EXHIBIT 3.1
CNA FINANCIAL CORPORATION
CERTIFICATE OF DESIGNATION RELATING
TO THE SERIES H CUMULATIVE PREFERRED
STOCK WITH NO PAR VALUE OF
CNA FINANCIAL CORPORATION
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Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
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CNA Financial Corporation, a Delaware corporation (the
"Corporation"), hereby certifies that pursuant to the authority contained
in Article FOURTH of the Corporation's Certificate of Incorporation, and in
accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware (the "DGCL"), the following resolution was
duly adopted by the Special Review Committee of the Board of Directors of
the Corporation (which was granted authority to designate the terms hereof
by resolutions of the Board of Directors of the Corporation), creating a
series of its Preferred Stock designated as Series H Cumulative Preferred
Stock:
RESOLVED, that there is hereby created and the Corporation be, and
it hereby is, authorized to issue 7,500 shares of a series of its Preferred
Stock designated Series H Cumulative Preferred Stock (the "Series H
Preferred") to have the powers, preferences and rights and the
qualifications, limitations or restrictions thereof hereinafter set forth
in this resolution:
1. Preference. The preferences of each share of Series H Preferred
with respect to distributions of the Corporation's assets as dividends or
upon voluntary or involuntary liquidation, dissolution or winding up of the
Corporation shall be (i) equal to the preferences of every other share of
Series H Preferred from time to time outstanding in every respect, (ii)
equal to the preferences of all Parity Stock, (iii) senior to the
preferences of the Corporation's common stock and any series of preferred
stock expressly made junior to the Series H Preferred to the extent so
provided and (iv) junior to the preferences of any Senior Stock.
2. Voting Rights. Except as otherwise expressly provided herein, in
the Certificate of Incorporation or the By-laws of the Corporation or by
law, the Holders of Series H Preferred, by virtue of their ownership
thereof, shall have no voting rights.
3. Liquidation Rights.
(A) Liquidation Amount. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, at any time when any
Series H Preferred shall be outstanding, each then outstanding share of
Series H Preferred shall entitle the Holder thereof to a preference,
against the Property of the Corporation available for distribution to the
Holders of the Corporation's Stock equal to the Series H Preferred Value
plus an amount equal to all unpaid dividends accrued thereon to the date
that the Corporation makes the payment available to the Holders.
(B) No Further Right To Participate. After payment of all amounts
payable pursuant to Section 3(A) shall have been made in full to the
Holders of the outstanding Series H Preferred, or funds necessary for such
payment shall have been set aside in trust for the account of the Holders
of Series H Preferred so as to be, and continue to be, available therefor,
the Holders of Series H Preferred shall be entitled to no further
participation in the distribution of assets of the Corporation.
(C) Proportionate Distribution. If, upon any liquidation, dissolution
or winding-up of the Corporation, the assets of the Corporation, or
proceeds thereof available for distribution to the Holders of shares of
Series H Preferred shall be insufficient to pay in full all amounts to
which such Holders are entitled pursuant to paragraph (A) of this Section
3, no such distribution shall be made on account of any shares of Parity
Stock unless proportionate distributive amounts shall be paid on account of
the shares of Series H Preferred, ratably, in proportion to the full
distributable amount for which holders of all such shares of Parity Stock
and Series H Preferred are respectively entitled upon such liquidation,
dissolution or winding-up.
(D) Order of Distributions. All of the preferential amounts to be paid
to the Holders of Series H Preferred as provided in this Section 3 shall be
paid or set apart for payment before the payment or setting apart for
payment of any amount for, or the distribution of any Property of the
Corporation to, the Holders of any common stock or any series of preferred
stock, whether now or hereafter authorized, which ranks junior to the
Series H Preferred upon such liquidation, dissolution or winding-up.
4. Dividends.
(A) Accrual of Dividends. The Holders of Series H Preferred shall be
entitled to receive, when and as declared by the Board out of funds legally
available therefor, cumulative dividends payable in cash. Such dividends
shall accrue at the Applicable Rate and shall be cumulative with respect to
each share of Series H Preferred, from the date of issuance of such share,
and shall accrue until paid, whether or not earned, whether or not declared
by the Board, whether or not the CCC Ratings Contingency or a CCC Ratings
Upgrade has occurred and whether or not there are funds legally available
therefor on the date such dividends are payable. The amount of dividends
per share payable on shares of Series H Preferred for each full Dividend
Period shall be computed by dividing by four the Applicable Rate for such
Dividend Period and applying the rate obtained against the Series H
Dividend Calculation Value per share of Series H Preferred as of the
relevant Dividend Payment Date. The amount of dividends payable for the
initial dividend period or any other period shorter than a full dividend
periods shall be computed on the basis of a 360-day year of twelve 30-day
months.
