets has a variety of large and small competitors that have resources far
beyond those of Capitol’s banks. While it is the intention of Capitol’s banks to
operate as niche players within their geographic markets, their continued
existence is dependent upon being able to attract and retain loan customers in
those markets that are dominated by substantially larger regulated and
unregulated financial institutions.
If
Capitol cannot recruit additional highly qualified personnel, its banks’
customer service could suffer, causing Capitol’s customer base to
decline.
Capitol’s
strategy is also dependent upon its continuing ability to attract and retain
other highly qualified personnel. Competition for such employees among financial
institutions is intense. Availability of personnel with appropriate community
banking experience varies. If Capitol does not succeed in attracting new
employees or retaining and motivating current and future employees, its business
could suffer significantly, increasing the possibility of a loss of value in the
Trust Preferred Securities or a deferral of interest payments.
Capitol
and its banks operate in an environment highly regulated by state and federal
government; changes in federal and state banking laws and regulations could have
a negative impact on its business.
As
a bank holding company, Capitol is regulated primarily by the Federal Reserve
Board. Many of Capitol’s current bank affiliates are regulated primarily by
state banking agencies, the FDIC, OCC, in the case of one national bank,
and OTS, in the case of Capitol’s federal savings banks.
Federal
and the various state laws and regulations govern numerous aspects of the banks’
operations, including:
·
|
adequate
capital and financial condition;
|
·
|
permissible
types and amounts of extensions of credit and
investments;
|
·
|
permissible
nonbanking activities; and
|
·
|
restrictions
on dividend payments.
|
Federal
and state regulatory agencies have extensive discretion and power to prevent or
remedy unsafe or unsound practices or violations of law by banks and bank
holding companies. Capitol and its banks also undergo periodic examinations by
one or more regulatory agencies. Following such examinations, Capitol may be
required, among other things, to change its asset valuations, amounts of
required loan loss allowances or to restrict bank operations. Those actions
would result from the regulators’ judgments based on information available to
them at the time of their examination.
Capitol’s
banks’ operations are required to follow a wide variety of state and federal
consumer protection and similar statutes and regulations. Federal and state
regulatory restrictions limit the manner in which Capitol and its banks may
conduct business and obtain financing. Those laws and regulations can and do
change significantly from time to time and any such change could adversely
affect Capitol.
Capitol’s
banks’ allowances for loan losses may prove inadequate to absorb actual loan
losses, which may adversely impact net income or increase operating
losses.
Capitol
believes that its consolidated allowance for loan losses is maintained at a
level adequate to absorb inherent losses in the loan portfolios at the
balance-sheet date. Management’s estimates are used to determine the allowance
and are based on historical loss experience, specific problem loans, value of
underlying collateral and other relevant factors. These estimates are subjective
and their accuracy depends on the outcome of future events. Actual future losses
may differ from current estimates. Depending on changes in economic, operating
and other conditions, including changes in interest rates that are generally
beyond Capitol’s control, actual loan losses could increase significantly. As a
result, such losses could exceed current allowance estimates. No assurance can
be provided that the allowance will be sufficient to cover actual future loan
losses should such losses be realized.
Loan
loss experience, which is helpful in estimating the requirements for the
allowance for loan losses at any given balance sheet date, has been minimal at
some of Capitol’s banks. Because many of Capitol’s banks are young, they do not
have seasoned loan portfolios and it is likely that the ratio of the allowance
for loan losses to total loans may need to be increased in future periods as the
loan portfolios become more mature and loss experience evolves. If it becomes
necessary to increase the ratio of the allowance for loan losses to total loans,
such increases would be accomplished through higher provisions for loan losses,
which may adversely impact net income or increase operating losses and could
result in reported net losses on a consolidated basis.
The
domestic economy is currently in a severe recession and Capitol’s levels of
nonperforming loans have increased significantly. Capitol’s loan
losses increased significantly in 2008. It is anticipated that levels
of nonperforming loans and related loan losses will continue to increase as
economic conditions in various local markets and nationally evolve.
In
addition, bank regulatory agencies, as an integral part of their supervisory
functions, periodically review the adequacy of the allowance for loan losses.
Regulatory agencies may require Capitol or its banks to increase their provision
for loan losses or to recognize further loan charge-offs based upon judgments
different from those of management. Any increase in the allowance required by
regulatory agencies could have a negative impact on Capitol’s operating
results.
Capitol’s
commercial loan concentration in small businesses and loans collateralized by
commercial real estate increases the risk of defaults by borrowers and
substantial credit losses could result.
Capitol’s
banks make various types of loans, including commercial, consumer, residential
mortgage and construction loans. Capitol’s strategy emphasizes lending to small
businesses and other commercial enterprises. Capitol typically relies upon
commercial real estate as a source of collateral for many of Capitol’s loans.
Recently, regulatory agencies have expressed concern with banks with a large
concentration in commercial real estate due to the recent downturn in the real
estate market in certain areas of the country, leading to increased risk of
credit loss and extended periods of sale. Loans to small and medium-sized
businesses are generally riskier than single-family mortgage loans. Typically,
the success of a small or medium-sized business depends on the management
talents and efforts of one or two persons or a small group of persons, and the
death, disability or resignation of one or more of these persons could have a
material adverse impact on the business. In addition, small and medium-sized
businesses
frequently
have smaller market shares than their competition, may be more vulnerable to
economic downturns, often need substantial additional capital to expand or
compete and may experience substantial variations in operating results, any of
which may impair a borrower’s ability to repay a loan.
Loan
origination activities, for both commercial and residential mortgages, involve
collateral valuation risks and the risk of the subsequent identification of
origination fraud or other losses which could exceed Capitol’s allowance for
loan losses.
Capitol’s
banks use an enterprise-wide loan policy which provides for conservative
loan-to-value guidelines when loans are originated. In today’s difficult real
estate economy in many parts of the country, falling property values and
significant foreclosure activity of both residential and commercial real estate
property are resulting in significant loan losses at many financial
institutions, including Capitol. Further, although most residential mortgage
loans originated by Capitol’s banks have been sold away to investors,
if it is subsequently determined that such loans were originated with any
element of alleged fraud, such as exaggerated borrower income or assets, for
example, the originating institution may be liable for any losses with such
loans and may have to buy back those loans. The potential for additional loan
losses from valuation issues or fraud is unknown. Fraud risks are particularly
difficult to identify and quantify, especially when the duration of the risk is
the same as the term of the loan, often as long as 30 years or more.
Occurrences of fraud are often more prevalent during an economic downturn or
recession. Potential losses from valuation issues or occurrences of fraud could
significantly exceed Capitol’s allowances for loan losses, adversely affecting
Capitol’s profitability and ability to make payments on the Trust Preferred
Securities.
Actions
by the Open Market Committee of the Federal Reserve Board may adversely affect
Capitol’s net interest income.
Changes
in Market Interest Rates.
Capitol’s results of
operations are significantly dependent on net interest income. Net interest
income is the difference between interest income on interest-earning assets,
such as loans, and interest expense on interest-bearing liabilities, such as
deposits. Therefore, any change in general market interest rates, whether as a
result of changes in monetary policies of the Federal Reserve Board or
otherwise, can have a significant effect on net interest income. Capitol’s
assets and liabilities may react differently to changes in overall market rates
or conditions because there may be mismatches between the repricing or maturity
characteristic of assets and liabilities. As a result, changes in interest rates
can affect net interest income in either a positive or negative
way.
Recently,
the Open Market Committee of the Federal Reserve Board decreased interest rates
to an unprecedented level to near zero. Future stability of interest
rates and Federal Reserve Open Market Committee policy, which impact such rates,
are uncertain.
Changes
in the Yield Curve.
Changes in the difference
between short and long-term interest rates, commonly known as the yield curve,
may also harm Capitol’s business. For example, short-term deposits may be used
to fund longer-term loans. When differences between short-term and long-term
interest rates shrink or disappear, the spread between rates paid on deposits
and received on loans could narrow significantly, decreasing net interest
income.
Capitol’s
bank subsidiaries have decentralized management which could have a negative
impact on the rate of growth and profitability of Capitol and its bank
subsidiaries.
Capitol’s
bank subsidiaries have independent boards of directors and management teams.
This decentralized structure gives the banks control over the day-to-day
management of their institution, including credit decisions, the selection of
personnel, the pricing of loans and deposits and marketing
decisions. This decentralized structure may impact Capitol’s ability
to uniformly implement corporate or enterprise-wide strategy at the bank level.
It may slow Capitol’s ability to react to changes in strategic direction due to
outside factors such as rate changes and changing economic conditions. This
decentralized structure may cause additional management time to be spent on
internal issues and could negatively impact the growth and profitability of the
banks individually and the holding company.
Capitol
may need to raise additional capital in order to fund growth and to remain
“well-capitalized,” reducing funds available for expansion.
Capitol’s
ability to raise additional capital to support growth and meet minimum
regulatory capital requirements at the holding company and at each of its bank
subsidiaries is dependent on its being able to efficiently and cost-effectively
access the capital markets. Accordingly, Capitol must be able to issue
additional equity securities, trust preferred securities and/or debt when and in
the amounts Capitol deems necessary, and there must be ready purchasers of
Capitol’s securities willing to invest in Capitol. Furthermore, events or
circumstances in the capital markets generally that are beyond Capitol’s control
may adversely affect Capitol’s capital costs and ability to raise capital at any
given time. Capitol’s inability to raise additional capital on terms
satisfactory to Capitol or at all may affect Capitol’s ability to grow and would
adversely affect Capitol’s financial condition and results of
operations. During the second half of 2008, capital markets became
volatile and unstable creating an unfavorable environment for raising capital
for financial institutions such as Capitol. Its uncertain when such
markets will stabilize and conditions will become more favorable for raising
capital.
New
accounting or tax pronouncements or interpretations may be issued by the
accounting standard-setters, regulatory agencies or other government bodies
which could change existing accounting methods. Changes in accounting methods
could negatively impact Capitol’s results of operations and financial
condition.
Current
accounting and tax rules, standards, policies, and interpretations influence the
methods by which financial institutions conduct business, implement strategic
initiatives and tax compliance and govern financial reporting and disclosures.
These laws, regulations, rules, standards, policies and interpretations are
constantly evolving and may change significantly over time. Events that may not
have a direct impact on Capitol, such as the failure or bankruptcy of major U.S.
companies, have resulted in legislators, regulators, and authoritative bodies,
such as the Financial Accounting Standards Board, the Securities and Exchange
Commission, the Public Company Accounting Oversight Board, and various taxing
authorities responding by adopting and/or proposing substantive revisions to
laws, regulations, rules, standards, policies, and interpretations. New
accounting pronouncements and varying interpretations of accounting
pronouncements have occurred and may occur in the future. A change in accounting
standards may adversely affect reported financial condition and results of
operations.
Capitol’s
business continuity plans or data security systems could prove to be inadequate,
resulting in a material interruption in, or disruption to, Capitol’s business
and a negative impact on its results of operations.
Capitol
relies heavily on electronic communications and information technology systems
to conduct its business. Any failure, interruption or breach in security of
these systems, whether due to severe weather, natural disasters, acts of war or
terrorism, criminal activity or other factors, could result in failures or
disruptions in general ledger, deposit, loan, customer relationship management
and other systems. While Capitol has disaster recovery and other policies and
procedures designed to prevent or limit the effect of the failure, interruption
or security breach of its information systems, there can be no assurance that
any such failures, interruptions or security breaches will not occur or, if they
do occur, that they will be adequately addressed. The occurrence of any
failures, interruptions or security breaches of Capitol’s information technology
systems could damage the reputation of Capitol and its banks, result in a loss
of customer business, subject Capitol and Capitol’s subsidiary banks to
additional regulatory scrutiny, or expose Capitol to civil litigation and
possible financial liability, any of which could have a material adverse effect
on Capitol’s results of operations.
Capitol
could face unanticipated environmental liabilities or costs related to real
property owned or acquired through foreclosure. Compliance with federal, state
and local environmental laws and regulations, including those related to
investigation and clean-up of contaminated sites, could have a negative effect
on expenses and results of operations.
A
significant portion of Capitol’s affiliate banks’ loan portfolios are secured by
real property. During the ordinary course of business, Capitol’s affiliate banks
may foreclose on and take title to properties securing certain loans. In doing
so, there is a risk that hazardous or toxic substances could be found on these
properties. If hazardous or toxic substances are found, Capitol’s affiliate
banks may be liable for remediation costs, as well as for personal injury and
property damage. Environmental laws may require Capitol’s affiliate banks to
incur substantial expenses
and may
materially reduce the affected property’s value or limit Capitol’s affiliate
banks’ ability to use or sell the affected property. In addition, future laws or
more stringent interpretations or enforcement policies with respect to existing
laws may increase Capitol’s affiliate banks’ exposure to environmental
liability. Although Capitol’s affiliate banks have policies and procedures to
perform an environmental review before initiating any foreclosure action on real
property, these reviews may not be sufficient to detect all potential
environmental hazards. The remediation costs and any other financial liabilities
associated with an environmental hazard could have a material adverse effect on
results of operations.
The
loss of personnel may adversely affect Capitol’s operations.
Capitol
is a relationship-driven organization. Capitol’s growth and development to date
have resulted in large part from the efforts of Capitol’s officers and
management of Capitol’s affiliate banks who have primary contact with Capitol’s
clients and are extremely important in maintaining personalized relationships
with Capitol’s client base, which is a key aspect of Capitol’s business strategy
and in increasing Capitol’s market presence. The loss of one or more
of these people could have a material adverse effect central to Capitol’s
operations if remaining employees are not successful in retaining client
relationships.
Capitol
has entered into employment contracts with Joseph D. Reid, Capitol’s CEO and
Chairman, Cristin K. Reid, Capitol’s Corporate President, and numerous other
executive officers and managing directors. Despite these agreements, there can
be no assurance that any of these individuals will decide to remain employed by
Capitol or that Capitol’s business will be protected by various covenants not to
compete or covenants not to solicit Capitol’s clients that are contained in
these agreements.
Capitol
relies on dividends from its wholly-owned subsidiaries.
Capitol
is a separate and distinct legal entity from its wholly-owned subsidiaries. It
receives dividends from its subsidiaries to help pay interest and principal on
its debt obligations, including the Debentures. Capitol does not own, directly
or indirectly, all of the equity of all of its subsidiaries. Capitol currently
does not rely on dividends from partially-owned subsidiaries. To the extent any
partially owned subsidiaries do pay dividends or make distributions, the other
holders of equity will participate pro rata with Capitol. Various
federal and state laws and regulations limit the amount of dividends that the
banks and certain nonbank subsidiaries may pay to the holding company. In the
event the banks are unable to pay sufficient dividends to Capitol, it may not be
able to service its debt obligations or pay its other obligations, including
obligations on the Debentures. The inability to receive dividends
from its subsidiaries could have a material adverse effect on the Company’s
business, financial condition and results of operations and its ability to meet
its obligations on the Debentures.
Capitol
may participate in the U.S. Treasury’s Capital Purchase Program, or other
programs announced by the U.S. Treasury, which may be dilutive to Capitol’s
common stock.
The
Emergency Economic Stabilization Act of 2008 (the
“EESA”
)
enacted by the U.S. Congress in response to the financial crises affecting the
banking system and financial markets and going concern threats to investment
banks and other financial institutions was signed into law on October 3,
2008. On October 14, 2008, the U.S. Department of Treasury (the
“U.S.
Treasury”
) announced the Troubled Asset Relief Program’s Capital Purchase
Program (
“CPP”
). This
program made $250 billion of capital available to U.S. financial institutions
from the initial $350 billion authorized by the EESA in the form of preferred
stock investments by the U.S. Treasury under the following general
terms:
·
|
the
preferred stock issued to the U.S. Treasury would pay 5% dividends for the
first five years, and then 9% dividends
thereafter;
|
·
|
in
connection with the purchase of preferred stock, the U.S. Treasury will
receive warrants entitling the U.S. Treasury to buy the participating
institution’s common stock equivalent in value to 15% of the preferred
stock;
|
·
|
the
preferred stock may not be redeemed for a period of three years, except
with proceeds from high-quality private
capital;
|
·
|
the
consent of the U.S. Treasury will be required to increase common dividends
per share or any share repurchases, with limited exceptions, during the
first three years, unless the preferred stock has been redeemed or
transferred to third parties; and
|
·
|
participating
companies must adopt the U.S Treasury’s standards for executive
compensation and corporate governance for the period during which the U.S.
Treasury holds the equity issued under
the TARP.
|
On
October 22, 2008, Capitol submitted an application to sell up to $144 million in
preferred stock to the U.S. Treasury. If Capitol’s application is
approved and its Board of Directors determines to move forward with
participation in the program, it would, as stated above, generally be prohibited
from increasing the dividend paid on the shares of its common stock or
repurchasing any shares of its common stock, for three years after the preferred
stock is sold, unless Capitol obtains the U.S. Treasury’s prior
consent. Accordingly, there can be no assurance that Capitol will
increase, or even pay, dividends on the shares of common stock you receive if
you exercise the warrants.
