The Notes due November 27, 2034 are senior unsecured
debt securities of Wells Fargo & Company and are part of a series entitled “Medium-Term Notes, Series T.”
You should read this pricing supplement together with
the prospectus supplement dated January 24, 2018 and the prospectus dated April 5, 2019 for additional information about the notes.
When you read the accompanying prospectus supplement, please note that all references in such supplement to the prospectus dated
November 3, 2017, or to any sections therein, should refer instead to the accompanying prospectus dated April 5, 2019 or to the
corresponding sections of such prospectus, as applicable. Information included in this pricing supplement supersedes information
in the prospectus supplement and prospectus to the extent it is different from that information. Certain defined terms used but
not defined herein have the meanings set forth in the prospectus supplement.
The notes are not designed for, and may not be a suitable
investment for, investors who:
RISK FACTORS
Your investment in the notes will involve risks
not associated with an investment in conventional debt securities. You should carefully consider the risk factors set forth below
as well as the other information contained in the prospectus supplement and prospectus, including the documents they incorporate
by reference. You should reach an investment decision only after you have carefully considered with your advisors the suitability
of an investment in the notes in light of your particular circumstances.
The Amount Of Interest You Receive May Be
Less Than The Return You Could Earn On Other Investments.
Interest rates may change significantly over
the term of the notes, and it is impossible to predict what interest rates will be at any point in the future. Although the interest
rate on the notes will increase to preset rates at scheduled intervals during the term of the notes, the interest rate that will
apply at any time on the notes may be more or less than prevailing market interest rates at such time. As a result, the amount
of interest you receive on the notes may be less than the return you could earn on other investments.
The Per Annum Interest Rate Applicable At
A Particular Time Will Affect Our Decision To Redeem The Notes.
It is more likely that we will redeem the notes
prior to the stated maturity date during periods when the remaining interest is to accrue on the notes at a rate that is greater
than that which we would pay on a conventional fixed-rate non-redeemable note of comparable maturity. If we redeem the notes prior
to the stated maturity date, you may not be able to invest in other notes that yield as much interest as the notes.
The Step-Up Feature Presents Different Investment
Considerations Than Fixed Rate Notes.
The interest rate payable on the notes during
their term will increase from the initial interest rate, subject to our right to redeem the notes. If we do not redeem the notes,
the interest rate will step up as described herein. You should not expect to earn the higher stated interest rates which are applicable
only after the first ten years of the term of the notes because, unless general interest rates rise significantly, the notes are
likely to be redeemed prior to the stated maturity date. When determining whether to invest in the notes, you should consider,
among other things, the overall annual percentage rate of interest to redemption as compared to other equivalent investment alternatives
rather than the higher stated interest rates which are applicable only after the first ten years of the term of the notes.
An Investment In The Notes May Be More Risky
Than An Investment In Notes With A Shorter Term.
The notes have a term of fifteen years, subject
to our right to redeem the notes starting on November 27, 2022. By purchasing notes with a longer term, you will bear greater
exposure to fluctuations in interest rates than if you purchased a note with a shorter term. In particular, you may be negatively
affected if interest rates begin to rise because the likelihood that we will redeem your notes will decrease and the interest
rate applicable to your notes during a particular interest period may be less than the amount of interest you could earn on other
investments available at such time. In addition, if you tried to sell your notes at such time, the value of your notes in any
secondary market transaction would also be adversely affected.
The Notes Are Subject To The Credit Risk
Of Wells Fargo.
The notes are our obligations and are not, either
directly or indirectly, an obligation of any third party. Any amounts payable under the notes are subject to our creditworthiness.
As a result, our actual and perceived creditworthiness may affect the value of the notes and, in the event we were to default
on our obligations, you may not receive any amounts owed to you under the terms of the notes.
Holders Of The Notes Have Limited Rights
Of Acceleration.
