ADDITIONAL RISK FACTORS RELATING TO
THE NOTES
An investment in
the notes involves risks. This section describes significant risks relating to the terms of the notes. Before investing in the
notes, you should read the following information about these risks, together with the other information contained in or incorporated
by reference in the applicable pricing supplement, this product supplement and the accompanying prospectus supplement and prospectus.
Your investment
in the notes may result in a loss if the value of the Reference Asset decreases. The notes do not guarantee any return of principal.
You will only receive the principal amount of your notes at maturity if the Final Level is greater than or equal to the Initial
Level, or, if a Monitoring Period is applicable to your notes, the level of the Reference Asset does not decrease to a trading
level or a closing level (as applicable) below the Trigger Level during the applicable Monitoring Period. If these conditions are
not satisfied, you will be entitled to receive at maturity shares or cash with a value that we expect to be less than the principal
amount of your notes, and may be zero. You may even lose the entire principal amount of your notes.
You will not benefit
from any appreciation in the Reference Asset above the Initial Level. You should not expect to receive a payment at maturity
or upon an automatic redemption with a value greater than your principal amount, plus any final interest payment. As a result,
the total of the payments that you receive over the term of the notes will not exceed the principal amount of your notes plus any
interest, even if the Final Level exceeds the Initial Level by a substantial amount.
Your yield may be
lower than the yield on a standard debt security of comparable maturity. The yield that you will receive on your notes, which
could be negative, may be less than the yield you could earn if you purchased a standard senior debt security of Bank of Montreal
with the same Maturity Date. Your investment may not reflect the full opportunity cost to you when you take into account factors
that affect the time value of money.
The cash value of
any Reference Asset that we deliver to you may be less than the market value of those shares on the Valuation Date. If you
receive the Physical Delivery Amount at maturity, the market price of the shares that you receive could decline between the Valuation
Date (or the final Valuation Date) and the Maturity Date, which is when you will actually receive those shares. Similarly, if we
elect to deliver to you the Cash Delivery Amount, we will determine the amount to be paid on the Valuation Date (or the final Valuation
Date) and you will not benefit from any appreciation in the market price of the Reference Asset that may occur between the Valuation
Date (or the final Valuation Date) and the Maturity Date.
Your notes may not
have an active trading market. Your notes will not be listed on any securities exchange, and there may be little or no secondary
market for your notes. Even if a secondary market for your notes develops, it may not provide significant liquidity. We expect
that transaction costs in any secondary market would be high. As a result, the difference between bid and ask prices for your notes
in any secondary market could be substantial. If you sell your notes before maturity, you may have to do so at a substantial discount
from the issue price, and as a result, you may suffer substantial losses.
An investment in
the notes is not the same as owning the Reference Asset or a security directly linked to the performance of the Reference Asset.
The return on your notes will not reflect the return you would realize if you actually owned the Reference Asset or a security
directly linked to the performance of the Reference Asset and held that investment for a similar period. An investment in the notes
differs from a direct investment in several ways, including because:
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the maximum return on your notes will be limited to the payment of the principal amount, plus any
interest payments;
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your notes may be subject to automatic redemption if the level of the Reference Asset reaches or
exceeds a level set forth in the applicable pricing supplement; and
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payments on the notes are dependent upon our credit risk, as the issuer of the notes.
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Your notes may trade
quite differently from the Reference Asset. Changes in the level of the Reference Asset may not result in comparable changes in
the market value of your notes. Even if the level of the Reference Asset increases from the Initial Level during the term of the
notes, the market value of the notes prior to maturity may not increase to the same extent, or may even decrease.
The market value
of your notes may be influenced by many unpredictable factors. The following factors, which are beyond our control, may influence
the market value of your notes:
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the level of the Reference Asset, including whether it trades or closes below the applicable Trigger
Level during the Monitoring Period, if applicable;
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the likelihood of an automatic redemption, if your notes are subject to an automatic redemption;
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the volatility of the Reference Asset;
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the proximity in time to the next interest payment, if any;
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the dividend rate on the applicable Reference Asset or the stocks held by any Reference Asset that
is an ETF;
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economic, financial, political, military, regulatory, legal and other events that affect the applicable
securities markets and which may affect the level of the Reference Asset;
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interest and yield rates in the market; and
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the time remaining to maturity of the notes.
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These factors may influence
the market value of your notes if you sell your notes before maturity. Our creditworthiness, as represented by our credit ratings
or as otherwise perceived in the market, will also affect the market value of your notes. If you sell your notes prior to maturity,
you may receive less than the principal amount of your notes.
Payments on the
notes are subject to our credit risk, and changes in our credit ratings are expected to affect the market value of the notes. The
notes are our senior unsecured debt securities. As a result, your receipt of any interest payments and the amount due on the Maturity
Date are each dependent upon our ability to repay our obligations at that time. This will be the case even if the level of the
Reference Asset increases after the pricing date. No assurance can be given as to what our financial condition will be at any time
during the term of the notes.
The market value
of your notes may decrease at an accelerated rate as the level of the Reference Asset approaches and decreases below any applicable
Trigger Level. When the level of the Reference Asset on any trading day decreases from the Initial Level to a level near the
Trigger Level for the first time, the market value of the notes may decrease at a greater rate than the market value of the Reference
Asset. If the Reference Asset trades (in the case of Continuous Monitoring) or closes (in the case of Daily Monitoring) at levels
that are near or below the Trigger Level, we expect that the market value of the notes will decrease, reflecting the fact that
you may receive at maturity shares of the Reference Asset or cash with a value that is less than the principal amount of your notes.
All other factors remaining constant, the longer the Monitoring Period is for your notes, the higher the probability will be that
the Reference Asset will trade or close (as applicable) at a level that is less than the applicable Trigger Level.
Your notes may be
subject to automatic early redemption. If your notes are subject to automatic redemption, we will redeem the notes if the level
of the Reference Asset reaches or exceeds a specified level as of the applicable call observation date. Following a redemption,
you will not receive any additional interest payments on the notes, and you may not be able to reinvest your proceeds in an investment
with returns that are comparable to the return on the notes.
The amount of shares
or cash to be paid at maturity will not be affected by all developments relating to the Reference Asset. Changes in the level
of the Reference Asset during the term of the notes before the Valuation Date or Valuation Dates will not be reflected in the calculation
of the payment at maturity, except to the extent that the Reference Asset trades or closes (as applicable) below the Trigger Level
during any applicable Monitoring Period, or to the extent that the notes are subject to an automatic redemption. The calculation
agent will calculate the amount to be paid at maturity by comparing the Final Level to the Initial Level. As a result, you may
receive shares or cash at maturity with a value that is less than the principal amount of your notes, even if the level of the
Reference Asset has increased at certain times during the term of the notes before decreasing to a level below the Initial Level.
You must rely on
your own evaluation of the merits of an investment linked to the Reference Asset. In the ordinary course of their business,
we or our affiliates may have expressed views on expected movements in any Reference Asset or any Reference Asset Constituents,
and may do so in the future. These views or reports may be communicated to our clients and clients of our affiliates. However,
these views are subject to change from time to time. Moreover, other professionals who transact business in markets relating to
any Reference Asset or any Reference Asset Constituents may at any time have significantly different views from our views or those
of our affiliates. For these reasons, you are encouraged to obtain information concerning the applicable Reference Asset and any
Reference Asset Constituents from multiple sources, and you should not rely solely on views expressed by us or our affiliates.
Our trading and
other transactions relating to the Reference Asset, any Reference Asset Constituents, futures, options or other derivative products
may adversely affect the market value of the notes. As described below under “Use of Proceeds and Hedging,” we
or one or more affiliates may hedge our obligations under the notes by purchasing or selling shares of the Reference Asset, any
Reference Asset Constituents, futures or options relating to the Reference Asset or Reference Asset Constituents, or other derivative
instruments with returns linked or related to changes in the performance of the Reference Asset or Reference Asset Constituents.
We or our affiliates may adjust these hedges by, among other things, purchasing or selling those assets at any time. Although they
are not expected to do so, any of these hedging activities may adversely affect the level of the Reference Asset, and therefore,
the market value of the notes, and the amounts payable at maturity. It is possible that we or one or more of our affiliates could
receive substantial returns from these hedging activities, even though the market value of the notes decreases.
We or one or more of
our affiliates may also engage in trading relating to the Reference Asset or any Reference Asset Constituents on a regular basis
as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to
facilitate transactions for our customers, including block trades. Any of these activities could adversely affect the level of
the Reference Asset and therefore, the market value of the notes. We or one or more of our affiliates may also issue or underwrite
other securities or financial or derivative instruments with returns linked or related to changes in the performance of the Reference
Asset or any Reference Asset Constituents. By introducing competing products into the marketplace in this manner, we or one or
more of our affiliates could adversely affect the market value of the notes.
Our business activities
or those of our affiliates may create conflicts of interest. We and our affiliates expect to engage in trading activities related
to the Reference Asset and any Reference Asset Constituents that are not for the account of holders of the notes or on their behalf.
These trading activities may present a conflict between the holders’ interests in the notes and the interests we and our
affiliates will have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions,
for their customers and in accounts under their management. These trading activities, if they influence the level of the Reference
Asset, could be adverse to the interests of the holders of the notes. We and one or more of our affiliates may, at the time that
we offer any notes or any time thereafter, engage in business with any applicable Reference Asset Issuer, or any issuer of any
Reference Asset Constituent or the issuer of any component stocks of any index that is tracked by a Reference Asset that is an
ETF (an “Underlying Index”), including making loans to or providing advisory services to those companies. These services
could include investment banking and merger and acquisition advisory services. These activities may present a conflict between
our or one or more of our affiliates’ obligations and your interests as a holder of the notes. Moreover, we and our affiliates
may have published, and in the future expect to publish, research reports that relate to the Reference Asset or Reference Asset
Constituents. This research is modified from time to time without notice and may express opinions or provide recommendations that
are inconsistent with purchasing or holding the notes. Any of these activities by us or one or more of our affiliates may affect
the level of the Reference Asset and therefore, the market value of the notes.
The calculation
agent may postpone the determination of the Final Level if a market disruption event occurs. The calculation agent may postpone
the determination of the Final Level if the calculation agent determines that a market disruption event has occurred or is continuing
on a Valuation Date. In no event, however, will any Valuation Date be postponed by more than ten trading days. As a result, if
a market disruption event occurs or is continuing on a Valuation Date, the Maturity Date for the notes could also be postponed.
If the determination
of the level of the Reference Asset for any Valuation Date is postponed to the last possible day, but a market disruption event
occurs or is continuing on that day, that day will nevertheless be the date on which the level of the Reference Asset will be determined
by the calculation agent. In such an event, the calculation agent will make a good faith estimate in its sole discretion of the
level that would have prevailed in the absence of the market disruption event. See “General Terms of the Notes—Market
Disruption Events.”
The delivery of
the Physical Delivery Amount may be postponed if a Physical Delivery Amount Disruption Event Occurs. As described in more detail
in the section below, “General Terms of the Notes—Payment at Maturity—Physical Delivery Amount,” there
may be circumstances in which the calculation agent determines that we are unable to procure all or a portion of the securities
needed to pay the Physical Delivery Amount on the Maturity Date. In such a case, the Maturity Date of your notes and the delivery
of the Physical Delivery Amount may be postponed by up to ten business days, without any payment of additional interest, and we
may also pay to you the Cash Delivery Amount in lieu of such securities. Accordingly, you are advised not to effect any transaction
involving the securities that you may expect to receive as part of the Physical Delivery Amount until you have confirmed that those
securities have been received in your account. In addition, the value of the securities delivered may decrease, perhaps to a significant
extent, in the period between the Valuation Date or Valuation Dates and the Maturity Date, as so postponed.
As calculation agent,
BMO Capital Markets Corp. will have the authority to make determinations that could affect the value of your notes and your payment
at maturity. As calculation agent for your notes, BMO Capital Markets Corp. will have discretion in making various determinations
that affect your notes, including determining the Final Level, market disruption events, and any amount of shares or cash payable
on your notes. The calculation agent also has discretion in making certain adjustments relating to mergers and certain other corporate
transactions which the Reference Asset Issuer may undertake. The exercise of this discretion by BMO Capital Markets Corp. could
adversely affect the value of your notes and may present BMO Capital Markets Corp., which is our wholly owned subsidiary, with
a conflict of interest.