In
addition, participation on the terms set forth above would require Capitol to
issue a 10-year warrant permitting the U.S. Treasury to purchase up to 4.5
million in shares of Capitol’s common stock, which would be immediately
exercisable. The proceeds from these transactions would be allocated
on a relative fair value basis between the preferred stock and the warrant
purchased by the U.S. Treasury. The preferred stock and the warrant
would both be classified in shareholders’ equity in Capitol’s consolidated
balance sheet. The issuance of the preferred stock and the warrant
issued by the U. S. Treasury, including preferred-stock dividends, would result
in a reduction of basic and diluted earnings per common
share. Capitol’s banks have restricted investments in Federal Home
Loan Banks which may be subject to future impairment.
There is
no assurance Capitol will be approved to participate in the CPP or, if approved,
whether it will choose to participate.
Capitol’s
Banks have restricted investments in Federal Home Loan Banks which may be
subject to future impairment.
As of December 31,
2008, Capitol’s banks had investments in several Federal Home Loan Banks
approximating $26.1 million. Such investments are restricted
securities which may be redeemed only by the issuer. Future
redemption of the securities is subject to the issuers liquidity and capital
adequacy which are, in part, dependent upon valuation of the issuer’s
significant mortgage-backed securities portfolios.
Risks Relating to this Offering and Ownership of the
Trust Preferred Securities
Purchases
of the Trust Preferred Securities by bank subsidiaries of Capitol will not count
as regulatory capital.
On
July 7, 2008, certain affiliates of Capitol, including several of its
state-chartered bank subsidiaries, purchased $24.6 million of Trust
Preferred Securities for investment purposes. The amount of the Trust
Preferred Securities purchased by such bank subsidiaries did not qualify as
regulatory capital under the risk-based capital guidelines adopted by the
Federal Reserve Board on a consolidated basis for so long as they are held by
Capitol’s bank subsidiaries. Capitol believes that any amounts
purchased by parties other than such bank subsidiaries, including parties not
affiliated with Capitol, should qualify as regulatory capital under the
aforementioned risk-based capital guidelines. Capitol believes that
purchases of the Trust Preferred Securities by Capitol’s bank subsidiaries are
not prohibited under applicable laws and banking regulations.
Subsequent
sales of the Trust Preferred Securities by the selling securityholders may
impact the market price of the Trust Preferred Securities.
Capitol
is unable to predict the time periods each of the selling securityholders will
hold such securities for investment. A selling securityholder may
elect to sell such Trust Preferred Securities after the declaration of the
effectiveness of this registration statement for liquidity or other
asset/liability management purposes, for other business reasons or if required
by a regulatory agency. If a selling securityholder sells some or all
of the Trust Preferred Securities, other selling securityholders may also elect
to sell Trust Preferred Securities, and such sale could have an adverse effect
on the trading price and liquidity of the Trust Preferred
Securities.
The
indenture does not limit the amount of indebtedness for money borrowed Capitol
may issue that ranks senior to the Debentures upon Capitol’s liquidation or in
right of payment as to principal or interest.
The
Debentures will be subordinate and junior upon Capitol’s liquidation to its
obligations under all of Capitol’s indebtedness for money borrowed that is not
by its terms made pari passu with or junior to the Debentures upon liquidation.
At December 31, 2008, Capitol’s indebtedness ranking senior to the Debentures on
liquidation, on a consolidated basis, totaled approximately
$446.9 million.
In
the event of the bankruptcy, liquidation or dissolution of Capitol, its assets
would be available to pay obligations under the Debentures and the guarantee
only after Capitol made all payments on its senior indebtedness. See
“Description of the Debentures—Subordinations of the Debentures.”
Capitol
has outstanding debt that will rank equally with the Debentures, and the
indenture permits Capitol to incur more, subject to a formula
limitation.
Capitol
has approximately $179.8 million of outstanding junior subordinated debt
securities underlying outstanding trust preferred securities. In addition, the
indenture permits Capitol to issue additional junior subordinated indebtedness,
subject to a formula limitation. See “Description of the Debentures—Limitation
on Additional Junior Indebtedness.” In the event of the bankruptcy, liquidation
or dissolution of Capitol, its assets available to pay obligations under the
Debentures and the guarantee (after paying all senior indebtedness, as described
in the preceding risk factor) would have to be shared pro rata with the holders
of Capitol’s other outstanding junior subordinated debt and any additional
junior subordinated indebtedness Capitol issues in the future.
The
Debentures beneficially owned by the Trust will be effectively subordinated to
the obligations of Capitol’s subsidiaries.
Capitol
receives a significant portion of its revenue from dividends from its
subsidiaries. Because Capitol is a holding company, Capitol’s right to
participate in any distribution of the assets of its banking or nonbanking
subsidiaries, upon a subsidiary’s dissolution, winding-up, liquidation or
reorganization or otherwise, and thus your ability to benefit indirectly from
such distribution, is subject to the prior claims of creditors of any such
subsidiary, except to the extent that Capitol may be a creditor of that
subsidiary and Capitol’s claims are recognized. There are legal limitations on
the extent to which some of Capitol’s subsidiaries may extend credit, pay
dividends or otherwise supply funds to, or engage in transactions with, Capitol
or some of Capitol’s other subsidiaries. Capitol’s subsidiaries are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
amounts due under Capitol’s contracts or otherwise to make any funds available
to Capitol. Accordingly, the payments on Capitol’s Debentures, and therefore the
Trust Preferred Securities, effectively will be subordinated to all existing and
future liabilities of Capitol’s subsidiaries. At December 31, 2008, Capitol’s
subsidiaries’ direct borrowings and deposit liabilities totaled approximately
$4.9 billion.
Capitol’s
ability to make distributions on or redeem the Trust Preferred Securities is
restricted.
Federal
banking authorities will have the right to examine the Trust and its activities
because it is Capitol’s subsidiary. Under certain circumstances, including any
determination that Capitol’s relationship to the Trust would result in an unsafe
and unsound banking practice, these banking authorities have the authority to
issue orders, that could restrict the Trust’s ability to make distributions on
or to redeem the Trust Preferred Securities.
Capitol
guarantees distributions on the Trust Preferred Securities only if the Trust has
cash available.
If
you hold any of the Trust Preferred Securities, Capitol will guarantee you, on
an unsecured and junior subordinated basis, the payment of the
following:
·
|
any
accumulated and unpaid distributions required to be paid on the Trust
Preferred Securities, to the extent the Trust has funds available for the
distributions;
|
·
|
the
redemption price for any Trust Preferred Securities called for redemption,
to the extent the Trust has funds available for the redemptions;
and
|
·
|
upon
a voluntary or involuntary dissolution, winding-up or termination of the
Trust (unless the Debentures are distributed to the holders of the Trust
Preferred Securities in exchange for their Trust Preferred Securities) the
lesser of:
|
■
|
|
the
liquidation distribution, to the extent the Trust has funds available
therefore; and
|
|
|
the
amount of assets of the Trust remaining available for distribution to
holders of the Trust Preferred Securities after satisfaction of
liabilities to creditors of the Trust as required by
law.
|
If
Capitol does not make a required interest payment on the Debentures, the Trust
will not have sufficient funds to make the related payment on the Trust
Preferred Securities. The guarantee does not cover payments on the Trust
Preferred Securities when the Trust does not have sufficient funds to make them.
If Capitol does not pay any amounts on the Debentures when due, holders of a
majority in liquidation amount of the Trust Preferred Securities will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the guarantee trustee or exercising any power conferred upon
the guarantee trustee or proceed directly against Capitol for payment of any
amounts due on the Debentures.
Capitol’s
obligations under the guarantee are unsecured and are subordinated to and junior
in right of payment to all of Capitol’s secured and senior indebtedness, and
will rank on parity with any similar guarantees issued by Capitol in the future
or that are currently outstanding.
Holders
of the Trust Preferred Securities should not rely on the distributions from the
Trust Preferred Securities through their maturity date—they may be redeemed at
Capitol’s option.
The
Trust Preferred Securities may be redeemed, in whole or in part, at Capitol’s
option at any time on or after September 30, 2013, at the redemption price
set forth herein plus any accrued and unpaid distributions to the date of
redemption. If the Debentures are redeemed, the Trust must redeem the Trust
Preferred Securities and the common securities having an aggregate liquidation
amount equal to the aggregate principal amount of the Debentures to be
redeemed.
If
the Trust Preferred Securities were redeemed, the redemption would be a taxable
event to you. In addition, you might not be able to reinvest the money you
receive upon redemption of the Trust Preferred Securities at the same rate as
the rate of return on the Trust Preferred Securities.
Holders
of the Trust Preferred Securities should not rely on the distributions from the
Trust Preferred Securities through their maturity date—they may be redeemed at
any time upon certain triggering events.
If
certain changes in tax, investment company or bank regulatory law occur, the
Trust Preferred Securities
could be
redeemed by the Trust within 180 days of the event at a redemption price
described herein. In such an event, you might not be able to invest the money
you receive upon redemption of the Trust Preferred Securities at the same rate
of return.
Capitol
has the right to defer interest for up to five years without causing an event of
default.
Capitol
has the right to defer interest on the Debentures for one or more periods of up
to 20 consecutive quarterly interest periods, or five years. During any such
deferral period, holders of Trust Preferred Securities will receive limited or
no current payments on the Trust Preferred Securities and, so long as Capitol is
otherwise in compliance with its obligations, such holders will have no remedies
against the Trust or Capitol for nonpayment unless Capitol fails to pay all
deferred interest (including compounded interest) at the end of the deferral
period.
Deferral
of interest payments could adversely affect the market price of the Trust
Preferred Securities and cause you to recognize income for federal tax purposes
without the receipt of any cash distribution.
Capitol
currently does not intend to exercise Capitol’s right to defer payments of
interest on the Debentures. However, if Capitol exercises that right in the
future, the market price of the Trust Preferred Securities is likely to be
affected. As a result of the existence of Capitol’s deferral right, the market
price of the Trust Preferred Securities, payments on which depend solely on
payments being made on the Debentures, may be more volatile than the market
prices of other securities that are not subject to optional deferrals. If
Capitol does defer interest on the Debentures and you elect to sell Trust
Preferred Securities during the period of that deferral, you may not receive the
same return on your investment as a holder that continues to hold its Trust
Preferred Securities until the payment of interest at the end of the deferral
period.
If
Capitol does defer interest payments on the Debentures, you will be required to
recognize interest income, in the form of original issue discount, for United
States federal income tax purposes during the period of the deferral in respect
of your proportionate share of the Debentures even if you normally report income
when received and even though you may not receive the cash attributable to that
income during the deferral period. You will also not receive the cash
distribution related to any accrued and unpaid interest from the Trust if you
sell the Trust Preferred Securities before the record date for any deferred
distributions, even if you held the Trust Preferred Securities on the date that
the payments would normally have been paid.
If
Capitol exercises its option to defer payment of interest on the Debentures, the
Trust Preferred Securities may trade at a price that does not fully reflect the
accrued but unpaid interest relating to the underlying Debentures. In the event
of that deferral, a holder who disposes of its Trust Preferred Securities will
be required to include in income as ordinary income accrued but unpaid interest
on the Debentures to the date of disposition and to add that amount to its
adjusted tax basis in its ratable share of the underlying Debentures. To the
extent the selling price is less than the holder’s adjusted tax basis, that
holder will recognize a capital loss.
See
“Certain United States Federal Income Tax Consequences—United States
Holders—Interest Income and Original Issue Discount.”
Claims
would be limited upon bankruptcy, insolvency or receivership.
In
certain events upon Capitol’s bankruptcy, insolvency or receivership prior to
the redemption or repayment of any Debentures, whether voluntary or not, a
holder of Debentures will have no claim for or a limited claim for, and thus no
right to receive, all or some portion of deferred and unpaid interest (including
compounded interest thereon). The reduction in such claims for unpaid interest
by holders of the Debentures will, in turn, reduce such claims by holders of the
Trust Preferred Securities.
You
must rely on the property trustee to enforce your rights if there is an event of
default under the indenture.
You
may not be able to directly enforce your rights against Capitol if an event of
default under the indenture occurs. If an event of default under the indenture
occurs and is continuing, this event will also be an event of default under the
trust agreement. In that case, you must rely on the enforcement by the property
trustee of its rights as
holder of
the Debentures against Capitol. The holders of at least 25% in liquidation
amount of outstanding Trust Preferred Securities will have the right to declare
the principal on the Debentures immediately due and payable, if the property
trustee fails to do so. If an event of default occurs under the trust agreement
that is attributable to Capitol’s failure to pay interest or principal on the
debentures, or if Capitol defaults under the guarantee, you may proceed directly
against Capitol. You will not be able to exercise directly any other remedies
available to the holders of the debentures unless the property trustee fails to
do so.
There
can be no assurance as to the market prices for the Trust Preferred Securities
or the Debentures; therefore, the holders of the Trust Preferred Securities may
suffer a loss.
Capitol
and the Trust cannot give the holders of the Trust Preferred Securities any
assurances as to the market prices for the Trust Preferred Securities or the
Debentures. Accordingly, the Trust Preferred Securities that an investor may
purchase, whether pursuant to the offer made by this prospectus supplement and
the accompanying prospectus or in the secondary market, may trade at a discount
to the price that the investor paid to purchase the Trust Preferred Securities.
As a result of the right to defer payments on the Debentures, the market price
of the Trust Preferred Securities may be more volatile than the market prices of
other securities that are not subject to such a deferral right.
The
secondary market for the Trust Preferred Securities may be illiquid and there
will be no market for the Warrants.
Capitol
is unable to predict how the Trust Preferred Securities will trade in the
secondary market or whether that market will be liquid or illiquid after the
offering. There is currently no secondary market for the Trust Preferred
Securities. The Trust Preferred Securities are listed on the NYSE under the
symbol “CBC PB,” Capitol can give you no assurance as to the liquidity of
any market that may develop for the Trust Preferred Securities. You should be
aware that an active trading market the Trust Preferred Securities will not
necessarily exist after the offering or that you will be able to sell your Trust
Preferred Securities at the price you originally paid for them. There
will be no market for the Warrants.
Capitol
has debt securities outstanding which may prohibit future cash dividends on
Capitol’s common stock or otherwise adversely affect regulatory capital
compliance.
Capitol
also has several series of trust-preferred securities outstanding, with a
liquidation amount totaling about $170.8 million, which are treated as capital
for regulatory capital purposes as of December 31, 2008. Although these
securities are viewed as capital for regulatory purposes, they are debt
securities which have numerous covenants and other provisions which, in the
event of noncompliance, could have an adverse effect on Capitol. For example,
these securities permit Capitol to defer the periodic payment of interest for
various periods; however, if such payments are deferred, Capitol is prohibited
from paying cash dividends on its common stock during deferral periods and until
accumulated deferred interest is paid. Future payment of interest is
dependent upon Capitol’s bank subsidiaries’ earnings and dividends, which may be
inadequate to service the obligations. Continued classification of these
securities as elements of capital for regulatory purposes is subject to future
changes in regulatory rules and regulations and the actions of regulatory
agencies, all of which is beyond the control or influence of
Capitol.
Capitol’s
controls and procedures may fail or be circumvented, which could have a material
adverse effect on Capitol’s business, results of operations and financial
condition.
Capitol
regularly reviews and updates its internal controls, disclosure controls and
procedures, and corporate governance policies and procedures. Any system of
controls, however well designed and operated, is based in part on certain
assumptions and can provide only reasonable, not absolute, assurances that the
objectives of the system are met. Any failure or circumvention of controls and
procedures, or failure to comply with regulations related to controls and
procedures, could have a material adverse effect on Capitol’s business, results
of operations and financial condition.
Capitol’s
bylaws, as well as certain banking laws, may have an anti-takeover
effect.
Provisions
of Capitol’s bylaws, the Michigan Control Share Act, and certain federal banking
laws, including regulatory approval requirements, could make it more difficult
for a third party to acquire Capitol, even if doing so would be perceived to be
beneficial to shareholders. The combination of these provisions effectively
inhibits a non-negotiated merger or other business combination which, in turn,
could adversely affect the market price of Capitol’s common stock.
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
prospectus supplement, those defined terms are incorporated in this prospectus
supplement by reference.
General
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 and will be payable quarterly in arrears on the last
calendar day of March, June, September and December of each year. 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.
If
an extension 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 15
th
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
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·
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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),
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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:
·
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the
Trust Preferred Securities will no longer be deemed to be
outstanding;
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·
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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
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·
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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.
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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
prospectus supplement.
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.”
