NASDAQ OMX Group (NDAQ)

12. Subordinated Notes

On May 3, 2001, Nasdaq issued and sold $240.0 million in aggregate principal amount of 4.0% convertible subordinated notes due 2006 to Hellman & Friedman Capital Partners IV, L.P. and certain of its affiliated limited partnerships (collectively, “Hellman & Friedman”). Until Nasdaq is granted Exchange Registration, Hellman & Friedman may only exercise its conversion rights for a number of shares of common stock such that immediately following such conversion, NASD will continue to control greater than 50.0% of the combined voting power of Nasdaq. The annual 4.0% coupon will be payable in arrears and the Subordinated Notes are convertible at any time into an aggregate of 12.0 million shares of common stock at $20.00 per share, subject to adjustment, in general, for any stock split, dividend, combination, recapitalization or other similar event. Interest expensed and paid under the agreement totaled approximately $9.6 million for each of the years ended December 31, 2004, 2003 and 2002.

F-28

Table of Contents

The Nasdaq Stock Market, Inc.

Notes to Consolidated Financial Statements—(Continued)

In 2002, Nasdaq stockholders approved an amendment to Nasdaq’s Restated Certificate of Incorporation (the “Certificate of Incorporation”) that provided for voting debt. As a result, the holders of the Subordinated Notes may vote on an as-converted basis on all matters on which holders of common stock have the right to vote, subject to the current 5.0% voting limitation in the Certificate of Incorporation. Nasdaq has granted Hellman & Friedman certain registration rights with respect to the shares of common stock underlying the Subordinated Notes.

On an as-converted basis as of December 31, 2004, Hellman & Friedman owned an approximate 13.7% equity interest in Nasdaq as a result of its ownership of these Subordinated Notes and 500,000 shares of common stock purchased from Nasdaq in a separate transaction. Hellman & Friedman is permitted to designate one person reasonably acceptable to Nasdaq for nomination as a director of Nasdaq for so long as Hellman & Friedman owns Subordinated Notes and/or shares of common stock issued upon conversion thereof representing at least 50.0% of the shares of common stock issuable upon conversion of the Subordinated Notes initially purchased. Patrick Healy, a managing director of Hellman & Friedman, was designated by Hellman & Friedman and currently serves on the Board of Directors.