THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Nasdaq Stock Market, Inc. (The) (NDAQ)

4/21/2006 Proxy Information

Regulatory Services Agreement

Pursuant to the Delegation Plan, NASDR, a wholly-owned subsidiary of NASD, currently provides us with regulatory services, including the regulation of trading activity on The Nasdaq Stock Market and the market surveillance functions of Nasdaq. We do not have a formalized written agreement with NASDR for the performance of regulatory services prior to us operating as an exchange. We paid NASDR $41.7 million for 2005 and $45.6 million for 2004 for regulatory services provided pursuant to the Delegation Plan. The reduction was due in part to changes in the NASD’s allocation of technology expenses. The decrease in 2005 was also due to the transfer of the ownership of the OTC Bulletin Board to NASD which reduced the associated regulatory costs.

We have entered into a regulatory services agreement under which NASDR would provide regulatory services to us for a term of 10 years commencing when we meet SEC conditions to operate as an exchange. Since these conditions have not yet been satisfied, no services have been performed under this agreement. Pursuant to the terms of the regulatory services agreement, the services provided will be of the same type and scope as are currently provided by NASDR to us under the Delegation Plan. Each regulatory service is to be provided for a minimum of five years, then the parties may determine to terminate a particular service. The termination of a particular service will generally be based upon a review of pricing and the need for such services. Under the agreement, NASD will bill us a fee for each required service provided that it is based on NASD’s direct and indirect costs plus a markup of six percent on compensation costs related to NASDR’s employees used to provide the services. Any services other than those required by the agreement will be billed at cost, plus a mutually agreed upon markup.

Similar to the services NASDR currently provides us, under the regulatory services agreement, NASDR will:

• review and approve new member applications;

• perform automated surveillance of trading on The Nasdaq Stock Market;

• review member firm compliance with the rules and regulations applicable to trading and market-making functions in The Nasdaq Stock Market;

• investigate suspicious activity in quoting and trading on The Nasdaq Stock Market;

• conduct examinations of member firms;

• initiate the disciplinary process once it is determined that a potential violation of a federal securities law or rule, or an SRO rule, may have occurred; and

• operate an arbitration program and a mediation program for the resolution of customer, member firm employee, and Nasdaq member-to-member disputes.

Services Agreement Pursuant to Section 17(d) of the Exchange Act

As a condition to our ability to operate as an exchange, the SEC order requires that we enter into an agreement with NASD pursuant to Section 17(d) of the Exchange Act and Rule 17d-2. Under these provisions of federal securities laws, two SROs may agree to coordinate the regulation and enforcement of the SROs’ rules by:

• allocating certain regulatory responsibilities to one party;

• relieving the other party of its responsibilities and obligations for the responsibilities allocated to the other party; and

• providing for the allocation of expenses incurred by the party undertaking the responsibilities.

It is expected that the agreement will allocate to NASD the application and enforcement of a number of our rules with respect to Nasdaq members that are also members of NASD. Nasdaq will reimburse NASD for certain costs incurred under the agreement. We filed the proposed agreement with the SEC, which published it for notice and comment. We anticipate entering into the agreement with NASD if we receive the approval order from the SEC.

Series D Preferred Stock

The SEC requires that NASD retain greater than 50% of the voting control over us. The one outstanding share of Series D stock issued to NASD ensures that NASD maintains voting control until we meet SEC conditions to operate as an exchange and no longer rely on the NASD’s SRO license. The voting power of the share of Series D stock is recalculated for each matter presented to stockholders. NASD is entitled to cast the number of votes that, together with all other votes that NASD is entitled to vote by virtue of ownership, proxies or voting trusts, enables NASD to cast one vote more than one-half of all votes entitled to be cast by holders of Nasdaq securities. Once we become operational as an exchange, the share of Series D stock will automatically lose its voting rights and will be redeemed by us for $1.00.

Series C Cumulative Preferred Stock

On February 15, 2006, we redeemed all outstanding shares of our Series C cumulative preferred stock. We were required to redeem the Series C stock after the closing of our common stock offering, which took place on the same date. At the time of redemption, the Series C accrued dividends at an annual rate of 3.0%, which would have increased to 10.6% after July 1, 2006. The total redemption price was $104.7 million, which also reflected accrued but unpaid dividends and a make-whole premium. We paid this entire amount to NASD, which was the sole holder of the Series C.

Investor Rights Agreement

In connection with our separation from NASD, in 2002 we entered into an investor rights agreement with NASD, pursuant to which we granted NASD registration rights with respect to the outstanding shares of Series C cumulative preferred stock and the shares of common stock underlying the warrants referred to below issued by NASD in two private placements in 2000 and 2001. In addition, the terms of the investor rights agreement gave NASD the ability to direct that we allow NASD members to subscribe to purchase up to 10,295,403 shares of common stock in the event that we conducted an initial public offering of our common stock for cash. On February 15, 2006 we sold participating NASD members 206,700 shares of common stock in a directed share program as part of a public offering in full satisfaction of this obligation.

