DEFM14A 1 ddefm14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant  x

Filed by a party other than the Registrant  ¨

Check the appropriate box:

¨    Preliminary Proxy Statement   ¨      Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x   

Definitive Proxy Statement

    
¨   

Definitive Additional Materials

    
¨   

Soliciting Material Pursuant to Section 240.14a-12

    

THE NASDAQ STOCK MARKET, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

¨ No fee required

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11

 

  (1) Title of each class of securities to which transaction applies:

      

 
  (2) Aggregate number of securities to which transaction applies:

      

 
  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

      

 
  (4) Proposed maximum aggregate value of transaction:

      

 
  (5) Total fee paid:

      

 

 

x Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid:

      

 
  (2) Form, Schedule or Registration Statement No.:

      

 
  (3) Filing Party:

      

 
  (4) Date Filed:

      

 


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LOGO

PROXY STATEMENT

Dear Holders of Nasdaq Voting Securities:

On behalf of the Board of Directors of The Nasdaq Stock Market, Inc., we are pleased to deliver this Proxy Statement relating to our proposed acquisition of OMX AB (publ), a public corporation organized under the laws of Sweden. We have entered into agreements with Borse Dubai Limited, a Dubai company, which contemplate various transactions, which we refer to collectively as the Transactions. Pursuant to the Transactions, Borse Dubai will conduct an offer for all of the outstanding shares of OMX, which we refer to as the Borse Dubai Offer, and, once complete, will sell the OMX Shares acquired in the Borse Dubai Offer or otherwise owned by Borse Dubai to Nasdaq in exchange for (i) up to SEK 12,582,952,392 in cash and (ii) 60,561,515 shares of Nasdaq Common Stock. At the close of the Transactions, Borse Dubai will directly hold approximately 42.7 million shares of Nasdaq Common Stock (representing 19.99% of our fully diluted outstanding share capital) and approximately 18.0 million shares will be held in a trust for Borse Dubai’s economic benefit until disposed of by the trust. The issuance of 60,561,515 shares of Nasdaq Common Stock in connection with the Transactions requires the approval of holders of Nasdaq Voting Securities. We are seeking that approval through this proxy solicitation.

Pursuant to our agreement with Borse Dubai, the Borse Dubai Offer will not be opened for acceptances until a number of conditions are met, including the receipt of regulatory approvals and your approval of the issuance of 60,561,515 shares of Nasdaq Common Stock in connection with the Transactions. We and Borse Dubai are working together to satisfy these conditions and to enable us to acquire OMX through the Transactions. However, if these conditions cannot be met, we and Borse Dubai generally have the right to pursue separate offers for OMX—which, in our case, means we could continue our previously announced cash and stock offer for OMX, which we refer to as the Offer. We have agreed with Borse Dubai not to open the Offer for acceptances unless the conditions to the Transactions cannot be met.

We also are seeking the approval of holders of Nasdaq Voting Securities for an amendment to our Restated Certificate of Incorporation to change our name to “The NASDAQ OMX Group, Inc.” upon completion of our acquisition of OMX.

We currently estimate that approximately 28% of the fully diluted shares of Nasdaq Common Stock outstanding after completion of the Transactions will be held by Borse Dubai and the Trust, and that approximately 72% of the shares of Nasdaq Common Stock outstanding after completion of the Transactions will be held by current Nasdaq shareholders. As required by our certificate of incorporation, Borse Dubai’s voting rights in respect of the Nasdaq Common Stock it holds will be limited to a maximum of 5% of our fully diluted outstanding share capital.

Nasdaq’s Board of Directors has scheduled a Special Meeting of holders of Nasdaq Voting Securities to vote on these matters on December 12, 2007. This Proxy Statement also provides information about the Transactions that holders of Nasdaq Voting Securities should know when they vote. We urge you to read this entire Proxy Statement carefully.

Nasdaq’s Board of Directors unanimously recommends that holders of Nasdaq Voting Securities vote “for” approval of the issuance of 60,561,515 shares of Nasdaq Common Stock in connection with the Transactions and “for” approval of the amendment to Nasdaq’s Restated Certificate of Incorporation to change Nasdaq’s name to “The NASDAQ OMX Group, Inc.”

Sincerely,

LOGO

Robert Greifeld

Chief Executive Officer and President

This Proxy Statement is dated November 19, 2007 and is first being mailed to holders of record of Nasdaq Voting Securities on or about November 20, 2007.


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The Nasdaq Stock Market, Inc.

One Liberty Plaza

New York, New York 10006

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON DECEMBER 12, 2007

To the holders of Voting Securities of The Nasdaq Stock Market, Inc.:

A Special Meeting of the holders of Voting Securities of The Nasdaq Stock Market, Inc. will be held at One Liberty Plaza, New York, New York 10006, on December 12, 2007 at 9:00 a.m., local time, for the following matters:

 

  1. To approve the issuance of 60,561,515 shares of Nasdaq Common Stock, pursuant to our agreements with Borse Dubai Limited, a Dubai company.

 

  2. To approve an amendment to Nasdaq’s Restated Certificate of Incorporation to change Nasdaq’s name to “The NASDAQ OMX Group, Inc.” upon completion of our acquisition of OMX AB (publ), a public corporation organized under the laws of Sweden.

 

  3. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only holders of Nasdaq Voting Securities at the close of business on October 29, 2007, which we refer to as the Record Date, are entitled to notice of and to vote at the Special Meeting. A list of such holders as of the Record Date will be available during normal business hours for examination by any such holder for a period of ten days prior to December 12, 2007, at the principal executive offices of The Nasdaq Stock Market, Inc., One Liberty Plaza, New York, New York 10006.

All holders of Nasdaq Voting Securities are urged to attend the meeting in person or by proxy. Your vote is important. Whether or not you expect to attend the meeting in person, please sign and submit your proxy as soon as possible so that your securities can be voted at the Special Meeting in accordance with the instructions on the enclosed proxy card (holders may vote over the Internet, by telephone, or by mailing the enclosed voting instructions). The proxy is revocable and will not affect your right to vote in person in the event you attend the Special Meeting. You may revoke your proxy at any time before it is voted. If you receive more than one proxy card because your securities are registered in different names or at different addresses, please sign and return each proxy card so that all of your securities will be represented at the Special Meeting.

 

By Order of the Board of Directors,

LOGO

Robert Greifeld

Chief Executive Officer and President

New York, New York

November 19, 2007


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IMPORTANT

Nasdaq files annual, quarterly and special reports, proxy statements and other information with the S.E.C. under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. You may read and copy these reports and other information filed by Nasdaq at the Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the S.E.C. at 1-800-SEC-0330.

The S.E.C. also maintains an Internet worldwide web site that contains reports, proxy statements and other information about issuers, like Nasdaq, who file electronically with the S.E.C. through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The address of this site is http://www.sec.gov.

Nasdaq provides copies of its Forms 8-K, 10-K, 10-Q, Proxy Statement and Annual Report at no charge to investors upon request and makes electronic copies of its most recently filed reports available through its website at http://ir.nasdaq.com/sec.cfm as soon as reasonably practicable after filing such material with the S.E.C.

Holders of Nasdaq Voting Securities who have questions about the Special Meeting or how to vote or revote their proxy, or who need additional copies of this Proxy Statement, should contact Mellon Investor Services LLC toll-free at 1-866-374-7270.

If you would like to request additional copies of the Proxy Statement from Nasdaq, please do so before December 5, 2007 in order to receive them before the Special Meeting.


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TABLE OF CONTENTS

 

     Page

QUESTIONS AND ANSWERS

   v

SUMMARY

   1

The Nasdaq Stock Market, Inc.

   1

OMX AB (publ)

   1

Borse Dubai Limited and BD Stockholm AB

   2

Why You are Receiving this Proxy Statement

   2

Nasdaq’s Reasons for the Transactions

   2

The Borse Dubai Offer and the OMX Transaction Agreement

   2

The DIFX Transaction

   3

The LSE Transaction

   4

Post Closing Organization

   4

Approval by Holders of Nasdaq Voting Securities

   4

Opinion of Financial Advisor

   5

Risk Factors

   5

Regulatory Matters

   5

Appraisal Rights

   5

Directors and Management of the Combined Company Following the Completion of the
Transactions

   5

Background Information About the Offer

   6

SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION OF NASDAQ

   7

SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION OF OMX

   9

EXCHANGE RATE INFORMATION

   17

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF THE COMBINED COMPANY

   18

COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

   19

MARKET PRICE AND DIVIDEND INFORMATION

   21

FORWARD-LOOKING STATEMENTS

   22

RISK FACTORS

   23

Risks Related to the Transactions

   23

Risks Relating to Nasdaq’s, OMX’s and the Combined Company’s Business

   27

THE SPECIAL MEETING OF HOLDERS OF NASDAQ VOTING SECURITIES

   41

Time, Place and Purpose of the Nasdaq Special Meeting

   41

Who Can Vote at the Nasdaq Special Meeting

   41

Quorum

   41

Required Vote

   42

Adjournments

   42

Manner of Voting

   42

Broker Non-Votes

   43

Solicitation of Proxies

   43

PROPOSALS TO BE CONSIDERED AND VOTED UPON BY HOLDERS OF NASDAQ VOTING SECURITIES AT THE SPECIAL MEETING

   44

Proposal One

   44

Proposal Two

   44

Background of the Offer and the Transactions

   45

Nasdaq’s Reasons for the Transactions and the Offer

   51

Recommendation of Nasdaq’s Board of Directors

   56

Opinion of J.P. Morgan Securities Inc.—Financial Advisor to Nasdaq

   56

Appraisal Rights

   65

Financing of the Acquisition

   65

Regulatory Matters—The OMX Transaction Agreement

   67

Regulatory Matters—The DIFX Transaction Agreement

   72

Regulatory Matters—The LSE Transaction

   72

The Transactions—Principal Agreements

   73

The LSE Transaction—Principal Agreement

   85

The Offer—Principal Agreements

   85

Directors and Management of the Combined Company Following the Completion of the
Transactions

   87

 

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INFORMATION ABOUT OMX

   89

Introduction

   89

Competition

   89

Customers

   90

History

   90

The OMX Timeline

   91

Business Model and Strategy

   91

Customer Offerings

   93

Three Business Areas

   94

Nordic Marketplaces

   94

Information Services & New Markets

   97

Market Technology

   101

Research and Development

   104

Intellectual Property

   104

Real Estate

   104

Insurance

   105

Legal Proceedings

   105

Management

   106

Compensation Discussion and Analysis

   111

Summary Compensation Table

   114

Outstanding Equity Awards at Fiscal Year-End

   116

Retirement Plans

   117

Potential Payments on Termination of Employment or Change in Control

   117

Director Compensation

   121

Compensation Committee Interlocks and Insider Participation

   122

Certain Relationships and Related Party Transactions

   122

Beneficial Ownership of Management

   122

Major Shareholders and Affiliates

   123

SELECTED HISTORICAL FINANCIAL DATA OF OMX

   124

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF OMX

   129

Overview

   129

Sources of Revenue and Principal Expense Items

   129

Results of Operations for Six Months Ended June 30, 2007 Compared to Six Months Ended
June 30, 2006

   132

Results of Operations for the Year Ended December 31, 2006 Compared to the Year Ended December 31, 2005

   136

Results of Operations for the Year Ended December 31, 2005 Compared to the Year Ended December 31, 2004

   140

Liquidity and Capital Resources

   143

Debt and Minority Put Options

   144

Contractual Obligations

   145

Off Balance Sheet Arrangements

   145

Critical Accounting Policies

   145

Quantitative and Qualitative Disclosures About Market Risk

   146

Currency Exposure

   149

Summary of Material Differences between IFRS and U.S. GAAP

   151

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF THE COMBINED COMPANY

   152

NASDAQ’S SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

   171

 

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     Page

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   172

FUTURE NASDAQ STOCKHOLDER PROPOSALS

   176

IMPORTANT NOTICE REGARDING DELIVERY OF STOCKHOLDER DOCUMENTS

   177

WHERE YOU CAN FIND MORE INFORMATION

   177

OTHER MATTERS

   178

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF OMX

   FIN-1

ANNEX A—Nasdaq OMX Transaction Agreement

   A-1

ANNEX B—Supplement

   B-1

ANNEX C—OMX Transaction Agreement

   C-1

ANNEX D—Form of September Irrevocable Undertakings

   D-1

ANNEX E—DIFX Transaction Agreement

   E-1
ANNEX F—Opinion of J.P. Morgan Securities Inc.    F-1

 

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CERTAIN FREQUENTLY USED TERMS

Unless otherwise specified or if the context so requires:

 

   

“Acquisition” refers to the acquisition of OMX Shares from Borse Dubai;

 

   

“Bidder” refers to BD Stockholm AB, a Swedish limited liability company;

 

   

“Borse Dubai” refers to Borse Dubai Limited, a Dubai company;

 

   

“Borse Dubai Option Agreements” refers to those agreements between Borse Dubai and various counter-parties pursuant to which Borse Dubai has the option to purchase 24.2% of OMX’s share capital;

 

   

“Borse Dubai Offer” refers to the offer by Borse Dubai to acquire all of the outstanding OMX Shares;

 

   

“combined company” refers to Nasdaq after the combination of Nasdaq and OMX, and is also referred to as “The NASDAQ OMX Group, Inc.”;

 

   

“DIFX” refers to the Dubai International Financial Exchange;

 

   

“DIFX Transactions” refers to the transactions contemplated by the DIFX Transaction Agreement;

 

   

“DIFX Transaction Agreement” refers to the agreement among Nasdaq, Borse Dubai and DIFX, dated as of November 15, 2007;

 

   

“DKK”, “Danish Krone” or Danish Kroner” refers to the lawful currency of Denmark;

 

   

“EUR or “Euro” refers to the official currency of the Eurozone;

 

   

“Irrevocable Undertakings” refers to the three Irrevocable Undertakings, each dated as of May 25, 2007, between each of Investor AB, Nordea Bank AB and Magnus Böcker, on the one hand, and Nasdaq, on the other hand;

 

   

“Irrevocable Undertakings Parties” refers to Investor AB, Nordea Bank AB and Magnus Böcker;

 

   

“ISK”, “Icelandic Króna” or “Icelandic Króner” refers to the lawful currency of Iceland;

 

   

“LSE” refers to the London Stock Exchange Group plc, an English company;

 

   

“Nasdaq” refers to The Nasdaq Stock Market, Inc., a Delaware corporation, and “we,” “us,” “our” and similar phrases refer to Nasdaq (before the completion of the Transactions or the Offer) or the combined company (after the completion of the Transactions or the Offer);

 

   

“Nasdaq Common Stock” refers to Nasdaq’s common stock, par value $0.01 per share;

 

   

“Nasdaq OMX Transaction Agreement” refers to the Transaction Agreement, dated as of May 25, 2007, between Nasdaq and OMX, as modified by the Supplement between Nasdaq and OMX, dated September 20, 2007;

 

   

“Nasdaq Stockholders’ Agreement” refers to the stockholders’ agreement to be entered into among Nasdaq, Borse Dubai and the Trust on the closing date of the Transactions;

 

   

“Nasdaq Voting Notes” refers to, collectively, Nasdaq’s 3.75% Series A convertible notes due 2012 and 3.75% Series B convertible notes due 2012;

 

   

“Nasdaq Voting Securities” refers to, collectively, Nasdaq Common Stock and Nasdaq Voting Notes;

 

   

“Nordic Exchange” means, collectively, the OMX Nordic Exchange Stockholm, the OMX Nordic Exchange Copenhagen, the OMX Nordic Exchange Helsinki, the OMX Nordic Exchange Iceland, the Tallinn Stock Exchange, the Riga Stock Exchange and the Vilnius Stock Exchange;

 

   

“Offer” refers to the offer by Nasdaq to acquire all of the outstanding OMX shares;

 

   

“OMX” refers to OMX AB (publ), a public corporation organized under the laws of Sweden;

 

   

“OMX Shares” refers to shares of OMX;

 

   

“OMX Transaction Agreement” refers to the agreement among Nasdaq, Borse Dubai and the Bidder, dated as of November 15, 2007;

 

   

“Proposal One” refers to the issuance of 60,561,515 shares of Nasdaq Common Stock in connection with the Transactions as set forth in this Proxy Statement;

 

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“Proposal Two” refers to an amendment to Nasdaq’s Restated Certificate of Incorporation to change Nasdaq’s name to “The NASDAQ OMX Group, Inc.” upon completion of the Transactions as set forth in this Proxy Statement;

 

   

“Registration Rights Agreement” refers to the registration rights agreement to be entered into among Nasdaq, Borse Dubai and the Trust on the closing date of the Transactions;

 

   

“S.E.C.” refers to the United States Securities and Exchange Commission;

 

   

“SEK,” “Swedish Krona,” “Krona,” “Swedish Kronor” or “Kronor” refers to the lawful currency of Sweden;

 

   

“September Irrevocable Undertakings” refers to the Irrevocable Undertakings, each dated September 26, 2007, between each of Investor AB (publ), Nordea Bank AB (publ), Olof Stenhammar, Didner & Gerge Fonder AB, Nykredit Realkredit A/S and Magnus Böcker, on the one hand, and Nasdaq and Borse Dubai, on the other hand;

 

   

“Special Meeting” refers to the special meeting of the holders of Nasdaq Voting Securities to which this Proxy Statement relates;

 

   

“Supplement” refers to the supplement agreement between Nasdaq and OMX, dated as of September 20, 2007;

 

   

“Takeover Rules” refers to the OMX Nordic Exchange Stockholm Rules Concerning Public Takeover Bids in the Stock Market (Sw: OMX Nordic Exchange Stockholm AB:s regler rörande offentliga uppköpserbjudanden aktiemarknaden) and the Swedish Securities Council’s (Sw: Aktiemarknadsnämnden) rulings regarding the interpretation and application thereof (including its rulings with respect to the Rules on Public Offers for the Acquisition of Shares issued by the Swedish Industry and Commerce Stock Exchange Committee (Sw: Näringslivets Börskommittés regler om Offentliga erbjudanden om aktieförvärv)), with which Nasdaq and Borse Dubai have, in written undertakings to OMX Nordic Exchange Stockholm AB, agreed to comply;

 

   

“Technology License and Marketing Agreement” refers to the technology license and marketing agreement to be entered between Nasdaq and Borse Dubai on the closing date of the Transactions;

 

   

“The NASDAQ Stock Market” refers to The NASDAQ Stock Market LLC, a wholly-owned subsidiary of Nasdaq;

 

   

“Trademark License Agreement” refers to the trademark license agreement to be entered between Nasdaq and DIFX on the closing date of the Transactions;

 

   

“Transactions” refers to the transactions contemplated by the OMX Transaction Agreement and the DIFX Transaction Agreement;

 

   

“Trust” refers to the trust established to hold certain shares of Nasdaq Common Stock to be issued in connection with the Transactions;

 

   

“Trust Agreement” refers to the trust agreement to be entered into among Nasdaq, Borse Dubai and the Trust on the closing date of the Transactions;

 

   

“USD”, “$,” “U.S. dollars” or “U.S. $” refers to the lawful currency of the United States of America; and

 

   

“Voting Agreement Parties” refers to affiliates of Hellman & Friedman LLC, affiliates of Silver Lake Partners and Nasdaq’s Chief Executive Officer, Robert Greifeld.

QUESTIONS AND ANSWERS

Questions and Answers About the Nasdaq Special Meeting

What is the proposed transaction to which this Proxy Statement relates?

This Proxy Statement relates to the proposed combination of Nasdaq with OMX and the proposed investment by Borse Dubai in Nasdaq. In order to consummate the Transactions, Nasdaq must secure the

 

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approval of the holders of Nasdaq Voting Securities for Proposal One. We are also seeking the approval of holders of Nasdaq Voting Securities for Proposal Two, an amendment to our Restated Certificate of Incorporation to change our name to “The NASDAQ OMX Group, Inc.” upon our acquisition of OMX.

Why are holders of Nasdaq Voting Securities being asked to approve Proposal One and Proposal Two?

We are seeking shareholder approval to issue 60,561,515 shares of Nasdaq Common Stock as part of consideration for the Transactions. These shares represent approximately 28% of the Nasdaq Common Stock outstanding after completion of the Transactions (calculated on a fully diluted basis using the treasury method). The NASDAQ Stock Market rules require the approval of holders of Nasdaq Voting Securities prior to the issuance of additional shares of Nasdaq Common Stock in any transaction if, among other things, the issuance is in connection with certain acquisitions or the issuance could result in a change of control, the number of shares of common stock to be issued is, or will be upon issuance, in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock or of securities convertible into or exercisable for common stock and the price is less than the greater of book or market value.

Therefore, your approval of Proposal One is required to complete the Transactions.

In addition, as part of our separate agreement with OMX, we have committed to seek the vote of holders of Nasdaq Voting Securities to approve a change in our corporate name to “The NASDAQ OMX Group, Inc.” upon completion of our acquisition of OMX to better reflect the combined company’s expanded global reach. The approval of Proposal Two is not required, however, to complete the Transactions.

Will you complete both the Transactions and the Offer?

No. We and Borse Dubai are working together to satisfy the conditions necessary to enable us to acquire OMX through the Transactions. However, if these conditions cannot be met, we and Borse Dubai generally have the right to pursue separate offers for OMX—which, in our case, means we could continue the Offer. We have agreed with Borse Dubai not to open the Offer for acceptances unless the conditions to the Transactions cannot be met. Following the satisfaction of certain of the conditions to the Transactions, we will immediately withdraw and terminate the Offer. In the event that we terminate our agreements with Borse Dubai and we are unable to consummate the Transactions, we intend to proceed with the Offer. However, given that the consideration in the Borse Dubai Offer is SEK 265 per OMX Share in cash, and the implied value of the consideration in the Offer is SEK 227 per OMX Share as of November 16, 2007, if we and Borse Dubai pursue separate offers, we may have to increase the consideration in the Offer in order to be successful.

When and where will the Special Meeting be held and what business will occur at the meeting?

The Special Meeting will be held at One Liberty Plaza, New York, New York 10006, on December 12, 2007, at 9:00 a.m., local time. At the Special Meeting, holders of Nasdaq Voting Securities will consider and vote upon Proposal One and Proposal Two. You do not need to be present at the Special Meeting to have your vote counted. By utilizing any one of the various voting procedures described in this Proxy Statement prior to the date of the Special Meeting, your vote will be counted and included in the final results.

How does Nasdaq’s Board of Directors recommend that holders of Nasdaq Voting Securities vote with respect to the proposals?

Nasdaq’s Board of Directors recommends a vote “for” approval of Proposal One and Proposal Two. Please see the sections entitled “Proposals to be Considered and Voted Upon by Holders of Nasdaq Voting Securities at the Special Meeting—Proposal One” and “Proposals to be Considered and Voted Upon by Holders of Nasdaq Voting Securities at the Special Meeting—Proposal Two.”

 

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Why is it important for holders of Nasdaq Voting Securities to vote?

Pursuant to our agreement with Borse Dubai, the Borse Dubai Offer will not be opened for acceptances until a number of conditions are met, including the receipt of regulatory approvals and your approval of Proposal One. We and Borse Dubai are working together to satisfy these conditions and to enable us to acquire OMX through the Transactions.

We cannot complete the Transactions unless Proposal One is approved by the affirmative vote of at least a majority of the votes present in person or represented by proxy at the Special Meeting and entitled to vote thereon.

Who may vote at the Special Meeting?

Only holders of record listed on the books of Nasdaq at the close of business on October 29, 2007, which we refer to as the Record Date, of the following Nasdaq securities will be entitled to notice of, and to vote at, the Special Meeting:

 

   

Nasdaq Common Stock; and

 

   

Nasdaq Voting Notes.

As of the Record Date, there were outstanding 114,523,533 shares of Nasdaq Common Stock (including shares of restricted Nasdaq Common Stock entitled to vote at the Special Meeting). As of the Record Date, the Nasdaq Voting Notes were convertible into 30,689,655 shares of Nasdaq Common Stock.

Are there different voting procedures depending on how I hold my Nasdaq Voting Securities?

Many holders of Nasdaq Voting Securities hold their Nasdaq Voting Securities through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between Nasdaq Voting Securities held of record and those owned beneficially.

Holder of Record

If your Nasdaq Voting Securities are registered directly in your name with Nasdaq’s transfer agent, Mellon Investor Services, you are considered, with respect to those Nasdaq Voting Securities, the holder of record, and these proxy materials are being sent directly to you by Nasdaq. As the holder of record, you have the right to grant your voting proxy directly to Nasdaq or to vote in person at the Special Meeting. Nasdaq has enclosed a proxy card for you to use.

Beneficial Owner

If your Nasdaq Voting Securities are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of securities held in street name, and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those securities, the holder of record. As the beneficial owner, you have the right to direct your broker on how to vote and are also invited to attend the Special Meeting. Your broker or nominee has enclosed a voting instruction card for you to use in directing the broker or nominee regarding how to vote your securities. The voting instruction card provides various alternative voting methods, such as via the Internet, by telephone or by mail.

How many votes may a holder of Nasdaq Voting Securities cast?

Each share of Nasdaq Common Stock has one vote, subject to the voting limitation in our Restated Certificate of Incorporation that generally prohibits a holder from voting in excess of 5% of the total voting power of Nasdaq. The holder of each Voting Note is entitled to the number of votes equal to the number of shares of Nasdaq Common Stock into which that Voting Note could be converted on the Record Date, subject to

 

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the 5% voting limitation contained in our Restated Certificate of Incorporation. The enclosed proxy card shows the number of Nasdaq Voting Securities that you are entitled to vote. Your individual vote is confidential and will not be disclosed to third parties.

How can I vote my securities in person at the Special Meeting?

Securities held directly in your name as the holder of record may be voted in person at the Special Meeting. If you choose to do so, please bring the enclosed proxy card and proof of identification. Even if you plan to attend the Special Meeting, we recommend that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend the Special Meeting. Securities held in street name may be voted in person by you only if you obtain a letter from the record holder giving you the right to vote the securities in person.

How can I vote my Nasdaq Voting Securities without attending the Special Meeting?

Whether you hold securities directly as the holder of record or beneficially in street name, you may direct your vote without attending the Special Meeting. You may vote your directly held securities by granting a proxy or, for securities held in street name, by submitting voting instructions to your broker, bank or nominee following the instructions on the form included with this package by the deadline indicated on that form.

What vote is required to approve each item?

In order to conduct business at the Special Meeting, a quorum must be present. The presence of the holders of at least a majority (greater than 50%) of the votes entitled to be cast by holders of the Nasdaq Voting Securities constitutes a quorum. We will treat Nasdaq Voting Securities represented by a properly signed and returned proxy, including abstentions and broker non-votes, as present at the Special Meeting for the purposes of determining the existence of a quorum. If a quorum is not present, it is expected that the Special Meeting will be adjourned or postponed to solicit additional proxies.

Approval of Proposal One requires the affirmative vote of at least a majority of the votes present in person or represented by proxy at the Special Meeting and entitled to vote thereon.

Approval of Proposal Two requires the affirmative vote of at least a majority of our outstanding voting power.

What does it mean if I receive more than one proxy or voting instruction card?

It means that your securities are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.

May I change my vote after I have given it?

You may change your proxy instructions and your vote at any time prior to the vote at the Special Meeting. For securities held directly in your name, you may accomplish this by granting a new proxy bearing a later date, which automatically revokes the earlier proxy, and delivering such new proxy to the Secretary of Nasdaq either by mail or by calling the phone number, or accessing the Internet address, listed on the proxy card or by attending the Special Meeting and voting in person. Attendance at the Special Meeting will not cause your previously granted proxy to be revoked unless you specifically request to do so. For securities held beneficially by you, you may accomplish this by submitting new voting instructions to your broker, bank or nominee by the deadline indicated in the instructions sent to you by your broker, bank or nominee.

Who bears the cost of soliciting proxies?

We will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in

 

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person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. We have retained the services of Mellon Investor Services LLC to aid in the solicitation of proxies from banks, brokers, nominees and intermediaries. We estimate that we will pay Mellon Investor Services LLC a fee of $12,500 for its services, plus out of pocket expenses. We will also, upon request, reimburse brokerage firms and other persons representing beneficial owners of Nasdaq Voting Securities for their expenses in forwarding solicitation materials to such beneficial owners.

How are votes counted?

For both proposals, you may vote “for,” “against” or “abstain.” If you “abstain,” it has the same effect as a vote “against” both of Proposal One and Proposal Two. If you do not sign and send in your proxy card, do not vote using the telephone or Internet, or do not vote at the Special Meeting, it will have no effect on the vote needed for Proposal One, assuming that there is a quorum, but it will have the effect of a vote “against” Proposal Two. If you sign your proxy card or broker voting instruction card with no further instructions, your Nasdaq Voting Securities will be voted in accordance with the recommendations of the Board of Directors described in this proxy. Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of Nasdaq’s Board of Directors. With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by Nasdaq’s Board of Directors or, if no recommendation is given, in their own discretion.

If my securities are held in “Street Name” by my broker, will my broker vote my Nasdaq Voting Securities for me?

Included with this package, you should have received from your broker a voting instruction card with instructions on how to vote your securities and how to provide instructions to your broker on how you want your securities voted. If you have any questions regarding the procedures necessary for your broker to vote your securities, you should contact your broker directly. Please instruct your broker as to how you would like him or her to vote your securities following the procedures on the instruction card.

What are “Broker non-votes”?

Broker non-votes are securities held by banks, brokers or nominees for which, with respect to any item to be voted upon, voting instructions have not been received from the beneficial owners or the persons entitled to vote those securities and with respect to which the bank, broker or nominee does not have discretionary voting power under rules applicable to broker-dealers. Broker non-votes, if any, will have no effect on the vote on Proposal One, assuming that there is a quorum, but will have the effect of a vote “against” Proposal Two.

What do holders of Nasdaq Voting Securities need to do now?

After carefully reading and considering the information contained in this Proxy Statement, you should either complete, sign and date your proxy card and voting instructions and return them in the enclosed postage-paid envelope, vote by phone or by the Internet as provided for on the voting instruction card included in this package, or vote in person at the Special Meeting. You can simplify your voting and save Nasdaq expense by either voting via the Internet or calling the toll-free number listed on the proxy card. Please vote your securities as soon as possible so that your securities will be represented at the Special Meeting.

Where can I find the voting results of the Special Meeting?

We may be able to announce preliminary voting results at the Special Meeting and we may issue a press release with the final results after the Special Meeting is completed. In addition, we intend to publish the final results in our annual report on Form 10-K for the fiscal year ended December 31, 2007.

 

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What will happen if Proposal One or Proposal Two is not approved?

If Proposal One is not approved, we cannot complete the Transactions, including the acquisition of OMX from Borse Dubai. If Proposal Two is not approved, the Transactions may proceed, but Nasdaq is obligated under the terms of its agreement with OMX to take such actions as reasonably requested by OMX to ensure that Nasdaq Common Stock trades under the name “The NASDAQ OMX Group” following the acquisition of OMX.

Are there risks associated with the Transactions that holders of Nasdaq Voting Securities should be aware of?

Yes. The combined company may not achieve the expected benefits because of the risks and uncertainties discussed in the section entitled “Risk Factors.” In deciding whether to approve Proposal One and Proposal Two, Nasdaq urges you to carefully read and consider the risk factors contained in the section entitled “Risk Factors.”

Who should I contact if I have questions about the Special Meeting?

If you have questions about the Special Meeting, please contact Mellon Investor Services LLC toll-free at 1-866-374-7270.

 

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SUMMARY

This section highlights selected information from this Proxy Statement and may not contain all of the information that is important to you. To better understand the proposed transactions, you should read this entire Proxy Statement carefully, as well as those additional documents to which we refer you. You may obtain more information by following the instructions in the section entitled “Where You Can Find More Information” on page 177. We have included page references to direct you to more complete descriptions of the topics presented in this summary.

The Nasdaq Stock Market, Inc.

We are a holding company that operates The NASDAQ Stock Market as a wholly-owned subsidiary and operates certain other related businesses through other subsidiaries. We became a holding company on August 1, 2006 when The NASDAQ Stock Market commenced operations as a registered national securities exchange for Nasdaq-listed securities.

We, through our subsidiaries, are a leading provider of securities listing, trading, and information products and services. Our revenue sources are diverse and include revenues from transaction services, market data products and services, listing fees, insurance products, shareholder and newswire services and financial products. The NASDAQ Stock Market is the largest electronic equity securities market in the United States, both in terms of number of listed companies and traded share volume. As of September 30, 2007, The NASDAQ Stock Market was home to over 3,100 listed companies with a combined market capitalization of over $4.7 trillion. We also operate, through The NASDAQ Stock Market, The Nasdaq Market Center, which provides our market participants with the ability to access, process, display and integrate orders and quotes in The NASDAQ Stock Market and other national securities exchanges in the United States. Transactions involving 550.9 billion equity securities were executed on or reported to our systems in the first nine months of 2007, 27.7% higher than the same period in 2006.

For the nine months ended September 30, 2007, based on financial statements prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, Nasdaq generated $1,772.1 million in total revenues and $439.4 million in net income.

Nasdaq Common Stock is listed on The Nasdaq Global Select Market under the symbol “NDAQ.” We maintain our principal executive offices at One Liberty Plaza, New York, New York 10006. Our telephone number is (212) 401-8700, and our Internet address is www.nasdaq.com. Information contained on our website does not constitute part of this Proxy Statement.

OMX AB (publ) (Page 89)

OMX owns and operates exchanges in Sweden, Finland, Denmark, Iceland, Estonia, Latvia and Lithuania and provides technology solutions to exchanges and other marketplaces. OMX was established as OM Gruppen AB in 1984 in Stockholm, Sweden and today over 800 companies are traded on the Nordic Exchange (including its alternative market, First North). OMX’s technology solutions enable efficient securities transactions for more than 60 marketplaces in over 50 countries.

OMX operates in three business areas: Nordic Marketplaces, Information Services & New Markets and Market Technology. The Nordic Marketplaces business area constituted approximately 46% of OMX’s revenues for the year ended December 31, 2006 (calculated based on the revenues for the business area in question divided by the sum of revenues for all three business areas) and comprises OMX’s exchange operations in Sweden, Finland, Denmark and Iceland. The Information Services & New Markets business area constituted approximately 20% of OMX’s revenues for the year ended December 31, 2006 and comprises OMX’s

 

 

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information services, its exchanges and central securities depositories, which we refer to as CSDs, in the Baltic States and its business unit Broker Services. The Market Technology business area constituted approximately 34% of OMX’s revenues for the year ended December 31, 2006 and comprises the delivery of technology and services to marketplaces throughout the world.

