-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IqhajP82SE6dToyBqkHFldjkjqg3YXGh/nZqgM2JUgA/c459Pl6cgqUV4tBWBwzj H0pExAW9fTV3aiFdAhWNjw== 0000912057-97-011149.txt : 19970401 0000912057-97-011149.hdr.sgml : 19970401 ACCESSION NUMBER: 0000912057-97-011149 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMERICA INC /NEW/ CENTRAL INDEX KEY: 0000028412 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 381998421 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10706 FILM NUMBER: 97569142 BUSINESS ADDRESS: STREET 1: COMERICA TOWER AT DETROIT CENTER STREET 2: SUITE 3800 CITY: DETROIT STATE: MI ZIP: 48243 BUSINESS PHONE: 3132224000 MAIL ADDRESS: STREET 1: 411 W LAFAYETTE MAIL CODE 3415 STREET 2: ATTN JAY K OBERG CITY: DETROIT STATE: MI ZIP: 48226 FORMER COMPANY: FORMER CONFORMED NAME: DETROITBANK CORP DATE OF NAME CHANGE: 19850311 10-K 1 FORM 10-K Securities and Exchange Commission Washington, DC 20549 Form 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 1996. Commission file number 1-10706 Comerica Incorporated Comerica Tower at Detroit Center 500 Woodward Avenue, Detroit, Michigan 48226 313-222-4000 Incorporated in the State of Delaware, IRS Employer Identification No. 38-1998421. Securities registered pursuant to Section 12(b) of the Act: - - Common Stock, $5 par value - - Rights to acquire Series D Preferred Stock, no par value - - Preferred Stock Series E, $50.00 liquidation preference per share These securities are registered on the New York Stock Exchange. Securities registered pursuant to Section 12(g) of the Act: - - 10 1/8 percent Subordinated Debentures due in 1998 1 - - 7 1/4 percent Subordinated Notes due in 2007 The registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, but will be contained in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. At March 10, 1997, the registrant's common stock, $5 par value, held by nonaffiliates had an aggregate market value of $6,161,755,577 based on the closing price on the New York Stock Exchange on that date of $ 62.75 per share and 98,195,308 shares of common stock held by nonaffiliates. For purposes of this Form 10-K only, it has been assumed that all common shares held by the Trust Department of Comerica affiliated banks and by the registrant's directors and executive officers are held by affiliates. At March 10, 1997, the registrant had outstanding 106,421,266 shares of its common stock, $5 par value. DOCUMENTS INCORPORATED BY REFERENCE: 1. Parts I and II: Items 1-8--Annual Report to Shareholders for the year ended December 31, 1996. 2. Part III: Items 10-13--Proxy Statement for the Annual Meeting of Shareholders to be held May 16, 1997. PART I ITEM 1. BUSINESS GENERAL Comerica Incorporated ("Comerica" or the "Corporation") is a registered bank holding company incorporated under the laws of the State of Delaware, headquartered in Detroit, Michigan. Based on assets as of December 31, 1996, it was the 25th largest bank holding company in the United 2 States and the largest bank holding company headquartered in Michigan in terms of both total assets and total deposits. Comerica was formed in 1973 to acquire the outstanding common stock of Comerica Bank (formerly Comerica Bank-Detroit), one of Michigan's oldest banks ("Comerica Bank"). Since that time, Comerica has acquired financial institutions in California, Texas and Florida. As of December 31, 1996, Comerica owned directly or indirectly all the outstanding common stock (except for directors' qualifying shares, where applicable) of six banking and thirty-seven non-banking subsidiaries. At December 31, 1996, Comerica had total assets of approximately $34.2 billion, total deposits of approximately $22.4 billion, total loans (net of unearned income) of approximately $26.2 billion and common shareholders' equity of approximately $2.4 billion. BUSINESS STRATEGY Comerica has strategically aligned its operations into three major lines of business: the Business Bank, the Individual Bank and the Investment Bank. The Business Bank is comprised of middle market lending, asset based lending, large corporate banking, international financial services and institutional trust. This line of business meets the needs of medium-size businesses, multinational corporations, and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, institutional trust, international trade finance, letters of credit and foreign exchange management services. The Individual Bank includes consumer lending, consumer deposit gathering, mortgage loan origination and servicing, small business banking (annual sales under $5 million) and private banking. This line of business offers a variety of consumer products, including deposit accounts, direct and indirect installment loans, credit cards, home equity lines of credit and residential mortgage loans. In addition, a full range of financial services is provided to small business, area merchants and municipalities. Private lending and personal trust services are also provided to meet the personal financial needs of affluent individuals (as defined by individual net income or wealth). The Investment Bank is responsible for the sales of mutual fund and annuity products, as well as life, disability and long-term care insurance products. This line of business also offers capital market products, manages loan syndications and provides investment management and advisory services, investment banking and discount securities brokerage services. The core businesses are tailored to each of Comerica's four primary geographic markets: Michigan, Texas, California and Florida. 3 PHASE III OF DIRECTION 2000 In 1996, Comerica completed the final steps of Direction 2000, the strategic effort to prepare the organization for the new millennium. Following Comerica's 1995 organization of its business units into the Business, Individual and Investment Banks, and the subsequent alignment and consolidation of back-office areas, Comerica in 1996 identified which business lines it believed were best managed on a local basis and a national basis and realigned its support functions to optimally link them to business strategies and corporate objectives. In the third and final phase of this effort, Comerica employees systematically reviewed all functions of the organization. Their objectives were to determine first, if the work was absolutely necessary and second, if they were doing the work in the most efficient way possible. Comerica's goal was to improve customer service, increase efficiency, enhance revenue and position it to achieve its financial objectives. Comerica employees identified myriad ways to serve customers better, including simplifying the referral and delivery of its services, empowering colleagues with additional authority and reducing their clerical responsibility. In addition to reducing overhead costs and enhancing revenues, the results of Phase III are expected to support future investments in growth businesses, geographic expansion, marketing, technology and talent. Phase III of Direction 2000 which, when fully implemented by the first half of 1998, may reduce overhead costs and increase revenues on an annualized basis by $110 million. However, several outside factors such as an economic downturn, significant changes in monetary or governmental policies or dramatic changes in interest rates could cause the actual results to differ materially from these projections. SHAREHOLDER VALUE In 1996, as part of Comerica's capital management program, Comerica directors authorized the purchase of up to 15 million shares of Comerica common stock. At December 31, 1996, 8.6 million shares had been repurchased under this program, reflecting its commitment to optimize its capital position and focus on shareholder value. The share repurchase activity is beneficial to shareholders who sell their shares by providing additional liquidity to the marketplace and allowing for the efficient redistribution of ownership. For shareholders who remain, the repurchase activity leverages ownership through a smaller base of common shares over which earnings are spread. In 1996 Comerica also issued preferred stock, a strategy which, when coupled with the common stock repurchase plan, further enhanced the returns available to common shareholders. ACQUISITIONS Comerica acquired Metrobank, a California bank with assets of approximately $1.1 billion, on January 16, 1996, through the merger of Metrobank into Comerica Holdings Incorporated 4 ("Holdings"), a California corporation and wholly-owned subsidiary of Comerica, with Metrobank being the surviving corporation, operating as a wholly-owned subsidiary of Comerica under the charter and by-laws of Metrobank with the name "Metrobank." The acquisition was accounted for as a purchase and the shareholders of Metrobank received common stock of Comerica valued at about $125 million in exchange for their interests in Metrobank. To complete the acquisition, Comerica merged Metrobank into Comerica Bank-California, effective November 1, 1996, with Comerica Bank-California surviving. Comerica completed several other non-bank acquisitions in 1996 to enhance its ability to compete in its developing markets. On April 10, 1996, Comerica Bank acquired Fairlane Associates, Inc., a Michigan corporation and insurance agency whose product line includes property and casualty insurance. This acquisition expanded Comerica's ability to provide insurance products to its customers. On October 17, 1996, acting through its partnership interest in Munder Capital Management ("Munder"), Comerica broadened its global capabilities when Munder purchased a 49% interest in London based Framlington Group plc. Framlington offers a wide range of international mutual funds and enhanced Munder's penetration in this market and enabled Munder to offer additional products to its customers. On November 15, 1996, Comerica acquired a 36% interest in B. Motor Acceptance Corp., which was formed to offer subprime indirect automobile lending. On December 20, 1996, acting through a national banking subsidiary, Comerica acquired a 5.58% interest in Integrion Financial Network, LLC, to offer it access to electronic banking and commerce services available through a common network. DIVESTITURES During 1996 Comerica continued to sharpen its focus on those areas in which it excels and exit those lines which do not meet its profitability standards. This strategy includes outsourcing and entering into alliances to better provide services to its customers. Comerica followed this strategy with respect to merchant services by entering into (through its California, Michigan and Texas banking subsidiaries), an alliance with National Data Corporation ("NDC") on March 31, 1996. This alliance is designed to enhance services to customers and gain operational efficiencies using NDC's technical expertise. On March 18, 1996, Comerica entered into an agreement with ABN- 5 AMRO North America, Inc. ("ABN-AMRO") for the sale of the stock of Comerica Bank-Illinois ("CBI"), an Illinois bank, via a merger with a subsidiary of ABN-AMRO. The transaction closed on August 18, 1996. The assets sold to ABN-AMRO represented approximately 4% of Comerica's total assets and Comerica received approximately $160 million in exchange for its ownership interest in CBI. Comerica continues to maintain a presence in Illinois to serve certain of its business customers. Comerica also decided to exit the customs brokerage and freight forwarding business. On April 12, 1996, Comerica entered into an agreement with AEI Radix Custom Brokerage Services, a California corporation, to sell the business and certain assets of John V. Carr & Son, Inc., Comerica Bank's wholly owned customs brokerage and freight forwarding subsidiary. The transaction was consummated on May 18, 1996. Comerica's final strategic divestiture in 1996 was the sale of its bond indenture and escrow business. On September 25, 1996, Comerica entered into an agreement with First Bank System, Inc. for that business. The transaction closed on January 31, 1997. SUPERVISION AND REGULATION Banks, bank holding companies and financial institutions are highly regulated at both the state and federal level. As a bank holding company, Comerica is subject to supervision and regulation by the Federal Reserve Board under the Bank Holding Company Act of 1956, as amended (the "Act"). Under the Act, the Corporation is prohibited from engaging in activities other than those of banking or of managing or controlling banks or from acquiring or retaining direct or indirect ownership or control of voting shares of any company which is not a bank or bank holding company unless the activities engaged in by the Corporation or the company whose voting shares are acquired by the Corporation are activities which the Federal Reserve Board determines to be so closely related to the business of banking as to be a proper incident thereto. Comerica Bank is chartered by the State of Michigan and is supervised and regulated by the Financial Institutions Bureau of the State of Michigan. Comerica Bank-Texas is chartered by the State of Texas and is supervised and regulated by the Texas Department of Banking. Comerica Bank-Midwest, N.A. and Comerica Bank-Ann Arbor, N.A. are chartered under federal law and subject to supervision and regulation by the Office of the Comptroller of the Currency. Comerica Bank-California is chartered by the State of California and regulated by the California State Banking Department. Comerica Bank & Trust, FSB is chartered under federal law and subject to supervision and regulation by the Office of Thrift Supervision. Comerica Bank, Comerica Bank-Ann Arbor, N.A. and Comerica Bank-Midwest, N.A. are members of the Federal Reserve 6 System. State member banks are also regulated by the Federal Reserve Board and state non-member banks are also regulated by the Federal Deposit Insurance Corporation ("FDIC"). The deposits of all the banks are insured by the Bank Insurance Fund (the "BIF") of the FDIC to the extent provided by law, except that the deposits of Comerica Bank & Trust, FSB are insured by the FDIC's Savings Association Insurance Fund ("SAIF"). Comerica is a legal entity separate and distinct from its banking and other subsidiaries. Most of Comerica's revenues result from dividends paid to it by its bank subsidiaries. There are statutory and regulatory requirements applicable to the payment of dividends by subsidiary banks to Comerica as well as by Comerica to its shareholders. INTERSTATE BANKING AND BRANCHING On September 29, 1995, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act") was enacted. The Interstate Act's provisions, among other things: (i) permit bank holding companies to acquire control of banks in any state, subject to (a) specified maximum national state deposit concentration limits; (b) any applicable state law provisions requiring the acquired bank to be in existence for a specified period of up to five years; (c) any applicable nondiscriminatory state provisions that make an acquisition of a bank contingent upon a requirement to hold a portion of such bank's assets available for call by a state sponsored housing entity; and (d) applicable anti-trust laws; (ii) authorize interstate mergers by banks in different states (and retention of interstate branches resulting from such mergers) beginning June 1, 1997, subject to the provisions noted in (i) and to any state laws that "opt-in" as of an earlier date or "opt-out" of the provision entirely; and (iii) authorize states to enact legislation permitting interstate de novo branching. Since the provision permitting interstate bank acquisitions became effective, Comerica has had enhanced opportunities to acquire banks in any state subject to approval by the appropriate federal and state regulatory agencies. Under the Interstate Act, Comerica will have the opportunity (after June 1, 1997, for states that do not "opt-out" and earlier for states that "opt-in") to consolidate its affiliate banks to create one bank with branches in more than one state, or to establish branches in different states, subject to any state "opt-in" and "opt-out" provisions. Of Comerica's primary markets, as of December 31, 1996 Texas was the only state to have opted out of the interstate branching provisions. The Texas "opt-out" expires in September 1999. DIVIDENDS Each state bank subsidiary that is a member of the Federal Reserve System and each national banking association is required by federal law to obtain the prior approval of the Federal Reserve 7 Board or the Office of the Comptroller of the Currency, as the case may be, for the declaration and payment of dividends if the total of all dividends declared by the board of directors of such bank in any year will exceed the total of (i) such bank's retained net income (as defined and interpreted by regulation) for that year plus (ii) the retained net income (as defined and interpreted by regulation) for the preceding two years, less any required transfers to surplus. In addition, these banks may only pay dividends to the extent that retained net profits (including the portion transferred to surplus) exceed bad debts (as defined by regulation). Comerica's state bank subsidiaries that are not members of the Federal Reserve System are also subject to limitations under state law regarding the amount of earnings that may be paid out as dividends. Comerica's federal savings bank subsidiary is subject to limitations under federal law regarding the payment of dividends. Under the foregoing dividend restrictions, at January 1, 1997 Comerica's subsidiary banks, without obtaining governmental approvals, could declare aggregate dividends of approximately $371 million from retained net profits of the preceding two years, plus an amount approximately equal to the net profits (as measured under current regulations), if any, earned for the period from January 1, 1997 through the date of declaration. Dividends paid to Comerica by its subsidiary banks amounted to $322 million in 1996, $184 million in 1995 and $293 million in 1994. FIRREA Banking legislation, including the Financial Institutions Reform and Recovery and Enforcement Act of 1989 ("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), has broadened the regulatory powers of the federal bank regulatory agencies. Under FIRREA, a depository institution insured by the FDIC shall be liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC in connection with (i) the default of a commonly controlled FDIC-insured depository institution, or (ii) any assistance provided by the FDIC to any commonly controlled FDIC-insured depository institution "in danger of default." "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined as the existence of certain conditions indicating that a default is likely to occur in the absence of regulatory assistance. FDICIA In December 1991, FDICIA was enacted, substantially revising the bank regulatory and funding provisions of the Federal Deposit Insurance Act and making revisions to several other federal banking statutes. Among other things, FDICIA requires the federal banking agencies to take "prompt corrective action" in respect of depository institutions that do not meet minimum capital requirements. FDICIA establishes five capital tiers: "well capitalized," "adequately capitalized," 8 "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." A depository institution's capital tier will depend upon where its capital levels are in relation to various relevant capital measures, which will include a risk-based capital measure and a leverage ratio capital measure, and certain other factors. Regulations establishing the specific capital tiers provide that, for an institution to be well capitalized it must have a total risk-based capital ratio of at least 10 percent, a Tier 1 risk-based capital ratio of at least 6 percent, a Tier 1 leverage ratio of at least 5 percent, and not be subject to any specific capital order or directive. For an institution to be adequately capitalized it must have a total risk-based capital ratio of at least 8 percent, a Tier 1 risk-based capital ratio of at least 4 percent, and a Tier 1 leverage ratio of at least 4 percent (and in some cases 3 percent). Under these regulations, the banking subsidiaries of Comerica would be considered to be well capitalized as of December 31, 1996. FDICIA generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. Undercapitalized depository institutions are subject to limitations on growth and certain activities and are required to submit an acceptable capital restoration plan. The federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. In addition, for a capital restoration plan to be acceptable, the depository institution's parent holding company must guarantee for a specific time period that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company under the guaranty is limited to the lesser of (i) an amount equal to 5 percent of the depository institution's total assets at the time it became undercapitalized, and (ii) the amount that is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a depository institution fails to submit or implement an acceptable plan, it is treated as if it is significantly undercapitalized. Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, restrictions on interest rates on deposits and on asset growth, orders to improve management cessation of receipt of deposits from correspondent banks. Critically undercapitalized institutions are subject to the appointment of a receiver or conservator. Under FDICIA, the FDIC is permitted to provide financial assistance to an insured bank before appointment of a conservator or receiver only if (i) such assistance would be the least costly method of meeting the FDIC's insurance obligations, (ii) grounds for appointment of a conservator 9 or a receiver exist or are likely to exist in the future, (iii) it is unlikely that the bank can meet all capital standards without assistance and (iv) the bank's management has been competent, has complied with applicable laws, regulations, rules and supervisory directives and has not engaged in any insider dealing, speculative practice or other abusive activity. FDICIA directs that each federal banking agency prescribe standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, asset quality, earnings, stock valuation and other standards as they deem appropriate. Such standards were issued jointly by the agencies on August 9, 1995, in guideline form. FDICIA also contains a variety of other provisions that may affect the operations of depository institutions including new reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, the requirement that a depository institution give 90 days prior notice to customers and regulatory authorities before closing any branch and a prohibition on the acceptance or renewal of brokered deposits by depository institutions that are not well capitalized or are adequately capitalized and have not received a waiver from the FDIC. Under regulations relating to the brokered deposit prohibition, Comerica's subsidiary banks are all well-capitalized and may accept brokered deposits without restriction. FDIC INSURANCE ASSESSMENTS Comerica's subsidiary banks are subject to FDIC deposit insurance assessments. On January 1, 1994, a permanent risk-based deposit premium assessment system became effective under which each depository institution is placed in one of nine assessment categories based on certain capital and supervisory measures. The deposit-insurance assessment schedule published by the FDIC for the assessment period commencing January 1, 1997 maintained the nine categories but provided for major reductions in the assessment rates for institutions insured by BIF. These reductions occurred because the balance in BIF has reached or surpassed the "designated reserve ratio" set by law for the balance in the fund to maintain with respect to BIF-insured deposits. These reduced assessment levels have been continued by the FDIC. For similar reasons, the assessment rates for institutions insured by SAIF also have been reduced. As a result of these reduced rates, highly-rated banks (including Comerica's banking subsidiaries) have and will experience significant reductions in deposit insurance costs. The Corporation's FDIC expenses decreased significantly by $16 million, or 66 percent, in 1996, primarily due to the FDIC adopting a new assessment rate schedule for BIF members in the third quarter of 1995. The new rate schedule, which continues to determine assessments based on a 10 bank's risk-based capital levels, virtually eliminated each subsidiary bank's BIF annual deposit insurance premium as of January 1, 1996. The Corporation's SAIF-insured deposits continued to be assessed at a rate of 23 cents per $100 of insured deposits through September 30, 1996. This BIF reduction translated into a $21 million savings in FDIC insurance expense for the Corporation in 1996. Offsetting this savings was a one-time charge of $5 million representing the Corporation's portion of an assessment, levied on banks with SAIF-insured deposits in order to recapitalize the SAIF. Beginning in 1997, deposit insurance expense will approximate $3 million based on current deposit levels and current deposit assessment rates. COMPETITION Banking is a highly competitive business. The Michigan banking subsidiary of the Corporation competes primarily with Detroit and outstate Michigan banks for loans, deposits and trust accounts. Through its offices in Arizona, California, Colorado, Florida, Indiana, Illinois, Ohio and Texas, Comerica competes with other financial institutions for various types of loans. Through its Florida subsidiary, Comerica competes with many companies, including financial institutions, for trust business. At year-end 1996, Comerica Incorporated was the largest bank holding company headquartered in Michigan in terms of total assets and deposits. Based on the Interstate Act as described above, the Corporation believes that the level of competition in all geographic markets will increase in the future. Comerica's banking subsidiaries also face competition from other financial intermediaries, including savings and loan associations, consumer finance companies, leasing companies and credit unions. EMPLOYEES As of December 31, 1996, Comerica and its subsidiaries had 9,868 full-time and 2,101 part-time employees. ITEM 2. PROPERTIES The executive offices of the Corporation are located in the Comerica Tower at Detroit Center, 500 Woodward Ave., Detroit, Michigan 48226. Comerica and its subsidiaries occupy 15 floors of the building, which is leased through Comerica Bank from an unaffiliated third party. This lease extends through January 2007. As of December 31, 1996, Comerica Bank operated 271 offices within the State of Michigan, of which 208 were owned and 63 were leased. Four other banking affiliates operate 92 offices in California, Florida, and Texas. The affiliates own 37 of their 11 offices and lease 55 offices. One banking affiliate also operates from leased space in Toledo, Ohio. The Corporation owns an operations and check processing center in Livonia, Michigan, a ten-story building in the central business district of Detroit that houses certain departments of the Corporation and Comerica Bank and a building in Oakland county used mainly for consumer lending functions. In 1983, Comerica entered into a sale/leaseback agreement with an unaffiliated party covering an operations center which was built in Auburn Hills, Michigan, and now is occupied by various departments of the Corporation and Comerica Bank. ITEM 3. LEGAL PROCEEDINGS The response to this item is included under the caption "Other Matters" on page 30 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1996, which is hereby incorporated by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to shareholders in the fourth quarter of 1996. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The common stock of Comerica Incorporated is traded on the New York Stock Exchange (NYSE Trading Symbol: CMA). At March 11, 1997, there were approximately 17,973 holders of the Corporation's common stock. Quarterly cash dividends were declared during 1996 and 1995 totaling $1.52 and $1.37 per common share per year, respectively. The following table sets forth, for the periods indicated, the high and low sale prices per share of the Corporation's common stock as reported on the NYSE Composite Transactions Tape for all quarters of 1996 and 1995. 12 - ------------------------------------------------------------------------------- Quarter High Low Dividend Dividend* Per Share Yield - ------------------------------------------------------------------------------- 1996 Fourth $59.375 $50.250 $ .39 2.9% Third 54.000 40.125 $ .39 3.3 Second 44.875 40.250 $ .39 3.7 First 41.875 36.250 $ .35 3.6 1995 Fourth $42.750 $33.625 $ .35 3.7% Third 36.750 31.875 $ .35 4.1 Second 33.125 27.250 $ .35 4.6 First 28.375 24.125 $ .32 4.9 - ------------------------------------------------------------------------------- * Dividend yield is calculated by annualizing the quarterly dividend per share and dividing by an average of the high and low price in the quarter. - ------------------------------------------------------------------------------- ITEM 6. SELECTED FINANCIAL DATA The response to this item is included on page 13 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1996, which is hereby incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The response to this item is included on pages 14 through 30 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1996, which are hereby incorporated by reference. 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is included on pages 15, 16, 18, 22, 23, 25, and 31 through 57 of the Corporation's Annual Report to Shareholders for the year ended December 31, 1996, which are hereby incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The response to this item will be included under the captions "Election of Directors" and "Executive Officers of the Corporation" of the Corporation's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 16, 1997, which are hereby incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION The response to this item will be included under the caption "Compensation of Executive Officers" of the Corporation's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 16, 1997, which is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The response to this item will be included under the captions "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" of the Corporation's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 16, 1997, which is hereby incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The response to this item will be included under the captions "Transactions of Directors and Executive Officers with the Corporation" and "Certain Beneficial Owners" and "Election of Directors" of the Corporation's definitive Proxy Statement relating to the Annual Meeting of Shareholders to be held on May 16, 1997, which are hereby incorporated by reference. 14 Comerica Incorporated and Subsidiaries FORM 10-K CROSS-REFERENCE INDEX - ------------------------------------------------------------------------------- Certain information required to be included in this Form 10-K is included in the 1996 Annual Report to Shareholders or in the 1997 Proxy Statement used in connection with the 1997 annual meeting of shareholders to be held on May 16, 1997. The following cross-reference index shows the page location in the 1996 Annual Report or the section of the 1997 Proxy Statement of only that information which is to be incorporated by reference into this Form 10-K. All other sections of the 1996 Annual Report or the 1997 Proxy Statement are not required in this Form 10-K and should not be considered a part thereof. - ------------------------------------------------------------------------------- Page Number of 1996 Annual Report or Section of 1997 Proxy Statement PART I ITEM I. Business...............................................Included herein ITEM 2. Properties.............................................Included herein ITEM 3. Legal Proceedings...................................................30 ITEM 4. Submission of Matters to a Vote of Security Holders -- no matters were voted upon by security holders in the fourth quarter of 1996. PART II ITEM 5. Market for Registrant's Common Equity and Related Security Holder Matters...............................................Included herein ITEM 6. Selected Financial Data.............................................13 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................................14 ITEM 8. Financial Statements and Supplementary Data: Comerica Incorporated and Subsidiaries Consolidated Balance Sheets....................................31 Consolidated Statements of Income..............................32 Consolidated Statements of Changes in Shareholders' Equity.....33 Consolidated Statements of Cash Flows..........................34 Notes to Consolidated Financial Statements..........................35 Report of Independent Auditors......................................54 Statistical Disclosure by Bank Holding Companies: Analysis of Net Interest Income - FTE..........................15 Rate-Volume Analysis - FTE.....................................16 Analysis of Investment Securities Portfolio - FTE..............25 Analysis of Investment Securities and Loans....................22 Allocation of the Allowance for Loan Losses....................23 Loan Maturities and Interest Rate Sensitivity..................23 Summary of Nonperforming Assets and Past Due Loans.............25 Cross-Border Outstandings......................................22 Analysis of the Allowance for Loan Losses......................18 Maturity Distribution of Domestic Certificates of Deposit of $100,000 and Over.............................................23 Financial Ratios and Other Data................................55 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - None. PART III ITEM 10. Directors and Executive Officers of the Registrant...............................Election of Directors; Executive Officers ITEM 11. Executive Compensation..................................Compensation of Executive Officers 15 ITEM 12. Security Ownership of Certain Beneficial Owners and Management.............Security Ownership of Certain Owners and Security Ownership of Management ITEM 13. Certain Relationships and Related Transactions..........Transactions of Directors and Executive Officers with the Corporation; Election of Directors PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 1. Financial Statements: The financial statements that are filed as part of this report are listed under Item 8 in the Form 10-K Cross-reference Index on page 15. 2. All of the schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are either not required under the related instruction, the required information is contained elsewhere in the Form 10-K, or the schedules are inapplicable and therefore have been omitted. Exhibits: Exhibit Document Number* 3.1 Restated Certificate of Incorporation of Comerica Incorporated, as amended 3.2 Amended and restated bylaws of Comerica Incorporated 4 Rights Agreement between Comerica Incorporated and Comerica Bank** 10.1 Comerica Incorporated 1997 Long-Term Incentive Plan 10.2 Comerica Incorporated Management Incentive Plan, 1997 10.3 Comerica Incorporated Director Fee Deferral Plan 10.4 Benefit Equalization Plan for Employees of Comerica Incorporated 10.5 Comerica Incorporated's Directors Retirement Plan*** 16 10.6 Manufacturers National Corporation's 1987 and 1989 Stock Option Plans for Key Employees*** 10.7 Manufacturers National Corporation's Executive Incentive Plan*** 10.8 Manufacturers National Corporation's Key Employee Retention Plan*** 10.10 Form of Director Indemnification Agreement between Comerica Incorporated and its directors 10.11 Employment Continuation Agreement with Eugene A. Miller*** 10.12 Severance Agreement with Michael T. Monahan ***** 10.13 Management Continuation Agreement with Ralph W. Babb Jr.***** 10.14 Employment Agreement with Ralph W. Babb Jr.***** 10.15 Comerica Incorporated Deferred Compensation Plan, 1997 Amendment and Restatement 10.16 Form of Comerica Incorporated Executive Officer Continuity Agreement between registrant and listed officers, January 1, 1997 10.17 Form of Comerica Incorporated Senior Officer Severance Plan between registrant and listed officers, January 1, 1997 11 Statement regarding Computation of Per Share Earnings**** 13 Required portions of Registrant's 1996 Annual Report to Shareholders 21 Subsidiaries of the Corporation 23 Consent of Ernst & Young LLP (b) No reports on Form 8-K were filed by the Corporation during the last quarter of 1996. * This is the original copy of the 1996 Form 10-K and includes all exhibits. ** A report was filed on Form 8-K dated June 18, 1996 regarding the Registrant's Rights Agreement with Comerica Bank. 17 *** Incorporated by reference from Registrant's Annual Report on Form 10-K for the year ended December 31,1992 -- Commission File Number 0-7269. **** Incorporated by reference from note 11 on page 41 of Registrant's Annual Report to Shareholders attached hereto as Exhibit 13. ***** Incorporated by reference from Registrant's Annual Report on Form 10-K for the year ended December 31, 1995--Commission File Number 1-10706. SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized in the City of Detroit, State of Michigan on the 21st day of March, 1997. COMERICA INCORPORATED Eugene A. Miller Chairman and Chief Executive Officer Ralph W. Babb Jr. Executive Vice President and Chief Financial Officer Arthur W. Hermann Senior Vice President and Controller (Chief Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities indicated on March 21, 1997. BY DIRECTORS E. Paul Casey James F. Cordes J. Philip DiNapoli Max M. Fisher 18 John D. Lewis Patricia Shontz Longe, Ph.D. Wayne B. Lyon Gerald V. MacDonald Eugene A. Miller Michael T. Monahan Alfred A. Piergallini Howard F. Sims Martin D. Walker 19 EX-3.1 2 RESTATED CERT/INCORP EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF COMERICA INCORPORATED (the "Corporation") FIRST The name of the Corporation is Comerica Incorporated. SECOND The address of the registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the registered agent at such address is The Corporation Trust Company. THIRD The nature of the business or purposes to be conducted or promoted is: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH The total number of shares of all classes of stock which the Corporation shall have authority to issue is 260,000,000 shares which shall be divided into two classes as follows: (a) 10,000,000 shares of Preferred Stock without par value (Preferred Stock); and (b) 250,000,000 shares of Common Stock of the par value of $5.00 per share (Common Stock). The designations and the powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of the above classes of stock shall be as follows: PART I: PREFERRED STOCK (a) Shares of Preferred Stock may be issued in one or more series at such time or times and for such consideration or considerations as the Board of Directors may determine. (b) The Board of Directors is expressly authorized at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, with such voting powers, full or limited but not to exceed one vote per share, or without voting powers, and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restriction thereof, as shall be stated and expressed in the resolution or resolutions providing for the issue thereof adopted by the Board of Directors, and as are not stated and expressed in this Restated Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) the following: (i) The designation of such series and number of shares comprising such series, which number may (except where otherwise provided by the Board of Directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the Board of Directors. (ii) The dividend rate or rates on the shares of such series and the preference or relation which such dividends shall bear to the dividends payable on any other class of capital stock or on any other series of Preferred Stock, the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what condition such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate. (iii) Whether the shares of such series shall be redeemable, and, if redeemable, whether redeemable for cash, property or rights, including securities of any other corporations, at the option of either the holder or the Corporation or upon the happening of a specified event, the limitations and restrictions with respect to such redemption, the time or times when, the price or prices or rate or rates at which, the adjustments with which and the manner in which such shares shall be redeemable, including the manner of selection shares of such series for redemption if less than all shares are to be redeemed. (iv) The rights to which the holders of shares of such series shall be entitled, and the preferences, if any, over any other series (or of any other series over such series), upon the voluntary or involuntary liquidation, dissolution, distribution or winding up of the Corporation, which rights may vary depending on whether such liquidation, dissolution, distribution or winding up is voluntary or involuntary, and, if voluntary, may vary at different dates. (v) Whether the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or noncumulative, the extent to which and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof. (vi) Whether the shares of such series shall be convertible into, or exchangeable for, at the option of either the holder or the Corporation or upon the happening of a specified event, shares of any other class or of any other series of any class of capital stock 2 of the Corporation, and, if so convertible or exchangeable, the times, prices, rates, adjustments, and other terms and conditions of such conversion or exchange. (vii) The voting powers, full and/or limited, if any, of the shares of such series, and whether and under what conditions the shares of such series (alone or together with the shares of one or more other series having similar Provisions) shall be entitled to vote separately as a single class, for the election of one or more directors, or additional directors, of the Corporation in case of dividend arrearages or other specified events, or upon other matters. (viii) Whether the issuance of any additional shares of such series, or of any shares of any other series, shall be subject to restrictions as to issuance, or as to the powers, preferences or rights of any such other series. (ix) Any other preferences, privileges and powers and relative, participating, option or other special rights, and qualifications, limitations or restrictions of such series, as the Board of Directors may deem advisable and as shall not be inconsistent with the provisions of this Restated Certificate of Incorporation. (c) Unless and except to the extent otherwise required by law or provided in the resolution or resolutions of the Board of Directors creating any series of Preferred Stock pursuant to this Part I, the holders of the Preferred Stock shall have no voting power with respect to any matter whatsoever. In no event shall the Preferred Stock be entitled to more than one vote in respect of each share of stock. (d) Shares of Preferred Stock redeemed, converted, exchanged, purchased, retired or surrendered to the Corporation, or which have been issued and reacquired in any manner, may, upon compliance with any applicable provisions of the General Corporation Law of the State of Delaware, be given the status of authorized and unissued shares of Preferred Stock and may be reissued by the Board of Directors as part of the series of which they were originally a part or may be reclassified into and reissued as part of a new series or as a part of any other series, all subject to the protective conditions or restrictions of any outstanding series of Preferred Stock. PART II: COMMON STOCK (a) Except as otherwise required by law or by any amendment to this Restated Certificate of Incorporation, each holder of Common Stock Shall have one vote for each share of stock held by him of record on the books of the Corporation on all matters voted upon by the stockholders. (b) Subject to the preferential dividend rights, if any, applicable to shares of Preferred Stock and subject to applicable requirements, if any, with respect to the setting aside of sums for purchase, retirement or sinking funds for Preferred Stock, the holders of Common Stock shall be 3 entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors. (c) In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Corporation, after distribution in full of the preferential amounts, if any, to be distributed to the holders of shares of Preferred Stock, holders of Common Stock shall be entitled to receive all of the remaining assets of the Corporation of whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively. The Board of Directors may distribute in kind to the holders of Common Stock such remaining assets of the Corporation or may sell, transfer or otherwise dispose of all or any part of such remaining assets to any other corporation, trust or entity, or any combination thereof, and may sell all or any part of the consideration so received and distribute any balance thereof in kind to holders of Common Stock. The merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into it, or any purchase or redemption of shares of stock of the Corporation of any class, shall not be deemed to be a dissolution, liquidation of winding up of the Corporation for the purposes of this paragraph. (d) Such numbers of shares of Common Stock as may from time to time be required for such purpose shall be reserved for issuance (i) upon conversion of any shares of Preferred Stock or any obligation of the Corporation convertible into shares of Common Stock which is at the time outstanding or issuable upon exercise of any options or warrants at the time outstanding and (ii) upon exercise of any options, warrants or rights at the time outstanding to purchase shares of Common Stock. FIFTH The Corporation is to have perpetual existence. SIXTH The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes designated Class I, Class II, and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At each annual meeting of shareholders, successors to the class of directors whose term express at the annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a 4 decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Until June 18, 1995, vacancies on the Board of Directors may be filled, and nominations of persons on behalf of the Corporation will be made in accordance with Article III, Section 12 of the Corporation's Bylaws. Thereafter, any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of Shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Restated Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article Sixth unless expressly provided by such terms. Any amendment, change or repeal of this Article Sixth or any other amendment or change of this Restated Certificate of Incorporation which will have the effect of modifying or permitting circumvention of this Article Sixth, shall require the favorable vote, at a meeting of the Shareholders of the Corporation, of the holders of at least 75% of the then outstanding shares of capital stock of the Corporation entitled to vote; provided, however, that such 75% vote shall not be required for any such amendment, change or repeal recommended to Shareholders by the affirmative vote of not less than three-fourths of the Board of Directors then in office, and such amendment, change, or repeal so recommended shall require only the vote, if any, required under the applicable provision of the General Corporation Law of the State of Delaware. SEVENTH The directors shall have the power to make, alter, amend, change, add to or repeal the Bylaws of the Corporation not inconsistent with the provisions of this Restated Certificate of Incorporation. The affirmative vote of the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote shall be required for the approval and adoption of any amendment, alteration, change, addition to or repeal of Article II, Section (5) and Article III, Section (12) of the Bylaws of the Corporation proposed by any Shareholder of the Corporation. Any amendment, change or repeal of this Article Seventh, or any other amendment of this Restated Certificate of Incorporation which will have the effect of modifying or permitting circumvention of this Article Seventh, shall require the favorable vote, at a meeting of the 5 Shareholders of the Corporation, of the holders of at least 75% of the then outstanding shares of capital stock of the Corporation entitled to vote; provided, however, that such 75% vote shall not be required for any such amendment, change or repeal recommended to Shareholders by the affirmative vote of not less than three-fourths of the Board of Directors, and such amendment, change, or repeal so recommended shall require only the vote, if any, required under the applicable provision of the General Corporation Law of the State of Delaware. EIGHTH I. The affirmative vote of (a) the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote and (b) the holders of not less than a majority of the outstanding shares of capital stock of the Corporation entitled to vote excluding for purposes of determining the affirmative vote required by this clause (b) all such shares of which a "Related Person" (as hereinafter defined) shall be a "Beneficial Owner" (as hereinafter defined), shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined) involving a Related Person; provided, however, that the foregoing voting requirements set forth in clauses (a) and (b) above shall not be applicable, and the provisions of Delaware law relating to the percentage of Shareholder approval, if any, shall apply to any such Business Combination if: A. The "Continuing Directors" of the Corporation (as hereinafter defined) by a three-fourths vote thereof have expressly approved the Business Combination either in advance of or subsequent to the acquisition of outstanding shares of capital stock of the Corporation that caused the Related Person to become a Related Person; or B. If each of the following conditions are satisfied: 1. The aggregate amount of the cash and the fair market value of the property, securities or other consideration to be received per share of any class or series of capital stock of the Corporation in the Business Combination by holders of such capital stock of the Corporation, other than the Related Person involved in the Business Combination, is not less than the "Highest Per Share Price" or the "Highest Equivalent Price" (as these terms are hereinafter defined), paid or to be paid by the Related Person in acquiring any of such class or series of the capital stock of the Corporation outside of such Business Combination; and 2. A proxy statement complying with the requirements of the Securities Exchange Act of 1934, as amended, shall have been mailed to all Shareholders of the Corporation for the purpose of soliciting Shareholder approval of the Business Combination. The proxy statement shall contain at the front thereof, in a prominent place, the position of the Continuing Directors as to the advisability (or inadvisability) of the Business Combination and, if deemed advisable by a majority of the Continuing Directors, the opinion of an investment banking firm selected by the Continuing Directors as to the 6 fairness of the terms of the Business Combination, from the point of view of the holders of the outstanding shares of capital stock of the Corporation other than any Related Person. For purposes of this Article Eighth: 1. The term "Business Combination" means (i) any merger, consolidation or share exchange of the Corporation or any of its subsidiaries into or with any member of any Related Person, in each case irrespective of which Corporation or company is the surviving entity; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with any member of any Related Person (in a single transaction or a series of related transactions) of all or a Substantial Part (as hereinafter defined) of the assets of the Corporation (including without limitation any securities of a subsidiary) or a Substantial Part of the assets of any of its subsidiaries; (iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with the Corporation or to or with any of its subsidiaries (in a single transaction or series of related transactions) of all or a Substantial Part of the assets of any member of any Related Person; (iv) the issuance or transfer of any securities of the Corporation or any of its subsidiaries by the Corporation or any of its subsidiaries to any member of any Related Person (other than an issuance or transfer of securities which is effected on a pro rata basis to all Shareholders of the Corporation); (v) the acquisition by the Corporation or any of its subsidiaries of any securities of any member of any Related Person; and (vi) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination. 2. The term "Related Person" shall mean any individual, corporation, partnership or other person or entity, including any member of a "group" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 as in effect at the date of the adoption of this Article by the Shareholders of the Corporation; such act and such Rules and Regulations promulgated thereunder, collectively and as so in effect, being hereinafter referred to as the "Exchange Act"), and any "Affiliate" or "Associate" (as defined in Rule 12b-2 of the Exchange Act) of any such individual, corporation, partnership or other person or entity which, as of the record date for the determination of Shareholders entitled to notice of and to vote on any Business Combination, or immediately prior to the consummation of such transaction, together with their Affiliates and Associates, are "Beneficial Owners" (as defined in Rule 13d-3 of the Exchange Act) in the aggregate of ten percent or more of the outstanding shares of any class or series of capital stock of the Corporation. 3. The term "Substantial Part" shall mean more than 10% of the fair market value, as determined by three-fourths of the Continuing Directors, of the total consolidated assets of the Corporation and its subsidiaries taken as a whole, as of the end of its most recent fiscal year ending prior to the time the determination is being made. 4. For the purposes of subparagraph B. 1. of Paragraph One of this Article Eighth, the term "other consideration to be received" shall include, without limitation, Common stock or 7 other capital stock of the Corporation retained by Shareholders of the Corporation other than Related Persons or parties to such Business Combination in which the Corporation is the surviving corporation. 5. The term "Continuing Director" shall mean a director who either (i) was a member of the Board of Directors of the Corporation immediately prior to the time that the Related Person involved in a Business Combination became a Related Person, or (ii) has been designated (before his or her initial election as director) as a Continuing Director by a majority of the then Continuing Directors. 6. A "Related Person" shall be deemed to have acquired a share of the capital stock of the Corporation at the time when such Related Person became a Beneficial Owner thereof. With respect to the shares owned by Affiliates, Associates or other persons whose ownership is aggregated with that of a Related Person under the foregoing definition of Related Person, if the price paid by such Related Person for such shares is not determinable by the Continuing Directors, such price shall be deemed to be the higher of (i) the price paid upon the acquisition thereof by the Affiliate, Associate or other person or (ii) the market price of the shares in question at the time when the Related Person became a Beneficial Owner thereof. 7. The terms "Highest Per Share Price" and "Highest Equivalent Price" as used in this Article Eighth shall mean the following: If there is only one class of capital stock of the Corporation issued and outstanding, the Highest Per Share Price shall mean the highest price that can be determined to have been paid at any time, or to have been agreed to be paid, by the Related Person for any share or shares of that class of capital stock. If there is more than one class of capital stock of the Corporation issued and outstanding, the Highest Equivalent Price shall mean with respect to each class and series of capital stock of the Corporation, the amount determined by three-fourths of the Continuing Directors, on whatever basis they believe is appropriate, to be the highest per share price equivalent for each such class or series of the highest price that can be determined to have been paid at any time, or to have been agreed to be paid, by the Related Person for any share or shares of any class or series of capital stock of the Corporation. In determining the Highest Per Share Price and Highest Equivalent Price, all acquisitions by the Related Person shall be taken into account regardless of whether the shares were acquired before or after the Related Person became a Related Person. The Highest Per Shares Price and the Highest Equivalent Price shall also include any brokerage commissions, transfer taxes and soliciting dealers' fees paid by the Related Person with respect to the shares of capital stock of the Corporation acquired by the Related Person. II. The Board of Directors of the Corporation shall have the power and duty to determine for the purposes of this Article Eighth on the basis of information then known to it, (i) whether any person is an Affiliate or Associate of another person, (ii) whether any proposed sale, lease, exchange or other disposition of part of the properties or assets of the Corporation involves a Substantial Part of the properties or assets of the Corporation and (iii) the value of the Highest Per 8 Share Price and Highest Equivalent Price. Any such reasonable determination by the Board shall be conclusive and binding for all purposes of this Article Eighth. III. Any amendment, change or repeal of this Article Eighth, or any other amendment of this Restated Certificate of Incorporation which will have the effect of modifying or permitting circumvention of this Article Eighth, shall require the favorable vote, at a meeting of the Shareholders of the Corporation, of (a) the holders of at least 75% of the then outstanding shares of capital stock of the Corporation entitled to vote and (b) a majority of the outstanding shares of capital stock of the Corporation entitled to vote of which a Related Person is not a Beneficial Owner; provided, however, that this Paragraph III shall not apply to, and such 75% and majority vote shall not be required for, any such amendment, change or repeal recommended to Shareholders by the affirmative vote of not less than three-fourths of the Continuing Directors, and such amendment, change, or repeal so recommended shall require only the vote, if any, required under the applicable provision of the General Corporation Law of the State of Delaware. NINTH Any action required or permitted to be taken at any Annual or Special Meeting of Shareholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote. Any amendment, change or repeal of this Article Ninth, or any other amendment of this Restated Certificate of Incorporation which will have the effect of modifying or permitting circumvention of this Article Ninth, shall require the favorable vote, at a meeting of the Shareholders of the Corporation, of the holders of at leaste 75% of the then outstanding shares of capital stock of the Corporation entitled to vote; provided, however, that such 75% vote shall not be required for any such amendment, change or repeal recommended to Shareholders by the affirmative vote of not less than three-fourths of the Board of Directors, and such amendment, change, or repeal so recommended shall require only the vote, if any, required under the applicable provision of the General Corporation Law of the State of Delaware. TENTH The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of Delaware, and all rights conferred herein upon stockholders and directors are granted subject to this reservation. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. 9 ELEVENTH A director of the Corporation shall not be personally liable to the Corporation or its Shareholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its Shareholders; (ii) for act or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit. CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES C PARTICIPATING PREFERRED STOCK COMERICA INCORPORATED Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, Eugene A. Miller, President, and Judith C. Lalka, Secretary, of Comerica Incorporated, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Restated Certificate of Incorporation of the said Corporation, the said Board of Directors on January 26, 1988, adopted the following resolution creating a series of 500,000 shares of Preferred Stock designated as Series C Participating Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Restated Certificate of Incorporation, a series of Preferred Stock of the Corporation be, and it hereby is, created and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations or restrictions thereof are as follows: Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as "Series C Participating Preferred Stock" and the number of shares constituting such series shall be 500,000. Section 2. DIVIDENDS AND DISTRIBUTIONS. (A) The dividend rate on the shares of Series C Participating Preferred Stock for each quarterly dividend period (hereinafter referred to as a "quarterly dividend period"}, which quarterly dividend periods shall commence on January 1, April 1, July 1 and October 1 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date") (or in the case of original issuance, from the date of original issuance) and shall end on and include the day next preceding the first date of the next quarterly dividend period. shall be equal (rounded to the nearest cent) to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared as determined in good faith by the Board of Directors) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared (but not withdrawn) on the Common Stock, $5.00 par value, of this Corporation (the "Common Stock") during the immediately preceding quarterly dividend period, or, with respect to the first quarterly dividend period, since the first issuance of any share or fraction of a share of Series C Participating Preferred Stock. In the event the Corporation shall at any time after January 26, 1988 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or number of shares, then in each such case the amount to which holders of shares of Series C Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series C Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series C Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series C Participating Preferred Stock from the Quarterly Dividend Payment Series C Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series C Participation Preferred Stock entitled to receive a quarterly dividend and before such Quarterly dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series C Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series C Participating Preferred Stock entitled to receive payment of a dividend or distribution 30 days prior to the date fixed for the payment thereof. Section 3. VOTING RIGHTS. The holders of shares of Series C Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series C Participating Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the stockholders of the Corporation. In the event Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding 2 Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series C Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding is the number of shares of Common Stock that were outstanding immediately prior to such event, provided, however, that in no event shall any share of Series C Participating Preferred Stock have more than one vote per share. (B) Except as otherwise provided herein, by the Restated Certificate of Incorporation or by la, the holders of shares of Series C Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Series C Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series C Participating Preferred Stock then all shares of Series C Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of the Series C Participating Preferred Stock with dividends thereon, voting as a class, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series C Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of preferred stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Series C Participating Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Series C Participating Preferred Stock of such voting right. At any meeting at which the holders of Series C Participating Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or,if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Series C Participating Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Series C Participating Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Series C Participating Preferred Stock as herein provided or pursuant to the rights of any equity 3 securities ranking senior to or PARI PASSU with the Series C Participating Preferred Stock. (iii) unless the holders of Series C Participating Preferred Stock shall, during an existing default period. have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series C Participating Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Series C Participating Preferred Stock, which meeting shall thereupon be called by the Chairman, the President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Series C Participating Preferred Stock are entitled to vote pursuant to this paragraph (C) (iii) shall be given to each holder of record of Series C Participating Preferred Stock by mailing a copy of such notice to the holder at the holder's last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request, or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series C Participating Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any event default period, the holders of Common Stock, and other classes of Stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Series C Participating Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Series C Participating Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(iii) of this Section 3) be filed by vote of a majority of the remaining Directors theretofore elected by the holders of the class of the stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Series C Participating Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Series C Participating Preferred Stock as a Class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the certificate of incorporation or by-laws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however, to change, thereafter in any manner provided by law or in the certificate of incorporation or by-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors. 4 (D) Except as set forth herein, holders of Series C Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except tot he extent that are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. CERTAIN RESTRICTIONS. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series C Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series C Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series C Participating Preferred Stock; (ii) declare or pay dividends on, or make any other distributions on, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding) with the Series C Participating Preferred Stock, except dividends paid ratably on the Series C Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled.; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series C Participating Preferred Stock, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series C Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series C Participating Preferred Stock, or any shares of stock ranking on a parity with the Series C Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 5 Section 5. REACQUIRED SHARES. Any shares of Series C Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding) to the Series C Participating Preferred Stock unless, prior thereto, the holders of shares of Series C Participating Preferred Stock shall have received $100 per share, plus accrued and unpaid dividends to the date of distribution, whether or not earned or declared to the date of such payment (the "Series C Liquidation Preference"). Following the payment of the full amount of the Series C Liquidation Preference, no additional distributions shall be made to the holders of shares of Series C Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series C Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series C Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series C Participating Preferred Stock and Common Stock, respectively, holders of Series C Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series C Liquidation Preference an the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series C Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series C Participating Preferred Stock were entitled immediately prior to such event pursuant to clause (ii) of Subsection (A) above shall be adjusted by multiplying such amount by a fraction the numerator 6 of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series C Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series C Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. NO REDEMPTION. The shares of Series C Participating Preferred Stock shall not be redeemable. Section 9. RANKING. The Series C Participating Preferred Stock shall rank junior to the Adjustable Rate Cumulative Dividend Preferred Stock, Series A and the $4.32 Cumulative Preferred Stock, Series B of the Corporation as to the payment of dividends and as regards liquidation, dissolution and winding up and shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and as regards liquidation, dissolution and winding up, unless the terms of any such series shall provide otherwise. Section 10. AMENDMENT. The Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series C Participating Preferred Stock so as to affect them adversely without affirmative vote of the holders of a majority or more of the outstanding shares of Series C Participating Preferred Stock, voting separately as a class. 7 Section 11. FRACTIONAL SHARES. Series C Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series C Participating Preferred Stock. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Eugene A. Miller, its Chairman of the Board, President and Chief Executive Officer, and attested by Judith C. Lalka, its Secretary, as of the 18th day of June, 1992. COMERICA INCORPORATED ----------------------------------------- By: Eugene A. Miller Its: Chairman of the Board, President and Chief Executive Officer Attest: - ----------------------------- By: Judith C. Lalka Its: Secretary CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES D PARTICIPATING PREFERRED STOCK COMERICA INCORPORATED Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, Eugene A. Miller, Chairman and Chief Executive Officer and Mark W. Yonkman, Vice President and Assistant Secretary, of Comerica Incorporated, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Restated Certificate of Incorporation of the said Corporation, the said Board of Directors on May 17, 1996, adopted the following resolution creating a series of 250,000 shares of Preferred Stock designated as Series D Participating Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Restated Certificate of Incorporation, a series of Preferred Stock of the Corporation be, and it hereby is, created and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations or restrictions thereof are as follows: Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as "Series D Participating Preferred Stock" and the number of shares constituting such series shall be 250,000. Section 2. DIVIDENDS AND DISTRIBUTIONS. (A) The dividend rate on the shares of Series D Participating Preferred Stock for each quarterly dividend period (hereinafter referred to as a "quarterly dividend period"), which quarterly dividend periods shall commence on January 1, April 1, July 1 and October 1 in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date") (or in the case of original issuance, from the date of original issuance) and shall end on and include the day next preceding the first date of the next quarterly dividend period, shall be equal (rounded to the nearest cent) to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in cash, based upon the fair market value at the time the non-cash dividend or other distribution is declared as determined in good faith by the Board of Directors) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared (but not withdrawn) on the common stock, $5.00 par value, of this Corporation (the "Common Stock") during the immediately preceding quarterly dividend period, or, with respect to the first quarterly dividend period, since the first issuance of any share or fraction of a share of Series D Participating Preferred Stock. In the event the Corporation shall at any time after May 17, 1996 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series D Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series D Participating Preferred Stock as provided in Paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series D Par- 2 ticipating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series D Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series D Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series D Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series D Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series D Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. VOTING RIGHTS. The holders of shares of Series D Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series D Participating Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series D Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 3 (B) Except as otherwise provided herein, by the Restated Certificate of Incorporation or by law, the holders of shares of Series D Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C)(i) If at any time dividends on any Series D Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series D Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of the Series D Participating Preferred Stock with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series D Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of preferred stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Series D Participating Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Series D Participating Preferred Stock of such voting right. At any meeting at which the holders of Series D Participating Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Series D Participating Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Series D Participating Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Series D Participating Preferred Stock as herein provided or pursuant to the rights of any 4 equity securities ranking senior to or PARI PASSU with the Series D Participating Preferred Stock. (iii) Unless the holders of Series D Participating Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series D Participating Preferred Stock outstanding, irrespective of series, may request, the calling of special meeting of the holders of Series D Participating Preferred Stock, which meeting shall thereupon be called by the Chairman, the President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Series D Participating Preferred Stock are entitled to vote pursuant to this Paragraph (C)(iii) shall be given to each holder of record of Series D Participating Preferred Stock by mailing a copy of such notice to the holder at the holder's last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request, or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Series D Participating Preferred Stock outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Series D Participating Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Series D Participating Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this Paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. 