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(B) Payment of Dividends. Dividends shall be payable in cash to each Holder
of Series H Preferred in quarterly installments on March 1, June 1,
September 1, and December 1 in each year, commencing on March 1, 2003 (each
a "Dividend Payment Date"), as declared by the Board out of funds legally
available therefor. The Board may fix a record date for the determination
of a dividend or distribution declared thereon, which record date shall not
be more than 30 days prior to the date fixed for the payment thereof. Prior
to the occurrence of a CCC Ratings Contingency, the Board may not declare a
dividend on the Series H Preferred; provided, however, that any time after
the occurrence of a CCC Ratings Upgrade, the Board may declare and pay a
dividend in an amount not greater than, and which shall be credited
against, the accrued but unpaid dividends with respect to the Series H
Preferred for all Dividend Periods ending after such CCC Ratings Upgrade
has occurred. After the occurrence of the CCC Ratings Contingency, the
Board may declare a dividend and any dividend payment made on shares of
Series H Preferred shall first be credited against the earliest accrued but
unpaid dividend due with respect to the Series H Preferred. Dividends shall
cease to accrue on any Stock if and when redeemed as provided herein, or as
to the Series H Preferred upon any liquidation as described herein.
(C) Limitation on Certain Distributions.
(1) Except as hereinafter provided, no dividends shall be
declared or paid or set apart for payment on any Parity Stock or the shares
of any series of any class of Stock ranking, as to dividends, junior to the
Series H Preferred for any period unless all cumulative dividends have been
or contemporaneously are declared and paid on the Series H Preferred
through the most recent Dividend Payment Date. When dividends are not paid
in full as aforesaid upon the shares of Series H Preferred and any Parity
Stock, all dividends declared upon shares of Series H Preferred and any
Parity Stock shall be declared pro rata so that the amount of dividends
declared per share on Series H Preferred and such other series shall in all
cases bear to each other the same ratio that the product of the amount per
share on which dividends are calculated multiplied by the dividend rate on
the shares of Series H Preferred and such other series bear to each other
(for purposes of this sentence, "dividend rate" shall mean the average
Applicable Rate on the Series H Preferred for the Dividend Periods during
which dividends shall not have been paid in full). Holders of shares of
Series H Preferred shall not be entitled to any dividend, whether payable
in cash, Property or Stock, in excess of full cumulative dividends, as
herein provided on the Series H Preferred. No interest or sum of money in
lieu of interest, shall be payable in respect of any dividend payment or
payments on the Series H Preferred which may be in arrears.
(2) So long as any shares of Series H Preferred are outstanding,
no dividend (other than a dividend or distribution paid in shares of, or
options, warrants or rights to subscribe for or purchase shares of, common
stock or in any other Stock ranking junior to the Series H Preferred as to
dividends and liquidation and other than as provided in subparagraph (1) of
this Section 4(C)) shall be declared or paid or set aside for payment or
other distribution declared or made upon the common stock or upon any other
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Stock of the Corporation ranking junior to or on a parity with the Series H
Preferred as to dividends or upon liquidation, nor shall any common stock
nor any other Stock of the Corporation ranking junior to or on parity with
the Series H Preferred as to dividends or upon liquidation be redeemed,
purchased or otherwise acquired for any consideration (or any moneys to be
paid to or made available for a sinking fund for the redemption of any
shares of any such Stock) by the Corporation (except by conversion into or
exchange for Stock of the Corporation ranking junior to Series H Preferred
as to dividends and upon liquidation) unless, in each case, the full
cumulative dividends on all outstanding shares of Series H Preferred shall
have been paid for all past Dividend Periods.
5. Redemption.
Upon the mutual agreement of the Corporation and the Holders of a
majority of the outstanding shares of Series H Preferred, at any time and
from time to time, the outstanding shares of the Series H Preferred may be
redeemed for cash in whole or in part on a pro rata basis at a redemption
price per share equal to the Series H Preferred Value plus all unpaid
dividends accrued thereon through and including the date of redemption.
6. Conversion; Exchange. The Series H Preferred shall not be
convertible into or exchangeable for any other shares of Stock or Property
of the Corporation.
7. Protective Provisions. So long as any shares of Series H Preferred
remain outstanding, the Corporation shall not, without the affirmative vote
or written consent of Holders of at least a majority (or more if required
by law) of the outstanding shares of Series H Preferred:
(A) Amend, waive or repeal any provisions of, or add any provision
to, this Certificate of Designation; or
(B) Authorize, create, issue or sell any shares of Senior Stock or
Parity Stock.
