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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED).
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995.
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 C
Preferred Stock, no par value
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
- - 7 1/4 percent Subordinated
Notes due in 2007
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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 14, 1996, the registrant's common stock, $5 par value, held by
nonaffiliates had an aggregate market value of $4,117,214,634 based on the
closing price on the New York Stock Exchange on that date of $38.125 per share
and 107,992,515 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 14, 1996, the registrant had outstanding 117,873,239 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, 1995.
2. Part III:
Items 10-13--Proxy Statement for the Annual Meeting
of Shareholders to be held May 17, 1996.
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, and
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was formed in 1973 to acquire the outstanding common stock of Comerica Bank
(formerly Comerica Bank-Detroit), a Michigan banking corporation ("Comerica
Bank"). As of December 31, 1995, Comerica owned directly or indirectly all the
outstanding common stock (except for directors' qualifying shares, where
applicable) of nine banking and forty-one non-banking subsidiaries. At December
31, 1995, Comerica had total assets of approximately $35.5 billion, total
deposits of approximately $23.2 billion, total loans (net of unearned income)
of approximately $24.4 billion, and shareholders' equity of approximately $2.6
billion. At December 31, 1995, Comerica was the largest bank holding company
headquartered in Michigan in terms of both total assets and total deposits.
BUSINESS STRATEGY
Comerica has strategically focused its operations on three major lines of
business: the Business Bank, the Individual Bank and the Investment Bank.
The Business Bank is comprised of middle market 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, corporate and 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, 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 are provided to local companies
with annual sales under $5 million, 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.
Comerica has strategically focused its lines of business to each of Comerica's
four primary geographic markets: the Midwest (Michigan and Illinois), Texas,
California and Florida. Comerica pursues all three lines of business in each of
these markets.
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ACQUISITIONS
On May 2, 1995, Comerica, Comerica Holdings Incorporated ("Holdings"), a
corporation chartered under the laws of California as a wholly-owned subsidiary
of Comerica, and Metrobank, a bank chartered under the laws of California,
entered into an Agreement and Plan of Reorganization and Merger providing for,
among other things, the merger of Holdings into Metrobank with Metrobank being
the surviving corporation, operating as a wholly-owned subsidiary of Comerica
under the charter and by-laws of Metrobank and with the name "Metrobank". The
acquisition of Metrobank was completed on January 16, 1996, and was accounted
for as a purchase. Shareholders of Metrobank received common stock of Comerica
valued at about $125 million in exchange for their interests in Metrobank.
Metrobank had assets of about $1.3 billion at December 31, 1995.
On June 28, 1995, Comerica, Comerica Texas Incorporated ("ComTex"), a Delaware
Corporation, Comerica Interim, N.A. ("Interim"), a non-operating national bank
formed as a wholly-owned subsidiary of ComTex, and QuestStar Bank, National
Association ("QuestStar"), a national banking association, entered into an
Agreement and Plan of Reorganization and Consolidation providing for, among
other things, the consolidation of QuestStar with Interim, with the
consolidated corporation operating as a wholly-owned subsidiary of ComTex
under the charter and title of QuestStar. The consolidation of Interim and
QuestStar was completed on October 27, 1995. Shareholders of QuestStar
received cash in the amount of about $25 million in exchange for their
ownership interest in the bank. QuestStar had assets of about $220 million at
December 31, 1995. On January 26, 1996, QuestStar was consolidated into
Comerica Bank-Texas.
On June 1, 1995, Comerica entered into an Agreement and Plan of Reorganization
with William Y. Campbell, William F. McKinley and Andre A. Augier for the
acquisition of all of the capital stock of W. Y. Campbell & Company
("Campbell"). Campbell is an investment banking company engaged in the
business of arranging so-called "mezzanine" financing to finance growth,
recapitalization plans, acquisitions and friendly leveraged buyouts, for
commercial customers. The acquisition was completed on June 26, 1995, and the
stock of Campbell was sold by Comerica to its wholly-owned subsidiary, Comerica
Bank-Ann Arbor, N.A.
On September 1, 1995, acting through its principal Michigan banking subsidiary,
Comerica acquired Professional Life Underwriters Services, Inc. ("PLUS"). PLUS
is a life insurance brokerage firm that distributes insurance products to
licensed agents located in about 28 states including Michigan.
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DIVESTITURES
On March 18, 1996, Comerica entered into an agreement with ABN-AMRO North
America, Inc. ("ABN-AMRO") for the sale of the stock of Comerica Bank-Illinois
("CBI"), a bank chartered under the laws of the State of Illinois, via a merger
with a subsidiary of ABN-AMRO. This transaction is expected to close during
the third quarter of 1996. The assets to be sold to ABN-AMRO represent
approximately 4% of Comerica's total assets. The agreement with ABN-AMRO calls
for Comerica to receive about $190,000,000 million in exchange for its
ownership interest in CBI.
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, with certain exceptions, 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 and from engaging in activities other
than those of banking or of managing or controlling banks, other than
subsidiary companies and 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 California State Banking
Department by the State of California. Comerica Bank & Trust, FSB is chartered
under federal law and subject to supervision and regulation by the Office of
Thrift Supervision. Comerica Bank-Illinois is chartered by the State of
Illinois and is regulated by the State of Illinois Commissioner of Banks and
Trust Companies. Comerica Bank, Comerica Bank-Illinois and Comerica
Bank-Midwest, N.A. are members of the Federal Reserve System. State member
banks are also regulated by the local Federal Reserve Bank and state non-member
banks are also regulated by the Federal Deposit Insurance Corporation. The
deposits of all the banks are insured by the Bank Insurance Fund (the "BIF") of
the Federal Deposit Insurance Corporation 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").
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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, certain provisions of the Riegle/Neal Interstate Banking
and Branching Efficiency Act of 1994 (the "Interstate Act") became effective
and, for practical purposes, permit nationwide banking. The Interstate Act
provides that adequately capitalized and adequately managed bank holding
companies may acquire banks in any state, even in those jurisdictions that
previously barred acquisitions by out-of-state institutions, subject to deposit
concentration limits. The deposit concentration limits provide that regulatory
approval by the Federal Reserve Board may not be granted for a proposed
interstate acquisition if after the acquisition, the acquiror on a consolidated
basis would control more than 10% of the total deposits nationwide or would
control more than 30% of deposits in the state where the acquiring institution
is located. The deposit concentration state limit does not apply for initial
acquisitions in a state and in every case, may be waived by the state
regulatory authority. Interstate acquisitions are subject to compliance with
the Community Reinvestment Act ("CRA"). States are permitted to impose age
requirements not to exceed five years on target banks for interstate
acquisitions. States are not allowed to opt-out of interstate banking.
Branching between states may be accomplished either by merging separate banks
located in different states into one legal entity, or by establishing de novo
branches in another state. Consolidation of banks is not permitted until June
1, 1997, provided that the state has not passed legislation "opting-out" of
interstate branching. If a state opts-out prior to June 1, 1997, then banks
located in that state may not participate in interstate branching. If a state
"opts-in" before June 1, 1997, then banks located in that state may participate
in consolidations on an interstate basis from the date the opt-in becomes
effective. Interstate branching is also subject to a 30% statewide deposit
concentration limit on a consolidated basis, and a 10% nationwide deposit
concentration limit. The laws of the host state regarding community
reinvestment, fair lending, consumer protection (including usury limits) and
establishment of branches shall apply to the interstate branches.
De novo branching by an out-of-state bank is not permitted unless the host
state expressly permits de novo branching by banks from out-of-state. The
establishment of an initial de novo branch in a state is subject to the same
conditions as apply to initial acquisition of a bank in the host state other
than the deposit concentration limits.
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Effective one year after enactment, the Interstate Act permits bank
subsidiaries of a bank holding company to act as agents for affiliated
depository institutions in receiving deposits, renewing time deposits, closing
loans, servicing loans and receiving payments on loans and other obligations.
A bank acting as agent for an affiliate shall not be considered a branch of the
affiliate. Any agency relationship between affiliates must be on terms that
are consistent with safe and sound banking practices. The authority for an
agency relationship for receiving deposits includes the taking of deposits for
an existing account but is not meant to include the opening or origination of
new deposit accounts. Subject to certain conditions, insured saving
associations which were affiliated with banks as of June 1, 1994 may act as
agents for such banks. An affiliate bank or saving association may not conduct
any activity as an agent which such institution is prohibited from conducting
as principal.
If an interstate bank decides to close a branch located in a low- or
moderate-income area, it must comply with additional branch closing notice
requirements. The appropriate regulatory agency is authorized to consult with
community organizations to explore options to maintain banking services in the
affected community where the branch is to be closed.
To ensure that interstate branching does not result in taking deposits without
regard to a community's credit needs, the regulatory agencies are directed to
implement regulations prohibiting interstate branches from being used as
"deposit production offices." The regulations to implement its provisions are
due by June 1, 1997. The regulations must include a provision to the effect
that if loans made by an interstate branch are less than fifty percent of the
average of all depository institutions in the state, then the regulator must
review the loan portfolio of the branch. If the regulator determines that the
branch is not meeting the credit needs of the community, it has the authority
to close the branch and to prohibit the bank from opening new branches in that
state.
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. When the
interstate branching provisions become effective in June 1997, Comerica will
have the opportunity to consolidate its affiliate banks to create one legal
entity with branches in more than one state should management decide to do so,
or to establish branches in different states, subject to any state opt-out
provisions. Of Comerica's primary markets, as of December 31, 1995 Texas was
the only state to have opted out of the interstate branching provisions. The
agency authority permitting Comerica affiliate banks to act as agents for each
other in accepting deposits or servicing loans should make it more convenient
for customers of one Comerica bank to transact their banking business at a
Comerica affiliate in another state provided that operations are in place to
facilitate these out of state transactions.
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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 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 net profits (as defined
and interpreted by regulation) for that year plus (ii) the retained net profits
(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.
Under the foregoing dividend restrictions, at January 1, 1996 Comerica's
subsidiary banks, without obtaining governmental approvals, could declare
aggregate dividends of approximately $279 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, 1996 through the date of declaration. Dividends paid to Comerica by
its subsidiary banks amounted to $184 million in 1995 and $293 million in 1994.
FIRREA
Recent 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 Federal Deposit Insurance Corporation
(the "FDIC") can be held 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
generally 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
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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,"
"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, 1995.
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
growth limitations and are required to submit a 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 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 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 and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator.
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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 or a receiver exist
or are likely to exist, (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, a maximum ratio of classified assets to capital, minimum earnings
sufficient to absorb losses, a minimum ratio of market value to book value for
publicly traded shares and other standards as they deem appropriate. Such
standards were issued jointly by the agencies on August 9, 1995, in guideline
form. Comerica does not believe that the standards will have a material effect
on its operations.
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 depositary 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, 1996 maintains the nine categories but
provides for major reductions in the assessment rates for institutions insured
by the BIF. These reductions occur 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. As a result of these reduced
rates, highly-rated banks (including Comerica's banking subsidiaries) will
experience significant reductions in deposit insurance costs.
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Legislation that is now pending in the United States Congress would impose a
substantial one-time assessment on deposits that are insured by the SAIF. The
purpose of this assessment would be to raise the SAIF to its designated reserve
ratio, thereby permitting SAIF assessment rates to be reduced in the same
manner as BIF rates, and avoiding the competitive disadvantage that might
otherwise accrue to SAIF-insured institutions. If this proposal becomes law,
the deposits held by Comerica's federal savings bank subsidiary in Florida, as
well as SAIF-insured deposits that were acquired from insolvent savings
associations by Comerica's subsidiary banks, would be subject to this special
assessment.
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 1995, 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, 1995, Comerica and its subsidiaries had 11,370 full-time and
2,202 part-time employees.
ITEM 2. PROPERTIES
The executive offices of the Corporation are located in the Comerica Tower at
Detroit Center in Detroit, Michigan. 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, 1995, Comerica Bank operated 314 offices within the State of
Michigan, of which 249 were owned and 65 were leased. Five other banking
affiliates operate 196 offices in California, Florida, Illinois and Texas. The
affiliates own 105 of their offices and lease 91 offices. One banking affiliate
also operates from leased space in Toledo, Ohio.
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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
32 of the Corporation's Annual Report to Shareholders for the year ended
December 31, 1995, 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 1995.
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 January 31, 1996, there were
approximately 17,457 holders of the Corporation's common stock.
Quarterly cash dividends were declared during 1995 and 1994 totaling $1.37 and
$1.24 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 1995 and 1994. All of the prices are adjusted for the
January 4, 1993 two-for-one stock split.
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<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Quarter High Low Dividend Dividend*
Per Share Yield
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
- ---------------------------------------------------------------------------
1994
Fourth $28.250 $24.125 $.32 4.9%
Third 31.250 27.750 .32 4.3
Second 30.875 25.125 .32 4.6
First 28.250 25.250 .28 4.2
- ---------------------------------------------------------------------------
</TABLE>
* 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 14 of the Corporation's Annual
Report to Shareholders for the year ended December 31, 1995, 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 15 through 32 of the
Corporation's Annual Report to Shareholders for the year ended December 31,
1995, which are hereby incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The response to this item is included on pages 16, 17, 19, 23, 24, 25, 26 and
33 through 55 of the Corporation's Annual Report to Shareholders for the year
ended December 31, 1995, which are hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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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 17, 1996, 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 17, 1996, 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 caption "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 17, 1996, 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 "Election of
Directors" of the Corporation's definitive Proxy Statement relating to the
Annual Meeting of Shareholders to be held on May 17, 1996, which are hereby
incorporated by reference.
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 1995 Annual Report to Shareholders or in the 1996 Proxy Statement used in
connection with the 1996 annual meeting of shareholders to be held on May 17,
1996.
The following cross-reference index shows the page location in the 1995 Annual
Report or the section of the 1996 Proxy Statement
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of only that information which is to be incorporated by reference into this
Form 10-K.
All other sections of the 1995 Annual Report or the 1996 Proxy Statement are
not required in this Form 10-K and should not be considered a part thereof.
<TABLE>
<CAPTION>
Page Number of 1995
Annual Report or Section
of 1996 Proxy Statement
PART I
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ITEM I. Business ............................................................................... Included herein
ITEM 2. Properties ............................................................................. Included herein
ITEM 3. Legal Proceedings ................................................................................... 32
ITEM 4. Submission of Matters to a Vote of Security Holders -- no matters were
voted upon by security holders in the fourth quarter of 1995.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Security Holder Matters .............. Included herein
ITEM 6. Selected Financial Data ............................................................................. 14
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ............... 15
ITEM 8. Financial Statements and Supplementary Data:
Comerica Incorporated and Subsidiaries
Consolidated Balance Sheets ..................................................................... 33
Consolidated Statements of Income ............................................................... 34
Consolidated Statements of Changes in Shareholders' Equity ...................................... 35
Consolidated Statements of Cash Flows ........................................................... 36
Notes to Consolidated Financial Statements .......................................................... 37
Report of Independent Auditors ...................................................................... 52
Statistical Disclosure by Bank Holding Companies:
Analysis of Net Interest Income - FTE ........................................................... 16
Rate-Volume Analysis - FTE ...................................................................... 17
Analysis of Investment Securities Portfolio - FTE ............................................... 26
Analysis of Investment Securities and Loans ..................................................... 23
Allocation of the Allowance for Loan Losses ..................................................... 24
Loan Maturities and Interest Rate Sensitivity ................................................... 24
Summary of Nonperforming Assets and Past Due Loans .............................................. 26
Cross-Border Outstandings ....................................................................... 23
Analysis of the Allowance for Loan Losses ....................................................... 19
Maturity Distribution of Domestic Certificates of Deposit of $100,000 and Over .................. 25
Financial Ratios and Other Data ................................................................. 53
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
ITEM 12. Security Ownership of Certain Beneficial Owners and Management .................. Security Ownership of
certain Beneficial
Owners and
Security Ownership
of Management
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<TABLE>
<CAPTION>
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ITEM 13. Certain Relationships and Related Transactions ......................................... Transactions of
Directors and
Executive
Officers with the
Corporation;
Election of
Directors
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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 16.
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 Long-term
Incentive Plan***
10.2 Summary of Comerica Incorporated
Annual Incentive Compensation Plan***
10.3 Comerica Incorporated Plan for
Deferring the Payment of Directors Fees***
10.4 Comerica Incorporated Nonqualified
Retirement Income Guaranty Plan****
10.5 Comerica Incorporated's Directors
Retirement Plan*****
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*****
18
<PAGE> 19
10.9 Form of Management Continuation Agreement between
registrant and listed officers, October 1987***
10.10 Form of Director Indemnification Agreement between
Comerica Incorporated and its directors, dated
April 1987******
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*******
10.16 Form of Comerica Incorporated Executive Officer
Continuity Agreement between registrant and listed
officers, January 1, 1996
10.17 Form of Comerica Incorporated Senior Officer Severance
Plan between registrant and listed officers, January
1, 1996
11 Statement regarding Computation of Per Share
Earnings********
13 Required portions of Registrant's 1995 Annual Report
to Shareholders
21 Subsidiaries of the Corporation
23.1 Consent of Ernst & Young, L.L.P.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Corporation during the last
quarter of 1995.
** Incorporated by reference from registrant's Annual
Report on Form 10-K for the year ended December 31,
1987 -- Commission File Number 0-7269.
*** Incorporated by reference from Registrant's Annual
Report on Form 10-K for the year ended December 31,
1991 -- Commission File Number 0-7269.
**** Incorporated by reference from Registrant's Form 8-A
Registration Statement dated January 26, 1988 --
Commission File Number 0-7269.
19
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***** 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 Registrant's Annual
Report on Form 10-K for the year ended December 31,
1989 -- Commission File Number 0-7269.
******* Incorporated by reference from Registrant's Annual
Report on Form 10-K for the year ended December 31,
1993--Commission File Number 0-7269.
******** Incorporated by reference from note 11 on page 42 of
Registrant's Annual Report to Shareholders attached
hereto as Exhibit 13.
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 15th day of March, 1996.
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)
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<PAGE> 21
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 15, 1996.
BY DIRECTORS
- -----------------------------------
E. Paul Casey
- -----------------------------------
James F. Cordes
- -----------------------------------
J. Philip DiNapoli
- -----------------------------------
Max M. Fisher
- -----------------------------------
John D. Lewis
- -----------------------------------
Patricia Shontz Longe, Ph.D.
- -----------------------------------
Wayne B. Lyon
- -----------------------------------
Gerald V. MacDonald
- -----------------------------------
Eugene A. Miller
- -----------------------------------
Michael T. Monahan
21
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- -----------------------------------
Alfred A. Piergallini
- -----------------------------------
Alan E. Schwartz
- -----------------------------------
Howard F. Sims
22
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EXHIBIT INDEX
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ------------ ----
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 Long-term Incentive Plan***
10.2 Summary of Comerica Incorporated Annual Incentive
Compensation Plan***
10.3 Comerica Incorporated Plan for Deferring the Payment
of Directors Fees***
10.4 Comerica Incorporated Nonqualified Retirement Income
Guaranty Plan****
10.5 Comerica Incorporated's Directors Retirement Plan*****
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*****
10.9 Form of Management Continuation Agreement between
registrant and listed officers, October 1987***
10.10 Form of Director Indemnification Agreement between
Comerica Incorporated and its directors, dated
April 1987******
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*******
10.16 Form of Comerica Incorporated Executive Officer Continuity
Agreement between registrant and listed officers, January 1,
1996
10.17 Form of Comerica Incorporated Senior Officer Severance Plan
between registrant and listed officers, January 1, 1996.
11 Statement regarding Computation of Per Share Earnings********
13 Required portions of Registrant's 1995 Annual Report to
Shareholders
21 Subsidiaries of the Corporation
23.1 Consent of Ernst & Young, L.L.P.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Corporation during the last
quarter of 1995.
** Incorporated by reference from registrant's Annual Report on Form
10-K for the year ended December 31, 1987 -- Commission File Number
0-7269.
*** Incorporated by reference from Registrant's Annual Report on Form
10-K for the year ended December 31, 1991 -- Commission File Number
0-7269.
**** Incorporated by reference from Registrant's Form 8-A Registration
Statement dated January 26, 1988 -- Commission File Number 0-7269.
***** 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 Registrant's Annual Report on Form
10-K for the year ended December 31, 1989 -- Commission File Number
0-7269.
******* Incorporated by reference from Registrant's Annual Report on Form
10-K for the year ended December 31, 1993 -- Commission File Number
0-7269.
********Incorporated by reference from note 11 on page 42 of Registrant's
Annual Report to Shareholders attached hereto as Exhibit 13.
<PAGE> 1
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
<PAGE> 2
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 of the Corporation,
and, if so convertible or exchangeable, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or
exchange.
2
<PAGE> 3
(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 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,
3
<PAGE> 4
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
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
4
<PAGE> 5
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 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.
5
<PAGE> 6
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 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
6
<PAGE> 7
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 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
<PAGE> 8
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 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
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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 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.
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.
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.
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EXHIBIT 3.2
As Amended on
July 21, 1995
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.
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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.
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
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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 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
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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 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
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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, by resolution
passed by a majority of the whole Board, 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 of any meeting of
the Committee. In the absence or disqualification of a member of a Committee,
the member or members thereof 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 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 amending the Certificate of Incorporation, adopting an agreement
of merger or
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consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the Bylaws of the Corporation; and, unless the
resolution of the Board of Directors or the Certificate of Incorporation
expressly so provide, no such Committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
(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 of the directors of
Manufacturers National Corporation ("MNC"). 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 of 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.
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
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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.
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
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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, 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
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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.
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
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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.
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.
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<PAGE> 11
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 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 possession or under his
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.
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<PAGE> 12
SECTION 12. INDEMNIFICATION AND INSURANCE.
(a) 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, the spouse
of the director or officer shall be indemnified to the same extent as
hereinabove provided. 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) 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 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 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
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
12
<PAGE> 13
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, the spouse
of the director or officer shall be indemnified to the same extent as
hereinabove provided.
(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 (1) by the Board of Directors by a majority vote of a quorum consisting
of Directors who were not parties to the action, suit or proceeding, or (2) if
such a quorum is not obtainable, or even if obtainable a quorum of
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 (3) 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 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
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<PAGE> 14
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.
(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.
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.
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<PAGE> 15
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 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
15
<PAGE> 16
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.
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 (1) out of surplus as
defined in and computed in accordance with the provisions of the governing
statute, or (2) 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.
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<PAGE> 17
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.
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.
<PAGE> 1
[COMERICA INCORORATED LETTERHEAD]
EXHIBIT 10.12
December 21, 1995
Michael T. Monahan, President
Comerica Incorporated
One Detroit Center
500 Woodward Avenue
Detroit, MI 48236
Re: Severance Agreement ("Agreement")
Dear Mike:
This letter will evidence our agreement with the inclusion of the following
additions to the understandings set forth in Agreement between you and Comerica
Incorporated ("Company") of even date:
1. If you voluntarily terminate your employment with the Company prior
to February 1, 1999, your entitlement to the Stock Award and any
non-vested stock options will be determined by the specific
agreements relating to those two benefits, notwithstanding Section
III.1 of the Agreement.
2. On the other hand, if (i) your employment by the Company is
involuntarily terminated prior to February 1, 1999; (ii) your
employment terminates for any reason on February 1, 1999; or (iii)
your employment terminates for any reason specified in paragraphs
III.2 or III.3 of the Agreement prior to February 1, 1999, your
unvested stock options shall vest as of the date of termination and
any restrictions applicable to your Stock Award shall lapse as of
such date, notwithstanding any inconsistent provision in any separate
agreement.
To evidence your agreement with the foregoing additional provisions to the
Agreement, please sign and date a copy of this letter in the place indicated
below and return such copy to the undersigned.
Very truly yours,
COMERICA INCORPORATED
By: Richard A. Collister
--------------------------
Richard A. Collister
Michael T. Monahan
- -----------------------
Michael T. Monahan
December 21, 1995
<PAGE> 2
SEVERANCE AGREEMENT
Comerica Incorporated, a Delaware corporation (together with its
subsidiaries and affiliates being hereinafter referred to as the "Company"),
and Michael T. Monahan ("Executive") hereby agree to the provisions set forth
below.
I.
Purpose
To induce Executive to continue in the employment of the Company, this
Severance Agreement ("Agreement") sets forth the understanding of the Company
and the Executive with respect to certain payments and benefits the Executive
(or his Beneficiaries, as hereinafter defined) will become entitled to receive
upon the subsequent termination of his employment with the Company on or prior
to February 1, 1999.
II
Definitions
Whenever used in this Agreement and capitalized, the following terms
shall have the meaning set forth below:
1. "Severance Payment" means a cash payment in the amount of $3,000,000.
2. "Insurance Coverage" means continuation of long-term disability coverage,
accident insurance coverage, group-term life
<PAGE> 3
insurance coverage and coverage under the whole life insurance policies in
effect at June 30, 1995, for three years subsequent to the date of Executive's
termination of employment; provided, however, that such coverage or any portion
thereof will be discontinued if Executive receives substantially similar
coverage from a subsequent employer during such three-year period.
3. "Medical Benefits" means medical benefits for Executive and/or
his spouse for the remainder of their respective lives which are substantially
similar to those provided to Executive and his spouse at the date of execution
of this Agreement; provided, however, that payment of such medical benefits
shall be coordinated with any medical benefits Executive may become entitled
to receive from a subsequent employer, Medicare, Social Security or any similar
source applying generally accepted procedures for the coordination of benefits.
4. "Stock Award" means the 15,000 shares of Common Stock of the
Company awarded to Executive, subject to restrictions, on July 16, 1993.
5. "Outstanding Options" means any non-vested employee stock
options held by Executive at the date of termination of his employment by the
Company.
III.
Circumstances Under which Executive
Will Receive Payments and/or Benefits
1. If Executive voluntarily retires from the Company before
February 1, 1999, he shall receive (i) the Severance Payment, (ii)
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<PAGE> 4
Insurance Coverages and (iii) Medical Benefits.
2. If Executive dies before February 1, 1999, (i) his
beneficiary(ies) shall receive the Severance Payment and insurance Coverages
(except disability insurance), (ii) his Outstanding Options shall vest at the
date of his death, (iii) any remaining restrictions applicable to the Stock
Award shall lapse as of his date of death, and (iv) his surviving spouse shall
continue to receive Medical Benefits.
