National will not be required to make a change of control offer upon the occurrence of a change of control triggering event if a third party makes such an offer in the manner, at the times and
otherwise in compliance with the requirements for an offer made by National and the third party repurchases all notes properly tendered and not withdrawn under its offer. In addition, National will not repurchase any notes if there has occurred and
is continuing on the change of control payment date an event of default under the indenture, other than a default in the payment of the change of control payment upon a change of control triggering event.
National will comply with the applicable requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are
applicable in connection with the repurchase of the notes as a result of a change of control triggering event. To the extent that the provisions of any securities laws or regulations conflict with the change of control offer provisions of the notes,
National will comply with those securities laws and regulations and will not be deemed to have breached its obligations under the change of control offer provisions of the notes by virtue of any such conflict.
For purposes of the change of control offer provisions of the notes, the following terms will be applicable:
change of control
means the occurrence of any of the following: (1) the direct or indirect sale, lease,
transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or more series of related transactions, of all or substantially all of Nationals assets and the assets of Nationals subsidiaries, taken as a
whole, to any person, other than National or one of Nationals subsidiaries; (2) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any person becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of Nationals outstanding voting stock or other voting stock into which Nationals voting stock is reclassified, consolidated,
exchanged or changed, measured by voting power rather than number of shares; (3) National consolidates with, or merges with or into, any person, or any person consolidates with, or merges with or into, National, in any such event pursuant to a
transaction in which any of Nationals outstanding voting stock or the voting stock of such other person is converted into or exchanged for cash, securities or other property, other than any such transaction where the shares of Nationals
voting stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the voting stock of the surviving person or any direct or indirect parent company of the surviving person, measured by
voting power rather than number of shares, immediately after giving effect to such transaction; (4) the first day on which a majority of the members of Nationals Board of Directors are not continuing directors; or (5) the adoption of a plan
relating to Nationals liquidation or dissolution.
The term person, as used in this definition, has the meaning given thereto in Section 13(d)(3) of the Exchange Act.
change of control triggering event
means the occurrence of both a change of control and a rating event.
continuing directors
means, as of any date of determination, any member of Nationals Board of
Directors who (1) was a member of such Board of Directors on the date the notes were issued or (2) was nominated for election, elected or appointed to such Board of Directors with the approval of a majority of the continuing directors who were
members of such Board of Directors at the time of such nomination, election or appointment (either by a specific vote or by approval of Nationals proxy statement in which such member was named as a nominee for election as a director).
Fitch
means Fitch Ratings and its successors.
investment grade rating
means a rating equal to or higher than BBB- (or the equivalent) by Fitch, Baa3 (or
the equivalent) by Moodys and BBB- (or the equivalent) by S&P, and the equivalent investment grade credit rating from any replacement rating agency or rating agencies selected by National.
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Moodys
means Moodys Investors Service, Inc. and its successors.
rating agencies
means (1) each of Fitch, Moodys and S&P and (2) if any of Fitch, Moodys or
S&P ceases to rate the notes or fails to make a rating of the notes publicly available for reasons outside of Nationals control, a nationally recognized statistical rating organization within the meaning of Rule
15c3-1(c)(2)(vi)(F) under the Exchange Act selected by National (as certified by a resolution of Nationals Board of Directors) as a replacement agency for Fitch, Moodys or S&P, or all of them, as the case may be.
rating event
means the rating on the notes is lowered by at least two of the three rating agencies and the
notes are rated below an investment grade rating by at least two of the three rating agencies, in any case on any day during the period (which period will be extended so long as the rating of the notes is under publicly announced consideration for a
possible downgrade by any of the rating agencies) commencing 60 days prior to the first public notice of the occurrence of a change of control or Nationals intention to effect a change of control and ending 60 days following consummation of
such change of control.
S&P
means Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc.,
and its successors.
voting stock
means, with respect to any specified person (as that term is used in Section
13(d)(3) of the Exchange Act) as of any date, the capital stock of such person that is at the time entitled to vote generally in the election of the board of directors of such person.
Unless National defaults in the change of control payment, on and after the change of control payment date, interest will cease to accrue on the notes or portions of the notes tendered for
repurchase pursuant to the change of control offer.
The definition of change of control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of all or substantially all of
Nationals assets and the assets of Nationals subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase substantially all there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a holder of notes to require National to repurchase its notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of Nationals assets and those of Nationals
subsidiaries taken as a whole to another person or group may be uncertain.