If
the property trustee gives a notice of redemption in respect of the Trust
Preferred Securities, then, by 12:00 noon, New York City time, on the redemption
date, to the extent funds are available, the property trustee will, with respect
to Trust Preferred Securities held in global form, deposit irrevocably with DTC
funds sufficient to pay the
applicable
redemption price. If the Trust Preferred Securities are no longer in global
form, the property trustee, to the extent funds are available, will irrevocably
deposit with the paying agent for the Trust Preferred Securities funds
sufficient to pay the applicable redemption price and will give the paying agent
irrevocable instructions and authority to pay the redemption price to the
holders of the Trust Preferred Securities upon surrender of their Trust
Preferred Securities certificates. Notwithstanding the above, distributions
payable on or prior to the redemption date for Trust Preferred Securities called
for redemption will be payable to the holders of the Trust Preferred Securities
on the relevant record dates for the related distribution dates. If notice of
redemption has been given and funds deposited as required, then upon the date of
the deposit, all rights of the holders of the Trust Preferred Securities so
called for redemption will cease, except the right of the holders of the Trust
Preferred Securities to receive the redemption price and any distribution
payable in respect of the Trust Preferred Securities on or prior to the
redemption date, but without interest on the redemption price, and the Trust
Preferred Securities will cease to be outstanding. In the event that any date
fixed for redemption of Trust Preferred Securities is not a business day, then
payment of the redemption price 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, the redemption
payment will be made on the immediately preceding business day, in either case
with the same force and effect as if made on the original date. In the event
that payment of the redemption price in respect of the Trust Preferred
Securities called for redemption is improperly withheld or refused and not paid
either by the Trust or by Capitol pursuant to the related guarantee as described
under “Description of the Guarantee,” distributions on the Trust Preferred
Securities will continue to accrue at the then applicable rate from the
redemption date originally established by the Trust for the Trust Preferred
Securities to the date the redemption price is actually paid, in which case the
actual payment date will be the date fixed for redemption for purposes of
calculating the redemption price.
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:
·
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the
expiration of its term;
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·
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certain
events of bankruptcy, dissolution or liquidation of the holder of the
common securities;
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·
|
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;
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·
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redemption
of all of the Trust Preferred Securities as described under “—Redemption
or Exchange;” and
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·
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the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
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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:
·
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any
debenture event of default (see “Description of the Debentures—Events of
Default”);
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·
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default
for 30 days by the Trust in the payment of any
distribution;
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·
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default
by the Trust in the payment of any redemption price of any Trust Preferred
Security or common security;
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·
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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
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·
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bankruptcy,
insolvency or reorganization of the property trustee and the failure by
Capitol to appoint a successor property trustee within
60 days.
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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:
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the
successor entity either:
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§
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expressly
assumes all of the obligations of the Trust with respect to the Trust
Preferred Securities; or
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§
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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;
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Capitol
expressly appoints a trustee of the successor entity possessing the same
powers and duties as the property trustee as the holder of the
Debentures;
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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;
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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;
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the
successor entity has a purpose substantially identical to that of the
Trust;
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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:
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§
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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
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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
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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.
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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:
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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
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to
modify, eliminate or add to any provisions of the trust agreement as
necessary to ensure that the Trust:
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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
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will
not be required to register as an “investment company” under the
Investment Company Act; or
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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;
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provided
that:
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no
such amendment may adversely affect in any material respect the rights of
the holders of the Trust Preferred Securities;
and
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any
such amendment will become effective when notice of the amendment is given
to the holders of Trust Preferred Securities and common
securities.
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The
trust agreement may be amended by the property trustee, the administrative
trustees and the Depositor with:
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the
consent of holders representing at least a majority (based upon
liquidation amounts) of the outstanding Trust Preferred Securities and
common securities; and
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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,
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provided
that, without the consent of each holder of Trust Preferred Securities and
common securities, the trust agreement may not be amended to:
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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
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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.
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So
long as the Debentures are held by the property trustee on behalf of the Trust,
the property trustee may not:
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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;
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waive
any past default that is waivable under the
indenture;
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exercise
any right to rescind or annul a declaration that the principal of all the
Debentures will be due and payable;
or
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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;
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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:
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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
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the
action will not cause the Trust to be classified as other than a grantor
trust for U.S. federal income tax
purposes.
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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 was 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”
)
to be 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 filed as an exhibit to Capitol’s registration statement to
which this prospectus supplement relates. Whenever particular defined
terms of the indenture are referred to in this prospectus supplement, those
defined terms are incorporated in this prospectus supplement by
reference.
General
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, 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
15
th
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:
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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
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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.
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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:
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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:
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dividends
or distributions in Capitol’s common stock or a declaration of a noncash
dividend in connection with implementing a shareholder rights plan, or the
issuance or redemption of stock pursuant to a shareholder rights
plan,
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purchases
of Capitol’s common stock under officer, director or employee benefit
plans, or
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as
a result of reclassifying Capitol’s
stock;
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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
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acquire
any of the Trust Preferred Securities or redeem or acquire less than all
of the Debentures.
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The
above prohibitions will also apply if the Debentures are held by the Trust
and:
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an
event of default under the indenture with respect to the Debentures
occurs, or
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Capitol
is in default with respect to its payment of any obligations under the
guarantee related to the Trust Preferred
Securities.
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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:
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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
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·
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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;
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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:
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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;
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·
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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
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·
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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.
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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.
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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:
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§
|
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;
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§
|
Capitol’s
bankruptcy, insolvency or reorganization;
or
|
·
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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 prospectus supplement 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:
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§
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debt
Capitol owes to its subsidiaries;
|
§
|
debt
Capitol owes to any employee;
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§
|
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);
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·
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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:
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§
|
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;
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§
|
senior
debt (as defined above); and
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§
|
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
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·
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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:
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§
|
claims
in respect of senior debt or subordinated debt;
or
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§
|
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.
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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 prospectus supplement
relates. Whenever particular defined terms of the guarantee are
referred to in this prospectus supplement, those defined terms are incorporated
in this prospectus supplement by reference.
General
The
guarantee was executed and delivered by Capitol at the same time the Trust
issued its Trust Preferred Securities. The guarantee is for the
benefit of the holders from time to time of the Trust Preferred
Securities. Wells Fargo Bank, N.A. acts as trustee (referred to below
as the
“guarantee trustee”
) under the guarantee for the purposes of compliance
with the Trust Indenture Act and the guarantee is qualified under the Trust
Indenture Act. The guarantee trustee holds the guarantee for the
benefit of the holders of the Trust Preferred Securities.
Capitol
irrevocably and unconditionally agreed to pay in full on a subordinated basis,
to the extent described below, the guarantee payments (as defined below) to the
holders of the Trust Preferred Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments or
distributions with respect to the Trust Preferred Securities, to the extent not
paid by or on behalf of the Issuer Trust (referred to as the
“guarantee
payments”
), will be subject to the guarantee:
·
|
any
accumulated and unpaid distributions required to be paid on the Trust
Preferred Securities, to the extent that the Trust has funds on hand
available for the distributions;
|
·
|
the
redemption price with respect to Trust Preferred Securities called for
redemption, to the extent that the Trust has funds on hand available for
the redemptions; or
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·
|
upon
a voluntary or involuntary dissolution, winding up or liquidation of the
Trust (unless the Debentures are distributed to holders of such Trust
Preferred Securities in exchange for their Trust Preferred Securities),
the lesser of:
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§
|
the
liquidation distribution to the extent the Trust has funds available
therefor; and
|
§
|
the
amount of assets of the Trust remaining available for distribution to
holders of Trust Preferred Securities after satisfaction of liabilities to
creditors of the Trust as required by applicable
law.
|
Capitol’s
obligation to make a guarantee payment may be satisfied by direct payment of the
required amounts by Capitol to the holders of the Trust Preferred Securities or
by causing the Trust to pay these amounts to the holders.
The
guarantee is an irrevocable and unconditional guarantee on a subordinated basis
of the Trust’s obligations under the Trust Preferred Securities, but will apply
only to the extent the Trust has funds sufficient to make such payments, and is
not a guarantee of collection. See “—Status of the
Guarantee.”
If
Capitol does not make interest payments on the Debentures held by the Trust, the
Trust will not be able to pay distributions on the Trust Preferred Securities
and will not have funds legally available for the distributions. The
guarantee constitutes an unsecured obligation of Capitol and will rank
subordinate and junior in right of payment to all of Capitol’s senior or
subordinated indebtedness. See “—Status of the
Guarantee.” Because Capitol is a holding company, Capitol’s right to
participate in any distribution of assets of any subsidiary upon such
subsidiary’s liquidation or reorganization or otherwise, is subject to the prior
claims of creditors of that subsidiary, except to the extent Capitol may
ourselves be recognized as a creditor of that
subsidiary. Accordingly, Capitol’s obligations under the guarantee
will be effectively subordinated to all existing and future liabilities of
Capitol’s subsidiaries, and claimants should look only to Capitol’s assets for
payments. The guarantee does not limit the incurrence or issuance of
other secured or unsecured debt of Capitol’s, including senior or subordinated
indebtedness, whether under any other existing indenture or any other indenture
that Capitol may enter into in the future or otherwise.
Capitol
has, through the guarantee, the trust agreement, the Debentures and indenture,
taken together, fully, irrevocably and unconditionally guaranteed all of the
Trust’s obligations under the Trust Preferred Securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes a guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust’s obligations under its
Trust Preferred Securities. See “Relationship Among the Trust
Preferred Securities, Debentures and Guarantee.” In addition,
pursuant to the expense agreement entered into between Capitol and the Trust,
Capitol 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.
Status
of the Guarantee
The
guarantee constitutes an unsecured obligation of Capitol and ranks subordinate
and junior in right of payment to all of Capitol’s senior or subordinated
indebtedness in the same manner as the Debentures.
The
guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly
against Capitol to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or
entity). The guarantee is held for the benefit of the holders of the
Trust Preferred Securities. The guarantee will not be discharged
except by payment of the guarantee payments in full to the extent not paid by
the Trust or upon distribution to the holders of the Trust Preferred Securities
of the Debentures. The guarantee does not place a 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.
Amendments
and Assignment
Except
with respect to any changes which do not materially adversely affect the
material rights of holders of the Trust Preferred Securities (in which case no
vote of the holders will be required), the guarantee may not be amended without
the prior approval of the holders of at least a majority of the aggregate
liquidation amount of the Trust Preferred Securities. The manner of
obtaining any such approval will be as described under “Description of the Trust
Preferred Securities and Related Instruments—Voting Rights; Amendment of Trust
Agreement.” All guarantees and agreements contained in the guarantee
bind Capitol’s successors, assigns, receivers, trustees and representatives and
will inure to the benefit of the holders of the Trust Preferred Securities then
outstanding.
Events
of Default
An
event of default under the guarantee will occur upon Capitol’s failure to
perform any of Capitol’s payment obligations under the guarantee or to perform
any non-payment obligations. The holders of at least a majority in
aggregate liquidation amount of the Trust Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the guarantee trustee in respect of the guarantee or to direct the
exercise of any trust or power conferred upon the guarantee trustee under the
guarantee.
The
holders of at least a majority in aggregate liquidation amount of the Trust
Preferred Securities have the right, by vote, to waive any past events of
default and its consequences under the guarantee. If such a waiver
occurs, any event of default will cease to exist and be deemed to have been
cured under the terms of the guarantee.
Any
holder of the Trust Preferred Securities may, to the extent permissible under
applicable law, institute a legal proceeding directly against Capitol to enforce
its rights under the guarantee without first instituting a legal proceeding
against the Trust, the guarantee trustee or any other person or
entity.
Capitol,
as guarantor, is required to file annually with the guarantee trustee a
certificate as to whether or not Capitol is in compliance with all the
conditions and covenants applicable to it under the guarantee.
Information
Concerning the Guarantee Trustee
The
guarantee trustee, other than during the occurrence and continuance of a default
by Capitol in performance of the guarantee, undertakes to perform only those
duties specifically set forth in the guarantee and, after default with respect
to the guarantee, must exercise the same degree of care and skill as a prudent
person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the guarantee trustee is under no
obligation to exercise any of the powers vested in it by the guarantee at the
request of any holder of the Trust Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred as a result. However, such a requirement does not relieve
the guarantee trustee of its obligations to exercise its rights and powers under
the guarantee upon the occurrence of an event of default.
Termination
of the Guarantee
The
guarantee will terminate and be of no further force and effect
upon:
·
|
full
payment of the redemption price of the Trust Preferred
Securities;
|
·
|
full
payment of the amounts payable upon liquidation of the Trust;
or
|
·
|
the
distribution of the Debentures to the holders of the Trust Preferred
Securities in exchange for their Trust Preferred
Securities.
|
The
guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the Trust Preferred Securities must restore
payment of any sums paid under the Trust Preferred Securities or the
guarantee.
Governing
Law
The
guarantee is governed by and construed in accordance with the laws of the State
of New York.
RELATIONSHIP
AMONG THE TRUST PREFERRED SECURITIES,
DEBENTURES
AND GUARANTEE
The
following description of the relationship among the Trust Preferred Securities,
the Debentures and the guarantee is not complete and is subject to, and is
qualified in its entirety by reference to, the trust agreement, the indenture
and the guarantee, forms of each of which has been filed as an exhibit to
Capitol’s registration statement to which this prospectus supplement
relates.
Full
and Unconditional Guarantee
Payments
of distributions and other amounts due on the Trust Preferred Securities (to the
extent the Trust has funds available for the payment of such distributions) are
irrevocably guaranteed by Capitol as described under “Description of the
Guarantee.” Taken together, Capitol’s obligations under the
Debentures, the indenture, the trust agreement and the guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
distributions and other amounts due on the Trust Preferred
Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that
has the effect of providing a full, irrevocable and unconditional guarantee of
the Trust’s obligations under the Trust Preferred Securities. If and
to the extent that Capitol does not make payments on the Debentures, the Trust
will not pay distributions or other amounts due on its Trust Preferred
Securities. The guarantee does not cover payment of distributions
when the Trust does not have sufficient funds to pay such
distributions. In such an event, the remedy of a holder of any Trust
Preferred Securities is to institute a legal proceeding directly against Capitol
pursuant to the terms of the indenture for enforcement of payment of amounts of
such distributions to such holder. Capitol’s obligations under the
guarantee are subordinate and junior in right of payment to all of Capitol’s
senior or subordinated indebtedness.
Sufficiency
of Payments
As
long as payments of interest and other payments are made when due on the
Debentures, such payments will be sufficient to cover distributions and other
payments due on the Trust Preferred Securities, primarily because:
·
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the
aggregate principal amount of the Debentures will be equal to the sum of
the aggregate stated liquidation amount of the Trust Preferred Securities
and common securities;
|
·
|
the
interest rate and interest and other payment dates on the Debentures will
match the distribution rate and distribution and other payment dates for
the Trust Preferred Securities; and
|
·
|
the
trust agreement provides that the Trust will not engage in any activity
that is inconsistent with the limited purposes of the
Trust.
|
Notwithstanding
anything to the contrary in the indenture, Capitol has the right to set-off any
payment Capitol is otherwise required to make under the indenture with a payment
Capitol makes under the guarantee.
Enforcement
Rights of Holders of Trust Preferred Securities
A
holder of any Trust Preferred Security may, to the extent permissible under
applicable law, institute a legal proceeding directly against Capitol to enforce
its rights under the guarantee without first instituting a legal proceeding
against the guarantee trustee, the Trust or any other person or
entity.
A
default or event of default under any of Capitol’s senior or subordinated
indebtedness would not constitute a default or event of default under the
indenture. However, in the event of payment defaults under, or acceleration of,
Capitol’s senior or subordinated indebtedness, the subordination provisions of
the indenture provide that no payments may be made in respect of the Debentures
until the senior or subordinated indebtedness has been paid in full or any
payment default has been cured or waived. Failure to make required payments on
the Debentures would constitute an event of default under the
indenture.
Limited
Purpose of the Trust
The
Trust Preferred Securities evidence a preferred and undivided beneficial
interest in the Trust, and the Trust exists for the sole purpose of issuing its
Trust Preferred Securities and common securities and investing the proceeds
thereof in Debentures and engaging in only those other activities necessary or
incidental thereto. A principal difference between the rights of a holder of a
Trust Preferred Security and a holder of a Debenture is that a holder of a
Debenture is entitled to receive from Capitol the principal amount of and
interest accrued on Debentures held, while a holder of Trust Preferred
Securities is entitled to receive distributions from the Trust (or from Capitol
under the applicable guarantee) if and to the extent the Trust has funds
available for the payment of such distributions.
Rights
upon Termination
Upon
any voluntary or involuntary termination, winding-up or liquidation of the Trust
involving Capitol’s liquidation, the holders of the Trust Preferred Securities
will be entitled to receive, out of the assets held by the Trust, the
liquidation distribution in cash. See “Description of the Trust
Preferred Securities and Related Instruments—Liquidation Distribution Upon
Dissolution.” Upon any voluntary or involuntary liquidation or
bankruptcy of ours, the property trustee, as holder of the Debentures, would be
a subordinated creditor of ours, subordinated in right of payment to all senior
or subordinated indebtedness as set forth in the indenture, but entitled to
receive payment in full of principal and interest, before any shareholders of
ours receive payments or distributions. Since Capitol is the
guarantor under the guarantee, the positions of a holder of Trust Preferred
Securities and a holder of Debentures relative to other creditors and to
Capitol’s shareholders in the event of Capitol’s liquidation or bankruptcy are
expected to be substantially the same.