Payment of principal on the notes may be accelerated
only in the case of payment defaults that continue for a period of 30 days or certain events of bankruptcy or insolvency, whether
voluntary or involuntary. If you purchase the notes, you will have no right to accelerate the payment of principal on the notes
if we fail in the performance of any of our obligations under the notes, other than the obligations to pay principal and interest
on the notes. See “Description of Notes—Events of Default and Covenant Breaches” in the accompanying prospectus
supplement.
Holders Of The Notes Could Be At Greater
Risk For Being Structurally Subordinated If We Convey, Transfer Or Lease All Or Substantially All Of Our Assets To One Or More
Of Our Subsidiaries.
Under the indenture, we may convey, transfer
or lease all or substantially all of our assets to one or more of our subsidiaries. In that event, third-party creditors of our
subsidiaries would have additional assets from which to recover on their claims while holders of the notes would be structurally
subordinated to creditors of our subsidiaries with respect to such assets. See “Description of Notes—Consolidation,
Merger or Sale” in the accompanying prospectus supplement.
The Agent Discount, Offering Expenses And
Certain Hedging Costs Are Likely To Adversely Affect The Price At Which You Can Sell Your Notes.
Assuming no changes in market conditions or
any other relevant factors, the price, if any, at which you may be able to sell the notes will likely be lower than the original
offering price. The original offering price includes, and any price quoted to you is likely to exclude, the agent discount paid
in connection with the initial distribution, offering expenses and the projected profit that our hedge counterparty (which may
be one of our affiliates) expects to realize in consideration for assuming the risks inherent in hedging our obligations under
the notes. In addition, any such price is also likely to reflect dealer discounts, mark-ups and other transaction costs, such
as a discount to account for costs associated with establishing or unwinding any related hedge transaction. The price at which
the agent or any other potential buyer may be willing to buy your notes will also be affected by the interest rates provided by
the notes and by the market and other conditions discussed in the next risk factor.
The Value Of The Notes Prior To Stated Maturity
Will Be Affected By Numerous Factors, Some Of Which Are Related In Complex Ways.
The value of the notes prior to stated maturity
will be affected by interest rates at that time and a number of other factors, some of which are interrelated in complex ways.
The effect of any one factor may be offset or magnified by the effect of another factor. The following factors, among others,
are expected to affect the value of the notes. When we refer to the “value” of your note, we mean the value
that you could receive for your note if you are able to sell it in the open market before the stated maturity date.
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Interest
Rates. The value of the notes may be affected by changes in the interest rates in
the U.S. markets.
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Our
Creditworthiness. Actual or anticipated changes in our creditworthiness may affect
the value of the notes. However, because the return on the notes is dependent upon factors
in addition to our ability to pay our obligations under the notes, such as whether we
exercise our option to redeem the notes, an improvement in our creditworthiness will
not reduce the other investment risks related to the notes.
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The Notes Will Not Be Listed On Any Securities
Exchange And We Do Not Expect A Trading Market For The Notes To Develop.
The notes will not be listed or displayed on
any securities exchange or any automated quotation system. Although the agent and/or its affiliates may purchase the notes from
holders, they are not obligated to do so and are not required to make a market for the notes. There can be no assurance that a
secondary market will develop. Because we do not expect that any market makers will participate in a secondary market for the
notes, the price at which you may be able to sell your notes is likely to depend on the price, if any, at which the agent is willing
to buy your notes.
If a secondary market does exist, it may be
limited. Accordingly, there may be a limited number of buyers if you decide to sell your notes prior to stated maturity. This
may affect the price you receive upon such sale. Consequently, you should be willing to hold the notes to stated maturity.
A Dealer Participating In The Offering Of
The Notes Or Its Affiliates May Realize Hedging Profits Projected By Its Proprietary Pricing Models In Addition To Any Selling
Concession, Creating A Further Incentive For The Participating Dealer To Sell The Notes To You.