For the nine months ended September 30, 2007, based on financial statements prepared in accordance with International Financial Reporting Standards, which we refer to as IFRS, OMX generated SEK 3,021 million in revenues and SEK 841 million in net profit from continuing operations.

OMX Shares are listed on the Nordic Exchange under the symbol “OMX.” The address of OMX’s registered office is SE-105 78, Stockholm, Sweden, and its telephone number is +46 8 405 60 00. Its website is www.omxgroup.com. Information contained on OMX’s website does not constitute part of this Proxy Statement.

Borse Dubai Limited and BD Stockholm AB

Borse Dubai was incorporated on August 7, 2007 in the Dubai International Financial Centre, which we refer to as the DIFC, and is registered with the DIFC Registrar of Companies with registered number CL0447. Borse Dubai is 60% owned by the Investment Corporation of Dubai, 20% by Dubai Group LLC (a member of the Dubai Holding Group) and 20% by DIFC Investments LLC. Borse Dubai’s sole business purpose is to act as a holding company for investments in stock exchanges, including the Dubai Financial Market and the Dubai International Financial Exchange.

Borse Dubai’s stock is not publicly listed on any securities market. The address of Borse Dubai’s registered office is Level 14, The Gate, Dubai International Financial Centre, PO Box 74777, Dubai, UAE, and its telephone number is +9714 330 0707. Its website is www.borsedubai.ae. Information contained on Borse Dubai’s website does not constitute part of this Proxy Statement.

BD Stockholm AB is a wholly-owned Swedish subsidiary of Borse Dubai. BD Stockholm AB is a limited liability Swedish company with corporate registration number 556732-9940. The company was established on May 22, 2007 under the name Goldcup D 3097 AB and registered with the Swedish Companies Registration Office (Sw: Bolagsverket) on July 2, 2007. BD Stockholm AB has never conducted and at present does not conduct any business and its sole purpose is to make the Borse Dubai Offer and take all actions to finance and complete the Borse Dubai Offer.

Why You are Receiving this Proxy Statement

In order to complete the Transactions, at the Special Meeting to be held on December 12, 2007, holders of Nasdaq Voting Securities must approve Proposal One and will also be asked to approve Proposal Two.

Nasdaq’s Reasons for the Transactions (Page 51)

Based on the reasons for the Transactions described in this Proxy Statement, Nasdaq’s Board of Directors has unanimously recommended that holders of Nasdaq Voting Securities vote “for” Proposal One and Proposal Two.

The Borse Dubai Offer and the OMX Transaction Agreement (Page 73)

We, Borse Dubai and the Bidder entered into the OMX Transaction Agreement, which sets forth the general terms and conditions of the transactions involving OMX. Pursuant to the Transactions, Borse Dubai will conduct the Borse Dubai Offer and, once the Borse Dubai Offer is complete, will sell the OMX Shares acquired in the Borse Dubai Offer or otherwise owned by Borse Dubai or its subsidiaries (including pursuant to the Borse Dubai Option Agreements) to Nasdaq in exchange for up to SEK 12,582,952,842 in cash ($2.0 billion as of November 16, 2007) (which amount will be decreased by SEK 265 for every OMX Share not acquired by Borse Dubai in connection with the Borse Dubai Offer), and 60,561,515 shares of Nasdaq Common Stock. As of September 26,

 

 

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2007, the day the Transactions were announced, and as of November 16, 2007, the last practicable date before the date of this Proxy Statement, the total consideration to be paid to Borse Dubai pursuant to the Transactions was $4.2 billion (SEK 27.3 billion) and $4.5 billion (SEK 28.6 billion), respectively (based on Nasdaq’s closing stock price and the SEK/USD exchange rate on those dates), which implies a per-OMX Share price of SEK 227 ($34.83) and SEK 237 ($37.56), respectively (assuming all OMX Shares are acquired by Borse Dubai in connection with the Borse Dubai Offer). As of November 16, 2007, the last practicable date before the date of this Proxy Statement, the implied value of the consideration in the Offer was SEK 227 per OMX Share ($35.98) and SEK 27.4 billion ($4.3 billion) in the aggregate.

At the close of the Transactions, Borse Dubai will be issued shares of Nasdaq Common Stock representing 19.99% of our fully diluted outstanding share capital (approximately 42.7 million shares), and the balance of the 60,561,515 shares of Nasdaq Common Stock issued in the Transactions will be held in the Trust for Borse Dubai’s economic benefit until disposed of by the Trust. For as long as the Trust continues to hold any shares of Nasdaq Common Stock, Borse Dubai has agreed to use its reasonable best efforts to cause the Trust to dispose of its Nasdaq Common Stock. However, Borse Dubai has no obligation to cause the Trust to dispose of any shares of Nasdaq Common Stock if the net amount that the Trust would receive from any sale of such shares is less than $49.20, the agreed-upon floor price, which is equal to the implied price per share of Nasdaq Common Stock paid by Borse Dubai in the Transactions. This implied share price is subject to adjustment based upon the SEK/USD exchange rate at the closing of the Transactions, and upward adjustment based upon certain reasonable expenses of the Trust and a 6% cost of capital, and downward adjustment for any distributions made by Nasdaq.

Pursuant to the OMX Transaction Agreement, the Borse Dubai Offer will not be opened for acceptances until a number of conditions are met. We and Borse Dubai are working together to satisfy these conditions and to enable us to acquire OMX through the Transactions. However, if these conditions cannot be met, we and Borse Dubai generally have the right to pursue separate offers for OMX—which, in our case, means we could continue our previously announced cash and stock offer for OMX. We have agreed with Borse Dubai not to open the Offer for acceptances unless the conditions to the Transactions cannot be met.

At the closing of the Transactions, we and Borse Dubai will enter into the Nasdaq Stockholders’ Agreement, we, Borse Dubai and the Trust will enter into the Registration Rights Agreement and we, Borse Dubai and the trustee of the Trust will enter into the Trust Agreement.

In connection with the Transactions, certain OMX stockholders have executed the September Irrevocable Undertakings in favor of Borse Dubai and assignable to Nasdaq, pursuant to which such OMX stockholders have agreed, among other things, to tender their shares in and support the Borse Dubai Offer, as long as there is not a competing offer equal to or for more than SEK 303 per OMX Share outstanding.

The parties to the September Irrevocable Undertakings beneficially own 19.3% of the outstanding OMX Shares, and the number of OMX Shares either owned by Borse Dubai, or subject to the Borse Dubai Option Agreements, constitutes 29.1% of the outstanding OMX Shares. The minimum condition for Borse Dubai’s obligations under the Borse Dubai Offer is that 50% plus one of the outstanding OMX Shares have been tendered in the Borse Dubai Offer or are otherwise owned by Borse Dubai or any of its subsidiaries or subject to the Borse Dubai Option Agreements. However, unless Borse Dubai acquires more than 67% of the outstanding OMX shares in the Borse Dubai Offer, we will require a waiver under our credit facilities in order to acquire those OMX Shares from Borse Dubai.

The DIFX Transaction (Page 79)

We, Borse Dubai and DIFX have also entered into the DIFX Transaction Agreement, which provides that in exchange for a contribution of $50 million in cash to DIFX and the entry into certain technology and trademark

 

 

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licensing agreements, we will acquire 33 1/3% of the equity of DIFX. We will also be responsible for 50% of any additional capital contribution calls made by DIFX, subject to a maximum aggregate additional commitment by us of up to $25 million. Closing of the transactions contemplated by the DIFX Transaction Agreement is conditioned upon the concurrent closing of the transactions contemplated by the OMX Transaction Agreement. No vote of holders of Nasdaq Voting Securities is required to complete the DIFX Transactions. At the closing of the transactions contemplated by the DIFX Transaction Agreement, we, Borse Dubai and DIFX will enter into the DIFX Stockholders’ Agreement, we and DIFX will enter into the Trademark License Agreement and we and Borse Dubai will enter into the Technology License and Marketing Agreement.

The LSE Transaction

On September 25, 2007, we, through our wholly-owned subsidiary Nightingale Acquisition Limited, which we refer to as Nightingale, completed the sale of shares at that time representing 28% of the share capital of the LSE to Borse Dubai for approximately $1.6 billion in cash, which we refer to as the LSE Transaction. The LSE Transaction was separate from the Transactions. In connection with the LSE Transaction, Borse Dubai submitted a signed irrevocable binding offer to acquire those LSE shares from Nightingale prior to Nasdaq and Borse Dubai agreeing to the terms of the Transactions. On September 28, 2007, we used approximately $1.1 billion of the proceeds from the LSE Transaction to repay in full and terminate certain of our credit facilities. On September 26, 2007, Nightingale sold the substantial balance of its holdings in LSE in open market transactions for approximately $190 million. No vote of holders of Nasdaq Voting Securities was required to complete the LSE Transaction.

Post Closing Organization

The following depicts the ownership structure of the various companies following consummation of the Transactions, assuming all OMX Shares are acquired by Borse Dubai in connection with the Borse Dubai Offer and Borse Dubai retains its current ownership interest in LSE:

LOGO

Approval by Holders of Nasdaq Voting Securities (Page 41)

Approval of Proposal One requires the affirmative vote of at least a majority of the votes present in person or represented by proxy at the Special Meeting and entitled to vote thereon. Approval of Proposal Two requires the affirmative vote of at least a majority of our outstanding voting power.

 

 

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At the close of business on the Record Date, directors and executive officers of Nasdaq and their affiliates beneficially owned and were entitled to vote approximately 2.4% of the 145,213,188 votes attributable to Nasdaq Voting Securities outstanding on that date, and these individuals have indicated that they intend to vote “for” Proposal One and Proposal Two. As a result, an additional 47.6% of Nasdaq Voting Securities would need to be voted in favor of Proposal One and Proposal Two, respectively, in order to approve those proposals.

Opinion of Financial Advisor (Page 56)

At a meeting of Nasdaq’s Board of Directors on September 23, 2007, J.P. Morgan Securities Inc., which we refer to as JPMorgan, rendered its oral opinion to Nasdaq’s Board of Directors that, as of that date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid by Nasdaq in the Acquisition was fair, from a financial point of view, to Nasdaq. JPMorgan confirmed its oral opinion by delivering to Nasdaq’s Board of Directors a written opinion dated September 23, 2007. The full text of the written opinion of JPMorgan, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by JPMorgan in connection with its opinion, is attached to this Proxy Statement as Annex F and is incorporated in this Proxy Statement by reference. Holders of Nasdaq Voting Securities should read this opinion carefully and in its entirety. JPMorgan’s opinion is directed to Nasdaq’s Board of Directors and addresses only the fairness, from a financial point of view, of the consideration to be paid by Nasdaq in the Acquisition. JPMorgan’s opinion does not address the underlying decision by Nasdaq to enter into the Acquisition or any of the other Transactions and is not a recommendation as to how any holder of Nasdaq Voting Securities should vote with respect to the Acquisition or any of the other Transactions or any other matter.

Pursuant to its engagement letter with JPMorgan, Nasdaq has agreed to pay JPMorgan a fee of $15,000,000, of which 20% has been paid with the remainder due if and when the Transactions are completed.

Risk Factors (Page 23)

In deciding how to vote your Nasdaq Voting Securities on the matters described in this Proxy Statement, you should carefully consider the risks related to the Transactions and Nasdaq’s and OMX’s businesses.

Regulatory Matters (Page 67)

Certain approvals from, or filings with, regulatory authorities are required in connection with the Transactions (but not with respect to the LSE Transaction).

Appraisal Rights (Page 65)

Under Delaware law and Nasdaq’s Restated Certificate of Incorporation, holders of Nasdaq Voting Securities are not entitled to any rights to seek appraisal of their securities or to exercise any preemptive rights in connection with the proposals to issue shares of Nasdaq Common Stock in connection with the Transactions or the LSE Transaction.

Directors and Management of the Combined Company Following the Completion of the Transactions (Page 87)

Following completion of the Transactions, Nasdaq’s Chief Executive Officer (currently Robert Greifeld) will serve as Chief Executive Officer of the combined company and OMX’s Chief Executive Officer (currently Magnus Böcker) will serve as President of the combined company. The combined company’s Board of Directors will consist of sixteen directors, comprised of (i) nine individuals from (or nominated by) Nasdaq’s Board of Directors as of immediately prior to the completion of the Transactions, (ii) Nasdaq’s Chief Executive Officer, (iii) four individuals from (or proposed for nomination by) OMX’s Board of Directors as of immediately prior to the completion of the Transactions and (v) two individuals proposed for nomination by Borse Dubai.

 

 

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Background Information About the Offer

On May 25, 2007, we and OMX announced the Offer.

We and OMX have entered into the Nasdaq OMX Transaction Agreement, as amended by the Supplement, which sets forth the terms and conditions of the Offer, as well as the composition of the board of directors and management team for the combined company. The Nasdaq OMX Transaction Agreement also contains certain prohibitions against the solicitation or entertainment of competing proposals on the part of both Nasdaq and OMX. Although we now intend to acquire OMX through the OMX Transaction Agreement, our agreements with OMX that were originally entered into as part of the Offer still control our relationship with OMX in certain respects.

On September 20, 2007, we and Borse Dubai announced the Transactions. Pursuant to our agreement with Borse Dubai, the Borse Dubai Offer will not be opened for acceptances until a number of conditions are met, including the receipt of regulatory approvals and approval of Proposal One. We and Borse Dubai are working together to satisfy these conditions and to enable us to acquire OMX through the Transactions. However, if these conditions cannot be met, we and Borse Dubai generally have the right to pursue separate offers for OMX—which, in our case, means we could continue the Offer. We have agreed with Borse Dubai not to open the Offer for acceptances unless the conditions to the Transactions cannot be met. However, given the consideration in the Borse Dubai Offer is SEK 265 per OMX Share in cash, and the implied value of the consideration in the Offer is SEK 227 per OMX Share as of November 16, 2007, if we and Borse Dubai pursue separate offers, we may have to increase the consideration in the Offer in order to be successful.

 

 

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SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION OF NASDAQ

The following table sets forth summary selected historical consolidated financial data of Nasdaq, which should be read in conjunction with the consolidated financial statements of Nasdaq and the notes thereto and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as part of Nasdaq’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006. The financial data for the five years ended December 31, 2006 has been derived from the audited consolidated financial statements of Nasdaq. The financial data as of and for the nine months ended September 30, 2007 and 2006 has been derived from the unaudited condensed consolidated financial statements of Nasdaq included as part of Nasdaq’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007. In the opinion of Nasdaq’s management, the unaudited information has been prepared on substantially the same basis as the consolidated financial statements appearing elsewhere in this Proxy Statement and includes all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the unaudited consolidated data for the nine months ended September 30, 2007 and 2006. The historical financial and operating information may not be indicative of our future performance.

 

    Year Ended December 31,     Nine Months Ended
September 30,
 
    2006     2005     2004     2003     2002     2007     2006  
    (in thousands, except share and per share amounts)     (unaudited)  

Statements of Income:

             

Total revenues(1)

  $ 1,657,776     $ 879,919     $ 540,441     $ 589,845     $ 787,154     $ 1,772,106     $ 1,210,336  

Cost of revenues(1)

    (970,381 )     (353,908 )     (55,845 )     —         —         (1,171,417 )     (705,991 )
                                                       

Revenues less liquidity rebates, brokerage, clearance and exchange fees

    687,395       526,011       484,596       589,845       787,154       600,689       504,345  

Total expenses

    473,306       412,348       476,413       647,159       675,307       336,541       358,347  

Net income (loss) from continuing operations

    127,893       61,690       1,804       (45,112 )     65,021       439,438       64,858  

Net income (loss) from discontinued operations, net of taxes(2)

    —         —         9,558       (60,335 )     (21,893 )     —         —    

Net income (loss)

    127,893       61,690       11,362       (105,447 )     43,128      
439,438
 
    64,858  

Net income (loss) applicable to common shareholders

    127,203       55,093       (1,826 )     (113,726 )     33,363      
439,438
 
    64,168  

Basic and diluted earnings (loss) per share:

             

Basic earnings (loss) per share:

             

Continuing operations

  $ 1.22     $ 0.68     $ (0.14 )   $ (0.68 )   $ 0.66     $ 3.90     $ 0.63  

Discontinued operations

    —         —         0.12       (0.77 )     (0.26 )     —         —    
                                                       

Total basic earnings (loss) per share

  $ 1.22     $ 0.68     $ (0.02 )   $ (1.45 )   $ 0.40     $ 3.90     $ 0.63  
                                                       

Diluted earnings (loss) per share:

             

Continuing operations

  $ 0.95     $ 0.57     $ (0.14 )   $ (0.68 )   $ 0.66     $ 2.94     $ 0.51  

Discontinued operations

    —         —         0.12       (0.77 )     (0.26 )     —         —    
                                                       

Total diluted earnings (loss) per share

  $ 0.95     $ 0.57     $ (0.02 )   $ (1.45 )   $ 0.40     $ 2.94     $ 0.51  
                                                       

Weighted average common shares outstanding for earnings (loss) per share:

             

Basic

    104,311,040       80,543,397       78,607,126       78,378,376       83,650,478       112,788,486       101,687,006  

Diluted

    144,228,855       111,913,715       78,607,126       78,378,376       84,073,381       151,902,689       141,724,642  
    December 31,     September 30,  
    2006     2005     2004     2003     2002     2007     2006  
    (in thousands)     (unaudited)  

Balance Sheets:

             

Cash and cash equivalents and available-for-sale investments(3)

  $ 1,950,204     $ 344,606     $ 233,099     $ 334,633     $ 423,588     $ 1,267,863     $ 1,860,371  

Total assets(4)

    3,716,452       2,046,786       814,820       851,254       1,175,914       3,000,018       3,542,395  

Total long-term liabilities(4)

    1,798,466       1,467,453       449,941       452,927       636,210       694,471       1,874,922  

Total shareholders’ equity(4)

    1,457,355       253,007       156,563       160,696       270,872       1,780,717       1,317,462  

(1)

Pursuant to Emerging Issues Task Force, which we refer to as EITF, of the Financial Accounting Standards Board, which we refer to as FASB, Issue No. 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent,” which we refer to as EITF 99-19, we record

 

 

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execution revenues from transactions on a gross basis in revenues and record related expenses such as liquidity rebate payments and execution costs as cost of revenues. We have recorded execution revenues related to the Brut and INET platforms on a gross basis since the related acquisitions, as Brut and INET have historically had risk as principal on transactions executed through their respective platforms. On February 1, 2006, Brut and INET merged together into a single broker-dealer, Brut, LLC, which was later renamed, Nasdaq Execution Services, LLC. Starting with the second quarter of 2005, we have reported execution revenues from transactions on our legacy platform on a gross basis in revenues and reported related expenses as cost of revenues, as we have certain risk associated with trade execution, subject to rule limitations and caps, as a result of our Limitation of Liability Rule, pursuant to which we may provide compensation for losses due to malfunctions of our order-execution systems. This change in presentation was implemented on a prospective basis beginning April 1, 2005 as required under U.S. GAAP as a direct result of the rule change. This rule change did not have a material impact on the consolidated financial position or results of operations of Nasdaq.

 

(2)

Net of tax provision (benefit) for income taxes of $5,595 in 2004, $(3,663) in 2003 and $128 in 2002.

 

(3)

At December 31, 2006 and September 30, 2006 cash and cash equivalents and available-for-sale investments include our investment in the LSE, accounted for in accordance with Statement of Financial Accounting Standards, which we refer to as SFAS, No. 115 “Accounting for Certain Investments in Debt and Equity Securities,” which we refer to as SFAS 115, at December 31, 2006. See Note 7, “Investments,” to the consolidated financial statements in our Form 10-K for the year ended December 31, 2006 for further discussion. Unrealized gains and losses, including foreign currency gains, were included in accumulated other comprehensive income until the sale of the shares in September 2007. On September 25, 2007, we completed the sale of shares at that time representing 28.0% of the share capital of the LSE to Borse Dubai for $1.6 billion in cash. We sold the remaining substantial balance of our holdings in the LSE in open market transactions for approximately $193.5 million in cash on September 26, 2007 for total proceeds of $1.8 billion. As a result of the sale, we recognized a $431.4 million pre-tax gain which is net of $18.0 million of costs directly related to the sale, primarily broker fees. On September 28, 2007, we used approximately $1.1 billion of the proceeds from the above transactions to repay in full and terminate our credit facilities. See Note 6, “Debt Obligations,” to the condensed consolidated financial statements in our Form 10-Q for the fiscal quarter ended September 30, 2007 for further discussion.

 

(4)

Includes continuing and discontinued operations for 2003 and 2002.

 

 

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Table of Contents

SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION OF OMX

The following table sets forth summary selected historical consolidated financial data of OMX, which should be read in conjunction with the consolidated financial statements of OMX and the notes thereto and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations of OMX” included in this Proxy Statement. The selected balance sheet data as of December 31, 2005 and 2006 and the selected income statement data for each of the years in the three-year period ended December 31, 2006 have been derived from the audited consolidated financial statements and related notes set forth on pages FIN-17 to FIN-90. The selected balance sheet data as of June 30, 2007 and selected income statement data for the six months ended June 30, 2006 and 2007 have been derived from the unaudited consolidated financial statements and related notes set forth on pages FIN-2 to FIN-15. The selected balance sheet data as of December 31, 2002, 2003 and 2004 and the selected income statement data for each of the years in the two-year period ended December 31, 2003 have been derived from audited consolidated financial statements and related notes not included in this Proxy Statement. The selected balance sheet data as of June 30, 2007 and the operating data for the six months ended June 30, 2006 and 2007 include, in the opinion of OMX’s management, all adjustments considered necessary for a fair statement of such data. The results of operations for the six months ended June 30, 2007 and 2006 are not necessarily indicative of results that may be expected for the entire year, nor is the information below necessarily indicative of OMX’s future performance.

OMX’s consolidated financial statements have been prepared in accordance with IFRS, which differ in certain material respects from U.S. GAAP. For a description of the principal differences between IFRS and U.S. GAAP as they relate to OMX and to its consolidated subsidiaries, and for a reconciliation of OMX’s shareholders’ equity and net income to U.S. GAAP, see Note 36 to the audited consolidated financial statements on pages FIN-84 to FIN-90, and Note 8 to the unaudited interim condensed consolidated financial statements on pages FIN-9 to FIN-15. All financial data for 2003 and 2002 are presented in accordance with Swedish GAAP. U.S. GAAP shareholders’ equity and net income data presented in the following tables has been derived from these Notes. Other U.S. GAAP data presented in the following tables has been derived from unaudited analyses prepared by OMX from its accounting records.

With respect to the unaudited interim financial information for OMX as of June 30, 2007 and 2006 and for the three and six months ended June 30, 2007 and 2006, Rule 3-12 (f) of Regulation S-X indicates that the financial statements of a foreign business to be acquired should be furnished pursuant to Rule 3-05. As OMX is a foreign business, Item 8.A.5 of Form 20-F addresses the age of interim financial statements and indicates that for any filing dated more than nine months after the end of the last audited financial year, such filing should contain consolidated interim financial statements, which may be unaudited, covering at least the first six months of the financial year. Therefore, the interim financial information relating to OMX included in this Proxy Statement includes unaudited interim financial statements as of June 30, 2007 and 2006 and for the three and six months ended June 30, 2007 and 2006. In addition, on pages 14 to 16, OMX has published and made available in the public domain certain interim financial information for the nine months ended September 30, 2007. However, this interim financial information does not represent full interim financial statements nor does it include a reconciliation between IFRS and U.S. GAAP. This current information is included in this Proxy Statement to provide the holders of Nasdaq Voting Securities with this additional information.

 

 

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Table of Contents
    Six months ended
June 30,
    Year ended December 31,  
(IFRS)   2007(1)     2006(1)     2006(1)     2005(1)(8)     2004(1)  
    (in millions of SEK, except per share amounts)  

Results of Operations:

         
Results of Operations from Continuing Operations:          

Revenues

         

Net sales

  1,899     1,643     3,313     2,969     2,576  

Own work capitalized

  79     48     68     125     74  

Other revenues

  101     22     105     —       119  
                             

Total revenues

  2,079     1,713     3,486     3,094     2,769  

Expenses:

         

Premises expenses

  (88 )   (101 )   (204 )   (189 )   (308 )

Marketing expenses

  (31 )   (23 )   (63 )   (40 )   (38 )

Consultancy expenses

  (183 )   (150 )   (310 )   (253 )   (195 )

Operations and maintenance, IT

  (117 )   (102 )   (239 )   (225 )   (254 )

Other external expenses

  (121 )   (78 )   (167 )   (201 )   (302 )

Personal expenses

  (663 )   (548 )   (1,083 )   (1,049 )   (1,017 )

Depreciation and impairment

  (132 )   (106 )   (216 )   (225 )   (228 )

Items effecting comparability(2)

  —       —       —       —       —    
                             

Total expenses

  (1,335 )   (1,108 )   (2,282 )   (2,182 )   (2,342 )
                             
Participation in earnings of associated companies   24     29     46     15     9  

Operating income

  768     634     1,250     927     436  

Financial items:

         

Financial income

  48     19     48     48     40  

Financial expenses

  (77 )   (48 )   (101 )   (112 )   (90 )
                             

Total financial items

  (29 )   (29 )   (53 )   (64 )   (50 )

Income after financial items

  739     605     1,197     863     386  

Tax for the year

  (136 )   (141 )   (240 )   (303 )   (162 )
                             
Net profit from continuing operations for the period   603     464     957     560     224  
                             
Net profit (loss) from discontinuing operations for the period(3)   (39 )   (20 )   (46 )   (17 )   159  
                             
Net profit from continuing and discontinuing operations for the period   564     444     911     543     383  
                             

of which, attributable to shareholders in OMX

  560     442     907     538     382  

of which, attributable to minority interests

  4     2     4     5     1  

Average number of shares, millions

  120.640     118.474     118.671     118.108     115.547  

Number of shares, millions

  120.640     118.474     120.640     118.474     115.547  
Average number of shares after dilution, millions   120.640     118.760     118.886     118.394     115.833  

Number of shares after dilution, millions

  120.640     118.760     120.640     118.760     115.833  

Earnings per share, basic SEK(4)

  4.64     3.73     7.64     4.56     3.31  
Earnings per share from continuing operations, basic SEK(4)   4.97     3.90     8.03     4.70     1.94  

Earnings per share after dilution, SEK(4)

  4.64     3.73     7.64     4.56     3.31  
Earnings per share after dilution from continuing operations, SEK(4)   4.97     3.90     8.03     4.70     1.94  

Proposed dividend per share, SEK(5)

  —       —       6.50     6.50     —    

 

 

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    Year ended
December 31,
 
(Swedish GAAP)   2003(7)(9)     2002(7)  
    (in millions of SEK,
except per share amounts)
 

Results of Operations:

   

Results of Operations from Continuing Operations

   

Revenues:

   

Net sales

  2,469     2,557  

Own work capitalized

  86     80  

Other revenues

  100     —    
           

Total revenues

  2,655     2,637  

Expenses:

   

Premises expenses

  (340 )   (214 )

Marketing expenses

  (42 )   (53 )

Consultancy expenses

  (258 )   (273 )

Operations and maintenance, IT

  (343 )   (244 )

Other external expenses

  (233 )   (231 )

Personal expenses

  (1,406 )   (1,154 )

Depreciation and impairment

  (559 )   (319 )

Items effecting comparability(2)

  —       (57 )
           

Total expenses

  (3,181 )   (2,545 )
           

Participation in earnings of associated companies

  21     38  

Operating income

  (505 )   130  

Financial items:

   

Financial income

  98     115  

Financial expenses

  (128 )   (146 )
           

Total financial items

  (30 )   (31 )

Income (loss) after financial items

  (535 )   99  

Tax for the year

  54     (15 )
           
Net profit (loss) from continuing operations for the period   (481 )   84  
           
Net profit (loss) from discontinuing operations for the period(3)   50     (155 )
           
Net loss from continuing and discontinuing operations for the period   (431 )   (71 )
           

of which, attributable to shareholders of OMX

  (431 )   (71 )

of which, attributable to minority interests

  —       —    

Average number of shares, millions

  99.738     84.041  

Number of shares, millions

  115.547     84.041  

Average number of shares after dilution, millions

  100.644     84.819  

Number of shares after dilution, millions

  116.325     84.819  

Earnings per share, basic SEK(4)

  (4.32 )   (0.84 )

Earnings per share from continuing operations, basic SEK(4)

  (4.82 )   1.00  

Earnings per share after dilution, SEK(4)

  (4.32 )   (0.84 )

Earnings per share after dilution from continuing operations, SEK(4)

  (4.82 )   1.00  

Proposed dividend per share, SEK(5)

  —       —    

 

 

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Table of Contents
    June 30,   December 31,
(IFRS)   2007(1)   2006(1)   2005(1)(8)   2004(1)
    (in millions of SEK)

Balance Sheet:

       

Intangible assets

  4,704   4,350   3,832   2,385

Tangible fixed assets

  303   321   355   366

Financial fixed assets

  729   720   1,094   1,228

Short-term receivables

  8,530   6,139   4,026   1,264

Financial assets available for sale

  481   519   724   705

Cash equivalents

  275   409   519   672

Assets held for sale

  69   70   62   —  

Total current assets

  9,355   7,137   5,331   2,641

Total assets

  15,091   12,528   10,612   6,620
Equity attributable to shareholders in parent company   4,540   4,597   4,735   3,805

Total shareholders’ equity

  4,562   4,614   4,749   3,835

Total long-term liabilities

  1,679   1,643   1,608   808

Total short-term liabilities

  8,850   6,271   4,255   1,977

 

    December 31,
(Swedish GAAP)   2003(7)(9)   2002(7)
    (in millions of SEK)

Balance Sheet:

   

Intangible assets

  2,234   1,247

Tangible fixed assets

  465   475

Financial fixed assets

  968   852

Short-term receivables

  1,209   1,071

Financial assets available for sale

  —     —  

Short-term investments

  1,012   993

Cash equivalents

  350   282

Assets held for sale

  508   —  

Total current assets

  3,079   2,346

Total assets

  6,746   4,920
Equity attributable to shareholders in parent company   3,533   2,017

Total shareholders’ equity

  3,535   2,017

Total long-term liabilities

  827   354

Total short-term liabilities

  2,384   2,549

 

 

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Table of Contents
     Six months ended
June 30,
    Year ended
December 31,
 
(U.S. GAAP)(6)      2007         2006         2006         2005    
     (in millions of SEK, except per share data)  

Results of Operations:

        

Revenues

   1,883     1,635     3,318     2,963  

Operating expenses

   (1,294 )   (1,143 )   (2,294 )   (2,259 )

Operating income

   589     492     1,024     704  

Net income

   528     382     859     390  

Net income from continuing operations

   567     402     905     407  

Net loss from discontinued operations

   (39 )   (20 )   (46 )   (17 )

Net income per share:

        

Basic

   4.38     3.23     7.24     3.30  

Diluted

   4.38     3.22     7.22     3.29  

Net income per share from continuing operations

        

Basic

   4.70     3.40     7.62     3.44  

Diluted

   4.70     3.39     7.61     3.44  

Weighted average shares outstanding (in thousands):

        

Basic

   120,640     118,474     118,671     118,108  

Diluted

   120,640     118,760     118,886     118,394  

Dividends declared per share:

        

Krona

   —       —       6.50     6.50  

US$

   —       —       0.95     0.82  

 

     June 30,    December 31,
(U.S. GAAP)(6)    2007    2006    2005
     (in millions of SEK)

Balance Sheet:

        

Property and equipment

   303    321    355

Intangible assets

   4,504    4,213    3,775

Short-term financial investments / cash and cash equivalents

   756    928    1,243

Total assets

   14,826    12,345    10,480

Current financial liabilities

   598    398    498

Non-current financial liabilities

   1,359    1,360    1,409

Total liabilities

   10,704    8,120    6,097

Shareholders equity

   4,122    4,225    4,383

(1)

Effective January 1, 2005, OMX reports in accordance with IFRS. Restatement of comparison figures was made for 2004 in respect of all standards, except for IAS 39 (Financial instruments), which was applied for the first time in 2005. Furthermore, from January 1, 2006, OMX applies hedge accounting of hedging of internally forecasted flows in foreign currency. Income from cash-flow hedges are reported in shareholders’ equity.

 

(2)

Items affecting comparability amounted to SEK (57) million, which related to expenses incurred, as a result of a group-wide cost-reduction program.

 

(3)

The years 2002 to 2006 have been reclassified for comparison purposes due to the disclosure of discontinued operations, relating to OMX’s UK sales operations in securities administration services.

 

(4)

Earnings per share are calculated on the basis of the weighted average number of shares during the year. The amount is based on OMX’s shareholders’ portion of net profit/loss for the period including or excluding discontinuing operations.

 

(5)

Dividends are set forth in the above table under the year to which they relate. In accordance with general practice in Sweden, the dividends are declared and paid in the year following the financial period.

 

(6)

For further details, see Note 36 in OMX’s audited financial statements. For the periods ending June 30, 2006 and 2007 see Note 8 in OMX’s unaudited interim consolidated financial statements.

 

(7)

The reported figures have been prepared in accordance with Swedish GAAP. Swedish GAAP differs in certain material respects from IFRS and U.S. GAAP.

 

(8)

Copenhagen Stock Exchange was consolidated in OMX from January 1, 2005.

 

(9)

HEX (Finnish exchange organization) was consolidated in OMX from July 1, 2003.

 

 

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Recent Development: 2007 Third Quarter Results

The information presented below was provided by OMX in its unaudited interim report for the three and nine months ended September 30, 2007.

OMX’s unaudited consolidated financial statements have been prepared in accordance with IFRS.