BOOK-ENTRY
SYSTEM
The
Depository Trust Company, which Capitol refers to along with its successors in
this capacity as
“DTC,”
acts as securities depository for the Trust Preferred Securities. The
Trust Preferred Securities were issued only as fully registered securities
registered in the name of Cede & Co. (DTC’s partnership nominee)
or such other name as may be requested by an authorized representative of
DTC. One or more fully registered global security certificates,
representing the total aggregate number of each class of Trust Preferred
Securities has been issued and deposited with DTC. At any time when
the Debentures may be held by persons other than the property trustee, one or
more fully registered global security certificates, representing the total
aggregate principal amount of Debentures, will be issued and will be deposited
with DTC.
The
laws of some jurisdictions may require that some purchasers of securities take
physical delivery of securities in definitive form. These laws may
impair the ability to transfer beneficial interests in Trust Preferred
Securities or Debentures, so long as the corresponding securities are
represented by global security certificates.
DTC
has advised Capitol that it is a limited-purpose trust company organized under
the New York Banking Law, a “banking organization” within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a “clearing
corporation” within the meaning of the New York Uniform Commercial Code and a
“clearing agency” registered pursuant to the provisions of Section 17A of
the Exchange Act. DTC holds securities that its direct participants
deposit with DTC. DTC also facilitates the post-trade settlement
among participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges
between participants’ accounts. This eliminates the need for physical
movement of securities certificates. Direct participants include both U.S. and
non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is a wholly owned
subsidiary of The Depository Trust & Clearing Corporation, which, in
turn, is owned by a number of direct participants of DTC and members of the
National Securities Clearing Corporation, Fixed Income Clearing Corporation and
Emerging Markets Clearing
Corporation,
as well as by the New York Stock Exchange, Inc., the American Stock
Exchange LLC and Financial Industry Regulatory Authority Inc. (
“FINRA”
). Access to the DTC system is also available to others, referred to
as “indirect participants,” such as both U.S. and non-U.S. securities brokers
and dealers, banks, trust companies and clearing corporations that clear through
or maintain a direct or indirect custodial relationship with a direct
participant. The rules applicable to DTC and its participants are on
file with the SEC.
To facilitate
subsequent transfers, all securities deposited by direct participants with DTC
are registered in the name of DTC’s partnership nominee,
Cede & Co., or such other name as may be requested by an
authorized representative of DTC. The deposit of securities with DTC and their
registration in the name of Cede & Co. or such other DTC nominee
do not effect any change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the securities; DTC’s records
reflect only the identity of the direct participants to whose accounts the
securities are credited, which may or may not be the beneficial
owners. The direct and indirect participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance
of redemption notices and other communications by DTC to direct participants, by
direct participants to indirect participants, and by direct and indirect
participants to beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. If less than all of the securities of any class are being
redeemed, DTC will determine the amount of the interest of each direct
participant to be redeemed in accordance with its then current
procedures.
Neither
DTC nor Cede & Co. (nor any other DTC nominee) will consent or
vote with respect to any securities unless authorized by a direct participant in
accordance with DTC’s procedures. Under its usual procedures, DTC
mails an omnibus proxy to the issuer as soon as possible after the record
date. The omnibus proxy assigns Cede & Co.’s consenting
or voting rights to those direct participants to whose accounts securities are
credited on the record date (identified in a listing attached to the omnibus
proxy).
DTC
may discontinue providing its services as securities depository with respect to
the Trust Preferred Securities at any time by giving reasonable notice to the
issuer or its agent. Under these circumstances, in the event that a
successor securities depository is not obtained, certificates for the Trust
Preferred Securities are required to be printed and
delivered. Capitol may decide to discontinue the use of the system of
book-entry-only transfers through DTC (or a successor securities
depository). In that event, certificates for the Trust Preferred
Securities will be printed and delivered to DTC.
As
long as DTC or its nominee is the registered owner of the global security
certificates, DTC or its nominee, as the case may be, will be considered the
sole owner and holder of the global security certificates and all securities
represented by these certificates for all purposes under the instruments
governing the rights and obligations of holders of such
securities. Except in the limited circumstances referred to above,
owners of beneficial interests in global security certificates:
·
|
will
not be entitled to have such global security certificates or the
securities represented by these certificates registered in their
names;
|
·
|
will
not receive or be entitled to receive physical delivery of securities
certificates in exchange for beneficial interests in global security
certificates; and
|
·
|
will
not be considered to be owners or holders of the global security
certificates or any securities represented by these certificates for any
purpose under the instruments governing the rights and obligations of
holders of such securities.
|
All
redemption proceeds, distributions and dividend payments on the securities
represented by the global security certificates and all transfers and deliveries
of such securities will be made to DTC or its nominee, as the case may be, as
the registered holder of the securities. DTC’s practice is to credit
direct participants’ accounts upon DTC’s receipt of funds and corresponding
detail information from the issuer or its agent, on the payable date in
accordance with their respective holdings shown on DTC’s
records. Payments by participants to beneficial owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
“street name,” and will be the responsibility of that participant and not of
DTC, the depository, the issuer or any of their agents, subject to any statutory
or regulatory requirements as may be in effect from time to
time. Payment of redemption proceeds, distributions and dividend
payments to Cede & Co. (or such other nominee as may be requested
by an authorized representative of DTC) is the responsibility of the issuer or
its agent, disbursement of such payments to direct participants will be the
responsibility of DTC, and disbursement of such payments to the beneficial
owners will be the responsibility of direct and indirect
participants.
Ownership
of beneficial interests in the global security certificates will be limited to
participants or persons that may hold beneficial interests through institutions
that have accounts with DTC or its nominee. Ownership of beneficial
interests in global security certificates will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by DTC or its nominee, with respect to participants’ interests, or
any participant, with respect to interests of persons held by the participant on
their behalf. Payments, transfers, deliveries, exchanges, redemptions
and other matters relating to beneficial interests in global security
certificates may be subject to various policies and procedures adopted by DTC
from time to time. None of Capitol, the Trust, the trustees of the
Trust or any agent for Capitol or any of them, will have any responsibility or
liability for any aspect of DTC’s or any direct or indirect participant’s
records relating to, or for payments made on account of, beneficial interests in
global security certificates, or for maintaining, supervising or reviewing any
of DTC’s records or any direct or indirect participant’s records relating to
these beneficial ownership interests.
Although
DTC has agreed to the foregoing procedures in order to facilitate transfer of
interests in the global security certificates among participants, DTC is under
no obligation to perform or continue to perform these procedures, and these
procedures may be discontinued at any time. Capitol will not have any
responsibility for the performance by DTC or its direct participants or indirect
participants under the rules and procedures governing DTC.
Because
DTC can act only on behalf of direct participants, who in turn act only on
behalf of direct or indirect participants, and certain banks, trust companies
and other persons approved by it, the ability of a beneficial owner of
securities to pledge them to persons or entities that do not participate in the
DTC system may be limited due to the unavailability of physical certificates for
the securities.
DTC
has advised Capitol that it will take any action permitted to be taken by a
registered holder of any securities under the Trust Agreement, the guarantee,
the indenture or Capitol’s Articles of Incorporation, only at the direction of
one or more participants to whose accounts with DTC the relevant securities are
credited.
The
information in this section concerning DTC and its book-entry system has been
obtained from sources that Capitol and the trustees of the Trust believe to be
accurate, but Capitol assumes no responsibility for the accuracy
thereof.
WARRANTS
The
warrants offered in this offering will be issued pursuant to a subscription
agreement between each of the purchasers and Capitol. You should review a copy
of the form of subscription agreement and the form of warrant, each of which has
been filed by us as an exhibit to a Current Report on Form 8-K filed with
the SEC in connection with this offering, for a complete description of the
terms and conditions applicable to the warrants. The following is
a brief
summary of the material terms of the warrants and is subject in all respects to
the provisions contained in the warrants.
Exercisability
Holders
may exercise the warrants beginning on the date that is six months after the
date of original issuance and at any time up to the date that is five years
after such date of issuance. The warrants will be exercisable, at the option of
each holder, in whole or in part by delivering to Capitol a duly executed
exercise notice accompanied by payment in full for the number of shares of our
common stock purchased upon such exercise (except in the case of a cashless
exercise as discussed below). Unless otherwise specified in the applicable
warrant, except upon at least 61 days’ prior notice from the holder to
Capitol, the holder will not have the right to exercise any portion of the
warrant if the holder (together with its affiliates) would beneficially own in
excess of 9.9% of the number of shares of our common stock outstanding
immediately after giving effect to the exercise, as such percentage ownership is
determined in accordance with the terms of the warrants. Any holder (together
with its affiliates) beneficially owning in excess of 9.9% of the number of
shares of our common stock outstanding on the date of issuance would not be
subject to the foregoing limitation on exercisability unless such holder
(together with its affiliates) thereafter beneficially owns 9.9% (or a lesser
percentage) of the number of shares of our common stock
outstanding.
Cashless
Exercise
If at any
time during the warrant exercisability period the fair market value of Capitol
common stock exceeds the exercise price of the warrants, Capitol may, at its
sole discretion, permit the holders to effect a cashless exercise of the
warrants (in whole or in part) by surrendering the warrants to Capitol together
with delivery of a duly executed exercise notice, by canceling a portion of the
warrant in payment of the purchase price payable in respect of the number of
shares of our common stock purchased upon such exercise.
Exercise
Price
The
exercise price per share of common stock purchasable upon exercise of the
warrants is $10.00 per share of common stock being purchased. The exercise price
is subject to appropriate adjustment in the event of stock dividends and
distributions, stock splits, stock combinations, reclassifications or similar
events affecting Capitol’s common stock.
Transferability
Subject
to applicable laws and the restriction on transfer set forth in the subscription
agreements, the warrants may be transferred at the option of the holders upon
surrender of the warrants to Capitol together with the appropriate instruments
of transfer.
Exchange
Listing
Capitol
does not plan on making an application to list the warrants on the NYSE, The
NASDAQ Global Market, any national securities exchange or other nationally
recognized trading system.
Fundamental
Transactions
In the
event of any fundamental transaction, as described in the warrants and generally
including any capital reorganization, reclassification of our capital stock,
consolidation or merger with another entity in which Capitol is not the
survivor, or the sale, transfer or other disposition of all or substantially all
of Capitol’s assets to another entity, then Capitol will use commercially
reasonable efforts to ensure that the holders of the warrants will thereafter
have the right to receive upon exercise of the warrants such shares of stock,
securities or assets as would have been issuable or payable with respect to or
in exchange for a number of shares of Capitol’s common stock equal to the number
of shares of Capitol’s common stock issuable upon exercise of the warrants
immediately prior to the fundamental transaction, had the fundamental
transaction not taken place, and appropriate provision will be made so that the
provisions of the warrants (including, for example, provisions relating to the
adjustment of the exercise price) will thereafter be applicable, as nearly
equivalent as may be practicable in relation to any share of stock,
s
ecurities
or assets deliverable upon the exercise of the warrants after the fundamental
transaction.
Rights
as a Shareholder
Except as
otherwise provided in the warrants or by virtue of such holder’s ownership of
shares of Capitol’s common stock, the holders of the warrants do not have the
rights or privileges of holders of Capitol’s common stock, including any voting
rights, until they exercise their warrants.
Waivers
and Amendments
Any term
of the warrants may be amended or waived with Capitol’s written consent and the
written consent of the holders of warrants representing at least two-thirds of
the number of shares of Capitol’s common stock then subject to outstanding
warrants, provided that such amendment or waiver applies to all warrants in the
same fashion. However, in no event may the exercise price of or the number of
shares of Capitol’s common stock subject to any warrant be amended, nor may the
right to exercise that warrant be waived, without the written consent of the
holder of that warrant.
DESCRIPTION
OF CAPITAL STOCK
The
total number of shares of all classes of capital stock which Capitol has the
authority to issue is seventy million (70,000,000) shares consisting of (i)
twenty million (20,000,000) shares of preferred stock, no par value per share
and (ii) fifty million (50,000,000) shares of common stock, no par value per
share. The authorized shares of the common stock are all of one class
with equal voting power, and each share shall be equal to every other
share.
Shares of
the preferred stock may be divided into and issued in one or more
series. Capitol’s Board of Directors is authorized to cause the
preferred stock to be issued from time to time
in one or more
series, with such designations and such relative voting, dividend, liquidation
and other rights, preferences and limitations as shall be stated and expressed
in the resolution or resolutions providing for the issue of such preferred stock
adopted by the Board of Directors. The Board of Directors is
expressly authorized to adopt such resolutions or resolutions and issue such
stock from time to time as it may deem desirable.
As of
February 24, 2009, there were 17,290,623 shares of common stock outstanding and
no shares of the preferred stock issued and outstanding.
Capitol’s
common stock is traded on the New York Stock Exchange, Inc. under the symbol
“CBC.” All of the outstanding shares of common stock are, and any
common stock issued and sold under this prospectus will be, fully paid and
nonassessable.
DESCRIPTION OF CAPITAL STOCK CAPITOL
MAY OFFER
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 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.
|
Capitol’s
board of directors, without shareholder approval, can issue preferred stock with
voting and conversion rights which could adversely affect the voting power of
Capitol’s common stock.
Common
Stock
The
following description summarizes the material provisions of our common
stock. This description is not complete, and is qualified in its
entirety by reference to the provisions of our articles of incorporation, as
amended and Capitol’s amended and restated bylaws, as well as the Michigan
Business Corporation Act, as amended, or the MBCA. Capitol’s articles
of incorporation and bylaws are, and any amendments to them will be,
incorporated by reference in Capitol’s registration statement.
The
transfer agent and registrar for Capitol’s common stock is Computershare Trust
Company, N.A., 250 Royall Street, Canton, MA 02021.
All of
the outstanding shares of our common stock are fully paid and
nonassessable. The holders of common stock are entitled to
receive:
·
|
dividends
when, as and if declared by Capitol’s Board of Directors out of funds
legally available for the payment of dividends (as a bank holding company,
Capitol’s ability to pay distributions will be affected by the ability of
its banking subsidiaries to pay dividends under applicable laws, rules and
regulations; the ability of these banking subsidiaries, as well as
Capitol, to pay dividends in the future currently is, and could be
further, influenced by bank regulatory requirements and capital
guidelines); and
|
·
|
in
the event of dissolution of Capitol, to share ratably in all assets
remaining after payment of all
liabilities.
|
Each
holder of common stock is entitled to one vote for each share held of record on
all matters presented to a vote at a shareholders meeting, including the
election of directors. Holders of common stock have no cumulative
voting rights or preemptive rights to purchase or subscribe for any additional
shares of common stock or other securities and there are no conversion rights or
redemption or sinking fund provisions with respect to the common
stock. Capitol’s common stock is traded on the NYSE under the symbol
“CBC.”
Certain
Restrictions Under Michigan Law
Subject
to certain exceptions, Chapter 7A of the Michigan Business Corporation Act
prohibits a corporation from engaging in any business combination with an
interested shareholder (generally defined as a 10% shareholder) unless approved
by at least (1) 90% of the votes of each class of stock entitled to vote
and (2) two-thirds of the votes of each class of stock entitled to be cast
by the shareholders other than voting shares beneficially owned by the
interested shareholder.
In
addition, Chapter 7B of the Michigan Business Corporation Act provides that
a party that acquires or offers to acquire ownership of control shares of a
corporation (defined as shares obtained pursuant to a transaction in which the
acquiring party reaches the 20%, 33% or majority ownership levels) has the right
to vote those shares, and shares acquired within the previous 90 days (or
while pursuing a plan to acquire control shares), only to the extent granted by
a resolution of the shareholders approved at a special or annual meeting. A
resolution granting voting rights must be approved by a majority vote of
(1) all shares and (2) all disinterested shares. If the
acquiring party has acquired a majority stake and been accorded full voting
rights, shareholders other than the acquiring shareholder are entitled to put
their shares to the corporation for “fair value” (defined as the highest price
paid per share by the acquiring party in the control share
acquisition).
Certain
Restrictions Under Federal Banking Laws
The Bank
Holding Company Act prohibits any company that is not engaged in banking
activities and activities that are permissible for a bank holding company or a
financial holding company from acquiring control of Capitol. Control
is generally defined in the Bank Holding Company Act and the regulations
thereunder as ownership of 25% or more of any class of voting stock or other
exercise of a controlling influence. In addition, any existing bank
holding company would require the prior approval of the Federal Reserve Board
before acquiring 5% or more of the voting stock of Capitol. In
addition, the Change in Bank Control Act of 1978, as amended, prohibits a person
or group of persons from acquiring “control” of a bank holding company unless
the Federal Reserve Board has been notified and has not objected to the
transaction. Under a rebuttable presumption established by the
Federal Reserve Board, the acquisition of 10% or more of a class of voting stock
of a bank holding company with a class of securities registered under
Section 12 of the Exchange Act, such as Capitol, would, under the
circumstances set forth in the presumption, constitute acquisition of control of
the bank holding company.
Certain
Other Limitations
In
addition to the foregoing limitations, the articles of incorporation and bylaws
of Capitol contain provisions that could have an anti-takeover effect, and may
prevent or delay mergers and other business combination transactions that common
shareholders may believe to be in their best interests. Some of the
provisions also may make it difficult for shareholders to replace incumbent
directors with new directors who may be willing to entertain changes that
shareholders may believe will lead to improvements in the combined company’s
business. These additional or different provisions include the
classified board structure of Capitol.