3. If Executive becomes disabled before February 1, 1999, he
shall receive (i) the Severance Payment, (ii) applicable Insurance Coverages,
and (iii), together with his spouse, Medical Benefits. Further, his
Outstanding Options shall vest as of the date of termination of his employment,
and any remaining restrictions applicable to the Stock Award shall lapse as of
the date of termination of his employment by the Company.
4. If Executive's employment is involuntarily terminated before
February 1, 1999, or if his employment terminates for any reason on February 1,
1999, he shall receive (i) the Severance Payment, (ii) applicable Insurance
Coverages, and (iii), together with his spouse, Medical Benefits. Further, his
Outstanding Options shall vest as of the date of termination of his employment,
and any remaining restrictions applicable to the Stock Award shall lapse as of
the date of termination of his employment by the Company.
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<PAGE> 5
IV.
Designation of Beneficiary
Executive may designate a beneficiary(ies) to receive the amounts
payable and the other benefits bestowed hereunder upon his death.
V.
Remuneration for Services Prior to February, 1999
The receipt of the Severance Payment and all or a portion of the other
benefits specified in paragraph I of this Agreement by Executive, or by the
other party(ies) entitled thereto, shall be exclusive of, and unrelated to, the
remuneration (including salary, bonuses, options and stock awards) to which
Executive may be entitled in consideration for the continuation of his services
as an officer or employee of the Company between the date of this Agreement and
February 1, 1999.
VI.
Miscellaneous
Both the Company and Executive acknowledge and agree that (i) this
Agreement is being made after the "change of control" of Manufacturers National
Corporation contemplated by the July 3, 1990 Manufacturers National Corporation
Key Employees Retention Plan occurred; and (ii) Executive shall not be entitled
to receive severance benefits under any change of control agreement under the
terms of which the Company bestows, or is required to bestow, benefits on or
prior to February 1, 1999, upon officers or key employees of the Company.
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<PAGE> 6
VII.
Successor(s) and Assign(s)
This Agreement will inure to the benefit of Executive, and to the benefit
of his spouse, personal representative(s), beneficiary(ies), legatee(s),
successor(s), administrator(s), trustee(s) and/or other fiduciary(ies)
(collectively, "Beneficiaries"), and will be binding upon the Company and upon
its successor(s) and assign(s), irrespective of whether such successor(s) or
assign(s) come into existence by reason or as a result of (i) a merger(s) or
consolidation(s) in which the Company is not the survivor, (ii) a sale(s) of all
or substantially all of the assets of the Company, or (iii) any other
restructuring(s) of the Company.
VIII.
Term of Agreement
This Agreement will become effective on the date it is executed and
delivered by the Company and the Executive, and shall remain in effect through
February 1, 1999. No amounts will be payable nor benefits provided hereunder
if Executive's employment with the Company continues after February 1, 1999.
IX.
Release
Executive or his Beneficiaries agree to release the Company from liability
with respect to any and all matters relating to his
-5-
<PAGE> 7
employment with the Company upon satisfaction of its obligations hereunder.
X.
Arbitration
If any dispute shall arise with respect to the performance of the
Company's obligations hereunder, such dispute shall be resolved by an
arbitration conducted in Detroit, Michigan, in accordance with the rules of the
American Arbitration Association. The selection of the arbitrator(s), the
hearing and the rendition of the arbitrator(s)' decision shall be completed
within thirty (30) days after written demand for the arbitration is delivered
by the Executive to the Company. All of the expenses, including the fees of
the arbitrator(s) and the fees of the attorneys retained by each of the parties,
shall be borne by the Company. The decision of the arbitrator(s) shall be
conclusive and binding upon the Company and the Executive. A judgment may be
entered upon the arbitration award, if any, in the Circuit Court for the County
of Wayne, State of Michigan, in accordance with applicable Michigan statutes.
XI.
Execution
The Company and the Executive hereto have entered into this Agreement
this 21st day of December, 1995.
-6-
<PAGE> 8
COMERICA INCORPORATED
By: Richard A. Collister
------------------------------
Its: Executive Vice President
-----------------------------
Michael T. Monahan
---------------------------------
MICHAEL T. MONAHAN
-7-
<PAGE> 1
EXHIBIT 10.13
PRIVILEGED AND CONFIDENTIAL
COMERICA INCORPORATED
June 1, 1995
Ralph W. Babb, Jr.
Executive Vice President
Comerica Incorporated
Comerica Tower at One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Re: Management Continuation Agreement
Dear Mr. Babb:
Comerica Incorporated (the "Corporation") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the
Corporation (the "Board") recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control of the Corporation
may exist and that such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Corporation and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and
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<PAGE> 2
dedication of members of the Corporation's management, including yourself, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control of the
Corporation, although no such change is now contemplated.
In order to induce you to remain in the employ of the Corporation and in
consideration of your agreement set forth in Subsection 2(ii) hereof, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement ("Agreement") in the event your employment with the
Corporation is terminated subsequent to a "change in control of the
Corporation" (as defined in Section 2 hereof) under the circumstances
described below.
1. Term of Agreement. This Agreement shall commence on the date hereof and
shall continue in effect through May 31, 1998; provided, however, that if,
during the term of this Agreement, the Corporation adopts a form of management
continuation agreement for its executive vice presidents which provides
benefits at least as favorable as you receive under this Agreement, you consent
to the cancellation of this Agreement and substitution of such other agreement
in place of this Agreement as soon as is administratively feasible following
the Corporation's adoption of such other
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agreement.
2. Change in Control. (i) No benefits shall be payable hereunder unless
there shall have been a change in control of the Corporation, as set forth
below. For purposes of this Agreement, a "change in control of the
Corporation" shall be deemed to have occurred if (A) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 26% or more of the
combined voting power of the Corporation's then outstanding securities; or (B)
during any period of two consecutive years (not including any period prior to
the execution of this Agreement), individuals who at the beginning of such
period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the
Corporation to effect a transaction described in clauses (A) or (C) of this
Subsection) whose election by the Board or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds
(2/3rds) of the directors then still in office who
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either were directors at the beginning of the period or whose election or
nomination for election was previously so approved ("Continuing Members"),
cease for any reason to constitute a majority thereof; or (C) the shareholders
of the Corporation approve a merger or consolidation of the Corporation with
any other corporation, other than a merger or consolidation which would result
in the voting securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 75% of the
combined voting power of the voting securities of the Corporation or such
surviving entity outstanding immediately after such merger or consolidation, or
the shareholders of the Corporation approve a plan of complete liquidation of
the Corporation or an agreement for the sale or disposition by the Corporation
of all or substantially all the Corporation's assets.
(ii) For purposes of this Agreement, a "potential change in control of
the Corporation" shall be deemed to have occurred if (A) the Corporation enters
into an agreement, the consummation of which would result in the occurrence of
a change in control of the Corporation, (B) any person (including the
Corporation) publicly announces an intention to take or to consider
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taking actions which if consummated would constitute a change in
control of the Corporation; (C) any person, other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Corporation,
who is or becomes the beneficial owner, directly or indirectly, of securities
of the Corporation representing 10% or more of the combined voting power of the
Corporation's then outstanding securities, increases his beneficial ownership
of such securities by 5% or more over the percentage so owned by such person on
the date hereof; or (D) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a potential change in control of the Corporation
has occurred. You agree that, subject to the terms and conditions of this
Agreement, in the event of a potential change in control of the Corporation,
you will remain in the employ of the Corporation until the earliest of (i) a
date which is six months from the occurrence of such potential change in
control of the Corporation, (ii) the termination by you of your employment by
reason of Disability or Retirement (at your normal retirement age), as defined
in Subsection 3(i), or (iii) the occurrence of a change in control of the
corporation, provided, however, that (a) if there is a change in control of the
Corporation and your employment is thereafter terminated before the earlier of
the dates described in clause (i)
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or (ii), the terms of this Agreement shall determine the benefits payable to
you and (b) if there is no change in control of the Corporation, on the date
described in clause (i) you shall not automatically be entitled to any benefits
pursuant to this Agreement and your rights and obligations shall be as they
were before the potential change in control of the Corporation, provided
further that following a potential change in control of the Corporation, if (x)
there is one or more additional potential changes in control of the Corporation
before the date described in clause (i), such potential change in control shall
be disregarded for purposes of this Agreement or (y) there is a potential
change in control of the Corporation after the date described in clause (i),
the terms of this Section 2(ii) shall become operative.
3. Termination Following Change in Control. If any of the events
described in Subsection 2(i) hereof constituting a change in control of the
Corporation shall have occurred, you shall be entitled to the benefits
provided in Subsection 4(iii) hereof upon the subsequent termination of your
employment during the term of this Agreement unless such termination is (A)
because of your death, Disability or Retirement, (B) by the Corporation for
Cause, or (C) by you other than for Good Reason.
(i) Disability; Retirement. If, as a result of your
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incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after written Notice of
Termination (as defined in Subsection (iv) below) is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability". Termination by the Corporation or you of your
employment based on "Retirement" shall mean termination in accordance with the
Corporation's retirement policy (including any early retirement policy adopted
before a change in control of the Corporation) generally applicable to its
salaried employees or in accordance with any retirement arrangement established
with your consent with respect to you.
(ii) Cause. Termination by the Corporation of your employment for "Cause"
shall mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after the issuance of a Notice of
Termination, by you for Good Reason as defined in Subsections 3(iv) and 3(iii),
respectively) after a written demand for substantial performance is delivered
to you by the Board, which demand
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specifically identifies the manner in which the Board believes that you have
not substantially performed your duties, or (B) the willful engaging by you in
conduct which is demonstrably and materially injurious to the Corporation,
monetarily or otherwise. For purposes of this Subsection, no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be done,
by you not in good faith and without reasonable belief that your action or
omission was in the best interest of the Corporation. Notwithstanding the
foregoing, you shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4ths) of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection and specifying the
particulars thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the
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occurrence after a change in control of the Corporation of any of the following
circumstances unless, in the case of paragraphs (A), (E), (F), (G) or (H), such
circumstances are fully corrected prior to the Date of Termination specified in
the Notice of Termination, as defined in Subsections 3(v) and 3(iv),
respectively, given in respect thereof:
(A) the assignment to you of any duties inconsistent with your status as
Executive Vice President of the Corporation or a substantial adverse alteration
in the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Corporation;
(B) a reduction by the Corporation in your annual base salary or salary
range as in effect on the date hereof or as the same may be increased from time
to time except for across-the-board salary reductions similarly affecting all
senior executives of the Corporation and all senior executives of any person in
control of the Corporation;
(C) the Corporation's requiring you to be based anywhere other than the
Corporation's principal executive offices except for required travel on the
Corporation's business to an extent substantially consistent with your present
business travel obligations, or the relocation of the Corporation's principal
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executive offices more than 60 miles from their location on the date hereof;
(D) the failure by the Corporation, without your consent, to pay to you
any portion of your current compensation, including a cash bonus substantially
consistent with your average cash bonus for the three years immediately prior
to the Date of Termination and including an amount of stock options designed to
produce a value to you substantially consistent with the average value stock
options received by you for the three years immediately prior to the Date of
Termination were designed to produce, except pursuant to an across-the-board
compensation deferral similarly affecting all senior executives of the
Corporation and all senior executives of any person in control of the
Corporation, or to pay to you any portion of an installment of deferred
compensation under any deferred compensation program of the Corporation,
within seven (7) days of the date such compensation is due;
(E) the failure by the Corporation to continue in effect any compensation
plan in which you participate immediately prior to the change in control of the
Corporation which is material to your total compensation, including but not
limited to the Annual Management Incentive Plan, Comerica Incorporated
Long-Term Incentive Plan, Comerica Incorporated Preferred Savings Plan and
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Comerica Incorporated Retirement Plan, or any substitute plans adopted prior to
the change in control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or the
failure by the Corporation to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of your participation
relative to other participants, as existed at the time of the change in
control;
(F) the failure by the Corporation to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Corporation's pension, life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the change in
control of the Corporation, the taking of any action by the Corporation which
would directly or indirectly materially reduce any of such benefits or deprive
you of any material fringe benefit enjoyed by you at the time of the change in
control of the Corporation, or the failure by the Corporation to provide you
with the number of paid vacation days to which you are entitled on the basis of
years of service with the Corporation in accordance with the Corporation's
normal vacation policy in effect at the time of the change in control of the
Corporation;
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<PAGE> 12
(G) the failure of the Corporation to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as contemplated in
Section 5 hereof; or
(H) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Subsection
(iv) below (and, if applicable, the requirements of Subsection (ii) above); for
purposes of this Agreement, no such purported termination shall be effective.
Your right to terminate your employment pursuant to this Subsection shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder. For
purposes of this Subsection 3(iii), any good faith determination of "Good
Reason" made by you shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, your resignation for any reason during the 30-day
period immediately following the first anniversary of a "change in control of
the Corporation" shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
(iv) Notice of Termination. Any purported termination of your employment
by the Corporation or by you shall be communicated by written Notice of
Termination to the other party hereto in
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accordance with Section 6 hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a 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 your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
your employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30) day period), and
(B) if your employment is terminated for any reason other than Disability,
thirty (30) days after Notice of Termination is given.
4. Compensation Upon Termination or During Disability. Following a
change in control of the Corporation, as defined by Subsection 2(i), upon
termination of your employment or during a period of disability you shall be
entitled to the following benefits:
(i) During any period that you fail to perform your full-time duties
with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive your base salary at the rate in effect
at the commencement of any such
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period, together with all compensation payable to you under any disability plan
of the Corporation until this Agreement is terminated pursuant to Section 3(i)
hereof. Thereafter, or in the event your employment shall be terminated by the
Corporation or by you for Retirement, or by reason of your death, your benefits
shall be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the Corporation for Cause
or by you other than for Good Reason, Disability, death or Retirement, the
Corporation shall pay you your full base salary, and continue to provide you
with life, disability, accident, health insurance and other benefits, through
the Date of Termination at the rate in effect at the time Notice of Termination
is given, plus all other amounts to which you are entitled under any
compensation plan of the Corporation at the time such payments are due, and the
Corporation shall have no further obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be terminated (a) by
the Corporation other than for Cause, Retirement, death or Disability or (b) by
you for Good Reason, then you shall be entitled to the benefits provided below:
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(A) the Corporation shall pay you your full base salary, and continue to
provide you with life, disability, accident, health insurance and all other
benefits (including, without limitation, the continued use of a Corporation
automobile, and reimbursement of club dues, if applicable), through the Date of
Termination at the rate in effect immediately prior to the occurrence of the
circumstance giving rise to the Notice of Termination, plus all other amounts
to which you are entitled under any compensation plan of the Corporation, at
the time such payments are due, except as otherwise provided below;
(B) in lieu of any further salary payments to you for periods subsequent
to the Date of Termination, the Corporation shall pay as severance pay to you a
lump sum severance payment (together with the payments provided in paragraphs C
and D, below, the "Severance Payments") equal to three times your annual base
salary (including any amounts contributed by you to the Comerica Incorporated
Preferred Savings Plan or any successor plan and any amounts otherwise
deferred) in effect immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination given in respect thereof;
(C) notwithstanding any terms or provisions of the Annual Management
Incentive Plan or the Comerica Incorporated Long-Term
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Incentive Plan or any successor plan, the Corporation shall pay to you a lump
sum amount equal to the sum of (x) three times the highest bonus you received
under the Annual Management Incentive Plan (whether or not deferred) plus any
incentive compensation which you have earned (whether or not yet determined)
pursuant to the terms or provisions of the Comerica Incorporated Long-Term
Incentive Plan or successor plan for a fiscal year or other measuring period
preceding the Date of Termination which has not yet been paid, and (y) a pro
rata portion to the Date of Termination of the aggregate value of all
contingent incentive compensation awards to you for all uncompleted periods
under each of the Annual Management Incentive Plan and the Comerica
Incorporated Long-Term Incentive Plan or successor plan calculated by assuming
that the Target Performance Threshold was achieved.
(D) in lieu of shares of common stock of the Corporation ("Corporation
Shares") issuable upon exercise of outstanding options (other than options
qualifying as incentive stock options ("ISOs") under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), which ISOs were granted
on or before the date hereof (such options (other than existing ISOs) will
hereinafter be referred to as "Options"), if any, granted to you under the
Comerica Incorporated Long-Term Incentive Plan (which
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Options shall be canceled upon the making of the payment referred to below),
you shall receive an amount in cash equal to the product of (i) the excess of,
in the case of ISOs granted after the date hereof, the closing price of
Corporation Shares as reported on the New York Stock Exchange as reported on
the Composite Tape on or nearest the Date of Termination, and, in the case of
all other Options, the higher of such closing price or the highest per share
price for Corporation Shares actually paid in connection with any change in
control of the Corporation, over the per share exercise price of each Option
held by you (whether or not then fully exercisable), times (ii) the number of
Corporation Shares covered by each such option;
(E) The payments provided for in paragraphs (B), (C) and (D), above, shall
be made not later than the fifth day following the Date of Termination.
(iv) If your employment shall be terminated (A) by the Corporation other
than for Cause, Retirement or Disability or (B) by you for Good Reason, then
for a thirty-six (36) month period after such termination, the Corporation
shall arrange to provide you with life, disability, accident, and health
insurance benefits substantially similar to those which you are receiving
immediately prior to the circumstance giving rise to the Notice of Termination.
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Benefits otherwise receivable by you pursuant to this Subsection 4(iv) shall be
reduced to the extent comparable benefits are actually received by you during
the thirty-six (36) month period following your termination, and any such
benefits actually received by you shall be reported to the Corporation. The
Corporation may satisfy its obligation under this Subsection by providing a
lump sum payment to you or your family equal to the present value of its
obligation to provide the welfare benefits referred to above. The
determination of the present value of such benefits shall be made utilizing
reasonable actuarial assumptions.
(v) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by you to the Corporation, or otherwise except as specifically
provided in this Section 4.
(vi) In addition to all other amounts payable to you under this
Section 4, you shall be entitled to receive all benefits payable to you
under the Comerica Incorporated Retirement Plan (the "Retirement Plan") and the
Benefit Equalization Plan For Employees
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of Comerica Incorporated (the "Benefit Equalization Plan"). In addition, you
shall be entitled to receive an additional pension calculated pursuant to the
formula in the Retirement Plan, utilizing your actual benefit accrual service
under the Retirement Plan (a) plus three additional years of benefit accrual
service, (b) together with your service while you were employed at Mercantile
Bancorporation, Inc. ("Mercantile") treating such service at Mercantile as
though it were benefit accrual service under the Retirement Plan, the amount so
calculated to be reduced by the aggregate pensions you receive under the
defined benefit pension plans, whether qualified or non-qualified, maintained
by Mercantile in which you participate, and by the aggregate pensions you
receive under the Retirement Plan and the Benefit Equalization Plan without
including your service while employed at Mercantile. The additional pension
shall be paid from the Benefit Equalization Plan.
(vii) The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which you may reasonably incur as
a result of any contest (regardless of the outcome thereof) by the Company,
yourself or others relating to the validity or enforceability of, or liability
under, any provision of this Agreement or any guarantee of performance thereof
(including
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as a result of any contest by you about the amount of any payment pursuant to
this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of Code.
5. Successors; Binding Agreement. (i) The Corporation will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Corporation to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle you to compensation from
the Corporation in the same amount and on the same terms as you would be
entitled to hereunder if you terminate your employment for Good Reason
following a change in control of the Corporation, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Corporation" shall mean the Corporation as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to perform this
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Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purpose 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 on the first page of this Agreement, provided
that all notice to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation, 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
receipt.
7. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or
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discharge is agreed to in writing and signed by you and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Michigan. All
reassurances to sections of the Exchange Act or the Code shall be deemed also
to refer to any successor provisions to such sections. Any payments provided
for hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Corporation under Section 4
shall survive the expiration of the term of this Agreement.
8. Validity. The invalidity or unenforceability or any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
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9. 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.
10. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in Detroit,
Michigan in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
11. Gross-Up Payment. (i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Corporation to or for your benefit (whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 11 (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or you incur any interest or penalties with respect
to such excise tax (such excise tax, together with any such interest and
penalties, being hereinafter collectively referred to as the "Excise Tax"),
then you shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after your payment of all taxes and any
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benefits that result from your deductibility of such taxes (including, in each
case, any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, you
retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(ii) Subject to the provisions of Section 11(iii), all determinations
required to be made under this Section 11, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Ernst & Young LLP or such other nationally recognized certified public
accounting firm as you may designate (the "Accounting Firm") which shall
provide detailed supporting calculations both to you and the Corporation within
15 business days of the receipt of notice from you that there has been a
Payment, or such earlier time as is requested by the Corporation. In the event
that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the change in control of the Corporation,
you shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
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then be referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up
Payment, as determined pursuant to this Section 11, shall be paid by the
Corporation to you within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
you and the Corporation. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Corporation should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Corporation exhausts its remedies pursuant to Section 11(iii) and,
thereafter, you are required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Corporation to
or for your benefit.
(iii) You shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would require the Corporation to
pay the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after you are informed in
writing of such
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claim and shall apprise the Corporation of the nature of such claim and the
date on which such claim is requested to be paid. You shall not pay such claim
prior to the expiration of the 30-day period following the date on which you
give such notice to the Corporation (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Corporation notifies you in writing prior to the expiration of such period that
it desires to contest such claim, you shall:
(A) give the Corporation any information it reasonably requests relating
to such claim,
(B) take such action in connection with contesting such claim as the
Corporation shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Corporation,
(C) cooperate with the Corporation in good faith in order effectively to
contest such claim, and
(D) permit the Corporation to participate in any proceedings relating to
such claim;
provided, however, that the Corporation shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall
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indemnify and hold you harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 11(iii), the Corporation
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at it sole option, either direct you to pay the tax claimed
and sue for a refund or contest the claim in any permissible manner, and you
agree to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Corporation shall determine; provided, however, that if the
Corporation directs you to pay such claim and sue for a refund, the Corporation
shall advance the amount of such payment to you, on an interest-free basis and
shall indemnify and hold you harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of
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taxes for your taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Corporation's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and you shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(iv) If, after your receipt of an amount advanced by the Corporation
pursuant to Section 11(i) or 11(iii), you become entitled to receive any refund
with respect to such claim, then you shall (subject to the Corporation's
complying with the requirements of Section 11(iii) promptly pay to the
Corporation the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after your receipt of an
amount advanced by the Corporation pursuant to Section 11(iii), a determination
is made that you shall not be entitled to any refund with respect to such claim
and the Corporation does not notify you in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
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12. No Prohibited Payments. Notwithstanding anything in this Agreement to
the contrary, the Corporation shall not make any payment to you which,
according to the opinion of the Corporation's outside counsel, would violate
Section 2523(k) of the Comprehensive Thrift and Bank Fraud Prosecution and
Taxpayer Recovery Act of 1990 (codified at 12 U.S.C. 1828(k)), or any rules or
regulations promulgated thereunder.
13. You shall hold in a fiduciary capacity for the benefit of the
Corporation all secret or confidential information, knowledge or data relating
to the Corporation or any of its affiliated companies, and their respective
businesses, which you shall have obtained during your employment by the
Corporation or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by you or your representatives in
violation of this Agreement). After termination of your employment with the
Corporation, you shall not, without the prior written consent of the
Corporation 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 Corporation and those designated by it. In no event shall an asserted
violation of the provisions of this Section 13 constitute a basis for deferring
or withholding any amounts otherwise payable to you under this Agreement.
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If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
Comerica Incorporated
By:
-----------------------------------
Richard A. Collister
Executive Vice President
Agreed to this 1st day of
June, 1995.
- ----------------------------------
Ralph W. Babb, Jr.
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EXHIBIT 10.14
EMPLOYMENT AGREEMENT
AGREEMENT by and between Comerica Incorporated, a Delaware corporation
(the "Company") and Ralph W. Babb, Jr. (the "Executive"), is made and shall be
effective as of the 1st day of June, 1995.
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Section 1. Definitions. The following words and phrases, wherever
capitalized, shall have the following meanings respectively:
A. "Annual Base Salary" means the annual base salary described in Section
3.B(ii) hereof, including any increases thereof.
B. "Annual Bonus" means the annual bonus described in Section 3.B.(iii)
hereof.
C. "Benefit Equalization Plan" means the Benefit Equalization Plan For
Employees of Comerica Incorporated, as amended.
D. "Board" means the Board of Directors of the Company.
E. "Cause" means
(i) An act of serious misconduct which includes, but is not limited to,
embezzlement, fraud, dishonesty, breach of fiduciary duty to Comerica or
violation of the Code of Ethics;
(ii) The failure of the Executive to perform substantially and loyally the
Executive's duties with the Company or one of its affiliates (other than any
such failure resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the
Executive by the Chief Executive Officer of the Company which specifically
identifies the manner in which the Chief Executive Officer believes that the
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Executive has not substantially and loyally performed his duties; or
(iii) Conviction of a crime involving dishonesty, breach of trust or
money laundering, or conviction of any other crime which impairs his ability to
perform his duties, or
(iv) Willfully engaging in illegal conduct.
F. "Change in Control of the Company" means a "change in control of the
Corporation" as that term is defined in the Management Continuation Agreement.
G. "Code" means the Internal Revenue Code of 1986, as amended.
H. "Common Stock" means shares of $5.00 par value common stock of the
Company.
I. "Company" means Comerica Incorporated, a Delaware corporation.
J. "Date of Termination" means:
(i) if the Executive's employment is terminated by the Company for
Cause, (or other than for cause), the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be;
(ii) if the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date
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of death of the Executive or the Disability Effective Date, as the case may be;
and
(iii) if the Executive's employment is terminated by the Executive, the
Date of Termination shall be his last day of employment.
K. "Disability" or "Disabled": The Executive shall be considered to be
"Disabled" or suffering from "Disability" when the conditions set forth in the
Comerica Long-Term Disability Policy applicable to Executive Vice Presidents
are satisfied, the provisions of which policy being incorporated herein by
reference.
L. "Employment Period" means the period commencing on the date this
Agreement becomes effective and ending on the third anniversary of such date.