Significant aspects
of the tax treatment of the notes are uncertain. The tax treatment of the notes is uncertain. We do not plan to request a ruling
from the Internal Revenue Service or from any Canadian authorities regarding the tax treatment of the notes, and the Internal Revenue
Service or a court may not agree with the tax treatment described in this product supplement. Please read carefully the sections
entitled “Supplemental Tax Considerations” in this product supplement, the sections “United States Federal Income
Taxation” and “Canadian Taxation” in the accompanying prospectus and the section entitled “Certain Income
Tax Consequences” in the accompanying prospectus supplement. You should consult your tax advisor about your own tax situation.
A 30% U.S. Federal
Withholding Tax May Be Withheld on Interest Payments to Non-United States Holders. The U.S. federal income tax treatment of
the notes is uncertain and as a result, the institution through which you hold the notes may determine to withhold U.S. federal
income tax at a 30% rate (or at a lower rate under an applicable income tax treaty) in respect of the interest payments made to
a non-United States holder unless such payments are effectively connected with the conduct by the non-United States holder of a
trade or business in the United States (in which case, to avoid withholding, the non-United States holder will be required to provide
a Form W-8ECI). We will not pay any additional amounts in respect of such withholding. Please read carefully the sections entitled
“Supplemental Tax Considerations” in this product supplement, the sections “United States Federal Income Taxation”
and “Canadian Taxation” in the accompanying prospectus and the section entitled “Certain Income Tax Consequences”
in the accompanying prospectus supplement. You should consult your tax advisor about your own tax situation.
Employee benefit plans should carefully
review the legal issues of an investment in the notes. Any fiduciary of an “employee benefit plan” as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), subject to Title I
of ERISA, a plan or account subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”),
an entity whose underlying assets include the assets of any of the foregoing (each of the foregoing, a “Benefit Plan Investor”)
or any other plan which is subject to any federal, state, local or other law that is substantially similar to the fiduciary responsibility
and prohibited transaction provisions of ERISA or Section 4975 of the Code (“Similar Law”) that is considering
purchasing the notes with the assets of such Benefit Plan Investor or plan subject to Similar Law, should consult with its counsel
regarding whether the purchase or holding of the notes is or could become a non-exempt “prohibited transaction” under
ERISA or the Code or a violation of any Similar Law. For additional information, please see the discussion under “Certain
Considerations for ERISA and Other U.S. Employee Benefit Plans” below.
Additional Risks Relating to the Reference Assets
You will not have
any shareholder rights prior to maturity of the notes. Unless and until shares of a Reference Asset are delivered to you at
maturity, the notes will not entitle a holder to any direct or indirect ownership or entitlement to the Reference Asset or any
Reference Asset Constituents. Until the delivery of any shares of a Reference Asset occurs, a holder of the notes will not be entitled
to the rights and benefits of a holder of the Reference Asset, including any right to receive any distributions or dividends or
to vote at or attend any meetings of holders of shares of the Reference Asset.
No Reference Asset
Issuer will have any role or responsibilities with respect to the notes. Neither the applicable Reference Asset Issuer, or
the issuer of any Reference Asset Constituent, will have authorized or approved the notes, and will not be involved in any offering.
No such company will have any financial or legal obligation with respect to the notes or the amounts to be paid to you, including
any obligation to take our needs or your needs into consideration for any reason, including taking any corporate actions that might
affect the value of the Reference Asset or the notes. No such company will receive any of the proceeds from any offering of the
notes. No Reference Asset Issuer or any other such company will be responsible for, or participate in, the determination or calculation
of the amounts receivable by holders of the notes.
An investment in
the notes may be subject to risks associated with non-U.S. securities markets. The Reference Asset, or any Reference Asset
Constituents, may have been issued by one or more non-U.S. companies. An investment in notes linked to the value of non-U.S. equity
securities involves particular risks. Non-U.S. securities markets may be more volatile than U.S. securities markets, and market
developments may affect non-U.S. securities markets differently from the U.S. securities markets. Direct or indirect government
intervention to stabilize these non-U.S. securities markets, as well as cross shareholdings among non-U.S. companies, may affect
trading prices and volumes in those markets. Also, there is generally less publicly available information in the U.S. about non-U.S.
companies than about those U.S. companies that are subject to the reporting requirements of the U.S. Securities and Exchange Commission
(the “SEC”), and non-U.S. companies are subject to accounting, disclosure, auditing and financial reporting standards
and requirements that differ from those that are applicable to U.S. reporting companies.
Levels of securities
in countries outside of the U.S. are subject to political, economic, financial and social factors that may be unique to the particular
country. These factors, which could negatively affect the non-U.S. securities markets, include the possibility of recent or future
changes in the economic and fiscal policies of non-U.S. governments, the possible imposition of, or changes in, currency exchange
laws or other non-U.S. laws or restrictions applicable to non-U.S. companies or investments in non-U.S. equity securities, the
possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility and political
instability and the possibility of natural disaster or adverse public health developments in the region. Moreover, the economies
of certain foreign countries may differ favorably or unfavorably from the U.S. economy in important respects, such as growth of
gross national product, rate of inflation, trade surpluses or deficits, capital reinvestment, resources and self-sufficiency.
We do not control
any Reference Asset Issuer and we are not responsible for any disclosure made by any other company. Except to the extent set
forth in the applicable pricing supplement, neither we nor any of our affiliates have the ability to control the actions of any
Reference Asset Issuer, or the issuers of any Reference Asset Constituents. We do not assume any responsibility for the adequacy
or accuracy of any publicly available information about any of these companies, unless (and only to the extent that) our securities
or the securities of our affiliates are represented by that Reference Asset. We are not responsible for any other issuer’s
public disclosure of information on itself or the Reference Asset, whether contained in SEC filings or otherwise. We will not perform
any due diligence procedures with respect to the applicable Reference Asset Issuer or any issuers of any Reference Asset Constituents.
You should make your own investigation into the applicable Reference Asset Issuer and any issuers of the Reference Asset Constituents.
You will have limited
anti-dilution protection with respect to the Reference Asset. The calculation agent will adjust the Initial Level, the Trigger
Level and any call level for stock splits, reverse stock splits, stock dividends, extraordinary dividends and other events that
affect the applicable issuer’s capital structure, but only in the situations we describe in “General Terms of the Notes—Anti-Dilution
Adjustments” below. The calculation agent will not be required to make an adjustment for every corporate event that may affect
the relevant security. For example, the calculation agent will not make any adjustments for events such as an offering by the Reference
Asset Issuer of equity securities or a tender or exchange offer for less than all outstanding shares of that issuer by a third
party. Those events or other actions by the applicable issuer or a third party may nevertheless adversely affect the level of the
Reference Asset, and adversely affect the value of your notes.
The historical performance
of the Reference Asset should not be taken as an indication of its future performance. The level of the Reference Asset will
determine the amount to be paid on the notes at maturity and whether the notes are subject to an automatic redemption. The historical
performance of the Reference Asset is not necessarily an indicator of its future performance. As a result, it is impossible to
predict whether the level of the Reference Asset will rise or fall during the term of the notes. The level of the Reference Asset
will be influenced by complex and interrelated political, economic, financial and other factors.
We will not hold
any shares of the Reference Asset for your benefit. The indenture and the terms governing your notes do not contain any restriction
on our ability or the ability of any of our affiliates to sell, pledge or otherwise convey all or any shares of the Reference Asset
that we or they may acquire. Neither we nor our affiliates will pledge or otherwise hold any such shares for your benefit. Consequently,
in the event of our bankruptcy, insolvency or liquidation, any of those assets that we own will be subject to the claims of our
creditors generally and will not be available for your benefit specifically.
Additional Risks Relating to Reference Assets that Are
ADRs
The value of the
Reference Asset may not accurately track the value of the common shares of the applicable company. If the Reference Asset is
an ADR, each share of the Reference Asset will represent shares of the relevant company (an “Underlying Company”).
The trading patterns of the ADRs will generally reflect the characteristics and valuations of the underlying common shares; however,
the value of the ADRs may not completely track the value of those shares. Trading volume and pricing on the applicable non-U.S.
exchange may, but will not necessarily, have similar characteristics as the ADRs. For example, certain factors may increase or
decrease the public float of the ADRs and, as a result, the ADRs may have less liquidity or lower market value than the common
shares of the Underlying Company.
Adverse trading
conditions in the applicable non-U.S. market may negatively affect the value of the Reference Asset. Holders of the Underlying
Company’s ADRs may usually surrender the ADRs in order to receive and trade the underlying common shares. This provision
permits investors in the ADRs to take advantage of price differentials between markets. However, this provision may also cause
the market prices of the Reference Asset to more closely correspond with the values of the common shares in the applicable non-U.S.
markets. As a result, a market outside of the U.S. for the underlying common shares that is not liquid may also result in an illiquid
market for the ADRs.
Additional Risks Relating to Reference Assets that Are
Issued by Exchange Traded Funds
You will have no
rights against the sponsor of any ETF Reference Asset or any issuers of the Reference Asset Constituents. The notes are not
sponsored, endorsed, sold or promoted by any sponsor of any ETF that is a Reference Asset or any such issuer. No sponsor of the
relevant ETF or any such issuer has passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures
relating to, the notes. No sponsor of the relevant ETF or any such issuer makes any representation or warranty, express or implied,
to you or any member of the public regarding the advisability of investing in securities generally or the notes in particular,
or the ability of the relevant ETF to track general market performance. The sponsor of that ETF has no obligation to take our needs
or your needs into consideration in determining, composing or calculating that ETF, or in making changes to that ETF. No sponsor
of the relevant ETF or any issuer of any Reference Asset Constituent is responsible for, and none of them has participated in the
determination of, the timing, prices or quantities of the notes to be issued or in the determination or calculation of the equation
by which the amounts to be paid on the notes are to be determined. No sponsor of the relevant ETF or any such issuer has any liability
in connection with the administration, marketing or trading of the notes.
Adjustments to the
relevant ETF could adversely affect the notes. The sponsor of the relevant ETF is responsible for calculating and maintaining
such ETF. The relevant ETF sponsor can add, delete or substitute the stocks comprising the relevant ETF or make other methodological
changes that could change the value of the ETF at any time. If one or more of these events occurs, the calculation of the amount
payable at maturity may be adjusted to reflect such event or events. Please refer to “Description of the Notes—Adjustments
to an ETF.” Consequently, any of these actions could adversely affect the amount payable at maturity and/or the market value
of the notes.
The policies of
an ETF sponsor or investment advisor, as applicable, and changes that affect the ETF or the relevant Underlying Index could adversely
affect the amount payable on your notes and their market value. The policies of the sponsor or investment advisor, as applicable,
of the relevant ETF concerning the calculation of the ETF’s net asset value, additions, deletions or substitutions of securities
in such ETF and the manner in which changes affecting the relevant Underlying Index are reflected in the ETF could affect the market
price of the shares of the ETF and, therefore, the amount payable on your notes on the Maturity Date and the market value of your
notes before that date. The amount payable on your notes and their market value could also be affected if the ETF sponsor or investment
advisor, as applicable, changes these policies, for example, by changing the manner in which it calculates the ETF’s net
asset value, or if the ETF sponsor or investment advisor, as applicable, discontinues or suspends calculation or publication of
the ETF’s net asset value, in which case it may become difficult to determine the market value of the notes.
We and our affiliates
generally do not have any affiliation with the investment advisor of an ETF and are not responsible for its public disclosure of
information. Each investment advisor of an ETF advises that ETF on various matters including matters relating to the policies,
maintenance and calculation of the ETF. Unless otherwise specified in the applicable pricing supplement, we and our affiliates
generally are not affiliated with the investment advisor of an ETF in any way and have no ability to control or predict its actions,
including any errors in or discontinuance of disclosure regarding their methods or policies relating to the ETF. Except in the
limited cases where we or an affiliate is the investment advisor of an ETF, the investment advisor is not involved in any offering
of the notes in any way and has no obligation to consider your interests as an owner of the notes in taking any actions relating
to the ETF that might affect the value of the notes.
Neither we nor any
of our affiliates assumes any responsibility for the adequacy or accuracy of the information about an ETF or the investment advisor
of such ETF contained in any public disclosure of information by such investment advisor (except to the extent that we or an affiliate
is the investment advisor of such ETF). You, as an investor in the notes, should make your own investigation into the ETF.