OMX GROUP, CONSOLIDATED

Results of Operations:

 

    

Three months ended September 30,

     2007    2006
     Continuing
operations
   Operations
being dis-
continued
   Total
OMX
   Continuing
operations
   Operations
being dis-
continued(4)
   Total
OMX
    

(in millions of SEK except per share amounts, unaudited)

REVENUE

                 

Net sales

   921    60    981    766    33    799

Own work capitalized(1)

   21    —      21    18    —      18

Other revenue(2)

   —      —      —      —      —      —  

Total revenue

   942    60    1,002    784    33    817

EXPENSES

                 

External expenses

                 

Premises

   -50    -2    -52    -49    -1    -50

Marketing expenses

   -10    —      -10    -9    —      -9

Consultancy expenses

   -85    -2    -87    -76    —      -76

Operations and maintenance,
Information Technology

   -45    -4    -49    -77    -4    -81

Other external expenses

   -53    -30    -83    -32    -14    -46

Personnel expenses

   -315    -32    -347    -250    -22    -272

Depreciation and impairment

   -64    -2    -66    -56    -2    -58

Total expenses

   -622    -72    -694    -549    -43    -592

Participation in earnings of associated companies

   12    —      12    13    —      13

Operating income

   332    -12    320    248    -10    238

Financial items

   -21    -4    -25    -8    -3    -11

Income/loss after financial items

   311    -16    295    240    -13    227

Tax

   -72    0    -72    -56    0    -56

Net income/loss for the period

   239    -16    223    184    -13    171

of which attributable to shareholders in OMX AB

   236    -16    220    183    -13    170

of which attributable to minority interests

   3    —      3    1    —      1

Average number of shares, millions

         120.640          118.474

Number of shares at period end, millions

         120.640          118.474

Average number of shares after full conversion, millions

         120.640          118.760

Number of shares after full conversion at period end, millions

         120.640          118.760

Earnings per share, SEK(3)

   1.96       1.82    1.54       1.43

Earnings per share, SEK after full conversion(3)

   1.96       1.82    1.54       1.43

 

 

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Table of Contents
    

Nine months ended September 30,

     2007    2006
     Continuing
operations
  

Operations
being dis-

continued

   Total
OMX
   Continuing
operations
   Operations
being dis-
continued(4)
   Total
OMX
    

(in millions of SEK except per share amounts, unaudited)

REVENUE

                 

Net sales

   2,820    171    2,991    2,409    88    2,497

Own work capitalized(1)

   100    —      100    66    —      66

Other revenue(2)

   101    —      101    22    —      22

Total revenue

   3,021    171    3,192    2,497    88    2,585

EXPENSES

                 

External expenses

                 

Premises

   -138    -5    -143    -150    -4    -154

Marketing expenses

   -41    —      -41    -32    —      -32

Consultancy expenses

   -268    -6    -274    -226    —      -226

Operations and maintenance, IT

   -162    -8    -170    -179    -14    -193

Other external expenses

   -174    -108    -282    -110    -36    -146

Personnel expenses

   -978    -85    -1,063    -798    -54    -852

Depreciation and impairment

   -196    -6    -202    -162    -6    -168

Total expenses

   -1,957    -218    -2,175    -1,657    -114    -1,771

Participation in earnings of associated companies

   36    —      36    42    —      42

Operating income

   1,100    -47    1,053    882    -26    856

Financial items

   -51    -8    -59    -37    -7    -44

Income/loss after financial items

   1,049    -55    994    845    -33    812

Tax

   -208    0    -208    -197    0    -197

Net income/loss for the period

   841    -55    786    648    -33    615

of which attributable to shareholders in OMX AB

   834    -55    779    645    -33    612

of which attributable to minority interests

   7    —      7    3    —      3

Average number of shares, millions

         120.640          118.474

Number of shares at period end, millions

         120.640          118.474

Average number of shares after full conversion, millions

         120.640          118.760

Number of shares after full conversion at period end, millions

         120.640          118.760

Earnings per share, SEK(3)

   6.91       6.46    5.44       5.17

Earnings per share, SEK after full conversion(3)

   6.91       6.46    5.44       5.17

(1)

Own work invested in assets during the period, which are carried as fixed assets, has been recognized in revenue under the heading “Own work capitalized.” This item refers only to capitalized personnel costs. Personnel costs were not reduced for the work pertaining to capitalized assets, instead the costs are met by reported revenue. Accordingly, revenue recognition of own work capitalized has no impact on results, but has a negative effect on the operating margin.

 

(2)

For the nine months ended September 30, 2007, Other revenue refers to earnings of SEK 101 million attributable to the sale of shares in ORC Software. For the nine months ended September 30, 2006, the item refers to earnings of SEK 22 million attributable to the sale of shares in NOS ASA.

(3)

Earnings per share are calculated on the basis of the weighted average number of shares during the period and is based on OMX AB shareholders’ share of earnings for the period.

 

(4)

The income statement for discontinuing operations has been adjusted compared with interim reports in 2006 as a result of organizational changes where certain parts of the business area have been retained.

 

 

15


Table of Contents

Balance Sheet:

 

    

September 30,

2007
(Unaudited)

  

September 30,

2006
(Unaudited)

  

December 31,

2006

    

(in millions of SEK)

Goodwill

   3,247    3,071    3,140

Other intangible fixed assets

   1,474    1,056    1,210

Tangible fixed assets

   295    306    321

Financial fixed assets, non-interest-bearing

   788    822    699

Financial fixed assets, interest-bearing

   21    84    21

Total fixed assets

   5,825    5,339    5,391

Market value outstanding derivatives positions(3)

   4,803    3,250    4,401

Current receivables(1)(4)

   2,262    1,663    1,738

Financial assets available for sale

   487    789    518

Liquid assets

   243    230    410

Assets held for sale(2)

   67    66    70

Total current assets

   7,862    5,998    7,137

Total assets

   13,687    11,337    12,528

Shareholders’ equity

   4,826    4,501    4,614

Long-term liabilities, non-interest-bearing

   305    298    282

Long-term liabilities, interest-bearing

   1,358    1,413    1,361

Total long-term liabilities

   1,663    1,711    1,643

Market value outstanding derivatives positions(3)

   4,803    3,250    4,401

Current liabilities, non-interest-bearing(4)

   1,860    1,317    1,434

Current liabilities, interest-bearing

   535    558    436

Total current liabilities

   7,198    5,125    6,271

Total shareholders’ equity and liabilities

   13,687    11,337    12,528

In addition to assets and liabilities reported in the balance sheet, OMX has deposits in a client funds account that totaled SEK 2,848 million at September 30, 2007, SEK 2,809 million at September 30, 2006 and SEK 2,604 million at December 31, 2006.

 

(1)

Of which interest-bearing receivables amount to SEK 21 million at September 30, 2007, SEK 19 million at September 30, 2006 and SEK 1 million at December 31, 2006.

 

(2)

Assets held for sale have been adjusted for periods in 2006 compared with interim reports in 2006 as a result of organizational changes where certain parts of the business area have been retained.

 

(3)

Through its clearing operations in the derivatives markets, Nordic Marketplaces is the formal counterparty in all derivatives positions traded via the exchanges. However, the exchanges do not utilize the derivatives for purpose of conducting their own trading, instead these derivatives are to be seen as a method of documenting the counterparty guarantees established in the clearing operations.

 

(4)

Includes current trading accounts in the amount of SEK 838 million at September 30, 2007, SEK 582 million at September 30, 2006 and SEK 650 million at December 31, 2006, mainly arising in the UK operations for the sale of securities administration services, organized under operations being discontinued.

 

 

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EXCHANGE RATE INFORMATION

The following tables show, for the periods indicated, information concerning the exchange rate between the Swedish Krona and the U.S. dollar. The average rates for the monthly periods presented in these tables were calculated by taking the simple average of the daily Euro foreign exchange reference rates at 2:15 p.m. CET, as published by the European Central Bank. The average rates for the interim periods and annual periods presented in these tables were calculated by taking the simple average of the daily Euro foreign exchange reference rates at 2:15 p.m. CET during the relevant period. This information is provided solely for your information, and neither Nasdaq nor OMX represents that Swedish Kronor could be converted into U.S. dollars at these rates or at any other rate. These rates are not the rates used by OMX in the preparation of its consolidated financial statements included in this Proxy Statement. On May 23, 2007, the last full trading day for OMX Shares prior to the announcement of the Offer, the exchange rate was SEK 6.83 to $1.00. On November 16, 2007, the last practicable day before the date of this Proxy Statement, the exchange rate was SEK 6.3195 to $1.00.

 

Recent Monthly Data    Period-end
Rate(1)
   Average
Rate(2)
   High    Low

November 2007 (through November 16, 2007)

   6.3195    6.3447    6.3943    6.2855

October 2007

   6.3813    6.4480    6.5277    6.3707

September 2007

   6.4988    6.6824    6.9140    6.4980

August 2007

   6.8341    6.8446    7.0220    6.6719

July 2007

   6.7046    6.6965    6.8189    6.6324

June 2007

   6.8512    6.9526    7.0864    6.8512

May 2007

   6.9089    6.8138    6.9273    6.7151

April 2007

   6.7272    6.8349    7.0094    6.7020

March 2007

   7.0177    7.0228    7.1320    6.9512

February 2007

   7.0216    7.0287    7.1078    6.9428

January 2007

   6.9878    6.9855    7.0670    6.8007

December 2006

   6.8644    6.8403    6.9154    6.7871

November 2006

   6.8683    7.0663    7.2131    6.8683

October 2006

   7.2558    7.3377    7.4013    7.2402

September 2006

   7.3299    7.2808    7.3307    7.2232

Interim Period Data

           

Three months ended September 30, 2007

   6.4988    6.7445    7.0220    6.4988

Three months ended September 30, 2006

   7.3299    7.2439    7.4175    7.1166

Nine months ended September 30, 2007

   6.4988    6.8740    7.1320    6.4988

Nine months ended September 30, 2006

   7.3299    7.4733    7.9683    7.0916

Annual Data

           

(Year ended December 31,)

           

2006

   6.8644    7.3793    7.9683    6.7871

2005

   7.9584    7.4780    8.2562    6.6453

2004

   6.6226    7.3453    7.7688    6.5921

2003

   7.1892    8.0838    8.7625    7.1892

2002

   8.7278    9.7194    10.7572    8.7278

(1)

The period-end rate is derived from the Euro foreign exchange reference rates at 2:15 p.m. CET on the last business day of the applicable period.

 

(2)

The average rates for the monthly, interim, and annual periods were calculated by taking the simple average of the daily Euro foreign exchange reference rates at 2:15 p.m. CET of each business day in the period, as published by the European Central Bank.

 

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA OF THE COMBINED COMPANY

The following table sets forth selected information about the pro forma financial condition and results of operations, including per share data, of The NASDAQ OMX Group (including our equity investment in DIFX) after giving effect to the completion of the Transactions. In addition, in accordance with Regulation S-X, we have excluded the material non-recurring charges or credits and related tax effects which resulted directly from our initial equity investment in DIFX. These charges or credits and related tax effects will be included in our income within 12 months succeeding the Transactions. The remaining effect of this transaction has been included in our pro forma statements of income. We have also excluded the material non-recurring charges or credits and related tax effects related to our investment in the LSE that were included in our statements of income for the year ended December 31, 2006 and for the nine months ended September 30, 2007. The remaining effects of the LSE Transaction have also been included in our pro forma statements of income. See Note 3, “Equity Investment in DIFX,” and Note 5, “LSE Related Transactions,” to the Unaudited Pro Forma Condensed Combined Financial Statements for further discussion. The table sets forth selected unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2007 and the fiscal year ended December 31, 2006, as if the Transactions had been completed on January 1, 2006, and the selected unaudited pro forma condensed combined balance sheet data as of September 30, 2007, as if the Transactions had been completed on that date. The information presented below was derived from the consolidated historical financial statements of Nasdaq and OMX, and should be read in conjunction with these financial statements and the notes thereto included elsewhere in this Proxy Statement and the other unaudited pro forma financial data, including related notes, included elsewhere in this Proxy Statement.

The unaudited pro forma financial data is based on estimates and assumptions that are preliminary and does not purport to represent the financial position or results of operations that would actually have occurred had the Transactions been completed as of the dates or at the beginning of the periods presented or what the combined company’s results will be for any future date or any future period. See also “Forward-Looking Statements” and “Risk Factors.” For purposes of the pro forma condensed combined financial information, OMX financial information has been translated from Swedish Kronor into U.S. Dollars and is presented in accordance with U.S. GAAP. The pro forma condensed combined financial information is unaudited and is presented for informational purposes only.

 

     Year Ended
December 31,
2006
   Nine Months Ended
September 30, 2007
     (in thousands, except per share
amounts)

Total revenues

   $ 2,142,914    $ 2,190,876

Income from continuing operations

   $ 176,505    $ 240,129

Basic earnings per share from continuing operations

   $ 1.07    $ 1.39

Diluted earnings per share from continuing operations

   $ 0.91    $ 1.17
          As of September 30,
2007
          (in thousands)

Total assets

   $ 9,153,052

Total liabilities

   $ 5,023,425

Stockholders’ equity

   $ 4,126,054

 

 

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COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA

The following table presents audited basic and diluted income per share data for the year ended December 31, 2006, unaudited basic and diluted income per share data for the nine months ended September 30, 2007 and unaudited cash dividends and net book value per share data for the year ended December 31, 2006 and the nine months ended September 30, 2007 for Nasdaq under U.S. GAAP, OMX under IFRS and OMX under U.S. GAAP, on a historical basis, and unaudited basic and diluted per share data for the year ended December 31, 2006 and the nine months ended September 30, 2007 and unaudited cash dividends and net book value per share data for the nine months ended September 30, 2007 for OMX equivalent and the combined company, on a pro forma basis. The per share data for the combined company on a pro forma basis presented below is not necessarily indicative of the financial position of the combined company had the Transactions been completed on September 30, 2007 and the operating results that would have been achieved by the combined company had the Transactions been completed as of the beginning of the period presented, and should not be construed as representative of future financial position or operating results. The per share data for the combined company on a pro forma basis presented below has been derived from the Unaudited Pro Forma Condensed Combined Financial Data of the Combined Company included in this Proxy Statement. The balance sheet of OMX as of September 30, 2007 has been translated using a SEK/USD exchange rate of 6.4379 to 1. The statement of income of OMX for the year ended December 31, 2006, and the nine months ended September 30, 2007 have been translated using an average SEK/USD exchange rate of 6.8403 to 1 and 6.6669 to 1, respectively.

This information is only a summary and should be read in conjunction with the selected historical financial data of Nasdaq and OMX, the Nasdaq and OMX Unaudited Pro Forma Condensed Combined Financial Data of the Combined Company, and the separate historical financial statements of Nasdaq and OMX and related notes included in this Proxy Statement.

Nasdaq Historical

 

(U.S. GAAP)   Year Ended
December 31, 2006
  

Nine Months Ended 

September 30, 2007

Basic income per share

  $1.22    $3.90

Diluted income per share

  $0.95    $2.94

Cash dividends per share

  —      —  

Net book value per share

  $12.98    $15.69

OMX Historical

 

(IFRS)   Year Ended
December 31, 2006
  

Nine Months Ended 

September 30, 2007

Basic income per share from continuing operations

  $1.17    $1.04

Diluted income per share from continuing operations

  $1.17    $1.04

Cash dividends per share

  $0.95    —  

Net book value per share

  $5.59    $6.21

 

 

 

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OMX Historical

 

(U.S. GAAP)   Year Ended
December 31, 2006
  

Nine Months Ended 

September 30, 2007

Basic income per share from continuing operations

  $1.12    $0.93

Diluted income per share from continuing operations

  $1.12    $0.93

Cash dividends per share

  $0.95    —  

Net book value per share

  $5.10    $5.58

OMX Equivalent Pro Forma*

 

(U.S. GAAP)   Year Ended
December 31, 2006
  

Nine Months Ended 

September 30, 2007

Basic income per share

  $0.98    $1.28

Diluted income per share

  $0.84    $1.07

Cash dividends per share

  —      —  

Net book value per share

     $21.76

* Determined using the related Combined Company pro forma per share data times 0.918 (the proposed exchange ratio per OMX Share for a share of Nasdaq Common Stock).

Combined Company Pro Forma

 

(U.S. GAAP)   Year Ended
December 31, 2006
  

Nine Months Ended 

September 30, 2007

Basic income per share

  $1.07    $1.39

Diluted income per share

  $0.91    $1.17

Cash dividends per share

  —      —  

Net book value per share

     $23.70

 

 

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MARKET PRICE AND DIVIDEND INFORMATION

Nasdaq Common Stock is listed on The Nasdaq Global Select Market under the symbol “NDAQ.” OMX’s shares are listed on the Nordic Exchange in Stockholm, Sweden, Helsinki, Finland, Copenhagen, Denmark and Iceland under the symbol “OMX.” Prior to 2004, the Symbol for OMX was OM. From July 1, 2002 to February 9, 2005, Nasdaq was quoted on the OTCBB under the symbol “NDAQ.” As of the Record Date, there were approximately 1,495 holders of record of Nasdaq Common Stock and as of June 30, 2007, there were approximately 10,922 holders of record of OMX Shares. The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share of Nasdaq Common Stock and OMX Shares, as reported on The Nasdaq Global Select Market, the OTCBB or the OMX Nordic Exchange Stockholm AB, as applicable.

 

     OMX Shares (SEK)    Nasdaq Common Stock ($)

Calendar Quarter

     High        Low        High        Low  

2002

           

First Quarter

   151.50    107.50    NA    NA

Second Quarter

   126.00    55.50    NA    NA

Third Quarter

   71.00    31.50    13.75    9.05

Fourth Quarter

   66.50    24.00    11.20    6.25

2003

           

First Quarter

   49.80    32.10    10.40    6.75

Second Quarter

   59.00    35.30    8.55    5.15

Third Quarter

   89.50    58.50    10.05    6.75

Fourth Quarter

   89.50    74.00    9.35    8.05

2004

           

First Quarter

   120.50    88.50    12.60    8.55

Second Quarter

   118.50    84.00    8.80    6.30

Third Quarter

   92.00    76.00    7.00    5.53

Fourth Quarter

   91.50    80.50    10.50    6.40

2005

           

First Quarter

   87.25    77.50    11.86    7.60

Second Quarter

   91.25    78.50    20.00    9.81

Third Quarter

   102.00    88.25    25.75    18.80

Fourth Quarter

   110.50    92.00    45.23    25.33

2006

           

First Quarter

   155.00    108.00    46.75    34.83

Second Quarter

   167.00    109.50    45.00    23.91

Third Quarter

   143.75    104.00    32.49    25.33

Fourth Quarter

   143.50    123.25    42.37    28.90

2007

           

First Quarter

   147.00    123.75    37.45    26.57

Second Quarter

   230.50    144.50    34.96    29.05

Third Quarter

   285.50    272.00    39.00    28.48

Fourth Quarter (through November 16, 2007)

   289.50    262.50    50.47    37.65

Dividend Policy

To date, Nasdaq has not paid cash dividends on Nasdaq Common Stock and does not intend to pay any cash dividends in the foreseeable future.

 

 

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FORWARD-LOOKING STATEMENTS

The S.E.C. encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. These forward-looking statements include all matters that are not historical facts. This Proxy Statement contains these types of statements. Words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes,” “may,” “will” or “should” and words or terms of similar substance used in connection with any discussion of future operating results or financial performance identify forward-looking statements.

These forward-looking statements involve certain known and unknown risks and uncertainties. Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, but are not limited to, the following factors:

 

   

our operating results, which may be lower than expected;

 

   

our ability to implement our strategic initiatives and any consequences from our pursuit of our corporate strategy, including the Transactions;

 

   

competition, economic, political and market conditions and fluctuations, including interest rate risk;

 

   

government and industry regulation; or

 

   

adverse changes that may occur in the securities markets generally.

See also “Risk Factors” beginning on page 23 and the risk factors disclosed in Nasdaq’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006. These risks and uncertainties are not exhaustive. Other sections of this Proxy Statement describe additional factors that could adversely impact the combined company’s business and financial performance. Moreover, the combined company will operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact that these factors will have on the combined company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the uncertainty and any risk resulting from such uncertainty in connection with any forward-looking statement that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Proxy Statement. Readers should carefully review this Proxy Statement in its entirety, including, but not limited to, our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the accompanying notes thereto, both of which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and the risks described in “Risk Factors,” in this Proxy Statement. Readers should also review OMX’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the accompanying notes thereto in this Proxy Statement. Except for our ongoing obligations to disclose material information under U.S. federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

Nasdaq expressly qualifies in their entirety all forward-looking statements attributable to Nasdaq, OMX or the combined company, or any person acting on their behalf, by the cautionary statements contained or referred to in this section.

 

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RISK FACTORS

In deciding how to vote your Nasdaq Voting Securities on the matters described in this Proxy Statement, you should carefully consider the risks set forth below in addition to the other information contained in this Proxy Statement.

Risks Related to the Transactions

We may not be able to successfully combine the Nasdaq and OMX businesses.

Rationalizing and coordinating the operations of Nasdaq and OMX will involve complex technological, operational and personnel-related challenges. This process will be time-consuming and expensive and may disrupt the business of the combined company. The difficulties, costs and delays that could be encountered may include:

 

   

unforeseen difficulties, costs or complications in combining the companies’ operations, which could lead to the combined company not achieving the synergies we anticipate;

 

   

unanticipated incompatibility of systems and operating methods;

 

   

inability to use capital assets efficiently to develop the business of the combined company;

 

   

the difficulty of complying with government-imposed regulations in both the United States and Europe, which may be different from each other;

 

   

resolving possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures between Nasdaq and OMX;

 

   

the diversion of management’s attention from ongoing business concerns and other strategic opportunities;

 

   

the integration of Nasdaq’s and OMX’s respective businesses, operations and workforces;

 

   

the retention of key employees and the management of OMX and Nasdaq;

 

   

the implementation of disclosure controls, internal controls and financial reporting systems at OMX to enable the combined company to comply with the requirements of U.S. GAAP and U.S. securities laws and regulations required as a result of the combined company’s status as a reporting company under the Exchange Act;

 

   

the coordination of geographically separate organizations;

 

   

the coordination and consolidation of ongoing and future research and development efforts;

 

   

possible tax costs or inefficiencies associated with integrating the operations of the combined company;

 

   

possible modification of OMX’s operating control standards in order for the combined company to comply with the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, which is required as a result of the combined company’s status as a reporting company under the Exchange Act;

 

   

the retention and recruitment of employees to support existing and new aspects of the combined company’s business and new technology development;

 

   

the pre-tax restructuring and revenue investment costs, which are estimated at $150 million to be incurred in the two years following completion of the Transactions;

 

   

the retention of strategic partners and attracting new strategic partners;

 

   

negative impacts on employee morale and performance as a result of job changes and reassignments; and

 

   

regulatory issues, including with respect to the regulatory approvals necessary to complete the Transactions.

 

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For these reasons, the combined company may not achieve the anticipated financial and strategic benefits, including cost savings from operational efficiencies and synergies, from the combination of the businesses of Nasdaq and OMX, and any actual cost savings and synergies may be lower than we currently expect and may take a longer time to achieve than we currently anticipate, and we may fail to realize any of the anticipated benefits of the combination of the two companies.

We will need to invest in our operations to integrate OMX and prior transactions and to maintain and grow our business, and we may need additional funds to do so.

We depend on the availability of adequate capital to maintain and develop our business. We believe that we can meet our current capital requirements, including our planned acquisition of the Boston Stock Exchange and investment in DIFX, from internally generated funds, cash on hand and available borrowings. If the combined company is unable to fund its capital requirements as currently planned, however, it would have a material adverse effect on the combined company’s business, financial condition and operating results.

In addition to our debt service obligations, we will need to continue to invest in our operations through 2010 to integrate OMX. If the combined company does not achieve the expected operating results, we will need to reallocate our cash resources. This may include borrowing additional funds to service debt payments, which may impair our ability to make investments in our business or to integrate OMX.

Should the combined company need to raise funds through incurring additional debt, the combined company may become subject to covenants even more restrictive than those contained in our current debt instruments. Furthermore, if we issue additional equity, our equity holders will suffer dilution. Thus, there can be no assurance that additional capital will be available on a timely basis, on favorable terms or at all.

Regulatory authorities, including the Committee on Foreign Investment in the United States, may delay or impose conditions on approval of the Transactions, which may diminish the anticipated benefits of the completion of the Transactions.

The completion of the Transactions requires the receipt of certain approvals from public authorities or other regulatory bodies. Failure to obtain these approvals in a timely manner may delay the completion of the Transactions, possibly for a significant period of time. In addition, regulatory authorities may attempt to condition their approval of the Transactions on the imposition of conditions that may have a material adverse effect on the combined company’s operating results or the value of Nasdaq Common Stock after the Transactions are completed. Any delay in the completion of the Transactions may diminish the anticipated benefits or may result in additional transaction costs, loss of revenue or other effects associated with uncertainty about the completion of the Transactions. For additional information on these regulatory approvals, please see “Proposals to be Considered and Voted Upon by Holders of Nasdaq Voting Securities at the Special Meeting—Regulatory Matters—the OMX Transaction Agreement.”

Charges to earnings resulting from acquisition, restructuring and integration costs may materially adversely affect the market value of Nasdaq Common Stock following the completion of the Transactions.

In accordance with U.S. GAAP, the combined company will account for the completion of the Transactions using the purchase method of accounting. The combined company will allocate the total estimated purchase price to OMX’s net tangible assets, amortizable intangible assets and non-amortized intangibles, and based on their fair values as of the date of completion of the Transactions, record the excess of the purchase price over those fair values as goodwill. The combined company’s financial results, including earnings per share, could be adversely affected by a number of financial adjustments required by U.S. GAAP including the following:

 

   

the combined company will incur additional amortization expense over the estimated useful lives of certain of the intangible assets acquired in connection with the Transactions during such estimated useful lives;

 

   

the combined company may have additional depreciation expense as a result of recording purchased tangible assets at fair value, in accordance with U.S. GAAP, as compared to book value as recorded by OMX;

 

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to the extent the value of goodwill or intangible assets with indefinite lives becomes impaired, the combined company may be required to incur material charges relating to the impairment of those assets; and

 

   

the combined company will incur certain adjustments to reflect OMX’s financial condition and operating results under U.S. GAAP and U.S. dollars.

We expect to incur costs associated with the Transactions, including financial advisors’ fees and legal and accounting fees. In addition, we expect to incur costs associated with realizing synergies from the Transactions. These costs may be substantial and may include those related to the severance and stock option acceleration provisions of employee benefit plans, which could be triggered by the completion of the Transactions as well as other exit costs. We face potential costs related to employee retention and deployment of physical capital and other integration costs. We have not yet determined the amount of these costs. We expect to account for costs directly related to the Transactions, including financial advisors’ costs, legal and accounting fees, and certain exit costs associated with OMX’s operations as purchase related adjustments when the Transactions are completed, as proscribed under U.S. GAAP. These items will reduce cash balances for the periods in which those costs are paid. Other costs that are not directly related to the Transactions, including retention and integration costs, will be recorded as incurred and will negatively impact earnings, which could have a material adverse effect on the price of Nasdaq Common Stock.

In addition, from the date of the completion of the Transactions, the combined company’s results of operations will include OMX’s operating results, presented in accordance with U.S. GAAP. OMX’s historical consolidated financial statements for 2004 through 2007 have been prepared in accordance with IFRS, which differ in certain material respects from U.S. GAAP. For instance, U.S. GAAP will require OMX to recognize revenue under certain of its technology contracts over the term of the contract rather than at the beginning of the contract. Accordingly, the U.S. GAAP presentation of OMX’s results of operations may not be comparable to its historical financial statements.

The terms of the Borse Dubai Offer are subject to change—for instance, in the event of a competing Offer—and any alternative transaction effecting the proposed acquisition of OMX, including the Offer, may be on terms and conditions which are different from those currently contemplated by the Borse Dubai Offer.

Although Nasdaq and Borse Dubai are under no obligation to increase the amount of consideration they are offering for OMX Shares in the Borse Dubai Offer, they have reserved the right to, in their sole discretion, choose to increase the amount of such consideration by, for example, increasing the amount of cash to be exchanged for each OMX Share in the Borse Dubai Offer (or in any alternative transaction effecting the proposed acquisition of OMX, including the Offer). If Nasdaq and Borse Dubai determine to increase the amount of cash consideration payable in the Borse Dubai Offer, Nasdaq may be required to bear all or part of such increase and, accordingly, may have to incur additional indebtedness. Nasdaq does not intend to seek approval of holders of Nasdaq Voting Securities in connection with any such increase.

The combined company’s indebtedness following completion of the Transactions will limit financial flexibility.

Our indebtedness as of September 30, 2007 was approximately $443.1 million. After giving effect to the Transactions the combined company’s pro forma indebtedness as of September 30, 2007 is approximately $2.6 billion. Nasdaq anticipates borrowing all of the $1.9 billion cash payment due to Borse Dubai in respect of the Transactions (or any additional amounts that may be required if the cash portion of the consideration in the Borse Dubai Offer is increased). This borrowing will have a variable interest rate. In the pro forma statements of income for the year ended December 31, 2006 and for the nine months ended September 30, 2007, interest expense was calculated using an interest rate of the average 3 month LIBOR plus a spread of 1.75%, which was 6.85% and 7.11%, respectively. A 1.0% increase in interest rates would result in additional interest expense of $19.0 million in pro forma interest expense for the year ended December 31, 2006 and additional interest expense of $14.3 million in pro forma interest expense for the nine months ended September 30, 2007.

 

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The combined company’s leverage after completion of the Transactions will be higher than Nasdaq’s and OMX’s combined existing indebtedness. As a result of the increase in debt, demands on the cash resources of the combined company will increase after completion of the Transactions, which could have important effects on an investment in Nasdaq Common Stock, including reducing funds available to the combined company for its operations and general corporate purposes or for capital expenditures as a result of the dedication of a substantial portion of the combined company’s consolidated cash flow from operations to the payment of principal and interest on the combined company’s indebtedness; increasing the combined company’s vulnerability to a downturn in general economic conditions; placing the combined company at a competitive disadvantage compared with its competitors with less debt; and affecting the combined company’s ability to obtain additional financing in the future for refinancing indebtedness, acquisitions, working capital, capital expenditures or other purposes. The cash portion of the consideration in the Borse Dubai Offer may be increased, in Borse Dubai and Nasdaq’s sole discretion, which would exacerbate these effects.

The anticipated incurrence of this debt resulted in the downgrading of our credit rating outlook by Moody’s after the announcement of the Offer in May 2007. An increase in debt relating to the Transactions may result in additional credit rating downgrades. Existing downgradings and any downgradings in the future will not impact Nasdaq’s ability to complete the Transactions.

The market price of Nasdaq Common Stock may decline as a result of the completion of the Transactions.

The market price of Nasdaq Common Stock may decline as a result of the completion of the Transactions if:

 

   

the combination of Nasdaq’s and OMX’s businesses is unsuccessful;

 

   

we do not achieve the expected benefits of the combination with OMX as rapidly or to the extent anticipated by financial analysts or investors; or

 

   

the effect of the Transactions on our financial results is not consistent with the expectations of financial analysts or investors.

Nasdaq shareholders will have a reduced ownership and voting interest after the completion of the Transactions and will exercise less influence over management.

After the completion of the Transactions, Nasdaq shareholders will own a smaller percentage of the combined company than they currently own of Nasdaq. Upon completion of the Transactions, Nasdaq shareholders will own approximately 72% of the outstanding Nasdaq Common Stock of the combined company immediately after the completion of the Transactions, calculated on a fully diluted basis using the treasury method. Consequently, current Nasdaq shareholders, as a group, will have reduced ownership and voting power in the combined company compared to their current ownership and voting power in Nasdaq.

The benefits of the combination of Nasdaq and OMX may not be achieved if we cannot effect the compulsory acquisition of all of the issued and outstanding OMX Shares or if we terminate the OMX Transaction Agreement.

Under Swedish law, to effect the compulsory acquisition of OMX Shares for which valid acceptances have not been received under the Borse Dubai Offer, we are required to have acquired more than 90% of the outstanding OMX Shares. The Borse Dubai Offer is subject to a condition that the Borse Dubai Offer is accepted to such an extent that Borse Dubai (and subsequently Nasdaq) becomes the owner of shares representing more than 50% of the outstanding OMX Shares on a fully diluted basis. As a result, it is possible that, at the end of the Borse Dubai Offer period, we and Borse Dubai will not have acquired a sufficient number of OMX Shares under the Borse Dubai Offer to effect a compulsory acquisition of the remaining outstanding OMX Shares. Since, in this situation, OMX would not be a wholly-owned subsidiary of Nasdaq, this will prevent or delay us from realizing the anticipated benefits (including synergies) from the integration of our operations with OMX’s operations by requiring transactions between OMX and Nasdaq to be on an arm’s-length basis.

 

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In addition, we may terminate the OMX Transaction Agreement if less than 67% of the outstanding OMX Shares are tendered into the Borse Dubai Offer or are otherwise owned by Borse Dubai, including pursuant to the Borse Dubai Option Agreements. If we terminate the OMX Transaction Agreement on this basis and Borse Dubai consummates the Borse Dubai Offer, we will not be able to acquire OMX and we will not be able to achieve any of the benefits of acquiring OMX described in this Proxy Statement.

We may be required to pay a higher price for some OMX Shares as a result of compulsory acquisition proceedings under Swedish law.

In the event that Nasdaq obtains more than 90% of the OMX Shares, Nasdaq intends to commence a compulsory acquisition procedure under the Swedish Companies Act to acquire all remaining OMX Shares. The cost of the compulsory acquisition proceeding will be borne entirely by Nasdaq.

The purchase price for the OMX Shares acquired through a compulsory acquisition procedure will be determined by an arbitration tribunal. The Swedish Companies Act provides that the purchase price for the remaining OMX Shares will be equivalent to the value of the consideration in the Borse Dubai Offer, unless there are any special circumstances at hand that call for a different price. It may take up to two years or more from initiation of the compulsory acquisition procedure until the arbitration tribunal decides on the purchase price. Thereafter, the purchase price will be distributed to the shareholders whose OMX Shares were acquired through the compulsory acquisition procedure, together with interest earned at a market rate set by the Swedish Central Bank pursuant to Swedish law.

Nasdaq may elect to request advance title to the OMX Shares to be acquired in the compulsory acquisition procedure, in accordance with the Swedish Companies Act. Advance title means that full ownership is obtained by Nasdaq with respect to the remaining OMX Shares before the arbitration proceedings regarding the purchase price have been completed. The arbitration tribunal’s granting of advance title would be subject to Nasdaq providing satisfactory security for payment of the purchase price and the accrued interest thereon.

As a result of the compulsory acquisition proceedings under Swedish law, Nasdaq may ultimately have to pay, in the aggregate, a higher price per OMX Share in order to purchase the remaining OMX Shares that are outstanding after completion of the Borse Dubai Offer than it has agreed to pay through the OMX Transaction Agreement.

Risks Relating to Nasdaq’s, OMX’s and the Combined Company’s Business

The securities market business is highly competitive.

Nasdaq and OMX face, and the combined company will face, competition from numerous entities in the securities market industry, including competition for trading services, listings, and financial products from other exchanges and market centers. This competition includes both product and price competition and could increase as a result of the registration of new exchanges and market centers in the United States and Europe.

In addition, the liberalization and globalization of world markets have resulted in greater mobility of capital, greater international participation in local markets and more competition. Both in the U.S. and in other countries, the competition among exchanges and other execution venues has become more intense.