M. "Good Reason" means:
(i) The assignment to the Executive of any duties inconsistent with the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
3.A. of this Agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not
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taken in bad faith which is remedied by the Company promptly after receipt of
notice thereof from the Executive;
(ii) Any failure by the Company to comply with any of the provisions of
Section 3.B. of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith which is remedied by the Company
promptly after receipt of notice thereof from the Executive;
(iii) The assignment by the Company of the Executive to any office or
location other than that to which the Executive was assigned as of the
effective date of this Agreement other than in connection with a change of the
Company's headquarters if the Executive is relocated to such headquarters;
(iv) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy Section 8.C.
of this Agreement.
N. "Initial Option Grant" means the nonqualified stock option to acquire
15,000 shares of the Company's Common Stock described in Section 3.B.(iv)
hereof to be granted to Executive under the Long-Term Incentive Plan.
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O. "Initial Restricted Stock Award" means the 10,000 shares of the
Company's Common Stock described in Section 3.B.(iv) hereof to be awarded to
the Executive under the Long-Term Incentive Plan.
P. "Long-Term Incentive Plan" means the Comerica Incorporated Long-Term
Incentive Plan, as amended.
Q. "Management Continuation Agreement" means an agreement entered into by
the Executive and the Company of even date herewith which provides benefits to
the Executive upon a "change in control of the Corporation", the provisions of
which agreement are incorporated herein by reference.
R. "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated, and (iii) if the Date of Termination is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than thirty days after the giving of such notice).
S. "Retirement Plan" means the Comerica Incorporated Retirement Plan, as
amended.
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T. "Supplemental Pension" means a monthly pension calculated pursuant to
the formula in the Retirement Plan, utilizing the Executive's benefit accrual
service under the Retirement Plan and his service while he was employed at
Mercantile Bancorporation, Inc. ("Mercantile") as though it were benefit
accrual service under the Retirement Plan, the amount so calculated to be
reduced by the aggregate pensions the Executive receives under the defined
benefit pension plans, whether qualified or non-qualified, maintained by
Mercantile in which the Executive participates, and by the aggregate pensions
he receives under the Retirement Plan and the Benefit Equalization Plan without
including his service while employed at Mercantile. The Supplemental Pension
shall be paid from the Benefit Equalization Plan.
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Section 2. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
for the Employment Period.
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Section 3. Terms of Employment.
A. Position and Duties.
(i) Commencing on the effective date hereof and for the remainder of
the Employment Period, the Executive shall be Executive Vice President and Chief
Financial Officer of the Company and shall have such duties, responsibilities
and authority as shall be consistent therewith. The Executive shall also be
Executive Vice President and Chief Financial Officer of Comerica Bank.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full attention and time during normal business hours to the
business and affairs of the Company and to use his reasonable best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period, it shall not be a violation of this Agreement for the
Executive to (a) serve on corporate, civic or charitable boards or committees,
(b) deliver lectures, fulfill speaking engagements or teach at educational
institutions, and (c) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
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this Agreement and further provided that they conform to Comerica's Code of
Ethics.
B. Compensation.
(i) Signing Bonus. Within 10 days after the effective date hereof, the
Company shall pay the Executive a $100,000 signing bonus in cash.
(ii) Annual Base Salary. Commencing on the effective date hereof and
during the Employment Period, the Executive shall receive an Annual Base Salary
of $300,000 to be paid in accordance with established Company payroll policy.
The Annual Base Salary shall be reviewed in accordance with established Company
policy for Executive Vice Presidents. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation which is or may be owed
to the Executive under this Agreement. Annual Base Salary shall not be reduced
after any increase thereof.
(iii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be eligible for an Annual Bonus pursuant to the Company's annual
management incentive compensation program; provided, however that Executive
shall receive an Annual Bonus of at least $200,000 for the period commencing on
the effective date of this Agreement and ending on December 31, 1995.
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(iv) Stock Options and Restricted Stock. The Executive shall receive on
the effective date hereof an Initial Option Grant under the Long-Term Incentive
Plan to acquire 15,000 shares of Common Stock, with a purchase price equal to
the fair market value of such shares on the effective date hereof. Options
under the Initial Option Grant shall vest and become exercisable with respect
to 3,750 shares after one year, with respect to an additional 3,750 shares
after two years, with respect to an additional 3,750 shares after three years,
and as to the final 3,750 shares, after four years. Executive shall also be
considered for additional option grants under the Long-Term Incentive Plan on
an annual basis during the Employment Period. Notwithstanding the foregoing,
all options held by the Executive, including those comprising the Initial
Option Grant, shall vest and become immediately exercisable (a) upon a Change
in Control of the Company, (b) upon a termination of Executive's employment by
the Company in the absence of a showing of Cause or (c) upon a resignation by
the Executive for Good Reason.
The Executive shall receive on the effective date hereof an Initial
Restricted Stock Award of 10,000 shares of Common Stock. Shares comprising the
Initial Restricted Stock Award shall vest on
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the fifth anniversary of such award; provided, that the Executive remains
employed by Comerica on such date, and further provided, that the restricted
shares shall vest immediately (a) upon a Change in Control of the Company, (b)
upon a termination of the Executive's employment by the Company in the absence
of showing of Cause, (c) upon the death or Disability of the Executive or (d)
upon a resignation by the Executive for Good Reason.
(v) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be eligible to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to Executive Vice Presidents of the Company. In addition, the
Company shall provide the Executive with a Supplemental Pension. The
Executive's right to receive the Supplemental Pension shall vest on the
earliest to occur of (a) the fifth anniversary of the effective date hereof,
(b) a Change in Control of the Company, or (c) a termination of the Executive's
employment by the Company in the absence of a showing of Cause or the
resignation by the Executive from the Company for Good Reason.
(vi) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
to participate in and shall receive all
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benefits under welfare benefit plans, practices, policies and programs provided
by the Company (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable
generally to other Executive Vice Presidents of the Company.
(vii) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable business expenses
he incurs, in accordance with established Company policy.
(viii) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to receive fringe benefits provided generally to other
Executive Vice Presidents of the Company.
(ix) Vacation. During the Employment Period, the Executive shall be
entitled to four weeks of paid vacation annually.
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Section 4. Termination of Employment.
The Executive or the Company, as the case may be, may terminate the
Executive's employment during the Employment Period for the following reasons
subject to adherence to the applicable requirements of this Agreement:
A. Due to Disability. If the Company determines in good faith that the
Executive has become Disabled during the Employment Period, it may terminate
his employment by delivering a Notice of Termination to the Executive or his
representative. In such event, the Executive's employment with the Company
shall cease effective on the 30th day after receipt of such notice by the
Executive or his representative (the "Disability Effective Date"), provided
that, within the 30 days after receipt of such notice, the Executive shall not
have returned to full-time performance of his duties.
B. For Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause.
C. For Good Reason. The Executive may terminate his employment during the
Employment Period for Good Reason.
D. Without Cause. The Company may terminate the Executive's employment
without Cause during the Employment Period.
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E. Voluntary Resignation. The Executive may voluntarily resign during the
Employment Period.
Any termination of the Executive's employment by the Company with or
without Cause, or by the Executive with or without Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 9.B. of this Agreement. The failure by the Executive
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive's or the Company's rights hereunder.
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Section 5. Obligations of the Company Upon Termination of Executive's
Employment.
A. Resignation By The Executive For Good Reason; Termination By the
Company In The Absence of a Showing of Cause. If, during the Employment
Period, the Executive shall resign for Good Reason or the Company shall
terminate the Executive's employment other than for Cause or by reason of the
Executive's Disability, the Executive shall receive the following:
(i) His Annual Base Salary for the remainder of the
Employment Period or for a period of one year, whichever
period is longer, shall be paid to him in a lump sum in
cash within 30 days after the Date of Termination;
(ii) An amount in lieu of the Annual Bonus he would have been
eligible to receive during the remainder of the Employment
Period shall be paid to him in a lump sum in cash within 30
days after the Date of Termination, such amount to be
determined by dividing the highest Annual Bonus he earned
during the Employment Period (annualized for any period of
less than 12 months) by 12 and multiplying such amount by the
greater of (a) the number of months
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and fractions of a month remaining in the Employment Period
subsequent to cessation of his employment or (b) 12;
provided, however, that if the Executive's employment ceases
prior to December 31, 1995, for purposes hereof, the highest
Annual Bonus shall be deemed to be $200,000;
(iii) any compensation previously deferred by the
Executive (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each
case to the extent not theretofore paid shall be paid to
him in a lump sum in cash within 30 days after the Date
of Termination (the sum of the amounts described in
clauses (i)-(iii) above, being hereinafter referred to
as "Contractual Obligations".
(iv) full and immediate vesting as of the Date of Termination
of all stock options and restricted stock awards (including,
without limitation, the Initial Option Grant and the Initial
Restricted Stock Award) in addition to full and immediate
vesting as of the Date of Termination of any other
stock-based compensation;
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(v) for the remainder of the Employment Period or for a
period of one year, whichever period is longer, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the plans, programs,
practices and policies described in Section 3.B.(vi) of this
Agreement if the Executive's employment had not been
terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
Executive Vice Presidents of the Company and their families;
provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan,
the medical and other welfare benefits described herein shall
be secondary to those provided under such other plan during
such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to
such plans, practices,
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programs and policies, the Executive shall be considered to
have remained employed until the last day of the Employment
Period. The Company may satisfy its obligation to continue
benefits described in Section 3.B.(vi) by providing a lump
sum payment to the Executive or his family equal to the
present value of its obligation to provide such benefits.
The determination of the present value of such benefits shall
be made utilizing reasonable actuarial assumptions;
(vi) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope
and provider of which shall be mutually selected by the
Company and the Executive; and
(vii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or
which the Executive is entitled to receive under any plan,
program, policy or practice or contract or agreement of the
Company through the last day of the Employment Period,
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including, without limitation, the Supplemental Pension (such
other amounts and benefits being hereinafter referred to as
the "Other Benefits").
B. Cessation of Executive's Employment Due To Death. If the Executive
dies during the Employment Period, this Agreement shall terminate without
further obligations to the Executive's legal representatives, other than for
payment of (i) his Annual Base salary through the date of death; (ii) the
amount of any compensation previously deferred by the Executive (together with
any accrued interest or earnings thereon), and (iii) Other Benefits, in each
case to the extent theretofore unpaid through the Date of Termination.
Applicable life insurance benefits shall be paid to the designated beneficiary.
C. Cessation Of Executive's Employment Due To Disability. If the
Executive's employment ceases during the Employment Period due to his
Disability, this Agreement shall terminate without further obligations to the
Executive, other than for payment of (i) his Annual Base salary through the
Disability Effective Date; (ii) the amount of any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon), and (iii) Other Benefits, in each case to the extent theretofore
unpaid through the Date of Termination.
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D. Termination of Executive's Employment By The Company For Cause. If
the Executive's employment shall be terminated by the Company for Cause during
the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than to pay to the Executive (i) his Annual
Base Salary through the Date of Termination, (ii) the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon), and (iii) Other Benefits, in each case to the
extent theretofore unpaid through the Date of Termination. Upon a termination
of the Executive's employment for Cause by the Company, the Executive shall
forfeit all stock options and restricted stock awards that are not vested on
the Date of Termination, including, without limitation, the Initial Option
Grant and the Initial Restricted Stock Award to the extent not vested.
E. Resignation By The Executive. If the Executive voluntarily resigns
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than to pay to the Executive (i) his Annual
Base Salary through the Date of Termination, (ii) the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon), and (iii) Other Benefits, in each case to the
extent theretofore unpaid through the Date of Termination. Upon the
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resignation by the Executive during the Employment Period, he shall forfeit all
stock options and restricted stock awards that are not vested on the Date of
Termination including, without limitation, the Initial Option Grant and the
Initial Restricted Stock Award to the extent not vested.
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Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company and for which the Executive
may qualify nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
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Section 7. Confidential Information. The 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 the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the 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.
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Section 8. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
C. The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly 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.
As used in this Agreement, "Company" shall mean the Company as hereinbefore
defined, and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
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Section 9. Miscellaneous.
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
B. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Ralph W. Babb, Jr.
143 High Grove Lane
Chesterfield, Missouri 63005
If to the Company:
Comerica Incorporated
P.O. Box 75000
Detroit, MI 48275-1061
Attention: Chief Executive Officer
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
D. The Company may withhold from any amounts payable under this Agreement
such Federal, state, local or foreign taxes or other withholdings as shall be
required to be withheld pursuant to any applicable law or regulation or as
directed by the Executive.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement
or the failure to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason, shall not be deemed to be a waiver of
such provision or right or any other provision or right of this Agreement.
F. The Company agrees to pay as incurred, to the full extent permitted by
law, all legal fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the
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outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of Code. Notwithstanding the foregoing,
the Company shall have no liability for such legal fees and expenses if the
Executive fails to act in good faith with respect to any controversy involving
this Agreement.
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Section 10. No Prohibited Payments. Notwithstanding anything in this
Agreement to the contrary, the Company shall not make any payment to the
Executive which, according to the opinion of the Company's outside counsel,
would violate Section 2523(k) of the Comprehensive Thrift and Bank Fraud
Prosecution and Taxpayer Recovery Act of 1990 (codified at 12 U.S.C. 1828(k)),
or any rules or regulations promulgated thereunder.
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Section 11. Interrelationsip With Management Continuation Agreement. The
Executive acknowledges that he is a party to the Management Continuation
Agreement and that any rights he may possess that arise due to the occurrence
of a Change in Control of the Company will be governed by the provisions of the
Management Continuation Agreement (or any similar agreement which may replace
the Management Continuation Agreement) and not this Agreement, and under no
circumstances shall he be entitled to any double recovery by reason of the fact
that he is a party to this Agreement and the Management Continuation Agreement
(or any replacement agreement).
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
RALPH W. BABB, JR.
--------------------------------
COMERICA INCORPORATED
By
-----------------------------
Richard A. Collister
Executive Vice President
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EXHIBIT 10.16
COMERICA INCORPORATED
EXECUTIVE OFFICER CONTINUITY AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
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<PAGE> 4
ARTICLE 4.
CONTINUATION OF COMPENSATION AND
SEVERANCE BENEFITS
<TABLE>
<S> <C> <C>
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
</TABLE>
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<PAGE> 5
ARTICLE 7.
ADMINISTRATION AND CONFIDENTIALITY OF INFORMATION;
OBLIGATIONS OF EXECUTIVE UPON A POTENTIAL CHANGE OF CONTROL
<TABLE>
<S> <C> <C>
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
</TABLE>
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<PAGE> 6
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.
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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
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<PAGE> 8
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.
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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.
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<PAGE> 10
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
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<PAGE> 11
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
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<PAGE> 12
(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
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<PAGE> 13
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
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<PAGE> 14
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.
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<PAGE> 15
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:
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<PAGE> 16
(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
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<PAGE> 17
(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
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<PAGE> 18
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.
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<PAGE> 19
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
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<PAGE> 20
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
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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
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<PAGE> 22
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.
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<PAGE> 23
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.
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<PAGE> 24
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
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<PAGE> 25
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.
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<PAGE> 26
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,
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<PAGE> 27
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
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<PAGE> 28
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.
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<PAGE> 29
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.
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<PAGE> 30
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.
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<PAGE> 31
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
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<PAGE> 32
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
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<PAGE> 33
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.
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<PAGE> 34
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
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<PAGE> 35
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.
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<PAGE> 36
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
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<PAGE> 37
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.
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<PAGE> 38
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
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<PAGE> 39
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:
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<PAGE> 40
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,
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<PAGE> 41
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
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<PAGE> 42
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: _____________________ ________________________________
<PAGE> 43
NAMES OF EMPLOYEES WHO ARE
PARTICIPANTS OF THE
COMERICA INCORPORATED
EXECUTIVE OFFICER CONTINUITY AGREEMENT
(Effective Date of Coverage January 1, 1996)
John R. Beran
Joseph J. Buttigieg, III
Richard A. Collister
George C. Eshelman
J. Michael Fulton
Dale E. Greene
Charles L. Gummer
John R. Haggerty
Thomas R. Johnson
John D. Lewis
Ronald P. Marcinelli
David B. Stephens
R. Fenton Talbott
David C. White
<PAGE> 1
EXHIBIT 10.17
COMERICA INCORPORATED
SENIOR OFFICER SEVERANCE PLAN
-i-
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1.PURPOSE, ESTABLISHMENT AND TERM
<TABLE>
<S> <C> <C>
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
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
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
</TABLE>
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<PAGE> 4
ARTICLE 4.
CONTINUATION OF COMPENSATION AND
SEVERANCE BENEFITS
<TABLE>
<S> <C> <C>
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
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C> <C>
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
</TABLE>
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<PAGE> 6
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.
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<PAGE> 7
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.
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<PAGE> 8
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.
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<PAGE> 9
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-
<PAGE> 10
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-
<PAGE> 11
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-
<PAGE> 12
(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-
<PAGE> 13
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-
<PAGE> 14
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-
<PAGE> 15
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
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<PAGE> 16
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,
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<PAGE> 17
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
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<PAGE> 18
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
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<PAGE> 19
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
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<PAGE> 20
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
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<PAGE> 21
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
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<PAGE> 22
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.
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<PAGE> 23
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
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<PAGE> 24
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.
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<PAGE> 25
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
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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
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<PAGE> 27
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.
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<PAGE> 28
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.
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<PAGE> 29
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
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<PAGE> 30
no purported termination which fails to comply with this requirement shall be
effective.
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<PAGE> 31
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
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<PAGE> 32
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
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<PAGE> 33
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.
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<PAGE> 34
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
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<PAGE> 35
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.
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<PAGE> 36
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
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<PAGE> 37
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.
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<PAGE> 38
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:
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<PAGE> 39
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.
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<PAGE> 40
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
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<PAGE> 41
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.
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<PAGE> 42
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-
<PAGE> 43
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
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<PAGE> 44
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.
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<PAGE> 45
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:
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<PAGE> 46
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:___________________ ________________________________
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<PAGE> 47
Exhibit B to Comerica Incorporated
Senior Officer Severance Plan
NAMES OF EMPLOYEES WHO ARE
PARTICIPANTS OF THE COMERICA
INCORPORATED SENIOR OFFICER SEVERANCE PLAN
<TABLE>
<CAPTION>
Name of Participant Effective Date of Coverage
- ------------------- --------------------------
SVP I
- -----
<S> <C>
Lawrence N. David January 1, 1996
James D. Deyo January 1, 1996
Paul E. Ellis January 1, 1996
Pat Faubion January 1, 1996
Thomas K. Fisher January 1, 1996
Frank N. Gaddy, Jr. January 1, 1996
Alan R. Goldman January 1, 1996
Joe R. Goyne January 1, 1996
E. Mark Gregory, III January 1, 1996
Stephen G. Hawkins January 1, 1996
Arthur W. Hermann January 1, 1996
Stephen J. Hugley January 1, 1996
Walter T. Kaczmarek January 1, 1996
John M. Killian January 1, 1996
George W. Lindenberg January 1, 1996
Elaine A. McMahon January 1, 1996
Thomas D. Ogden January 1, 1996
Douglas A. Ransdell January 1, 1996
Mark W. Shobe January 1, 1996
SVP II
- ------
Mary Ellen Baker January 1, 1996
Fred Ball. Jr. January 1, 1996
Leonard B. Carleton January 1, 1996
Tom Daniels January 1, 1996
Thomas W. Early January 1, 1996
Larry E. Eastham January 1, 1996
Douglas W. Fiedler January 1, 1996
Raymond J. Janisse January 1, 1996
Dan T. Kawamoto January 1, 1996
Robert D. Kemp, Jr. January 1, 1996
Jerry A. Lamb January 1, 1996
Judith Slusser Love January 1, 1996
Ed K. Mims January 1, 1996
Joseph A. Moran January 1, 1996
Karen J. Mulvahill January 1, 1996
Robert N. Olsen January 1, 1996
Michael R. Ong January 1, 1996
Peter W. Ronan January 1, 1996
Michael J. Tierney January 1, 1996
James Tietjen January 1, 1996
Philip R. Welsher January 1, 1996
Thomas A. Wilson January 1, 1996
</TABLE>
Total # Participants = 41
<PAGE> 1
EXHIBIT 13
TABLE 1: SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31
(dollar amounts in millions, except per share data) 1995 1994 1993 1992 1991
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Total interest income $2,614 $2,092 $1,783 $1,933 $2,268
Net interest income 1,300 1,230 1,134 1,121 1,050
Provision for loan losses 87 56 69 111 105
Securities gains 12 3 2 6 5
Noninterest income
(excluding securities gains) 487 447 447 393 370
Merger, integration and restructuring charge -- 7 22 128 --
Noninterest expenses (excluding merger,
integration and restructuring charge) 1,086 1,035 1,003 952 935
Net income 413 387 341 240 280
PER SHARE OF COMMON STOCK
Net income $3.54 $3.28 $2.85 $1.99 $2.41
Cash dividends declared 1.37 1.24 1.07 0.96 0.92
Common shareholders' equity 22.75 20.46 18.99 17.38 16.30
Market value 40.00 24.38 26.63 32.00 26.88
YEAR-END BALANCES
Total assets $35,470 $33,430 $30,295 $27,556 $28,989
Total earning assets 32,051 30,606 27,852 25,131 26,594
Total loans 24,442 22,209 19,100 18,215 17,269
Total deposits 23,167 22,432 20,950 21,200 21,142
Total borrowings 9,319 8,303 6,861 3,963 5,522
Medium- and long-term debt 4,644 4,098 1,461 741 306
Common shareholders' equity 2,608 2,392 2,182 2,058 1,898
DAILY AVERAGE BALANCES
Total assets $34,129 $31,451 $27,236 $26,510 $26,365
Total earning assets 31,537 29,038 25,012 24,510 24,374
Total loans 23,561 20,211 18,307 17,447 16,622
Total deposits 21,655 21,325 20,721 20,913 20,785
Total borrowings 9,639 7,527 4,105 3,275 3,380
Medium- and long-term debt 4,510 2,708 1,087 414 323
Common shareholders' equity 2,511 2,313 2,136 1,957 1,741
RATIOS
Return on average assets 1.21% 1.23% 1.25% 0.91% 1.06%
Return on average common shareholders' equity 16.46 16.74 15.94 12.10 15.90
Efficiency ratio 60.09 61.28 63.68 69.61 63.88
Dividend payout ratio 38.30 37.47 36.82 45.51 33.73
Common shareholders' equity as
a percent of average assets 7.36 7.35 7.84 7.38 6.60
</TABLE>
14
<PAGE> 2
1995 HIGHLIGHTS
REPORTED RECORD EARNINGS
- - Increased net income $26 million to $413 million, or $3.54 per share.
FOCUSED ON PERFORMANCE
- - Earned 16.46 percent on average common shareholders' equity.
- - Returned 1.21 percent on average assets.
SUSTAINED GROWTH
- - Grew average total assets 9 percent to $34.1 billion.
- - Reached $23.6 billion in average total loans, a 17 percent increase.
- - Increased average shareholders' equity $198 million to $2.5 billion.
ENHANCED SHAREHOLDERS' RETURN
- - Raised the quarterly cash dividend 9 percent to $0.35 per share.
- - Declared annual cash dividends of $1.37 per share.
COMPLETED STRATEGIC ACQUISITIONS
- - Acquired University Bank & Trust (University), a $490 million
California bank, for $69 million of common stock.
- - Acquired the $200 million QuestStar Bank, N.A., located in Texas,
for $25 million in cash.
- - Acquired the $1.2 billion Metrobank in California for $125 million of
common stock.
[RETURN ON ASSETS GRAPH]
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 and reflects adjustments made to the
yields on tax-exempt assets in order to analyze tax-exempt income and fully
taxable income on a comparable basis. Net interest income (FTE) comprised 72.6
percent of net revenues, compared to 73.6 percent in 1994 and 72.1 percent in
1993.
Net interest income (FTE) rose 5 percent to $1,321 million in 1995,
primarily due to a 9 percent increase in average earning assets, which was
concentrated in commercial loans. Average total loans represented 75 percent of
average earning assets in 1995, compared to 70 percent in 1994. Growth in
interest income was partially offset by the utilization of higher costing
wholesale funds to support loan growth, as well as a shift by customers toward
higher-priced time deposits. Average purchased funds increased 28 percent in
1995 to $9.6 billion.
[NET INTEREST INCOME GRAPH]
The net interest margin for 1995 declined 13 basis points to 4.19 percent
from 4.32 percent last year, principally due to 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. As a result, a reduction in the prime rate
in the second half of the year caused further compression in loan and deposit
spreads as rates on deposit products remained relatively unchanged due to market
competition.