Even if the stocks
held by the ETF or included in the ETF’s Underlying Index are all part of the same industry, such stocks are not necessarily
representative of that industry. Even if an ETF or an ETF’s Underlying Index purports to be representative of a particular
industry, the performance of that ETF may not correlate with the performance of the entire industry as represented by the stocks
held by the ETF or included in the ETF’s Underlying Index. The ETF may decline in value even if the industry as a whole rises
in value. Furthermore, one or more of the issuers of the stocks held by the ETF or included in the ETF’s Underlying Index
may engage in new lines of business unrelated to the particular industry or cease to be involved in lines of business in the particular
industry. The stocks held by the ETF or included in the ETF’s Underlying Index may not vary even if one or more of the issuers
of such stocks are no longer involved in the particular industry. The composition of the Underlying Index may also be changed from
time to time.
If the stocks held
by the ETF or included in the ETF’s Underlying Index are all part of the same sector, there are risks associated with a sector
investment. If the stocks held by the ETF or included in the ETF’s Underlying Index are all part of the same sector,
the performance of notes linked to such ETF is dependent upon the performance of issuers of stocks in a particular sector of the
economy. Consequently, the value of the notes may be subject to greater volatility and be more adversely affected by a single economic,
political or regulatory occurrence affecting the particular sector than an investment linked to a more broadly diversified asset.
The correlation
between the performance of an ETF and the performance of the ETF’s Underlying Index may be imperfect. The performance
of an ETF is linked principally to the performance of the ETF’s Underlying Index. However, the performance of an ETF may
also be linked in part to shares of other ETFs because some ETFs generally invest a specified percentage, e.g., 10% of their assets,
in the shares of other ETFs. In addition, while the performance of an ETF is linked principally to the performance of such ETF’s
Underlying Index, ETFs generally invest in a representative sample of the stocks included in such ETF’s Underlying Index
and generally do not hold all or substantially all of the stocks included in such ETF’s Underlying Index. Finally, the performance
of an ETF and of the ETF’s Underlying Index will generally vary due to transaction costs, certain corporate actions and timing
variances.
Imperfect correlation
between the stocks held by an ETF and the stocks included in such ETF’s Underlying Index; the performance of the shares of
other ETFs, if applicable; rounding of prices; changes to an ETF’s Underlying Index; and changes to regulatory policies,
may cause the performance of an ETF to differ from the performance of the ETF’s Underlying Index. In addition, because shares
of ETFs are traded on exchanges and are subject to market supply and investor demand, the market value of one share of an ETF may
differ from its net asset value per share and the shares of an ETF may trade at, above or below their net asset value per share.
Because of the potential
discrepancies identified above, the return on an ETF may correlate imperfectly with the return on the ETF’s Underlying Index.
These discrepancies may also result in your notes being priced with a lower interest rate than otherwise would have been the case.
The performance
and market value of an ETF during periods of market volatility may not correlate with the Underlying Index as well as the net asset
value per share. During periods of market volatility, Reference Asset Constituents may be unavailable in the secondary market,
market participants may be unable to calculate accurately the net asset value per share of an ETF and the liquidity of an ETF may
be adversely affected. This kind of market volatility may also disrupt the ability of market participants to create and redeem
shares of an ETF. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants
are willing to buy and sell shares of an ETF. As a result, under these circumstances, the market value of the shares of an ETF
may vary substantially from the net asset value per share of such ETF. For all of the foregoing reasons, the performance of the
ETF may not correlate with the performance of its Underlying Index as well as the net asset value per share of the ETF, which could
materially and adversely affect the value of the notes in the secondary market and/or reduce your payment at maturity.
There is no assurance
that an active trading market will continue for the shares of the relevant ETF or that there will be liquidity in the trading market.
Although the shares of an ETF to which your notes may be linked are listed for trading on various securities exchanges and a number
of similar products have been traded on other securities exchanges for varying periods of time, there is no assurance that an active
trading market will continue for the shares of such ETF or that there will be liquidity in the trading market.
An ETF is subject
to management risks. Each ETF is subject to management risk, which is the risk that the investment advisor’s investment
strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example,
an investment advisor may invest a portion of the ETF’s assets in securities not included in the relevant industry or sector
but which the investment advisor believes will help the ETF track the relevant industry or sector.
The notes may be
subject to foreign currency risk if the relevant ETF is comprised of foreign equity securities. If the relevant ETF and the
stocks comprising such ETF are not denominated in the same currency as that ETF, the notes may be subject to foreign currency risk.
Because the prices of the stocks comprising the relevant ETF will be converted into the currency in which the ETF is denominated
(the “base currency”) for the purposes of calculating the value of such ETF, your investment will be exposed to currency
exchange risk with respect to each of the countries represented in such ETF which do not use the base currency. Your net exposure
to such risk will depend on the extent to which the currencies in which the stocks comprising the ETF are denominated, other than
the base currency, strengthen or weaken relative to the base currency. If the base currency strengthens relative to any of the
currencies in which the stocks comprising the ETF are denominated, the value of the ETF may be adversely affected, and the amount
payable on the notes at maturity may be reduced. Of particular importance to potential currency exchange risks are: existing and
expected rates of inflation, existing and expected interest rate levels, the balance of payments, and the extent of governmental
surpluses or deficits in the relevant countries represented in any relevant ETF. All of these factors are in turn sensitive to
the monetary, fiscal and trade policies pursued by the governments of the countries represented in such ETF and other countries
important to international trade and finance.
If the relevant ETF
is comprised of stocks denominated in a currency other than U.S. dollars, the notes, which are denominated in U.S. dollars, are
subject to foreign currency risk because the return on the notes is linked to the performance of such ETF, the value of which is
dependant on the stocks denominated in a currency other than U.S. dollars. Foreign currency risks include, but are not limited
to, convertibility risk and market volatility and potential interference by foreign governments through regulation of local markets,
foreign investment or particular transactions in foreign currency. These factors may adversely affect the values of the stocks
comprising the ETF, the price of the ETF’s shares and the value of the notes.
GENERAL TERMS OF THE NOTES
This product supplement
and the accompanying prospectus dated April 27, 2017 relating to the notes, should be read together. Because the notes are part
of a series of our senior debt securities called Senior Medium-Term Notes, Series E, this product supplement and the accompanying
prospectus should also be read together with the accompanying prospectus supplement, dated September 23, 2018. Terms used but not
defined in this product supplement have the meanings given them in the accompanying prospectus or accompanying prospectus supplement,
unless the context requires otherwise.
The notes will be issued
in book-entry form through The Depository Trust Company. Owners of beneficial interests in the notes should read the section entitled
“Description of the Notes We May Offer – Legal Ownership” in the accompanying prospectus supplement and “Description
of the Debt Securities We May Offer – Legal Ownership and Book-Entry Issuance” in the accompanying prospectus.
The notes are part
of a series of senior debt securities entitled “Senior Medium-Term Notes, Series E” that we may issue from time to
time under the senior indenture, dated January 25, 2010, as amended by the First Supplemental Indenture thereto, dated September
23, 2018, between Bank of Montreal and Wells Fargo Bank, National Association, as trustee. Terms that apply generally to our medium
term notes are described in “Description of the Notes We May Offer” in the accompanying prospectus supplement. The
terms described in this document supplement those described in the accompanying prospectus and the accompanying prospectus supplement,
and, if the terms described here are inconsistent with those described in those documents, the terms described in this product
supplement are controlling.
As described in more
detail below, we may make periodic interest payments on the notes, and holders of the notes will be entitled to receive a payment
of cash and/or securities on the Maturity Date. If any interest payment date or the Maturity Date of the notes falls on a day that
is not a business day, we will pay the required payment on the first subsequent business day, and no additional interest will accrue
on the notes as a result.
Payment at Maturity
Your payment at maturity
will be based on the performance of the applicable Reference Asset. You will receive at maturity the principal amount of your notes
unless:
(i) the Final Level is less than the Initial Level; and
(ii) (a)
if the notes are notes subject to Continuous Monitoring, at any time during the applicable Monitoring Period, the level of the
Reference Asset quoted on the relevant exchange is less than the applicable Trigger Level; or
(b) if the notes
are notes subject to Closing Level Monitoring, on any trading day during the applicable Monitoring Period, the closing level of
the Reference Asset is less than the Trigger Level.
If either of these
conditions occur, you will receive at maturity, instead of the principal amount of the notes, the number of shares of the Reference
Asset equal to the Physical Delivery Amount or, at our election, the Cash Delivery Amount.
The applicable pricing
supplement will specify if a Monitoring Period is applicable to the notes, and if so, will specify Continuous Monitoring, Closing
Level Monitoring, or another method for monitoring the Reference Asset.
The applicable Monitoring
Period will be specified in the applicable pricing supplement. For example, the Monitoring Period (a) may include the period from
pricing date through the final Valuation Date, (b) be limited to the final Valuation Date or (c) may be of any other period of
time set forth in the applicable pricing supplement.
At maturity, you will
also receive any final payment of interest due on your notes.
Physical Delivery Amount
The Physical Delivery
Amount for each $1,000 in principal amount of the notes will equal $1,000 divided by the Initial Level.
Physical Delivery Amount =
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$1,000
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Initial Level
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Any fractional shares
will be paid in cash, in an amount equal to that fraction multiplied by the Final Level. The number of shares or the amount of
cash that we may deliver to you is subject to adjustment, as described below under “— Anti-dilution Adjustments”
and “— Consequences of Market Disruption Events.”
We expect that the
market price of the shares you receive in exchange for your notes at maturity will be less than the principal amount of your notes.
If we have not exercised
our option to pay to you the Cash Delivery Amount, and the calculation agent determines in its sole discretion that a Physical
Delivery Amount Disruption Event (as defined below) has occurred and is continuing on any Valuation Date, then the Maturity Date
of the notes will be postponed by the number of business days (up to ten business days) as the calculation agent shall determine
to be necessary to enable us to procure the securities needed to pay the Physical Delivery Amount. We will not pay any additional
interest to you if the Maturity Date is so postponed. If we are unable to deliver all or a portion of the securities to which you
are entitled on the Maturity Date, as so postponed, we may pay to you the Cash Delivery Amount, determined as described below.
A “Physical Delivery
Amount Disruption Event” means any event or series of events, as a result of which the calculation agent determines that,
due to the operation of law, regulation, market conditions, our policies or the policies of our affiliates relating to the trading
of securities or other factors, we cannot in a commercially reasonable manner procure delivery of all or a portion of the securities
required to be delivered to make payment of the Physical Delivery Amount.
Cash Delivery Amount
At our election, instead
of delivering to you shares of the Reference Asset equal to the Physical Delivery Amount, we may deliver to you the Cash Delivery
Amount. We may make this election at any time, including on the applicable Maturity Date.
The Cash Delivery Amount
will be equal to the product of the Final Level and the Physical Delivery Amount.
Cash Delivery Amount =
Final Level × Physical Delivery Amount
The Final Level will
be the closing level of one share of the Reference Asset on the Valuation Date or the average of the closing levels of the Reference
Asset on each of the Valuation Dates, subject to anti-dilution adjustment.
The Cash Delivery Amount
will be less than the principal amount of your notes.
Valuation Date
Unless otherwise specified
in the applicable pricing supplement, the Valuation Date (if there is only one Valuation Date applicable to the notes) or the final
Valuation Date (if there is more than one Valuation Date applicable to the notes) will be the third trading day before the Maturity
Date. If the calculation agent determines that a market disruption event occurs or is continuing on any Valuation Date, the Final
Level will be determined as set forth in “—Consequences of Market Disruption Events” below. The Valuation Date
or Valuation Dates that are applicable to your notes will be set forth in the applicable pricing supplement.
Maturity Date
As set forth in the
applicable pricing supplement, unless that date is not a business day, in which case the Maturity Date will be the next following
business day. The Maturity Date will be postponed by the same number of trading days as the Valuation Date or the final Valuation
Date, as applicable, if a market disruption event occurs or is continuing as described below. However, interest will not accrue
after the applicable Maturity Date.
Certain Definitions
Business Day.
Unless otherwise set forth in the applicable pricing supplement, “business day” means a day of the week other than
Saturday or Sunday that is neither a legal holiday nor a day on which banking institutions are authorized or obligated by law or
executive order to close in New York City, Toronto, or Montreal.
If any payment on the
notes is scheduled to occur on a day which is not a business day, such payment will be made on the next following business day
unless otherwise set forth in the applicable pricing supplement.
Trading Day.
Unless otherwise set forth in the applicable pricing supplement, “trading day” is any day, as determined by the calculation
agent, on which trading is generally conducted on the relevant primary U.S. exchange for the applicable Reference Asset.
Closing Level.