If any dealer participating in the offering
of the notes, which we refer to as a “participating dealer,” or any of its affiliates conducts hedging activities
for us in connection with the notes, that participating dealer or its affiliates will expect to realize a projected profit from
such hedging activities, if any, and this projected hedging profit will be in addition to any concession that the participating
dealer realizes for the sale of the notes to you. This additional projected profit may create a further incentive for the participating
dealer to sell the notes to you.
The Resolution Of Wells Fargo Under The Orderly
Liquidation Authority Could Result In Greater Losses For Holders Of The Notes, Particularly If A Single-Point-Of-Entry Strategy
Is Used.
Your ability to recover the full amount that
would otherwise be payable on the notes in a proceeding under the U.S. Bankruptcy Code may be impaired by the exercise by the
Federal Deposit Insurance Corporation (the “FDIC”) of its powers under the “orderly liquidation authority”
under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
In particular, the single point of entry strategy described below is intended to impose losses at the top-tier holding company
level in the resolution of a Global Systemically Important Bank (“G-SIB”) such as Wells Fargo.
Title II of the Dodd-Frank Act created a new
resolution regime known as the “orderly liquidation authority” to which financial companies, including bank holding
companies such as Wells Fargo, can be subjected. Under the orderly liquidation authority, the FDIC may be appointed as receiver
for a financial company for purposes of liquidating the entity if, upon the recommendation of applicable regulators, the United
States Secretary of the Treasury determines, among other things, that the entity is in severe financial distress, that the entity’s
failure would have serious adverse effects on the U.S. financial system and that resolution under the orderly liquidation authority
would avoid or mitigate those effects. Absent such determinations, Wells Fargo, as a bank holding company, would remain subject
to the U.S. Bankruptcy Code.
If the FDIC is appointed as receiver under the
orderly liquidation authority, then the orderly liquidation authority, rather than the U.S. Bankruptcy Code, would determine the
powers of the receiver and the rights and obligations of creditors and other parties who have transacted with Wells Fargo. There
are substantial differences between the rights available to creditors in the orderly liquidation authority and under the U.S.
Bankruptcy Code, including the right of the FDIC under the orderly liquidation authority to disregard the strict priority of creditor
claims in some circumstances (which would otherwise be respected by a bankruptcy court) and the use of an administrative claims
procedure to determine creditors’ claims (as opposed to the judicial procedure utilized in bankruptcy proceedings). In certain
circumstances under the orderly liquidation authority, the FDIC could elevate the priority of claims if it determines that doing
so is necessary to facilitate a smooth and orderly liquidation without the need to obtain the consent of other creditors or prior
court review. In addition, under the orderly liquidation authority, the FDIC has the right to transfer assets or liabilities of
the failed company to a third party or “bridge” entity.
The FDIC has announced that a “single
point of entry” strategy may be a desirable strategy to resolve a large financial institution such as Wells Fargo in a manner
that would, among other things, impose losses on shareholders, unsecured debt holders (including, in our case, holders of the
notes) and other creditors of the top-tier holding company (in our case, Wells Fargo), while permitting the holding company’s
subsidiaries to continue to operate. In addition, in December 2016, the Board of Governors of the Federal Reserve System (the
“FRB”) finalized rules requiring U.S. G-SIBs, including Wells Fargo, to maintain minimum amounts of long-term
debt and total loss-absorbing capacity (TLAC). It is possible that the application of the single point of entry strategy—in
which Wells Fargo would be the only legal entity to enter resolution proceedings—could result in greater losses to holders
of the notes than the losses that would result from the application of a bankruptcy proceeding or a different resolution strategy
for Wells Fargo. Assuming Wells Fargo entered resolution proceedings and that support from Wells Fargo to its subsidiaries was
sufficient to enable the subsidiaries to remain solvent, losses at the subsidiary level could be transferred to Wells Fargo and
ultimately borne by Wells Fargo’s security holders (including holders of the notes and our other unsecured debt securities),
with the result that third-party creditors of Wells Fargo’s subsidiaries would receive full recoveries on their claims,
while Wells Fargo’s security holders (including holders of the notes) and other unsecured creditors could face significant
losses. In that case, Wells Fargo’s security holders could face significant losses while the third-party creditors of Wells
Fargo’s subsidiaries would incur no losses because the subsidiaries would continue to operate and would not enter resolution
or bankruptcy proceedings. In addition, holders of the notes and other debt securities of Wells Fargo could face losses ahead
of our other similarly situated creditors in a resolution under the orderly liquidation authority if the FDIC exercised its right,
described above, to disregard the strict priority of creditor claims.
