CAPITOL BANCORP LTD, S-3, 1999-07-29

CAPITOL BANCORP LTD
S-3, 1999-07-29
NATIONAL COMMERCIAL BANKS

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<PAGE> 1

As filed with the Securities and Exchange Commission on July 29, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

CAPITOL BANCORP LTD.
(NAME OF REGISTRANT IN ITS CHARTER)
-------------------------

<TABLE>
<S> <C>
MICHIGAN 38-2761672
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

200 WASHINGTON SQUARE NORTH, 4TH FLOOR
LANSING, MICHIGAN 48933
(517) 487-6555
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

JOSEPH D. REID
200 WASHINGTON SQUARE NORTH, 4TH FLOOR
LANSING, MICHIGAN 48933
(517) 487-6555
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------------------

COPIES TO:

<TABLE>
<S> <C>
JOHN SHARP DONALD L. JOHNSON
STROBL CUNNINGHAM CARETTI & SHARP, P.C. VARNUM, RIDDERING, SCHMIDT & HOWLETT LLP
300 E. LONG LAKE ROAD, SUITE 200 333 BRIDGE STREET, N.W., SUITE 1700
BLOOMFIELD HILLS, MI 48304 GRAND RAPIDS, MI 49504
(248) 540-2300 (616) 336-6000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
BEING REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (no par value)...... $2,070,000 $17.50 $36,225,000 $10,071
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRATION
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

(1) Includes 270,000 shares which may be sold by the Company to cover
over-allotments.

(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457 of the Securities Act of 1933.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

Subject to completion dated July 29, 1999

PROSPECTUS

1,800,000 SHARES

CAPITOL BANCORP LTD.
COMMON STOCK

[CAPITOL BANCORP LIMITED LOGO]

Capitol Bancorp Ltd. is offering 1,700,000 shares of common stock and a
selling shareholder is offering 100,000 shares of common stock. Capitol will not
receive any proceeds from sale of common stock by the selling shareholder.

Capitol's common stock is traded on the Nasdaq National Market under the
symbol "CBCL." The last reported sale price for the common stock on
, 1999 was $ per share.

INVESTING IN COMMON STOCK INVOLVES RISKS, WHICH ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE .
------------------------

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
PER SHARE TOTAL
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Public offering price.......................... $ $
- ----------------------------------------------------------------------------------------------------------
Underwriting discount.......................... $ $
- ----------------------------------------------------------------------------------------------------------
Proceeds to Capitol Bancorp Ltd., before
expenses..................................... $ $
- ----------------------------------------------------------------------------------------------------------
Proceeds to the selling shareholder, before
expenses..................................... $ $
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>

Capitol has granted the underwriters a 30-day option to purchase up to
270,000 additional shares of its common stock on the same terms and conditions
as above to cover over-allotments, if any.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

Capitol expects that the shares of common stock will be ready for delivery
in Chicago, Illinois on or about , 1999.

------------------------
KEEFE, BRUYETTE & WOODS, INC.
RAYMOND JAMES & ASSOCIATES, INC.
U.S. BANCORP PIPER JAFFRAY
------------------------

The date of this prospectus is , 1999
<PAGE> 3

[MAP GRAPHIC OF BANK LOCATIONS]

<TABLE>
<S> <C> <C> <C>
MICHIGAN BANKS LOCATION
1. Capitol National Bank Lansing
2. Portage Commerce Bank Portage
3. Ann Arbor Commerce Bank Ann Arbor
4. Oakland Commerce Bank Farmington Hills
5. Paragon Bank & Trust Holland
6. Grand Haven Bank Grand Haven
7. Macomb Community Bank Clinton Township
8. Brighton Commerce Bank Brighton
9. Muskegon Commerce Bank Muskegon
10. Kent Commerce Bank Grand Rapids
11. Detroit Commerce Bank Detroit
ARIZONA BANKS
12. Bank of Tucson Tucson
13. Valley First Community Bank Scottsdale
14. Camelback Community Bank Phoenix
15. Southern Arizona Community Bank Tucson
16. Mesa Bank Mesa
17. Sunrise Bank of Arizona Phoenix
18. East Valley Community Bank Chandler
NEVADA BANKS
19. Desert Community Bank (in formation) Las Vegas
20. Red Rock Community Bank (in formation) Las Vegas
INDIANA BANK
21. Elkhart Community Bank (in formation) Elkhart
</TABLE>
<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Cautionary Statement Regarding Forward-Looking
Information............................................... 2
Prospectus Summary.......................................... 3
Selected Consolidated Financial Data........................ 7
Risk Factors................................................ 9
Recent Developments......................................... 14
Use of Proceeds............................................. 15
Capitalization.............................................. 16
Dividends and Market For Common Stock....................... 17
Business.................................................... 18
Management.................................................. 26
Supervision and Regulation.................................. 30
Description of Capital Stock................................ 37
Underwriting................................................ 40
Legal Matters............................................... 42
Experts..................................................... 42
Incorporation of Certain Documents By Reference............. 42
Where You Can Find More Information......................... 43
</TABLE>

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This prospectus includes forward-looking statements. Capitol has based
these forward-looking statements on its current expectations and projections
about future events. These forward-looking statements may be impacted by risks,
uncertainties and assumptions. Examples of some of the risks, uncertainties or
assumptions that may impact the forward-looking statements are:

-- the results of management's efforts to implement Capitol's business
strategy including planned expansion into new markets in Arizona,
Nevada, New Mexico, Indiana and elsewhere;

-- adverse changes in the banks' loan portfolios and the resulting credit
risk-related losses and expenses;

-- adverse changes in the economy of the banks' market areas that could
increase credit-related losses and expenses;

-- adverse changes in real estate market conditions that could also
negatively affect credit risk;

-- the possibility of increased competition for financial services in
Capitol's markets;

-- fluctuations in interest rates and market prices, which could negatively
affect net interest margins, asset valuations and expense expectations;

-- changes in regulatory requirements of federal and state agencies
applicable to bank holding companies and Capitol's present and future
banking subsidiaries;

-- year 2000 (Y2K) computer, embedded chip and related data processing
issues; and

-- other factors discussed in "Risk Factors."

Capitol undertakes no obligation to publicly update or otherwise revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur.

2
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
Because this is a summary, it may not contain all of the information that is
important to you. To understand the offering fully, you should read the entire
prospectus before making a decision to invest in Capitol's common stock.

Unless stated otherwise, all share, per share and financial information in
this prospectus assumes no exercise of the underwriters' option to purchase
additional shares of common stock from Capitol.

ABOUT CAPITOL BANCORP LTD.

Capitol believes it follows a unique approach to developing and managing
community banks. It emphasizes local decision making at the bank level with
significant community ownership and individual boards of directors for each
bank, drawn from the community. Its customer focused approach to banking is
founded on the operating philosophy of local leadership and decision-making
authority in all aspects of making loans and providing deposit services.

Capitol currently has eleven bank subsidiaries which span the most populous
section of Michigan's lower peninsula, including its eastern and western shores.
Of those eleven banks, nine were started as new banks and two were acquisitions
from unaffiliated entities.

Capitol has expanded into the southwestern portion of the United States
through its 51%-owned subsidiary, Sun Community Bancorp Limited. Sun currently
has seven banking subsidiaries, all of which are located in Arizona. Although
viewed by regulators as a bank holding company, Capitol describes itself as a
bank development company. Bank development includes managing Capitol's bank
subsidiaries and the formation of new banks and bank holding companies.

CAPITOL'S COMMUNITY BANKING PHILOSOPHY

Capitol's business is community banking with emphasis on the bank customer
relationship. Capitol's banks are each small, generally single location
facilities. Each bank has a president. The bank president's office is adjacent
to the bank lobby and is readily accessible to customers. Each bank makes its
own credit decisions. Each bank has its own board of directors, drawn mainly
from leaders within the local business community. Each bank has local investors.
Each bank is focused on the customer, offering the following:

- the bank president serves customers,

- the bank's decision-makers are on site, and

- the bank makes house calls (courier service or other on-site delivery).

Capitol's banks seek the profitable customer relationships which are often
displaced through mergers, mass marketing and an impersonal approach to treating
customers. Each of Capitol's banks is focused on commercial banking activities.
They emphasize commercial loans, but offer a complete array of credit facilities
to customers. The banks also offer a wide range of deposit products with
emphasis on business checking and time accounts.

CAPITOL'S OPERATING STRATEGY

3
<PAGE> 6

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.

Capitol's banks comprise a blend of seasoned, maturing and start-up banks.
The following table lists each of the subsidiary banks, their formation dates,
and assets as of June 30, 1999:

<TABLE>
<CAPTION>
TOTAL ASSETS
YEAR FORMED AT
AFFILIATE LOCATION OR ACQUIRED JUNE 30, 1999
--------- -------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Capitol National Bank................... Lansing, Michigan 1982 $ 125,891
Ann Arbor Commerce Bank................. Ann Arbor, Michigan 1990 197,846
Portage Commerce Bank................... Portage, Michigan 1990 111,131
Oakland Commerce Bank................... Farmington Hills, Michigan 1992 98,720
Paragon Bank & Trust.................... Holland, Michigan 1994 82,929
Grand Haven Bank........................ Grand Haven, Michigan 1995 71,781
Macomb Community Bank................... Clinton Township, Michigan 1996 82,919
Brighton Commerce Bank.................. Brighton, Michigan 1997 50,006
Muskegon Commerce Bank.................. Muskegon, Michigan 1997 37,300
Detroit Commerce Bank................... Detroit, Michigan 1998 23,103
Kent Commerce Bank...................... Grand Rapids, Michigan 1998 35,880
Sun Community Bancorp Limited:.......... Phoenix, Arizona 1997
Bank of Tucson........................ Tucson, Arizona 1996 76,731
Valley First Community Bank........... Scottsdale, Arizona 1997 36,984
Camelback Community Bank.............. Phoenix, Arizona 1998 26,414
Mesa Bank............................. Mesa, Arizona 1998 17,669
Southern Arizona Community Bank....... Tucson, Arizona 1998 19,373
Sunrise Bank of Arizona............... Phoenix, Arizona 1998 15,033
East Valley Community Bank............ Chandler, Arizona 1999 4,406
Nevada Community Bancorp Limited...... Las Vegas, Nevada 1999 10,000
Indiana Community Bancorp Limited....... Elkhart, Indiana 1999 5,027
Other, net.............................. (14,978)
----------
Total $1,114,165
==========
</TABLE>

CAPITOL'S BANK DEVELOPMENT STRATEGY

Capitol's strategy is to establish an attractive community banking
franchise through bank development. The foundation of Capitol's strategy is that
small banks in large markets can thrive through their focus on serving the
customer. This strategy is focused on identification of dynamic, typically
populous communities where ongoing consolidation of the banking industry creates
opportunities for formation of small, customer-focused banks. These banks will
be focused on serving their customer in a comprehensive relationship and on a
profitable basis, rather than achieving significant market share.

As part of its bank development efforts, Capitol mentors its banks through
the most crucial and early formative periods. This is done by recruiting
management and directors from the local community and providing experience and
guidance in the formation process. As a consequence of its strategy and the
effects of industry consolidation, Capitol has succeeded in attracting community
investors to its new banks and local directors who compliment management in
achieving development of customer relationships.

4
<PAGE> 7

When forming a new bank, Capitol purchases a majority interest, but does
not seek 100% ownership. Each new bank commences a community stock offering
prior to opening. Typically, up to 49% of the bank's stock will be sold in the
local community and involve more than 100 local investors. Capitol views this
joint ownership to be a shared vision. It is a vision that the community has a
need for a new bank, one that is focused on the customer. It is shared because
of the joint investment of community investors and Capitol. Capitol views the
concept of shared vision to also encompass other relationships, particularly
applicable to bank customers and employees.

CAPITOL'S MANAGEMENT

Capitol's management team and bank presidents have significant banking
experience.

Capitol's Chairman, President and Chief Executive Officer, Joseph D. Reid,
has more than 15 years of experience in starting new banks and managing bank
development. Thus far, he has started 18 community banks and three bank
development companies.

Sun recently hired John S. Lewis as its president to oversee the growth of
Sun's banks and Sun's back-room and administrative support services to its bank
subsidiaries. He has over 22 years of bank management experience in the
Southwestern United States.

CAPITOL'S RELATIONSHIP WITH SUN

Capitol owns 51% of Sun's common stock. Sun operates autonomously from
Capitol. Sun recently completed an initial public offering and its common stock
is traded under the symbol "SCBL" on the Nasdaq National Market.

Capitol's Chairman, President and Chief Executive Officer, Joseph D. Reid,
is also Chairman and Chief Executive Officer of Sun. In addition to Mr. Reid,
two other executive officers of Capitol are also executive officers of Sun. Lee
W. Hendrickson is Executive Vice President and Chief Financial Officer of
Capitol and Sun. Cristin Reid English is Vice President and General Counsel of
Capitol and Sun. Except for those three executive officers who have shared
responsibility for Capitol and Sun, Capitol's and Sun's management are separate
and have little overlap.

Messrs. Reid and Hendrickson and Ms. English are compensated by Capitol and
Sun by separate salaries from each company. These individuals allocate their
time to Capitol and Sun depending upon current projects and other
responsibilities. This allocation of time and effort varies from time to time
depending on need. Mr. Hendrickson and Ms. English also allocate their time and
effort under the direction of Mr. Reid. There are no contractual provisions
directing how time will be allocated between Capitol and Sun.

ABOUT THE SELLING SHAREHOLDER

The selling shareholder is , an individual. The selling
shareholder owns shares of common stock, or about % of Capitol's
common stock as of June 30, 1999. The selling shareholder is selling 100,000 of
those shares. Upon completion of this offering, the selling shareholder will own
shares of Capitol's common stock, or about % of Capitol's issued
and outstanding common stock, as adjusted for this offering. The selling
shareholder is not an officer or director of Capitol or otherwise related to
Capitol other than as a shareholder.

CAPITOL'S ADDRESS AND TELEPHONE NUMBER

Capitol's principal executive offices are located at One Business and Trade
Center, 200 Washington Square North, Lansing, Michigan 48933. Capitol's
telephone number is (517) 487-6555.

5
<PAGE> 8

THE OFFERING

Common stock offered by
Capitol....................... 1,700,000 shares(1)

Common stock offered by
selling
shareholder................ 100,000 shares

Total.................... 1,800,000 shares

Common stock to be outstanding
after
the offering............... 8,044,886 shares(1)(2)

Use of Proceeds............... Capitol intends to use substantially all of the
net proceeds to retire existing debt under its
credit facilities with an unaffiliated bank.
Any remaining net proceeds will be used to fund
future growth or for other corporate purposes.

Nasdaq National Market
Symbol........................ "CBCL"
- -------------------------
(1) Capitol has granted the underwriters a 30-day option to purchase up to an
additional 270,000 shares of common stock. See "Underwriting."

(2) Does not include 617,714 shares of common stock issuable upon exercise of
stock options. Also does not include 300,000 additional stock options
issuable pursuant to Capitol's stock option program upon completion of this
offering. See "Management--Stock Option Program."

6
<PAGE> 9

SELECTED CONSOLIDATED FINANCIAL DATA

The consolidated financial data below summarizes historical consolidated
financial information for the periods indicated and should be read in
conjunction with the financial statements and other information included in
Capitol's Annual Report on Form 10-K for the year ended December 31, 1998, which
is incorporated by reference in this prospectus. The unaudited consolidated
financial data below for the interim periods indicated has been derived from,
and should be read in conjunction with, Capitol's Quarterly Report on Form 10-Q
for the period ended June 30, 1999, which is incorporated by reference in this
prospectus. See "Where You Can Find More Information" and "Incorporation of
Certain Documents by Reference." Interim results for the six months ended June
30, 1999 are not necessarily indicative of results which may be expected in
future periods, including the year ending December 31, 1999. BECAUSE OF THE
NUMBER OF BANKS ADDED IN 1997 AND 1998, AND BECAUSE OF THE DIFFERING OWNERSHIP
PERCENTAGE OF BANKS INCLUDED IN THE CONSOLIDATED AMOUNTS, HISTORICAL OPERATING
RESULTS ARE OF LIMITED RELEVANCE IN EVALUATING HISTORICAL PERFORMANCE AND
PREDICTING CAPITOL'S FUTURE OPERATING RESULTS.

Results of operations data and selected balance sheet data as of and for
the years ended December 31, 1998, 1997, 1996, 1995 and 1994 were derived from
audited consolidated financial statements which are not presented in this
prospectus. Capitol's audited consolidated financial statements as of and for
the years ended December 31, 1998 and 1997 and related statements of operations
for the years ended December 31, 1998, 1997 and 1996 are incorporated by
reference in this prospectus. The selected data provided below as of and for the
six months ended June 30, 1999 and 1998 have been derived from Capitol's
unaudited consolidated financial statements which have also been incorporated by
reference in this prospectus.

Under current accounting rules, entities which are more than 50% owned by
another are consolidated or combined for financial reporting purposes. This
means that all of the banks' assets are included in Capitol's consolidated
balance sheet, regardless of whether Capitol owns 51% or 100%. Capitol's net
income, however, will only include its subsidiaries' net income or net loss to
the extent of its ownership percentage. This means that when a newly formed bank
incurs early start-up losses, Capitol will only reflect that loss based on its
ownership percentage. Conversely, when banks generate income, Capitol will only
reflect that income based on its ownership percentage.

7
<PAGE> 10

<TABLE>
<CAPTION>
AS OF AND FOR THE
SIX MONTHS ENDED
JUNE 30 AS OF AND FOR THE
(UNAUDITED) YEARS ENDED DECEMBER 31
--------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Earnings per common share:
Before cumulative effect of
accounting change:.......
Basic................. $ 0.45 $ 0.32 $ 0.74 $ 0.91 $ 0.85 $ 0.63 $ 0.52
Diluted............... 0.44 0.31 0.72 0.88 0.82 0.62 0.52
After cumulative effect of
accounting change:
Basic................. 0.42 0.32 0.74 0.91 0.85 0.63 0.52
Diluted............... 0.41 0.31 0.72 0.88 0.82 0.62 0.52
Cash dividends declared...... 0.18 0.17 0.33 0.30 0.25 0.19 0.19
Book value................... 7.90 7.45 7.77 7.22 7.43 7.58 6.79
Tangible book value per
share...................... 7.57 7.09 7.35 6.87 6.99 6.95 5.60
Dividend payout ratio........ 42.86% 51.71% 43.63% 32.95% 29.05% 30.37% 37.15%
Weighted average number of
common shares
outstanding................ 6,345 6,254 6,284 6,130 5,477 4,841 4,000
SELECTED BALANCE SHEET DATA:
Total assets................. $1,114,165 $846,477 $1,024,444 $690,556 $492,263 $384,070 $316,312
Investment securities........ 71,712 66,734 86,464 64,470 48,725 36,329 33,802
Portfolio loans.............. 863,579 606,623 724,280 502,755 357,623 283,471 241,583
Allowance for loan losses.... (10,417) (7,373) (8,817) (6,229) (4,578) (3,687) (3,220)
Deposits..................... 969,809 748,526 890,890 604,407 436,166 340,287 279,650
Debt obligations............. 25,200 3,000 23,600 6,500 8,712 7,924
Trust preferred securities... 24,273 24,237 24,255 24,126
Stockholders' equity......... 50,143 46,775 49,292 45,032 40,159 30,865 25,714
PERFORMANCE RATIOS:(2)
Return on average equity..... 10.69% 8.91% 10.19% 13.28% 12.01% 10.55% 9.45%
Return on average assets..... 0.50% 0.52% 0.55% 0.96% 1.08% 0.87% 0.75%
Net interest margin (fully
taxable equivalent)........ 4.22% 4.18% 4.15% 4.54% 4.62% 4.46% 4.71%
Efficiency ratio(3).......... 72.98% 70.89% 70.63% 60.92% 60.38% 64.95% 74.01%
ASSET QUALITY:
Non-performing loans(4)...... 7,839 4,926 7,242 4,011 2,699 1,341 1,930
Allowance for loan losses to
non-performing loans....... 132.89% 149.68% 121.75% 155.30% 169.62% 274.94% 166.84%
Allowance for loan losses to
portfolio loans............ 1.21% 1.22% 1.22% 1.24% 1.28% 1.30% 1.33%
Non-performing loans to total
portfolio loans............ 0.91% 0.81% 1.00% 0.80% 0.75% 0.47% 0.80%
Net loan losses to average
portfolio loans............ 0.01% 0.09% 0.15% 0.09% 0.10% 0.14% 0.13%
CAPITAL RATIOS:
Average equity to average
assets..................... 4.67% 5.87% 5.36% 7.22% 8.97% 8.24% 7.93%
Tier 1 risk-based capital
ratio...................... TBD 13.30% 13.42% 14.26% 11.91% 9.80% 9.27%
Total risk-based capital
ratio...................... TBD 15.00% 14.60% 16.61% 12.88% 10.91% 10.51%
Leverage ratio............... TBD 9.67% 4.88% 6.65% 8.16% 7.16% 6.95%
</TABLE>

- -------------------------
(1) Accounting change relates to new accounting standard which requires
write-off of previously capitalized start-up costs as of January 1, 1999.