15
<PAGE> 3
TABLE 2: ANALYSIS OF NET INTEREST INCOME--FTE
<TABLE>
<CAPTION>
1995
--------------------------------
Average Average
(dollar amounts in millions) Balance Interest Rate
------- -------- ----
<S> <C> <C> <C>
Commercial loans $11,302 $989 8.75%
International loans 1,257 89 7.06
Real estate construction loans 541 52 9.52
Commercial mortgage loans 3,157 297 9.40
Residential mortgage loans 2,450 191 7.80
Consumer loans 4,569 461 10.10
Lease financing 285 19 6.65
------- ------ ------
Total loans (1) 23,561 2,098 8.90
Investment securities available for sale (2) 2,833 186 6.50
Taxable securities 4,393 287 6.52
Securities exempt from federal income taxes 399 41 10.43
------- ------ ------
Total investment securities held
to maturity 4,792 328 6.85
Interest-bearing deposits with banks 126 8 6.39
Federal funds sold and securities purchased
under agreements to resell 124 7 5.97
Trading account securities 5 -- 6.51
Loans held for sale 96 8 7.75
------- ------ ------
Total earning assets 31,537 2,635 8.35
Cash and due from banks 1,500
Allowance for loan losses (340)
Accrued income and other assets 1,432
-------
Total assets $34,129
=======
NOW accounts $1,744 29 1.67
Money market deposit accounts 4,667 188 4.03
Savings deposits 2,277 48 2.14
Certificates of deposit 6,358 344 5.41
Foreign office deposits (3) 1,842 112 6.07
------- ------ ------
Total interest-bearing deposits 16,888 721 4.27
Federal funds purchased and securities
sold under agreements to repurchase 2,816 166 5.88
Other borrowed funds 2,313 136 5.87
Medium- and long-term debt 4,510 289 6.41
Other (4) -- 2 --
------- ------ ------
Total interest-bearing sources 26,527 1,314 4.95
Noninterest-bearing deposits 4,767
Accrued expenses and other liabilities 324
Common shareholders' equity 2,511
------- ------ ------
Total liabilities and shareholders' equity $34,129
=======
Net interest income/Rate spread (FTE) $1,321 3.40
======
FTE adjustment (5) $ 21
======
Impact of net noninterest-bearing
sources of funds 0.79
----
Net interest margin (as a percent of
average earning assets) (FTE) 4.19%
====
<CAPTION>
1994
--------------------------------
Average Average
(dollar amounts in millions) Balance Interest Rate
------- -------- ----
<S> <C> <C> <C>
Commercial loans $ 9,598 $ 709 7.38%
International loans 1,107 62 5.58
Real estate construction loans 403 32 7.85
Commercial mortgage loans 2,916 248 8.52
Residential mortgage loans 2,175 162 7.46
Consumer loans 3,795 358 9.44
Lease financing 217 14 6.48
------- ------ -----
Total loans (1) 20,211 1,585 7.84
Investment securities available for sale (2) 3,044 168 5.50
Taxable securities 4,498 276 6.15
Securities exempt from federal income taxes 462 49 10.51
------- ------ -----
Total investment securities held
to maturity 4,960 325 6.55
Interest-bearing deposits with banks 552 22 3.96
Federal funds sold and securities purchased
under agreements to resell 116 5 4.06
Trading account securities 5 -- 1.67
Loans held for sale 150 11 7.31
------- ------ -----
Total earning assets 29,038 2,116 7.28
Cash and due from banks 1,532
Allowance for loan losses (322)
Accrued income and other assets 1,203
------- ------ -----
Total assets $31,451
=======
NOW accounts $ 1,805 30 1.66
Money market deposit accounts 4,787 143 2.99
Savings deposits 2,536 53 2.08
Certificates of deposit 5,681 239 4.21
Foreign office deposits (3) 1,816 78 4.28
------- ------ -----
Total interest-bearing deposits 16,625 543 3.26
Federal funds purchased and securities
sold under agreements to repurchase 2,817 121 4.31
Other borrowed funds 2,002 79 3.92
Medium- and long-term debt 2,708 148 5.46
Other (4) -- (29) --
------- ------ -----
Total interest-bearing sources 24,152 862 3.57
Noninterest-bearing deposits 4,700
Accrued expenses and other liabilities 286
Common shareholders' equity 2,313
------- ------ -----
Total liabilities and shareholders' equity $31,451
=======
Net interest income/Rate spread (FTE) $1,254 3.71
======
FTE adjustment (5) $ 24
======
Impact of net noninterest-bearing
sources of funds 0.61
-----
Net interest margin (as a percent of
average earning assets) (FTE) 4.32%
=====
<CAPTION>
1993
--------------------------------
Average Average
(dollar amounts in millions) Balance Interest Rate
------- -------- ----
<S> <C> <C> <C>
Commercial loans $ 8,473 $ 556 6.56%
International loans 897 45 5.04
Real estate construction loans 441 29 6.63
Commercial mortgage loans 2,629 213 8.10
Residential mortgage loans 1,979 169 8.57
Consumer loans 3,697 369 9.98
Lease financing 191 14 7.34
------- ------ -----
Total loans (1) 18,307 1,395 7.62
Investment securities available for sale (2) n/a n/a n/a
Taxable securities 4,893 305 6.23
Securities exempt from federal income taxes 619 64 10.25
------- ------ -----
Total investment securities held
to maturity 5,512 369 6.70
Interest-bearing deposits with banks 814 28 3.41
Federal funds sold and securities purchased
under agreements to resell 135 4 2.99
Trading account securities 12 1 6.76
Loans held for sale 232 15 6.38
------- ------ -----
Total earning assets 25,012 1,812 7.25
Cash and due from banks 1,490
Allowance for loan losses (311)
Accrued income and other assets 1,045
-------
Total assets $27,236
=======
NOW accounts $1,657 37 2.23
Money market deposit accounts 4,723 129 2.73
Savings deposits 2,494 67 2.67
Certificates of deposit 6,161 254 4.13
Foreign office deposits (3) 1,306 43 3.29
------- ------ -----
Total interest-bearing deposits 16,341 530 3.24
Federal funds purchased and securities
sold under agreements to repurchase 1,586 47 3.01
Other borrowed funds 1,432 41 2.88
Medium- and long-term debt 1,087 63 5.77
Other (4) -- (32) --
------- ------ -----
Total interest-bearing sources 20,446 649 3.18
Noninterest-bearing deposits 4,380
Accrued expenses and other liabilities 274
Common shareholders' equity 2,136
------- ------ -----
Total liabilities and shareholders' equity $27,236
=======
Net interest income/Rate spread (FTE) $1,163 4.07
======
FTE adjustment (5) $ 29
======
Impact of net noninterest-bearing
sources of funds 0.58
-----
Net interest margin (as a percent of
average earning assets) (FTE) 4.65%
=====
</TABLE>
(1) Nonaccrual loans are included in average balances reported and are used to
calculate rates.
(2) Average investment securities available for sale were primarily taxable.
(3) Includes substantially all deposits by foreign depositors; deposits are in
excess of $100,000.
(4) Net interest rate swap (income)/expense. If swap (income)/expense were
allocated, average rates on total loans would have been 8.84% in 1995, 7.75% in
1994 and 7.42% in 1993; average rates on medium- and long-term debt would have
been 6.14% in 1995, 5.10% in 1994 and 5.94% in 1993.
(5) The FTE adjustment is computed using a federal income tax rate of 35%.
n/a Not applicable
16
<PAGE> 4
The Corporation implemented various asset and liability management
strategies in 1995 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 and temporary investments to run off in order to facilitate growth in
higher-yielding loans and shifting from federal funds purchased to short- and
medium-term debt issuances to lengthen the maturity of funding sources.
Off-balance sheet interest rate swaps were also entered into during the second
half of the year to effectively fix high yields on certain variable rate loans
and reduce interest expense associated with certain fixed rate liabilities.
Refer to page 28 of this financial review for additional information regarding
the Corporation's asset and liability management policies.
TABLE 3: RATE-VOLUME ANALYSIS--FTE
<TABLE>
<CAPTION>
1995 / 1994 1994 / 1993
---------------------------------- ---------------------------------
Increase Increase
Increase (Decrease) Net Increase (Decrease) Net
(Decrease) Due to Increase (Decrease) Due to Increase
(in millions) Due to Rate Volume* (Decrease) Due to Rate Volume* (Decrease)
----------- --------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest income (FTE)
Commercial loans $131 $149 $280 $ 70 $ 83 $153
International loans 16 11 27 5 12 17
Real estate construction loans 7 13 20 6 (3) 3
Commercial mortgage loans 26 23 49 11 24 35
Residential mortgage loans 7 22 29 (22) 15 (7)
Consumer loans 25 78 103 (20) 9 (11)
Lease financing -- 5 5 (2) 2 --
---- ---- ---- ---- ---- ----
Total loans 212 301 513 48 142 190
Investment securities available for sale 31 (13) 18 (27) 195 168
Taxable securities 17 (6) 11 (5) (24) (29)
Securities exempt from federal income taxes (1) (7) (8) 2 (17) (15)
---- ---- ---- ---- ---- ----
Total investment securities held to maturity 16 (13) 3 (3) (41) (44)
Interest-bearing deposits with banks 13 (27) (14) 4 (10) (6)
Federal funds sold and securities
purchased under agreements to resell 2 -- 2 2 (1) 1
Trading account securities -- -- -- (1) -- (1)
Loans held for sale 1 (4) (3) 2 (6) (4)
---- ---- ---- ---- ---- ----
Total interest income (FTE) 275 244 519 25 279 304
Interest expense
NOW accounts -- (1) (1) (10) 3 (7)
Money market deposit accounts 50 (5) 45 12 2 14
Savings deposits 1 (6) (5) (15) 1 (14)
Certificates of deposit 68 37 105 5 (20) (15)
Foreign office deposits 32 2 34 13 22 35
---- ---- ---- ---- ---- ----
Total interest-bearing deposits 151 27 178 5 8 13
Federal funds purchased and securities
sold under agreements to repurchase 45 -- 45 21 53 74
Other borrowed funds 39 18 57 15 23 38
Medium- and long-term debt 26 115 141 (3) 88 85
Other (1) 31 -- 31 3 -- 3
---- ---- ---- ---- ---- ----
Total interest expense 292 160 452 41 172 213
---- ---- ---- ---- ---- ----
Net interest income (FTE) $(17) $ 84 $ 67 $(16) $107 $ 91
==== ==== ==== ==== ==== ====
</TABLE>
* Rate/volume variances are allocated to variances due to volume.
(1) Net interest rate swap income.
17
<PAGE> 5
In 1994, net interest income (FTE) increased 8 percent over 1993,
benefiting from strong growth in average earning assets, primarily commercial
and consumer loans. However, the net interest margin for 1994 declined 33 basis
points from 1993. Compression in the margin reflected narrower rate spreads
between average earning assets and average interest-bearing liabilities. The
Corporation's balance sheet structure was also in a slightly liability
sensitive position during this period.
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 $87 million in 1995, compared to $56
million in 1994 and $69 million in 1993. The increase in the provision in 1995
primarily reflects higher net charge-offs related to consumer loans. The rise
in consumer loan net charge-offs largely resulted from significant portfolio
growth as customers responded to bankcard promotions begun in the third quarter
of 1994. Management took steps early in 1995 to reduce potential losses in the
consumer loan portfolio by tightening the credit criteria used for bankcard
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 during the
year.
Total net charge-offs increased to $76 million in 1995, compared to $48
million and $78 million in 1994 and 1993, respectively. The ratio of net loans
charged-off to average total loans, while still historically low, increased to
0.32 percent in 1995 from 0.24 percent in 1994. Commercial loan net charge-offs
as a percentage of average commercial loans was 0.12 percent for 1995, compared
to 0.10 percent in 1994. Consumer loan net charge-offs as a percentage of
average consumer loans was 1.31 percent and 0.69 percent for 1995 and 1994,
respectively.
[NET LOANS CHARGED OFF TO AVERAGE LOANS GRAPH]
At December 31, 1995, the allowance for loan losses was $341 million,
an increase of $15 million since year-end 1994. Due to the magnitude of loan
growth during 1995, the allowance as a percentage of total loans declined
slightly to 1.40 percent from 1.47 percent at December 31, 1994. However, the
allowance as a percentage of total nonperforming assets increased to 209
percent at December 31, 1995 from 160 percent at year-end 1994. The Corporation
adopted Statement of Financial Accounting Standard (SFAS) Nos. 114 and 118
regarding the accounting for impaired loans in the first quarter of 1995
without impact to the consolidated financial statements.
An estimated allocation of the allowance for loan losses is provided in
Table 8 on page 24. 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
<TABLE>
<CAPTION>
Year Ended December 31
(in millions) 1995 1994 1993
- --------------------------- ---- ---- ----
<S> <C> <C> <C>
Income from fiduciary activities $125 $122 $122
Service charges on deposit accounts 130 124 120
Customhouse broker fees 36 41 40
Revolving credit fees 36 24 23
Securities gains 12 3 2
Other 160 136 142
---- ---- ----
Total noninterest income $499 $450 $449
==== ==== ====
</TABLE>
Noninterest income grew $49 million, or 11 percent, to $499 million in
1995, compared to $450 million and $449 million in 1994 and 1993, respectively.
After adjusting for acquisitions, noninterest income rose $37 million, or 8
percent, in 1995.
18
<PAGE> 6
Table 4: ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Year Ended December 31
(dollar amounts in millions) 1995 1994 1993 1992 1991
- -------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 326 $ 299 $ 308 $ 279 $ 265
Allowance of institutions and loans purchased/sold 4 19 -- 17 6
Loans charged off
Domestic
Commercial 33 25 36 47 47
Real estate construction 3 1 1 4 8
Commercial mortgage 8 17 20 8 9
Residential mortgage 2 -- 1 1 2
Consumer 73 40 52 60 59
Lease financing -- -- -- 1 1
----- ----- ----- ----- -----
Total loans charged off 119 83 110 121 126
Recoveries
Domestic
Commercial 19 15 18 9 15
Real estate construction 3 -- -- 1 --
Commercial mortgage 8 5 2 1 2
Residential mortgage -- -- -- 1 1
Consumer 13 14 12 10 9
International -- 1 -- -- 2
----- ----- ----- ----- -----
Total recoveries 43 35 32 22 29
----- ----- ----- ----- -----
Net loans Charged Off 76 48 78 99 97
Provision for loan losses 87 56 69 111 105
----- ----- ----- ----- -----
Balance at end of period $ 341 $ 326 $ 299 $ 308 $ 279
===== ===== ===== ===== =====
Ratio of allowance for loan losses to total loans
at end of period 1.40% 1.47% 1.56% 1.69% 1.62%
Ratio of net loans charged off during the period
to average loans outstanding during the period 0.32% 0.24% 0.43% 0.57% 0.58%
</TABLE>
Income from fiduciary activities increased $3 million, or 3 percent, in
1995, while remaining flat in 1994. Fiduciary income was positively impacted in
1995 by a $7 million, or 11 percent, increase in personal trust fees due to an
expanded customer base and improved market values of assets under management
resulting from strong market performance. Total trust assets under management
increased to $91 billion at December 31, 1995 from $77 billion at year-end 1994.
Discretionary funds, which represent trust assets over which the Corporation has
investment management authority, decreased $5 billion to $22 billion from $27
billion in 1994. This decline resulted primarily from the transfer of investment
management authority over a number of institutional trust assets to Munder
Capital Management (Munder), the investment advisory firm in which the
Corporation acquired a minority interest in December 1994.
Service charges on deposit accounts rose $6 million, or 5 percent, in 1995,
compared to an increase of $4 million, or 3 percent, in 1994. Excluding the
impact of acquisitions, service charges were up 2 percent in 1995. This growth
represents the net result of fee increases on retail accounts and a decrease in
commercial account fees as the Corporation passed on to corporate customers the
savings realized from a reduction in FDIC insurance expense in the third
quarter.
Customhouse broker fees were down $5 million in 1995 after increasing
moderately last year, principally reflecting a decline in transaction volumes
resulting from mid-year 1994 branch sales.
Revolving credit fee income rose $12 million, or 47 percent, in 1995,
compared to an increase of $1 million, or 8 percent, in 1994. Excluding the
effects of acquisitions, revolving credit fees increased 41 percent. The higher
fees were primarily due to significant growth in the bankcard portfolio. Also
contributing to the increase was the development of new merchant relationships
which resulted in the generation of additional merchant and bankcard interchange
fee income.
Securities gains increased $9 million in 1995, representing primarily gains
of $11 million on the sale of Brady bonds (Latin American debt secured by U.S.
Government securities) and U.S. Government agency securities.
19
<PAGE> 7
Other noninterest income grew $24 million, or 17 percent, in 1995 after
declining $6 million in 1994. Excluding the impact of acquisitions, other
noninterest income rose 15 percent. This increase was primarily due to income
received from Munder totaling $8 million in 1995 and 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 $4 million, or 43 percent, in 1995 from $9 million last
year. The Corporation adopted SFAS No. 122, "Accounting for Mortgage Servicing
Rights," in 1995 without significant impact to the consolidated financial
statements.
[NONINTEREST INCOME GRAPH]
No significant nonrecurring items were 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. Significant nonrecurring items reflected in other
noninterest income in 1993 included a $24 million gain on the sale of land.
NONINTEREST EXPENSES
<TABLE>
<CAPTION>
Year Ended December 31
(in millions) 1995 1994 1993
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Salaries $ 466 $ 455 $ 434
Employee Benefits 96 94 95
----- ----- -----
Total salaries and
employee benefits 562 549 529
Net occupancy expense 99 99 96
Equipment expense 68 68 62
FDIC insurance expense 24 44 44
Telecommunications expense 29 27 21
Merger, integration and
restructuring expense -- 7 22
Other 304 248 251
----- ----- -----
Total noninterest expenses $1,086 $1,042 $1,025
===== ===== =====
</TABLE>
Noninterest expenses increased 4 percent to $1,086 million in 1995,
compared to $1,042 million in 1994 and $1,025 million in 1993. Excluding the
effect of acquisitions, noninterest expenses increased $10 million, or 1
percent, in 1995.
Total salaries expense increased $11 million, or 3 percent, in 1995 versus
$21 million, or 5 percent, in 1994. Excluding the effect of acquisitions,
salaries declined slightly during the year reflecting a modest decline in staff
levels and further reductions in overtime hours and temporary help. The number
of full-time equivalent employees decreased 201 from year-end 1994, even with
the addition of 273 employees from 1995 acquisitions. 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
will not adopt the recognition provisions of SFAS No. 123, but will continue
accounting for stock options in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted by the
new standard.
Employee benefits expense rose $2 million, or 2 percent, in 1995 after
declining slightly in 1994. After adjusting for acquisitions, employee benefits
remained relatively flat from year to year.
Net occupancy and equipment expenses, on a combined basis, were unchanged
after increasing $9 million last year, as costs acquired from acquisitions were
offset by declines in repair and maintenance expense and property taxes from
branch consolidations.
The Federal Deposit Insurance Corporation (FDIC) adopted 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, reduced each subsidiary bank's annual BIF
deposit insurance premium for 1995 from 23.0 cents to 4.0 cents per $100 of
insured domestic deposits. The lower rate translated into a $20 million savings
in FDIC insurance expense for the Corporation in 1995. In the fourth quarter of
1995, the FDIC voted to lower 1996 deposit insurance premiums to the legal
annual minimum of $2,000 for well-capitalized banks. Consolidated FDIC insurance
expense for 1996 is expected to be significantly lower since each subsidiary
bank qualifies for this premium reduction. In addition, Congress is considering
passing legislation that will require the FDIC to refund to banks any amount in
the BIF that exceeds the required reserve ratio of 1.25 percent of insured
deposits.
20
<PAGE> 8
[NONINTEREST EXPENSES GRAPH]
In 1996, the Corporation may be subject to a one-time assessment levied on
banks with thrift deposits in order to recapitalize the Savings Association
Insurance Fund (SAIF). Based on current proposals, the Corporation's assessment
would range from $5 million to $8 million. Congress may also require banks to
contribute 2.5 cents per $100 of insured deposits to help pay a large portion of
the annual interest due on the Financing Corporation bonds issued during the
savings and loan crises. This proposal, if passed, would cost the Corporation
approximately $5 million annually on a pretax basis over the next 20 years.
Other noninterest expenses rose $56 million in 1995, compared to a slight
decrease in 1994. Included in other noninterest expenses is a $16 million loss
on the sale of a portion of the bankcard loan portfolio. Excluding acquisitions
and the loss on the sale of bankcard loans, other noninterest expenses rose $20
million, or 8 percent. Contributing to the rise in other noninterest expenses
was a $7 million increase in bankcard fee expense from the issuance of
additional bankcards during special promotions begun in 1994. Net amortization
of intangible assets, excluding purchased mortgage servicing rights, increased
$4 million, of which $2 million represents goodwill amortization related to 1995
acquisitions.
The Corporation's efficiency ratio, defined as total noninterest expenses
divided by the sum of net interest income (FTE) and noninterest income,
excluding net securities gains, improved to 60.09 percent in 1995, compared to
61.28 percent in 1994 and 63.68 percent in 1993.
INCOME TAXES
The provision for income taxes was $212 million in 1995, compared to $195
million in 1994 and $148 million in 1993. The effective tax rate, computed by
dividing the provision for income taxes by income before income taxes, increased
to 33.9 percent for 1995 from 33.5 percent in 1994 and 30.3 percent in 1993. 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 22 presents the financial results of these business lines
for the years ended December 31, 1995 and 1994.
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 1995 and 1994 amounts are based on methodologies in effect at December 31,
1995. 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 a matched maturity funding
concept for certain assets and liabilities and a pooled funding concept for
others. The loan loss provision is assigned based on actual loan loss experience
adjusted for loan growth. 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's noninterest expenses to
total noninterest expenses incurred by all business lines. Common equity is
allocated based on credit, operational, and business risks.
21
<PAGE> 9
Table 5: STRATEGIC LINES OF BUSINESS FINANCIAL RESULTS
<TABLE>
<CAPTION>
Business Bank Individual Bank Investment Bank*
---------------- ------------------- ------------------
(dollar amounts in millions) 1995 1994 1995 1994 1995 1994
---------------- ------------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (FTE) $ 518 $ 428 $ 759 $ 671 $ (2) $ 1
Provision for loan losses 34 32 72 43 n/a n/a
Noninterest income 204 198 255 223 30 26
Noninterest expenses 341 325 658 642 27 26
Provision for income taxes 125 97 99 75 -- --
Net income 222 172 185 134 1 1
SELECTED AVERAGE BALANCES
Assets $15,357 $12,762 $ 9,481 $ 8,849 $ 10 $ 22
Loans 14,594 12,061 8,746 7,939 n/a n/a
Deposits 2,867 2,713 16,551 16,478 n/a n/a
Common equity 847 701 848 763 3 3
STATISTICAL DATA
Return on average assets 1.45% 1.35% 0.78% 0.59% 5.70% 4.40%
Return on average equity 26.27 24.54 21.83 17.51 19.00 32.30
Efficiency ratio 47.89 52.50 64.83 71.30 96.91 94.40
<CAPTION>
Other Total
---------------- -------------------
(dollar amounts in millions) 1995 1994 1995 1994
---------------- -------------------
<S> <C> <C> <C> <C>
EARNINGS SUMMARY
Net interest income (FTE) $ 46 $ 154 $ 1,321 $ 1,254
Provision for loan losses (19) (19) 87 56
Noninterest income 10 3 499 450
Noninterest expenses 60 49 1,086 1,042
Provision for income taxes 10 47 234 219
Net income 5 80 413 387
SELECTED AVERAGE BALANCES
Assets $9,281 $9,818 $34,129 $31,451
Loans 221 211 23,561 20,211
Deposits 2,237 2,134 21,655 21,325
Common equity 813 846 2,511 2,313
STATISTICAL DATA
Return on average assets 0.03% 0.82% 1.21% 1.23%
Return on average equity 0.63 9.49 16.46 16.74
Efficiency ratio 116.69 32.75 60.09 61.28
</TABLE>
* 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 following discussion provides information about each line of business,
along with an explanation of factors impacting 1995 performance.
The BUSINESS BANK is comprised of middle market lending, large corporate
banking, international financial services, customhouse brokerage 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, corporate and institutional trust, international
trade finance, letters of credit and foreign exchange management services.
Net income increased $50 million, or 29 percent, in 1995, principally
due to additional net interest income resulting from 21 percent average loan
growth, which was concentrated in middle market commercial loans.
The INDIVIDUAL BANK includes consumer lending, consumer deposit gathering,
mortgage loan origination and servicing, small business banking, 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 are provided to local companies with annual sales
under $5 million, 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).
Net income increased $51 million, or 38 percent, in 1995, due to higher
levels of net interest income in consumer lending and increased rate spreads for
small business banking. A wider interest margin also benefited net interest
income as the consumer portfolio became more weighted toward higher-yielding
bankcard loans and the spread between consumer deposit rates and market rates
expanded. The rise in net interest income was partially offset by an increase
in the provision for loan losses related to credit card loans.
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.
Net income remained flat from 1994 to 1995 as costs were incurred to
develop the products and services offered by these emerging businesses. For
example, the Corporation established a partnership with an investment management
and advisory firm in December 1994 and made recent acquisitions within the
insurance and investment banking industries. Future revenue growth and improved
profitability are expected as management continues to focus on providing high
quality investment services in an efficient manner.
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 declined $75 million, or 94 percent, in 1995 due to interest
margin compression. Loan growth in the Business Bank and Individual Bank, which
exceeded core deposit growth, was partially funded by short-term, rate-
sensitive liabilities. Margin compression resulted as interest rates rose during
the first half of the year. Such volatility in the interest rate environment is
absorbed in the Other category.
22
<PAGE> 10
Table 6: ANALYSIS OF INVESTMENT SECURITIES AND LOANS
<TABLE>
<CAPTION>
December 31
(in millions) 1995 1994 1993 1992 1991
- ---------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Investment securities available for sale
U.S. Government and agency securities $ 6,038 $ 2,674 $ 2,164 $ n/a $ n/a
State and municipal securities 371 -- -- n/a n/a
Other securities 450 232 158 n/a n/a
------- ------- ------- ------- -------
Total investment securities available for sale 6,859 2,906 2,322 n/a n/a
Investment securities held to maturity
U.S. Government and agency securities -- 4,462 3,232 3,824 3,542
State and municipal securities -- 422 513 693 889
Other securities -- 86 233 646 1,275
------- ------- ------- ------- -------
Total investment securities held to maturity -- 4,970 3,978 5,163 5,706
------- ------- ------- ------- -------
Total investment securities $ 6,859 $ 7,876 $ 6,300 $ 5,163 $ 5,706
======= ======= ======= ======= =======
Commercial loans $12,041 $10,634 $ 9,087 $ 8,213 $ 7,568
International loans
Government and official institutions 6 18 143 156 156
Banks and other financial institutions 583 660 671 323 148
Other 796 517 322 257 245
------- ------- ------- ------- -------
Total international loans 1,385 1,195 1,136 736 549
Real estate construction loans 641 414 437 471 521
Commercial mortgage loans 3,254 3,056 2,700 2,666 2,315
Residential mortgage loans 2,221 2,436 1,857 2,126 2,462
Consumer loans 4,570 4,215 3,674 3,836 3,654
Lease financing 330 259 209 167 200
------- ------- ------- ------- -------
Total loans $24,442 $22,209 $19,100 $18,215 $17,269
======= ======= ======= ======= =======
</TABLE>
n/a Not applicable
BALANCE SHEET AND CAPITAL FUNDS ANALYSIS
Total assets were $35.5 billion at year-end 1995, representing a $2.0 billion
increase from December 31, 1994. On an average basis, total assets increased to
$34.1 billion in 1995 from $31.5 billion in 1994. This increase was funded
primarily by purchased funds, which rose on average $2.1 billion.
EARNING ASSETS
The average balance of domestic commercial loans, which is comprised of
commercial and commercial mortgage loans, increased $1.9 billion, or 16
percent, from 1994. Real estate construction loans also rose on average $138
million, or 34 percent, in 1995. This growth, along with an increase of
approximately 11 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.