In the last several years, the structure of the securities industry has changed significantly through demutualizations and consolidations. In response to growing competition, many marketplaces in both Europe and the United States have demutualized to provide greater flexibility for future growth. The securities industry is also experiencing consolidation, creating a more intense competitive environment. In addition, a high proportion of business in the securities market is becoming increasingly concentrated in a smaller number of institutions and the combined company’s revenue may therefore become concentrated in a smaller number of customers.

 

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Examples of these new competitive forces include:

 

   

since the fall of 2006, eight investment banks have announced that they intend to set up a multilateral trading facility in Europe, also known as Project Turquoise;

 

   

since the fall of 2006, 14 investment banks have announced that they intend to set up a multilateral trade reporting facility in Europe, also known as Project Boat;

 

   

alternative trading platforms such as Equiduct, Chi-X and Plus Markets;

 

   

alternative trade reporting platforms such as Reuters Trade Publication;

 

   

the proposed combination of Deutsche Börse AG and International Securities Exchange Holdings, Inc.;

 

   

electronic trading systems specializing in large volume trades, such as LiquidNet, Pipeline Trading and Investment Technology Group’s POSIT platform;

 

   

the creation of NYSE Euronext, Inc. in April 2007 (see discussion below);

 

   

the Chicago Stock Exchange, Inc., the Philadelphia Stock Exchange, Inc, the National Stock Exchange, the International Securities Exchange LLC, and the Chicago Board Options Exchange all have investment agreements with other participants in the securities industry;

 

   

new ECNs operating in the U.S. cash equities trading market, such as Direct Edge, Lava Flow and BATS; and

 

   

the International Securities Exchange’s and the Chicago Board Options Exchange’s launch of cash equities exchanges in September 2006 and March 2007, respectively.

If these or other trading venues are successful, the combined company’s business, financial condition and operating results could be adversely affected.

Because of these market trends, the combined company will face intense competition. Competitors may develop market trading platforms that are more competitive than those of the combined company. If the combined company is unable to compete successfully in this environment, our business, financial condition and operating results will be adversely affected.

Price competition has affected and could continue to affect the business of Nasdaq and OMX.

The securities trading industry in the United States is characterized by intense price competition. We have in the past lowered prices and increased rebates for trade executions to attempt to gain or maintain market share. These strategies have not always been successful and have at times hurt operating performance. Additionally, we have also been, and may once again be, required to adjust pricing to respond to actions by competitors, which adversely impacts operating results. We have recently taken steps to unify pricing for trading of securities listed on different exchanges. This rationalization of our pricing may adversely affect our market share. OMX is subject to potential price competition from new competitors and potentially from new and existing regulated markets and multilateral trading facilities.

The securities trading industry also competes with respect to the pricing of market data. In addition, we are subject to price competition with respect to proprietary products for pre-trade book data and for post-trade last sale data. In the future our competitors may offer market data rebates for quotes and trades on their systems. The success of competitors for trade executions, pressure from users for lower data fees and regulatory changes could also affect OMX’s market data business.

Our trade reporting facility (which we operate jointly with the Financial Industry Regulatory Authority, which we refer to as FINRA and which was formerly known as the National Association of Securities Dealers or the NASD, for the purpose of accepting reports of off-exchange trades) faces competition from the trade

 

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reporting facilities operated jointly with FINRA by the National Stock Exchange, the Boston Stock Exchange and the NYSE. Our trade reporting facility also faces competition from FINRA’s alternative display facility. Our competitors’ market data rebate programs for trade reporting could lead to a loss of market share and decreased revenues.

The NYSE’s recent mergers and acquisitions activity has created a strong competitor in our industry that has a similar strategy to that of the combined company.

The combination of the NYSE and Euronext creates strong competition for the combined company. The combination makes NYSE Euronext more competitive in attracting new listings. NYSE Euronext is also enhancing its electronic trading capabilities, which compete directly with Nasdaq’s and may result in NYSE Euronext’s trading volume increasing to our detriment. If NYSE Euronext succeeds in attracting disproportionately more trading volume or additional listings, this may have a negative impact on the combined company’s business, financial condition and operating results.

We face significant competition in our securities trading business, which could reduce Nasdaq’s and OMX’s transactions, trade reporting and market information revenues and negatively impact our financial results.

We compete for trading of Nasdaq-, NYSE- and Amex-listed securities and OMX competes for trading of securities listed on the Nordic Exchange and the Baltic Market. Any decision by market participants to quote, execute or report their trades in the U.S. through other exchanges, ECNs or the Alternative Display Facility maintained by FINRA, could have a negative impact on our share of quotes and trades in securities traded through The Nasdaq Market Center. Any decision by market participants to quote, execute or report their trades in Northern Europe through another regulated market or multilateral trading facility could have a negative impact on OMX’s share of quotes and trades in securities traded through the Nordic Exchange.

Although we trade a large percentage of securities of Nasdaq-listed companies, we face strong competition from other exchanges and emerging players in the market. For non-Nasdaq-listed securities, the other national exchanges collectively offer greater liquidity than we do. Accordingly, we face greater obstacles in trying to attract trading volume in non-Nasdaq-listed securities. OMX has had a history of trading a greater percentage of the securities of several of the largest OMX-listed companies than its nearest competitors although it does face trade execution competition from other European and U.S. markets.

Nasdaq’s responses to competition may not be sufficient to regain lost business or prevent other market participants from shifting some of their quoting and/or trade reporting to other industry participants. We may need to reduce prices to remain competitive.

Nasdaq and OMX must adapt to significant competition in their listing businesses.

Nasdaq and OMX must adapt to significant competition in their respective listing businesses from other exchanges. Historically, the NYSE has been our largest competitor, and we have competed with the NYSE primarily for listings of larger domestic and international companies. OMX faces competition from various European exchanges for new secondary listings. In addition, on occasion, issuers may transfer their listings from Nasdaq and OMX to other venues. While the reduction in initial listings or the loss of one or more large issuers could decrease the combined company’s listing revenues, it could cause an even more significant decrease in revenues from the quoting, reporting and trading of those issuers’ securities.

Nasdaq’s revenues may be affected by competition in the business for financial products.

We have grown our financial products business, which creates indices and licenses them for Nasdaq-branded financial products. Nasdaq-sponsored financial products are subject to intense competition from other Exchange Traded Funds, which we refer to as ETFs, derivatives and structured products as investment

 

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alternatives. Our revenues may be adversely affected by increasing competition from competitors’ financial products designed to replicate or correlate with the performance of our financial products. In addition, the legal and regulatory climate, which supports the licensing of these financial products, has changed in a manner which is likely to adversely impact our ability to successfully license our products. Further, many other entrants have recently emerged who not only compete with us for future growth opportunities, but who may also introduce products that erode the position of our current offerings, thereby adversely affecting our business, financial conditions and operating results.

A decrease in trading volume will decrease the combined company’s trading revenues.

Trading volume is directly affected by economic and political conditions, broad trends in business and finance, changes in price levels of securities and the overall level of investor confidence. Weak economic conditions or a reduction in securities prices could result in a decline in trading volume. A decline in trading volume would lower revenues and may adversely affect the combined company’s operating results. In addition, investor confidence and trader interest, and thus trading volume, can be affected by factors outside Nasdaq’s or OMX’s control, such as the publicity surrounding investigations and prosecutions for corporate governance or accounting irregularities at listed companies.

Declines in the initial public offering market could have an adverse effect on Nasdaq’s and OMX’s revenues.

Stagnation or decline in the initial public offering market will impact the number of new listings on The NASDAQ Stock Market and the Nordic Exchange, and thus our related revenues. We recognize revenue from new listings on a straight-line basis over an estimated six-year service period.

The combined company may experience fluctuations in its operating results.

The financial services industry is risky and unpredictable and is directly affected by many national and international factors beyond our control. Any one of these factors could have a material adverse effect on the combined company’s business, financial condition and operating results by causing a substantial decline in the financial services markets and reduced trading volume.

Additionally, since borrowings under the credit facility that we plan to enter into in connection with the Transactions bear interest at variable rates and we do not have interest rate hedges in place on this debt, any increase in interest rates will increase the combined company’s interest expense and reduce its cash flow. Other than variable rate debt, we believe our business has relatively large fixed costs and low variable costs, which magnifies the impact of revenue fluctuations on the combined company’s operating results. As a result, a decline in our revenue may lead to a relatively larger impact on operating results. A substantial portion of the combined company’s operating expenses will be related to personnel costs, regulation and corporate overhead, none of which can be adjusted quickly and some of which cannot be adjusted at all. The combined company’s operating expense levels will be based on our expectations for future revenue. If actual revenue is below management’s expectations, or if the combined company’s expenses increase before revenues do, both revenues less liquidity rebates, brokerage, clearance and exchange fees and operating results would be materially and adversely affected. Because of these factors, it is possible that the combined company’s operating results or other operating metrics may fail to meet the expectations of stock market analysts and investors. If this happens, the market price of Nasdaq Common Stock is likely to decline.

The combined company’s results of operations may differ significantly from the unaudited pro forma condensed combined financial data included in this Proxy Statement.

This Proxy Statement includes unaudited pro forma condensed combined financial statements to illustrate the effects of the Transactions on the historical financial position and operating results of Nasdaq and OMX. The unaudited pro forma condensed combined statements of income combine the historical consolidated financial

 

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statements of income of Nasdaq and OMX, giving effect to the Transactions as if they had been completed on January 1, 2006. The unaudited pro forma condensed combined balance sheet combines the historical consolidated balance sheets of Nasdaq and OMX, giving effect to the Transactions as if they occurred on September 30, 2007. This pro forma financial information is presented for illustrative purposes only and does not necessarily indicate the results of operations or the combined financial position that would have resulted had the Transactions been completed at the beginning of the periods presented, nor is it indicative of the results of operations in future periods or the future financial position of the combined company.

The combined company must control its costs to remain profitable.

We base our cost structure on historical and expected levels of demand for our products and services. A decline in the demand for the combined company’s products and services may reduce the combined company’s revenues without a corresponding decline in its expenses since the combined company may not be able to adjust its cost structure on a timely basis. The combined company’s failure to achieve its goals on cost savings will have an adverse impact on the combined company’s results of operations. The combined company may fail in its initiatives to increase its business.

The combined company may not be able to keep up with rapid technological and other competitive changes affecting its industry.

The markets in which the combined company will compete are characterized by rapidly changing technology, evolving industry standards, frequent enhancements to existing products and services, the introduction of new services and products and changing customer demands. If the Nasdaq or OMX platforms fail to function as expected, the combined company’s business would be negatively affected. In addition, the combined company’s business, financial condition and operating results may be adversely affected if the combined company cannot successfully develop, introduce or market new services and products or if it needs to adopt costly and customized technology for its services and products. Further, the combined company’s failure to anticipate or respond adequately to changes in technology and customer preferences, or any significant delays in product development efforts, could have a material adverse effect on its business, financial condition and operating results.

System limitations, failures or security breaches could harm the combined company’s business.

Nasdaq’s and OMX’s businesses depend on the integrity and performance of the computer and communications systems supporting them. If the combined company’s systems cannot expand to cope with increased demand or otherwise fail to perform, the combined company could experience unanticipated disruptions in service, slower response times and delays in the introduction of new products and services. These consequences could result in lower trading volumes, financial losses, decreased customer service and satisfaction and regulatory sanctions. Nasdaq and OMX have experienced occasional systems failures and delays in the past and could experience future systems failures and delays.

If Nasdaq’s or OMX’s trading volume increases unexpectedly, the combined company will need to expand and upgrade its technology, transaction processing systems and network infrastructure. We do not know whether it will be able to accurately project the rate, timing or cost of any increases, or expand and upgrade its systems and infrastructure to accommodate any increases in a timely manner.

Nasdaq’s and OMX’s systems and operations also are vulnerable to damage or interruption from human error, natural disasters, power loss, sabotage or terrorism, computer viruses, intentional acts of vandalism and similar events. We have active and aggressive programs in place to identify and minimize our exposure to these vulnerabilities and work in collaboration with the technology industry to share corrective measures with our business partners. Although we currently maintain and expect to maintain multiple computer facilities that are designed to provide redundancy and back-up to reduce the risk of system disruptions and have facilities in place

 

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that are expected to maintain service during a system disruption, such systems and facilities may prove inadequate. Any system failure that causes an interruption in service or decreases the responsiveness of the combined company’s services could impair its reputation, damage its brand name and negatively impact its business, financial condition and operating results.

The implementation of MiFID may increase competition for quoting, trade execution and reporting revenues in Europe.

The combined company’s competitive position could be adversely affected by legislation and regulation implementing the European Markets in Financial Instruments Directive, which we refer to as MiFID, which requires all European Union countries to have MiFID regulation in force by November 1, 2007. MiFID is intended to create a unified European financial services market, with common regulation regarding investments and trading in European Union countries. MiFID is intended to enable greater transparency and competition among exchanges (regulated markets), investment firms and banks who internalize their order flow (systematic internalizers), and multilateral trading facilities. MiFID encourages competition for quotation, trade execution, trade reporting and market data distribution and introduces a European-wide requirement for best execution by requiring investment firms to establish and publish execution policies for all traded instruments.

MiFID provides that trades may be executed (in addition to regulated exchange trading) on multilateral trading facilities via over-the-counter trading, or through systematic internalization. As a result, MiFID creates an opportunity for new multilateral trading facilities, over-the-counter and internalization arrangements to be developed on either a single country or a pan-European basis, thereby removing entry barriers and facilitating entry of alternative off-exchange trading facilities and increasing the attractiveness of such alternative facilities to users. In addition, investment firms will have to ensure that they obtain the “best execution” conditions for their clients, and will therefore have to direct orders to the most favorable execution venue, without any regulatory incentive to favor established regulated markets.

Taken together, these changes to the regulatory environment are likely to make it easier for multilateral trading facilities to establish themselves in Europe as low-cost alternatives to regulated exchanges, thereby increasing the level of competition with and between market operators. OMX will face competition from other exchanges as well as from multilateral trading facilities and alternative trading systems (including a move toward greater systematic internalization by member firms outside OMX’s exchanges) and this competition may intensify in the near future especially as technological advances create pressure to reduce the costs of trading. Increased competition from alternative trading facilities and operators could cause the combined company to lose market share or to lower its fees in order to remain competitive, either of which could lead to lower revenues and/or lower margins, harming profitability.

The adoption and implementation of Regulation NMS by the S.E.C. could adversely affect our business.

On April 6, 2005, the S.E.C. adopted Regulation NMS. Regulation NMS’s four primary components are: the Order Protection Rule, the Access Rule, the Market Data Rule and the Sub-Penny Rule. We have incurred technological and other costs in changing our systems and operations so that we can comply with these rules. Although the major provisions of Regulation NMS have largely been phased in over the course of 2007, the impact of Regulation NMS is hard to predict and there may be problems or competitive challenges that we do not foresee that adversely affect our business as Regulation NMS is implemented. Regulation NMS may increase competition in securities listed on The NASDAQ Stock Market or other exchanges from existing or new competitors.

Regulatory changes and changes in market structure could have a material adverse effect on our business.

Nasdaq and OMX operate in a highly regulated industry. In recent years, the securities trading industry and, in particular, the securities markets, have been subject to significant regulatory changes. Moreover, the securities

 

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markets have been the subject of increasing governmental and public scrutiny in response to a number of recent developments and inquiries. Any of these factors or events may result in future regulatory or other changes, although we cannot predict the nature of these changes or their impact on our business at this time. The combined company’s market participants also operate in a highly regulated industry. The S.E.C., the Swedish Financial Supervisory Authority, which we refer to as the SFSA, and other regulatory authorities could impose regulatory changes that could impact the ability of Nasdaq’s and OMX’s market participants to use The Nasdaq Market Center or the Nordic Exchange or could adversely affect The NASDAQ Stock Market or the Nordic Exchange. Regulatory changes by the S.E.C., the SFSA or other regulatory authorities could result in the loss of a significant number of market participants or a reduction in trading activity on The NASDAQ Stock Market or the Nordic Exchange.

The regulatory framework under which Nasdaq and OMX operate and new regulatory requirements or new interpretations of existing regulatory requirements could require substantial time and resources for compliance, which could make it difficult and costly for the combined company to operate the businesses.

Under current U.S. federal securities laws, changes in Nasdaq’s rules and operations, including our pricing structure, must be reviewed, and in many cases explicitly approved by the S.E.C. The S.E.C. may approve, disapprove, or recommend changes to proposals that Nasdaq submits. In addition, the S.E.C. may delay either the approval process or the initiation of the public comment process.

OMX is subject to regulatory oversight in all the countries in which it operates regulated businesses, such as operating exchanges or CSDs. The countries in which OMX is currently regulated are Sweden, Finland, Denmark, Iceland, Estonia, Lithuania and Latvia.

OMX has, in all the aforementioned countries, received authorization from the relevant authorities to conduct its regulated business activities. The authorities may revoke this authorization if OMX does not suitably carry out its regulated business activities. The authorities are also entitled to request that OMX adopt measures in order to ensure that OMX continues to fulfill the authorities’ requirements.

Furthermore, OMX holds minority stakes in other regulated entities. OMX owns approximately 10% of the Oslo Stock Exchange, approximately 24% of the United Kingdom derivatives exchange EDX London, 3% of the Bulgarian Stock Exchange and approximately 33% of the International Exchange St. Petersburg.

In addition, certain of OMX’s customers also operate in a highly regulated industry. Regulatory authorities with jurisdiction over OMX and the exchanges it operates could impose regulatory changes that could impact the ability of OMX’s customers to use one or more of the exchanges operated by OMX. The loss of a significant number of customers or a reduction in trading activity on any of the exchanges comprising the Nordic Exchange as a result of such changes could have a material adverse effect on the combined company’s business, financial condition and operating results. Certain of OMX’s customers are themselves exchanges which outsource certain technology functions to OMX, and thus the combined company would be particularly exposed to regulatory or other events impacting the global exchange industry.

Nasdaq is subject to extensive regulation that may harm its ability to compete with less regulated entities.

Under current U.S. federal securities laws, changes in our rules and operations, including our pricing structure, must be reviewed, and in many cases explicitly approved by the S.E.C. The S.E.C. may approve, disapprove or recommend changes to proposals that we submit. In addition, the S.E.C. may delay the initiation of the public comment process or the approval process. This delay in approving changes, or the altering of any proposed change, could have an adverse effect on Nasdaq’s business, financial condition and operating results. We must compete not only with ECNs that are not subject to the same S.E.C. approval process but also with other exchanges that have lower regulation and surveillance costs than us. There is a risk that trading will shift to exchanges that charge lower fees because, among other reasons, they spend significantly less on regulation.

 

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In addition, Nasdaq’s registered broker-dealer subsidiaries, Nasdaq Execution Services, LLC and NASDAQ Option Services, LLC are subject to regulation by the S.E.C., FINRA and other self-regulatory organizations. Any failure to comply with these broker-dealer regulations could have a material effect on the operation of our business, financial condition and operating results. These subsidiaries are subject to regulatory requirements intended to ensure their general financial soundness and liquidity, which require that they comply with certain minimum capital requirements. The S.E.C. and FINRA impose rules that require notification when net capital falls below certain predefined criteria, dictate the ratio of debt to equity in the regulatory capital composition of a broker-dealer and constrain the ability of a broker-dealer to expand its business under certain circumstances. Additionally, the Uniform Net Capital Rule and NYSE and FINRA rules impose certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing capital and requiring prior notice to the S.E.C., the NYSE and FINRA for certain withdrawals of capital.

Nasdaq has self-regulatory obligations and also operates for-profit businesses, and these two roles may create conflicts of interest.

We have obligations to regulate and monitor activities on The NASDAQ Stock Market and ensure compliance with applicable law and the rules of our market by market participants and Nasdaq-listed companies. The S.E.C. staff has expressed concern about potential conflicts of interest of “for-profit” markets performing the regulatory functions of a self-regulatory organization. Although Nasdaq outsources the majority of its market regulation functions to FINRA, Nasdaq does perform regulatory functions related to its listed companies and its market. In addition, as part of Nasdaq’s application for exchange registration, Nasdaq has agreed that 20% of the directors of its exchange subsidiary will be elected by members of the exchange rather than the equity holders of the subsidiary. Any failure by Nasdaq to diligently and fairly regulate its market or to otherwise fulfill its regulatory obligations could significantly harm its reputation, prompt S.E.C. scrutiny and adversely affect the combined company’s business and reputation.

OMX’s reputation depends on the diligent performance of its self-regulatory obligations.

The Nordic Exchange monitors trading on the Nordic Exchange and compliance with listing standards. It also monitors the listing of equities and other financial instruments. The prime objective of such monitoring activities is to maintain confidence in the exchanges among the general public. The monitoring functions within the Nordic Exchange are the responsibility of the Surveillance Committees. The Surveillance Committees are established by the Board of Directors of the OMX Nordic Exchange Stockholm AB in order to strengthen the integrity of and confidence in the Nordic Exchange and to avoid conflicts of interest. Each of the Surveillance Committees consist of five members, three of whom are independent of OMX or qualified owners of OMX. Any failure by OMX to diligently and fairly regulate its market could significantly harm its reputation, prompt scrutiny from its regulators and adversely affect its business and reputation.

Recent S.E.C. rulemaking has liberalized the foreign private issuer deregistration rules.

In March 2007, the S.E.C. adopted rules that make it easier for foreign private issuers to deregister and terminate their S.E.C. reporting obligations. Under the new deregistration rule, a foreign private issuer can deregister equity securities if its average U.S. trading volume over a 12-month period represents 5% or less of its worldwide trading volume, so long as it meets certain requirements. Once a foreign private issuer’s securities are deregistered and the issuer ceases its Exchange Act reporting, those securities are no longer eligible for trading on any public exchange in the U.S. As a result, we may face the loss of listing and trading services revenues associated with foreign private issuers who chose to deregister under the new S.E.C. rules.

Regulatory recognition of foreign exchanges may harm the combined company’s ability to compete with less regulated entities.

Under current U.S. federal securities laws, foreign exchanges seeking to operate in the U.S. must meet substantially all of the regulatory requirements we face. The S.E.C. has the authority to exempt foreign

 

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exchanges from these requirements and currently has granted one foreign exchange, Tradepoint LLC, an exemption based on low volume and other restrictions. Consequently, Virt-x (the successor to Tradepoint) is the only foreign exchange able to operate in the U.S. without meeting all the regulatory requirements we face. Recently, the S.E.C. has begun discussing the possibility of reciprocal recognition of exchanges operating under comparable regulatory regimes. Based on the extent and manner in which the S.E.C. pursues reciprocal recognition, there is a possibility that other foreign exchanges may enter the U.S. market without meeting all the regulatory requirements we meet. The entry of foreign exchanges into the U.S. market without complying with U.S. regulatory obligations would create additional competitive pressure on the combined company, particularly in the trading of dual-listed foreign securities.

The legal and regulatory environment in the United States may make it difficult for The NASDAQ Stock Market to attract the secondary listings of non-U.S. companies.

The combined company’s U.S. exchange, The NASDAQ Stock Market, will continue to compete to obtain the listing of non-U.S. issuer securities (in addition to the listing of U.S. issuer securities). However, the legal and regulatory environment in the United States, as well as the perception of this environment, has made and may continue to make it more difficult for Nasdaq to attract these listings and may therefore adversely affect the combined company’s competitive position. For example, the Sarbanes-Oxley Act of 2002 imposes a stringent set of corporate governance, reporting and other requirements on publicly listed companies in the U.S. Significant resources are necessary for issuers to come into and remain in compliance with the requirements of the Sarbanes-Oxley Act, which has had, and may continue to have, an impact on the ability of Nasdaq to attract and retain listings. At the same time, international companies are increasingly seeking access to the U.S. markets through private transactions that do not require listing or trading in the U.S. public markets, such as through Rule 144A transactions. Non-U.S. issuers may choose to list with non-U.S. securities exchanges exclusively without a secondary listing in the United States because they perceive the U.S. regulatory requirements and the U.S. litigation environment as too cumbersome and costly. If Nasdaq is unable to successfully attract the listing business of non-U.S. issuers, the perception of The NASDAQ Stock Market as a premier listing venue may be diminished, and the combined company’s competitive position may be adversely affected or its operating results could suffer.

We believe, based on the S.E.C.’s Fact Sheet on Potential Cross-Border Exchange Mergers, dated June 16, 2006, that listed companies on the Nordic Exchange are not, and will not become as a consequence of the completion of the Transactions, subject to the requirements of the Sarbanes-Oxley Act unless they otherwise choose to list or register their securities in the United States. However, there can be no assurances that non-U.S. issuers that do not list on The NASDAQ Stock Market will elect to list on the Nordic Exchange rather than other non-U.S. exchanges.

The combined company will be exposed to clearing risk.

OMX clears a range of equity-related and fixed-income-related derivative products. OMX assumes the counterparty risk for all transactions that are cleared through its markets and guarantees that its cleared contracts will be honored. As protection against the risks that are associated with its derivatives clearing business, OMX enforces minimum financial and operational criteria for membership eligibility, requires members and investors to provide collateral, and maintains established risk policies and procedures to ensure that the counterparty risks are properly monitored and pro-actively managed, but none of these measures provide absolute assurance against defaults by OMX’s counterparties on their obligations. Moreover, while collateralizing member and investor risk exposures is designed to ensure that sufficient collateral is maintained to compensate for the default risk incurred, no guarantee can be given that the collateral provided will at all times be sufficient. Although OMX maintains, and the combined company will maintain, clearing capital resources to serve as an additional layer of protection to help ensure that the combined company is able to meet its obligations, these resources may not be sufficient. Indebtedness to be incurred by the combined company in connection with the Transactions could limit the combined company’s flexibility in operation of its clearing business.

 

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Failure to attract and retain key personnel may adversely affect the combined company’s ability to conduct its business.

The combined company’s future success depends, in large part, upon its ability to attract and retain highly qualified professional personnel. Competition for key personnel in the various localities and business segments in which the combined company will operate is intense. The combined company’s ability to attract and retain key personnel, in particular senior officers, will be dependent on a number of factors, including prevailing market conditions and compensation packages offered by companies competing for the same talent. There is no guarantee that the combined company will have the continued service of key employees who will be relied upon to execute its business strategy and identify and pursue strategic opportunities and initiatives. In particular, the combined company may have to incur costs to replace senior executive officers or other key employees who leave, and the combined company’s ability to execute its business strategy could be impaired if it is unable to replace such persons in a timely manner.

The combined company will be highly dependent on the continued services of Robert Greifeld, our current Chief Executive Officer and President and the anticipated Chief Executive Officer of the combined company, Magnus Böcker, the current Chief Executive Officer of OMX and the anticipated President of the combined company, and other executive officers and key employees who possess extensive financial markets knowledge and technology skills. Other than employment agreements with Mr. Greifeld and Nasdaq’s general counsel, we do not have employment agreements with key executive officers, which would prevent them from leaving and competing with us. We do not maintain “key person” life insurance policies on any of our executive officers, managers, key employees or technical personnel. The loss of the services of these persons for any reason, or the loss of the services of similarly-positioned, key OMX employees, as well as any negative market or industry perception arising from those losses, could have a material adverse effect on the combined company’s business, financial condition and operating results.

We are subject to risks relating to litigation and potential securities laws liability.

Many aspects of our business potentially involve substantial liability risks. Although we are immune from private suits for self-regulatory organization activities, this immunity only covers certain of our activities, and we and our broker-dealer affiliates could be exposed to liability under federal and state securities laws, other federal and state laws and court decisions, and rules and regulations promulgated by the S.E.C. and other regulatory agencies. In addition, the combined company will be subject to liability under the laws of certain foreign jurisdictions. These risks include, among others, potential liability from disputes over the terms of a trade, or claims that a system failure or delay cost a customer money, that we entered into an unauthorized transaction or that we provided materially false or misleading statements in connection with a securities transaction. As we intend to defend any such litigation actively, significant legal expenses could be incurred.

In addition, Nasdaq is subject to oversight by the S.E.C. The S.E.C. regularly examines Nasdaq and its broker-dealer affiliates for compliance with Nasdaq’s obligations under the securities laws. In the case of non-compliance with our obligations under those laws, Nasdaq or its broker-dealer affiliates could be subject to investigation and judicial or administrative proceedings that may result in substantial penalties.

OMX is regulated both at the national level in several countries and at the European Union level. Implementation and application of these regulations may be undertaken by one or more regulatory authorities, which may challenge compliance with one or more aspects of such regulations. If a regulatory authority makes a finding of non-compliance, conditional fines can be imposed and OMX’s license can be revoked.

Failure to protect Nasdaq’s and OMX’s intellectual property rights could harm the combined company’s brand-building efforts and ability to compete effectively.

To protect Nasdaq’s and OMX’s intellectual property rights, we rely, and the combined company will rely, on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality

 

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agreements and other contractual arrangements with its affiliates, clients, strategic partners and others. The protective steps that the combined company will take may be inadequate to deter misappropriation of its proprietary information. The combined company may be unable to detect the unauthorized use of, or take appropriate steps to enforce, its intellectual property rights. Nasdaq has registered, or applied to register, its trademarks in the United States and in over 50 foreign jurisdictions and has pending U.S. and foreign applications for other trademarks. Nasdaq also maintains copyright protection on its Nasdaq-branded materials and pursues patent protection for Nasdaq-developed inventions and processes. OMX claims copyright to the software products developed by OMX, and holds a number of patents, patent applications and licenses, including the names OMX, OMX Nordic Exchange, Genium, OMX Nordic Exchange Stockholm AB and OMX Exchanges. Effective trademark, copyright, patent and trade secret protection may not be available in every country in which we offer or the combined company intends to offer its services. Failure to protect Nasdaq’s and OMX’s intellectual property adequately could harm the combined company’s brand and affect its ability to compete effectively. Further, defending the combined company’s intellectual property rights could result in the expenditure of significant financial and managerial resources.

Damage to the combined company’s reputation could have a material adverse effect on its businesses.

One of the combined company’s competitive strengths will be its strong reputation and brand name. Various issues may give rise to reputational risk, including issues relating to:

 

   

the representation of the combined company’s business in the media;

 

   

the accuracy of the combined company’s financial statements and other financial and statistical information;

 

   

the quality of the combined company’s corporate governance structure; and

 

   

the quality of the combined company’s products, including the reliability of its transaction-based business, the accuracy of the quote and trade information provided by its market information services business and the accuracy of calculations used by its financial products business for indices and unit investment trusts.

Damage to the combined company’s reputation could cause some issuers not to list their securities on the combined company’s exchanges, as well as reduce the trading volume on the combined company’s exchanges or cause it to lose customers in its market information services or financial products businesses. This, in turn, may have a material adverse effect on the combined company’s business, financial condition and operating results.

We are a holding company that depends on cash flow from our subsidiaries to meet our obligations.

As of August 1, 2006, Nasdaq is a holding company with no direct operating businesses other than the equity interests of our subsidiaries. The combined company will retain a holding company structure and, accordingly, all our operations will be conducted by our subsidiaries. As a holding company, the combined company will require dividends and other payments from its subsidiaries to meet cash requirements or to pay dividends. If the combined company’s subsidiaries are unable to pay it dividends and make other payments to it when needed, it will be unable to satisfy its obligations.

OMX shareholder approval is required for the payment of dividends or distributions; however, no prior approval from any regulatory body is necessary for such payment. Nevertheless, minimum capital requirements mandated by financial supervisory authorities having jurisdiction over the exchanges operated by OMX, which we refer to as FSAs, indirectly restrict the amount of any dividend paid. Failure to satisfy minimum capital requirements can result in revocation of the licenses of the exchanges operated by OMX. Minimum capital requirements vary between the different FSAs. In Iceland, the minimum capital requirement is approximately 60 million Icelandic Kronor. In Denmark, the minimum capital requirement is 40 million Danish Kronor, which

 

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will be decreased to 8 million Danish Kronor in November 2007. FSAs in other jurisdictions in which OMX operates generally only require that capital be sufficient for exchange and clearing operations. To the extent the applicable FSA does not permit the companies operating the Nordic Exchange or the Baltic Market to dividend or distribute their earnings upstream, the combined company will be subject to increased demands on its cash resources from its other operations, which could have a material adverse effect on the combined company’s business, financial condition and operating results.

Future acquisitions, partnerships and joint ventures may require significant resources and/or result in significant unanticipated losses, costs, or liabilities.

Over the past three years, acquisitions including the acquisitions of INET and Nasdaq Execution Services, LLC (formerly Brut, LLC) and the proposed combinations with OMX, the Boston Stock Exchange and the Philadelphia Stock Exchange have been (or, in the case of future acquisitions, are expected to be) significant factors in Nasdaq’s growth. Although we cannot predict the combined company’s rate of growth as the result of acquisitions with complete accuracy, we believe that additional acquisitions or entering into partnership and joint ventures will be important to the combined company’s growth strategy. Many of the other potential purchasers of assets in our industry have greater financial resources than we have. Therefore, we cannot be sure that we will be able to complete future acquisitions on terms favorable to us.

We may finance future acquisitions by issuing additional equity and/or debt. The issuance of additional equity in connection with any such transaction could be substantially dilutive to existing shareholders. The issuance of additional debt could increase our leverage substantially. In addition, announcement or implementation of future transactions by us or others could have a material effect on the price of our stock. We could face financial risks associated with incurring additional debt, particularly if the debt resulted in significant incremental leverage. Additional debt may reduce our liquidity, curtail our access to financing markets, impact our standing with the credit agencies and increase the cash flow required for debt service. Any incremental debt incurred to finance an acquisition could also place significant constraints on the operation of our business.

These equity, debt and managerial commitments may impair the operation of our businesses. Furthermore, any future acquisitions of businesses or facilities could entail a number of additional risks, including:

 

   

problems with effective integration of operations;

 

   

the inability to maintain key pre-acquisition business relationships;

 

   

increased operating costs;

 

   

the diversion of our management team from its other operations;

 

   

problems with regulatory bodies;

 

   

exposure to unanticipated liabilities;

 

   

difficulties in realizing projected efficiencies, synergies and cost savings; and

 

   

changes in our credit rating and financing costs.

OMX operates in various emerging markets that are subject to greater political, economic, and social uncertainties than developed countries.

The operations of OMX are subject to the risk inherent in international operations, including but not limited to, risks with respect to operating in Central and Eastern Europe, the Middle East and Asia. Some of these economies are perceived to be subject to greater political, economic and social uncertainties than countries with more developed institutional structures. Political, economic or social events or developments in one or more of these countries could adversely affect OMX’s operations and its related financial results and, in turn, the operations and financial results of the combined company.

 

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OMX has invested substantial capital in system platforms, including Genium, and a failure to successfully implement such systems could adversely affect OMX’s business.