Unless otherwise set forth in the applicable pricing supplement, the closing level for any Reference Asset on any trading day will
equal the closing sale price or last reported sale price, regular way, for the security or the ETF, on a per-share or other unit
basis:
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on the principal national securities exchange on which that Reference Asset is listed for trading
on that day; or
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if that security or ETF is not quoted on any national securities exchange on that day, on any other
market system or quotation system that is the primary market for the trading of that Reference Asset.
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If the Reference Asset
is not listed or traded as described above, then the closing level for that Reference Asset on any trading day will be the average,
as determined by the calculation agent, of the bid prices for the Reference Asset obtained from as many dealers in that Reference
Asset selected by the calculation agent, in its sole discretion, as will make those bid prices available to the calculation agent.
The number of dealers need not exceed three and may include the calculation agent or any of our other affiliates.
Consequences of Market Disruption
Events
If the calculation
agent determines that, on a Valuation Date and/or, if your notes are subject to automatic early redemption, on a call observation
date, a market disruption event has occurred or is continuing with respect to the Reference Asset, the determination of the Final
Level and/or, if applicable, the closing level of the applicable Reference Asset, may be postponed. If such a postponement occurs,
the calculation agent will use the closing level of the Reference Asset on the first subsequent trading day on which no market
disruption event occurs or is continuing. However, in no event will the determination of the Final Level and/or, if applicable,
the closing level of the applicable Reference Asset, be postponed by more than ten trading days.
If the determination
of the Final Level and/or, if applicable, the closing level of the applicable Reference Asset, is postponed to the last possible
day, but a market disruption event for the Reference Asset occurs or is continuing on that day, that day will be the date on which
the Final Level and/or, if applicable, the closing level of the applicable Reference Asset, will be determined by the calculation
agent. In such an event, the calculation agent will make a good faith estimate in its sole discretion of the Final Level and/or,
if applicable, the closing level of the applicable Reference Asset, that would have prevailed in the absence of the market disruption
event.
For the avoidance of
doubt, if any observation date (including, without limitation, any Valuation Date or call observation date) is postponed due to
a market disruption event, the corresponding payment date will be postponed by the same number of trading days.
Any of the following
will be a market disruption event:
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a suspension, absence or limitation of trading in (i) that security in its primary market, as determined
by the calculation agent, or (ii) futures or options contracts relating to that security in the primary market for those contracts,
as determined by the calculation agent;
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any event that disrupts or impairs, as determined by the calculation agent, the ability of market
participants to (i) effect transactions in, or obtain market values for, the security in its primary market, or (ii) effect transactions
in, or obtain market values for, futures or options contracts relating to the security in its primary market;
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the closure on any day of the primary market for that security on a scheduled trading day prior
to the scheduled weekday closing time of that market (without regard to after hours or any other trading outside of the regular
trading session hours) unless such earlier closing time is announced by the primary market at least one hour prior to the earlier
of (i) the actual closing time for the regular trading session on such primary market on such scheduled trading day for such primary
market and (ii) the submission deadline for orders to be entered into the relevant exchange system for execution at the close of
trading on such scheduled trading day for such primary market;
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any scheduled trading day on which (i) the primary market for that security or (ii) the exchanges
or quotation systems, if any, on which futures or options contracts on that security are traded, fails to open for trading during
its regular trading session; or
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any other event, if the calculation agent determines that the event interferes with our ability
or the ability of any of our affiliates to unwind all or a portion of a hedge with respect to the notes that we or our affiliates
have effected or may effect as described below under “Use of Proceeds and Hedging” in this product supplement.
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Interest Payments
Any interest will accrue
on the principal amount of your notes and will be calculated and paid as described in the accompanying prospectus and prospectus
supplement with regard to fixed rate notes, as modified by the pricing supplement. The interest payment dates will be those specified
in the applicable pricing supplement. Unless otherwise specified in the applicable pricing supplement, interest will be computed
on the basis of a 360-day year of twelve 30-day months. The applicable pricing supplement may also specify a fixed amount that
will be paid on each interest payment, based on the applicable interest rate.
As long as your notes
are in global form, the regular record date for each interest payment date will be the third preceding business day, unless otherwise
specified in the applicable pricing supplement. However, the final payment of interest will be paid to the person to whom the payment
at maturity is due.
Automatic Call
If so specified in
the applicable pricing supplement, your notes will be subject to automatic redemption. In such a case, we will automatically redeem
the notes if the closing level of the Reference Asset on the applicable call observation date is greater than or equal to the call
level. The applicable pricing supplement will set forth the applicable call level, call observation dates and the amount that we
will pay upon an early redemption.
Anti-dilution Adjustments
The Initial Level,
the Trigger Level and the call level (if applicable), as well as any other applicable level, will be specified in the applicable
pricing supplement. The calculation agent will adjust the Initial Level, the Trigger Level and the call level, as well as any other
applicable level, if any of the dilution events described below occurs with respect to the Reference Asset.
The calculation agent
will adjust the Initial Level, the Trigger Level, the call level and any other applicable level as described below, but only if
an event below under this section occurs with respect to the Reference Asset and only if the relevant event occurs during the period
described under the applicable subsection. The Initial Level, the Trigger Level, the call level and any other applicable level
will be subject to the adjustments described below, independently and separately, with respect to the dilution events that affect
the Reference Asset.
If more than one anti-dilution
event requiring adjustment occurs with respect to the Initial Level, the Trigger Level, the call level and any other applicable
level, the calculation agent will adjust the Initial Level, the Trigger Level, the call level and any other applicable level for
each event, sequentially, in the order in which the events occur, and on a cumulative basis. Therefore, having adjusted the Initial
Level, the Trigger Level, the call level and any other applicable level for the first event, the calculation agent will adjust
the Initial Level, the Trigger Level, the call level and any other applicable level for the second event, applying the required
adjustment to the Initial Level, the Trigger Level, the call level and any other applicable level as already adjusted for the first
event, and so on for each event.
If an event requiring
an anti-dilution adjustment occurs, the calculation agent will make the adjustment in an attempt to offset, to the extent practical,
any change in the economic position of the holder and us, relative to your note, that results solely from that event. The calculation
agent may, in its sole discretion, modify the anti-dilution adjustments set forth in the section as necessary to ensure an equitable
result.
Stock Splits and Stock Dividends
A stock split is an
increase in the number of a corporation’s outstanding shares of stock without any change in its stockholders’ equity.
When a corporation pays a stock dividend, it issues additional shares of its stock to all holders of its outstanding stock in proportion
to the shares they own. Each outstanding share will be worth less as a result of a stock split or stock dividend.
If the Reference Asset
is subject to a stock split or receives a stock dividend, then the calculation agent will adjust the Initial Level, the Trigger
Level, the call level and any other applicable level by dividing the prior Initial Level, Trigger Level, and call level before
the stock split or stock dividend by an amount equal to: (1) the number of shares of the Reference Asset outstanding immediately
after the stock split or stock dividend becomes effective; divided by (2) the number of shares of the Reference Asset outstanding
immediately before the stock split or stock dividend becomes effective. The Initial Level, the Trigger Level, the call level and
any other applicable level will not be adjusted, however, unless:
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in the case of a stock split, the first day on which the Reference Asset trades without the right
to receive the stock split occurs after the pricing date and on or before the applicable Valuation Date or call observation date;
or
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in the case of a stock dividend, the ex-dividend date occurs after the pricing date and on or before
the applicable Valuation Date or call observation date.
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The ex-dividend date
for any dividend or other distribution with respect to the Reference Asset is the first day on which the Reference Asset trades
without the right to receive that dividend or other distribution.
Reverse Stock Splits
A reverse stock split
is a decrease in the number of a corporation’s outstanding shares of stock without any change in its stockholders’
equity. Each outstanding share will be worth more as a result of a reverse stock split.
If the Reference Asset
is subject to a reverse stock split, then the calculation agent will adjust the Initial Level, the Trigger Level, the call level
and any other applicable level by multiplying the prior Initial Level, the Trigger Level, the call level and any other applicable
level by a number equal to: (1) the number of shares of the Reference Asset outstanding immediately before the reverse stock split
becomes effective; divided by (2) the number of shares of the Reference Asset outstanding immediately after the reverse stock split
becomes effective. The Initial Level, the Trigger Level, the call level and any other applicable level will not be adjusted, however,
unless the reverse stock split becomes effective after the pricing date and on or before the applicable Valuation Date or call
observation date.
Extraordinary Dividends
Any distribution or
dividend on the Reference Asset determined by the calculation agent to be a distribution or dividend that is not in the ordinary
course of the issuer’s historical dividend practices will be deemed to be an extraordinary dividend. The calculation agent
will determine if the dividend is an extraordinary dividend and, if so, the amount of the extraordinary dividend. Each outstanding
share will be worth less as a result of an extraordinary dividend.
If any extraordinary
dividend occurs with respect to the Reference Asset, the calculation agent will adjust the Initial Level, the Trigger Level, the
call level and any other applicable level to equal the product of: (1) the prior Initial Level, the Trigger Level, the call level
and any other applicable level, times (2) a fraction, the numerator of which is the amount by which the closing level of the Reference
Asset on the business day before the ex-dividend date exceeds the extraordinary dividend amount and the denominator of which is
the closing level of the Reference Asset on the business day before the ex-dividend date. The Initial Level, the Trigger Level,
the call level and any other applicable level will not be adjusted, however, unless the ex-dividend date occurs after the pricing
date and on or before the applicable Valuation Date or call observation date.
The extraordinary dividend
amount with respect to an extraordinary dividend for the Reference Asset equals:
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for an extraordinary dividend that is paid in lieu of a regular quarterly dividend, the amount
of the extraordinary dividend per share of the Reference Asset minus the amount per share of the immediately preceding dividend,
if any, that was not an extraordinary dividend for the Reference Asset; or
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for an extraordinary dividend that is not paid in lieu of a regular quarterly dividend, the amount
per share of the extraordinary dividend.
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To the extent an extraordinary
dividend is not paid in cash, the value of the non-cash component will be determined by the calculation agent. A distribution on
the Reference Asset that is a stock dividend, an issuance of transferable rights or warrants or a spin-off event and also an extraordinary
dividend will result in an adjustment to the Initial Level, the Trigger Level, the call level and any other applicable level only
as described under “— Stock Splits and Stock Dividends” above, “— Transferable Rights and Warrants”
below or “— Reorganization Events” below, as the case may be, and not as described here.
Transferable Rights and Warrants
If the issuer of the
Reference Asset issues transferable rights or warrants to all holders of the Reference Asset to subscribe for or purchase the Reference
Asset at an exercise price per share that is less than the closing level of the Reference Asset on the business day before the
ex-dividend date for the issuance, then the applicable Initial Level, the Trigger Level, the call level and any other applicable
level will be adjusted by multiplying the prior Initial Level, the Trigger Level, the call level and any other applicable level
by the following fraction:
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the numerator will be the number of shares of the Reference Asset outstanding at the close of business
on the day before that ex-dividend date plus the number of additional shares of the Reference Asset that the aggregate offering
price of the total number of shares of the Reference Asset so offered for subscription or purchase pursuant to the transferable
rights or warrants could purchase at the closing price on the trading day before the ex-dividend date, with that number of additional
shares being determined by multiplying the total number of shares so offered by the exercise price of those transferable rights
or warrants and dividing the resulting product by the closing level on the trading day before that ex-dividend date.
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the denominator will be the number of shares of the Reference Asset outstanding at the close of
business on the day before that ex-dividend date plus the number of additional shares of the Reference Asset offered for subscription
or purchase under those transferable rights or warrants.
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The Initial Level,
the Trigger Level, the call level and any other applicable level will not be adjusted, however, unless the ex-dividend date described
above occurs after the pricing date and on or before the applicable Valuation Date or call observation date.
Reorganization Events
If the issuer of the
Reference Asset undergoes a reorganization event in which property other than the Reference Asset—e.g., cash and securities
of another issuer—is distributed in respect of the Reference Asset, then, for purposes of calculating the level of the Reference
Asset, the calculation agent will determine the closing level of the Reference Asset on the Valuation Date to equal the value of
the cash, securities and other property distributed in respect of one share of the Reference Asset.
If the calculation
agent determines that, by valuing such cash, securities and other property, a commercially reasonable result is not achieved, then
the calculation agent will, in its sole discretion, substitute another stock for that Reference Asset.