USE
OF PROCEEDS
All net
proceeds from the sale of the Trust Preferred Securities being offered under
this prospectus will go to the selling securityholders. Capitol has
agreed to bear the expenses (other than broker’s commissions and similar
charges) of the registration of the Trust Preferred Securities, including legal
and accounting fees.
SELLING
SECURITYHOLDERS
The
following table provides information regarding the selling securityholders and
the number of the Trust Preferred Securities each selling securityholder is
offering. Capitol has prepared this table based on information
furnished to Capitol by or on behalf of the selling
securityholders. Under the rules of the SEC, beneficial ownership
includes Trust Preferred Securities over which the indicated beneficial owner
exercises voting or investment power. Beneficial ownership is
determined under Section 13(d) of the Securities Exchange Act of 1934, as
amended (the
“Exchange
Act”
) and generally includes voting or investment power with respect to
securities, including any
securities
that grant the selling securityholder the right to acquire Trust Preferred
Securities within 60 days of February 27, 2009. Unless otherwise
indicated in the footnotes below, Capitol believes that the selling
securityholders have sole voting and investment power with respect to all of the
Trust Preferred Securities beneficially owned. The percentage
ownership data is based on shares of the Trust Preferred Securities issued and
outstanding as of February 15, 2009. Since the date on which they
provided Capitol with the information below, the selling securityholders may
have sold, transferred or otherwise disposed of some or all of their Trust
Preferred Securities in transactions exempt from the registration requirements
of the Securities Act of 1933, as amended, or the Securities
Act.
The Trust
Preferred Securities may be sold by the selling securityholders, by those
persons or entities to whom they transfer, donate, devise, pledge or distribute
their Trust Preferred Securities or by other successors in interest. The
information regarding shares beneficially owned after this offering assumes the
sale of all Trust Preferred Securities offered by each of the selling
securityholders. The selling securityholders may sell less than all
of the Trust Preferred Securities listed in the table. In addition,
the Trust Preferred Securities listed below may be sold pursuant to this
prospectus or in privately negotiated transactions. Accordingly,
Capitol cannot estimate the number of Trust Preferred Securities the selling
securityholders will sell under this prospectus.
Each of
the selling security holders are subsidiaries and affiliates of
Capitol.
The
selling securityholders have represented to Capitol that they purchased the
Trust Preferred Securities for their own account, for investment only and not
with a view toward selling or distributing them in violation of the Securities
Act, except in sales either registered under the Securities Act, or sales that
are exempt from registration. In recognition of the fact that the
selling securityholders, even though purchasing their shares for investment, may
wish to be legally permitted to sell their Trust Preferred Securities when they
deem appropriate, Capitol agreed with the selling securityholders to file a
registration statement to register the resale of the Trust Preferred
Securities.
Capitol
prepared this table based on the information supplied to Capitol by the selling
securityholders named in the table. Ownership information about the
selling securityholders may change over time. Any changed information
supplied to Capitol will be set forth in prospectus supplements or amendments to
this prospectus.
Name
and Address of Selling Securityholder(1)
|
|
Number
of
Trust
Preferred Securities
Beneficially
Owned
Prior
to
Offerings(2)
|
|
Maximum
Number
of
Trust
Preferred Securities
Being
Offered
|
|
Percentage
of
Trust
Preferred Securities
Beneficially
Owned
After
the
Offering(3)
|
Ann
Arbor Commerce Bank
2950
State Street South
Ann
Arbor, MI 48104
|
|
260,000
|
|
260,000
|
|
*
|
Arrowhead
Community Bank
17235
North 75
th
Avenue, Suite B100
Glendale,
AZ 85308
|
|
58,900
|
|
58,900
|
|
*
|
Bank
of Escondido
200
West Grand Avenue
Escondido,
CA 92025
|
|
95,000
|
|
95,000
|
|
*
|
Bank
of Las Vegas
6001
S. Decatur Blvd. Suite P
Las
Vegas, NV 89118
|
|
60,000
|
|
60,000
|
|
*
|
Bank
of Tucson
4400
East Broadway – Suite 112
Tucson,
AZ 85711
|
|
150,000
|
|
150,000
|
|
*
|
Black
Mountain Community Bank
1700
West Horizon Ridge Parkway, Suite 101
Henderson,
NV 89012
|
|
110,000
|
|
110,000
|
|
*
|
Brighton
Commerce Bank
8700
North Second Street
Brighton,
MI 48116
|
|
80,000
|
|
80,000
|
|
*
|
Camelback
Community Bank
2777
E. Camelback Road, Suite 100
Phoenix,
AZ 85016
|
|
70,000
|
|
70,000
|
|
*
|
Name
and Address of Selling Securityholder(1)
|
|
Number
of
Trust
Preferred Securities
Beneficially
Owned
Prior
to
Offerings(2)
|
|
Maximum
Number
of
Trust
Preferred Securities
Being
Offered
|
|
Percentage
of
Trust
Preferred Securities
Beneficially
Owned
After
the
Offering(3)
|
Capitol
Bancorp Limited
200
Washington Square North
Lansing,
MI 48933
|
|
180,000
|
|
180,000
|
|
*
|
Community
Bank of Rowan
6000
Village Drive, Suite 100
Lincoln,
NE 68516
|
|
30,000
|
|
30,000
|
|
*
|
Desert
Community Bank
3740
South Pecos-McLeod
Las
Vegas, NV 89121
|
|
75,000
|
|
75,000
|
|
*
|
Detroit
Commerce Bank
645
Griswold, Suite 70
Detroit,
MI 48226
|
|
80,000
|
|
80,000
|
|
*
|
Elkhart
Community Bank
303
South Third Street
Elkhart,
IN 46516
|
|
70,000
|
|
70,000
|
|
*
|
First
Carolina State Bank
171
North Winstead Avenue
Rocky
Mount, NC 27804
|
|
72,000
|
|
72,000
|
|
*
|
Goshen
Community Bank
511
West Lincoln Avenue
Goshen,
IN 46526
|
|
55,000
|
|
55,000
|
|
*
|
Macomb
Community Bank
16000
Hall Rd, Suite 102
Clinton
Twp, MI 48038
|
|
80,000
|
|
80,000
|
|
*
|
Mesa
Bank
63
East Main, Suite 100
Mesa,
AZ 85201
|
|
150,000
|
|
150,000
|
|
*
|
Oakland
Commerce Bank
31731
Northwestern Hwy, Suite 100
Farmington
Hills, MI 48334
|
|
85,000
|
|
85,000
|
|
*
|
Portage
Commerce Bank
800
East Milham Rd.
Portage,
MI 49002
|
|
150,000
|
|
150,000
|
|
*
|
Red
Rock Community Bank
10000
West Charleston, Suite 100
Las
Vegas, NV 89135
|
|
90,000
|
|
90,000
|
|
*
|
Southern
Arizona Community Bank
6400
North Oracle Road
Tucson,
AZ 85704
|
|
70,000
|
|
70,000
|
|
*
|
Sunrise
Bank of Albuquerque
219
Central Ave. NW, Suite 100
Albuquerque,
NM 87102
|
|
55,000
|
|
55,000
|
|
*
|
Sunrise
Bank of Arizona
4350
East Camelback Road, Suite 100A
Phoenix,
AZ 85018
|
|
100,000
|
|
100,000
|
|
*
|
Sunrise
Bank of San Diego
4445
Eastgate Mall, Suite 110
San
Diego, CA 92121
|
|
75,000
|
|
75,000
|
|
*
|
Yuma
Community Bank
2285
S. 4
th
Avenue
Yuma,
AZ 85364
|
|
50,000
|
|
50,000
|
|
*
|
*
Represents
less than 1% of the outstanding Trust Preferred Securities.
1.
|
Each
of the above listed selling securityholders are subsidiaries and
affiliates of Capitol Bancorp Ltd.
|
2. Beneficial
ownership is determined in accordance with Rule 13d-3 under the Exchange
Act.
3. Assumes
all of the Trust Preferred Securities offered hereby are sold.
Because
the selling securityholders may offer all or some of their Trust Preferred
Securities from time to time, Capitol cannot estimate the number of the Trust
Preferred Securities that will be held by the selling shareholders upon the
termination of any particular offering. Each of the selling
securityholders has been informed that they may be required to comply with,
among other regulations, Regulation M during such time that such selling
securityholder is engaged in a distribution of any of the Trust Preferred
Securities that Capitol is registering by this registration
statement. See “Plan of Distribution.”
PLAN
OF DISTRIBUTION
The
selling securityholders and any of its pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of the Trust
Preferred Securities on any stock exchange, market or trading facility on which
the Trust Preferred Securities are traded or in private
transactions. These sales may be at fixed or negotiated
prices. The selling securityholders may use any one or more of the
following methods when selling the Trust Preferred Securities:
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the Trust Preferred
Securities as agent but may position and resell a portion of the block as
principal to facilitate the
transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
settlement
of short sales;
|
·
|
broker-dealers
may agree with the selling securityholder to sell a specified number of
such Trust Preferred Securities at a stipulated price per
share;
|
·
|
a
combination of any such methods of
sale;
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling securityholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling securityholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or
discounts from the selling securityholders (or, if any broker-dealer acts as
agent for the purchaser of the Trust Preferred Securities, from the purchaser)
in amounts to be negotiated. The selling securityholders do not
expect these commissions and discounts relating to its sales of the Trust
Preferred Securities to exceed what is customary in the types of transactions
involved.
In
connection with the sale of the Trust Preferred Securities or interests therein,
the selling securityholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the Trust Preferred Securities in the course of hedging the
positions they assume. The selling securityholders may also sell the Trust
Preferred Securities short and deliver these securities to close out its short
positions, or loan or pledge the Trust Preferred Securities to broker-dealers
that in turn may sell these securities. The selling securityholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or create one or more derivative securities which require
the delivery to such broker-dealer or other financial institution
of shares
offered by this prospectus, which the Trust Preferred Securities such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
selling securityholders and any broker-dealers or agents that are involved in
selling the Trust Preferred Securities may be deemed to be “underwriters” within
the meaning of the Securities Act in connection with such sales. In
such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The
selling securityholders have informed Capitol that they do not have any
agreement or understanding, directly or indirectly, with any person to
distribute the Trust Preferred Securities.
Because
the selling securityholders may be deemed to be “underwriters” within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this
prospectus. The selling securityholders have advised Capitol that it
has not entered into any agreements, understandings or arrangements with any
underwriter or broker-dealer regarding the sale of the resale
shares. There is no underwriter or coordinating broker acting in
connection with the proposed sale of the resale shares by the selling
securityholders.
The
shares will be sold only through registered or licensed brokers or dealers if
required under applicable state securities laws. In addition, in
certain states, the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the Trust Preferred Securities for a period of
two business days prior to the commencement of the distribution. In addition,
the selling securityholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M,
which may limit the timing of purchases and sales of the Trust Preferred
Securities by the selling securityholders or any other
person. Capitol will make copies of this prospectus available to the
selling securityholders and have informed the selling securityholders of the
need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale.
CERTAIN
LEGAL MATTERS
The
validity of the securities offered hereby and certain other legal matters in
connection therewith will be passed upon for Capitol by Honigman Miller Schwartz
and Cohn LLP, Kalamazoo, Michigan.
EXPERTS
The
consolidated financial statements of Capitol as of December 31, 2007 and 2006
and for each of the three years in the period ended December 31, 2007 and
management’s assessment of the effectiveness of internal control over financial
reporting as of December 31, 2007 incorporated by reference in this prospectus
have been so incorporated in reliance on the reports of BDO Seidman, LLP, an
independent registered public accounting firm, incorporated herein by reference,
given on the authority of said firm as experts in auditing and
accounting.
WHERE
YOU CAN FIND MORE INFORMATION
Capitol
files annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document Capitol
files at the SEC’s public reference room at 100 F Street, N.E., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. In addition, Capitol’s SEC
filings are available to the public at the SEC’s Internet site at
http://www.sec.gov
and through the New
York Stock Exchange Inc., 20 Broad Street, New York, New
York 10005.
DOCUMENTS
INCORPORATED BY REFERENCE
In this
prospectus, as permitted by law, Capitol “incorporates by reference” information
from other documents that Capitol files with the SEC. This means that
Capitol can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to
be a part of this prospectus and should be read with the same
care. When Capitol updates the information contained in documents
that have been incorporated by reference by making future filings with the SEC,
the information incorporated by reference in this prospectus is considered to be
automatically updated and superseded. In other words, in case of a
conflict or inconsistency between information contained in this prospectus and
information incorporated by reference into this prospectus, you should rely on
the information contained in the document that was filed later.
Capitol
incorporates by reference the documents listed below and any documents Capitol
files with the SEC in the future under Section 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 (the
“Exchange
Act”
) until Capitol’s offering is completed:
·
|
Capitol’s
Annual Report on Form 10-K for the year ended December 31,
2007;
|
·
|
Capitol’s
Quarterly Report on Form 10-Q for the quarter ended March 31,
2008;
|
·
|
Capitol’s
Quarterly Report on Form 10-Q for the quarter ended June 30,
2008;
|
·
|
Capitol’s
Quarterly Report on Form 10-Q for the quarter ended September 30,
2008;
|
·
|
Capitol’s
Current Reports on Form 8-K filed with the SEC on January 31,
2008, February 1, 2008, March 18, 2008, March 31, 2008,
April 17, 2008, April 24, 2008, June 19, 2008, June 20,
2008, June 27, 2008, July 1, 2008, July 9, 2008, July 17, 2008, July 30,
2008, August 8, 2008, August 29, 2008, October, 16, 2008, November
14, 2008, December 1, 2008, December 10, 2008, December 15, 2008, December
16, 2008, January 29, 2009, February 3, 2009, February 6, 2009 and
February 17, 2009;
|
·
|
the
description of Capitol’s common stock contained in Capitol’s Registration
Statement on Form 8-A filed April 19, 1990;
and
|
·
|
the
description of the Trust Preferred Securities contained in Capitol’s
Registration Statement on Form 8-A filed on June 12,
2008.
|
Information
furnished under Item 2.02 or 7.01 of Capitol’s Current Reports on
Form 8-K is not incorporated by reference.
You may
request a copy of any of these filings, other than an exhibit to a filing unless
that exhibit is specifically incorporated by reference into that filing, at no
cost, by writing to or telephoning Capitol at the following
address:
Capitol
Bancorp Ltd.
Capitol
Bancorp Center
200
Washington Square North, Fourth Floor
Lansing,
Michigan 48933
Attention:
Investor Relations
Telephone:
(517) 487-6555
Internet
website:
www.capitolbancorp.com
PROSPECTUS
Capitol
Bancorp Ltd.
$150,000,000
Warrants
Purchase
Contracts
Units
Common
Stock
Capitol
may offer and sell any combination of the securities listed above, in one or
more offerings, up to a total dollar amount of $150,000,000 (or the equivalent
in foreign currency or currency units). Capitol may also issue common
stock or other of the securities listed above upon the exchange, conversion or
exercise of such listed securities. Capitol will describe specific
terms of the securities in supplements to this prospectus. The
warrants and purchase contracts may be convertible into or exercisable or
exchangeable for common stock or other securities of Capitol or debt or equity
securities of one or more other entities. You should read this
prospectus and the applicable prospectus supplement carefully before you
invest.
Our
common stock is traded on the New York Stock Exchange under the symbol “CBC.”
This
prospectus describes some of the general terms that may apply to these
securities and the general manner in which they may be offered. The
specific terms of any securities to be offered, and the specific manner in which
they may be offered, will be described in a supplement to this prospectus or
incorporated into this prospectus by reference. Where appropriate,
the applicable prospectus supplement will describe U.S. federal income tax
considerations relevant to the securities being offered.
Investing
in our securities involves risks. See the section entitled “Risk
Factors” contained on page 7 and in the applicable prospectus
supplement.
These
securities are not deposits or obligations of a bank or savings association and
are not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other governmental agency.
Neither
the Securities and Exchange Commission nor any state or foreign securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Capitol
may offer and sell these securities to or through one or more underwriters,
dealers and agents, or directly to purchasers, on a continuous or delayed
basis.
The date
of this prospectus is ___________, 2008.