Average international loans increased $150 million, consisting largely
of loans originated to facilitate trade with limited cross-border risk. The
Corporation's cross-border exposure to any one country has not exceeded 0.75
percent of assets from 1993 to 1995.
Average residential mortgage loans increased $275 million, primarily due
to the acquisition of University and the origination of over $200 million of
residential mortgages late in 1994 which were retained in the loan portfolio.
Average consumer loans rose $774 million representing increases in all consumer
loan categories. Average bankcard loans rose $440 million, while average
installment and revolving credit loans increased $274 million and $60 million,
respectively. The bankcard portfolio continued to grow as a result of
promotional campaigns for bankcard products begun last year. In late 1995, the
Corporation sold $333 million of the bankcard portfolio. 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 revolving credit loan growth resulted from
efforts to encourage customers to activate current unsecured check credit
products.
Average investment securities declined to $7.6 billion in 1995, compared
to $8.0 billion in 1994, reflecting sales and runoff of securities primarily to
fund growth in higher-yielding loans. Average U.S. Government and agency
securities decreased $248 million, while average state and municipal securities
and average other securities declined $63 million and
23
<PAGE> 11
TABLE 7: LOAN MATURITIES AND INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
After One
December 31, 1995 Within But Within After
(in millions) One Year* Five Years Five Years Total
- --------------------- --------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Commercial loans $8,937 $2,523 $581 $12,041
Commercial mortgage loans 920 1,851 483 3,254
International loans 1,270 114 1 1,385
Real estate construction loans 386 210 45 641
------- ------ ------ -------
Total $11,513 $4,698 $1,110 $17,321
======= ====== ====== =======
Loans maturing after one year
Predetermined interest rates $2,149 $654
Floating interest rates 2,549 456
------ ------
Total $4,698 $1,110
====== ======
</TABLE>
* Includes demand loans, loans having no stated repayment schedule or maturity,
and overdrafts.
TABLE 8: ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
1995 1994 1993
--------------------- --------------------- ---------------------
Percent Percent Percent
December 31 Allocated of Total Allocated of Total Allocated of Total
(dollar amounts in millions) Allowance Loans Allowance Loans Allowance Loans
- ---------------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic
Commercial $118 49% $119 48% $123 48%
Real estate construction 5 3 6 2 4 2
Commercial mortgage 33 13 35 14 26 14
Residential mortgage 2 9 2 11 3 10
Consumer 84 19 60 19 60 19
Lease Financing 1 1 1 1 1 1
International 2 6 3 5 18 6
Unallocated 96 -- 100 -- 64 --
---- --- ---- --- ---- ---
Total $341 100% $326 100% $299 100%
==== === ==== === ==== ===
<CAPTION>
1992 1991
--------------------- --------------------
Percent Percent
December 31 Allocated of Total Allocated of Total
(dollar amounts in millions) Allowance Loans Allowance Loans
- ---------------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Domestic
Commercial $120 45% $81 44%
Real estate construction 9 2 12 3
Commercial mortgage 37 15 20 14
Residential mortgage 6 12 1 14
Consumer 59 21 55 21
Lease Financing 2 1 2 1
International 39 4 54 3
Unallocated 36 -- 54 --
---- --- ---- ---
Total $308 100% $279 100%
==== === ==== ===
</TABLE>
$46 million, respectively. The Corporation has 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 objective. The decline in U.S. Government and agency
securities principally resulted from paydowns, 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) and Brady bonds.
The decline in other securities during the year was mainly a result of calls,
maturities and payments received on CMOs.
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." This reclassification will increase the Corporation's flexibility
in managing interest rate risk and liquidity needs. At the date of transfer the
amortized cost of the held to maturity securities was $4.6 billion. The
after-tax net unrealized holding gain or loss on available for sale securities
is reported as a separate component of shareholders' equity and totaled a $4
million loss in 1995 and a $55 million loss in 1994. $6 million of the 1995 net
unrealized loss resulted from the redesignation of held to maturity securities.
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
24
<PAGE> 12
located in the United States. Federal funds sold provide a vehicle to control
the reserve position and serve correspondent banks, as well as offer earnings
opportunities. As a result of the emphasis on higher-yielding loans, short-
term investments declined on average $418 million during 1995.
Loans held for sale totaled $512 million in 1995 compared to $92
million in 1994. The year-end 1995 balance includes the receivable established
as a result of the 1995 sale of a portion of the bankcard portfolio having a
fair value of $320 million. This transaction was subsequently settled in early
1996.
TABLE 9: MATURITY DISTRIBUTION OF DOMESTIC CERTIFICATES OF DEPOSIT OF $100,000
AND OVER
<TABLE>
<CAPTION>
December 31
(in millions) 1995
- ----------------- ----
<S> <C>
Three months or less $1,143
Over three months to six months 307
Over six months to twelve months 291
Over twelve months 229
------
Total $1,970
======
</TABLE>
DEPOSITS AND BORROWED FUNDS
Total deposits rose to $23.2 billion at December 31, 1995, a 3 percent increase
from the prior year. Excluding the impact of acquisitions, deposits would have
increased less than 1 percent, reflecting the continued trend of interest-
sensitive customers investing in higher-yielding deposit alternatives,
including mutual funds. Total deposits increased less than 2 percent during
1994, excluding acquisitions.
The average mix of deposits also reflected the consumer's desire for
higher deposit interest rates. As interest rates rose during the year, average
certificates of deposits increased $677 million while more liquid savings and
money market deposit accounts declined on average $379 million. Foreign office
deposits also decreased slightly to $2.1 billion from $2.4 billion at December
31, 1994.
As the deposit base remained relatively flat, greater reliance on
medium- and long-term debt provided the necessary funding to support expanding
loan volumes. The interest rates associated with medium-term notes create a
funding source with maturities ranging from nine months 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 borrowings increased $400 million, representing the net
result of the issuance of $2.7 billion and the maturity of $2.3 billion of
notes during 1995. Further information on the Corporation's medium- and long-
term debt is included in Note 9 to the consolidated financial statements on
page 41.
CAPITAL
Shareholders' equity totaled $2.6 billion at December 31, 1995, a 9 percent
increase from $2.4 billion at year-end 1994. The increased equity represents
primarily earnings retention of $255 million, treasury shares totaling $77
million issued for acquisitions, $11 million of common stock issued for
employee stock plans, and a change of $51 million in unrealized losses on
available for sale securities. These items were partially offset by the
repurchase of 1.4 million shares into treasury and the purchase and retirement
of 4.2 million shares relating to the Metrobank acquisition.
The Corporation's capital ratios exceeded the minimum levels prescribed
by the Federal Reserve Board, as shown in the following table.
CAPITAL RATIOS
<TABLE>
<CAPTION>
December 31
(dollar amounts in millions) 1995 1994
- ---------------------------- ---- ----
<S> <C> <C>
Tier 1 (core) capital
Shareholders' equity $ 2,608 $ 2,392
Less: Goodwill and other
disallowed intangibles 250 214
Less: Unrealized gains and (losses) (4) (55)
------- -------
Total tier 1 capital $ 2,362 $ 2,233
------- -------
Tier 2 (supplemental) capital
Qualifying subordinated debt $ 767 $ 648
Eligible allowance for loan losses 341 326
------- -------
Total tier 2 capital $ 1,108 $ 974
------- -------
Total capital $ 3,470 $ 3,207
======= =======
Assets
Risk-weighted assets (net) $30,969 $27,466
Average quarterly assets (net) $34,381 $32,197
Risk-based ratios
Tier 1 (minimum-4.0%) 7.63% 8.13%
Total (minimum-8.0%) 11.21% 11.68%
Tier 1 leverage (minimum-3.0%) 6.87% 6.93%
</TABLE>
At December 31, 1995, all of the Corporation's banking subsidiaries
exceeded the minimum ratios required of a "well capitalized" institution as
defined in the final rule under the Federal Deposit Insurance Corporation
Improvement Act of 1991.
The common dividend payout ratio was 38.3 percent in 1995, compared to
37.5 percent in 1994. The board of directors currently targets a payout ratio
of 30 to 40 percent, but will continue to reassess this target in light of
changing market and industry conditions.
25
<PAGE> 13
TABLE 10: ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO--FTE
<TABLE>
<CAPTION>
Maturity+
---------------------------------------------------------------------------------
December 31, 1995 Within 1 Year 1-5 Years 5-10 Years After 10 Years
---------------- ----------------- ---------------- ----------------
(dollar amounts in millions) Amount Yield Amount Yield Amount Yield Amount Yield
- ---------------------------- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale
U.S. Treasury $ 68 5.94% $ 45 6.73% $ -- --% $ -- --%
U.S. Government
and agency 21 6.58 439 6.68 236 7.29 5,229 6.54
State and municipal
securities 64 11.05 208 10.31 74 10.03 25 10.55
Other bonds, notes
and debentures 60 14.33 119 7.47 50 8.37 156 7.08
Federal Reserve
Bank stock and
other investments* -- -- -- -- -- -- -- --
---- ----- ---- ---- ---- ---- ------ ----
Total investment
securities available
for sale $213 9.91% $811 7.73% $360 8.01% $5,410 6.58%
==== ===== ==== ==== ==== ==== ====== ====
<CAPTION>
Total
December 31, 1995 ----------------- Weighted Average
(dollar amounts in millions) Amount Yield Maturity Yrs./Mos.
- ---------------------------- ------ ----- ------------------
<S> <C> <C> <C>
Available for sale
U.S. Treasury $ 113 6.26% 1 / 1
U.S. Government
and agency 5,925 6.58 14 / 3
State and municipal
securities 371 10.40 3 / 11
Other bonds, notes
and debentures 385 8.50 11 / 2
Federal Reserve
Bank stock and
other investments* 65 -- --
------ ---- --------
Total investment
securities available
for sale $6,859 6.90% 12 / 10
====== ==== ========
</TABLE>
* Balances are excluded in the calculation of total yield.
+ Based on final contractual maturity.
TABLE 11: SUMMARY OF NONPERFORMING ASSETS AND PAST DUE LOANS
<TABLE>
<CAPTION>
December 31
(dollar amounts in millions) 1995 1994 1993 1992 1991
- ----------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Nonperforming assets
Nonaccrual loans
Commercial loans $ 87 $ 89 $ 71 $ 75 $ 62
International loans -- -- -- -- --
Real estate construction loans 7 17 19 28 47
Real estate mortgage loans (principally commercial) 37 56 64 120 101
-------- -------- -------- -------- --------
Total nonaccrual loans 131 162 154 223 210
Reduced-rate loans 3 2 5 1 --
-------- -------- -------- -------- --------
Total nonperforming loans 134 164 159 224 210
Other real estate 29 40 50 49 46
-------- -------- -------- -------- --------
Total nonperforming assets $ 163 $ 204 $ 209 $ 273 $ 256
======== ======== ======== ======== ========
Nonperforming loans as a percentage of total loans 0.55% 0.74% 0.83% 1.23% 1.22%
Nonperforming assets as a percentage of total loans
and other real estate 0.67% 0.92% 1.09% 1.50% 1.48%
Allowance for loan losses as a percentage of total
nonperforming assets 209% 160% 143% 113% 109%
Loans past due 90 days-domestic $ 57 $ 39 $ 46 $ 100 $ 54
</TABLE>
26
<PAGE> 14
ASSET QUALITY
NONPERFORMING ASSETS
The Corporation's accounting and classification policies regarding nonaccrual
loans reflect the importance of recognizing 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 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 GRAPH]
Nonperforming assets as a percent of total loans and other real estate
was 0.67 percent and 0.92 percent at year-end 1995 and 1994, 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, 1995 decreased 19 percent to $131 million from year-end
1994. The following table indicates the percentage of nonaccrual loan value to
original contractual value and demonstrates the conservative and prompt nature
of the corporate charge-off policy.
NONACCRUAL LOANS
<TABLE>
<CAPTION>
December 31
(dollar amounts in millions) 1995 1994
- ------------------------------ ---- ----
<S> <C> <C>
Carrying value $131 $162
Contractual value $181 $221
Carrying value as a percentage
of contractual value 72% 73%
</TABLE>
Other real estate owned (ORE) declined to $29 million as sales and
write-downs of properties exceeded ORE additions. Only one property over $2
million was added during 1995.
In addition to the nonaccrual loans and the loans past due 90 days or
more at December 31, 1995, there were loans totaling $254 million where
possible financial problems of borrowers caused management to have serious
doubts as to the ability of such borrowers to comply with the present
contractual repayment terms. These loans are specifically considered in
management's evaluation of the adequacy of the allowance for loan losses.
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, 1995. These loans totaled
$4.5 billion, or 18 percent of total loans at December 31, 1995, and included
floor plan loans to automobile dealers of $1,083 million and $986 million at
December 31, 1995 and 1994, respectively. All other industry concentrations
individually represented less than 5 percent of total loans at year-end 1995.
Automotive industry loans at year-end 1994 totaled approximately $3.6 billion,
or 16 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 $7 million on nonaccrual
status as of year-end 1995. 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 longtime
customers in local markets with satisfactory project completion experience. The
portfolio has approximately 856 loans, of which 80 percent have balances of
less than $1 million. The largest real estate construction loan has a balance
of approximately $10 million.
The commercial mortgage loan portfolio, 46 percent of which relates to
owner-occupied properties, also consists of loans to longtime customers. Of the
approximately 7,705 loans in the portfolio, 91 percent have balances under $1
million, and the largest loan is less than $28 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 the regulatory limits.
27
<PAGE> 15
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
<TABLE>
<CAPTION>
December 31, 1995 Real Estate Commercial
(in millions) Construction Mortgage
- ----------------- ------------ ----------
<S> <C> <C>
Michigan $ 221 $ 2,089
California 154 369
Texas 194 325
Illinois 4 156
Florida 32 82
Other 36 233
-------- ----------
Total $ 641 $ 3,254
======== ==========
</TABLE>
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 minimize 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 rate sensitive 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
gradually 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 1995 for a 200 basis point decline in short-term interest rates
identified approximately $20 million of net interest income at risk during
1996. If short-term interest rates rise 200 basis points, net interest income
could potentially decrease $36 million. The negative impact on net interest
income in both interest rate scenarios results from considering the effect of
changes in volume and core deposit elasticities, as well as rate changes.
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 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, before elasticity adjustments, is between an asset sensitive
position of 5 percent of earning assets and a liability sensitive position of
10 percent of earning assets. However, the elasticity adjustment made to core
deposits adds asset sensitivity to the balance sheet. Accordingly, on an
elasticity adjusted basis, the operating range allows for an asset sensitive
position of 10 percent of earning assets and a liability sensitive position of
5 percent of earning assets.
The table on page 29 shows the interest sensitivity gap as of year-end
1995 and 1994. The report reflects the contractual repricing and payment
schedules of assets and liabilities, including an estimate of all early loan
and security repayments
28
<PAGE> 16
TABLE 12: SCHEDULE OF RATE SENSITIVE ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Interest Sensitivity Period Interest Sensitivity Period
------------------------------- -------------------------------
Within Over Within Over
(dollar amounts in millions) One Year One Year Total One Year One Year Total
- --------------------------- -------- ------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks $ -- $ 2,028 $ 2,028 $ -- $ 1,823 $ 1,823
Short-term investments 736 14 750 487 34 521
Investment securities 2,678 4,181 6,859 3,173 4,703 7,876
Commercial loans
(including lease financing) 11,050 1,321 12,371 9,225 1,667 10,892
International loans 1,385 -- 1,385 1,182 13 1,195
Real estate related loans 3,611 2,505 6,116 3,748 2,159 5,907
Consumer loans 2,591 1,979 4,570 2,206 2,009 4,215
-------- -------- -------- ------- ------- --------
Total loans 18,637 5,805 24,442 16,361 5,848 22,209
Other assets 711 680 1,391 313 688 1,001
-------- -------- -------- ------- ------- --------
Total assets $ 22,762 $ 12,708 $ 35,470 $20,334 $13,096 $33,430
======== ======== ======== ======= ======= ========
LIABILITIES
Deposits
Noninterest-bearing $ 521 $ 5,059 $ 5,580 $ 470 $ 4,787 $ 5,257
NOW -- 1,770 1,770 57 1,777 1,834
Savings -- 2,204 2,204 -- 2,432 2,432
Money market 4,798 -- 4,798 4,565 -- 4,565
Certificates of deposit 5,289 1,400 6,689 4,494 1,417 5,911
Foreign office 2,125 1 2,126 2,433 -- 2,433
-------- -------- -------- ------- ------- --------
Total deposits 12,733 10,434 23,167 12,019 10,413 22,432
Short-term borrowings 4,674 -- 4,674 4,206 -- 4,206
Medium- and long-term debt 3,044 1,600 4,644 3,248 850 4,098
Other liabilities 62 315 377 (13) 315 302
-------- -------- -------- ------- ------- --------
Total liabilities 20,513 12,349 32,862 19,460 11,578 31,038
Shareholders' equity (4) 2,612 2,608 (55) 2,447 2,392
-------- -------- -------- ------- ------- --------
Total liabilities and shareholders' equity $20,509 $ 14,961 $ 35,470 $19,405 $14,025 $33,430
======== ======== ======== ======= ======= ========
Sensitivity impact of interest rate swaps $(3,875) $ 3,875 -- $(2,578) $ 2,578 --
-------- -------- -------- ------- ------- --------
Interest sensitivity gap (1,622) 1,622 -- (1,649) 1,649 --
Gap as a percentage of earning assets (5)% 5% -- (5)% 5% --
Sensitivity impact from elasticity adjustments (1) 1,407 (1,407) -- 1,258 (1,258) --
-------- -------- -------- ------- ------- --------
Interest sensitivity gap with elasticity adjustments $ (215) $ 215 -- $ (391) $ 391 --
Gap as a percentage of earning assets (1)% 1% -- (1)% 1% --
======== ======== ======== ======= ======= ========
</TABLE>
(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.
29
<PAGE> 17
which adds $1.4 billion of rate sensitivity to the 1995 year-end gap. In
addition, the schedule identifies the adjustment for the price elasticity on
certain core deposits.
The Corporation was asset sensitive for much of the first three quarters of
1995, and management anticipates material growth in asset sensitivity
throughout 1996. Initiatives to reduce this gap position, which began in the
third quarter, resulted in a one-year liability sensitive gap of $215 million,
or 1 percent of earning assets, as of December 31, 1995. This compares to a
$391 million liability sensitive gap, or 1 percent of earning assets, on
December 31, 1994. Management will continue to look at both on- and
off-balance sheet alternatives in the near term to manage the expected increase
in 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
<TABLE>
<CAPTION>
Interest Foreign
Rate Exchange
(in millions) Contracts Contracts Totals
- ------------------ --------- --------- ------
<S> <C> <C> <C>
Balances at December 31, 1993 $ 3,923 $ 86 $ 4,009
Additions 2,075 1,642 3,717
Maturities/amortizations (2,107) (1,605) (3,712)
------- ------- -------
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
======= ======= =======
</TABLE>
Note: The Corporation did not terminate any of the above risk management
derivative or foreign exchange contracts prior to maturity in 1995 and 1994.
Therefore, no deferred gains or losses associated with such events were
recorded in the consolidated balance sheets at December 31, 1995 and 1994.
At December 31, 1995 and 1994, the notional amount of risk management
interest rate swaps totaled $5,925 million and $3,643 million, respectively. The
fair value of risk management interest rate swaps at December 31, 1995 was a
positive $68 million, compared to a negative $234 million at December 31, 1994.
These off-balance sheet instruments represented 83 percent and 74 percent of
total derivative financial instruments and foreign exchange contracts, including
commitments, at year-end 1995 and 1994, respectively.
Interest rate swaps are utilized predominantly as asset and liability
management tools with the overall objective of managing the sensitivity of net
interest income to fluctuations in interest rates. To accomplish this objective,
interest rate swaps are used primarily to modify the interest rate
characteristics of certain assets and liabilities (for example, 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 permits the achievement of an optimal match
between the rate maturities of assets and their funding sources and, in the
process, reduces the exposure of net interest income to interest rate risk. For
the year ended December 31, 1995, risk management interest rate swaps generated
$2 million of net interest expense, compared to contributions of $29 million and
$32 million of net interest income for the years ended December 31, 1994 and
1993, respectively. Net interest expense resulted in 1995 due to rising interest
rates in 1994 and early 1995.
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,
1995. The swaps have been grouped by the assets and liabilities to which they
have been designated.
The notional amounts of generic interest rate swaps do not change over the
life of the contract, while the notional amounts of non-indexed amortizing swaps
generally decline on a straight-line basis until the stated maturity. Basis
swaps are interest rate swaps in which both payment streams are based on
variable rates (e.g., prime or Treasury bill rates and LIBOR). Index amortizing
swaps are interest rate swaps whose notional amount decreases at a rate that
varies with the level of a specified index in accordance with a predetermined
schedule. The notional amounts of these swaps are indexed to short-term interest
rates and generally decline more rapidly as interest rates fall and more slowly
as interest rates rise. As of December 31, 1995, index amortizing swaps had an
average expected life of approximately 2.4 years with a stated maturity that
averaged 4.5 years.
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, 1995 and
1994, were $473 million and $371 million, respectively. Further information
regarding risk management derivative financial instruments and foreign exchange
contracts is provided in Notes 8, 9 and 17 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 $4.5
billion medium-term note program which allows the Michigan and Illinois banks
to issue senior debt with maturities ranging between nine months and 15 years.
The Michigan bank can issue up to an additional
30
<PAGE> 18
TABLE 13: REMAINING EXPECTED MATURITY OF RISK MANAGEMENT INTEREST RATE SWAPS
<TABLE>
<CAPTION>
2001- Dec. 31
(amounts in millions) 1996 1997 1998 1999 2000 2014 Total 1994
- --------------------- ---- ---- ---- ---- ---- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VARIABLE RATE ASSET DESIGNATION:
Receive fixed swaps
Generic $ 50 $ -- $ -- $ -- $ -- $ -- $ 50 $ 50
Amortizing 16 84 100 -- -- -- 200 297
Index amortizing 868 1,373 484 343 288 332 3,688 1,936
Weighted average: (1)
Receive rate 6.20% 5.64% 6.14% 6.43% 5.91% 6.63% 6.02% 5.38%
Pay rate 5.82% 5.88% 5.84% 5.81% 5.76% 5.76% 5.84% 5.78%
------- ------- ----- ----- ----- ------ ------ ------
FIXED RATE ASSET DESIGNATION:
Generic pay fixed swaps $ 35 $ -- $ -- $ 2 $ -- $ -- $ 37 $ 185
Weighted average: (1)
Receive rate 5.77% --% --% 5.62% --% --% 5.76% 5.91%
Pay rate 7.05% --% --% 8.73% --% --% 7.14% 7.43%
------- ------- ----- ----- ----- ------ ------ ------
MEDIUM- AND LONG-TERM
DEBT DESIGNATION:
Generic receive fixed swaps $ 625 $ 50 $ -- $ -- $ -- $ 700 $1,375 $ 675
Weighted average: (1)
Receive rate 6.12% 9.35% --% --% --% 7.65% 7.01% 7.37%
Pay rate 5.75% 6.01% --% --% --% 5.82% 5.80% 5.73%
Generic pay fixed swaps $ 25 $ -- $ -- $ -- $ -- $ -- $ 25 $ 25
Weighted average: (1)
Receive rate 5.70% --% --% --% --% --% 5.70% 6.89%
Pay rate 8.28% --% --% --% --% --% 8.28% 8.28%
Basis swaps $ 550 $ -- $ -- $ -- $ -- $ -- $ 550 $ 475
Weighted average: (2)
Receive rate 5.76% --% --% --% --% --% 5.76% 6.01%
Pay rate 5.75% --% --% --% --% --% 5.75% 5.80%
------- ------- ----- ----- ----- ------ ------ ------
Total notional amount $ 2,169 $ 1,507 $ 584 $ 345 $ 288 $1,032 $5,925 $3,643
======= ======= ===== ===== ===== ====== ====== ======
</TABLE>
(1) Variable rates paid or received are based primarily on one-month and three-
month LIBOR rates paid or received at December 31, 1995.
(2) Variable rates paid are based on LIBOR at December 31, 1995 while variable
rates received are based on prime.
31
<PAGE> 19
$1 billion of short-term senior notes. At year-end 1995, unissued debt related
to the two programs totaled $1.4 billion. The board of directors has approved
two new funding sources, not yet implemented, which will allow the subsidiary
banks to issue as much as $9.5 billion of senior notes. These new programs
will replace the $4.5 billion medium-term note program. Liquid assets totaled
$9.6 billion at December 31, 1995. An additional $1.4 billion was available
from a collateralized borrowing account with the Federal Reserve Bank and
purchased funds, excluding certificates of deposit with maturities beyond one
year, approximated $8.5 billion at year-end 1995.
Another source of liquidity for the parent company is dividends from
its subsidiaries. As discussed in Note 16 to the consolidated financial
statements on page 44, subsidiary banks are subject to regulation and may be
limited in their ability to pay dividends or transfer funds to the holding
company. During 1996, the subsidiary banks can pay dividends of up to $279
million plus current net profits without prior regulatory approval. At December
31, 1995, total parent company assets, excluding the investment in
subsidiaries, were 63 percent of total liabilities.
CUSTOMER INITIATED AND OTHER DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN
EXCHANGE CONTRACTS
CUSTOMER INITIATED AND OTHER NOTIONAL ACTIVITY
<TABLE>
<CAPTION>
Interest Foreign
Rate Exchange
(in millions) Contracts Contracts Totals
- ---------------- --------- --------- ------
<S> <C> <C> <C>
Balances at December 31, 1993 $ 114 $ 224 $ 338
Additions 262 44,679 44,941
Maturities/amortizations (32) (44,400) (44,432)
Terminations (16) -- (16)
----- -------- --------
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
===== ======== ========
</TABLE>
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, 1995 and 1994, customer
initiated activity represented 10 percent and 17 percent, respectively, of
total derivative and foreign exchange contracts, including commitments. Refer
to Note 17 to the consolidated financial statements on page 44 for further
information regarding customer initiated and other derivative financial
instruments and foreign exchange contracts.