In its technology operations, OMX invests substantial amounts in the development of system platforms. Although investments are carefully planned, there can be no assurance that the demand for such platforms will justify the related investments and that the future levels of orders will be sufficient to generate an acceptable return on such investments. In particular, OMX’s Market Technology business area has invested substantial capital in its development of next-generation information technology for marketplaces called Genium. If OMX is unable to successfully implement Genium, or if OMX fails to generate adequate revenue from planned system platforms, or if it fails to do so within the envisioned timeframe, it could have an adverse effect on the combined company’s results of operations and financial condition.

If the Transactions are completed, OMX’s technology operations may be negatively affected.

If the Transactions are completed, certain current or potential customers of OMX’s technology operations, who do not currently view OMX as a competitor, may view the combined company as a competitor. As a result, these customers may limit or eliminate their use of OMX’s technology operations, and, as a result, the performance of OMX’s technology operations may suffer.

After completion of the Transactions, the combined company will be exposed to greater currency risk.

After completion of the Transactions, the combined company will have operations in the U.S. and several of the Nordic and Baltic markets and will thus have significant exposure to exchange rate movements between the Swedish Krona, Danish Krone, Icelandic Króna, Euro, U.S. dollar and other foreign currencies. Significant inflation or disproportionate changes in foreign exchange rates with respect to one or more of these currencies could occur as a result of general economic conditions, acts of war or terrorism, changes in governmental monetary or tax policy or changes in local interest rates. Although we have certain currency hedges in place, these hedges may not be effective and, as a result, fluctuations in exchange rates may increase the amount of U.S. dollars we are required to pay for OMX Shares.

In addition, these exchange rate differences will also affect the translation of OMX’s results of operations and financial condition into U.S. dollars as part of the preparation of the combined company’s consolidated financial statements.

We may be required to pay a higher price for some OMX Shares as a result of compulsory acquisition proceedings under Swedish law.

In the event that Nasdaq obtains more than 90% of the OMX Shares, Nasdaq intends to commence a compulsory acquisition procedure under the Swedish Companies Act to acquire all remaining OMX Shares.

The purchase price for the OMX Shares acquired through a compulsory acquisition procedure will be determined by an arbitration tribunal. It may take up to two years or more from initiation of the compulsory acquisition procedure until the arbitration tribunal decides on the purchase price. Thereafter, the purchase price will be distributed to the shareholders whose OMX Shares were acquired through the compulsory acquisition procedure, together with interest earned at a market rate set by the Swedish Central Bank pursuant to Swedish law.

Nasdaq may elect to request advance title to the OMX Shares to be acquired in the compulsory acquisition procedure, in accordance with the Swedish Companies Act. Advance title means that full ownership is obtained by Nasdaq with respect to the remaining OMX Shares before the arbitration proceedings regarding the purchase price have been completed. The arbitration tribunal’s granting of advance title would be subject to Nasdaq providing satisfactory security for payment of the purchase price and the accrued interest thereon.

 

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As a result of the compulsory acquisition proceedings under Swedish law, we may ultimately have to pay, in the aggregate, a higher price per OMX Share in order to purchase the remaining OMX Shares that are outstanding after completion of the Transactions.

As a result, holders of OMX Shares that do not accept the Borse Dubai Offer and whose OMX Shares are subsequently acquired in the compulsory acquisition proceedings may not receive payment for a significant period after completion of the Transactions.

Our investment in DIFX may be unsuccessful and could harm us in other ways.

Pursuant to the DIFX Transaction Agreement, we and Borse Dubai have agreed that in exchange for $50 million and the entry into certain licensing and technology agreements, we will acquire 33 1/3% of the outstanding equity of DIFX. We have also committed to providing additional capital, up to $25 million, to DIFX under certain circumstances. These investments are in addition to the maximum SEK 12,582,952,392 in cash we may pay Borse Dubai for OMX Shares pursuant to the OMX Transaction Agreement. Our investment in DIFX may be unsuccessful. Additionally, the licensing and technology agreements we will enter into with DIFX may have an adverse effect on our brand and on us. We may not be able to terminate these agreements or end our association with DIFX in a manner that would prevent lasting and potentially significant harm to our brand and reputation, particularly in certain key emerging markets. Our agreements with DIFX will also prevent or limit us from seeking opportunities to grow our business in certain regions, and this may have a negative impact on us in the future.

 

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THE SPECIAL MEETING OF HOLDERS OF NASDAQ VOTING SECURITIES

Time, Place and Purpose of the Nasdaq Special Meeting

The special meeting of holders of Nasdaq Voting Securities is scheduled to be held on December 12, 2007, at 9:00 a.m., local time, at One Liberty Plaza, New York, New York 10006. The purpose of the Special Meeting is:

 

   

to approve the issuance of 60,561,515 shares of Nasdaq Common Stock, pursuant to our agreement with Borse Dubai;

 

   

to approve an amendment to Nasdaq’s Restated Certificate of Incorporation to change Nasdaq’s name to “The NASDAQ OMX Group, Inc.” upon our acquisition of OMX; and

 

   

to transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Nasdaq’s Board of Directors recommends that you vote “for” Proposal One and Proposal Two. For the reasons for this recommendation, see “Proposals to be Considered and Voted Upon by Holders of Nasdaq Voting Securities at the Special Meeting—Nasdaq’s Reasons for the Transactions.”

Who Can Vote at the Nasdaq Special Meeting

Only holders of record listed on the books of Nasdaq at the close of business on the Record Date of the following Nasdaq securities will be entitled to notice of, and to vote at the Special Meeting:

 

   

Nasdaq Common Stock; and

 

   

Nasdaq Voting Notes.

As of the Record Date, there were outstanding 114,523,533 shares of Nasdaq Common Stock (including shares of restricted Nasdaq Common Stock entitled to vote at the Special Meeting). As of the Record Date, the Nasdaq Voting Notes were convertible into 30,689,655 shares of Nasdaq Common Stock.

The 114,523,533 shares of Nasdaq Common Stock outstanding as of the Record Date were held by approximately 1,495 holders of record. Each share of Nasdaq Common Stock has one vote, subject to the voting limitation in our Restated Certificate of Incorporation that generally prohibits a holder from voting in excess of 5% of the total voting power of Nasdaq. The holder of each Nasdaq Voting Note is entitled to the number of votes equal to the number of shares of Nasdaq Common Stock into which that Nasdaq Voting Note could be converted on the Record Date, subject to the 5% voting limitation contained in our Restated Certificate of Incorporation. The enclosed proxy card shows the number of Nasdaq Voting Securities that you are entitled to vote. Your individual vote is confidential and will not be disclosed to third parties. If you own Nasdaq Voting Securities through a broker, bank or other nominee and attend the Special Meeting, you should bring a letter from your broker, bank or other nominee identifying you as the beneficial owner of the Nasdaq Voting Securities and authorizing you to vote.

Shares that are held in Nasdaq’s treasury are not entitled to vote at the Special Meeting.

Quorum

In order to conduct business at the Special Meeting, a quorum must be present. The presence of the holders of at least a majority (greater than 50%) of the votes entitled to be cast by holders of the Nasdaq Voting Securities constitutes a quorum. We will treat the holders of Nasdaq Voting Securities represented by a properly signed and returned proxy, including abstentions and broker non-votes, as present at the Special Meeting for the purposes of determining the existence of a quorum. If a quorum is not present, it is expected that the Special Meeting will be adjourned or postponed to solicit additional proxies.

 

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Required Vote

Approval of Proposal One requires the affirmative vote of at least a majority of the votes present in person or represented by proxy at the Special Meeting and entitled to vote thereon.

Approval of Proposal Two requires the affirmative vote of at least a majority of our outstanding voting power.

For both proposals, you may vote “for,” “against” or “abstain.” If you “abstain,” it has the same effect as a vote “against” each of Proposal One and Proposal Two. If you do not sign and send in your proxy card, do not vote using the telephone or Internet, or do not vote at the Special Meeting, it will have no effect on the vote needed for Proposal One, assuming that there is a quorum, but it will have the effect of a vote “against” Proposal Two. If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of Nasdaq’s Board of Directors described in this proxy.

Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of Nasdaq’s Board of Directors. With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by Nasdaq’s Board of Directors or, if no recommendation is given, in their own discretion.

A djournments

If a quorum is not present at the Special Meeting, the Special Meeting may be adjourned from time to time until a quorum is present or represented. In addition, adjournments of the Special Meeting may be made for the purpose of soliciting additional proxies in favor of Proposal One and Proposal Two. Pursuant to our By-Laws, the chairman of the Special Meeting has the right and authority to adjourn the Special Meeting in the chairman’s sole discretion and without a vote of holders of Nasdaq Voting Securities, which adjournment may be for up to 30 days without further notice (unless a new record date is fixed for the adjourned Special Meeting), other than by an announcement made at the Special Meeting.

Manner of Voting

If you are a holder of Nasdaq Voting Securities and you hold your Nasdaq Voting Securities in your own name, you may submit your vote for or against the proposals considered at the Special Meeting in person or by proxy. You may vote by proxy in any of the following ways:

 

   

by using the enclosed proxy card and mailing a completed and signed proxy card to the address listed on the proxy card using the provided self-addressed stamped envelope;

 

   

by telephone using the toll-free number shown on the enclosed proxy card; or

 

   

by visiting the website noted on the enclosed proxy card and voting through the Internet by no later than 11:59 p.m., Eastern Time, on December 11, 2007.

Information and applicable deadlines for using the proxy card, or voting by telephone or through the Internet, are set forth in the enclosed proxy card instructions.

If your Nasdaq Voting Securities are registered in the name of a broker, bank or other nominee (which is also known as being held in “street name”), that broker, bank or other nominee has enclosed or will provide a voting instruction card for the holder to direct the broker, bank or other nominee how to vote its shares. Holders who hold securities in “street name” must return their instructions to their broker, bank or other nominee on how to vote their securities. If a holder that holds securities in “street name” desires to attend the Special Meeting, the holder should bring a letter from its broker, bank or other nominee identifying the holder as the beneficial owner of such securities, confirming that such securities have not otherwise been voted and will not be voted via proxy, and authorizing the holder of Nasdaq Voting Securities to vote the securities or specifying how such securities had been voted.

 

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All Nasdaq Voting Securities represented by properly executed proxies or voting instructions (including those given by phone or through the Internet) received in time for the Special Meeting will, unless revoked, be voted in accordance with the instructions indicated on those proxies or voting instructions. If no instructions are indicated on a properly executed proxy card, the Nasdaq Voting Securities will be voted in accordance with the recommendation of Nasdaq’s Board Of Directors and, therefore, “for” Proposal One and Proposal Two.

If you are a holder of Nasdaq Voting Securities and your proxy indicates instructions for some, but not all, of the proposals, your votes will be cast as indicated on the specified proposals and as described in the preceding sentence for any proposal for which no instructions are indicated.

If you return a properly executed proxy card or voting instruction card and have indicated that you have abstained from voting on a proposal, your Nasdaq Voting Securities represented by the proxy will be considered present at the Special Meeting for purposes of determining a quorum, but will have the same effect as a vote against the proposal. Nasdaq urges you to mark each applicable box on the proxy card or voting instruction card to indicate how to vote your Nasdaq Voting Securities.

You may revoke your proxy at any time before it is voted by:

 

   

submitting a later-dated proxy by mail, fax, telephone or through the Internet; or

 

   

attending the Special Meeting and voting by paper ballot in person.

Attendance at the Special Meeting will not, in and of itself, constitute revocation of a previously granted proxy. If the Special Meeting is adjourned or postponed, it will not affect the ability of holders of Nasdaq Voting Securities to exercise their voting rights or to revoke any previously granted proxy using the methods described above.

Broker Non-Votes

Broker non-votes are securities held by banks, brokers or nominees for which, with respect to an item to be voted on, voting instructions have not been received from the beneficial owners or the persons entitled to vote those securities and with respect to which the bank, broker or nominee does not have discretionary voting power under rules applicable to broker-dealers. Broker non-votes, if any, will have no effect on the vote on Proposal One, assuming that there is a quorum, but will have the effect of a vote “against” Proposal Two.

Solicitation of Proxies

Nasdaq will incur expenses in connection with the printing and mailing of this Proxy Statement. We have retained the services of Mellon Investor Services LLC to aid in the solicitation of proxies from banks, brokers, nominees and intermediaries. We estimate that we will pay Mellon Investor Services LLC a fee of $12,500 for its services, plus out of pocket expenses. Nasdaq and its proxy solicitor also will request banks, brokers and other intermediaries holding Nasdaq Voting Securities beneficially owned by others to send this Proxy Statement to, and obtain proxies from, the beneficial owners and will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone and other electronic means, advertisements and personal solicitation by the directors, officers or employees of Nasdaq. No additional compensation will be paid to Nasdaq directors, officers or employees for solicitation.

 

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PROPOSALS TO BE CONSIDERED AND VOTED UPON BY HOLDERS OF NASDAQ VOTING SECURITIES AT THE SPECIAL MEETING

The Special Meeting will be held on December 12, 2007, at 9:00 a.m., local time, at One Liberty Plaza, New York, New York 10006 to consider the following items of business:

Proposal One

Approval of the Issuance of 60,561,515 shares of Nasdaq Common Stock

Nasdaq is seeking the approval of holders of Nasdaq Voting Securities for the issuance of 60,561,515 shares of Nasdaq Common Stock in the Transactions as described in this Proxy Statement, as required by The NASDAQ Stock Market Marketplace Rule 4350(i).

NASDAQ Requirements

The NASDAQ Stock Market rules require the approval of holders of Nasdaq Voting Securities prior to the issuance of additional shares of Nasdaq Common Stock in any transaction if, among other things, the issuance is in connection with certain acquisitions or the issuance could result in a change of control or the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the common stock or of securities convertible into or exercisable for common stock and the price is less than the greater of book or market value.

As of the Record Date, there were 114,523,533 shares of Nasdaq Common Stock outstanding and the Nasdaq Voting Notes were convertible into 30,689,655 shares of Nasdaq Common Stock. As part of the Transactions, Borse Dubai and the Trust will acquire in the aggregate 60,561,515 shares of Nasdaq Common Stock, representing an increase of approximately 39% over the number of outstanding shares of Nasdaq Common Stock as of the Record Date (calculated on a fully diluted basis using the treasury method). The issuance of the shares of Nasdaq Common Stock will allow us to conduct and complete the Transactions discussed in this Proxy Statement.

Impact of Issuance on Existing Shareholders

Nasdaq’s existing common shareholders will have rights which are equal to those of the holders of the newly-issued Nasdaq Common Stock. In determining whether to vote for this proposal, shareholders should consider that they are subject to the risk of substantial dilution of their interests which will result from the issuance of shares of Nasdaq Common Stock, and that as a result of the issuance of such Nasdaq Common Stock, the current shareholders will own a smaller percentage of the outstanding Nasdaq Common Stock. Immediately following the completion of the Transactions, we estimate that Borse Dubai will hold approximately 19.99% and the Trust will hold approximately 8.33% of Nasdaq Common Stock outstanding after the Transactions calculated on a fully diluted basis using the treasury method.

Recommendation of Nasdaq’s Board of Directors

Nasdaq cannot complete the Transactions unless Proposal One is approved by the required vote. Nasdaq’s Board of Directors recommends a vote “for” approval of Proposal One.

Proposal Two

Approval of an Amendment to Nasdaq’s Restated Certificate of Incorporation to Change

Nasdaq’s Name to “The NASDAQ OMX Group, Inc.”

Nasdaq’s Restated Certificate of Incorporation currently provides that Nasdaq’s name is “The Nasdaq Stock Market, Inc.” As part of our agreement with OMX, we have committed to seeking the approval of our shareholders to change the name of the combined company to “The NASDAQ OMX Group, Inc.” upon

 

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completion of the acquisition of OMX. We believe this name better reflects the expanded global reach of the combined company and best leverages the significant brand equity in the Nasdaq and OMX names. If holders of Nasdaq Voting Securities approve this proposal, Article First of Nasdaq’s Restated Certificate of Incorporation would be amended to read in its entirety as follows:

“The name of the corporation is The NASDAQ OMX Group, Inc.”

If holders of Nasdaq Voting Securities do not approve this proposal, Nasdaq will not be prevented from completing the Transactions as described in this Proxy Statement. As part of our agreement with OMX, however, if this proposal is not approved, we must take such actions as reasonably requested by OMX to ensure that after the closing of the acquisition of OMX, Nasdaq trades under the name “The NASDAQ OMX Group.” If holders of Nasdaq Voting Securities approve this proposal, we intend to file an amendment to our Restated Certificate of Incorporation reflecting the name change with the Secretary of State of the State of Delaware as promptly as practicable following completion of the Transactions.

Recommendation of Nasdaq’s Board of Directors

At a meeting held on May 24, 2007, Nasdaq’s Board of Directors adopted a resolution setting forth the proposed name change and declaring it advisable. Nasdaq’s Board of Directors recommends a vote “for” Proposal Two.

Background of the Offer and the Transactions

Nasdaq’s Board of Directors and OMX’s Board of Directors continually review their respective companies’ results of operations and competitive positions in the industries in which they operate, as well as their strategic alternatives. In connection with these reviews, each of Nasdaq and OMX from time to time has evaluated potential transactions that would further its strategic objectives. In addition, OMX regularly has contact with other exchange companies to discuss areas of possible collaboration, including strategic transactions. In connection with these reviews and discussions, OMX has regularly engaged Credit Suisse Securities (Europe) Limited, which we refer to as Credit Suisse, since 2002 to act as its financial advisor with respect to evaluating possible strategic transactions.

Following a request from OMX, on August 1 and 2, 2006, members of management of Nasdaq, led by David Warren, and members of senior management of OMX met in person in New York for a general introduction. Similar meetings were held on September 21 and 22, 2006 in Amsterdam, with Adena Friedman leading the meeting for Nasdaq. Terms of a potential combination of Nasdaq and OMX were not discussed at these meetings. Rather, Nasdaq and OMX shared general information about their respective organizations, operations and technology.

On October 20, 2006, Robert Greifeld met with members of OMX’s Board of Directors and executive team, led by Magnus Böcker, for a general introduction and discussion regarding Nasdaq’s business, and in December 2006, Mr. Böcker met with members of Nasdaq’s Board of Directors and executive team, led by Mr. Greifeld, for a general introduction and discussion regarding OMX’s business. Terms of the combination were not discussed at these meetings. Rather, Nasdaq and OMX shared basic information about their respective organizations and operations.

During February, March and April 2007, representatives of Nasdaq, led by Mr. Warren, and OMX, led by Mr. Böcker, as well as representatives of JPMorgan, Morgan Stanley & Co. Limited, which we refer to as Morgan Stanley (which had been engaged by OMX in March 2007 as co-financial advisor with Credit Suisse in connection with a potential combination of Nasdaq and OMX), and Credit Suisse had ongoing discussions regarding a potential combination of Nasdaq and OMX. At these meetings, the parties engaged in initial business diligence, with no confidential information exchanged and all discussions utilizing publicly available data.

 

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On March 12, 13 and 14, 2007, these same parties participated in due diligence sessions in New York, and on March 20 and 21, 2007, these same parties participated in due diligence sessions in Stockholm. Again, no confidential information was exchanged and all discussions utilized publicly available data.

On March 23, 2007, Nasdaq’s Board of Directors met and management provided an update regarding discussions between Nasdaq and OMX, including a discussion of the financial and strategic effects of a potential combination of OMX with Nasdaq.

On April 12 and April 23, 2007, OMX’s Board of Directors was presented with an update regarding discussions between Nasdaq and OMX, including a discussion of the financial and strategic effects of a potential combination of OMX with Nasdaq.

On April 18, 2007, Nasdaq’s Board of Directors met and was presented with an update regarding discussions between Nasdaq and OMX and reviewed the strategic rationale of a combination with OMX. In the presentation materials provided to Nasdaq’s Board of Directors by management, management presented a range of possible per-OMX Share purchase prices from SEK 180 to SEK 220 (in SEK 10 increments). An indicative purchase price of SEK 190 was an illustrative case chosen by management, after discussions with JPMorgan, to begin Nasdaq’s Board of Directors’ discussions of a potential transaction across the entire range of purchase prices presented at that meeting.

On April 19, 2007, representatives of Nasdaq, led by Jean-Jacques Louis, JPMorgan, Hellman & Friedman LLC and Silver Lake Partners met to discuss a possible combination of Nasdaq with OMX. These discussions focused on the strategic rationale and financial impact on Nasdaq of a combination. For discussion purposes, the parties utilized the same price per OMX Share as discussed at the April 18 meeting of Nasdaq’s Board of Directors.

On April 24, 2007, representatives of Nasdaq, led by Mr. Warren, JPMorgan, Hellman & Friedman LLC and Silver Lake Partners met to discuss a possible combination of Nasdaq with OMX. These discussions were substantively similar to those at the April 19 meeting.

On April 26, 2007, Mr. Greifeld and Mr. Böcker conducted in-person discussions in Amsterdam regarding the proposed transaction. This meeting focused on the organizational structure of the combined company.

On April 28, 2007, representatives of Nasdaq, led by Mr. Warren, and OMX, led by its senior management, including representatives of JPMorgan and Morgan Stanley, discussed a potential transaction, including potential terms, documentation and timing. Over the next two weeks, these parties discussed various terms of the proposed transaction and exchanged term sheets regarding a proposed combination of Nasdaq and OMX.

On May 3, 2007, representatives of Nasdaq, led by Mr. Warren, JPMorgan, Hellman & Friedman LLC and Silver Lake Partners met to discuss a possible combination of Nasdaq with OMX. These discussions focused on the strategic rationale and financial impact on Nasdaq of a combination with OMX.

On May 7 and May 13, 2007, Nasdaq’s Board of Directors met and management provided an update regarding discussions between Nasdaq and OMX. At this meeting, Nasdaq’s Board of Directors was given a detailed analysis of the strategic rationale for the combination and discussed key terms, including the price per OMX Share, the appropriate mixture of cash and stock and the overall structure of the Offer.

On May 16, 2007, Nasdaq’s legal counsel, Skadden, Arps, Slate, Meagher & Flom LLP and Advokatfirman Cederquist KB, distributed a draft of the Nasdaq OMX Transaction Agreement to OMX. From May 16 to May 24, 2007, OMX, together with its financial advisors and legal advisors, Cleary Gottlieb Steen & Hamilton LLP and Advokatfirman Vinge KB, and Nasdaq, together with its financial and legal advisors, negotiated the terms of the Nasdaq OMX Transaction Agreement and press release announcing the Offer.

On May 17 and May 18, 2007, Mr. Greifeld and Mr. Böcker conducted in-person discussions in New York regarding the proposed transaction. Significant progress on open issues between the parties was made during

 

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these discussions, and, as a result, the parties decided to pursue definitive documentation with respect to a combination of Nasdaq and OMX in parallel with continued discussions. At this meeting, the parties reached a fundamental agreement on the financial aspect of the Offer and other significant terms (for example, the number of seats on the combined company’s Board of Directors to which each party would be entitled, the appropriate mixture of cash and stock, and the overall structure of the Offer).

In the second and third weeks of May 2007, the Voting Agreement Parties were made aware that OMX desired that they enter into voting agreements in connection with any announcement of the Offer. During this time period, there were informal discussions among OMX, the Voting Agreement Parties and Nasdaq regarding these potential voting agreements. From May 22 to May 24, 2007, OMX and the Voting Agreement Parties negotiated the terms of the proposed voting agreements.

In the second and third weeks of May 2007, the Irrevocable Undertakings Parties were made aware that Nasdaq desired that they enter into irrevocable undertakings in connection with any announcement of the Offer. During this time period, there were informal discussions among Nasdaq, the Irrevocable Undertakings Parties and OMX regarding these potential irrevocable undertakings.

From May 19 to May 24, 2007, Nasdaq and the Irrevocable Undertakings Parties negotiated the terms of the proposed Irrevocable Undertakings.

On May 23, 2007, members of Nasdaq’s management, led by Mr. Greifeld, along with its financial and legal advisors, traveled to Stockholm, Sweden to continue discussions with OMX’s executive team and its financial and legal advisors relating to a possible transaction. At this meeting, the parties finalized the financial and other terms of the Offer, including the price of SEK 208 per OMX Share in the Offer. Also on May 23, Nasdaq’s Board of Directors met and was presented with an update regarding discussions between Nasdaq and OMX.

On May 24, 2007, Nasdaq’s Board of Directors met and was presented with the Nasdaq OMX Transaction Agreement and Irrevocable Undertakings for approval. At that meeting, Nasdaq’s management, led by Mr. Greifeld, gave a presentation to Nasdaq’s Board of Directors regarding the Offer and related matters and JPMorgan reviewed with Nasdaq’s Board of Directors its financial analysis of the Offer, which analysis included certain financial information provided to JPMorgan by Nasdaq’s management. JPMorgan also delivered its oral opinion, subsequently confirmed in writing, that, as of May 24, 2007, and based upon and subject to the factors and assumptions stated in its opinion, the consideration to be paid by Nasdaq in the Offer was fair, from a financial point of view, to Nasdaq. At that meeting and following a review of the materials presented, Nasdaq’s Board of Directors unanimously approved the Nasdaq OMX Transaction Agreement and the Irrevocable Undertakings and resolved to:

 

   

approve the Offer upon the terms and subject to the conditions in the press release announcing the Offer;

 

   

recommend that holders of Nasdaq Voting Securities vote in favor of the issuance of shares of Nasdaq Common Stock in the Offer and Proposal Two; and

 

   

authorize the public announcement of the recommendation of Nasdaq’s Board of Directors in the press release announcing the Offer.

On May 25, 2007, Nasdaq and OMX executed the Nasdaq OMX Transaction Agreement, the Irrevocable Undertakings and the voting agreements with the Voting Agreement Parties. Shortly thereafter, Nasdaq and OMX issued a joint press release announcing the Offer and the recommendation of the combination by OMX’s Board of Directors and Nasdaq’s Board of Directors. On November 6, 2007, OMX waived compliance by the Voting Agreement Parties with the voting agreements at the Special Meeting. On November 8, 2007, affiliates of Hellman & Friedman LLC sold their entire holdings in Nasdaq in a secondary public offering. As a result of such sale, the voting agreement between the affiliates of Hellman & Friedman LLC and OMX terminated in accordance with its terms.

 

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On June 5, 2007, OMX issued an additional press release confirming that OMX’s Board of Directors unanimously recommended that OMX shareholders accept the Offer.

On August 9, 2007, Borse Dubai announced that it had acquired 4.9% of the outstanding OMX Shares at a price of SEK 230 per share and had entered into the Borse Dubai Option Agreements to purchase another 24.2% of OMX’s share capital at an exercise price of SEK 230 per share (subject to Borse Dubai making an offer for OMX and subject to increase if the offer price was greater than SEK 230), the exercise of which was conditional on, among other things, receiving all necessary regulatory approvals to acquire OMX.

On August 17, 2007, Borse Dubai, through a wholly-owned Swedish subsidiary, announced a public offer to acquire all OMX Shares for SEK 230 in cash per OMX Share. As a consequence of that offer, the Irrevocable Undertakings terminated in accordance with their terms.

Since acquiring its stake in the LSE, Nasdaq had evaluated its options with respect to that stake. Over time, Nasdaq felt that its stock price did not adequately reflect the value of its stake in the LSE, and beginning in the week of July 30, 2007, Nasdaq began discussions with its financial advisors regarding the best way to reflect this value. As a result of these discussions, Nasdaq and its financial advisors came to the conclusion that an auction process with respect to the sale of Nasdaq’s stake in the LSE was the best way to meet Nasdaq’s desire to receive full value for its LSE holdings.

On August 19, 2007, Nasdaq’s Board of Directors met and authorized Nasdaq’s management to explore strategic alternatives for its stake in the LSE, including divestiture, and on August 20, 2007, Nasdaq publicly announced its intention to sell its stake in the LSE.

During the week of August 20, 2007, Mr. Greifeld received a telephone call from Tom Volpe of Borse Dubai. During this conversation, Mr. Greifeld and Mr. Volpe talked in general terms about Nasdaq and Borse Dubai working together to acquire OMX.

From August 20 to August 30, 2007, Nasdaq’s financial advisors began the auction process for Nasdaq’s stake in the LSE by contacting ten strategic and fourteen financial buyers to ascertain their interest in acquiring Nasdaq’s stake in the LSE, and confidentiality agreements between Nightingale and six separate parties were executed during this period. During this period, Nasdaq’s financial advisors distributed bid instruction letters to the six separate parties who had executed confidentiality agreements with Nightingale, which letters contained instructions for submitting a bid to acquire the LSE stake.

On August 29, 2007, Mr. Greifeld and others from Nasdaq traveled to London and met with Mr. Volpe and others from Borse Dubai. The parties discussed their respective offers for OMX as well as each party’s larger goals and objectives. The parties did not undertake negotiations at this meeting and no confidential information was exchanged.

During the week of September 4, 2007, Mr. Warren and others from Nasdaq, along with representatives of JPMorgan, traveled to London and met with Soud Ba’alawy and others from Borse Dubai for two days. The parties focused on an investment by Borse Dubai in Nasdaq and the structure of a joint offer for OMX, with a brief discussion of an investment by Nasdaq in DIFX. The same parties engaged in further telephonic discussions later in the week, with the focus again on an investment by Borse Dubai in Nasdaq and a joint offer for OMX.

On September 8 and 9, 2007, Edward Knight and others from Nasdaq, along with its legal advisors, and Mr. Ba’alawy and others from Borse Dubai, along with its legal advisors, began discussions of potential legal structures for a joint offer for OMX as well as legal issues related to an investment by Borse Dubai in Nasdaq. During the course of the discussions between Nasdaq and Borse Dubai regarding OMX, the parties considered acquiring OMX through the Offer as an alternative to the Borse Dubai Offer. The parties also considered transaction structures that would have allowed for OMX’s institutional shareholders to acquire from Nasdaq the shares to be issued to the Trust. However, the Takeover Rules do not permit a structure that would have enabled

 

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some, but not all, shareholders to participate in that opportunity. Given the cost and complexity of complying with the public securities offering requirements in numerous jurisdictions, Nasdaq did not feel it was feasible to continue to undertake an offering to all OMX shareholders. At all times, the goals of the parties remained acquiring OMX in as efficient a manner as possible by utilizing the Borse Dubai Option Agreements previously entered into by Borse Dubai, allowing Borse Dubai to become a significant minority shareholder in Nasdaq and ensuring that Nasdaq’s shareholders were not further diluted relative to the Offer. As a result of those goals, the parties determined that the transaction was best structured by using the Borse Dubai Offer (and thus utilizing the Borse Dubai Option Agreements) and issuing to Borse Dubai and the Trust the same number of shares of Nasdaq Common Stock that would have been issued to OMX shareholders in the Offer. The parties decided to structure the Transactions to include the issuance of shares of Nasdaq Common Stock to the Trust to be held for the economic benefit of Borse Dubai, instead of issuing such shares directly to Borse Dubai itself, to ensure that Borse Dubai’s investment in Nasdaq would be non-controlling in nature. This structure reflects the parties’ sensitivity to possible regulatory concerns (with respect to the Committee on Foreign Investment in the United States and regulatory authorities in the Nordic and Baltic regions) that a third party could exercise control with respect to Nasdaq and a desire to mitigate those concerns to the extent possible while still allowing the parties to meet their goals in the Transactions. The parties believe this structure alleviates these possible concerns. As a benchmark for the division of shares of Nasdaq Common Stock between Borse Dubai and the Trust, the parties considered that, under the membership rules of The Nasdaq Stock Market, broker-dealers that are members of The Nasdaq Stock Market are not permitted to own more than 20% of the shares of Nasdaq Common Stock, and that issuance of 20% or more of the shares of Nasdaq Common Stock often requires a shareholder vote under the listing standards of The Nasdaq Stock Market. Although neither of these provisions directly applies to Borse Dubai’s ownership, the parties viewed them as helpful reference points in their discussions and eventual agreement.

Throughout these and subsequent discussions, the initial consideration of SEK 230 per OMX Share discussed by the parties was the offer price in the original Borse Dubai Offer, and under the Takeover Rules the offer price could generally not be reduced in connection with an acquisition of OMX involving Borse Dubai. In addition, SEK 230 was the price at which Borse Dubai could acquire the OMX Shares subject to the Borse Dubai Option Agreements after the Borse Dubai Offer.

During the week of September 10, 2007, Borse Dubai and another party submitted bids to acquire Nasdaq’s stake in the LSE.

On September 11 and 12, 2007, representatives of Nasdaq, led by Mr. Griefeld, traveled to London and met with Mr. Ba’alawy and others from Borse Dubai to discuss Nasdaq’s investment in DIFX. Nasdaq shared general, non-confidential information regarding certain aspects of its technology and other Nasdaq assets that could be provided in connection with an investment in DIFX. The parties also discussed Borse Dubai’s goals and objectives for DIFX. Negotiations began regarding the structure and terms of an investment by Nasdaq in DIFX during these meetings. Throughout these and subsequent negotiations with respect to DIFX, Nasdaq’s position regarding the valuation of its investment was based on DIFX’s historical financial statements and budget, the view of Nasdaq’s management with respect to the proposed license arrangements and Nasdaq’s view of the opportunity, in cooperation with DIFX, to play an active role in the development of certain key emerging and rapidly developing markets. In addition, the parties took into account the expected capital contributions projected under DIFX’s business plan when determining the size of Nasdaq’s equity investment in, and subsequent ownership of, DIFX.

On September 13, 2007, Mr. Greifeld and others from Nasdaq, along with its legal advisors, and Mr. Ba’alawy and others from Borse Dubai met telephonically to discuss certain aspects of Borse Dubai’s investment in Nasdaq. Also on September 13, representatives of Nasdaq, led by Mr. Greifeld, and representatives of Borse Dubai, led by Mr. Ba’alawy, met telephonically to continue negotiations regarding Nasdaq’s investment in Borse Dubai and a joint offer for OMX. A term sheet regarding these matters was shared and discussed by the parties.

On September 15, 2007, Nasdaq’s Board of Directors met and management provided an update regarding the discussions with Borse Dubai.

 

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On September 15 and 16, 2007, representatives of Nasdaq, led by Mr. Greifeld, along with its legal advisors, and Mr. Ba’alawy, and others from Borse Dubai, along with its legal advisors, met telephonically at various times to continue discussions of all aspects of the Transactions.

During the period from September 17 to September 20, 2007, Mr. Knight of Nasdaq, along with its legal advisors, and Magnus Billing of OMX negotiated the terms of the Supplement, pursuant to which OMX would waive its rights under the nonsolicitation, no-shop and standstill provisions of the Nasdaq OMX Transaction Agreement with respect to the transactions contemplated by the press release issued by Nasdaq and Borse Dubai on September 20, 2007, and would approve the modified board composition as agreed to by the parties. On September 20, 2007, the Supplement was executed.