Each of the following
is a reorganization event with respect to the Reference Asset:
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the Reference Asset is reclassified or changed;
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the issuer of the Reference Asset has been subject to a merger, consolidation or other combination
and either is not the surviving entity or is the surviving entity but all the outstanding stock is exchanged for or converted into
other property;
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a statutory share exchange involving the outstanding stock and the securities of another entity
occurs, other than as part of an event described in the two bullet points above;
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the issuer of the Reference Asset sells or otherwise transfers its property and assets as an entirety
or substantially as an entirety to another entity;
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the issuer of the Reference Asset effects a spin-off—that is, issues to all holders of the
Reference Asset equity securities of another issuer, other than as part of an event described in the four bullet points above;
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the issuer of the Reference Asset is liquidated, dissolved or wound up or is subject to a proceeding
under any applicable bankruptcy, insolvency or other similar law; or
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another entity completes a tender or exchange offer for all of the outstanding stock of the issuer
of the Reference Asset.
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Valuation of Distribution Property
If a reorganization
event occurs with respect to the Reference Asset, and the calculation agent does not substitute another stock for the Reference
Asset as described in “— Substitution” below, then the calculation agent will determine the applicable closing
level on each Valuation Date so as to equal the value of the property — whether it be cash, securities or other property
— distributed in the reorganization event in respect of one share of the Reference Asset, as the Reference Asset existed
before the date of the reorganization. We refer to the property distributed in a reorganization event as distribution property,
a term we describe in more detail below. The calculation agent will not make any determination for a reorganization event, however,
unless the event becomes effective (or, if the event is a spin-off, unless the ex-dividend date for the spin-off occurs) after
the pricing date and on or before the applicable Valuation Date or call observation date.
For the purpose of
making a determination required by a reorganization event, the calculation agent will determine the value of each type of distribution
property, in its sole discretion. For any distribution property consisting of a security, the calculation agent will use the closing
level for the security on the relevant date. The calculation agent may value other types of property in any manner it determines,
in its sole discretion, to be appropriate. If a holder of the Reference Asset may elect to receive different types or combinations
of types of distribution property in the reorganization event, the distribution property will consist of the types and amounts
of each type distributed to a holder that makes no election, as determined by the calculation agent in its sole discretion.
If a reorganization
event occurs and the calculation agent adjusts the closing level of the Reference Asset on a Valuation Date to equal the value
of the distribution property distributed in the event, as described above, the calculation agent will make further determinations
for later events that affect the distribution property considered in determining the closing level. The calculation agent will
do so to the same extent that it would make determinations if the Reference Asset were outstanding and were affected by the same
kinds of events.
For example, if the
issuer of the Reference Asset merges into another company and each share of the Reference Asset is converted into the right to
receive two common shares of the surviving company and a specified amount of cash, then on each Valuation Date the closing level
of a share of the Reference Asset will be determined to equal the value of the two common shares of the surviving company plus
the specified amount of cash. The calculation agent will further determine the common share component of such closing level to
reflect any later stock split or other event, including any later reorganization event, that affects the common shares of the surviving
company, to the extent described in “— Anti-Dilution Adjustments” or as described above in this “—
Reorganization Events” section as if the common shares were the Reference Asset. In that event, the cash component will not
be redetermined but will continue to be a component of the closing level.
When we refer to “distribution
property”, we mean the cash, securities and other property distributed in a reorganization event in respect of the Reference
Asset. If an adjustment resulting from a prior reorganization had occurred, the “distribution property” will mean the
cash, securities and other property distributed in respect of any securities whose value determines the closing level on a Valuation
Date. In the case of a spin-off, the distribution property also includes the Reference Asset in respect of which the distribution
is made.
If a reorganization
event occurs, the distribution property distributed in the event will be substituted for the Reference Asset as described above.
Consequently, in this product supplement, when we refer to the Reference Asset, we mean any distribution property that is distributed
in a reorganization event in respect of the Reference Asset. Similarly, when we refer to the issuer of the Reference Asset, we
mean any successor entity in a reorganization event.
Substitution
If the calculation
agent determines that a commercially reasonable result is not achieved by valuing distribution property with respect to the Reference
Asset upon becoming subject to a reorganization event, then the calculation agent will, in its sole discretion, substitute another
stock for the Reference Asset. In such case, the adjustments described above in “— Valuation of Distribution Property”
will not apply.
If the calculation
agent so determines, it may choose, in its sole discretion, the stock of a different company listed on a national securities exchange
or quotation system as a substitute for the Reference Asset. For all purposes, the substitute stock will be deemed to be a Reference
Asset for all purposes under the notes hereof.
The calculation agent
will determine, in its sole discretion, the Initial Level, the Trigger Level, the call level and any other applicable level and/or
the manner of valuation of the substitute stock. The calculation agent will have the right to make such adjustments to the calculation
of the individual stock performance as it determines in its sole discretion are necessary to preserve as nearly as possible our
and your relative economic position prior to the reorganization event.
Adjustments Relating to ADRs
The Reference Asset
may consist of ADRs of the Underlying Company. As a result, for purposes of this section, the calculation agent will consider the
effect of any of the relevant events on the holders of the Reference Asset. For example, if a holder of the Reference Asset receives
an extraordinary dividend, the provisions described in this section would apply to the Reference Asset. On the other hand, if a
spin-off occurs, and the Reference Asset represents both the spun-off security as well as the existing Reference Asset, the calculation
agent may determine not to effect the anti-dilution adjustments set forth in this section. More particularly, the calculation agent
may not make an adjustment (1) if holders of the Reference Asset are not eligible to participate in any of the events that would
otherwise require anti-dilution adjustments as set forth in this section or (2) to the extent that the calculation agent determines
that the Underlying Company or the depositary for the ADRs has adjusted the number of common shares of the Underlying Company represented
by each share of Reference Asset so that the market price of the Reference Asset would not be affected by the corporate event in
question.
If the Underlying Company
or the depository for the ADRs, in the absence of any of the events described in this section, elects to adjust the number of common
shares of the Underlying Company represented by each share of Reference Asset, then the calculation agent may make the appropriate
anti-dilution adjustments to reflect such change. The depository for the ADRs may also make adjustments in respect of the ADRs
for share distributions, rights distributions, cash distributions and distributions other than shares, rights, and cash. Upon any
such adjustment by the depository, the calculation agent may adjust such terms and conditions of the notes as the calculation agent
determines appropriate to account for that event.
Other Events and Adjustments
The calculation agent
may make such adjustments to the terms of the notes with respect to any of the events described above, as it deems in its discretion
is necessary to ensure an equitable result.
Delisting of ADRs or Termination of ADR Facility
If the Reference Asset
is an ADR that is no longer listed or admitted to trading on a U.S. securities exchange registered under the U.S. Securities Exchange
Act of 1934, as amended (the “Exchange Act”), or included in the OTC Bulletin Board Service operated by FINRA, or if
the ADR facility between the Underlying Company and the ADR depositary is terminated for any reason, then, on and after the date
that the Reference Asset is no longer so listed or admitted to trading or the date of such termination, as applicable (the “termination
date”), the notes will be deemed to be linked to the common shares of the Underlying Company, and the calculation agent will
determine the payment at maturity by reference to such common shares. Under such circumstances, the calculation agent may modify
any terms of the notes as it deems necessary, in its sole discretion, to ensure an equitable result. On and after the termination
date, for all purposes, including the determination of the Final Level, the closing level of the Underlying Company’s common
shares on their primary exchange will be converted to U.S. dollars using such exchange rate as the calculation agent, in its sole
discretion, determines to be commercially reasonable.
Adjustments to an ETF
If a Reference Asset
that is an ETF is de-listed from the relevant exchange, liquidated or otherwise terminated, the calculation agent will substitute
an ETF that the calculation agent determines, in its sole discretion, is comparable to the discontinued fund (such fund being referred
to herein as a “successor ETF”). If the ETF (or a successor ETF) is de-listed, liquidated or otherwise terminated and
the calculation agent determines that no successor fund is available, then the calculation agent will, in its sole discretion,
calculate the appropriate closing level of one share of the ETF by a computation methodology that the calculation agent determines
will as closely as reasonably possible replicate the ETF. If a successor ETF is selected or the calculation agent calculates the
closing level by a computation methodology that the calculation agent determines will as closely as reasonably possible replicate
the ETF, that successor ETF or closing level will be substituted for the ETF (or such successor ETF) for all purposes of the notes.
If the calculation
agent determines that no substitute ETF comparable to the original ETF, or no appropriate computation methodology exists, then
(i) the calculation agent will deem the closing level of the original ETF on the trading day immediately prior to its delisting,
liquidation or other termination to be the closing level of the original ETF on every remaining trading day to, and including,
the final Valuation Date and (ii) the Cash Delivery Amount will be paid in lieu of any Physical Delivery Amount that is otherwise
required to be delivered pursuant to the applicable pricing supplement on the Maturity Date.
The calculation agent
also may determine that no adjustment is required under this subsection by the modification of the method of calculation.
The calculation agent
will be solely responsible for the method of calculating the closing level of one share of the ETF (or any successor ETF) and of
any related determinations and calculations, and its related determinations and calculations will be conclusive in the absence
of manifest error.
Events of Default
Unless otherwise specified
in the applicable pricing supplement, in case an event of default with respect to the notes shall have occurred and be continuing,
the amount declared due and payable on the notes upon any acceleration of the notes will be determined by the calculation agent
and will be an amount in shares of the Reference Asset or cash equal to the amount payable as described under the caption “—
Payment at Maturity,” calculated as if the date of acceleration were the Valuation Date or the final Valuation Date, as applicable,
together with accrued and unpaid interest through the date of acceleration.
If the maturity of
the notes is accelerated because of an event of default, we will, or will cause the calculation agent to, provide written notice
to the trustee at its New York office, on which notice the trustee may conclusively rely, and to the depositary, of the amount
due with respect to the notes as promptly as possible and in no event later than two business days after the date of acceleration.
Role of the Calculation Agent
The calculation agent
in its sole discretion will make all determinations in connection with the notes, including the amount of securities or cash to
be delivered at maturity, trading days, postponement of any Valuation Date and the adjustments described in the sections “—Anti-dilution
Adjustments,” “—Delisting of ADRs or Termination of ADRs or Termination of ADR Facility” and “—Adjustments
to an ETF.” Absent manifest error, all determinations of the calculation agent will be final and binding on you and us, without
any liability on the part of the calculation agent.
Please note that our
affiliate, BMO Capital Markets Corp., is expected to serve as the calculation agent for the notes. We may change the calculation
agent for your notes at any time after the date of this product supplement without notice and BMO Capital Markets Corp. may resign
as calculation agent at any time upon 60 days written notice to us.
Listing
Your notes will not
be listed on any securities exchange.
Supplemental U.S. Federal Income Tax Considerations
The following is
a general description of certain U.S. tax considerations relating to the notes. It does not purport to be a complete analysis of
all tax considerations relating to the notes. Prospective purchasers of the notes should consult their tax advisors as to the consequences
under the tax laws of the country of which they are resident for tax purposes and the tax laws of Canada and the U.S. of acquiring,
holding and disposing of the notes and receiving payments of interest, principal and/or other amounts under the notes. This summary
is based upon the law as in effect on the date of this product supplement and is subject to any change in law that may take effect
after such date.
The following disclosure
— including the opinion of Mayer Brown LLP — has been prepared without regard to any particular note that you may purchase
in the future and, therefore, is provided solely as a matter of general information. You should not rely upon the following disclosure,
or the disclosure under “United States Federal Income Taxation” in the prospectus or “Certain Income Tax Consequences
— United States Federal Income Taxation” in the prospectus supplement, with regard to an investment in any particular
note because it does not take into account the terms of any particular note or the tax consequences of investing in or holding
any particular note unless the pricing supplement applicable to your notes indicates that you may rely on the following disclosure
and expressly states that you may rely on the opinion of Mayer Brown LLP. Any note that you purchase may have terms that would
result in a tax treatment that is significantly different from the treatment described below. Consequently, any tax disclosure
relevant to any note you may purchase will be set forth only in the pricing supplement relating to your note, and, unless the pricing
supplement indicates otherwise, you should not rely on the tax disclosure below or in the prospectus supplement or prospectus in
deciding whether to invest in any note. In addition, this tax disclosure assumes the following for all notes issued off of this
product supplement: (i) the Reference Stock will be stock of a U.S. corporation that is traded on a public exchange and is not
a “United States real property holding corporation” (as such term is defined in the Code); (ii) interest will be paid
or payable at least annually and at equal intervals; (iii) in the case of notes paying fixed interest, the Interest Rate (as defined
in the relevant pricing supplement) will not be below the market rate for non-contingent debt with terms similar to the notes;
(iv) there is a significant possibility of a significant loss of principal on an investment in the notes; (v) initial purchasers
will acquire the notes for an amount equal to their principal amount; and (vi) there is a reasonable likelihood that the Final
Level will be greater than or equal to the Initial Level. Moreover, in all cases, you should consult with your own tax advisor
concerning the consequences of investing in and holding any particular note you propose to purchase.