The orderly liquidation authority also requires
that creditors and shareholders of the financial company in receivership must bear all losses before taxpayers are exposed to
any losses, and amounts owed by the financial company or the receivership to the U.S. government would generally receive a statutory
payment priority over the claims of private creditors, including senior creditors such as claims in respect of the notes. In addition,
under the orderly liquidation authority, claims of creditors (including holders of the notes) could be satisfied through the issuance
of equity or other securities in a bridge entity to which Wells Fargo’s assets are transferred. If securities
were to be delivered in satisfaction of claims,
there can be no assurance that the value of the securities of the bridge entity would be sufficient to repay all or any part of
the creditor claims for which the securities were exchanged.
While the FDIC has issued regulations to implement
the orderly liquidation authority, not all aspects of how the FDIC might exercise this authority are known and additional rulemaking
is possible.
The Resolution Of Wells Fargo In A Bankruptcy
Proceeding Could Also Result in Greater Losses For Holders Of Our Debt Securities, Including The Notes.
As required by the Dodd-Frank Act and regulations
issued by the FRB and the FDIC, we are required to provide to the FRB and the FDIC a plan for our rapid and orderly resolution
in the event of material financial distress affecting Wells Fargo or the failure of Wells Fargo. The strategy described in our
2017 resolution plan is a “multiple point of entry” strategy, in which Wells Fargo, Wells Fargo Bank, National Association
(“WFBNA”) and Wells Fargo Securities, LLC (“WFS”) would each undergo separate resolution
proceedings under the U.S. Bankruptcy Code, the Federal Deposit Insurance Act, and the Securities Investor Protection Act, respectively.
To further the orderly resolution of its businesses and those of its subsidiaries, Wells Fargo may provide capital and liquidity
resources to certain of its major subsidiaries (such as WFBNA and WFS) during any period of distress, including through the forgiveness
of intercompany indebtedness, the making of additional intercompany loans and by other means. These subsidiaries may enter into
separate resolution proceedings even after receiving capital and liquidity resources from Wells Fargo. It is possible that creditors
of some or all of Wells Fargo’s major subsidiaries would receive significant, or even full, recoveries on their claims while
holders of Wells Fargo’s debt securities (including holders of the notes) could face significant or complete losses. It
is also possible that holders of Wells Fargo’s debt securities (including holders of the notes) could face greater losses
than if the multiple point of entry strategy had not been implemented and Wells Fargo had not provided capital and liquidity resources
to major subsidiaries that enter separate resolution proceedings because assets and other resources provided to those subsidiaries
would not be available to pay Wells Fargo’s creditors (including holders of the notes and Wells Fargo’s other debt
securities).
For our next resolution plan submission, we
have made a decision to move to a single point of entry strategy, in which Wells Fargo would be resolved under the U.S. Bankruptcy
Code using a strategy in which only Wells Fargo itself enters proceedings while some or all of its operating subsidiaries are
maintained as going concerns. In this case, the effects on creditors of Wells Fargo would likely be similar to those arising under
the orderly liquidation authority, as described above. We are not obligated to maintain either a single point of entry or multiple
point of entry strategy, and the strategies reflected in our resolution plan submissions are not binding in the event of an actual
resolution of Wells Fargo, whether conducted under the U.S. Bankruptcy Code or by the FDIC under the orderly liquidation authority.