On September 18 and 19, 2007, representatives of Nasdaq, led by Mr. Greifeld, along with its legal advisors, met in London with representatives of Borse Dubai, led by Mr. Ba’alawy, along with its financial and legal advisors, to finalize negotiations of the Transactions.

By September 17, 2007, Nasdaq had received irrevocable, binding written offers from Borse Dubai and another party to acquire Nasdaq’s stake in the LSE.

On September 19, 2007, Nasdaq’s Board of Directors met and was presented with the proposed terms of the Transactions. At that meeting, Nasdaq’s management, led by Mr. Greifeld, gave a presentation to Nasdaq’s Board of Directors regarding the Transactions and related matters and JPMorgan reviewed with Nasdaq’s Board of Directors its financial analysis of the Acquisition, which included certain financial information provided to JPMorgan by Nasdaq’s management. JPMorgan delivered its oral opinion, subsequently confirmed in writing, that, as of that date, and based upon and subject to the factors and assumptions stated in its opinion, the consideration to be paid by Nasdaq in the Acquisition was fair, from a financial point of view, to Nasdaq. At that meeting and following a review of the materials presented, Nasdaq’s Board of Directors unanimously approved the Transactions and resolved to:

 

   

approve the LSE Transaction, a transaction independent of the Transactions and with respect to which an irrevocable binding written offer had been submitted by Borse Dubai at a higher price to the other party’s offer;

 

   

approve the Transactions upon the terms and subject to the conditions in the definitive documents presented to Nasdaq’s Board of Directors and further negotiated between Nasdaq and Borse Dubai;

 

   

authorize the arms’ length investment in DIFX and entry into the related licensing agreements;

 

   

recommend that holders of Nasdaq Voting Securities vote in favor of Proposal One;

 

   

approve the Supplement; and

 

   

authorize the public announcement of the recommendation of Nasdaq’s Board of Directors in the press release announcing the Transactions.

On September 20, 2007, Nasdaq, Borse Dubai and OMX executed the initial definitive documents related to the Transactions. Shortly thereafter, Nasdaq and Borse Dubai issued a joint press release announcing the Transactions and the recommendation of Nasdaq’s Board of Directors.

From September 23 to September 26, 2007, representatives of Nasdaq and representatives of Borse Dubai negotiated the terms of the proposed September Irrevocable Undertakings with certain OMX shareholders (including the terms governing the termination of the irrevocable undertakings and the conditions of the Borse Dubai Offer that would apply to those irrevocable undertakings), as well as a proposed increase in the offer price of the Borse Dubai Offer that was required by those OMX shareholders in order for them to enter into the irrevocable undertakings.

On September 23, 2007, Nasdaq’s Board of Directors met and approved the September Irrevocable Undertakings, an increase in Nasdaq’s cash payment of SEK 10 per OMX Share, and the public announcement of the same. At this meeting, JPMorgan reviewed with Nasdaq’s Board of Directors its financial analysis of the increase in Nasdaq’s cash payment in light of the Transactions. At this meeting, JPMorgan delivered its oral opinion, subsequently confirmed in writing, that, as of September 23, 2007, and based upon and subject to the

 

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factors and assumptions stated in its opinion, the consideration to be paid by Nasdaq in the Acquisition was fair, from a financial point of view, to Nasdaq. At this meeting, Nasdaq’s Board of Directors reviewed the presentation of JPMorgan, including the financial analyses and forecasts of Nasdaq’s management contained therein as well as the synergies expected to result from the Transactions, all of which were reviewed for accuracy and completeness by Nasdaq’s management, and extensively questioned management about such analyses, forecasts and underlying assumptions. In keeping with Delaware corporate law and the traditional practices of Nasdaq’s Board of Directors, Nasdaq’s Board of Directors relied on Nasdaq’s management, which is in the best position to provide accurate and complete estimates of the amount and timing of cost savings and related expense and revenue and other synergies expected to result from the Transactions.

On September 25, 2007, Nasdaq completed the sale of holdings representing 28% of the share capital of the LSE to Borse Dubai for approximately $1.6 billion. On September 26, 2007, Nasdaq completed the sale of the substantial balance of its holdings in LSE in open market transactions for approximately $190 million.

On September 26, 2007, Nasdaq and Borse Dubai jointly announced that the consideration per OMX Share in the Borse Dubai Offer was being increased to SEK 265 and that the minimum condition to the Borse Dubai Offer would be reduced to more than 50% of the outstanding OMX Shares. In connection with these changes to the Borse Dubai Offer, the parties announced that they had secured the September Irrevocable Undertakings. In connection with this announcement, Nasdaq and Borse Dubai executed an amendment to the agreements governing the Transactions entered into on September 20, 2007. The decision with respect to the value of the revised Borse Dubai Offer reflected the Offer Price required by those OMX shareholders party to the September Irrevocable Undertakings in order to for them to enter into the September Irrevocable Undertakings.

On November 15, 2007, Nasdaq and Borse Dubai entered into the OMX Transaction Agreement and the DIFX Transaction Agreement, which replaced the previous agreement between the parties relating to the Transactions. The commercial terms of the DIFX Transaction Agreement are a reflection of negotiations between Nasdaq and Borse Dubai concerning the DIFX Transactions.

Nasdaq’s Reasons for the Transactions and the Offer

On May 24, 2007, Nasdaq’s Board of Directors approved the Transaction Agreement, the Irrevocable Undertakings and the making of the Offer and recommends that holders of Nasdaq Voting Securities vote for Proposal Two at the Special Meeting.

On September 19, 2007, Nasdaq’s Board of Directors approved the Supplement and the initial definitive agreements related to the Transactions.

On September 23, 2007, Nasdaq’s Board of Directors approved an increase in Nasdaq’s cash payment as part of the Borse Dubai Offer. Nasdaq’s Board of Directors recommends that holders of Nasdaq Voting Securities vote “for” Proposal One at the Special Meeting.

On November 15, 2007, Nasdaq and Borse Dubai entered into the OMX Transaction Agreement and the DIFX Transaction Agreement, which superceded the previous agreement between the parties relating to the Transactions.

In reaching these decisions, Nasdaq’s Board of Directors consulted with Nasdaq’s management and its financial and legal advisors and considered a variety of factors, including the material factors described below. In light of the number and wide variety of factors considered in connection with its evaluation of the transaction, Nasdaq’s Board of Directors considered it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination. Nasdaq’s Board of Directors viewed its position as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of Nasdaq’s reasons for the proposed combination and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed under “Forward-Looking Statements.”

 

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The factors described in this section and in “—Recommendation of Nasdaq’s Board of Directors” were all of the material factors generally supporting Nasdaq’s Board of Directors’ decision to approve the Nasdaq OMX Transaction Agreement, the OMX Transaction Agreement and the DIFX Transaction Agreement, and to enter the Transactions. The factors included those set forth below, which were the factors set out in the joint press announcement of Nasdaq and OMX that was released on May 25, 2007 in connection with the announcement of the Offer.

 

   

That the combination of Nasdaq and OMX would create a premier global exchange company with an average daily trading volume of 7.4 million trades, representing a value of approximately $61 billion, and with approximately 4,000 listed companies from 39 countries with an aggregate market capitalization of approximately $5.5 trillion;

 

   

That the combined company would have many of the world’s largest companies listed on its marketplaces, with a leading market share of listings in the technology, software, telecommunication and pulp and paper industries worldwide, and that issuers listing with the combined company would be associated with an innovative, future-focused global exchange company with blue-chip peers in all industry sectors and would have access to a broad base of investors and deep pools of liquidity;

 

   

That the combined company’s liquidity pools, advanced speed of execution and integrated cross-border trading capabilities would provide issuers with increased visibility and access to global equity capital;

 

   

That the combined company would be the world-leading provider of exchange technology, since:

 

   

OMX has been a pioneer in creating a truly integrated cross-border stock market and also has created a world-renowned technology customer base of equity, debt and derivatives exchanges with its systems being used by over 60 marketplaces in more than 50 countries worldwide, including Hong Kong, Singapore, Australia and the U.S.; and

 

   

As the world’s first electronic stock exchange, Nasdaq pioneered electronic trading and has continued to innovate over the last thirty years and now has the fastest, most efficient trading platform in the U.S.;

 

   

That, together, Nasdaq and OMX could provide the technology for the world’s increasingly competitive and demanding capital markets, which increasingly require that exchanges be able to constantly secure the best price for investors and customers—a natural strength of Nasdaq’s and OMX’s robust technology and electronic trading platforms;

 

   

That OMX’s extensive experience and expertise in providing state-of-the-art exchange technology worldwide to a sophisticated and global customer base, matched with Nasdaq’s technology excellence and global brand and advanced services and support for innovative growth companies, provides a powerful opportunity to grow and enhance the combined technology business;

 

   

That the focus of the combined company on technology leadership and the combination of Nasdaq’s and OMX’s expertise and brands would generate growth opportunities and additional sales of technology and related services globally;

 

   

That the combined company would provide a highly competitive derivatives market considering:

 

   

the Nordic Exchange is Europe’s third largest marketplace for trading and clearing equity-related derivatives with an annual trading volume of approximately 140 million equity related derivatives contracts;

 

   

OMX’s Nordic distribution network is extended through an international network of links to cooperating exchanges and clearinghouses; and

 

   

OMX’s technology solutions are also being used by other leading derivatives exchanges around the world and would be a key asset in the combined company’s efforts to capture the high growth in derivatives trading globally;

 

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That the combined company would feature an enhanced data business with richer content and improved global distribution;

 

   

That the combined company would leverage the strength of each organization’s distribution capabilities to broaden the customer base for Nasdaq’s and OMX’s existing data products and to provide enhanced data tailored with value-added services to market participants;

 

   

That through Nasdaq’s distribution network of over 250 data vendors and OMX’s over 100 data vendors, the combined company would be able to enhance its global market transparency;

 

   

That the market data generated by the combined company would lever its product expertise and develop innovative data products and combined indices incorporating global complementary Nasdaq and OMX stocks and derivatives;

 

   

That the combined company would have enhanced strategic opportunities, including that:

 

   

the combined company, with increased financial and managerial resources, would be the partner of choice for future cooperation and consolidation opportunities;

 

   

the combined company would be well positioned to drive organic growth and to continue to take a proactive role in sector consolidation in Europe, emerging markets, the Americas and Asia; and

 

   

both Nasdaq and OMX would benefit from increased geographic, product and sector diversification and each would benefit from the other’s strategic holdings in the industry;

 

   

That the combined company would have significant synergy potential given that the acquisition of OMX is anticipated to create substantial value for shareholders, with total annual pre-tax annual synergies estimated at $150 million (of which $100 million constitutes estimated cost synergies and $50 million estimated revenue synergies) by 2010. The $100 million of cost synergies are expected to be comprised of $66 million in the rationalization of IT-systems and data centers and $34 million in the rationalization of non-IT functions, and reduced capital and procurement expenditure. The $50 million of revenue synergies are expected to be comprised of $30 million in transaction services, $10 million in issuer services and $10 million in information services;

 

   

That cost synergies would be realized through the rationalization of IT systems and data centers, rationalization of non-IT functions, and reduced capital and procurement expenditure;

 

   

That revenue synergies would be achieved through the creation of deeper liquidity pools, increased cross-border trading, increased international listings, packaged data products and enhanced technology sales;

 

   

That investors and members would benefit from deeper pools of liquidity and higher trading volumes, a common IT infrastructure and interface for both exchange companies, access to more products and positive portfolio diversification;

 

   

That issuers on OMX’s exchanges would benefit from increased visibility and direct access to the largest investor base in the world as a result of their affiliation with Nasdaq, and increased trading activity and liquidity is also expected to reduce the cost of capital for these issuers;

 

   

That technology customers would continue to benefit from the market insight the combined company derives from its direct participation in capital markets, and combined expertise would accelerate the development of the next generation of exchange technology at a time when investors and members are increasingly demanding multi-asset class trading platforms;

 

   

That data providers and vendors would receive richer content and improved global distribution and the market data would allow the combined company to leverage its product expertise and develop a range of combined indices incorporating complementary stocks and derivatives from existing indices; and

 

   

That employees of both Nasdaq and OMX would have enhanced career opportunities as employees of the combined company given the combined company’s strategy to grow volume and broaden its customer base.

 

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In addition to the foregoing factors, Nasdaq’s Board of Directors also considered the following material factors in connection with its decision to approve the Nasdaq OMX Transaction Agreement:

 

   

The opinion of JPMorgan that, as of May 24, 2007, and based upon and subject to the factors and assumptions stated in its opinion, the consideration to be paid by Nasdaq in the Offer is fair, from a financial point of view, to Nasdaq, which opinion addresses the fairness of the consideration to be offered by Nasdaq in the Offer only as it relates to Nasdaq and does not address the underlying decision by Nasdaq to make the Offer or constitute a recommendation to the shareholders of Nasdaq or the shareholders of OMX with respect to the Offer, including how to vote with respect thereto.

 

   

The structure of the Offer, the terms of the transaction, the dilution effects on common shareholders of Nasdaq, the Irrevocable Undertakings, the non-solicitation provisions of the Nasdaq OMX Transaction Agreement and expected capital structure of the combined company. In this respect, Nasdaq’s Board of Directors considered the following factors as part of its decision-making process:

 

   

An implied price per OMX Share of SEK 205, for a total implied consideration in the Offer of SEK 24,731 million; and

 

   

Assuming the Offer was composed of 54% stock and 46% cash, total borrowings of $3.4 billion, composed of $750 million in unsecured notes at an interest rate of 7.5% and the interest rate on the remaining debt at LIBOR plus 200 basis points.

 

   

The historical and current market prices of Nasdaq Common Stock and OMX Shares, which provided a baseline for Nasdaq’s Board of Directors to evaluate whether the value to be paid in connection with the Offer was reasonable in light of Nasdaq’s Board of Directors’ judgment of the potential benefits from the completion of the Offer. In this respect, Nasdaq’s Board of Directors considered the following factors as part of its decision-making process:

 

   

That the transaction would be accretive in 2009; and

 

   

Nasdaq’s customary sensitivity analysis assuming 50% and 100% achievement of synergy realization, with value creation reviewed at various price points around the price of Nasdaq Common Stock and OMX Shares on May 24, 2007.

 

   

That the price of SEK 208 per OMX Share offered to OMX shareholders in the Offer (as of May 23, 2007) was determined based on negotiations with OMX prior to the announcement of the Offer.

In addition to the foregoing factors, Nasdaq’s Board of Directors considered the following material factors in connection with its decision to approve the OMX Transaction Agreement:

 

   

The opinion of JPMorgan that, as of September 23, 2007, and based upon and subject to the factors and assumptions stated in its opinion, the consideration to be paid by Nasdaq in the Acquisition is fair, from a financial point of view, to Nasdaq, which opinion addresses the fairness of the consideration to be offered by Nasdaq in the Acquisition only as it relates to Nasdaq and does not address the underlying decision by Nasdaq to enter into the Acquisition or any of the other Transactions or constitute a recommendation to the shareholders of Nasdaq or with respect to the Acquisition or any of the other Transactions, including how to vote with respect thereto (such opinion is described under “Opinion of J.P. Morgan Securities Inc.—Financial Advisor to Nasdaq” beginning on page 56 and is set forth in its entirety in Annex F).

 

   

The structure of the Transactions, the dilution effects on common shareholders of Nasdaq and the expected capital structure of the combined company. In this respect, Nasdaq’s Board of Directors considered the following factors as part of its decision-making process:

 

   

The additional consideration of SEK 10 per OMX Share to be paid by Nasdaq as a result of the increase in the Borse Dubai Offer;

 

   

An implied price per OMX Share of SEK 205 for the Offer and SEK 224 for the Transactions, for a total implied consideration in the Transactions of SEK 26,985 million;

 

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Total borrowings of $1.9 billion, composed of term loans with an interest rate of LIBOR plus 210 basis points;

 

   

That the structure of the Transactions allowed Nasdaq to acquire OMX, including those OMX Shares that could be acquired pursuant to the Option Agreements, after OMX was first acquired by Borse Dubai through the Borse Dubai Offer, and that the existence of the Borse Dubai Option Agreements could make any other proposed structure through which Nasdaq might attempt to acquire OMX difficult to successfully implement;

 

   

That the structure of the Transactions enabled Nasdaq to acquire OMX without issuing more shares of Nasdaq Common Stock than the number of shares of Nasdaq Common Stock that were to be issued in the Offer, thus enabling Nasdaq to acquire OMX without further diluting Nasdaq’s existing shareholders; and

 

   

That the Transactions were not conditioned upon the LSE Transaction, including that Borse Dubai had submitted an irrevocable, binding, written offer for Nasdaq’s stake in the LSE prior to approval of the Transactions by Nasdaq’s Board of Directors.

 

   

That the initial consideration in the Borse Dubai Offer of SEK 230 per OMX Share announced by the parties on September 20, 2007 was the offer price in the offer for OMX made by Borse Dubai on August 17, 2007, which offer price, under the Takeover Rules, could generally not be reduced in connection with an acquisition of OMX involving Borse Dubai, and that SEK 230 per OMX Share was the price at which Borse Dubai could acquire the OMX Shares subject to the Borse Dubai Option Agreements after, and in connection with, the Borse Dubai Offer.

 

   

That the revised consideration in the Borse Dubai Offer of SEK 265 per OMX Share announced on September 26, 2007 was the offer price required by those OMX shareholders party to the September Irrevocable Undertakings in order for them to enter into the September Irrevocable Undertakings.

 

   

The historical and current market prices of Nasdaq Common Stock and OMX Shares, which provided a baseline for Nasdaq’s Board of Directors to evaluate whether the value to be paid in connection with the Transactions was reasonable in light of Nasdaq’s Board of Directors’ judgment of the potential benefits from the completion of the Transactions. In this respect, Nasdaq’s Board of Directors considered the following factors as part of its decision-making process:

 

   

That the transaction would be accretive in 2009; and

 

   

Nasdaq’s customary sensitivity analysis assuming 50% and 100% achievement of synergy realization, with value creation reviewed at various price points around the price of Nasdaq Common Stock and OMX Shares on September 25, 2007.

Nasdaq’s Board of Directors considered the following material factors in connection with its decision to approve the investment in DIFX and the related licensing agreements:

 

   

That the investment in DIFX presented Nasdaq with an attractive strategic opportunity to make a long-term investment in DIFX, an exchange focused on certain key emerging markets;

 

   

That the investment in DIFX would allow Nasdaq to leverage DIFX’s regional knowledge, contacts and relationships to extend Nasdaq’s footprint beyond established and developed markets and into emerging and rapidly developing markets with attractive growth opportunities; and

 

   

That by sharing Nasdaq’s brand, technology, geographic reach and market experience, Nasdaq could assist DIFX in growing the Middle Eastern and North African markets to better allow DIFX to achieve its goal of becoming a leading exchange in certain key emerging markets.

 

   

That the consideration to be paid by Nasdaq in connection with its investment in DIFX was negotiated on an arms’ length basis and reflected DIFX’s historical financial statements and budget.

 

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Nasdaq’s Board of Directors considered the following material factors in connection with its decision to approve the LSE Agreement:

 

   

The belief that Nasdaq’s current stock price did not adequately reflect the value of Nasdaq’s stake in the LSE;

 

   

That Nasdaq planned to use approximately $1 billion of proceeds from the sale of Nasdaq’s stake in the LSE to retire senior term debt and possibly to repurchase shares;

 

   

That Nasdaq estimated that selling the stake would increase its stand-alone earnings per share for 2008 by approximately $0.30 to $0.35; and

 

   

That the sale of Nasdaq’s stake in the LSE was the result of a thorough, extensive and open process with interest from numerous potential buyers.

There can be no assurance that the potential synergies or opportunities considered by Nasdaq’s Board of Directors will be achieved through completion of the transaction. See the section entitled “Risk Factors” on page 23.

Recommendation of Nasdaq’s Board of Directors

Nasdaq’s Board of Directors believes that the Transactions are advisable, fair to and in the best interests of Nasdaq and holders of Nasdaq Voting Securities and recommends that holders of Nasdaq Voting Securities vote “for” Proposal One and Proposal Two.

In connection with its deliberations, Nasdaq’s Board of Directors considered certain potential risks associated with the Transactions and the business of Nasdaq, OMX and the combined company described in the section entitled “Risk Factors” on page 23, as well as the following additional potential risks associated with the Transactions:

 

   

The risks and costs to Nasdaq if the Transactions are not completed, including the potential diversion of management and employee attention, potential employee attrition and the potential effect on business and customer relationships;

 

   

The risk that holders of Nasdaq Voting Securities may fail to approve Proposal One; and

 

   

The fees and expenses associated with completing the Transactions.

Opinion of J.P. Morgan Securities Inc.—Financial Advisor to Nasdaq

Pursuant to an engagement letter dated May 23, 2007, Nasdaq retained JPMorgan as its financial advisor in connection with a potential transaction with OMX and to deliver a fairness opinion in connection with such transactions.

At a meeting of Nasdaq’s Board of Directors on May 24, 2007, JPMorgan rendered its oral opinion to Nasdaq’s Board of Directors that, as of that date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid by Nasdaq in the Offer was fair, from a financial point of view, to Nasdaq. JPMorgan confirmed its oral opinion by delivering to Nasdaq’s Board of Directors a written opinion dated May 24, 2007. In connection with the consideration by Nasdaq’s Board of Directors of the Acquisition and the other Transactions on September 19, 2007, JPMorgan rendered its oral opinion to Nasdaq’s Board of Directors that, as of that date and based upon and subject to the factors and assumptions set forth in its opinion, the consideration to be paid by Nasdaq in the Acquisition was fair, from a financial point of view, to Nasdaq. JPMorgan subsequently confirmed its oral opinion by delivering to Nasdaq’s Board of Directors its written opinion dated September 19, 2007. At a subsequent meeting of Nasdaq’s Board of Directors on September 23, 2007 called to consider revisions to the terms of the Transactions in response to the Qatar Investment Authority’s announcement regarding OMX, JPMorgan updated its opinion by rendering its oral opinion to Nasdaq’s Board of Directors that, as of that date and based upon and subject to the factors and assumptions set forth in its further

 

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updated opinion, the consideration to be paid by Nasdaq in the Acquisition, as revised, was fair, from a financial point of view, to Nasdaq. Nasdaq’s Board of Directors did not limit the investigations made or the procedures followed by JPMorgan in giving its oral or written opinions.

The full text of the written opinion of JPMorgan, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by JPMorgan in connection with its opinion, is attached to this Proxy Statement as Annex F and is incorporated in this Proxy Statement by reference. Holders of Nasdaq Voting Securities should read this opinion carefully and in its entirety.

JPMorgan provided its advisory services and opinion for the information and assistance of Nasdaq’s Board of Directors in connection with its consideration of the Acquisition. Neither its opinion nor the related analyses constituted a recommendation of the Acquisition or the other Transactions to Nasdaq’s Board of Directors. The description of the JPMorgan opinion is qualified in its entirety by reference to the full text of the opinion set forth in Annex F.

JPMorgan’s opinion is directed to Nasdaq’s Board of Directors and addresses only the fairness, from a financial point of view, to Nasdaq of the consideration to be paid in connection with the Acquisition and does not address the underlying decision by Nasdaq to enter into the Acquisition or the other Transactions. Moreover, JPMorgan has expressed no opinion as to the price at which Nasdaq Common Stock or OMX Shares will trade at any future time. JPMorgan was not asked to, and did not, recommend the specific consideration payable in the Acquisition or the other Transactions, which consideration was determined through negotiations between Nasdaq, Borse Dubai and OMX. The JPMorgan opinion is not a recommendation as to how any holder of Nasdaq Voting Securities should vote with respect to the Acquisition, the other Transactions or any other matter. JPMorgan’s opinion was one of many factors taken into consideration by Nasdaq’s Board of Directors in making its determination to approve the Transactions. Consequently, JPMorgan’s analyses described below should not be viewed as determinative of the decision of Nasdaq’s Board of Directors with respect to the fairness from a financial point of view of the consideration to be paid by Nasdaq in the Acquisition.

In arriving at its opinion, JPMorgan, among other things:

 

   

reviewed the Nasdaq OMX Transaction Agreement dated May 25, 2007;

 

   

reviewed the press release dated May 25, 2007 contemplated by the Nasdaq OMX Transaction Agreement announcing the Offer;

 

   

reviewed a draft dated September 20, 2007 of the Supplement;

 

   

reviewed a draft dated September 17, 2007 of the initial letter agreement between Nasdaq and Borse Dubai relating to the Transactions;

 

   

reviewed a draft dated September 16, 2007 of the transaction agreement among Nasdaq, Borse Dubai and the other parties thereto, which we refer to in this section as the “New Acquisition Agreement;”

 

   

reviewed certain publicly available business and financial information concerning OMX and Nasdaq and the industries in which they operate;

 

   

compared the proposed financial terms of the Acquisition with the publicly available financial terms of certain transactions involving companies that JPMorgan deemed relevant and the consideration received for such companies;

 

   

compared the financial and operating performance of OMX and Nasdaq with publicly available information concerning certain other companies that JPMorgan deemed relevant and reviewed the current and historical market prices of OMX Shares and Nasdaq Common Stock and certain publicly traded securities of such other companies;

 

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reviewed certain internal financial analyses and forecasts prepared by the managements of OMX and Nasdaq relating to the estimated amount and timing of the cost savings and related expense and revenue and other synergies expected to result from the Acquisition, which we refer to in this section as the “Synergies”, and compared the Synergies with publicly available information regarding cost savings and related expense and revenue and other synergies expected to be received in transactions involving companies JPMorgan deemed relevant;

 

   

reviewed with the managements of Nasdaq and OMX certain publicly available research analysts’ financial forecasts and estimates of the future performance of OMX and Nasdaq and financial data extrapolated from such forecasts and estimates as directed by managements of Nasdaq and OMX; and

 

   

performed such other financial studies and analyses, and took into account such other information and matters as JPMorgan deemed appropriate for the purposes of its opinion.

JPMorgan also held discussions with certain members of the managements of OMX and Nasdaq with respect to certain aspects of the Acquisition, and the past and current business operations of OMX and Nasdaq, the financial condition and future prospects and operations of OMX and Nasdaq, the effects of the Acquisition on the financial condition and future prospects of Nasdaq and OMX, and certain other matters that JPMorgan believed necessary or appropriate to its inquiry.

JPMorgan relied upon and assumed, without assuming responsibility or liability for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to or discussed with it by OMX and Nasdaq or otherwise reviewed by or for JPMorgan. JPMorgan did not conduct, nor was it provided with, any valuation or appraisal of any assets or liabilities, nor did it evaluate the solvency of OMX or Nasdaq under any state or federal laws relating to bankruptcy, insolvency or similar matters. In connection with its analyses, JPMorgan was directed by the managements of OMX and Nasdaq to utilize the publicly available research analysts’ financial forecasts and estimates and the extrapolated financial forecasts and estimates referred to above relating to OMX and Nasdaq. In relying on such publicly available research analysts’ financial forecasts and estimates and the extrapolated financial forecasts and estimates, JPMorgan was advised by the managements of OMX and Nasdaq, and JPMorgan assumed, at Nasdaq’s direction, that they were a reasonable basis on which to evaluate the expected future results of operations and financial condition of OMX and Nasdaq. In relying on internal analyses and forecasts relating to the Synergies, JPMorgan assumed that the Synergies were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by OMX and Nasdaq management. JPMorgan expressed no view as to the foregoing analyses or forecasts (including the Synergies) or the assumptions on which they were based and assumed that they would be achieved at the times and in the amounts projected. In that regard, Nasdaq’s management advised JPMorgan that it believed that the financial analyses and forecasts prepared by it were reasonably prepared and reflected their best available judgments and estimates and JPMorgan assumed with Nasdaq’s Board of Directors’ consent that the financial analyses and forecasts of Nasdaq prepared by Nasdaq’s management were reasonably prepared on a basis reflecting the best currently available estimates and judgments of management. JPMorgan also assumed that:

 

   

any reduction in the cash consideration required to be paid to holders of OMX Shares based on the actual number of OMX Shares acquired by Nasdaq in the Acquisition would not change the mix or amount of the consideration to be paid per share by Nasdaq in the Acquisition in any respect material to JPMorgan’s analysis;

 

   

no additional stock or other equity securities of OMX would be issued after the date of JPMorgan’s opinion and that the only OMX Shares that would be purchased in the Borse Dubai Offer would be the OMX Shares outstanding as of the date of JPMorgan’s opinion as specified in clause (A) of the recitals to the Nasdaq OMX Transaction Agreement;

 

   

the Acquisition would have the tax consequences described in discussions with, and materials furnished to JPMorgan by, representatives of Nasdaq;

 

   

the transactions contemplated by the Supplement, the initial letter agreement between Nasdaq and Borse Dubai relating to the Transactions and the New Acquisition Agreement would be consummated

 

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as described in such agreements, without any waiver of any of the conditions thereof or changes in the terms thereof;

 

   

the terms set forth in the definitive agreements relating to the Transactions will not differ in any respect material to JPMorgan’s analysis from the terms set forth in the drafts of the Supplement, the initial letter agreement between Nasdaq and Borse Dubai relating to the Transactions and the New Acquisition Agreement furnished to, and reviewed by, JPMorgan (and, in the case of terms contained in the definitive agreements but not set forth in such draft agreements furnished to JPMorgan, will not otherwise affect JPMorgan’s analysis in any respect); and

 

   

the definitive agreements relating to (x) the consummation of the Borse Dubai Offer, (y) the sale by Nasdaq of 55,966,856 shares of 6 79/86 pence in the capital of the LSE for an aggregate purchase price of £791,371,344 and (z) the acquisition by Nasdaq of a 33 1/3% interest in DIFX for an initial cash investment of $50 million will not contain terms that, and the consummation of such transactions will not, affect the consideration to be paid by Nasdaq in the Acquisition or any other matter material to JPMorgan’s analysis.

JPMorgan relied as to all legal matters relevant to rendering its opinion upon the advice of counsel. JPMorgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transactions will be obtained without any adverse effect on OMX or Nasdaq or on the contemplated benefits of the Transactions.

JPMorgan based its opinions on economic, market and other conditions as in effect on, and the information made available to JPMorgan as of, the date of its opinion. Subsequent developments may affect its opinion, and JPMorgan has no obligation to update, revise or reaffirm its opinion.

In accordance with customary investment banking practice, JPMorgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses presented by JPMorgan to Nasdaq’s Board of Directors in connection with rendering its opinion letter dated September 23, 2007. Except for supplemental materials presented to Nasdaq’s Board of Directors on September 23, 2007 to reflect revisions to the terms of the Acquisition following Nasdaq’s Board of Directors’ consideration and approval of the Acquisition and the other Transactions at its September 19, 2007 meeting, the analyses relied on by JPMorgan in connection with its September 23, 2007 opinion letter were the same financial analyses presented to Nasdaq’s Board of Directors in connection with its September 19, 2007 opinion letter. The following summary does not purport to be a complete description of the analyses underlying JPMorgan’s opinion or the presentations made by JPMorgan to Nasdaq’s Board of Directors. Some of the summaries of financial analyses are presented in tabular format. In order to understand the financial analyses used by JPMorgan more fully, you should read the tables together with the text of each summary. The tables alone do not constitute a complete description of JPMorgan’s financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by JPMorgan.

Trading Comparables Analysis

JPMorgan compared selected financial and market data of OMX and Nasdaq with similar data for the following companies:

European Exchanges

 

   

Deutsche Börse AG;

 

   

the LSE;

 

   

Bolsas y Mercados Españoles, Sociedad Holding De Mercados y Sistemas Financieros, S.A.;

 

   

Hellenic Exchanges S.A.;

 

   

Oslo Børs Holding ASA; and

 

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Imarex Nos ASA.

North American Exchanges

 

   

The Chicago Mercantile Exchange Holdings Inc.;

 

   

NYSE Euronext;

 

   

NYMEX Holdings, Inc.;

 

   

IntercontinentalExchange, Inc.;

 

   

TSX Group Inc.; and

 

   

International Securities Exchange Holdings, Inc.

Australian/Asian/African Exchanges

 

   

Hong Kong Exchanges and Clearing Limited;

 

   

Singapore Exchange Limited;

 

   

ASX Limited;

 

   

Bursa Malaysia Berhad; and

 

   

JSE Limited.

JPMorgan calculated and compared various financial multiples and ratios based on publicly available financial data, information it obtained from filings with the S.E.C., information it obtained from Datastream, research analyst reports and I/B/E/S estimates, each as of September 14, 2007. With respect to the selected companies, JPMorgan presented:

 

   

price;

 

   

market capitalization;

 

   

firm value;

 

   

estimated 2007 and 2008 firm value to EBITDA ratio;

 

   

estimated 2007 and 2008 price to earnings ratio;

 

   

estimated 2007 and 2008 EBITDA margin;

 

   

estimated 2007 and 2008 EBITDA growth rate;

 

   

estimated 2007 and 2008 dividend yield; and

 

   

estimated 2007 and 2008 PEG ratio.

EBITDA means earnings before interest, taxes, depreciation and amortization. A PEG ratio is the ratio of a company’s price to earnings ratio to the I/B/E/S consensus estimate of the annual growth rate of its earnings. JPMorgan calculated the firm value of each of the selected companies by first adding the sum of the long-term and short-term debt of each of the selected companies to the sum of the market value of such selected company’s common equity, the book value of such selected company’s minority interest, and then subtracting from the result such selected company’s cash and cash equivalents.

 

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The median multiples for the price to earnings ratio relating to the trading comparables are set forth below.

Trading Comparables Multiples

 

Measure

   Median

European Exchanges

  

2007 Estimated Price to Earnings Ratio

   20.1x

2008 Estimated Price to Earnings Ratio .

   17.6x
North American Exchanges   

2007 Estimated Price to Earnings Ratio

   36.5x

2008 Estimated Price to Earnings Ratio .

   25.3x
Australian/Asian Exchanges   

2007 Estimated Price to Earnings Ratio

   27.4x

2008 Estimated Price to Earnings Ratio

   27.1x

Based on its analysis, JPMorgan selected a reference range of 18.0x-21.0x 2007 adjusted EPS and 16.0-19.0x 2008 EPS for each of OMX and Nasdaq. These reference ranges implied a range of SEK 138.5 to SEK 161.5 and SEK 138.6 to SEK 164.5 per share for OMX Shares, respectively, based on its 2007 and 2008 earnings per share, as adjusted for 2007. The implied range resulting from OMX’s 2007 earnings per share reflects the exclusion of capital gains related to OMX’s sale of its shares in Orc Software from its 2007 earning per share. Based on Nasdaq’s 2008 estimated earnings per share of $2.10, with pro forma adjustments to take into account Nasdaq’s sale of its stock in the LSE at a weighted average price of £14.13 and Nasdaq’s reusing the proceeds of such sale to repurchase its shares at $38.50 per share after Nasdaq has repaid its existing debt in the aggregate amount of $1.05 billion, the reference range implied a range per share for Nasdaq Common Stock of $33.56 to $39.85.