The following section
supplements the discussion of U.S. federal income taxation in the accompanying prospectus and prospectus supplement with respect
to United States holders (as defined in the accompanying prospectus). It applies only to those holders who are not excluded from
the discussion of U.S. federal income taxation in the accompanying prospectus. In addition to such exclusions, this discussion
does not apply to holders subject to special rules under Section 451(b) of the Code.
You should consult
your tax advisor concerning the U.S. federal income tax and other tax consequences of your investment in the notes in your particular
circumstances, including the application of state, local or other tax laws and the possible effects of changes in federal or other
tax laws.
NO STATUTORY, JUDICIAL
OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW THE NOTES SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES. AS A RESULT,
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARE UNCERTAIN. BECAUSE OF THE UNCERTAINTY, YOU SHOULD CONSULT
YOUR TAX ADVISOR IN DETERMINING THE U.S. FEDERAL INCOME TAX AND OTHER TAX CONSEQUENCES OF YOUR INVESTMENT IN THE NOTES, INCLUDING
THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
We will not attempt
to ascertain whether the Reference Stock Issuer or any of the entities whose stock is owned by any Reference Stock Issuer that
is an exchange traded fund would be treated as a “passive foreign investment company” within the meaning of Section
1297 of the Code or a “U.S. real property holding corporation” within the meaning of Section 897 of the Code. If the
Reference Stock Issuer or any of the entities whose stock is owned by any Reference Stock Issuer that is an exchange traded fund
were so treated, certain adverse U.S. federal income tax consequences could possibly apply. You should refer to any available
information filed with the SEC by the Reference Stock Issuer or any of the entities whose stock is owned by any Reference Stock
Issuer that is an exchange traded fund and consult your tax advisor regarding the possible consequences to you in this regard.
We will treat the notes
as effectively connected with our U.S. trade or business, as determined for U.S. federal income tax purposes. As a result, we intend
to treat any interest with respect to the notes, as determined for U.S. federal income tax purposes, as U.S. source.
The U.S. federal income
tax treatment of your notes will depend on whether (i) the interest is fixed or contingent, (ii) the term of your notes exceeds
one year, and (iii) the term of your notes will not exceed one year, without regard to the effect of an extension in the event
of a market disruption event. Accordingly, we set forth a separate subsection for each of the situations described in the previous
sentence.
Notes With Fixed Interest
Where the Term of Your Notes Exceeds
One Year
General
In the opinion of our
counsel, Mayer Brown LLP, it would generally be reasonable to treat your notes as an investment unit consisting of (i) a non-contingent
debt instrument issued by us to you (the “Debt Portion”), and (ii) a put option with respect to the Reference Stock
written by you and purchased by us (the “Put Option”) for U.S. federal income tax purposes. The balance of this discussion
under “Notes With Fixed Interest—Where the Term of Your Notes Exceeds One Year” assumes this treatment is proper
and will be respected for U.S. federal income tax purposes.
Treatment as an Investment
Unit
If your notes are properly
treated as an investment unit consisting of a Debt Portion and Put Option, it is likely that the Debt Portion of your notes would
be treated as having been issued for the principal amount of the notes (if you are an initial purchaser) and that interest payments
on the notes would be treated in part as payments of interest and in part as payments for the Put Option. Amounts treated as interest
would be included in income in accordance with your regular method of accounting for interest for U.S. federal income tax purposes.
Amounts treated as payment for the Put Option would be deferred and accounted for upon the sale, redemption or maturity of the
notes, as discussed below.
If you were to receive
a cash payment of the full principal amount of your notes upon the redemption or maturity of your notes, such payment would likely
be treated as (i) payment in full of the principal amount of the Debt Portion (which would not result in the recognition of gain
or loss if you are an initial purchaser of your notes) and (ii) the lapse of the Put Option which would likely result in your recognition
of short-term capital gain in an amount equal to the amount paid to you for the Put Option and deferred as described above. If
you were to receive a cash payment upon the redemption or maturity of your notes (excluding cash received as a coupon) of less
than the full principal amount of your notes, such payment would likely be treated as (i) payment in full of the principal amount
of the Debt Portion (which would not result in the recognition of gain or loss if you are an initial purchaser of your notes) and
(ii) the cash settlement of the Put Option pursuant to which you paid to us an amount equal to the excess of the principal amount
of your notes over the amount that you received upon the maturity of your notes (excluding cash received as a coupon) in order
to settle the Put Option. If the aggregate amount paid to you for the Put Option and deferred as described above is greater than
the amount you are deemed to have paid to us to settle the Put Option, you will likely recognize short-term capital gain in an
amount that is equal to such excess. Conversely, if the amount paid to you for the Put Option and deferred as described above is
less than the amount you are deemed to have paid to us to settle the Put Option, you will likely recognize short-term capital loss
in an amount that is equal to such difference.
If, instead of making
a cash payment to you, we were to exchange your notes for shares of the Reference Stock of equivalent value, the receipt of such
stock upon the maturity of your notes would likely be treated as (i) payment in full of the principal amount of the Debt Portion
(which would likely not result in the recognition of gain or loss if you are an initial purchaser of your notes) and (ii) the exercise
by us of the Put Option and your purchase of the shares of stock you receive for an amount equal to the principal amount of your
notes. The U.S. federal income tax basis of the shares of stock you receive with respect to each note would equal the principal
amount of the note less the amount of payments you received for the Put Option and deferred as described above. The holding period
in the shares of stock you receive would begin the day after you beneficially receive such shares of stock. If you receive cash
in lieu of a fractional share of stock, you will be treated as having received such fractional share and then having received cash
in exchange for such fractional share. You generally will recognize short-term capital gain or loss based on the difference between
the amount of cash received in lieu of the fractional share and the U.S. federal income tax basis allocated to such fractional
share.
Upon the sale of your
notes, you would be required to apportion the value of the amount you receive between the Debt Portion and Put Option on the basis
of the values thereof on the date of the sale. You would recognize gain or loss with respect to the Debt Portion in an amount equal
to the difference between (i) the amount apportioned to the Debt Portion and (ii) your adjusted U.S. federal income tax basis in
the Debt Portion (which would generally be equal to the principal amount of your notes if you are an initial purchaser of your
notes). Except to the extent attributable to accrued but unpaid interest with respect to the Debt Portion, such gain or loss would
be long-term capital gain or loss if your holding period is greater than one year. The amount of cash that you receive that is
apportioned to the Put Option (together with any amount of premium received in respect thereof and deferred as described above)
would be treated as short-term capital gain. If the value of the Debt Portion on the date of the sale of your notes is in excess
of the amount you receive upon such sale, you would likely be treated as having made a payment (to the purchaser in the case of
a sale) equal to the amount of such excess in order to extinguish your rights and obligations under the Put Option. In such a case,
you would likely recognize short-term capital gain or loss in an amount equal to the difference between the premium you previously
received in respect of the Put Option and the amount of the deemed payment made by you to extinguish the Put Option.
If you are a secondary
purchaser of your notes, you would be required to allocate your purchase price for your notes between the Debt Portion and Put
Option based on the respective fair market values of each on the date of purchase. If, however, the portion of your purchase price
allocated to the Debt Portion is at a discount from, or is in excess of, the principal amount of your notes, you may be subject
to the market discount or amortizable bond premium rules described in the accompanying prospectus under “United States Federal
Income Taxation — Tax consequences to holders of our debt securities — Debt Securities Purchased with Market Discount”
and “United States Federal Income Taxation — Tax consequences to holders of our debt securities — Debt Securities
Purchased at a Premium” with respect to the Debt Portion. The portion of your purchase price that is allocated to the Put
Option would likely be offset for tax purposes against amounts you subsequently receive with respect to the Put Option (including
amounts received upon a sale of the notes that are attributable to the Put Option), thereby reducing the amount of gain or increasing
the amount of loss you would recognize with respect to the Put Option or with respect to the sale of any Reference Stock you receive
upon the exercise of the Put Option. If, however, the portion of your purchase price allocated to the Debt Portion as described
above is in excess of your purchase price for your notes, you would likely be treated for tax purposes as having received a payment
for the Put Option (which will be deferred as described above) in an amount equal to such excess.
Alternative Characterizations
There is no judicial
or administrative authority discussing how your notes should be treated for U.S. federal income tax purposes. Therefore, other
treatments would also be reasonable and the Internal Revenue Service might assert that treatment other than that described above
is more appropriate.
For example, it is
possible that your note could be treated as a single debt instrument subject to the special tax rules governing contingent payment
debt instruments. If your note is so treated, you would be required to accrue interest income over the term of your note based
upon the yield at which we would issue a non-contingent fixed-rate debt instrument with other terms and conditions similar to your
note. You would recognize gain or loss upon the sale, redemption or maturity of your note in an amount equal to the difference,
if any, between the amount you receive at such time and your adjusted basis in your note. In general, your adjusted basis in your
note would be equal to the amount you paid for your note, increased by the amount of interest you previously accrued with respect
to your note. Any gain you recognize upon the sale, redemption or maturity of your note would be ordinary income and any loss recognized
by you at such time would generally be ordinary loss to the extent of interest you included in income in the current or previous
taxable years with respect to your note, and thereafter would be capital loss.
If your note is treated
as a contingent payment debt instrument and you purchase your note in the secondary market at a price that is at a discount from,
or in excess of, the adjusted issue price of your note, such excess or discount would not be subject to the generally applicable
market discount or amortizable bond premium rules described in the accompanying prospectus but rather would be subject to special
rules set forth in U.S. Treasury regulations governing contingent payment debt instruments. Accordingly, if you purchase your note
in the secondary market, you should consult your tax advisor as to the possible application of such rules to you.
Further, your note
may be characterized in whole or in part as a notional principal contract. If your notes were to be treated in whole or in part
as a notional principal contract, the tax consequences to you could differ materially and adversely from the tax consequences described
above. You are urged to consult your own tax advisor with respect to the potential characterization of your notes as a notional
principal contract, in whole or in part. Additionally, your note may be characterized as a different type of derivative contract.
For example, it is possible your notes could be treated as a pre-paid income-bearing derivative contract in respect of the Reference
Stock. In such case, your notes would be subject to similar treatment as described under “Notes With Contingent Interest”
below.
In addition, the Internal
Revenue Service has released a notice that may affect the taxation of holders of “prepaid forward contracts” and similar
instruments. According to the notice, the Internal Revenue Service and the U.S. Treasury are actively considering whether the holder
of such instruments should be required to accrue ordinary income on a current basis, and they sought taxpayer comments on the subject.
While it is not clear whether the notes would be viewed as similar to such instruments, it is possible that any future guidance
could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect.
Because of the absence
of authority regarding the appropriate tax characterization of your note, it is possible that the Internal Revenue Service could
seek to characterize your note in a manner that results in tax consequences to you that are different from those described above.
For example, it is possible that you may be required to include the entire coupon into income when it is received. You should consult
your tax advisor as to the tax consequences of possible alternative characterizations of your note for U.S. federal income tax
purposes.
Where the Term of Your Notes Will Not
Exceed One Year Without Regard to the Effect of an Extension in the Event of a Market Disruption Event
General
In the opinion of our
counsel, Mayer Brown LLP, it would generally be reasonable to treat your notes as an investment unit consisting of (i) a non-contingent
debt instrument subject to the rules governing short-term debt instruments (as described under “United States Federal Income
Taxation — Tax consequences to holders of our debt securities — Original Issue Discount — Short-Term Debt Securities”
in the accompanying prospectus) issued by us to you (the “Short-Term Debt Portion”), and (ii) a Put Option for U.S.
federal income tax purposes. The balance of this discussion under “Notes With Fixed Interest—Where the Term of the
Your Notes Will Not Exceed One Year Without Regard to the Effect of an Extension in the Event of a Market Disruption Event”
assumes this treatment is proper and will be respected for U.S. federal income tax purposes.
Treatment as an Investment
Unit
If your notes are properly
treated as an investment unit consisting of a Short-Term Debt Portion and Put Option, it is likely that the Short-Term Debt Portion
of your notes would be treated as having been issued for the principal amount of the notes and that interest payments on the notes
would be treated in part as payments of interest and in part as payments for the Put Option. Amounts treated as interest would
be subject to the rules governing short-term debt instruments (as described under “United States Federal Income Taxation
— Tax consequences to holders of our debt securities — Original Issue Discount — Short-Term Debt Securities”
in the accompanying prospectus). Amounts treated as payment for the Put Option would be deferred and accounted for upon sale, redemption
or maturity of the notes, as discussed below.