To carry out such a single point of entry strategy, Wells Fargo may seek to recapitalize its subsidiaries or provide them with
liquidity in order to preserve them as going concerns prior to the commencement of Wells Fargo’s bankruptcy proceeding.
Moreover, Wells Fargo could seek to elevate the priority of its guarantee obligations relating to its major subsidiaries’
derivatives contracts over its other obligations, so that cross-default and early termination rights under derivatives contracts
at its subsidiaries would be stayed under the ISDA Resolution Stay Protocol. This elevation would result in holders of our debt
securities (including the notes) incurring losses ahead of the beneficiaries of those guarantee obligations. It is also possible
that holders of our debt securities (including the notes) could incur losses ahead of other similarly situated creditors.
In response to the regulators’ guidance
and to facilitate the orderly resolution of Wells Fargo using either a single point of entry or multiple point of entry resolution
strategy, on June 28, 2017, Wells Fargo entered into a Support Agreement with WFC Holdings, LLC, an intermediate holding company
and subsidiary of Wells Fargo (the “IHC”), and WFBNA, WFS, and Wells Fargo Clearing Services, LLC (“WFCS”),
each an indirect subsidiary of Wells Fargo (the “Support Agreement”). Pursuant to the Support Agreement, Wells
Fargo transferred a significant amount of its assets, including the majority of its cash, deposits, liquid securities and intercompany
loans (but excluding its equity interests in its subsidiaries and certain other assets), to the IHC and will continue to transfer
those types of assets to the IHC from time to time. In the event of Wells Fargo’s material financial distress or failure,
the IHC will be obligated to use the transferred assets to provide capital and/or liquidity to WFBNA pursuant to the Support Agreement
and to WFS and WFCS through repurchase facilities entered into in connection with the Support Agreement. Under the Support Agreement,
the IHC will also provide funding and liquidity to Wells Fargo through subordinated notes and a committed line of credit, which,
together with the issuance of dividends, is expected to provide Wells Fargo, during business as usual operating conditions, with
the same access to cash necessary to service its debts, pay dividends, repurchase its shares and perform its other obligations
as it would have if it had not entered into these arrangements and transferred any assets. If certain liquidity and/or capital
metrics fall below defined triggers, the subordinated notes would be forgiven and the committed line of credit would terminate,
which
could materially and adversely impact Wells
Fargo’s liquidity and its ability to satisfy its debts and other obligations, and could result in the commencement of bankruptcy
proceedings by Wells Fargo at an earlier time than might have otherwise occurred if the Support Agreement were not implemented.
Wells Fargo’s and the IHC’s respective obligations under the Support Agreement are secured pursuant to a related security
agreement.
If either resolution strategy proved to be unsuccessful,
holders of our debt securities (including the notes) may as a consequence be in a worse position than if the strategy had not
been implemented. In all cases, any payments to holders of our debt securities are dependent on our ability to make such payments
and are therefore subject to our credit risk.
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a discussion of the material
U.S. federal income and certain estate tax consequences of the ownership and disposition of the notes. It applies to you only
if you purchase a note for cash in the initial offering at the “issue price,” which is the first price at which
a substantial amount of the notes is sold to the public, and hold the note as a capital asset within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the “Code”). It does not address all of the tax consequences
that may be relevant to you in light of your particular circumstances or if you are an investor subject to special rules, such
as:
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a
financial institution;
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a
“regulated investment company”;
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a
“real estate investment trust”;
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a
tax-exempt entity, including an “individual retirement account” or “Roth
IRA”;
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a
dealer or trader subject to a mark-to-market method of tax accounting with respect to
the notes;
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a
person holding a note as part of a “straddle” or conversion transaction or
who has entered into a “constructive sale” with respect to a note;
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a
U.S. holder (as defined below) whose functional currency is not the U.S. dollar; or
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an
entity classified as a partnership for U.S. federal income tax purposes.