OTHER MATTERS
As disclosed in Note 18 to the consolidated financial statements on page 47, 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 State of Michigan has filed an appeal
which is still pending. Management believes that even if the summary judgment
is not upheld on appeal, the results of this action will not have a materially
adverse effect on the Corporation's consolidated financial position. However,
depending upon the amount of ultimate liability, if any, and the consolidated
results of operations in the year of final resolution, the legal action may
have a materially adverse effect on the consolidated results of operations in
that year.
32
<PAGE> 20
CONSOLIDATED BALANCE SHEETS: COMERICA INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31
(in thousands, except share data) 1995 1994
- --------------------------------- ----------- ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 2,028,375 $ 1,822,313
Interest-bearing deposits with banks 23,568 378,873
Federal funds sold and securities purchased under agreements to resell 203,798 46,000
Trading account securities 10,668 4,332
Loans held for sale 511,562 91,547
Investment securities available for sale 6,859,310 2,906,296
Investment securities held to maturity
(estimated fair value of $4,659,317 in 1994) -- 4,970,165
---------- ----------
Total investment securities 6,859,310 7,876,461
Commercial loans 12,041,009 10,633,808
International loans 1,384,814 1,195,328
Real estate construction loans 641,432 413,987
Commercial mortgage loans 3,254,041 3,056,337
Residential mortgage loans 2,221,359 2,436,445
Consumer loans 4,570,015 4,214,716
Lease financing 329,608 258,625
---------- ----------
Total loans 24,442,278 22,209,246
Less allowance for loan losses (341,344) (326,195)
---------- ----------
Net loans 24,100,934 21,883,051
Premises and equipment 455,002 437,757
Customers' liability on acceptances outstanding 21,135 33,632
Accrued income and other assets 1,255,522 855,936
----------- -----------
Total assets $35,469,874 $33,429,902
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits (noninterest-bearing) $ 5,579,536 $ 5,257,396
Interest-bearing deposits 15,461,213 14,741,438
Deposits in foreign offices 2,126,466 2,433,482
---------- ----------
Total deposits 23,167,215 22,432,316
Federal funds purchased and securities sold
under agreements to repurchase 3,206,612 2,594,189
Other borrowed funds 1,467,550 1,611,219
Acceptances outstanding 21,135 33,632
Accrued expenses and other liabilities 355,219 268,823
Medium- and long-term debt 4,644,416 4,097,943
---------- ----------
Total liabilities 32,862,147 31,038,122
Common stock--$5 par value
Authorized--250,000,000 shares
Issued--115,094,531 shares in 1995 and 119,294,531 shares in 1994 575,473 596,473
Capital surplus 408,644 525,052
Unrealized gains and losses on investment securities available for sale (4,141) (55,039)
Retained earnings 1,640,980 1,390,405
Less cost of common stock in treasury--490,704 shares
in 1995 and 2,382,333 shares in 1994 (13,229) (65,111)
----------- ----------
Total shareholders' equity 2,607,727 2,391,780
----------- -----------
Total liabilities and shareholders' equity $35,469,874 $33,429,902
=========== ===========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE> 21
CONSOLIDATED STATEMENTS OF INCOME: COMERICA INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
(in thousands, except per share data) 1995 1994 1993
- ------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $2,090,854 $1,577,329 $1,388,169
Interest on investment securities
Taxable 473,759 446,307 307,354
Exempt from federal income tax 26,189 30,645 40,124
---------- ---------- ----------
Total interest on investment securities 499,948 476,952 347,478
Trading account interest 227 70 640
Interest on federal funds sold and securities
purchased under agreements to resell 7,402 4,717 4,050
Interest on time deposits with banks 8,032 21,858 27,744
Interest on loans held for sale 7,461 10,998 14,772
---------- ---------- ----------
Total interest income 2,613,924 2,091,924 1,782,853
INTEREST EXPENSE
Interest on deposits 721,475 542,727 529,802
Interest on short-term borrowings
Federal funds purchased and securities
sold under agreements to repurchase 165,544 121,390 47,817
Other borrowed funds 135,667 78,546 41,216
Interest on medium- and long-term debt 288,990 147,942 62,719
Net interest rate swap (income) / expense 2,365 (28,808) (32,239)
---------- ---------- ----------
Total interest expense 1,314,041 861,797 649,315
---------- ---------- ----------
Net interest income 1,299,883 1,230,127 1,133,538
Provision for loan losses 86,500 56,000 69,000
---------- ---------- ----------
Net interest income after provision for
loan losses 1,213,383 1,174,127 1,064,538
NONINTEREST INCOME
Income from fiduciary activities 125,038 121,755 122,280
Service charges on deposit accounts 130,249 123,626 120,125
Customhouse broker fees 36,086 40,662 39,926
Revolving credit fees 36,248 24,743 22,880
Securities gains 11,748 3,461 1,978
Other noninterest income 159,356 135,943 142,486
---------- ---------- ----------
Total noninterest income 498,725 450,190 449,675
NONINTEREST EXPENSES
Salaries and employee benefits 562,159 548,607 528,658
Net occupancy expense 98,945 98,885 95,736
Equipment expense 67,872 67,319 62,401
FDIC insurance expense 23,817 44,276 44,593
Telecommunications expense 29,644 27,304 20,788
Merger, integration and restructuring charge -- 7,000 22,000
Other noninterest expenses 303,977 248,831 251,462
---------- ---------- ----------
Total noninterest expenses 1,086,414 1,042,222 1,025,638
---------- ---------- ----------
Income before income taxes 625,694 582,095 488,575
Provision for income taxes 212,328 194,853 147,937
---------- ---------- ----------
Net Income $ 413,366 $ 387,242 $ 340,638
========== ========== ==========
Net income applicable to common stock $ 413,366 $ 387,242 $ 340,596
========== ========== ==========
Net income per common share $3.54 $3.28 $2.85
Average common and common equivalent shares 116,894 118,160 119,569
Cash dividends declared on common stock $158,309 $145,098 $125,411
Dividends per common share $1.37 $1.24 $1.07
</TABLE>
See notes to consolidated financial statements.
34
<PAGE> 22
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY: COMERICA
INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Redeemable Unrealized Total
Preferred Common Capital Gains Retained Treasury Shareholders'
(in thousands, except share data) Stock Stock Surplus and (Losses) Earnings Stock Equity
- --------------------------------- ---------- -------- --------- ------------ ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1993 $ 37,605 $309,219 $538,097 $ -- $1,239,078 $ (28,862) $2,095,137
Net income for 1993 -- -- -- -- 340,638 -- 340,638
Cash dividends declared
Preferred stock -- -- -- -- (42) -- (42)
Common stock -- -- -- -- (125,411) -- (125,411)
Purchase of 4,720,117 shares
of common stock -- -- -- -- -- (128,848) (128,848)
Retirement of treasury stock -- (4,105) (17,730) -- (505) 22,340 --
Issuance of common stock under
employee stock plans and
for conversion of
debentures -- 3,780 3,118 -- (6,725) 13,616 13,789
Stock split -- 287,579 -- -- (287,579) -- --
Amortization of deferred
compensation -- -- 701 -- -- -- 701
Redemption of preferred stock (37,605) -- -- -- (4,174) -- (41,779)
Adjustment for change
in accounting method,
net of income taxes -- -- -- 27,473 -- -- 27,473
---------- -------- -------- -------- ---------- ---------- ----------
BALANCES AT DECEMBER 31, 1993 $ -- $596,473 $524,186 $ 27,473 $1,155,280 $(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 -- -- 373 -- (3,161) 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 $525,052 $(55,039) $1,390,405 $ (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 -- -- 227 -- (4,482) 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 $408,644 $ (4,141) $1,640,980 $ (13,229) $2,607,727
========== ======== ======== ======== ========== ========== ==========
</TABLE>
( ) Indicates deduction.
See notes to consolidated financial statements.
35
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS: COMERICA INCORPORATED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended December 31
(in thousands) 1995 1994 1993
- ---------------------- ------- ------- ------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 413,366 $ 387,242 $ 340,638
Adjustments to reconcile net income to
net cash provided by operating activities
Provision for loan losses 86,500 56,000 69,000
Depreciation 64,014 59,819 54,473
Net (increase) decrease in trading account securities (6,336) (732) 105,779
Net (increase) decrease in loans held for sale (420,015) 239,120 (95,955)
Net increase in accrued income receivable (26,749) (43,495) (2,888)
Net increase (decrease) in accrued expenses 96,645 (31,845) 15,967
Net amortization of intangibles 29,016 25,597 21,205
Funding for employee benefit plans (200,000) (59,719) (100,000)
Other, net (184,813) 72,004 (10,346)
----------- ---------- ----------
Total adjustments (561,738) 316,749 57,235
----------- ---------- ----------
Net cash provided by (used in) operating activities (148,372) 703,991 397,873
INVESTING ACTIVITIES
Net decrease in interest-bearing deposits with banks 363,870 647,600 295,042
Net (increase) decrease in federal funds sold and securities
purchased under agreements to resell (122,498) 1,045,789 (1,005,157)
Proceeds from sale of investment securities available for sale 103,531 3,001 --
Proceeds from maturity of investment securities available for sale 837,412 565,445 --
Purchases of investment securities available for sale (211,222) (1,150,178) --
Proceeds from maturity of investment securities held to maturity 788,620 1,429,966 3,316,794
Purchases of investment securities held to maturity (223,579) (2,197,840) (4,320,627)
Net increase in loans (other than loans purchased) (1,908,266) (2,224,057) (927,971)
Purchase of loans (48,349) (257,043) (23,868)
Fixed assets, net (62,334) (78,454) (79,305)
Net (increase) decrease in customers' liability on acceptances outstanding 13,097 4,580 (12,548)
Net cash provided by acquisitions 19,224 58,626 --
----------- ---------- ----------
Net cash used in investing activities (450,494) (2,152,565) (2,757,640)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 130,276 304,768 (249,639)
Net increase (decrease) in short-term borrowings 468,754 (1,056,522) 2,178,890
Net increase (decrease) in acceptances outstanding (13,097) (4,580) 12,548
Proceeds from issuance of medium- and long-term debt 2,960,000 3,550,000 1,005,000
Repayments and purchases of medium- and long-term debt (2,418,171) (912,613) (280,541)
Proceeds from issuance of common stock and other capital transactions 11,548 5,407 9,395
Purchase of common stock for treasury and retirement (178,656) (76,280) (128,848)
Redemption of preferred stock -- -- (41,779)
Dividends paid (155,726) (139,988) (124,306)
----------- ---------- ----------
Net cash provided by financing activities 804,928 1,670,192 2,380,720
----------- ---------- ----------
Net increase in cash and due from banks 206,062 221,618 20,953
Cash and due from banks at beginning of year 1,822,313 1,600,695 1,579,742
----------- ---------- ----------
Cash and due from banks at end of year $ 2,028,375 $1,822,313 $1,600,695
=========== ========== ==========
Interest paid $ 1,274,101 $ 862,563 $ 665,297
=========== ========== ==========
Income taxes paid $ 180,134 $ 171,851 $ 109,557
=========== ========== ==========
Noncash investing and financing activities
Loan transfers to other real estate $ 23,908 $ 26,598 $ 38,955
=========== ========== ==========
Conversion of debentures to equity $ -- $ -- $ 5,095
=========== ========== ==========
Treasury stock issued for acquisitions $ 77,100 $ 121,363 $ --
=========== ========== ==========
Loan transfers to investment securities $ -- $ 91,538 $ --
=========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
36
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS: COMERICA INCORPORATED AND
SUBSIDIARIES
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: the
Midwest (currently Michigan and Illinois), 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.
The historical consolidated financial statements have been restated to
include the accounts and results of operations for acquisitions accounted for
as pooling-of-interests combinations. For acquisitions of subsidiary banks
using the purchase method of accounting, the assets acquired and liabilities
assumed have been adjusted to fair market values at the date of acquisition,
and the resulting net discount or premium is being 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. 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.
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.
37
<PAGE> 25
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.
2. ACQUISITIONS
During the years ended December 31, 1995, 1994 and 1993 Comerica made
the following acquisitions:
Transactions accounted for as purchases:
<TABLE>
<CAPTION>
FMV of FMV of
Assets Liabilities Purchase Intangibles
(in millions) Acquired Assumed Price Recorded
- ------------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C>
During 1995
University Bank & Trust $ 491 $422 $ 69 $36
QuestStar Bank, N.A. 218 193 25 13
During 1994
Pacific Western Bancshares 1,029 908 121 70
Lockwood Banc Group 332 288 44 27
</TABLE>
Transactions accounted for using the pooling-of-interests method:
<TABLE>
<CAPTION>
Common
Shares Issued
-------------
<S> <C>
During 1993
NorthPark National Corporation 2,677,706
Sugar Creek National Bank 892,976
</TABLE>
The Corporation completed the following acquisition in January of 1996:
<TABLE>
<CAPTION>
Purchase
(in millions) Asset Size Price Method
- ------------- ---------- --------- --------
<S> <C> <C> <C>
Metrobank $1,200 $125 Purchase
</TABLE>
3. INVESTMENT SECURITIES
Information concerning investment securities as shown
in the consolidated balance sheets of the Corporation was
as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value
- -------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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
========== ======= ======= ==========
</TABLE>
Gross unrealized gains and losses were $13 million and $98 million,
respectively, at December 31, 1994 for securities available for sale. The
available for sale portfolio at December 31, 1994 was primarily U.S. Government
and agency securities.
38
<PAGE> 26
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
(in thousands) Cost Gains Losses Fair Value
- -------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Government and
agency securities $4,461,592 $ 5,538 $328,757 $4,138,373
State and municipal
securities 421,975 15,820 2,192 435,603
Other securities 86,598 308 1,565 85,341
---------- ------- -------- ----------
Total securities
held to maturity $4,970,165 $21,666 $332,514 $4,659,317
========== ======= ======== ==========
</TABLE>
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.
<TABLE>
<CAPTION>
December 31, 1995 Estimated
(in thousands) Cost Fair Value
- ----------------- ---------- ------------
<S> <C> <C>
Contractual maturity
Within one year $ 194,253 $ 194,744
Over one year to five years 365,760 378,079
Over five years to ten years 129,750 133,383
Over ten years 95,548 87,895
---------- ----------
Sub-total securities 785,311 794,101
Mortgage-backed securities 6,015,119 5,999,952
Equity and other non-debt securities 65,253 65,257
---------- ----------
Total securities
available for sale $6,865,683 $6,859,310
========== ==========
</TABLE>
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:
<TABLE>
<CAPTION>
Year Ended December 31 Available for Sale Held to Maturity
- ---------------------- ------------------ ----------------
(in thousands) 1995 1994 1995 1994
- --------------- --------- ------- ----- -----
<S> <C> <C> <C> <C>
Securities gains $11,729 $2,557 $456 $926
Securities losses (350) -- (87) (22)
------- ------ ---- ----
Total $11,379 $2,557 $369 $904
======= ====== ==== ====
</TABLE>
Assets, principally securities, carried at approximately $5.2 billion at
December 31, 1995, were pledged to secure public deposits (including State of
Michigan deposits of $33 million at December 31, 1995), 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.
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.
<TABLE>
<CAPTION>
December 31
(in thousands) 1995 1994
- -------------- ------ --------
<S> <C> <C>
Nonaccrual loans
Commercial loans $ 87,195 $ 88,514
International loans -- --
Real estate construction loans 6,578 16,941
Real estate mortgage loans
(principally commercial) 36,630 56,268
--------- ---------
Total 130,403 161,723
Reduced-rate loans 3,244 2,299
--------- ---------
Total nonperforming loans 133,647 164,022
Other real estate 29,384 40,462
--------- ---------
Total nonperforming assets $ 163,031 $ 204,484
========= =========
Loans past due 90 days $ 57,134 $ 39,161
========= =========
Gross interest income that would
have been recorded had the
nonaccrual and reduced-rate
loans performed in accordance
with original terms $ 18,925 $ 17,406
========= =========
Interest income recognized $ 3,427 $ 3,325
========= =========
</TABLE>
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.
Impaired loans averaged $148 million for the year ended December 31, 1995.
Of the $135 million period-end impaired loans, approximately $89 million
required an impairment allowance of $27 million in accordance with SFAS No. 114.
The remaining impaired loan balance represents loans for which the fair value
exceeded the recorded investment in the loan. Fifty-nine percent of the total
impaired loans 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.
39
<PAGE> 27
5. ALLOWANCE FOR LOAN LOSSES
An analysis of changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -------------- --------- -------- --------
<S> <C> <C> <C>
Balance at January 1 $326,195 $298,685 $308,007
Allowance of institutions and
loans purchased/sold 4,668 19,467 --
Loans charged off (119,028) (83,086) (110,504)
Recoveries on loans previously
charged off 43,009 35,129 32,182
-------- ------- -------
Net loans charged off (76,019) (47,957) (78,322)
Provision for loan losses 86,500 56,000 69,000
-------- ------- -------
Balance at December 31 $341,344 $326,195 $298,685
======== ======= =======
As a percent of total loans 1.40% 1.47% 1.56%
======== ======= =======
</TABLE>
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 the Corporation's 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, 1995 and 1994, the Corporation's exposure from loan
commitments and guarantees to companies related to the automotive industry
totaled $8.0 billion and $6.4 billion, respectively. Additionally, the
Corporation's commercial real estate loans, including commercial mortgages and
construction loans, totaled $3.9 billion in 1995 and $3.5 billion in 1994.
Approximately $1.8 billion of the Corporation's commercial real estate loans at
December 31, 1995 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.
7. PREMISES AND EQUIPMENT
A summary of premises and equipment at December 31 by major category follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- -------------- ---------- ----------
<S> <C> <C>
Land $ 61,144 $ 59,142
Buildings and improvements 402,569 372,988
Furniture and equipment 479,099 453,131
--------- --------
Total cost 942,812 885,261
Less accumulated depreciation and amortization (487,810) (447,504)
--------- --------
Net book value $ 455,002 $ 437,757
========== =========
</TABLE>
Other noninterest income for 1993 includes a $24 million gain on the
sale of land adjacent to an operations center.
Rental expense for leased properties and equipment amounted to $44
million in 1995 and 1994, and $42 million in 1993. Future minimum lease rentals
under noncancelable operating lease obligations are as follows:
<TABLE>
<CAPTION>
(in thousands)
- --------------
<S> <C>
1996 $ 39,632
1997 34,293
1998 31,369
1999 29,057
2000 25,122
2001 and later 157,829
</TABLE>
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.
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
Corporation entered into an interest rate swap contract that converts $100
million of short-term notes from 5.65% to the three-month London Interbank
Offered Rate (LIBOR) (5.69% at December 31, 1995). The following is a summary
of short-term borrowings for the two years ended December 31, 1995:
<TABLE>
<CAPTION>
Federal Funds Purchased
and Securities Sold Other
Under Agreements Borrowed
(in thousands) to Repurchase Funds
- -------------- ----------------------- --------
<S> <C> <C>
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%
December 31, 1994
Amount outstanding at year-end $2,594,189 $1,611,219
Weighted average interest rate at year-end 5.64% 4.96%
</TABLE>
At December 31, 1995, 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 1999.
40
<PAGE> 28
9. MEDIUM- AND LONG-TERM DEBT
Medium- and long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
- -------------- ---- ----
<S> <C> <C>
Parent Company
7.25% subordinated notes due 2007 $ 148,584 $ --
9.75% subordinated notes due 1999 74,692 74,601
10.125% subordinated debentures due 1998 74,800 74,721
---------- ----------
Total parent company 298,076 149,322
Subsidiaries
Subordinated notes:
8.375% subordinated notes due 2024 147,782 147,709
7.25% subordinated notes due 2002 148,931 148,777
6.875% subordinated notes due 2008 99,066 98,990
7.125% subordinated notes due 2013 148,000 147,890
FDIC subordinated note -- 4,500
---------- ----------
Total subordinated notes 543,779 547,866
Medium-term notes:
Floating rate based on Treasury bill indices 1,099,701 2,849,205
Floating rate based on Prime indices 550,000 299,988
Floating rate based on LIBOR indices 624,937 25,000
Fixed rate notes with interest rates ranging
from 5.65% to 7.50% 1,523,433 224,610
---------- ----------
Total medium-term notes 3,798,071 3,398,803
Notes payable maturing on dates ranging
from 1996 through 2015 4,490 1,952
---------- ----------
Total subsidiaries 4,346,340 3,948,621
---------- ----------
Total medium- and long-term debt $4,644,416 $4,097,943
========== ==========
</TABLE>
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 the effective rate identified in the
following table.
<TABLE>
<CAPTION>
Principal
Amount Rate in
of Debt Effect at
(in thousands) Converted Effective Rate 12/31/95
- --------------- --------- -------------- ---------
<S> <C> <C> <C>
Parent Company
7.25% subordinated notes $150,000 6-month LIBOR 5.56%
9.75% subordinated notes 50,000 3-month LIBOR 5.69
Subsidiaries
Subordinated notes:
8.375% subordinated notes 150,000 6-month LIBOR 5.56
7.25% subordinated notes 150,000 6-month LIBOR 5.56
6.875% subordinated notes 100,000 6-month LIBOR 5.56
7.125% subordinated notes 150,000 6-month LIBOR 5.56
Medium-term notes:
Floating rate based on Prime
indices 550,000 3-month LIBOR 5.69
5.65%, 5.70%, 5.85%, 6.45%
and 7.50% fixed rate notes 525,000 3-month LIBOR 5.69
5.95% fixed rate note 150,000 5.63% 5.63
</TABLE>
All subordinated notes and debentures, with maturities greater than one
year, qualify as tier 2 capital.
Under established medium-term senior bank note programs, certain of the
Corporation's bank subsidiaries may offer an aggregate principal amount of up to
$4.5 billion. The notes can be issued as fixed or floating rate notes and with
terms from nine months 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 minus 0.10%. The notes are due in 1996. The interest rates on
the floating rate medium-term notes based on the bank prime rate (8.50% at
December 31, 1995) ranged from prime minus 2.90% to prime minus 2.85% for notes
maturing in 1996. The interest rates on the floating medium-term notes based on
the three-month U.S. Treasury Bill bond equivalent rate (5.05% at December 31,
1995) ranged from the rate plus 0.17% to the rate plus 0.30% for notes maturing
from 1996 to 1997. The maturities of the fixed rate notes range from 1996 to
2000. The medium-term notes do not qualify as tier 2 capital and are not insured
by the FDIC. The board of directors approved two funding programs, not yet
implemented, which will allow the bank subsidiaries to issue up to $9.5 billion
of senior notes. These new programs will replace the $4.5 billion medium-term
senior bank note program currently in place. The principal maturities of medium-
and long-term debt are as follows:
<TABLE>
<CAPTION>
(in thousands)
- --------------
<S> <C>
1996 $2,648,691
1997 749,041
1998 274,437
1999 74,635
2000 199,770
2001 and later 697,842
</TABLE>
10. SHAREHOLDERS' EQUITY
The board of directors has authorized the repurchase of up to 8.9 million shares
of Comerica Incorporated common stock for general corporate purposes,
acquisitions and employee benefit plans. At December 31, 1995, 4.5 million
shares had been repurchased. In January of 1996, the Corporation issued 4.4
million shares to shareholders of Metrobank, in exchange for their outstanding
stock.
The redeemable preferred stock was redeemed on January 4, 1993 for $42
million.
At December 31, 1995, the Corporation had reserved 5.4 million shares of
common stock for issuance to employees under the Corporation's profit sharing
and long-term incentive plans.
41
<PAGE> 29
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 is computed by
assuming conversion of common stock equivalents and convertible subordinated
notes after eliminating the related after-tax interest expense. A computation
of earnings per share follows:
<TABLE>
<CAPTION>
Year Ended December 31
(in thousands, except per share data) 1995 1994 1993
- ------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Primary
Average shares outstanding 115,797 117,264 118,461
Common stock equivalent
Net effect of the assumed
exercise of stock options 1,097 896 1,108
-------- -------- --------
Primary average shares 116,894 118,160 119,569
======== ======== ========
Net income $413,366 $387,242 $340,638
Less preferred stock dividends -- -- 42
-------- -------- --------
Income applicable to common stock $413,366 $387,242 $340,596
======== ======== ========
Primary net income per share $3.54 $3.28 $2.85
Fully diluted
Average shares outstanding 115,797 117,264 118,461
Common stock equivalents
Net effect of the assumed
exercise of stock options 1,783 899 1,109
Average shares reserved for
conversion of convertible debt -- -- 166
-------- -------- --------
Fully diluted average shares 117,580 118,163 119,736
======== ======== ========
Net income $413,366 $387,242 $340,638
Less preferred stock dividends -- -- 42
-------- -------- --------
Income applicable to common stock 413,366 387,242 340,596
Interest on convertible debt less
related income tax effect -- -- 86
-------- -------- --------
Net income applicable to
common stock excluding above
interest (net of income tax effect) $413,366 $387,242 $340,682
======== ======== ========
Fully diluted net income per share $3.52 $3.28 $2.85
======== ======== ========
</TABLE>
12. LONG-TERM INCENTIVE PLAN
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
key executive and senior officers 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 accounts for employee stock-based compensation awards in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees."
<TABLE>
<CAPTION>
Number Exercise Price Range
------ -----------------------
<S> <C> <C> <C> <C>
Outstanding--December 31, 1992 3,271,570 $ 8.71 -- $ 31.06
Granted 754,740 32.38
Cancelled (139,943) 11.40 -- 32.38
Exercised (445,094) 8.71 -- 29.75
Expired --
--------- ------ --- -------
Outstanding--December 31, 1993 3,441,273 8.71 -- 32.38
Granted 887,350 27.00 -- 28.50
Cancelled (92,877) 14.75 -- 32.38
Exercised (247,726) 8.71 -- 29.75
Expired --
--------- ------ --- -------
Outstanding--December 31, 1994 3,988,020 8.71 -- 32.38
Granted 1,106,180 27.88 -- 31.50
Cancelled (220,741) 27.00 -- 32.38
Exercised (514,247) 8.71 -- 32.38
Expired --
Acquisition of
University Bank & Trust 153,119 13.23 -- 21.02
--------- ------ --- -------
Outstanding--December 31, 1995 4,512,331 $ 9.37 -- $32.38
========= ====== === =======
Exercisable--December 31, 1995 2,333,723
Available for grant--
December 31, 1995 30,820
</TABLE>
13. EMPLOYEE BENEFIT PLANS
The Corporation has either defined benefit or defined contribution pension plans
in effect for substantially all full-time employees. Staff expense includes
income of $1.0 million in 1995, income of $2.3 million in 1994 and expense of
$2.4 million in 1993 for defined benefit plans and expense of $243 thousand in
1995, $387 thousand in 1994 and $866 thousand in 1993 for defined contribution
plans. Benefits under the defined benefit pension 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.