TABLE
OF CONTENTS
Page
ABOUT
THIS PROSPECTUS
|
3
|
WHERE
YOU CAN FIND MORE INFORMATION
|
4
|
DOCUMENTS
INCORPORATED BY REFERENCE
|
4
|
FORWARD
LOOKING STATEMENTS
|
5
|
PROSPECTUS
SUMMARY
|
7
|
RISK
FACTORS
|
9
|
CAPITOL
BANCORP LTD.
|
9
|
USE
OF PROCEEDS
|
9
|
RATIO
OF EARNINGS TO FIXED CHARGES
|
10
|
REGULATORY
CONSIDERATIONS
|
10
|
DESCRIPTION
OF CAPITAL STOCK
|
11
|
DESCRIPTION
OF COMMON STOCK CAPITOL MAY OFFER
|
11
|
DESCRIPTION
OF WARRANTS CAPITOL MAY OFFER
|
13
|
DESCRIPTION
OF PURCHASE CONTRACTS CAPITOL MAY OFFER
|
15
|
DESCRIPTION
OF UNITS CAPITOL MAY OFFER
|
15
|
LEGAL
OWNERSHIP AND BOOK-ENTRY ISSUANCE
|
16
|
PLAN
OF DISTRIBUTION
|
21
|
CERTAIN
LEGAL MATTERS
|
22
|
EXPERTS
|
22
|
ABOUT THIS PROSPECTUS
This
prospectus is part of a registration statement that Capitol filed with the
Securities and Exchange Commission (the
“SEC”
)
utilizing a shelf registration process. This prospectus provides you
with a general description of the securities Capitol may offer. This
prospectus does not contain all the information set forth in the registration
statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to us
and the securities offered by this prospectus, reference is made to the
registration statement, including the exhibits to the registration statement and
the documents incorporated by reference.
References
to “Capitol,” “us,” “we” or “our” in this prospectus mean Capitol Bancorp Ltd.,
and do not include the consolidated subsidiaries of Capitol Bancorp
Ltd. When we to “you” in this section, we mean all purchasers of the
securities being offered by this prospectus, whether they are the record holders
or only indirect owners of those securities.
Each time
Capitol sells securities, Capitol will provide a prospectus supplement that will
contain specific information about the terms of that offering. In
addition, Capitol and any underwriter or agent that Capitol may from time to
time retain may also provide other information relating to an offering, which
Capitol refers to as “other offering material.” The prospectus
supplement as well as the other offering material may also add, update or change
information contained in this prospectus. You should read this
prospectus, any prospectus supplement, any applicable pricing supplement,
together with additional information described in the section entitled “Where
You Can Find More Information” and any other offering material before making an
investment in our securities. Throughout this prospectus, where
Capitol indicates that information may be supplemented in an applicable
prospectus supplement or supplements, that information may also be supplemented
in other offering material provided. If there is any inconsistency
between the information contained in this prospectus and any prospectus
supplement, you should rely upon the information contained in such prospectus
supplement.
You should rely only on the
information contained in this prospectus or any prospectus supplement, and in
other offering material Capitol provides, if any, or information contained in
documents to which you are referred by this prospectus or any prospectus
supplement, or in other offering material Capitol provides, if
any. Capitol has not authorized anyone to provide you with different
information. Capitol is offering to sell the securities only in
jurisdictions where offers and sales are permitted. The information
contained in this prospectus or any prospectus supplement or other offering
material Capitol provides is accurate only as of the date on the front of those
documents, regardless of the time of delivery of the documents or any sale of
the securities
.
WHERE
YOU CAN FIND MORE INFORMATION
Capitol
files annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document Capitol
files at the SEC’s public reference room at 100 F Street, N.E., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. In addition, our SEC
filings are available to the public at the SEC’s Internet site at
http://www.sec.gov
and through the New
York Stock Exchange Inc., 20 Broad Street, New York, New
York 10005.
DOCUMENTS
INCORPORATED BY REFERENCE
In this
prospectus, as permitted by law, Capitol will “incorporate by reference”
information from other documents that Capitol files with the
SEC. This means that Capitol can disclose important information to
you by referring you to those documents. The information incorporated
by reference is considered to be a part of this prospectus and should be read
with the same care. When Capitol updates the information contained in
documents that have been incorporated by reference by making future filings with
the SEC, the information incorporated by reference in this prospectus is
considered to be automatically updated and superseded. In other
words, in case of a conflict or inconsistency between information contained in
this prospectus and information incorporated by reference into this prospectus,
you should rely on the information contained in the document that was filed
later.
Capitol
incorporates by reference the documents listed below and any documents Capitol
files with the SEC in the future under Section 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934 (the
“Exchange
Act”
) until our offering is completed:
·
|
our
Annual Report on Form 10-K for the year ended December 31,
2007;
|
·
|
our
Quarterly Report on Form 10-Q for the quarter ended March 31,
2008;
|
·
|
our
Current Reports on Form 8-K filed with the SEC on January 31, 2008,
February 1, 2008, March 18, 2008, March 31, 2008, April 17, 2008 and
April 24, 2008; and
|
·
|
the
description of our common stock contained in our Registration Statement on
Form 8-A filed April 19, 1990.
|
Information
furnished under Item 2.02 or 7.01 of our Current Reports on Form 8-K
is not incorporated by reference.
You may
request a copy of any of these filings, other than an exhibit to a filing unless
that exhibit is specifically incorporated by reference into that filing, at no
cost, by writing to or telephoning us at the following address:
Capitol
Bancorp Ltd.
Capitol
Bancorp Center
200
Washington Square North, Fourth Floor
Lansing,
Michigan 48933
Attention:
Investor Relations
Telephone:
(517) 487-6555
Internet
website:
www.capitolbancorp.com
FORWARD-LOOKING
STATEMENTS
This
prospectus and each prospectus supplement contains or incorporates statements
that Capitol believes are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
relate to our financial condition, results of operations, plans, objectives,
future performance or business. They usually can be identified by the use of
forward-looking language such as “will likely result,” “may,” “are expected to,”
“is anticipated,” “estimate,” “forecast,” “projected,” “intends to” or other
similar words. You should not place undue reliance on these
statements, as they are subject to risks and uncertainties, including but not
limited to those described in this prospectus, the prospectus supplement or the
documents incorporated by reference. When considering these
forward-looking statements, you should keep in mind these risks and
uncertainties, as well as any cautionary statements Capitol may
make. Moreover, you should treat these statements as speaking only as
of the date they are made and based only on information then actually known to
us. Capitol undertakes no obligation to update these forward-looking
statements to reflect events or circumstances after the date of this prospectus
or to reflect the occurrence of unanticipated events.
The
forward-looking statements involve certain risks and
uncertainties. Capitol cannot predict the results or actual effects
of our plans and strategies, which are inherently
uncertain. Accordingly, actual results may differ materially from
those expressed in, or implied by, the forward-looking
statements. Some of the factors that may cause our actual results or
earnings to differ materially from those contemplated by the forward-looking
statements include, but are not limited to, those discussed in our SEC filings
that are incorporated herein by reference, including future filings, as well as
the following:
·
|
the
environment for formation of new banks could change
adversely;
|
·
|
new
banks, which include our younger affiliates, incur operating losses and
may not contribute to consolidated earnings for a period of
time;
|
·
|
the
environment which has made both capital and management talent readily
available for formation of new banks could change
adversely;
|
·
|
changes
in regulations, or regulatory action regarding us or our banks could limit
future expansion plans;
|
·
|
Our
consolidated allowance for loan losses is based on
estimates;
|
·
|
concentrations
in loans secured by commercial real estate could limit or delay future
expansion plans and loss estimates could change significantly if real
estate market conditions
deteriorate;
|
·
|
the
complexity of our structure (a mixture of partially-owned and wholly-owned
banks and related entities) complicates financial
analysis;
|
·
|
the
results of our efforts to implement our business strategy may not meet the
expectations underlying our forward-looking
statements;
|
·
|
legislation
or regulatory requirements may adversely impact our banking business
and/or expansion strategy;
|
·
|
competitive
pressure among financial services companies may increase significantly,
which may adversely affect our ability to market our products and
services;
|
·
|
general
economic conditions may be less favorable than
expected;
|
·
|
changes
in the interest rate environment may reduce interest margins and impact
funding sources;
|
·
|
changes
in market rates and prices may adversely impact the value of financial
products and assets;
|
·
|
legislation
or regulatory environments, requirements or changes may adversely affect
businesses in which our company is
engaged;
|
·
|
litigation
liabilities, including costs, expenses, settlements and judgments, may
adversely affect us or our its
businesses;
|
·
|
trade,
monetary and fiscal policies of various governmental bodies may affect the
economic environment in which Capitol operates, as well as Capitol’s
financial condition and results of
operations;
|
·
|
adversity
in general economic conditions, or in the condition of the local economies
or industries in which Capitol has significant operations or assets,
could, among other things, materially impact credit quality trends and our
ability to generate loans;
|
·
|
it
could take us longer than anticipated to implement strategic initiatives
designed to grow revenue or manage expenses; Capitol may be unable to
implement certain initiatives; or the initiatives may be
unsuccessful;
|
·
|
acquisitions
and dispositions of assets, business units or affiliates could adversely
affect us in ways that management has not
anticipated;
|
·
|
Capitol
may experience operational or risk management failures due to
technological or other factors;
|
·
|
changes
in the stock markets, public debt markets and other capital markets could
adversely affect our ability to raise capital or other funding for
liquidity and business purposes;
|
·
|
terrorist
activities or military actions could disrupt the economy and the general
business climate, which may have an adverse effect on our financial
results or condition and that of our
borrowers;
|
·
|
Capitol
may become subject to new accounting, tax or regulatory practices or
requirements; and
|
·
|
Capitol
may engage in various merger and other business combination transactions,
which entail various risks and uncertainties,
including:
|
§
|
revenues
following the transaction may be lower than
expected;
|
§
|
deposit
attrition, operating costs, customer loss and business disruption
following any such transaction, including difficulties in maintaining
relationships with employees, may be greater than
expected; and
|
|
§
|
Capitol
may not be able to achieve cost or revenue synergies and other benefits
anticipated from the transaction in full, at the times anticipated or at
all.
|
Because
these forward-looking statements are subject to assumptions and uncertainties,
actual results may differ materially from those expressed or implied by these
forward-looking statements. You are cautioned not to place undue
reliance on these statements, which speak only as of the date of this document
or the date of any document incorporated by reference in this
document. Capitol cautions investors not to place significant
reliance on the forward-looking statements contained in this prospectus, any
prospectus supplement, and the documents Capitol incorporate by
reference.
You
should refer to our periodic and current reports filed with the SEC (and
incorporated by reference herein) for further information on other factors that
could cause actual results to be significantly different from those expressed or
implied by these forward-looking statements. See above under the
caption “Where You Can Find More Information” and “Documents Incorporated by
Reference” in this prospectus.
PROSPECTUS
SUMMARY
This
summary provides a general description of the securities Capitol may
offer. This summary is not complete and does not contain all of the
information that may be important to you. For a more complete
understanding of us and the terms of the securities Capitol will offer, you
should read carefully this entire prospectus, including the “Risk Factors”
section, the applicable prospectus supplement for the securities and the other
documents Capitol refers to and incorporates by reference. In
particular, Capitol incorporates important business and financial information
into this prospectus by reference.
The
Securities CAPITOL May Offer
Capitol
may offer any of the following securities from time to time:
·
|
purchase
contracts; and
|
·
|
units,
comprised of two or more securities, in any
combination.
|
Manner
of Offering
Capitol
may use this prospectus to offer securities in an aggregate amount of up to
$150,000,000 in one or more offerings. The securities will be offered
when they are first issued and sold and after that in market-making transactions
involving one or more of our subsidiaries.
A
prospectus supplement, which Capitol will provide each time Capitol offers
securities, will describe the amounts, prices and detailed terms of the
securities offered and may describe risks associated with an investment in the
securities in addition to those described in the “Risk Factors” section of this
prospectus. Capitol will also include in the prospectus supplement,
where applicable, information about material United States federal income tax
considerations relating to the securities.
Capitol
may sell the securities to or through underwriters, dealers or agents or
directly to purchasers. We, as well as any agents acting on our
behalf, reserve the sole right to accept or to reject in whole or in part any
proposed purchase of our securities. Each prospectus supplement will
set forth the names of any underwriters, dealers or agents involved in the sale
of our securities described in that prospectus supplement and any applicable
fee, commission or discount arrangements with them.
Common
Stock
Capitol
may sell our common stock, no par value per share. In a prospectus
supplement, Capitol will describe the aggregate number of shares offered and the
offering price or prices of the shares.
Warrants
Capitol
may sell warrants to purchase our shares of our common stock. In a
prospectus supplement, Capitol will inform you of the exercise price and other
specific terms of the warrants, including whether our or your obligations, if
any, under any warrants may be satisfied by delivering or purchasing the
underlying securities or their cash value.
Purchase
Contracts
Capitol
may issue purchase contracts, including purchase contracts issued as part of a
unit with one or more other securities, for the purchase or sale of our common
stock. The price per share of common stock, may be fixed
at the
time the purchase contracts are issued or may be determined by reference to a
specific formula contained in the purchase contracts. Capitol may
issue purchase contracts in such amounts and in as many distinct series as
Capitol wishes.
Units
Capitol
may sell any combination of one or more of the other securities described in
this prospectus, together as units. In a prospectus supplement,
Capitol will describe the particular combination of securities constituting any
units and any other specific terms of the units.
Listing
If any securities are to be listed or
quoted on a securities exchange or quotation system, your prospectus supplement
will say so. Our common stock is traded on the New York Stock
Exchange under the symbol “CBC.”
RISK
FACTORS
Before
making an investment decision, you should carefully consider the risks described
under “Risk Factors” in the applicable prospectus supplement and in Capitol’s
most recent Annual Report on Form 10-K, and in our updates to those Risk
Factors in our Quarterly Reports on Form 10-Q, together with all of the
other information appearing in this prospectus or incorporated by reference into
this prospectus and any applicable prospectus supplement, in light of your
particular investment objectives and financial circumstances. In addition to
those risk factors, there may be additional risks and uncertainties of which
management is not aware or focused on or that management deems
immaterial. Our business, financial condition or results of
operations could be materially adversely affected by any of these
risks. The trading price of our securities could decline due to any
of these risks, and you may lose all or part of your investment.
CAPITOL BANCORP LTD.
About
Capitol Bancorp Ltd.
Capitol
is a $5.1 billion national community bank development company, with a network of
64 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 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
is a uniquely structured affiliation of community banks. Each of Capitol’s
banks is viewed by its management as being a separate business from the
perspective of monitoring performance and allocation of financial
resources. Capitol uses a unique strategy of bank ownership and
development.
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. 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.” Our principal executive office is located at
Capitol Bancorp Center, 200 Washington Square North, Fourth Floor, Lansing,
Michigan 48933, and our telephone number is (517) 487-6555.
Recent
Developments
Subsequent
to March 31, 2008, two de novo banks have opened. Colonia Bank, located in
Phoenix, Arizona, opened on April 30, 2008. On May 15, 2008, Pisgah
Community Bank, located in Asheville, North Carolina, commenced
operations. Each is majority owned by bank-development subsidiaries
controlled by Capitol.
In May
2008, Capitol commenced a private offering of up to $25 million of promissory
notes, bearing interest at 9%, with a maturity of five years. Such
offering was made solely to “accredited investors” who are affiliated with or
associates of Capitol or its subsidiaries. It is anticipated that the
offering will be completed on or about June 15, 2008. Proceeds from the
offering will be used for bank development and other corporate
purposes.
USE
OF PROCEEDS
Unless
otherwise set forth in a prospectus supplement, Capitol expects to use the net
proceeds from the sale of any securities for general corporate and other
purposes, which may include:
·
|
reducing
or refinancing existing debt;
|
·
|
investments
at the holding company level;
|
·
|
investing
in, or extending credit to, our
subsidiaries;
|
·
|
providing
capital to our subsidiaries to support additional
growth;
|
·
|
continued
investment in new bank
subsidiaries; and
|
·
|
other
purposes as described in any prospectus
supplement.
|
Pending such use, Capitol may temporarily invest the net proceeds. The precise
amounts and timing of the application of proceeds will depend upon our funding
requirements and the availability of other funds. Except as indicated
in a prospectus supplement, allocations of the proceeds to specific purposes
will not have been made at the date of that prospectus supplement.
Based
upon our historical and anticipated future growth and our financial needs,
Capitol may engage in additional financings of a character and amount that
Capitol determines as the need arises.
Capitol
continually evaluates possible business combination opportunities. As
a result, future business combinations involving cash, debt or equity securities
may occur. Any future business combination or series of business
combinations that Capitol might undertake may be material, in terms of assets
acquired, liabilities assumed or otherwise, to our financial
condition.