If you were to receive
a cash payment of the full principal amount of your notes upon the redemption or maturity of your notes, such payment would likely
be treated as (i) payment in full of the principal amount of the Short-Term Debt Portion (which would not result in the recognition
of gain or loss if you are an initial purchaser of your notes), and (ii) the lapse of the Put Option which would likely result
in your recognition of short-term capital gain in an amount equal to the amount paid to you for the Put Option and deferred as
described above. If you were to receive a cash payment upon the maturity of your notes (excluding cash received as a coupon) of
less than the full principal amount of your notes, such payment would likely be treated as (i) payment in full of the principal
amount of the Short-Term Debt Portion (which would not result in the recognition of gain or loss if you are an initial purchaser
of your notes), and (ii) the cash settlement of the Put Option pursuant to which you paid to us an amount equal to the excess of
the principal amount of your notes over the amount that you received upon the maturity of your notes (excluding cash received as
a coupon) in order to settle the Put Option. If the aggregate amount paid to you for the Put Option and deferred as described above
is greater than the amount you are deemed to have paid to us to settle the Put Option, you will likely recognize short-term capital
gain in an amount that is equal to such excess. Conversely, if the amount paid to you for the Put Option and deferred as described
above is less than the amount you are deemed to have paid to us to settle the Put Option, you will likely recognize short-term
capital loss in an amount that is equal to such difference.
If, instead of making
a cash payment to you, we were to exchange your notes for shares of the Reference Stock of equivalent value, the receipt of such
stock upon the maturity of your notes would likely be treated as (i) payment in full of the principal amount of the Short-Term
Debt Portion (which would likely not result in the recognition of gain or loss if you are an initial purchaser of your notes),
and (ii) the exercise by us of the Put Option and your purchase of the shares of stock you receive for an amount equal to the principal
amount of your notes. The U.S. federal income tax basis of the shares of stock you receive would equal the principal amount of
your notes less the amount of payments you received for the Put Option and deferred as described above. The holding period in the
shares of stock you receive would begin the day after you beneficially receive such shares of stock. If you receive cash in lieu
of a fractional share of stock, you will be treated as having received such fractional share and then having received cash in exchange
for such fractional share. You generally will recognize short-term capital gain or loss based on the difference between the amount
of cash received in lieu of the fractional share and the U.S. federal income tax basis allocated to such fractional share.
Upon the sale of your
notes, you would be required to apportion the value of the amount you receive between the Short-Term Debt Portion and Put Option
on the basis of the values thereof on the date of the sale. You would recognize gain or loss with respect to the Short-Term Debt
Portion in an amount equal to the difference between (i) the amount apportioned to the Short-Term Debt Portion, and (ii) your adjusted
U.S. federal income tax basis in the Debt Portion. Except to the extent attributable to accrued but unpaid interest with respect
to the Short-Term Debt Portion, such gain or loss would be short-term capital gain or loss. If you are a cash basis taxpayer and
do not elect to accrue interest currently, your adjusted basis in your notes should generally be the purchase price of your notes.
If you are an accrual basis holder, or a cash basis holder that elects to accrue interest on your notes currently, your adjusted
basis in your notes should generally be the purchase price of your notes increased by the amount of accrued interest and decreased
by any interest that is paid in respect of the Short-Term Debt Portion.
Upon the sale of your
notes, the amount of cash that you receive that is apportioned to the Put Option (together with any amount of premium received
in respect thereof and deferred as described above) would be treated as short-term capital gain. If the value of the Short-Term
Debt Portion on the date of the sale of your notes is in excess of the amount you receive upon such sale, you would likely be treated
as having made a payment (to the purchaser in the case of a sale) equal to the amount of such excess in order to extinguish your
rights and obligations under the Put Option. In such a case, you would likely recognize short-term capital gain or loss in an amount
equal to the difference between the premium you previously received in respect of the Put Option and the amount of the deemed payment
made by you to extinguish the Put Option.
If you are a secondary
purchaser of your notes, you would be required to allocate your purchase price for your notes between the Short-Term Debt Portion
and Put Option based on the respective fair market values of each on the date of purchase. If the portion of your purchase price
allocated to the Short-Term Debt Portion is in excess of the principal amount of your notes, you may be subject to the amortizable
bond premium rules described in the accompanying prospectus under “United States Federal Income Taxation — Tax consequences
to holders of our debt securities — Debt Securities Purchased at a Premium” with respect to the Short-Term Debt Portion.
If the portion of your purchase price allocated to the Short-Term Debt Portion is at a discount from the principal amount of the
notes, special market discount rules applicable to short-term debt instruments may apply. You should consult your tax advisor with
respect to such rules in such case. The portion of your purchase price that is allocated to the Put Option would likely be offset
for tax purposes against amounts you subsequently receive with respect to the Put Option (including amounts received upon a sale
of the notes that are attributable to the Put Option), thereby reducing the amount of gain or increasing the amount of loss you
would recognize with respect to the Put Option or with respect to the sale of any stock you receive upon the exercise of the Put
Option. If, however, the portion of your purchase price allocated to the Short-Term Debt Portion as described above is in excess
of your purchase price for your notes, you would likely be treated for tax purposes as having received a payment for the Put Option
(which will be deferred as described above) in an amount equal to such excess.
Alternative Characterizations
There is no judicial
or administrative authority discussing how your notes should be treated for U.S. federal income tax purposes. Therefore, other
treatments would also be reasonable and the Internal Revenue Service might assert that treatment other than that described above
is more appropriate. For example, the Internal Revenue Service might assert that your notes should be treated as a single debt
instrument as described in “United States Federal Income Taxation” in the accompanying prospectus. Pursuant to such
characterization, the notes would generally be subject to the rules concerning short-term debt instruments as described under the
heading “United States Federal Income Taxation — Tax consequences to holders of our debt securities — Original
Issue Discount — Short-Term Debt Securities” therein. It is also possible that you may be required to include the entire
coupon in income when it is received. In addition, if the term of your notes may exceed one year in the event of a market disruption
event, your notes may be treated as notes with a term in excess of one year. In such case, your notes would be subject to the rules
described under “Where the Term of Your Notes Exceeds One Year” above.
Further, your note
may be characterized in whole or in part as a notional principal contract. If your notes were to be treated in whole or in part
as a notional principal contract, the tax consequences to you could differ materially and adversely from the tax consequences described
above. You are urged to consult your own tax advisor with respect to the potential characterization of your notes as a notional
principal contract, in whole or in part. Additionally, your note may be characterized as a different type of derivative contract.
For example, it is possible your notes could be treated as a pre-paid income-bearing derivative contract in respect of the Reference
Stock. In such case, your notes would be subject to similar treatment as described under “Notes With Contingent Interest”
below.
In addition, the Internal
Revenue Service has released a notice that may affect the taxation of holders of “prepaid forward contracts” and similar
instruments. According to the notice, the Internal Revenue Service and the U.S. Treasury are actively considering whether the holder
of such instruments should be required to accrue ordinary income on a current basis, and they are seeking taxpayer comments on
the subject. While it is not clear whether the notes would be viewed as similar to such instruments, it is possible that any future
guidance could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect.
You should consult your tax advisor as to the tax consequences of possible alternative characterizations of your note for U.S.
federal income tax purposes.
Notes With Contingent Interest
General
In the opinion of our counsel, Mayer Brown
LLP, it would generally be reasonable to treat your notes as a pre-paid contingent income-bearing derivative contract in respect
of the Reference Stock for U.S. federal income tax purposes. The balance of this discussion under “Notes With Contingent
Interest” assumes this treatment is proper and will be respected for U.S. federal income tax purposes.
Although the U.S. federal income tax treatment
of the contingent interest payments is uncertain, we intend to take the position, and the following discussion assumes, that such
contingent interest payments (including any interest payment on or with respect to the maturity date) constitute taxable ordinary
income to you at the time received or accrued in accordance your regular method of accounting. If the notes are treated as described
above and you were to receive a cash payment in satisfaction of the full principal amount of your notes upon the redemption or
maturity of your notes, it would be reasonable for you to take the position that you will recognize capital gain or loss upon the
sale or maturity of the notes in an amount equal to the difference between the amount you receives at such time (other than amounts
properly attributable to any interest payments, which would be treated, as described above, as ordinary income) and your tax basis
in the notes. In general, a your tax basis in the notes will be equal to the price you paid for the notes. Capital gain recognized
by an individual United States holder is generally taxed at ordinary income rates where the property is held for one year or less.
The deductibility of capital losses is subject to limitations.
If, instead of making a cash payment to
you, we were to exchange your notes for shares of the Reference Stock of equivalent value and cash in lieu of fractional shares,
although no assurances can be provided in this regard, you may generally expect not to recognize any gain or loss with respect
to any stock received. Your holding period in the shares of stock you receive would begin the day after you beneficially receive
such shares of stock. If you receive cash in lieu of a fractional share of stock, you will be treated as having received such fractional
share and then having received cash in exchange for such fractional share. You generally will recognize short-term capital gain
or loss based on the difference between the amount of cash received in lieu of the fractional share and the U.S. federal income
tax basis allocated to such fractional share. As discussed above, we intend to treat any contingent interest payments you receive
as constituting ordinary income to you.
Alternative Characterizations
Alternative tax treatments of the notes
are also possible and the Internal Revenue Service might assert that a treatment other than that described above is more appropriate.
For example, it is possible that your note could be treated as a single debt instrument. Under this treatment, where the term of
your notes exceeds one year, the notes would generally be subject to the special tax rules governing contingent payment debt instruments.
If your note is so treated, you would be required to accrue interest income over the term of your note based upon the yield at
which we would issue a non-contingent fixed-rate debt instrument with other terms and conditions similar to your note. You would
recognize gain or loss upon the sale, redemption or maturity of your note in an amount equal to the difference, if any, between
the amount you receive at such time and your adjusted basis in your note. In general, your adjusted basis in your note would be
equal to the amount you paid for your note, increased by the amount of interest you previously accrued with respect to your note.
Any gain you recognize upon the sale, redemption or maturity of your note would be ordinary income and any loss recognized by you
at such time would generally be ordinary loss to the extent of interest you included in income in the current or previous taxable
years with respect to your note, and thereafter would be capital loss. If your note is treated as a contingent payment debt instrument
and you purchase your note in the secondary market at a price that is at a discount from, or in excess of, the adjusted issue price
of your note, such excess or discount would not be subject to the generally applicable market discount or amortizable bond premium
rules described in the accompanying prospectus but rather would be subject to special rules set forth in U.S. Treasury regulations
governing contingent payment debt instruments. Accordingly, if you purchase your note in the secondary market, you should consult
your tax advisor as to the possible application of such rules to you. Where the notes have a term of one year or less, the notes
would generally be subject to the rules concerning short-term debt instruments as described under the heading “United States
Federal Income Taxation — Tax consequences to holders of our debt securities — Original Issue Discount — Short-Term
Debt Securities” therein.
Because of the absence of authority regarding
the appropriate tax characterization of the notes, it is also possible that the Internal Revenue Service could seek to characterize
the notes in a manner that results in other tax consequences that are different from those described above.
In addition, the Internal
Revenue Service has released a notice that may affect the taxation of holders of “prepaid forward contracts” and similar
instruments. According to the notice, the Internal Revenue Service and the U.S. Treasury are actively considering whether the holder
of such instruments should be required to accrue ordinary income on a current basis, and they are seeking taxpayer comments on
the subject. While it is not clear whether the notes would be viewed as similar to such instruments, it is possible that any future
guidance could materially and adversely affect the tax consequences of an investment in the notes, possibly with retroactive effect.
You should consult your tax advisor as to the tax consequences of possible alternative characterizations of your note for U.S.
federal income tax purposes.
Non-United States Holders
The following discussion
applies to non-United States holders of the notes. You are a non-United States holder if you are a beneficial owner of a note and
are for U.S. federal income tax purposes a non-resident alien individual, a foreign corporation, or a foreign estate or trust.
As discussed above,
the U.S. federal income tax treatment of the notes is uncertain and as a result, the institution through which you hold the notes
may determine to withhold U.S. federal income tax at a 30% rate (or at a lower rate under an applicable income tax treaty) in respect
of interest payments made on the notes to a non-United States holder unless such payments are effectively connected with the conduct
by the non-United States holder of a trade or business in the United States (in which case, to avoid withholding, the non-United
States holder will be required to provide a Form W-8ECI). We will not pay any additional amounts in respect of such withholding.