5 (v) Immediately upon the expiration of a default period, (x) the right of the holders of Series D Participating Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Series D Participating Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the Restated Certificate of Incorporation or by-laws irrespective of any increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Restated Certificate of Incorporation or by-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors. (D) Except as set forth herein, holders of Series D Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. CERTAIN RESTRICTIONS. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series D Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series D Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series D Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series D Participating Preferred Stock, except dividends paid ratably on the Series D Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 6 (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series D Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series D Participating Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series D Participating Preferred Stock, or any shares of stock ranking on a parity with the Series D Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. REACQUIRED SHARES. Any shares of Series D Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series D Participating Preferred Stock unless, prior thereto, the holders of shares of Series D Participating Preferred Stock shall have received 7 $1,000 per share, plus accrued and unpaid dividends to the date of distribution, whether or not earned or declared to the date of such payment (the "Series D Liquidation Preference"). Following the payment of the full amount of the Series D Liquidation Preference, no additional distributions shall be made to the holders of shares of Series D Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series D Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series D Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series D Participating Preferred Stock and Common Stock, respectively, holders of Series D Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series D Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series D Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of Series D Participating Preferred Stock were entitled immediately prior to such event pursuant to clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the 8 shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series D Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series D Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. NO REDEMPTION. The shares of Series D Participating Preferred Stock shall not be redeemable. Section 9. RANKING. The Series D Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and as regards liquidation, dissolution and winding up, unless the terms of any such series shall provide otherwise. Section 10. AMENDMENT. The Restated Certificate of Incorporation of the Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series D Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series D Participating Preferred Stock, voting separately as a class. Section 11. FRACTIONAL SHARES. Series D Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series D Participating Preferred Stock. 9 IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 18th day of June, 1996. _______________________________________________ Name: Eugene A. Miller Its: Chairman and Chief Executive Officer Attest: ______________ Name: Mark W. Yonkman Its: Vice President and Assistant Secretary 10 CERTIFICATE OF DESIGNATION PURSUANT TO SECTION 151(g) OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE -------------------------------------------- 5,000,000 SHARES OF FIXED/ADJUSTABLE RATE NONCUMULATIVE PREFERRED STOCK SERIES E --------------------------------------------- COMERICA INCORPORATED, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that the following resolution was duly adopted by the Board of Directors of the Corporation pursuant to authority conferred upon the Board of Directors by the provisions of the Restated Certificate of Incorporation of the Corporation, which authorizes the issuance of up to 10,000,000 shares of preferred stock without par value, and by the Preferred Stock Designation Committee of the Board of Directors (the "Stock Committee"), pursuant to authority conferred upon the Stock Committee of the Board of Directors in accordance with Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 8 of the Bylaws of the Corporation and by resolutions of the Board of Directors at meetings of the Board of Directors duly held on March 15, 1996 and June 4, 1996, and at a meeting of the Preferred Stock Designation Committee of the Board of Directors duly held on June 18, 1996; RESOLVED, that the issue of a series of preferred stock without par value of this Corporation is hereby authorized and the designation, powers, preferences and privileges, relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof, in addition to those set forth in the Restated Certificate of Incorporation, as amended, of the Corporation, are hereby fixed as follows: FIXED/ADJUSTABLE RATE NONCUMULATIVE PREFERRED STOCK, SERIES E (1) NUMBER OF SHARES AND DESIGNATION. Five million (5,000,000) shares of the preferred stock without par value of the Corporation are hereby constituted as a series of preferred stock without par value designated as "Fixed/Adjustable Rate Noncumulative Preferred Stock, Series E" (hereinafter called the "Preferred Stock, Series E"). (2) DIVIDENDS. (a) The holders of shares of the Preferred Stock, Series E, shall be entitled to receive cash dividends, as, if and when declared by the Board of Directors of the Corporation (the "Board of Directors") or by the Preferred Stock Designation Committee of said Board of Directors (the "Stock Committee"), out of funds legally available for that purpose, at the rate set forth below in this Section (2) applied to the amount of $50 per share. Such dividends shall be payable quarterly, as, if and when declared by the Board of Directors or by the Stock Committee on January 1, April 1, July 1 and October 1 of each year, commencing on October 1, 1996. Each such dividend shall be payable in arrears to the holders of record of shares of the Preferred Stock, Series E, as they appear on the stock register of the Corporation on such record dates, not more than 30 nor less than 15 days preceding the payment dates thereof, as shall be fixed by the Board of Directors or the Stock Committee. Dividends on Preferred Stock, Series E shall not be cumulative and no rights shall accrue to the holders of Preferred Stock, Series E by reason of the fact that the Corporation may fail to declare or pay dividends on the Preferred Stock, Series E in any amount in any year, whether or not the earnings of the Corporation in any year were sufficient to pay such dividends in whole or in part. (b) (i) Dividend periods ("Dividend Periods") shall commence on January 1, April 1, July 1 and October 1 of each year other than the initial Dividend Period, which shall commence on the date of original issue of the Preferred Stock, Series E and shall end on and include the calendar day next preceding the first day of the next Dividend Period. The initial dividend on the shares of Preferred Stock, Series E, for the period from the date of original issue thereof to but not including October 1, 1996 will be $.95 per share of Preferred Stock, Series E and such dividend shall be payable (if declared) on October 1, 1996. For each Dividend Period thereafter the dividend rate on the shares of Preferred Stock, Series E shall be 6.84% per annum through July 1, 2001. The amount of dividends payable for each full Dividend Period occurring prior to July 1, 2001 for the Preferred Stock, Series E, shall be computed by dividing the dividend rate of 6.84% per annum by four and applying the resulting rate of 1.71% to the amount of $50 per share. For each Dividend Period beginning on or after July 1, 2001, the dividend rate on the shares of Preferred Stock, Series B shall be the Applicable Rate (as defined below) per annum. The amount of dividends payable for each full Dividend Period beginning on or after July 1, 2001 shall be computed by dividing the Applicable Rate per annum by four and applying the resulting rate to the amount of $50 per share. The amount of dividends payable for any period shorter or longer than a full Dividend Period on the Preferred Stock, Series E, shall be computed on the basis of twelve 30-day months, a 360-day year and, for any Dividend Period of less than one month (other than the initial Dividend Period), the actual number of days elapsed in such period. Unless otherwise required by law, dividends payable with respect to each share of Preferred Stock, Series E, shall be rounded to the nearest one cent, with $.005 being rounded upward. Holders of shares called for redemption on a redemption date between a dividend payment record date -2- and the dividend payment date shall not be entitled to receive the dividend payable on such dividend payment date. (ii) Except as provided below in this paragraph (ii), the "Applicable Rate" per annum for any Dividend Period beginning on or after July 1, 2001 will be equal to 0.625% plus the Effective Rate (as defined below), but not less than 7.34% or more than 13.34% (without taking into consideration any adjustments as described in paragraph (viii) below). The "Effective Rate" for any Dividend Period beginning on or after July 1, 2001 will be equal to the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate (each as defined below) for such Dividend Period. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate will each be rounded to the nearest five hundredths of a percent, with .025% being rounded upward. In the event that the Corporation determines in good faith that for any reason: (A) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate cannot be determined for any Dividend Period Beginning on or after July 1, 2001, then the Effective Rate for such Dividend Period will be equal to the higher of whichever two of such rates can be so determined, (B) only one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for any Dividend Period beginning on or after July 1, 2001, then the Effective Rate for such Dividend Period will be equal to whichever such rate can be so determined; or (C) none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for any Dividend Period beginning on or after July 1, 2001, then the Effective Rate for the preceding Dividend Period will be continued for such Dividend Period. (iii) Except as described below in this paragraph (iii), the "Treasury Bill Rate" for each applicable Dividend Period will be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate is published during the relevant Calendar Period (as defined below)) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board (as defined below) during the Calendar Period immediately preceding the last ten calendar days preceding the Dividend Period for which the dividend rate on the Preferred Stock, Series E is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during any such Calendar Period, then the Treasury Bill Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate is published during the relevant Calendar Period) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. -3- Treasury bills is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate is published during the relevant Calendar Period) for all of the U.S. Treasury bills then having remaining maturities of not less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury bill rates are published as provided above such Calendar Period, then the Treasury Bill Rate for such Dividend Period will be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable non-interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any applicable Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such applicable Dividend Period will be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by Corporation. (iv) Except as described below in this paragraph (iv), the "Ten Year Constant Maturity Rate" for each applicable Dividend Period will be arithmetic average of the two most recent weekly per annum Ten Year Average Yields (as defined below) (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the last ten Calendar days preceding the Dividend Period for which the dividend rate on the Preferred Stock, Series E is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly -4- during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the even that a per annum Ten Year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly per annum average yield to maturity, if only one such yield is published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities (as defined below)) then having remaining maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any applicable Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by the Corporation. (v) Except as described below in this paragraph (v), the "Thirty Year Constant Maturity Rate" for each applicable Dividend Period will be arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (as defined below) (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the last ten calendar days preceding the Dividend Period for which the dividend rate on the Preferred Stock, Series E is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Thirty Year Average Yield during such Calendar Period, then the Thirty Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Thirty Year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency -5- during such Calendar Period, then the Thirty Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly per annum average yield to maturity, if only one such yield is published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having remaining maturities of not less than twenty-eight nor more than thirty years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Thirty Year Constant Maturity Rate for any applicable Dividend Period as provided above in this paragraph, then the Thirty Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than twenty-eight nor more than thirty years from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by the Corporation. (vi) The Applicable Rate with respect to each Dividend Period beginning on or after July 1, 2001 will be calculated as promptly as practicable by the Corporation according to the appropriate method described above. The Corporation will cause notice of each Applicable Rate to be enclosed with the dividend payment checks next mailed to the holders of Preferred Stock, Series E. (vii) As used above, the term "Calendar Period" means a period of fourteen calendar days; the term "Federal Reserve Board" means the Board of Governors of the Federal Reserve System; the term "Special Securities" means securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; the term "Ten Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and the term "Thirty Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of thirty years). (viii) If one or more amendments to the Internal Revenue Code of 1986, as amended (the "Code"), are enacted that change the percentage of the dividends received deduction as specified in Section 243(a)(1) of the Code or any successor -6- provision (the "Dividends Received Percentage"), the amount of each dividend payable per share of the Preferred Stock, Series E for dividend payments made on or after the date of enactment of such change shall be adjusted by multiplying the amount of the dividend payable determined as described above (before adjustment) by a factor, which shall be the number determined in accordance with the following formula (the "DRD Formula"), and rounding the result to the nearest cent: I-[.35(I - .70)] -------------- I-[.35(I - DRP)] For the purposes of the DRD Formula, "DRP" means the Dividends Received Percentage applicable to the dividend in question. No amendment to the Code, other than a change in the percentage of the dividends received deduction set forth in Section 243 (a)(?) of the Code or any successor provision, will give rise to an adjustment. Notwithstanding the foregoing provisions, in the event that, with respect to any such amendment, the Corporation shall receive either an unqualified opinion of nationally recognized independent tax counsel selected by the Corporation and approved by Skadden, Arpa, Slate, Meagher & Flom (which approval shall not be unreasonably withheld) or a private letter ruling or similar form of authorization from the Internal Revenue Service to the effect that such an amendment would not apply to dividends payable on the Preferred Stock, Series E, then any such amendment shall not result in the adjustment provided for pursuant to the DRD Formula. The opinion referenced in the previous sentence shall be based upon a specific exception in the legislation amending the DRP or upon a published pronouncement of the Internal Revenue Service addressing such legislation. Unless the context otherwise requires, references to dividends in this Certificate of Designations shall mean dividends as adjusted by the DRD Formula. The Corporations's calculation of the dividends payable as so adjusted and as certified accurate as to calculation and reasonable as to method by the independent certified public accountants then regularly engaged by the Corporation, shall be final and not subject to review. (ix) If any amendment to the Code which reduces the Dividends Received Percentage is enacted after a dividend payable on a Dividend Payment Date has been declared, the amount of dividend payable on such Dividend Payment Date will not be increased in accordance with paragraph (viii) above, but instead, an amount equal to the excess of (x) the product of the dividends paid by the Corporation on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the reduced Dividends Received Percentage) and (y) the dividends paid by the Corporation on such Dividend Payment Date, will be payable to holders of record on the next succeeding Dividend Payment Date in addition to any other amounts payable on such date. -7- (x) If, prior to January 2, 1997, an amendment to the Code is enacted that reduces the Dividends Received Percentage and such reduction retroactively applies to a Dividend Payment Date as to which the Corporation previously paid dividends on the Preferred Stock, Series E (each an "Affected Dividend Payment Date"), holders of the Preferred Stock, Series E shall be entitled to receive as, if and when declared by the Board of Directors or the Stock Committee, out of funds legally available for that purpose, additional dividends (the "Additional Dividends") on the next succeeding Dividend Payment Date (or if such amendment is enacted after the dividend payable on such Dividend Payment Date has been declared, on the second succeeding Dividend Payment Date following the date of enactment) to holders of record on such succeeding Dividend Payment Date in an amount equal to the excess of (x) the product of the dividends paid by the Corporation on each Affected Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the Dividends Received Percentage applied to each Affected Dividend Payment Date) and (y) the dividends paid by the Corporation on each Affected Dividend Payment Date. Additional Dividends will not be paid in respect of the enactment of any amendment to the Code if such amendment would not result in an adjustment due to the Corporation having received either an opinion of counsel or tax ruling referred to in paragraph (viii) above. The Corporation shall only make one payment of Additional Dividends. (xi) In the event that the amount of dividend payable per share of the Preferred Stock, Series E, shall be adjusted pursuant to the DRD Formula and/or Additional Dividends are to be paid, the Corporation will cause notice of each such adjustment and, if applicable, any Additional Dividends, to be sent to the holders of the Preferred Stock, Series E. (c) So long as any shares of the Preferred Stock, Series E, are outstanding, no full dividends shall be declared or paid or set apart for payment on the preferred stock of the Corporation of any series ranking, as to dividends, on a parity with or junior to the Preferred Stock, Series E, for any period unless full dividends for the Dividend Period immediately preceding the date of payment of such full dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Stock, Series E. When dividends are not paid in full, as aforesaid, upon the shares of the Preferred Stock, Series E, and any other preferred stock of the Corporation ranking on a parity as to dividends with the Preferred Stock, Series E, all dividends declared upon shares of the Preferred Stock, Series E, and any other preferred stock of the Corporation ranking on a parity as to dividends (whether dividends on such other preferred stock are cumulative or noncumulative) with the Preferred Stock, Series E, shall be declared pro rata so that the amount of dividends declared per share on the Preferred Stock, Series E, and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Preferred Stock, Series E (but without any cumulation in respect -8- of unpaid dividends for Dividend Periods prior to the immediately preceding Dividend Period on the Preferred Stock, Series E and any other noncumulative preferred stock) and such other preferred stock bear to each other. Holders of shares of the Preferred Stock, Series E shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full dividends, as herein provided, on the Preferred Stock, Series E, Series E. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the Preferred Stock, Series E which may be in arrears. (d) So long as any shares of the Preferred Stock, Series E are outstanding, no dividend (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of stock ranking junior to the Preferred Stock, Series E, as to dividends and upon liquidation and other than as provided in subsection (c) of this Section (2)) shall be declared or paid or set aside for payment or other distribution declared or made upon any stock of the Corporation ranking junior to or on a parity with the Preferred Stock, Series E, as to dividends or upon liquidation, nor shall any stock of the Corporation ranking junior to or on a parity with the Preferred Stock, Series E, as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Stock, Series E, as to dividends and upon liquidation) unless, in each case, full dividends for the immediately preceding Dividend Period shall have been paid or set apart for payment and the Corporation is not in default with respect to any redemption of shares of Preferred Stock, Series E, announced by the Corporation pursuant to Section (4) below. (3) LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of any series or class or classes of stock of the Corporation ranking junior to the Preferred Stock, Series E, upon liquidation, dissolution or winding up, the holders of the shares of the Preferred Stock, Series E shall be entitled to receive $50 per share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date of final distribution to such holders, but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of the Preferred Stock, Series E, shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other preferred stock ranking, as to liquidation, dissolution or winding up, on a parity with the Preferred Stock, Series E, then such assets, or the proceeds thereof, shall be distributed among the holders of the shares of Preferred Stock, Series E, and any such other preferred stock ratably in accordance with the respective amounts which would be payable on such shares of Preferred Stock, Series E, and any such other preferred stock if all amounts payable thereon were paid in full. For the purposes of this -9- Section (3), a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. (b) Subject to the rights of holders of shares of any series or class or classes of stock ranking on a parity with or prior to the Preferred Stock, Series E, as to distribution of assets upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Preferred Stock, Series E, as provided in this Section (3), but not prior thereto, any other series or class or classes of stock ranking junior to the Preferred Stock, Series E, upon liquidation shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Stock, Series E, shall not be entitled to share therein. (4) REDEMPTION. (a) Except as provided in subsections (b) and (c) of this Section (4), the Preferred Stock, Series E, may not be redeemed prior to July 1, 2001. At any time or from time to time on and after July 1, 2001, the Corporation, at its option, may, with prior Federal Reserve Board approval to the extent then required by applicable law, redeem shares of the Preferred Stock, Series E, in whole or in part, out of funds legally available therefor, at a redemption price of $50 per share, together in each case with accrued and unpaid dividends (whether or not declared) from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date fixed for redemption. (b) If the Dividends Received Percentage is equal to or less than 40% and, as a result, the amount of dividends on the Preferred Stock, Series E payable on any Dividend Payment Date will be or is adjusted upwards as described in paragraph 2(b)(viii) above, the Corporation, at its option, with prior Federal Reserve Board approval to the extent then required by applicable law, may redeem all, but not less than all, of the outstanding shares of the Preferred Stock, Series E, out of funds legally available therefor, provided, that within sixty days of the date on which an amendment to the Code is enacted which reduces the Dividends Received Percentage to 40% or less, the Corporation sends notice to holders of the Preferred Stock, Series E of such redemption in accordance with subsection (d) below. Any Redemption of the Preferred Stock, Series E in accordance with this subsection (b) shall be on notice as aforesaid at the applicable redemption price set forth in the following table, in each case plus accrued and unpaid dividends (whether or not declared) from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date fixed for redemption. -10- REDEMPTION PERIOD REDEMPTION PRICE PER SHARE June 21, 1996 to June 30, 1997 $52.50 July 1, 1997 to June 30, 1998 52.00 July 1, 1998 to June 30, 1999 51.50 July 1, 1999 to June 30, 2000 51.00 July 1, 2000 to June 30, 2001 50.50 On or after July 1, 2001 50.00 (c) The Corporation, at its option, may, with prior Federal Reserve Board approval to the extent then required by applicable law, redeem all, but not less than all, of the outstanding shares of the Preferred Stock, Series E, out of funds legally available therefor if the holders of the shares of the Preferred Stock, Series E, shall be entitled to vote upon or consent to a merger or consolidation of the Corporation as provided in Section 11 below and all of the following conditions have been satisfied: (i) the Corporation shall have requested the vote or consent of the holders of the Preferred Stock, Series E, to the consummation of such merger or consolidation, stating in such request that failing the requisite favorable vote or consent the Corporation will have the option to redeem the Preferred Stock, Series E, (ii) the Corporation shall not have received the favorable vote or consent requisite to the consummation of the transaction within 60 days after making such written request (which shall be deemed to have been made upon the mailing of the notice of any meeting of holders of the Preferred Stock, Series E, to vote upon such merger or consolidation or the mailing of the form of written consent to be signed by such holders), and (iii) such transaction shall be consummated on the date fixed for such redemption, which date shall be no more than one year after such request is made. Any such redemption shall be on notice as set forth in subsection (d) of this Section 4 at a redemption price of $50 per share of the Preferred Stock, Series E, together with accrued and unpaid dividends, if any, from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date fixed for redemption. (d) In the event the Corporation shall redeem shares of Preferred Stock, Series E, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (1) the redemption date; (2) the number of shares of Preferred Stock, Series E, to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (5) that dividends on the shares to be redeemed will cease to accrue on such redemption date. Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price, together with accrued and unpaid dividends from the immediately preceding dividend payment date to the date of redemption) dividends on the shares of the Preferred Stock, Series E, so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the -11- holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price, together with accrued and unpaid dividends from the immediately preceding dividend payment date, whether or not declared) shall cease. The Corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $50,000,000, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Preferred Stock, Series E, so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of two years from such redemption date shall be released or repaid to the Corporation, after which the holder or holders of such shares of Preferred Stock, Series E, so called for redemption shall look only to the Corporation for payment of the funds necessary for such redemption. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the applicable redemption price aforesaid, together with accrued and unpaid dividends from the immediately preceding dividend payment date to the date of redemption. If less than all the outstanding shares of Preferred Stock, Series E, are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Preferred Stock, Series E, not previously called for redemption by lot or pro rata (as nearly as may be) or by any other method determined by the Corporation in its sole discretion to be equitable. If fewer than all the shares represented by any certificate are redeemed a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (e) In no event shall the Corporation redeem less than all the outstanding shares of Preferred Stock, Series E, pursuant to subsection (a) of this Section (4) unless full dividends shall have been paid or declared and set apart for payment upon all outstanding shares of Preferred Stock, Series E, for the Dividend Period immediately preceding the date of redemption (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E). (5) SHARES TO BE RETIRED. All shares of Preferred Stock, Series E, purchased or redeemed by the Corporation shall be retired and canceled and the Board of Directors shall cause to be taken all action necessary to restore such shares to the status of authorized but unissued shares of preferred stock, without designation as to series, and such shares may thereafter be issued, but not as shares of Preferred Stock, Series E. (6) CONVERSION OR EXCHANGE. The holders of shares of Preferred Stock, Series E, shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock (or any other security) of the Corporation. -12- (7) RANKING. Any class or series of stock of the Corporation shall be deemed to rank: (i) prior to the Preferred Stock, Series E, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, if holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Preferred Stock, Series E; (ii) on a parity with the Preferred Stock, Series E, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Preferred Stock, Series E, if the holders of such class of stock and the Preferred Stock, Series E (whether or not such class of stock is cumulative or noncumulative as to payment of dividends) shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation prices, without preference or priority one over the other (except with respect to the cumulation of dividends on such class of stock); and (iii) junior to the Preferred Stock, Series E, as to dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock shall be common stock or if the holders of Preferred Stock, Series E, shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up, as the case may be, in preference or priorty to the holders of shares of such stock. Accordingly, the Preferred Stock, Series E, shall be deemed to rank on a parity with all other series of preferred stock of the Corporation (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) outstanding on the date on which this Certificate of Designation is first filed with the Secretary of State of the State of Delaware. (8) EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, shares of Preferred Stock, Series E, shall not have any rights, including preemptive rights, or preferences other than those specifically set forth herein or as provided by applicable law. (9) NOTICES. All notices or communications, unless otherwise specified in the Bylaws of the Corporation or the Restated Certificate of Incorporation, as amended, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid to the holders of record of the Preferred Stock, Series E. Notice shall be deemed given on the earlier of the date received or the date such notice is mailed. (10) RECORD HOLDERS. The Corporation and the transfer agent for the Preferred Stock, Series E, may deem and treat the record holder of any share of such Preferred Stock as the true and -13- lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary. (11) VOTING RIGHTS. Except as hereinafter set forth in this Section (11) or as otherwise from time to time required by law, the Preferred Stock, Series E, shall have no voting rights. Whenever, at any time or times, dividends payable on the Preferred Stock, Series E, shall be unpaid for such number of dividend periods, whether or not consecutive, which shall in the aggregate contain not less than 540 days, the holders of the outstanding Preferred Stock, Series E, shall have the exclusive right, voting separately as a class with holders of shares of any one or more other series of preferred stock ranking on a parity with the Preferred Stock, Series E, either as to dividends (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) or on the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, to elect two directors of the Corporation at the Corporation's next annual meeting of stockholders and at each subsequent annual meeting of stockholders. At elections for such directors, each holder of the Preferred Stock, Series E, shall be entitled to one vote for each share held (the holders of shares of any other series of preferred stock ranking on such a parity being entitled to such number of votes, if any, for each share of stock held as may be granted to them). Upon the vesting of such right of such holders, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of such outstanding shares of the Preferred Stock, Series E (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such parity and upon which like voting rights have been conferred and are exercisable) as hereinafter set forth. The right of such holders of such shares of the Preferred Stock, Series E, voting separately as a class, to elect (together with the holders of shares of any one or more other series of preferred stock ranking on such a parity and upon which like voting rights have been conferred and are exercisable) members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends on the Preferred Stock, Series E, shall have been paid in full for at least one year, at which time such right shall terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. Upon any termination of the right of the holders of the Preferred Stock, Series E, as a class to vote for directors as herein provided, the term of office of all directors then in office elected by such holders voting as a class shall terminate immediately. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the remaining director elected by such holders voting as a class may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. Whenever the term of office of the directors elected by such holders voting as a class shall end and the special voting powers vested in such holders as provided in this Section (11) shall have expired, the number of directors shall automatically be decreased to such number as may be provided for in the By-Laws irrespective of any increase made pursuant to the provisions of this Section (11). -14- So long as any shares of the Preferred Stock, Series E, remain outstanding, the consent of the holders of at least two-thirds of the shares of the Preferred Stock, Series E, outstanding at the time (voting separately as a class together with all other series of preferred stock ranking on a parity with such series either as to dividends (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock ranking prior to the Preferred Stock, Series E, with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, or (b) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Restated Certificate of Incorporation, as amended, or of the resolution contained in this Certificate of Designations for the Preferred Stock, Series E, and the powers, preferences and privileges, relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof which would materially and adversely affect any right, preference, privilege or voting power of the Preferred Stock, Series E, or of the holders thereof; provided, however, that any increase in the amount of authorized preferred stock or the creation and issuance of other series of preferred stock, or any increase in the amount of authorized shares of the Preferred Stock, Series E, or of any other series of preferred stock, in each case ranking on a parity with or junior to the Preferred Stock, Series E, with respect to the payment of dividends (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to such vote would otherwise be required shall be effected, all outstanding shares of the Preferred Stock, Series E, shall have been redeemed or sufficient funds shall have been deposited in trust to effect such redemption, scheduled to be consummated within three months after such time. -15- IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed by Mark W. Yonkman, its Vice President and Assistant Secretary, as of the 18th day of June, 1996. COMERICA INCORPORATED By: /s/ Mark W. Yonkman ---------------------------------- Mark W. Yonkman Its: Vice President and Assistant Secretary -16- CERTIFICATE OF DESIGNATION Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware ------------------------------------------- ------------------------------------------- 5,000,000 SHARES OF FIXED/ADJUSTABLE RATE NONCUMULATIVE PREFERRED STOCK SERIES E ------------------------------------------- ------------------------------------------- COMERICA INCORPORATED, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that the following resolution was duly adopted by the Board of Directors of the Corporation pursuant to authority conferred upon the Board of Directors by the provisions of the Restated Certificate of Incorporation of the Corporation, which authorizes the issuance of up to 10,000,000 shares of preferred stock without par value, and by the Preferred Stock Designation Committee of the Board of Directors (the "Stock Committee"), pursuant to authority conferred upon the Stock Committee of the Board of Directors in accordance with Section 141(c) of the General Corporation Law of the State of Delaware, by Article III, Section 8 of the Bylaws of the Corporation and by resolutions of the Board of Directors at meetings of the Board of Directors duly held on March 15, 1996 and June 4, 1996, and at a meeting of the Preferred Stock Designation Committee of the Board of Directors duly held on June 18, 1996: RESOLVED, that the issue of a series of preferred stock without par value of this Corporation is hereby authorized and the designation, powers, preferences and privileges, relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof, in addition to those set forth in the Restated Certificate of Incorporation, as amended, of the Corporation, are hereby fixed as follows: FIXED/ADJUSTABLE RATE NONCUMULATIVE PREFERRED STOCK, SERIES E (1) NUMBER OF SHARES AND DESIGNATION. Five million (5,000,000) shares of the preferred stock without par value of the Corporation are hereby constituted as a series of preferred stock without par value designated as "Fixed/Adjustable Rate Noncumulative Preferred Stock, Series E" (hereinafter called the "Preferred Stock, Series E"). (2) DIVIDENDS. (a) The holders of shares of the Preferred Stock, Series E, shall be entitled to receive cash dividends, as, if and when declared by the Board of Directors of the Corporation (the "Board of Directors") or by the Preferred Stock Designation Committee of said Board of Directors (the "Stock Committee"), out of funds legally available for that purpose, at the rate set forth below in this Section (2) applied to the amount of $50 per share. Such dividends shall be payable quarterly, as, if and when declared by the Board of Directors or by the Stock Committee on January 1, April 1, July 1 and October 1 of each year, commencing on October 1, 1996. Each such dividend shall be payable in arrears to the holders of record of shares of the Preferred Stock, Series E, as they appear on the stock register of the Corporation on such record dates, not more than 30 nor less than 15 days preceding the payment dates thereof, as shall be fixed by the Board of Directors or the Stock Committee. Dividends on Preferred Stock, Series E shall not be cumulative and no rights shall accrue to the holders of Preferred Stock, Series E by reason of the fact that the Corporation may fail to declare or pay dividends on the Preferred Stock, Series E in any amount in any year, whether or not the earnings of the Corporation in any year were sufficient to pay such dividends in whole or in part. (b) (i) Dividend periods ("Dividend Periods") shall commence on January 1, April 1, July 1 and October 1 of each year other than the initial Dividend Period, which shall commence on the date of original issue of the Preferred Stock, Series E and shall end on and include the calendar day next preceding the first day of the next Dividend Period. The initial dividend on the shares of Preferred Stock, Series E, for the period from the date of original issue thereof to but not including October 1, 1996 will be $.95 per share of Preferred Stock, Series E and such dividend shall be payable (if declared) on October 1, 1996. For each Dividend Period thereafter the dividend rate on the shares of Preferred Stock, Series E shall be 6.84% per annum through July 1, 2001. The amount of dividends payable for each full Dividend Period occurring prior to July 1, 2001 for the Preferred Stock, Series E, shall be computed by dividing the dividend rate of 6.84% per annum by four and applying the resulting rate of 1.71% to the amount of $50 per share. For each Dividend Period beginning on or after July 1, 2001, the dividend rate on the shares of Preferred Stock, Series E shall be the Applicable Rate (as defined below) per annum. The amount of dividends payable for each full Dividend Period beginning on or after July 1, 2001 shall be computed by dividing the Applicable Rate per annum by four and applying the resulting rate to the amount of $50 per share. The amount of dividends payable for any period shorter or longer than a full Dividend Period on the Preferred Stock, Series E, shall be computed on the basis of twelve 30-day months, a 360-day year and, for any Dividend Period of less than one month (other than the initial Dividend Period), the actual number of days elapsed in such period. Unless otherwise required by law, dividends payable with respect to each share of Preferred Stock, Series E, shall be rounded to the nearest one cent, with $.005 being rounded upward. Holders of shares called for redemption on a redemption date between a dividend payment record date and the dividend payment date shall not be entitled to receive the dividend payable on such dividend payment date. (ii) Except as provided below in this paragraph (ii), the "Applicable Rate" per annum for any Dividend Period beginning on or after July 1, 2001 will be equal to 0.625% plus the Effective Rate (as defined below), but not less than 7.34% or more than 13.34% (without taking into consideration any adjustments as described in paragraph (viii) below). The "Effective Rate" for any Dividend Period beginning on or after July 1, 2001 will be equal to the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate (each as defined below) for such Dividend Period. The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate will each be rounded to the nearest five hundredths of a percent, with .025% being rounded upward. In the event that the Corporation determines in good faith that for any reason: (A) any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate cannot be determined for any Dividend Period beginning on or after July 1, 2001, then the Effective Rate for such Dividend Period will be equal to the higher of whichever two of such rates can be so determined; (B) only one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for any Dividend Period beginning on or after July 1, 2001, then the Effective Rate for such Dividend Period will be equal to whichever such rate can be so determined; or (C) none of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate can be determined for any Dividend Period beginning on or after July 1, 2001, then the Effective Rate for the preceding Dividend Period will be continued for such Dividend Period. (iii) Except as described below in this paragraph (iii), the "Treasury Bill Rate" for each applicable Dividend Period will be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate is published during the relevant Calendar Period (as defined below)) for three-month U.S. Treasury bills, as published weekly by the Federal Reserve Board (as defined below) during the Calendar Period immediately preceding the last ten calendar days preceding the Dividend Period for which the dividend rate on the Preferred Stock, Series E is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum market discount rate during any such Calendar Period, then the Treasury Bill Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate is published during the relevant Calendar Period) for three-month U.S. Treasury bills, as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum market discount rate for three-month U.S. Treasury bills is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Treasury Bill Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum market discount rates (or the one weekly per annum market discount rate, if only one such rate is published during the relevant Calendar Period) for all of the U.S. Treasury bills then having remaining maturities of not less than 80 nor more than 100 days, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such rates, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason no such U.S. Treasury bill rates are published as provided above during such Calendar Period, then the Treasury Bill Rate for such Dividend Period will be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable non-interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Treasury Bill Rate for any applicable Dividend Period as provided above in this paragraph, the Treasury Bill Rate for such applicable Dividend Period will be the arithmetic average of the per annum market discount rates based upon the closing bids during such Calendar Period for each of the issues of marketable interest-bearing U.S. Treasury securities with a remaining maturity of not less than 80 nor more than 100 days, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by the Corporation. (iv) Except as described below in this paragraph (iv), the "Ten Year Constant Maturity Rate" for each applicable Dividend Period will be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (as defined below) (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the last ten calendar days preceding the Dividend Period for which the dividend rate on the Preferred Stock, Series E is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Ten Year Average Yield during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum Ten Year Average Yields (or the one weekly per annum Ten Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Ten Year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Ten Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly per annum average yield to maturity, if only one such yield is published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities (as defined below)) then having remaining maturities of not less than eight nor more than twelve years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Ten Year Constant Maturity Rate for any applicable Dividend Period as provided above in this paragraph, then the Ten Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than eight nor more than twelve years from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by the Corporation. (v) Except as described below in this paragraph (v), the "Thirty Year Constant Maturity Rate" for each applicable Dividend Period will be the arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (as defined below) (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly by the Federal Reserve Board during the Calendar Period immediately preceding the last ten calendar days preceding the Dividend Period for which the dividend rate on the Preferred Stock, Series E is being determined. In the event that the Federal Reserve Board does not publish such a weekly per annum Thirty Year Average Yield during such Calendar Period, then the Thirty Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum Thirty Year Average Yields (or the one weekly per annum Thirty Year Average Yield, if only one such yield is published during the relevant Calendar Period), as published weekly during such Calendar Period by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that a per annum Thirty Year Average Yield is not published by the Federal Reserve Board or by any Federal Reserve Bank or by any U.S. Government department or agency during such Calendar Period, then the Thirty Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the two most recent weekly per annum average yields to maturity (or the one weekly per annum average yield to maturity, if only one such yield is published during the relevant Calendar Period) for all of the actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) then having remaining maturities of not less than twenty-eight nor more than thirty years, as published during such Calendar Period by the Federal Reserve Board or, if the Federal Reserve Board does not publish such yields, by any Federal Reserve Bank or by any U.S. Government department or agency selected by the Corporation. In the event that the Corporation determines in good faith that for any reason the Corporation cannot determine the Thirty Year Constant Maturity Rate for any applicable Dividend Period as provided above in this paragraph, then the Thirty Year Constant Maturity Rate for such Dividend Period will be the arithmetic average of the per annum average yields to maturity based upon the closing bids during such Calendar Period for each of the issues of actively traded marketable U.S. Treasury fixed interest rate securities (other than Special Securities) with a final maturity date not less than twenty-eight nor more than thirty years from the date of each such quotation, as chosen and quoted daily for each business day in New York City (or less frequently if daily quotations are not generally available) to the Corporation by at least three recognized dealers in U.S. Government securities selected by the Corporation. (vi) The Applicable Rate with respect to each Dividend Period beginning on or after July 1, 2001 will be calculated as promptly as practicable by the Corporation according to the appropriate method described above. The Corporation will cause notice of each Applicable Rate to be enclosed with the dividend payment checks next mailed to the holders of Preferred Stock, Series E. (vii) As used above, the term "Calendar Period" means a period of fourteen calendar days; the term "Federal Reserve Board" means the Board of Governors of the Federal Reserve System; the term "Special Securities" means securities which can, at the option of the holder, be surrendered at face value in payment of any Federal estate tax or which provide tax benefits to the holder and are priced to reflect such tax benefits or which were originally issued at a deep or substantial discount; the term "Ten Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of ten years); and the term "Thirty Year Average Yield" means the average yield to maturity for actively traded marketable U.S. Treasury fixed interest rate securities (adjusted to constant maturities of thirty years). (viii) If one or more amendments to the Internal Revenue Code of 1986, as amended (the "Code"), are enacted that change the percentage of the dividends received deduction as specified in Section 243(a)(1) of the Code or any successor provision (the "Dividends Received Percentage"), the amount of each dividend payable per share of the Preferred Stock, Series E for dividend payments made on or after the date of enactment of such change shall be adjusted by multiplying the amount of the dividend payable determined as described above (before adjustment) by a factor, which shall be the number determined in accordance with the following formula (the "DRD Formula"), and rounding the result to the nearest cent: 1-[.35 (1 - .70)] --------------- 1-[.35 (1 - DRP)] For the purposes of the DRD Formula, "DRP" means the Dividends Received Percentage applicable to the dividend in question. No amendment to the Code, other than a change in the percentage of the dividends received deduction set forth in Section 243 (a)(1) of the Code or any successor provision, will give rise to an adjustment. Notwithstanding the foregoing provisions, in the event that, with respect to any such amendment, the Corporation shall receive either an unqualified opinion of nationally recognized independent tax counsel selected by the Corporation and approved by Skadden, Arps, Slate, Meagher & Flom (which approval shall not be unreasonably withheld) or a private letter ruling or similar form of authorization from the Internal Revenue Service to the effect that such an amendment would not apply to dividends payable on the Preferred Stock, Series E, then any such amendment shall not result in the adjustment provided for pursuant to the DRD Formula. The opinion referenced in the previous sentence shall be based upon a specific exception in the legislation amending the DRP or upon a published pronouncement of the Internal Revenue Service addressing such legislation. Unless the context otherwise requires, references to dividends in this Certificate of Designations shall mean dividends as adjusted by the DRD Formula. The Corporation's calculation of the dividends payable as so adjusted and as certified accurate as to calculation and reasonable as to method by the independent certified public accountants then regularly engaged by the Corporation, shall be final and not subject to review. (ix) If any amendment to the Code which reduces the Dividends Received Percentage is enacted after a dividend payable on a Dividend Payment Date has been declared, the amount of dividend payable on such Dividend Payment Date will not be increased in accordance with paragraph (viii) above, but instead, an amount equal to the excess of (x) the product of the dividends paid by the Corporation on such Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the reduced Dividends Received Percentage) and (y) the dividends paid by the Corporation on such Dividend Payment Date, will be payable to holders of record on the next succeeding Dividend Payment Date in addition to any other amounts payable on such date. (x) If, prior to January 2, 1997, an amendment to the Code is enacted that reduces the Dividends Received Percentage and such reduction retroactively applies to a Dividend Payment Date as to which the Corporation previously paid dividends on the Preferred Stock, Series E (each an "Affected Dividend Payment Date"), holders of the Preferred Stock, Series E shall be entitled to receive as, if and when declared by the Board of Directors or the Stock Committee, out of funds legally available for that purpose, additional dividends (the "Additional Dividends") on the next succeeding Dividend Payment Date (or if such amendment is enacted after the dividend payable on such Dividend Payment Date has been declared, on the second succeeding Dividend Payment Date following the date of enactment) to holders of record on such succeeding Dividend Payment Date in an amount equal to the excess of (x) the product of the dividends paid by the Corporation on each Affected Dividend Payment Date and the DRD Formula (where the DRP used in the DRD Formula would be equal to the Dividends Received Percentage applied to each Affected Dividend Payment Date) and (y) the dividends paid by the Corporation on each Affected Dividend Payment Date. Additional Dividends will not be paid in respect of the enactment of any amendment to the Code if such amendment would not result in an adjustment due to the Corporation having received either an opinion of counsel or tax ruling referred to in paragraph (viii) above. The Corporation shall only make one payment of Additional Dividends. (xi) In the event that the amount of dividend payable per share of the Preferred Stock, Series E, shall be adjusted pursuant to the DRD Formula and/or Additional Dividends are to be paid, the Corporation will cause notice of each such adjustment and, if applicable, any Additional Dividends, to be sent to the holders of the Preferred Stock, Series E. (c) So long as any shares of the Preferred Stock, Series E, are outstanding, no full dividends shall be declared or paid or set apart for payment on the preferred stock of the Corporation of any series ranking, as to dividends, on a parity with or junior to the Preferred Stock, Series E, for any period unless full dividends for the Dividend Period immediately preceding the date of payment of such full dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Preferred Stock, Series E. When dividends are not paid in full, as aforesaid, upon the shares of the Preferred Stock, Series E, and any other preferred stock of the Corporation ranking on a parity as to dividends with the Preferred Stock, Series E, all dividends declared upon shares of the Preferred Stock, Series E, and any other preferred stock of the Corporation ranking on a parity as to dividends (whether dividends on such other preferred stock are cumulative or noncumulative) with the Preferred Stock, Series E, shall be declared pro rata so that the amount of dividends declared per share on the Preferred Stock, Series E, and such other preferred stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Preferred Stock, Series E (but without any cumulation in respect of unpaid dividends for Dividend Periods prior to the immediately preceding Dividend Period on the Preferred Stock, Series E and any other noncumulative preferred stock) and such other preferred stock bear to each other. Holders of shares of the Preferred Stock, Series E shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full dividends, as herein provided, on the Preferred Stock, Series E. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment on the Preferred Stock, Series E which may be in arrears. (d) So long as any shares of the Preferred Stock, Series E are outstanding, no dividend (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of stock ranking junior to the Preferred Stock, Series E, as to dividends and upon liquidation and other than as provided in subsection (c) of this Section (2)) shall be declared or paid or set aside for payment or other distribution declared or made upon any stock of the Corporation ranking junior to or on a parity with the Preferred Stock, Series E, as to dividends or upon liquidation, nor shall any stock of the Corporation ranking junior to or on a parity with the Preferred Stock, Series E, as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Preferred Stock, Series E, as to dividends and upon liquidation) unless, in each case, full dividends for the immediately preceding Dividend Period shall have been paid or set apart for payment and the Corporation is not in default with respect to any redemption of shares of Preferred Stock, Series E, announced by the Corporation pursuant to Section (4) below. (3) LIQUIDATION PREFERENCE. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of any series or class or classes of stock of the Corporation ranking junior to the Preferred Stock, Series E, upon liquidation, dissolution or winding up, the holders of the shares of the Preferred Stock, Series E, shall be entitled to receive $50 per share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of the Preferred Stock, Series E, shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other preferred stock ranking, as to liquidation, dissolution or winding up, on a parity with the Preferred Stock, Series E, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Preferred Stock, Series E, and any such other preferred stock ratably in accordance with the respective amounts which would be payable on such shares of Preferred Stock, Series E, and any such other preferred stock if all amounts payable thereon were paid in full. For the purposes of this Section (3), a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary. (b) Subject to the rights of holders of shares of any series or class or classes of stock ranking on a parity with or prior to the Preferred Stock, Series E, as to distribution of assets upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of Preferred Stock, Series E, as provided in this Section (3), but not prior thereto, any other series or class or classes of stock ranking junior to the Preferred Stock, Series E, upon liquidation shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Preferred Stock, Series E, shall not be entitled to share therein. (4) REDEMPTION. (a) Except as provided in subsections (b) and (c) of this Section (4), the Preferred Stock, Series E, may not be redeemed prior to July 1, 2001. At any time or from time to time on and after July 1, 2001, the Corporation, at its option, may, with prior Federal Reserve Board approval to the extent then required by applicable law, redeem shares of the Preferred Stock, Series E, in whole or in part, out of funds legally available therefor, at a redemption price of $50 per share, together in each case with accrued and unpaid dividends (whether or not declared) from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date fixed for redemption. (b) If the Dividends Received Percentage is equal to or less than 40% and, as a result, the amount of dividends on the Preferred Stock, Series E payable on any Dividend Payment Date will be or is adjusted upwards as described in paragraph 2(b)(viii) above, the Corporation, at its option, with prior Federal Reserve Board approval to the extent then required by applicable law, may redeem all, but not less than all, of the outstanding shares of the Preferred Stock, Series E, out of funds legally available therefor, provided, that within sixty days of the date on which an amendment to the Code is enacted which reduces the Dividends Received Percentage to 40% or less, the Corporation sends notice to holders of the Preferred Stock, Series E of such redemption in accordance with subsection (d) below. Any redemption of the Preferred Stock, Series E in accordance with this subsection (b) shall be on notice as aforesaid at the applicable redemption price set forth in the following table, in each case plus accrued and unpaid dividends (whether or not declared) from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date fixed for redemption. REDEMPTION PERIOD REDEMPTION PRICE PER SHARE ----------------- -------------------------- June 21, 1996 to June 30, 1997 $52.50 July 1, 1997 to June 30, 1998 52.00 July 1, 1998 to June 30, 1999 51.50 July 1, 1999 to June 30, 2000 51.00 July 1, 2000 to June 30, 2001 50.50 On or after July 1, 2001 50.00 (c) The Corporation, at its option, may, with prior Federal Reserve Board approval to the extent then required by applicable law, redeem all, but not less than all, of the outstanding shares of the Preferred Stock, Series E, out of funds legally available therefor if the holders of the shares of the Preferred Stock, Series E, shall be entitled to vote upon or consent to a merger or consolidation of the Corporation as provided in Section 11 below and all of the following conditions have been satisfied: (i) the Corporation shall have requested the vote or consent of the holders of the Preferred Stock, Series E, to the consummation of such merger or consolidation, stating in such request that failing the requisite favorable vote or consent the Corporation will have the option to redeem the Preferred Stock, Series E, (ii) the Corporation shall not have received the favorable vote or consent requisite to the consummation of the transaction within 60 days after making such written request (which shall be deemed to have been made upon the mailing of the notice of any meeting of holders of the Preferred Stock, Series E, to vote upon such merger or consolidation or the mailing of the form of written consent to be signed by such holders), and (iii) such transaction shall be consummated on the date fixed for such redemption, which date shall be no more than one year after such request is made. Any such redemption shall be on notice as set forth in subsection (d) of this Section 4 at a redemption price of $50 per share of the Preferred Stock, Series E, together with accrued and unpaid dividends, if any, from the immediately preceding dividend payment date (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E) to the date fixed for redemption. (d) In the event the Corporation shall redeem shares of Preferred Stock, Series E, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Corporation. Each such notice shall state: (1) the redemption date; (2) the number of shares of Preferred Stock, Series E, to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (5) that dividends on the shares to be redeemed will cease to accrue on such redemption date. Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Corporation in providing money for the payment of the redemption price, together with accrued and unpaid dividends from the immediately preceding dividend payment date to the date of redemption) dividends on the shares of the Preferred Stock, Series E, so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price, together with accrued and unpaid dividends from the immediately preceding dividend payment date, whether or not declared) shall cease. The Corporation's obligation to provide moneys in accordance with the preceding sentence shall be deemed fulfilled if, on or before the redemption date, the Corporation shall deposit with a bank or trust company (which may be an affiliate of the Corporation) having an office in the Borough of Manhattan, City of New York, having a capital and surplus of at least $50,000,000, funds necessary for such redemption, in trust, with irrevocable instructions that such funds be applied to the redemption of the shares of Preferred Stock, Series E, so called for redemption. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of two years from such redemption date shall be released or repaid to the Corporation, after which the holder or holders of such shares of Preferred Stock, Series E, so called for redemption shall look only to the Corporation for payment of the funds necessary for such redemption. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the applicable redemption price aforesaid, together with accrued and unpaid dividends from the immediately preceding dividend payment date to the date of redemption. If less than all the outstanding shares of Preferred Stock, Series E, are to be redeemed, shares to be redeemed shall be selected by the Corporation from outstanding shares of Preferred Stock, Series E, not previously called for redemption by lot or pro rata (as nearly as may be) or by any other method determined by the Corporation in its sole discretion to be equitable. If fewer than all the shares represented by any certificate are redeemed a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (e) In no event shall the Corporation redeem less than all the outstanding shares of Preferred Stock, Series E, pursuant to subsection (a) of this Section (4) unless full dividends shall have been paid or declared and set apart for payment upon all outstanding shares of Preferred Stock, Series E, for the Dividend Period immediately preceding the date of redemption (but without any cumulation for unpaid dividends for prior Dividend Periods on the Preferred Stock, Series E). (5) SHARES TO BE RETIRED. All shares of Preferred Stock, Series E, purchased or redeemed by the Corporation shall be retired and canceled and the Board of Directors shall cause to be taken all action necessary to restore such shares to the status of authorized but unissued shares of preferred stock, without designation as to series, and such shares may thereafter be issued, but not as shares of Preferred Stock, Series E. (6) CONVERSION OR EXCHANGE. The holders of shares of Preferred Stock, Series E, shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock (or any other security) of the Corporation. (7) RANKING. Any class or series of stock of the Corporation shall be deemed to rank: (i) prior to the Preferred Stock, Series E, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, if holders of such class shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Preferred Stock, Series E; (ii) on a parity with the Preferred Stock, Series E, as to dividends or as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Preferred Stock, Series E, if the holders of such class of stock and the Preferred Stock, Series E (whether or not such class of stock is cumulative or noncumulative as to payment of dividends) shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation prices, without preference or priority one over the other (except with respect to the cumulation of dividends on such class of stock); and (iii) junior to the Preferred Stock, Series E, as to dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock shall be common stock or if the holders of Preferred Stock, Series E, shall be entitled to receipt of dividends or of amounts distributable upon dissolution, liquidation or winding up, as the case may be, in preference or priority to the holders of shares of such stock. Accordingly, the Preferred Stock, Series E, shall be deemed to rank on a parity with all other series of preferred stock of the Corporation (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) outstanding on the date on which this Certificate of Designation is first filed with the Secretary of State of the State of Delaware. (8) EXCLUSION OF OTHER RIGHTS. Unless otherwise required by law, shares of Preferred Stock, Series E, shall not have any rights, including preemptive rights, or preferences other than those specifically set forth herein or as provided by applicable law. (9) NOTICES. All notices or communications, unless otherwise specified in the Bylaws of the Corporation or the Restated Certificate of Incorporation, as amended, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid to the holders of record of the Preferred Stock, Series E. Notice shall be deemed given on the earlier of the date received or the date such notice is mailed. (10) RECORD HOLDERS. The Corporation and the transfer agent for the Preferred Stock, Series E, may deem and treat the record holder of any share of such Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor such transfer agent shall be affected by any notice to the contrary. (11) VOTING RIGHTS. Except as hereinafter set forth in this Section (11) or as otherwise from time to time required by law, the Preferred Stock, Series E, shall have no voting rights. Whenever, at any time or times, dividends payable on the Preferred Stock, Series E, shall be unpaid for such number of dividend periods, whether or not consecutive, which shall in the aggregate contain not less than 540 days, the holders of the outstanding Preferred Stock, Series E, shall have the exclusive right, voting separately as a class with holders of shares of any one or more other series of preferred stock ranking on a parity with the Preferred Stock, Series E, either as to dividends (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) or on the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable, to elect two directors of the Corporation at the Corporation's next annual meeting of stockholders and at each subsequent annual meeting of stockholders. At elections for such directors, each holder of the Preferred Stock, Series E, shall be entitled to one vote for each share held (the holders of shares of any other series of preferred stock ranking on such a parity being entitled to such number of votes, if any, for each share of stock held as may be granted to them). Upon the vesting of such right of such holders, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of such outstanding shares of the Preferred Stock, Series E (either alone or together with the holders of shares of any one or more other series of preferred stock ranking on such a parity and upon which like voting rights have been conferred and are exercisable) as hereinafter set forth. The right of such holders of such shares of the Preferred Stock, Series E, voting separately as a class, to elect (together with the holders of shares of any one or more other series of preferred stock ranking on such a parity and upon which like voting rights have been conferred and are exercisable) members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends on the Preferred Stock, Series E, shall have been paid in full for at least one year, at which time such right shall terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. Upon any termination of the right of the holders of the Preferred Stock, Series E, as a class to vote for directors as herein provided, the term of office of all directors then in office elected by such holders voting as a class shall terminate immediately. If the office of any director elected by such holders voting as a class becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the remaining director elected by such holders voting as a class may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. Whenever the term of office of the directors elected by such holders voting as a class shall end and the special voting powers vested in such holders as provided in this Section (11) shall have expired, the number of directors shall automatically be decreased to such number as may be provided for in the By-Laws irrespective of any increase made pursuant to the provisions of this Section (11). So long as any shares of the Preferred Stock, Series E, remain outstanding, the consent of the holders of at least two-thirds of the shares of the Preferred Stock, Series E, outstanding at the time (voting separately as a class together with all other series of preferred stock ranking on a parity with such series either as to dividends (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) or the distribution of assets upon liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) given in person or by proxy, either in writing or at any special or annual meeting called for the purpose, shall be necessary to permit, effect or validate any one or more of the following: (a) The authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of stock ranking prior to the Preferred Stock, Series E, with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, or (b) The amendment, alteration or repeal, whether by merger, consolidation or otherwise, of any of the provisions of the Restated Certificate of Incorporation, as amended, or of the resolution contained in this Certificate of Designations for the Preferred Stock, Series E, and the powers, preferences and privileges, relative, participating, optional and other special rights and qualifications, limitations and restrictions thereof which would materially and adversely affect any right, preference, privilege or voting power of the Preferred Stock, Series E, or of the holders thereof; provided, however, that any increase in the amount of authorized preferred stock or the creation and issuance of other series of preferred stock, or any increase in the amount of authorized shares of the Preferred Stock, Series E, or of any other series of preferred stock, in each case ranking on a parity with or junior to the Preferred Stock, Series E, with respect to the payment of dividends (whether or not such other series of preferred stock is cumulative or noncumulative as to payment of dividends) and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to such vote would otherwise be required shall be effected, all outstanding shares of the Preferred Stock, Series E, shall have been redeemed or sufficient funds shall have been deposited in trust to effect such redemption, scheduled to be consummated within three months after such time. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed by Mark W. Yonkman, its Vice President and Assistant Secretary, as of the 18th day of June, 1996. COMERICA INCORPORATED By: /S/ MARK W. YONKMAN ------------------------------ Mark W. Yonkman Its: Vice President and Assistant Secretary EX-3.2 3 AMENDED AND RESTATED BYLAWS OF COMERICA INC. EXHIBIT 3.2 AS AMENDED AND RESTATED ON SEPTEMBER 20, 1996 AMENDED AND RESTATED BYLAWS OF COMERICA INCORPORATED ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS SECTION 1. PLACE OF MEETING. All meetings of the shareholders of this Corporation shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. SECTION 2. ANNUAL MEETING OF SHAREHOLDERS. The annual meeting of shareholders shall be held on the third Friday of May, if not a legal holiday, and if a legal holiday then the next secular day following, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At said meeting, shareholders shall elect by a plurality vote the Directors to be elected at such meeting, and shall transact such other business as may properly be brought before the meeting. SECTION 3. NOTICE OF MEETING OF SHAREHOLDERS. Written notice of every meeting of shareholders stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each shareholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. SECTION 4. LIST OF SHAREHOLDERS ENTITLED TO VOTE. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. SECTION 5. SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chairman of the Board of Directors or, during the absence or disability of the Chairman or while that office is vacant, by the President and shall be called by the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of shareholders owning, in the aggregate, at least seventy-five percent (75%) in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote at such special meeting. Such request shall state the purpose or purposes of the proposed meeting. SECTION 6. QUORUM OF SHAREHOLDERS. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. SECTION 7. REQUIRED VOTE. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which a different vote is required by statute or by the Certificate of Incorporation. 2 Section 8. VOTING. Unless otherwise provided in the Certificate of Incorporation or in a certificate filed pursuant to Section 151(g) of the General Corporation Law of Delaware, as amended, each shareholder shall at every meeting of the shareholders be entitled to one vote, in person or by proxy, for each share of the capital stock having voting power held by such shareholder, but no proxy shall be voted on after three (3) years from its date, unless the proxy provides for a longer period. Section 9. NATURE OF BUSINESS. At any meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting by or at the direction of the Board of Directors or by any shareholder who complies with the procedures set forth in this Section 9. No business may be transacted at any meeting of shareholders, other than business that is either: (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof); (b) otherwise properly brought before such meeting of shareholders by or at the direction of the Board of Directors (or any duly authorized committee thereof); or (c) in the case of an annual meeting of shareholders, otherwise properly brought before such meeting by any shareholder (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of shareholders entitled to vote at such annual meeting of shareholders; and (ii) who complies with the notice procedures set forth in this Section 9. In addition to any other applicable requirements, for business to be properly brought before an annual meeting of shareholders by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting of shareholders was mailed or public disclosure of the date of the annual meeting of shareholders was made, whichever first occurs. To be in proper written form, a shareholder's notice to the Secretary of the Corporation must set forth as to each matter such shareholder proposes to bring before the annual meeting of shareholders: (i) a brief description of the business desired to be brought before the annual meeting of shareholders and the reasons for conducting such business at the annual meeting of shareholders; (ii) the name and record address of such shareholder; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder as of the record 3 date for the meeting (if such date shall then have been made publicly available and shall have occurred); (iv) as of the date of such notice, a description of all arrangements or understandings between such shareholder an any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business; (v) any other information which would be required to be disclosed in a proxy statement or other filings required to be made in connection with the solicitation of proxies for the proposal pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder if such shareholder were engaged in such a solicitation; and (vi) a representation that such shareholder intends to appear in person or by proxy at the annual meeting of shareholders to bring such business before the meeting. No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting of shareholders in accordance with the procedures set forth in this Section 9, provided however, that once business has been properly brought before the annual meeting of shareholders in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any shareholder of any such business. If the Chairman of an annual meeting of shareholders determines that business was not properly brought before the annual meeting of shareholders in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. When a meeting is adjourned to another time or place, notice of the adjourned meeting need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than 30 days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which case notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting as originally notified. ARTICLE III DIRECTORS SECTION 1. POWERS. The business of the Corporation shall be managed by or under the direction of its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. SECTION 2. LOCATION OF MEETINGS. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. SECTION 3. ORGANIZATION MEETING OF BOARD. The first meeting of each newly elected Board of Directors shall be held at the place of holding the annual meeting of shareholders, and immediately following the same, for the purpose of electing officers 4 and transacting any other business properly brought before it, provided that the organization meeting in any year may be held at a different time and place than that herein provided by a consent of a majority of the Directors of such new Board. No notice of such meeting shall be necessary to the newly elected Directors in order legally to constitute the meeting, provided a quorum shall be present, unless said meeting is not held at the place of holding and immediately following the annual meeting of shareholders. SECTION 4. REGULAR MEETINGS OF BOARD. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. SECTION 5. SPECIAL MEETINGS OF BOARD. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or, during the absence or disability of the Chairman or while that office is vacant by the President on one (1) day's notice to each director; and special meetings shall be called by the President or Secretary on like notice on the written request of five or more Directors. SECTION 6. QUORUM AND REQUIRED VOTE. At all meetings of the Board of Directors a majority of the total number of Directors shall constitute a quorum for the transaction of business and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 7. CONSENT OF DIRECTORS IN LIEU OF MEETING. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any Committee thereof may be taken without a meeting if all members of the Board or Committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or Committee. SECTION 8. COMMITTEES OF DIRECTORS. (a) GENERAL AUTHORITY. The Board of Directors may, to the fullest extent permitted by Section 141(c)(2) of the Delaware General Corporation Law as the same may be hereinafter amended from time to time, designate one or more Committees, each Committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any Committee, who may replace any absent or disqualified member at any meeting of the Committee. In the absence or disqualification of a member of a Committee, the member or members present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any 5 such Committee, to the extent provided in the resolution of the Board of Directors, or in these Bylaws shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such Committee shall have the power or authority in reference to the following matters (except as permitted by Delaware General Corporation Law as the same may be hereinafter amended from time to time): (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required to be submitted to stockholders for approval; or (ii) adopting, amending or repealing any Bylaw of the Corporation. (b) DIRECTORS COMMITTEE. The Board of Directors may establish a Directors Committee of the Board of Directors. The Directors Committee may: (i) nominate candidates for election as Directors of the Corporation at any meeting of shareholders called for election of Directors (an "Election Meeting"); (ii) nominate candidates to fill any vacancies on the Board of Directors which may exist from time to time; and (iii) have such other powers and authority as the Board of Directors may delegate to it from time to time. (c) MNC INDEMNIFICATION COMMITTEE. Until June 18, 1998, there shall be an MNC Indemnification Committee consisting of all the directors of the Corporation who were directors of Manufacturers National Corporation ("MNC") immediately prior to June 18, 1992. The MNC Indemnification Committee shall make all determinations necessary with respect to the Corporation's indemnification obligations pursuant to Section 5.13 of the Agreement and Plan of Merger, dated as of October 27, 1991, between the Corporation and MNC (the "Merger Agreement"). (d) COMERICA INDEMNIFICATION COMMITTEE. Until June 18, 1998, there shall be a Comerica Indemnification Committee consisting of all the directors of the Corporation immediately prior to June 18, 1992. The Comerica Indemnification Committee shall make all determinations necessary with respect to the Corporation's indemnification obligations pursuant to the Corporation's Bylaws prior to June 18, 1992. Section 9. COMMITTEE MINUTES. Each Committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. SECTION 10. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending Committee meetings. 6 SECTION 11. PARTICIPATION IN MEETING BY TELEPHONE. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or any Committee designated by the Board of Directors may participate in a meeting of the Board of Directors or Committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 12. NOMINATIONS OF DIRECTOR CANDIDATES. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of shareholders, or at any special meeting of shareholders called for the purpose of electing directors, shall be made: (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof, including the Directors' Committee); or (b) by any shareholder of the Corporation: (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 12 and on the record date for the determination of shareholders entitled to vote at such meeting; and (ii) who complies with the notice procedures set forth in this Section 12. In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice to the Secretary of the Corporation must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an annual meeting of shareholders, not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of shareholders; provided, however, that in the event that the annual meeting of shareholders is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the shareholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which notice of the date of the annual meeting of shareholders was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of shareholders called for the purpose of electing directors, not later than the close of business on the tenth (l0th) day following the day on which notice of the date of the special meeting of shareholders was mailed or public disclosure of the date of the special meeting of shareholders was made, whichever first occurs. 7 To be in proper written form, a shareholder's notice to the Secretary of the Corporation must set forth: (a) as to each person whom the shareholder proposes to nominate for election as a director: (i) the name, age, business address and residence address of the person; (ii) the principal occupation or employment of the person; (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to section 14 of the Exchange Act, and the rules and regulations promulgated thereunder; and (b) as to the shareholder giving the notice: (i) the name and record address of such shareholder; (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such shareholder as of the record date for the meeting (if such date shall then have been made publicly available and shall have occurred) and as of the date of such notice; (iii) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nominations are to be made by such shareholder; (iv) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by the written consent to such nomination of each person proposed as a nominee and such person's written consent to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 12. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. ARTICLE IV NOTICES SECTION 1. NOTICE. Whenever any notice is required to be given to any director or shareholder under any provision of statute or of the Certificate of Incorporation or of these Bylaws, 8 it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to Directors may also be given orally in person or by telegram, telex, radiogram or cablegram, and such notice shall be deemed to be given when the recipient receives the notice personally, by telephone or when the notice, addressed as provided above, has been delivered to the company, or to the equipment transmitting such notice. SECTION 2. WAIVER OF NOTICE. Whenever any notice is required to be given under any provision of statute or of the Certificate of Incorporation or of these Bylaws, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, Directors, or members of a Committee of Directors need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE V OFFICERS SECTION 1. SELECTION. The Board of Directors may appoint such officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The officers so appointed may include a Chairman of the Board, President, one or more Vice Chairmen, one or more Vice Presidents (including Executive, Senior, First, regular and Assistant Vice Presidents), a Secretary and a Treasurer, and one or more lesser officers as may be deemed appropriate. The Chief Executive Officer may also appoint officers of the level of Senior Vice President and below as he shall deem necessary, at any time, which officers shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board or the Chief Executive Officer. Any number of offices may be held by the same person, unless the Certificate of Incorporation otherwise provides. SECTION 2. COMPENSATION. The salaries of all executive officers of the Corporation shall be fixed by the Board of Directors. 9 SECTION 3. TERM, REMOVAL AND VACANCIES. Each officer of the Corporation shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Additionally, any officer of the level of regular Vice President or below may also be removed at any time by the Chief Executive Officer. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. Any vacancy occurring in any office of the Corporation of the level of regular Vice President or below may also be filled by the Chief Executive Officer. SECTION 4. CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER. (a) CHIEF EXECUTIVE OFFICER. At the first meeting of each newly-elected Board of Directors, the Board shall designate the Chairman of the Board or President as the chief executive officer of the Corporation; provided, however, that if a motion is not made and carried to change the designation, the designation shall be same as the designation for the preceding year; provided, further, that the designation of the chief executive officer may be changed at any regular or special meeting of the Board of Directors. The chief executive officer shall be responsible to the Board of Directors for the general supervision and management of the business and affairs of the Corporation. The Chairman of the Board or President who is not the chief executive officer shall be subject to the authority of the chief executive officer, but shall exercise all of the powers and discharge all of the duties of the chief executive officer, during the absence or disability of the chief executive officer. (b) CHIEF OPERATING OFFICER. At any meeting of the Board of Directors, the Board may designate a chief operating officer of the Corporation. The chief operating officer shall perform such duties as may be delegated to him or her by the Board of Directors, the Executive Committee of the Board or the Chairman of the Board. SECTION 5. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors shall be selected by, and from among the membership of, the Board of Directors. He shall preside at all meetings of the shareholders and of the Board of Directors. He shall perform such other duties and functions as shall be assigned to him from time to time by the Board of Directors. He shall be, ex officio, a member of all standing committees except the Select Compensation Committee and the Audit and Legal Committee. Except where by law the signature of the President of this Corporation is required, the Chairman of the Board of Directors shall possess the same power and authority as the President to sign all certificates, contracts, instruments, papers and documents of every conceivable kind and character whatsoever, in the name of and on behalf of this Corporation, which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all of the powers and discharge all of the duties of the President. 10 SECTION 6. PRESIDENT. The President shall be selected by, and from among the membership of, the Board of Directors. During the absence or disability of the Chairman of the Board of Directors, or while such office is vacant, the President shall perform all duties and functions, and while so acting shall have all of the powers and authority, of the Chairman of the Board of Directors. The President shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors. The President shall be, ex officio, a member of all standing committees except the Select Compensation Committee and the Audit and Legal Committee. SECTION 7. VICE CHAIRMEN. One or more Vice Chairmen may be chosen from the membership of the Board. Unless the Board of Directors shall otherwise provide by resolution duly adopted by it, such of the Vice Chairmen who are members of the Board of Directors in the order specified by the Board of Directors shall perform the duties and exercise the powers of the President during the absence or disability of the President. The Vice Chairmen shall perform such other duties as may be delegated to them by the Board of Directors, any executive committee, or the President. SECTION 8. SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all the proceedings thereof in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, all notices required by statute, Bylaw or resolution, and shall perform such other duties as may be prescribed by the Board of Directors or President. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary and Assistant Secretaries shall have authority to affix the same to any instrument when its use is required or appropriate. SECTION 9. ASSISTANT SECRETARIES. The Assistant Secretary or Assistant Secretaries shall, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECTION 10. TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall deliver to the Corporation, and shall keep in force, a bond, in such form, amount, and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of the duties of his or her office and for the 11 restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. SECTION 11. ASSISTANT TREASURERS. The Assistant Treasurer or Assistant Treasurers shall, in the absence of the Treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECTION 12. INDEMNIFICATION AND INSURANCE. (a) To the fullest extent permitted by applicable law and regulation, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Any person who is or was an agent of the Corporation may be indemnified to the same extent as hereinabove provided. In addition, in the event any such action, suit or proceeding is threatened or instituted against a spouse to whom a director or officer is legally married at the time such director or officer is covered under the indemnification provided herein which action, suit or proceeding arises solely out of his or her status as the spouse of a director or officer, including, without limitation, an action, suit or proceeding that seeks damages recoverable from marital community property of the director or officer and his or her spouse, property owned jointly by them or property purported to have been transferred from the director or officer to his or her spouse, then the spouse of the director or officer shall be indemnified to the same extent as provided above. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, raise any inference that he or she had reasonable cause to believe that his or her conduct was unlawful. (b) To the fullest extent permitted by applicable law and regulation, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the Corporation to procure 12 a judgment in its favor by reason of the fact that he or she is or was a director, officer or employee of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Any person who is or was an agent of the Corporation may be indemnified to the same extent as hereinabove provided. In addition, in the event any such action or suit is threatened or instituted against a spouse to whom a director or officer is legally married at the time such director or officer is covered under the indemnification provided herein which action or suit arises solely out of his or her status as the spouse of a director or officer, including, without limitation, an action or suit that seeks damages recoverable from marital community property of the director or officer and his or her spouse, property owned jointly by them or property purported to have been transferred from the director or officer to his or her spouse, then the spouse of the director or officer shall be indemnified to the same extent as provided above. (c) To the extent that a director, officer, spouse of the director or officer, employee, or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this Section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. (d) Any indemnification under subsections (a) and (b) of this Section (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, spouse of the director or officer, employee, or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in subsections (a) and (b) of this Section. Such determination shall be made (i)by a majority vote of Directors who were not parties to the action, suit or proceeding, even if they constitute less than a quorum, or (ii) if there are no such disinterested directors, or if a majority of such disinterested directors so directs, by independent legal counsel chosen by the entire Board of Directors, subject to the reasonable satisfaction of the party seeking indemnification, in a written opinion, or (iii) by the shareholders. (e) Expenses (including attorney's fees) incurred by an officer, director, or spouse of an officer or director, in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such 13 action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer or spouse to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. (g) The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, spouse of a director or officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Section. (h) For the purposes of this Section, references to "the Corporation" include, in addition to the resulting or surviving corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers, spouses of directors or officers, and employees or agents, so that any person who is or was a director, officer, spouse of a director or officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this Section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Section. 14 (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent, and with respect to any spouse of a director or officer, shall continue following the time the director or officer spouse ceases to be a director or officer even if the marriage of the individuals terminates prior to the end of the period of coverage, and shall inure to the benefit of the heirs, executors and administrators of such a person. (k) The Court of Chancery shall have exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this Section or under any agreement, vote of shareholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine the Corporation's obligation to advance expenses (including attorneys' fees). SECTION 13. OFFICERS APPOINTED PURSUANT TO MERGER AGREEMENT. During the period in which the Employment Agreement, dated as of February 20, 1992, between the Corporation and Mr. Gerald V. MacDonald, and the Employment Agreement, entered into as of February 20, 1992, between the Corporation and Mr. Eugene A. Miller (the "Employment Agreements") are in effect, any modification, amendment or failure to honor the terms of either of such Employment Agreements shall require the affirmative vote of 75% of the members of the entire Board of Directors. ARTICLE VI STOCK AND TRANSFERS SECTION 1. CERTIFICATES OF STOCK. Every holder of stock in the Corporation shall be entitled to have a certificate signed by, or in the name of the Corporation by, the Chairman of the Board of Directors, or the President or a Vice President and the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by him in the Corporation. If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the Certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences and relative, participating optional or other special rights 15 of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Any of or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. SECTION 2. LOST CERTIFICATES. The Board of Directors may direct a new certificate to be issued in the place of any certificate theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing the issuance of a new certificate the Board of Directors may, in its discretion and as a condition present to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against it with respect to the certificate alleged to have been lost, stolen or destroyed. SECTION 3. TRANSFERS OF STOCK. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 4. FIXING RECORD DATE. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 5. REGISTERED SHAREHOLDERS. The Corporation shall have the right to treat the person registered on its books as the owner of shares as the absolute owner thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 16 ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS. The Board of Directors, subject to any restrictions contained in its Certificate of Incorporation, may declare and pay any dividends upon the shares of its capital stock either (a) out of surplus as defined in and computed in accordance with the provisions of the governing statute, or (b) in case there shall be no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Dividends may be paid in cash, in property, or in shares of the Corporation's capital stock, subject to the provisions of the statute and of the Certificate of Incorporation. SECTION 2. RESERVES. The Board of Directors shall have power and authority to set apart, out of any funds available for dividends, such reserve or reserves, for any proper purpose, as the Board in its discretion shall approve, and the Board shall have the power and authority to abolish any reserve created by the Board. SECTION 3. VOTING SECURITIES. Unless otherwise directed by the Board, the Chairman of the Board or President, or, in the case of their absence or inability to act, the Vice Presidents, in order of their seniority, shall have full power and authority on behalf of the Corporation to attend and to act and to vote, or to execute in the name or on behalf of the Corporation a proxy authorizing an agent or attorney-in-fact for the Corporation to attend and vote at any meetings of security holders of Corporations in which the Corporation may hold securities, and at such meetings he or his duly authorized agent or attorney-in-fact shall possess and may exercise any and all rights and powers incident to the ownership of such securities and which, as the owner thereof, the Corporation might have possessed and exercised if present. The Board by resolution from time to time may confer like power upon any other person or persons. SECTION 4. CHECKS. All checks, drafts and orders for the payment of money shall be signed in the name of the Corporation in such manner and by such officer or officers or such other person or persons as the Board of Directors shall from time to time designate for that purpose. SECTION 5. CONTRACTS, CONVEYANCES, ETC. When the execution of any contract, conveyance or other instruments has been authorized without specification of the executing officers, the Chairman of the Board, President or any Vice President, and the Secretary or Assistant Secretary, may execute the same in the name and on behalf of this Corporation and may affix the corporate seal thereto. The Board of Directors shall have power to designate the officers and agents who shall have authority to execute any instrument in behalf of this Corporation. SECTION 6. FISCAL YEAR. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. 17 SECTION 7. SEAL. The corporate seal shall have inscribed thereon the name of the Corporation and the words "Corporate Seal" and "Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 8. MICHIGAN CONTROL SHARE STATUTE. Pursuant to Section 794 of the Michigan Business Corporation Act ("MBCA"), Chapter 7B of the MBCA shall not apply to the Corporation or control share acquisitions (as such term is defined in Section 791 of the MBCA) of the shares of the Corporation's capital stock. ARTICLE VIII AMENDMENTS SECTION 1. AMENDMENT BY REGULAR VOTE. These bylaws may be altered, amended or repealed or new Bylaws may be adopted by the shareholders or by the Board of Directors, when such power is conferred upon the Board of Directors by the Certificate of Incorporation, at any regular meeting of the shareholders or of the Board of Directors or at any special meeting of the shareholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new Bylaws be contained in the notice of such special meeting. SECTION 2. AMENDMENT BY 75% VOTE. The affirmative vote of 75% of the total Board of Directors is required to alter, amend, repeal, add to or otherwise change the effects of Article III, Sections 8(b), (c) or (d); Article V, Section 13; or this Article VIII, Section 2 of the Corporation's Bylaws. 18 EX-10.1 4 COMERICA INC. 1997 LONG-TERM INCENTIVE PLAN Exhibit 10.1 COMERICA INCORPORATED 1997 LONG-TERM INCENTIVE PLAN SECTION 1. PURPOSE. The purpose of Comerica's Long-Term Incentive Plan is to align the interests of employees of the Corporation selected to receive awards with those of shareholders by rewarding long term decision-making and actions for the betterment of the Corporation. Accordingly, eligible individuals may receive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Awards and Other Stock-Based Awards. Ownership of the Corporation's stock assists in the attraction and retention of qualified employees, and provides them with additional incentive to devote their best efforts to pursue and sustain the Corporation's superior long-term performance. This enhances the value of the Corporation for the benefit of its shareholders. SECTION 2. DEFINITIONS. A. "Affiliate" means (i) any entity that is controlled by the Corporation, whether directly or indirectly, and (ii) any entity in which the Corporation has a significant equity interest, as determined by the Committee. B. "Agreement" means a written agreement, in a form approved by the Committee, which sets forth the terms and conditions of an Award. Agreements shall be subject to the express terms and conditions set forth herein, and to such other terms and conditions not inconsistent with the Plan as the Committee shall deem appropriate. C. "Award" means an Option, a Stock Appreciation Right, a Restricted Stock Award, a Performance Award or an Other Stock-Based Award pursuant to the Plan. Each Award shall be evidenced by an Agreement. D. "Award Recipient" means an Eligible Individual who has received an Award under the Plan. E. "Beneficiary" means any person(s) designated by an Award Recipient on a beneficiary designation form, or any person(s) entitled to receive any amounts owing to such Award Recipient under this Plan upon his or her death by reason of having been named in the Award Recipient's will or trust agreement or having qualified as a taker of the Award Recipient's property under the laws of intestacy. If an Award Recipient authorizes any person, in writing, to exercise such individual's Options or SARs following the Award Recipient's death, the term "Beneficiary" shall include any person in whose favor such Options or SARs are exercised by the person authorized to exercise the Options or SARs. 1 F. "Board" means the Board of Directors of Comerica Incorporated. G. "Code" means the Internal Revenue Code of 1986, as amended. H. "Committee" means the committee appointed by the Board to administer the Plan as provided herein. Unless otherwise determined by the Board, the Compensation Committee of the Board shall be the Committee. I. "Corporation" means Comerica Incorporated, a Delaware corporation, and its Affiliates. J. "Disabled" or "Disability" means "Totally Disabled" within the meaning of such term as set forth in the Long-Term Disability Plan of Comerica Incorporated (the provisions of which are incorporated herein by reference), or as the Committee shall determine based on information provided to it. However, with respect to the rules relating to Incentive Stock Options, the term "Disabled" shall mean disabled as that term is utilized in Sections 422 and 22(e)(3) of the Code, or any successor Code provisions relating to ISOs. K. "Eligible Individual" means any employee of the Corporation or any Affiliate who the Committee determines to be an Eligible Individual. Notwithstanding the foregoing, an Eligible Individual for purposes of receipt of the grant of an ISO shall be limited to those individuals who are eligible to receive ISOs under rules set forth in the Code and applicable regulations. L. "Exchange Act" means the Securities Exchange Act of 1934, as amended. M. "Fair Market Value" means the closing price of a Share on the New York Stock Exchange as reported on the Composite Tape; if, however, there is no trading of Shares on the date in question, then the closing price of the Shares as so reported, on the last preceding date on which there was trading shall instead be used to determine Fair Market Value. If Fair Market Value for any date in question cannot be determined as provided above, Fair Market Value shall be determined by the Committee by whatever method or means the members, in the good faith exercise of their discretion, at that time shall deem appropriate. N. "Incentive Stock Option" or "ISO" means an Option granted pursuant to the Plan that meets the requirements of Section 422 of the Code, or any successor provision, and that is intended by the Committee to constitute an ISO. O. "Nonqualified Stock Option" or "NQSO" means an Option granted pursuant to the Plan that is not intended to be an Incentive Stock Option. P. "Option" means a Nonqualified Stock Option or an Incentive Stock Option. Q. "Other Stock-Based Award" means any right granted under Section 6(E) of the 2 Plan. R. "Performance Award" means any Award made pursuant to Section 6(D) of the Plan. S. "Performance Measures" means, with respect to each Award, the criteria and objectives, determined by the Committee, which must be met during the applicable Performance Period or Restriction Period, as the case may be, as a condition of the holder's receipt of payment with respect to, or retention of, such Award. Such criteria and objectives may include, but shall not be limited to, return on investments, cumulative earnings per share, or return on shareholders' equity. The Performance Measures pertinent to any Award shall be established at the time of the making of such Award and shall be set forth in the Agreement covering such Award, but may be revised by the Committee thereafter if and whenever its members determine that, in light of events occurring or circumstances arising after the date such Award is made, such revision is necessary or appropriate to afford the recipient benefits substantially similar to those originally intended with respect to such Award. T. "Performance Period" means the period designated by the Committee during which the Performance Measures applicable to an Award shall be measured. The Performance Period shall be established on or before the time of the making of the Award, and the length of any Performance Period shall be within the discretion of the Committee. U. "Plan" means the Comerica Incorporated 1997 Long-Term Incentive Plan. V. "Restriction Period" means the period designated by the Committee during which Shares of Restricted Stock remain forfeitable. W. "Restricted Stock Award" means an award of Shares pursuant to Section 6(C) of the Plan subject to such restrictions as may be imposed by the Committee. Shares of restricted stock shall constitute issued and outstanding Shares for all corporate purposes. X. "Retirement" means retirement in accordance with the policies of the Corporation or Affiliate which employs the Award Recipient. Y. "Shares" means shares of Common Stock, $5.00 par value, of the Corporation or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 8 of the Plan. Z. "Stock Appreciation Right" or "SAR" means a right granted under Section 6(B) of the Plan. AA. "Tax Withholding Date" shall mean the earliest date the obligation to withhold tax with respect to an Award arises. 3 SECTION 3. STOCK SUBJECT TO THE PLAN. Shares which may be issued pursuant to Awards under the Plan may be either authorized and unissued Shares, or authorized and issued Shares held in the Corporation's Treasury, Shares purchased in the open market or in private transactions or any combination of the foregoing. Subject to adjustment as provided in Section 8, as of the first day of each calendar year during which the Plan remains in effect, there shall be reserved for issuance for the purpose of Awards under the Plan that number of Shares which equals 1.6 percent of the Shares that were outstanding (including, for this purpose, any treasury shares) as of the close of business on the preceding December 31st. Not more than 49% of the Shares available for Awards each calendar year may be utilized for Awards other than Options. Shares reserved for issuance in any calendar year may only be utilized in connection with Awards made during the year in which they first become available, and may not be carried forward and utilized for the purpose of making Awards in future years. However, Shares covered by Awards which are canceled or forfeited may be reutilized to make Awards. Not more than 2,000,000 Shares (subject to adjustment as provided in Section 8) shall be available for issuance pursuant to the exercise of Incentive Stock Options. The maximum number of Shares which may become subject to Awards to any Eligible Individual during any calendar year shall be the lesser of (i) 10% of the Shares available for Awards during such calendar year, or (ii) 200,000 Shares. SECTION 4. ADMINISTRATION. The Plan shall be administered by the Committee. In addition to any implied powers and duties that may be needed to carry out the provisions of the Plan, the Committee shall have all the powers vested in it by the terms of the Plan, including exclusive authority to select Eligible Individuals, to make Awards, to determine the type, size, terms and timing of Awards (which need not be uniform), to accelerate the vesting of awards for any reason, including the occurrence of a change in control of the Corporation or the termination of an Award Recipient's employment, to permit or prohibit the transfer of Awards, and to prescribe the form of the Agreements governing Awards. The Committee may cancel all or any portion of any Award as a consequence of which the Award Recipient shall forfeit the renumeration attributable to such cancelled Award or portion thereof if, in its sole discretion, the Committee determines that the Award Recipient has engaged in conduct detrimental to the Corporation. The Committee may interpret the Plan and the Agreements entered into pursuant to the Plan, establish, amend and rescind rules and regulations relating to the Plan, make any other determinations it believes necessary or advisable in connection with the administration of the Plan, and correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Agreement in the manner and to the extent the Committee deems appropriate. Determinations of the Committee shall be made by a majority vote of its members at a meeting at which a quorum is present or pursuant to a unanimous written consent of its 4 members. A majority of the members of the Committee shall constitute a quorum. All Committee determinations shall be final, conclusive and binding on the Corporation, any Award Recipient, Beneficiary or other interested party. The Committee may authorize any one or more of its members, or any officer of the Corporation, to execute and deliver documents on behalf of the Committee. No member of the Committee shall be liable for any action or omission in connection with the Plan, except for his or her own willful misconduct. SECTION 5. ELIGIBILITY. Awards may only be made to Eligible Individuals. No member of the Committee shall be eligible to receive an Award under the Plan. SECTION 6. AWARDS. A. Options. The Committee may grant Options to Eligible Individuals in accordance with the provisions of this subsection subject to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine to be appropriate. 1. Exercise Price. The purchase price per Share under an Option shall be determined by the Committee; provided, however, that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option, and such purchase price may not be decreased during the term of the Option other than pursuant to Section 8. 2. Option Term. The term of each Option shall be fixed by the Committee. 3. Time and Manner of Exercise. The Committee shall determine the time or times at which an Option may be exercised, and the manner in which (including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) payment of the exercise price with respect thereto may be made, or deemed to have been made. Any form of "cashless" exercise of an Option which is legally permissible may be utilized under the Plan in connection with the exercise of an Option. 4. Employment Status. a. In General. Except as otherwise provided herein, any Option must be exercised during the period of the Award Recipient's employment with the Corporation or Affiliate. b. Retirement. Upon the Retirement of the Award Recipient, any Option held by such individual shall continue to be exercisable, provided the 5 term of the Option has not otherwise expired, for a period of three years subsequent to the date of the Award Recipient's Retirement (or, in the case of any ISO held by an optionee who is not Disabled, for a period of three months subsequent to such retirement date). c. Disability. Upon the cessation of the Award Recipient's employment due to Disability, any Option held by such individual shall continue to be exercisable, provided the term of the Option has not otherwise expired, for a period of three years subsequent to the date of cessation of the Award Recipient's employment (or, in the case of any ISO held by an optionee who is Disabled, for a period of one year subsequent to such cessation date). d. Termination of Employment. Upon the cessation of the Award Recipient's employment for any reason other than Retirement, Disability or death, any Option held by such individual shall continue to be exercisable, provided the term of the Option has not otherwise expired, for a period of ninety days after the date of termination of the Award Recipient's employment. e. Death. Upon the Award Recipient's death (whether during his or her employment with the Corporation or an Affiliate or during any applicable post-termination exercise period), any Option held by such individual shall continue to be exercisable by the Beneficiary(ies) of the decedent, provided the term of the Option (as such term may have been shortened due to the Award Recipient's Retirement, Disability or termination of employment for any other reason) has not otherwise expired, for a period of one year after the date of the Award Recipient's death (or, in the case of ISOs, for a period of three months after the Award Recipient's death). f. Extension or Reduction of Exercise Period. In any of the foregoing circumstances, the Committee may extend or shorten the exercise period, but may not extend any such period beyond the term of the Option as originally established (or, insofar as this paragraph relates to SARs, the term of the SAR as originally established). Further, with respect to ISOs, as a condition of any such extension, the holder shall be required to deliver to the Corporation a release which provides that such individual will hold the Corporation and/or Affiliate harmless with respect to any adverse tax consequences the individual may suffer by reason of any such extension. 6 5. Reload Options. With respect to Options granted pursuant to this Plan, the Committee may grant "reload" options pursuant to which grant the Award Recipient will receive a new Option when the payment of the exercise price of a previously granted Option is made by the delivery of Shares already owned by the Award Recipient pursuant to Section 6(A)(3) hereof, and/or when Shares are tendered or forfeited as payment of the amount required to be withheld under applicable income tax laws in connection with the exercise of an Option. Any such new Option shall be an Option to purchase the number of Shares not exceeding the sum of (A) the number of Shares tendered or forfeited to satisfy the purchase price upon the exercise of the previously-granted Option to which such "reload" option relates, and (B) the number of Shares tendered or forfeited as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of the Option to which such "reload" option relates. Such "reload" Options shall have a per share exercise price equal to the Fair Market Value as of the date of grant of the Shares covered by such Option. B. Stock Appreciation Rights. The Committee may grant Stock Appreciation Rights to Eligible Individuals in accordance with the provisions of this subsection subject to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine to be appropriate. A Stock Appreciation Right granted under the Plan shall confer on the Award Recipient a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Agreement, the grant price, term, manner of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be those determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. Except as otherwise provided herein, any SAR must be exercised during the period of the Award Recipient's employment with the Corporation or Affiliate. The provisions of Section 6(A)(4)(b)-(f) hereof shall apply for purposes of determining the exercise period in the event of the Award Recipient's Retirement, Disability, death or other termination of employment. C. Restricted Stock. The Committee may make Restricted Stock Awards to Eligible Individuals in accordance with the provisions of this subsection subject to such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine to be appropriate. 1. Nature of Restrictions. Restricted Stock Awards shall be subject to such restrictions, including Performance Measures, as the Committee may impose (including, without limitation, any limitation on the right to vote a 7 Share of restricted stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. In the event a Restricted Stock Award is made subject to restrictions which are not performance-related, the minimum Restriction Period shall be three years. 2. Stock Certificates. Shares of restricted stock under the Plan shall be evidenced by issuance of a stock certificate(s), which shall be held by the Corporation. Such certificate(s) shall be registered in the name of the Award Recipient and shall bear an appropriate legend which refers to the restrictions applicable to such Restricted Stock Award. Alternatively, shares of restricted stock under the Plan may be recorded in book entry form. 3. Forfeiture; Delivery of Shares. Except as otherwise determined by the Committee, upon termination of an Award Recipient's employment (as determined under criteria established by the Committee) during the applicable Restriction Period, all Shares of restricted stock shall be forfeited and reacquired by the Corporation. However, in such circumstances, the Committee may waive, in whole or in part, any or all remaining restrictions applicable to the Restricted Stock Award. Shares comprising any Restricted Stock Award held by the Corporation that are no longer subject to restrictions shall be delivered to the Award Recipient (or his or her Beneficiary) promptly after the applicable restrictions lapse or are waived. D. Performance Awards. The Committee may grant Performance Awards to Eligible Individuals in accordance with the provisions of this subsection subject to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine to be appropriate. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, restricted Shares), other securities, other Awards, or other property, and (ii) shall confer on the Award Recipient the right to receive a payment upon the attainment of Performance Measures during any Performance Period the Committee may establish. Subject to the terms of the Plan and any applicable Award Agreement, the Performance Measures to be achieved during any Performance Period, the length of any Performance Period and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee. E. Other Stock-Based Awards. The Committee may grant Other Stock-Based Awards to Eligible Individuals in accordance with the provisions of this subsection and subject to such additional terms and conditions, including Performance Measures, not inconsistent with the provisions of the Plan, as the Committee shall determine. Other Stock-Based Awards may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; 8 provided, however, that such grants must comply with applicable law. F. General. Except as otherwise specified herein, the following provisions shall relate to Awards under the Plan: 1. Consideration for Awards. Awards shall be made without monetary consideration or for such minimal monetary consideration as may be required by applicable law. 2. Separate or Tandem Awards. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, in fulfillment of, or in substitution for, any other Award or any award made under any plan of the Company or any Affiliate other than this Plan. Awards granted in addition to, or in tandem with, other Awards, or in addition to, or in tandem with, awards made under any such other plan of the Corporation or any Affiliate may be made either at the same time as, or at a different time from, the making of such other Awards or awards. 3. Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Agreement, payments or transfers to be made by the Corporation or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or an a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments. 4. Limits on Transfer of Awards. No Award and no right under any such Award shall be transferable by an Award Recipient otherwise than by will or by the laws of intestacy; provided, however, that, an Award Recipient may, in the manner established by the Committee, designate a Beneficiary to exercise the rights of the Award Recipient and to receive any property distributable with respect to any Award upon the death of the Award Recipient. Each Award or right under any Award shall be exercisable during the Award Recipient's lifetime only by the Award Recipient or, if permissible under applicable law, by the Award Recipient's guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Corporation or any Affiliate. 5. Term of Awards. Subject to any specific provisions of the Plan, the term of each Award shall be for such period as may be determined by the Committee. 9 6. Securities Law Restrictions. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem advisable under the Plan, or the rules, regulations and other requirements of the Securities and Exchange Commission, the New York Stock Exchange, any other exchange on which Shares may be eligible to be traded or any applicable federal or state securities laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. 7. Limitation on Awards. The maximum amount of compensation payable with respect to any Award to any Eligible Officer under the Plan which is settled in cash will not exceed $2,500,000 for any calendar year. SECTION 7. WITHHOLDING OF TAXES. The Corporation will, if required by applicable law, withhold Federal, state and/or local taxes in connection with the exercise or vesting of an Award. Unless otherwise provided in the applicable Agreement, each Award Recipient may satisfy any such tax withholding obligation by any of the following means, or by a combination of such means: (i) a cash payment; (ii) by delivery to the Corporation of already-owned Shares which have been held by the individual for at least six months having a Fair Market Value, as of the Tax Withholding Date, sufficient to satisfy the amount of the withholding tax obligation arising from an exercise or vesting of an Award; (iii) by authorizing the Corporation to withhold from the Shares otherwise issuable to the individual pursuant to the exercise or vesting of an Award, a number of shares having a Fair Market Value, as of the Tax Withholding Date, which will satisfy the amount of the withholding tax obligation; or (iv) by a combination of such methods of payment. If the amount requested is not paid, the Corporation may refuse to satisfy the Award. SECTION 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event the number of outstanding Shares changes as a result of any stock split, stock dividend, recapitalization, merger, consolidation, reorganization, combination, or exchange of shares, split-up, split-off, spin-off, liquidation or other similar change in capitalization, or any distribution made to common stockholders other than cash dividends, the number or kind of shares that may be issued under the Plan pursuant to Section 3, and the number or kind of shares subject to, or the exercise price per share under, any outstanding Award, shall be automatically adjusted, and the Committee shall be authorized to make such other equitable adjustment of any Award or Shares issuable pursuant thereto, or in any Performance Measures relating to any Award, so that the value of the interest of the individual shall not be decreased by reason of the occurrence of such event. Any such adjustment shall be conclusive and binding. SECTION 9. AMENDMENT AND TERMINATION. 10 The Committee may amend, modify or terminate the Plan, at any time, in such respects as it shall deem advisable. Any such amendment, modification or termination of the Plan shall not, without the consent of any Award Recipient, adversely affect his or her rights under an Award previously made. SECTION 10. MISCELLANEOUS PROVISIONS. A. No employee or other person shall have any claim or right to receive an Award under the Plan. B. Receipt of an Award shall not confer upon the Award Recipient any rights of a shareholder with respect to any Shares subject to such Award except as specifically provided in the Agreement relating to the Award. C. The Plan, the making and exercise of Awards thereunder, and the obligations of the Corporation to satisfy Awards shall be subject to all applicable Federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required, and the Committee may impose any additional restrictions with respect to Awards in order to comply with any legal requirements applicable to Awards or to qualify for any exemption it may deem appropriate. D. The expenses of the Plan shall be borne by the Corporation. E. By accepting an Award under the Plan or payment pursuant to any Award, each Award Recipient, legal representative and Beneficiary shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Committee or the Corporation. F. Awards under the Plan shall be binding upon the Corporation, its successors, and assigns. G. Nothing in the Plan, or in any Agreement entered into pursuant to the Plan, shall confer on an Award Recipient any right to continue in the employ of the Corporation or any Affiliate, or in any way affect the Corporation's (or such Affiliate's) right to terminate the individual's employment without prior notice, at any time, for any reason or for no reason. H. Participation in the Plan shall not affect an individual's eligibility to participate in any other benefit or incentive plan of the Corporation. I. A breach by any Award Recipient, his or her Beneficiary(ies), or legal representative, of any restrictions, terms or conditions contained in the Plan, any Agreement, or otherwise established by the Committee with respect to any Award will, unless waived in whole or in part by the Committee, cause a forfeiture of such Award. J. The Plan shall be submitted to the shareholders of the Corporation for their 11 approval on May 16, 1997, or on such other date as may be fixed for the next meeting of shareholders, and shall become effective upon such approval and thereafter continue until terminated by the Committee. K. Except to the extent superseded by Federal law, the provisions of this Plan shall be interpreted and construed in accordance with the laws of the State of Delaware. 12 EX-10.2 5 COMERICA INC. MANAGEMENT INCENTIVE PLAN Exhibit 10.2 COMERICA INCORPORATED MANAGEMENT INCENTIVE PLAN SECTION 1. PURPOSE. The purpose of the Comerica Incorporated Management Incentive Plan is to promote and advance the interests of Comerica Incorporated (the "Corporation") and its shareholders by enabling the Corporation to attract, retain and reward key employees of the Corporation and its Affiliates, and to qualify incentive compensation paid to Participants who are Covered Employees as performance-based compensation within the meaning of Section 162(m) of the Code. SECTION 2. DEFINITIONS. The terms below shall have the following meanings: a. "AFFILIATE" means (i) any entity that is controlled by the Corporation, whether directly or indirectly, and (ii) any entity in which the Corporation has a significant equity interest, as determined by the Committee. b. "ANNUAL BASE SALARY" means the participant's rate of annual salary as of the last December 1st occurring during the Performance Period. c. "BOARD" means the Board of Directors of the Corporation. d. "CODE" means the Internal Revenue Code of 1986, as amended. e. "COMMITTEE" means the committee appointed by the Board to administer the Plan as provided herein. Unless otherwise determined by the Board, the Compensation Committee of the Board shall be the Committee. f. "CORPORATION" means Comerica Incorporated, a Delaware corporation, and its successors and assigns. g. "COVERED EMPLOYEE" means a "covered employee" within the meaning of Section 162(m) of the Code. h. "INCENTIVE PAYMENT" means, with respect to each Participant, the amount he or she may receive for the applicable Performance Period as established by the Committee pursuant to the provisions of the Plan. i. "PARTICIPANT" means any employee of the Corporation or an Affiliate who is designated by the Committee as eligible to receive an Incentive Payment under the Plan. 1 j. "PERFORMANCE GOALS" mean (i) earnings per share, (ii) return on average equity, (iii) return on average assets, or (iv) any other objective performance goals as may be established by the Committee for a Performance Period. Performance Goals may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated and may be based on or adjusted for any other objective goals, events, or occurrences established by the Committee for a Performance Period. Such Performance Goals may be particular to a line of business, subsidiary or other unit or may be based on the performance of the Corporation generally. Such Performance Goals may cover such period as may be specified by the Committee. k. "PERFORMANCE PERIOD" means, with respect to any Incentive Payment for a one-year performance period, the calendar year, and, with respect to any Incentive Payment for a three-year performance period, the three-year period specified by the Committee. l. "PERFORMANCE TARGETS" mean the specific measures which must be satisfied in connection with any Performance Goal prior to funding of any incentive pool. m. "PLAN" means the Comerica Incorporated Management Incentive Plan. SECTION 3. ADMINISTRATION. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have exclusive authority to interpret the Plan, to promulgate, amend, and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable in connection with the administration of the Plan, including, but not limited to, determinations relating to eligibility, whether to make Incentive Payments, the terms of any such payments, the time or times at which Performance Goals are established, the Performance Periods to which Incentive Payments relate, and the actual dollar amount of any Incentive Payment. The determinations of the Committee pursuant to this authority shall be conclusive and binding. The Committee may, in its discretion, authorize the Chief Executive Officer of the Corporation to act on its behalf, except with respect to matters relating to such Chief Executive Officer or which are required to be certified by the Committee under the Plan, or which are required to be handled exclusively by the Committee under Code Section 162(m) or the regulations promulgated thereunder. SECTION 4. ESTABLISHMENT OF PERFORMANCE GOALS AND INCENTIVE PAYMENTS. a. ESTABLISHMENT OF PERFORMANCE GOALS. Prior to the completion of 25% of the Performance Period or such earlier date as is required under Section 162(m) of the Code, the Committee shall, in its sole discretion, for each such Performance Period, determine and establish in writing the following: 2 1. The Performance Goals applicable to the Performance Period; and 2. The Performance Targets pursuant to which the total amount which may be available for payment to all Participants as Incentive Payments based upon the relative level of attainment of the Performance Goals may be calculated. B. CERTIFICATION AND PAYMENT. After the end of each Performance Period, the Committee shall: 1. Certify in writing, prior to the unconditional payment of any Incentive Payment, the level of attainment of the Performance Goals for the Performance Period; 2. Determine the total amount available for Incentive Payments based on the relative level of attainment of such Performance Goals; 3. In its sole discretion, reduce the size of, or eliminate, the total amount available for Incentive Payments for the Performance Period; and 4. In its sole discretion, determine the share, if any, of the available amount to be paid to each Participant as that Participant's Incentive Payment, and authorize payment of such amount. In the case of a Participant who is a Covered Employee, the Committee shall not be authorized to increase the amount of the Incentive Payment for any Performance Period determined with respect to any such individual by reference to the applicable Performance Targets except to the extent permitted under Section 162(m) of the Code and regulations thereunder. C. CONDITIONAL PAYMENTS. The Committee may authorize a conditional payment of a Participant's Incentive Payment prior to the end of a Performance Period based upon the Committee's good faith determination of the projected size of (i) the total amount which will become available for payment as Incentive Payments for the Performance Period, and (ii) the amount determined with respect to any such Participant by reference to the Performance Targets. D. OTHER APPLICABLE RULES. 1. Unless otherwise determined by the Committee with respect to any Covered Employee or by the Corporation's Chief Executive Officer with respect to any other Participant (unless otherwise required by applicable law), no payment pursuant to this Plan shall be made to a Participant unless the Participant is employed by the Corporation or an Affiliate as of the date of payment. 2. Incentive Payments shall be subject to applicable federal, state and local withholding taxes and other applicable withholding in accordance with the Corporation's payroll practices as from time-to-time in effect. 3. The maximum amount which may become payable to any Covered 3 Employee in any calendar year as an Incentive Payment with respect to all Performance Periods completed during such calendar year shall be the lesser of (i) 200% of such Participant's Annual Base Salary, or (ii) $2,500,000. 4. Incentive Payments calculated by reference to one-year Performance Periods shall be payable in cash or shares of the Corporation's common stock, $5.00 par value per share ("Shares"), and Incentive Payments calculated by reference to three-year Performance Periods shall be payable one-half in cash and one-half in Shares. Any such Shares shall be awarded pursuant to the Corporation's long-term incentive plan and may be subject to restrictions as may be determined by the Committee. In each case, Incentive Payments shall be made as soon as practical after the completion of the Performance Period. 5. A Participant shall have the right to defer payment of all or any portion of any Incentive Payment as permitted under the provisions of any deferred compensation plan maintained by the Corporation. 