(2) These ratios are annualized for the period indicated.

(3) Efficiency ratio is computed by dividing noninterest expense by the sum of
total interest income and noninterest income.

(4) Nonperforming loans consist of loans on nonaccrual status and loans more
than 90 days delinquent.

8
<PAGE> 11

RISK FACTORS

The shares of common stock that are being offered are not savings accounts
or deposits or other obligations of a bank and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency.

Investing in the common stock from this offering will provide you with an
equity ownership interest in Capitol. As a Capitol shareholder, your investment
may be impacted by risks inherent in its business. You should carefully consider
the following factors, as well as other information contained in this
prospectus, before deciding to invest in shares of Capitol's common stock.

This prospectus also contains certain forward-looking statements that
involve risks and uncertainties. These statements relate to Capitol's future
plans, objectives, expectations and intentions. These statements may be
identified by the use of words such as "believes," "expects," "may," "will,"
"should," "seeks," "pro forma," "anticipates," and similar expressions. Actual
results could differ materially from those discussed in these statements.
Factors that could contribute to these differences include those discussed below
and elsewhere in this prospectus.

NEWLY FORMED BANKS ARE LIKELY TO INCUR SIGNIFICANT OPERATING LOSSES.

Five of Capitol's bank subsidiaries are less than one year old. Newly
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. An
accounting rule change effective January 1, 1999 requires immediate write-off,
rather than capitalization, of start-up costs and, as a result, future newly
formed banks are expected to report larger early period operating losses. 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.

CAPITOL MAY BE UNABLE TO EFFECTIVELY MANAGE ITS GROWTH.

Capitol has rapidly and significantly expanded its operations and
anticipates that further expansion will be required to realize its growth
strategy. Capitol's rapid growth has placed significant demands on its
management and other resources which, given its expected future growth rate, are
likely to continue. To manage future 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 growing employee base.

FAVORABLE ENVIRONMENT FOR FORMATION OF NEW BANKS COULD CHANGE ADVERSELY.

Capitol's growth strategy includes the formation of additional new banks.
Thus far, Capitol has experienced favorable business conditions for the
formation of its small, community and customer-focused banks. Those favorable
conditions could change suddenly or over an extended period of time. A change in
the availability of financial capital, human resources or general economic
conditions could eliminate or severely limit expansion opportunities. To the
extent Capitol is unable to effectively attract personnel and deploy its capital
in new or existing banks, this could adversely affect future asset growth,
earnings and the value of Capitol's common stock.

CAPITOL'S BANKS ARE SMALL, HAVE LIMITATIONS ON THE SIZE OF LOANS THEY CAN MAKE
AND HAVE MINIMAL MARKET SHARE.

Capitol endeavors to capitalize its newly formed banks with the lowest
dollar amount permitted by regulatory agencies. As a result, the legal lending
limits of Capitol's banks severely constrain the size of

9
<PAGE> 12

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.

Capitol's banks are intended to be small in size. They each generally
operate from single locations. They are very 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 large markets that are dominated by
substantially larger regulated and unregulated financial institutions.

CAPITOL IS DEPENDENT UPON THE CONTRIBUTIONS OF ITS KEY MANAGEMENT PERSONNEL.

Capitol's future success depends, in large part, upon the continuing
contributions of its key management personnel, including bank presidents and
other senior officers. In particular, Capitol is dependent upon the continuing
services of Joseph D. Reid, Capitol's Chairman, President and Chief Executive
Officer. The loss of services of one or more key employees at Capitol or its
subsidiaries could have a material adverse effect on Capitol. Capitol can
provide no assurance that it will be able to retain any of its key officers and
employees or attract and retain qualified personnel in the future.

Joseph D. Reid has an employment agreement which expires on December 31,
2001. The agreement automatically extends for one year unless Mr. Reid or
Capitol gives written notice 45 days prior to December 31 of each year. Certain
members of Capitol's and Sun's senior management also have employment agreements
with Capitol and/or Sun.

IF CAPITOL CANNOT RECRUIT ADDITIONAL HIGHLY QUALIFIED PERSONNEL, CAPITOL'S
BUSINESS MAY BE ADVERSELY IMPACTED.

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, Capitol's business could suffer significantly.

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 CAPITOL'S BUSINESS.

As a bank holding company, Capitol is regulated primarily by the Federal
Reserve Board. Capitol's current bank affiliates are regulated primarily by the
state banking regulators and the FDIC and, in the case of one national bank, the
Office of the Comptroller of the Currency (OCC).

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 or
the amounts of required loan loss allowances or to restrict its operations.
Those actions would result from the regulators' judgments based on information
available to them at the time of their examination.

10
<PAGE> 13

The 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.

REGULATORY ACTION COULD SEVERELY LIMIT FUTURE EXPANSION PLANS.

To carry out some of its expansion plans, Capitol is required to obtain
permission from the Federal Reserve Board. Applications for the formation of new
banks are submitted to the state and federal bank regulatory agencies for their
approval.

While Capitol's recent experience with the regulatory application process
has been favorable, the future climate for regulatory approval is impossible to
predict. Regulatory agencies could prohibit or otherwise significantly restrict
the expansion plans of Capitol, its current bank subsidiaries and future new
start-up banks.

THE BANKS' ALLOWANCES FOR LOAN LOSSES MAY PROVE INADEQUATE TO ABSORB ACTUAL
FUTURE LOAN LOSSES.

Capitol believes that its consolidated allowance for loan losses is
maintained at a level adequate to absorb any inherent losses in the loan
portfolios of its banks. Management's estimates are used to determine the
allowance that is considered adequate to absorb losses in the loan portfolios of
Capitol's banks. Management's estimates are based on historical loan 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.

Because some of Capitol's banks were formed more recently, they do not have
seasoned loan portfolios, and it is likely that the ratio of the allowance for
loan losses to total loans will need to be increased in future periods as the
loan portfolios become more mature. 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 will adversely
impact net income or will increase operating losses.

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 INCREASES THE RISK OF DEFAULTS BY
BORROWERS.

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.
Approximately % of all commercial loans are secured by commercial real estate.
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. Substantial credit losses could result,
which could cause you to lose your entire investment in the common stock.

11
<PAGE> 14

CHANGES IN INTEREST RATES MAY ADVERSELY AFFECT CAPITOL'S BUSINESS.

Changes in Net Interest Income. Capitol's profitability is 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.

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 INVESTMENT IN SUN IS ILLIQUID AND MAY REQUIRE ADDITIONAL INVESTMENT BY
CAPITOL.

Capitol currently owns 51% of Sun's common stock. Sun completed its initial
public offering (IPO) in July 1999 and its common stock is listed on the Nasdaq
National Market. Although a trading market for Sun's common stock may develop,
Capitol's investment in Sun is likely to remain illiquid because:

- Capitol has entered into an agreement with the underwriters of Sun's IPO
which prohibits Capitol from selling any of its shares in Sun for a six
month period after Sun's IPO;

- Capitol is currently encouraged by the Federal Reserve Board to maintain
an investment of not less than 51% of Sun's common stock; and

- Market conditions may limit the ability for Capitol to sell any large
blocks of Sun's common stock.

In addition, Capitol might be required by regulatory agencies, such as the
Federal Reserve Board, to increase its investment in Sun by investing additional
capital to meet unexpected needs at Sun or at one or more of its subsidiaries.

EXISTING SUBSIDIARIES OF CAPITOL MAY NEED ADDITIONAL FUNDS TO AID IN THEIR
GROWTH OR TO MEET OTHER ANTICIPATED NEEDS WHICH COULD REDUCE CAPITOL'S FUNDS
AVAILABLE FOR NEW BANK DEVELOPMENT OR OTHER CORPORATE PURPOSES.

Capitol's affiliated banks are generally capitalized at the minimum amount
permitted by regulatory agencies. Future growth of existing banks may require
additional capital infusions or other investment by Capitol to maintain
compliance with regulatory capital requirements or to meet growth opportunities.
Such capital infusions could reduce funds available for development of new
banks, or other corporate purposes.

POSSIBLE VOLATILITY OF STOCK PRICE.

The market price of Capitol's common stock may fluctuate in response to
numerous factors, including variations in the annual or quarterly financial
results of Capitol, or its competitors, changes by financial research analysts
in their estimates of the earnings of Capitol or its competitors or the failure
of Capitol or its competitors to meet such estimates, conditions in the economy
in general or the banking industry in particular, or unfavorable publicity
affecting Capitol, its banks, or the industry. In addition, equity markets have,
on occasion, experienced significant price and volume fluctuations that have
affected the market price for many companies' securities and have been unrelated
to the operating performance of those companies. Any fluctuation may adversely
affect the prevailing market price of Capitol's common stock.

12
<PAGE> 15

CAPITOL RELIES ON COMPUTER HARDWARE, SOFTWARE, AND INTERNET-BASED TECHNOLOGY
THAT COULD HAVE YEAR 2000 PROBLEMS AND ADVERSELY AFFECT THE DELIVERY OF BANK
SERVICES TO CUSTOMERS.

Capitol relies extensively on computer hardware, software and related
technology, together with data, in the operation of its business. This
technology and data are used in creating and delivering bank products and
services, and in Capitol's internal operations, for example, its billing and
accounting. An enterprise-wide program has been initiated to evaluate the
technology and data used in the creation and delivery of bank products and
services and in Capitol's and Sun's internal operations. If Capitol or Sun fails
to complete the implementation of its Year 2000 plan prior to the commencement
of the Year 2000, or bank customers and suppliers fail to successfully remediate
their own Year 2000 issues, it could materially adversely affect Capitol, Sun
and their banks. The planned enterprise-wide program includes resolving any Year
2000 issues that are related to Capitol and its banks' systems, customers and
suppliers. However, there can be no assurances that third parties will
successfully remedy their own Year 2000 issues over which Capitol has no
control.

13
<PAGE> 16

RECENT DEVELOPMENTS

SUN'S INITIAL PUBLIC OFFERING

On July 8, 1999, Sun completed an initial public offering of 1,650,000
shares of common stock, resulting in net proceeds of approximately $25 million.
Of that offering, Capitol purchased 850,000 shares at the same price as offered
to the public, $16.00 per share, for a total of $13.6 million.

Capitol's ownership of Sun was 51% both before and remains at 51% after
Sun's public offering transaction. Capitol and Sun are parties to an
anti-dilution agreement whereby Capitol has the right to purchase additional
shares of Sun, in the event of a stock offering by Sun, in order to maintain
Capitol's ownership of at least 51% of Sun's common stock. Additionally, Capitol
is currently encouraged by the Federal Reserve Board to maintain a controlling
interest in Sun.

Capitol's purchase of shares in Sun's initial public offering was funded by
borrowings from Capitol's unaffiliated bank lender. The amounts borrowed were
advanced under a short-term additional credit facility which Capitol negotiated
in June 1999.

RECENT EXPANSION ACTIVITY

On June 30, 1999, Sun opened its seventh bank subsidiary, East Valley
Community Bank located in Chandler, Arizona.

Nevada Community Bancorp Limited was formed as a majority-owned subsidiary
of Sun in April 1999. Indiana Community Bancorp Limited was formed as a
majority-owned subsidiary of Capitol in May 1999. Nevada Community Bancorp
Limited completed a $10 million private placement stock offering in which Sun
invested $5.1 million; Indiana Community Bancorp Limited also completed a
private placement stock offering of $5 million, of which $2.6 million was
invested by Capitol.

Applications are currently pending for the formation of three new banks,
two in Las Vegas, Nevada, as subsidiaries of Nevada Community Bancorp Limited,
and one in Elkhart, Indiana, as a subsidiary of Indiana Community Bancorp
Limited.

Sunrise Bank of Arizona, a majority-owned subsidiary of Sun, opened a loan
production office in Albuquerque, New Mexico on July , 1999.

Additional expansion through the development of new banks in the states of
Indiana, Nevada, New Mexico, California and others, is currently under
consideration by Capitol or its subsidiary bank development entities.

14
<PAGE> 17

USE OF PROCEEDS

The net proceeds to Capitol from the sale of the 1,700,000 shares of common
stock by Capitol in this offering are estimated to be approximately $27.6
million ($32.1 million if the underwriters' over-allotment option is exercised
in full) after deducting the underwriting discount and other fees and expenses.
It is currently expected that substantially all of the net proceeds from the
offering will be used by Capitol for repayment of indebtedness.

Capitol's indebtedness prior to this offering was incurred at various dates
in 1998 and 1999 pursuant to lines of credit with an unaffiliated bank. Borrowed
funds were principally used for investment in Capitol's subsidiaries for
expansion purposes. This indebtedness includes $13.6 million borrowed in early
July 1999 by Capitol to fund its purchase of 850,000 shares of Sun's common
stock from Sun's initial public offering of common stock. That $13.6 million was
borrowed pursuant to a temporary additional line of credit of $15 million from
the unaffiliated bank, negotiated in June 1999. Borrowings under the credit
lines bear interest at a rate slightly less than prime (effectively % at
June 30, 1999) with interest payable monthly. The credit facility is reviewed
annually for continuance.

Any remaining net proceeds will be used for investment in bank and bank
holding company subsidiaries to fund the development and growth of new or
existing banks, including expansion into new geographic markets, as part of
Capitol's growth strategy.

Capitol will not receive any proceeds from the sale of shares of common
stock by the selling shareholder.

15
<PAGE> 18

CAPITALIZATION

The table presented below shows Capitol's actual total capitalization as of
June 30, 1999, and as adjusted to reflect the issuance and sale of 1,700,000
shares of common stock Capitol is offering in this prospectus and the
application of the estimated net proceeds as described in "Use of Proceeds."

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
--------------------------------------------
AS ADJUSTED FOR THE
OFFERING AND USE OF
ACTUAL NET PROCEEDS
------ -------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C>
DEBT OBLIGATIONS:
Notes payable to unaffiliated bank........................ $ 16,700(1) $ --(1)
Other..................................................... 8,500 8,500
-------- --------
Total debt obligations............................... 25,200 8,500
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN THE
CORPORATION'S SUBORDINATED DEBENTURES..................... 24,272 24,272
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES.............. 35,875 35,875
STOCKHOLDERS' EQUITY(2):
Common stock, no par value; 25,000,000 shares
authorized; issued, and outstanding:
Actual--6,344,886 shares
As adjusted--8,044,886 shares.......................... 53,968 81,578
Retained earnings......................................... (2,616) (2,616)
Market value adjustment for available-for-sale
securities............................................. (484) (484)
Less unallocated ESOP shares.............................. (725) (725)
-------- --------
Total stockholders' equity........................... 50,143 76,753
-------- --------
TOTAL CAPITALIZATION........................................ $135,490 $145,400
======== ========
Book value per share of common stock...................... $ 7.90 $ 9.54
======== ========
CAPITAL RATIOS:
Stockholders' equity to total assets...................... 4.50% 6.82%
Total capital funds to total assets(3).................... 9.89% 12.17%
Leverage ratio:........................................... TBD TBD
Risk-based capital ratios:
Tier 1 capital to risk-weighted assets................. TBD TBD
Tier 1 and Tier 2 capital to risk-weighted assets...... TBD TBD
</TABLE>

- -------------------------
(1) Notes payable to unaffiliated bank are estimated to approximate the amount
of net proceeds from the offering when this offering is completed, including
borrowings after June 30, 1999 of approximately $ million.

(3) Total capital funds includes guaranteed preferred beneficial interests in
the corporation's subordinated debentures, minority interest in consolidated
subsidiaries and stockholders' equity.

16
<PAGE> 19

DIVIDENDS AND MARKET FOR COMMON STOCK

Capitol's common stock is listed on the Nasdaq National Market under the
symbol "CBCL." The following table shows the high and low sale prices per share
of common stock as reported on the Nasdaq National Market and cash dividends
paid for the periods indicated. The table reflects inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions and have been restated, where appropriate, for Capitol's 6-for-5
stock split in December 1998. The last reported sale price of Capitol's common
stock was $ on , 1999.

<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW PAID
---- --- ---------
<S> <C> <C> <C>
1997
- ----
1st Quarter................................................. $13.542 $12.083 $0.075
2nd Quarter................................................. 15.000 11.458 0.075
3rd Quarter................................................. 22.083 14.375 0.075
4th Quarter................................................. 27.500 20.104 0.075

1998
- ----
1st Quarter................................................. 25.625 20.833 0.083
2nd Quarter................................................. 25.417 20.104 0.083
3rd Quarter................................................. 21.667 18.333 0.083
4th Quarter................................................. 22.500 16.250 0.083

1999
- ----
1st Quarter................................................. 21.750 18.250 0.090
2nd Quarter................................................. 20.000 16.875 0.090
3rd Quarter (through , 1999)................. TBD TBD TBD
</TABLE>

As of , 1999, the Company had a total of approximately
beneficial holders of Capitol's common stock based on information supplied by
its stock transfer agent and other sources.

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.
Although Capitol has paid dividends on its common stock for the preceding five
years, there is no assurance that dividends will be paid in the future. The
declaration and payment of dividends on Capitol's common stock depends upon the
earnings and financial condition of Capitol, liquidity and capital requirements,
the general economic and regulatory climate, Capitol's ability to service debt
obligations senior to the common stock and other factors deemed relevant by
Capitol's Board of Directors. Regulatory authorities impose limitations on the
ability of banks to pay dividends to Capitol and the ability of Capitol to pay
dividends to its shareholders.

17
<PAGE> 20

BUSINESS

OVERVIEW

Capitol Bancorp Ltd. is a $1.1 billion multi-bank holding company
headquartered in Lansing, Michigan. Capitol is engaged in the business of bank
development and community banking. Organized as a Michigan corporation in 1985,
Capitol became a bank holding company in May 1988 when it completed a share
exchange with the shareholders of Capitol National Bank, a bank which was formed
by the same group of organizers in 1982. As a result of the share exchange,
Capitol National Bank became Capitol Bancorp's first bank subsidiary, and is
100% owned by Capitol. Since that time, Capitol has expanded significantly
principally through start-up state-chartered banks.

While customer related activities are performed at each bank, the so-called
"back-office" services, such as operations, data processing, and administrative
services, are centralized.

As of June 30, 1999, Capitol controlled, directly and indirectly, 18 bank
subsidiaries, which includes banks in Michigan and Arizona. In addition,
applications are pending for formation of start-up banks in Indiana and Nevada.
At June 30, 1999, Capitol had total assets of $1.1 billion, loans of $863.6
million, deposits of $969.8 million and stockholders' equity of $50.1 million.
Capitol uses a unique strategy of bank ownership and development through a
tiered structured shown below:

[FLOW CHART]

18
<PAGE> 21

CAPITOL'S BANKING PHILOSOPHY

The focus of Capitol's banking philosophy is the bank customer. Management
believes that the trend towards bank consolidation and branch closings, and the
apparent decreased personal service creates significant opportunities for
customer-focused banking.

Each of Capitol's banks typically has only one location. They focus on
meeting the banking needs of small businesses, professionals and other high net
worth individuals seeking customer-tailored service. Capitol's banks are small
compared to their competitors but operate in large markets.

Emphasis on a high level of personal service requires each bank to be
committed to maintaining the stability of its senior personnel. In contrast to
large financial institutions, which frequently rotate or transfer management
personnel, Capitol emphasizes stability and consistency of senior staff to
enhance its capacity to deliver the highest level of personal service.