Contributions under the defined contribution plans are made at the
discretion of the governing board and are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future.
Net periodic pension cost consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
- -------------- ---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned
during the period $ 8,857 $ 9,273 $11,101
Interest cost on projected
benefit obligation 29,231 27,043 28,541
Actual return on plan assets (93,650) 15,323 (44,094)
Net amortization and (deferral) 54,585 (53,926) 6,811
------- ------- -------
Net pension (income) expense $ (977) $ (2,287) $ 2,359
======= ======= =======
</TABLE>
42
<PAGE> 30
The following table sets forth the funded status of the defined benefit
pension plans and amounts recognized on the Corporation's balance sheet:
<TABLE>
<CAPTION>
December 31
(in thousands) 1995 1994
-------- --------
<S> <C> <C>
Accumulated benefit obligation
Vested $336,411 $269,889
Nonvested 16,970 13,753
-------- --------
Accumulated benefit obligation 353,381 283,642
Effect of projected future compensation levels 71,597 51,974
-------- --------
Projected benefit obligation 424,978 335,616
Plan assets at fair value 466,845 395,365
-------- --------
Plan assets in excess of projected benefit obligation 41,867 59,749
Unrecognized net gain due to past experience
different from that assumed and effects of
changes in assumptions (13,397) (27,422)
Unrecognized net assets being amortized
over 15 years (25,026) (29,859)
-------- --------
Prepaid pension $ 3,444 $ 2,468
======== ========
</TABLE>
Actuarial assumptions were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ---- ------
<S> <C> <C> <C>
Discount rate used in determining
projected benefit obligation 7.5% 8.5% 7.5%
Rate of increase in compensation levels 5% 5% 5%
Long-term rate of return on assets 8% 8% 8%-8.75%
</TABLE>
The Corporation adopted SFAS No. 106, "Employer's Accounting for
Postretirement Benefits Other Than Pensions" in 1993. This statement mandates
the accrual of the cost of providing postretirement benefits during the active
service period of the employee. The Corporation's previous practice was to
expense these benefits when paid. The Corporation's 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:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
------- -------- -------
<S> <C> <C> <C>
Service cost $ 383 $ 467 $ 335
Interest cost on accumulated
postretirement benefit obligation 6,652 6,698 7,234
Return on plan assets (2,453) -- --
Amortization of transition obligation 4,628 4,628 4,534
Net amortization and (deferral) (1,511) -- --
------- ------- -------
Net periodic postretirement
benefit cost $ 7,699 $11,793 $12,103
======= ======= =======
</TABLE>
The following table sets forth the status of the postretirement plan at
December 31:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
-------- --------
<S> <C> <C>
Retirees $ 68,477 $ 74,338
Other fully eligible plan participants 4,568 3,897
Other active plan participants 4,993 5,598
-------- ---------
Total accumulated postretirement
benefit obligation 78,038 83,833
Plan assets at fair value 77,453 --
-------- ---------
Funded status (585) (83,833)
Unrecognized net gain (12,110) (8,394)
Unrecognized transition obligation 78,360 82,988
-------- ---------
Postretirement benefit prepaid (liability) $ 65,665 $ (9,239)
======== =========
</TABLE>
Actuarial assumptions were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------ ------
<S> <C> <C> <C>
Discount rate used in determining
accumulated postretirement
benefit obligation 7.5% 8.5% 7.5%
Long-term rate of return on assets 6.7% -- --
</TABLE>
A 12 percent health care cost trend rate was projected for 1995, 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 $6 million at
December 31, 1995 and the aggregate of the service and interest cost components
by $490 thousand for the year ended December 31, 1995.
14. INCOME TAXES
The current and deferred components of income taxes were as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Currently payable
Federal $192,899 $176,322 $129,220
State, local and foreign 8,610 6,676 4,143
-------- -------- --------
201,509 182,998 133,363
Deferred federal, state and local 10,819 11,855 14,574
-------- -------- --------
Total $212,328 $194,853 $147,937
======== ======== ========
</TABLE>
There were $4.1 million, $1.2 million and $0.7 million of income taxes
provided on securities transactions in 1995, 1994 and 1993, respectively.
The principal components of deferred tax (assets) liabilities at December
31 were as follows:
<TABLE>
<CAPTION>
(in thousands) 1995 1994
-------- --------
<S> <C> <C>
Allowance for loan losses $(99,660) $(99,305)
Lease financing transactions 96,735 83,268
Allowance for depreciation 11,017 8,221
Deferred loan origination fees and costs (13,604) (14,268)
Investment securities available for sale (2,242) (29,605)
Employee benefits (8,514) (3,405)
Other temporary differences, net (23,728) (23,512)
--------- ---------
Total $(39,996) $(78,606)
========= =========
</TABLE>
43
<PAGE> 31
The provision for federal income taxes is less than that computed by
applying the federal statutory rate of 35 percent for the reasons in the
following analysis:
<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Tax based on statutory rate $218,993 $203,733 $171,001
Effect of tax-exempt interest income (12,538) (16,153) (18,145)
Other 5,873 7,273 (4,919)
-------- -------- ---------
Provision for income taxes $212,328 $194,853 $147,937
======== ======== =========
</TABLE>
15. TRANSACTIONS WITH RELATED PARTIES
The Corporation's 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, 1995, approximated $114 million at the
beginning and $105 million at the end of 1995. During 1995, new loans to
related parties aggregated $63 million and repayments totaled $72 million.
16. DIVIDENDS DECLARED BY 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 $279 million at January 1, 1996 plus current
years 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
$184 million in 1995, $293 million in 1994, and $311 million in 1993.
17. 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
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 reflected 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 30
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, 1995
and 1994.
44
<PAGE> 32
<TABLE>
<CAPTION>
Notional/
Contract Unrealized Unrealized Fair
(in millions) Amount Gains Losses Value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
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
====== ==== ===== =====
December 31, 1994
Risk management
Interest rate contracts:
Swaps $3,643 $ 4 $(238) $(234)
Caps purchased 50 -- -- --
Caps written 198 -- (1) (1)
------ ---- ----- -----
Total interest rate
contracts 3,891 4 (239) (235)
Foreign exchange
contracts:
Spot and forwards 98 -- (1) (1)
Swaps 25 -- -- --
------ ---- ----- -----
Total foreign
exchange contracts 123 -- (1) (1)
------ ---- ----- -----
Total risk management $4,014 $ 4 $(240) $(236)
====== ==== ===== =====
</TABLE>
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.
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, 1995 and 1994, bilateral collateral agreements with counterparties
covered 82 percent and 77 percent, respectively, of the notional amount of
interest rate derivative contracts. These agreements are instrumental in
reducing credit risk because they provide for the exchange of marketable
investment securities to secure amounts due on contracts in an unrealized gain
position. In addition, as of December 31, 1995, master netting arrangements
were 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.
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 both years
ended December 31, 1995 and 1994, unrealized gains and unrealized losses on
customer initiated and other foreign exchange contracts averaged $6 million and
$5 million, respectively. These contracts also generated $7 million and $5
million of noninterest income for the years ended December 31, 1995 and 1994,
respectively. Average positive and negative fair values and income related to
customer initiated and other interest rate contracts were not material for both
1995 and 1994.
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, 1995
and 1994.
<TABLE>
<CAPTION>
Notional/
Contract Unrealized Unrealized Fair
(in millions) Amount Gains Losses Value
---------- ---------- ---------- -----
<S> <C> <C> <C> <C>
December 31, 1995
Customer initiated and other
interest rate contracts:
Caps written $360 $ -- $-- $--
Swaps 3 -- -- --
---- ---- --- ---
Total interest rate
contracts 363 -- -- --
Foreign exchange
contracts:
Spot, forward, futures
and options 320 5 (5) --
---- ---- --- ---
Total customer
initiated and other $683 $ 5 $(5) $--
==== ==== === ===
December 31, 1994
Customer initiated and other
interest rate contracts:
Caps written $321 $ -- $(1) $(1)
Swaps 7 -- -- --
---- ---- --- ---
Total interest rate
contracts 328 -- (1) (1)
Foreign exchange
contracts:
Spot, forward, futures
and options 503 5 (4) 1
---- ---- --- ---
Total customer
initiated and other $831 $ 5 $(5) $--
==== ==== === ===
</TABLE>
45
<PAGE> 33
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. The
Corporation's swap agreements are structured such that all variable payments
are based primarily on one-month and three-month LIBOR. These instruments are
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.
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, 1995 and 1994.
Commitments to purchase investment securities with settlement terms of up to 60
days are executed to secure certain rates on primarily U.S. Government and
agency securities. No such commitments were outstanding at year-end 1995 and
1994. Commitments to purchase and sell municipal bond securities totaled $30
million and $1 million at December 31, 1995 and 1994, respectively. At December
31, 1995 and 1994, $147 million and $77 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 and $1.9 billion at December 31, 1995 and 1994, respectively. 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.
<TABLE>
<CAPTION>
(in millions) 1995 1994
------- --------
<S> <C> <C>
Unused commitments to extend credit $18,622 $16,955
Standby letters of credit and financial guarantees 1,925 1,487
Commercial letters of credit 167 509
</TABLE>
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, 1995 and 1994,
included $4 billion and $5 billion, respectively, of variable and fixed rate
revolving credit commitments. Other unused loan commitments, primarily variable
rate, totaled $15 billion at December 31, 1995 and $12 billion at December 31,
1994.
46
<PAGE> 34
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
$758 million and $683 million at December 31, 1995 and 1994, respectively. The
remaining standby letters of credit and financial guarantees, which mature
within one year, totaled $1,167 million and $804 million at December 31, 1995
and 1994, respectively. Commercial letters of credit are issued to finance
foreign or domestic trade transactions.
18. 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 denied the Attorney General's motion for summary judgment. The
Attorney General has filed an appeal to the Sixth Circuit Court of Appeals,
which is still pending.
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.
19. 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,
1995 and 1994, the Federal Reserve balances were $575 million and $562 million,
respectively.
20. 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 and loan servicing rights, 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.
47
<PAGE> 35
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.
Customers' liability on acceptances outstanding: The carrying amount
approximates the estimated fair value.
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, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
Carrying Estimated Carrying Estimated
(in millions) Amount Fair Value Amount Fair Value
- ------------- -------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and short-term
investments $ 2,255 $ 2,255 $ 2,247 $ 2,247
Trading account securities 11 11 4 4
Loans held for sale 512 513 92 92
Investment securities
available for sale 6,859 6,859 2,906 2,906
Investment securities held
to maturity -- -- 4,970 4,659
Commercial loans 12,041 11,957 10,634 10,448
International loans 1,385 1,383 1,195 1,183
Real estate construction
loans 641 637 414 406
Commercial mortgage
loans 3,254 3,233 3,056 2,983
Residential mortgage
loans 2,221 2,261 2,436 2,346
Consumer loans 4,570 4,468 4,215 4,025
Lease financing 330 333 259 251
------- ------ ------ ------
Total loans 24,442 24,272 22,209 21,642
Less allowance for
loan losses (341) -- (326) --
------- ------ ------ ------
Net loans 24,101 24,272 21,883 21,642
Customers' liability on
acceptances outstanding 21 21 34 34
LIABILITIES
Demand deposits
(noninterest-bearing) 5,580 5,580 5,257 5,257
Interest-bearing deposits 15,461 15,487 14,742 14,731
Deposits in foreign offices 2,126 2,126 2,433 2,433
------- ------ ------ ------
Total deposits 23,167 23,193 22,432 22,421
Short-term borrowings 4,674 4,674 4,206 4,206
Acceptances outstanding 21 21 34 34
Medium- and
long-term debt 4,644 4,724 4,098 4,046
OFF-BALANCE SHEET
FINANCIAL INSTRUMENTS
Derivative financial
instruments and foreign
exchange contracts
Risk management:
Unrealized gains -- 117 -- 4
Unrealized losses -- (43) -- (240)
Customer initiated
and other:
Unrealized gains 5 5 5 5
Unrealized losses (5) (5) (5) (5)
Credit-related financial
instruments -- (9) -- (13)
</TABLE>
48
<PAGE> 36
21. Parent Company Financial Statements
<TABLE>
<CAPTION>
BALANCE SHEETS--Comerica Incorporated
December 31 (in thousands, except share data) 1995 1994
---------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 292 $ 2,041
Time deposits with subsidiary bank 130,800 89,600
Investment securities available for sale 13,231 6,946
Investment in subsidiaries, principally banks 2,754,395 2,423,918
Premises and equipment 54,566 58,967
Other assets 49,873 41,931
---------- ----------
Total assets $3,003,157 $2,623,403
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt $ 298,076 $ 149,322
Other borrowed funds 1,101 --
Advances from nonbanking subsidiaries 3,759 7,823
Other liabilities 92,494 74,478
---------- ----------
Total liabilities 395,430 231,623
Common stock--$5 par value
Authorized--250,000,000 shares
Issued--115,094,531 shares in 1995 and 119,294,531 shares in 1994 575,473 596,473
Capital surplus 408,644 525,052
Unrealized gains and losses on investment securities available for sale (4,141) (55,039)
Retained earnings 1,640,980 1,390,405
Less cost of common stock in treasury--490,704 shares
in 1995 and 2,382,333 shares in 1994 (13,229) (65,111)
---------- ----------
Total shareholders' equity 2,607,727 2,391,780
---------- ----------
Total liabilities and shareholders' equity $3,003,157 $2,623,403
========== ==========
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF INCOME--Comerica Incorporated
Year Ended December 31 (in thousands) 1995 1994 1993
-------- --------- ---------
<S> <C> <C> <C>
INCOME
Income from subsidiaries
Dividends from subsidiaries $183,700 $293,390 $312,148
Interest on receivables from subsidiaries -- -- 3,303
Other interest income 7,113 8,127 1,630
Intercompany management fees 293,292 267,123 211,351
Other interest income -- 171 51
Other noninterest income 2,680 779 24,818
-------- -------- --------
Total income 486,785 569,590 553,301
EXPENSES
Interest on commercial paper -- -- 13
Interest on long-term debt 19,948 15,076 18,529
Net interest rate swap income (785) -- --
Interest on advances from subsidiaries 243 198 193
Salaries and employee benefits 127,261 123,924 128,509
Occupancy expense 22,778 18,570 8,515
Equipment expense 25,600 25,649 23,608
Merger, integration and restructuring charge -- 2,363 22,000
Other noninterest expenses 76,319 68,185 60,305
-------- -------- --------
Total expenses 271,364 253,965 261,672
-------- -------- --------
Income before income taxes and equity
in undistributed net income of subsidiaries 215,421 315,625 291,629
Income tax expense (credit) 10,705 7,058 (6,550)
-------- -------- --------
204,716 308,567 298,179
Equity in undistributed net income of
subsidiaries, principally banks 208,650 78,675 42,459
-------- -------- --------
NET INCOME $413,366 $387,242 $340,638
======== ======== ========
</TABLE>
49
<PAGE> 37
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS--Comerica Incorporated
Year Ended December 31 (in thousands) 1995 1994 1993
--------- --------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 413,366 $ 387,242 $ 340,638
Adjustments to reconcile net income to
net cash provided by operating activities
Undistributed earnings of
subsidiaries, principally banks (208,650) (78,675) (42,459)
Depreciation 20,447 19,784 17,658
Merger, integration and restructuring charge (6,078) (12,380) 5,414
Net amortization of intangibles 443 583 1,207
Other, net 15,940 10,480 (21,962)
--------- --------- ----------
Total adjustments (177,898) (60,208) (40,142)
--------- --------- ----------
Net cash provided by operating activities 235,468 327,034 300,496
INVESTING ACTIVITIES
Net decrease in receivables from subsidiaries -- -- 100,000
Net decrease in securities purchased from
bank subsidiary under agreements to resell -- -- 16,538
Proceeds from maturities of investment securities available for sale 499 15,157 --
Purchase of investment securities available for sale (6,097) (22,818) --
Proceeds from maturity of investment securities
held to maturity -- 7,507 33,548
Purchase of investment securities held to maturity -- -- (16,549)
Proceeds from sales of fixed assets and other real estate 3,439 1,638 13,633
Purchases of fixed assets (16,413) (30,226) (58,086)
Net (increase) decrease in bank time deposits (41,200) 7,600 26,400
Capital transactions with subsidiaries (1,400) (97,647) (4,620)
--------- --------- ----------
Net cash provided by (used in) investing activities (61,172) (118,789) 110,864
FINANCING ACTIVITIES
Net increase (decrease) in advances from subsidiaries (4,064) 3,546 (7,464)
Proceeds from issuance of long-term debt 210,000 -- --
Repayments and purchases of long-term debt (59,147) -- (111,008)
Net decrease in short-term borrowings -- -- (8,502)
Proceeds from issuance of common stock
and other capital transactions 11,548 5,407 9,395
Purchase of common stock for treasury and retirement (178,656) (76,280) (128,848)
Redemption of preferred stock -- -- (41,779)
Dividends paid (155,726) (139,988) (124,306)
--------- --------- ----------
Net cash used in financing activities (176,045) (207,315) (412,512)
--------- --------- ----------
Net increase (decrease) in cash on deposit at bank subsidiary (1,749) 930 (1,152)
Cash on deposit at bank subsidiary at beginning of year 2,041 1,111 2,263
--------- --------- ----------
Cash on deposit at bank subsidiary at end of year $ 292 $ 2,041 $ 1,111
========= ========= ==========
Interest paid $ 15,623 $ 15,104 $ 18,652
========= ========= ==========
Income taxes recovered $ 3,275 $ 4,743 $ 12,191
========= ========= ==========
Noncash investing and financing activities
Conversion of debentures to equity $ -- $ -- $ 5,095
========= ========= ==========
Treasury stock issued for acquisition $ 77,100 $ 121,363 $ --
========= ========= ==========
</TABLE>
50
<PAGE> 38
22. 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.
<TABLE>
<CAPTION>
1995
-------------------------------------------------
(in thousands, Fourth Third Second First
except per share data) Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
1994
-------------------------------------------------
(in thousands, Fourth Third Second First
except per share data) Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income $581,538 $540,934 $514,057 $455,395
Interest expense 269,255 227,935 199,503 165,104
Net interest income 312,283 312,999 314,554 290,291
Provision for loan losses 12,000 14,000 15,000 15,000
Securities gains 1,098 1,581 358 424
Noninterest income
(excluding securities gains) 116,803 110,578 110,754 108,594
Noninterest expenses 274,245 258,636 260,562 248,779
Net income 96,597 100,604 99,178 90,863
Net income per share $0.82 $0.84 $0.83 $0.79
</TABLE>
51
<PAGE> 39
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.
/s/ EUGENE A. MILLER
Eugene A. Miller
Chairman and Chief Executive Officer
/s/ RALPH W. BABB JR.
Ralph W. Babb Jr.
Executive Vice President and Chief Financial Officer
/s/ ARTHUR W. HERMANN
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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Detroit, Michigan
January 16, 1996
52
<PAGE> 40
Historical Review-Average Balance Sheets: Comerica Incorporated and
Subsidiaries
<TABLE>
<CAPTION>
Consolidated Financial Information
(in millions) 1995 1994 1993 1992 1991
- ---------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Assets
Cash and due from banks $ 1,500 $ 1,532 $ 1,490 $ 1,322 $ 1,201
Interest-bearing deposits with banks 126 552 814 1,017 1,413
Federal funds sold and securities
purchased under agreements to resell 124 116 135 399 454
Trading account securities 5 5 12 78 53
Loans held for sale 96 150 232 196 92
Investment securities 7,625 8,004 5,512 5,373 5,740
Commercial loans 11,302 9,598 8,473 7,753 7,359
International loans 1,257 1,107 897 710 501
Real estate construction loans 541 403 441 503 530
Commercial mortgage loans 3,157 2,916 2,629 2,368 2,190
Residential mortgage loans 2,450 2,175 1,979 2,297 2,438
Consumer loans 4,569 3,795 3,697 3,625 3,427
Lease financing 285 217 191 191 177
------- ------- ------- ------- -------
Total loans 23,561 20,211 18,307 17,447 16,622
Less allowance for loan losses (340) (322) (311) (291) (275)
------- ------- ------- ------- -------
Net loans 23,221 19,889 17,996 17,156 16,347
Accrued income and other assets 1,432 1,203 1,045 969 1,065
------- ------- ------- ------- -------
Total assets $34,129 $31,451 $27,236 $26,510 $26,365
======= ======= ======= ======= =======
Liabilities and Shareholders' Equity
Demand deposits (noninterest-bearing) $ 4,767 $ 4,700 $ 4,380 $ 3,796 $ 3,417
Interest-bearing deposits 15,046 14,809 15,035 15,449 15,933
Deposits in foreign offices 1,842 1,816 1,306 1,668 1,435
------- ------- ------- ------- -------
Total deposits 21,655 21,325 20,721 20,913 20,785
Federal funds purchased and securities sold
under agreements to repurchase 2,816 2,817 1,586 1,553 1,530
Other borrowed funds 2,313 2,002 1,432 1,308 1,527
Accrued expenses and other liabilities 324 286 274 327 421
Medium- and long-term debt 4,510 2,708 1,087 414 323
------- ------- ------- ------- -------
Total liabilities 31,618 29,138 25,100 24,515 24,586
Shareholders' equity 2,511 2,313 2,136 1,995 1,779
------- ------- ------- ------- -------
Total liabilities and shareholders' equity $34,129 $31,451 $27,236 $26,510 $26,365
======= ======= ======= ======= =======
</TABLE>
53
<PAGE> 41
Historical Review-Statements of Income: Comerica Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Financial Information
(in millions, except per share data) 1995 1994 1993 1992 1991
- ------------------------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $ 2,091 $ 1,577 $ 1,388 $ 1,445 $ 1,634
Interest on investment securities
Taxable 474 446 307 356 437
Exempt from federal income tax 26 31 40 55 62
-------- -------- -------- -------- --------
Total interest on investment securities 500 477 347 411 499
Trading account interest -- -- 1 3 3
Interest on federal funds sold and securities
purchased under agreements to resell 7 5 4 15 25
Interest on time deposits with banks 8 22 28 45 99
Interest on loans held for sale 8 11 15 14 8
-------- -------- -------- -------- --------
Total interest income 2,614 2,092 1,783 1,933 2,268
Interest Expense
Interest on deposits 721 543 530 707 1,033
Interest on short-term borrowings
Federal funds purchased and securities
sold under agreements to repurchase 166 121 47 53 86
Other borrowed funds 136 79 41 46 86
Interest on medium- and long-term debt 289 148 63 30 28
Net interest rate swap (income) / expense 2 (29) (32) (24) (15)
-------- -------- -------- -------- --------
Total interest expense 1,314 862 649 812 1,218
-------- -------- -------- -------- --------
Net interest income 1,300 1,230 1,134 1,121 1,050
Provision for loan losses 87 56 69 111 105
-------- -------- -------- -------- --------
Net interest income after provision for loan losses 1,213 1,174 1,065 1,010 945
Noninterest Income
Income from fiduciary activities 125 122 122 114 105
Service charges on deposit accounts 130 124 120 113 103
Customhouse broker fees 36 41 40 38 36
Revolving credit fees 36 24 23 22 22
Securities gains 12 3 2 6 5
Other noninterest income 160 136 142 106 104
-------- -------- -------- -------- --------
Total noninterest income 499 450 449 399 375
Noninterest Expenses
Salaries and employee benefits 562 549 529 516 500
Net occupancy expense 99 99 96 86 83
Equipment expense 68 68 62 57 54
FDIC insurance expense 24 44 44 45 41
Telecommunications expense 29 27 21 17 16
Merger, integration and restructuring charge -- 7 22 128 --
Other noninterest expenses 304 248 251 231 241
-------- -------- -------- -------- --------
Total noninterest expenses 1,086 1,042 1,025 1,080 935
-------- -------- -------- -------- --------
Income before income taxes 626 582 489 329 385
Provision for income taxes 213 195 148 89 105
-------- -------- -------- -------- --------
Net Income $ 413 $ 387 $ 341 $ 240 $ 280
======== ======== ======== ======== ========
Net income applicable to common stock $ 413 $ 387 $ 341 $ 237 $ 277
======== ======== ======== ======== ========
Net income per common share $3.54 $3.28 $2.85 $1.99 $2.41
Average common and common equivalent
shares (in thousands) 116,894 118,160 119,569 119,113 114,713
Cash dividends declared on common stock $158 $145 $125 $108 $93
Dividends per common share $1.37 $1.24 $1.07 $0.96 $0.92
</TABLE>
54
<PAGE> 42
Historical Review-Statistical Data: Comerica Incorporated and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Financial Information 1995 1994 1993 1992 1991
- ---------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Average Rates (Fully Taxable Equivalent Basis)
Interest-bearing deposits with banks 6.39% 3.96% 3.41% 4.43% 7.01%
Federal funds sold and securities purchased
under agreements to resell 5.97 4.06 2.99 3.67 5.58
Trading account securities 6.51 1.67 6.76 3.99 6.75
Loans held for sale 7.75 7.31 6.38 7.34 8.66
Investment securities available for sale 6.50 5.50 n/a n/a n/a
Investment securities held to maturity 6.85 6.55 6.70 8.16 9.25
------- ------- ------- ------- -------
Total investment securities 6.67 6.15 6.70 8.16 9.25
Commercial loans 8.75 7.38 6.56 6.98 9.01
International loans 7.06 5.58 5.04 5.70 8.14
Real estate construction loans 9.52 7.85 6.63 7.00 8.69
Commercial mortgage loans 9.40 8.52 8.10 8.54 9.99
Residential mortgage loans 7.80 7.46 8.57 9.53 10.01
Consumer loans 10.10 9.44 9.98 11.03 12.10
Lease financing 6.65 6.48 7.34 8.89 9.66
------- ------- ------- ------- -------
Total loans 8.90 7.84 7.62 8.34 9.89
------- ------- ------- ------- -------
Interest income as a percent of earning assets 8.35 7.28 7.25 8.04 9.48
Domestic deposits 4.05 3.14 3.24 4.13 5.93
Deposits in foreign offices 6.07 4.28 3.29 4.11 6.14
------- ------- ------- ------- -------
Total interest-bearing deposits 4.27 3.26 3.24 4.13 5.95
Federal funds purchased and securities sold
under agreements to repurchase 5.88 4.31 3.01 3.44 5.60
Other borrowed funds 5.87 3.92 2.88 3.52 5.68
Medium- and long-term debt 6.41 5.46 5.77 7.18 8.56
------- ------- ------- ------- -------
Interest expense as a percent of
interest-bearing sources 4.95 3.57 3.18 3.98 5.87
------- ------- ------- ------- -------
Interest rate spread 3.40 3.71 4.07 4.06 3.61
Impact of net noninterest-bearing
sources of funds 0.79 0.61 0.58 0.67 0.88
------- ------- ------- ------- -------
Net interest margin as percent of
earning assets 4.19 4.32 4.65 4.73 4.49
Return on Average Common
Shareholders' Equity 16.46 16.74 15.94 12.10 15.90
Return on Average Assets 1.21 1.23 1.25 0.91 1.06
Efficiency Ratio 60.09 61.28 63.68 69.61 63.88
Per Share Data
Book value at year-end $22.75 $20.46 $18.99 $17.38 $16.30
Market value at year-end 40.00 24.38 26.63 32.00 26.88
Market value--high and low for year 43-24 31-24 35-25 33-26 27-14
Other Data
Number of banking offices 395 398 385 427 412
Number of employees (full-time equivalent) 12,876 13,077 12,670 13,322 13,836
</TABLE>
55
<PAGE> 43
OFFICERS AND DIRECTORS: COMERICA INCORPORATED
Management Policy
Committee
EUGENE A. MILLER
Chairman and Chief Executive Officer,
Comerica Incorporated and Comerica Bank
Mr. Miller joined Comerica in 1955 when it was known as The Detroit Bank. He
rose to chairman, president and chief executive officer of Comerica
Incorporated and Comerica Bank prior to the 1992 merger of Comerica
Incorporated and Manufacturers National Corporation. Mr. Miller served as
president and chief operating officer of Comerica Incorporated and chairman and
chief executive officer of Comerica Bank following the merger. He became
chairman and chief executive officer of Comerica Incorporated in July 1993.