8. Notices. All notices provided for hereunder shall be in writing and
delivered by hand or by first-class or certified mail, postage prepaid and,
if to a Holder of Series H Preferred, to such Holder at the address as
shown on the books of the Corporation or its transfer agent, if any, and if
to the Corporation to its offices at CNA Plaza, Chicago, Illinois 60685;
Attention: Treasurer, or such other place as shall be designated by the
Corporation in a notice delivered to the Holders of Series H Preferred.
9. Definitions. As used in this Certificate of Designation, the
following terms have the following meanings:
"Applicable Rate" shall mean, (i) until the CCC Ratings
Contingency is satisfied, 8.00% per annum and (ii) as of the first day of
the Dividend Period beginning after the CCC Ratings Contingency is
satisfied and the first day of each Dividend Period thereafter (each a
"Reset Date"), the Treasury Yield plus 400 basis points.
"Board" shall mean the Board of Directors of the Corporation.
"CCC" shall mean Continental Casualty Company and its successors.
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"CCC Ratings Contingency" shall have been satisfied on the earlier
to occur of (1) the date on which the insurer financial strength ratings of
CCC shall have increased by two ratings levels, including intermediate
rating levels (e.g. from A- to A+), from its ratings on the date of
original issuance of the Series H Preferred by any of the Rating Agencies
or (2) the date which is one year after a CCC Ratings Upgrade shall have
occurred. Once satisfied as provided herein, the CCC Ratings Contingency
shall not be deemed to have lapsed or otherwise been rendered ineffective
as the result of any subsequent actions of Rating Agencies in relation to
CCC.
"CCC Ratings Upgrade" shall mean that the insurer financial
strength ratings of CCC shall have increased one rating level, including
intermediate rating levels (e.g. from A- to A), from its rating on the date
of original issuance of the Series H Preferred by any of the Rating
Agencies. Once satisfied as provided herein, the CCC Ratings Upgrade shall
not be deemed to have lapsed or otherwise been rendered ineffective as the
result of any subsequent actions of Rating Agencies in relation to CCC.
"Dividend Payment Date" shall have the meaning set forth in
Section 4(B) hereof.
"Dividend Period" shall mean (i) initially the period commencing
on the date of the initial issuance of any shares of Series H Preferred and
ending on March 1, 2003 and (ii) thereafter, the period commencing on the
date immediately following a Dividend Payment Date and ending on the next
Dividend Payment Date, except that the final Dividend Period with respect
to any share of Series H Preferred shall end on the date if and when such
share is redeemed.
"Holders" shall mean the Persons who shall, from time to time, own
of record or beneficially any shares of Series H Preferred. The term
"Holder" shall mean one of the Holders.
"Parity Stock" shall mean any shares of any class or series of
Stock of the Corporation having any preference or priority as to dividends
or liquidation, dissolution or winding up equal to or pari passu with any
such preference or priority of the Series H Preferred and any instrument or
security convertible into or exchangeable for Parity Stock.
"Person" shall mean an individual, a corporation, a partnership, a
limited liability company, a trust, an unincorporated organization or a
government organization or an agency or political subdivision thereof.
"Property" shall mean an interest in any kind of property or
assets, whether real, personal or mixed, or tangible or intangible.
"Rating Agencies" shall mean A.M. Best Company, Standard & Poor's
and Moody's Investors Services or their respective successors, or if any
such agency is no longer publishing ratings of the CNA Pool, then another
nationally recognized statistical rating agency or agencies, as the case
may be, selected by the Board.
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"Senior Stock" shall mean any shares of any class or series of
Stock of the Corporation having any preference or priority as to dividends
or liquidation superior to any such preference or priority of the Series H
Preferred and any instrument or security convertible into or exchangeable
for Senior Stock.
"Series H Dividend Calculation Value" shall mean as of December 1
of each year, the sum of (i) the Series H Preferred Value and (ii) all
accrued and unpaid dividends as of such date.
"Series H Preferred Value" shall mean $100,000 per share of Series
H Preferred.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participations in, corporate stock.
"Treasury Yield" shall mean the yield to maturity at the time of
computation of United States Treasury securities with a maturity of 10
years (or the longest maturity available for which yield information is
publicly reported), as reported by Bloomberg L.P. (or any successor to
Bloomberg L.P.), as of 4:00 p.m., New York City time on the business day
immediately preceding the applicable Reset Date, on screen "Govt C4" or
another screen hereafter used by Bloomberg L.P. to report on United States
Government securities, or if Bloomberg L.P. (or a successor) is no longer
publishing such information, then any publicly available source of similar
data as determined by the Board.
IN WITNESS WHEREOF, CNA Financial Corporation has caused this
Certificate to be duly executed this 19th day of December, 2002.
CNA FINANCIAL CORPORATION
By: /s/ Robert V. Deutsch
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Its: Executive Vice President and
Chief Financial Officer
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