Capitol's banks start small and stay relatively small from a management and
staffing perspective in an effort to provide customers with prompt local
decision making in all aspects of product delivery. By taking an active interest
in their customers' business and personal financial needs, Capitol's banks are
more likely to be successful in attracting individuals and small- to
medium-sized businesses as customers.

CAPITOL'S OPERATING STRATEGY

Community-Based Banking Structure

Capitol is a uniquely structured affiliation of community banks. Each bank
is viewed by management as being a separate business from the perspective of
monitoring performance and allocation of financial resources. Subsidiary banks
have full decision-making authority in structuring and approving loans and in
the delivery and pricing of other banking services. The banks are managed by an
on-site president and management team under the direction of its own board of
directors comprised of business leaders from that bank's community. Each bank's
board of directors has full authority over each bank, unlike many competitors'
use of "advisory" boards, which often lack authority.

As of June 30, 1999, Capitol was comprised of eleven community banks in
Michigan and two second-tier bank development companies, one in Indiana and one
in Arizona. The Arizona-based bank development company, Sun, has seven community
banks in Arizona and a subsidiary bank development company in Nevada.

19
<PAGE> 22

Capitol's banks comprise a blend of seasoned, maturing and start-up banks.
The following table lists each of the subsidiary banks, their formation dates,
ownership and assets as of June 30, 1999:

<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP
--------------------
DATE DIRECTLY DIRECTLY
FORMED OR BY BY TOTAL ASSETS AT
ACQUIRED CAPITOL SUN JUNE 30, 1999
--------- -------- -------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Capitol National Bank................................ 1982 100% $ 125,891
Ann Arbor Commerce Bank.............................. 1990 100% 197,846
Portage Commerce Bank................................ 1990 100% 111,131
Oakland Commerce Bank................................ 1992 100% 98,720
Paragon Bank & Trust................................. 1994 100% 82,929
Grand Haven Bank..................................... 1995 100% 71,781
Macomb Community Bank................................ 1996 51% 82,919
Brighton Commerce Bank............................... 1997 59% 50,006
Muskegon Commerce Bank............................... 1997 51% 37,300
Detroit Commerce Bank................................ 1998 93% 23,103
Kent Commerce Bank................................... 1998 51% 35,880
Sun Community Bancorp Limited: 1997 51%
Bank of Tucson..................................... 1996 100% 76,731
Valley First Community Bank........................ 1997 52% 36,984
Camelback Community Bank........................... 1998 55% 26,414
Mesa Bank.......................................... 1998 53% 17,669
Southern Arizona Community Bank.................... 1998 51% 19,373
Sunrise Bank of Arizona............................ 1998 51% 15,033
East Valley Community Bank......................... 1999 86% 4,406
Nevada Community Bancorp Limited................... 1999 51% 10,000
Indiana Community Bancorp Limited.................... 1999 51% 5,027
Other, net........................................... (14,978)
----------
Consolidated.................................. $1,114,165
==========
</TABLE>

Centralized Administrative and Operational Support

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 customer relationship. This also reinforces
Capitol's belief that customer service and relationships should remain the
primary focus of each subsidiary bank. Management believes Capitol is able to
provide these services economically and efficiently and at a lower cost to each
bank than if each bank had to contract for those services through external
providers.

The processing and support services provided by Capitol and Sun include,
but are not limited to:

- data processing;

- processing of checks and deposits;

- accounting;

- internal and external financial reporting;

- asset/liability management;

20
<PAGE> 23

- internal audit;

- credit administration and loan review;

- regulatory compliance assistance;

- budgeting;

- strategic planning;

- legal support services;

- human resources and employee benefits administration; and

- other administrative support services.

Capitol and Sun also actively monitor and mentor their banks by:

- reviewing monthly financial statements of each bank, including
comparisons to budget and other goals or performance targets;

- actively participating in the development of detailed budgets for each
bank;

- periodic internal auditing of transactions, balances, lending activity
and deposit gathering;

- loan review procedures to monitor loan quality, origination procedures
and identification of problem loans;

- asset/liability management assistance to monitor and enhance net interest
margins, overall profitability and balance sheet matters; and

- implementing a comprehensive risk management program which includes a
risk matrix and assesses trends in business and financial risk at each
bank.

CAPITOL'S BANK DEVELOPMENT STRATEGY--CONCEPT OF SHARED VISION

Although viewed by regulators as a bank holding company, Capitol describes
itself as a bank development company. The concept of "bank development" differs
from "bank holding" because it is more active, proactive and dynamic in its
approach.

Capitol views bank development as:

- identifying opportunities for development;

- recruiting management from the local community;

- recruiting directors from the local community;

- facilitating the regulatory process;

- raising capital;

- mentoring new banks through their early and formative periods; and

- managing Capitol's investments.

Under Capitol's approach, each new bank conducts a community offering prior
to opening. Typically, up to 49% of the bank's stock is sold within the local
community, involving more than 100 local investors. Capitol or a subsidiary
controlled by Capitol purchases a majority interest of at least 51%.

Capitol views this joint ownership structure to be a shared vision. It is
shared because of the joint investment of community investors and Capitol. It is
a vision that the community has a need for a new, customer-focused bank.
Capitol's management believes its shared vision concept also applies to its
relationship with other stakeholders including bank customers and employees.

21
<PAGE> 24

Management believes the strategy of involving community investors in newly
formed banks has several advantages because it:

- requires significantly less capital investment in new banks by Capitol at
the outset;

- effectively ties the local community to the bank by creating a
participating interest; and

- greatly reduces the effect of early period start-up losses in Capitol's
net income.

This shared investment affects Capitol's reporting because under current
accounting rules, entities which are more than 50% owned by another are
consolidated or combined for financial reporting purposes. This means that 100%
of each banks' assets are included in Capitol's consolidated balance sheet,
regardless of the percentage owned by Capitol. Reported net income, however,
will only include the subsidiaries' net income or net loss to the extent of
Capitol's ownership percentage. When a newly formed bank incurs early start-up
losses, Capitol will only reflect that loss based on its ownership percentage.
Conversely, when the subsidiary banks generate income, Capitol will only reflect
that income based on its ownership percentage.

Recent industry statistics report that newly formed banks on average take
between one and two years to reach break-even results. Capitol's banks seek to
achieve profitability with their first year of operation and earn back their
operating losses in advance of their 36th month of operation.

Capitol emphasizes minimal capitalization of its banks, generally $5
million or less, in order to achieve the benefits of leverage earlier and, in
Capitol's opinion, at a significantly lower cost than independently formed
banks. Capitol's external costs of raising capital for its banks on a community
offering basis have typically been less than $50,000 per bank. Some unaffiliated
start-up banks are, in Capitol's opinion, excessively capitalized at $10 million
or more, often through an initial public offering of their common stock. When
capitalized at this level, the costs of raising capital can be $750,000 or more,
and can often take an extended period of time to achieve appropriate leverage
(i.e. adding sufficient loans and deposits to create a reasonable return on
equity).

Capitol's banks utilize their small size to emphasize customer-focused
banking. Larger banks tend to emphasize their need for a targeted market share
because they need to, in part due to their larger capitalization. On the other
hand, Capitol's banks do not focus on market share as a key indicator of
success; being a small bank in a big market can provide a superior rate of
return on deployed capital and assets. Capitol is able to achieve consolidated
asset growth through formation of new banks without forcing its existing banks
to outgrow their niche focus.

Plans for 1999 include the ongoing growth and development of Capitol's
existing banks and the formation of additional new banks. As of July , 1999,
applications were pending for three new banks, one in Indiana and two in Nevada.
See "Recent Developments."

Capitol's new bank development activity occurs on various levels. In
Michigan, Capitol has direct ownership of its bank subsidiaries ranging from 51%
to 100%, a 51% ownership in a new Indiana bank development company and a 51%
ownership of Sun in Arizona. Sun's current banks are direct subsidiaries of it
with ownership varying from 51% to 100%. Sun also owns 51% of a newly formed
Nevada bank development company. In other southwestern states, Sun may form new
banks through subsidiary bank holding companies which are majority owned by Sun.

For example, in early 1999, Nevada Community Bancorp Limited was formed. A
private placement of $10 million was completed in April 1999 with Sun purchasing
$5.1 million or 51% of the common stock, retaining majority voting control in
the Nevada company. The Nevada company will purchase a majority interest in a
new community bank being formed in Las Vegas in August 1999 and may also
purchase a majority interest in one or two additional banks in Nevada
thereafter. Following its development strategy, Sun will provide support
services to the Nevada bank development company and its future subsidiary banks.
Capitol is employing a similar bank development strategy in Indiana through
Indiana Community Bancorp Limited which is 51% owned by Capitol. Sun currently
anticipates using a similar bank development strategy in other southwestern
states such as California.
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<PAGE> 25

BANK PRODUCTS AND SERVICES

Each of the banks offers a comprehensive range of banking products and
services, tailored to meet the needs of the bank customers. The banks' primary
customer emphasis is on small businesses, professionals and other high net worth
individuals seeking personalized banking services. The banks emphasize
commercial loans, consistent with the banks' focus on business customers.
Capitol's banks emphasize commercial loans of $350,000 to $600,000 individually,
and larger loans through loan participations with affiliated or nonaffiliated
banks. The banks also offer residential and other consumer loans. One bank,
Sunrise Bank of Arizona, emphasizes SBA lending (loans made through the Small
Business Administration, an agency of the US government). Each of the banks
offers a wide range of deposit products, with emphasis on business checking
accounts and time deposits.

Each bank defines its own particular market. No map lines are drawn to
prohibit any of Capitol's or Sun's banks from pursuing customers in particular
areas. Each bank develops its own marketing effort, tailored to the strengths of
bank management, the bank's location and the bank's board of directors.

The banks offer trust services through Paragon Bank & Trust in Michigan and
Valley First Community Bank in Arizona. Certain mortgage loans are originated
through Amera Mortgage Corporation, a 49% owned affiliate of Capitol,
headquartered in Michigan, and Sun Community Mortgage Company, a wholly-owned
subsidiary of Bank of Tucson, in addition to other residential mortgages
originated directly by the banks for holding in their portfolio or for sale into
the secondary market.

COMPETITION

The markets of Capitol's banks are dynamic and highly competitive. The
banks are generally small and are located in large markets. The market share of
these banks, individually and collectively, is not significant. Capitol's banks
are not expected to achieve significant market share; rather, they are expected
to remain small.

Banking services, in general, are becoming viewed as a commodity. This
perception seems to result from an apparent retail banking strategy of larger,
megabanks and other mass marketers of financial services. Capitol's banks do not
have a mass marketing retail focus, they have a relationship focus. Capitol's
banks seek the profitable customer relationships which are often displaced
through mergers, mass marketing and an impersonal approach to handling the
customer. Capitol believes that there is a large enough group of profitable
customers seeking a banking relationship within Capitol's target markets to
enable small customer-focused banks to thrive in the shadows of larger
institutions.

Competition for loans and deposits is intense in Capitol's markets. Larger
banks and nonbank financial institutions are aggressive in their efforts to
obtain banking business on the basis of price, delivery and service. While
Capitol's banks frequently encounter competitive situations in both loans and
deposits which are price driven, Capitol's banks emphasize personalized service
and the ability to meet the customers' needs, rather than emphasizing price.

Capitol believes its banks' competitive advantages are:

- local decision making,

- quick response time,

- service, and

- follow-through.

The competitors of Capitol's banks vary from small to large to very large
banks. In addition, there are a significant number of nonbank competitors,
including commercial finance companies, credit unions, credit card issuers, loan
'stores' and numerous other companies and agencies which provide credit or
deposits, investment accounts and the like. Most of the competitors are
significantly larger than Capitol's banks, individually and collectively, and
have resources much larger than Capitol or its banks.

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<PAGE> 26

The small size of Capitol's banks limits the size of the loans each bank
can make. All commercial banks have legal lending limits which are based
primarily upon a bank's capital. Larger banks have significantly larger legal
lending limits than small banks, such as Capitol's. While this can adversely
impact the banks' ability to compete on loan transactions, the banks can make
larger loans than their individual lending limit through having other banks,
which can be affiliated or unaffiliated banks, participate in making the loan.

Each of Capitol's banks generally operate from a single location.
Competitors generally operate from multiple locations including branches and the
Internet. The single locations of Capitol's banks are not perceived to be a
limiting factor but are perceived to be a competitive advantage because:

- the customer seeks a banking relationship,

- the bank's decision-makers are on site, and

- the bank makes house calls (courier service or other on-site delivery).

EMPLOYEES

At June 30 1999, Capitol and its banks employed a total of 391 full time
equivalent employees. None of the work force is unionized. Management believes
that its relationships with employees is good.

PROPERTIES

Substantially all of the bank facility locations are leased. Each of the
banks operate from a single location, except Capitol National Bank (which has
one branch located in Okemos, Michigan).

Ann Arbor Commerce Bank, in 1998, and Portage Commerce Bank, in 1997,
relocated their main offices to substantially larger leased facilities
(approximately 18,000 and 10,000 square feet, respectively) in response to asset
growth and to better serve customers.

Most of the other bank subsidiaries' facilities are generally small (i.e.,
less than 10,000 square feet), first floor offices with convenient access to
parking.

Some of the banks have drive-up customer service. The banks are typically
located in or near high traffic centers of commerce in their respective
communities. Customer service is enhanced through utilization of ATMs to process
some customer-initiated transactions and some of the banks also make available a
courier service to pick up transactions at customers' locations.

The principal offices of Capitol are located within the same building as
Capitol National Bank in Lansing, Michigan. Those headquarters include
administrative, operations, accounting, and executive staff and Capitol's data
center. Sun occupies executive office space adjacent to Camelback Community Bank
in Phoenix, Arizona. Certain of the office locations are leased from related
parties and are believed to be on terms comparable with terms with unrelated
parties. Bank lease agreements typically have a lease term of 10 years plus
renewal options. Capitol believes that its facilities are adequate for its
operations, as now conducted.

RELATIONSHIP WITH SUN

Sun is 51% owned by Capitol. Sun completed an initial public offering in
early July 1999 and its common stock is publicly traded. Sun is included in
Capitol's financial statements as a consolidated subsidiary, it is also a
separate reporting company to its shareholders, regulatory agencies and others.
Capitol has entered into an anti-dilution agreement with Sun which requires Sun
to afford to Capitol the opportunity to maintain Capitol's ownership percentage
of Sun at 51%. Pursuant to Capitol's By-Laws, Joseph D. Reid, as President of
Capitol, has authority to vote Sun's shares held by Capitol.

Sun and Capitol, and their bank subsidiaries, share a number of common
directors and executive officers. Sun's Chairman and Chief Executive Officer,
Joseph D. Reid, is also Chairman, President and Chief Executive Officer of
Capitol. Mr. Reid is also a significant shareholder of Sun and Capitol. Lee W.
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<PAGE> 27

Hendrickson is Executive Vice President and Chief Financial Officer of Sun and
Capitol. Cristin Reid English is Vice President and General Counsel of Sun and
Capitol, and director of two subsidiary banks of Capitol.

Michael L. Kasten, Sun's Vice Chairman, is also a director of Capitol and
is Chairman and a director of Portage Commerce Bank. Michael J. Devine, a
director of Sun, is also a director of Oakland Commerce Bank, a subsidiary of
Capitol. Messrs. Kasten and Devine both serve as directors of each of Sun's
current subsidiaries, Sun and Nevada Community Bancorp Limited.

Sun and its banks operate separately from Capitol. Although Sun's and
Capitol's data processing systems are substantially similar, they are physically
separate in different states and are not interdependent.

Some of Sun's employee benefit plans are either patterned after Capitol's
or are a part of a multiemployer plan with Capitol. Sun and Capitol jointly
purchase some insurance, including property, casualty, directors' and officers'
insurance.

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<PAGE> 28

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table lists the directors and executive officers of Capitol:

<TABLE>
<CAPTION>
DIRECTOR AND/OR
EXECUTIVE OFFICER
NAME AGE POSITION SINCE
---- --- -------- -----------------
<S> <C> <C> <C>
Joseph D. Reid....................... 56 Chairman, President, Chief Executive 1988
Officer and Director
Robert C. Carr....................... 59 Treasurer, Executive Vice President and 1988
Director
David O'Leary........................ 68 Secretary and Director 1988
Paul R. Ballard...................... 49 Executive Vice President and Director 1990
Michael L. Kasten.................... 54 Director 1990
Louis G. Allen....................... 69 Director 1989
David L. Becker...................... 63 Director 1990
Douglas E. Crist..................... 58 Director 1988
James C. Epolito..................... 44 Director 1999
Gary A. Falkenberg................... 60 Director 1988
Joel I. Ferguson..................... 60 Director 1988
Kathleen A. Gaskin................... 57 Director 1988
H. Nicholas Genova................... 59 Director 1992
L. Douglas Johns..................... 55 Director 1988
Leonard Maas......................... 77 Director 1995
Lyle W. Miller....................... 55 Director 1988
Bruce A. Thomas...................... 42 Executive Vice President and Chief 1998
Operating Officer
David K. Powers...................... 53 Executive Vice President and Chief Credit 1990
Officer
Lee W. Hendrickson................... 43 Executive Vice President and Chief 1991
Financial Officer
Cristin Reid English................. 30 Vice President and General Counsel 1997
</TABLE>

JOSEPH D. REID, CHAIRMAN, CHIEF EXECUTIVE OFFICER, DIRECTOR, is the founder
of Capitol and Sun and most of its banks. He serves as Chairman, President and
Chief Executive Officer of Capitol. Mr. Reid also holds the office of Chairman
of the Board of Directors and Chief Executive Officer of Sun, and Chairman of
the Board and Chief Executive Officer of each of its banks. Mr. Reid has been in
the bank development business since 1982 and has an extensive background in the
formation, organization and operation of community based banks. To date, Mr.
Reid has organized 18 operating banks in the states of Michigan and Arizona. Mr.
Reid is developing three additional bank holding companies to be located in
Nevada, California, and Indiana.

ROBERT C. CARR, TREASURER, EXECUTIVE VICE PRESIDENT AND DIRECTOR, is
President and a director of Indiana Community Bancorp Limited and will serve as
Chairman and CEO of its future bank subsidiaries in Indiana. He served as
President and CEO of Capitol National Bank from inception through 1998. Mr. Carr
is a member of the board of directors of Capitol, Capitol National Bank, Ann
Arbor Commerce Bank, Brighton Commerce Bank, Macomb Community Bank and Detroit
Commerce Bank. He also serves as Chairman of Capitol National Bank, which he
co-founded with Mr. Reid in 1982.

DAVID O'LEARY, SECRETARY AND DIRECTOR, is Chairman of O'Leary Paint
Company, a Lansing, Michigan-based producer and retailer of paint and ancillary
products. He has been a director of Capitol since 1988 and, prior to that, was a
founding director of Capitol National Bank.

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<PAGE> 29

PAUL R. BALLARD, EXECUTIVE VICE PRESIDENT AND DIRECTOR, is President and
CEO of Portage Commerce Bank. He co-founded Portage Commerce Bank with Mr. Reid
in 1988. He also serves as a member of the board of directors of Portage
Commerce Bank, Grand Haven Bank, Muskegon Commerce Bank, Kent Commerce Bank,
Paragon Bank & Trust and also serves as Chief Operating Officer of Indiana
Community Bancorp Limited.

LOUIS G. ALLEN, DIRECTOR, is a retired bank executive.

DAVID L. BECKER, DIRECTOR, is President of Becker Insurance Agency, P.C., a
full-service insurance agency located in Portage, Michigan. Mr. Becker is also a
director of Portage Commerce Bank.

DOUGLAS E. CRIST, DIRECTOR, is President of Developers of S.W. Florida,
Inc. He has been a director of Capitol since 1988 and, prior to that, was a
founding director of Capitol National Bank.

JAMES C. EPOLITO, DIRECTOR, is President and CEO of the Accident Fund
Company, which provides workers' compensation insurance coverage to Michigan
employers.

GARY A. FALKENBERG, DIRECTOR, is a doctor of osteopathic medicine. He has
been a director of Capitol since 1988 and, prior to that, was a founding
director of Capitol National Bank.

JOEL I. FERGUSON, DIRECTOR, is Chairman of Ferguson Development, LLC.
Additionally, he is General Partner, F&S Development Co. (a real estate
development firm). He also serves as a member of the board of trustees of
Michigan State University. He has been a director of Capitol since 1988 and,
prior to that, was a founding director of Capitol National Bank.