RATIO
OF EARNINGS TO FIXED CHARGES
The
following table shows the ratio of earnings to fixed charges for Capitol, which
includes its subsidiaries, on a consolidated basis. The ratio of
earnings to fixed charges has been computed by dividing:
·
|
net
income plus all applicable income taxes plus fixed charges,
by
|
Fixed
charges, excluding interest on deposits, includes interest on long-term debt,
FHLB advances, federal funds purchased, securities sold under agreements to
repurchase, subordinated debentures, other borrowed funds and a portion of rent
expense deemed to be representative of interest cost (estimated to approximate
one-third of rent expense). Fixed charges, including interest on
deposits, include all of the items listed above plus interest on
deposits.
|
|
Three
Months
Ended
|
|
Year
Ended December 31,
|
|
|
March
31, 2008
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of earnings to fixed
charges
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding
interest on
deposits
|
|
1.03x
|
|
1.95x
|
|
3.97x
|
|
4.36x
|
|
4.25x
|
|
4.75x
|
Including
interest on
deposits
|
|
1.01x
|
|
1.16x
|
|
1.54x
|
|
1.79x
|
|
1.84x
|
|
1.73x
|
REGULATORY
CONSIDERATIONS
Capitol
is extensively regulated under both federal and state law. Capitol is
a bank holding company under the Bank Holding Company Act of 1956, as amended
(the
“Bank
Holding Company Act”
) and Regulation Y
thereunder. As
such, the Board of Governors of the Federal Reserve System (the
“Federal Reserve
Board”
) regulates, supervises and examines Capitol. Our
banking subsidiaries have deposit insurance provided by the Federal Deposit
Insurance Corporation through the Deposit Insurance Fund. For a
discussion of the material elements of the regulatory framework applicable to
bank holding companies and their subsidiaries and specific information relevant
to us, please refer to our Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 and any subsequent reports Capitol files with the
SEC, which are incorporated by reference in this prospectus.
This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. As a result of this regulatory framework, our earnings are
affected by actions of the Federal Deposit Insurance Corporation, which insures
the deposits of our banking subsidiaries within certain limits, certain other
federal and state regulatory agencies that regulate us and our bank
subsidiaries, and the SEC.
Our
earnings are also affected by general economic conditions, our management
policies and legislative action. In addition, there are numerous
governmental requirements and regulations that affect our business
activities. A change in applicable statutes, regulations or
regulatory policy may have a material effect on our business.
Depository
institutions, like Capitol’s bank subsidiaries, are also affected by various
federal and state laws, including those relating to consumer protection and
similar matters. Capitol also has other subsidiaries regulated,
supervised and examined by the Federal Reserve Board, as well as other relevant
state and federal regulatory agencies and self-regulatory organizations,
including, without limitation, the OCC, the OTS and the NYSE. Our
non-bank subsidiaries may be subject to other laws and regulations of the
federal government or the various states in which they do business.
DESCRIPTION
OF CAPITAL STOCK
Our
authorized capital stock includes 50,000,000 shares of common stock, no par
value per share. As of May 20, 2008, there were
17,321,916 shares of common stock outstanding.
Our
common stock is traded on the New York Stock Exchange, Inc. under the symbol
“CBC.” All of the outstanding shares of common stock are, and any
common stock issued and sold under this prospectus will be, fully paid and
nonassessable.
DESCRIPTION OF COMMON STOCK CAPITOL
MAY OFFER
General
The
following description summarizes the material provisions of our common
stock. This description is not complete, and is qualified in its
entirety by reference to the provisions of our articles of incorporation, as
amended and our amended and restated bylaws, as well as the Michigan Business
Corporation Act, as amended, or the MBCA. Our articles of
incorporation and bylaws are, and any amendments to them will be, incorporated
by reference in our registration statement.
The
transfer agent and registrar for Capitol’s common stock is Computershare Trust
Company, N.A., 250 Royall Street, Canton, MA 02021.
All of
the outstanding shares of our common stock are fully paid and
nonassessable. The holders of common stock are entitled to
receive:
·
|
dividends
when, as and if declared by our Board of Directors out of funds legally
available for the payment of dividends (as a bank holding company,
Capitol’s ability to pay distributions will be affected by the ability of
its banking subsidiaries to pay dividends under applicable laws, rules and
regulations; the ability of these banking subsidiaries, as well as
Capitol, to pay dividends in the future currently is, and could be
further, influenced by bank regulatory requirements and capital
guidelines); and
|
·
|
in
the event of dissolution of Capitol, to share ratably in all assets
remaining after payment of all
liabilities.
|
Each
holder of common stock is entitled to one vote for each share held of record on
all matters presented to a vote at a shareholders meeting, including the
election of directors. Holders of common stock have no cumulative
voting rights or preemptive rights to purchase or subscribe for any additional
shares of common stock or other securities and there are no conversion rights or
redemption or sinking fund provisions with respect to the common
stock. Capitol’s common stock is traded on the New York Stock
Exchange, Inc. under the symbol “CBC.”
Certain
Restrictions Under Michigan Law
Subject
to certain exceptions, Chapter 7A of the Michigan Business Corporation Act
prohibits a corporation from engaging in any business combination with an
interested shareholder (generally defined as a 10% shareholder) unless approved
by at least (1) 90% of the votes of each class of stock entitled to vote
and (2) two-thirds of the votes of each class of stock entitled to be cast
by the shareholders other than voting shares beneficially owned by the
interested shareholder.
In
addition, Chapter 7B of the Michigan Business Corporation Act provides that
a party that acquires or offers to acquire ownership of control shares of a
corporation (defined as shares obtained pursuant to a transaction in which the
acquiring party reaches the 20%, 33% or majority ownership levels) has the right
to vote those shares, and shares acquired within the previous 90 days (or
while pursuing a plan to acquire control shares), only to the extent granted by
a resolution of the shareholders approved at a special or annual meeting. A
resolution granting voting rights must be approved by a majority vote of
(1) all shares and (2) all disinterested shares. If the
acquiring party has acquired a majority stake and been accorded full voting
rights, shareholders other than the acquiring shareholder are entitled to put
their shares to the corporation for “fair value” (defined as the highest price
paid per share by the acquiring party in the control share
acquisition).
Certain
Restrictions Under Federal Banking Laws
The Bank
Holding Company Act prohibits any company that is not engaged in banking
activities and activities that are permissible for a bank holding company or a
financial holding company from acquiring control of Capitol. Control
is generally defined in the Bank Holding Company Act and the regulations
thereunder as ownership of 25% or more of any class of voting stock or other
exercise of a controlling influence. In addition, any existing bank
holding company would require the prior approval of the Federal Reserve Board
before acquiring 5% or more of the voting stock of Capitol. In
addition, the Change in Bank Control Act of 1978, as amended, prohibits a person
or group of persons from acquiring “control” of a bank holding company unless
the Federal Reserve Board has been notified and has not objected to the
transaction. Under a rebuttable presumption established by the
Federal Reserve Board, the acquisition of 10% or more of a class of voting stock
of a bank holding company with a class of securities registered under
Section 12 of the Exchange Act, such as Capitol, would, under the
circumstances set forth in the presumption, constitute acquisition of control of
the bank holding company.
Certain
Other Limitations
In
addition to the foregoing limitations, the articles of incorporation and bylaws
of Capitol contain provisions that could have an anti-takeover effect, and may
prevent or delay mergers and other business combination transactions that common
shareholders may believe to be in their best interests. Some of the
provisions also may make it difficult for shareholders to replace incumbent
directors with new directors who may be willing to entertain changes that
shareholders may believe will lead to improvements in the combined company’s
business. These additional or different provisions include the
classified board structure of Capitol.
DESCRIPTION OF WARRANTS CAPITOL MAY OFFER
General
The
following outlines some of the general terms and provisions of the
warrants. Further terms of the warrants and the applicable warrant
agreement will be stated in the applicable prospectus supplement. The
following description and any description of the warrants in a prospectus
supplement may not be complete and is subject to and qualified in its entirety
by reference to the terms and provisions of the relevant warrant
agreement.
Capitol
may issue warrants to purchase common stock. Warrants may be issued
by us independently or together with any other securities and may be attached or
separate from such securities. Capitol may issue each series of
warrants under a separate warrant agreement to be entered into between us and a
warrant agent. If Capitol designates a warrant agent, such warrant
agent will act solely as our agent in connection with the warrants of such
series and will not assume any obligation or relationship of agency for or with
holders or beneficial owners of warrants.
The
applicable prospectus supplement will describe the terms of any warrants that
Capitol may offer, including the following:
·
|
the
title of the warrants;
|
·
|
the
total number of warrants;
|
·
|
the
price or prices at which the warrants will be
issued;
|
·
|
if
applicable, the currency or currencies investors may use to pay for the
warrants;
|
·
|
the
securities or other rights, including rights to receive payment in cash or
securities based on the value, rate or price of one or more specified
commodities, currencies, securities or indices, or any combination of the
foregoing, to be delivered to warrantholders upon exercise of the
warrants;
|
·
|
if
applicable, the price at which and the currency or currencies, including
composite currencies, in which investors may purchase the underlying
securities or other rights purchasable upon exercise of the
warrants;
|
·
|
the
date on which the right to exercise the warrants will commence and the
date on which the right will
expire;
|
·
|
whether
the warrants will be issued in registered form or bearer
form;
|
·
|
information
with respect to book-entry procedures, if
any;
|
·
|
if
applicable, the minimum or maximum amount of warrants which may be
exercised at any one time;
|
·
|
if
applicable, the designation and terms of the underlying securities with
which the warrants are issued and the number of warrants issued with each
underlying security;
|
·
|
if
applicable, the date on and after which the warrants and the related
underlying securities will be separately
transferable;
|
·
|
if
applicable, a discussion of material U.S. federal income tax
considerations;
|
·
|
the
identity of the warrant agent, if
any;
|
·
|
the
procedures and conditions relating to the exercise of the
warrants; and
|
·
|
any
other terms of the warrants, including terms, procedures and limitations
relating to the exchange and exercise of the
warrants.
|
Exercise
of Warrants
Each
warrant will entitle the holder to purchase such principal amount of such number
of shares of common stock at such exercise price as shall in each case be set
forth in, or can be calculated according to information contained in, the
prospectus supplement relating to the warrant. Warrants may be
exercised at such times as are set forth in the prospectus supplement relating
to such warrants. After the close of business on the expiration date
of the warrants, or such later date to which such expiration date may be
extended by Capitol, unexercised warrants will become void.
Subject
to any restrictions and additional requirements that may be set forth in the
prospectus supplement, warrants may be exercised by delivery to the warrant
agent of the certificate evidencing such warrants properly completed and duly
executed and of payment as provided in the prospectus supplement of the amount
required to purchase shares of common stock purchasable upon such
exercise. The exercise price will be the price applicable on the date
of payment in full, as set forth in the prospectus supplement relating to the
warrants. Upon receipt of such payment and the certificate
representing the warrants to be exercised, properly completed and duly executed
at the corporate trust office of the warrant agent or any other office indicated
in the prospectus supplement, Capitol will, as soon as practicable, issue and
deliver the shares of common stock purchasable upon such exercise. If
fewer than all of the warrants represented by such certificate are exercised, a
new certificate will be issued for the remaining amount of
warrants.
Additional
Provisions
The
exercise price payable and the number of shares of common stock purchasable upon
the exercise of each stock warrant will be subject to adjustment in certain
events, including:
·
|
the
issuance of the stock dividend to holders of common
stock;
|
·
|
a
combination, subdivision or reclassification of common
stock; or
|
·
|
any
other event described in the applicable prospectus
supplement.
|
In lieu
of adjusting the number of shares of common stock purchasable upon exercise of
each stock warrant, Capitol may elect to adjust the number of stock
warrants. No adjustment in the number of shares purchasable upon
exercise of the stock warrants will be required until cumulative adjustments
require an adjustment of at least 1% thereof. Capitol may, at our
option, reduce the exercise price at any time. No fractional shares
will be issued upon exercise of stock warrants, but Capitol will pay the cash
value of any fractional shares otherwise issuable. Notwithstanding
the foregoing, in case of any consolidation, merger, or sale or conveyance of
the property of Capitol as an entirety or substantially as an entirety, the
holder of each outstanding stock warrant shall have the right upon the exercise
thereof to the kind and amount of shares of stock and other securities and
property, including cash, receivable by a holder of the number of shares of
common stock into which such stock warrants were exercisable immediately prior
thereto.
No
Rights as Shareholders
Unless
specified in a prospectus supplement, holders of stock warrants will not be
entitled, by virtue of being such holders, to vote, to consent, to receive
dividends, to receive notice as shareholders with respect to any meeting of
shareholders for the election of directors of Capitol or any other matter or to
exercise any rights whatsoever as shareholders of Capitol.
No
warrant agreement will be qualified as an indenture, and no warrant agent will
be required to qualify as a trustee, under the Trust Indenture
Act. Therefore, holders of warrants issued under a warrant agreement
will not have the protection of the Trust Indenture Act with respect to their
warrants.
DESCRIPTION
OF PURCHASE CONTRACTS CAPITOL MAY OFFER
Capitol
may issue purchase contracts for the purchase or sale of:
·
|
shares
of our common stock;
|
Each
purchase contract will entitle the holder thereof to purchase or sell, and
obligate us to sell or purchase, on specified dates, such securities, currencies
or commodities at a specified purchase price, which may be based on a formula,
all as set forth in the applicable prospectus supplement.
The
applicable prospectus supplement will contain, where applicable, the following
information about the purchase contracts issued under it:
·
|
whether
the purchase contracts obligate the holder to purchase or sell, or both
purchase and sell, securities, currencies or commodities, as applicable,
and the nature and amount of each of those securities, currencies or
commodities, or the method of determining those
amounts;
|
·
|
whether
the purchase contracts are to be prepaid or not and whether holders
thereof are required to secure their obligations in a specified
manner;
|
·
|
whether
Capitol may satisfy our obligations, if any, with respect to any purchase
contract by delivering the cash value of such purchase contract or the
cash value of the property otherwise deliverable or, in the case of
purchase contracts on underlying currencies, by delivering the underlying
currencies;
|
·
|
the
methods by which the holders may purchase or sell such securities,
currencies or commodities;
|
·
|
whether
the purchase contracts require us to make periodic payments to the holders
thereof or vice versa, which payments may be deferred to the extent set
forth in the applicable prospectus supplement, and whether those payments
may be unsecured or prefunded on some
basis;
|
·
|
any
acceleration, cancellation, termination or other provisions relating to
the settlement of the purchase
contracts; and
|
·
|
whether
the purchase contracts will be issued in fully registered or global
form.
|
The
applicable prospectus supplement will describe the terms of any purchase
contracts. The preceding description and any description of purchase
contracts in the applicable prospectus supplement does not purport to be
complete and is subject to and is qualified in its entirety by reference to the
purchase contract agreement and, if applicable, collateral arrangements and
depository arrangements relating to such purchase contracts.
DESCRIPTION
OF UNITS CAPITOL MAY OFFER
Capitol
may issue units comprised of one or more of the other securities described in
this prospectus in any combination. Each unit will be issued so that
the holder of the unit is also the holder of each security included in the
unit. Thus, the holder of a unit will have the rights and obligations
of a holder of each included security. The unit agreement under which
a unit is issued may provide that the securities included in the unit may not be
held or transferred separately, at any time or at any time before a specified
date.
The
applicable prospectus supplement will describe:
·
|
the
designation and terms of the units and of the securities comprising the
units, including whether and under what circumstances those securities may
be held or transferred separately;
|
·
|
any
provisions for the issuance, payment, settlement, transfer or exchange of
the units, any unit agreement governing the units or of the securities
comprising the units; and
|
·
|
whether
the units will be issued in fully registered or global
form.
|
The
applicable prospectus supplement will describe the additional material terms of
any units. The preceding description and any description of units in
the applicable prospectus supplement does not purport to be complete and is
subject to and is qualified in its entirety by reference to the unit agreement
and, if applicable, collateral arrangements and depositary arrangements relating
to such units.
LEGAL OWNERSHIP AND BOOK-ENTRY
ISSUANCE
In this
section, Capitol describes special considerations that will apply to securities
issued in global — i.e., book-entry — form. First Capitol
describes the difference between legal ownership and indirect ownership of
securities. Then Capitol describes special provisions that apply to
securities.
Who
is the Legal Owner of a Registered Security?
Each debt
security, warrant, purchase contract, unit or share of common stock in
registered form will be represented either by a certificate issued in definitive
form to a particular investor or by one or more global securities representing
such securities. Capitol refers to those who have securities
registered in their own names, on the books that Capitol or the trustee, warrant
agent or other agent maintain for this purpose, as the “holders” of those
securities. These persons are the legal holders of the
securities. Capitol refers to those who, indirectly through others,
own beneficial interests in securities that are not registered in their own
names as indirect owners of those securities. As discussed below, indirect
owners are not legal holders, and investors in securities issued in book-entry
form or in street name will be indirect owners.
Book-Entry
Owners
Unless
otherwise noted in your prospectus supplement, Capitol will issue each security
in book-entry form only. This means securities will be represented by
one or more global securities registered in the name of a financial institution
that holds them as depositary on behalf of other financial institutions that
participate in the depositary’s book-entry system. These
participating institutions, in turn, hold beneficial interests in the securities
on behalf of themselves or their customers.
Under
each indenture, warrant agreement, purchase contract or unit agreement, only the
person in whose name a security is registered is recognized as the holder of
that security. Consequently, for securities issued in global form, Capitol will
recognize only the depositary as the holder of the securities and will make all
payments on the securities, including deliveries of any property other than
cash, to the depositary. The depositary passes along the payments it
receives to its participants, which in turn pass the payments along to their
customers who are the beneficial owners. The depositary and its
participants do so under agreements they have made with one another or with
their customers; they are not obligated to do so under the terms of the
securities.
As a
result, investors will not own securities directly. Instead, they
will own beneficial interests in a global security, through a bank, broker or
other financial institution that participates in the depositary’s book-entry
system or holds an interest through a participant. As long as the
securities are issued in global form, investors will be indirect owners, and not
holders, of the securities.