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If an entity that is classified as a partnership
for U.S. federal income tax purposes holds the notes, the U.S. federal income tax treatment of a partner will generally depend
on the status of the partner and the activities of the partnership. If you are a partnership holding the notes or a partner in
such a partnership, you should consult your tax adviser as to the particular U.S. federal tax consequences of holding and disposing
of the notes to you.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final, temporary and proposed Treasury regulations, all as of the date hereof, changes
to any of which subsequent to the date hereof may affect the tax consequences described herein, possibly with retroactive effect.
This discussion does not address the effects of any applicable state, local or non-U.S. tax laws, any alternative minimum tax
consequences, the potential application of the Medicare tax on net investment income or the consequences to taxpayers subject
to special tax accounting rules under Section 451(b) of the Code. You should consult your tax adviser concerning the application
of U.S. federal income and estate tax laws to your particular situation, as well as any tax consequences arising under the laws
of any state, local or non-U.S. taxing jurisdiction.
General
In the opinion of our counsel, Davis Polk &
Wardwell LLP, the notes will be treated as debt instruments for U.S. federal income tax purposes.
We expect the “issue price” of the
notes to be equal to their stated principal amount. Assuming that the notes’ issue price is equal to the stated principal
amount, the notes will be issued without original issue discount (“OID”) for U.S. federal income tax purposes,
as discussed further below under “Tax Consequences to U.S. Holders.” However, the issue price of the notes will be
determined on the pricing date. If the notes’ issue price is less than the stated principal amount, the notes would potentially
be issued with OID, in which case a U.S. holder of the notes would generally be required to recognize the OID in income in advance
of the receipt of the related cash payments. The remaining discussion assumes that the notes’ issue price is equal to the
stated principal amount.
Tax Consequences to U.S. Holders
This section applies only to U.S. holders. You
are a “U.S. holder” if you are a beneficial owner of a note that is, for U.S. federal income tax purposes:
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a
citizen or individual resident of the United States;
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a
corporation created or organized in or under the laws of the United States, any state
therein or the District of Columbia; or
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an
estate or trust the income of which is subject to U.S. federal income taxation regardless
of its source.
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Interest
on the Notes. Stated interest on the notes will generally be taxable to you as ordinary interest income at the time
it accrues or is received in accordance with your method of accounting for U.S. federal income tax purposes.
Under applicable Treasury regulations, we will
generally be presumed to exercise our option to redeem the notes if the exercise of the option would lower the yield on the notes.
The yield on the notes would be lowered if we redeemed the notes before the initial increase in the interest rate, and therefore
the notes will not be treated as issued with OID. If, contrary to the presumption in the applicable Treasury regulations, we do
not redeem the notes before the initial increase in the interest rate, solely for purposes of calculating OID, the notes will
be treated as if they were redeemed and new notes were issued on the presumed exercise date for the notes’ principal amount.
The same analysis will generally apply to any subsequent increase in the interest rate, which means a note that is deemed reissued
will generally be treated as redeemed prior to that subsequent increase in the interest rate, and therefore as issued without
OID. The rules governing short-term debt instruments may apply to a note deemed reissued in conjunction with the final scheduled
increase in the interest rate. You should consult your tax adviser concerning the possible application of these rules.
Sale, Exchange
or Retirement of the Notes. You will recognize capital gain or loss on the sale, exchange or retirement of a note equal
to the difference between the amount received (other than amounts received in respect of accrued interest, which will be treated
as described under “—Interest on the Notes”) and your adjusted tax basis in the note. Your adjusted tax basis
in a note generally will be equal to your original purchase price for the note. Your gain or loss generally will be long-term
capital gain or loss if at the time of the sale, exchange or retirement you held the notes for more than one year, and short-term
capital gain or loss otherwise. Long-term capital gains recognized by non-corporate U.S. holders are generally subject to taxation
at reduced rates. Any capital loss you recognize may be subject to limitations.