KATHLEEN A. GASKIN, DIRECTOR, is Associate Broker/State Appraiser, Tomie
Raines, Inc. Realtors. She has been a director of Capitol since 1988 and, prior
to that, was a founding director of Capitol National Bank.

H. NICHOLAS GENOVA, DIRECTOR, is Chairman and CEO of Washtenaw News
Company, Inc. and President of H.N. Genova Development Company. Additionally, he
serves as a member of the board of directors of Ann Arbor Commerce Bank.

L. DOUGLAS JOHNS, DIRECTOR, is President of Mid-Michigan Investment
Company. He has been a director of Capitol since 1988 and, prior to that, was a
founding director of Capitol National Bank.

MICHAEL L. KASTEN, DIRECTOR, is Managing Partner of Kasten Investment, LLC.
Additionally, he is Vice President, Kasten Insulation Services, Inc. He serves
as Chairman and Director of Portage Commerce Bank. Additionally, he is Director
and Vice Chairman of Sun Community Bancorp and is a Director of each of its bank
subsidiaries. Additionally, he serves on the board of directors of Nevada
Community Bancorp Limited.

LEONARD MAAS, DIRECTOR, is President of Gillisse Construction Company, an
underground utility construction firm, and is a partner of CP Limited
Partnership. He also serves as a director of Paragon Bank & Trust.

LYLE W. MILLER, DIRECTOR, is President of SERVCO, Inc., a provider of
credit card and computer enhancement services. Additionally, he is President of
Northern Connections, LLC (a property leasing company); President, Northern
Leasing and Sales (property leasing entity); President, Lansing Ice & Gymnastics
Center; President, McMiller Holding Company (land holding company); President,
Cove Leasing & Rental (boat rental company); and President, Ironton Cove
Landing, Inc. (a restaurant). He has been a director of Capitol since 1988 and,
prior to that, was a founding director of Capitol National Bank.

BRUCE A. THOMAS, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER,
joined Capitol in early 1998 to oversee Capitol's risk management function,
including asset/liability management, insurance, loan review, internal audit and
related functions. In addition to those responsibilities, he became Chief
Operating Officer in early 1999 and has responsibility for the day-to-day
operation functions of Capitol.

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<PAGE> 30

Previously, Mr. Thomas held senior management positions with the Office of the
Comptroller of the Currency, eastern region.

DAVID K. POWERS, EXECUTIVE VICE PRESIDENT AND CHIEF CREDIT OFFICER, has
years of commercial credit experience. He has been Chief Credit Officer since
1990.

LEE W. HENDRICKSON, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
has served as Chief Financial Officer for Capitol since 1991 and has served as
Executive Vice President and Chief Financial Officer of Sun since its inception.
Upon commencement of operations, he will also serve as Executive Vice President
and Chief Financial Officer of Nevada Community Bancorp Limited and Indiana
Community Bancorp Limited. Prior to joining Capitol, he was engaged in the
practice of public accounting with a major international public accounting firm,
with emphasis on community banking.

CRISTIN REID ENGLISH, VICE PRESIDENT AND GENERAL COUNSEL, has served as
Vice President of Corporate Development and General Counsel of Capitol and Sun
since September of 1997. Upon commencement of operations, she will also serve as
Vice President and General Counsel of Nevada Community Bancorp Limited and
Indiana Community Bancorp Limited. Prior to these positions, she served as Vice
President of Access BIDCO, Incorporated (a specialized commercial finance
company) from 1995 to 1998, and from 1993 to 1995 she was engaged in the private
practice of law in Lansing, Michigan. She currently serves as a director of Ann
Arbor Commerce Bank and Portage Commerce Bank and is a director of Nevada
Community Bancorp Limited. Ms. English is the daughter of Joseph D. Reid.

STOCK OWNERSHIP

The following table presents information regarding the beneficial ownership
as of July 15, 1999 of Capitol's common stock:

- Each beneficial owner of more than 5% of Capitol's outstanding common
shares,

- Each director or executive officer of Capitol owning 1% or more of
Capitol's outstanding common shares, and

- All of Capitol's directors and executive officers as a group.

Unless otherwise indicated, each of the shareholders listed below has sole
voting and investment power with respect to the shares beneficially owned and
the address of each of the listed shareholders is 200 Washington Square North,
One Business and Trade Center, Lansing, MI 48933.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING(1)
------------------------- -------------------------
NAME AND TITLE OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
---------------------------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Joseph D. Reid, Chairman and CEO................ 1,036,607(2) 15.18% 1,225,495(6) 14.06%
Paul R. Ballard, Executive Vice President....... 86,072(3) 1.35% 86,072(3) 1.07%
Robert C. Carr, Treasurer and Executive Vice
President..................................... 68,336(4) 1.07% 68,336(4) 0.85%
L. Douglas Johns, Director...................... 96,160 1.52% 96,160 1.20%
Michael L. Kasten, Director..................... 78,741 1.24% 78,741 0.98%
Leonard Maas, Director.......................... 94,807 1.49% 94,807 1.18%
All directors and executive officers as a group
(33 persons).................................. 1,909,633(5) 27.66% 2,209,633(7) 24.82%
</TABLE>

- -------------------------
(1) Assuming no purchase of common stock in this offering.

(2) Includes 485,119 stock options, each to purchase one share of common stock.

(3) Includes 21,600 stock options, each to purchase one share of common stock.

(4) Includes 39,600 stock options, each to purchase one share of common stock.

(5) Includes 559,519 stock options, each to purchase one share of common stock.

28
<PAGE> 31

(6) Includes 674,007 stock options, each to purchase one share of common stock.

(7) Includes 859,519 stock options, each to purchase one share of common stock.

STOCK OPTION PROGRAM

Under the terms of Capitol's employment agreement with Joseph D. Reid,
additional stock options will be granted to Mr. Reid when Capitol issues
additional shares of common stock so that total options granted to Mr. Reid
equal 15% of shares issued. In May 1999, Mr. Reid's employment agreement was
amended to reduce the percentage of future stock options to be granted to 10%
with the remaining 5% to be granted as a pool of stock options to directors and
executive officers of Capitol to be allocated to individuals by Capitol's board
of directors. All stock options granted pursuant to this agreement have an
exercise price equal to fair market value at the time of grant and a seven-year
exercise period. Upon completion of this offering, an additional 300,000 stock
options will be granted, including 188,888 stock options to be granted to Mr.
Reid in accordance with his employment agreement.

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<PAGE> 32

SUPERVISION AND REGULATION

Bank holding companies and banks are extensively regulated under federal
and state law. References under this heading to applicable statutes or
regulations are brief summaries of portions of the regulations that do not
purport to be complete and that are qualified in their entirety by reference to
those statutes and regulations. Any change in applicable laws or regulations may
have a material adverse effect on Capitol's business. Furthermore, formation of
additional banks may subject Capitol and its subsidiaries to additional
supervision and regulation under various state laws.

BANK HOLDING COMPANY REGULATION

FEDERAL RESERVE BOARD. Capitol is regulated by the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board") under the Bank Holding
Company Act (the "BHC Act"). As a result, Capitol is required to file periodic
reports, and other additional information as the Federal Reserve Board may
require, pursuant to the BHC Act. Capitol is examined by the Federal Reserve
Board, which may also examine its banking and non-banking affiliates. Because
Sun and other second tier bank holding companies of Capitol are bank holding
companies, ("BHC subsidiaries") they are similarly regulated and examined by the
Federal Reserve Board.

ACQUISITIONS AND ACTIVITIES. Under the BHC Act, Capitol and its BHC
subsidiaries must obtain prior Federal Reserve Board approval for the
acquisition of more than 5% of the voting shares, or substantially all the
assets, of any bank or bank holding company. They must also obtain approval for
any merger or consolidation with another bank holding company. With certain
exceptions, the BHC Act prohibits Capitol and its BHC subsidiaries from
acquiring the voting shares or assets of any company that is not a bank or bank
holding company. It also prevents Capitol and its BHC subsidiaries from engaging
in any activity other than banking, managing or controlling banks, or performing
services for its authorized affiliates.

Capitol and its BHC subsidiaries may, however, acquire an interest in a
company or engage in an activity if the Federal Reserve Board determines that it
is so closely related to banking or managing or controlling banks that it should
be permitted. Even if a specific activity has previously been approved, the
Federal Reserve Board may still order Capitol and its BHC subsidiaries to
terminate the activity, or to terminate its ownership or control of any
subsidiary, if it constitutes a serious risk to the financial safety, soundness
or stability of any banking subsidiaries.

ACQUISITIONS OF CONTROL OVER A BANK HOLDING COMPANY. Under the Change in
Bank Control Act, any person is required to give notice to the Federal Reserve
Board upon acquiring 10% of the common stock of Capitol. In addition, any
corporation, partnership, trust or organized group that acquires 25% of more of
Capitol's common stock may have to obtain the Federal Reserve Board's approval
to become a bank holding company and as a result will become subject to its
regulations.

CAPITAL ADEQUACY REQUIREMENTS. Under Federal Reserve Board policy, Capitol
is expected to act as a source of financial strength and commit resources to
support its banking affiliates. It is the Federal Reserve Board's position that
Capitol must provide support even when it would otherwise not consider itself
able to do so.

The Federal Reserve Board has adopted risk-based capital requirements for
assessing the capital adequacy of bank holding companies. These standards define
regulatory capital and establish minimum capital standards in relation to assets
and off-balance sheet exposures, as adjusted for credit risks. The Federal
Reserve Board's risk-based guidelines apply on a consolidated basis for bank
holding companies with consolidated assets of $150 million or more and on a
"bank-only" basis for bank holding companies with consolidated assets of less
than $150 million. Under the Federal Reserve Board's risk-based guidelines,
capital is classified into two categories:

- Tier 1 or "core" capital, which consists of the following:

- common shareholders' equity,

- a portion of the preferred securities,
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<PAGE> 33

- minority interests in the common equity accounts of consolidated
affiliates, and

- certain other capital instruments.

Tier 1 capital is reduced by goodwill, certain other intangible assets and
certain investments in other corporations.

- Tier 2 capital, which consists of the following:

- allowance for loan and lease losses,

- the remainder of the preferred securities,

- "hybrid capital instruments,"

- perpetual debt and mandatory convertible debt securities,

- term subordinated debt,

- intermediate term preferred stock, and

- certain other capital instruments excluded from Tier 1 capital.

Under the Federal Reserve Board's capital guidelines, bank holding
companies are required to maintain a minimum ratio of qualifying capital to
risk-weighted assets of 8.0%, of which at least 4.0% must be in the form of Tier
1 capital.

The Federal Reserve Board also requires a minimum leverage ratio of Tier 1
capital to total assets of 3.0%, except that bank holding companies not rated in
the highest category under the regulatory rating system are required to maintain
a leverage ratio of 1.0% to 2.0% above the minimum. The 3.0% Tier 1 capital to
total assets ratio constitutes the minimum leverage standard for the strongest
bank holding companies under the rating system, and is used in conjunction with
the risk-based ratio in determining the overall capital adequacy of banking
organizations. In addition, the Federal Reserve Board continues to consider the
Tier 1 leverage ratio in evaluating proposals for expansion or new activities.

In its capital adequacy guidelines, the Federal Reserve Board emphasizes
that these standards are supervisory minimums and that banking organizations
generally are expected to operate well above the minimum ratios. These
guidelines also provide that banking organizations experiencing internal growth
or making acquisitions are expected to maintain strong capital positions
substantially above the minimum levels.

Capitol's banking affiliates are subject to these requirements. They are
also subject to requirements of the FDIC, state banking regulatory agencies and
other agencies, whether as a condition of charter approval or other
circumstances.

BANK REGULATION

The deposits of Capitol's affiliate banks are insured under the provisions
of the Federal Deposit Insurance Act. As a result, the state chartered affiliate
banks are regulated by the FDIC which supervises compliance with federal law and
regulations. These laws and regulations place restrictions on loans between
FDIC-insured banks and their directors, executive officers and other controlling
persons. The OCC supervises Capitol National Bank's compliance with federal laws
and regulations.

Capitol is also affected by the credit policies of other monetary
authorities, including the Federal Reserve Board, which regulate the national
supply of bank credit. These policies influence the overall growth of bank
loans, investments, and deposits and may also affect interest rates charged on
loans and paid on deposits. The monetary policies of the Federal Reserve Board
have had a significant effect on the operating results of commercial banks in
the past and are expected to continue to do so in the future.

Capitol's state chartered banks are subject to regulation by the banking
regulators of the state in which the bank is chartered. The state banking
regulators supervise compliance with the state banking

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<PAGE> 34

laws and regulations from time to time and also review compliance with
applicable federal banking laws and regulations. State banking regulators often
cooperate with and coordinate their activities with federal regulators, but
their primary emphasis is on compliance with state banking laws and regulations.

FINANCIAL INSTITUTION REGULATION GENERALLY

TRANSACTIONS WITH AFFILIATES. State and federal regulatory agencies impose
various restrictions on transactions between a bank and its holding company or
other affiliates. These transactions include loans and other extensions of
credit, purchases of securities and other assets, and payments of fees or other
distributions. In general, these restrictions may limit or prohibit the amount
of transactions between Capitol and its affiliates. The restrictions also
require that transactions with affiliates be on terms comparable to those with
unaffiliated entities.

LOANS TO DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS. Loans
between Capitol and its affiliates and any of their respective bank directors,
executive officers or principal shareholders must be made on substantially the
same terms as a comparable transaction with a person who is not in the same
position. This restriction does not apply if the loan is made pursuant to a
compensation or benefit plan that is widely available to all of Capitol's
employees and does not favor insiders.

Under Federal law, outstanding loans to Capitol's and its affiliates'
executive officers, directors, principal shareholders and affiliates generally
may not exceed 15% of its unimpaired capital and surplus for loans that are not
fully secured and 10% of unimpaired capital and surplus for loans that are fully
secured by readily marketable collateral. A majority of Capitol's disinterested
directors must approve any loans to insiders in excess of the greater of $25,000
or 5% of capital and unimpaired surplus. State laws may additionally limit the
aggregate value of loans made to any one director, officer, or employee.

DIVIDEND LIMITATIONS. As a bank holding company, Capitol is primarily
dependent upon dividend distributions from its bank affiliates. A major source
of Capitol's revenue comes from dividends received or expected to be received
from its bank affiliates. As a result, Capitol's ability to pay dividends is
dependent on the amount of dividends paid by its bank affiliates. Capitol's bank
affiliates are prohibited from paying dividends until start up losses are
recovered and a cumulative profit is made. No assurance can be given that
Capitol's bank affiliates will, in any circumstances, pay dividends.

Federal and state statutes and regulations impose restrictions on Capitol's
ability to pay dividends:

- Federal Reserve Board policy provides that a bank holding company should
not pay dividends unless:

- the bank holding company's net income over the prior year is sufficient
to fully fund the dividends, and

- the prospective rate of earnings retention appears consistent with the
capital needs, asset quality and overall financial condition of the bank
holding company and its affiliates.

In addition, Capitol's ability to pay dividends may be affected by the
various minimum capital requirements and the capital and non-capital standards
established under the Federal Deposit Insurance Corporation Improvements Act of
1991 ("FDICIA"). Capitol's right and the right of its shareholders and creditors
to participate in any distribution of the assets or earnings of Capitol's
affiliates exists only after satisfaction of the prior claims of creditors of
the affiliate.

In addition to the restrictions on dividends imposed by the Federal Reserve
Board, Michigan law provides that dividends may be declared or paid if, after
the distribution, Capitol can pay its debts as they come due in the usual course
of business and its total assets equal or exceed the sum of its liabilities.
Arizona law provides that dividends may be declared by Sun as permitted by the
general laws governing Arizona corporations, except that approval of the
regulatory authority is required prior to the declaration of any dividend by Sun
which is payable out of its capital surplus.

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<PAGE> 35

YEAR 2000 COMPLIANCE. The federal banking agencies, through the Federal
Financial Institutions Examination Council, expect the senior management and
board of directors of banks and their holding companies to be actively involved
in overseeing the Year 2000 issue. The agencies expect active involvement in the
readiness and monitoring of business risks posed not only by vendors of computer
systems but business partners, counter parties, and major loan customers. The
Office of the Controller of the Currency ("OCC") issued an advisory letter in
May 1997 providing comprehensive Year 2000 guidance and establishing a schedule
for banks to achieve Year 2000 compliance. Senior management is expected to
report at least quarterly to the board of directors on Year 2000 compliance
progress and to notify the board immediately if critical benchmarks are missed.

The agencies have indicated that Year 2000 readiness progress will be
required as a condition to regulatory approval of expansion proposals.
Enforcement actions may also be brought against banking organizations that have
inadequate Year 2000 readiness programs.

STANDARDS FOR SAFETY AND SOUNDNESS

The FDICIA requires the Federal Reserve Board, together with the other
federal bank regulatory agencies, to prescribe standards of safety and soundness
relating generally to operations and management, asset growth, asset quality,
earnings, stock valuation, and compensation. The federal bank regulatory
agencies have adopted a set of guidelines prescribing safety and soundness
standards pursuant to the FDICIA. The guidelines establish general standards
relating to:

- internal controls and information systems,

- internal audit systems,

- loan documentation,

- credit underwriting,

- interest rate exposure,

- asset growth,

- compensation, and

- fees and benefits.

In general, the guidelines require appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice.
Compensation is deemed excessive when the amount paid is unreasonable or
disproportionate to the services performed by an executive officer, employee,
director or principal shareholder.

The Federal Reserve Board, FDIC and the OCC have adopted regulations that
authorize the agencies to order non-complying institutions to submit a
compliance plan. If the institution fails to submit or implement an acceptable
compliance plan, the applicable agency must issue an order directing action to
correct the deficiency. The agency may also issue an order directing other
actions of the types to which an undercapitalized association is subject under
the "prompt corrective action" provisions of the FDICIA. If an institution fails
to comply with an order the agency may seek to enforce it through judicial
proceedings and impose civil money penalties. The agencies may also propose
guidelines for asset quality and earnings standards.

A range of other provisions of the FDICIA include:

- requirements applicable to closure of branches;

- additional disclosures to depositors with respect to terms and interest
rates applicable to deposit accounts;

- uniform regulations for extensions of credit secured by real estate;
33
<PAGE> 36

- restrictions on activities of, and investments by, state-chartered banks;

- modification of accounting standards to conform to generally accepted
accounting principles including (1) the reporting of off-balance sheet
items and (2) supplemental disclosure of the estimated fair market value
of assets and liabilities in financial statements filed with the banking
regulators;

- increased penalties in making or failing to file assessment reports with
the FDIC;

- greater restrictions on extensions of credit to directors, officers and
principal shareholders; and

- increased reporting requirements on agricultural loans and loans to small
businesses.

The Federal Reserve Board, OCC, FDIC and other federal banking agencies'
risk-based capital standards provide for consideration of interest rate risk
when assessing the capital adequacy of a bank. The agencies must explicitly
include a bank's exposure to declines in the economic value of its capital due
to changes in interest rates as a factor in evaluating its capital adequacy. The
agencies have also adopted a joint agency policy statement providing guidance to
banks for managing interest rate risk. The policy statement emphasizes the
importance of adequate oversight by management and a sound risk management
process. The assessment of interest rate risk management made by the banks'
examiners will be incorporated into the banks' overall risk management rating
and used to determine the effectiveness of management.

PROMPT CORRECTIVE ACTION. The FDICIA requires the federal banking
regulators, including the Federal Reserve Board, the OCC and the FDIC, to take
prompt corrective action with respect to depository institutions that fall below
certain capital standards. It also prohibits any depository institution from
making any capital distribution that would cause it to be undercapitalized.

Institutions that are not adequately capitalized may be subject to a
variety of supervisory actions including the following:

- restrictions on growth;

- restrictions on investment activities;

- restrictions on capital distributions;

- restrictions on affiliate transactions; and

- required to submit a capital restoration plan guaranteed in part by any
company having control of the institution.

In other respects, the FDICIA provides for enhanced supervisory authority,
including greater authority for the appointment of a conservator or receiver for
under-capitalized institutions. The capital-based prompt corrective action
provisions of the FDICIA and their implementing regulations apply to FDIC-
insured depository institutions. Federal banking agencies, however, have
indicated that they may take appropriate action at the holding company level
based on their assessment of the effectiveness of supervisory actions imposed
upon affiliate insured depository institutions pursuant to the prompt corrective
action provisions of the FDICIA.