Registration and Transfer
The transfer of notes may be registered, and notes may be exchanged for other notes of the same series, of authorized denominations and with the same terms and principal amount, at the
corporate trust office of the trustee in The City of New York. National may change the place for registration of transfer and exchange of the notes and may designate additional places for such registration and exchange. No service charge will be
made for any transfer or exchange of the notes. However, National may require payment to cover any tax or other governmental charge that may be imposed. National will not be required to execute or to provide for the registration of transfer of, or
the exchange of, (a) any notes during a period of 15 days prior to giving any notice of redemption or (b) any note selected for redemption except the unredeemed portion of any notes being redeemed in part. (See Section 305.)
Satisfaction and Discharge
National will be discharged from its obligations on the notes, or any portion of the principal amount of the notes, if it irrevocably deposits with the trustee sufficient cash or government
securities to pay the principal, or portion of principal, interest, any premium and any other sums when due on the notes at their maturity, stated maturity date, or redemption. (See Section 701.)
The indenture will be deemed satisfied and discharged when none of the notes or any other debt securities remain outstanding and when National has paid all other sums payable by National under
the indenture. (See Section 702.)
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All moneys National pays to the trustee or any paying agent on the notes that remain unclaimed at the end of two years after payments have become due will be paid to or upon the order of
National. Thereafter, the holder of such notes may look only to National for payment thereof. (See Section 603.)
Limitation on Liens on Subsidiary Capital Stock
The indenture provides that National will not pledge, mortgage, hypothecate or grant a security interest in, or permit any pledge, mortgage, security interest or other lien upon, any capital
stock of any of its majority-owned subsidiaries, which capital stock National now or hereafter directly owns, to secure any Indebtedness, as defined below, without also securing the notes (so long as the other Indebtedness shall be so secured)
equally and ratably, with or, at Nationals option, prior to, the other Indebtedness and any other Indebtedness similarly entitled to be so secured.
This limitation does not apply to, or prevent the creation or existence of:
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(1)
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any pledge, mortgage, security interest, lien or encumbrance upon any such capital stock created at the time National acquires that capital stock or within 270 days after that time to secure the purchase
price for that capital stock so acquired;
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(2)
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any pledge, mortgage, security interest, lien or encumbrance upon any such capital stock existing at the time National acquires that capital stock, whether or not National assumes the secured obligations;
or
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(3)
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any extension, renewal, replacement or refunding of any pledge, mortgage, security interest, lien or encumbrance permitted by (1) and (2) above, or of any Indebtedness secured thereby;
provided
, that,
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(a)
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the principal amount of Indebtedness so secured immediately after the extension, renewal, replacement or refunding may not exceed the principal amount of Indebtedness so secured immediately before the
extension, renewal, replacement or refunding, and
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(b)
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the extension, renewal, replacement or refunding of such pledge, mortgage, security interest, lien or encumbrance is limited to no more than the same proportion of all shares of capital stock as were covered
by the pledge, mortgage, security interest, lien or encumbrance that was extended, renewed, refunded or replaced; or
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(4)
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any judgment, levy, execution, attachment or other similar lien arising in connection with court proceedings,
provided
that:
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(a)
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the execution or enforcement of the lien is effectively stayed within 30 days after entry of the corresponding judgment, or the corresponding judgment has been discharged within such 30 day period, and the
claims secured thereby are being contested in good faith by appropriate proceedings timely commenced and diligently prosecuted; or
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(b)
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the payment of the lien is covered in full by insurance and the insurance company has not denied or contested coverage thereof; or
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(c)
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so long as the lien is adequately bonded, any appropriate legal proceedings that may have been duly initiated for the review of the corresponding judgment, decree or order shall not have been fully
terminated or the period within which these proceedings may be initiated shall not have expired.
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Any pledge, mortgage, security interest, lien or encumbrance on any shares of the capital stock of any of the majority-owned subsidiaries of National, which shares of capital stock National now
or hereafter directly owns, to secure any Indebtedness other than as described in (1) through (4) above, is referred to in this prospectus as a Restricted Lien. This limitation on liens does not apply to the extent that National creates
any Restricted Liens to
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secure Indebtedness that, together with all other Indebtedness of National secured by Restricted Liens, does not at the time exceed 5% of Nationals Consolidated Capitalization. (See Section 608.)
For this purpose, Consolidated Capitalization means the sum of:
(1)
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Consolidated Common Shareholders Equity;
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(2)
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Consolidated Indebtedness, exclusive of any that is due and payable within one year of the date the sum is determined; and, without duplication
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(3)
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any preference or preferred stock of National or any Consolidated Subsidiary, as defined below, which is subject to mandatory redemption or sinking fund provisions.