Comparable Transactions Analysis

Using publicly available information, information it obtained from filings with the S.E.C., information it obtained from Datastream and research analyst reports, JPMorgan examined the following transactions involving exchanges as a target company:

 

Announcement
Date

  

Acquiror

  

Target

08/17/2007    Borse Dubai    OMX
07/06/2007    Chicago Mercantile Exchange Holdings Inc.    CBOT Holdings, Inc.
06/23/2007   

LSE

   Borsa Italiana S.p.A
05/25/2007    Nasdaq    OMX
05/11/2007    Chicago Mercantile Exchange Holdings Inc.    CBOT Holdings, Inc.
04/30/2007    Deutsche Börse AG    International Securities Exchange Holdings, Inc.
03/15/2007    Intercontinental Exchange, Inc.    CBOT Holdings, Inc.
11/20/2006    Nasdaq   

LSE

10/17/2006    Chicago Mercantile Exchange Holdings Inc.    CBOT Holdings, Inc.
09/15/2006    Intercontinental Exchange, Inc.    Board of Trade of the City of New York, Inc.
05/22/2006    NYSE Group, Inc.    Euronext N.V.
04/22/2005    Nasdaq    Instinet Group Incorporated
04/20/2005    NYSE Group, Inc.    Archipelago Holdings, Inc.

For each of these transactions, JPMorgan presented, among other measures, the following information:

 

   

ratio of the transaction value to the last twelve months, which we refer to as LTM EBITDA;

 

   

ratio of the transaction value to an estimate of the twelve months forward, which we refer to as NTM EBITDA;

 

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ratio of the equity value to LTM Earnings; and

 

   

ratio of equity value to NTM Earnings.

The median and mean multiples for certain measures relating to the comparable transactions are set forth below. The table also sets forth the reference range of multiples selected by JPMorgan based on a review of the comparable transaction multiples.

 

Measure

   Precedent Transaction Multiples
   Mean    Median    Reference Range

LTM EBITDA

   21.9x    22.2x    16.0x-18.0x

NTM EBITDA

   17.0x    17.7x    14.0x-16.0x

LTM Earnings

   41.3x    44.4x    24.0x-27.0x

NTM Earnings

   30.0x    27.7x    21.0x-23.0x

The reference range of LTM EBITDA implied a range of SEK 188.0 to SEK 212.7 per share for OMX Shares. The reference range of NTM EBITDA implied a range of SEK 182.1 to SEK 209.6 per share for OMX Shares. The reference range of LTM EPS implied a range of SEK 183.3 to SEK 206.2 per share for OMX Shares. The reference range of NTM EPS implied a range of SEK 175.8 to SEK 192.6 per share for OMX Shares.

Discounted Cash Flow Analysis

JPMorgan calculated ranges of implied equity value per share for both OMX Shares and Nasdaq Common Stock by performing discounted cash flow analyses for OMX and Nasdaq. For both OMX and Nasdaq, the discounted cash flow analysis assumed a valuation date of September 30, 2007. For OMX, JPMorgan also conducted a discounted cash flow analysis that took into account the effect of the impact of the value of the expected synergies that could be achieved by the combined company after taking into account the cost of achieving the synergies resulting in connection with the Acquisition.

A discounted cash flow analysis is a traditional method of evaluating a business by estimating the future cash flows of a business and taking into consideration the time value of money with respect to those future cash flows by calculating the “present value” of the estimated future cash flows of the business. “Present value” refers to the current value of one or more future cash payments, or “cash flows,” from a business and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macro-economic assumptions, estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors. Other financial terms utilized below are “terminal value,” which refers to the value of all future cash flows from a business beyond the end of a specific forecast period, and “unlevered free cash flows,” which refers to a calculation of the future cash flows of a business without including in such calculation any debt servicing costs.

In arriving at the estimated equity values per share of OMX Shares and Nasdaq Common Stock, JPMorgan applied a discount rate of 10% for OMX and a range of discount rates of 11.0% to 12.0% for Nasdaq to the unlevered free cash flows that OMX and Nasdaq were respectively projected to generate on an annual basis during the calendar year forecast period of 2007 through 2016. The discount rates utilized to calculate the present value of the respective unlevered free cash flows for OMX and Nasdaq were chosen based upon an analysis of the weighted average cost of capital for each of OMX and Nasdaq. JPMorgan’s analysis of OMX’s weighted average cost of capital was based on several variables related to the capital asset pricing model for the cost of equity, including estimates of the applicable unlevered risk factor, or unlevered beta, of 1.53x, an estimated riskfree rate of return of 4.31% and an estimated equity market premium of 3.63%. In addition, JPMorgan used an estimated pre-tax cost of debt for OMX of 5%, an assumed tax rate of 25% and a net debt-to-total market capitalization ratio of 6.8%. JPMorgan’s analysis of Nasdaq’s weighted average cost of capital was based on a similar analysis and utilized an unlevered beta of 1.80x, an estimated risk-free rate of return of 4.78% and an estimated equity market premium of 4.06%. In addition, JPMorgan used an estimated pre-tax cost of debt for Nasdaq of 7%, an assumed tax rate of 40% and a net debt-to-total market capitalization ratio of 20%. JPMorgan also calculated the terminal value as of December 31, 2016 for each of OMX and Nasdaq assuming perpetual free cash flow growth rates of 2.5% to 3.5% for both OMX and Nasdaq. JPMorgan’s decision to use perpetual

 

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growth rates of 2.5% to 3.5% was based on its judgment of the long-term growth prospects of OMX, Nasdaq and the industry in which they participate as well as the long-term growth prospects of the overall economy. Based on these growth and discount rate assumptions, JPMorgan calculated the present value of the unlevered free cash flows of calendar years 2007 through 2016. JPMorgan then calculated the present value of the terminal values for OMX and Nasdaq using the discount rates specified above. For both OMX and Nasdaq, the present value of unlevered free cash flows and terminal values were added together in order to derive the unlevered enterprise values for each of OMX and Nasdaq, respectively. In arriving at the estimated equity values per share of OMX Shares and Nasdaq Common Stock, JPMorgan calculated the equity value for both OMX and Nasdaq by reducing the unlevered enterprise values of each of OMX and Nasdaq by the value of their respective indebtedness, and by adding the value of their respective cash and cash equivalents and marketable securities. The equity values for each of OMX and Nasdaq were divided by the number of fully diluted shares outstanding for each of OMX and Nasdaq, respectively, and treating the Nasdaq Voting Notes on an “as converted” basis. For purposes of Nasdaq’s discounted cash flow analysis, the analysis excludes all earnings and dividends attributable to Nasdaq’s proportional ownership of the LSE and includes the market value of such ownership.

Based on the assumptions set forth above, this analysis implied a range of SEK 154.9 to SEK 169.5 per share for OMX Shares, and a range of $32.61 to $37.41 per share for Nasdaq Common Stock. JPMorgan also calculated the implied value range per share of OMX Shares based on the after-tax present value of the expected synergies that could be achieved by the combined company after taking into account the cost of achieving the synergies. Assuming the achievement of such synergies, the analysis implied a range of SEK 211.2 to SEK 229.6 per share for OMX Shares.

Relative Contribution Analysis

JPMorgan reviewed the contribution of OMX and Nasdaq to the combined company relative to forecasted revenue, EBITDA, and net income of the combined company for the calendar year ending December 31, 2008 as well as the market capitalization of OMX based on an unaffected share price as of May 21, 2007, which is the last trading day for OMX Shares prior to the announcement of the Offer, and the market capitalization of Nasdaq as of September 14, 2007. The calendar year 2008 forecasted revenue, EBITDA and net income for both OMX and Nasdaq were based on research analyst reports. The relative contribution analysis did not give effect to the impact of any synergies as a result of the proposed Acquisition and assumed Borse Dubai would receive only shares of Nasdaq Common Stock in the Acquisition. JPMorgan adjusted the relative contribution percentages resulting from the estimated revenue and EBITDA for the calendar year ending December 31, 2008 to reflect the relative capital structures for each of OMX and Nasdaq. The relative contribution percentages resulting from such revenue and EBITDA figures were used to determine the implied pro forma ownership percentages, which we refer to as PF Ownership, of the combined company for the common shareholders of OMX and Nasdaq. The PF Ownership percentages were used to determine the implied exchange ratio of each OMX Share to Nasdaq Common Stock. Additionally, JPMorgan conducted a similar analysis based on the net income of the combined company for the calendar year ending December 31, 2008 using equity value measures as well as the market capitalizations of OMX and Nasdaq. The following table presents the results of the relative contribution analysis:

 

     Percentage Implied Ownership of the
Combined Company
     
     OMX
Shareholders
    Nasdaq
Shareholders
    Implied Exchange
Ratio

Revenue

Calendar Year Ending December 31, 2008 . . . . . . . . . .

   45.6 %   54.4 %   1.0693x

EBITDA

Calendar Year Ending December 31, 2008 . . . . . . . . . .

   35.6 %   64.4 %   0.7075x

Net Income

Calendar Year Ending December 31, 2008 . . . . . . . . . .

   34.8 %   65.2 %   0.6801x

Market Capitalization

   36.7 %   63.3 %   0.7397x

 

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Relative Valuation Analysis

JPMorgan analyzed the consideration to be received by the holders of OMX Shares pursuant to the Acquisition by calculating the range of the implied exchange ratios of OMX Shares to Nasdaq Common Stock for the corresponding valuation methodology. In its analysis, JPMorgan compared the highest value per share of OMX Shares to the lowest value per share of Nasdaq Common Stock to derive the highest implied exchange ratio. JPMorgan also compared the lowest value per share of OMX Shares to the highest value per share of Nasdaq Common Stock to derive the lowest implied exchange ratio. Based on a Nasdaq share price of $34.91, an OMX acquisition price of SEK 205 per share, a SEK/USD exchange rate of 6.68 to 1, and a 55.4%/44.6% nominal stock cash consideration mix, the implied exchange ratio for the Acquisition was 0.502x Nasdaq shares per OMX Share. The results of this analysis are as follows:

 

Valuation Methodology

  

Range of Implied Exchange Ratios

52-Week Natural Exchange Ratios

   0.250x-0.479x

Public Comparables

   0.288x-0.407x

Discounted Cash Flow without Synergies

   0.343x-0.431x

Discounted Cash Flow with Synergies

   0.468x-0.584x

Contribution Analysis

   0.377x-0.592x

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by JPMorgan. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances, and therefore, is not readily susceptible to partial analysis or summary description. JPMorgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. No single factor or analysis was determinative of JPMorgan’s fairness determination, and JPMorgan did not attribute any particular weight to any analysis or factor considered by it. Rather, JPMorgan considered the totality of the factors and analyses performed in determining its opinion and made its determination as to fairness based on its professional judgment and after considering the results of all of its analyses. JPMorgan based its analyses on assumptions that it deemed reasonable, including those concerning general business, economic, market and financial conditions, industry-specific factors, and other matters. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by JPMorgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, JPMorgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. None of the selected companies reviewed as described in the above summary is identical to OMX or Nasdaq, and none of the selected transactions reviewed was identical to the Acquisition. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of JPMorgan’s analysis, may be considered similar to those of Nasdaq and OMX. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of JPMorgan’s analysis, may be considered

similar to the Acquisition. The analyses necessarily involve complex considerations and judgments concerning, with respect to the selected companies, differences in financial and operating characteristics of the comparable companies and other factors that could affect public trading values of such comparable companies and, with respect to the selected transactions, differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Nasdaq and OMX and the transactions compared to the Acquisition. Mathematical analysis (such as determining the median) is not by itself a meaningful method of using selected company or acquisition transaction data.

The terms of the Acquisition and the other Transactions were determined through negotiations between Nasdaq, Borse Dubai and OMX and were approved by Nasdaq’s Board of Directors. Although JPMorgan provided advice to Nasdaq during the course of the negotiations, the decision to enter into the Acquisition and the

 

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other Transactions was solely that of Nasdaq’s Board of Directors. As described above, the presentation and opinion of JPMorgan was only one of a number of factors taken into consideration by Nasdaq’s Board of Directors in making its determination to approve and enter into the Acquisition and the other Transactions.

As a part of its investment banking business, JPMorgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. JPMorgan and its affiliates have provided, and in the future may continue to provide, for compensation, investment banking and other services to Nasdaq, OMX and their respective affiliates, including acting as joint lead arranger and joint bookrunner on senior secured credit facilities to finance Nasdaq’s acquisition of INET ECN in 2005 and acting as joint bookrunner on the public offering of Nasdaq Common Stock in February 2006. In the ordinary course of business, JPMorgan and its affiliates may actively trade in the debt and equity securities of Nasdaq and OMX for their own accounts or for the accounts of their customers, and accordingly, may at any time hold a long or short position in such securities.

Nasdaq selected JPMorgan to advise it and deliver a fairness opinion with respect to the Acquisition on the basis of its experience and its familiarity with Nasdaq. Pursuant to its engagement letter with JPMorgan, Nasdaq has agreed to pay JPMorgan a fee of $15,000,000, of which 20% has been paid with the remainder due if and when the Acquisition is completed. In addition, Nasdaq has agreed to reimburse JPMorgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify JPMorgan against certain liabilities, including liabilities arising under federal securities laws.

Appraisal Rights

Under Delaware law and our Restated Certificate of Incorporation, Nasdaq shareholders are not entitled to any rights to seek appraisal of their Nasdaq Common Stock or to exercise any preemptive rights in connection with the proposals to approve the Proposal One and Proposal Two.

Financing of the Acquisition

To finance the Acquisition, Nasdaq executed a Commitment Letter, dated September 28, 2007, delivered by Bank of America, N.A., Banc of America Securities LLC, J.P. Morgan Securities Inc. and JPMorgan Chase Bank, N.A., which we refer to collectively as the Banks, including a Summary of Terms and Conditions, which we refer to as the Commitment Letter. In accordance with the Commitment Letter, we anticipate that we will enter into the following credit agreements, which we refer to collectively as the New Credit Facility, on or before April 15, 2008:

 

   

Credit Agreement among Nasdaq, as Borrower, the financial institutions that are or may from time to time become parties thereto as Lenders, Bank of America, N.A., as Administrative Agent, Collateral Agent, Swingline Lender and Issuing Bank, Banc of America Securities LLC and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners, and JPMorgan Chase Bank N.A., as Syndication Agent; and

 

   

Term Loan Credit Agreement, among Nasdaq, as Borrower, the financial institutions that are or may from time to time become parties thereto as Lenders, Bank of America, N.A., as Administrative Agent, Collateral Agent, Swingline Lender and Issuing Bank, Banc of America Securities LLC and J.P. Morgan Securities Inc., as Joint Lead Arrangers and Joint Bookrunners, and JPMorgan Chase Bank N.A., as Syndication Agent.

If the Acquisition is to be effected by means of the Transactions, the closing of the New Credit Facility will be subject to the closing conditions set forth in the Commitment Letter, including (i) the satisfaction of the conditions to the consummation of the Borse Dubai Offer set forth in the OMX Transaction Agreement, (ii) there being no amendments or modifications to the Nasdaq OMX Transaction Agreement or the OMX Transaction

 

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Agreement that are materially adverse to the Lenders without the consent of the Joint Lead Arrangers, and (iii) the payment of required fees and expenses and the negotiation, execution and delivery of definitive documentation.

The New Credit Facility is expected to provide for credit of up to approximately $2.2 billion of debt financing to be used: (i) to purchase the OMX Shares, (ii) to pay fees and expenses incurred in connection with the Transactions, and the entering into and funding of the New Credit Facility and related transactions thereto, (iii) to repay certain indebtedness of OMX and (iv) to provide ongoing working capital and for other general corporate purposes of Nasdaq and its subsidiaries, and represents an increase over the previously assumed amount of total borrowings based on the increased purchase price for OMX and the $50 million investment in DIFX, but does not include any working capital. The New Credit Facility is expected to include:

 

   

a five-year $75.0 million secured revolving credit facility, with a letter of credit subfacility and swingline loan subfacility under the Credit Agreement;

 

   

a five-year $750.0 million secured term loan facility under the Credit Agreement; and

 

   

a five-year $1.375 billion secured term loan facility under the Term Loan Credit Agreement.

The interest rate on loans made under New Credit Facility is expected to be at Nasdaq’s option, either:

 

   

the higher of:

 

   

the federal funds effective rate plus 1/2 of 1%; and

 

   

the “prime rate” of Bank of America, N.A.,

 

     plus 0.75%, for the first three months after the closing date with respect to the New Credit Facility, and thereafter, a percentage per annum to be determined in accordance with a performance pricing grid to be agreed, or

 

   

the rate per annum equal to the British Bankers Association LIBOR Rate, BBA, plus 1.75% for the first three months after the closing date with respect to the New Credit Facility, and thereafter, a percentage per annum to be determined in accordance with a performance pricing grid to be agreed.

The obligations under the New Credit Facility will be guaranteed by each of the existing and future direct and indirect material wholly-owned domestic subsidiaries of Nasdaq, subject to exceptions to be agreed upon. The obligations of Nasdaq and the guarantors under the New Credit Facility will be secured, subject to certain exceptions, by all the capital stock of each of their present and future subsidiaries (limited, in the case of foreign subsidiaries, to 65% of the voting stock of such subsidiaries) and all of the present and future property and assets (real and personal) of Nasdaq and the guarantors. If the collateral (other than capital stock of domestic subsidiaries that is required to be pledged and assets over which a lien may be perfected by filing a financing statement under the uniform commercial code) is not provided on the closing date despite use of commercially reasonable efforts to do so, the delivery of the collateral will not be a condition precedent to the availability of the New Credit Facility on the closing date, but instead will be delivered following the closing date.

The New Credit Facility is expected to contain customary negative covenants applicable to Nasdaq and its subsidiaries, including the following:

 

   

limitations on the payment of dividends and redemptions of Nasdaq’s capital stock;

 

   

limitations on changes in Nasdaq’s business;

 

   

limitations on amendment of subordinated debt agreements;

 

   

limitations on prepayments, redemptions and repurchases of debt;

 

   

limitations on liens and sale-leaseback transactions;

 

   

limitations on mergers, recapitalizations, acquisitions and asset sales;

 

   

limitations on transactions with affiliates;

 

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limitations on restrictions on liens and other restrictive agreements; and

 

   

limitations on loans, guarantees, investments, incurrence of debt and hedging arrangements,

subject to certain exceptions.

The New Credit Facility is expected to permit Nasdaq to obtain a letter of credit or bank guaranty in an aggregate amount sufficient to pay the minority shareholders of OMX in accordance with the applicable compulsory acquisition procedures under the Swedish Companies Act, and to use term loans under the Term Loan Credit Agreement to repay any draws under such letter of credit or guaranty or to cash-collateralize such letter of credit or guaranty prior to any draw thereunder.

The New Credit Facility is also expected to contain:

 

   

customary affirmative covenants, including access to financial statements, notice of trigger events and defaults, maintenance of properties and insurance;

 

   

an affirmative covenant requiring Nasdaq to use commercially reasonable efforts to refinance OMX’s outstanding third-party debt as soon as practicable after the initial funding thereunder;

 

   

customary events of default, including cross-defaults to material indebtedness; and

 

   

maximum total leverage ratio and interest coverage ratio maintenance covenants.

Nasdaq expects to be permitted to repay borrowings under the New Credit Facility at any time in whole or in part. Following the end of each fiscal year, commencing with the end of the first full fiscal year following the closing date with respect to the New Credit Facility, Nasdaq also expects to be required to use a percentage of its excess cash flow, as defined in the Credit Agreement and the Term Loan Credit Agreement and calculated with respect to the prior fiscal year, to repay loans outstanding under the Credit Agreement and the Term Loan Credit Agreement. Nasdaq anticipates that the percentage of excess cash flow Nasdaq will be required to use for repayments will vary depending on Nasdaq’s leverage ratio at the end of the year for which excess cash flow is calculated, with the maximum repayment percentage set at 50.0% of excess cash flow.

The Commitment Letter provides that if definitive, signed bank finance documentation is not negotiated and signed by the earlier of the closing date with respect to the Borse Dubai Offer and April 15, 2008, Nasdaq and the Banks will execute and deliver an interim loan agreement in the form annexed to the Commitment Letter and provide credit facilities in an aggregate amount of $2.2 billion thereunder on substantially the same terms as set forth above, other than that such interim loan will not include a revolving credit facility.

Regulatory Matters—The OMX Transaction Agreement

Nasdaq

The completion of the Transactions is conditioned upon Nasdaq obtaining certain regulatory approvals. In addition, certain regulatory filings are required to be made in connection with the Transactions. Customary approval under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 is also required for the Transactions.

Below is a description of the applicable procedures for obtaining regulatory approvals and making certain regulatory filings in the relevant jurisdictions.

Sweden

Pursuant to the Swedish Securities Exchange and Clearing Operations Act and the Securities Operations Act, a direct or indirect acquisition of shares in a securities company or in a securities exchange which results in the acquiring party’s total holdings constituting no less than 10% of its share capital or the voting capital or where the holding otherwise renders it possible to exercise a significant influence over the management of the company, may only take place pursuant to prior authorization by the SFSA. Prior approval of the indirect

 

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acquisition of the OMX Nordic Exchange Stockholm AB and OMX Broker Services AB was granted by the SFSA on September 27, 2007.

Denmark

Pursuant to the Danish Act on Securities Trading, any natural or legal person contemplating a direct or indirect acquisition of no less than 10% of the share capital in a stock exchange is to notify the Danish Financial Supervisory Authority (Da: Finanstilsynet), which we refer to as the Danish FSA, and obtain its approval prior to the acquisition. Prior approval of the indirect acquisition of the Copenhagen Stock Exchange (Da: Københavns Fondsbørs A/S) (now called the OMX Nordic Exchange Copenhagen A/S) was granted by the Danish FSA on September 27, 2007.

Finland

Pursuant to the Finnish Securities Markets Act, if anyone proposes to acquire a holding of a stock exchange which would be equal to at least one-twentieth of the share capital or voting rights of a stock exchange, the Finnish Financial Supervision Authority (Fi: Rahoitustarkastus), which we refer to as the FFSA, shall be notified of the acquisition well in advance, and certain information regarding the acquirer, its management and its key shareholders shall be provided to the FFSA. The FFSA tendered a letter of non-intervention on September 27, 2007 with respect to the indirect acquisition of the Helsinki Stock Exchange (Fi: Helsingin Pörssi Oy).

Iceland

According to the Icelandic Act on the Activities of Stock Exchanges and Regulated OTC Markets, individuals and legal entities must notify the Icelandic Financial Supervisory Authority (Is: Fjármálaeftirlitið), which we refer to as the Icelandic FSA, of direct or indirect holdings in a company operating in accordance with the Act which amount to at least 10% of its share capital or voting rights, or less if such holding confers substantial influence on the management of the companies, and the extent of such holdings. The Icelandic FSA tendered a letter of no objections on September 27, 2007 with respect to the indirect acquisition of the Iceland Stock Exchange (Is: Kauphöll Íslands hf.) (now called the OMX Nordic Exchange Iceland hf.) and the Icelandic VÍ.

Estonia

According to the Estonian Central Register of Securities Act, a person acquiring a direct or indirect qualifying holding in the Estonian Central Register of Securities (Et: AS Eesti Väärtpaberikeskus) is obliged to apply for the approval by the Estonian Financial Supervisory Authority (Et: Finantsinspektsioon), which we refer to as the Estonian FSA. Prior approval by the Estonian FSA of the indirect acquisition of the Estonian Central Register of Securities was granted on August 2, 2007.

Latvia

Pursuant to the Latvian Law on Financial Instruments Market, if anyone proposes to acquire, has acquired or is suspected of having acquired a direct or indirect material holding of a stock exchange or of the Latvian Central Depository, which we refer to as the LCD, which would be equal to at least one-tenth of the share capital or the voting rights, the Latvian Finance and Capital Markets Commission (Lv: Finanðu un kapitâla tirgus komisija), which we refer to as the FCMC, is entitled to demand certain information regarding the acquirer, its management and its beneficial owners. Prior approval by the FCMC of the indirect acquisition of the Riga Stock Exchange (Lv: Rîgas Fondu birþa) and the Latvian Central Securities Depository (Lv: Latvijas Centrâlais depozitârijs) was granted by the FCMC on September 27, 2007.

Lithuania

Pursuant to the Lithuanian Law on Markets of Financial Instruments, a person intending to increase the threshold of the votes or the authorized capital in a stock exchange or the central depository of by increments of

 

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up to one-fifth, one-third or one-half, or because of the increase of a person’s equity interest in a stock exchange or the central depositary to the extent that such entity would become a direct or indirect subsidiary of the acquirer, the acquirer must obtain a prior consent of the Lithuanian Securities Commission (Lt: Lietuvos Respublikos vertybiniø popieriø komisija). Prior approval by the Lithuanian Securities Commission of the indirect acquisition of the Vilnius Stock Exchange (Lt: Vilniaus vertybiniø popieriø birþa) and the Lithuanian Central Securities Depository (Lt: Lietuvos Centrinis Vertybiniø Popieriø Depozitoriumas) was granted on September 27, 2007.

United Kingdom

Pursuant to the United Kingdom Financial Services and Markets Act 2000, the acquisition of control (or an additional kind of control, or an increase in a relevant kind control already held) over a UK recognized investment exchange may only take place pursuant to prior authorization by the Financial Services Authority, which we refer to as the FSA. Control is deemed to be acquired where the acquirer holds 20% or more of the shares in the exchange or a parent undertaking of the exchange, where the acquirer is able to exercise significant influence over the management of either the exchange by virtue of its shareholding or voting power in the exchange, or in its parent undertaking by virtue of its shareholding or voting power in the parent undertaking, or where the acquirer is entitled to exercise, or control the exercise of, 20% or more of the voting power in the exchange or the parent. Prior approval of the indirect acquisition of a 24% shareholding in EDX London Limited is being sought by Nasdaq and Hedgehog AB, a subsidiary of Nasdaq. Nasdaq and Hedgehog AB submitted the applications for authorization on November 5, 2007.

Authorization must be granted if the FSA is of the view that the acquisition of control by the person who gave the notice of control does not pose a threat to the sound and prudent management of any financial market operated by the recognised investment exchange. The FSA must render a decision within three months of the filing of the application for authorization. If the change of control occurs without prior approval having taken place, or in violation of a decision by the FSA, then the controller will have committed an offence and the FSA may subject the shares to restrictions, including, among others, that the transfer of shares is void or that no voting rights are exercisable in respect of the shares.

Committee on Foreign Investment in the United States

The Exon-Florio Amendment to the Defense Production Act of 1950, which we refer to as the Exon-Florio Amendment, empowers the President of the United States to prohibit or suspend an acquisition of, or investment in, a U.S. company by a “foreign person” if the President, after investigation, finds credible evidence that the foreign person might take action that threatens to impair the national security of the United States and that other provisions of existing law do not provide adequate and appropriate authority to protect the national security. By a 1988 executive order, the President delegated to the Committee on Foreign Investment in the United States, which we refer to as CFIUS, the authority to receive notices of proposed transactions, determine when an investigation is warranted, conduct investigations and submit recommendations to the President to suspend or prohibit the completion of transactions or to require divestitures of completed transactions. The Foreign Investment and National Security Act of 2007 increased the scrutiny of national security reviews for acquisitions by foreign-government-controlled entities of companies providing critical U.S. infrastructure.

A party or parties to a transaction may, but are not required to, submit to CFIUS a voluntary notice of the transaction. CFIUS has 30 calendar days from the date of submission to decide whether to initiate a formal investigation. If CFIUS declines to investigate, it sends a “no action” letter, and the review process is complete. If CFIUS decides to investigate, it has up to 45 calendar days and may prepare a recommendation to the President of the United States, who must then decide within 15 calendar days whether to block the transaction, whether to permit the transaction subject to specified restrictions or, in the case of completed transactions, whether and how any actual or threatened impairment of national security can be addressed.

 

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Nasdaq stated on September 20, 2007 that it voluntarily intended to submit a notice of the Transactions to CFIUS in accordance with the regulations implementing the Exon-Florio Amendment, and the parties have since filed with CFIUS. Nasdaq and Borse Dubai are working with the U.S. government to ensure that U.S. national security interests are protected. Although Nasdaq and Borse Dubai do not believe an investigation of, or recommendation to block or impose restrictions on, the Transactions by CFIUS is warranted under the standards of the Exon-Florio Amendment, CFIUS and the President of the United States have considerable discretion to conduct investigations and block and impose restrictions on transactions under the Exon-Florio Amendment.

Borse Dubai

The completion of the Transactions is conditioned upon Borse Dubai obtaining certain regulatory approvals. In addition, certain regulatory filings are required to be made in connection with the Transactions. Customary approval under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 is also required for the Transactions.

An offer document for the Borse Dubai Offer has been prepared in accordance with the Takeover Rules, the Swedish Act Concerning Public Takeover Bids in the Stock Market (Sw: lagen (2006:451) om offentliga uppköpserbjudanden på aktiemarknaden), the Swedish Financial Instruments Trading Act (Sw: lagen (1991:980) om handel med finansiella instrument) and the Commission Regulation (EC) No 809/2004 of April 29, 2004 implementing Directive 2003/71/EC of the European Parliament and the Council. That offer document has been registered by the Swedish Financial Supervisory Authority (Sw: Finansinspektionen) in accordance with the Swedish Financial Instruments Trading Act.

Below is a description of the applicable procedures for obtaining regulatory approvals and making certain regulatory filings in the relevant jurisdictions.

Sweden

Pursuant to the Swedish Securities Exchange and Clearing Operations Act and the Securities Operations Act, a direct or indirect acquisition of shares in a securities company or in a securities exchange which results in the acquiring party’s total holdings constituting no less than 10% of its share capital or the voting capital or where the holding otherwise renders it possible to exercise a significant influence over the management of the company, may only take place pursuant to prior authorization by the SFSA. Prior approval of the indirect acquisition of the OMX Nordic Exchange Stockholm AB and OMX Broker Services AB was granted by the SFSA on November 12, 2007.

Denmark

Pursuant to the Danish Act on Securities Trading, any natural or legal person contemplating a direct or indirect acquisition of no less than 10% of the share capital in a stock exchange is to notify the Danish Financial Supervisory Authority (Da: Finanstilsynet), which we refer to as the Danish FSA, and obtain its approval prior to the acquisition. Prior approval of the indirect acquisition of the Copenhagen Stock Exchange (Da: Københavns Fondsbørs A/S) (now called the OMX Nordic Exchange Copenhagen A/S) has been requested by Borse Dubai.

The Danish FSA will upon the filing of an application decide whether the acquirer can be expected to counteract the safe operation of the stock exchange and in such case deny approving the acquisition. The Danish FSA’s approval or rejection shall be available no later than three months after the its receipt of adequate notification of the contemplated acquisition. If the shares have already been acquired before a ruling has been made by the Danish FSA, the Danish FSA may annul the voting rights attached to the shares in question. If the Danish FSA in such case subsequently approves the acquisition, the acquirer may exercise its voting rights again.

Finland

Pursuant to the Finnish Securities Markets Act, if anyone proposes to acquire a holding of a stock exchange which would be equal to at least one-twentieth of the share capital or voting rights of a stock exchange, the

 

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Finnish Financial Supervision Authority (Fi: Rahoitustarkastus), which we refer to as the FFSA, shall be notified of the acquisition well in advance, and certain information regarding the acquirer, its management and its key shareholders shall be provided to the FFSA. The FFSA tendered a letter of non-intervention on November 12, 2007 with respect to the indirect acquisition of the Helsinki Stock Exchange (Fi: Helsingin Pörssi Oy).

Iceland

According to the Icelandic Act on the Activities of Stock Exchanges and Regulated OTC Markets, individuals and legal entities must notify the Icelandic Financial Supervisory Authority (Is: Fjármálaeftirlitið), which we refer to as the Icelandic FSA, of direct or indirect holdings in a company operating in accordance with the Act which amount to at least 10% of its share capital or voting rights, or less if such holding confers substantial influence on the management of the companies, and the extent of such holdings. The Icelandic FSA tendered a letter of no objections on November 12, 2007 with respect to the indirect acquisition of the Iceland Stock Exchange (Is: Kauphöll Íslands hf.) (now called the OMX Nordic Exchange Iceland hf.) and the Icelandic VÍ.

Estonia

According to the Estonian Central Register of Securities Act, a person acquiring a direct or indirect qualifying holding in the Estonian Central Register of Securities (Et: AS Eesti Väärtpaberikeskus) is obliged to apply for the approval by the Estonian Financial Supervisory Authority (Et: Finantsinspektsioon), which we refer to as the Estonian FSA. Prior approval by the Estonian FSA of the indirect acquisition of the Estonian Central Register of Securities has been requested by Borse Dubai.

Failure to receive the Estonian FSA’s approval results in not counting the shares held (or acquired) in determining the quorum of general meeting of the Estonian Central Register of Securities and the shares bear no voting rights.

There is no legal requirement for notifying the Estonian FSA of the changes in the shareholding of the operator of the regulated market (stock exchange). Nevertheless, there are ongoing proceedings on adopting amendments, which is expected to enter into force in November 2007.

Latvia

Pursuant to the Latvian Law on Financial Instruments Market, if anyone proposes to acquire, has acquired or is suspected of having acquired a direct or indirect material holding of a stock exchange or of the Latvian Central Depository, which we refer to as the LCD, which would be equal to at least one-tenth of the share capital or the voting rights, the Latvian Finance and Capital Markets Commission (Lv: Finanðu un kapitâla tirgus komisija), which we refer to as the FCMC, is entitled to demand certain information regarding the acquirer, its management and its beneficial owners. Prior approval by the FCMC of the indirect acquisition of the Riga Stock Exchange (Lv: Rîgas Fondu birþa) and the Latvian Central Securities Depository (Lv: Latvijas Centrâlais depozitârijs) has been requested by Borse Dubai.