To claim benefits under an income tax treaty, a non-United States holder must obtain a taxpayer identification number and certify
as to its eligibility under the appropriate treaty’s limitations on benefits article, if applicable (which certification
may generally be made on a Form W-8BEN or W-8BEN-E, or a substitute or successor form). In addition, special rules may apply to
claims for treaty benefits made by corporate non-United States holders. A non-United States holder that is eligible for a reduced
rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing
an appropriate claim for refund with the Internal Revenue Service. The availability of a lower rate of withholding or an exemption
from withholding under an applicable income tax treaty will depend on the proper characterization of the interest payments under
U.S. federal income tax laws and whether such treaty rate or exemption applies to such interest payments. No assurance can be provided
on the proper characterization of the interest payments for U.S. federal income tax purposes and, accordingly, no assurance can
be provided on the availability of benefits under any income tax treaty. Non-United States holders must consult their tax advisors
in this regard.
Except as discussed
below, you will generally not be subject to U.S. federal income or withholding tax on any gain upon the sale or maturity of the
notes, provided that (i) you comply with applicable certification requirements, which certification may be made on a Form W-8BEN
or W-8BEN-E (or a substitute or successor form) on which you certify, under penalties of perjury, that you are not a U.S. person
and provide your name and address, (ii) your gain is not effectively connected with your conduct of a U.S. trade or business, and
(iii) if you are a non-resident alien individual, you are not present in the U.S. for 183 days or more during the taxable year
of the sale or maturity of the notes. In the case of (ii) above, you generally would be subject to U.S. federal income tax with
respect to any income or gain in the same manner as if you were a United States holder and, if you are a corporation, you may also
be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable U.S. income tax treaty) of a portion
of your earnings and profits for the taxable year that are effectively connected with its conduct of a trade or business in the
U.S., subject to certain adjustments. Payments made to you may be subject to information reporting and to backup withholding unless
you comply with applicable certification and identification requirements as to your foreign status.
As discussed above,
alternative characterizations of the notes for U.S. federal income tax purposes are possible. Should an alternative characterization,
by reason of change or clarification of the law, by regulation or otherwise, cause payments as to the notes to become subject to
withholding tax in addition to the withholding tax described above, or if we or the institution through which you hold the notes
determine withholding is appropriate under current law, we or such institution will withhold tax at the applicable statutory rate.
Prospective investors should consult their own tax advisors in this regard.
A “dividend equivalent”
payment is treated as a dividend from sources within the United States and such payments generally would be subject to a 30% U.S.
withholding tax if paid to a non-United States holder. Under U.S. Treasury Department regulations, payments (including deemed payments)
with respect to equity-linked instruments (“ELIs”) that are “specified ELIs” may be treated as dividend
equivalents if such specified ELIs reference an interest in an “underlying security,” which is generally any interest
in an entity taxable as a corporation for U.S. federal income tax purposes if a payment with respect to such interest could give
rise to a U.S. source dividend. However, IRS guidance provides that withholding on dividend equivalent payments will not apply
to specified ELIs that are not delta-one instruments and that are issued before January 1, 2021. Except as otherwise set forth
in any applicable pricing supplement, we expect that the delta of a note with terms described in this product supplement with respect
to the Reference Stock will not be one, and therefore, we expect non-United States holders should not be subject to withholding
on dividend equivalent payments, if any, under a note described in this product supplement issued before January 1, 2021. However,
it is possible that notes issued before January 1, 2021 could be treated as deemed reissued for U.S. federal income tax purposes
upon the occurrence of certain events affecting the Reference Stock or the notes, and following such occurrence, such notes could
be treated as subject to withholding on dividend equivalent payments. Non-United States holders that enter, or have entered, into
other transactions in respect of the Reference Stock or the notes should consult their tax advisors as to the application of the
dividend equivalent withholding tax in the context of the notes and their other transactions. If any payments are treated as dividend
equivalents subject to withholding, we (or the applicable paying agent) would be entitled to withhold taxes without being required
to pay any additional amounts with respect to amounts so withheld.
Backup Withholding
and Information Reporting
Please see the discussion
under “United States Federal Income Taxation — Backup Withholding and Information Reporting” in the accompanying
prospectus for a description of the applicability of the backup withholding and information reporting rules to payments made on
the notes to United States holders.
In the case of a non-United
States holder, backup withholding and information reporting will not apply to payments made if the non-United States holder provides
the required certification that it is not a United States person, or the non-United States holder otherwise establishes an exemption,
provided that the payor or withholding agent does not have actual knowledge or reason to know that the holder is a United States
person, or that the conditions of any exemption are not satisfied. However, we and other payors are required to report payments
of interest on the notes on IRS Form 1042-S even if the payments are not otherwise subject to information reporting requirements.
Foreign Account Tax Compliance Act
The Foreign Account
Tax Compliance Act imposes a 30% U.S. withholding tax on certain U.S. source payments, including interest (and OID), dividends,
other fixed or determinable annual or periodical gain, profits, and income, and on the gross proceeds from a disposition of property
of a type which can produce U.S. source interest or dividends (“Withholdable Payments”), if paid to a foreign financial
institution (including amounts paid to a foreign financial institution on behalf of a holder), unless such institution enters into
an agreement with the Treasury Department to collect and provide to the Treasury Department substantial information regarding U.S.
account holders, including certain account holders that are foreign entities with U.S. owners, with such institution. The legislation
also generally imposes a withholding tax of 30% on Withholdable Payments made to a non-financial foreign entity unless such entity
provides the withholding agent with a certification that it does not have any substantial U.S. owners or a certification identifying
the direct and indirect substantial U.S. owners of the entity.
The U.S. Treasury Department
and the IRS have announced that withholding on payments of gross proceeds from a sale or redemption of the notes will only apply
to payments made after December 31, 2018. However, recently proposed regulations eliminate the requirement of withholding on gross
proceeds from the sale or disposition of financial instruments. The U.S. Treasury Department has indicated that taxpayers may rely
on these proposed regulations pending their finalization. If we (or an applicable withholding agent) determine withholding is appropriate
with respect to the notes, we (or such agent) will withhold tax at the applicable statutory rate, and we will not pay any additional
amounts in respect of such withholding. Account holders subject to information reporting requirements pursuant to the Foreign Account
Tax Compliance Act may include holders of the notes. Foreign financial institutions and non-financial foreign entities located
in jurisdictions that have an intergovernmental agreement with the United States governing the Foreign Account Tax Compliance Act
may be subject to different rules. Holders are urged to consult with their own tax advisors regarding the possible implications
of this legislation on their investment in the notes.
CERTAIN CONSIDERATIONS FOR ERISA AND
OTHER U.S. EMPLOYEE BENEFIT PLANS
Subject to the following discussion, the
notes may be purchased by an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”), subject to Title I of ERISA, a plan or account subject to Section 4975 of the Internal
Revenue Code of 1986, as amended (the “Code”), an entity whose underlying assets include the assets of any of the foregoing
(each of the foregoing, a “Benefit Plan Investor”), or any other plan which is subject to any federal, state, local
or other law that is substantially similar to the fiduciary responsibility and prohibited transaction provisions of ERISA or Section
4975 of the Code (“Similar Law”). A fiduciary of a Benefit Plan Investor subject to ERISA, should consider the fiduciary
standards of ERISA in the context of the plan’s particular circumstances before authorizing an investment in the notes. Among
other factors, the fiduciary should consider whether the investment would satisfy the prudence and diversification requirements
of ERISA and would be consistent with the documents and instruments governing the plan, and whether the investment would involve
a prohibited transaction under ERISA or the Code.
Section 406 of ERISA and Section 4975 of
the Code prohibit Benefit Plan Investors, from engaging in certain transactions involving “plan assets” with persons
who are “parties in interest” under ERISA or “disqualified persons” under the Code with respect to the
Benefit Plan Investors. A violation of these prohibited transaction rules may result in excise tax or other liabilities under ERISA
or the Code for those persons, unless exemptive relief is available under an applicable statutory, regulatory or administrative
exemption. Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA) and certain church plans (as
defined in Section 3(33) of ERISA) are not subject to the requirements of Section 406 of ERISA or Section 4975 of the Code but
may be subject to Similar Law.
The acquisition of notes by Benefit Plan
Investor with respect to which we or certain of our affiliates is or becomes a party in interest or disqualified person may result
in a prohibited transaction under ERISA or Section 4975 of the Code, unless the notes are acquired pursuant to an applicable exemption.
The U.S. Department of Labor has issued five prohibited transaction class exemptions, or “PTCEs”, that may provide
exemptive relief if required for direct or indirect prohibited transactions that may arise from the purchase or holding of notes.
These exemptions are PTCE 84-14 (for certain transactions determined by independent qualified professional asset managers), PTCE
90-1 (for certain transactions involving insurance company pooled separate accounts), PTCE 91-38 (for certain transactions involving
bank collective investment funds), PTCE 95-60 (for transactions involving certain insurance company general accounts), and PTCE
96-23 (for transactions managed by in-house asset managers). In addition, ERISA Section 408(b)(17) and Section 4975(d)(20) of the
Code provide an exemption for certain transactions between a Benefit Plan Investor and persons who are parties in interest or disqualified
persons solely by reason of providing services to the Benefit Plan Investor or being affiliated with such service providers. There
can be no assurance that these or any other exemption will be available with respect to any particular transaction involving the
notes, or that, if an exemption is available, it will cover all aspects of any particular transaction.
Because we or our affiliates may be considered
to be a party in interest with respect to many plans, the notes may not be purchased, held or disposed of by any plan, unless such
purchase, holding or disposition is eligible for exemptive relief, including relief available under PTCE 96-23, 95-60, 91-38, 90-1,
or 84-14 or the service provider exemption, or any other applicable exemption. Except as otherwise set forth in any applicable
pricing supplement, by its purchase of any notes, each purchaser (whether in the case of the initial purchase or in the case of
a subsequent transferee) will be deemed to have represented and agreed by its purchase and holding of the notes offered hereby
that either (i) it is not and it is not acquiring the notes on behalf of, or with the assets of a Benefit Plan Investor or any
other plan that is subject to Similar Law, or (ii) its purchase, holding and disposition of the notes will not, in the case of
a Benefit Plan Investor, result in a nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code because
an exemption is available with respect to such transactions and all the conditions of such exemption have been satisfied (or, in
the case of any other plan, result in a violation of Similar Law).
SUPPLEMENTAL PLAN OF DISTRIBUTION
With respect to each
note to be issued, we will agree to sell to BMO Capital Markets Corp., and BMO Capital Markets Corp. will agree to purchase from
us, the principal amount of the note specified, at the price specified in the applicable pricing supplement, less the indicated
underwriting commission. BMO Capital Markets Corp. may also resell the notes to other brokers or dealers in connection with any
offering. BMO Capital Markets Corp. or another of our affiliates may repurchase and resell outstanding notes in market-making transactions,
with resales being made at prices related to prevailing market prices at the time of resale or at negotiated prices. For more information
about the plan of distribution, the distribution agreement and possible market-making activities see “Supplemental Plan of
Distribution” in the accompanying prospectus supplement.
No
Prospectus (as defined in Directive 2003/71/EC, as amended (the “Prospectus Directive”)) will be prepared in connection
with the notes. Accordingly, the notes may not be offered to the public in any member state of the European Economic Area (the
“EEA”), and any purchaser of the notes who subsequently sells any of the notes in any EEA member state must do so only
in accordance with the requirements of the Prospectus Directive, as implemented in that member state.
The
notes are not intended to be offered, sold or otherwise made available to, and should not be offered, sold or otherwise made available
to, any retail investor in the EEA. For these purposes, the expression “offer” includes the communication in any form
and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to
decide to purchase or subscribe the notes, and a “retail investor” means a person who is one (or more) of: (a) a retail
client, as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended (“MiFID II”); or (b) a customer,
within the meaning of Insurance Distribution Directive 2016/97/EU, as amended, where that customer would not qualify as a professional
client as defined in point (10) of Article 4(1) of MiFID II; or (c) not a qualified investor as defined in the Prospectus Directive.
Consequently, no key information document required by Regulation (EU) No 1286/2014, as amended (the “PRIIPs Regulation”),
for offering or selling the notes or otherwise making them available to retail investors in the EEA has been prepared, and therefore,
offering or selling the notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.
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