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The term Consolidated Common Shareholders Equity, as used above, means the total assets of National and its Consolidated Subsidiaries that would, in accordance with generally
accepted accounting principles in the United States, be classified on a balance sheet as assets, less: (a) all liabilities of National and its Consolidated Subsidiaries that would, in accordance with generally accepted accounting principles in the
United States, be classified on a balance sheet as liabilities; (b) minority interests owned by third parties in Consolidated Subsidiaries of National; and (c) preference or preferred stock of National and its Consolidated Subsidiaries only to the
extent any such preference or preferred stock is subject to mandatory redemption or sinking fund provisions.
The term Consolidated Indebtedness, as used above, means total indebtedness as shown on the consolidated balance sheet of National and its Consolidated Subsidiaries.
The term Consolidated Subsidiary, as used above, means at any date any majority-owned subsidiary the financial statements of which under generally accepted accounting principles in
the United States would be consolidated with those of National in its consolidated financial statements as of such date.
For purposes of the limitation described in the first paragraph under this heading, Indebtedness means:
(1)
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all indebtedness created or assumed by National for the repayment of money borrowed;
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(2)
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all indebtedness for money borrowed secured by a lien upon capital stock owned by National and upon which indebtedness for money borrowed National customarily pays interest, although National has not assumed
or become liable for the payment of such indebtedness for money borrowed; and
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(3)
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all indebtedness of others for money borrowed that is guaranteed as to payment of principal by National or in effect guaranteed by National through a contingent agreement to purchase such indebtedness for
money borrowed, but excluding from this definition any other contingent obligation of National in respect of indebtedness for money borrowed or other obligations incurred by others.
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The foregoing limitation does not limit in any manner the ability of: (1) National to place liens on any of its assets other than the capital stock of directly held, majority-owned
subsidiaries; (2) National to cause the transfer of its assets or those of its subsidiaries, including the capital stock covered by the foregoing restrictions; or (3) any of the direct or indirect subsidiaries of National to place liens on any of
their assets.
In addition, the indenture provides that if debentures issued by National under the indenture dated as of October 15, 1974, as supplemented (the 1974 indenture), between National
and The Bank of New York Mellon, as trustee, in an aggregate principal amount in excess of 5% of Nationals Consolidated Capitalization become secured pursuant to the provisions of the 1974 indenture, National will secure the notes and any
other outstanding debt securities under the indenture equally and ratably with those debentures. If National secures the outstanding debt securities, as provided in the prior sentence, then if and for so long as the aggregate principal amount of the
debentures secured pursuant to the 1974 indenture at any time decreases and as a result constitutes 5% or less of Nationals Consolidated Capitalization, the outstanding debt securities will no longer be secured. (See Section 608.)
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As of September 30, 2008, the Consolidated Capitalization of National was approximately $2.6 billion.
Consolidation, Merger, and Sale of Assets
Under the terms of the indenture, National may not consolidate with or merge into any other entity or convey, transfer or lease its properties and assets substantially as an entirety to any
entity, unless:
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the surviving or successor entity is organized and validly existing under the laws of any domestic
jurisdiction and it expressly assumes Nationals obligations on all
debt securities and under the
indenture (including the notes);
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immediately after giving effect to the transaction, no event of default and no event that, after
notice or lapse of time or both, would become an event of default shall have
occurred and be
continuing; and
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National shall have delivered to the trustee an officers certificate and an opinion of counsel as to
compliance with the foregoing.
The terms of the indenture do not restrict National in a merger in which National is the surviving entity. (See Section 1101.)
Events Of Default
Event of default when used in the indenture with respect to the notes, means any of the following:
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failure to pay interest, if any, on the notes for 30 days after it is due;
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failure to pay the principal of or premium, if any, on the notes when due (whether at maturity or
upon earlier redemption);
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failure to perform any other covenant in the indenture, other than a covenant that does not relate to
the notes, that continues for 90 days after National receives written
notice from the trustee, or
National and the trustee receive a written notice from the holders of at least 33% in principal
amount of the notes; however, the trustee or the trustee
and the holders of such principal amount
of the notes can agree to an extension of the 90 day period and such an agreement to extend will
be automatically deemed to occur if National
is diligently pursuing action to correct the default; or
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certain events in bankruptcy, insolvency or reorganization of National.
(See Section 801.)
The trustee may withhold notice to the holders of notes of any default, except default in the payment of principal, premium or interest, if it considers such withholding of notice to be in the
interests of the holders. An event of default for a particular series of debt securities does not necessarily constitute an event of default for any other series of debt securities issued under the indenture.