INSURANCE OF DEPOSIT ACCOUNTS. The banks' deposits are insured by the FDIC
to the maximum amount permitted by law, which is currently $100,000 per
depositor in most cases. FDIC insurance premiums are assessed on a risk-based
system, meaning that the amount of a depositary institution's premium depends on
its risk classification. The FDIC has authority to raise or lower assessment
rates on insured deposits in order to achieve certain designated reserve ratios
in the insurance funds. The FDIC may also impose special additional assessments.
Each depository institution is assigned to one of three capital groups: "well
capitalized," "adequately capitalized" or "undercapitalized". Within each
capital group, institutions are assigned to one of three subgroups. The
institution is assigned to a subgroup on the basis of supervisory evaluations by
the institution's primary supervisory authority and other information the FDIC
determines to be relevant to its financial condition and the risk posed to the
deposit insurance fund.
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<PAGE> 37

An institution's assessment rate depends on the capital category and supervisory
category to which it is assigned.

The FDIC's current assessment rate schedule for the Bank Insurance Fund
("BIF") provides an assessment rate of zero for well-capitalized institutions
with the highest supervisory ratings and the schedule calls for an assessment
rate of 0.27% of insured deposits for institutions in the lowest risk assessment
classification.

ENFORCEMENT ACTIONS. Federal and state statutes and regulations provide
financial institution regulatory agencies with great flexibility to undertake
enforcement action against an institution that fails to comply with regulatory
requirements, particularly capital requirements.

Possible enforcement actions include the following:

- the imposition of a capital restoration plan and capital directive,

- receivership,

- conservatorship, or

- the termination of deposit insurance.

INTERSTATE BANKING AND BRANCHING LEGISLATION. Under the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994, adequately capitalized
and adequately managed bank holding companies are allowed to acquire banks
across state lines after complying with various regulations. It also permits
banks to merge with one another across state lines resulting in a main bank with
branches in separate states. After establishing branches in a state through an
interstate merger transaction, a bank could then establish and acquire
additional branches at any location in the state where the bank involved in the
interstate merger could have established or acquired branches under applicable
federal and state law.

COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act is intended to
encourage banks to help meet the credit needs of their service area, including
low and moderate income neighborhoods, consistent with the safe and sound
operations of the bank. The CRA regulations also provide for regulatory
assessment of a bank's record in meeting the needs of its service area when
considering applications regarding establishing branches, merger or other bank
or branch acquisitions. By law, federal banking agencies make public a rating of
a bank's performance under the CRA. In the case of a bank holding company, the
CRA performance record of the banks involved in any transaction are reviewed in
connection with the filing of an application to acquire ownership or control of
shares or assets of a bank or to merge with any other bank holding company. An
unsatisfactory record can substantially delay or block the transaction.

CONSUMER LAWS AND REGULATIONS. In addition to the laws and regulations
discussed in this prospectus, Capitol's subsidiary banks are also subject to
certain consumer laws and regulations that are designed to protect consumers in
transactions with banks. These laws and regulations include, among others, the
Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer
Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act and
the Fair Housing Act. These laws and regulations mandate certain disclosure
requirements and regulate the manner in which financial institutions must deal
with consumers when taking deposits or making loans to such customers. Capitol's
banks must comply with the applicable provisions of these consumer protection
laws and regulations as part of their conduct of banking.

MONETARY POLICY AND ECONOMIC CONDITIONS

The earnings of banks and bank holding companies are affected by general
economic conditions and by the fiscal and monetary policies of federal
regulatory agencies, including the Federal Reserve Board. Through open market
transactions, variations in the discount rate and the establishment of reserve
requirements, the Federal Reserve Board exerts considerable influence over the
cost and availability of funds obtainable for lending or investing.

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<PAGE> 38

The above monetary and fiscal policies and resulting changes in interest
rates have affected the operating results of all commercial banks in the past
and are expected to do so in the future. It is impossible to predict the nature
or the extent of any effects which fiscal or monetary policies may have on
Capitol's business and earnings.

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<PAGE> 39

DESCRIPTION OF CAPITAL STOCK

Capitol's Articles of Incorporation, as amended to date, authorize the
issuance of up to 25,000,000 shares of common stock, without par value.
Capitol's articles of incorporation do not authorize the issuance of any other
class of stock. As of June 30, 1999, 6,344,886 shares of common stock were
outstanding. UMB Bank, n.a., serves as transfer agent and registrar for
Capitol's common stock.

Michigan law allows Capitol's board of directors to issue additional shares
of stock up to the total amount of common stock authorized without obtaining the
prior approval of the shareholders.

Capitol's board of directors has authorized the issuance of the shares of
common stock offered by this prospectus. All shares of common stock offered will
be, when issued, fully paid and nonassessable.

The following summary of the terms and provisions of the common stock does
not purport to be complete and is qualified in its entirety by reference to
Capitol's articles of incorporation, as amended, a copy of which is on file with
the SEC, and to the Michigan Business Corporation Act ("MBCA").

RIGHTS OF COMMON STOCK

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

SHARES AVAILABLE FOR ISSUANCE

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

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

Moreover, it will be possible that additional shares of common stock would
be issued for the purpose of making an acquisition by an unwanted suitor of a
controlling interest in Capitol more difficult, time consuming or costly or
would otherwise discourage an attempt to acquire control of Capitol. Under such
circumstances, the availability of authorized and unissued shares of common
stock may make it more difficult for shareholders to obtain a premium for their
shares. Such authorized and unissued shares could be used to create voting or
other impediments or to frustrate a person seeking to obtain control of Capitol
by means of a merger, tender offer, proxy contest or other means. Such shares
could be privately placed with purchasers who might cooperate with the board of
directors of Capitol in opposing such an attempt by a third party to gain
control of Capitol. The issuance of new shares of common stock could also be
37
<PAGE> 40

used to dilute ownership of a person or entity seeking to obtain control of
Capitol. Although Capitol does not currently contemplate taking that action,
shares of Company common stock could be issued for the purposes and effects
described above, and the board of directors reserves its rights (if consistent
with its fiduciary responsibilities) to issue shares for such purposes.

CAPITOL PREFERRED SECURITIES

Capitol has issued debentures to Capitol Trust I, a Delaware business trust
subsidiary of Capitol. Capitol Trust I purchased the debentures with the
proceeds of preferred securities (which are traded on the NASDAQ National Stock
Market under the symbol "CBCLP"). Capitol has guaranteed the preferred
securities. The documents governing these securities, including the indenture
under which the debentures were issued, restrict Capitol's right to pay a
dividend on its common stock under certain circumstances and give the holders of
the preferred securities preference on liquidation over the holders of Capitol's
common stock. Specifically, Capitol may not declare or pay a cash dividend on
its common stock if (a) an event of default has occurred as defined in the
indenture, (b) Capitol is in default under its guarantee, or (c) Capitol has
exercised its right under the debentures and the preferred securities to extend
the interest payment period. In addition, if any of these conditions have
occurred and until they are cured, Capitol is restricted from redeeming or
purchasing any shares of its common stock except under very limited
circumstances. Capitol's obligation under the debentures, the preferred
securities and the guarantee is $25.3 million and the interest rate is 8.5% per
annum, payable quarterly.

ANTI-TAKEOVER PROVISIONS

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

CONTROL SHARE ACT. The MBCA contains provisions intended to protect
shareholders and prohibit or discourage certain types of hostile takeover
activities. These provisions regulate the acquisition of "control shares" of
large public Michigan corporations.

The act establishes procedures governing "control share acquisitions." A
control share acquisition is defined as an acquisition of shares by an acquirer
which, when combined with other shares held by that person or entity, would give
the acquirer voting power at or above any of the following thresholds: 20%,
33 1/3% or 50%. Under that act, an acquirer may not vote "control shares" unless
the corporation's disinterested shareholders vote to confer voting rights on the
control shares. The acquiring person, officers of the target corporation, and
directors of the target corporation who are also employees of the corporation
are precluded from voting on the issue of whether the control shares shall be
accorded voting rights. The act does not affect the voting rights of shares
owned by an acquiring person prior to the control share acquisition.

The act entitles corporations to redeem control shares from the acquiring
person under certain circumstances. In other cases, the act confers dissenters'
rights upon all of a corporation's shareholders except the acquiring person.

The act applies only to an "issuing public corporation." Capitol falls
within the statutory definition of an "issuing public corporation." The act
automatically applies to any "issuing public corporation" unless the corporation
"opts out" of the statute by so providing in its articles of incorporation or
bylaws. Capitol has not "opted out" of the provisions of the act.

FAIR PRICE ACT. Certain provisions of the MBCA establish a statutory scheme
similar to the supermajority and fair price provisions found in many corporate
charters. The act provides that a supermajority vote of 90% of the shareholders
and no less than two-thirds of the votes of non-interested shareholders must
approve a "business combination." The act defines a "business combination" to
encompass any merger, consolidation, share exchange, sale of assets, stock
issue, liquidation, or reclassification of securities involving an "interested
shareholder" or certain "affiliates." An "interested

38
<PAGE> 41

shareholder" is generally any person who owns 10% or more of the outstanding
voting shares of the company. An "affiliate" is a person who directly or
indirectly controls, is controlled by, or is under common control with a
specified person.

At this time, Capitol's management beneficially owns (including immediately
exercisable stock options) control of approximately 27.66% of the outstanding
common stock. It is now unknown what percentage will be owned by management upon
completion of the offering. If management's shares are voted as a block,
management will be able to prevent the attainment of the required supermajority
approval.

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

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

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<PAGE> 42

UNDERWRITING

Subject to the terms and conditions of the Purchase Agreement among
Capitol, the selling shareholder and the Representatives, on behalf of the
Underwriters, the Underwriters named below have severally agreed to purchase
from Capitol and the selling shareholder, the following respective numbers of
shares of common stock at the initial public offering price less the
underwriting discount set forth on the cover page of this prospectus.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
Keefe, Bruyette & Woods, Inc. ..............................
Raymond James & Associates, Inc. ...........................
U.S. Bancorp Piper Jaffray, Inc. ...........................
---------
Total.................................................. 1,800,000
=========
</TABLE>

The Purchase Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all such shares of the common stock if any of such shares are
purchased. The Underwriters are obligated to take and pay for all of the shares
of common stock offered hereby (other than those covered by the over-allotment
option described below) if any are taken.

Capitol has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer such shares of common stock to the public at
the public offering price set forth on the cover page of this prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $ per share to certain other dealers. After the offering,
the offering price and other selling terms may be changed by the Representatives
and the Underwriters.

Pursuant to the Purchase Agreement, Capitol has granted to the Underwriters
an option, exercisable not later than 30 days after the date of this prospectus,
to purchase up to 270,000 additional shares of common stock at the public
offering price, less the underwriting discounts and commissions set forth on the
cover page of this prospectus, solely to cover over-allotments. To the extent
that the Underwriters exercise such option, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares in
such table, and Capitol will be obligated, pursuant to the option, to sell such
shares to the Underwriters.

Capitol, each of its directors and executive officers, the selling
shareholder and certain other shareholders of the Company have agreed not to
sell or otherwise dispose of any shares of common stock for a period of 180 days
after the date of this prospectus without the prior written consent of the
Representatives of the Underwriters, except that Capitol may issue shares of
common stock upon the exercise of currently outstanding options.

The Representatives of the Underwriters have advised Capitol that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Capitol has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

Until the distribution of the common stock is completed, rules of the SEC
may limit the ability of the Underwriters and certain selling group members to
bid for and purchase the common stock. As an exception to these rules, the
Underwriters are permitted to engage in certain transactions that stabilize the
price of the common stock. Such transactions consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the common stock.

If the Underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell a greater aggregate number of
shares of common stock than is set forth on the cover page of this

40
<PAGE> 43

prospectus, the Underwriters may reduce the short position by purchasing shares
of common stock in the open market. The Underwriters may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above.

The Underwriters may also impose a penalty bid on certain selling group
members. This means that if the Underwriters purchase common stock in the open
market to reduce the selling group members' short position or to stabilize the
price of the common stock, they may reclaim the amount of the selling concession
from the selling group members who sold those shares of common stock as part of
the offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither Capitol nor the Representatives make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
Capitol nor the Representatives make any representation that the Underwriters
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.

The Underwriters and dealers may engage in passive market making
transactions in the shares of common stock in accordance with Rule 103 of
Regulation M promulgated by the SEC. In general, a passive market maker may not
bid for, or purchase, shares of common stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive market
maker generally may not exceed 30% of its average daily trading volume in the
common stock during a specified two month prior period, or 200 shares, whichever
is greater. A passive market maker must identify passive market making bids as
such on the Nasdaq electronic inter-dealer reporting system. Passive market
making may stabilize or maintain the market price of the common stock above
independent market levels. Underwriters and dealers are not required to engage
in passive market making and may end passive market making activities at any
time.

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<PAGE> 44

LEGAL MATTERS

The legality of the shares of common stock offered hereby will be passed
upon for Capitol by Strobl Cunningham Caretti & Sharp, P.C., Bloomfield Hills,
Michigan. Certain legal matters will be passed upon for the Underwriters by
Varnum, Riddering, Schmidt & Howlett LLP, Grand Rapids, Michigan.

EXPERTS

The consolidated financial statements of Capitol incorporated in this
prospectus by reference to Capitol's annual report on Form 10-K for the fiscal
year ended December 31, 1998, have been audited by BDO Seidman, LLP, independent
auditors, as stated in their report, which is incorporated here by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents are incorporated by reference into this prospectus:

- Capitol's annual report on Form 10-K for the fiscal year ended December
31, 1998,

- Capitol's report on Form 10-Q for the quarterly period ended March 31,
1999, and

- Capitol's report on Form 10-Q for the quarterly period and six months
ended June 30, 1999.

In addition, all subsequent documents filed with the SEC by Capitol
pursuant Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 after the date of this prospectus shall be deemed to be incorporated by
reference into this prospectus and to be a part hereof from the date of filing
such documents. Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference in this prospectus or
another such document shall be deemed to be modified or superseded for purposes
of this prospectus to the extent that a statement contained in this prospectus
or another such document or in any subsequently filed document which also is or
is deemed to be incorporated by reference herein modified or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified superseded, to constitute a part of this prospectus.

This prospectus incorporates documents by reference which are not presented
here or delivered with this document. These documents (excluding exhibits unless
specifically incorporated in these documents) are available without charge upon
written or oral request to Capitol Bancorp Ltd., 200 Washington Square North,
4th Floor, Lansing, Michigan 48933, attention: General Counsel, telephone number
(517) 487-6555.

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<PAGE> 45

WHERE YOU CAN FIND MORE INFORMATION

Capitol and Sun are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance with the Exchange
Act, file reports, proxy statements, information statements and other
information with the SEC. Such reports, proxy statements and other information
can be inspected and copied at the public reference facilities of the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the SEC located at 7 World Trade Center, 13th Floor, Suite 1300, New
York, New York 10048 and Citicorp Center, 14th Floor, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. You may obtain information on the
operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.
Copies of this material can also be obtained at prescribed rates by writing to
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549. This material also may be accessed electronically by means of the
SEC's home page on the Internet at www.sec.gov.

Capitol's common stock trades on the Nasdaq National Market under the
symbol "CBCL." In addition to Capitol's common stock, trust-preferred securities
of Capitol Trust I are also traded on the Nasdaq National Market under the
symbol "CBCLP." Documents filed by Capitol with the SEC also can be inspected at
the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.

Capitol has filed a registration statement on Form S-3 with the SEC under
the Securities Act of 1933 in connection with the offering. This prospectus does
not contain all of the information set forth in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. The registration statement, including any amendments, schedules and
exhibits thereto, is available for inspection and copying as set forth above.
Statements contained in this prospectus as to the contents of any contract or
other document referred to in this document include all material terms of such
contract or other documents but are not necessarily complete, and in each
instance reference is made to the copy of any such contract or other document
which may have been filed as an exhibit to the registration statement, each such
statement being qualified in all respects by such reference.

43
<PAGE> 46

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
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. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER TO
SELL THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED. YOU SHOULD ASSUME THAT THE INFORMATION APPEARING IN THIS PROSPECTUS
IS ACCURATE AS OF THE DATE ON THE FRONT COVER OF THIS PROSPECTUS ONLY. OUR
BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE
CHANGED SINCE THAT DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Cautionary Statement Regarding
Forward-Looking Information......... 2
Prospectus Summary.................... 3
Selected Consolidated Financial
Data................................ 7
Risk Factors.......................... 9
Recent Developments................... 14
Use of Proceeds....................... 15
Capitalization........................ 16
Dividends and Market For Common
Stock............................... 17
Business.............................. 18
Management............................ 26
Supervision and Regulation............ 30
Description of Capital Stock.......... 37
Underwriting.......................... 40
Legal Matters......................... 42
Experts............................... 42
Incorporation of Certain Documents By
Reference........................... 42
Where You Can Find More Information... 43
</TABLE>

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

CAPITOL BANCORP LTD LOGO
1,800,000 SHARES

$ PER SHARE
CAPITOL BANCORP LTD.

COMMON STOCK
----------------------

PROSPECTUS
----------------------
KEEFE, BRUYETTE & WOODS, INC.

RAYMOND JAMES & ASSOCIATES, INC.

U.S. BANCORP PIPER JAFFRAY
AUGUST , 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 47

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Expenses in connection with the issuance and distribution of the securities
being registered are estimated as follows, all of which are to be paid by the
Company:

<TABLE>
<S> <C>
SEC Registration Fee........................................ $
NASD Filing Fee.............................................
Nasdaq Additional Listing Fee...............................
Printing and Mailing Expenses...............................
Accounting Fees.............................................
Transfer and Registrar's Fees...............................
Legal Fees and Expenses.....................................
Blue Sky Fees and Expenses..................................
Miscellaneous...............................................
--------
Total.................................................. $250,000
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Sections 561-571 of the Michigan Business Corporation Act, as amended (the
"MBCA"), grant the Registrant broad powers to indemnify any person in connection
with legal proceedings brought against him by reason of his present or past
status as an officer or director of the Registrant, provided that the person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Registrant, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The MBCA also gives the Registrant broad powers to indemnify any
such person against expenses and reasonable settlement payments in connection
with any action by or in the right of the Registrant, provided the person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Registrant, except that no indemnification may be made
if such person is adjudged to be liable to the Registrant unless and only to the
extent the court in which such action was brought determines upon application
that, despite such adjudication, but in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnity for reasonable
expenses as the court deems proper. In addition, to the extent that any such
person is successful in the defense of any such legal proceeding, the Registrant
is required by the MBCA to indemnify him against expenses, including attorneys'
fees, that are actually and reasonably incurred by him in connection therewith.

The Registrant's Articles of Incorporation contain provisions entitling
directors and executive officers of the Registrant to indemnification against
certain liabilities and expenses to the full extent permitted by Michigan law.

Under an insurance policy maintained by the Registrant, the directors and
officers of the Registrant are insured within the limits and subject to the
limitations of the policy, against certain expenses in connection with the
defense of certain claims, actions, suits or proceedings, and certain
liabilities which might be imposed as a result of such claims, actions, suits or
proceedings, which may be brought against them by reason of being or having been
such directors and officers.

ITEM 16. EXHIBITS.

Reference is made to the Exhibit Index which appears at page II-5 of the
Registration Statement.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant

II-1
<PAGE> 48

to the forgoing provisions described in Item 15 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes:

(a) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(b) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(c) The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(d) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(e) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-2
<PAGE> 49

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Lansing, Michigan on July 29, 1999.
CAPITOL BANCORP LTD.