Warrants and the Voting Trust Agreement

In connection with our restructuring in 2000, NASD sold 10,806,494 warrants to purchase up to an aggregate of 43,225,976 outstanding shares of common stock owned by NASD. Each warrant issued by NASD entitled the holder to purchase one share in each of four one-year exercise periods. The first three exercise periods expired on June 27, 2003, June 25, 2004 and June 27, 2005. As of December 31, 2005, holders have exercised warrants to purchase approximately 6.9 million shares of common stock during the first three exercise periods. The fourth and final exercise period, during which the exercise price per share is $16, will expire on June 27, 2006. The voting rights associated with the shares of common stock underlying the warrants, as well as the shares of common stock purchased through the valid exercise of warrants, are governed by the voting trust agreement entered into by us, NASD and The Bank of New York, as voting trustee.

Initially, the holders of the warrants do not have any voting rights with respect to the shares of common stock underlying such warrants. Until we are operating as an exchange, the shares of common stock underlying unexercised and unexpired warrant tranches, as well as the shares of common stock purchased through the exercise of warrants, will be voted by the voting trustee at the direction of NASD. The voting rights associated with the shares of common stock underlying unexercised and expired warrant tranches will revert to NASD. However, NASD has determined, commencing at the time we meet SEC conditions to operate as an exchange, to vote any shares of common stock that it owns (other than shares underlying then outstanding warrants) in the same proportion as our other stockholders. As soon as we meet these conditions, the warrant holders will have the right to direct the voting trustee as to the voting of the shares of common stock underlying unexercised and unexpired warrant tranches until the earlier of the exercise or the expiration of such warrant tranches. The shares of common stock purchased upon a valid exercise of a warrant tranche prior to our satisfaction of SEC conditions to operate as an exchange will be released from the voting trust agreement upon the earlier to occur of such time or the filing of a registration statement applicable to such shares underlying a warrant. The shares of common stock purchased upon a valid exercise of a warrant tranche after our satisfaction of SEC conditions to operate as an exchange will not be subject to the voting trust agreement.

At NASD’s request, we provided those persons who purchased warrants to purchase shares of our common stock in our 2000 and 2001 private placements and exercised those warrants by December 31, 2005 with the opportunity to sell those shares. On February 15, 2006, these stockholders sold 3,389,343 shares underlying these warrants as part of our public offering. Additionally, we plan to register the remaining exercised and unexercised warrant shares by May 16, 2006.

Defined-Benefit Pension Plan

Prior to January 1, 2006, we were a participating employer in a noncontributory, defined-benefit pension plan that NASD sponsors for the benefit of its eligible employees and the eligible employees of its subsidiaries. The investment policy and strategy of the plan asset is established by the NASD Pension Plan Committee and reviewed on an annual basis, under the advisement of an investment consultant. As part of our separation from NASD, effective January 1, 2006, we adopted our own noncontributory, defined benefit pension plan and transferred Nasdaq participants in NASD’s pension plan to our pension plan.

Leases

We pay NASD and certain of its subsidiaries approximately $5.8 million on an annual basis for the use of approximately 118,000 square feet of office space in multiple locations.

Sale of Building

In June 2005, we completed the sale of the building we owned in Rockville, Maryland to NASD for $17.8 million. This facility was our disaster recovery site. Effective September 2005, we relocated our disaster recovery site to a third party outsource facility.

Transfer of Responsibility for OTC Bulletin Board

On October 1, 2005, we transferred responsibility for the OTC Bulletin Board back to NASD. Consideration for the OTCBB Agreement was NASD’s agreement to outsource the operation of the OTCBB to us for an initial two year period, subject to one year renewals upon mutual consent. NASD will pay us $14.2 million in the first year and $14.7 million in the second year for our services under the agreement.

Nasdaq Insurance Agency, LLC

In December 2002, we purchased NASD’s 50.0% interest in NASD Insurance Agency, LLC (subsequently renamed the Nasdaq Insurance Agency, LLC) for a purchase price consisting of an upfront payment of $0.5 million and future contingent payments of up to $5.1 million based on the cash flows of the business through 2011. In December 2004, Nasdaq amended our payment terms with NASD to extend future contingent payments based on the cash flows of the business through 2016. On January 1, 2005, Nasdaq acquired the remaining 50.0% interest in the Nasdaq Insurance Agency, which it did not previously own, from a subsidiary of American International Group, Inc. for a nominal amount. We paid NASD $1.5 million in the fourth quarter of 2005 as settlement of NASD’s claims on Nasdaq Insurance Agency’s future cash flows and no further payments will be made to NASD as a result of this acquisition.

Hellman & Friedman

On May 3, 2001, we issued and sold $240 million in aggregate principal amount of its 4.0% Convertible Subordinated Notes due 2006 (previously defined as the “voting notes”) to Hellman & Friedman. On April 22, 2005, we exchanged these voting notes for $240 million aggregate principal amount of Series B notes and Series B warrants to purchase 2,753,448 shares of common stock at $14.50 per share. The Series B notes are convertible into 16,551,724 shares of common stock, subject to adjustment, in general for any stock split, dividend, combination or other similar event. The Series B warrants will be exercisable by Hellman and Friedman and their transferees on or after April 22, 2006, or earlier under certain circumstances and will terminate on December 8, 2008, unless earlier terminated in connection with the mandatory redemption of the Series B notes.