Remedies
Acceleration of Maturity
If an event of default with respect to the notes, but not all of the other series of debt securities, occurs and continues, either the trustee or the holders of at least 33% in principal amount
of the notes may declare the entire principal amount of all the notes, together with accrued interest, to be due and payable immediately. However, if the event of default is applicable to all outstanding debt securities under the indenture, only the
trustee or holders of at least 33% in principal amount of all outstanding debt securities of all series, voting as one class, and not the holders of any one series, including the notes, may make such a declaration of acceleration.
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At any time after a declaration of acceleration with respect to the notes has been made and before a judgment or decree for payment of the money due has been obtained, the event of default
giving rise to such declaration of acceleration will be considered waived, and such declaration and its consequences will be considered rescinded and annulled, if:
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National has paid or deposited with the trustee a sum sufficient to pay:
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all overdue interest, if any, on all the notes;
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the principal of and premium, if any, on any notes that have otherwise become due and interest, if any, that is currently due;
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interest, if any, on overdue interest; and
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all amounts due to the trustee under the indenture; and
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any other event of default with respect to the notes shall have been cured or waived as provided in the indenture.
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There is no automatic acceleration, even in the event of bankruptcy, insolvency or reorganization of National. (See Section 802.)
Right to Direct Proceedings
Other than its duties in case of an event of default, the trustee is not obligated to exercise any of its rights or powers under the indenture at the request, order or direction of any of the
holders, unless the holders offer the trustee a reasonable indemnity. (See Section 903.) If they provide a reasonable indemnity, the holders of a majority in principal amount of the notes will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or exercising any power conferred upon the trustee. However, if the event of default also relates to other series of debt securities, only the holders of a majority in aggregate
principal amount of all affected series will have the right to give this direction. (See Section 812). The trustee is not obligated to comply with directions that conflict with law or other provisions of the indenture.
Limitation on Right to Institute Proceedings
No holder of any of the notes will have any right to institute any proceeding under the indenture, or to exercise any remedy under the indenture, unless:
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the holder has previously given to the trustee written notice of a continuing event of default;
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the holders of a majority in aggregate principal amount of the outstanding debt securities of all
series in respect of which an event of default shall have occurred and be
continuing have made a
written request to the trustee, and have offered reasonable indemnity to the trustee to institute
proceedings; and
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the trustee has failed to institute any proceeding for 60 days after notice and has not received any
direction inconsistent with the written request of holders during such
period.
(See Section 807.)
No Impairment of Right to Receive Payment
However, such limitations do not apply to a suit by a holder of a note for payment of the principal of or premium, if any, or interest, if any, on such note on or after the applicable due date.
(See Section 808.)
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Annual Notice to Trustee
National will provide to the trustee an annual statement by an appropriate officer as to Nationals compliance with all conditions and covenants under the indenture. (See Section 606.)
Modification and Waiver
National and the trustee may enter into one or more supplemental indentures without the consent of any holder of the notes for any of the following purposes:
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to evidence the assumption by any permitted successor of the covenants of National in the indenture and in the notes;
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to add additional covenants of National or to surrender any right or power of National under the indenture;
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to add additional events of default;
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to change, eliminate, or add any provision to the indenture; provided, however, if the change, elimination, or addition will adversely affect the interests of the holders of the notes in any material
respect, such change, elimination, or addition will become effective only:
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when the consent of the holders of the notes has been obtained in accordance with the indenture; or
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when none of the notes remain outstanding under the indenture;
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to provide collateral security for all but not part of the notes;
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to establish the form or terms of the notes as permitted by the indenture;
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to provide for the authentication and delivery of bearer securities and coupons attached thereto;
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to evidence and provide for the acceptance of appointment of a successor trustee;
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to provide for the procedures required for use of a noncertificated system of registration for the notes;
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to change any place where principal, premium, if any, and interest shall be payable, notes may be surrendered for registration of transfer or exchange and notices to National may be served; or
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to cure any ambiguity or inconsistency or to make any other provisions with respect to matters and questions arising under the indenture; provided that such action shall not adversely affect the interests of
the holders of the notes in any material respect.
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(See Section 1201.)
The holders of at least a majority in aggregate principal amount of the debt securities of all series then outstanding may waive compliance by National with certain restrictive provisions of
the indenture. (See Section 607.) The holders of not less than a majority in principal amount of the notes may waive any past default under the indenture with respect to the notes, except a default in the payment of principal, premium, if any, or
interest and certain covenants and provisions of the indenture that cannot be modified or be amended without the consent of the holder of each outstanding note. (See Section 813.)