6. Until paid to a Participant, awards shall not be subject to the claims of creditors and may not be assigned, alienated, transferred or encumbered in any way other than by will or pursuant to laws of intestacy. SECTION 5. AMENDMENT OR TERMINATION. The Committee may amend, modify or terminate the Plan in any respect at any time without the consent of any Participant. Any such action may be taken without the approval of the Corporation's shareholders unless shareholder approval is required by applicable law. Termination of the Plan shall not affect any Incentive Payments earned prior to, but payable on or after, the date of termination, and any such payments shall continue to be subject to the terms of the Plan notwithstanding its termination. SECTION 6. CHANGE OF CONTROL. Notwithstanding any other provision hereof, in the event of a "Change of Control of the Company" as defined in the Comerica Incorporated Executive Officer Continuity Agreements, the following provisions shall be applicable: A. The Performance Periods then in effect will be deemed to have concluded on the date of the Change of Control of the Company and the total amount deemed to be available to fund the related incentive pools will be that proportion of the amount (based upon the number of months in such Performance Period elapsed through the date of Change of Control of the Company) which would be available for funding assuming the Corporation had attained Performance Goals at a level generating maximum funding for the Performance Periods; and B. The Committee, in its sole discretion, will approve the share of the available 4 amount payable to each Participant as that Participant's Incentive Payment (provided that in all events the entire available amount as calculated pursuant to Section 6(A) shall be paid to Participants as Incentive Payments), and payments shall be made to each Participant as soon thereafter as is practicable. Notwithstanding the foregoing, no Incentive Payments will be made to any Participant pursuant to a three-year Performance Period which shall be deemed to have concluded on the date of the occurrence of a Change of Control of the Company unless the Participant has completed more than two years of service under that Performance Period. SECTION 7. EFFECTIVE DATE OF THE PLAN. Subject to shareholder approval, the Plan shall generally be effective as of January 1, 1997 provided, however, that with respect to three year Performance Periods which began on or after January 1, 1995, the Plan shall be effective as of January 1, 1995. The Plan shall remain in effect until terminated by the Committee pursuant to Section 5. SECTION 8. GENERAL PROVISIONS. A. The establishment of the Plan shall not confer upon any Participant any legal or equitable right against the Corporation or any Affiliate, except as expressly provided in the Plan. B. The Plan does not constitute an inducement or consideration for the employment of any Participant, nor is it a contract between the Corporation, or any Affiliate, and any Participant. Participation in the Plan shall not give a Participant any right to be retained in the employ of the Corporation or any Affiliate. C. Nothing contained in this Plan shall prevent the Board or Committee from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases. D. The Plan shall be governed, construed and administered in accordance with the laws of the State of Delaware except to the extent such laws may be superseded by federal law. E. This Plan is intended to comply in all aspects with applicable law and regulation, including, with respect to those Participants who are Covered Employees, Section 162(m) of the Code. In case any one or more of the provisions of this Plan shall be held invalid, illegal or unenforceable in any respect under applicable law or regulation, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provision shall be deemed null and void; however, to the extent permissible by law, any provision which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Plan to be 5 construed in compliance with all applicable laws including, without limitation, Code Section 162(m), so as to carry out the intent of this Plan. 6 EX-10.3 6 COMERICA INC. DIRECTOR FEE DEFERRAL PLAN EXHIBIT 10.3 COMERICA INCORPORATED DIRECTOR FEE DEFERRAL PLAN (1997 AMENDMENT AND RESTATEMENT) COMERICA INCORPORATED DIRECTOR FEE DEFERRAL PLAN TABLE OF CONTENTS SECTION I. PURPOSE ..........................................................1 SECTION II. DEFINITIONS .....................................................2 A. Beneficiary(ies).....................................................2 B. Beneficiary Designation..............................................2 C. Cancellation of Deferral Election....................................2 D. Code.................................................................2 E. Committee............................................................2 F. Company..............................................................2 G. Corporate Secretary..................................................2 H. Deferral Election....................................................2 I. Director Fees........................................................3 J. Fee Deferral Account.................................................3 K. Participant..........................................................3 L. Plan.................................................................3 M. Plan Administrator...................................................3 N. Subsidiary...........................................................3 O. Unforeseeable Emergency..............................................3 SECTION III. ELIGIBILITY ....................................................4 SECTION IV. PROCEDURES RELATING TO DEFERRAL ELECTIONS .......................5 1. Submission to Corporate Secretary...............................5 2. Irrevocability..................................................5 3. Cancellation....................................................5 -i- SECTION V. FEE DEFERRAL ACCOUNTS AND CREDITING OF EARNINGS THEREON.............................................6 SECTION VI. DISTRIBUTION OF DEFERRED FEES....................................7 A. Time and Manner .....................................................7 B. Installment Payments.................................................7 C. Hardship Distributions...............................................7 D. Cash Out Distributions...............................................8 SECTION VII. DESIGNATION OF BENEFICIARY......................................9 SECTION VIII. MISCELLANEOUS PROVISIONS......................................10 A. Nonalienation of Benefits...........................................10 B. Administration of Plan..............................................10 C. Amendment or Termination............................................10 D. Effective Date......................................................10 E. Statements to Participants..........................................11 F. Nonforfeitability of Participant Accounts...........................11 G. Successors Bound....................................................11 H. Governing Law and Rules of Construction.............................11 I. Ownership of Fee Deferrals..........................................12 EXHIBIT A - NOTICE OF ELECTION TO DEFER THE PAYMENT OF DIRECTORS' FEES..........................................A-1 EXHIBIT B - NOTICE OF CANCELLATION OF DEFERRAL ELECTION.....................B-1 EXHIBIT C - BENEFICIARY DESIGNATION FORM....................................C-1 -ii- SECTION I. PURPOSE. The purpose of this Plan is to enable each director of the Company and each director of any Subsidiary of the Company to defer the receipt of all or any portion of his or her Director Fees. -1- SECTION II. DEFINITIONS. The following words and phrases, wherever capitalized, shall have the following meanings respectively: A. "BENEFICIARY(IES)" means such individual(s) or entity(ies) designated on the most recent Beneficiary Designation the director has submitted to the Corporate Secretary. B. "BENEFICIARY DESIGNATION" means a beneficiary designation on the form attached hereto as Exhibit "C", as such form may be modified by the Plan Administrator from time to time. C. "CANCELLATION OF DEFERRAL ELECTION" means a written notice of cancellation of election to defer unearned fees on the form attached hereto as Exhibit "B", as such form may be modified by the Plan Administrator from time to time. D. "CODE" means the Internal Revenue Code of 1986, as amended. E. "COMMITTEE" means the Directors' Committee of the Board of Directors of Comerica Incorporated. F. "COMPANY" means Comerica Incorporated, a Delaware corporation. G. "CORPORATE SECRETARY" means the Secretary of Comerica Incorporated. H. "DEFERRAL ELECTION" means a written election to defer the payment of director fees on the form attached hereto as Exhibit "A", as such form may be modified by the Plan Administrator from time to time. -2- I. "DIRECTOR FEES" means a director's annual retainer, fees for attending board meetings, fees for attending meetings of any committee of the board and fees for serving as chairman of any committee of the board. J. "FEE DEFERRAL ACCOUNT" means an account established under Section V hereof in the name of each director who has submitted a Deferral Election under the Plan to record Director Fees which have been deferred and earnings thereon. K. "PARTICIPANT" means an eligible director who has submitted a Deferral Election to the Corporate Secretary in accordance with the provisions of the Plan, and who either has a Deferral Election currently in effect or for whom a Fee Deferral Account is maintained under the Plan. L. "PLAN" means the "Comerica Incorporated Director Fee Deferral Plan," the provisions of which are set forth herein, as it may be amended from time to time. M. "PLAN ADMINISTRATOR" means one or more individuals appointed by the Committee to handle the day-to-day administration of the Plan. N. "SUBSIDIARY" means any corporation a majority of whose stock is owned by Comerica Incorporated. O. "UNFORESEEABLE EMERGENCY" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (within the meaning of Code Section 152(a)) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. -3- SECTION III. ELIGIBILITY. Each director of the Company and each director of any Subsidiary of the Company shall be eligible to participate in the Plan provided any such director is not an employee of the Company or an employee of any Subsidiary of the Company. -4- SECTION IV. PROCEDURES RELATING TO DEFERRAL ELECTIONS. 1. SUBMISSION TO CORPORATE SECRETARY. Any eligible director wishing to participate in the Plan must submit a Deferral Election to the Corporate Secretary at 500 Woodward, Detroit, Michigan 48226-3391 prior to the beginning of the calendar year during which the fees are to be earned. However, any newly-appointed or newly-elected director may submit a Deferral Election within sixty days of his or her appointment or election. A Deferral Election may cover all or any portion of an individual's Director Fees. 2. IRREVOCABILITY. Deferral Elections may not be modified or revoked once a director has rendered the services that entitle the director to the fees. If a director has submitted a Deferral Election relating to fees to be earned in the future, he or she may modify such election by submitting a new Deferral Election prior to the beginning of the calendar year in which the fees will be earned. Any such Deferral Election will supersede any previous Deferral Election as it related to fees to be earned in future years. 3. CANCELLATION. A Deferral Election may be cancelled by submitting a Cancellation of Deferral Election. A director who cancels a Deferral Election may not submit a new Deferral Election before the elapse of at least twelve months from the effective date of the cancellation. -5- SECTION V. FEE DEFERRAL ACCOUNTS AND CREDITING OF EARNINGS THEREON. Director Fees which have been deferred under the Plan shall be credited to a Fee Deferral Account maintained by the Company. As of the last day of each month, each Fee Deferral Account shall be adjusted as follows: A. The account shall first be charged with any distributions made during the month; B. The account shall then be credited with earnings for the month. Earnings shall be computed by multiplying the balance of the account after the adjustment referred to in Subsection A. by a fraction, the numerator of which is the 5-year United States Treasury note yield (asked) as of the last business day of the preceding quarter as published in the Wall Street Journal, and the denominator of which is 12; and C. The account shall then be credited with the amount, if any, of Director Fees deferred during that month. -6- SECTION VI. DISTRIBUTION OF DEFERRED FEES. A. TIME AND MANNER. Distribution of Fee Deferral Accounts shall be made at such time and in such manner, i.e., a lump sum or installments, as the Participant has specified in the Deferral Election(s) submitted to the Corporate Secretary. A lump sum distribution shall be made on January 15th of the year selected for distribution or, if the Participant has chosen to receive installment payments, such installments shall commence on January 15th of the year selected for installments to commence. B. INSTALLMENT PAYMENTS. Installment payments under an installment payment option may not exceed ten years. The amount of each installment payment shall be determined by multiplying the balance of the Fee Deferral Account on the date the installment is scheduled to be paid by a fraction, the numerator of which is one and the denominator of which is the number of unpaid installments remaining at such time. If a Participant who is receiving installment payments dies prior to receiving the balance of his or her account, the unpaid balance shall be paid in one lump sum to the Participant's Beneficiary(ies) not later than the 15th day of the month following the month in which the Participant's death occurred. C. HARDSHIP DISTRIBUTIONS. In the event of an Unforeseeable Emergency involving a Participant which occurs prior to distribution of the entire balance of the Participant's Fee Deferral Account, the Committee may, in its sole discretion, distribute to the Participant in a single sum an amount equal to such portion of such account as shall be necessary, in the judgment of the Committee, to alleviate the financial hardship occasioned by the -7- Unforeseeable Emergency. Any Participant desiring a distribution under the Plan on account of an Unforeseeable Emergency shall submit to the Committee a written request for such distribution which sets forth in reasonable detail the Unforeseeable Emergency which would cause the Participant severe financial hardship, and the amount which the Participant believes to be necessary to alleviate the financial hardship. In determining whether to grant any requested hardship distribution, the Committee shall adhere to the requirements of Section 1.457-2(h)(4) of the Income Tax Regulations (or to any successor regulations dealing with the same subject matter), the provisions of which are incorporated herein by reference. D. CASH OUT DISTRIBUTIONS. If, at the time an installment distribution of a Fee Deferral Account in the name of any Participant is scheduled to commence, the fair market value of such account does not exceed $10,000, then, notwithstanding an election by the Participant that such account be distributed in installments, the balance of such account shall be distributed to the Participant in a single sum on or about the date the first installment is scheduled to be made. -8- SECTION VII. DESIGNATION OF BENEFICIARY. Upon becoming a Participant of the Plan, each director shall submit to the Corporate Secretary a Beneficiary Designation on the form attached as Exhibit "C" designating one or more Beneficiaries to whom payments otherwise due the Participant shall be made in the event of the Participant's death before distribution of the Participant's Fee Deferral Account has been completed. A Beneficiary Designation will be effective only if it is signed by the Participant and submitted to the Corporate Secretary before the Participant's death. Any Beneficiary Designation submitted to the Corporate Secretary will supersede any previous Beneficiary Designation so submitted. If the primary beneficiary shall predecease the Participant or the primary beneficiary and the Participant die in a common disaster under such circumstances that it is impossible to determine who survived the other, amounts remaining unpaid at the time of the Participant's death shall be paid to the alternate beneficiary(ies) who survive the Participant. If there are no alternate beneficiaries living or in existence at the date of the Participant's death, the balance of the account shall be paid in one lump sum to the legal representative of the Participant's estate. -9- SECTION VIII. MISCELLANEOUS PROVISIONS. A. NONALIENATION OF BENEFITS. Neither the Participant nor any Beneficiary designated by him or her shall have any right to alienate, assign, or encumber any amount that is or may be payable hereunder, nor may any such amount be subjected to attachment, garnishment, levy, execution or other legal or equitable process for the debts, contracts, liabilities, engagements or acts of any Participant or Beneficiary. B. ADMINISTRATION OF PLAN. Full power and authority to construe, interpret, and administer the Plan shall be vested in the Directors' Committee of the Board of Directors of the Company. To the extent permitted by law, the Committee may delegate any authority it possesses to the Plan Administrator. To the extent the Committee has delegated authority concerning a matter to the Plan Administrator, any reference in the Plan to the "Committee" insofar as it pertains to such matter, shall refer likewise to the Plan Administrator. Decisions of the Committee shall be final, conclusive, and binding upon all parties. C. AMENDMENT OR TERMINATION. The Board of Directors of the Company may amend or terminate this Plan at any time. Any amendment or termination of this Plan shall not affect the rights of Participants or Beneficiaries to the amounts in Fee Deferral Accounts at the time of such amendment or termination. The Plan Administrator may make any amendments to the Plan, including forms under the Plan, recommended by the Company's legal counsel which are necessary or appropriate to keep the Plan and forms -10- in compliance with applicable laws. The Company reserves the right to accelerate distribution of fees deferred hereunder in the event the Plan is terminated. D. EFFECTIVE DATE. This Plan is intended to constitute an amendment and restatement of a prior plan maintained by the Company captioned "Comerica Incorporated Plan for Deferring the Payment of Directors' Fees." The version of the Plan contained in this document shall be effective to defer monies to be earned from and after January 1, 1997, and the earnings rate contained in this version of the Plan shall apply to existing accounts under the Plan beginning January 1, 1997. Except for the earnings rate, monies deferred under prior versions of the Plan shall remain subject to prior deferral elections. E. STATEMENTS TO PARTICIPANTS. Statements will be provided to Participants under the Plan on at least an annual basis. F. NONFORFEITABILITY OF PARTICIPANT ACCOUNTS. Each Participant shall be fully vested in his or her Fee Deferral Account. G. SUCCESSORS BOUND. The contractual agreement between Comerica Incorporated and each Participant resulting from the execution of a Deferral Election shall be binding upon and inure to the benefit of Comerica Incorporated, its successors and assigns, and to the Participant and to the Participant's heirs, executors, administrators and other legal representatives. H. GOVERNING LAW AND RULES OF CONSTRUCTION. This Plan shall be governed in all respects, whether as to construction, validity or otherwise, by applicable federal law and, to the extent that federal law is inapplicable, by the laws of the State of Michigan. Each provision of this Plan shall be treated as severable, to the end that, if any one or more -11- provisions shall be adjudged or declared illegal, invalid or unenforceable, this Plan shall be interpreted, and shall remain in full force and effect, as though such provision or provisions had never been contained herein. It is the intention of Comerica Incorporated that the Plan established hereunder be "unfunded" for income tax purposes, and the provisions hereof shall be construed in a manner to carry out that intention. I. OWNERSHIP OF FEE DEFERRALS. Title to and beneficial ownership of any assets, of whatever nature, which may be allocated by Comerica Incorporated to any Fee Deferral Account in the name of any Participant shall at all times remain with Comerica Incorporated, and no Participant or Beneficiary shall have any property interest whatsoever in any specific assets of Comerica Incorporated by reason of the establishment of the Plan. The rights of each Participant and Beneficiary hereunder shall be limited to enforcing the unfunded, unsecured promise of Comerica Incorporated to pay benefits under the Plan, and the status of any Participant or Beneficiary shall be that of an unsecured general creditor of Comerica Incorporated. -12- EXHIBIT "A" COMERICA INCORPORATED DIRECTOR FEE DEFERRAL PLAN NOTICE OF ELECTION TO DEFER THE PAYMENT OF DIRECTORS' FEES A director who wishes to defer fees should check applicable boxes, complete the other portions of the form, sign and date the form and return it to: Secretary Comerica Incorporated 500 Woodward Avenue 33rd Floor Detroit, Michigan 48226-3391 A. BOARD ON WHICH I SERVE AS DIRECTOR: / / Comerica Incorporated / / Comerica Bank / / Comerica Bank-California / / Comerica Bank-Texas / / Comerica Bank & Trust, F.S.B. B. ELECTION TO DEFER FEES. Pursuant to provisions of the above-referenced Plan, I hereby elect to have the fees specified below which become payable to me for rendering services as a member of the Board of Directors on which I serve deferred in the manner specified below. It is understood and agreed that this election shall become effective on the first day of the calendar year following receipt of this Notice of Election by the Secretary of Comerica Incorporated or on the first day of the month following receipt thereof by such Secretary if I am newly-eligible to participate in the Plan. I understand that this election shall be irrevocable with respect to fees once I have performed the services which entitle me to receive such fees. This election shall continue in effect until I modify or revoke it. C. PERCENTAGE OF FEES TO BE DEFERRED % of my Director Fees (Select up to 100%) _____ A-1 D. YEAR DISTRIBUTION OF DEFERRED FEES IS TO COMMENCE: 19 20 ___ ___ Payments will be made or commence on January 15th of the year selected. E. PAYMENT METHOD DESIRED: / / Lump Sum / / Installments over ____ years (you may choose 2 to 10 years). (The balance of any Fee Deferral Account will be distributed in one lump sum to the director's designated beneficiary if the director dies before receipt of all installment payments). F. FREQUENCY OF INSTALLMENTS: / / Annually / / Quarterly Date: -------------------------- ----------------------------------- Signature of Director A-2 EXHIBIT "B" COMERICA INCORPORATED DIRECTOR FEE DEFERRAL PLAN NOTICE OF CANCELLATION OF DEFERRAL ELECTION A director who wishes to cancel a deferral election should sign and date this form and return it to: Secretary Comerica Incorporated 500 Woodward Avenue 33rd Floor Detroit, Michigan 48226-3391 Pursuant to provisions of the above-reference Plan, I hereby cancel my deferral election under the Plan effective as of the first day of the month following your receipt of this Notice of Cancellation of Deferral Election. This cancellation shall apply only to unearned fees that would, but for this cancellation, be deferred under my prior deferral election. Any fees I have previously elected to defer that have already been earned through my rendering of services shall remain subject to my prior deferral election. Date: -------------------------- ----------------------------------- Signature of Director B-1 EXHIBIT "C" COMERICA INCORPORATED DIRECTOR FEE DEFERRAL PLAN BENEFICIARY DESIGNATION FORM A director who is submitting an election to defer fees should complete this form, sign and date it and return it to: Secretary Comerica Incorporated 500 Woodward Avenue 33rd Floor Detroit, Michigan 48226-3391 Pursuant to the provisions of the Comerica Incorporated Director Fee Deferral Plan (the "Plan"), I hereby designate the person(s) named below as beneficiary of all sums held under the Plan which are owing to me at the time of my death. A. PRIMARY BENEFICIARY (Check one box and provide related information): 1. / / My spouse. Name of Spouse Social Security # --------------------- ----------- Address ----------------------------------------- ----------------------------------------- 2. / / The successor trustee(s) of my revocable living trust. Caption Appearing on Trust Agreement -------------------------------- Date of Original or Amended and Restated Trust Agreement ------------ Employer Identification Number -------------------------------- 3. / / The executor, administrator or personal representative of my estate. C-1 4. / / Other (Each beneficiary must be over 18 years of age). a. Name of Beneficiary --------------------- Social Security # --------------------- Relationship to Director --------------------------------- Address --------------------------------------- --------------------------------------- Portion of account to be distributed to this beneficiary: % -------------- b. Name of Beneficiary -------------------- Social Security # -------------------- Relationship to Director -------------------------------- Address -------------------------------------- -------------------------------------- Portion of account to be distributed to this beneficiary: % ------------ (If you wish to name more than two beneficiaries, please submit duplicate copies of this form and insert appropriate percentages. Please sign and date each copy of this form which is submitted.) B. ALTERNATE BENEFICIARY If all persons named above as my primary beneficiary predecease me or such person(s) and I die in a common disaster under such circumstances that it is impossible to determine who survived the other, then I designate the following person as alternate beneficiary to receive the sums that would otherwise have been payable to the primary beneficiary if the primary beneficiary had survived. Name of Alternate Beneficiary ----------------------------------- Social Security or Employer Identification # -------------------- Address ----------------------------------------- ----------------------------------------- C-2 This designation supersedes any previous Beneficiary Designation I may have made with respect to deferred fees under the Plan, including prior versions of the Plan. I reserve the right to change the beneficiary(ies) named herein in accordance with the terms of the Plan. If there are no alternate beneficiaries living or in existence at the date of my death, I understand that the balance of my account will be paid to the legal representative of my estate. ------------------------------------ --------------------------------- Signature of Director Date ------------------------------------ --------------------------------- Signature of Witness Date Witness may not be a named beneficiary C-3 EX-10.4 7 BENEFIT EQUALIZATION PLAN/EMPLOYEES OF COMERICA Exhibit 10.4 BENEFIT EQUALIZATION PLAN FOR EMPLOYEES OF COMERICA INCORPORATED PREAMBLE Comerica Incorporated maintains the Comerica Incorporated Retirement Plan and Manufacturers National Corporation formerly maintained the Manufacturers National Corporation Pension Plan. In June of 1992, Manufacturers National Corporation merged into Comerica Incorporated. Effective as of December 31, 1993, the Manufacturers National Corporation Pension Plan was merged into the Comerica Incorporated Retirement Plan. Effective as of October 28, 1980, Comerica Incorporated established the "Comerica Incorporated Nonqualified Retirement Income Guarantee Plan", the purpose of which is to restore benefits not available to participants of the Comerica Incorporated Retirement Plan due to tax law limitations. Manufacturers National Corporation established the "Benefit Equalization Plan For Employees of Manufacturers National Corporation" effective as of January 1, 1983 in order to restore benefits not available to participants of the Manufacturers National Corporation Pension Plan due to tax law limitations. Due to the merger of the Manufacturers National Corporation Pension Plan into the Comerica Incorporated Retirement Plan the raison d'etre for the Benefit Equalization Plan For Employees of Manufacturers National Corporation disappeared. As a consequence, the Board of Directors of Comerica Incorporated approved the merger -1- of the Comerica Incorporated Nonqualified Retirement Income Guarantee Plan into the Benefit Equalization Plan For Employees of Manufacturers National Corporation, the renaming of the latter plan as the Benefit Equalization Plan For Employees of Comerica Incorporated and the amendment and restatement of such plan as renamed to provide as set forth herein. -2- Section 1. PURPOSE AND EFFECTIVE DATE. The sole purpose of this Plan is to assure that Participants who have a vested right to receive benefits under the Qualified Plan will receive the same value of benefits they would receive but for the limitations on contributions and benefits contained in ERISA and Sections 401(a)(17), 415 and 416 of the Code, and, also, but for the nonrecognition under the Qualified Plan of deferred incentive compensation under the Manufacturers Incentive Compensation Plans. This Plan is not intended to and shall not be construed so as to provide any Participant receiving benefits under the Qualified Plan, and where applicable, this Plan, with benefits which, in the aggregate, either have a greater or lesser value than the benefit which would result from the calculation made under the applicable provisions of the Qualified Plan without giving effect to the benefit limitation provisions of ERISA and the Code and regulations promulgated thereunder, or the nonrecognition of compensation deferred under the Manufacturers Incentive Compensation Plans. The provisions of this restated Plan shall be effective as of December 31, 1993. -3- Section 2. DEFINITIONS. The following words and phrases, wherever capitalized, shall have the following meanings respectively: A. "CODE" means the Internal Revenue Code of 1986, as it may be amended from time to time. B. "COMPANY" means Comerica Incorporated, a Delaware corporation. C. "ERISA" means the Employee Retirement Income Security Act of 1974 (Public Law 93-406), as from time to time amended. D. "MANUFACTURERS INCENTIVE COMPENSATION PLANS" means the following plans: (i) the Manufacturers National Corporation Executive Incentive Plan; (ii) the Manufacturers National Corporation Trust Investment Incentive Plan; (iii) the Manufacturers National Corporation Institutional Trust Sales and Servicing Plans; (iv) the Manufacturers National Corporation Private Banking Sales and Servicing Plans; (v) the Manufacturers National Corporation incentive plans for: Foreign Exchange Trading, Mergers and Acquisitions, and Commercial Mortgage Banking Services; and (vi) any similar incentive compensation plans formerly maintained by Manufacturers National Corporation for employees of its business units as determined by the Company's Employee Benefits Committee. E. "PARTICIPANT" means an individual who at the time in question is participating in the Plan pursuant to Section 3. -4- F. "PLAN" means the plan set forth herein which is to be known as the "Benefit Equalization Plan For Employees of Comerica Incorporated." G. "QUALIFIED PLAN" means the Comerica Incorporated Retirement Plan (1994 Amendment and Restatement). -5- Section 3. ELIGIBILITY AND PARTICIPATION. Any participant of the Qualified Plan whose benefits thereunder are limited by the provisions of Sections 401(a)(17), 415 and/or 416 of the Code or by the nonrecognition under the Qualified Plan of compensation deferred under any of the Manufacturers Incentive Compensation Plans shall automatically participate in and accrue benefits under this Plan. -6- Section 4. AMOUNT OF BENEFITS. The benefits payable under this Plan shall equal the excess, if any, of: (a) the benefits which would have been paid to such Participant for his or her life only at normal retirement under the Qualified Plan if the provisions of such plan were administered and benefits paid without regard to the special benefit limitations added to such plan to conform it to Sections 401(a)(17), 415 and 416 of the Code, and including in the benefit calculation compensation of the Participant which was deferred under the Manufacturers Incentive Compensation Plans and which is not otherwise recognized under the Qualified Plan, over (b) the benefits which would be payable to such Participant for his or her life only at normal retirement under the Qualified Plan; such excess then to be converted to its actuarial equivalent (as that term is defined in the Qualified Plan) to account for (i) the benefit commencement date of the benefit under this Plan, using the early retirement pension reduction factors set forth in the Qualified Plan, and (ii) the payment method determined pursuant to the following paragraph and computed in each case on the assumption that the assets in the Qualified Plan are sufficient to pay all vested benefits. (If the benefit commencement date under this Plan is earlier than the earliest date upon which benefits are payable to such Participant under the Qualified Plan, then such excess -7- shall be further reduced by 5/12 percent for each month or fraction thereof from the commencement of the benefit under this Plan until the date on which such Participant would attain age 55.) Calculation of the amount of benefits under this Plan shall disregard the method of payment selected by the Participant under the Qualified Plan. The method of payment under this Plan shall be in the form of a 50% joint and survivor annuity with the Participant's spouse as the joint annuitant. The benefit under this Plan shall be calculated using the age of the joint annuitant (if any) at the date benefits commence under this Plan. If the Participant has no spouse, then the benefit under this Plan shall be paid in the form of an annuity for the life of the Participant. Nothing herein shall restrict the right of the Company to amend the Qualified Plan and the computations under this section shall be made according to the terms of the Qualified Plan in effect at the time the benefits first become payable. -8- Section 5. PAYMENT OF BENEFITS AND ESTABLISHMENT OF TRUST. A. Payment of benefits under this Plan shall commence on the first day of the month next succeeding the day on which the Participant terminates employment with the Company. B. The Company may establish a Trust to be entitled "Trust for the Benefit Equalization Plan for Employees of Comerica Incorporated" with Comerica Bank of Detroit, Michigan as Trustee. If the Company establishes a Trust, the Company intends, but is not obligated to, fund the Trust with an amount which, on the same actuarial basis employed with respect to the funding of the Qualified Plan, is expected to provide funds equal to the sum of the expected benefits under this Plan. The Company shall augment the funds in the Trust from time to time as required. The assets of the Trust shall at all times be subject to levy by the Company's general creditors and Participants of this Plan shall have no greater right to the Trust assets than other unsecured general creditors of the Company. -9- Section 6. RIGHTS OF EMPLOYEES. A. Except to the extent provided in Section 7 below, no employee or spouse or beneficiary of an employee shall at any time have any vested rights to receive the benefits provided by this Plan. B. No right or interest of any Participant in the Plan shall be assignable or transferable, otherwise than by will or the laws of descent or pursuant to a beneficiary designation, nor shall such right or interest be subject to any lien directly, by operation of law, or otherwise, including execution, levy, garnishment, attachment, pledge and bankruptcy. -10- Section 7. AMENDMENT AND DISCONTINUANCE. The Company expects to continue this Plan indefinitely, but reserves the right to amend or discontinue it if, in its sole judgment, such an amendment or discontinuance is deemed necessary or desirable. In the event the Company does amend or discontinue this Plan, the Company shall be liable for any benefits that shall have accrued under this Plan to those persons who are eligible under Section 3 as of the date of such amendment or discontinuance, such accrued benefits to be determined as though the employee had terminated employment at the date of such amendment or discontinuance. -11- Section 8. ADMINISTRATION. A. This Plan shall be administered by the Employee Benefits Committee of the Company as an unfunded plan which is not intended to meet the qualification requirements of Section 401 of the Code. The Committee shall have full power to construe and interpret the Plan, and the Committee's decisions in all matters involving the interpretation and application of this Plan shall be conclusive. The claims procedure of the Qualified Plan shall apply to this Plan. B. The Plan shall at all times be maintained by the Company and administered by the Committee as a plan wholly separate from the Qualified Plan. -12- Section 9. ADDITIONAL BENEFIT. In addition to the purpose of Section 1 of this Plan, this Section shall, for individuals who are (or may be later) specifically named by resolution of the Board of Directors of the Company, increase the benefit determined under Section 4(a) of this Plan by including in the benefit calculation all of the individual's service with the Company (and its predecessors) from the date of the individual's initial participation in the Qualified Plan until the individual's retirement date and disregarding any breaks in service occurring before January 1, 1990; provided, however, that each named individual shall be entitled to an additional benefit derived from this Section only if the individual's employment with the Company continues until or after the date he or she attains age 62. Each individual who is specifically named by resolution of the Board of Directors to be entitled to the benefit established by this Section shall receive such benefits upon the condition that during the period such individual is entitled to payments of deferred compensation under this Section, he will not directly or indirectly enter into or engage in any banking or related businesses in the geographic area served by the Company either as an individual on his own account, as a partner or joint venturer, as an employe or agent, or as an officer or director of a competing organization. The Compensation Committee of the Board of Directors of the Company may, in its sole discretion and by way of a resolution of -13- the Committee, waive or modify the age 62 employment requirement and the noncompetition requirement for any named individual as well as any other restrictions imposed on the individuals by the provisions hereof. Any additional benefit derived from this Section shall be treated as a benefit payable under Section 4 for the purpose of Sections 4, 5, 6, and 7 of this Plan. -14- EX-10.10 8 DEAR FIELD(1) Exhibit 10.10 COMERICA INCORPORATED Comerica Tower at Detroit Center 500 Woodward Detroit, Michigan 48226 Date Dear FIELD(1) This will confirm the agreement (Agreement) between you and Comerica Incorporated (the Corporation) concerning indemnification of you by the Corporation with respect to expenses, liabilities and losses including attorneys' fees, judgments, fines and amounts paid or to be paid in settlement actually and reasonably incurred by you (indemnified costs) in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (proceeding) (whether or not by or in the right of the Corporation) in which you are involved, as a party or otherwise, by reason of your acting or having acted at any time as a director or officer of the Corporation. In view of recent developments with respect to the terms, availability and cost of directors and officers liability insurance (D&O Insurance), the Corporation is entering into this Agreement pursuant to the authority contained in its Bylaws and the provisions of the General Corporation Law of Delaware (Delaware Law), including the provision thereof to the effect that the indemnification authorized thereby is not exclusive. That provision of Delaware Law suggests that contracts may be entered into between a corporation organized under Delaware Law and its directors and officers with respect to indemnification of such persons. In order to induce you to continue to act as a director or officer of the Corporation, the Corporation desires to provide you with the broadest indemnity which it is permitted by law to extend. In consideration of the foregoing and of your service as a director or officer after the date of this Agreement the Corporation agrees as follows: BASIC INDEMNIFICATION ARRANGEMENT 1. To the fullest extent permitted by applicable law and regulation, as currently in effect or hereafter amended, the Corporation shall indemnify you and hold you harmless from and against, and if paid by you, to reimburse you for, any indemnified costs incurred by you in connection with any proceedings arising by reason of the fact that you are or at any time in the past were a director or officer of the Corporation or are or were serving or at any time shall serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise including service with respect to employee benefit plans, to the extent of the highest and most advantageous to you of any combination of (a) the benefits provided by the indemnification provisions of the Corporation's Bylaws as in effect on the date hereof; (b) the benefits provided by the indemnification provisions of the Corporation's Bylaws in effect at the time such indemnified costs are incurred by you; (c) the benefits allowable under the Delaware Law in effect at the date hereof or as the same may hereafter be amended; (d) the benefits allowable under the law of the jurisdiction under which the Corporation is organized at the time such indemnified costs are incurred by you; (e) the benefits available under any D&O Insurance or other liability insurance obtained by the Corporation; and (f) the benefits available to the fullest extent authorized to be provided to you by the Corporation under the non-exclusivity provisions of the Bylaws of the Corporation and the Delaware Law. 2. To the fullest extent permitted by applicable law and regulation, as currently in effect or hereafter amended, the Corporation shall pay any and all expenses in connection with a proceeding arising by reason of the fact that you are or at any time in the past were a director or officer of the Corporation as the same are incurred and in advance of the final disposition of any such proceeding, regardless of whether the directors of the Corporation have previously authorized such payments, upon receipt from you, unless not required by the law of the state of incorporation of the Corporation, of an undertaking by or on your behalf to repay such amount if it shall ultimately be determined that you are not entitled to be indemnified by the Corporation for such expenses under applicable law, the Corporation's Bylaws or this Agreement or otherwise. SPOUSAL INDEMNIFICATION The Corporation further agrees to indemnify your spouse to whom you are legally married at any time you are covered under the indemnification provided herein (even if you do not remain married to such spouse during the entire period of coverage) against third party actions, suits or proceedings or direct or derivative actions or suits for the same period, to the same extent and subject to the same standards, limitations, obligations and conditions you are provided indemnification herein in the event your spouse (or former spouse) becomes involved in an action, suit or proceeding solely by reason of your spouse's status as your spouse, including without limitation, any action, suit or proceeding that seeks damages recoverable from marital community property, jointly-owned property or property purported to have been transferred from you to your spouse (or former spouse). Your spouse or former spouse may also be entitled to advancement of expenses to the same extent you would be hereunder, and the Corporation may maintain insurance to cover its obligation hereunder with respect to your spouse (or former spouse) or set aside assets in a trust or escrow fund for such purpose. ENFORCEMENT COSTS To pay any and all costs and expenses (including, without limitation, reasonable attorneys' fees) incurred by you to enforce your rights hereunder. INSURANCE The Corporation will purchase and maintain in effect for your benefit one or more valid, binding and enforceable policy or policies of D&O Insurance provided that the Corporation shall not be required to purchase and maintain the same if such insurance is not reasonably available or if in the reasonable business judgment of the then directors of the Corporation the cost for such insurance is substantially 2 disproportionate to the coverage provided or the coverage provided is so limited by exclusions that the benefits provided by such insurance are insufficient. The Corporation agrees that the provisions hereof shall remain in effect regardless of whether D&O Insurance or other liability insurance coverage is at any time obtained or retained by the Corporation and that any benefits granted to you hereunder shall be in addition to any indemnification benefits provided to you by any entity other than the Corporation; except that any payments made under an insurance policy or from any other source shall reduce the obligations of the Corporation hereunder. PARTIAL INDEMNIFICATION If you are entitled under any provision of this Agreement to indemnification for some claims but not as to other claims or for some portion of expenses but not for the total amount thereof, the Corporation shall nevertheless indemnify you for the portion of such claims and expenses to which you are entitled to indemnification. LIMITATIONS ON INDEMNIFICATION No indemnification, reimbursement or payment shall be required of the Corporation hereunder except to the extent it is provided from policies of insurance carried by the Corporation: (1) with respect to any claim as to which you shall have been finally adjudged by a court of competent jurisdiction to (a) have acted with bad faith, (b) be liable for acts or omissions which involve intentional misconduct, a knowing violation of law or of your duty of loyalty to the Corporation or its shareholders, (c) have authorized a redemption of or dividend on the Corporation's stock which is prohibited by Delaware Law or (d) have effected any transaction from which you have derived an improper personal benefit within the meaning of Section 102(b)(7) of the Delaware Law, except to the extent that such court, or another court having jurisdiction, shall determine upon application that, despite the adjudication of liability, but in view of all the circumstances of the case, you are fairly and reasonably entitled to indemnity for such indemnified costs as the court shall deem proper; (2) with respect to any payment determined by final judgment of a court, or other tribunal having jurisdiction over the question, to be unlawful; and (3) with respect to any obligation of yours under Section 16(b) of the Securities Exchange Act of 1934, as amended. and (4) with respect to any liability or expense (including any penalty, judgment or legal expense) sustained in connection with an administrative or civil enforcement action which is initiated by a federal banking agency and results in a final adjudication or finding against you; if such indemnification, reimbursement or payment, on the date thereof, is a prohibited indemnification payment under Part 359 of Title 12, Chapter 3 III of the Code of Federal Regulations as amended and in effect on the date of such payment. ESTABLISHMENT OF TRUST The Corporation may (but shall not be obligated to) dedicate assets of the Corporation as collateral security for the funding of its obligations under this Agreement and under similar agreements with other directors, officers, employees and agents by depositing assets or bank letters of credit in trust or escrow, establishing reserve accounts, funding self-insurance arrangements or otherwise on such terms as the Corporation may determine. LEGAL DEFENSE You shall provide to the Corporation prompt written notice of any proceeding brought, threatened, asserted or commenced against you with respect to which you may assert a right to indemnification hereunder. You shall not make any admission or effect any settlement without the Corporation's written consent unless you shall have determined to undertake your own defense in such matter and have waived the benefits of this Agreement. The Corporation shall not settle any proceeding to which you are a party in any manner which would impose any penalty on you without your written consent. Neither you nor the Corporation will unreasonably withhold consent to any proposed settlement. Except as otherwise provided below, to the extent that it may wish to do so, the Corporation jointly with any other indemnifying party similarly notified will be entitled to assume your defense in any proceeding, with counsel mutually satisfactory to you and the Corporation. After notice from the Corporation to you of the Corporation's election so to assume such defense, the Corporation will not be liable to you under this Agreement for any legal or other expenses subsequently incurred by you in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below. You shall have the right to employ counsel in such proceeding but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at your expense unless (a) the employment of counsel by you has been authorized by the Corporation, (b) you shall have reasonably concluded that there may be a conflict of interest between you and the Corporation in the conduct of the defense of such action, or (c) the Corporation shall not in fact have employed counsel to assume the defense of such action; in each of these cases the fees and expenses of counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume your defense in any proceeding brought by or on behalf of the Corporation or as to which you shall have made the conclusion provided for in clause (b) above. INDEMNIFICATION - SECURITIES ACT LIABILITIES You agree that it will not be a breach of this Agreement for the Corporation to undertake with the Securities and Exchange Commission in connection with the registration for sale of any securities of the Corporation that, in the event a claim for indemnification against liabilities under the Securities Act of 1933 (Act) (other than the payment of expenses incurred in the successful defense of any such action, suit or proceeding) is asserted in connection with such securities being registered, the Corporation will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of competent jurisdiction the question of whether or not such indemnification by it is against public policy as 4 expressed in the Act and will be governed by the final adjudication of such issue. NO PERSONAL LIABILITY You agree that neither the stockholders nor the directors nor any officer, employee, representative or agent of the Corporation shall be personally liable for the satisfaction of the Corporation's obligations under this Agreement, and you shall look solely to the assets of the Corporation for satisfaction of any claims hereunder. CONTINUING RIGHTS Your rights and the obligation of the Corporation hereunder shall continue in full force and effect despite any subsequent amendment or modification of the Bylaws as such are in effect on the date hereof or any action by the directors or shareholders of the Corporation. DURATION OF AGREEMENT This Agreement shall continue until and terminate upon the later of: (a) 10 years after the date that you shall have ceased to serve as a director, officer, employee, agent or fiduciary of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which you served at the request of the Corporation; or (b) the final termination of all pending proceedings in respect of which rights of indemnification or advancement of expenses are granted under this Agreement. GOVERNING LAW This Agreement shall be construed, interpreted and the rights of the parties determined in accordance with the laws of the State of Delaware and the rights provided to you hereunder shall not be deemed exclusive of any other rights you may be or become entitled to in respect of indemnity for your actions as a director or officer of the Corporation. SEVERABILITY The provisions of this Agreement are severable and if any provision or portion hereof, shall for any reason be held illegal, invalid or unenforceable, such determination shall not affect any other provision or portion hereof or any rights existing otherwise than under this Agreement. SUCCESSORS AND ASSIGNS This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, personal representatives, successors and assigns. 5 COMERICA INCORPORATED By ________________________________ George W. Madison Executive Vice President General Counsel and Corporate Secretary Accepted: ____________________________________ Director or Officer 6 EX-10.15 9 DEFERRED COMPENSATION PLAN EXHIBIT 10.5 COMERICA INCORPORATED DEFERRED COMPENSATION PLAN (1997 AMENDMENT AND RESTATEMENT) COMERICA INCORPORATED DEFERRED COMPENSATION PLAN TABLE OF CONTENTS ARTICLE I. PURPOSE AND INTENT. . . . . . . . . . . . . . . . . . . . . . I-1 ARTICLE II. DEFINITIONS A. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . .II-1 (1) Account . . . . . . . . . . . . . . . . . . . . . . . . . . .II-1 (2) Adoption Agreement. . . . . . . . . . . . . . . . . . . . . .II-1 (3) Beneficiary(ies). . . . . . . . . . . . . . . . . . . . . . .II-1 (4) Board . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-1 (5) Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-1 (6) Comerica Stock Fund . . . . . . . . . . . . . . . . . . . . .II-1 (7) Comerica Stock. . . . . . . . . . . . . . . . . . . . . . . .11-1 (8) Committee . . . . . . . . . . . . . . . . . . . . . . . . . .II-1 (9) Compensation. . . . . . . . . . . . . . . . . . . . . . . . .II-1 (10) Compensation Deferral . . . . . . . . . . . . . . . . . . . .II-1 (11) Deferral Period . . . . . . . . . . . . . . . . . . . . . . .II-2 (12) Disabled and Disability . . . . . . . . . . . . . . . . . . .II-2 (13) Eligible Employee . . . . . . . . . . . . . . . . . . . . . .II-2 (14) Employer. . . . . . . . . . . . . . . . . . . . . . . . . . .II-2 (15) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-2 (16) Exchange Act. . . . . . . . . . . . . . . . . . . . . . . . .II-2 (17) Participant . . . . . . . . . . . . . . . . . . . . . . . . .II-2 (18) Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-2 (19) Plan Administrator(s) . . . . . . . . . . . . . . . . . . . .II-2 (20) Retirement. . . . . . . . . . . . . . . . . . . . . . . . . .II-2 (21) Section 16 Insider. . . . . . . . . . . . . . . . . . . . . .II-3 (22) Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-3 (23) Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . .II-3 (24) Unforeseeable Emergency . . . . . . . . . . . . . . . . . . .II-3 ARTICLE III. ELECTION TO PARTICIPATE IN THE PLAN A. Completion of Adoption Agreement . . . . . . . . . . . . . . . . III-1 B. Contents of Adoption Agreement . . . . . . . . . . . . . . . . . III-1 C. Effect of Entering Into Adoption Agreement . . . . . . . . . . . III-1 D. Special Rules Applicable to Adoption Agreement and Deferral of Compensation . . . . . . . . . . . . . . . . . . III-1 (1) Deferral Election to be Made Before Compensation is Earned. . . . . . . . . . . . . . . . . . . III-1 (2) Irrevocability of Deferral Election . . . . . . . . . . . . III-1 (3) Cancellation of Deferral Election . . . . . . . . . . . . . III-2 E. Deferrals By Committee . . . . . . . . . . . . . . . . . . . . . III-4 - i - ARTICLE IV. DEFERRED COMPENSATION ACCOUNTS AND INVESTMENT OF DEFERRED COMPENSATION A. Deferred Compensation Accounts . . . . . . . . . . . . . . . . . .IV-1 B. Earnings on Compensation Deferrals . . . . . . . . . . . . . . . .IV-1 C. Contribution of Compensation Deferrals to Trust. . . . . . . . . .IV-1 D. Insulation from Liability. . . . . . . . . . . . . . . . . . . . .IV-2 E. Ownership of Compensation Deferrals. . . . . . . . . . . . . . . .IV-2 F. Special Rule Application to Section 16 Insiders. . . . . . . . . .IV-2 ARTICLE V. DISTRIBUTION OF COMPENSATION DEFERRALS A. In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-1 (1) Employment Through Deferral Period. . . . . . . . . . . . . . V-1 (2) Termination Prior to End of Deferral Period . . . . . . . . . V-1 (3) Death of Participant Prior to End of Installment Distribution Period . . . . . . . . . . . . . . . V-2 (4) Hardship Distributions. . . . . . . . . . . . . . . . . . . . V-2 (5) Cash Out Distributions. . . . . . . . . . . . . . . . . . . . V-2 B. Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . V-2 (1) Beneficiary Designation Must be Filed Prior to Participant's Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-3 (2) Absence of Beneficiary. . . . . . . . . . . . . . . . . . . . V-3 ARTICLE VI. AMENDMENT OR TERMINATION A. Amendment and Termination of Plan. . . . . . . . . . . . . . . . .VI-1 ARTICLE VII. AUDITING OF ACCOUNTS AND STATEMENTS TO PARTICIPANTS A. Auditing of Accounts . . . . . . . . . . . . . . . . . . . . . . VII-1 B. Statements to Participants . . . . . . . . . . . . . . . . . . . VII-1 C. Fees and Expenses of Administration. . . . . . . . . . . . . . . VII-1 ARTICLE VIII. MISCELLANEOUS PROVISIONS A. Nonforfeitability of Participant Accounts. . . . . . . . . . . .VIII-1 B. Prohibition Against Assignment . . . . . . . . . . . . . . . . .VIII-1 C. No Employment Contract . . . . . . . . . . . . . . . . . . . . .VIII-1 D. Successors Bound . . . . . . . . . . . . . . . . . . . . . . . .VIII-1 E. Prohibition Against Loans. . . . . . . . . . . . . . . . . . . .VIII-1 F. Administration By Committee. . . . . . . . . . . . . . . . . . .VIII-1 G. Governing Law and Rules of Construction. . . . . . . . . . . . .VIII-1 H. Power to Interpret . . . . . . . . . . . . . . . . . . . . . . .VIII-2 I. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . .VIII-2 - ii - ARTICLE I. PURPOSE AND INTENT. The Plan enables Eligible Employees to defer receipt of all or a portion of their Compensation to provide additional income for them subsequent to retirement, disability or termination of employment. It is the intention of Comerica Incorporated that the Plan cover only employees who are management or highly-compensated employees within the meaning of sections 201(2), 301(a)(3), and 401(a)(1) of ERISA. I-1 ARTICLE II. DEFINITIONS. A. DEFINITIONS. The following words and phrases, wherever capitalized, shall have the following meanings respectively: (1) "ACCOUNT(S)" means the account established for each Participant under Article IV(A) hereof. (2) "ADOPTION AGREEMENT" means the Adoption Agreement in the form attached hereto as Exhibit A, as it may be revised from time to time. (3) "BENEFICIARY(IES)" means the person(s), natural or corporate, in whatever capacity, designated by a Participant pursuant to this Plan, or the person otherwise deemed to constitute the Participant's beneficiary under Article V(B)(2) hereof. (4) "BOARD" means the Board of Directors of Comerica Incorporated. (5) "CODE" means the Internal Revenue Code of 1986, as amended. (6) "COMERICA STOCK FUND" means an investment option established under the Plan pursuant to which a Participant may request investment of sums deferred under the Plan in units whose value is tied to the market value of shares of Comerica Stock. (7) "COMERICA STOCK" means shares of common stock of Comerica Incorporated, $5.00 par value. II-1 (8) "COMMITTEE" means the Compensation Committee of the Board, or such other committee appointed by the Board to administer the Plan. (9) "COMPENSATION" means gross salary from the Employer including base salary, incentive compensation, bonuses, overtime, commissions and any other form of cash remuneration approved by the Committee. (10) "COMPENSATION DEFERRAL(S)" means the amount of Compensation a Participant has elected to defer, pursuant to an Adoption Agreement and, where the context requires, shall also include earnings on such amounts. (11) "DEFERRAL PERIOD" means the period during which a Participant elects to defer receipt of Compensation under the Plan. (12) "DISABLED" OR "DISABILITY" means "disabled" under the Comerica Incorporated Long-Term Disability Plan or under the Comerica Incorporated Executive Long-Term Disability Plan, whichever such plan covers the individual. (13) "ELIGIBLE EMPLOYEE" means an individual employed by an Employer who is: (i) eligible to receive compensation under the Comerica Incorporated Annual Management Incentive Program; (ii) eligible to receive compensation under an incentive program sponsored by any business unit of the Employer, provided the Compensation the individual expects to earn in the year his II-2 deferral election is operative is approximately $100,000; or (iii) approved for participation by the Committee on the basis of high earning potential and other relevant factors consistent with the Plan. (14)"EMPLOYER" means Comerica Incorporated, a Delaware corporation, and its subsidiary corporations, and any successor entity which may succeed the Employer and its subsidiary corporations. (15) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. (16) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (17) "PARTICIPANT" means an Eligible Employee whose Adoption Agreement has been accepted by the Committee pursuant to Article III(A) hereof, and who either has a deferral election currently in effect or an Account balance under the Plan. (18) "PLAN" means the unfunded, nonqualified elective deferred compensation plan the provisions of which are set forth herein, as they may be amended from time to time. (19) "PLAN ADMINISTRATOR(S)" means the individual(s) appointed by the Committee to handle the day-to-day administration of the Plan. II-3 (20) "RETIREMENT" means retirement under the Comerica Incorporated Retirement Plan. (21) "SECTION 16 INSIDER" means any Participant who is designated by the Company as a reporting person under Section 16 of the Exchange Act. (22) "TRUST" means such trust as may be established by Comerica Incorporated in connection with this Plan. (23) "TRUSTEE" means the entity selected by Comerica Incorporated as trustee of the Trust. (24) "UNFORESEEABLE EMERGENCY" means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a dependent (within the meaning of Code Section 152(a)) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. II-4 ARTICLE III. ELECTION TO PARTICIPATE IN THE PLAN. A. COMPLETION OF ADOPTION AGREEMENT. An Eligible Employee who wishes to become a Participant in the Plan must complete and sign an Adoption Agreement. Any Adoption Agreement received by the Committee shall become binding upon the Committee's acceptance thereof. In the Adoption Agreement, the Employee shall indicate the Compensation the Participant wishes to defer. An Eligible Employee must file a separate Adoption Agreement with respect to each year's Compensation he or she wishes to defer. B. CONTENTS OF ADOPTION AGREEMENT. Each Adoption Agreement shall: (i) designate the amount of Compensation to be deferred in whole percentages or in whole dollars; (ii) request that the Employer defer payment of the Compensation to the Participant until the year the Participant retires; (iii) state how the Participant wishes to receive payment of the Compensation Deferrals at retirement; and (iv) contain other provisions the Committee deems appropriate. C. EFFECT OF ENTERING INTO ADOPTION AGREEMENT. Upon the Committee's acceptance of a Participant's Adoption Agreement, the Participant shall be (i) bound by the provisions of the Plan and by the provisions of any agreement governing the Trust; (ii) bound by the provisions of the Adoption Agreement; and (iii) deemed to have III-1 assumed the risks of deferral, including, without limitation, the risk of poor investment performance and the risk that Comerica Incorporated may become insolvent. D. SPECIAL RULES APPLICABLE TO ADOPTION AGREEMENTS AND DEFERRAL OF COMPENSATION. (1) DEFERRAL ELECTION TO BE MADE BEFORE COMPENSATION IS EARNED. In no event shall any Compensation which has been earned by a Participant prior to the date such Participant's Adoption Agreement has been accepted by the Committee be deferred under the Plan. Further, the effective date of any Adoption Agreement shall not be earlier than the first day of the calendar year which begins after the Adoption Agreement is signed by the Participant and accepted by the Committee. Notwithstanding the preceding sentence, an Adoption Agreement delivered to the Committee within 60 days of the effective date of the Plan may defer Compensation to be earned in the remaining portion of the year in which it is delivered; and, provided further, an Adoption Agreement delivered to the Committee within 30 days of the date an individual first becomes eligible to participate in the Plan may defer Compensation to be earned in the remaining portion of the year in which it is delivered. (2) IRREVOCABILITY OF DEFERRAL ELECTION. Except as provided in Article III(D)(3) and V(A)(4) below, the provisions of the Adoption Agreement relating to a Participant's election to defer III-2 Compensation and the Participant's selection of the time and manner of payment of Compensation Deferrals shall be irrevocable. (3) CANCELLATION OF DEFERRAL ELECTION. In the event of an Unforeseeable Emergency, the Committee may, in its sole discretion, permit the Participant to cancel an election to defer Compensation, in whole or in part, and permit the Participant to receive at the otherwise scheduled payment date whatever portion of the amount subject to the deferral election as is necessary, in the judgment of the Committee, to alleviate the financial hardship occasioned by the Unforeseeable Emergency. Any Participant who seeks to cancel a deferral election on account of an Unforeseeable Emergency shall submit to the Committee a written request which sets forth in reasonable detail the Unforeseeable Emergency, and the amount of the Compensation Deferral which the Participant believes to be necessary to remedy it. In determining whether to grant any Participant's request to cancel a deferral election on the basis of Unforeseeable Emergency, the Committee shall adhere to the requirements of Section 1.457-2(h)(4) of the Income Tax Regulations, the provisions of which are incorporated herein by reference. Any Participant who is permitted to cancel a deferral election shall not again be eligible to submit a deferral election until the calendar year following the calendar year in which such cancellation is permitted. III-3 If a Participant receives a hardship distribution under the Comerica Incorporated Preferred Savings Plan, the Participant's deferral election hereunder shall be automatically cancelled to the extent it would defer the Participant's receipt of any Compensation the Participant would earn during a twelve-month period beginning on the date of the Participant's receipt of such hardship distribution. Any Participant whose deferral election is automatically cancelled in accordance with the provisions hereof shall not again be eligible to submit a deferral election until the next enrollment period after the elapse of at least 12 months following the Participant's receipt of a hardship distribution. E. DEFERRALS BY COMMITTEE. At its discretion, the Committee may defer any Compensation payable to an Eligible Employee pursuant to a notice to the Eligible Employee. Any Compensation payable to an Eligible Employee which is deferred by the Committee shall be paid to the Eligible Employee in a manner determined by the Committee, i.e., a lump sum or installments, upon his or her termination of employment. Any Compensation deferred under the Plan by the Committee shall be invested in the investment option under the Plan which most closely approximates a money market fund pending the Employer's receipt of an investment request from the Eligible Employee. It shall be the Eligible Employee's obligation to submit an investment request to the Employer if any Compensation III-4 deferred by the Committee is to be invested in any fund other than a money market fund. Also, upon the death of the Eligible Employee on behalf of whom the Compensation is deferred prior to distribution of all Compensation deferred by the Committee and the earnings thereon, unless the Eligible Employee has delivered a beneficiary designation form to the Committee with respect to the sums deferred by the Committee, the balance will be distributed to the Beneficiary(ies) listed on the most recent beneficiary designation form delivered to the Committee with respect to other Compensation deferred by the Eligible Employee under the Plan. If the Eligible Employee has not designated a Beneficiary(ies) with respect to sums deferred by the Committee and has not deferred other Compensation under the Plan (or submitted a beneficiary designation form with respect to any such deferrals), the Compensation deferred by the Committee and any earnings thereon shall be payable to the Eligible Employee's estate upon his or her death. III-5 ARTICLE IV. DEFERRED COMPENSATION ACCOUNTS AND INVESTMENT OF DEFERRED COMPENSATION. A. DEFERRED COMPENSATION ACCOUNTS. The Plan Administrator shall establish a book reserve account in the name of each Participant. As soon as is administratively feasible following the date Compensation subject to a Participant's deferral election would otherwise be paid to the Participant, the Plan Administrator shall credit the Compensation being deferred to the Participant's Account. Each Participant's Account shall further be credited with earnings or charged with losses resulting from the deemed investment of the Compensation Deferrals credited to the Account as though the Compensation Deferrals had been invested in the investments selected by the Participant as provided below, and shall be charged with any distributions, any federal and state income tax withholdings, any social security tax as may be required by law and by any further amounts, including administrative fees and expenses, the Employer is either required to withhold or determines are appropriate charges to such Participant's Account. B. EARNINGS ON COMPENSATION DEFERRALS. At the time a Participant submits an Adoption Agreement, and from time to time thereafter at intervals to be determined by the Committee, each IV-1 Participant shall direct, in a form approved by and in accordance with procedures established by the Committee, how the Participant chooses the balance in his Account to be deemed to be invested among investment options to be made available by the Committee. In lieu of making investment options available to Participants, Comerica Incorporated may credit deferred sums with a reasonable rate of interest to reflect the time value of money. Comerica Incorporated shall be under no obligation to acquire any of the investments selected by any Participant, and any investments actually made by it with Compensation Deferrals will be acquired solely in the name of Comerica Incorporated, and will remain the sole property of Comerica Incorporated. C. CONTRIBUTION OF COMPENSATION DEFERRALS TO TRUST. In the sole discretion of Comerica Incorporated, all or any portion of the Compensation Deferrals credited to any Participant's Account may be contributed to a Trust established by Comerica Incorporated in connection with the Plan. No Participant or Beneficiary shall have the right to direct or require that Comerica Incorporated contribute the Participant's Compensation Deferrals to the Trust. Any Compensation Deferrals so contributed shall be held, invested and administered to provide benefits under the Plan except as otherwise required in the agreement governing the Trust. IV-2 D. INSULATION FROM LIABILITY. No member of the Committee or officer, employee or director of any Employer shall be liable to any person for any action taken or omitted in connection with the administration of this Plan or Trust unless attributable to such individual's own fraud or willful misconduct. E. OWNERSHIP OF COMPENSATION DEFERRALS. Title to and beneficial ownership of any assets, of whatever nature, which may be allocated by Comerica Incorporated to any Account in the name of any Participant shall at all times remain with Comerica Incorporated, and no Participant or Beneficiary shall have any property interest whatsoever in any specific assets of Comerica Incorporated by reason of the establishment of the Plan nor shall the rights of any Participant or Beneficiary to payments under the Plan be increased by reason of Comerica Incorporated's contribution of Compensation Deferrals to the Trust. The rights of each Participant and Beneficiary hereunder shall be limited to enforcing the unfunded, unsecured promise of the Participant's Employer to pay benefits under the Plan, and the status of any Participant or Beneficiary shall be that of an unsecured general creditor of Comerica Incorporated. Participants and Beneficiaries shall not be deemed to be parties to any trust agreement Comerica Incorporated enters into with the Trustee. IV-3 F. SPECIAL RULE APPLICABLE TO SECTION 16 INSIDERS. 1. Notwithstanding the foregoing, effective November 1, 1996, the following restrictions on reallocation of accounts shall be applicable with respect to any Participant who is a Section 16 Insider: (A) A Section 16 Insider may not direct a reallocation of monies out of any investment funds other than the Comerica Stock Fund into the Comerica Stock Fund if, within the previous six months, he or she (or any other person whose transactions are attributed to the Section 16 Insider under Section 16 of the Exchange Act) either (i) disposed of shares of Comerica Stock in the open market or pursuant to a private transaction, or (ii) made an election under the Plan (or under any other plan sponsored by the Company) that resulted in a disposition of equity securities of the Company within the meaning of that term under Section 16 of the Exchange Act. (B) A Section 16 Insider may not direct a reallocation of monies out of the Comerica Stock Fund into any other investment funds if, within the previous six months, he or she (or any other person whose transactions are attributed to the Section 16 Insider under Section 16 of IV-4 the Exchange Act) either (i) acquired shares of Comerica Stock in the open market or pursuant to a private transaction; or (ii) made an election under the Plan (or under any other plan sponsored by the Company) that resulted in an acquisition of equity securities of the Company within the meaning of that term under Section 16 of the Exchange Act. To the extent consistent with rules under Section 16 of the Exchange Act, the foregoing prohibitions shall not be applicable if the reallocation is in connection with the Section 16 Insider's death, disability, retirement or termination of employment. 