PREFERREDSECURITIES GUARANTEE AGREEMENT BYAND BETWEEN CAPITOLBANCORP LTD. AND WELLSFARGO BANK, N.A. DATEDAS OF JULY 7, 2008

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ARTICLE I	DEFINITIONS AND INTERPRETATION	1
SECTION 1.1	DEFINITIONS AND INTERPRETATION	1
ARTICLE II	TRUST INDENTURE ACT	4
SECTION 2.1	TRUST INDENTURE ACT; APPLICATION	4
SECTION 2.2	LISTS OF HOLDERS OF SECURITIES	5
SECTION 2.3	REPORTS BY THE GUARANTEE TRUSTEE	5
SECTION 2.4	PERIODIC REPORTS TO GUARANTEE TRUSTEE	5
SECTION 2.5	EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT	5
SECTION 2.6	EVENTS OF DEFAULT; WAIVER	5
SECTION 2.7	EVENT OF DEFAULT; NOTICE	6
SECTION 2.8	CONFLICTING INTERESTS	6
ARTICLE III	POWERS, DUTIES AND RIGHTS OF GUARANTEE TRUSTEE	6
SECTION 3.1	POWERS AND DUTIES OF THE GUARANTEE TRUSTEE	6
SECTION 3.2	CERTAIN RIGHTS OF GUARANTEE TRUSTEE	8
SECTION 3.3	NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE	10
SECTION 3.4	SECURITIES	10
ARTICLE IV	GUARANTEE TRUSTEE	10
SECTION 4.1	GUARANTEE TRUSTEE; ELIGIBILITY	10
SECTION 4.2	APPOINTMENT, REMOVAL AND RESIGNATION OF GUARANTEE TRUSTEE	11
ARTICLE V	GUARANTEE	11
SECTION 5.1	GUARANTEE	11
SECTION 5.2	WAIVER OF NOTICE AND DEMAND	12
SECTION 5.3	OBLIGATIONS NOT AFFECTED	12
SECTION 5.4	RIGHTS OF HOLDERS	13
SECTION 5.5	GUARANTEE OF PAYMENT	13
SECTION 5.6	SUBROGATION	13
SECTION 5.7	INDEPENDENT OBLIGATIONS	13
ARTICLE VI	LIMITATION OF TRANSACTIONS; SUBORDINATION	14
SECTION 6.1	LIMITATION OF TRANSACTIONS	14
SECTION 6.2	RANKING	14
ARTICLE VII	TERMINATION	14
SECTION 7.1	TERMINATION	14
ARTICLE VIII	INDEMNIFICATION	15
SECTION 8.1	EXCULPATION	15

 

 

 

 

 

SECTION 8.2	INDEMNIFICATION	15
SECTION 8.3	COMPENSATION	15
ARTICLE IX	MISCELLANEOUS	16
SECTION 9.1	SUCCESSORS AND ASSIGNS	16
SECTION 9.2	AMENDMENTS	16
SECTION 9.3	NOTICES	16
SECTION 9.4	BENEFIT	17
SECTION 9.5	GOVERNING LAW	17
SECTION 9.6	COUNTERPARTS	17

  “Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.

  “Business Day” means any day other than a Saturday, Sunday, a day on which federal or state banking institutions in New York, New York are authorized or required by law, executive order or regulation to close or a day on which the Corporate Trust Office of the Guarantee Trustee is closed for business.

  “Corporate Trust Office” means the office of the Guarantee Trustee at which the corporate trust business of the Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Preferred Securities Guarantee is located at 919 North Market Street, Suite 1600, Wilmington, Delaware 19801, Attention: Corporate Trust Services.

  “Covered Person” means any Holder or beneficial owner of Preferred Securities.

  “Debenture Issuer” means Capitol Bancorp Ltd., issuer of the Debentures under the Indenture.

  “Debentures” means the 10.50% Junior Subordinated Debentures due September 30, 2038, of the Debenture Issuer held by the Property Trustee of the Trust.

  “Event of Default” means a default by the Guarantor on any of its payment or other obligations under this Preferred Securities Guarantee.

  “Guarantee Payments” means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Trust; (i) any accrued and unpaid Distributions that are required to be paid on such Preferred Securities, to the extent the Trust shall have funds available therefor, (ii) the redemption price, including all accrued and unpaid Distributions to the date of redemption (the “Redemption Price”), to the extent the Trust has funds available therefor, with respect to any Preferred Securities called for redemption by the Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Debentures to the Holders in exchange for Preferred Securities as provided in the Trust Agreement), the lesser of

  “Guarantee Trustee” means Wells Fargo Bank, N.A., until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Preferred Securities Guarantee and thereafter means each such Successor Guarantee Trustee.