If the Trust Indenture Act of 1939 is amended after the date of the indenture in such a way as to require changes to the indenture, the indenture will be deemed to be amended so as to conform
to such amendment of the Trust Indenture Act of 1939. National and the trustee may, without the consent of any holders, enter into one or more supplemental indentures to evidence such an amendment. (See Section 1201.)
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The consent of the holders of a majority in aggregate principal amount of the debt securities of all series then outstanding is required for all other modifications to the indenture. However,
if the notes, but not all the other series of debt securities outstanding, are directly affected by a proposed supplemental indenture, then the consent only of the holders of a majority in aggregate principal amount of all series that are directly
affected will be required. No such amendment or modification may:
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change the stated maturity of the principal of, or any installment of principal of or interest on, any
note, or reduce the principal amount of any note or its rate of
interest or change the method of
calculating such interest rate or reduce any premium payable upon redemption, or change the
currency in which payments are made, or impair the right
to institute suit for the enforcement of
any payment on or after the stated maturity of any debt security, without the consent of the holder;
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reduce the percentage in principal amount of the outstanding notes with respect to which consent
is required for any supplemental indenture or any waiver of compliance with a
provision of the
indenture or any default thereunder and its consequences, or reduce the requirements for quorum
or voting, without the consent of all the holders of the notes;
or
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modify certain of the provisions of the indenture relating to supplemental indentures, waivers of
certain covenants and waivers of past defaults with respect to the notes,
without the consent of the
holder of each outstanding note.
A supplemental indenture that changes the indenture solely for the benefit of one or more particular series of debt securities, or modifies the rights of the holders of debt securities of one
or more series, will not affect the rights under the indenture of the holders of the debt securities of any other series. (See Section 1202.)
The indenture provides that debt securities owned by National or anyone else required to make payment on the debt securities shall be disregarded and considered not to be outstanding in
determining whether the required holders have given a request or consent. (See Section 101.)
National may fix in advance a record date to determine the required number of holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or other such act
of the holders, but National shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other act of the holders may be given before or after such record date, but
only the holders of record at the close of business on that record date will be considered holders for the purposes of determining whether holders of the required percentage of the outstanding debt securities have authorized or agreed or consented
to such request, demand, authorization, direction, notice, consent, waiver or other act of the holders. For that purpose, the outstanding debt securities shall be computed as of the record date. Any request, demand, authorization, direction, notice,
consent, election, waiver or other act of a holder shall bind every future holder of the same debt securities and the holder of every debt security issued upon the registration of transfer of or in exchange of such debt securities. A transferee of
any note will be bound by acts of the trustee or National taken in reliance thereon, whether or not notation of such action is made upon such note. (See Section 104.)
Resignation of the Trustee
The trustee may resign at any time by giving written notice to National or may be removed at any time by act of the holders of a majority in principal amount of all series of debt securities
then outstanding delivered to the trustee and National. No resignation or removal of the trustee and no appointment of a successor trustee will be effective until the acceptance of appointment by a successor trustee. So long as no event of default
or event that, after notice or lapse of time, or both, would become an event of default has occurred and is continuing and except with respect to a trustee appointed by act of the holders, if National has delivered to the trustee a resolution of its
Board of Directors appointing a successor trustee and such successor has accepted such appointment in accordance with the terms of the indenture, the trustee will be deemed to have resigned and the successor will be deemed to have been appointed as
trustee in accordance with the indenture. (See Section 910.)
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Notices
Notices to holders of the notes will be given by mail to the addresses of such holders as they may appear in the security register therefor. (See Section 106.)
Title
National, the trustee, and any agent of National or the trustee, may treat the person in whose name the notes are registered as the absolute owner thereof, whether or not such notes may be
overdue, for the purpose of making payments and for all other purposes irrespective of notice to the contrary. (See Section 308.)
Governing Law
The indenture and the notes will be governed by, and construed in accordance with, the laws of the State of New York. (See Section 112.)
Regarding The Trustee
In addition to acting as trustee, The Bank of New York Mellon acts, and may act, as trustee under various indentures and trusts of National and its affiliates.
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BOOK-ENTRY; DELIVERY AND FORM
Book-Entry System
Book-Entry, Delivery and Form
Except as set forth below, the new notes will be issued in registered, global form (a Global Note or the Global Notes) in minimum denominations of $2,000 and
integral multiples of $1,000 in excess thereof. The Global Notes will be deposited upon issuance with the Trustee as custodian for The Depository Trust Company (DTC), in New York, New York, and registered in the name of DTC or its
nominee, in each case, for credit to an account of a direct or indirect participant in DTC as described below.