Tax Consequences to Non-U.S. Holders
This section applies only to non-U.S. holders. You
are a “non-U.S. holder” if you are a beneficial owner of a note that is, for U.S. federal income tax purposes:
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an
individual who is classified as a nonresident alien;
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a
foreign corporation; or
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a
foreign estate or trust.
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You are not a non-U.S. holder for purposes of
this discussion if you are (i) an individual who is present in the United States for 183 days or more in the taxable year of disposition,
(ii) a former citizen or resident of the United States or (iii) a person for whom income or gain in respect of the notes is effectively
connected with the conduct of a trade or business in the United States. If you are or may become such a person during the period
in which you hold a note, you should consult your tax adviser regarding the U.S. federal tax consequences of an investment in
the notes.
Treatment
of Income and Gain on the Notes. You should not be subject to U.S. federal income or withholding tax in respect of
the notes, provided that interest on the notes qualifies as “portfolio interest” and is not subject to withholding
under the “FATCA” regime described below. Interest on the notes should generally qualify as portfolio interest, exempt
from withholding (which for an individual non-U.S. holder is pursuant to Section 871(h) of the Code), provided that:
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you
do not own, directly or by attribution, ten percent or more of the total combined voting
power of all classes of our stock entitled to vote;
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you
are not a controlled foreign corporation related, directly or indirectly, to us through
stock ownership;
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you
are not a bank receiving interest under Section 881(c)(3)(A) of the Code; and
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you
provide to the applicable withholding agent an appropriate Internal Revenue Service (“IRS”)
Form W-8 on which you certify under penalties of perjury that you are not a U.S. person.
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U.S. Federal Estate Tax
A note held by an individual non-U.S. holder
who at death is not a citizen or a resident of the United States for U.S. federal estate tax purposes generally will not be includible
in the individual’s gross estate, and will be deemed “property without the United States” under Section 2105
of the Code, for U.S. federal estate tax purposes if, at the time of death, interest on the note would qualify as portfolio interest
exempt from withholding under Section 871(h), as described above, without regard to the certification requirement described in
the fourth bullet above under “—Treatment of Income and Gain on the Notes.”
You should consult your tax adviser regarding
the U.S. federal estate tax consequences of an investment in the notes in your particular situation.
Backup Withholding and Information Reporting
Information returns generally will be filed
with the IRS with respect to payments of interest on the notes and may be filed with the IRS in connection with the payment of
proceeds from a sale, exchange or other disposition of the notes. If you fail to provide certain identifying information (such
as an accurate taxpayer identification number if you are a U.S. holder) or meet certain other conditions, you may also be subject
to backup withholding at the rate specified in the Code. If you are a non-U.S. holder that provides an appropriate IRS Form W-8,
you will generally establish an exemption from backup withholding. Amounts withheld under the backup withholding rules are not
additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the relevant information
is timely furnished to the IRS.
FATCA
Legislation commonly referred to as “FATCA”
generally imposes a withholding tax of 30% on payments to certain non-U.S. entities (including financial intermediaries) with
respect to certain financial instruments, unless various U.S. information reporting and due diligence requirements have been satisfied.
An intergovernmental agreement between the United States and the non-U.S. entity’s jurisdiction may modify these requirements.
Withholding under these rules (if applicable) applies to payments of amounts treated as interest on the notes. While existing
Treasury regulations would also require withholding on payments of gross proceeds of the disposition (including upon retirement)
of certain financial instruments treated as paying U.S.-source interest or dividends, the U.S. Treasury Department has indicated
in subsequent proposed regulations its intent to eliminate this requirement. The U.S. Treasury Department has indicated that taxpayers
may rely on these proposed regulations pending their finalization. If withholding applies to the notes, we will not be required
to pay any additional amounts with respect to amounts withheld. Both U.S. and non-U.S. holders should consult their tax advisers
regarding the potential application of FATCA to the notes.
The preceding discussion constitutes the
full opinion of Davis Polk & Wardwell LLP regarding the material U.S. federal tax consequences of owning and disposing of
the notes.