The FCMC may, within three months from the receipt of a notification object to the acquisition if it is likely, based on the information obtained on the stability, good reputation, experience and other suitability of the holders or otherwise that the acquisition would endanger the sound and prudent business principles of the stock exchange or LCD. If the acquisition is not notified or if a material holding has been acquired despite the objection of the FCMC, the voting rights of the holder can be denied. If the material holding is deemed to threaten the stability, prudence or compliance with applicable normative acts of the stock exchange or LCD, the FCMC can require that the influence of such holding be suspended, including, if necessary, requiring that changes be made to members of the management and/or supervisory board of the stock exchange or LCD, and suspending the voting rights in respect of such material holding. Resolutions of a general meeting of a stock exchange or LCD which have been passed with the assistance of votes in respect of material holdings which have not been duly notified or approved by the FCMC are deemed to be invalid and not passed.

 

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Lithuania

Pursuant to the Lithuanian Law on Markets of Financial Instruments, a person intending to increase the threshold of the votes or the authorized capital in a stock exchange or the central depository of by increments of up to one-fifth, one-third or one-half, or because of the increase of a person’s equity interest in a stock exchange or the central depositary to the extent that such entity would become a direct or indirect subsidiary of the acquirer, the acquirer must obtain a prior consent of the Lithuanian Securities Commission (Lt: Lietuvos Respublikos vertybiniø popieriø komisija). Prior approval by the Lithuanian Securities Commission of the indirect acquisition of the Vilnius Stock Exchange (Lt: Vilniaus vertybiniø popieriø birþa) and the Lithuanian Central Securities Depository (Lt: Lietuvos Centrinis Vertybiniø Popieriø Depozitoriumas) has been requested by Borse Dubai.

If the acquirer increases the shareholding by exceeding the above mentioned thresholds without prior consent of the Lithuanian Securities Commission, the acquirer would lose the voting rights at the general meeting of shareholders. According to the Lithuanian legislation, the Lithuanian Securities Commission should pass its decision not later than within three months from the receipt of the application. However, the Lithuanian Securities Commission has a right to prolong the above time period in order to clarify certain issues.

United Kingdom

Pursuant to the United Kingdom Financial Services and Markets Act 2000, the acquisition of control (or an additional kind of control, or an increase in a relevant kind control already held) over a UK recognized investment exchange may only take place pursuant to prior authorization by the FSA. Control is deemed to be acquired where the acquirer holds 20% or more of the shares in the exchange or a parent undertaking, or where the acquirer is able to exercise significant influence over the management of either the exchange by virtue of its shareholding or voting power in the exchange, or in its parent undertaking by virtue of its shareholding or voting power in the parent undertaking, or where the acquirer is entitled to exercise, or control the exercise of, 20% or more of the voting power in the exchange or the parent. Change of control approval is being sought by Borse Dubai.

Authorization must be granted if the FSA is of the view that the acquisition of control by the person who gave the notice of control does not pose a threat to the sound and prudent management of any financial market operated by the recognized investment exchange. The FSA must render a decision within three months of the filing of the application for authorization. If a change of control occurs without prior approval having taken place, or in violation of a decision by the FSA, then the controller will have committed an offense and the FSA may subject the shares to restrictions, including, among others, that the transfer of shares is void or that no voting rights are exercisable in respect of the shares.

Regulatory Matters—The DIFX Transaction Agreement

Pursuant to the Dubai Financial Services Authority Authorized Market Institutions Module, the application or notification of change of control must be submitted at least 28 days in advance of the proposed change, or immediately upon becoming aware of a proposed or actual change in control. When considering an application or a notification of a change of control, the Dubai Financial Services Authority must be satisfied that an Authorized Market Institution would still satisfy its licensing requirements and remain fit and proper in light of any changes in control. Completion of the transactions contemplated by the DIFX Transaction Agreement requires the approval of the Dubai Financial Services Authority under this standard.

Regulatory Matters—The LSE Transaction

No regulatory approvals were required in connection with the LSE Transaction, which was completed on September 25, 2007.

 

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The Transactions—Principal Agreements

The descriptions of the agreements set forth in this section are summaries only and are qualified in their entirety by reference to the complete current form of the agreements attached to this Proxy Statement as Annexes C, D and E which are in draft form and have not yet been executed. Readers of this Proxy Statement should not view the existence of a representation and warranty, or the description of it in this Proxy Statement, as a representation to the readers of this Proxy Statement that all facts are as represented and warranted.

OMX Transaction Agreement

On November 15, 2007, Nasdaq, Borse Dubai and the Bidder entered into the OMX Transaction Agreement regarding Nasdaq’s and Borse Dubai’s pending offers for OMX and Borse Dubai’s investment in Nasdaq.

Terms and Conditions

In the OMX Transaction Agreement Nasdaq and Borse Dubai have each agreed not to open their respective offers for OMX for acceptances while they seek regulatory and shareholder approval for the Transactions. While the OMX Transaction Agreement is in effect, the Borse Dubai Offer will open for acceptances upon the satisfaction or waiver of the following conditions, which we refer to as the Conditions, by the beneficiary of such conditions:

 

   

there being no material adverse effect with respect to DIFX and the accuracy of the representations and warranties of Borse Dubai and DIFX set forth in, the compliance by Borse Dubai and DIFX with the covenants contained in, and the receipt of certain regulatory approvals related to, the DIFX Transaction Agreement (with Nasdaq as the beneficiary), provided that a failure of this condition will not prevent the Borse Dubai Offer from opening for acceptances but would release Nasdaq from its obligations in respect of the DIFX Transaction;

 

   

there being no material adverse effect in respect of OMX and the accuracy of certain information made public by OMX (with both Borse Dubai and Nasdaq as the beneficiaries);

 

   

there being no material adverse effect in respect of Nasdaq (with both Borse Dubai and Nasdaq as the beneficiaries);

 

   

the continued accuracy of all representations and warranties and compliance by the parties with their respective covenants (with Nasdaq being the beneficiary in respect of Borse Dubai’s representations, warranties and covenants and Borse Dubai being the beneficiary in respect of Nasdaq’s representations, warranties and covenants);

 

   

the receipt of regulatory and other approvals necessary to consummate the acquisition of OMX Shares and shares of Nasdaq Common Stock by Borse Dubai and OMX Shares by Nasdaq (with both Borse Dubai and Nasdaq as the beneficiaries);

 

   

there being no legal prohibition preventing the acquisition of OMX Shares and shares of Nasdaq Common Stock by Borse Dubai and OMX Shares by Nasdaq (with both Borse Dubai and Nasdaq as the beneficiaries); and

 

   

that no party has made a higher offer for OMX than the Borse Dubai Offer (with both Borse Dubai and Nasdaq as the beneficiaries).

Following the satisfaction of the Conditions, Nasdaq is obligated to withdraw the Offer. Pursuant to the OMX Transaction Agreement, Nasdaq and Borse Dubai are obligated to cooperate in the conduct of their offers for OMX. The Transactions can be terminated if the Conditions have not been satisfied by February 15, 2008, or if the Borse Dubai Offer has not closed by April 15, 2008. Closing of the transactions contemplated by the OMX Transaction Agreement is also conditioned upon the satisfaction or waiver of the following conditions by the beneficiary of such conditions:

 

   

there being no material adverse effect with respect to DIFX and the accuracy of the representations and warranties of Borse Dubai and DIFX set forth in, compliance by Borse Dubai and DIFX with the

 

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covenants contained in, and the receipt of certain regulatory approvals related to, the DIFX Transaction Agreement (with Nasdaq as the beneficiary), provided that a failure of this condition will not prevent the Borse Dubai Offer from opening for acceptances but would release from Nasdaq from its obligations in respect of the DIFX Transaction;

 

   

the simultaneous closing of the DIFX Transaction (with Borse Dubai as the beneficiary);

 

   

there being no material adverse effect in respect of OMX and the accuracy of certain information made public by OMX (with both Borse Dubai and Nasdaq as the beneficiaries);

 

   

there being no material adverse effect in respect of Nasdaq (with both Borse Dubai and Nasdaq as the beneficiaries);

 

   

the continued accuracy of all representations and warranties and compliance by the parties with their respective covenants (with Nasdaq being the beneficiary in respect of Borse Dubai’s representations, warranties and covenants and Borse Dubai being the beneficiary in respect of Nasdaq’s representations, warranties and covenants);

 

   

there being no legal prohibition preventing the acquisition of OMX Shares and shares of Nasdaq Common Stock by Borse Dubai and OMX Shares by Nasdaq (with both Borse Dubai and Nasdaq as the beneficiaries); and

 

   

that no party has made a higher offer for OMX than the Borse Dubai Offer (with both Borse Dubai and Nasdaq as the beneficiaries).

The condition of the Borse Dubai Offer pertaining to the minimal level of acceptances has been reduced to more than 50% of the outstanding OMX Shares. However, Nasdaq is permitted to terminate its agreements with Borse Dubai if less than 67% of the outstanding OMX Shares are tendered into the Borse Dubai Offer and delivered by Borse Dubai to Nasdaq.

Following the closing of the Borse Dubai Offer, Borse Dubai is obligated to cause its subsidiary currently holding the Borse Dubai Option Agreements to exercise all of these agreements, and thereafter Borse Dubai is required to sell, and to cause any of its subsidiaries to sell, to Nasdaq all OMX Shares then owned by Borse Dubai and any of its subsidiaries, however acquired. Concurrent with Borse Dubai’s delivery of OMX Shares, Nasdaq will pay to Borse Dubai up to SEK 12,582,952,392 in cash and deliver approximately 42.7 million shares of Nasdaq Common Stock (the exact number of shares will be equal to 19.99% of Nasdaq’s fully-diluted outstanding stock as of such date). The amount of cash delivered by Nasdaq will be reduced by SEK 265 for each issued and outstanding OMX Share as of such date not delivered to Nasdaq by Borse Dubai.

As additional consideration for the delivery of shares of OMX to Nasdaq by Borse Dubai, Nasdaq shall deliver approximately 18.0 million shares of its common stock to be deposited in the Trust for the benefit of Borse Dubai and to be managed by an independent trustee. In total, 60,561,515 shares of Nasdaq Common Stock will be issued to Borse Dubai and the Trust.

The parties have agreed to use reasonable best efforts to secure regulatory approvals for the transactions contemplated by the OMX Transaction Agreement, except that Borse Dubai will not be required to accept any condition imposed by any regulator that Borse Dubai, in its reasonable judgment, deems materially adverse to its investment in Nasdaq, including any condition that would prevent Borse Dubai from obtaining equity accounting treatment for its investment in Nasdaq, but after Borse Dubai takes into account possible alternative arrangements that the parties agree to negotiate in good faith.

Representations and Warranties

The OMX Transaction Agreement contains representations and warranties the parties made to each other. The assertions embodied in those representations and warranties were made solely for purposes of the OMX Transaction Agreement and are subject to important qualifications and limitations agreed to by the parties in

 

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connection with negotiating the terms of the OMX Transaction Agreement. Moreover, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different from what may be viewed as material to stockholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts.

In the OMX Transaction Agreement, Nasdaq makes a number of representations and warranties to Borse Dubai and the Bidder, including with respect to the matters set forth below:

 

   

corporate existence and power;

 

   

corporate authorization and enforceability;

 

   

governmental authorization;

 

   

noncontravention;

 

   

Section 203 of the Delaware General Corporation Law, which we refer to as the DGCL;

 

   

capitalization;

 

   

subsidiaries;

 

   

SEC reports and financial statements;

 

   

absence of certain changes;

 

   

legal proceedings and violations of law;

 

   

intellectual property;

 

   

employee benefits;

 

   

taxes;

 

   

financing;

 

   

no brokers or finders;

 

   

Nasdaq is not an “Investment Company”;

 

   

general solicitation and no integration; and

 

   

documentation.

In the OMX Transaction Agreement, Borse Dubai and the Bidder make a number of representations and warranties to Nasdaq, including with respect to the matters set forth below:

 

   

private placement;

 

   

corporate existence and power;

 

   

authority;

 

   

governmental authorization;

 

   

noncontravention;

 

   

limited purpose of the Bidder and option holder;

 

   

ownership of the OMX Shares;

 

   

options;

 

   

financing;

 

   

documentation; and

 

   

no brokers or finders.

 

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Indemnification

Nasdaq has agreed to indemnify and hold harmless Borse Dubai and the Bidder and their respective directors, trustees, members, partners, officers, agents and employees from and against any losses, claims, damages, expenses and liabilities, resulting from:

 

   

any breach of any representation or warranty made by Nasdaq in the OMX Transaction Agreement, the Registration Rights Agreement, the Nasdaq Stockholders’ Agreement or the Trust Agreement; and

 

   

any breach of any covenant made or to be performed by Nasdaq under the OMX Transaction Agreement, the Registration Rights Agreement, the Nasdaq Stockholders’ Agreement or the Trust Agreement.

Borse Dubai and the Bidder will not be entitled to indemnification with respect to breaches of representations and warranties (other than those regarding corporate existence and power, corporate authorization and enforceability, Section 203 of the DGCL, capitalization, Nasdaq not being an investment company and general solicitation and no integration) unless the aggregate amount of damages incurred by such party for which indemnification is available exceeds an amount equal to $29,000,000. The aggregate amount of Nasdaq’s liability for indemnification with respect to breaches of representations and warranties (other than those regarding corporate existence and power, corporate authorization and enforceability, Section 203 of the DGCL, capitalization, Nasdaq not being an investment company and general solicitation and no integration) will not exceed $2,900,000,000.

Borse Dubai and the Bidder’s right to make claims for indemnification with respect to breaches of representations and warranties (other than those regarding corporate existence and power, corporate authorization and enforceability, Section 203 of the DGCL, capitalization, Nasdaq not being an investment company and general solicitation and no integration) will survive for a period of 12 months following the closing, and with respect to breaches of the representations and warranties specified in the previous clause, will survive indefinitely.

Borse Dubai and the Bidder have agreed, jointly and severally, to indemnify and hold harmless Nasdaq and its directors, trustees, members, partners, officers, agents and employees from and against any losses, claims, damages, expenses and liabilities, resulting from:

 

   

any breach of any representation or warranty made by Borse Dubai or the Bidder in the OMX Transaction Agreement, the Registration Rights Agreement, the Nasdaq Stockholders’ Agreement or the Trust Agreement; and

 

 

   

any breach of any covenant made or to be performed by Borse Dubai or the Bidder under the OMX Transaction Agreement, the Registration Rights Agreement, the Nasdaq Stockholders’ Agreement or the Trust Agreement.

Nasdaq will not be entitled to indemnification with respect to breaches of representations and warranties (other than those regarding private placement, corporate existence and power, authority and ownership of the OMX Shares) unless the aggregate amount of damages incurred by such party for which indemnification is available exceeds an amount equal to $29,000,000. The aggregate amount of Borse Dubai and the Bidder’s liability for indemnification with respect to breaches of representations and warranties (other than those regarding private placement, corporate existence and power, authority and ownership of the OMX Shares) will not exceed $2,900,000,000.

Nasdaq’s right to make claims for indemnification with respect to breaches of representations and warranties (other than those regarding private placement, corporate existence and power, authority and ownership of the OMX Shares) will survive for a period of 12 months following the closing, and with respect to breaches of the representations and warranties specified in the previous clause will survive indefinitely.

 

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Nasdaq Stockholders’ Agreement

Pursuant to the OMX Transaction Agreement, at the closing of the OMX Transaction Agreement, Nasdaq and Borse Dubai will enter into the Nasdaq Stockholders’ Agreement.

Transfer Restrictions

Under the terms of the Nasdaq Stockholders’ Agreement, Borse Dubai is restricted from transferring any of the Nasdaq Common Stock acquired in the Transactions for a period of one year from the date of the agreement, subject to certain exceptions for transfers to, among others, its affiliates, Nasdaq and to the Trust under certain circumstances. Additionally, at no time may Borse Dubai transfer any Nasdaq Common Stock to a competitor of Nasdaq, other than in a change of control of Nasdaq, a public offering or sale pursuant to Rule 144 under the Securities Act or in limited circumstances involving not more than 5% of the outstanding Nasdaq Common Stock. During the 18 months following the date of the Nasdaq Stockholders’ Agreement, Borse Dubai may participate pro rata in any repurchases by Nasdaq of Nasdaq Common Stock or may contribute Nasdaq Common Stock to the Trust, in each case in order to maintain its ownership percentage at or below 19.99%.

Trust Matters

For as long as the Trust continues to hold any shares of Nasdaq Common Stock, Borse Dubai has agreed to use its reasonable best efforts to cause the Trust to dispose of its Nasdaq Common Stock. However, Borse Dubai has no obligation to cause the Trust to dispose of any shares of Nasdaq Common Stock if the net amount that the Trust would receive from any sale of such shares is less than $49.20, the agreed-upon floor price, which is equal to the implied price per share of Nasdaq Common Stock paid by Borse Dubai in the Transactions. This implied share price is subject to adjustment based upon the SEK/USD exchange rate at the closing of the Transactions, and upward adjustment based upon certain reasonable expenses of the Trust and a 6% cost of capital, and downward adjustment for any distributions made by Nasdaq. The parties do not believe that Borse Dubai’s control over the disposition by the Trust of shares of Nasdaq Common Stock in accordance with the Nasdaq Stockholders’ Agreement adversely affects the independence of the trustee of the Trust, since the Trust’s rights with respect to voting its shares of Nasdaq Common Stock and to otherwise act in relation to Nasdaq is set forth in the Trust Agreement and may not be modified by Borse Dubai without the prior written consent of Nasdaq.

Board Representation

As long as Borse Dubai maintains at least one-half of its initial 19.99% investment, Borse Dubai will be entitled to propose for nomination two directors for election to Nasdaq’s Board of Directors, and Nasdaq will use its reasonable best efforts to ensure that one Borse Dubai director will be appointed to the Audit, Executive, Finance, and Management Compensation committees of Nasdaq’s Board of Directors and that one designee of Borse Dubai will be appointed to the Nominating Committee of Nasdaq’s Board of Directors, in each case subject to applicable law, regulation, stock exchange listing standard or committee composition standard.

As long as Borse Dubai maintains at least 25% of its initial 19.99% investment, Borse Dubai will be entitled to nominate one director for election to Nasdaq’s Board of Directors, but will have no right to appoint members of any committees of Nasdaq’s Board of Directors.

Standstill Restrictions

Under the terms of the Nasdaq Stockholders’ Agreement, until the earliest to occur, which we refer to as a Standstill Termination Date, of:

 

   

the 10th anniversary of the Nasdaq Stockholders’ Agreement;

 

   

Borse Dubai owning less than 10% of Nasdaq’s outstanding common stock;

 

   

Nasdaq entering into a definitive agreement with respect to a change of control of it;

 

   

a change of control of Nasdaq;

 

   

directors nominated by Borse Dubai are not elected by shareholders at two consecutive meetings of shareholders for the election of the Nasdaq’s Board of Directors; and

 

   

Nasdaq holds less than 25% of its original interest in DIFX, subject to certain exceptions.

 

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Borse Dubai will be restricted from (i) acquiring shares in excess of 19.99% on a fully-diluted basis of Nasdaq, (ii) soliciting proxies with respect to Nasdaq, (iii) proposing or seeking to effect a merger or change of control of Nasdaq, (iv) making public statements or otherwise directly or indirectly seeking to control the management or policies of Nasdaq or its subsidiaries or seeking additional board representatives or removal of directors, (v) forming a “group” with respect to Nasdaq or (vi) otherwise acting in concert with others regarding any of the foregoing.

In addition, if any third party makes a tender or exchange offer that is not recommended against by the Nasdaq’s Board of Directors, after 10 business days Borse Dubai may tender into that offer.

Preemptive Rights

At any time prior to the Standstill Termination Date, if Nasdaq effects an issuance of Nasdaq Common Stock or any securities exchangeable for, or convertible into, Nasdaq Common Stock in any capital raising transaction, which we refer to as a preemptive issuance, that would cause Borse Dubai to own less than 19.99% (as may be reduced in certain circumstances) of Nasdaq Common Stock calculated on a fully diluted basis, Borse Dubai will have the right to purchase securities in such issuance to maintain the same total voting power as Borse Dubai owned immediately prior to such issuance. Borse Dubai’s purchase rights will not apply to the following issuances:

 

   

upon conversion of shares of Nasdaq’s current or future issued options, warrants or similar securities exerciseable, convertible, or exchangeable for capital stock of Nasdaq;

 

   

any stock split or subdivision or similar transaction with respect to Nasdaq’s capital stock;

 

   

a preemptive issuance with respect to which Borse Dubai’s participation would require approval of Nasdaq’s stockholders regardless of the number of shares offered, which Nasdaq will use its reasonable best efforts to obtain, unless and until shareholder approval is obtained (but this exception shall not apply if the approval of Nasdaq’s stockholders is required for any other reason);

 

   

a preemptive issuance with respect to which Borse Dubai’s participation would require regulatory approvals, which Nasdaq will use its commercially reasonable efforts to obtain, unless and until such regulatory approvals have been obtained;

 

   

any issuance of capital stock of Nasdaq to employees, officers, directors of, and consultants, customers and vendors to, Nasdaq;

 

   

in connection with acquisitions by Nasdaq, whether by merger, consolidation, share exchange or other reorganization or business combination; and

 

   

upon exercise of securities issued pursuant to rights distributed to holders of Nasdaq Common Stock generally.

Registration Rights Agreement

Pursuant to the OMX Transaction Agreement, at the closing of the OMX Transaction Agreement Nasdaq, Borse Dubai and the Trust will enter into the Registration Rights Agreement.

Demand Registrations

Following the 12 month anniversary of the closing of the Transactions, each of Borse Dubai and the Trust will have the right to demand registration of the shares of Nasdaq Common Stock that it receives as part of the Transactions. Pursuant to the Registration Rights Agreement, each of Borse Dubai and the Trust may only demand registration for sales of Nasdaq Common Stock having a value (based on the average closing sale price per share of Nasdaq Common Stock for the 10 trading days preceding the registration request) of not less than $50 million. Borse Dubai will be entitled to six demand registrations and the Trust will be entitled to three demand registrations, each subject to certain exceptions.

 

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Piggyback Registration

The Registration Rights Agreement also provides Borse Dubai and the Trust with piggyback registration rights such that if at any time Nasdaq proposes to file a registration statement with respect to any underwritten offering of its securities for its own account or for the account of any stockholder that holds its securities (subject to certain exceptions), Nasdaq is required to give written notice of such proposed filing to Borse Dubai and the Trust, and the notice must offer Borse Dubai and the Trust the opportunity to register such number of registrable securities as each of Borse Dubai and the Trust may request in writing.

The registration rights granted in the Registration Rights Agreement are subject to customary restrictions such as blackout periods and limitations on the number of shares to be included in any underwritten offering imposed by the managing underwriter. In addition, the Registration Rights Agreement contains other limitations on the timing and ability of Borse Dubai and the Trust to exercise demands.

Trust Agreement

Pursuant to the OMX Transaction Agreement, at the closing of the OMX Transaction Agreement Nasdaq, Borse Dubai and the Trustee will enter into the Trust Agreement.

The parties decided to structure the Transactions to include the issuance of shares of Nasdaq Common Stock to the Trust to be held for the economic benefit of Borse Dubai, instead of issuing such shares directly to Borse Dubai itself, to ensure that Borse Dubai’s investment in Nasdaq would be non-controlling in nature. This structure reflects the parties’ sensitivity to possible regulatory concerns (with respect to the Committee on Foreign Investment in the United States and regulatory authorities in the Nordic and Baltic regions) that a third party could exercise control with respect to Nasdaq, and a desire to mitigate the possibility of those concerns while still allowing the parties to meet their goals in the Transactions.

As a benchmark for the division of shares of Nasdaq Common Stock between Borse Dubai and the Trust, the parties considered that, under the membership rules of The Nasdaq Stock Market, broker-dealers that are members of The Nasdaq Stock Market are not permitted to own more than 20% of the shares of Nasdaq Common Stock, and that issuance of 20% or more of the shares of Nasdaq Common Stock often requires a shareholder vote under the listing standards of The Nasdaq Stock Market. Although neither of these provisions directly applies to Borse Dubai’s ownership, the parties viewed them as helpful reference points in their discussions and eventual agreement.

The Trust Agreement governs the Trust established to hold certain of the shares of Nasdaq Common Stock issued to the Trust upon consummation of the Transactions. The Trust Agreement provides that the Trustee will hold the shares of Nasdaq Common Stock in trust for the benefit of Borse Dubai, and will sell the shares of Nasdaq Common Stock in the Trust as directed by Borse Dubai. From time to time, upon notice from Borse Dubai certified by Nasdaq, the trustee will transfer that number of shares of Nasdaq Common Stock to Borse Dubai necessary to ensure that Borse Dubai’s ownership of Nasdaq Common Stock is not more than 19.99% of the fully-diluted Nasdaq Common Stock. If at any time the shares of Nasdaq Common Stock held by the Trust are deemed to have the right to vote on any matters submitted to the stockholders of Nasdaq, or any action by written consent requested to be taken by the stockholders of Nasdaq, the Trustee will execute a proxy with respect to the shares of Nasdaq Common Stock held by the Trust in favor of the Corporate Secretary or other designee of Nasdaq to vote or act by written consent, and such shares will be voted or consented pro rata with the other stockholders of Nasdaq (other than Borse Dubai).

DIFX Transaction Agreement

On November 15, 2007, Nasdaq, Borse Dubai and DIFX entered into the DIFX Transaction Agreement regarding Nasdaq’s investment in DIFX.

 

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Terms and Conditions

Pursuant to, and at the closing of, the DIFX Transaction Agreement, in exchange for $50 million, Nasdaq will acquire 33 1/3% of the outstanding equity of DIFX.

The following are conditions to the closing of the DIFX Transaction Agreement:

 

   

The transactions contemplated by the OMX Transaction Agreement shall occur simultaneously (being a closing condition of all parties);

 

   

DIFX shall have received the prior written consent of the Dubai Financial Services Authority approving the transactions contemplated by the DIFX Transaction Agreement (being a closing condition of all parties);

 

   

No material adverse effect with respect to DIFX shall have occurred and be existing (being a closing condition of all parties);

 

   

No restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated by the DIFX Transaction Agreement shall be in effect (being a closing condition of all parties);

 

   

Accuracy of Nasdaq’s representations and warranties, performance by Nasdaq of its covenants, delivery by Nasdaq of a certificate regarding those conditions and delivery by Nasdaq of signed copies of the DIFX Stockholders’ Agreement, the Trademark License Agreement and the Technology License and Marketing Agreement (being a closing condition of Borse Dubai and DIFX); and

 

   

Accuracy of Borse Dubai’s and DIFX’s representations and warranties, performance by each of Borse Dubai and DIFX of its covenants, delivery by each of Borse Dubai and DIFX of a certificate regarding those conditions and delivery by the parties of signed copies of the DIFX Stockholders’ Agreement, the Trademark License Agreement and the Technology License and Marketing Agreement (being a closing condition of Nasdaq).

Representations and Warranties

The DIFX Transaction Agreement contains representations and warranties the parties made to each other. The assertions embodied in those representations and warranties were made solely for purposes of the DIFX Transaction Agreement and are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the terms of the DIFX Transaction Agreement. Moreover, certain representations and warranties were made as of a specified date, may be subject to a contractual standard of materiality different from what may be viewed as material to stockholders, or may have been used for the purpose of allocating risk between the parties rather than establishing matters as facts.

In the DIFX Transaction Agreement, DIFX and Borse Dubai make a number of representations and warranties to Nasdaq, including with respect to the matters set forth below:

 

   

corporate authorization and enforceability;

 

   

governmental authorization;

 

   

noncontravention;

 

   

capitalization;

 

   

financial statements;

 

   

absence of certain changes;

 

   

legal proceedings and violations of law;

 

   

intellectual property;

 

   

employee benefits;

 

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taxes;

 

   

no brokers or finders;

 

   

DIFX is not an “Investment Company”;

 

   

general solicitation and no integration;

 

   

constitutional documents;

 

   

licenses and consents;

 

   

insolvency;

 

   

IT systems;

 

   

important contracts; and

 

   

disclosure.

In the DIFX Transaction Agreement, Nasdaq makes a number of representations and warranties to Borse Dubai and DIFX, including with respect to the matters set forth below:

 

   

private placement;

 

   

corporate existence and power;

 

   

authority;

 

   

governmental authorization;

 

   

noncontravention;

 

   

financing; and

 

   

no brokers or finders.

Indemnification

Borse Dubai and DIFX have agreed, jointly and severally, to indemnify and hold harmless Nasdaq and its directors, trustees, members, partners, officers, agents and employees from and against any losses, claims, damages, expenses and liabilities, resulting from:

 

   

any breach of any representation or warranty made by Borse Dubai or DIFX in the DIFX Stockholders’ Agreement, the Trademark License Agreement and the Technology License and Marketing Agreement; and

 

   

any breach of any covenant made or to be performed by Borse Dubai or DIFX under the DIFX Stockholders’ Agreement, the Trademark License Agreement and the Technology License and Marketing Agreement.

Nasdaq will not be entitled to indemnification with respect to breaches of representations and warranties (other than those regarding corporate authorization and enforceability, capitalization, DIFX not being an investment company and general solicitation and no integration) unless the aggregate amount of damages incurred by such party for which indemnification is available exceeds an amount equal to $1,800,000. The aggregate amount of Borse Dubai and DIFX’s liability for indemnification with respect to breaches of representations and warranties (other than those regarding corporate authorization and enforceability, capitalization, DIFX not being an investment company and general solicitation and no integration) will not exceed $180,000,000.

Nasdaq’s right to make claims for indemnification with respect to breaches of representations and warranties (other than those regarding corporate authorization and enforceability, capitalization, DIFX not being an investment company and general solicitation and no integration) will survive for a period of 12 months following the closing, and with respect to breaches of the representations and warranties specified in the previous clause will survive indefinitely.

 

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Nasdaq has agreed to indemnify and hold harmless Borse Dubai and DIFX and their respective directors, trustees, members, partners, officers, agents and employees from and against any losses, claims, damages, expenses and liabilities, resulting from:

 

   

any breach of any representation or warranty made by Nasdaq in the DIFX Stockholders’ Agreement, the Trademark License Agreement and the Technology License and Marketing Agreement; and

 

   

any breach of any covenant made or to be performed by Nasdaq under the DIFX Stockholders’ Agreement, the Trademark License Agreement and the Technology License and Marketing Agreement.

Borse Dubai and DIFX will not be entitled to indemnification with respect to breaches of representations and warranties (other than those regarding private placement, corporate existence and power and authority) unless the aggregate amount of damages incurred by such party for which indemnification is available exceeds an amount equal to $1,800,000. The aggregate amount of Nasdaq’s liability for indemnification with respect to breaches of representations and warranties (other than those regarding private placement, corporate existence and power and authority) will not exceed $180,000,000.

Borse Dubai and DIFX’s right to make claims for indemnification with respect to breaches of representations and warranties (other than those regarding private placement, corporate existence and power and authority) will survive for a period of 12 months following the closing, and with respect to breaches of the representations and warranties specified in the previous clause, will survive indefinitely.

DIFX Stockholders’ Agreement

Pursuant to the DIFX Transaction Agreement, at the closing of the DIFX Transaction Agreement, Nasdaq, Borse Dubai and DIFX will enter into the DIFX Stockholders’ Agreement.

Transfer Restrictions

Under the terms of the DIFX Stockholders’ Agreement, Nasdaq is restricted from transferring any of its ownership interest in DIFX for a period of seven years from the date of the agreement, subject to certain exceptions.

Additionally, Nasdaq has a co-sale right to sell a pro rata portion of its ownership interest in DIFX if Borse Dubai sells an amount that, when combined with those interests to be sold by Nasdaq, represents 25% or more of the outstanding ownership interests of DIFX. Borse Dubai has a drag-along right that would require Nasdaq to sell a pro rata portion of its ownership interest in DIFX if Borse Dubai sells an amount that, when combined with those interests to be sold by Nasdaq, would result in a change in control of DIFX. Other than in a co-sale or drag- along transaction, Borse Dubai has a right of first refusal with respect to sales by Nasdaq of its ownership interests in Borse Dubai. Finally, in certain situations, Nasdaq has a put right that would obligate DIFX to repurchase Nasdaq’s ownership interests in DIFX at fair market value.

Board Representation

As long as Nasdaq maintains at least one-half of its initial ownership interest in DIFX, Nasdaq will be entitled to propose for nomination two directors, who we refer to as a Nasdaq Designee, for election to DIFX’s Board of Directors, and DIFX will use its reasonable best efforts to cause the appointment of one Nasdaq director to the Market Oversight and Nominations committees of DIFX’s board of directors and one designee of Nasdaq to the Listing Committee of DIFX, in each case subject to applicable law, regulation, stock exchange listing standard or committee composition standard.

As long as Nasdaq maintains at least 25% of its initial ownership interest in DIFX, Nasdaq will be entitled to nominate one director for election to DIFX’s Board of Directors, but will have no right to nominate members to any committees of DIFX’s Board of Directors.

 

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Supermajority Vote Required for Certain Board Actions

For so long as Nasdaq is entitled to designate a Nasdaq Designee, the following actions may not be entered into without the approval of at least one Nasdaq Designee:

 

   

any material change in, or expansion of, DIFX’s business purpose;

 

   

any transaction or series of transactions with an affiliate of DIFX (subject to certain exceptions);

 

   

any sale of capital stock in DIFX (other than pursuant to an initial public offering) to a competitor of Nasdaq;

 

   

any transactions by DIFX outside of certain geographic areas with a competitor of Nasdaq;

 

   

any amendment to DIFX’s organizational documents that would be adverse to Nasdaq; and

 

   

a change in control of DIFX.

Information Rights and Compliance

DIFX has agreed to provide Nasdaq with certain financial statements. In addition, DIFX and its subsidiaries will maintain compliance functions reasonably required for their own regulatory purposes and comply in all respects material to each of Nasdaq and DIFX with all United States laws applicable to DIFX and its subsidiaries.

Capital Calls

In certain circumstances, Nasdaq may be obligated to provide up to $25 million in addition capital to DIFX.

Pre-emptive Rights

Other than in connection with a public offering, if DIFX effects an issuance of DIFX shares or any securities exchangeable for, or convertible into, DIFX shares in any capital raising transaction, Nasdaq will have the right to purchase securities on a basis proportional to its ownership of DIFX. Nasdaq’s purchase rights will not apply to the following issuances:

 

   

any stock split or subdivision or similar transaction with respect to Nasdaq’s capital stock;

 

   

a preemptive issuance with respect to which Borse Dubai’s participation would require regulatory approvals, unless and until such regulatory approvals have been obtained;

 

   

any issuance of capital stock of Nasdaq to employees, officers, directors of, and consultants, customers and vendors to, Nasdaq;

 

   

in connection with acquisitions by DIFX, whether by merger, consolidation, share exchange or other reorganization or business combination; and