Exchanges Among the Global Notes
Any beneficial interest in one of the global notes that is transferred to a person who takes delivery in the form of an interest in another global note will, upon transfer, cease to be an
interest in that global note and become an interest in the other global note and, accordingly, will then be subject to any transfer restrictions and other procedures applicable to beneficial interests in the other global note for as long as it
remains such an interest.
Book-Entry Procedures for the Global Notes
The descriptions of the operations and procedures of DTC, Euroclear Bank S.A./N.V., as operator of the Euroclear System (Euroclear), and Clearstream Banking, société
anonyme (Clearstream) set forth below are provided solely as a matter of convenience and are not intended to serve as a representation or warranty of any kind. These operations and procedures are solely within the control of these
settlement systems and are subject to change by them from time to time. National does not take any responsibility for these operations or procedures, and investors are urged to contact the relevant system and its participants directly to discuss
these matters.
DTC has advised National:
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DTC is a limited-purpose trust company organized under the New York Banking Law, a banking
organization within the meaning of the New York Banking Law, a member
of the Federal
Reserve System, a clearing corporation within the meaning of the New York Uniform
Commercial Code and a clearing agency registered under Section
17A of the Securities
Exchange Act of 1934.
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DTC holds securities that its participants deposit with DTC and facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities
through electronic computerized book-entry changes in participants accounts, thereby eliminating
the need for physical movement of securities
certificates.
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Direct participants include securities brokers and dealers, banks trust companies, clearing
corporations and other organizations.
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Access to the DTC system is also available to others such as securities brokers and dealers, banks
and trust companies that clear through or maintain a custodial relationship
with a direct
participant, either directly or indirectly.
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The rules applicable to DTC and its direct and indirect participants are on file with the SEC.
Clearstream has advised National that it is incorporated under the laws of Luxembourg as a professional depositary. Clearstream holds securities for its customers and facilitates the clearance
and settlement of securities transactions between its customers through electronic book-entry changes in accounts of its customers, thereby eliminating the need for physical movement of certificates. Clearstream provides to its customers, among
other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a professional
depositary, Clearstream is subject to regulation by the Luxembourg Commission for the Supervision of
35
the Financial Section. Clearstream customers are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and other
organizations and may include the underwriters. Indirect access to Clearstream is also available to others, such as banks, brokers, dealers and trust companies, that clear through or maintain a custodial relationship with a Clearstream customer
either directly or indirectly.
Euroclear has advised National that it was created in 1968 to hold securities for participants of Euroclear and to clear and settle transactions between Euroclear participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear provides various other services,
including securities lending and borrowing and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V, which is referred to as the Euroclear Operator, under contract with Euroclear Clearance Systems
S.C., a Belgian cooperative corporation, which is referred to as the Cooperative. All operations are conducted by the Euroclear Operator; and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear participants. Euroclear participants include banks (including central banks), securities brokers and dealers, and other professional financial
intermediaries. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. The Euroclear Operator is licensed by the Belgian
Banking and Finance Commission to carry out banking activities on a global basis. As a Belgian bank, it is regulated and examined by the Belgian Banking and Finance Commission.
National expects that under procedures established by DTC:
-
upon deposit of the global notes with DTC or its custodian, DTC will credit on its internal system
the accounts of direct participants with portions of the principal amounts
of the global notes; and
-
ownership of the new notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC or its nominee, with respect to
interests of
direct participants, and the records of direct and indirect participants, with respect to interests of
persons other than participants.
The laws of some jurisdictions may require that purchasers of securities take physical delivery of those securities in definitive form. Accordingly, the ability to transfer interests in the
notes represented by a global note to those persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an
interest in new notes represented by a global note to pledge or transfer those interests to persons or entities that do not participate in DTCs system, or otherwise to take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a global note, DTC or that nominee will be considered the sole owner or holder of the notes represented by that global note for all
purposes under the indenture and under the notes. Except as provided below, owners of beneficial interests in a global note will not be entitled to have new notes represented by that global note registered in their names, will not receive or be
entitled to receive physical delivery of certificated notes and will not be considered the owners or holders thereof under the indenture or under the new notes for any purpose, including with respect to the giving of any direction, instruction or
approval to the trustee. Accordingly, each holder owning a beneficial interest in a global note must rely on the procedures of DTC and, if that holder is not a direct or indirect participant, on the procedures of the participant through which that
holder owns its interest, to exercise any rights of a holder of new notes under the indenture or a global note. National understands that under existing industry practice, if National requests any action of holders of new notes, or a holder that is
an owner of a beneficial interest in a global note desires to take any action that DTC, as the holder of the global note, is entitled to take, then DTC would authorize its participants to take the action and the participants would authorize holders
owning through participants to take the action or would otherwise act upon the instruction of such holders.