MICHAEL T. MONAHAN
President,
Comerica Incorporated and Comerica Bank
Mr. Monahan began his banking career in 1960 with Manufacturers Bank. He rose
to president and chief operating officer of Manufacturers National Corporation
and Manufacturers Bank, N.A. prior to the merger with Comerica. He served as
president and chief operating officer of Comerica Bank following the merger and
in 1993 became president of Comerica Incorporated.
JOHN D. LEWIS
Vice Chairman,
Comerica Incorporated and Comerica Bank
Mr. Lewis joined Comerica in 1970. He has held a variety of leadership
positions in the Corporation. Mr. Lewis served as executive vice president of
Comerica Incorporated following the 1992 merger. In 1994 he was named vice
chairman of the Corporation and in 1995 also was named vice chairman of
Comerica Bank.
RALPH W. BABB JR.
Executive Vice President
and Chief Financial Officer,
Comerica Incorporated
Mr. Babb joined Comerica as chief financial officer in 1995. He previously was
vice chairman of Mercantile Bancorporation, Inc.
JOHN R. BERAN
Executive Vice President
and Chief Information Officer,
Comerica Incorporated
Mr. Beran joined Comerica as chief information officer in 1995. He previously
was president and chief executive officer of Money Access Service.
JOSEPH J. BUTTIGIEG III
Executive Vice President,
Comerica Bank
Mr. Buttigieg began his banking career with Manufacturers Bank in 1971. He was
named officer-in-charge of Comerica Bank's Global Banking Division in 1995.
RICHARD A. COLLISTER
Executive Vice President,
Comerica Incorporated and Comerica Bank
Mr. Collister joined Comerica as executive vice president in charge of Human
Resources in 1992. In 1995 he also was named officer-in-charge of Corporate
Staff. Previously, he held executive positions in human resources for Merrill
Lynch and Chase Manhattan Bank.
GEORGE C. ESHELMAN
Executive Vice President,
Comerica Incorporated
Mr. Eshelman has served as executive vice president in charge of Comerica
Investment Services since 1994. He joined Comerica in 1978.
CHARLES L. GUMMER
President and Chief Executive Officer,
Comerica Bank-Texas
Mr. Gummer began his banking career with Comerica in 1970. He has been
president and chief executive officer of Comerica's Texas subsidiary since
1989.
FENTON R. TALBOTT
Executive Vice President, Community Banking,
Comerica Bank
Mr. Talbott joined Comerica in 1996 and is responsible for branch and small
business activities in Michigan. Previously, he held executive positions with
American Express, The First Boston Corporation, Bank of America and Citicorp.
EXECUTIVE OFFICERS
JUDITH C. LALKA DART
Executive Vice President,
General Counsel and Corporate Secretary
Ms. Dart has served as executive vice president, general counsel and corporate
secretary since 1992. She joined Comerica in 1985.
DOUGLAS W. FIEDLER
President and Chief Executive Officer,
Comerica Bank & Trust, FSB
Mr. Fiedler has been president and chief executive officer of Comerica's
Florida subsidiary, Comerica Bank & Trust, FSB, since 1993. He joined Comerica
in 1973.
J. MICHAEL FULTON
President and Chief Executive Officer,
Comerica Bank-California
Mr. Fulton has served as president and chief executive officer of Comerica's
California subsidiary since 1993. He joined Comerica in 1971.
JOHN R. HAGGERTY
President and Chief Executive Officer,
Comerica Mortgage Corporation
Mr. Haggerty joined Comerica in 1994 as president and chief executive officer
of Comerica Mortgage Corporation. He directs the mortgage operations of
Comerica's subsidiaries in Michigan, Texas, California, Illinois and Florida.
ARTHUR W. HERMANN
Senior Vice President and Controller,
Comerica Incorporated
Mr. Hermann has been senior vice president and controller since 1992. He joined
Comerica in 1976.
THOMAS R. JOHNSON
Executive Vice President
and Chief Credit Officer,
Comerica Incorporated
Mr. Johnson became executive vice president and chief credit officer in 1992.
He began his banking career with Comerica in 1968.
56
<PAGE> 44
OFFICERS AND DIRECTORS: COMERICA INCORPORATED
RONALD P. MARCINELLI
Executive Vice President,
Comerica Bank
Mr. Marcinelli was named executive vice president and officer-in-charge of
Corporate Banking and Institutional Trust in 1995. He joined Comerica in 1972.
DAVID B. STEPHENS
Executive Vice President,
Comerica Bank
Mr. Stephens has served as executive vice president in charge of the Private
Banking Division since 1994. He joined Comerica in 1991.
JAMES R. TIETJEN
Senior Vice President and General Auditor,
Comerica Incorporated
Mr. Tietjen was named senior vice president and general auditor in 1995. He
joined Comerica in 1989.
DAVID C. WHITE
President and Chief Executive Officer,
Comerica Bank-Illinois
Mr. White has been president and chief executive officer of Comerica's Illinois
subsidiary since 1992. He began his banking career in 1970 with Manufacturers
Bank.
COMERICA INCORPORATED
BOARD OF DIRECTORS
E. PAUL CASEY
Chairman and Managing General Partner
Metapoint Partners
JAMES F. CORDES
Executive Vice President
The Coastal Corporation
J. PHILIP DINAPOLI
Attorney
J. Philip DiNapoli Offices
MAX M. FISHER
Investor
JOHN D. LEWIS
Vice Chairman
Comerica Incorporated
and Comerica Bank
PATRICIA SHONTZ LONGE, Ph.D.
Economist; Senior Partner
The Longe Company
WAYNE B. LYON
President and Chief Operating Officer
Masco Corporation
GERALD V. MACDONALD
Retired Chairman
and Chief Executive Officer
Comerica Incorporated
EUGENE A. MILLER
Chairman and Chief Executive Officer
Comerica Incorporated
and Comerica Bank
MICHAEL T. MONAHAN
President
Comerica Incorporated
and Comerica Bank
ALFRED A. PIERGALLINI
President and Chief Executive Officer
Gerber Products Company
ALAN E. SCHWARTZ
Partner
Honigman Miller Schwartz and Cohn
HOWARD F. SIMS
Chairman
Sims-Varner & Associates
57
<PAGE> 45
OFFICERS AND DIRECTORS: COMERICA INCORPORATED AND SUBSIDIARIES
COMERICA BANK (MICHIGAN)
DIRECTORS
LILLIAN BAUDER, PH.D.
President and Chief Executive Officer
Cranbrook Educational Community
E.L. COX
Retired Chief Executive Officer
Michigan Mutual/Amerisure Companies
Accident Fund of Michigan
ROGER FRIDHOLM
President
St. Clair Group
TODD W. HERRICK
President and Chief Executive Officer
Tecumseh Products Company
DAVID BAKER LEWIS
Chairman
Lewis, White & Clay, P.C.
JOHN D. LEWIS
Vice Chairman
Comerica Incorporated
and Comerica Bank
EUGENE A. MILLER
Chairman and Chief Executive Officer
Comerica Incorporated
and Comerica Bank
MICHAEL T. MONAHAN
President
Comerica Incorporated
and Comerica Bank
JOHN W. PORTER
Chief Executive Officer
Urban Education Alliance, Inc.
HEINZ C. PRECHTER
Chairman and Founder
ASC Incorporated
RICHARD D. ROHR
Managing Partner
Bodman, Longley & Dahling
ROBERT S. TAUBMAN
President and Chief Executive Officer
The Taubman Company, Inc.
ALFRED H. TAYLOR JR.
Retired Chairman
and Chief Executive Officer
Kresge Foundation
WILLIAM P. VITITOE
Chairman, President
and Chief Executive Officer
Washington Energy Company
MARTIN D. WALKER
Chairman and Chief Executive Officer
M.A. Hanna Company
GAIL L. WARDEN
President and Chief Executive Officer
Henry Ford Health System
COMERICA BANK-TEXAS
CHARLES L. GUMMER
President and Chief Executive Officer
DIRECTORS
CARROLL BAIRD
Executive Consultant
Mrs Baird's Bakeries, Inc.
C. DEWITT BROWN JR.
President and Chief Executive Officer
Dee Brown Masonry
JAMES F. CORDES
Executive Vice President
The Coastal Corporation
THOMAS M. DUNNING
Chairman
Dunning Benefit Corporation
RUBEN E. ESQUIVEL
Vice President,
Community and Corporate Relations
The University of Texas
Southwestern Medical Center
JOSEPH R. GOYNE
Vice Chairman
Comerica Bank-Texas
CHARLES L. GUMMER
President and Chief Executive Officer
Comerica Bank-Texas
REV. ZAN W. HOLMES JR.
Senior Pastor
St. Luke Community
United Methodist Church
MARY A. JORDAN, PH.D.
President
Jordan-DeLaurenti, Inc.
JAKE KAMIN
Chairman, South Texas Advisory Board
Comerica Bank-Texas
W. THOMAS MCQUAID
President
Performance Properties Corporation
RAYMOND D. NASHER
Chairman of the Board of Directors
Comerica Bank-Texas
Chairman
The Nasher Company
CALVIN E. PERSON
Owner
Calvin Person & Associates
BOONE POWELL JR.
President and Chief Executive Officer
Baylor University Medical Center
BILL J. PRIEST, PH.D.
Chancellor Emeritus
Dallas County Community
College District
THOMAS J. TIERNEY
Chairman of the Board
Corporate Communications Center, Inc.
COMERICA BANK-CALIFORNIA
J. MICHAEL FULTON
President and Chief Executive Officer
DIRECTORS
THEODORE J. BIAGINI
Attorney
Hopkins & Carley
PHILLIP R. BOYCE
Investor
JACK C. CARSTEN
Principal
Technology Investments
LEO E. CHAVEZ
Chancellor
Foothill-DeAnza
Community College District
JACK W. CONNER
Chairman
Comerica Bank-California
J. PHILIP DINAPOLI
Attorney
J. Philip DiNapoli Offices
58
<PAGE> 46
OFFICERS AND DIRECTORS: COMERICA INCORPORATED AND SUBSIDIARIES
BRUCE C. EDWARDS
President
March Development Company
J. MICHAEL FULTON
President and Chief Executive Officer
Comerica Bank-California
DREW GIBSON
Chairman and Chief Executive Officer
Gibson Speno Companies
WALTER T. KACZMAREK
Northern California Regional President
and Chief Operating Officer
Comerica Bank-California
ELINOR WEISS MANSFIELD
Attorney
WALTER J. MCCARTHY JR.
Retired Chairman
and Chief Executive Officer
The Detroit Edison Company
LINDA R. MEIER
Chairman of the Board
Stanford University Hospital
LOWELL W. MORSE
Chairman of the Board
Cypress Ventures, Inc.
JOSEPH P. PARISI
President
Therma Corporation
EDWARD P. ROSKI JR.
President
Majestic Realty Company
CARL J. SCHMITT
Retired Chairman
and Chief Executive Officer
University Bank & Trust
LEWIS N. WOLFF
Chairman and Chief Executive Officer
Wolff Sesnon Buttery
COMERICA BANK-ILLINOIS
DAVID C. WHITE
President and Chief Executive Officer
DIRECTORS
THOMAS F. CAREY
Attorney at Law
Carey, Filter, White & Boland
ROBERT E. HUGHES
Retired Chairman
Affiliated Banc Group, Inc.
WILLIAM C. MITCHELL
Retired Chairman
Lake Shore Bancorp
FRANK H. RESNIK
Vice Chairman
Medline Industries, Inc.
DAVID C. WHITE
President and Chief Executive Officer
Comerica Bank-Illinois
ROBERT J. ZAHORIK
Private Investor
COMERICA BANK & TRUST, FSB
(FLORIDA)
DOUGLAS W. FIEDLER
President and Chief Executive Officer
DIRECTORS
ARTHUR R. BRADLEY
Retired Chairman
and Chief Executive Officer
Comerica Bank & Trust, FSB
NANCY H. CANARY
Partner
Thompson, Hine and Flory
E. PAUL CASEY
Chairman and Managing General Partner
Metapoint Partners
JOHN F. DALY
Retired Vice Chairman
Johnson Controls
DOUGLAS W. FIEDLER
President and Chief Executive Officer
Comerica Bank & Trust, FSB
DON B. DEAN
Retired President and Chief Executive Officer
Manufacturers Bank & Trust of Florida
PATRICIA SHONTZ LONGE, PH.D.
Economist; Senior Partner
The Longe Company
DONALD R. MANDICH
Retired Chairman
and Chief Executive Officer
Comerica Incorporated
BILL T. SMITH JR., ESQ.
Attorney
Bill T. Smith Jr., P.A.
DAVID B. STEPHENS
Executive Vice President
Comerica Bank
59
<PAGE> 47
COMERICA INCORPORATED AND SUBSIDIARIES
COMERICA BANK (MICHIGAN)
COMERICA BANK-CALIFORNIA
COMERICA BANK-TEXAS
COMERICA BANK-ILLINOIS
COMERICA BANK & TRUST, FSB (FLORIDA)
COMERICA ACCEPTANCE CORPORATION
Generates consumer loans through dealers in several states.
COMERICA BANK-ANN ARBOR, N.A.
A cash management and holding company for certain investment subsidiaries.
COMERICA BANK-MIDWEST, N.A.
Specializes in revolving credit loans; based in Toledo, Ohio.
COMERICA COMMUNITY
DEVELOPMENT CORPORATION
A non-conventional financial resource for housing rehabilitation and small
business enterprise in Comerica's Michigan markets.
COMERICA LEASING CORPORATION
Provides equipment leasing and financing services for businesses throughout the
United States.
COMERICA MORTGAGE CORPORATION
Offers residential real estate financing for new mortgages and servicing of
existing mortgages owned by Comerica Bank and other investors.
COMERICA TRUST COMPANY OF
BERMUDA, LTD.
Offers trust services for captive insurance companies and offshore mutual
funds.
JOHN V. CARR & SON, INC.
Provides customhouse brokerage and freight forwarding services from offices in
12 states and the Canadian provinces of Ontario and Quebec.
COMERICA INVESTMENT SERVICES, INC.
Parent company for Comerica's investment-related businesses.
COMERICA INSURANCE SERVICES
Provides retail and commercial insurance consulting, sales and product
management services.
COMERICA INSURANCE SERVICES
CORPORATION
Offers life, disability, and long-term care insurance and annuities through
retail distribution.
PROFESSIONAL LIFE UNDERWRITERS
SERVICES, INC. (PLUS)
Provides life insurance, annuities and disability insurance products to
independent insurance agents.
COMERICA CAPITAL MARKETS CORPORATION
Provides investment banking services to Fortune 500 companies and middle-market
firms.
W.Y. CAMPBELL & COMPANY
Provides a wide array of investment banking services.
COMERICA SECURITIES, INC.
A full service broker-dealer that offers stocks, bonds, mutual funds and
annuities to individual investors, along with public finance services.
WILSON, KEMP & ASSOCIATES, INC.
Offers individualized investment portfolio management services to customers in
the Midwest and Florida.
PARTNERSHIP INTEREST:
MUNDER CAPITAL MANAGEMENT
An independent investment advisory firm.
60
<PAGE> 48
SHAREHOLDER INFORMATION
Stock
Comerica's stock trades on the New York Stock Exchange (NYSE) under the
symbol CMA.
SHAREHOLDER ASSISTANCE
Inquiries related to shareholder records, change of name, address or ownership
of stock, and lost or stolen stock certificates should be directed to the
transfer agent and registrar:
Norwest Bank Minnesota, N.A.
P.O. Box 738
South St. Paul, Minnesota 55075-0738
800-468-9716
ELIMINATION OF DUPLICATE MATERIALS
If you receive duplicate mailings at one address, you may have multiple
shareholder accounts. You can consolidate your multiple accounts into a single,
more convenient account by contacting the transfer agent shown above. In
addition, if more than one member of your household is receiving shareholder
materials, you can eliminate the duplicate mailings by contacting the transfer
agent.
DIVIDEND REINVESTMENT PLAN
Comerica offers a dividend reinvestment plan which permits participating
shareholders of record to reinvest dividends in Comerica common stock without
paying brokerage commissions or service charges. Participating shareholders
also may invest up to $3,000 in additional funds each quarter for the purchase
of additional shares. A brochure describing the plan in detail and an
authorization form can be requested from the transfer agent shown above.
DIVIDEND DIRECT DEPOSIT
Common shareholders of Comerica may have their dividends deposited into their
savings or checking account at any bank that is a member of the National
Automated Clearing House (ACH) system. Information describing this service and
an authorization form can be requested from the transfer agent shown above.
DIVIDEND PAYMENTS
Subject to approval of the board of directors, dividends customarily are paid
on Comerica's common stock on or about April 1, July 1, October 1 and January
1.
ANNUAL MEETING
The Annual Meeting of Shareholders of Comerica Incorporated will be held on
Friday, May 17, 1996, at 9:30 a.m. in the Renaissance Conference Center, Level
2, Tower 300 of the Renaissance Center, Detroit, Michigan.
FORM 10-K
A copy of the Corporation's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission, may be obtained without charge upon written
request to the Secretary of the Corporation.
STOCK PRICES, DIVIDENDS AND YIELDS
<TABLE>
<CAPTION>
Dividend Dividend*
Quarter High Low Per Share Yield
- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C>
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
1994
Fourth $28.250 $24.125 $.32 4.9%
Third 31.250 27.750 .32 4.3
Second 30.875 25.125 .32 4.6
First 28.250 25.250 .28 4.2
</TABLE>
* 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.
At January 31, 1996, there were approximately 17,457 holders of record of the
Corporation's common stock.
CORPORATE INFORMATION
Comerica Incorporated
Comerica Tower at Detroit Center
Detroit, Michigan 48226
313-222-3300
Internet: http://www.comerica.com
Community Reinvestment Act (CRA) Performance
Comerica is committed to meeting the credit needs of the communities it serves.
Following are the most recent CRA ratings for Comerica subsidiaries:
Comerica Bank (Michigan) Outstanding
Comerica Bank-Texas Outstanding
Comerica Bank-Illinois Outstanding
Comerica Bank & Trust, FSB (Florida) Outstanding
Comerica Bank-California Satisfactory
Comerica Bank-Midwest Satisfactory
EQUAL EMPLOYMENT OPPORTUNITY
Comerica is committed to its affirmative action program and practices which
ensure uniform treatment of employees without regard to race, creed, color,
age, national origin, religion, handicap, marital status, veteran status,
weight, height or sex.
INVESTOR CONTACT
Allison T. McFerren
313-222-6317
MEDIA CONTACT
Sharon R. McMurray
313-222-4881
<PAGE> 49
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL
<TABLE>
<CAPTION>
PAGE
NUMBER GRAPHIC MATERIAL
<S> <C> <C> <C> <C> <C> <C>
15 Bar graph depicting the Corporation's return on assets (in percentages)
from 1991 to 1995 compared to an industry average.
1991 1992 1993 1994 1995
-----------------------------------------------------------------
Comerica 1.06 0.91 1.25 1.23 1.21
Excluding Restructuring Charge 1.25
Industry Average 0.47 0.83 1.15 1.11 1.12
15 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 1991 to
1995.
1991 1992 1993 1994 1995
------------------------------------------------------------------
Net Interest Income (FTE) 1,093 1,159 1,163 1,254 1,321
Net Interest Margin (FTE) 4.49 4.73 4.65 4.32 4.19
18 Bar graph depicting the Corporation's net loans charged off to average loans (in
percentages) from 1991 to 1995 compared to an industry average.
1991 1992 1993 1994 1995
-------------------------------------------------------------------
Comerica 0.58 0.57 0.43 0.24 0.32
Industry Average 1.85 1.42 0.96 0.51 0.53
20 Bar graph depicting the Corporation's noninterest income (in millions) from
1991 to 1995.
1991 1992 1993 1994 1995
-------------------------------------------------------------------
375 399 449 450 499
21 Bar graph depicting the Corporation's noninterest expenses (in millions) from
1991 to 1995.
1991 1992 1993 1994 1995
-------------------------------------------------------------------
935 1,080 1,025 1,042 1,086
27 Bar graph depicting the Corporation's nonperforming assets to loans and other
real estate (in percentages) from 1991 to 1995 compared to an industry average.
1991 1992 1993 1994 1995
-------------------------------------------------------------------
Comerica 1.48 1.50 1.09 0.92 0.67
Industry Average 5.30 4.62 2.81 1.67 1.23
</TABLE>
<PAGE> 1
EXHIBIT 21
COMERICA INCORPORATED AND SUBSIDIARIES
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]
Comerica Leasing Corporation [Michigan]
Comerica AutoLease, Inc. [Michigan]
Comerica Mortgage Corporation [Michigan]
A/H Hotel Management Co. [Michigan]
VRB Corp. [Michigan]
John V. Carr & Son, Inc. [Michigan]
Duty Drawback Service, Inc. [Michigan]
John V. Carr & Son Limited (Canada) [Ontario]
Comerica International Corporation [United States]
Comerica International (Canada), Limited [Ontario]
Comerica International (Canada) Properties, Limited [Ontario]
Comerica Trust Company of Bermuda, Ltd. [Bermuda]
Comerica California Incorporated [Delaware]
Comerica Bank-California [California]
Lytton Corporation [California]
Metrobank [California]
Metrocorp [California]
Comerica Bank-Illinois [Illinois]
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]
Munder Capital Management (less than 50%) [Delaware Limited Partnership]
Comerica Capital Markets Corporation [Michigan]
Comerica Financial Services, Inc. [Texas] (in process of dissolution)
Comerica Texas Incorporated [Delaware]
Comerica Bank-Texas [Texas]
Riverside Investments Inc. [Texas]
Riverside Investments II Inc. [Texas]
BTXW Investments 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]
<PAGE> 1
EXHIBIT 23.1
[ERNST & YOUNG LLP LETTERHEAD]
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
listed below, of our report on the consolidated financial statements of
Comerica Incorporated and subsidiaries dated January 16, 1996, included in this
Annual Report on Form 10-K for the year ended December 31, 1995:
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
ERNST & YOUNG LLP
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
1995 FORM 10K FOR COMERICA INCORPORATED AND SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,028,375
<INT-BEARING-DEPOSITS> 23,568
<FED-FUNDS-SOLD> 203,798
<TRADING-ASSETS> 10,668
<INVESTMENTS-HELD-FOR-SALE> 6,859,310
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 24,442,278
<ALLOWANCE> 341,344
<TOTAL-ASSETS> 35,469,874
<DEPOSITS> 23,167,215
<SHORT-TERM> 4,674,162
<LIABILITIES-OTHER> 355,219
<LONG-TERM> 4,644,416
<COMMON> 575,473
0
0
<OTHER-SE> 2,032,254
<TOTAL-LIABILITIES-AND-EQUITY> 35,469,874
<INTEREST-LOAN> 2,090,854
<INTEREST-INVEST> 499,948
<INTEREST-OTHER> 23,122
<INTEREST-TOTAL> 2,613,924
<INTEREST-DEPOSIT> 721,475
<INTEREST-EXPENSE> 1,314,041
<INTEREST-INCOME-NET> 1,299,883
<LOAN-LOSSES> 86,500
<SECURITIES-GAINS> 11,748
<EXPENSE-OTHER> 1,086,414
<INCOME-PRETAX> 625,694
<INCOME-PRE-EXTRAORDINARY> 413,366
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 413,366
<EPS-PRIMARY> 3.54
<EPS-DILUTED> 3.52
<YIELD-ACTUAL> 4.19
<LOANS-NON> 130,403
<LOANS-PAST> 57,134
<LOANS-TROUBLED> 3,244
<LOANS-PROBLEM> 254,295
<ALLOWANCE-OPEN> 326,195
<CHARGE-OFFS> 119,028
<RECOVERIES> 43,009
<ALLOWANCE-CLOSE> 341,344
<ALLOWANCE-DOMESTIC> 243,165
<ALLOWANCE-FOREIGN> 2,173
<ALLOWANCE-UNALLOCATED> 96,006
</TABLE>