On April 22, 2005, we sold $205 million aggregate principal amount of the Series A notes and the Series A warrants to Norway Acquisition SPV, LLC. Hellman & Friedman is the beneficial owner of $60 million of the Series A notes and Series A warrants to purchase 646,522 shares of common stock. The warrants are exercisable for common stock on or after April 22, 2006; provided, that they may be exercised earlier in connection with a fundamental change. The notes will be governed by the terms of an indenture, dated as of April 22, 2005, between Nasdaq and Law Debenture Trust Company of New York, as trustee and are convertible into common stock on or after April 22, 2006; provided, that they may be exercised earlier in connection with a fundamental change. The aggregate redemption price for Hellman & Friedman’s Series A notes and Series A warrants was $60.0 million plus any accrued interest from its Series A notes. Upon redemption of the Series A notes, (i) the indenture and the Series B notes can automatically be deemed to be amended to restate, with limited exceptions, the terms of the voting notes and (ii) the Series B warrants will be terminated.

In connection with these transactions we held a special stockholders’ meeting and recommended that our stockholders approve an amendment to our restated certificate of incorporation that would permit the holders of the notes to vote on all matters submitted to a vote of Nasdaq’s stockholders. Under the restated certificate, each holder of the Series A or Series B notes is entitled to the number of votes equal to the number of shares of common stock that could be acquired upon conversion of the holder’s Series A or Series B notes on the applicable record date, subject to the 5% voting limitation.

We have also agreed that in the event that the Nasdaq board approves an exemption from the foregoing 5% limitation for any person pursuant to the restarted certificate of incorporation (other than an exemption granted in connection with a strategic market alliance) and seeks the concurrence of the SEC, we will grant Hellman & Friedman a comparable exemption from this limitation and use best efforts to obtain SEC concurrence. We also have granted Hellman & Friedman registration rights with respect to the shares of common stock underlying the notes and the warrants. Additionally, Hellman & Friedman is permitted to designate one person reasonably acceptable to us for nomination as a director of Nasdaq for so long as Hellman & Friedman owns Series B notes and/or shares of common stock issued upon conversion representing at least 35% of the shares of common stock issuable upon conversion of the Series B notes it initially received. Patrick Healy has been nominated for re-election at the annual meeting and currently serves on the Nasdaq board pursuant to this commitment.

Silver Lake Partners

On April 22, 2005, we sold $205 million aggregate principal amount of the Series A notes and the Series A warrants to Norway Acquisition SPV, LLC. In December 2005, Norway Holdings SPV, the parent of Norway Acquisition, distributed the notes and warrants to its interest holders, including the Silver Lake entities. The Silver Lake entities beneficially own $141,364,589 of the Series A notes and Series A warrants to purchase 1,523,325 shares of our common stock at $14.50 per share. The Silver Lake entities’ Series A notes will be convertible into 9,749,282 shares of common stock, subject to adjustment, in general for any stock split, dividend, combination or other similar event.

We have granted the Silver Lake entities certain registration rights with respect to the shares of common stock underlying the Series A notes and the Series A warrants. Additionally, Silver Lake Partners II TSA, L.P. is permitted to designate one person reasonably acceptable to us for nomination as a director of Nasdaq for so long as the Silver Lake entities owns Series A notes and/or shares of common stock issued upon conversion representing at least 35% of the shares of common stock issuable upon conversion of the Series A notes initially purchased. Glenn H. Hutchins was designated by Silver Lake Partners II TSA, L.P. and serving as a director with a term that expires at Nasdaq’s 2007 annual meeting of stockholders.

In connection with these transactions, we held a special stockholders’ meeting and recommended that our stockholders approve an amendment to our restated certificate of incorporation that would permit the holders of the notes to vote on all matters submitted to a vote of Nasdaq’s stockholders. Under the restated certificate, each holder of the Series A or Series B notes is entitled to the number of votes equal to the number of shares of common stock that could be acquired upon conversion of the holder’s Series A or Series B notes on the applicable record date, subject to the 5% voting limitation.

Directors and Officers

In April 2006, David P. Warren, an executive officer, repaid in full the outstanding balance with interest on a promissory note issued in December 2001. Under the note, we loaned Mr. Warren a total of $225,000. The loan was advanced in two stages, $125,000 on May 22, 2001 and $100,000 on August 14, 2001. This full recourse promissory note was unsecured and bore interest at a rate of 5.31% compounded annually. The purpose of the loan was for the acquisition of Mr. Warren’s principal residence upon relocation to the New York area.

In connection with the Equity Plan, officers of Nasdaq received awards of options to purchase shares of common stock and/or restricted shares of common stock. Non-employee directors have the option to be awarded shares of restricted Common Stock under the Equity Plan. See “Executive Compensation—Director Compensation.” In connection with the ESPP, employees (including employees who are directors) have the opportunity to purchase shares of common stock.

One of our directors, Jeffrey Edwards, is an officer of Merrill Lynch, which has engaged in investment banking and other commercial activities in the ordinary course of business with Nasdaq.