2. Notwithstanding any other provision of the Plan, effective November 1, 1996, except in the circumstances of death, disability, retirement or other termination of employment, a Section 16 Insider shall not be permitted to receive a cash distribution from the Plan which is funded to any extent by a disposition of his or her interest in the Comerica Stock Fund if, within the previous six months, he or she (or any other person whose transactions are attributed to the Section 16 Insider under Section 16 of the Exchange Act) either (i) acquired shares of Comerica Stock in the open market or pursuant to a private transaction; or (ii) made an election under the Plan (or under any IV-5 other Plan sponsored by the Company) that resulted in an acquisition of equity securities of the Company within the meaning of that term under Section 16 of the Exchange Act. IV-6 ARTICLE V. DISTRIBUTION OF COMPENSATION DEFERRALS. A. IN GENERAL. The benefits payable hereunder as deferred compensation shall be paid to the Participant or to the Participant's Beneficiary as follows: (1) EMPLOYMENT THROUGH DEFERRAL PERIOD. If the Participant's employment with an Employer continues until the last day of the Deferral Period, Comerica Incorporated shall, as soon as administratively feasible following the end of the Deferral Period, distribute, or commence to distribute, the balance of the Account in the name of the Participant in cash in any manner described below which is selected by the Participant in the Participant's Adoption Agreement: (i) a single sum; (ii) annual installments over 5 years, (iii) annual installments over 10 years; or (iv) annual installments over 15 years. For purposes of determining the amount of annual installments, X shall equal the number of years over which benefits will be paid as elected by the Participant. Comerica Incorporated shall pay to the Participant or to the Participant's Beneficiary an amount equal to 1/X of the fair market value of the Account in the Participant's name, such value to be determined by the Committee as of the earliest convenient date, as determined by the Committee, which V-1 occurs prior to the date the payment is to be made. On approximately the same date of the following year, Comerica Incorporated shall pay to the Participant or to the Participant's Beneficiary an amount equal to 1/X-1 of the fair market value of such Account, such value to be determined by the Committee as of the earliest convenient date, as determined by the Committee, which occurs prior to the date the payment is to be made. On approximately the same date of the following year, Comerica Incorporated shall pay to the Participant or to the Participant's Beneficiary an amount equal to 1/X-2 of the fair market value of such Account, such value to be determined by the Committee as of the earliest convenient date, as determined by the Committee, which occurs prior to the date the payment is to be made, and similar payments shall be made on approximately the same date of each succeeding year until a total of X annual payments have been made with the last such payment being in an amount equal to the fair market value of the Account in the name of the Participant determined as of the date such amount is paid. (2) TERMINATION PRIOR TO END OF DEFERRAL PERIOD. If the Participant's employment with the Employer terminates prior to the last day of the Deferral Period (unless such termination is due to the Participant's Disability), then notwithstanding the manner of V-2 distribution selected by the Participant, Comerica Incorporated shall distribute or direct the Trustee to distribute an amount equal to the fair market value of the Account in the name of the Participant as of the earliest convenient date, as determined by the Committee, which occurs subsequent to the date the Participant's employment terminates. Such amount shall be distributed to the Participant or to the Participant's Beneficiary in a single sum as soon as is administratively feasible following the Participant's termination date. If the Participant's employment terminates prior to the last day of the Deferral Period because the Participant has become Disabled, then notwithstanding the distribution date selected by the Participant in the Participant's Adoption Agreement, an amount equal to the fair market value of the Account in the name of the Participant as of the earliest convenient date, as determined by the Committee, which occurs subsequent to the date the Participant's employment terminates, shall be distributed, or commence to be distributed, as soon as administratively feasible following his termination date, such distribution to be made in the manner specified in the Participant's Adoption Agreement. (3) DEATH OF PARTICIPANT PRIOR TO END OF INSTALLMENT DISTRIBUTION PERIOD. If the Participant dies before a total X V-3 annual payments are made hereunder, then an amount equal to the fair market value of the Account in the name of the Participant as of the earliest convenient date, as determined by the Committee, which occurs subsequent to the date of the Participant's death shall be distributed in a single sum to the Participant's Beneficiary, such distribution to be made as soon as is administratively feasible following the date of the Participant's death. (4) HARDSHIP DISTRIBUTIONS. In the event of an Unforeseeable Emergency involving a Participant which occurs prior to distribution of the entire balance of the Account in the name of the Participant, the Committee may, in its sole discretion, distribute to the Participant in a single sum an amount equal to such portion of the Account in the Participant's name as shall be necessary in the judgment of the Committee to alleviate the financial hardship occasioned by the Unforeseeable Emergency. Any Participant desiring a distribution under the Plan on account of an Unforeseeable Emergency shall submit to the Committee a written request for such distribution which sets forth in reasonable detail the Unforeseeable Emergency which would cause the Participant severe financial hardship, and the amount which the Participant believes to be necessary to alleviate the financial hardship. In V-4 determining whether to grant any requested hardship distribution, the Committee shall adhere to the requirements of the Income Tax Regulations referred to in Article III(D)(3) hereof. (5) CASH OUT DISTRIBUTIONS. If, at the time an installment distribution of an Account in the name of any Participant is scheduled to commence, the fair market value of such Account does not exceed $3,500 then, notwithstanding an election by the Participant that such Account be distributed in installments, the balance of such Account shall be distributed to the Participant in a single sum on or about the date the first installment is scheduled to be made. B. DESIGNATION OF BENEFICIARY. A Participant shall deliver to the Committee a written designation of Beneficiary(ies) under the Plan, which designation may from time to time be amended or revoked without notice to, or consent of, any previously designated Beneficiary. (1) BENEFICIARY DESIGNATION MUST BE FILED PRIOR TO PARTICIPANT'S DEATH. No designation of Beneficiary, and no amendment or revocation thereof, shall become effective if delivered to the Committee after such Participant's death, unless the Committee shall determine such designation, amendment or revocation to be valid. V-5 (2) ABSENCE OF BENEFICIARY. In the absence of an effective designation of Beneficiary, or if no Beneficiary designated shall survive the Participant, then the balance of the Account in the name of the Participant shall be paid to the Participant's estate. V-6 ARTICLE VI. AMENDMENT OR TERMINATION. A. AMENDMENT AND TERMINATION OF PLAN. This Plan may be amended or terminated at any time in the sole discretion of the Committee by a written instrument executed by the Committee. No such amendment shall affect the time of payment of any Compensation earned prior to the time of such amendment or termination except as the Committee may determine to be necessary to carry out the purpose of the Plan. Written notice of any such amendment or termination shall be given to each Participant. Upon termination of the Plan, Comerica Incorporated shall distribute to each Participant or Beneficiary, or direct that the Trustee so distribute, the amounts which would have been distributed to such Participant or Beneficiary under the Plan had the Participant's employment with an Employer terminated at the time of termination of the Plan. In addition, no such amendment shall make the Trust revocable. VI-1 ARTICLE VII. AUDITING OF ACCOUNTS AND STATEMENTS TO PARTICIPANTS. A. AUDITING OF ACCOUNTS. The Plan shall be audited from time to time as directed by the Committee by auditors selected by the Committee. B. STATEMENTS TO PARTICIPANTS. Statements will be provided to Participants under the Plan on at least an annual basis. C. FEES AND EXPENSES OF ADMINISTRATION. Fees of the Trustee and expenses of administration of the Plan shall be deducted from Accounts. VII-1 ARTICLE VIII. MISCELLANEOUS PROVISIONS. A. NONFORFEITABILITY OF PARTICIPANT ACCOUNTS. Each Participant shall be fully vested in his or her Account. B. PROHIBITION AGAINST ASSIGNMENT. Benefits payable to Participants and their Beneficiaries under the Plan may not be anticipated, assigned (either at law or in equity), alienated, sold, transferred, pledged or encumbered in any manner, nor may they be subjected to attachment, garnishment, levy, execution or other legal or equitable process for the debts, contracts, liabilities, engagements or acts of any Participant or Beneficiary. C. NO EMPLOYMENT CONTRACT. Nothing in the Plan is intended to be construed, or shall be construed, as constituting an employment contract between the Employer and any Participant nor shall any Plan provision affect the Employer's right to discharge any Participant for any reason or for no reason. D. SUCCESSORS BOUND. The contractual agreement between Comerica Incorporated and each Participant resulting from the execution of an Adoption Agreement shall be binding upon and inure to the benefit of Comerica Incorporated, its successors and assigns, and to the Participant and to the Participant's heirs, executors, administrators and other legal representatives. VIII-1 E. PROHIBITION AGAINST LOANS. The Participant may not borrow any Compensation Deferrals from Comerica Incorporated nor utilize his or her Account as security for any loan from the Employer. F. ADMINISTRATION BY COMMITTEE. Responsibility for administration of the Plan shall be vested in the Committee. To the extent permitted by law, the Committee may delegate any authority it possesses to the Plan Administrator(s). To the extent the Committee has delegated authority concerning a matter to the Plan Administrator(s), any reference in the Plan to the "Committee" insofar as it pertains to such matter, shall refer likewise to the Plan Administrator(s). G. GOVERNING LAW AND RULES OF CONSTRUCTION. This Plan shall be governed in all respects, whether as to construction, validity or otherwise, by applicable federal law and, to the extent that federal law is inapplicable, by the laws of the State of Michigan. Each provision of this Plan shall be treated as severable, to the end that, if any one or more provisions shall be adjudged or declared illegal, invalid or unenforceable, this Plan shall be interpreted, and shall remain in full force and effect, as though such provision or provisions had never been contained herein. It is the intention of Comerica Incorporated that the Plan established hereunder be "unfunded" for income tax purposes and for purposes of VIII-2 Title I of ERISA, and the provisions hereof shall be construed in a manner to carry out that intention. H. POWER TO INTERPRET. This Plan shall be interpreted and effectuated to comply with the applicable requirements of ERISA, the Code and other applicable tax law principles; and all such applicable requirements are hereby incorporated herein by reference. Subject to the above, the Committee shall have power to construe and interpret this Plan, including but not limited to all provisions of this Plan relating to eligibility for benefits and the amount, manner and time of payment of benefits, any such construction and interpretation by the Committee and any action taken thereon in good faith by the Plan Administrator(s) to be final and conclusive upon any affected party. The Committee shall also have power to correct any defect, supply any omission, or reconcile any inconsistency in such manner and to such extent as the Committee shall deem proper to carry out and put into effect this Plan; and any construction made or other action taken by the Committee pursuant to this Article VIII(H) shall be binding upon such other party and may be relied upon by such other party. VIII-3 I. EFFECTIVE DATE. The effective date of this amendment and restatement shall be January 1, 1997, except as otherwise expressly stated herein. IN THE PRESENCE OF: COMERICA INCORPORATED By: - ------------------------------ ---------------------------- Its: - ------------------------------ --------------------------- VIII-4 EX-10.16 10 FORM OF COMERICA INC. COUNTINUITY AGREE. EXHIBIT 10.16 COMERICA INCORPORATED EXECUTIVE OFFICER CONTINUITY AGREEMENT TABLE OF CONTENTS ARTICLE 1.PURPOSE, ESTABLISHMENT AND TERM 1.1. Purpose and Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2. Term of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2.NATURE OF RIGHTS UNDER AGREEMENT 2.1. Contractual Rights to Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.2 Effect on Other Benefits and Rights as Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3. Employment Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 3.DEFINITIONS AND CONSTRUCTION 3.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 A. Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 B. Annual Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 C. Annual Management Incentive Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 D. Beneficial Owner or Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 E. Benefit Equalization Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 F. Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 G. Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 H. Change of Control of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 I. Claims Arbiter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 J. Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 K. Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 L. Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 M. Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 N. Deferred Compensation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 O. Disability or Diabled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 P. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Q. Employee Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 R. Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 S. Executive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 T. Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 U. Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
V. Long-Term Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 W. Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 X. Official Employment Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Y. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Z. Potential Change of Control of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 AA. Preferred Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 AB. Qualifying Circumstance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 AC. Receipt and Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 AD. Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 AE. Retirement or Retiring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 AF. Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 AG. Severance Benefit(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.2. Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.4. Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.5. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-ii- ARTICLE 4. CONTINUATION OF COMPENSATION AND SEVERANCE BENEFITS 4.1. Continuation of Compensation Through Date of Termination and Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 A. Continuation of Compensation Through Date of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 B. Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.2. Qualifying Circumstance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.3. Description of Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.4. Effect of Death, Disability or Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.5. Effect of Termination for Cause or Other Than for Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.6. Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE 5. FORM AND TIMING OF SEVERANCE BENEFITS 5.1. Form and Timing of Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.2. Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 6.SUCCESSORS 6.1. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 6.2. Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
-iii- ARTICLE 7. ADMINISTRATION AND CONFIDENTIALITY OF INFORMATION; OBLIGATIONS OF EXECUTIVE UPON A POTENTIAL CHANGE OF CONTROL 7.1 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.2 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.3 Obligations of Executive Upon a Potential Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE 8.MISCELLANEOUS PROVISIONS 8.1. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.2. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.4. Claims and Disputes; Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 8.5. Limitation of Company's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
-iv- COMERICA INCORPORATED EXECUTIVE OFFICER CONTINUITY AGREEMENT AGREEMENT by and between Comerica Incorporated, a Delaware corporation (the "Company") and ____________________ ("Executive"), dated as of the 1st day of January, 1996. -1- ARTICLE 1. PURPOSE, ESTABLISHMENT AND TERM 1.1 Purpose and Establishment. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders that the Company maintain the continued dedication of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company (as defined below). To alleviate the inevitable distraction associated with a pending or threatened Change of Control of the Company and to encourage Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control of the Company, the Board believes that it is imperative that it take steps, consistent with those taken by other similarly situated organizations, to provide Executive with compensation and benefits arrangements upon a Change of Control of the Company which ensure that the compensation and benefits expectations of Executive will be satisfied. In order to accomplish the foregoing objectives, the Board has caused the Company to enter into this Agreement. Upon the execution of this Agreement by Executive and approval by the Board, this Agreement shall become effective as of January 1, 1996 (the "Effective Date"), and shall remain in effect as provided in Section 1.2 herein. 1.2. Term of the Agreement. The term of this Agreement will commence on the Effective Date and continue through December 31, 1998. Beginning January 1, 1999, and each third succeeding January 1st thereafter, the term of this Agreement shall be extended automatically for three additional years unless the Committee delivers written notice to Executive at least fifteen months prior to the end of the original term, or any extended term, that the -2- Agreement will not be extended. Upon the delivery of such written notice to Executive, the term of the Agreement will expire at the end of the original term, or extended term, then in progress; provided, however, that if a Change of Control of the Company occurs during the original term or during any extended term of this Agreement, this Agreement will not expire until the elapse of the longer of the following periods: (i) the period which ends on the last day of the twenty-fourth month subsequent to the month in which the Change of Control of the Company occurs (or, in the case of a Change of Control of the Company described in Section 3.1.H(3) or (4) hereof, the period which ends on the earlier of (a) the last day of the twenty-fourth month subsequent to the month in which consummation of the transaction, approval of which constitutes the Change of Control of the Company, occurs, or (b) the last day of the thirtieth month subsequent to the month in which the Change of Control of the Company occurs); or (ii) the period which ends on the date all benefits owing to Executive hereunder have been paid. -3- ARTICLE 2. NATURE OF RIGHTS UNDER AGREEMENT 2.1. Contractual Rights to Benefits. This Agreement establishes a contractual right to the Severance Benefits Executive may become entitled to hereunder following the occurrence of a Change of Control of the Company. 2.2 Effect on Other Benefits and Rights as Employee. Entry into this Agreement shall not affect Executive's right to receive any amounts payable to Executive under any benefit, incentive, retirement, or other plan or arrangement, or under any employment agreement, except to the extent that the express provisions of such other agreement, plan or arrangement preclude the payment of or provide for offset of benefits thereunder upon receipt of benefits under this Agreement. Further, Executive's entry into this Agreement shall not adversely affect Executive's rights as an Employee of the Company, whether those rights exist now or arise hereafter. 2.3. Employment Status. The provisions hereof shall not be deemed to create a contract between the Company and Executive to employ Executive for any fixed period of time. Executive's employment with the Company may be terminated at will by either the Company or Executive, with or without Cause, subject to fulfillment by the Company of its obligation to provide such Severance Benefits as may be required hereunder. -4- ARTICLE 3. DEFINITIONS AND CONSTRUCTION 3.1. Definitions. Whenever used in the Agreement, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the term is capitalized. AH. "Agreement" means the Comerica Incorporated Executive Officer Continuity Agreement as herein set forth. AI. "Annual Base Salary" means Executive's rate of annual salary in effect, except as otherwise specifically provided herein, as of the date a Change of Control of the Company occurs, or if such rate is higher as of the date Executive experiences a Qualifying Circumstance, Executive's rate of annual salary in effect as of the date he or she experiences a Qualifying Circumstance. Annual Base Salary shall include (i) any amount which is contributed by the Company pursuant to an elective deferral which is not includable in Executive's gross income under Code Sections 125 or 402(e)(3) and (ii) any amount contributed by the Company to the Deferred Compensation Plan pursuant to Executive's election. AJ. "Annual Management Incentive Program" means the Comerica Incorporated annual management incentive program or any plan or program adopted or implemented by the Company as a successor to such program. AK. "Beneficial Owner" or "Beneficial Ownership" or "Beneficially Owns" or "Beneficially Owned" shall have -5- the meanings ascribed to such terms in Exchange Act Rule 13d-3. AL. "Benefit Equalization Plan" means the Benefit Equalization Plan For Employees of Comerica Incorporated or any plan adopted by the Company as a successor to such plan. AM. "Board" means the Board of Directors of Comerica Incorporated. AN. "Cause" shall be deemed to have arisen if Executive has conducted himself or herself in a manner described in (1) or (2) below: (1) If Executive has willfully and continually failed to perform substantially all of his or her duties with the Company or one of its affiliates (unless such failure occurs (i) as a result of Executive's incapacity precipitated by physical or mental illness or (ii) after Executive's issuance of a Notice of Termination for Good Reason pursuant to Section 4.6 hereof), after a written demand to perform is delivered to Executive by the Board or Chief Executive Officer of the Company which demand must specifically identify the manner in which the Board or Chief Executive Officer believes that Executive has not performed substantially all of his or her duties, provided that Executive fails to remedy the situation within ten (10) business days of receiving such notice; or -6- (2) If Executive has engaged willfully in illegal or gross misconduct which is materially and demonstrably injurious to the Company, monetarily or otherwise. However, no act, or failure to act, on Executive's part shall be considered "willful" unless Executive took such action (or failed to take such action) other than in good faith and without reasonable belief that his or her action or omission was in the best interests of the Company. AO. "Change of Control of the Company" shall be deemed to have occurred if, during the term of this Agreement, the conditions set forth in any of the following paragraphs shall have been satisfied: (1) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates) which represent 26% or more of the combined voting power of the Company's then outstanding securities; or (2) during any period of up to two consecutive years (not including any period prior to the Effective Date of this Agreement), individuals who constitute the Board at the beginning of such period and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including -7- but not limited to, a consent solicitation relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (3) the shareholders of the Company (i) approve a merger or consolidation of the Company with any other corporation, or (ii) approve the issuance of voting securities of the Company pursuant to applicable stock exchange requirements in connection with a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than in either (i) or (ii) above a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with shares owned by any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 75% of the combined voting -8- power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (4) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement to sell or dispose of all or substantially all of the Company's assets. AP. "Claims Arbiter" means such person or persons as the Company designates to mediate disputes involving the Agreement. No such person shall be an employee of the Company. AQ. "Code" means the Internal Revenue Code of 1986, as amended. All references to sections of the Code shall be deemed to refer to any successor provisions to such sections. AR. "Committee" means the Compensation Committee of the Board of Directors of Comerica Incorporated. AS. "Company" means Comerica Incorporated, a Delaware corporation (including any and all subsidiaries), and any successor to its business and/or assets which assumes this Agreement by operation of law, or otherwise (except in determining, under Section 3.1.H. hereof, whether or not a Change of Control of the Company has occurred in connection with any such succession). AT. "Company Shares" means shares of $5.00 par value common stock of the Company or any equity securities into which such shares have been converted. -9- AU. "Deferred Compensation Plan" means the Comerica Incorporated Deferred Compensation Plan, the Manufacturers National Corporation Executive Incentive Plan, or any plan adopted by the Company as a successor to either such plan. AV. "Disability" or "Disabled" means "Totally Disabled" within the meaning of such term as set forth in the Long-Term Disability Plan of Comerica Incorporated, the provisions of which are incorporated herein by reference. AW. "Effective Date" means January 1, 1996. AX. "Employee Options" means options to purchase Company Shares granted pursuant to the Long-Term Incentive Plan. AY. "Exchange Act" means the Securities Exchange Act of 1934, as amended. All references to sections of the Exchange Act shall be deemed to refer to any successor provisions to such sections. AZ. "Executive" means the senior officer of the Company who has signed this Agreement as Executive. BA. "Expiration Date" means the date the Agreement expires, as provided in Section 1.2 herein. BB. "Good Reason" to justify Executive's decision to terminate his or her employment means the occurrence (without the express written consent of Executive) of any one or more of the following acts by the Company, or failures by the Company to act, unless any such act or failure to act is corrected prior to Executive's Official Employment Termination Date: -10- (1) Assignment of any duties to Executive inconsistent with his or her position as an executive officer of the Company or a substantial reduction in the nature of Executive's responsibilities compared to his or her responsibilities as they existed immediately prior to the occurrence of the Change of Control of the Company; (2) Relocation of Executive's principal work station to a location more than sixty miles away from Executive's principal office at the time of the occurrence of the Change of Control of the Company; (3) Any reduction in the amount of Executive's Annual Base Salary from the rate in effect on the date a Change of Control of the Company occurs or a reduction in Executive's salary range of 15% or more from his or her salary range in effect on the date a Change of Control of the Company occurs; (4) Failure to pay to Executive his or her (i) Annual Base Salary on the date scheduled for payment unless Executive has voluntarily deferred the receipt of any amount not paid, (ii) annual bonus under the Annual Management Incentive Program (or under any other short-term compensation plan in which Executive was eligible to participate before the occurrence of a Change of Control of the Company) at the normal payment time unless non-payment of the bonus is attributable to the Company's failure to attain a level of performance which would generate a bonus pool or to inadequate performance by Executive, or (iii) deferred compensation under the Deferred Compensation Plan -11- (or under any other deferred compensation program of the Company), within sixty days of the date such compensation is scheduled to be paid; (5) (i) Discontinuance of any compensation plan in which Executive is eligible to participate immediately prior to the occurrence of the Change of Control of the Company which provides benefits material vis-a-vis Executive's overall remuneration (including, but not limited to, the Annual Management Incentive Program, the Long-Term Incentive Plan, the Preferred Savings Plan, the Retirement Plan, the Benefit Equalization Plan, the Deferred Compensation Plan, or any substitute plans adopted by the Company prior to the occurrence of the Change of Control of the Company), unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to any such plan, or (ii) failure to continue Executive's coverage under any such plan or arrangement on a basis at least as favorable, both in terms of the amount of benefits provided and the level of Executive's coverage relative to other executives, as existed at the time of the occurrence of the Change of Control of the Company; (6) (i) Failure to continue to provide coverage (and/or benefits) to Executive similar to that he or she enjoyed under the company-sponsored life insurance, medical, health and accident, disability or other welfare benefit or material fringe benefit plans at the time of the occurrence of the Change of Control -12- of the Company, or (ii) the taking of any action which would materially reduce, directly or indirectly, any such coverage or which would deprive Executive of any material welfare or fringe benefit he or she enjoyed at the time of the occurrence of the Change of Control of the Company, provided, in either situation, the Company's action occurs other than as a result of an across-the-board adjustment in coverage and/or benefits which affects all senior officers of the Company and all senior officers of any Person in control of the Company; (7) Failure to obtain a satisfactory agreement from any successor to assume the Company's obligations under this Plan, as required under Section 6.1 hereof; and (8) The taking of action by the Company which purports to terminate Executive's employment without providing Executive a Notice of Termination which satisfies the requirements of Section 3.1.W. hereof. Executive's right to resign for Good Reason shall not be affected by his or her incapacity due to physical or mental illness nor shall Executive's continuation of employment following the occurrence of any circumstance constituting Good Reason constitute consent to such circumstance or a waiver of rights hereunder. -13- BC. "Long-Term Incentive Plan" means the Comerica Incorporated Long Term Incentive Plan or any plan adopted by the Company as a successor to such plan. BD. "Notice of Termination" means a written notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination after reasonable notice to Executive and an opportunity for Executive, together with Executive's counsel, to be heard before the Board (i) which finds that, in the good faith opinion of the Board, Executive was guilty of conduct set forth in clause (1) and/or (2) of the definition of Cause herein, and (ii) which specifies the particulars thereof in detail. BE. "Official Employment Termination Date", with respect to any purported termination of Executive's employment after the occurrence of a Change of Control of the Company and during the term of this Agreement, means: (i) if Executive's employment is terminated due to Disability, thirty days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of his or her duties during such thirty-day period), and (ii) if Executive's employment is -14- terminated for any other reason, the date specified in the Notice of Termination [which, in the case of a termination by either the Company or Executive, shall be not less than thirty days (except in the case of a termination for Cause or except in the case where the event constituting Good Reason occurred during the last thirty days of the term of this Agreement)] from the date such Notice of Termination is given. BF. "Person" shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan sponsored by the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation, owned directly or indirectly, by the stockholders of the Company, in which their ownership interests are in substantially the same proportions as their ownership interests in stock of the Company. BG. "Potential Change of Control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (1) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change of Control of the Company; (2) the Company or any Person publicly announces an intention to take or to consider taking actions -15- which, if consummated, would constitute a Change of Control of the Company; (3) any Person who is, or becomes, the Beneficial Owner, directly or indirectly, of securities of the Company, which represent 10% or more of the combined voting power of the Company's then outstanding securities, increases such Person's Beneficial Ownership of such securities by 5% or more over the percentage so owned by such Person on the Effective Date; or (4) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change of Control of the Company has occurred. BH. "Preferred Savings Plan" means the Comerica Incorporated Preferred Savings Plan or any plan adopted by the Company as a successor to such plan. BI. "Qualifying Circumstance" means any of the events described in Section 4.2 hereof. BJ. "Receipt and Release" means a receipt for payment of benefits hereunder and a release of claims against the Company in the form set forth in Exhibit A. The provisions of Exhibit A are incorporated herein by reference. DD. "Restricted Shares" means Company Shares granted to Executive under the Long-Term Incentive Plan subject to restrictions. EE. "Retirement" or "Retiring" shall be deemed to be the reason for the termination by the Company or Executive of Executive's employment if Executive's employment is terminated in accordance with (i) the Company's -16- retirement policy (excluding its early retirement policy), which applies to its salaried employees, as in effect immediately prior to the occurrence of the Change of Control of the Company, or (ii) any retirement arrangement which Executive has consented to. FF. "Retirement Plan" means the Comerica Incorporated Retirement Plan or any plan adopted by the Company as a successor to such plan. GG. "Severance Benefit(s)" means the items of severance compensation as provided in Article 4 hereof. -17- 3.2. Gender and Number. The masculine, feminine and neuter, wherever used in the Plan, shall refer to either the masculine, feminine or neuter; and, unless the context otherwise requires, the singular shall include the plural and the plural the singular. 3.3. Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity of the provision shall not affect the remaining provisions of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. 3.4. Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by Executive and by the Chairman of the Committee. 3.5. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of Delaware shall be the controlling law in all matters relating to this Agreement. -18- ARTICLE 4. CONTINUATION OF COMPENSATION AND SEVERANCE BENEFITS 4.1. Continuation of Compensation Through Date of Termination and Severance Benefits. A. Continuation of Compensation Through Date of Termination. Following a Change of Control of the Company and during the term of this Agreement, during any period that Executive fails to perform Executive's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay Executive's full base salary to Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until Executive's employment is terminated by the Company for Disability. Further, the Company shall pay Executive's normal post-termination compensation and benefits to Executive as such payments become due. Such post- termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements. If Executive's employment shall be terminated for any reason following the occurrence of a Change of Control of the Company and during the term of this Agreement, the Company shall pay Executive's full salary to Executive through Executive's Official Employment Termination Date at the rate in effect at the time the Notice of Termination is given, together with all compensation and benefits payable to Executive through Executive's Official -19- Employment Termination Date under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period. Further, the Company shall pay Executive's normal post-termination compensation and benefits to Executive as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements. B. Severance Benefits. Executive shall be entitled to receive the Severance Benefits described in Section 4.3 hereof provided there has been a Change of Control of the Company, not later than the end of the twenty-fourth month which begins after the month in which the Change of Control of the Company occurs(1), Executive experiences a Qualifying Circumstance and Executive signs a Receipt and Release and delivers it to the Company. Executive shall not be entitled to receive Severance Benefits if his or her employment is terminated for Cause or ends as a result of Executive becoming Disabled, Retiring, dying or resigning without Good Reason. 4.2. Qualifying Circumstance. The occurrence or deemed occurrence of any one or more of the following events not later than the end of the period referred to in Section 4.1.B. (or not - - --------------- (1)In the case of a Change of Control of the Company described in Section 3.1.H.(3) or (4) hereof, the period during which Executive must experience a Qualifying Circumstance in order to become entitled to Severance Benefits shall be, in lieu of the period referred to above, the period which ends on the earlier of (a) the last day of the twenty-fourth month subsequent to the month in which consummation of the transaction, approval of which constitutes the Change of Control of the Company, occurs, or (b) the last day of the thirtieth month subsequent to the month in which the Change of Control of the Company occurs. -20- later than the period referred to in footnote (1), if applicable) shall be considered to be a Qualifying Circumstance: BK. A successor company fails or refuses to assume the Company's obligations under this Agreement; BL. The Company or any successor company breaches any of the provisions of this Agreement; BM. Executive's employment with the Company ends unless his or her employment is terminated for Cause, or ends as a result of Executive becoming Disabled, Retiring, dying or resigning without Good Reason; or D. Executive's resigns for Good Reason. Executive's employment shall be deemed to have been terminated following a Change of Control of the Company by Executive with Good Reason if Executive's employment is terminated prior to the occurrence of a Change of Control of the Company without Cause at the direction of a Person who has entered into an agreement with the Company the consummation of which will constitute a Change of Control of the Company or if Executive terminates his employment with Good Reason prior to the occurrence of a Change of Control of the Company (determined by treating a Potential Change of Control of the Company as a Change of Control of the Company in applying the definition of Good Reason) if the circumstance or event which constitutes Good Reason occurs at the direction of such Person. 4.3. Description of Severance Benefits. The following items constitute the Severance Benefits Executive may receive hereunder: BN. A severance payment equal to 2.99 times Executive's Annual Base Salary; provided, however, that the amount of this payment, together with other amounts and/or benefits Executive receives hereunder (or under other plans, -21- agreements, or arrangements sponsored by the Company or to which the Company is a party) as a result of the occurrence of the Change of Control of the Company which constitute "parachute payments" under Section 280G of the Code may not exceed the maximum amount deductible under Section 280G of the Code, and, if necessary to remain within the deduction limitation imposed by Code Section 280G, this severance payment shall be reduced to the maximum amount (but not below zero) which may be paid without loss of the Company's deduction under Code Section 280G; BO. An amount (in lieu of any amounts Executive may be entitled to receive as an eligible participant under the Annual Management Incentive Program) equal to the sum of (i) any incentive compensation Executive earned (or, if such amount has not yet been determined, the amount he or she would have earned assuming the Company's annual profit plan performance threshold was achieved) under the Annual Management Incentive Program for the fiscal year immediately preceding the year in which Executive's Official Employment Termination Date occurs, provided any such sum has not yet been paid; (ii) any incentive compensation Executive earned under the Annual Management Incentive Program with respect to any multi-year performance period which was completed on or prior to Executive's Official Employment Termination Date provided any such sum has not yet been paid; and (iii) a pro rata portion of the aggregate estimated value of all incentive compensation awards to Executive relating to all -22- uncompleted one-year performance periods(2) under the Annual Management Incentive Program calculated by assuming the Company's annual profit plan performance threshold was achieved(3); BP. Early lapse of restrictions applicable to all Restricted Shares which were awarded to Executive under the Long-Term Incentive Plan prior to the time a Change of Control of the Company occurs (or, in the case of a Change of Control of the Company described in Section 3.1.H(3) or (4) hereof, any such shares awarded prior to consummation of the transaction, approval of which constitutes the Change of Control of the Company), and acceleration of vesting of all outstanding Employee Options granted to Executive under the Long-Term Incentive Plan prior to the time a Change of Control of the Company occurs (or, in the case of a Change of Control of the Company described in Section 3.1.H(3) or (4) hereof, any such options granted prior to consummation of the transaction, approval of which constitutes the Change of Control of the Company); - - --------------- (2)Executive shall not be entitled to receive a pro rata payment with respect to awards to be computed under multi-year performance periods which have not been completed on or prior to Executive's Official Employment Termination Date. (3)The pro rata portion of any such award shall be the amount payable (i) assuming the Company's performance threshold in the annual profit plan for the year in which Executive's Official Employment Termination Date occurs was achieved, and (ii) that a multiplier was utilized based on the multiplier which would have applied had that performance occurred in the prior fiscal year, said amount to be multiplied by a fraction, the numerator of which is the number of full months which elapsed from the beginning of the performance period through Executive's Official Employment Termination Date and the denominator of which is twelve. -23- BQ. Continuation of medical, dental, accident, and life insurance coverage for three full years subsequent to the Official Employment Termination Date; provided, however, that this coverage will be discontinued prior to the end of the three-year period if Executive receives substantially similar benefits from a subsequent employer (or such benefits are made available to Executive without cost during such period), as determined by the Committee (and any such benefits actually received by Executive or made available to Executive shall be reported to the Company by Executive); and, provided, further, that if the value of the coverage to be provided under this subsection causes a reduction in the Severance Benefits to be paid to Executive and such benefits are thereafter reduced by reason of Executive's receipt of similar benefits, the Company shall, at the time such benefits are reduced, pay to Executive the lesser of (i) the amount by which Executive's Severance Benefits were previously reduced, or (ii) the maximum amount which can be paid to Executive without such amount being, or causing any other payment to be, nondeductible by reason of Section 280G of the Code; and BR. Payment by the Company of all legal fees and expenses incurred by Executive in connection with the resolution of issues regarding his or her rights under this Agreement; provided however, that such fees and expenses shall not exceed five percent of the amount of the Severance Benefits payable to Executive under this Agreement determined without reduction for taxes thereon. -24- 4.4. Effect of Death, Disability or Retirement. If, during the term of this Agreement, Executive (i) dies, (ii) fails to perform his or her duties with the Company on a full-time basis for six consecutive months due to Disability, and fails to recommence the full-time performance of his or her duties within thirty days after a written Notice of Termination is given to Executive (which notice may be given after Executive fails to perform his or her duties with the Company on a full-time basis for five consecutive months due to Disability), or (iii) ends his or her employment by Retiring, this Plan shall expire as of the date of Executive's death, Official Employment Termination Date or date of Retirement, as the case may be, without any obligation on the part of the Company or its successors to pay any Severance Benefits to or with respect to Executive hereunder. 4.5. Effect of Termination for Cause or Other Than for Good Reason. Following a Change of Control of the Company, if Executive's employment is terminated either (i) by the Company for Cause; or (ii) by Executive without Good Reason, subject to Section 4.1.A. hereof, the Company shall have no further obligations to Executive under this Agreement. 4.6. Notice of Termination. After a Change of Control of the Company and during the term of this Agreement, any purported termination of Executive's employment (other than by reason of death), shall be communicated by a Notice of Termination from one party hereto to the other party hereto in accordance with Section 8.3 hereof, and no purported termination which fails to comply with this requirement shall be effective. -25- ARTICLE 5. FORM AND TIMING OF SEVERANCE BENEFITS 5.1. Form and Timing of Severance Benefits. Following Executive's satisfaction of the applicable conditions, the Severance Benefits shall be paid or provided in the manner and at the times hereinafter set forth. Severance Benefits described in Sections 4.3.A. and 4.3.B. hereof shall be paid in cash (except as otherwise provided herein) to Executive in a single lump sum as soon as practicable following Executive's Official Employment Termination Date, provided, however, that if the amounts of such payments cannot be finally determined within ninety days after such date, the Company shall pay Executive an estimate of the amount Executive is entitled to receive not later than such ninetieth day. Such estimate shall be determined in good faith by the Company. The Company shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2) of the Code) as soon as the final amount thereof can be determined. If the estimated payments exceed the amount subsequently determined to be due, any excess shall constitute a loan by the Company to Executive, which shall be repayable to the Company on the fifth business day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made hereunder, the Company shall provide -26- Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations. If a decision is rendered by a court or a determination is made by the Internal Revenue Service that the aggregate "parachute payments" which were paid to or for Executive's benefit exceeded the maximum amount deductible under Code Section 280G, and such decision or determination has become final, then Executive shall be obligated to repay to the Company upon demand an amount equal to the sum of (i) the excess of the aggregate "parachute payments" which were paid to or for Executive's benefit over the aggregate "parachute payments" that could have been paid to or for Executive's benefit without loss of deduction under Section 280G of the Code with respect to any portion of such "parachute payments", and (ii) interest on the amount set forth in clause (i) of this sentence at the rate provided in Section 1274(b)(2)(B) of the Code from the date of Executive's receipt of such excess until the date of Executive's repayment thereof. Early lapse of restrictions relating to Restricted Shares and acceleration of vesting of Employee Options under Section 4.3.C. shall occur as of Executive's Official Employment Termination Date. Severance Benefits described in Section 4.3.D. hereof shall be provided to Executive beginning on the Official Employment -27- Termination Date, and subject to Section 4.3.D hereof, shall continue for three full calendar years from such date. Payments of Executive's legal fees and expenses by the Company referred to in Section 4.3.E. hereof shall be made within thirty days after written requests by Executive for payment accompanied by such evidence of payment or incurrence of fees and expenses as the Company may reasonably require. 5.2. Withholding of Taxes. Company shall withhold from any amounts payable under this Agreement all Federal, state, city, or other taxes as legally required. -28- ARTICLE 6. SUCCESSORS 6.1. Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to receive Severance Benefits from the Company in the same amount and on the same terms as Executive would be entitled to hereunder if Executive voluntarily terminated his or her employment for Good Reason after the occurrence of a Change of Control of the Company, except, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed to be Executive's Official Employment Termination Date. 6.2. Beneficiaries. This Agreement shall inure to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If Executive should die -29- while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to Executive's estate or, if the Company is satisfied that there will be no probate proceeding involving Executive's estate, and Executive has executed a will which does not specifically refer to the Severance Benefits hereunder but which pours over the residue of Executive's estate to a trustee under a revocable inter vivos trust established by Executive during his or her lifetime, then all such amounts shall be paid to the trustee or successor trustee of such trust. -30- ARTICLE 7. ADMINISTRATION AND CONFIDENTIALITY OF INFORMATION; OBLIGATIONS OF EXECUTIVE UPON A POTENTIAL CHANGE OF CONTROL 7.1 Administration. This Agreement shall be administered by the Board, as advised by the Committee. In such advisory capacity, and with the approval of a majority of the Board concerning all such actions hereunder, the Committee, to the extent any of its actions are not contrary to the express provisions of the Agreement, is authorized to interpret this Agreement, to prescribe and rescind rules and regulations, to provide conditions and assurances deemed necessary and advisable to protect the interests of the Company, to recommend individuals for participation, and to make all other determinations necessary or advisable in connection with the administration of this Agreement. In fulfilling its administrative duties hereunder, the Board and the Committee may rely on outside counsel, independent accountants, or other consultants to render advice or assistance, and shall be indemnified by the Company for acting in reliance on such advice. 7.2 Confidential Information. Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by Executive during Executive's employment by the Company or any of its affiliated -31- companies and which shall not be or have become public knowledge (other than by acts by Executive or representatives of Executive in violation of this Agreement). After termination of Executive's employment with the Company, Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 7.2 constitute a basis for deferring or withholding any amounts otherwise payable to Executive under this Agreement. 7.3 Obligations of Executive Upon a Potential Change of Control. Executive agrees that, subject to the terms and conditions of this Agreement, in the event of the occurrence of a Potential Change of Control of the Company during the term of this Agreement, he or she will remain in the employ of the Company until the earliest of (i) a date which is six months from the date such Potential Change of Control of the Company occurs; (ii) the date of occurrence of a Change of Control of the Company; (iii) the date of termination by Executive of his or her employment for Good Reason (determined by treating the Potential Change of Control of the Company as a Change of Control of the Company in applying the definition of Good Reason), by reason of death, Disability or Retirement; or (iv) the date of termination by the Company of Executive's employment. -32- ARTICLE 8. MISCELLANEOUS PROVISIONS 8.1. Entire Agreement. This Agreement shall constitute the entire agreement between the Company and Executive and shall supersede those provisions of any employment agreement between Executive and the Company or severance plan sponsored by the Company which agreement or plan, as the case may be, affects Executive's rights to receive benefits as a result of his or her termination of employment following the occurrence of a Change of Control of the Company. In all other respects, any employment agreement or plan shall continue in full force and effect, and is hereby ratified and confirmed. 8.2. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument. 8.3. Notices. Except as otherwise specified herein, for purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in -33- writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: To the Company: Executive Vice President of Corporate Staff and Human Resources Comerica Tower at Detroit Center 500 Woodward Avenue, 31st Floor Detroit, Michigan 48226 To Executive (current home address): ------------------------------------- 8.4. Claims and Disputes; Arbitration. Claims for benefits under this Agreement shall be made in writing to the Company. If the claim is rejected or not acted upon within thirty days, a copy of the claim shall be presented to the Claims Arbiter. The Claims Arbiter shall provide a reasonable opportunity (not to exceed thirty days) for both parties to present relevant evidence and shall schedule a hearing if required by applicable law or if the Claims Arbiter otherwise determines to hold a hearing. The Claims Arbiter shall, within a reasonable period of time but not later than thirty days after receipt of the claim or the date of a hearing, whichever is later, provide written notice of disposition of the claim. If the claim is denied in whole or in part, such notice shall also set forth: -34- A. The specific reason or reasons for denial; and B. Specific reference to the pertinent provisions of the Agreement upon which the denial is based. Unless waived by the Company in writing, Executive shall be required to exhaust his or her remedies under the foregoing claims procedure as a condition precedent to filing a claim for arbitration in accordance with the following paragraph. Any controversy arising out of or relating to this Agreement, or alleged breach thereof, shall be settled by binding arbitration in Wayne County, Michigan in accordance with the laws of the State of Michigan by three arbitrators, one of whom shall be appointed by the Company, one by Executive (or in the event of his or her death, Executive's legal representative) and the third of whom shall be appointed by the first two arbitrators. The arbitration shall be conducted as a de novo review in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 8.5 Limitation of Company's Liability. Notwithstanding any other provision hereof, the Company shall not be liable for any actual or potential loss or diminution of value Executive may incur or allege due to legal, financial accounting and/or internal Company policy restrictions applicable to Executive by reason of his or her position with the Company, including, without limitation, restrictions imposed by Section 16 of the Exchange Act, -35- the Securities Act of 1933, as amended, the Company's internal trading blackout policy and the pooling-of-interest financial accounting rules applicable to dispositions of stock by "affiliates". Executive further agrees that he or she will not make any claim against the Company for reimbursement or otherwise in connection with any adverse financial consequences he or she may incur in complying with such rules and policy. IN WITNESS WHEREOF, Executive has hereunto set Executive's hand, and pursuant to authorization from its Board, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first written above. EXECUTIVE: COMERICA INCORPORATED By -------------------------- ------------------------------ Richard A. Collister -------------------------- Title --------------------------- Executive Vice President -36- Exhibit A to Comerica Incorporated Executive Officer Continuity Agreement RECEIPT AND RELEASE Executive hereby acknowledges that he or she has been advised by Comerica Incorporated (the "Company") that he or she is entitled to receive a severance payment in the net amount of _______________ _____________________ Dollars ($___________) under Sections 4.3.A. and 4.3.B. of the Comerica Incorporated Executive Officer Continuity Agreement (the "Agreement") and that said sum is the correct amount owing to him or her under Sections 4.3.A. and 4.3.B. of the Agreement. Upon receipt by Executive of a check from the Company payable to the order of Executive in the above amount which is backed by sufficient funds, Executive hereby agrees to refrain from making any claim against the Company or any of its affiliates (or against any successors of the Company or of any of its affiliates) for any further sums under Sections 4.3.A. and 4.3.B. of the Agreement. Executive further reaffirms and agrees to honor all obligations Executive has under the Agreement. EXECUTIVE Dated: _____________________ ________________________________ NAMES OF EMPLOYEES WHO ARE PARTICIPANTS OF THE COMERICA INCORPORATED EXECUTIVE OFFICER CONTINUITY AGREEMENT (Effective Date of Coverage January 1, 1996) LEWIS, J. FULTON, J. JOHNSON, T. GREENE, D. HAGGERTY, J. MARCINELLI, R. STEPHENS, D. WHITE, D. BERAN, J. BUTTIGIEG III, J. COLLISTER, R. ESHELMAN, G. GUMMER, C. MADISON, G. TALBOTT, F EX-10.17 11 FORM OF COMERICA INC. SERVERANCE PLAN EXHIBIT 10.17 COMERICA INCORPORATED SENIOR OFFICER SEVERANCE PLAN -i- TABLE OF CONTENTS ARTICLE 1.PURPOSE, ESTABLISHMENT AND TERM 1.1. Purpose and Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Term of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2.NATURE OF RIGHTS UNDER PLAN 2.1. Contractual Rights to Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Effect on Other Benefits and Rights as Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.3. Employment Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE 3.DEFINITIONS AND CONSTRUCTION 3.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A. Annual Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 B. Annual Management Incentive Program . . . . . . . . . . . . . . . . . . . . . . 5 C. Beneficial Owner or Beneficial Ownership . . . . . . . . . . . . . . . . . . . 5 D. Benefit Equalization Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 E. Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 F. Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 G. Change of Control of the Company . . . . . . . . . . . . . . . . . . . . . . . 7 H. Claims Arbiter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 I. Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 J. Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 K. Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 L. Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 M. Deferred Compensation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 10 N. Disability or Disabled . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 O. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 P. Employee Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Q. Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 R. Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 S. Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 T. Long-Term Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 U. Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
V. Official Employment Termination Date . . . . . . . . . . . . . . . . . . . . . 15 W. Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 X. Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Y. Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Z. Potential Change of Control of the Company . . . . . . . . . . . . . . . . . . 17 AA. Preferred Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 AB. Qualifying Circumstance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 AC. Restricted Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 AD. Retirement or Retiring . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 AE. Retirement Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 AF. Severance Agreement and Release . . . . . . . . . . . . . . . . . . . . . . . . 19 AG. Severance Benefit(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.2. Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.3. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.4. Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.5. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-ii- ARTICLE 4. CONTINUATION OF COMPENSATION AND SEVERANCE BENEFITS 4.1. Continuation of Compensation Through Date of Termination and Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 A. Continuation of Compensation Through Date of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 B. Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.2. Qualifying Circumstance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.3. Description of Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.4. Effect of Death, Disability or Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4.5. Effect of Termination for Cause or Other Than for Good Reason . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4.6. Notice of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 ARTICLE 5. FORM AND TIMING OF SEVERANCE BENEFITS 5.1. Form and Timing of Severance Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.2. Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE 6.SUCCESSORS 6.1. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 6.2. Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-iii- ARTICLE 7. ADMINISTRATION AND CONFIDENTIALITY OF INFORMATION; OBLIGATIONS OF PARTICIPANT UPON A POTENTIAL CHANGE OF CONTROL 7.1 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 7.2 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 7.3 Obligations of Participant Upon a Potential Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE 8.MISCELLANEOUS PROVISIONS 8.1. Entire Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 8.3. Claims and Disputes; Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 8.4. Limitation of Company's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