  “Guarantor” means Capitol Bancorp Ltd., a Michigan corporation.

  “Holder” shall mean any holder, as registered on the books and records of the Trust, of any Preferred Securities; provided, however, that, in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, “Holder” shall not include the Guarantor, the Guarantee Trustee or any of their respective Affiliates.

  “Liquidation Amount” means the stated value of $10 per Preferred Security.

  “Liquidation Distribution” has the meaning provided therefor in the definition of Guarantee Payments.

  “Person” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

  “Preferred Securities” means the 10.50% Cumulative Trust Preferred Securities representing undivided beneficial interests in the assets of the Trust which rank pari passu with Common Securities issued by the Trust; provided, however, that upon the occurrence of an Event of Default, the rights of holders of Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of Preferred Securities.

  “Redemption Price” has the meaning provided therefor in the definition of Guarantee Payments.

  “Responsible Officer” means, with respect to the Guarantee Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee with direct responsibility for the administration of this Preferred Securities Guarantee, including any vice-president, any assistant vice-president, any trust officer, or other officer or assistant officer of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject.

  “Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1.

  “Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

The Holders of a Majority in Liquidation Amount of Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom.

The Trust Agreement shall be deemed to be specifically described in this Preferred Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

The Recitals contained in this Guarantee shall be taken as the statements of the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Preferred Securities Guarantee.

The Guarantee Trustee or any other agent of the Guarantee Trustee, in its individual or any other capacity, may become the owner or pledgee of Common or Preferred Securities.

The Guarantor hereby waives notice of acceptance of this Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands.

The obligations, covenants, agreements and duties of the Guarantor under this Preferred Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following:

 There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing.

This Preferred Securities Guarantee creates a guarantee of payment and not of collection.

The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Trust in respect of any amounts paid to such Holders by the Guarantor under this Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Preferred Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.

The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof.

So long as any Preferred Securities remain outstanding, if there shall have occurred an Event of Default under this Preferred Securities Guarantee, an event of default under the Trust Agreement or during an Extended Interest Payment Period (as defined in the Indenture), then (a) the Guarantor shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (i) dividends or distributions in common stock of the Guarantor, or any declaration of a non-cash dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (ii) purchases of common stock of the Guarantor related to the rights under any of the Guarantor’s benefit plans for its directors, officers, or employees, or (iii) as a result of a reclassification of its capital stock for another class of its capital stock) and (b) the Guarantor shall not make any payment of interest or principal on or repay, repurchase or redeem any debt securities issued by the Guarantor which rank pari passu with or junior to the Debentures, other than payments under this Preferred Securities Guarantee.

This Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all Senior Debt, Subordinated Debt and Additional Senior Obligations, as defined in the Indenture, of the Guarantor, to the extent and in the manner set forth in the Indenture, and the applicable provisions of the Indenture will apply, in all relevant respects, to the obligations of the Guarantor hereunder.

This Preferred Securities Guarantee shall terminate upon (i) full payment of the Redemption Price of all Preferred Securities, (ii) full payment of the amounts payable in accordance with the Trust Agreement upon liquidation of the Trust, or (iii) distribution of the Debentures to the Holders of the Preferred Securities. Notwithstanding the foregoing, this Preferred Securities Guarantee shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder of Preferred Securities must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee.

The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Preferred Securities Guarantee.  In no event shall the Guarantee Trustee be liable for any indirect, special, punitive or consequential loss or damage of any kind whatsoever, including, but not limited to, lost profits, even if the Guarantee Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.  In no event shall the Guarantee Trustee be liable for any failure or delay in the performance of its obligations hereunder because of circumstances beyond its control, including, but not limited to, acts of God, flood, war (whether declared or undeclared), terrorism, fire, riot, embargo, government action, including any laws, ordinances, regulations, governmental action or the like which delay, restrict or prohibit the providing of the services contemplated by this Preferred Securities Guarantee.

All guarantees and agreements contained in this Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding.

This Preferred Securities Guarantee can only be amended by an instrument in writing signed by the Guarantor and the Guarantor Trustee.  Except with respect to any changes that do not materially adversely affect the rights of Holders (in which case no consent of Holders will be required), this Preferred Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in Liquidation Amount of the Preferred Securities. The provisions of Article VI of the Trust Agreement with respect to meetings of Holders of the Preferred Securities apply to the giving of such approval.

All notices provided for in this Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by registered or certified mail, as follows:

All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver.

This Preferred Securities Guarantee is solely for the benefit of the Holders of the Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities.

THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

This Preferred Securities Guarantee may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.