Street
Name Owners
Capitol
may terminate an existing global security or issue securities initially in
non-global form. In these cases, investors may choose to hold their
securities in their own names or in street name. Securities held by
an investor in
street
name would be registered in the name of a bank, broker or other financial
institution that the investor chooses, and the investor would hold only a
beneficial interest in those securities through an account he or she maintains
at that institution.
For
securities held in street name, Capitol will recognize only the intermediary
banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities and will make all payments on
those securities, including deliveries of any property other than cash, to
them. These institutions pass along the payments they receive to
their customers who are the beneficial owners, but only because they agree to do
so in their customary agreements or because they are legally required to do
so. Investors who hold securities in street name will be indirect
owners, not holders, of those securities.
Legal
Holders
Our
obligations, as well as the obligations of the trustee under any indenture and
the obligations, if any, of any warrant agents and unit agents and any other
third parties employed by us or any of those agents, run only to the holders of
the securities. Capitol does not have obligations to investors who
hold beneficial interests in global securities, in street name or by any other
indirect means. This will be the case whether an investor chooses to
be an indirect owner of a security or has no choice because Capitol is issuing
the securities only in global form.
For
example, once Capitol makes a payment or gives a notice to the holder, we have
no further responsibility for that payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect owners but does not do
so. Similarly, if Capitol wants to obtain the approval of the holders
for any purpose — for example, to amend the indenture for a series of
warrants or the warrant agreement for a series of warrants or to relieve us of
the consequences of a default or of its obligation to comply with a particular
provision of an indenture —Capitol would seek the approval only from the
holders, and not the indirect owners, of the relevant
securities. Whether and how the holders contact the indirect owners
is up to the holders.
When
Capitol refers to “you” in this prospectus, Capitol means all purchasers of the
securities being offered by this prospectus, whether they are the holders or
only indirect owners of those securities. When Capitol refers to
“your securities” in this prospectus, Capitol means the securities in which you
will hold a direct or indirect interest.
Special
Considerations for Indirect Owners
If you
hold securities through a bank, broker or other financial institution, either in
book-entry form or in street name, you should check with your own institution to
find out:
·
|
how
it handles securities payments and
notices;
|
·
|
whether
it imposes fees or charges;
|
·
|
whether
and how you can instruct it to exercise any rights or purchase or sell
warrant property under a warrant or purchase contract property under a
purchase contract or to exchange or convert a security for or into other
property;
|
·
|
how
it would handle a request for the holders’ consent, if ever
required;
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·
|
how
it would exercise rights under the securities if there were a default or
other event triggering the need for holders to act to protect their
interests; and
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·
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if
the securities are in book-entry form, how the depositary’s rules and
procedures will affect these
matters.
|
What
is a Global Security?
Unless
otherwise noted in the applicable prospectus supplement, Capitol will issue each
security in book-entry form only. Each security issued in book-entry
form will be represented by a global security that Capitol will deposit with and
register in the name of one or more financial institutions or clearing systems,
or their nominees, which Capitol will select. A financial institution
or clearing system that Capitol selects for any security for this purpose is
called the “depositary” for that security. A security will usually
have only one depositary but it may have more. Each series of
securities will have one or more of the following as the
depositaries:
·
|
The
Depository Trust Company, New York, New York, which is known as
“DTC;”
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·
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Euroclear
System, which is known as
“Euroclear;”
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·
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Clearstream
Banking, societe anonyme, Luxembourg, which is known as
“Clearstream;” and
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·
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any
other clearing system or financial institution named in the prospectus
supplement.
|
The
depositaries named above may also be participants in one another’s
systems. Thus, for example, if DTC is the depositary for a global
security, investors may hold beneficial interests in that security through
Euroclear or Clearstream, as DTC participants. The depositary or
depositaries for your securities will be named in your prospectus supplement; if
none is named, the depositary will be DTC.
A global
security may represent one or any other number of individual
securities. Generally, all securities represented by the same global
security will have the same terms. Capitol may, however, issue a
global security that represents multiple securities of the same kind, such as
warrants, that have different terms and are issued at different
times. Capitol calls this kind of global security a master global
security.
A global
security may not be transferred to or registered in the name of anyone other
than the depositary or its nominee, unless special termination situations
arise. Capitol describes those situations below under
“— Holder’s Option to Obtain a Non-Global Security; Special Situations When
a Global Security Will Be Terminated.” As a result of these
arrangements, the depositary, or its nominee, will be the sole registered owner
and holder of all securities represented by a global security, and investors
will be permitted to own only indirect interests in a global
security. Indirect interests must be held by means of an account with
a broker, bank or other financial institution that in turn has an account with
the depositary or with another institution that does. Thus, an
investor whose security is represented by a global security will not be a holder
of the security, but only an indirect owner of an interest in the global
security.
If the
prospectus supplement for a particular security indicates that the security will
be issued in global form only, then the security will be represented by a global
security at all times unless and until the global security is
terminated. Capitol describes the situations in which this can occur
below under “— Holder’s Option to Obtain a Non-Global Security; Special
Situations When a Global Security Will Be Terminated.” If termination
occurs, we may issue the securities through another book-entry clearing system
or decide that the securities may no longer be held through any book-entry
clearing system.
Special
Considerations for Global Securities
As an
indirect owner, an investor’s rights relating to a global security will be
governed by the account rules of the depositary and those of the investor’s
bank, broker, financial institution or other intermediary through which it holds
its interest (e.g., Euroclear or Clearstream, if DTC is the depositary), as well
as general laws relating to securities transfers. We do not recognize
this type of investor or any intermediary as a holder of securities and instead
deal only with the depositary that holds the global security.
If
securities are issued only in the form of a global security, an investor should
be aware of the following:
·
|
An
investor cannot cause the securities to be registered in his or her own
name, and cannot obtain non-global certificates for his or her interest in
the securities, except in the special situations we describe
below;
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·
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An
investor will be an indirect holder and must look to his or her own bank,
broker or other financial institution for payments on the securities and
protection of his or her legal rights relating to the securities, as we
describe above under “— Who Is the Legal Owner of a Registered
Security?;”
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·
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An
investor may not be able to sell interests in the securities to some
insurance companies and other institutions that are required by law to own
their securities in non-book-entry
form;
|
·
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An
investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the securities
must be delivered to the lender or other beneficiary of the pledge in
order for the pledge to be
effective;
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·
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The
depositary’s policies will govern payments, deliveries, transfers,
exchanges, notices and other matters relating to an investor’s interest in
a global security, and those policies may change from time to
time. We, the trustee and any warrant agents and unit agents
will have no responsibility for any aspect of the depositary’s policies,
actions or records of ownership interests in a global
security. We, the trustee and any warrant agents and unit
agents also do not supervise the depositary in any way;
and
|
·
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The
depositary may require that those who purchase and sell interests in a
global security within its book-entry system use immediately available
funds and your bank, broker or other financial institution may require you
to do so as well.
|
Financial
institutions that participate in the depositary’s book-entry system and through
which an investor holds its interest in the global securities, directly or
indirectly, may also have their own policies affecting payments, deliveries,
transfers, exchanges, notices and other matters relating to the securities, and
those policies may change from time to time. For example, if you hold
an interest in a global security through Euroclear or Clearstream, when DTC is
the depositary, Euroclear or Clearstream, as applicable, may require those who
purchase and sell interests in that security through them to use immediately
available funds and comply with other policies and procedures, including
deadlines for giving instructions as to transactions that are to be effected on
a particular day. There may be more than one financial intermediary
in the chain of ownership for an investor. We do not monitor and are
not responsible for the policies or actions or records of ownership interests of
any of those intermediaries.
Holder’s
Option to Obtain a Non-Global Security; Special Situations When a Global
Security Will Be Terminated
If we
issues any series of securities in book-entry form but we choose to give the
beneficial owners of that series the right to obtain non-global securities, any
beneficial owner entitled to obtain non-global securities may do so by following
the applicable procedures of the depositary, any transfer agent or registrar for
that series and that owner’s bank, broker or other financial institution through
which that owner holds its beneficial interest in the securities. If
you are entitled to request a non-global certificate and wish to do so, you will
need to allow sufficient lead time to enable us or our agent to prepare the
requested certificate.
In
addition, in a few special situations described below, a global security will be
terminated and interests in it will be exchanged for certificates in non-global
form representing the securities it represented. After that exchange,
the choice of whether to hold the securities directly or in street name will be
up to the investor. Investors must consult their own banks, brokers
or other financial institutions, to find out how to have their interests in a
global security transferred on termination to their own names, so that they will
be holders. We have described the rights of holders and street name
investors above under “— Who Is the Legal Owner of a Registered
Security?”
The
special situations for termination of a global security are as
follows:
·
|
if
the depositary notifies us that it is unwilling, unable or no longer
qualified to continue as depositary for that global security and we do not
appoint another institution to act as depositary within
60 days;
|
·
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if
we notify the trustee, warrant agent or unit agent, as applicable, that we
wish to terminate that global
security; or
|
·
|
in
the case of a global security representing warrants issued under an
indenture, if an event of default has occurred with regard to these
warrants and has not been cured or
waived.
|
If a
global security is terminated, only the depositary, and not we, the warrant
agent for any warrants or the unit agent for any units, is responsible for
deciding the names of the institutions in whose names the securities represented
by the global security will be registered and, therefore, who will be the
holders of those securities.
Considerations
Relating to DTC
DTC has
informed Capitol that it is a limited-purpose trust company organized under the
New York Banking Law, a “banking organization” within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a “clearing
corporation” within the meaning of the New York Uniform Commercial Code and a
“clearing agency” registered pursuant to the provisions of Section 17A of
the Exchange Act. DTC holds securities that DTC participants deposit
with DTC. DTC also facilitates the settlement among DTC participants of
securities transactions, such as transfers and pledges in deposited securities
through electronic computerized book-entry changes in DTC participants’
accounts, thereby eliminating the need for physical movement of
certificates. DTC participants include securities brokers and
dealers, banks, trust companies and clearing corporations, and may include other
organizations. DTC is owned by a number of its DTC participants and
by the New York Stock Exchange, Inc., the American Stock Exchange, LLC and the
National Association of Securities Dealers, Inc. Indirect access to
the DTC system also is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The rules applicable to
DTC and DTC participants are on file with the SEC.
Purchases
of securities within the DTC system must be made by or through DTC participants,
which will receive a credit for the securities on DTC’s
records. Transfers of ownership interests in the securities are to be
accomplished by entries made on the books of participants acting on behalf of
beneficial owners.
Redemption
notices will be sent to DTC’s nominee, Cede & Co., as the registered
holder of the securities. If less than all of the securities are
being redeemed, DTC will determine the amount of the interest of each direct
participant to be redeemed in accordance with its then current
procedures.
In
instances in which a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to the securities. Under its
usual procedures, DTC would mail an omnibus proxy to the relevant trustee as
soon as possible after the record date. The omnibus proxy assigns
Cede & Co.’s consenting or voting rights to those direct participants
to whose accounts such securities are credited on the record date (identified in
a listing attached to the omnibus proxy).
Distribution
payments on the securities will be made by the relevant trustee to
DTC. DTC’s usual practice is to credit direct participants’ account
on the relevant payment date in accordance with their respective holdings shown
on DTC’s records unless DTC has reason to believe that it will not receive
payments on such payment date. Payments by participants to beneficial
owners will be governed by standing instructions and customary practices and
will be the responsibility of such participants and not of DTC, the relevant
trustee or us, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of distributions to DTC is the
responsibility of the relevant trustee, and disbursements of such payments to
the beneficial owners are the responsibility of direct and indirect
participants.
The
information in this section concerning DTC and DTC’s book-entry system has been
obtained from sources that we believe to be accurate, but we assume no
responsibility for the accuracy thereof. We do not have any
responsibility for the performance by DTC or its participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
PLAN
OF DISTRIBUTION
General
We may
sell the securities being offered hereby in one or more of the following ways
from time to time:
·
|
through
agents to the public or to investors including in private
placements;
|
·
|
to
underwriters for resale to the public or to
investors;
|
·
|
directly
to investors; or
|
·
|
through
a combination of any of these methods of
sale.
|
We will
set forth in a prospectus supplement the terms of that particular offering of
securities, including:
·
|
the
name or names of any agents or
underwriters;
|
·
|
the
purchase price of the securities being offered and the proceeds we will
receive from the sale;
|
·
|
any
over-allotment options under which underwriters may purchase additional
securities from us;
|
·
|
any
agency fees or underwriting discounts and other items constituting agents’
or underwriters’ compensation;
|
·
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any
initial public offering price;
|
·
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any
discounts or concessions allowed or reallowed or paid to
dealers; and
|
·
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any
securities exchanges or markets on which such securities may be
listed.
|
Agents
We may
designate agents who agree to use their reasonable efforts to solicit purchases
of our securities for a period of their appointment or to sell our securities on
a continuing basis.
Underwriters
If we use
underwriters for a sale of securities, the underwriters will acquire the
securities for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The underwriters may sell the securities directly or through
underwriting syndicates by managing underwriters. The obligations of
the underwriters to purchase the shares will be subject to the conditions set
forth in the applicable underwriting agreement. The underwriters will
be obligated to purchase all the shares if they purchase any of the
shares. The underwriters may change from time to time any initial
public offering price and any discounts or concessions the underwriters allow or
reallow or pay to dealers. We may use underwriters with whom we have
a material relationship. We will describe the nature of any such
relationship in any prospectus supplement naming any such
underwriter.
Underwriters,
dealers and agents that participate in the distribution of the securities may be
underwriters as defined in the Securities Act of 1933, as amended (the
“Securities
Act”
), and any discounts or commissions they receive may be treated as
underwriting discounts and commissions under the Securities Act. We
will identify in the applicable prospectus supplement any underwriters, dealers
or agents and will describe their compensation.
We may
have agreements with the underwriters, dealers and agents to indemnify them
against various civil liabilities, including liabilities under the Securities
Act, or to contribute payments that the agents, underwriters,
dealers
and remarketing firms may be required to make as a result of those civil
liabilities. Underwriters, dealers and agents and their affiliates
may be customers of, engage in transactions with, or perform services for us or
our subsidiary companies in the ordinary course of their
businesses. In connection with the distribution of the securities, we
may enter into swap or other hedging transactions with, or arranged by,
underwriters or agents or their affiliates. These underwriters or
agents or their affiliates may receive compensation, trading gain or other
benefits from these transactions.
Direct
Sales
We may
also sell shares directly to one or more purchasers without using underwriters
or agents.
Stabilization
Activities
Any
underwriter may engage in overallotment, stabilizing transactions, short
covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Overallotment involves sales in excess of the
offering size, which create a short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Short covering
transactions involve purchases of the securities in the open market after the
distribution is completed to cover short positions. Penalty bids
permit the underwriters to reclaim a selling concession from a dealer when the
securities originally sold by the dealer are purchased in a covering transaction
to cover short positions. Those activities may cause the price of the
securities to be higher than it would otherwise be. If commenced, the
underwriters may discontinue any of these activities at any time.
Trading
Markets and Listing of Securities
Unless
otherwise specified in the applicable prospectus supplement, each class or
series of securities will be a new issue with no established trading market,
other than our common stock, which is listed on the NYSE. Any shares
of common stock offered hereunder will be listed on the NYSE. We may
elect to list any other class or series of securities on any additional exchange
or market, but we are not obligated to do so unless stated otherwise in a
prospectus supplement. It is possible that one or more underwriters
may make a market in a class or series of securities offered by us, but the
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. We cannot give any assurance as to
the liquidity of the trading market for any of the securities offered pursuant
to this prospectus.
General
Information
The
securities may also be offered and sold, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more remarketing firms, acting as principals for their own accounts or
as agents for us. Any remarketing firm will be identified and terms of its
agreement, if any, with us, and its compensation will be described in the
applicable prospectus supplement. Remarketing firms may be deemed to
be underwriters, as that term is defined in the Securities Act, in connection
with the securities remarketed thereby.
CERTAIN
LEGAL MATTERS
Miller,
Canfield, Paddock and Stone, p.l.c. and Capitol’s General Counsel will pass upon
certain legal matters in connection with the securities, and Potter Anderson
& Corroon LLP will pass upon certain legal matters in connection with
Delaware law. Miller, Canfield, Paddock and Stone, p.l.c. has served
as primary outside counsel for us and our subsidiaries and affiliates and may do
so in the future. Counsel named in the applicable prospectus
supplement will pass upon certain legal matters in connection with the
securities for any underwriters or agents.
EXPERTS
The
consolidated financial statements of Capitol Bancorp as of December 31, 2007 and
2006 and for each of the three years in the period ended December 31, 2007 and
management’s assessment of the effectiveness of internal control over financial
reporting as of December 31, 2007 incorporated by reference in this prospectus
have been so
incorporated
in reliance on the reports of BDO Seidman, LLP, an independent registered public
accounting firm, incorporated herein by reference, given on the authority of
said firm as experts in auditing and accounting.