I captured Capital having an attached outpost. Post that I captured and raised another city and raised another outpost. Though all units and cities are captured, i still see diplomacy screen asking for surrender terms. Initially i thought some of the units might be left out but it wasnt the case. Eventually occupied city was converted to Independent ppl due to low stability. Event then it was showing diplomacy screen to surrender.

To get around it, i had went a turn back (load saved game) and surrendered capital. Post that i raised the outpost attached to capital and waited for capital to fail and be taken over by Independent ppl. Once capture fell to Independent ppl AI was eliminated.