By: /s/ JOSEPH D. REID
------------------------------------
Joseph D. Reid
Chairman of the Board
President and Chief Executive
Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joseph D. Reid, Robert C. Carr, David O'Leary and
Lee W. Hendrickson and each of them (with full power to each of them to act
alone), his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, including any Registration Statement
for the same offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 29, 1999:

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ JOSEPH D. REID Chairman of the Board, President and Chief
- --------------------------------------------- Executive Officer, Director (Principal
Joseph D. Reid Executive Officer)
/s/ LEE W. HENDRICKSON Chief Financial Officer (Principal Financial
- --------------------------------------------- and Accounting Officer)
Lee W. Hendrickson
/s/ ROBERT C. CARR Treasurer, Director
- ---------------------------------------------
Robert C. Carr
/s/ DAVID O'LEARY Secretary, Director
- ---------------------------------------------
David O'Leary
/s/ LOUIS G. ALLEN Director
- ---------------------------------------------
Louis G. Allen
/s/ PAUL R. BALLARD Director
- ---------------------------------------------
Paul R. Ballard
/s/ DAVID L. BECKER Director
- ---------------------------------------------
David L. Becker
</TABLE>

II-3
<PAGE> 50

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ DOUGLAS E. CRIST Director
- ---------------------------------------------
Douglas E. Crist
/s/ JAMES C. EPOLITO Director
- ---------------------------------------------
James C. Epolito
/s/ GARY A. FALKENBERG Director
- ---------------------------------------------
Gary A. Falkenberg
/s/ JOEL I. FERGUSON Director
- ---------------------------------------------
Joel I. Ferguson
/s/ KATHLEEN A. GASKIN Director
- ---------------------------------------------
Kathleen A. Gaskin
/s/ H. NICHOLAS GENOVA Director
- ---------------------------------------------
H. Nicholas Genova
/s/ L. DOUGLAS JOHNS Director
- ---------------------------------------------
L. Douglas Johns
/s/ MICHAEL L. KASTEN Director
- ---------------------------------------------
Michael L. Kasten
/s/ LEONARD MAAS Director
- ---------------------------------------------
Leonard Maas
/s/ LYLE W. MILLER Director
- ---------------------------------------------
Lyle W. Miller
</TABLE>

II-4
<PAGE> 51

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER AND DESCRIPTION PAGE
------------------------------ ------------
<S> <C> <C> <C>
1 -- Underwriting Agreement.
3(i) -- Amendment to Articles of Incorporation dated June 30,
1999.
5 -- Opinion re legality of shares to be issued.
10.1 -- Employment Agreement by and between Sun Community Bancorp *
Limited and Joseph D. Reid. (Exhibit 10.1 of Sun
Community Bancorp Limited).
10.2 -- Employment Agreement by and between Sun Community Bancorp *
Limited and John S. Lewis. (Exhibit 10.7 of Sun Community
Bancorp Limited).
10.3 -- Anti-dilution Agreement by and between Sun Community *
Bancorp Limited and Capitol Bancorp Ltd. (Exhibit 10.10
of Sun Community Bancorp Limited)
10.4 -- Amendment to Employment Agreement by and between Capitol **
Bancorp Ltd. and Joseph D. Reid.
21 -- Subsidiaries of Capitol Bancorp Ltd.
23.1 -- Consent of BDO Seidman, LLP, independent public
accountants.
23.2 -- Consent of Strobl Cunningham Caretti & Sharp, P.C.
(included in their opinion filed as Exhibit 5).
24 -- Powers of Attorney (set forth on signature page included
in Registration Statement).
</TABLE>

- -------------------------
* Incorporated by reference to Amendment No. 2 to the Registration Statement on
Form S-1 of Sun Community Bancorp Limited (Registration No. 333-76719) dated
June 15, 1999.

** To be filed by amendment.

II-5

<PAGE> 1
EXHIBIT 1

CAPITOL BANCORP LTD.

(a Michigan corporation)

1,800,000

Shares of Common Stock

(No Par Value Per Share)

PURCHASE AGREEMENT

, 1999

KEEFE, BRUYETTE & WOODS, INC.
US BANCORP PIPER JAFFRAY, INC.
RAYMOND JAMES & ASSOCIATES, INC.
as Representatives of the several Underwriters
c/o Keefe, Bruyette & Woods, Inc.
85th Floor
Two World Trade Center
New York, New York 10048

Ladies and Gentlemen:

Capitol Bancorp Ltd., a Michigan corporation (the "Company"), and
(the "Selling Shareholder") confirm their respective agreements
with Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette") and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters", which
term shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom Keefe Bruyette, US Bancorp Piper Jaffray, Inc. and
Raymond James & Associates, Inc. are acting as representatives (in such
capacity, the "Representatives"), with respect to (i) the sale by the Company
and the Selling Shareholders, acting severally and not jointly, and the purchase
by the Underwriters, acting severally and not jointly, of the respective numbers
of shares of Common Stock, no par value per share, of the Company ("Common
Stock") set forth in Schedules A and B hereto and (ii) the grant by the Company
to the Underwriters, acting severally and not jointly, of the option described
in Section 2(b) hereof to purchase all or any part of 270,000 additional shares
of Common Stock to cover over-allotments, if any. The aforesaid 1,800,000 shares
of Common Stock (the "Initial Securities") to be purchased by the Underwriters
and all or any part of the 270,000 shares of Common Stock subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities".

<PAGE> 2
The Company and the Selling Shareholder understand that the
Underwriters propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333- ) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). The
information included in such prospectus or in such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred
to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is
referred to as "Rule 434 Information." Each prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto, schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final prospectus,
including the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the 1933 Act, in the form first furnished to the Underwriters for
use in connection with the offering of the Securities is herein called the
"Prospectus." If Rule 434 is relied on, the term "Prospectus" shall refer to the
preliminary prospectus dated September , 1999 together with the Term Sheet
and all references in this Agreement to the date of the Prospectus shall mean
the date of the Term Sheet. For purposes of this Agreement, all references to
the Registration Statement, any preliminary prospectus, the Prospectus or any
Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").

All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any

<PAGE> 3

preliminary prospectus or the Prospectus shall be deemed to mean and include the
filing of any document under the Securities Exchange Act of 1934 (the "1934
Act") which is incorporated by reference in the Registration Statement, such
preliminary prospectus or the Prospectus, as the case may be.

SECTION 1. Representations and Warranties.

(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b) hereof, and agrees with each Underwriter,
as follows:

(i) Compliance with Registration Requirements. The Company
meets the requirements for use of Form S-3 under the 1933 Act. Each of
the Registration Statement and any Rule 462(b) Registration Statement
has become effective under the 1933 Act and no stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or, to
the knowledge of the Company, are contemplated by the Commission, and
any request on the part of the Commission for additional information
has been complied with.

At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the Closing Time (and, if any Option Securities
are purchased, at the Date of Delivery), the Registration Statement,
the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects
with the requirements of the 1933 Act and the 1933 Act Regulations and
did not and will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. Neither the
Prospectus nor any amendments or supplements thereto, at the time the
Prospectus or any such amendment or supplement was issued and at the
Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery), included or will include an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If Rule 434
is used, the Company will comply with the requirements of Rule 434. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Keefe
Bruyette expressly for use in the Registration Statement or Prospectus.

Each preliminary prospectus and the prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act

<PAGE> 4

Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.

(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectus, at the time the
Registration Statement became effective, at the time the Prospectus was
issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading.

(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.

(iv) Financial Statements. The financial statements included
in the Registration Statement and the Prospectus, together with the
related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiaries at the dates indicated
and the statement of operations, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries for the periods
specified; said financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved except as disclosed
therein. The supporting schedules, if any, included in the Registration
Statement present fairly in accordance with GAAP the information
required to be stated therein. The selected consolidated financial data
included in the Prospectus present fairly the information shown therein
and have been compiled on a basis consistent with that of the audited
financial statements included in the Registration Statement.

(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business
(a "Material Adverse Effect"), (B) there have been no transactions
entered into by the Company or any of its subsidiaries, other than
those in the ordinary course of business, which are material with
respect to the Company and its subsidiaries considered as one
enterprise, and (C) except for regular quarterly dividends on the
Common Stock and guaranteed preferred beneficial interests in the
Company's

<PAGE> 5

subordinated debentures in amounts per share and per preferred security
that are consistent with past practice, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock.

(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Michigan, and is duly registered under
Section 3(a)(1) of the Bank Holding Company Act of 1956, as amended,
and has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Prospectus
and to enter into and perform its obligations under this Agreement; and
the Company is duly qualified as a foreign corporation to transact
business and is in good standing in each other jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.

(vii) Good Standing of Subsidiaries. Each direct and indirect
subsidiary (whether wholly or partially owned by the Company) of the
Company (each a "Subsidiary" and, collectively, the "Subsidiaries") has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or to be in
good standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued
and outstanding capital stock of each such Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable (except
to the extent provided, as to Michigan bank Subsidiaries, in Section
201 of the Michigan Bank Code of 1969, as to Arizona bank Subsidiaries,
in Section of the Arizona Banking Code and as to the national bank
Subsidiary in Section 55 of the National Bank Act or to the extent
provided by 12 U.S.C. Section 1831o) and is owned by the Company,
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; none of
the outstanding shares of capital stock of any Subsidiary was issued in
violation of the preemptive or similar rights of any securityholder of
such Subsidiary. None of the outstanding shares of capital stock of any
Subsidiary was issued in violation of the 1933 Act, the 1933 Act
Regulations or any state securities laws or regulations. The only
subsidiaries of the Company are the subsidiaries listed on Exhibit 21
to the Registration Statement. Sun Community Bancorp Limited is duly
registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended. Each of Nevada Community Bancorp, California
Community Bancorp, Sunrise Capital Corp. and Indiana Community Bancorp
will, at the time of becoming a bank holding company, be duly
registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended. The deposit accounts of each Subsidiary that is a
bank are insured by the Bank Insurance Fund administered by the

<PAGE> 6

Federal Deposit Insurance Corporation up to the maximum amount provided
by law, and no proceedings for the modification, termination or
revocation of such insurance are pending or, to the knowledge of the
Company, threatened.

(viii) Capitalization. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus in the
column entitled "Actual" under the caption "Capitalization" (except for
subsequent issuances, if any, pursuant to this Agreement, pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus, pursuant to the exercise of convertible securities or
options referred to in the Prospectus, or pursuant to the issuance of
the Company's common stock to shareholders of Macomb Community Bank in
exchange for issued and outstanding shares of Macomb Community Bank).
The shares of issued and outstanding capital stock, including the
Securities to be purchased by the Underwriters from the Selling
Shareholder, have been duly authorized and validly issued and are fully
paid and non-assessable; none of the outstanding shares of capital
stock, including the Securities to be purchased by the Underwriters
from the Selling Shareholder, was issued in violation of the preemptive
or other similar rights of any securityholder of the Company.

(ix) Authorization of Agreement. This Agreement has been duly
authorized, executed and delivered by the Company.

(x) Authorization and Description of Securities. The
Securities to be purchased by the Underwriters from the Company have
been duly authorized for issuance and sale to the Underwriters pursuant
to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued and fully paid and non-assessable;
the Common Stock conforms to all statements relating thereto contained
in the Prospectus and such description conforms to the rights set forth
in the instruments defining the same; no holder of the Securities will
be subject to personal liability by reason of being such a holder; and
the issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.

(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its subsidiaries is in violation of its charter or by-laws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which it or any of them may be bound, or to which any
of the property or assets of the Company or any subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectus

<PAGE> 7

under the caption "Use of Proceeds") and compliance by the Company with
its obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined
below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action
result in any violation of the provisions of the charter or by-laws of
the Company or any subsidiary or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any subsidiary or any of their assets,
properties or operations. As used herein, a "Repayment Event" means any
event or condition which gives the holder of any note, debenture or
other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any subsidiary.

(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any subsidiary exists or, to the knowledge
of the Company, is imminent, and the Company is not aware of any
existing or imminent labor disturbance by the employees of any of its
or any subsidiary's principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to
result in a Material Adverse Effect.

(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending
legal or governmental proceedings to which the Company or any
subsidiary is a party or of which any of their respective property or
assets is the subject which are not described in the Registration
Statement, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material
Adverse Effect.

(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectus or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.

<PAGE> 8

(xv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms,
adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and neither the Company
nor any of its subsidiaries has received any notice or is otherwise
aware of any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property or of any facts or
circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its
subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.

(xvi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance or
sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.

(xvii) Possession of Licenses and Permits. The Company and its
subsidiaries possess such permits, licenses, approvals, consents and
other authorizations (collectively, "Governmental Licenses") issued by
the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not have a Material Adverse Effect; and neither
the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.

(xviii) Title to Property. The Company and its subsidiaries
have good and marketable title to all real property owned by the
Company and its subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectus or (b) do not,
singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company or any of its subsidiaries; and all of
the leases and subleases

<PAGE> 9

material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by
anyone adverse to the rights of the Company or any subsidiary under any
of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company or such subsidiary to the continued
possession of the leased or subleased premises under any such lease or
sublease.

(xix) Compliance with Cuba Act. The Company has complied with,
and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba,
codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder (collectively, the "Cuba Act") or is exempt
therefrom.

(xx) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").

(xxi) Environmental Laws. Except as described in the
Registration Statement and except as would not, singly or in the
aggregate, result in a Material Adverse Effect, (A) neither the Company
nor any of its subsidiaries is in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of
human health, the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) the Company and its subsidiaries have all
permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there are no pending or threatened administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings
relating to any Environmental Law against the Company or any of its
subsidiaries and (D) there are no events or circumstances that might
reasonably be expected to form the basis of an order for clean-up or
remediation, or an action, suit or proceeding by any private party or
governmental body or agency, against or affecting the Company or any of
its subsidiaries relating to Hazardous Materials or any Environmental
Laws.

<PAGE> 10

(xxii) Tax Matters. The Company and its subsidiaries have
filed all federal, state, local and foreign tax returns that are
required to be filed or have duly requested extensions thereof and have
paid all taxes required to be paid by any of them and any related
assessments, fines or penalties, except for any such tax, assessment,
fine or penalty that is being contested in good faith and by
appropriate proceedings; and adequate charges, accruals and reserves
have been provided for in the financial statements referred to in
Section 1(a)(iv) above in respect of all federal, state, local and
foreign taxes for all periods as to which the tax liability of the
Company or any of its subsidiaries has not been finally determined or
remains open to examination by applicable taxing authorities.

(xxv) Insurance. The Company and its subsidiaries carry or are
entitled to the benefits of insurance in such amounts and covering such
risks as is generally maintained by companies of established repute
engaged in the same or similar business, and all such insurance is in
full force and effect.

(xxvi) Accounting Controls. The Company and its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with management's general and specific authorizations; (ii)
transactions are recorded as necessary to permit preparations of
financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorizations; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

(xxxvii) Fees. Other than as contemplated by this Agreement,
there is no broker, finder or other party that is entitled to receive
from the Company any brokerage or finder's fee or any other fee,
commission or payment as a result of the transactions contemplated by
this Agreement.

(b) Representations and Warranties by the Selling Shareholder. The
Selling Shareholder represents and warrants to each Underwriter as of the date
hereof, as of the Closing Time, and, if the Selling Shareholder is selling
Option Securities on a Date of Delivery, as of each such Date of Delivery, and
agrees with each Underwriter, as follows:

(i) Accurate Disclosure. The disclosure in the Prospectus
under the heading "Selling Shareholder" does not include any untrue
statement of material fact or omit to state a material fact necessary
to make the statements therein not misleading. The Selling Shareholder
is not prompted to sell the Securities to be sold by the Selling
Shareholder hereunder by any information concerning the Company or any
subsidiary of the Company which is not set forth in the Prospectus.

(ii) Authorization of Agreements. The Selling Shareholder has
the full right, power and authority to enter into this Agreement and a
Power of Attorney and Custody

<PAGE> 11

Agreement (the "Power of Attorney and Custody Agreement") and to sell,
transfer and deliver the Securities to be sold by the Selling
Shareholder hereunder. The execution and delivery of this Agreement and
the Power of Attorney and Custody Agreement and the sale and delivery
of the Securities to be sold by the Selling Shareholder and the
consummation of the transactions contemplated herein and compliance by
the Selling Shareholder with its obligations hereunder have been duly
authorized by the Selling Shareholder and do not and will not, whether
with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any tax, lien, charge or encumbrance upon
the Securities to be sold by the Selling Shareholder or any property or
assets of the Selling Shareholder pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, license, lease
or other agreement or instrument to which the Selling Shareholder is a
party or by which the Selling Shareholder may be bound, or to which any
of the property or assets of the Selling Shareholder is subject, nor
will such action result in any violation of the provisions of the
charter or by-laws or other organizational instrument of the Selling
Shareholder, if applicable, or any applicable treaty, law, statute,
rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having
jurisdiction over the Selling Shareholder or any of its properties.

(iii) Good and Marketable Title. The Selling Shareholder has
and will at the Closing Time have good and marketable title to the
Securities to be sold by the Selling Shareholder hereunder, free and
clear of any security interest, mortgage, pledge, lien, charge, claim,
equity or encumbrance of any kind, other than pursuant to this
Agreement; and upon delivery of such Securities and payment of the
purchase price therefor as herein contemplated, assuming each such
Underwriter has no notice of any adverse claim, each of the
Underwriters will receive good and marketable title to the Securities
purchased by it from the Selling Shareholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.

(iv) Due Execution of Power of Attorney and Custody Agreement.
The Selling Shareholder has duly executed and delivered, in the form
heretofore furnished to the Representative(s), the Power of Attorney
and Custody Agreement with Joseph D. Reid and Lee W. Hendrickson, or
any of them, as attorneys-in-fact (the "Attorneys-in-Fact") and Capitol
Bancorp Ltd., as custodian (the "Custodian"); the Custodian is
authorized to deliver the Securities to be sold by the Selling
Shareholder hereunder and to accept payment therefor; and each
Attorney-in-Fact is authorized to execute and deliver this Agreement
and the certificate referred to in Section 5(f) or that may be required
pursuant to Section 5(l) on behalf of the Selling Shareholder, to sell,
assign and transfer to the Underwriters the Securities to be sold by
the Selling Shareholder hereunder, to determine the purchase price to
be paid by the Underwriters to the Selling Shareholder, as provided in
Section 2(a) hereof, to authorize the delivery of the Securities to be
sold by the Selling Shareholder hereunder, to accept payment therefor,
and otherwise to act on behalf of the Selling Shareholder in connection
with this Agreement.

<PAGE> 12

(v) Absence of Manipulation. The Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities.

(vi) Absence of Further Requirements. No filing with, or
consent, approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by the Selling
Shareholder of its obligations hereunder or in the Power of Attorney
and Custody Agreement, or in connection with the sale and delivery of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as may have previously been
made or obtained or as may be required under the 1933 Act or the 1933
Act Regulations or state securities laws.

(vii) Restriction on Sale of Securities. During a period of
180 days from the date of the Prospectus, the Selling Shareholder will
not, without the prior written consent of Keefe Bruyette, (i) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or
file any registration statement under the 1933 Act with respect to any
of the foregoing or (ii) enter into any swap or any other agreement or
any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not
apply to the Securities to be sold hereunder.

(viii) Certificates Suitable for Transfer. Certificates for
all of the Securities to be sold by the Selling Shareholder pursuant to
this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the Underwriters pursuant to this Agreement.

(ix) No Association with NASD. Neither the Selling Stockholder
nor any of his affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the By-laws of the National Association of
Securities Dealers, Inc.), any member firm of the National Association
of Securities Dealers, Inc.

(c) Officer's Certificates. Any certificate signed by any officer of
the Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby;

<PAGE> 13

and any certificate signed by or on behalf of the Selling Shareholders(s) as
such and delivered to the Representatives or to counsel for the Underwriters
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Selling Shareholder to the Underwriters as to the matters
covered thereby.

SECTION 2. Sale and Delivery to Underwriters; Closing.

(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company and the Selling Shareholders, severally and not jointly,
agree to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company and
the Selling Shareholder, at the price per share set forth in Schedule C, that
proportion of the number of Initial Securities set forth in Schedule B opposite
the name of the Company or the Selling Shareholder, as the case may be, which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof, bears to the total number of Initial Securities, subject, in
each case, to such adjustments among the Underwriters as the Representative in
their sole discretion shall make to eliminate any sales or purchases of
fractional securities.

(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional 270,000 shares of Common Stock,
as set forth in Schedule B, at the price per share set forth in Schedule C, less
an amount per share equal to any dividends or distributions declared by the
Company and payable on the Initial Securities but not payable on the Option
Securities. The option hereby granted will expire 30 days after the date hereof
and may be exercised in whole or in part from time to time only for the purpose
of covering over-allotments which may be made in connection with the offering
and distribution of the Initial Securities upon notice by the Representative to
the Company setting forth the number of Option Securities as to which the
several Underwriters are then exercising the option and the time and date of
payment and delivery for such Option Securities. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the Representative(s),
but shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Securities, each
of the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter bears to the total number of Initial Securities, subject in
each case to such adjustments as the Representatives in their discretion shall
make to eliminate any sales or purchases of fractional shares.