-iv- ARTICLE 1. PURPOSE, ESTABLISHMENT AND TERM 1.1 Purpose and Establishment. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders that the Company maintain the continued dedication of Participants (as defined below) of this Plan, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company (as defined below). To alleviate the inevitable distraction associated with a pending or threatened Change of Control of the Company and to encourage the full attention and dedication to the Company of Plan Participants currently and in the event of any threatened or pending Change of Control of the Company, the Board believes that it is imperative that it take steps, consistent with those taken by other similarly situated organizations, to provide Participants with compensation and benefits arrangements upon a Change of Control of the Company which ensure that the compensation and benefits expectations of Participants will be satisfied. In order to accomplish the foregoing objectives, the Board has established the Plan the provisions of which are embodied herein. This Plan shall become effective January 1, 1996 (the "Effective Date"), and shall remain in effect as provided in Section 1.2 herein. -1- 1.2. Term of Plan. The term of this Plan will commence on the Effective Date and continue through December 31, 1998; provided, however, that if a Change of Control of the Company occurs during the term of this Plan, the term of this Plan will not expire until the elapse of the longer of the following periods: (i) the period which ends on the last day of the twenty-fourth month subsequent to the month in which the Change of Control of the Company occurs (or, in the case of a Change of Control of the Company described in Section 3.1.G(3) or (4) hereof, the period which ends on the earlier of (a) the last day of the twenty-fourth month subsequent to the month in which consummation of the transaction, approval of which constitutes the Change of Control of the Company, occurs, or (b) the last day of the thirtieth month subsequent to the month in which the Change of Control of the Company occurs), or (ii) the period which ends on the date all benefits owing to Participant hereunder have been paid. -2- ARTICLE 2. NATURE OF RIGHTS UNDER PLAN 2.1. Contractual Rights to Benefits. This Plan establishes a contractual right to the Severance Benefits Participant may become entitled to hereunder following the occurrence of a Change of Control of the Company. 2.2 Effect on Other Benefits and Rights as Employee. Coverage under this Plan shall not affect Participant's right to receive any amounts payable to Participant under any benefit, incentive, retirement, or other plan or arrangement, or under any employment agreement, except to the extent that the express provisions of such other agreement, plan or arrangement preclude the payment of or provide for offset of benefits thereunder upon receipt of benefits under this Plan. Further, coverage of Participant under this Plan shall not adversely affect Participant's rights as an Employee of the Company, whether those rights exist now or arise hereafter. 2.3. Employment Status. The provisions hereof shall not be deemed to create a contract between the Company and Participant to employ Participant for any fixed period of time. Participant's employment with the Company may be terminated at will by either the Company or Participant, with or without Cause, subject to fulfillment by the Company of its obligation to provide such Severance Benefits as may be required hereunder. -3- ARTICLE 3. DEFINITIONS AND CONSTRUCTION 3.1. Definitions. Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the term is capitalized. AH. "Annual Base Salary" means Participant's rate of annual salary in effect, except as otherwise specifically provided herein, as of the date a Change of Control of the Company occurs, or if such rate is higher as of the date Participant experiences a Qualifying Circumstance, Participant's rate of annual salary in effect as of the date he or she experiences a Qualifying Circumstance; provided, however, that if Participant is compensated on a commission basis and does not have a rate of annual salary, Participant's salary level utilized for the purpose of determining Participant's benefit credits under the Comerica Incorporated Preferred Compensation Plan shall be considered Participant's rate of annual salary. Annual Base Salary shall include (i) any amount which is contributed by the Company pursuant to an elective deferral which is not includible in the Participant's gross income under Code Sections 125 or 402(e)(3) and (ii) any amount contributed by the Company to the Deferred Compensation Plan pursuant to Participant's election. AI. "Annual Management Incentive Program" means the Comerica Incorporated annual management incentive program or any -4- plan or program adopted or implemented by the Company as a successor to such program. AJ. "Beneficial Owner" or "Beneficial Ownership" or "Beneficially Owns" or "Beneficially Owned" shall have the meanings ascribed to such terms in Exchange Act Rule 13d-3. AK. "Benefit Equalization Plan" means the Benefit Equalization Plan For Employees of Comerica Incorporated or any plan adopted by the Company as a successor to such plan. AL. "Board" means the Board of Directors of Comerica Incorporated. AM. "Cause" shall be deemed to have arisen if Participant has conducted himself or herself in a manner described in (1) or (2) below: (1) If Participant has willfully and continually failed to perform substantially all of his or her duties with the Company or one of its affiliates (unless such failure occurs (i) as a result of Participant's incapacity precipitated by physical or mental illness or (ii) after the Participant's issuance of a Notice of Termination for Good Reason pursuant to Section 4.6 hereof), after a written demand to perform is delivered to Participant by the Board or Chief Executive Officer of the Company which demand must specifically identify the manner in which the Board or Chief Executive Officer -5- believes that Participant has not performed substantially all of his or her duties, provided that Participant fails to remedy the situation within ten (10) business days of receiving such notice; or (2) If Participant has engaged willfully in illegal or gross misconduct which is materially and demonstrably injurious to the Company, monetarily or otherwise. However, no act, or failure to act, on Participant's part shall be considered "willful" unless Participant took such action (or failed to take such action) other than in good faith and without reasonable belief that his or her action or omission was in the best interests of the Company. AN. "Change of Control of the Company" shall be deemed to have occurred if, during the term of this Plan, the conditions set forth in any of the following paragraphs shall have been satisfied: (1) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its affiliates) which represent 26% or more of the combined voting power of the Company's then outstanding securities; or -6- (2) during any period of up to two consecutive years (not including any period prior to the Effective Date of this Plan), individuals who constitute the Board at the beginning of such period and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to, a consent solicitation relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3rds) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; or (3) the shareholders of the Company (i) approve a merger or consolidation of the Company with any other corporation, or (ii) approve the issuance of voting securities of the Company pursuant to applicable stock exchange requirements in connection with a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than in either (i) or (ii) above a merger or consolidation -7- which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), in combination with shares owned by any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least 75% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (4) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement to sell or dispose of all or substantially all of the Company's assets. AO. "Claims Arbiter" means such person or persons as the Company designates to mediate disputes involving the Plan. No such person shall be an employee of the Company. AP. "Code" means the Internal Revenue Code of 1986, as amended. All references to sections of the Code shall be deemed to refer to any successor provisions to such sections. AQ. "Committee" means the Compensation Committee of the Board of Directors of Comerica Incorporated. AR. "Company" means Comerica Incorporated, a Delaware corporation (including any and all subsidiaries), and any -8- successor to its business and/or assets which assumes this Plan by operation of law, or otherwise (except in determining, under Section 3.1.G. hereof, whether or not a Change of Control of the Company has occurred in connection with any such succession). AS. "Company Shares" means shares of $5.00 par value common stock of the Company or any equity securities into which such shares have been converted. AT. "Deferred Compensation Plan" means the Comerica Incorporated Deferred Compensation Plan, the Manufacturers National Corporation Executive Incentive Plan, or any plan adopted by the Company as a successor to either such plan. AU. "Disability" or "Disabled" means "Totally Disabled" within the meaning of such term as set forth in the Long-Term Disability Plan of Comerica Incorporated, the provisions of which are incorporated herein by reference. AV. "Effective Date" means January 1, 1996. AW. "Employee Options" means options to purchase Company Shares granted pursuant to the Long-Term Incentive Plan. AX. "Exchange Act" means the Securities Exchange Act of 1934, as amended. All references to sections of the Exchange Act shall be deemed to refer to any successor provisions to such sections. AY. "Expiration Date" means the date the Plan expires, as provided in Section 1.2 herein. -9- AZ. "Good Reason" to justify a Participant's decision to terminate his or her employment means the occurrence (without the express written consent of Participant) of any one or more of the following acts by the Company, or failures by the Company to act, unless any such act or failure to act is corrected prior to Participant's Official Employment Termination Date: (1) Assignment of any duties to Participant inconsistent with his or her position as a Senior Vice President of the Company or a substantial reduction in the nature of Participant's responsibilities compared to his or her responsibilities as they existed immediately prior to the occurrence of the Change of Control of the Company; (2) Relocation of Participant's principal work station to a location more than sixty miles away from Participant's principal office at the time of the occurrence of the Change of Control of the Company; (3) Any reduction in the amount of Participant's Annual Base Salary from the rate in effect on the date a Change of Control of the Company occurs or a reduction in Participant's salary range of 15% or more from his or her salary range in effect on the date a Change of Control of the Company occurs; (4) Failure to pay to Participant his or her (i) Annual Base Salary (including any commissions owing to Participant) on the date scheduled for payment unless Participant has voluntarily deferred the receipt of any amount not paid, (ii) annual bonus -10- under the Annual Management Incentive Program (or under any other short-term compensation plan in which Participant was eligible to participate before the occurrence of a Change of Control of the Company) at the normal payment time unless non-payment of the bonus is attributable to the Company's failure to attain a level of performance which would generate a bonus pool or to inadequate performance by Participant, or (iii) deferred compensation under the Deferred Compensation Plan (or under any other deferred compensation program of the Company), within sixty days of the date such compensation is scheduled to be paid; (5) (i) Discontinuance of any compensation plan in which Participant is eligible to participate immediately prior to the occurrence of the Change of Control of the Company which provides benefits material vis-a-vis Participant's overall remuneration (including, but not limited to, the Annual Management Incentive Program, the Long-Term Incentive Plan, the Preferred Savings Plan, the Retirement Plan, the Benefit Equalization Plan, the Deferred Compensation Plan, or any substitute plans adopted by the Company prior to the occurrence of the Change of Control of the Company), unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to any such plan, or (ii) failure to continue Participant's coverage under any such plan or arrangement on a basis at least as favorable, -11- both in terms of the amount of benefits provided and the level of Participant's coverage relative to other executives, as existed at the time of the occurrence of the Change of Control of the Company; (6) (i) Failure to continue to provide coverage (and/or benefits) to Participant similar to that he or she enjoyed under the company-sponsored life insurance, medical, health and accident, disability or other welfare benefit or material fringe benefit plans at the time of the occurrence of the Change of Control of the Company, or (ii) the taking of any action which would materially reduce, directly or indirectly, any such coverage or which would deprive Participant of any material welfare or fringe benefit he or she enjoyed at the time of the occurrence of the Change of Control of the Company, provided, in either situation, the Company's action occurs other than as a result of an across-the-board adjustment in coverage and/or benefits which affects all senior officers of the Company and all senior officers of any Person in control of the Company; (7) Failure to obtain a satisfactory agreement from any successor to assume the Company's obligations under this Plan, as required under Section 6.1 hereof; and (8) The taking of action by the Company which purports to terminate Participant's employment without providing Participant a Notice of Termination which -12- satisfies the requirements of Section 3.1.U. hereof. Participant's right to resign for Good Reason shall not be affected by his or her incapacity due to physical or mental illness nor shall Participant's continuation of employment following the occurrence of any circumstance constituting Good Reason constitute consent to such circumstance or a waiver of rights hereunder. BA. "Long-Term Incentive Plan" means the Comerica Incorporated Long Term Incentive Plan or any plan adopted by the Company as a successor to such plan. BB. "Notice of Termination" means a written notice which shall indicate the specific termination provision in this Plan relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Participant's employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination after reasonable notice to Participant and an opportunity for Participant, together with Participant's counsel, to be heard before the Board (i) which finds that, in the good faith opinion of the Board, Participant was guilty of conduct set forth in clause (1) and/or (2) of the definition of Cause -13- herein, and (ii) which specifies the particulars thereof in detail. BC. "Official Employment Termination Date", with respect to any purported termination of Participant's employment after the occurrence of a Change of Control of the Company and during the term of this Plan, means: (i) if Participant's employment is terminated due to Disability, thirty days after Notice of Termination is given (provided that Participant shall not have returned to the full-time performance of his or her duties during such thirty-day period), and (ii) if Participant's employment is terminated for any other reason, the date specified in the Notice of Termination [which, in the case of a termination by either the Company or Participant, shall be not less than thirty days (except in the case of a termination for Cause or except in the case where the event constituting Good Reason occurred during the last thirty days of the term of this Plan)] from the date such Notice of Termination is given. BD. "Participant" means any senior officer of the Company whose name appears on Exhibit B hereto as an employee covered by this Plan. BE. "Person" shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities -14- under an employee benefit plan sponsored by the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation, owned directly or indirectly, by the stockholders of the Company, in which their ownership interests are in substantially the same proportions as their ownership interests in stock of the Company. BF. "Plan" means the Comerica Incorporated Senior Officer Severance Plan as herein set forth. BG. "Potential Change of Control of the Company" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied: (1) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change of Control of the Company; (2) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change of Control of the Company; (3) any Person who is, or becomes, the Beneficial Owner, directly or indirectly, of securities of the Company, which represent 10% or more of the combined voting power of the Company's then outstanding securities, increases such Person's Beneficial Ownership of such securities by 5% or -15- more over the percentage so owned by such Person on the Effective Date; or (4) the Board adopts a resolution to the effect that, for purposes of this Plan, a Potential Change of Control of the Company has occurred. BH. "Preferred Savings Plan" means the Comerica Incorporated Preferred Savings Plan or any plan adopted by the Company as a successor to such plan. BI. "Qualifying Circumstance" means any of the events described in Section 4.2 hereof. BJ. "Restricted Shares" means Company Shares granted to Participant under the Long-Term Incentive Plan subject to restrictions. BK. "Retirement" or "Retiring" shall be deemed to be the reason for the termination by the Company or Participant of Participant's employment if Participant's employment is terminated in accordance with (i) the Company's retirement policy (excluding its early retirement policy), which applies to its salaried employees, as in effect immediately prior to the occurrence of the Change of Control of the Company, or (ii) any retirement arrangement which Participant has consented to. BL. "Retirement Plan" means the Comerica Incorporated Retirement Plan or any plan adopted by the Company as a successor to such plan. BM. "Severance Agreement and Release" means a receipt for payment of benefits hereunder and a settlement of and -16- release of all claims against the Company in the form set forth in Exhibit A, including any modification of such form by the Company prior to Participant's Official Employment Termination Date. The provisions of Exhibit A, including any modifications thereof adopted by the Company, are incorporated herein by reference. BN. "Severance Benefit(s)" means the items of severance compensation as provided in Article 4 hereof. 3.2. Gender and Number. The masculine, feminine and neuter, wherever used in the Plan, shall refer to either the masculine, feminine or neuter; and, unless the context otherwise requires, the singular shall include the plural and the plural the singular. 3.3. Severability. In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity of the provision shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 3.4. Modification. No provision of this Plan may be modified, waived, or discharged unless Participant consents in writing to such modification, waiver, or discharge. 3.5. Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of Delaware shall be the controlling law in all matters relating to this Plan. -17- ARTICLE 4. CONTINUATION OF COMPENSATION AND SEVERANCE BENEFITS 4.1. Continuation of Compensation Through Date of Termination and Severance Benefits. A. Continuation of Compensation Through Date of Termination. Following a Change of Control of the Company and during the term of this Plan, during any period that Participant fails to perform Participant's full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay Participant's full base salary to Participant at the rate in effect at the commencement of any such period (or shall pay commissions earned at the scheduled payment date), together with all compensation and benefits payable to Participant under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period, until Participant's employment is terminated by the Company for Disability. Further, the Company shall pay Participant's normal post-termination compensation and benefits to Participant as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements. If Participant's employment shall be terminated for any reason following a Change of Control of the Company and during the term of this Plan, the Company shall pay Participant's full salary to Participant through Participant's Official Employment Termination Date at the rate in effect at the time the Notice of Termination is -18- given, together with all compensation and benefits payable to Participant through Participant's Official Employment Termination Date under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period. Further, the Company shall pay Participant's normal post-termination compensation and benefits to Participant as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements. B. Severance Benefits. Participant shall be entitled to receive the Severance Benefits described in Section 4.3 hereof provided there has been a Change of Control of the Company, not later than the end of the twenty-fourth month which begins after the month in which the Change of Control of the Company occurs(1), Participant experiences a Qualifying Circumstance and Participant signs a Severance Agreement and Release and delivers it to the Company. Participant shall not be entitled to receive Severance Benefits if his or her employment is terminated for Cause or ends as a result of Participant becoming Disabled, Retiring, dying or resigning without Good Reason. - - --------------- (1)In the case of a Change of Control of the Company described in Section 3.1.G.(3) or (4) hereof, the period during which Participant must experience a Qualifying Circumstance in order to become entitled to Severance Benefits shall be, in lieu of the period referred to above, the period which ends on the earlier of (a) the last day of the twenty-fourth month subsequent to the month in which consummation of the transaction, approval of which constitutes the Change of Control of the Company, occurs, or (b) the last day of the thirtieth month subsequent to the month in which the Change of Control of the Company occurs. -19- 4.2. Qualifying Circumstance. The occurrence or deemed occurrence of any one or more of the following events not later than the end of period referred to in Section 4.1.B. (or not later than the period referred to in footnote (1), if applicable) shall be considered a Qualifying Circumstance: BO. A successor company fails or refuses to assume the Company's obligations under this Plan; BP. The Company or any successor company breaches any of the provisions of this Plan; BQ. Participant's employment with the Company ends unless his or her employment is terminated for Cause, or ends as a result of Participant becoming Disabled, Retiring, dying or resigning without Good Reason; or -20- BR. Participant resigns for Good Reason. Participant's employment shall be deemed to have been terminated following a Change of Control of the Company by Participant with Good Reason if Participant's employment is terminated prior to the occurrence of a Change of Control of the Company without Cause at the direction of a Person who has entered into an agreement with the Company the consummation of which will constitute a Change of Control of the Company or if Participant terminates his employment with Good Reason prior to the occurrence of a Change of Control of the Company (determined by treating a Potential Change of Control of the Company as a Change of Control of the Company in applying the definition of Good Reason) if the circumstance or event which constitutes Good Reason occurs at the direction of such Person. 4.3. Description of Severance Benefits. The following items constitute the Severance Benefits Participant may receive hereunder: BS. A severance payment equal to two times Participant's Annual Base Salary; provided, however, that the amount of this payment, together with other amounts and/or benefits Participant receives hereunder (or under other plans, agreements, or arrangements sponsored by the Company or to which the Company is a party) as a result of the occurrence of the Change of Control of the Company which constitute "parachute payments" under Section 280G of the Code may not exceed the maximum amount deductible under Section 280G of the Code, and, if necessary to remain -21- within the deduction limitation imposed by Code Section 280G, this severance payment shall be reduced to the maximum amount (but not below zero) which may be paid without loss of the Company's deduction under Code Section 280G; BT. An amount (in lieu of any amounts Participant may be entitled to receive as an eligible participant under the Annual Management Incentive Program) equal to the sum of (i) any incentive compensation Participant earned (or, if such amount has not yet been determined, the amount he or she would have earned assuming the Company's annual profit plan performance threshold was achieved) under the Annual Management Incentive Program for the fiscal year immediately preceding the year in which Participant's Official Employment Termination Date occurs, provided any such sum has not yet been paid; (ii) any incentive compensation Participant earned under the Annual Management Incentive Program with respect to any multi-year performance period which was completed on or prior to Participant's Official Employment Termination Date provided any such sum has not yet been paid; and (iii) a pro rata portion of the aggregate estimated value of all incentive compensation awards to Participant relating to all uncompleted one-year performance periods (2) under the Annual Management Incentive Program calculated by - - --------------- (2)Participant shall not be entitled to receive a pro rata payment with respect to awards to be computed under multi-year performance periods which have not been completed on or prior to Participant's Official Employment Termination Date. -22- assuming the Company's annual profit plan performance threshold was achieved (3). BU. Early lapse of restrictions applicable to all Restricted Shares which were awarded to Participant under the Long-Term Incentive Plan prior to the time a Change of Control of the Company occurs (or, in the case of a Change of Control of the Company described in Section 3.1.G(3) or (4) hereof, any such shares awarded prior to consummation of the transaction, approval of which constitutes the Change of Control of the Company), and acceleration of vesting of all outstanding Employee Options granted to Participant under the Long-Term Incentive Plan prior to the time a Change of Control of the Company occurs (or, in the case of a Change of Control of the Company described in Section 3.1.G(3) or (4) hereof, any such options granted prior to consummation of the transaction, approval of which constitutes the Change of Control of the Company); BV. $10,000 for payment of premiums to continue employee benefit plan coverage offered to terminating employees subsequent to Participant's Official Employment Termination Date; and - - --------------- (3)The pro rata portion of any such award shall be the amount payable (i) assuming the Company's performance threshold in the annual profit plan for the year in which Participant's Official Employment Termination Date occurs was achieved, and (ii) that a multiplier was utilized based on the multiplier which would have applied had that performance occurred in the prior fiscal year, said amount to be multiplied by a fraction, the numerator of which is the number of full months which elapsed from the beginning of the performance period through Participant's Official Employment Termination Date and the denominator of which is twelve. -23- BW. Outplacement services under a program to be selected by the Company. 4.4. Effect of Death, Disability or Retirement. If, during the term of this Plan, Participant (i) dies, (ii) fails to perform his or her duties with the Company on a full-time basis for six consecutive months due to Disability, and fails to recommence the full-time performance of his or her duties within thirty days after a written Notice of Termination is given to Participant (which notice may be given after Participant fails to perform his or her duties with the Company on a full-time basis for five consecutive months due to Disability), or (iii) ends his or her employment by Retiring, this Plan shall expire as of the date of Participant's death, Official Employment Termination Date or date of Retirement, as the case may be, without any obligation on the part of the Company or its successors to pay any Severance Benefits to or with respect to Participant hereunder. 4.5. Effect of Termination for Cause or Other Than for Good Reason. Following a Change of Control of the Company, if Participant's employment is terminated either (i) by the Company for Cause; or (ii) by Participant without Good Reason, subject to Section 4.1.A. hereof, the Company shall have no further obligations to Participant under this Plan. 4.6. Notice of Termination. After a Change of Control of the Company and during the term of this Plan, any purported termination of Participant's employment (other than by reason of death), shall be communicated by a Notice of Termination from one party hereto to the other party hereto in accordance with Section 8.2 hereof, and -24- no purported termination which fails to comply with this requirement shall be effective. -25- ARTICLE 5. FORM AND TIMING OF SEVERANCE BENEFITS 5.1. Form and Timing of Severance Benefits. Following Executive's satisfaction of the applicable conditions, the Severance Benefits shall be paid or provided in the manner and at the times hereinafter set forth. Severance Benefits described in Sections 4.3.A., 4.3.B. and 4.3.D. hereof shall be paid in cash (except as otherwise provided herein) to Participant in a single lump sum as soon as practicable following Participant's Official Employment Termination Date; provided, however, that if the amounts of such payments cannot be finally determined within ninety days after such date, the Company shall pay Participant an estimate of the amount Participant is entitled to receive not later than such ninetieth day. Such estimate shall be determined in good faith by the Company. The Company shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2) of the Code) as soon as the final amount thereof can be determined. If the estimated payments exceed the amount subsequently determined to be due, any excess shall constitute a loan by the Company to Participant, which shall be repayable to the Company on the fifth business day after demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). At the time that payments are made hereunder, the Company shall provide -26- Participant with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations. If a decision is rendered by a court or a determination is made by the Internal Revenue Service that the aggregate "parachute payments" which were paid to or for Participant's benefit exceeded the maximum amount deductible under Code Section 280G, and such decision or determination has become final, then Participant shall be obligated to repay to the Company upon demand an amount equal to the sum of (i) the excess of the aggregate "parachute payments" which were paid to or for Participant's benefit over the aggregate "parachute payments" that could have been paid to or for Participant's benefit without loss of deduction under Section 280G of the Code with respect to any portion of such "parachute payments", and (ii) interest on the amount set forth in clause (i) of this sentence at the rate provided in Section 1274(b)(2)(B) of the Code from the date of Participant's receipt of such excess until the date of Participant's repayment thereof. Early lapse of restrictions relating to Restricted Shares and acceleration of vesting of Employee Options under Section 4.3.C. shall occur as of Participant's Official Employment Termination Date. Severance Benefits described in Section 4.3.E. hereof shall -27- be provided to Participant as soon as practical after Participant's Official Employment Termination Date. 5.2. Withholding of Taxes. Company shall withhold from any amounts payable under this Plan all Federal, state, city, or other taxes as legally required. -28- ARTICLE 6. SUCCESSORS 6.1. Successors. The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) of all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Plan and shall entitle Participant to receive Severance Benefits from the Company in the same amount and on the same terms as Participant would be entitled to hereunder if he voluntarily terminated his employment for Good Reason after the occurrence of a Change of Control of the Company, except, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed to be Participant's Official Employment Termination Date. 6.2. Beneficiaries. This Plan shall inure to the benefit of and be enforceable by Participant's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If Participant should die -29- while any amount would still be payable to him or her hereunder had he or she continued to live, all such amounts, unless otherwise provided herein, shall be paid to Participant's estate or, if the Company is satisfied that there will be no probate proceeding involving Participant's estate, and Participant has executed a will which does not specifically refer to the Severance Benefits hereunder but which pours over the residue of Participant's estate to a trustee under a revocable inter vivos trust established by Participant during his or her lifetime, then all such amounts shall be paid to the trustee or successor trustee of such trust. -30- ARTICLE 7. ADMINISTRATION AND CONFIDENTIALITY OF INFORMATION; OBLIGATIONS OF PARTICIPANT UPON A POTENTIAL CHANGE OF CONTROL 7.1 Administration. This Plan shall be administered by the Board, as advised by the Committee. In such advisory capacity, and with the approval of a majority of the Board concerning all such actions hereunder, the Committee, to the extent any of its actions are not contrary to the express provisions of the Plan, is authorized to interpret this Plan, to prescribe and rescind rules and regulations, to provide conditions and assurances deemed necessary and advisable to protect the interests of the Company, to recommend individuals for participation, and to make all other determinations necessary or advisable in connection with the administration of this Plan. In fulfilling its administrative duties hereunder, the Board and the Committee may rely on outside counsel, independent accountants, or other consultants to render advice or assistance, and shall be indemnified by the Company for acting in reliance on such advice. 7.2 Confidential Information. Participant shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by Participant during Participant's employment by the Company or any of its affiliated -31- companies and which shall not be or have become public knowledge (other than by acts by Participant or representatives of Participant in violation of this Plan). After termination of Participant's employment with the Company, Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 7.2 constitute a basis for deferring or withholding any amounts otherwise payable to Participant under this Plan. 7.3 Obligations of Participant Upon a Potential Change of Control. As a condition of participation in this Plan, Participant agrees that, subject to the terms and conditions of this Plan, in the event of the occurrence of a Potential Change of Control of the Company during the term of this Plan, he or she will remain in the employ of the Company until the earliest of (i) a date which is six months from the date such Potential Change of Control of the Company occurs; (ii) the date of occurrence of a Change of Control of the Company; (iii) the date of termination by Participant of his or her employment for Good Reason (determined by treating the Potential Change of Control of the Company as a Change of Control of the Company in applying the definition of Good Reason), by reason of death, Disability or Retirement; or (iv) the date of termination by the Company of Participant's employment. -32- ARTICLE 8. MISCELLANEOUS PROVISIONS 8.1. Entire Plan. This Plan shall constitute the entire plan governing the payment of severance benefits by the Company to Participant and shall supersede those provisions of any employment agreement between Participant and the Company or severance plan sponsored by the Company which agreement or plan, as the case may be, affects Participant's rights to receive benefits as a result of his or her termination of employment following the occurrence of a Change of Control of the Company. In all other respects, any employment agreement or plan shall continue in full force and effect, and is hereby ratified and confirmed. 8.2. Notices. Except as otherwise specified herein, for purposes of this Plan, notices and all other communications provided for in the Plan shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: -33- To the Company: Executive Vice President of Corporate Staff and Human Resources Comerica Tower at Detroit Center 500 Woodward Avenue, 31st Floor Detroit, Michigan 48226 To the Participant: At current address on file with Human Resources 8.3. Claims and Disputes; Arbitration. Claims for benefits under this Plan shall be made in writing to the Company. If the claim is rejected or not acted upon within thirty days, a copy of the claim shall be presented to the Claims Arbiter. The Claims Arbiter shall provide a reasonable opportunity (not to exceed thirty days) for both parties to present relevant evidence and shall schedule a hearing if required by applicable law or if the Claims Arbiter otherwise determines to hold a hearing. The Claims Arbiter shall, within a reasonable period of time but not later than thirty days after receipt of the claim or the date of a hearing, whichever is later, provide written notice of disposition of the claim. If the claim is denied in whole or in part, such notice shall also set forth: A. The specific reason or reasons for denial; and B. Specific reference to the pertinent provisions of the Plan upon which the denial is based. -34- Unless waived by the Company in writing, Participant shall be required to exhaust his or her remedies under the foregoing claims procedure as a condition precedent to filing a claim for arbitration in accordance with the following paragraph. Any controversy arising out of or relating to this Plan, or alleged breach thereof, shall be settled by binding arbitration in Wayne County, Michigan in accordance with the laws of the State of Michigan by three arbitrators, one of whom shall be appointed by the Company, one by Participant (or in the event of his or her death, Participant's legal representative) and the third of whom shall be appointed by the first two arbitrators. The arbitration shall be conducted as a de novo review in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. 8.4 Limitation of Company's Liability. Notwithstanding any other provision hereof, the Company shall not be liable for any actual or potential loss or diminution of value Participant may incur or allege due to legal, financial accounting and/or internal Company policy restrictions applicable to Participant by reason of his or her position with the Company, including, without limitation, restrictions imposed by Section 16 of the Exchange Act, the Securities Act of 1933, as amended, the Company's internal -35- trading blackout policy and the pooling-of-interest financial accounting rules applicable to dispositions of stock by "affiliates". Participant further agrees that he or she will not make any claim against the Company for reimbursement or otherwise in connection with any adverse financial consequences he or she may incur in complying with such rules and policy. -36- Exhibit A to Comerica Incorporated Senior Officer Severance Plan SEVERANCE AGREEMENT AND RELEASE This Severance Agreement and Release (hereinafter referred to as the "Release") is entered into between _____________________ (hereinafter referred to as "Participant") and Comerica Incorporated, a Delaware corporation (together with its affiliates being hereinafter referred to as "Comerica"). 1. Participant was employed by Comerica and was covered under the Comerica Incorporated Senior Officer Severance Plan (the "Plan"). As a result of a change of control of Comerica and the termination of Participant's employment, Participant is eligible to receive benefits under the Plan provided Participant signs this Release. Participant is not entitled to receive any benefits under the Plan if Participant fails to sign this Release. 2. Comerica hereby acknowledges that Participant is entitled to receive a severance payment in the net amount of _______________ dollars ($_____________) under Sections 4.3.A. and 4.3.B. of the Plan and a payment in the net amount of ___________________ dollars ($_____________) under Section 4.3.D. of the Plan, and Participant acknowledges that said sums are the correct amounts owning to Participant under Sections 4.3.A., 4.3.B. and 4.3.D. of the Plan. Comerica also acknowledges that Participant is entitled to receive other benefits under Sections 4.3.C. and 4.3.E. of the Plan. 3. Continuation of employee benefit plan coverage, with respect to which Participant is receiving an amount under Section -1- 4.3.D. of the Plan to defray the premiums, will begin on the date of termination of Participant's employment. 4. Except for payments and benefits under the Plan and under the Comerica Incorporated Retirement Plan and Comerica Incorporated Preferred Savings Plan, Participant acknowledges that he or she is not entitled to receive any other payments or benefits from Comerica. 5. In consideration of payment to Participant of the amounts and provision of benefits under the Plan, Participant agrees for himself (or herself) and on behalf of all people who may act on his or her behalf (including, but not limited to, Participant's family members, heirs, executors, administrators, personal representatives, agents and/or legal representatives), to forever and fully release and discharge Comerica, and all former, current and future employees, directors, officers, agents and successors of Comerica, from any and all claims, causes of action, charges, contracts, grievances, demands, and/or other liability of any nature whatsoever, that Participant ever had by reason of or arising out of any matter, cause and/or event occurring on or prior to the date of signing of this Release. This shall include, but not be limited to, any and all claims of any nature which may have arisen on or prior to the date of signing of this Release and which are in any way related to Participant's employment, termination of employment, any and all claims relating to forced resignation, constructive discharge, libel, slander, deprivation of due process, wrongful discharge, discrimination, harassment of any nature, breach of contract, breach of implied contract, infliction of emotional -2- distress, detrimental reliance, invasion of privacy, negligence, interference with contractual or other relationships, retaliatory discharge or treatment and/or termination in violation of public policy. This Release also specifically includes, but is not limited to, any and all claims under common law or any federal, state and/or local law, regulation, executive order, rule and/or ordinance, and/or any and all claims which could have been alleged in any litigation or administrative proceeding between Participant and any of the persons and/or entities released. This Release shall further include, but not be limited to, any right, claim or demand, which may have arisen on or prior to the date of signing of this Release, which Participant may have pursuant to the Michigan Payment of Wages and Fringe Benefits Act, the Whistleblowers' Protection Act, the Fair Labor Standards Act, the Equal Pay Act, the Age Discrimination in Employment Act, the Elliott-Larsen Civil Rights Act, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Michigan Handicappers' Civil Rights Act, the Employee Retirement Income Security Act and/or any other federal, state and/or local law, executive order, rule, ordinance or regulation. 6. Participant promises never to file a lawsuit, grievance, administrative charge or any other type of action asserting any claims which are released in Section 5. of this Release. Further, Participant acknowledges that he or she has received a copy of the Plan and reaffirms and agrees to honor all obligations Participant has under the Plan. -3- 7. The parties agree that this Release will forever and for all time bar any action and/or claim of Participant based on circumstances or events which occurred on or prior to the time of the signing of this Release. 8. This Release constitutes the entire agreement between Participant and Comerica relating to the subject matter within, and supersedes any other agreements and understandings between the parties relating to such subject matter. Comerica has not made any promises to Participant with respect to such subject matter other than those contained herein. 9. Comerica advises Participant to consult with an attorney prior to signing this Release. Participant shall have forty-five days in which to consider this Release. The forty-five day period shall not begin to run until Comerica informs Participant, in writing, in a manner calculated to be understood by the average individual eligible to participate in the Plan, as to (i) any class, unit, or group of individuals covered by the Plan, any eligibility factors for the Plan, and any time limits applicable to the Plan; and (ii) the job titles and ages of all individuals eligible or selected for the Plan, and the ages of all individuals in the same job classification or organizational unit who are not eligible or selected for participation in the Plan. 10. Following the signing of this Release, Participant shall have seven days within which he or she may revoke this Release, by hand delivering or mailing (certified mail suggested) during such seven-day period, a written notice of revocation to: -4- Executive Vice President of Corporate Staff and Human Resources Comerica Tower at Detroit Center 500 Woodward Avenue, 31st Floor Detroit, Michigan 48226 This Release shall not become effective or enforceable until the revocation period provided in this section has expired. If Participant fails to sign this Release, or if Participant revokes this Release, Participant will not receive any payments or benefits described herein and must return all payments and benefits which may have been made under the Plan. 11. Participant acknowledges that he or she has had sufficient time to review this Release and has carefully read and understands its contents. Participant has had the full opportunity to consult with an attorney regarding the terms hereof. Participant acknowledges that he or she is knowingly and voluntarily signing this Release with full knowledge of its terms. The parties have signed this Release on the dates set forth below. COMERICA INCORPORATED Dated:___________________ By:_____________________________ Its:____________________________ PARTICIPANT Dated:___________________ ________________________________ -5- Exhibit B to Comerica Incorporated Senior Officer Severance Plan NAMES OF EMPLOYEES WHO ARE PARTICIPANTS OF THE COMERICA INCORPORATED SENIOR OFFICER SEVERANCE PLAN DAVID, L. DEYO, J. ELLIS, P. FAUBION, P. FISHER, T. GADDY JR., F. GOLDMAN, A GOYNE, J. GREGORY III, E.M. HAWKINS, S. HERMANN, A. HUGLEY, S. KACZMAREK, W. KILLIAN, J. LINDENBERG, G. LOVE, J. MCMAHON, E. MORAN, J. MULVAHILL, K. OGDEN, T. RANSDELL, D. SHOBE, M. TIETJEN, J. BAKER, M.E. BALL JR. F. BELANGER, G. CARLETON, L. DANIELS, T. EARLY, T. EASTHAM, L. FIEDLER, D. GARAVAGLIA, J. JANISSE, R. KAWAMOTO, D. LAMB, J. LYONS, R. MAGDOWSKI, A. MARKS, R. MIMS, E. OLSEN, R. ONG, M. RONAN, P. TIERNEY, M. WELLER, P. WELSHER, P. ZARB, E. EX-13 12 ANNUAL REPORT 1996 HIGHLIGHTS FOCUSED ON PERFORMANCE - - Initiated a major corporate program to improve efficiency, revenue and customer service. Comerica expects to ultimately realize annual pre-tax benefits of approximately $110 million. As a result of the program, Comerica recorded a pre-tax restructuring charge in 1996 of $90 million ($60 million after tax, or $0.53 per share). - - Earned 15.98 percent on average common shareholders' equity (18.33 percent excluding the restructuring charge), compared to 16.46 percent in 1995. - - Returned 1.22 percent on average assets (1.40 percent excluding the restructuring charge), compared to 1.21 percent in 1995. REPORTED RECORD EARNINGS - - Recorded net income of $417 million, or $3.55 per share (excluding the restructuring charge, net income for 1996 increased $60 million to $477 million, or $4.08 per share), compared with $413 million, or $3.54 per share for 1995. SUSTAINED GROWTH - - Maintained average total assets at $34 billion (increased 2 percent excluding the sale of Comerica Bank-Illinois). - - Reached $25 billion in average total loans, an 8 percent increase (10 percent increase excluding the sale of Comerica Bank-Illinois). - - Reached $22 billion in average total deposits, a 3 percent increase (5 percent increase excluding the sale of Comerica Bank-Illinois). - - Increased average shareholders' equity $176 million to $2.7 billion. ENHANCED SHAREHOLDERS' RETURN - - Announced a share buyback program for 15 million shares and repurchased 13 million shares in 1996. - - Raised the quarterly cash dividend 11 percent to $0.39 per share. - - Declared annual cash dividends of $1.52 per share. IMPLEMENTED KEY STRATEGIES - - Completed the acquisition of the $1.1 billion Metrobank in California for $125 million of common stock. - - Divested the following businesses after determining that the investment in these companies did not provide a superior return to shareholders. - Sold the $1.4 billion Illinois bank subsidiary for approximately $160 million in cash and recorded a $6 million pre-tax gain. - Sold the business and certain assets of John V. Carr & Son, Inc., the wholly owned customs brokerage and freight forwarding subsidiary, which resulted in a $9 million pre-tax charge. - Announced the sale of the bond indenture services business, which closed in the first quarter of 1997. - Completed a merchant services strategic alliance with National Data Corporation (NDC) to enhance services to customers and gain operational efficiencies using NDC's technical expertise and recorded a gain of $13 million. - - Issued 5 million shares of Fixed/Adjustable Rate Noncumulative Preferred Stock, Series E, with a stated value of $50 per share, to economically support capital ratios during the share repurchase program. RETURN ON AVERAGE ASSETS (IN PERCENTAGES) [EDGAR REPRESENTATION OF GRAPHIC] Bar graph depicting the Corporation's return on average assets (in percentages) from 1992 to 1996 compared to an industry average. 1992 1993 1994 1995 1996 -------------------------------------- Comerica 0.91 1.25 1.23 1.21 1.22 Excluding Restructuring Charge 1.25 1.40 Industry Average 0.83 1.15 1.11 1.12 1.26 EARNINGS PERFORMANCE NET INTEREST INCOME Net interest income, on a fully taxable equivalent (FTE) basis, is the difference between interest earned on assets, including certain yield related fees, and interest paid on liabilities. Adjustments are made to the yields on tax-exempt assets in order to present tax-exempt income and fully taxable income on a comparable basis. Net interest income (FTE) comprised 74 percent of net revenues, compared to 73 percent in 1995 and 74 percent in 1994. NET INTEREST INCOME [EDGAR REPRESENTATION OF GRAPHIC] Bar graph depicting the Corporation's net interest income -- FTE (in millions), with a line showing net interest margin -- FTE (percent of earning assets), from 1992 to 1996. 1992 1993 1994 1995 1996 -------------------------------------- Net Interest Income (FTE) 1,159 1,163 1,254 1,321 1,427 Net Interest Margin (FTE) 4.73 4.65 4.32 4.19 4.54 14 TABLE 2: ANALYSIS OF NET INTEREST INCOME-FTE
1996 1995 1994 - ---------------------------------------------------------------------------------------------------------------------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE (dollar amounts in millions) BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE - ---------------------------------------------------------------------------------------------------------------------------------- Commercial loans $12,686 $1,041 8.21% $11,302 $ 989 8.75% $ 9,598 $ 709 7.38% International loans 1,541 102 6.64 1,257 89 7.06 1,107 62 5.58 Real estate construction loans 707 65 9.22 541 52 9.52 403 32 7.85 Commercial mortgage loans 3,483 324 9.29 3,157 297 9.40 2,916 248 8.52 Residential mortgage loans 1,960 153 7.83 2,450 191 7.80 2,175 162 7.46 Consumer loans 4,624 457 9.88 4,569 461 10.10 3,795 358 9.44 Lease financing 351 24 6.82 285 19 6.65 217 14 6.48 - ---------------------------------------------------------------------------------------------------------------------------------- Total loans (1) 25,352 2,166 8.54 23,561 2,098 8.90 20,211 1,585 7.84 Taxable securities 5,528 371 6.63 7,226 473 6.52 7,542 444 5.89 Securities exempt from federal income taxes 295 28 9.96 399 41 10.43 462 49 10.51 - ---------------------------------------------------------------------------------------------------------------------------------- Total investment securities 5,823 399 6.79 7,625 514 6.72 8,004 493 6.15 Interest-bearing deposits with banks 32 2 5.71 126 8 6.39 552 22 3.96 Federal funds sold and securities purchased under agreements to resell 95 5 5.35 124 7 5.97 116 5 4.06 Trading account securities 4 1 7.94 5 -- 6.51 5 -- 1.67 Loans held for sale 64 5 7.68 96 8 7.75 150 11 7.31 - ---------------------------------------------------------------------------------------------------------------------------------- Total earning assets 31,370 2,578 8.20 31,537 2,635 8.35 29,038 2,116 7.28 Cash and due from banks 1,576 1,500 1,532 Allowance for loan losses (361) (340) (322) Accrued income and other assets 1,610 1,432 1,203 - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $34,195 $34,129 $31,451 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Money market and NOW accounts $ 6,913 231 3.33 $ 6,411 217 3.39 $ 6,592 173 2.62 Savings deposits 2,026 44 2.18 2,277 48 2.14 2,536 53 2.08 Certificates of deposit 6,887 365 5.30 6,358 344 5.41 5,681 239 4.21 Foreign office deposits (2) 843 46 5.46 1,842 112 6.07 1,816 78 4.28 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 16,669 686 4.11 16,888 721 4.27 16,625 543 3.26 Federal funds purchased and securities sold under agreements to repurchase 2,106 112 5.31 2,816 166 5.88 2,817 121 4.31 Other borrowed funds 1,999 107 5.36 2,313 136 5.87 2,002 79 3.92 Medium- and long-term debt 4,745 295 6.22 4,510 289 6.41 2,708 148 5.46 Other (3) -- (49) -- -- 2 -- -- (29) -- - ---------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing sources 25,519 1,151 4.51 26,527 1,314 4.95 24,152 862 3.57 Noninterest-bearing deposits 5,589 4,767 4,700 Accrued expenses and other liabilities 400 324 286 Preferred stock 133 -- -- Common shareholders' equity 2,554 2,511 2,313 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $34,195 $34,129 $31,451 ------- ------- ------- ------- ------- ------- Net interest income/rate spread (FTE) $1,427 3.69 $1,321 3.40 $1,254 3.71 ------ ------ ------ ------ ------ ------ FTE adjustment (4) $ 15 $ 21 $ 24 ------ ------ ------ ------ ------ ------ Impact of net noninterest-bearing sources of funds 0.85 0.79 0.61 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest margin (as a percent of average earning assets) (FTE) 4.54% 4.19% 4.32% - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
(1) Nonaccrual loans are included in average balances reported and are used to calculate rates. (2) Includes substantially all deposits by foreign depositors; deposits are in excess of $100,000. (3) Net interest rate swap (income)/expense. If swap (income)/expense were allocated, average rates on total loans would have been 8.66% in 1996, 8.84% in 1995 and 7.75% in 1994; average rates on medium- and long-term debt would have been 5.80% in 1996, 6.14% in 1995 and 5.10% in 1994. (4) The FTE adjustment is computed using a federal income tax rate of 35%. 15 Net interest income (FTE) rose 8 percent to $1,427 million in 1996. The primary cause was an improvement in net interest margin due to a favorable change in the mix of earning assets, the basis for which was a 12 percent increase in average commercial loans. The net interest margin for 1996 increased 35 basis points to 4.54 percent from 4.19 percent last year, principally due to a favorable shift in the mix of earning assets. The Corporation primarily funded the growth in higher yielding loans with sales of thin margin, floating rate investment securities and runoff of fixed rate investment securities. This shifted the structure of the balance sheet, placing a heavier emphasis on higher spread loans and reducing the reliance on investment securities. TABLE 3: RATE-VOLUME ANALYSIS-FTE
1996 / 1995 1995 / 1994 - ---------------------------------------------------------------------------------------------------------------------------------- INCREASE INCREASE NET INCREASE INCREASE NET (DECREASE) (DECREASE) INCREASE (DECREASE) (DECREASE) INCREASE (in millions) DUE TO RATE DUE TO VOLUME* (DECREASE) DUE TO RATE DUE TO VOLUME* (DECREASE) - ---------------------------------------------------------------------------------------------------------------------------------- Interest income (FTE) Commercial loans $ (62) $114 $ 52 $131 $149 $280 International loans (6) 19 13 16 11 27 Real estate construction loans (2) 15 13 7 13 20 Commercial mortgage loans (3) 30 27 26 23 49 Residential mortgage loans 1 (39) (38) 7 22 29 Consumer loans (10) 6 (4) 25 78 103 Lease financing -- 5 5 -- 5 5 - ---------------------------------------------------------------------------------------------------------------------------------- Total loans (82) 150 68 212 301 513 Taxable securities 12 (114) (102) 48 (19) 29 Securities exempt from federal income taxes (3) (10) (13) (1) (7) (8) - ---------------------------------------------------------------------------------------------------------------------------------- Total investment securities 9 (124) (115) 47 (26) 21 Interest-bearing deposits with banks (1) (5) (6) 13 (27) (14) Federal funds sold and securities purchased under agreements to resell (1) (1) (2) 2 -- 2 Trading account securities 1 -- 1 -- -- -- Loans held for sale -- (3) (3) 1 (4) (3) - ---------------------------------------------------------------------------------------------------------------------------------- Total interest income (FTE) (74) 17 (57) 275 244 519 Interest expense Money market and NOW accounts (3) 17 14 50 (6) 44 Savings deposits 1 (5) (4) 1 (6) (5) Certificates of deposit (7) 28 21 68 37 105 Foreign office deposits (11) (55) (66) 32 2 34 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits (20) (15) (35) 151 27 178 Federal funds purchased and securities sold under agreements to repurchase (16) (38) (54) 45 -- 45 Other borrowed funds (12) (17) (29) 39 18 57 Medium- and long-term debt (9) 15 6 26 115 141 Other (1) (51) -- (51) 31 -- 31 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest expense (108) (55) (163) 292 160 452 - ---------------------------------------------------------------------------------------------------------------------------------- Net interest income (FTE) $ 34 $ 72 $106 $(17) $ 84 $ 67 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
* Rate/volume variances are allocated to variances due to volume. (1) Net interest rate swap income. 16 The Corporation implemented various asset and liability management strategies in 1996 to minimize exposure to net interest margin risk, which represents the potential reduction in net interest income that may result from rate spread compression between, for example, prime and market rates or core deposit and money market rates. Such strategies included permitting investment securities to run off in order to facilitate growth in higher-yielding loans. Off-balance sheet interest rate swaps were also entered into during the first half of the year to effectively fix the high yields on certain variable rate loans and alter the interest rate characteristics of debt issued throughout the year. Refer to page 26 of this financial review for additional information regarding the Corporation's asset and liability management policies. In 1995, net interest income (FTE) increased 5 percent over 1994, benefiting from strong growth in average earning assets, primarily commercial and consumer loans. However, the net interest margin for 1995 declined 13 basis points from 1994, principally from competition in asset pricing and continued compression in rate spreads caused by higher funding costs. In addition, significant loan growth coupled with runoff in investment securities and temporary investments shifted the balance sheet structure to an asset sensitive position for most of 1995. PROVISION AND ALLOWANCE FOR LOAN LOSSES The allowance for loan losses represents management's assessment of possible losses inherent in the Corporation's loan portfolio and is determined based on the application of projected loss ratios to risk-rated loans, both individually and by category. Projected loss ratios incorporate factors such as recent loan loss experience, current economic conditions and trends, geographic dispersion of borrowers, trends with respect to past due and nonaccrual amounts, risk characteristics of various categories and concentrations of loans, and transfer risks. The provision for loan losses reflects management's evaluation of the adequacy of the allowance for loan losses. This evaluation is performed on a quarterly basis. The provision for loan losses was $114 million in 1996, compared to $87 million in 1995 and $56 million in 1994. The provision increase in 1996 primarily reflects higher net charge-offs related to bankcard portfolios, mostly generated with early 1995 promotions. Management took steps in 1995 to reduce potential losses in the consumer loan portfolio by tightening the credit criteria used for bank-card marketing purposes. In late 1995, the Corporation sold $333 million of the bankcard portfolio. Net charge-offs related to the sold portfolio accounted for $27 million of the $28 million increase in total net charge-offs between 1994 and 1995. Total net charge-offs increased to $85 million in 1996, compared to $76 million and $48 million in 1995 and 1994, respectively. The ratio of net loans charged off to average total loans increased to 0.33 percent in 1996 from 0.32 percent in 1995. Commercial loan net charge-offs as a percentage of average commercial loans were 0.12 percent for 1996, the same as in 1995. Consumer loan net charge- offs as a percentage of average consumer loans were 1.57 percent and 1.31 percent for 1996 and 1995, respectively. The rise in net consumer loan charge- offs was primarily the result of bankcard charge-offs. NET LOANS CHARGED OFF TO AVERAGE LOANS (IN PERCENTAGES) [EDGAR REPRESENTATION OF GRAPHIC] Bar graph depicting the Corporation's net loans charged off to average loans (in percentages) from 1992 to 1996 compared to an industry average. 1992 1993 1994 1995 1996 -------------------------------------- Comerica 0.57 0.43 0.24 0.32 0.33 Industry Average 1.42 0.96 0.51 0.53 0.51 At December 31, 1996, the allowance for loan losses was $367 million, an increase of $26 million since year-end 1995. Due to the magnitude of loan growth during 1996, the allowance as a percentage of total loans remained at 1.40 percent, the same as December 31, 1995. However, the allowance as a percentage of total nonperforming assets increased significantly to 263 percent at December 31, 1996 from 209 percent at year-end 1995. An estimated allocation of the allowance for loan losses is provided in Table 8 on page 23. The increase in the allowance allocated to consumer loans primarily reflects a higher level of past due bankcard accounts similar to that experienced by the industry as a whole. NONINTEREST INCOME Year Ended December 31 (in millions) 1996 1995 1994 - ------------------------------------------------------------------------------ Income from fiduciary activities $133 $125 $122 Service charges on deposit accounts 140 130 124 Revolving credit fees 23 36 24 Securities gains 14 12 3 Other 186 160 136 - ------------------------------------------------------------------------------ Subtotal 496 463 409 Customhouse broker fees 11 36 41 - ------------------------------------------------------------------------------ Total noninterest income $507 $499 $450 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 17 TABLE 4: ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
Year Ended December 31 (dollar amounts in millions) 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- Balance at beginning of period $341 $326 $299 $308 $279 Allowance of institutions and loans purchased/sold (3) 4 19 -- 17 Loans charged off Domestic Commercial 33 33 25 36 47 Real estate construction 1 3 1 1 4 Commercial mortgage 5 8 17 20 8 Residential mortgage 1 2 -- 1 1 Consumer 86 73 40 52 60 Lease financing -- -- -- -- 1 - ---------------------------------------------------------------------------------------------------------------------------------- Total loans charged off 126 119 83 110 121 Recoveries Domestic Commercial 18 19 15 18 9 Real estate construction 1 3 -- -- 1 Commercial mortgage 9 8 5 2 1 Residential mortgage -- -- -- -- 1 Consumer 13 13 14 12 10 International -- -- 1 -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total recoveries 41 43 35 32 22 - ---------------------------------------------------------------------------------------------------------------------------------- Net loans charged off 85 76 48 78 99 Provision for loan losses 114 87 56 69 111 - ---------------------------------------------------------------------------------------------------------------------------------- Balance at end of period $367 $341 $326 $299 $308 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Ratio of allowance for loan losses to total loans at end of period 1.40% 1.40% 1.47% 1.56% 1.69% Ratio of net loans charged off during the period to average loans outstanding during the period 0.33% 0.32% 0.24% 0.43% 0.57% - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
Noninterest income increased $8 million, or 2 percent, to $507 million in 1996, compared to $499 million and $450 million in 1995 and 1994, respectively. After adjusting for acquisitions, divestitures and the large nonrecurring items discussed below, noninterest income rose $13 million, or 3 percent, in 1996. Income from fiduciary activities increased $8 million, or 7 percent, in 1996, compared to an increase of $3 million, or 3 percent, in 1995. The increase in 1996 reflects comparable rates of increase for both Personal Trust and Institutional Trust income. The increase in both Personal Trust and Institutional Trust income, from the prior year, was primarily due to an expanded customer base and improved market values of assets under management resulting from market performance. Total trust assets under management increased to $107 billion at December 31, 1996 from $91 billion at year-end 1995. Discretionary funds, which represent trust assets over which the Corporation has investment management authority, increased $4 billion to $26 billion from $22 billion in 1995. This increase resulted primarily from increases in the Institutional Trust category. Service charges on deposit accounts rose $10 million, or 8 percent, in 1996 compared to an increase of $6 million, or 5 percent, in 1995. The increase was comparable for both retail and commercial accounts. The increases were primarily the result of revised fees, growth in demand deposit activity, and lower earning credit allowances. Customhouse broker fees were down $25 million in 1996 reflecting the sale of John V. Carr & Son, Inc. in the second quarter of 1996. Revolving credit fee income decreased $13 million, or 37 percent, in 1996 compared to a $12 million, or 47 percent, increase in 1995. The lower fees were primarily due to transfer of fees and associated costs to a merchant services joint venture with National Data Corporation and decline in the bankcard portfolio from the sale of $333 million of receivables at the end of 1995. Securities gains increased slightly between 1996 and 1995 as both years included gains on the sale of Latin American debt (principally Brady bonds) and U.S. government agency securities. 18 Other noninterest income grew $26 million, or 17 percent, in 1996. Excluding the impact of acquisitions and divestitures, other noninterest income rose 13 percent. This increase was primarily due to significant nonrecurring items in 1996 which included a $13 million gain on the merchant services joint venture, $9 million of interest on a State of Michigan tax refund and a $6 million gain on the sale of Comerica Bank- Illinois; offset by a $9 million write-off related to the sale of John V. Carr & Son, Inc. Other noninterest income also increased due to management's continued emphasis on revenue growth through sales of nontraditional bank products such as life insurance, annuities and mutual funds. Commissions and fees related to these products increased $7 million, or 53 percent, in 1996 from $13 million in 1995. NONINTEREST INCOME (in millions) [EDGAR REPRESENTATION OF GRAPHIC] Bar graph depicting the Corporation's noninterest income (in millions) from 1992 to 1996. 1992 1993 1994 1995 1996 -------------------------------------- 399 449 450 499 507 There were no significant nonrecurring items included in other noninterest income in 1995. In 1994, other noninterest income included a $7 million gain on bulk sales of originated mortgage servicing rights and $7 million in gains on international loan sales. NONINTEREST EXPENSES Year Ended December 31 (in millions) 1996 1995 1994 - ------------------------------------------------------------------------------ Salaries $475 $466 $455 Employee benefits 86 96 94 - ------------------------------------------------------------------------------ Total salaries and employee benefits 561 562 549 Net occupancy expense 99 99 99 Equipment expense 69 68 68 FDIC insurance expense 8 24 44 Telecommunications expense 29 29 27 Other 303 304 248 - ------------------------------------------------------------------------------ Subtotal 1,069 1,086 1,035 Restructuring charge 90 -- 7 - ------------------------------------------------------------------------------ Total noninterest expenses $1,159 $1,086 $1,042 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Noninterest expenses increased 7 percent to $1,159 million in 1996 (decreased 2 percent to $1,069 million, excluding the restructuring charge), compared to $1,086 million in 1995 and $1,042 million in 1994. Excluding the effect of acquisitions, divestitures, the restructuring charge and the large nonrecurring items discussed later, noninterest expenses declined 1 percent in 1996. A pre-tax restructuring charge of $90 million was recorded in 1996 in connection with a major program to improve efficiency, revenue and customer service. The charge included $48 million for termination benefits, $21 million for occupancy and equipment write-offs and $21 million for other costs. Estimated annual benefits of $110 million (cost savings of $85 million and revenue enhancements of $25 million) are anticipated from the program. Projected completion of the implementation plan is the middle of 1998, so a substantial portion of the estimated benefits will not impact annual results until 1998 and full, annual realization is not expected until 1999. As a result of the program, nearly 1,900 employee positions, about 15 percent of total positions, are being eliminated. Total salaries expense increased $9 million, or 2 percent, in 1996 versus $11 million, or 3 percent, in 1995. Excluding the effect of acquisitions and divestitures, salaries declined slightly during the year reflecting a decline in staff levels offset by increased incentives tied to performance and annual merit increases. The number of full-time equivalent employees decreased 896, or 7 percent, from year-end 1995, excluding acquisitions and divestitures. SFAS No. 123, "Accounting for Stock-Based Compensation," was issued by the Financial Accounting Standards Board (FASB) and is effective for 1996 financial statements. The Corporation adopted the disclosure-only provisions of SFAS No. 123 and so will continue determining compensation expense for stock options in accordance with APB Opinion No. 25,"Accounting for Stock Issued to Employees" as permitted by the new standard. If the recognition provisions of SFAS No. 123 had been adopted as of the beginning of 1996, the effect on 1996 net income would have been immaterial. Employee benefits expense decreased $10 million, or 10 percent, in 1996 versus an increase of $2 million, or 2 percent, in 1995. After adjusting for acquisitions and divestitures, employee benefits decreased 9 percent largely due to expense reductions derived from company-owned life insurance contracts. Net occupancy and equipment expenses, on a combined basis, remained relatively flat in 1996 compared to 1995, as costs from acquisitions were offset by cost reductions relative to divestitures. The Federal Deposit Insurance Corporation (FDIC) expenses decreased significantly by $16 million, or 66 percent, in 1996, primarily due to the FDIC adopting a new assessment rate schedule for Bank Insurance Fund (BIF) members in the third quarter of 1995. The new rate schedule, which continues to determine assessments based on a bank's risk-based capital levels, virtually eliminated each subsidiary bank's BIF annual deposit insurance premium as of January 1, 1996. The Corporation's Savings Association Insurance Fund (SAIF) insured deposits continued to be assessed at a rate of 23 cents per $100 of insured deposits through September 30, 1996. This BIF rate reduction translated into a $21 million savings in FDIC insurance expense for the Corporation in 1996. Offsetting this savings was a one-time charge of $5 million representing the Corporation's portion of an assessment, levied on banks with SAIF-insured deposits in order to recapitalize the SAIF. Beginning in 1997, deposit insurance expense will approximate $3 million based on current deposit levels and current deposit assessment rates. 19 NONINTEREST EXPENSES (in millions) [EDGAR REPRESENTATION OF GRAPHIC] Bar graph depicting the Corporation's noninterest expenses (in millions) from 1992 to 1996. 1992 1993 1994 1995 1996 -------------------------------------- Excluding Restructuring Charge 952 1,025 1,042 1,086 1,069 Restructuring Charge 128 90 Other noninterest expenses decreased $1 million in 1996, compared to a $56 million increase in 1995. Other noninterest expenses in 1996 and 1995 included losses of $18 million and $15 million (excluding $1 million of costs to sell), respectively, on the sale of a portion of the bankcard portfolio. Loss-sharing provisions in the sales agreement expose the Corporation to maximum losses of $50 million over the first 42 months following the sale (December 1995). Loss rates in 1996 exceeded initial estimates, resulting in the additional charge for projected losses over the remaining 30 months. Excluding acquisitions, divestitures, and the above large nonrecurring item, other noninterest expenses decreased $13 million, or 4 percent. The decrease reflects management's continued efforts to control expenses. The Corporation's efficiency ratio is defined as total noninterest expenses divided by the sum of net interest revenue (FTE) and noninterest income, excluding securities gains/losses. The ratio was 60.36 percent in 1996 (55.67 percent excluding the restructuring charge), compared to 60.09 percent in 1995 and 61.28 percent in 1994. INCOME TAXES The provision for income taxes was $229 million in 1996, compared to $212 million in 1995 and $195 million in 1994. The effective tax rate, computed by dividing the provision for income taxes by income before income taxes, was 35.4 percent for 1996, compared to 33.9 percent in 1995 and 33.5 percent in 1994. The increase in the effective tax rate over prior years reflects relatively lower levels of tax-exempt interest income. STRATEGIC LINES OF BUSINESS The Corporation has strategically aligned its operations into three major lines of business: the Business Bank, the Individual Bank and the Investment Bank. Table 5 on page 21 presents the financial results of these business lines for the years ended December 31, 1996 and 1995. Lines of business results are produced by the Corporation's internal management accounting system. This system measures financial results based on the internal organizational structure of the Corporation; therefore, the information presented is not necessarily comparable with similar information for any other financial institution. The management accounting system assigns balance sheet and income statement items to each line of business using certain methodologies which are constantly being refined. For comparability purposes, both 1996 and 1995 amounts are based on methodologies in effect at December 31, 1996. These methodologies, which are briefly summarized in the following paragraph, may be modified as management accounting systems are enhanced and changes occur in the organizational structure or product lines. The Corporation's internal funds transfer pricing system records cost of funds or credit for funds using a combination of matched maturity funding for certain assets and liabilities and a blended rate based on various maturities for the remaining assets and liabilities. The loan loss provision is assigned based on the amount necessary to maintain an allowance for loan losses adequate for that line of business. Noninterest income and expenses directly attributable to a line of business are assigned to that business. Direct expenses incurred by areas whose services support the overall Corporation are allocated to the business lines as follows: Product processing expenditures are allocated based on standard unit costs applied to actual volume measurements; administrative expenses are allocated based on estimated time expended; and corporate overhead is assigned based on the ratio of a line of business' noninterest expenses to total noninterest expenses incurred by all business lines. Common equity is allocated based on credit, operational and business risks. The following discussion provides information about each line of business, along with an explanation of factors impacting 1996 performance. The Business Bank is comprised of middle market lending, asset-based lending, large corporate banking, international financial services and institutional trust. This line of business meets the needs of medium-size businesses, multinational corporations, and governmental entities by offering various products and services, including commercial loans and lines of credit, deposits, cash management, institutional trust, international trade finance, letters of credit and foreign exchange management services. Net income increased $57 million, or 26 percent, in 1996, principally due to additional net interest income resulting from 13 percent average loan growth, excluding the sale of the Corporation's Illinois subsidiary, and a lower provision for loan losses. The sale of the Illinois subsidiary and the Corporation's customhouse brokerage subsidiary during 1996 did not have a material impact on net income. 20 TABLE 5: STRATEGIC LINES OF BUSINESS FINANCIAL RESULTS
Business Bank Individual Bank Investment Bank* Other Total - ---------------------------------------------------------------------------------------------------------------------------------- (dollar amounts in millions) 1996 1995 1996 1995 1996 1995 1996 1995 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- EARNINGS SUMMARY Net interest income (FTE) $ 632 $ 518 $ 777 $ 759 $ (1) $ (2) $ 19 $ 46 $ 1,427 $ 1,321 Provision for loan losses 1 34 111 92 n/a n/a 2 (39) 114 87 Noninterest income 178 204 277 255 42 30 10 10 507 499 Noninterest expenses 370 341 658 658 44 27 87 60 1,159 1,086 Provision for income taxes 160 125 101 92 (1) -- (16) 17 244 234 Net income (loss) 279 222 184 172 (2) 1 (44) 18 417 413 SELECTED AVERAGE BALANCES Assets $17,460 $15,357 $ 9,821 $ 9,481 $ 9 $ 10 $6,905 $9,281 $34,195 $34,129 Loans 16,211 14,594 9,147 8,746 n/a n/a (6) 221 25,352 23,561 Deposits 4,061 2,867 17,229 16,551 n/a n/a 968 2,237 22,258 21,655 Common equity 972 847 703 848 3 3 876 813 2,554 2,511 STATISTICAL DATA Return on average assets 1.60% 1.45% 1.03% 0.99% (22.81)% 5.70% (0.27)% 0.09% 1.22% 1.21% Return on average common equity 28.74 26.27 26.13 20.30 (68.43) 19.00 (5.02) 2.23 15.98 16.46 Efficiency ratio 46.05 47.89 62.46 64.83 107.78 96.91 384.04 116.69 60.36 60.09 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
* Revenues and associated expenses resulting from Investment Bank activities are distributed to the business line which manages the customer relationship. n/a Not applicable The Individual Bank includes consumer lending, consumer deposit gathering, mortgage loan origination and servicing, small business banking (annual sales under $5 million) and private banking. This line of business offers a variety of consumer products, including deposit accounts, direct and indirect installment loans, credit cards, home equity lines of credit and residential mortgage loans. In addition, a full range of financial services is provided to small businesses, area merchants and municipalities. Private lending and personal trust services also are provided to meet the personal financial needs of affluent individuals (as defined by individual net income or wealth). Net income increased $12 million, or 7 percent, in 1996, as higher revenues were partially offset by an increase in the provision for loan losses. The Investment Bank is responsible for the sale of mutual fund and annuity products, as well as life, disability and long-term care insurance products. This line of business also offers capital market products, manages loan syndications and provides investment management and advisory services, investment banking and discount securities brokerage services. Operating results remained relatively flat from 1995 to 1996 as revenues were reinvested in training and the development of products and services. The Other category includes the income and expense impact of cash and loan loss reserves not assigned to specific business lines, miscellaneous other items of a corporate nature, and certain direct expenses not allocated to business lines. The Corporation's securities portfolio and asset and liability management activities are also reflected in these amounts. Net income decreased $62 million in 1996 as a result of the restructuring charge. BALANCE SHEET AND CAPITAL FUNDS ANALYSIS Total assets were $34.2 billion at year-end 1996, representing a $1.3 billion decrease from $35.5 billion on December 31, 1995. On an average basis, total assets remained relatively flat with $34.2 billion in 1996 compared to $34.1 billion in 1995. EARNING ASSETS Total earning assets were $31.1 billion at year-end 1996, representing a $1.0 billion decrease from $32.1 billion on December 31, 1995. On an average basis, total earning assets were $31.4 billion in 1996 compared to $31.5 billion in 1995. Earning assets were relatively flat as $2.1 billion of investment securities were either sold or allowed to mature to fund the $1.8 billion or 7 percent increase in loans; and $1.2 billion of earning assets were divested with the sale of the Illinois subsidiary. The average balance of domestic commercial loans, which is comprised of commercial and commercial mortgage loans, increased $1.7 billion, or 12 percent, from 1995. Real estate construction loans also rose an average $166 million, or 31 percent, in 1996. The commercial portfolio, especially small business and middle market loans, continues to grow in all the Corporation's markets. This growth, along with an increase of approximately 30 percent in commercial loan commitments to extend credit, is attributable to effective marketing efforts, strong customer relationships and continued economic strength in the commercial loan markets. 21 TABLE 6: ANALYSIS OF INVESTMENT SECURITIES AND LOANS