36
Neither National nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of new notes by DTC, Clearstream or Euroclear,
or for maintaining, supervising or reviewing any records of those organizations relating to the notes.
Payments on the new notes represented by the global notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. National expects that DTC or its nominee, upon
receipt of any payment on the new notes represented by a global note, will credit participants accounts with payments in amounts proportionate to their respective beneficial interests in the global note as shown in the records of DTC or its
nominee. National also expects that payments by participants to owners of beneficial interests in the global note held through such participants will be governed by standing instructions and customary practice as is now the case with securities held
for the accounts of customers registered in the names of nominees for such customers. The participants will be responsible for those payments.
Distributions on the new notes held beneficially through Clearstream will be credited to cash accounts of its customers in accordance with its rules and procedures, to the extent received by
the U.S. depositary for Clearstream.
Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the
Euroclear System, and applicable Belgian law, which are referred to collectively as the Terms and Conditions. The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding through Euroclear participants.
Distributions on the new notes held beneficially through Euroclear will be credited to the cash accounts of its participants in accordance with the Terms and Conditions, to the extent received
by the U.S. depositary for Euroclear.
Clearance and Settlement Procedures
Secondary market trading between DTC participants will occur in the ordinary way in accordance with DTC rules and will be settled in immediately available funds. Secondary market trading
between Clearstream customers or Euroclear participants will occur in the ordinary way in accordance with the applicable rules and operating procedures of Clearstream and Euroclear, as applicable, and will be settled using the procedures applicable
to conventional eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream customers or Euroclear participants, on the
other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international clearing system by the U.S. depositary; however, such cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in such system in accordance with its rules and procedures and within its established deadline (European time). The relevant European international clearing system will, if the transaction
meets its settlement requirements, deliver instructions as to the U.S. depositary to take action to effect final settlement on its behalf by delivering or receiving the new notes in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Clearstream customers and Euroclear participants may not deliver instructions directly to their U.S. depositaries.
Because of time-zone differences, credits of the new notes received in Clearstream or Euroclear as a result of a transaction with a DTC participant will be made during subsequent securities
settlement processing and dated the business day following the DTC settlement date. Such credits or any transactions in the new notes settled during such processing will be reported to the relevant Clearstream customers or Euroclear participants on
such business day. Cash received in Clearstream or Euroclear as a result of sales of the new notes by or through a Clearstream customer or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will
be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.
37
Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures to facilitate transfers of the new notes among participants of DTC, Clearstream and Euroclear, they are under no
obligation to perform or continue to perform such procedures and such procedures may be changed or discontinued at any time.
Certificated Notes
National will issue certificated notes to each person that DTC identifies as the beneficial owner of the new notes represented by a global note upon surrender by DTC of the global note if:
-
DTC notifies National that it is no longer willing or able to act as a depositary for such global note
or ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, and
National has not appointed a successor depositary within 90 days of that notice or becoming aware
that DTC is no longer so registered;
-
an event of default has occurred and is continuing, and DTC requests the issuance of certificated
notes; or
-
National determines not to have the new notes of such series represented by a global note.
Neither National nor the trustee will be liable for any delay by DTC, its nominee or any direct or indirect participant in identifying the beneficial owners of the notes. National and the
trustee may conclusively rely on, and will be protected in relying on, instructions from DTC or its nominee for all purposes, including with respect to the registration and delivery, and the respective principal amounts, of the certificated notes to
be issued.
38
U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following is a summary of material U.S. federal income tax consequences of the exchange of original notes for new notes pursuant to this exchange offer, but does not address any other
aspects of U.S. federal income tax consequences to holders of original notes or new notes (collectively referred to in this section as notes). This summary is based upon the Internal Revenue Code of 1986, as amended (the
Code), the Treasury Regulations promulgated or proposed thereunder, and administrative and judicial interpretations thereof, all as of the date hereof and all of which are subject to change, possibly on a retroactive basis. This summary
is not binding on the Internal Revenue Service (the Service), or on the courts, and no ruling will be sought from the Service with respect to the statements made and the conclusions reached in this summary. There can be no assurance that
the Service will agree with such statements and conclusions.