(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Varnum,
Riddering, Schmidt & Howlett LLP, or at such other place as shall be agreed upon
by the Representatives and the Company and the Selling

<PAGE> 14

Shareholder, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after the
date hereof (unless postponed in accordance with the provisions of Section 10),
or such other time not later than ten business days after such date as shall be
agreed upon by the Representatives and the Company and the Selling Shareholders
(such time and date of payment and delivery being herein called "Closing Time").

In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices, or at such other place as shall be agreed upon by the Representatives
and the Company and the Selling Shareholders, on each Date of Delivery as
specified in the notice from the Representatives to the Company and the Selling
Shareholders.

Payment shall be made to the Company and the Selling Shareholders by
wire transfer of immediately available funds to bank account(s) designated by
the Company and the Custodian pursuant to the Selling Shareholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
Representative(s) for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Keefe Bruyette, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.

(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in writing at least
one full business day before the Closing Time or the relevant Date of Delivery,
as the case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representative(s) in The City of Chicago not later than 10:00 A.M. (Eastern
time) on the business day prior to the Closing Time or the relevant Date of
Delivery, as the case may be.

SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:

(a) Compliance with Securities Regulations and Commission Requests. The
Company, subject to Section 3(b), will comply with the requirements of Rule 430A
or Rule 434, as applicable, and will notify the Representative(s) immediately,
and confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the

<PAGE> 15

Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any of
such purposes. The Company will promptly effect the filings necessary pursuant
to Rule 424(b) and will take such steps as it deems necessary to ascertain
promptly whether the form of prospectus transmitted for filing under Rule 424(b)
was received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.

(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus,
whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the
Representative(s) with copies of any such documents a reasonable amount of time
prior to such proposed filing or use, as the case may be, and will not file or
use any such document to which the Representative(s) or counsel for the
Underwriters shall object.

(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters, without
charge, signed copies of the Registration Statement as originally filed and of
each amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated by
reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the Representative(s), without charge, a
conformed copy of the Registration Statement as originally filed and of each
amendment thereto (without exhibits) for each of the Underwriters. The copies of
the Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.

(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.

<PAGE> 16

(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act
Regulations so as to permit the completion of the distribution of the Securities
as contemplated in this Agreement and in the Prospectus. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or for the
Company, to amend the Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include any untrue statements
of a material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances existing
at the time it is delivered to a purchaser, or if it shall be necessary, in the
opinion of such counsel, at any such time to amend the Registration Statement or
amend or supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and
file with the Commission, subject to Section 3(b), such amendment or supplement
as may be necessary to correct such statement or omission or to make the
Registration Statement or the Prospectus comply with such requirements, and the
Company will furnish to the Underwriters such number of copies of such amendment
or supplement as the Underwriters may reasonably request.

(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
(domestic or foreign) as the Representative(s) may designate and to maintain
such qualifications in effect for a period of not less than one year from the
later of the effective date of the Registration Statement and any Rule 462(b)
Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.

(g) Rule 158. The Company will timely file such reports pursuant to the
1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of Section
11(a) of the 1933 Act.

(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the Prospectus
under "Use of Proceeds".

(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and will
file with the Nasdaq National Market all documents and notices required by the
Nasdaq National Market of companies that have securities that are traded in the
over-the-counter market and quotations for which are reported by the Nasdaq
National Market.

<PAGE> 17

(j) Restriction on Sale of Securities. During a period of 180 days from
the date of the Prospectus, the Company will not, without the prior written
consent of Keefe Bruyette, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing (except for
share exchanges with holders of issued and outstanding common stock of one or
more Subsidiaries of the Company) or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly or
indirectly, the economic consequence of ownership of the Common Stock, whether
any such swap or transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Securities to be
sold hereunder, (B) any shares of Common Stock issued by the Company upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof and referred to in the Prospectus, (C) any shares of Common
Stock issued or options to purchase Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectus or (D) any
shares of Common Stock issued pursuant to any non-employee director stock plan
or dividend reinvestment plan.

(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act and the 1934 Act
Regulations.

SECTION 4. Payment of Expenses. (a) Expenses. The Company and the
Selling Shareholder will pay or cause to be paid all expenses incident to the
performance of their obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale, issuance or delivery
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel, accountants and other advisors, (v) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of each
preliminary prospectus, any Term Sheets and of the Prospectus and any amendments
or supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities and
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of
the Securities and

<PAGE> 18

(x) the fees and expenses incurred in connection with the inclusion of the
Securities in the Nasdaq National Market.

(b) Expenses of the Selling Shareholders. The Selling Shareholder will
pay all expenses incident to the performance of their respective obligations
under, and the consummation of the transactions contemplated by this Agreement,
including (i) any stamp duties, capital duties and stock transfer taxes, if any,
payable upon the sale of the Securities to the Underwriters, and their transfer
between the Underwriters pursuant to an agreement between such Underwriters, and
(ii) the fees and disbursements of its counsel and accountants.

(c) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5, Section 9(a)(i)
or Section 11 hereof, the Company and the Selling Shareholders shall reimburse
the Underwriters for all of their out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriters, up to a
maximum of $25,000 for fees and disbursements of such counsel.

(d) Allocation of Expenses. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders may make for
the sharing of such costs and expenses.

SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Shareholders
contained in Section 1 hereof or in certificates of any officer of the Company
or any subsidiary of the Company or on behalf of the Selling Shareholder
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:

(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission, and any request on the part
of the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. A prospectus
containing the Rule 430A Information shall have been filed with the Commission
in accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434,
a Term Sheet shall have been filed with the Commission in accordance with Rule
424(b).

(b) Opinion of Counsel for Company. At Closing Time, the
Representative(s) shall have received the favorable opinion, dated as of Closing
Time, of Strobl, Cunningham, Caretti & Sharp, P.C., counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters to
the effect set forth in Exhibit A hereto and to such further effect as counsel
to the Underwriters may reasonably request.

<PAGE> 19

(c) Opinion of Counsel for the Selling Shareholders. At Closing Time,
the Representatives shall have received the favorable opinion, dated as of
Closing Time, of , counsel for the Selling
Shareholders, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letter for each
of the other Underwriters to the effect set forth in Exhibit B hereto and to
such further effect as counsel to the Underwriters may reasonably request.

(d) Opinion of Counsel for Underwriters. At Closing Time, the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of Varnum, Riddering, Schmidt & Howlett LLP, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the other
Underwriters with respect to the matters set forth in clauses (i), (ii), (v),
(vi) (solely as to preemptive or other similar rights arising by operation of
law or under the charter or by-laws of the Company), (viii) through (x),
inclusive, and the penultimate paragraph of Exhibit A hereto. In giving such
opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the State of Michigan and the federal law of
the United States, upon the opinions of counsel satisfactory to the
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.

(e) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Representatives shall have
received a certificate of the President or a Vice President of the Company and
of the chief financial or chief accounting officer of the Company, dated as of
Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1(a) hereof are true
and correct with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.

(f) Certificate of Selling Shareholder. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of the Selling Shareholder, dated as of Closing Time, to the effect that
(i) the representations and warranties of the Selling Shareholder contained in
Section 1(b) hereof are true and correct in all respects with the same force and
effect as though expressly made at and as of Closing Time and (ii) the Selling
Shareholder has complied in all material respects with all agreements and all
conditions on its part to be performed under this Agreement at or prior to
Closing Time.

(g) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from BDO Seidman, LLP a
letter dated such date, in form and

<PAGE> 20

substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the other Underwriters containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus.

(h) Bring-down Comfort Letter. At Closing Time, the Representatives
shall have received from BDO Seidman, LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (g) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.

(i) Approval of Listing. At Closing Time, the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.

(j) No Objection. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.

(k) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule E hereto.

(l) Conditions to Purchase of Option Securities. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company and the Selling Shareholders contained herein and the statements
in any certificates furnished by the Company, any subsidiary of the Company and
the Selling Shareholders hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Representatives shall have
received:

(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(e) hereof remains true and correct as of such Date of
Delivery.

(ii) Certificate of Selling Shareholders. A certificate, dated
such Date of Delivery, of an Attorney-in-Fact on behalf of the Selling
Shareholder confirming that the certificate delivered at Closing Time
pursuant to Section 5(f) remains true and correct as of such Date of
Delivery.

(iii) Opinion of Counsel for Company. The favorable opinion of
Strobl Cunningham Caretti & Sharp, P.C., counsel for the Company, in
form and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(b) hereof.

<PAGE> 21

(iv) Opinion of Counsel for the Selling Shareholders. The
favorable opinion of , counsel for the
Selling Shareholders, in form and substance satisfactory to counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(c) hereof.

(v) Opinion of Counsel for Underwriters. The favorable opinion
of Varnum, Riddering, Schmidt & Howlett LLP, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(d) hereof.

(vi) Bring-down Comfort Letter. A letter from BDO Seidman,
LLP, in form and substance satisfactory to the Representative(s) and
dated such Date of Delivery, substantially in the same form and
substance as the letter furnished to the Representative(s) pursuant to
Section 5(g) hereof, except that the "specified date" in the letter
furnished pursuant to this paragraph shall be a date not more than five
days prior to such Date of Delivery.

(m) Additional Documents. At Closing Time and at each Date of Delivery
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company and the Selling Shareholders in connection with the
issuance and sale of the Securities as herein contemplated shall be satisfactory
in form and substance to the Representatives and counsel for the Underwriters.

(n) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled, this
Agreement, or, in the case of any condition to the purchase of Option Securities
on a Date of Delivery which is after the Closing Time, the obligations of the
several Underwriters to purchase the relevant Option Securities, may be
terminated by the Representatives by notice to the Company at any time at or
prior to Closing Time or such Date of Delivery, as the case may be, and such
termination shall be without liability of any party to any other party except as
provided in Section 4 and except that Sections 1, 6, 7 and 8 shall survive any
such termination and remain in full force and effect.

SECTION 6. Indemnification.

(a) Indemnification of Underwriters. The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act to the extent and in the manner set forth in clauses (i), (ii) and
(iii) below as follows:

<PAGE> 22

(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the Rule
430A Information and the Rule 434 Information, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto), or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section 6(d) below) any such settlement is effected
with the written consent of the Company;

(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Keefe
Bruyette), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission to the extent that any such
expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Keefe Bruyette expressly for use in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).

(b) Indemnification of Company, Directors and Officers and Selling
Shareholders. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and the Selling
Shareholder against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by

<PAGE> 23

such Underwriter through Keefe Bruyette expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).

(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Keefe Bruyette, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.

(e) Other Agreements with Respect to Indemnification. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Shareholder with respect to indemnification.

<PAGE> 24

SECTION 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other hand from
the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the
Selling Shareholders on the one hand and of the Underwriters on the other hand
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.

The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Shareholders and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus, or, if Rule 434 is used, the corresponding location
on the Term Sheet bear to the aggregate initial public offering price of the
Securities as set forth on such cover.

The relative fault of the Company and the Selling Shareholders on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Selling Shareholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
7. The aggregate amount of losses, liabilities, claims, damages and expenses
incurred by an indemnified party and referred to above in this Section 7 shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any

<PAGE> 25

damages which such Underwriter has otherwise been required to pay by reason of
any such untrue or alleged untrue statement or omission or alleged omission.

No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.

The provisions of this Section shall not affect any agreement among the
Company and the Selling Shareholders with respect to contribution.

SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or any of its
subsidiaries or the Selling Shareholders submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of the
Company or the Selling Shareholders, and shall survive delivery of the
Securities to the Underwriters.

SECTION 9. Termination of Agreement.

(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Shareholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or any
change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or materially limited by the Commission or the Nasdaq National Market,
or if trading generally on the American Stock Exchange or the New York Stock
Exchange or in the Nasdaq National Market has been suspended or materially
limited, or minimum or maximum prices for trading have been fixed, or

<PAGE> 26
maximum ranges for prices have been required, by any of said exchanges or by
such system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other governmental authority, or (iv) if a
banking moratorium has been declared by either Federal or Michigan authorities.

(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6, 7 and 8 shall survive such termination and remain in full force and
effect.

SECTION 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:

(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or

(b) if the number of Defaulted Securities exceeds 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to any
Date of Delivery which occurs after the Closing Time, the obligation of the
Underwriters to purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting Underwriter.

No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.

In the event of any such default which does not result in a termination
of this Agreement or, in the case of a Date of Delivery which is after the
Closing Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either (i) the Representatives or (ii) the Company and the
Selling Shareholder shall have the right to postpone Closing Time or the
relevant Date of Delivery, as the case may be, for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.

<PAGE> 27

SECTION 11. Default by the Selling Shareholder. (a) If the Selling
Shareholder shall fail at Closing Time or at a Date of Delivery to sell and
deliver the number of Securities which the Selling Shareholder is obligated to
sell hereunder, then the Underwriters may, at option of the Representatives, by
notice from the Representatives to the Company either (a) terminate this
Agreement without any liability on the fault of any non-defaulting party except
that the provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and
effect or (b) elect to purchase the Securities which the Company has agreed to
sell hereunder. No action taken pursuant to this Section 11 shall relieve any
Selling Shareholder so defaulting from liability, if any, in respect of such
default.

In the event of a default by the Selling Shareholder as referred to in
this Section 11, each of the Representatives and the Company shall have the
right to postpone Closing Time or Date of Delivery for a period not exceeding
seven days in order to effect any required change in the Registration Statement
or Prospectus or in any other documents or arrangements.

(b) If the Company shall fail at Closing Time or at the Date of
Delivery to sell the number of Securities that it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on the part
of any nondefaulting party; provided, however, that the provisions of Sections
1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken pursuant
to this Section shall relieve the Company from liability, if any, in respect of
such default.

SECTION 12. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives c/o Keefe, Bruyette &
Woods, Inc., at 85th Floor, Two World Trade Center, New York, New York 10048,
attention of ; notices to the Company shall be directed to it at
Capitol Bancorp Ltd., One Business and Trade Center, 200 Washington Square
North, Lansing, Michigan 48933, attention of ; and notices to
the Selling Shareholder shall be directed to , attention of
.

SECTION 13. Parties. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company and the Selling Shareholder
and their respective successors. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Shareholder and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Shareholders
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.

<PAGE> 28

SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 15. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.

<PAGE> 29

If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company and the Attorney-in-Fact for the Selling
Shareholders a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the Underwriters, the
Company and the Selling Shareholders in accordance with its terms.

Very truly yours,

CAPITOL BANCORP LTD.

By:
----------------------------------
Title:

[SELLING SHAREHOLDER]

By
----------------------------------
As Attorney-in-Fact acting on behalf of
the Selling Shareholder named in Schedule
B hereto

CONFIRMED AND ACCEPTED,
as of the date first above written:

KEEFE BRUYETTE & WOODS, INC.
US BANCORP PIPER JAFFRAY, INC.
RAYMOND JAMES & ASSOCIATES, INC.

By: KEEFE BRUYETTE & WOODS, INC.

By
-----------------------------
Authorized Signatory

For itself and as Representative of the other Underwriters named in Schedule A
hereto.

<PAGE> 30

SCHEDULE A

Name of Underwriter Number of
Initial
Securities

Keefe, Bruyette & Woods, Inc.
US Bancorp Piper Jaffray, Inc.
Raymond James & Associates, Inc.

-----------

Total 1,700,000
===========

Sch A-1

<PAGE> 31
SCHEDULE B

<TABLE>
<CAPTION>
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
------------------------ ------------------------
<S> <C> <C>
CAPITOL BANCORP LTD. 1,700,000 270,000
[SELLING SHAREHOLDER] 100,000 0

Total
</TABLE>

Sch B-1

<PAGE> 32
SCHEDULE C

CAPITOL BANCORP LTD.
1,800,000 Shares of Common Stock
(No Par Value Per Share)

1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $ .

2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $ , being an amount equal to the initial public
offering price set forth above less $ per share; provided that the purchase
price per share for any Option Securities purchased upon the exercise of the
over-allotment option described in Section 2(b) shall be reduced by an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial Securities but not payable on the Option Securities.

Sch C-1

<PAGE> 33

SCHEDULE E

Joseph D. Reid
David O'Leary
Robert C. Carr
Paul R. Ballard
David K. Powers
Lee W. Hendrickson
Carl C. Farrar
John C. Smythe
Bruce A. Thomas
Cristin Reid English
Louis G. Allen
David L. Becker
Douglas E. Crist
James C. Epolito
Gary A. Falkenberg
Joel I. Ferguson
Kathleen A. Gaskin
H. Nicholas Genova
L. Douglas Johns
Michael L. Kasten
Leonard Maas
Lyle W. Miller

Sch E-1

<PAGE> 34

EXHIBIT A

FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)

(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Michigan.

(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its
obligations under the Purchase Agreement.

(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a Material Adverse Effect.

(iv) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus in the column entitled
"Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to the Purchase Agreement or pursuant to
reservations, agreements or employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus); the shares of issued and
outstanding capital stock of the Company, including the Securities to
be purchased by the Underwriters from the Selling Shareholders, have
been duly authorized and validly issued and are fully paid and
non-assessable; and none of the outstanding shares of capital stock of
the Company was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.

(v) The Securities to be purchased by the Underwriters from
the Company have been duly authorized for issuance and sale to the
Underwriters pursuant to the Purchase Agreement and, when issued and
delivered by the Company pursuant to the Purchase Agreement against
payment of the consideration set forth in the Purchase Agreement, will
be validly issued and fully paid and non-assessable and no holder of
the Securities is or will be subject to personal liability by reason of
being such a holder.

(vi) The issuance and sale of the Securities by the Company
and the sale of the Securities by the Selling Shareholders is not
subject to the preemptive or other similar rights of any securityholder
of the Company.

A-1

<PAGE> 35

(vii) Each Subsidiary has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a Material Adverse Effect; except as
otherwise disclosed in the Registration Statement, all of the issued
and outstanding capital stock of each Subsidiary has been duly
authorized and validly issued, is fully paid and non-assessable and, to
the best of our knowledge, is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding
shares of capital stock of any Subsidiary was issued in violation of
the preemptive or similar rights of any securityholder of such
Subsidiary.

(viii) The Purchase Agreement has been duly authorized,
executed and delivered by the Company.

(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b);
and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b)
Registration Statement has been issued under the 1933 Act and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission.

(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus, excluding the documents
incorporated by reference therein, and each amendment or supplement to
the Registration Statement and Prospectus, excluding the documents
incorporated by reference therein, as of their respective effective or
issue dates (other than the financial statements and supporting
schedules included therein or omitted therefrom, as to which we need
express no opinion) complied as to form in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations.

(xi) The documents incorporated by reference in the Prospectus
(other than the financial statements and supporting schedules included
therein or omitted therefrom, as to which we need express no opinion),
when they were filed with the Commission complied as to form in all
material respects with the requirements of the 1934 Act and the rules
and regulations of the Commission thereunder.

(xii) The form of certificate used to evidence the Common
Stock complies in all material respects with all applicable statutory
requirements, with any applicable requirements

A-2

<PAGE> 36

of the charter and by-laws of the Company and the requirements of the
Nasdaq National Market.

(xiii) To the best of our knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to
which the Company or any subsidiary is a party, or to which the
property of the Company or any subsidiary is subject, before or brought
by any court or governmental agency or body, domestic or foreign, which
might reasonably be expected to result in a Material Adverse Effect, or
which might reasonably be expected to materially and adversely affect
the properties or assets thereof or the consummation of the
transactions contemplated in the Purchase Agreement or the performance
by the Company of its obligations thereunder.

(xiv) The information in the Prospectus under
"Business--Relationship with Sun Community Bancorp Limited",
"Supervision and Regulation," and in the Registration Statement under
Item 15, to the extent that it constitutes matters of law, summaries of
legal matters, the Company's charter and bylaws or legal proceedings,
or legal conclusions, has been reviewed by us and is correct in all
material respects

(xv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectus that
are not described as required.

