CHAPTER Ill OPTIONS ON EQUITY SECURITIES The term "stock options' is used broadly in this booklet to include not only options on common stocks but also options on all other types of equity securities, such as limited partnership interests, "American De- pository Receipts" and "American Depository Shares" representing interests in foreign entities, and preferred stocks. Options are available on exchange-traded eq• uity securities, on unlisted equity securities traded in the NASDAQ stock market and designated as national market system securities. and on equity securities traded both in the NASDAQ stock market and on ex- changes. The NASDAQ stock market is primarily an inter-dealer trading system as contrasted with ex- change auction markets. Issuers of underlying equity securities do not partici- pate in the selection of their securities for options trad- ing (although some options markets may determine not to select an underlying security without the con- sent of the issuer of that security). Issuers of underly- ing equity securities have no responsibility regarding me issuance, the terms, or the performance of options, and option holders have no rights as security holders of such issuers. The principal risks of holders and writers of stock options are discussed in Chapter X. Readers inter- ested in buying or writing stock options should care- fully read that chapter. FEATURES OF STOCK OPTIONS Each stock option generally covers 100 shares of the underlying security, although, as described below, the number of underlying shares may be adjusted as a result of certain events. The exercise prices of the stock options that are traded at the date of this booklet are stated in U.S. dollars per share. The exercise price of an option must each be multiplied by the number of shares underlying the option in order to determine the aggregate exer- cise price and aggregate premium of that option. 18 CONFIDENTIAL - PURSUANT TOEMESMCIM&Y.779 P. 6(e)