December 31 (in millions) 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- Investment securities available for sale U.S. government and agency securities $ 3,968 $ 6,038 $ 2,674 $ 2,164 $ n/a State and municipal securities 228 371 -- -- n/a Other securities 604 450 232 158 n/a - ---------------------------------------------------------------------------------------------------------------------------------- Total investment securities available for sale 4,800 6,859 2,906 2,322 n/a Investment securities held to maturity U.S. government and agency securities -- -- 4,462 3,232 3,824 State and municipal securities -- -- 422 513 693 Other securities -- -- 86 233 646 - ---------------------------------------------------------------------------------------------------------------------------------- Total investment securities held to maturity -- -- 4,970 3,978 5,163 - ---------------------------------------------------------------------------------------------------------------------------------- Total investment securities $ 4,800 $ 6,859 $ 7,876 $ 6,300 $ 5,163 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Commercial loans $13,520 $12,041 $10,634 $ 9,087 $ 8,213 International loans Government and official institutions 11 6 18 143 156 Banks and other financial institutions 323 583 660 671 323 Other 1,372 796 517 322 257 - ---------------------------------------------------------------------------------------------------------------------------------- Total international loans 1,706 1,385 1,195 1,136 736 Real estate construction loans 751 641 414 437 471 Commercial mortgage loans 3,446 3,254 3,056 2,700 2,666 Residential mortgage loans 1,744 2,221 2,436 1,857 2,126 Consumer loans 4,634 4,570 4,215 3,674 3,836 Lease financing 406 330 259 209 167 - ---------------------------------------------------------------------------------------------------------------------------------- Total loans $26,207 $24,442 $22,209 $19,100 $18,215 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
n/a Not applicable Average international loans increased $284 million, consisting largely of loans originated to facilitate trade with limited cross-border risk. The growth also reflects the increasing global activity of the Corporation's traditional customer base. Risk management practices in international lending include structuring bilateral arrangements or participating in bank facilities which secure repayment from sources external to the borrower's country. Accordingly, such international outstandings are excluded from cross-border risk of that country. Mexican cross-border risk of $268 million, 0.78 percent of assets, was the only country exposure exceeding 0.75 percent of assets at December 31, 1996. No country exceeded 0.75 percent of assets at December 31, 1995 or 1994. Average residential mortgage loans decreased $490 million primarily due to management's decision to sell the majority of mortgage originations. Average consumer loans rose $55 million representing increases in average installment loans offset by decreases in revolving credit and bankcard loans. Average installment loan balances increased $356 million, while average bankcard loans and revolving credit loans decreased $241 million and $60 million, respectively. The bankcard portfolio declined largely as a result of selling $333 million of the bankcard portfolio in late 1995 along with a temporary curtailment of credit card promotions through much of 1996. Increases in average installment loans reflect continued expansion in California and Texas markets related to marine and recreational vehicle loan products, as well as growth in fixed rate home equity loans. Average investment securities declined to $5.8 billion in 1996, compared to $7.6 billion in 1995, reflecting sales and runoff of securities primarily to fund growth in higher-yielding loans and to divest lower earning variable rate assets. Average U.S. government and agency securities decreased $1,988 million and average state and municipal securities decreased $105 million, while average other securities increased $291 million. The Corporation shifted away from purchasing on-balance-sheet securities to balance interest rate sensitivity and preserve net interest margin to purchasing off-balance sheet interest rate swaps that accomplish the same interest risk reduction objective. The decline in U.S. government and agency securities principally resulted from sales and pay downs, while the tax-exempt portfolio of state and municipal securities continued to decrease as reduced tax advantages for these types of securities deterred additional investment. Other securities consist primarily of collateralized mortgage obligations (CMOs), Brady bonds and Eurobonds. The increase in other securities during the year was largely a result of Eurobond purchases. 22 TABLE 7: LOAN MATURITIES AND INTEREST RATE SENSITIVITY
After One December 31, 1996 Within But Within After (in millions) One Year* Five Years Five Years Total - ---------------------------------------------------------------------------------------------------------------------------------- Commercial loans $ 9,990 $2,840 $ 690 $13,520 Commercial mortgage loans 1,123 1,790 533 3,446 International loans 1,598 105 3 1,706 Real estate construction loans 494 200 57 751 - ---------------------------------------------------------------------------------------------------------------------------------- Total $13,205 $4,935 $1,283 $19,423 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Loans maturing after one year Predetermined interest rates $2,199 $ 728 Floating interest rates 2,736 555 - ---------------------------------------------------------------------------------------------------------------------------------- Total $4,935 $1,283 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
* Includes demand loans, loans having no stated repayment schedule or maturity and overdrafts. TABLE 8: ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- December 31 Percent Percent Percent Percent Percent (dollar amounts in Allocated of Total Allocated of Total Allocated of Total Allocated of Total Allocated of Total millions) Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans - ---------------------------------------------------------------------------------------------------------------------------------- Domestic Commercial $ 98 52% $118 49% $119 48% $123 48% $120 45% Real estate construction 6 3 5 3 6 2 4 2 9 2 Commercial mortgage 27 13 33 13 35 14 26 14 37 15 Residential mortgage 2 7 2 9 2 11 3 10 6 12 Consumer 120 18 84 19 60 19 60 19 59 21 Lease financing 1 1 1 1 1 1 1 1 2 1 International 3 6 2 6 3 5 18 6 39 4 Unallocated 110 -- 96 -- 100 -- 64 -- 36 -- - ---------------------------------------------------------------------------------------------------------------------------------- Total $367 100% $341 100% $326 100% $299 100% $308 100% - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
OTHER EARNING ASSETS Short-term investments in interest-bearing deposits with banks, federal funds sold, and securities purchased under agreements to resell provide a range of maturities under one year to supplement corporate liquidity. Interest-bearing deposits with banks are investments with banks in developed countries or foreign banks' international banking facilities located in the United States. Federal funds sold provide a vehicle to control the reserve position and serve correspondent banks, as well as offer supplemental earnings opportunities. As a result of the emphasis on higher yielding loans, short-term investments declined on average $124 million during 1996. Loans held for sale totaled $38 million at the end of 1996, down from $512 million in 1995. This decrease represents the bankcard portfolio sold in late 1995, which settled in early 1996. TABLE 9: MATURITY DISTRIBUTION OF DOMESTIC CERTIFICATES OF DEPOSIT OF $100,000 AND OVER December 31 (in millions) 1996 - ------------------------------------------------------------------------------ Three months or less $1,391 Over three months to six months 279 Over six months to twelve months 255 Over twelve months 279 - ------------------------------------------------------------------------------ Total $2,204 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ DEPOSITS AND BORROWED FUNDS Average deposits rose $603 million, or 3 percent, from 1995. Excluding the impact of acquisitions and divestitures, deposits would have decreased 2 percent, reflecting a managed decline in foreign deposits due to more attractive funding alternatives such as medium-term notes, along with the continued trend of interest-sensitive customers investing in higher yielding deposit alternatives, including mutual funds. Total deposits increased less than 1 percent during 1995, excluding acquisitions and divestitures. 23 Average demand deposits grew $822 million, or 17 percent, from 1995 largely due to the growth in related commercial loan business and the acquisition of Metrobank. Average certificates of deposit increased $529 million or 8 percent, from 1995 largely due to various deposit promotions and the acquisition of Metrobank. Growth in these categories was offset by a decrease in average foreign office deposits of $999 million, or 54 percent, reflecting a managed decline due to more attractive funding alternatives such as medium-term notes. While deposit balances increased slightly, there was continued reliance on medium-term debt (both domestic and European), and long-term debt to provide the necessary funding to support expanding loan volumes. The interest rates associated with medium-term debt create a funding source with maturities ranging from one month to 15 years and durations that are similar to deposit liabilities. Long-term subordinated notes help maintain the bank's total capital ratio at the level that qualifies for the lowest FDIC risk-based insurance premium and supports acquisition activity. The Corporation issued $150 million of long-term notes during the year. Medium-term debt decreased $550 million, representing the net result of the issuance of $2.1 billion and the maturity of $2.6 billion of notes during 1996. Further information on the Corporation's medium- and long-term debt is included in Note 9 to the consolidated financial statements on page 40. CAPITAL Shareholders' equity was $2.6 billion at December 31, 1996, the same as December 31, 1995. During the year, the Corporation authorized the repurchase of up to 15 million shares of Comerica common stock. Coupled with other authorizations to acquire shares, Comerica repurchased 13 million shares equaling more than $600 million of capital during 1996. The combination of a nonredeemable preferred stock issue, the sale of Comerica Bank-Illinois and retained earnings were the principal sources of capital and liquidity that enabled the Corporation to accomplish this initiative. Comerica continues to maintain its capital ratios beyond the limits established by the Federal Reserve Board for a "well capitalized" bank. The remaining change in capital is the net effect of increases in capital from retained earnings of $238 million, $129 million of common stock issued for acquisitions, $35 million of common stock for employee stock plans, the issuance of $250 million in nonredeemable preferred stock, and a change of $19 million in the value of the Corporation's available for sale securities. At December 31, 1996, the Corporation and all of its banking subsidiaries exceeded the ratios required for an institution to be considered "well capitalized" by the standards developed under the Federal Deposit Insurance Corporation Improvement Act of 1991. See Note 17 of the consolidated financial statements on page 45 for the capital ratios. The Corporation declared common dividends totaling $170 million on net income applicable to common stock of $408 million, representing a dividend payout ratio of 43 percent (37 percent excluding the after-tax impact of the restructuring charge). The payout ratio in 1995 was 39 percent. The board of directors has targeted a payout ratio of between 30 to 40 percent, although this target is constantly reassessed by the board in light of changing market and industry conditions. ASSET QUALITY NONPERFORMING ASSETS The Corporation's policies regarding nonaccrual loans reflect the importance of identifying troubled loans early. Consumer loans are directly charged off no later than 180 days past due, or earlier if deemed uncollectible. Loans other than consumer are generally placed on nonaccrual status when management determines that principal or interest may not be fully collectible, but no later than when the loan is 90 days past due on principal or interest unless it is fully collateralized and in the process of collection. Loan amounts in excess of probable future cash collections are charged off at the time the loan is placed on nonaccrual status to an amount that represents management's assessment of the ultimate collectibility of the loan. Interest previously accrued but not collected on nonaccrual loans is charged against current income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. NONPERFORMING ASSETS TO LOANS AND OTHER REAL ESTATE (IN PERCENTAGES) [EDGAR REPRESENTATION OF GRAPHIC] Bar graph depicting the Corporation's nonperforming assets to loans and other real estate (in percentages) from 1992 to 1996 compared to an industry average. 1992 1993 1994 1995 1996 -------------------------------------- Comerica 1.50 1.09 0.92 0.67 0.53 Industry Average 4.62 2.81 1.67 1.23 0.79 Nonperforming assets as a percent of total loans and other real estate were 0.53 percent and 0.67 percent at year-end 1996 and 1995, respectively. This decline reflects the continued improvement in the quality of the loan portfolio and favorable economic conditions in the Corporation's markets. Nonaccrual loans at December 31, 1996 decreased 21 percent to $103 million from year-end 1995. The nonaccrual loan table on page 26 indicates the percentage of nonaccrual loan value to original contractual value and demonstrates the conservative and prompt nature of the corporate charge-off and payment application policy. 24 TABLE 10: ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO-FTE
Maturity+ ------------------------------------------------------------------------------------------------ Weighted December 31, 1996 Within 1 Year 1-5 Years 5-10 Years After 10 Years Total Average (dollar amounts ------------------------------------------------------------------------------------------------ Maturity in millions) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Yrs./Mos. - ---------------------------------------------------------------------------------------------------------------------------------- Available for sale U.S. Treasury $119 5.59% $123 5.50% $ -- --% $ -- --% $ 242 5.54% 1/6 U.S. government and agency 140 5.51 323 6.47 153 7.14 3,110 6.57 3,726 6.55 11/4 State and municipal securities 41 9.51 127 9.20 45 9.70 15 9.89 228 9.40 3/9 Other bonds, notes and debentures 240 7.66 111 7.57 61 8.27 110 7.33 522 7.64 6/5 Federal Reserve Bank stock and other -- -- -- -- -- -- -- -- 82 -- -- investments* - ---------------------------------------------------------------------------------------------------------------------------------- Total investment securities available for sale $540 6.79% $684 6.98% $259 7.85% $3,235 6.61% $4,800 6.75% 9/11 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
* Balances are excluded in the calculation of total yield. + Based on final contractual maturity. TABLE 11: SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS
December 31 (dollar amounts in millions) 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------------------------- Nonperforming assets Nonaccrual loans Commercial loans $ 72 $ 87 $ 89 $ 71 $ 75 Real estate construction loans 3 7 17 19 28 Real estate mortgage loans (principally commercial) 28 37 56 64 120 - ---------------------------------------------------------------------------------------------------------------------------------- Total nonaccrual loans 103 131 162 154 223 Reduced-rate loans 8 3 2 5 1 - ---------------------------------------------------------------------------------------------------------------------------------- Total nonperforming loans 111 134 164 159 224 Other real estate 29 29 40 50 49 - ---------------------------------------------------------------------------------------------------------------------------------- Total nonperforming assets $ 140 $ 163 $204 $ 209 $ 273 - ---------------------------------------------------------------------------------------------------------------------------------- Nonperforming loans as a percentage of total loans 0.42% 0.55% 0.74% 0.83% 1.23% Nonperforming assets as a percentage of total loans and other real estate 0.53% 0.67% 0.92% 1.09% 1.50% Allowance for loan losses as a percentage of total nonperforming assets 263% 209% 160% 143% 113% Loans past due 90 days--domestic $ 52 $ 57 $ 39 $ 46 $ 100 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
25 NONACCRUAL LOANS December 31 (dollar amounts in millions) 1996 1995 - -------------------------------------------------------------------------------- Carrying value $103 $131 Contractual value 147 181 Carrying value as a percentage of contractual value 70% 72% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Other real estate owned (ORE) remained at $29 million as sales and write-downs of properties offset ORE additions. The largest addition in 1996 was a $10 million property from an acquisition. CONCENTRATION OF CREDIT Loans to companies and individuals involved with the automotive industry, including suppliers, manufacturers and dealers, represented the largest significant industry concentration at December 31, 1996. These loans totaled $4.3 billion, or 16 percent of total loans at December 31, 1996, and included floor plan loans to automobile dealers of $1,209 million and $1,083 million at December 31, 1996 and 1995, respectively. All other industry concentrations individually represented less than 5 percent of total loans at year-end 1996. Automotive industry loans at year-end 1995 totaled approximately $4.5 billion, or 18 percent of total loans. The Corporation has successfully operated in the Michigan economy in spite of a loan concentration and several downturns in the auto industry. There were no automotive industry-related loans larger than $3 million on nonaccrual status as of year-end 1996. In addition, there were no significant automotive industry- related charge-offs during the year. COMMERCIAL REAL ESTATE LENDING The real estate construction loan portfolio contains loans made to long-time customers in local markets with satisfactory project completion experience. The portfolio has approximately 1,025 loans, of which 80 percent have balances of less than $1 million. The largest real estate construction loan has a balance of approximately $20 million. The commercial mortgage loan portfolio, 52 percent of which relates to owner- occupied properties, also consists of loans to long-time customers. Of the approximately 7,309 loans in the portfolio, 89 percent have balances under $1 million, and the largest loan is less than $20 million. Additionally, the Corporation's policy requires a 75 percent or less loan-to-value (LTV) ratio for all commercial mortgage and real estate construction loans. This policy is well within bank regulatory limits. The geographic distribution of the real estate construction and commercial mortgage loan portfolios is also an important determinant in evaluating credit risk. The following table indicates the diversification of the portfolios throughout the markets served by the Corporation. GEOGRAPHIC DISTRIBUTION December 31, 1996 Real Estate Commercial (in millions) Construction Mortgage - -------------------------------------------------------------------------------- Michigan $288 $2,043 California 110 523 Texas 258 358 Florida 39 124 Other 56 398 - -------------------------------------------------------------------------------- Total $751 $3,446 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSET AND LIABILITY MANAGEMENT The principal objective of asset and liability management is to maximize net interest income while operating within acceptable limits established for interest rate risk and maintaining adequate levels of funding and liquidity. The Corporation utilizes various on- and off-balance sheet financial instruments to manage the extent to which net interest income may be affected by fluctuations in interest rates. Corporate policies and risk limits pertaining to asset and liability management activities are established by the Asset Liability Policy Committee (ALPC) and approved by the board of directors. Adherence to these policies is governed by the ALPC, which is comprised of executive and senior management from various areas of the Corporation, including finance, lending, investments, and deposit gathering, who meet regularly to execute asset and liability management strategies. INTEREST RATE SENSITIVITY Interest rate risk arises in the normal course of business due to differences in the repricing and maturity characteristics of assets and liabilities. Since no single measurement system satisfies all management objectives, a combination of techniques are used to manage interest rate risk, including simulation analysis, asset and liability repricing schedules and duration of equity. The results of these interest rate risk measurement systems are reviewed regularly by the ALPC. Net interest income is frequently evaluated under various balance sheet and interest rate scenarios. The results of this analysis provide the information needed to assess the proper balance sheet structure. An unexpected change in the pace of economic activity, whether domestically or internationally, could translate into a materially different interest rate environment than currently expected. A process is maintained where management evaluates "base" net interest income under what is believed to be the most likely balance sheet structure and interest rate environment. This "base" net interest income is then evaluated against interest rate scenarios that are taken up and down 200 basis points from the most likely rate environment. In addition, adjustments to asset prepayment levels, yield curves, and overall balance sheet mix and growth assumptions are made to be consistent with each interest rate environment. The measurement of risk exposure at year-end 1996 for a 200 basis point decline in short-term interest rates identified approximately $9 million of net interest income at risk during 1997. If short- 26 term interest rates rise 200 basis points, the Corporation would have approximately $15 million of net interest income at risk. Corporate policy limits adverse change to no more than 5 percent of management's most likely net interest income forecast. In either case, the Corporation is within the policy guideline. While most assets and liabilities reprice either at maturity or in accordance with their contractual terms, several balance sheet components demonstrate characteristics that require adjustments to more accurately reflect repricing and cash flow behavior. Assumptions based on historical pricing relationships and anticipated market reactions are made to certain core deposit categories to reflect the elasticity of the changes in the related interest rates relative to the changes in market interest rates. In addition, estimates are made concerning early loan and security repayments. Prepayment assumptions are based on the expertise of portfolio managers along with input from financial markets. Consideration is given to current and future interest rate levels. While management recognizes the limited ability of a traditional gap schedule to accurately portray interest rate risk, adjustments are made to provide a more accurate picture of the Corporation's interest rate risk profile. This additional interest rate risk measurement tool provides a directional outlook on the impact of changes in interest rates. As market rates approach expected turning points, management adjusts the interest rate sensitivity of the Corporation. This sensitivity is measured as a percentage of earning assets. The operating range for interest rate sensitivity, on an elasticity-adjusted basis, is between an asset sensitive position of 10 percent of earning assets and a liability sensitive position of 10 percent of earning assets. The table on page 28 shows the interest sensitivity gap as of year-end 1996 and 1995. The report reflects the contractual repricing and payment schedules of assets and liabilities, including an estimate of all early loan and security repayments which adds $1.2 billion of rate sensitivity to the 1996 year-end gap. In addition, the schedule identifies the adjustment for the price elasticity on certain core deposits. The Corporation was liability sensitive for the first half of 1996, due to gap reduction initiatives put in place in the fourth quarter of 1995 and the first quarter of 1996. Deposit growth and investment security runoff moved the Corporation to an asset sensitive position in the latter half of 1996. The Corporation had a one-year asset sensitive gap of $547 million, or 2 percent of earning assets, as of December 31, 1996. This compares to a $215 million liability sensitive gap, or 1 percent of earning assets, on December 31, 1995. Management anticipates material growth in asset sensitivity throughout 1997, and will continue to look at both on- and off-balance sheet alternatives to hedge this increased asset sensitivity and achieve the desired interest rate risk profile for the Corporation. RISK MANAGEMENT DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN EXCHANGE CONTRACTS RISK MANAGEMENT NOTIONAL ACTIVITY Interest Foreign Rate Exchange (in millions) Contracts Contracts Totals - -------------------------------------------------------------------------------- Balances at December 31, 1994 $3,891 $ 123 $4,014 Additions 3,673 3,160 6,833 Maturities/amortizations (1,445) (3,004) (4,449) - -------------------------------------------------------------------------------- Balances at December 31, 1995 $6,119 $ 279 $6,398 Additions 4,026 4,762 8,788 Maturities/amortizations (1,925) (4,559) (6,484) - -------------------------------------------------------------------------------- Balances at December 31, 1996 $8,220 $ 482 $8,702 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Corporation utilizes interest rate swaps predominantly as asset and liability management tools with the overall objectives of managing the sensitivity of net interest income to changes in interest rates. To accomplish this objective, interest rate swaps are used primarily to modify the interest rate characteristics of certain assets and liabilities (e.g., from a floating rate to a fixed rate, a fixed rate to a floating rate, or from one floating rate index to another). This strategy assists management in achieving interest rate risk objectives. At December 31, 1996 and 1995, the notional amount of risk management interest rate swaps totaled $8,015 million and $5,925 million, respectively. The fair value of risk management interest rate swaps at December 31, 1996 was a negative $55 million, compared to a positive $68 million at December 31, 1995. For the year ended December 31, 1996, risk management interest rate swaps generated $49 million of net interest income, compared to $2 million in net interest expense for the year ended December 31, 1995. These off-balance sheet instruments represented 82 percent and 83 percent of total derivative financial instruments and foreign exchange contracts, including commitments, at year-end 1996 and 1995, respectively. Table 13 summarizes the expected maturity distribution of the notional amount of risk management interest rate swaps and provides the weighted average interest rates associated with amounts to be received or paid as of December 31, 1996. The swaps have been grouped by the assets and liabilities to which they have been designated. In addition to interest rate swaps, the Corporation employs various other types of off-balance sheet derivative and foreign exchange contracts to mitigate exposures to interest rate and foreign currency risks associated with specific assets and liabilities (e.g., loans or deposits denominated in foreign currencies, mortgages held for sale, and originated mortgage servicing rights). Such instruments include interest rate caps and floors, purchased put options, foreign exchange forward contracts, foreign exchange generic swap agreements, and cross-currency swaps. The aggregate notional amounts of these risk management derivative and foreign exchange contracts at December 31, 1996 and 1995, were $687 million and $473 million, respectively. 27 TABLE 12: SCHEDULE OF RATE SENSITIVE ASSETS AND LIABILITIES
December 31, 1996 December 31, 1995 Interest Sensitivity Period Interest Sensitivity Period - ---------------------------------------------------------------------------------------------------------------------------------- Within Over Within Over (dollar amounts in millions) One Year One Year Total One Year One Year Total - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ -- $ 1,902 $ 1,902 $ -- $ 2,028 $ 2,028 Short-term investments 98 5 103 736 14 750 Investment securities 1,428 3,372 4,800 2,678 4,181 6,859 Commercial loans (including lease financing) 12,489 1,437 13,926 11,050 1,321 12,371 International loans 1,706 -- 1,706 1,385 -- 1,385 Real estate related loans 3,662 2,279 5,941 3,611 2,505 6,116 Consumer loans 2,201 2,433 4,634 2,591 1,979 4,570 - ---------------------------------------------------------------------------------------------------------------------------------- Total loans 20,058 6,149 26,207 18,637 5,805 24,442 Other assets 615 579 1,194 711 680 1,391 - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $22,199 $12,007 $34,206 $22,762 $12,708 $35,470 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Deposits Noninterest-bearing $ 570 $ 6,143 $ 6,713 $ 521 $ 5,059 $ 5,580 Savings -- 1,770 1,770 -- 2,204 2,204 Money market and NOW 5,351 1,631 6,982 4,798 1,770 6,568 Certificates of deposit 5,056 1,550 6,606 5,289 1,400 6,689 Foreign office 295 1 296 2,125 1 2,126 - ---------------------------------------------------------------------------------------------------------------------------------- Total deposits 11,272 11,095 22,367 12,733 10,434 23,167 Short-term borrowings 4,489 -- 4,489 4,674 -- 4,674 Medium- and long-term debt 2,842 1,400 4,242 3,044 1,600 4,644 Other liabilities 177 315 492 62 315 377 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities 18,780 12,810 31,590 20,513 12,349 32,862 Shareholders' equity (23) 2,639 2,616 (4) 2,612 2,608 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $18,757 $15,449 $34,206 $20,509 $14,961 $35,470 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Sensitivity impact of interest rate swaps $(4,676) $ 4,676 -- $(3,875) $ 3,875 -- Sensitivity impact of unsettled swap and security purchases (43) 43 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Interest sensitivity gap (1,277) 1,277 -- (1,622) 1,622 -- Gap as a percentage of earning assets (4)% 4% -- (5)% 5% -- Sensitivity impact from elasticity adjustments (1) 1,824 (1,824) -- 1,407 (1,407) -- - ---------------------------------------------------------------------------------------------------------------------------------- Interest sensitivity gap with elasticity adjustments $ 547 $ (547) -- $ (215) $ 215 -- Gap as a percentage of earning assets 2% (2)% -- (1)% 1% -- - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
(1) Elasticity adjustments for NOW, savings and money market deposit accounts are based on historical pricing relationships dating back to 1985 as well as expected future pricing relationships. 28 TABLE 13: REMAINING EXPECTED MATURITY OF RISK MANAGEMENT INTEREST RATE SWAPS
2002- Dec. 31 (amounts in millions) 1997 1998 1999 2000 2001 2023 Total 1995 - ---------------------------------------------------------------------------------------------------------------------------------- VARIABLE RATE ASSET DESIGNATION: Receive fixed swaps Generic $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 50 Amortizing 84 100 -- -- -- -- 184 200 Index amortizing 1,465 861 1,083 690 328 587 5,014 3,688 Weighted average: (1) Receive rate 5.65% 6.25% 6.40% 6.14% 6.45% 6.33% 6.11% 6.02% Pay rate 5.56% 5.55% 5.53% 5.59% 5.55% 5.60% 5.56% 5.84% Floating/floating swaps (3) $ -- $ -- $ 25 $ -- $ -- $ -- $ 25 $ -- - ---------------------------------------------------------------------------------------------------------------------------------- FIXED RATE ASSET DESIGNATION: Pay fixed swaps Generic $ -- $ -- $ 2 $ -- $ -- $ -- $ 2 $ 37 Index amortizing 23 3 3 11 -- -- 40 -- Weighted average: (1) Receive rate 5.56% 5.67% 5.65% 5.67% --% --% 5.60% 5.76% Pay rate 5.07% 5.34% 6.70% 5.34% --% --% 5.35% 7.14% - ---------------------------------------------------------------------------------------------------------------------------------- MEDIUM- AND LONG-TERM DEBT DESIGNATION: Generic receive fixed swaps $1,300 $ -- $ -- $ 200 $ -- $ 850 $2,350 $1,375 Weighted average: (1) Receive rate 5.82% --% --% 6.91% --% 7.78% 6.62% 7.01% Pay rate 5.40% --% --% 5.50% --% 5.74% 5.53% 5.80% Generic pay fixed swaps $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 25 Weighted average: (1) Receive rate --% --% --% --% --% --% --% 5.70% Pay rate --% --% --% --% --% --% --% 8.28% Floating/floating swaps $ 400 $ -- $ -- $ -- $ -- $ -- $ 400 $ 550 Weighted average: (2) Receive rate 5.32% --% --% --% --% --% 5.32% 5.76% Pay rate 5.39% --% --% --% --% --% 5.39% 5.75% - ---------------------------------------------------------------------------------------------------------------------------------- Total notional amount $3,272 $ 964 $1,113 $ 901 $ 328 $1,437 $8,015 $5,925 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
(1) Variable rates paid or received are based primarily on one-month and three- month LIBOR rates paid or received at December 31, 1996. (2) Variable rates paid are based on LIBOR at December 31, 1996, while variable rates received are based on prime. (3) Variable rate paid was 5.68%, based on LIBOR at December 31, 1996, while variable rate received represents the return on a principal only total return swap. This return is based on principal paydowns of the referenced security as well as changes in market value. 29 In 1996, the FASB issued an Exposure Draft on accounting for derivative and similar financial instruments and for hedging activities. This Exposure Draft would introduce significant volatility in earnings and could affect how the Corporation balances interest rate sensitivity in the future. Management does not believe the proposed accounting model will accurately account for and report Comerica's use of derivatives and has expressed this opinion to the FASB. Further information regarding risk management derivative financial instruments and foreign exchange contracts is provided in Notes 8, 9 and 18 to the consolidated financial statements. LIQUIDITY Liquidity is the ability to meet financial obligations through the maturity or sale of existing assets or acquisition of additional funds. Liquidity requirements are satisfied with various funding sources, including a $7.5 billion medium-term note program which allows the Michigan, California and Texas banks to issue debt with maturities ranging between one month and 15 years. The Michigan bank has an additional $2 billion European note program. At year-end 1996, unissued debt related to the two programs totaled $5.6 billion. In addition, liquid assets totaled $6.8 billion, at December 31, 1996. The Corporation also had available $1.2 billion from a collateralized borrowing account with the Federal Reserve Bank at year-end 1996. Purchased funds at December 31, 1996, excluding certificates of deposit with maturities beyond one year, approximated $6.7 billion. Another source of liquidity for the parent company is dividends from its subsidiaries. As discussed in Note 17 to the consolidated financial statements on page 45, subsidiary banks are subject to regulation and may be limited in their ability to pay dividends or transfer funds to the holding company. During 1997, the subsidiary banks can pay dividends of up to $371 million plus current net profits without prior regulatory approval. One measure of current parent company liquidity is investment in subsidiaries, as a percent of shareholders' equity. An amount over 100 percent represents the reliance on subsidiary dividends to repay liabilities. As of December 31, 1996, the ratio was 108 percent. CUSTOMER INITIATED AND OTHER DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN EXCHANGE CONTRACTS CUSTOMER INITIATED AND OTHER NOTIONAL ACTIVITY Interest Foreign Rate Exchange (in millions) Contracts Contracts Totals - -------------------------------------------------------------------------------- Balances at December 31, 1994 $ 328 $ 503 $ 831 Additions 375 32,642 33,017 Maturities/amortizations (290) (32,825) (33,115) Terminations (50) -- (50) - -------------------------------------------------------------------------------- Balances at December 31, 1995 $ 363 $ 320 $ 683 Additions 237 37,571 37,808 Maturities/amortizations (210) (37,247) (37,457) - -------------------------------------------------------------------------------- Balances at December 31, 1996 $ 390 $ 644 $ 1,034 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- On a limited basis, the Corporation writes interest rate caps and enters into foreign exchange contracts and interest rate swaps to accommodate the needs of customers requesting such services. At December 31, 1996 and 1995, customer initiated activity represented 11 percent and 10 percent, respectively of total derivative and foreign exchange contracts, including commitments. Refer to Note 18 to the consolidated financial statements on page 45 for further information regarding customer initiated and other derivative financial instruments and foreign exchange contracts. OTHER MATTERS In June 1996, the FASB issued Statement on Financial Accounting Standards No. 125 on "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The statement changes the accounting for transfers and extinguishments occurring after December 31, 1996. SFAS No. 125 is not expected to materially impact the Corporation. As disclosed in Note 19 to the consolidated financial statements on page 48, a lawsuit was filed on July 24, 1990, by the State of Michigan against a subsidiary bank involving hazardous waste issues. The Corporation's motion for summary judgment was granted, and the Circuit Court of Appeals, on December 19, 1996, upheld that judgment. Many of the Corporation's computer systems contain programming code that will not function properly on January 1, 2000. The Corporation is working to ensure all systems will function properly at that date. Current estimates of costs to remedy potential problems are not expected to be material to the years 1997-9. Forward-looking statements in the preceding financial review are based on current expectations, but there are numerous factors that could cause variances in these factors as economic, industry and competitive positions change. 30 CONSOLIDATED BALANCE SHEETS COMERICA INCORPORATED AND SUBSIDIARIES
December 31 (in thousands, except share data) 1996 1995 - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 1,901,760 $ 2,028,375 Interest-bearing deposits with banks 27,329 23,568 Federal funds sold and securities purchased under agreements to resell 32,200 203,798 Trading account securities 6,009 10,668 Loans held for sale 38,069 511,562 Investment securities available for sale 4,800,034 6,859,310 Commercial loans 13,520,246 12,041,009 International loans 1,706,388 1,384,814 Real estate construction loans 750,760 641,432 Commercial mortgage loans 3,445,562 3,254,041 Residential mortgage loans 1,743,876 2,221,359 Consumer loans 4,634,258 4,570,015 Lease financing 405,618 329,608 - ---------------------------------------------------------------------------------------------------------------------------------- Total loans 26,206,708 24,442,278 Less allowance for loan losses (367,165) (341,344) - ---------------------------------------------------------------------------------------------------------------------------------- Net loans 25,839,543 24,100,934 Premises and equipment 407,663 455,002 Customers' liability on acceptances outstanding 33,102 21,135 Accrued income and other assets 1,120,362 1,255,522 - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $34,206,071 $35,469,874 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Demand deposits (noninterest-bearing) $ 6,712,985 $ 5,579,536 Interest-bearing deposits 15,357,840 15,461,213 Deposits in foreign offices 296,348 2,126,466 - ---------------------------------------------------------------------------------------------------------------------------------- Total deposits 22,367,173 23,167,215 Federal funds purchased and securities sold under agreements to repurchase 1,395,540 3,206,612 Other borrowed funds 3,093,651 1,467,550 Acceptances outstanding 33,102 21,135 Accrued expenses and other liabilities 459,267 355,219 Medium- and long-term debt 4,241,769 4,644,416 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities 31,590,502 32,862,147 Nonredeemable preferred stock--$50 stated value Authorized--5,000,000 shares Issued--5,000,000 shares in 1996 250,000 -- Common stock--$5 par value Authorized--250,000,000 shares Issued--107,297,345 shares in 1996 and 115,094,531 shares in 1995 536,487 575,473 Capital surplus -- 410,618 Unrealized gains and losses on investment securities available for sale (22,789) (4,141) Retained earnings 1,854,116 1,640,980 Deferred compensation (2,245) (1,974) Less cost of common stock in treasury--490,704 shares in 1995 -- (13,229) - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 2,615,569 2,607,727 - ---------------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $34,206,071 $35,469,874 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 31 CONSOLIDATED STATEMENTS OF INCOME COMERICA INCORPORATED AND SUBSIDIARIES
Year Ended December 31 (in thousands, except per share data) 1996 1995 1994 - ------------------------------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $2,160,981 $2,090,854 $1,577,329 Interest on investment securities Taxable 372,331 473,759 446,307 Exempt from federal income tax 17,443 26,189 30,645 - ------------------------------------------------------------------------------------------------------- Total interest on investment securities 389,774 499,948 476,952 Trading account interest 210 227 70 Interest on federal funds sold and securities purchased under agreements to resell 5,068 7,402 4,717 Interest on time deposits with banks 1,827 8,032 21,858 Interest on loans held for sale 4,920 7,461 10,998 - ------------------------------------------------------------------------------------------------------- Total interest income 2,562,780 2,613,924 2,091,924 INTEREST EXPENSE Interest on deposits 685,539 721,475 542,727 Interest on short-term borrowings Federal funds purchased and securities sold under agreements to repurchase 111,729 165,544 121,390 Other borrowed funds 107,155 135,667 78,546 Interest on medium- and long-term debt 294,990 288,990 147,942 Net interest rate swap (income)/expense (48,911) 2,365 (28,808) - ------------------------------------------------------------------------------------------------------- Total interest expense 1,150,502 1,314,041 861,797 - ------------------------------------------------------------------------------------------------------- Net interest income 1,412,278 1,299,883 1,230,127 Provision for loan losses 114,000 86,500 56,000 - ------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 1,298,278 1,213,383 1,174,127 NONINTEREST INCOME Income from fiduciary activities 133,482 125,038 121,755 Service charges on deposit accounts 140,436 130,249 123,626 Customhouse broker fees 10,764 36,086 40,662 Revolving credit fees 22,670 36,248 24,743 Securities gains 13,588 11,748 3,461 Other noninterest income 186,014 159,356 135,943 - ------------------------------------------------------------------------------------------------------- Total noninterest income 506,954 498,725 450,190 NONINTEREST EXPENSES Salaries and employee benefits 560,784 562,159 548,607 Net occupancy expense 99,211 98,945 98,885 Equipment expense 68,827 67,872 67,319 FDIC insurance expense 8,139 23,817 44,276 Telecommunications expense 29,092 29,644 27,304 Restructuring charge (including merger and integration in 1994) 90,000 - 7,000 Other noninterest expenses 302,973 303,977 248,831 - ------------------------------------------------------------------------------------------------------- Total noninterest expenses 1,159,026 1,086,414 1,042,222 - ------------------------------------------------------------------------------------------------------- Income before income taxes 646,206 625,694 582,095 Provision for income taxes 229,045 212,328 194,853 - ------------------------------------------------------------------------------------------------------- NET INCOME $ 417,161 $ 413,366 $ 387,242 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Net income applicable to common stock $ 408,136 $ 413,366 $ 387,242 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Net income per common share $ 3.55 $ 3.54 $ 3.28 Average common and common equivalent shares 114,854 116,894 118,160 Cash dividends declared on common stock $ 170,067 $ 158,309 $ 145,098 Dividends per common share $ 1.52 $ 1.37 $ 1.24 - -------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements 32 Comerica Incorporated CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY COMERICA INCORPORATED AND SUBSIDIARIES
Non- redeemable Unrealized Total Preferred Common Capital Gains Retained Deferred Treasury Shareholders' (in thousands, except share data) Stock Stock Surplus and (Losses) Earnings Compensation Stock Equity - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES AT JANUARY 1, 1994 $ -- $596,473 $525,668 $ 27,473 $1,155,280 $ (1,482) $(121,754) $2,181,658 Net income for 1994 -- -- -- -- 387,242 -- -- 387,242 Cash dividends declared on common stock -- -- -- -- (145,098) -- -- (145,098) Purchase of 2,810,564 shares of common stock -- -- -- -- -- -- (76,280) (76,280) Issuance of common stock: Employee stock plans -- -- 1,170 -- (3,161) (797) 7,702 4,914 Acquisition of Pacific Western -- -- -- -- (3,858) -- 125,221 121,363 Amortization of deferred compensation -- -- -- -- -- 493 -- 493 Change in unrealized gains/(losses) on investment securities available for sale -- -- -- (82,512) -- -- -- (82,512) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1994 $ -- $596,473 $526,838 $(55,039) $1,390,405 $ (1,786) $ (65,111) $2,391,780 Net income for 1995 -- -- -- -- 413,366 -- -- 413,366 Cash dividends declared on common stock -- -- -- -- (158,309) -- -- (158,309) Purchase of 1,405,500 shares of common stock -- -- -- -- -- -- (38,725) (38,725) Purchase and retirement of 4,200,000 shares of common stock -- (21,000) (118,931) -- -- -- -- (139,931) Issuance of common stock: Employee stock plans -- -- 1,261 -- (4,482) (1,034) 14,957 10,702 Acquisitions -- -- 1,450 -- -- -- 75,650 77,100 Amortization of deferred compensation -- -- -- -- -- 846 -- 846 Change in unrealized gains/(losses) on investment securities available for sale -- -- -- 50,898 -- -- -- 50,898 - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1995 $ -- $575,473 $410,618 $ (4,141) $1,640,980 $ (1,974) $ (13,229) $2,607,727 Net income for 1996 -- -- -- -- 417,161 -- -- 417,161 Issuance of preferred stock 250,000 -- (3,256) -- -- -- -- 246,744 Cash dividends declared: Preferred stock -- -- -- -- (9,025) -- -- (9,025) Common stock -- -- -- -- (170,067) -- -- (170,067) Purchase and retirement of 12,176,496 shares of common stock -- (60,883) (519,924) -- (5,065) -- (36,324) (622,196) Issuance of common stock: Employee stock plans -- 897 14,090 -- (20,076) (1,197) 40,295 34,009 Acquisitions -- 21,000 98,472 -- 208 -- 9,258 128,938 Amortization of deferred compensation -- -- -- -- -- 926 -- 926 Change in unrealized gains/(losses) on investment securities available for sale -- -- -- (18,648) -- -- -- (18,648) - ----------------------------------------------------------------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1996 $250,000 $536,487 $ -- $(22,789) $1,854,116 $ (2,245) $ -- $2,615,569 - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
( ) Indicates deduction. See notes to consolidated financial statements. Comerica Incorporated 33 CONSOLIDATED STATEMENTS OF CASH FLOWS COMERICA INCORPORATED AND SUBSIDIARIES
Year Ended December 31 (in thousands) 1996 1995 1994 - -------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 417,161 $ 413,366 $ 387,242 Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses 114,000 86,500 56,000 Depreciation 66,776 64,014 59,819 Restructuring charge 90,000 (6,127) (19,733) Net (increase) decrease in trading account securities 4,659 (6,336) (732) Net (increase) decrease in loans held for sale 473,493 (420,015) 239,120 Net (increase) decrease in accrued income receivable 924 (26,749) (43,495) Net increase (decrease) in accrued expenses (39,720) 96,645 (31,845) Net amortization of intangibles 30,803 29,016 25,597 Funding for employee benefit plans (25,000) (200,000) (59,719) Other, net 187,438 (178,874) 91,433 - -------------------------------------------------------------------------------------------------------------------- Total adjustments 903,373 (561,926) 316,445 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 1,320,534 (148,560) 703,687 INVESTING ACTIVITIES Net (increase) decrease in interest-bearing deposits with banks (3,705) 363,870 647,600 Net (increase) decrease in federal funds sold and securities purchased under agreements to resell 4,898 (122,498) 1,045,789 Proceeds from sale of investment securities available for sale 1,211,250 103,531 3,001 Proceeds from maturity of investment securities available for sale 1,531,012 837,412 565,445 Purchases of investment securities available for sale (643,796) (211,222) (1,150,178) Proceeds from maturity of investment securities held to maturity -- 788,620 1,429,966 Purchases of investment securities held to maturity -- (223,579) (2,197,840) Net increase in loans (other than loans purchased) (1,852,199) (1,908,266) (2,224,057) Purchase of loans (77,805) (48,349) (257,043) Fixed assets, net (46,038) (62,334) (78,454) Net (increase) decrease in customers' liability on acceptances outstanding (12,341) 13,097 4,580 Net cash provided by acquisitions/sales 200,459 19,224 58,626 - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 311,735 (450,494) (2,152,565) FINANCING ACTIVITIES Net increase (decrease) in deposits (825,859) 130,276 304,768 Net increase (decrease) in short-term borrowings (129,056) 468,754 (1,056,522) Net increase (decrease) in acceptances outstanding 12,341 (13,097) (4,580) Proceeds from issuance of medium- and long-term debt 2,251,000 2,960,000 3,550,000 Repayments and purchases of medium- and long-term debt (2,553,650) (2,418,171) (912,613) Proceeds from issuance of preferred stock 246,744 -- -- Proceeds from issuance of common stock 35,206 11,736 5,711 Purchase of common stock for treasury and retirement (622,196) (178,656) (76,280) Dividends paid (173,414) (155,726) (139,988) - -------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (1,758,884) 805,116 1,670,496 - -------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and due from banks (126,615) 206,062 221,618 Cash and due from banks at beginning of year 2,028,375 1,822,313 1,600,695 - -------------------------------------------------------------------------------------------------------------------- Cash and due from banks at end of year $1,901,760 $2,028,375 $1,822,313 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Interest paid $1,201,146 $1,274,101 $ 862,563 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Income taxes paid $ 212,530 $ 180,134 $ 171,851 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Noncash investing and financing activities Loan transfers to other real estate $ 10,534 $ 23,908 $ 26,598 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Stock issued for acquisitions $ 128,938 $ 77,100 $ 121,363 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Loan transfers to investment securities $ -- $ -- $ 91,538 - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 34 Comerica Incorporated NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMERICA INCORPORATED AND SUBSIDIARIES NOTE 1 - -------------------------------------------------------------------------------- ACCOUNTING POLICIES ORGANIZATION Comerica Incorporated is a registered bank holding company headquartered in Detroit, Michigan. The Corporation's principal lines of business are the Business Bank, the Individual Bank and the Investment Bank. The core businesses are tailored to each of the Corporation's four primary geographic markets: Michigan, Texas, California and Florida. The accounting and reporting policies of Comerica Incorporated and its subsidiaries conform to generally accepted accounting principles and prevailing practices within the banking industry. Management makes estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could differ from these estimates. The following is a summary of the more significant accounting and reporting policies. CONSOLIDATION The consolidated financial statements include the accounts of the Corporation and its subsidiaries after elimination of all significant intercompany accounts and transactions. Prior years' financial statements are reclassified to conform with current financial statement presentation. For acquisitions accounted for as pooling-of-interests combinations, the historical consolidated financial statements are restated to include the accounts and results of operations. For acquisitions using the purchase method of accounting, the assets acquired and liabilities assumed are adjusted to fair market values at the date of acquisition, and the resulting net discount or premium is accreted or amortized into income over the remaining lives of the relevant assets and liabilities. Goodwill representing the excess of cost over the net book value of identifiable assets acquired is amortized on a straight- line basis over periods ranging from 10 to 30 years (weighted average of 17 years). Core deposit intangible assets are amortized on an accelerated method over 10 years. LOANS HELD FOR SALE Loans, normally mortgages, held for sale are carried at the lower of cost or market. Market value is determined in the aggregate. SECURITIES Investment securities held to maturity are those securities which management has the ability and positive intent to hold to maturity. Investment securities held to maturity are stated at cost, adjusted for amortization of premium and accretion of discount. Investment securities that fail to meet the ability and positive intent criteria are accounted for as securities available for sale, and stated at fair value with unrealized gains and losses, net of income taxes, reported as a component of shareholders' equity. Trading account securities are carried at market value. Realized and unrealized gains or losses on trading securities are included in noninterest income. Gains or losses on the sale of securities are computed based on the adjusted cost of the specific security. PREMISES AND EQUIPMENT Premises and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation, computed on the straight-line method, is charged to operations over the estimated useful lives of the properties. Leasehold improvements are amortized over the terms of their respective leases or the estimated useful lives of the improvements, whichever is shorter. ALLOWANCE FOR LOAN LOSSES The allowance is maintained at a level adequate to absorb losses inherent in the loan portfolio. Management determines the adequacy of the allowance by applying projected loss ratios to the risk ratings of loans both individually and by category. The projected loss ratios incorporate such factors as recent loss experience, current economic conditions, the risk characteristics of the various categories and concentrations of loans, transfer risk and other pertinent factors. Loans which are deemed uncollectible are charged off and deducted from the allowance. The provision for loan losses and recoveries on loans previously charged off are added to the allowance. NONPERFORMING ASSETS Nonperforming assets are comprised of loans for which the accrual of interest has been discontinued, loans for which the terms have been renegotiated to less than market rates due to a serious weakening of the borrower's financial condition, and other real estate which has been acquired primarily through foreclosure and is awaiting disposition. Consumer loans are generally not placed on nonaccrual status and are directly charged off no later than 180 days past due, or earlier if deemed uncollectible. Loans other than consumer are generally placed on nonaccrual status when principal or interest is past due 90 days or more and/or when, in the opinion of management, full collection of principal or interest is unlikely. At the time a loan is placed on nonaccrual status, interest previously accrued but not collected is charged against current income. Income on such loans is then recognized only to the extent that cash is received and where future collection of principal is probable. Comerica Incorporated 35 NOTE 1 (CONTINUED) - -------------------------------------------------------------------------------- ACCOUNTING POLICIES Other real estate acquired is carried at the lower of cost or fair value, minus estimated costs to sell. When the property is acquired through foreclosure, any excess of the related loan balance over fair value is charged to the allowance for loan losses. Subsequent write-downs, operating expenses, and losses upon sale, if any, are charged to noninterest expenses. PENSION COSTS Pension costs are charged to salaries and employee benefits expense and funded consistent with the requirements of federal law and regulations. POSTRETIREMENT BENEFITS Postretirement benefits are recognized in the financial statements during the employee's active service period. DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN EXCHANGE CONTRACTS Interest rate and foreign exchange swaps, interest rate caps and floors, and futures and forward contracts may be used to manage the Corporation's exposure to interest rate and foreign currency risks. These instruments, with the exception of futures and forwards, are accounted for on an accrual basis. Net interest income or expense, including premiums paid or received, is recognized over the life of the contract and reported as an adjustment to interest expense. Realized gains and losses on futures and forwards are generally deferred and amortized over the life of the contract as an adjustment to net interest income. Gains or losses on early termination of risk management derivative financial instruments are deferred and amortized as an adjustment to the yields of the related assets or liabilities over their remaining contractual life. If the designated asset or liability matures, or is disposed of or extinguished, any unrealized gains or losses on the related derivative instrument are recognized currently and reported as an adjustment to interest expense. Foreign exchange futures and forward contracts, foreign currency options, interest rate caps, and interest rate swap agreements executed as a service to customers are accounted for on a mark-to-market basis. As a result, the fair values of these instruments are recorded in the consolidated balance sheet with both realized and unrealized gains and losses recognized currently in noninterest income. INCOME TAXES Provisions for income taxes are based on amounts reported in the statements of income (after exclusion of nontaxable income such as interest on state and municipal securities) and include deferred income taxes on temporary differences between the tax basis and financial reporting basis of assets and liabilities. STATEMENTS OF CASH FLOWS For the purpose of presentation in the statements of cash flows, cash and cash equivalents are defined as those amounts included in the balance sheet caption, "Cash and due from banks." LOAN ORIGINATION FEES AND COSTS Loan origination and commitment fees are deferred and recognized over the life of the related loan or over the commitment period as a yield adjustment. Loan fees on unused commitments and fees related to loans sold are recognized currently as other noninterest income. NOTE 2 - -------------------------------------------------------------------------------- ACQUISITIONS During the years ended December 31, 1996, 1995 and 1994, Comerica made the following acquisitions, which were accounted for as purchases: FMV of FMV of Assets Liabilities Purchase Intangibles (in millions) Acquired Assumed Price Recorded - -------------------------------------------------------------------------- During 1996 Metrobank $1,083 $1,020 $125 $62 During 1995 University Bank & Trust 456 422 69 35 QuestStar Bank, N.A. 205 193 25 13 During 1994 Pacific Western Bancshares 959 908 121 70 Lockwood Banc Group 305 288 44 27 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- 36 Comerica Incorporated NOTE 3 - -------------------------------------------------------------------------------- INVESTMENT SECURITIES Information concerning investment securities as shown in the consolidated balance sheets of the Corporation was as follows:
Gross Gross Unrealized Unrealized Estimated (in thousands) Cost Gains Losses Fair Value - ------------------------------------------------------------------------------------- December 31, 1996 U.S. government and agency securities $4,011,022 $ 22,702 $ 65,375 $3,968,349 State and municipal securities 220,173 7,866 196 227,843 Other securities 603,873 654 685 603,842 - ------------------------------------------------------------------------------------- Total securities available for sale $4,835,068 $ 31,222 $ 66,256 $4,800,034 - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- December 31, 1995 U.S. government and agency securities $6,052,184 $ 41,585 $ 55,429 $6,038,340 State and municipal securities 353,612 17,618 389 370,841 Other securities 459,887 12,682 22,440 450,129 - ------------------------------------------------------------------------------------- Total securities available for sale $6,865,683 $ 71,885 $ 78,258 $6,859,310 - ------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------
The cost and estimated fair values of debt securities by contractual maturity were as follows (securities with multiple maturity dates are classified in the period of final maturity). Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. December 31, 1996 Estimated (in thousands) Cost Fair Value - ----------------------------------------------------------------- Contractual maturity Within one year $ 423,356 $ 424,047 Over one year to five years 356,382 359,436 Over five years to ten years 105,318 107,610 Over ten years 75,113 75,777 - ----------------------------------------------------------------- Subtotal securities 960,169 966,870 Mortgage-backed securities 3,792,782 3,751,125 Equity and other nondebt securities 82,117 82,039 - ----------------------------------------------------------------- Total securities available for sale $4,835,068 $4,800,034 - ----------------------------------------------------------------- - ----------------------------------------------------------------- Sales and calls of investment securities available for sale and calls of investment securities held to maturity resulted in realized gains and losses as follows: Year Ended December 31 Available for Sale Held to Maturity - ---------------------------------------------------------------------------- (in thousands) 1996 1995 1996 1995 - ---------------------------------------------------------------------------- Securities gains $14,945 $11,729 $ -- $ 456 Securities losses (1,357) (350) -- (87) - ---------------------------------------------------------------------------- Total $13,588 $11,379 $ -- $ 369 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- Assets, principally securities, carried at approximately $3.5 billion at December 31, 1996, were pledged to secure public deposits (including State of Michigan deposits of $62 million at December 31, 1996), and for other purposes as required by law. All held to maturity securities were redesignated to the available for sale category in December 1995 in accordance with the one-time provisions issued in conjunction with the FASB's Special Report, "A Guide to Implementation of Statement 115 on Accounting for Certain Investments in Debt and Equity Securities." At the date of transfer the amortized cost of the held to maturity securities was $4.6 billion. The net unrealized loss related to the redesignated securities totaled $9 million. Comerica Incorporated 37 NOTE 4 - -------------------------------------------------------------------------------- NONPERFORMING ASSETS The following table summarizes nonperforming assets and loans which are contractually past due 90 days or more as to interest or principal payments. Nonperforming assets consist of nonaccrual loans, reduced-rate loans and other real estate. Nonaccrual loans are those on which interest is not being recognized. Reduced-rate loans are those on which interest has been renegotiated to lower than market rates because of the weakened financial condition of the borrower. Nonaccrual and reduced-rate loans are included in loans on the consolidated balance sheet. December 31 (in thousands) 1996 1995 - ------------------------------------------------------------- Nonaccrual loans Commercial loans $ 71,991 $ 87,195 Real estate construction loans 3,576 6,578 Commercial mortgage loans 22,567 31,123 Residential mortgage loans 5,160 5,507 - ------------------------------------------------------------- Total 103,294 130,403 Reduced-rate loans 8,009 3,244 - ------------------------------------------------------------- Total nonperforming loans 111,303 133,647 Other real estate 28,398 29,384 - ------------------------------------------------------------- Total nonperforming assets $139,701 $163,031 - ------------------------------------------------------------- - ------------------------------------------------------------- Loans past due 90 days $ 51,748 $ 57,134 - ------------------------------------------------------------- - ------------------------------------------------------------- Gross interest income that would have been recorded had the nonaccrual and reduced-rate loans performed in accordance with original terms $ 11,119 $ 18,925 - ------------------------------------------------------------- - ------------------------------------------------------------- Interest income recognized $ 2,681 $ 3,427 - ------------------------------------------------------------- - ------------------------------------------------------------- SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118, was adopted January 1, 1995. The statements consider a loan impaired when it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement. Consistent with this definition, all nonaccrual and reduced-rate loans (with the exception of residential mortgage and consumer loans) are impaired. The adoption of these accounting standards had no effect on the financial position or results of operations of the Corporation. December 31 (in thousands) 1996 1995 - ------------------------------------------------------------- Average impaired loans for the year $114,253 $148,087 Total period-end impaired loans 98,050 135,034 Period-end impaired loans requiring an allowance 59,960 89,209 Impairment allowance 19,528 26,578 - ------------------------------------------------------------- - ------------------------------------------------------------- Those impaired loans not requiring an allowance represent loans for which the fair value exceeded the recorded investment in the loan. Fifty percent of the total impaired loans at December 31, 1996 are evaluated based on fair value of related collateral. Remaining loan impairment is based on the present value of expected future cash flows discounted at the loan's effective interest rate. NOTE 5 - -------------------------------------------------------------------------------- ALLOWANCE FOR LOAN LOSSES An analysis of changes in the allowance for loan losses follows: (in thousands) 1996 1995 1994 - -------------------------------------------------------------------------- Balance at January 1 $341,344 $326,195 $298,685 Allowance of institutions and loans purchased/sold (3,630) 4,668 19,467 Loans charged off (125,912) (119,028) (83,086) Recoveries on loans previously charged off 41,363 43,009 35,129 - -------------------------------------------------------------------------- Net loans charged off (84,549) (76,019) (47,957) Provision for loan losses 114,000 86,500 56,000 - -------------------------------------------------------------------------- Balance at December 31 $367,165 $341,344 $326,195 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- As a percent of total loans 1.40% 1.40% 1.47% - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- 38 Comerica Incorporated NOTE 6 - -------------------------------------------------------------------------------- SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK Concentrations of both on-balance sheet and off-balance sheet credit risk are controlled and monitored as part of credit policies. The Corporation is a regional bank holding company with a geographic concentration of its on-balance sheet and off-balance sheet activities centered in Michigan. In addition, the Corporation has an industry concentration with the automotive industry, which includes manufacturers and their finance subsidiaries, suppliers, dealers and company executives. At December 31, 1996 and 1995, exposure from loan commitments and guarantees to companies related to the automotive industry totaled $8.2 billion and $8.0 billion, respectively. Additionally, commercial real estate loans, including commercial mortgages and construction loans, totaled $4.2 billion in 1996 and $3.9 billion in 1995. Approximately $1.9 billion of commercial real estate loans at December 31, 1996 involved mortgages on owner-occupied properties. Those borrowers are involved in business activities other than real estate, and the sources of repayment are not dependent on the performance of the real estate market. NOTE 7 - -------------------------------------------------------------------------------- PREMISES AND EQUIPMENT A summary of premises and equipment at December 31 by major category follows: (in thousands) 1996 1995 - -------------------------------------------------------------------------- Land $ 54,635 $ 61,144 Buildings and improvements 366,618 402,569 Furniture and equipment 436,133 479,099 - -------------------------------------------------------------------------- Total cost 857,386 942,812 Less accumulated depreciation and amortization (449,723) (487,810) - -------------------------------------------------------------------------- Net book value $ 407,663 $ 455,002 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- Rental expense for leased properties and equipment amounted to $44 million in 1996, 1995 and 1994. Future minimum lease rentals under noncancelable operating lease obligations are as follows: (in thousands) - ------------------------------------------------------------- 1997 $ 40,211 1998 38,575 1999 35,518 2000 32,256 2001 28,735 2002 and later 138,414 - ------------------------------------------------------------- - ------------------------------------------------------------- SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of," was adopted in 1995. The statement establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used. The adoption of this standard had no significant effect on the financial position or results of operations of the Corporation. NOTE 8 - -------------------------------------------------------------------------------- SHORT-TERM BORROWINGS Federal funds purchased and securities sold under agreements to repurchase generally mature within one to four days from the transaction date. Other borrowed funds, consisting of commercial paper, borrowed securities, term federal funds purchased, short-term notes and treasury tax and loan deposits, generally mature within one to 120 days from the transaction date. The following is a summary of short-term borrowings for the two years ended December 31, 1996: Federal Funds Purchased and Securities Sold Other Under Agreements Borrowed (in thousands) to Repurchase Funds - ------------------------------------------------------------------------------- December 31, 1996 Amount outstanding at year-end $1,395,540 $3,093,651 Weighted average interest rate at year-end 5.80% 5.14% December 31, 1995 Amount outstanding at year-end $3,206,612 $1,467,550 Weighted average interest rate at year-end 5.39% 5.18% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- The Corporation entered into interest rate swap contracts that convert $700 million of short-term notes based on the bank prime rate minus 2.96% and the one-month London Interbank Offered Rate (LIBOR) (5.29% and 5.53% at December 31, 1996, respectively) to a three-month LIBOR (5.56% at December 31, 1996) based rate. At December 31, 1996, the parent company had available additional credit totaling $100 million under a line of credit agreement, all of which was unused. Under the current agreement, the line will expire in April of 2000. Comerica Incorporated 39 NOTE 9 - -------------------------------------------------------------------------------- MEDIUM- AND LONG-TERM DEBT Medium- and long-term debt consisted of the following at December 31: (in thousands) 1996 1995 - ------------------------------------------------------------------------------- Parent Company 7.25% subordinated notes due 2007 $ 148,548 $ 148,584 9.75% subordinated notes due 1999 74,782 74,692 10.125% subordinated debentures due 1998 74,880 74,800 - ------------------------------------------------------------------------------- Total parent company 298,210 298,076 Subsidiaries Subordinated notes: 8.375% subordinated notes due 2024 147,860 147,782 7.25% subordinated notes due 2002 149,089 148,931 6.875% subordinated notes due 2008 99,143 99,066 7.125% subordinated notes due 2013 148,112 148,000 7.875% subordinated notes due 2026 146,814 -- - ------------------------------------------------------------------------------- Total subordinated notes 691,018 543,779 Medium-term notes: Floating rate based on Treasury bill indices 399,955 1,099,701 Floating rate based on Prime indices -- 550,000 Floating rate based on LIBOR indices 1,448,947 624,937 Fixed rate notes with interest rates ranging from 5.75% to 6.875% 1,399,040 1,523,433 - ------------------------------------------------------------------------------- Total medium-term notes 3,247,942 3,798,071 Notes payable maturing on dates ranging from 1997 through 2015 4,599 4,490 - ------------------------------------------------------------------------------- Total subsidiaries 3,943,559 4,346,340 - ------------------------------------------------------------------------------- Total medium- and long-term debt $4,241,769 $4,644,416 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Concurrent with the issuance of certain of the medium- and long-term debt presented above, the Corporation entered into interest rate swap agreements to convert the stated rate of the debt to a rate based on the indices identified in the following table: Principal Amount Base of Debt Rate at (in thousands) Converted Base Rate 12/31/96 - ---------------------------------------------------------------------------- Parent Company 7.25% subordinated notes $150,000 6-month LIBOR 5.63% 9.75% subordinated notes 50,000 3-month LIBOR 5.56 - ---------------------------------------------------------------------------- Subsidiaries Subordinated notes: 8.375% subordinated notes 150,000 6-month LIBOR 5.63 7.25% subordinated notes 150,000 6-month LIBOR 5.63 6.875% subordinated notes 100,000 6-month LIBOR 5.63 7.125% subordinated notes 150,000 6-month LIBOR 5.63 7.875% subordinated notes 150,000 6-month LIBOR 5.63 Medium-term notes: Floating based on LIBOR indices 200,000 3-month LIBOR 5.56 Fixed rate notes with interest rates ranging from 5.75% to 6.65% 850,000 3-month LIBOR 5.56 5.95% fixed rate note 150,000 5.63% 5.63 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- All subordinated notes and debentures with maturities greater than one year qualify as Tier 2 capital. The Corporation currently has two medium-term note programs: a senior note program and a European note program. Under these programs, certain of the bank subsidiaries may offer an aggregate principal amount of up to $9.5 billion. The notes can be issued as fixed or floating rate notes and with terms from one month to 15 years. The interest rate on the floating rate medium-term notes based on LIBOR ranged from three-month LIBOR minus 0.13% to three-month LIBOR plus 0.10%. The notes are due from 1997 to 2001. The interest rates on the floating medium-term notes based on the three-month U.S. Treasury bill bond equivalent rate (5.22% at December 31, 1996) were the rate plus 0.30% for notes maturing in 1997. The maturities of the fixed rate notes range from 1997 to 2000. The medium-term notes do not qualify as Tier 2 capital and are not insured by the FDIC. The principal maturities of medium- and long-term debt are as follows: (in thousands) - ------------------------------------------------------------- 1997 $2,549,030 1998 274,095 1999 74,290 2000 199,431 2001 299,315 2002 and later 845,608 - ------------------------------------------------------------- - ------------------------------------------------------------- 40 Comerica Incorporated NOTE 10 - -------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY During 1996, the board of directors authorized the repurchase of up to 15 million shares of Comerica Incorporated common stock for general corporate purposes, acquisitions and employee benefit plans. At December 31, 1996, 8.6 million shares had been repurchased under this program. At December 31, 1996, the Corporation had reserved 4.8 million shares of common stock for issuance to employees under the long-term incentive plans. During 1996, the Corporation issued 5 million shares of Fixed/ Adjustable Rate Noncumulative Preferred Stock, Series E, with a stated value of $50 per share. Dividends are payable quarterly, at a rate of 6.84% per annum through July 1, 2001. Thereafter, the rate will be equal to 0.625% plus an effective rate, but not less than 7.34% nor greater than 13.34%. The effective rate will be equal to the highest of the Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate (as defined in the prospectus). The Corporation, at its option, may redeem all or part of the outstanding shares on or after July 1, 2001. NOTE 11 - -------------------------------------------------------------------------------- NET INCOME PER COMMON SHARE Primary net income per common share is computed by dividing adjusted net income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Common stock equivalents consist of common stock issuable under the assumed exercise of stock options granted under the Corporation's stock plans, using the treasury stock method. Fully diluted net income per share of common stock differs from primary to the extent the treasury stock method affects the assumed conversion of common stock equivalents. A computation of earnings per share follows: Year Ended December 31 (in thousands, except per share data) 1996 1995 1994 - ------------------------------------------------------------------------------- Primary Average shares outstanding 112,847 115,797 117,264 Common stock equivalent Net effect of the assumed exercise of stock options 2,007 1,097 896 - ------------------------------------------------------------------------------- Primary average shares 114,854 116,894 118,160 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Net income $417,161 $413,366 $387,242 Less preferred stock dividends 9,025 -- -- - ------------------------------------------------------------------------------- Net income applicable to common stock $408,136 $413,366 $387,242 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Primary net income per share $ 3.55 $ 3.54 $ 3.28 Fully diluted Average shares outstanding 112,847 115,797 117,264 Common stock equivalents Net effect of the assumed exercise of stock options 2,411 1,783 899 - ------------------------------------------------------------------------------- Fully diluted average shares 115,258 117,580 118,163 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Net income $417,161 $413,366 $387,242 Less preferred stock dividends 9,025 -- -- - ------------------------------------------------------------------------------- Net income applicable to common stock $408,136 $413,366 $387,242 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Fully diluted net income per share $ 3.54 $ 3.52 $3.28 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Comerica Incorporated 41 NOTE 12 - -------------------------------------------------------------------------------- LONG-TERM INCENTIVE PLANS The Corporation has long-term incentive plans under which it has awarded both shares of restricted stock to key executive officers and stock options to executive officers and key personnel of the Corporation and its subsidiaries. The exercise price of the stock options is equal to the fair market value at the time the options are granted and the options may have restrictions regarding exercisability. The maturity of each option is determined at the date of grant; however, no options may be exercised later than ten years from the date of grant. The Corporation adopted the disclosure-only option under SFAS No. 123, "Accounting for Stock-Based Compensation," as of December 31, 1996. If the recognition provisions of the new statement had been adopted as of the beginning of 1996, the effect on 1996 net income would have been immaterial. Average per Share - ------------------------------------------------------------------------------- Exercise Market Number Price Price - ------------------------------------------------------------------------------- Outstanding--December 31, 1993 3,441,273 $21.68 $26.63 Granted 887,350 27.03 27.03 Cancelled (92,877) 29.30 27.78 Exercised (247,726) 14.67 28.94 Expired -- - ------------------------------------------------------------------------------- Outstanding--December 31, 1994 3,988,020 23.13 24.38 Granted 1,106,180 27.96 27.96 Cancelled (220,741) 29.15 31.88 Exercised (514,247) 16.11 31.56 Expired -- Acquisition of University Bank & Trust 153,119 16.05 27.50 - ------------------------------------------------------------------------------- Outstanding--December 31, 1995 4,512,331 24.58 40.00 Granted 1,262,762 38.42 38.42 Cancelled (214,079) 28.43 43.42 Exercised (1,183,742) 19.17 44.01 Expired -- Acquisition of Metrobank 397,145 12.74 39.63 - ------------------------------------------------------------------------------- Outstanding--December 31, 1996 4,774,417 $28.43 $52.38 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Exercisable--December 31, 1996 2,389,945 Available for grant-- December 31, 1996 58,238 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- The following table summarizes information about stock options outstanding at December 31,1996: Outstanding Exercisable - ------------------------------------------------------------------------- Average Average Exercise Average Exercise Exercise Price Range Shares Life (a) Price Shares Price - ------------------------------------------------------------------------- $ 9.48 - $15.44 793,185 3.2 $14.17 793,185 $14.17 15.55 - 27.00 817,617 6.2 24.56 504,918 23.05 27.88 - 29.25 927,230 8.2 27.90 236,058 27.91 29.75 - 37.75 1,024,398 5.9 31.20 855,784 30.96 38.13 - 52.38 1,211,987 9.2 38.43 -- -- - ------------------------------------------------------------------------- Total 4,774,417 6.8 $28.43 2,389,945 $23.41 - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- (a) Average contractual life remaining in years. 