This summary is limited to the U.S. federal income tax consequences of those persons who are the initial beneficial owners of original notes who purchased such original notes at their original
issue price, who exchange original notes for new notes in this exchange offer and who hold notes as capital assets within the meaning of Section 1221 of the Code, whom we refer to as Holders. This summary does not address specific tax
consequences that may be relevant to particular persons, including banks, financial institutions, broker
dealers, insurance companies, real estate investment trusts, regulated
investment companies, partnerships or other pass
through entities, expatriates, tax
exempt organizations and persons
that have a functional currency other than the U.S. dollar or persons in special situations, such as those who have elected to mark securities to market or those who hold the notes as part of a straddle, hedge, conversion transaction or other
integrated transaction. In addition, this summary does not address U.S. federal alternative minimum tax consequences, estate and gift tax consequences, consequences under the tax laws of any state, local or foreign jurisdiction, or consequences
under any U.S. federal tax laws other than income tax law.
If a partnership or other entity taxable as a partnership holds notes, the tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities
of the partnership. If you are a partner of a partnership holding the notes, you should consult your tax advisor regarding the tax consequences of the exchange of original notes for new notes pursuant to this exchange offer.
This summary is for general information only. Persons considering the exchange of original notes for new notes are urged to consult their own tax advisors concerning the U.S. federal income tax
consequences to them of exchanging notes and of owning the original notes or the new notes, as well as the application of state, local and foreign tax laws and U.S. federal tax laws other than income tax law.
Exchange of an Original Note for a New Note Pursuant to the Exchange Offer
The exchange of an original note for a new note pursuant to the exchange offer described herein will not constitute a taxable exchange for U.S. federal income tax purposes. Consequently, a
Holder will not recognize gain or loss on such exchange, the Holders tax basis in the new note will be the same as its tax basis in the original note immediately before the exchange and the Holders holding period in the new note will
include its holding period in the original note.
39
PLAN OF DISTRIBUTION
If you wish to exchange your original notes in the exchange offer, you will be required to make representations to National as described in The Exchange OfferExchange Offer
Procedures in this prospectus and in the letter of transmittal. In addition, each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with
any resale of such new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for original notes where such original notes were
acquired as a result of market-making activities or other trading activities. National has agreed that, for a period of one year after the expiration date of the exchange offer, National will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale.
National will not receive any proceeds from any sale of new notes by broker-dealers. New notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from
time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such new
notes may be deemed to be an underwriter within the meaning of the Securities Act and any profit on any such resale of new notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the
Securities Act.
A broker dealer that acquired original notes directly from National cannot exchange the original notes in the exchange offer. Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the new notes cannot rely on the no-action letters of the staff of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction.
For a period of one year after the expiration date of the exchange offer, National will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to
any broker-dealer that requests such documents in the letter of transmittal. National has agreed to pay all expenses incident to the exchange offer, including the expenses of one counsel for the holders of the original notes, other than commissions
or concessions of any brokers or dealers, and will indemnify the holders of the original notes, including any broker-dealers, against certain liabilities, including liabilities under the Securities Act.
40
EXPERTS
The financial statements and managements assessment of the effectiveness of internal control over financial reporting (which is included in Managements Report on Internal Control
over Financial Reporting) incorporated in this prospectus by reference to the Annual Report on Form 10-K for the year ended September 30, 2008 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent
registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The information incorporated in this prospectus by reference to Nationals Annual Report on Form 10-K for the year ended September 30, 2008, relating to the oil and gas reserves of Seneca
Resources Corporation, has been so incorporated in reliance on the audit report of Netherland, Sewell & Associates, Inc., an independent petroleum engineering firm, given on the authority of said firm as experts in petroleum engineering.
LEGAL MATTERS
The validity of the notes and certain tax matters will be passed upon by Dewey & LeBoeuf LLP, New York, New York. However, all matters of New Jersey law will be passed upon only by
Lowenstein Sandler PC, Roseland, New Jersey.
41
No dealer, salesperson or other person has been authorized to give any information or to make any representation not contained in this prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by National. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction. Neither the delivery of this prospectus nor any sale made hereunder shall under any circumstances create any implication that the information herein is correct as of any time
after the date hereof or that there has not been a change in the affairs of National since the date hereof.
January 21, 2009
National Fuel Gas Company
Offer to Exchange
its
6.50% Notes due 2018
which have been registered under the Securities Act of 1933
for any and all outstanding
6.50% Notes due 2018
which have not been registered under the Securities Act of 1933
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