(xvii) All descriptions in the Registration Statement of
contracts and other documents to which the Company or its subsidiaries
are a party are accurate in all material respects; to the best of our
knowledge, there are no franchises, contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments required to be
described or referred to in the Registration Statement or to be filed
as exhibits thereto other than those described or referred to therein
or filed or incorporated by reference as exhibits thereto, and the
descriptions thereof or references thereto are correct in all material
respects.

(xviii) To the best of our knowledge, neither the Company nor
any subsidiary is in violation of its charter or by-laws and no default
by the Company or any subsidiary exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note,
lease or other agreement or instrument that is described or referred to
in the Registration Statement or the Prospectus or filed or
incorporated by reference as an exhibit to the Registration Statement.

(xix) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than under
the 1933 Act and the 1933 Act Regulations, which have been obtained, or
as may be required under the securities or blue sky laws of the various
states, as to which we need express no opinion) is necessary or
required in connection with the due authorization, execution and
delivery of the Purchase Agreement or for the offering, issuance, sale
or delivery of the Securities.

A-3

<PAGE> 37

(xx) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the
Purchase Agreement and in the Registration Statement (including the
issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Prospectus under the
caption "Use Of Proceeds") and compliance by the Company with its
obligations under the Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict
with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(xi) of the Purchase Agreement) under or result
in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any subsidiary pursuant to any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or any other agreement or instrument, known to us, to which
the Company or any subsidiary is a party or by which it or any of them
may be bound, or to which any of the property or assets of the Company
or any subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws of the Company or any
subsidiary, or any applicable law, statute, rule, regulation, judgment,
order, writ or decree, known to us, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any subsidiary or any of their respective properties,
assets or operations.

(xxi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in
the 1940 Act.

Nothing has come to our attention that would lead us to
believe that the Registration Statement or any amendment thereto,
including the Rule 430A Information and Rule 434 Information (if
applicable), (except for financial statements and schedules and other
financial data included or incorporated by reference therein or omitted
therefrom, as to which we need make no statement), at the time such
Registration Statement or any such amendment became effective,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.

In rendering such opinion, such counsel may rely as to matters
of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company and
public officials. Such opinion shall not state that it is to be
governed or qualified by, or that it is otherwise subject to, any
treatise, written policy or other document

A-4

<PAGE> 38

relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).

A-5

<PAGE> 39

EXHIBIT B

FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDER
TO BE DELIVERED PURSUANT TO SECTION 5(c)

(i) No filing with, or consent, approval, authorization, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than the issuance of the order
of the Commission declaring the Registration Statement effective and such
authorizations, approvals or consents as may be necessary under state securities
laws, as to which we need express no opinion) is necessary or required to be
obtained by the Selling Shareholder for the performance by the Selling
Shareholder of its obligations under the Purchase Agreement or in the Power of
Attorney and Custody Agreement, or in connection with the offer, sale or
delivery of the Securities.

(ii) The Power of Attorney and Custody Agreement have been duly
executed and delivered by the Selling Shareholder and constitutes the legal,
valid and binding agreement of the Selling Shareholder.

(iii) The Purchase Agreement has been duly authorized, executed and
delivered by or on behalf of the Selling Shareholder.

(iv) The Attorney-in-Fact has been duly authorized by the Selling
Shareholder to deliver the Securities on behalf of the Selling Shareholder in
accordance with the terms of the Purchase Agreement.

(v) The execution, delivery and performance of the Purchase Agreement
and the Power of Attorney and Custody Agreement and the sale and delivery of the
Securities and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement and compliance by the Selling
Shareholder with its obligations under the Purchase Agreement have been duly
authorized by all necessary action on the part of the Selling Shareholder and do
not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default under or
result in the creation or imposition of any tax, lien, charge or encumbrance
upon the Securities or any property or assets of the Selling Shareholder
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other instrument or agreement to which the
Selling Shareholder is a party or by which it may be bound, or to which any of
the property or assets of the Selling Shareholder may be subject nor will such
action result in any violation of the provisions of the charter or by-laws of
the Selling Shareholder, if applicable, or any law, administrative regulation,
judgment or order of any governmental agency or body or any administrative or
court decree having jurisdiction over the Selling Shareholder or any of its
properties.

B-1

<PAGE> 40

(vi) To the best of my knowledge, the Selling Shareholder has valid and
marketable title to the Securities to be sold by the Selling Shareholder
pursuant to the Purchase Agreement, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind, and has full right,
power and authority to sell, transfer and deliver such Securities pursuant to
the Purchase Agreement. By delivery of a certificate or certificates therefor
the Selling Shareholder will transfer to the Underwriters who have purchased
such Securities pursuant to the Purchase Agreement (without notice of any defect
in the title of the Selling Shareholder and who are otherwise bona fide
purchasers for purposes of the Uniform Commercial Code) valid and marketable
title to such Securities, free and clear of any pledge, lien, security interest,
charge, claim, equity or encumbrance of any kind.

B-2

<PAGE> 41

EXHIBIT C

FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS
PURSUANT TO SECTION 5(K)

, 1999

KEEFE BRUYETTE & WOODS, INC.
US BANCORP PIPER JAFFRAY, INC.
RAYMOND JAMES & ASSOCIATES, INC.
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Keefe Bruyette & Woods, Inc.
85th Floor
Two World Trade Center
New York, New York 10048

Re: Proposed Public Offering by Capitol Bancorp Ltd.

Dear Sirs:

The undersigned, a stockholder [and an officer and/or director] of
Capitol Bancorp Ltd., a Michigan corporation (the "Company"), understands that
Keefe Bruyette & Woods, Inc. ("Keefe Bruyette"), US Bancorp Piper Jaffray, Inc.
and Raymond James & Associates, Inc. propose to enter into a Purchase Agreement
(the "Purchase Agreement") with the Company and the Selling Shareholder
providing for the public offering of shares (the "Securities") of the Company's
common stock, no par value per share (the "Common Stock"). In recognition of the
benefit that such an offering will confer upon the undersigned as a stockholder,
officer and/or director of the Company, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
undersigned agrees with each underwriter to be named in the Purchase Agreement
that, during a period of days from the date of the Purchase Agreement, the
undersigned will not, without the prior written consent of Keefe Bruyette,
directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or
transfer any shares of the Company's Common Stock or any securities convertible
into or exchangeable or exercisable for Common Stock, whether now owned or
hereafter acquired by the undersigned or with respect to which the undersigned
has or hereafter acquires the power of disposition, or file any registration
statement under the Securities Act of 1933, as amended, with respect to any of
the foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic

C-1

<PAGE> 42

consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise.

Very truly yours,

Signature:

Print Name:

C-2

<PAGE> 1
EXHIBIT -3.(I)

MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES - CORPORATION,
SECURITIES & LAND DEVELOPMENT BUREAU
- --------------------------------------------------------------------------------

Date Received (FOR BUREAU USE ONLY)
This document is
effective on the date
filed, unless a
subsequent effective date
within 90 days after
received date is stated
in the document.

JUN 30, 1999

FILED
Cristin Reid English
- -------------------------------------------- JUN 30, 1999
Address

200 N. Washington Square,
- --------------------------------------------

City State Zip Code Administrator
Lansing, Michigan 48933-1384 CORP., SECURITIES & LAND DEV.
BUREAU
EFFECTIVE DATE:
- --------------------------------------------------------------------------------

Document will be returned to the name and address you enter above. If left
blank document will be mailed to the registered office.

CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT AND NONPROFIT CORPORATIONS
(Please read information and instructions on the last page)

Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:

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

1. The present name of the corporation is: Capitol Bancorp LTD.

2. The identification number assigned by the Bureau is: 246-688
--------------------

3. Article III of the Articles of Incorporation is hereby
---------------------
amended to read as follows:

The total authorized capital stock is 25,000,000 common shares at a par
value of NO PAR per share.

Article III (2)

x Common Shares: 10,000,000
Stated Value Per Share: -0-

<PAGE> 2

COMPLETE ONLY ONE OF THE FOLLOWING:
- --------------------------------------------------------------------------------

4. (FOR AMENDMENTS ADOPTED BY UNANIMOUS CONSENT OF INCORPORATORS BEFORE THE
FIRST MEETING OF THE BOARD OF DIRECTORS OR TRUSTEES.)

The foregoing amendment to the Articles of Incorporation were duly adopted on
the day of , 1999, in accordance with the provisions of the Act by the unanimous
consent of the incorporator(s) before the first meeting of the Board of
Directors or Trustees.

Signed this day of , 19
--------------- ---------------------------- ----------

- ----------------------------- --------------------------------------
(Signature) (Signature)

- ----------------------------- --------------------------------------
(Type or Print Name) (Type or Print Name)

- ----------------------------- --------------------------------------
(Signature) (Signature)

- ----------------------------- --------------------------------------
(Type or Print Name) (Type or Print Name)

5. (FOR PROFIT AND NONPROFIT CORPORATIONS WHOSE ARTICLES STATE THE
CORPORATION IS ORGANIZED ON A STOCK OR ON A MEMBERSHIP BASIS.)

The foregoing amendment to the Articles of Incorporation was duly adopted on 4th
day of May, 1999, by the shareholders if a profit corporation, or by the
shareholders or members if a nonprofit corporation (check one of the following)

X at a meeting the necessary votes were cast in favor of the amendment.
- ---
by written consent of the shareholders or members having not less than
- --- the minimum number of votes required by statute in accordance with
Section 407(1) and (2) of the Act if a nonprofit corporation, or
Section 407(1) of the Act if a profit corporation. Written notice to
shareholders or members who have not consented in writing has been
given. (Note: Written consent by less than all of the shareholders or
members is permitted only if such provision appears in the Articles of
Incorporation.)

by written consent of all the shareholders or members entitled to vote
- --- in accordance with section 407(3) of the Act if a nonprofit
corporation, or Section 407(2) of the Act if a profit corporation.

by the board of a profit corporation pursuant to section 611(2).
- ---

<TABLE>
<CAPTION>
<S> <C>
Profit Corporations Nonprofit Corporations

Signed this 30th day of June, 1999 Signed this day of , 19
--------- ---- ----- ----------------------

By /S/ JOSEPH D. REID By
----------------------------------------- --------------------------------------------------
(Signature of an authorized officer or agent) (Signature of President, Vice-President, Chairperson or
Joseph D. Reid Vice-Chairperson)
Chairman, President and CEO

------------------------------------------ --------------------------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
</TABLE>

<PAGE> 3

Name of Person or Organization Preparer's Name and Business
Remitting Fees: Telephone Number:
Capitol BancorpLTD Cristin Reid English
------------------------------ -------------------------
( 517 )487-6555

INFORMATION AND INSTRUCTIONS

1. The amendment cannot be filed until this form, or a comparable document,
is submitted.

2. Submit one original of this document. Upon filing, the document will be
added to the records of the Corporation, Securities and Land Development
Bureau. The original will be returned to your registered office address,
unless you enter a different address in the box on the front of this
document.

Since this document will be maintained on optical disk media, it is
important that the filing be legible. Documents with poor black and
white contrast, or otherwise illegible, will be rejected.

3. This Certificate is to be used pursuant to the provisions of section 631
of Act 284, P.A. of 1972 or Act 162, P.A. of 1982, for the purpose of
amending the Articles of Incorporation of a domestic profit or nonprofit
corporation. Do not use this form for restated articles.

4. Item 2 - Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.

5. Item 3 - The article(s) being amended must be set forth in its entirety.
However, if the article being amended is divided 5. into separately
identifiable sections, only the sections being amended need be included.

6. For nonprofit charitable corporations, if an amendment changes the term
of existence to other than perpetual, Attorney General Consent should
be obtained at the time of dissolution.

7. This document is effective on the date endorsed "filed" by the Bureau. A
later effective date, no more than 90 days after 7. the date of
delivery, may be stated as an additional article.

8. Signatures:
PROFIT CORPORATIONS:
1) Item 4 must be completed and signed by at least a majority of the
Incorporators listed in the Articles of Incorporation.
2) Item 5 must be completed and signed by an authorized officer or agent
of the corporation.
NONPROFIT CORPORATIONS:
1) Item 4 must be completed and signed by all of the incorporators
listed in the Articles of Incorporation.
2) Item 5 or 6 must be completed and signed by either the president,
vice-president, chairperson or vice-chairperson.

9. NONREFUNDABLE FEE: Make remittance payable to the State of Michigan.
Include corporation name and identification number on check or money
order........................................................ $10.00

ADDITIONAL FEES DUE FOR INCREASED AUTHORIZED SHARES OF PROFIT
CORPORATIONS ARE:
<TABLE>
<S> <C>
Each additional 20,000 authorized shares or portion thereof .......................................... $ 30.00
Maximum fee per filing for first 10,000,000 authorized shares ........................................ $ 5,000.00
Each additional 20,000 authorized shares or portion thereof in excess of 10,000,000 shares............ $ 30.00
Maximum fee per filing for authorized shares in excess of 10,000,000 shares........................... $200,000.00
</TABLE>

<TABLE>
<S> <C>
To submit by US Postal Service mail form and fee to: To submit in person or by courier service deliver
Michigan Department of Consumer & Industry Services form and fee to:
Corporation, Securities & Land Development Bureau 6546 Mercantile Way
Corporation Division Lansing, MI 48911
P.O. Box 30054 (517) 334-6302
Lansing, Michigan 48909-7554 Fees may be paid by VISA or Mastercard when
delivered in person to our office.

</TABLE>

To submit by Mich-Elf fax form to: (517) 334-8048 *To use this service
complete a MICH-ELF application to provide your VISA or Mastercard
number. Include your assigned Filer number on your transmission. To
obtain an application for a filer number, contact (517) 334-6327 or
visit our WEB site at http://www.cis.state.mi.us/corp/.

<PAGE> 4
6. (FOR A NONPROFIT CORPORATION WHOSE ARTICLES STATE THE CORPORATION IS
ORGANIZED ON A DIRECTORSHIP BASIS.)

The foregoing amendment to the Articles of Incorporation was duly adopted on the
day of , 19 , by the directors of a nonprofit corporation whose articles of
incorporation state it is organized on a directorship basis (check one of the
following)

- ---- at a meeting the necessary votes were cast in favor of the amendment.

- ---- by written consent of all directors pursuant to Section 525 of the Act.

Signed this day of , 19
--------------- ------------------ -------

By
------------------------------------------------------------------------
(Signature of President, Vice-President, Chairperson or Vice-Chairperson)

----------------------------------------------------------------------
(Type or Print Name) (Type or Print Title)

<PAGE> 1
EXHIBIT 5

[STROBL CUNNINGHAM CARETTI & SHARP LETTERHEAD, P.C.]

July 29, 1999

Capitol Bancorp Ltd.
200 Washington Square North
Fourth Floor
Lansing, Michigan 48933

RE: REGISTRATION STATEMENT ON FORM S-3

Ladies and Gentlemen:

We have acted as special counsel to Capitol Bancorp Ltd., a Michigan
corporation (the "Corporation") in connection with the Registration Statement on
Form S-3 being filed contemporaneously by the Corporation with the Securities
and Exchange Commission under the Securities Act of 1933, as amended (the
"Registration Statement"). The Registration Statement covers (a) 1,700,000
shares of the Corporation's Common Stock, no par value, which the Corporation
expects to issue in the public offering being conducted pursuant to the
Registration Statement; (b) 100,000 shares of Common Stock which have been
included in the Registration Statement for the account of an individual
identified in the Registration Statement as the "Selling Stockholder"; and (c)
270,000 shares to cover over-allotments.

We have examined the Articles of Incorporation and the By-Laws of the
Corporation, both as amended to date, the corporate resolutions of the
Corporation relating to the issuance of the Common Stock, the Registration
Statement and such other instruments and documents as we have deemed relevant
under the circumstances. In making these examinations, we have assumed the
genuineness of all signatures and the conformity to original documents of all
copies furnished to us as photostatic copies. We have also assumed that the
corporate records furnished to us by the Corporation include all corporate
proceedings taken by the Corporation to date in connection with the issuance of
the Common Stock.

Based upon and subject to the foregoing, we are of the opinion that:

<PAGE> 2

Capitol Bancorp Ltd.
Page 2
July 29, 1999

(1) The Corporation has been duly incorporated and is validly existing
as a Corporation in good standing under the laws of the State of
Michigan.

(2) The shares of stock of the Selling Stockholder registered under
the Registration Statement have been duly and validly authorized
and issued and are fully paid and non-assessable.

(3) The Corporation has corporate authority to issue the shares of
Common Stock proposed to be issued and offered as described in the
Registration Statement.

(4) The shares of Common Stock proposed to be issued and offered by
the Corporation as set forth in the Registration Statement have
been duly authorized and when and if issued and delivered upon
receipt of the full consideration therefor, will be validly
issued, fully paid and non-assessable shares of Common Stock of
the Corporation.

We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our firm name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.

STROBL CUNNINGHAM CARETTI &
SHARP, P.C.

By: /s/ John Sharp
-------------------------
John Sharp

JS:kc

<PAGE> 1
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
CAPITOL BANCORP LTD.
JUNE 30, 1999

<TABLE>
<CAPTION>
PAGE 1 OF 2 STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ------------------ ----------------
<S> <C>
Consolidated Subsidiaries:

Ann Arbor Commerce Bank Michigan

Brighton Commerce Bank (59% owned) Michigan

Capitol National Bank United States
(national bank)

Detroit Commerce Bank (93% owned) Michigan

Grand Haven Bank Michigan

Kent Commerce Bank (51% owned) Michigan

Macomb Community Bank (51% owned) Michigan

Muskegon Commerce Bank (51% owned) Michigan

Oakland Commerce Bank Michigan

Paragon Bank & Trust Michigan

Portage Commerce Bank Michigan

Indiana Community Bancorp Limited (51% owned) Indiana

Sun Community Bancorp Limited (51% owned) Arizona
Bank of Tucson
(100% owned by Sun Community Bancorp Limited) Arizona
Valley First Community Bank
(51% owned by Sun Community Bancorp Limited) Arizona
Camelback Community Bank
(51% owned by Sun Community Bancorp Limited) Arizona
Southern Arizona Community Bank
(51% owned by Sun Community Bancorp Limited) Arizona
Mesa Bank
(51% owned by Sun Community Bancorp Limited) Arizona
Sunrise Bank of Arizona
(51% owned by Sun Community Bancorp Limited) Arizona
East Valley Community Bank
(86% owned by Sun Community Bancorp Limited) Arizona
Nevada Community Bancorp Limited
(51% owned by Sun Community Bancorp Limited) Nevada

Capitol Trust I Delaware
</TABLE>

<PAGE> 2

EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT--CONTINUED
CAPITOL BANCORP LTD.
JUNE 30, 1999

<TABLE>
<CAPTION>
PAGE 2 OF 2 STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ------------------ ----------------
<S> <C>
Unconsolidated Subsidiary:

Amera Mortgage Corporation, Inc. Michigan
(49% owned equity method investee)

Inactive subsidiaries:

MOI, Inc. Michigan
(wholly-owned subsidiary of
Oakland Commerce Bank)

Financial Center Corporation Michigan

C.B. Services, Inc. Michigan
</TABLE>

The following summarizes regulatory agencies of the registrant and its
subsidiaries:

The Corporation's state-chartered banks located in Michigan are regulated
by the Financial Institutions Bureau of the Michigan Department of
Commerce. Capitol National Bank, as a national bank, is regulated by the
Office of the Comptroller of the Currency. Bank subsidiaries located in
Arizona are state-chartered and are regulated by the Arizona Corporation
Division. Each of the banking subsidiaries, as federally-insured depository
institutions, are also regulated by the Federal Deposit Insurance
Corporation. As a bank holding company, Capitol Bancorp Ltd. is regulated
by the Federal Reserve Board, which also regulates its nonbanking
subsidiaries. Sun Community Bancorp Limited is also regulated by the
Federal Reserve Board. In addition to the bank regulatory agencies, the
registrant and its subsidiaries are subject to regulation by other state
and federal agencies.

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Capitol Bancorp Ltd.
Lansing, Michigan

We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated January
29, 1999, relating to the consolidated financial statements of Capitol Bancorp
Ltd. appearing in the Companies' Annual Report on Form 10-K for the year ended
December 31, 1998. We also consent to the reference to us under the caption
"Experts" in the Prospectus.

BDO SEIDMAN LLP

Grand Rapids, Michigan
July 29, 1999