42 Comerica Incorporated NOTE 13 - -------------------------------------------------------------------------------- EMPLOYEE BENEFIT PLANS The Corporation has a defined benefit pension plan in effect for substantially all full-time employees. Staff expense includes income of $1.4 million in 1996, $1.0 million in 1995 and $2.3 million in 1994 for the plan. Benefits under the plan are based primarily on years of service and the levels of compensation during the five highest paid consecutive calendar years occurring during the last ten years before retirement. The plan's assets primarily consist of U.S. government and agency securities, corporate bonds and notes, equity securities and units of certain collective investment funds administered by Comerica Bank. Net periodic pension cost/(income) consisted of the following: (in thousands) 1996 1995 1994 - ----------------------------------------------------------------------- Service cost--benefits earned during the period $11,675 $ 8,857 $ 9,273 Interest cost on projected benefit obligation 31,572 29,231 27,043 Actual return on plan assets (62,710) (93,650) 15,323 Net amortization and (deferral) 18,072 54,585 (53,926) - ----------------------------------------------------------------------- Net pension income $(1,391) $ (977) $(2,287) - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- The following table sets forth the funded status of the defined benefit pension plans and amounts recognized on the Corporation's balance sheet: December 31 (in thousands) 1996 1995 - ------------------------------------------------------------------------------- Accumulated benefit obligation Vested $367,376 $336,411 Nonvested 16,483 16,970 - ------------------------------------------------------------------------------- Accumulated benefit obligation 383,859 353,381 Effect of projected future compensation levels 78,917 71,597 - ------------------------------------------------------------------------------- Projected benefit obligation 462,776 424,978 Plan assets at fair value 515,164 466,845 - ------------------------------------------------------------------------------- Plan assets in excess of projected benefit obligation 52,388 41,867 Unrecognized net gain due to past experience different from that assumed and effects of changes in assumptions (17,672) (13,397) Unrecognized net assets being amortized over 15 years (20,191) (25,026) - ------------------------------------------------------------------------------- Prepaid pension $ 14,525 $ 3,444 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Actuarial assumptions were as follows: 1996 1995 1994 - -------------------------------------------------------------------------- Discount rate used in determining projected benefit obligation 7.5% 7.5% 8.5% Rate of increase in compensation levels 5% 5% 5% Long-term rate of return on assets 9% 8% 8% - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- The Corporation has a savings ("401(k)") plan which is a defined contribution plan. All of the Corporation's salaried and regular part-time employees are eligible to participate in the plan. The Corporation makes matching contributions based on a declining percentage of employee contributions (currently, maximum per employee is $800) as well as a performance-based matching contribution based on the Corporation's financial performance. Staff expense includes expense of $10.4 million in 1996, $7.1 million in 1995 and $7.6 million in 1994 for the plan. The Corporation's postretirement benefits plan continues postretirement health care and life insurance benefits for retirees as of December 31, 1992, provides a phase-out for employees over 50 as of that date, and substantially reduces all benefits for remaining employees. The Corporation has funded the plan with a company-owned life insurance contract purchased in 1995. Net periodic postretirement benefit cost included the following components: (in thousands) 1996 1995 1994 - ---------------------------------------------------------------------------- Service cost $ 402 $ 383 $ 467 Interest cost on accumulated postretirement benefit obligation 5,597 6,652 6,698 Return on plan assets (3,094) (2,453) -- Amortization of transition obligation 4,628 4,628 4,628 Net amortization and (deferral) (2,488) (1,511) -- - ---------------------------------------------------------------------------- Net periodic postretirement benefit cost $ 5,045 $ 7,699 $11,793 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- The following table sets forth the status of the postretirement plan at December 31: (in thousands) 1996 1995 - ---------------------------------------------------------------------------- Retirees $65,711 $68,477 Other fully eligible plan participants 4,910 4,568 Other active plan participants 5,799 4,993 - ---------------------------------------------------------------------------- Total accumulated postretirement benefit obligation 76,420 78,038 Plan assets at fair value 80,547 77,453 - ---------------------------------------------------------------------------- Funded status 4,127 (585) Unrecognized net gain (11,800) (13,039) Unrecognized transition obligation 73,733 78,360 - ---------------------------------------------------------------------------- Prepaid postretirement benefit $66,060 $64,736 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- Actuarial assumptions were as follows: 1996 1995 1994 - ---------------------------------------------------------------------------- Discount rate used in determining accumulated postretirement benefit obligation 7.5% 7.5% 8.5% Long-term rate of return on assets 6.7% 6.7% -- - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- An 11 percent health care cost trend rate was projected for 1996 and is assumed to decrease gradually to 6 percent by 2002, remaining constant thereafter. Increasing each health care rate by one percentage point would increase the accumulated postretirement benefit obligation by $5 million at December 31, 1996 and the aggregate of the service and interest cost components by $420 thousand for the year ended December 31, 1996. Comerica Incorporated 43 NOTE 14 - ------------------------------------------------------------------------------- INCOME TAXES The current and deferred components of income taxes were as follows: (in thousands) 1996 1995 1994 - -------------------------------------------------------------------------- Currently payable Federal $225,863 $192,899 $176,322 State, local and foreign 16,951 8,610 6,676 - -------------------------------------------------------------------------- 242,814 201,509 182,998 Deferred federal, state and local (13,769) 10,819 11,855 - -------------------------------------------------------------------------- Total $229,045 $212,328 $194,853 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- There were $4.8 million, $4.1 million and $1.2 million of income taxes provided on securities transactions in 1996, 1995 and 1994, respectively. The principal components of deferred tax (assets) liabilities at December 31 were as follows: (in thousands) 1996 1995 - --------------------------------------------------------------------------- Allowance for loan losses $(116,816) $(99,660) Lease financing transactions 105,805 96,735 Allowance for depreciation 18,972 11,017 Deferred loan origination fees and costs (11,408) (13,604) Investment securities available for sale (11,562) (2,242) Employee benefits (3,132) (8,514) Restructuring charge (15,178) -- Other temporary differences, net (35,825) (23,728) - --------------------------------------------------------------------------- Total $ (69,144) $(39,996) - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- The provision for income taxes differs from that computed by applying the federal statutory rate of 35 percent for the reasons in the following analysis: (in thousands) 1996 1995 1994 - ------------------------------------------------------------------------------- Tax based on federal statutory rate $226,172 $218,993 $203,733 Effect of tax-exempt interest income (8,842) (12,538) (16,153) Other 11,715 5,873 7,273 - ------------------------------------------------------------------------------- Provision for income taxes $229,045 $212,328 $194,853 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTE 15 - -------------------------------------------------------------------------------- RESTRUCTURING The Corporation recorded a restructuring charge of $90 million in 1996 in connection with a program to improve efficiency, revenue and customer service. The charge includes only identified direct and incremental costs associated with the program. The components of the restructuring charge are as follows: (in thousands) - ----------------------------------------------------- Termination benefits $48,000 Occupancy and equipment 21,000 Other 21,000 - ----------------------------------------------------- Total restructuring charge $90,000 - ----------------------------------------------------- - ----------------------------------------------------- Termination benefits primarily include severance payments. The occupancy and equipment portion consists of lease termination costs, space consolidation and estimated losses on the disposal of vacated properties. Other charges consist primarily of the project costs incurred during the assessment phase of the program. NOTE 16 - -------------------------------------------------------------------------------- TRANSACTIONS WITH RELATED PARTIES The bank subsidiaries have had, and expect to have in the future, transactions with the Corporation's directors and their affiliates. Such transactions were made in the ordinary course of business and included extensions of credit, all of which were made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other customers and did not, in management's opinion, involve more than normal risk of collectibility or present other unfavorable features. The aggregate amount of loans attributable to persons who were related parties at December 31, 1996, approximated $145 million at the beginning and $193 million at the end of 1996. During 1996, new loans to related parties aggregated $92 million and repayments totaled $44 million. 44 Comerica Incorporated NOTE 17 - -------------------------------------------------------------------------------- REGULATORY CAPITAL AND BANKING SUBSIDIARIES Banking regulations limit the transfer of assets in the form of dividends, loans or advances from the bank subsidiaries to the Corporation. Under the most restrictive of these regulations, the aggregate amount of dividends which can be paid to the Corporation without obtaining prior approval from bank regulatory agencies approximated $371 million at January 1, 1997, plus current year's earnings. Substantially all the assets of the Corporation's subsidiaries are restricted from transfer to the Corporation in the form of loans or advances. Dividends paid to the Corporation by its banking subsidiaries amounted to $322 million in 1996, $184 million in 1995, and $293 million in 1994. The Corporation and its banking subsidiaries are subject to various regulatory capital requirements administered by the federal banking agencies. Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios of Tier 1 and total capital (as defined in the regulations) to average and risk-weighted assets. At December 31, 1996, the Corporation and all of its banking subsidiaries exceeded the ratios required for an institution to be considered "well capitalized" (total capital ratio greater than 10 percent). The following is a summary of the capital position of the Corporation and its significant banking subsidiaries:
Comerica, Inc. Comerica Comerica Bank- Comerica Bank- (in thousands) (Consolidated) Bank Texas California - ------------------------------------------------------------------------------------------------------------- December 31,1996 Tier 1 capital $2,366,342 $1,930,830 $275,895 $282,108 Total capital 3,617,961 2,914,832 309,627 319,109 Tier 1 capital to average assets (minimum-3.0%) 7.07% 7.23% 8.42% 7.40% Tier 1 capital to risk-weighted assets (minimum-4.0%) 7.18 7.12 9.49 8.95 Total capital to risk-weighted assets (minimum-8.0%) 10.99 10.75 10.65 10.12 December 31,1995 Tier 1 capital $2,361,785 $1,799,266 $267,306 $170,038 Total capital 3,470,229 2,601,900 301,753 192,326 Tier 1 capital to average assets (minimum-3.0%) 6.87% 6.52% 7.73% 7.86% Tier 1 capital to risk-weighted assets (minimum-4.0%) 7.63 7.25 9.23 9.56 Total capital to risk-weighted assets (minimum-8.0%) 11.21 10.48 10.42 10.81 - ------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------
NOTE 18 - -------------------------------------------------------------------------------- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK In the normal course of business, the Corporation enters into various off- balance sheet transactions involving derivative financial instruments, foreign exchange contracts, and credit-related financial instruments to manage exposure to fluctuations in interest rate, foreign currency and other market risks and to meet the financing needs of customers. These financial instruments involve, to varying degrees, elements of credit and market risk in excess of the amount reflected in the consolidated balance sheets. Credit risk is the possible loss that may occur in the event of nonperformance by the counterparty to a financial instrument. The Corporation attempts to minimize credit risk arising from off-balance sheet financial instruments by evaluating the creditworthiness of each counterparty adhering to the same credit approval process used for traditional lending activities. Counterparty risk limits and monitoring procedures have also been established to facilitate the management of credit risk. Collateral is obtained, if deemed necessary, based on the results of management's credit evaluation. Collateral varies but may include cash, investment securities, accounts receivable, inventory, property, plant and equipment, or real estate. Derivative financial instruments and foreign exchange contracts are traded over an organized exchange or negotiated over-the-counter. Credit risk associated with exchange-traded contracts is typically assumed by the organized exchange. Over-the-counter contracts are tailored to meet the needs of the counterparties involved and, therefore, contain a greater degree of credit risk and liquidity risk than exchange-traded contracts which have standardized terms Comerica Incorporated 45 NOTE 18 (CONTINUED) - -------------------------------------------------------------------------------- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK and readily available price information. The Corporation reduces exposure to credit and liquidity risks from over-the-counter derivative and foreign exchange contracts by conducting such transactions with investment-grade domestic and foreign investment banks or commercial banks. Market risk is the potential loss that may result from movements in interest or foreign currency rates which cause an unfavorable change in the value of a financial instrument. The Corporation manages this risk by establishing counterparty and monetary exposure limits and monitoring compliance with those limits. Market risk arising from derivative and foreign exchange positions entered into on behalf of customers is relected in the consolidated financial statements and may be mitigated by entering into offsetting transactions. Market risk inherent in off-balance sheet derivative and foreign exchange contracts held or issued for risk management purposes is generally offset by changes in the value of rate sensitive on-balance sheet assets or liabilities. Termination of derivative contracts, other than by a counterparty, is unlikely as a particular instrument can be offset by entering into an opposite-effect derivative product to facilitate risk management strategies. DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN EXCHANGE CONTRACTS The Corporation, as an end-user, employs a variety of off-balance sheet financial instruments for risk management purposes. Activity related to these instruments is centered predominantly in the interest rate markets and mainly involves interest rate swaps. Various other types of instruments are also used to manage exposures to market risks, including interest rate caps and floors, foreign exchange forward contracts, and foreign exchange swap agreements. Refer to the section entitled "Risk Management Derivative Financial Instruments and Foreign Exchange Contracts" in Management's Discussion and Analysis on page 27 for further information about the Corporation's objectives for using such instruments. The following table presents the composition of off-balance sheet derivative financial instruments and foreign exchange contracts, excluding commitments, held or issued for risk management purposes at December 31, 1996 and 1995. Notional amounts, which represent the extent of involvement in the derivatives market, are generally used to determine the contractual cash flows required in accordance with the terms of the agreement. These amounts are typically not exchanged, significantly exceed amounts subject to credit or market risk, and are not reflected in the consolidated balance sheets. Notional/ Contract Unrealized Unrealized Fair (in millions) Amount Gains Losses Value - ------------------------------------------------------------------------------- December 31, 1996 Risk management Interest rate contracts: Swaps $8,015 $ 42 $(97) $(55) Options, caps and floors purchased 53 -- -- -- Caps written 152 -- -- -- - ------------------------------------------------------------------------------- Total interest rate contracts 8,220 42 (97) (55) Foreign exchange contracts: Spot and forwards 444 26 (4) 22 Swaps 38 -- (1) (1) - ------------------------------------------------------------------------------- Total foreign exchange contracts 482 26 (5) 21 - ------------------------------------------------------------------------------- Total risk management $8,702 $ 68 $(102) $(34) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- December 31, 1995 Risk management Interest rate contracts: Swaps $5,925 $ 88 $(20) $ 68 Options, caps and floors purchased 40 19 (21) (2) Caps written 154 -- -- -- - ------------------------------------------------------------------------------- Total interest rate contracts 6,119 107 (41) 66 Foreign exchange contracts: Spot and forwards 229 2 (1) 1 Swaps 50 8 -- 8 - ------------------------------------------------------------------------------- Total foreign exchange contracts 279 10 (1) 9 - ------------------------------------------------------------------------------- Total risk management $6,398 $117 $(42) $ 75 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Credit risk, which excludes the effects of any collateral or netting arrangements, is measured as the cost to replace, at current market rates, contracts in a profitable position. The amount of this exposure is represented by the gross unrealized gains on derivative and foreign exchange contracts. At December 31, 1996 and 1995, bilateral collateral agreements with counterparties covered 93 percent and 82 percent, respectively, of the notional amount of interest rate derivative contracts. These agreements reduce credit risk by providing for the exchange of marketable investment securities to secure amounts due on contracts in an unrealized gain position. In addition, at December 31, 1996 master netting arrangements had been established with all interest rate swap counterparties and certain foreign exchange counterparties. These arrangements effectively reduce credit risk by permitting settlement, on a net basis, of contracts entered into with the same counterparty. The Corporation has not experienced any credit losses associated with derivative or foreign exchange contracts. 46 Comerica Incorporated NOTE 18 (CONTINUED) - -------------------------------------------------------------------------------- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK On a limited scale, fee income is earned from entering into various transactions, principally foreign exchange contracts and interest rate caps, at the request of customers. The Corporation does not speculate in derivative financial instruments for the purpose of profiting in the short-term from favorable movements in market rates. Fair values for customer initiated and other derivative and foreign exchange contracts represent the net unrealized gains or losses on such contracts and are recorded in the consolidated balance sheets. Changes in fair value are recognized in the consolidated income statements. For the year ended December 31, 1996, unrealized gains and unrealized losses on customer initiated and other foreign exchange contracts averaged $10 million and $9 million, respectively. For the year ended December 31, 1995, unrealized gains and unrealized losses averaged $6 million and $5 million, respectively. These contracts also generated $7 million of noninterest income for both years ended December 31, 1996 and 1995. Average positive and negative fair values and income related to customer initiated and other interest rate contracts were not material for 1996 and 1995. The following table presents the composition of off-balance sheet derivative financial instruments and foreign exchange contracts held or issued in connection with customer initiated and other activities at December 31, 1996 and 1995. Notional/ Contract Unrealized Unrealized Fair (in millions) Amount Gains Losses Value - ------------------------------------------------------------------------------- December 31, 1996 Customer initiated and other interest rate contracts: Caps written $ 358 $ -- $ -- $ -- Floors purchased 2 -- -- -- Swaps 30 5 (5) -- - ------------------------------------------------------------------------------- Total interest rate contracts 390 5 (5) -- Foreign exchange contracts: Spot, forwards, futures and options 644 19 (18) 1 - ------------------------------------------------------------------------------- Total customer initiated and other $1,034 $ 24 $(23) $ 1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- December 31, 1995 Customer initiated and other interest rate contracts: Caps written $ 360 $ -- $ -- $ -- Swaps 3 -- -- -- - ------------------------------------------------------------------------------- Total interest rate contracts 363 -- -- -- Foreign exchange contracts: Spot, forwards, futures and options 320 5 (5) -- - ------------------------------------------------------------------------------- Total customer initiated and other $ 683 $ 5 $ (5) $ -- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Detailed discussions of each class of derivative financial instrument and foreign exchange contract held or issued by the Corporation for both risk management and customer initiated and other activities are provided below. INTEREST RATE SWAPS Interest rate swaps are agreements in which two parties periodically exchange fixed cash payments for variable payments based on a designated market rate or index (or variable payments based on two different rates or indices for basis swaps), applied to a specified notional amount until a stated maturity. In some cases, the payments may be based on the change in the value of an underlying security. The Corporation's swap agreements are structured such that variable payments are primarily based on one-month and three-month LIBOR. These instruments are principally negotiated over-the-counter and are subject to credit risk, market risk and liquidity risk. INTEREST RATE OPTIONS, INCLUDING CAPS AND FLOORS Option contracts grant the option holder the right to buy or sell an underlying financial instrument for a predetermined price before the contract expires. Interest rate caps and floors are option-based contracts which entitle the buyer to receive cash payments based on the difference between a designated reference rate and the strike price, applied to a notional amount. Written options, primarily caps, expose the Corporation to market risk but not credit risk. A fee is received at inception for assuming the risk of unfavorable changes in interest rates. Purchased options contain both credit and market risk; however, market risk is limited to the fee paid. Options are either exchange-traded or negotiated over-the-counter. All interest rate caps and floors are over-the- counter agreements. FOREIGN EXCHANGE CONTRACTS The Corporation uses foreign exchange rate swaps, including generic receive variable swaps and cross-currency swaps, for risk management purposes. Generic receive variable swaps involve payment, in a foreign currency, of the difference between a contractually fixed exchange rate and an average exchange rate determined at settlement, applied to a notional amount. Cross-currency swaps involve the exchange of both interest and principal amounts in two different currencies. Other foreign exchange contracts such as futures, forwards and options are primarily entered into as a service to customers and to offset market risk arising from such positions. Futures and forward contracts require the delivery or receipt of foreign currency at a specified date and exchange rate. Foreign currency options allow the holder to purchase or sell a foreign currency at a specified date and price. Foreign exchange futures are exchange- traded, while forwards, swaps and most options are negotiated over-the-counter. Foreign exchange contracts expose the Corporation to both market risk and credit risk. Comerica Incorporated 47 NOTE 18 (CONTINUED) - -------------------------------------------------------------------------------- FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK COMMITMENTS The Corporation also enters into commitments to purchase or sell earning assets for risk management purposes. These transactions, which are similar in nature to forward contracts, did not have a material impact on the consolidated financial statements for the years ended December 31, 1996 and 1995. Commitments to purchase investment securities are executed to secure certain rates on primarily U.S. government and agency securities, and totaled $50 million at year-end 1996. No such commitments were outstanding at year-end 1995. Commitments to purchase and sell municipal bond securities totaled $18 million and $30 million at December 31, 1996 and 1995, respectively. At December 31, 1996 and 1995, $23 million and $147 million, respectively, of commitments with settlement terms of up to 120 days had been initiated to reduce interest rate risk on fixed rate residential mortgage loans originated or held for sale. Outstanding commitments expose the Corporation to both credit risk and market risk. Available credit lines on fixed rate credit card and check product accounts, which have characteristics similar to option contracts, totaled $2.0 billion at December 31, 1996, the same as 1995. These commitments expose the Corporation to the risk of a reduction in net interest income as interest rates increase. Market risk exposure arising from fixed rate revolving credit commitments is very limited, however, since it is unlikely that a significant number of customers with these accounts will simultaneously borrow up to their maximum available credit lines. Additional information concerning unused commitments to extend credit is provided in the "Credit-Related Financial Instruments" section below. CREDIT-RELATED FINANCIAL INSTRUMENTS The Corporation issues off-balance sheet financial instruments in connection with commercial and consumer lending activities. Credit risk associated with these instruments is represented by the contractual amounts indicated in the following table: (in millions) 1996 1995 - ------------------------------------------------------------------------------- Unused commitments to extend credit $22,118 $18,622 Standby letters of credit and financial guarantees 2,684 1,925 Commercial letters of credit 335 167 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNUSED COMMITMENTS TO EXTEND CREDIT Commitments to extend credit are legally binding agreements to lend to a customer, provided there is no violation of any condition established in the contract. These commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments expire without being drawn upon, the total contractual amount of commitments does not necessarily represent future cash requirements of the Corporation. Total unused commitments to extend credit at December 31, 1996 and 1995, included $4 billion of variable and fixed rate revolving credit commitments. Other unused loan commitments, primarily variable rate, totaled $18 billion at December 31, 1996 and $15 billion at December 31, 1995. STANDBY AND COMMERCIAL LETTERS OF CREDIT AND FINANCIAL GUARANTEES Standby and commercial letters of credit and financial guarantees represent conditional obligations of the Corporation which guarantee the performance of a customer to a third party. Standby letters of credit and financial guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. Long-term standby letters of credit and financial guarantees, which generally extend for five or more years and expire in decreasing amounts through the year 2010, were $1,192 million and $758 million at December 31, 1996 and 1995, respectively. The remaining standby letters of credit and financial guarantees, which mature within one year, totaled $1,492 million and $1,167 million at December 31, 1996 and 1995, respectively. Commercial letters of credit are issued to finance foreign or domestic trade transactions. NOTE 19 - -------------------------------------------------------------------------------- CONTINGENT LIABILITIES The State of Michigan filed a lawsuit in District Court on July 24, 1990, against a subsidiary bank and certain former officers, directors and shareholders of a lending customer seeking recovery of amounts expended by the State (past and future) to clean up hazardous waste at two former plant sites, compensation for damages to natural resources, civil penalties for claimed violation of State Acts and attorney's fees. Plaintiff seeks cleanup costs and damages and has expressed the opinion that the claim will be well in excess of $30 million. In January 1993, the court granted the bank's motion for summary judgment and the Circuit Court of Appeals upheld the judgment on December 19, 1996. The Corporation and its subsidiaries are parties to other litigation and claims arising in the normal course of their activities. Although the amount of ultimate liability, if any, with respect to such matters cannot be determined, management, after consultation with legal counsel, believes that the litigation and claims, some of which are substantial, including the matter described above, will not have a materially adverse effect on the Corporation's consolidated financial position. 48 Comerica Incorporated NOTE 20 - -------------------------------------------------------------------------------- USAGE RESTRICTIONS Included in cash and due from banks are amounts required to be deposited with the Federal Reserve Bank. These reserve balances vary, depending on the level of customer deposits in the Corporation's subsidiary banks. At December 31, 1996 and 1995, the Federal Reserve balances were $534 million and $575 million, respectively. NOTE 21 - -------------------------------------------------------------------------------- ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS Disclosure of the estimated fair values of financial instruments, which differ from carrying values, often requires the use of estimates. In cases where quoted market values are not available, the Corporation uses present value techniques and other valuation methods to estimate the fair values of its financial instruments. These valuation methods require considerable judgment, and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used. Accordingly, the estimates provided herein do not necessarily indicate amounts which could be realized in a current exchange. Furthermore, as the Corporation normally intends to hold the majority of its financial instruments until maturity, it does not expect to realize many of the estimated amounts disclosed. The disclosures also do not include estimated fair value amounts for items which are not defined as financial instruments, but which have significant value. These include such items as core deposit intangibles, the future earnings potential of significant customer relationships, and the value of trust operations and other fee generating businesses. The Corporation does not believe that it would be practicable to estimate a representational fair value for these types of items. The Corporation used the following methods and assumptions: Cash and short-term investments: The carrying amount approximates the estimated fair value of these instruments, which consist of cash and due from banks, interest-bearing deposits with banks, and federal funds sold. Trading account securities: These securities are carried at quoted market value or the market value for comparable securities, which represents estimated fair value. Loans held for sale: The market value of these loans represents estimated fair value. The market value is determined on the basis of existing forward commitments or the market values of similar loans. Investment securities: The market value of investment securities, which is based on quoted market values or the market values for comparable securities, represents estimated fair value. Domestic commercial loans: These consist of commercial, real estate construction, commercial mortgage and equipment lease financing loans. The estimated fair value of the Corporation's variable rate commercial loans is represented by their carrying value, adjusted by an amount which estimates the change in fair value caused by changes in the credit quality of borrowers since the loans were originated. The estimated fair value of fixed rate commercial loans is calculated by discounting the contractual cash flows of the loans using year-end origination rates derived from the Treasury yield curve or other representative bases. The resulting amounts are adjusted to estimate the effect of changes in the credit quality of borrowers since the loans were originated. International loans: The estimated fair value of the Corporation's short-term international loans which consist of trade-related loans, or loans which have no cross-border risk due to the existence of domestic guarantors or liquid collateral, is represented by their carrying value, adjusted by an amount which estimates the effect on fair value of changes in the credit quality of borrowers or guarantors. The estimated fair value of long-term international loans is based on the quoted market values of these loans or on the market values of international loans with similar characteristics. Retail loans: This category consists of residential mortgage, consumer and auto lease financing loans. The estimated fair value of residential mortgage loans is based on discounted contractual cash flows or market values of similar loans sold in conjunction with securitized transactions. For consumer loans, the estimated fair values are calculated by discounting the contractual cash flows of the loans using rates representative of year-end origination rates. The resulting amounts are adjusted to estimate the effect of changes in the credit quality of borrowers since the loans were originated. Comerica Incorporated 49 NOTE 21 (CONTINUED) - -------------------------------------------------------------------------------- ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS Customers' liability on acceptances outstanding: The carrying amount approximates the estimated fair value. Loan servicing rights: The estimated fair value is computed using discounted cash flow analyses, using interest rates and prepayment speed assumptions currently quoted for comparable instruments. Deposit liabilities: The estimated fair value of demand deposits, consisting of checking, savings and certain money market deposit accounts, is represented by the amounts payable on demand. The carrying amount of deposits in foreign offices approximates their estimated fair value, while the estimated fair value of term deposits is calculated by discounting the scheduled cash flows using the year-end rates offered on these instruments. Short-term borrowings: The carrying amount of federal funds purchased, securities sold under agreements to repurchase, and other borrowings approximates estimated fair value. Acceptances outstanding: The carrying amount approximates the estimated fair value. Medium- and long-term debt: The estimated fair value of the Corporation's variable rate medium- and long-term debt is represented by their carrying value. The estimated fair value of the fixed rate medium- and long-term debt is based on quoted market values. If quoted market values are not available, the estimated fair value is based on the market values of debt with similar characteristics. Derivative financial instruments and foreign exchange contracts: The estimated fair value of interest rate swaps represents the amount the Corporation would receive or pay to terminate or otherwise settle the contracts at the balance sheet date, taking into consideration current unrealized gains and losses on open contracts. The estimated fair value of foreign exchange futures and forward contracts and commitments to purchase or sell financial instruments are based on quoted market prices. The estimated fair value of interest rate and foreign currency options (including interest rate caps and floors) are determined using option pricing models. Credit-related financial instruments: The estimated fair value of unused commitments to extend credit and standby and commercial letters of credit is represented by the estimated cost to terminate or otherwise settle the obligations with the counterparties. This amount is approximated by the fees currently charged to enter into similar arrangements, considering the remaining terms of the agreements and any changes in the credit quality of counterparties since the agreements were entered into. This estimate of fair value does not take into account the significant value of the customer relationships and the future earnings potential involved in such arrangements as the Corporation does not believe that it would be practicable to estimate a representational fair value for these items. The estimated fair values of the Corporation's financial instruments at December 31, 1996 and 1995 are as follows: 1996 1995 - ------------------------------------------------------------------------------- Carrying Estimated Carrying Estimated (in millions) Amount Fair Value Amount Fair Value - ------------------------------------------------------------------------------- ASSETS Cash and short-term investments $ 1,961 $1,961 $2,255 $2,255 Trading account securities 6 6 11 11 Loans held for sale 38 38 512 513 Investment securities available for sale 4,800 4,800 6,859 6,859 Commercial loans 13,520 13,445 12,041 11,957 International loans 1,706 1,704 1,385 1,383 Real estate construction loans 751 744 641 637 Commercial mortgage loans 3,446 3,413 3,254 3,233 Residential mortgage loans 1,744 1,771 2,221 2,261 Consumer loans 4,634 4,498 4,570 4,468 Lease financing 406 406 330 333 - ------------------------------------------------------------------------------- Total loans 26,207 25,981 24,442 24,272 Less allowance for loan losses (367) -- (341) -- - ------------------------------------------------------------------------------- Net loans 25,840 25,981 24,101 24,272 Customers' liability on acceptances outstanding 33 33 21 21 Loan servicing rights 23 25 16 17 Liabilities Demand deposits (noninterest-bearing) 6,713 6,713 5,580 5,580 Interest-bearing deposits 15,358 15,368 15,461 15,487 Deposits in foreign offices 296 296 2,126 2,126 - ------------------------------------------------------------------------------- Total deposits 22,367 22,377 23,167 23,193 Short-term borrowings 4,489 4,489 4,674 4,674 Acceptances outstanding 33 33 21 21 Medium- and long-term debt 4,242 4,268 4,644 4,724 Off-balance Sheet Financial Instruments Derivative financial instruments and foreign exchange contracts Risk management: Unrealized gains -- 68 -- 117 Unrealized losses -- (102) -- (42) Customer initiated and other: Unrealized gains 24 24 5 5 Unrealized losses (23) (23) (5) (5) Credit-related financial instruments -- (10) -- (9) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 50 Comerica Incorporated NOTE 22 - ------------------------------------------------------------------------------- PARENT COMPANY FINANCIAL STATEMENTS
BALANCE SHEETS--Comerica Incorporated December 31 (in thousands, except share data) 1996 1995 - --------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 263 $ 292 Time deposits with subsidiary bank 105,700 130,800 Investment securities available for sale 17,074 13,231 Investment in subsidiaries, principally banks 2,829,906 2,754,395 Premises and equipment 53,347 54,566 Other assets 31,345 49,873 - --------------------------------------------------------------------------------------------------------- Total assets $3,037,635 $3,003,157 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Long-term debt $ 298,210 $ 298,076 Other borrowed funds 842 1,101 Advances from nonbanking subsidiaries 236 3,759 Other liabilities 122,778 92,494 - --------------------------------------------------------------------------------------------------------- Total liabilities 422,066 395,430 Nonredeemable preferred stock--$50 stated value Authorized--5,000,000 shares Issued--5,000,000 shares in 1996 250,000 -- Common stock--$5 par value Authorized--250,000,000 shares Issued--107,297,345 shares in 1996 and 115,094,531 shares in 1995 536,487 575,473 Capital surplus -- 410,618 Unrealized gains and losses on investment securities available for sale (22,789) (4,141) Retained earnings 1,854,116 1,640,980 Deferred compensation (2,245) (1,974) Less cost of common stock in treasury--490,704 shares in 1995 -- (13,229) - --------------------------------------------------------------------------------------------------------- Total shareholders' equity 2,615,569 2,607,727 - --------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $3,037,635 $3,003,157 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- STATEMENTS OF INCOME--Comerica Incorporated Year Ended December 31 (in thousands) 1996 1995 1994 - --------------------------------------------------------------------------------------------------------- INCOME Income from subsidiaries Dividends from subsidiaries $322,000 $183,700 $293,390 Other interest income 3,372 7,113 8,127 Intercompany management fees 264,368 293,292 267,123 Other interest income 1,773 -- 171 Other noninterest income 5,278 2,680 779 - --------------------------------------------------------------------------------------------------------- Total income 596,791 486,785 569,590 EXPENSES Interest on long-term debt and other borrowed funds 26,328 19,948 15,076 Net interest rate swap income (2,794) (785) -- Interest on advances from subsidiaries 86 243 198 Salaries and employee benefits 123,271 127,261 123,924 Occupancy expense 22,483 22,778 18,570 Equipment expense 24,806 25,600 25,649 Restructuring charge 27,000 -- 2,363 Other noninterest expenses 63,224 76,319 68,185 - --------------------------------------------------------------------------------------------------------- Total expenses 284,404 271,364 253,965 - --------------------------------------------------------------------------------------------------------- Income before income taxes and equity in undistributed net income of subsidiaries 312,387 215,421 315,625 Income tax expense (credit) (1,931) 10,705 7,058 - --------------------------------------------------------------------------------------------------------- 314,318 204,716 308,567 Equity in undistributed net income of subsidiaries, principally banks 102,843 208,650 78,675 - --------------------------------------------------------------------------------------------------------- Net Income $417,161 $413,366 $387,242 - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
Comerica Incorporated 51 NOTE 22 (CONTINUED) - -------------------------------------------------------------------------------- PARENT COMPANY FINANCIAL STATEMENTS
STATEMENTS OF CASH FLOWS--Comerica Incorporated Year Ended December 31 (in thousands) 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------- Operating Activities Net income $ 417,161 $ 413,366 $ 387,242 Adjustments to reconcile net income to net cash provided by operating activities Undistributed earnings of subsidiaries, principally banks (102,843) (208,650) (78,675) Depreciation 20,595 20,447 19,784 Restructuring charge 27,000 (6,078) (12,380) Other, net 23,091 16,694 10,759 - ----------------------------------------------------------------------------------------------------------------------------- Total adjustments (32,157) (177,587) (60,512) - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 385,004 235,779 326,730 Investing Activities Proceeds from maturities of investment securities available for sale -- -- 15,157 Purchase of investment securities available for sale (4,820) (6,097) (22,818) Proceeds from maturity of investment securities held to maturity -- -- 7,507 Proceeds from sales of fixed assets and other real estate 603 3,439 1,638 Purchases of fixed assets (20,345) (16,413) (30,226) Net (increase) decrease in bank time deposits 25,100 (41,200) 7,600 Capital transactions with subsidiaries 131,871 (1,400) (97,647) - ----------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) investing activities 132,409 (61,671) (118,789) Financing Activities Net increase (decrease) in advances from subsidiaries (3,523) (4,064) 3,546 Proceeds from issuance of long-term debt -- 210,000 -- Repayments and purchases of long-term debt (259) (59,147) -- Proceeds from issuance of preferred stock 246,744 -- -- Proceeds from issuance of common stock 35,206 11,736 5,711 Purchase of common stock for treasury and retirement (622,196) (178,656) (76,280) Dividends paid (173,414) (155,726) (139,988) - ----------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (517,442) (175,857) (207,011) - ----------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash on deposit at bank subsidiary (29) (1,749) 930 Cash on deposit at bank subsidiary at beginning of year 292 2,041 1,111 - ----------------------------------------------------------------------------------------------------------------------------- Cash on deposit at bank subsidiary at end of year $ 263 $ 292 $ 2,041 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Interest paid $ 25,942 $ 15,623 $ 15,104 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Income taxes recovered $ 11,150 $ 3,275 $ 4,743 - ----------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------- Noncash investing and financing activities Stock issued for acquisitions $ 128,938 $ 77,100 $ 121,363 - ----------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------
52 Comerica Incorporated NOTE 23 - -------------------------------------------------------------------------------- SUMMARY OF QUARTERLY FINANCIAL INFORMATION The following quarterly information is unaudited. However, in the opinion of management, the information furnished reflects all adjustments which are necessary for the fair presentation of the results of operations for the periods presented. 1996 - -------------------------------------------------------------------------------- (in thousands, Fourth Third Second First except per share data) Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------- Interest income $632,737 $633,421 $642,192 $654,430 Interest expense 279,476 280,154 285,703 305,169 Net interest income 353,261 353,267 356,489 349,261 Provision for loan losses 32,000 28,500 25,000 28,500 Securities gains/(losses) 10,194 (276) 3,310 360 Noninterest income (excluding securities gains) 122,214 116,604 117,480 137,068 Restructuring charge 90,000 -- -- -- Noninterest expenses (excluding restructuring charge) 266,220 253,635 270,196 278,975 Net income 60,816 121,518 118,221 116,606 Net income per share $0.52 $1.04 $1.00 $0.98 1995 - -------------------------------------------------------------------------------- (in thousands, Fourth Third Second First except per share data) Quarter Quarter Quarter Quarter - -------------------------------------------------------------------------------- Interest income $670,632 $661,678 $659,992 $621,622 Interest expense 329,610 338,354 336,941 309,136 Net interest income 341,022 323,324 323,051 312,486 Provision for loan losses 33,000 26,000 15,500 12,000 Securities gains 10,960 516 71 201 Noninterest income (excluding securities gains) 129,605 123,873 118,361 115,138 Noninterest expenses 288,445 261,171 272,582 264,216 Net income 106,510 105,302 101,532 100,022 Net income per share $0.92 $0.91 $0.86 $0.85 - -------------------------------------------------------------------------------- Comerica Incorporated 53 REPORT OF MANAGEMENT Management is responsible for the accompanying financial statements and all other financial information in this Annual Report. The financial statements have been prepared in conformity with generally accepted accounting principles and include amounts which of necessity are based on management's best estimates and judgments and give due consideration to materiality. The other financial information herein is consistent with that in the financial statements. In meeting its responsibility for the reliability of the financial statements, management develops and maintains systems of internal accounting controls. These controls are designed to provide reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance with management's authorization. The concept of reasonable assurance is based on the recognition that the cost of internal accounting control systems should not exceed the related benefits. The systems of control are continually monitored by the internal auditors whose work is closely coordinated with and supplements in many instances the work of independent auditors. The financial statements have been audited by independent auditors Ernst & Young LLP. Their role is to render an independent professional opinion on management's financial statements based upon performance of procedures they deem appropriate under generally accepted auditing standards. The Corporation's Board of Directors oversees management's internal control and financial reporting responsibilities through its Audit Committee as well as various other committees. The Audit Committee, which consists of directors who are not officers or employees of the Corporation, meets periodically with management and internal and independent auditors to assure that they and the Committee are carrying out their responsibilities and to review auditing, internal control and financial reporting matters. Eugene A. Miller Chairman and Chief Executive Officer Ralph W. Babb Jr. Executive Vice President and Chief Financial Officer Arthur W. Hermann Senior Vice President and Controller REPORT OF INDEPENDENT AUDITORS Board of Directors, Comerica Incorporated We have audited the accompanying consolidated balance sheets of Comerica Incorporated and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Comerica Incorporated and subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Detroit, Michigan January 22, 1997 54 Comerica Incorporated HISTORICAL REVIEW-AVERAGE BALANCE SHEETS COMERICA INCORPORATED AND SUBSIDIARIES
Consolidated Financial Information (in millions) 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------ ASSETS Cash and due from banks $ 1,576 $ 1,500 $ 1,532 $ 1,490 $ 1,322 Interest-bearing deposits with banks 32 126 552 814 1,017 Federal funds sold and securities purchased under agreements to resell 95 124 116 135 399 Trading account securities 4 5 5 12 78 Loans held for sale 64 96 150 232 196 Investment securities 5,823 7,625 8,004 5,512 5,373 Commercial loans 12,686 11,302 9,598 8,473 7,753 International loans 1,541 1,257 1,107 897 710 Real estate construction loans 707 541 403 441 503 Commercial mortgage loans 3,483 3,157 2,916 2,629 2,368 Residential mortgage loans 1,960 2,450 2,175 1,979 2,297 Consumer loans 4,624 4,569 3,795 3,697 3,625 Lease financing 351 285 217 191 191 - ------------------------------------------------------------------------------------------------------ Total loans 25,352 23,561 20,211 18,307 17,447 Less allowance for loan losses (361) (340) (322) (311) (291) - ------------------------------------------------------------------------------------------------------ Net loans 24,991 23,221 19,889 17,996 17,156 Accrued income and other assets 1,610 1,432 1,203 1,045 969 - ------------------------------------------------------------------------------------------------------ Total assets $34,195 $34,129 $31,451 $27,236 $26,510 - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ Liabilities and Shareholders' Equity Demand deposits (noninterest-bearing) $ 5,589 $ 4,767 $ 4,700 $ 4,380 $ 3,796 Interest-bearing deposits 15,826 15,046 14,809 15,035 15,449 Deposits in foreign offices 843 1,842 1,816 1,306 1,668 - ------------------------------------------------------------------------------------------------------ Total deposits 22,258 21,655 21,325 20,721 20,913 Federal funds purchased and securities sold under agreements to repurchase 2,106 2,816 2,817 1,586 1,553 Other borrowed funds 1,999 2,313 2,002 1,432 1,308 Accrued expenses and other liabilities 400 324 286 274 327 Medium- and long-term debt 4,745 4,510 2,708 1,087 414 - ------------------------------------------------------------------------------------------------------ Total liabilities 31,508 31,618 29,138 25,100 24,515 Shareholders' equity 2,687 2,511 2,313 2,136 1,995 - ------------------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $34,195 $34,129 $31,451 $27,236 $26,510 - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
Comerica Incorporated 55 HISTORICAL REVIEW-STATEMENTS OF INCOME COMERICA INCORPORATED AND SUBSIDIARIES
Consolidated Financial Information (in millions, except per share data) 1996 1995 1994 1993 1992 - ----------------------------------------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 2,161 $ 2,091 $ 1,577 $ 1,388 $ 1,445 Interest on investment securities Taxable 372 474 446 307 356 Exempt from federal income tax 18 26 31 40 55 - ----------------------------------------------------------------------------------------------------------------- Total interest on investment securities 390 500 477 347 411 Trading account interest -- -- -- 1 3 Interest on federal funds sold and securities purchased under agreements to resell 5 7 5 4 15 Interest on time deposits with banks 2 8 22 28 45 Interest on loans held for sale 5 8 11 15 14 - ----------------------------------------------------------------------------------------------------------------- Total interest income 2,563 2,614 2,092 1,783 1,933 INTEREST EXPENSE Interest on deposits 686 721 543 530 707 Interest on short-term borrowings Federal funds purchased and securities sold under agreements to repurchase 112 166 121 47 53 Other borrowed funds 107 136 79 41 46 Interest on medium- and long-term debt 295 289 148 63 30 Net interest rate swap (income)/expense (49) 2 (29) (32) (24) - ----------------------------------------------------------------------------------------------------------------- Total interest expense 1,151 1,314 862 649 812 - ----------------------------------------------------------------------------------------------------------------- Net interest income 1,412 1,300 1,230 1,134 1,121 Provision for loan losses 114 87 56 69 111 - ----------------------------------------------------------------------------------------------------------------- Net interest income after provision for loan losses 1,298 1,213 1,174 1,065 1,010 NONINTEREST INCOME Income from fiduciary activities 133 125 122 122 114 Service charges on deposit accounts 140 130 124 120 113 Customhouse broker fees 11 36 41 40 38 Revolving credit fees 23 36 24 23 22 Securities gains 14 12 3 2 6 Other noninterest income 186 160 136 142 106 - ----------------------------------------------------------------------------------------------------------------- Total noninterest income 507 499 450 449 399 NONINTEREST EXPENSES Salaries and employee benefits 561 562 549 529 516 Net occupancy expense 99 99 99 96 86 Equipment expense 69 68 68 62 57 FDIC insurance expense 8 24 44 44 45 Telecommunications expense 29 29 27 21 17 Restructuring charge 90 -- 7 22 128 Other noninterest expenses 303 304 248 251 231 - ----------------------------------------------------------------------------------------------------------------- Total noninterest expenses 1,159 1,086 1,042 1,025 1,080 - ----------------------------------------------------------------------------------------------------------------- Income before income taxes 646 626 582 489 329 Provision for income taxes 229 213 195 148 89 - ----------------------------------------------------------------------------------------------------------------- Net Income $ 417 $ 413 $ 387 $ 341 $ 240 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Net income applicable to common stock $ 408 $ 413 $ 387 $ 341 $ 237 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Net income per common share $ 3.55 $ 3.54 $ 3.28 $ 2.85 $ 1.99 Average common and common equivalent shares (in thousands) 114,854 116,894 118,160 119,569 119,113 Cash dividends declared on common stock $ 170 $ 158 $ 145 $ 125 $ 108 Dividends per common share $ 1.52 $ 1.37 $ 1.24 $ 1.07 $ 0.96 - ----------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------
56 Comerica Incorporated HISTORICAL REVIEW-STATISTICAL DATA COMERICA INCORPORATED AND SUBSIDIARIES
Consolidated Financial Information 1996 1995 1994 1993 1992 - --------------------------------------------------------------------------------------------------------- AVERAGE RATES (FULLY TAXABLE EQUIVALENT BASIS) Interest-bearing deposits with banks 5.71% 6.39% 3.96% 3.41% 4.43% Federal funds sold and securities purchased under agreements to resell 5.35 5.97 4.06 2.99 3.67 Trading account securities 7.94 6.51 1.67 6.76 3.99 Loans held for sale 7.68 7.75 7.31 6.38 7.34 Investment securities 6.79 6.72 6.15 6.70 8.16 Commercial loans 8.21 8.75 7.38 6.56 6.98 International loans 6.64 7.06 5.58 5.04 5.70 Real estate construction loans 9.22 9.52 7.85 6.63 7.00 Commercial mortgage loans 9.29 9.40 8.52 8.10 8.54 Residential mortgage loans 7.83 7.80 7.46 8.57 9.53 Consumer loans 9.88 10.10 9.44 9.98 11.03 Lease financing 6.82 6.65 6.48 7.34 8.89 - --------------------------------------------------------------------------------------------------------- Total loans 8.54 8.90 7.84 7.62 8.34 - --------------------------------------------------------------------------------------------------------- Interest income as a percent of earning assets 8.20 8.35 7.28 7.25 8.04 Domestic deposits 4.04 4.05 3.14 3.24 4.13 Deposits in foreign offices 5.46 6.07 4.28 3.29 4.11 - --------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 4.11 4.27 3.26 3.24 4.13 Federal funds purchased and securities sold under agreements to repurchase 5.31 5.88 4.31 3.01 3.44 Other borrowed funds 5.36 5.87 3.92 2.88 3.52 Medium- and long-term debt 6.22 6.41 5.46 5.77 7.18 - --------------------------------------------------------------------------------------------------------- Interest expense as a percent of interest-bearing sources 4.51 4.95 3.57 3.18 3.98 - --------------------------------------------------------------------------------------------------------- Interest rate spread 3.69 3.40 3.71 4.07 4.06 Impact of net noninterest-bearing sources of funds 0.85 0.79 0.61 0.58 0.67 - --------------------------------------------------------------------------------------------------------- Net interest margin as a percent of earning assets 4.54 4.19 4.32 4.65 4.73 Return on Average Common Shareholders' Equity 15.98 16.46 16.74 15.94 12.10 Return on Average Assets 1.22 1.21 1.23 1.25 0.91 Efficiency Ratio 60.36 60.09 61.28 63.68 69.61 PER SHARE DATA Book value at year-end $22.05 $22.75 $20.46 $18.99 $17.38 Market value at year-end 52.38 40.00 24.38 26.63 32.00 Market value--high and low for year 59-36 43-24 31-24 35-25 33-26 OTHER DATA Number of banking offices 358 395 398 385 427 Number of employees (full-time equivalent) 11,079 12,876 13,077 12,670 13,322 - ---------------------------------------------------------------------------------------------------------
Comerica Incorporated 57 EX-21 13 AFFILIATE ORGANIZATION CHART. EXHIBIT 21 3/1/97 COMERICA INCORPORATED AFFILIATE ORGANIZATION CHART 1. Direct subsidiaries of Comerica Incorporated (a Delaware corporation) are shown on the left margin. 2. Subsidiaries of these direct subsidiaries are listed immediately following each direct subsidiary's name and are indented to the right. 3. Subsidiaries of these indirect subsidiaries are listed immediately following the indirect subsidiary's name and are further indented to the right. 4. The state or other jurisdiction of incorporation for each corporation or bank is listed in brackets after its name. 5. The parent company owns 100% of the outstanding capital stock of each subsidiary unless indicated otherwise. Comerica Bank [Michigan] Comerica Insurance Group, Inc. [Michigan] Comerica Insurance Services, Inc. [Michigan] Interstate Select Insurance Services, Inc. [California] Professional Life Underwriters Services, Inc. ("PLUS") [Michigan] Professional Life Underwriters Services Group Plus, Inc. [Michigan] Comerica Leasing Corporation, f/k/a/ CMCA Lease, Inc. [Michigan] Comerica Management Co., Inc. [Michigan] Comerica AutoLease, Inc. [Michigan] Comerica Mortgage Corporation [Michigan] DLKL Corporation [Delaware] 1 VRB Corp. [Michigan] CKN Corp., f/k/a John V. Carr & Son, Inc. [Michigan] CEF Corp., f/k/a Duty Drawback Service, Inc. [Michigan] Comerica International Corporation [United States] Comerica International (Canada), Limited [Ontario] Comerica International (Canada) Properties, Limited [Ontario] Comerica Trust Company of Bermuda, Ltd. [Bermuda] Comerica Trade Services Limited [Hong Kong] Comerica Merchant Services, Inc. [Delaware] NDPS Comerica Alliance L.L.C. {less than 50%}[Delaware LLC] Comerica California Incorporated [Delaware] Comerica Bank-California [California] Lytton Corporation [California] Metrocorp [California] Comerica Bank and Trust, F.S.B. [United States] Comerica Bank-Midwest, N.A. {99.5%} [United States] Comerica Bank-Ann Arbor, N.A. {97.4%} [United States] Comerica Investment Services, Inc. [Michigan] Comerica Securities, Inc. [Michigan] Wilson, Kemp & Associates, Inc. [Michigan] Woodbridge Capital Management, Inc. [Michigan] WAM Holdings, Inc. [Delaware] 2 Munder Capital Management {less than 50%} [Delaware Limited Partnership] Munder UK, LLC {99%} [Delaware LLC] Framlington Holdings Limited {less than 49%}[England] Comerica Capital Markets Corporation [Michigan] Comerica Networking, Inc. [Michigan] Integrion Financial Network, LLC {5.88%} [Delaware LLC] Comerica Texas Incorporated [Delaware] Comerica Bank-Texas [Texas] CMT Holdings, Inc. [Texas] Comerica Acceptance Corporation [Michigan] Comerica Assurance Ltd. [Bermuda] Comerica Community Development Corporation [Michigan] Comerica Corporate Services Incorporated [Michigan] Comerica Insurance Company [Arizona] Comerica Properties Corporation [Michigan] Waterfront Corporation [Michigan] M L, Inc. (Magic Line) {24.74%} [Michigan] FIRG (D/O Insurance) {5%} 3 EX-23 14 CONSENT OF INDEPENDENT AUDITORS Exhibit 23 [LETTERHEAD] Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statements listed below, of our reports on the consolidated financial statements of Comerica Incorporated and subsidiaries dated January 22, 1997, included in the Annual Report on Form 10-K for the year ended December 31, 1996: Registration Statement No. 33-42485 on Form S-8 dated August 29, 1991 Registration Statement No. 33-45500 on Form S-8 dated February 11, 1992 Registration Statement No. 33-49964 on Form S-8 dated July 23, 1992 Registration Statement No. 33-49966 on Form S-8 dated July 23, 1992 Registration Statement No. 33-53220 on Form S-8 dated October 13, 1992 Registration Statement No. 33-53222 on Form S-8 dated October 13, 1992 Registration Statement No. 33-58823 on Form S-8 dated April 26, 1995 Registration Statement No. 33-58837 on Form S-8 dated April 26, 1995 Registration Statement No. 33-58841 on Form S-8 dated April 26, 1995 Registration Statement No. 33-65457 on Form S-8 dated December 29, 1995 Registration Statement No. 33-65459 on Form S-8 dated December 29, 1995 Registration Statement No. 333-00839 on Form S-8 dated February 9, 1996 /s/ Ernst & Young LLP March 24, 1997 Ernst & Young LLP is a member of Ernst & Young International, Ltd. EX-27 15 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 1996 FORM 10K FOR COMERICA INCORPORATED AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1,901,760 27,329 32,200 6,009 4,838,103 0 0 26,206,708 367,165 34,206,071 22,367,173 4,489,191 492,369 4,241,769 536,487 0 250,000 1,829,082 34,206,071 2,160,981 389,774 12,025 2,562,780 685,539 1,150,502 1,412,278 114,000 13,588 1,159,026 646,206 417,161 0 0 417,161 3.55 3.54 4.54 103,294 51,748 8,009 0 341,344 125,912 41,363 367,165 255,409 2,062 109,694
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