<SUBMISSION>
<ACCESSION-NUMBER>0000950124-06-002063
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>5
<PERIOD>20060523
<FILING-DATE>20060421
<DATE-OF-FILING-DATE-CHANGE>20060420
<EFFECTIVENESS-DATE>20060421
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>BLUE NILE INC
<CIK>0001091171
<ASSIGNED-SIC>5944
<IRS-NUMBER>911963165
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>000-50763
<FILM-NUMBER>06770927
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>705 FIFTH AVE S
<STREET2>STE 900
<CITY>SEATTLE
<STATE>WA
<ZIP>98104
<PHONE>2063366700
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>705 FIFTH AVE S
<STREET2>STE 900
<CITY>SEATTLE
<STATE>WA
<ZIP>98104
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>INTERNET DIAMONDS INC
<DATE-CHANGED>20000131
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>v16811dedef14a.htm
<DESCRIPTION>DEFINITIVE PROXY STATEMENT
<TEXT>
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<HEAD>
<TITLE>def14a</TITLE>
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<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
WASHINGTON, D.C. 20549</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SCHEDULE 14A INFORMATION<BR>
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934<BR>
(Amendment No.&#95;&#95;&#95;)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Filed by
the Registrant&nbsp;<FONT style="font-family: Wingdings">&#120;</FONT><BR>
Filed by a Party other than the Registrant&nbsp;<FONT style="font-family: Wingdings">&#168;</FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Preliminary Proxy Statement</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-6(e)(2))</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#120;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Definitive Proxy Statement</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Definitive Additional Materials</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Soliciting Material Pursuant to &#167; 240.14a-12</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>Blue Nile, Inc.</B></FONT>
</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
(Name of Registrant as Specified In Its Charter)</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">N/A
</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payment of Filing Fee (Check the appropriate box)
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#120;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No fee required.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Title of each class of securities to which transaction applies:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Aggregate number of securities to which transaction applies:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule&nbsp;0-11 (Set forth the amount on which the filing fee is calculated and state how it was
determined):</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Proposed maximum aggregate value of transaction:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Total fee paid:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fee paid previously with preliminary materials.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Check box if any part of the fee is offset as provided by Exchange
Act Rule&nbsp;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.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount Previously Paid:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form, Schedule or Registration Statement No.:</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Filing Party:</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Date Filed:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">
</DIV>


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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center" style="font-size: 14.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>BLUE NILE, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>705 Fifth Avenue South</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>Suite&nbsp;900</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>Seattle, Washington 98104</B>
</DIV>

<DIV align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS</B>
</DIV>

<DIV align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff;">
<B>To Be Held On May&nbsp;23, 2006</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Dear Stockholder:
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You are cordially invited to attend the Annual Meeting of
Stockholders of Blue Nile, Inc., a Delaware corporation (the
&#147;Company&#148;). Notice is hereby given that the Annual
Meeting will be held on Tuesday, May&nbsp;23, 2006 at 2:00 PM
Pacific Time at the Washington Athletic Club located at 1325
Sixth Avenue, Seattle, Washington 98101, for the following
purposes<B>:</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    1.&nbsp;To elect two directors to hold office until the 2009
    Annual Meeting of Stockholders.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>2.&nbsp;</TD>
    <TD align="left">
    To ratify the selection by the Audit Committee of the Board of
    Directors of Deloitte&nbsp;&#38; Touche LLP as independent
    auditors of the Company for its fiscal year ending
    December&nbsp;31, 2006.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    3.&nbsp;To conduct any other business properly brought before
    the Annual Meeting.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These items of business are more fully described in the Proxy
Statement accompanying this Notice.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The record date for the Annual Meeting is March&nbsp;31, 2006.
Only stockholders of record at the close of business on that
date may vote at the Annual Meeting or any adjournment thereof.
For ten days prior to the Annual Meeting, a complete list of
stockholders entitled to vote at the Annual Meeting will be
available for examination by any stockholder, for any purpose
relating to the Annual Meeting, during ordinary business hours
at the Company&#146;s principal offices located at 705 Fifth
Avenue South, Suite&nbsp;900, Seattle, Washington 98104.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    By Order of the Board of Directors,</TD>
</TR>

<TR>
    <TD style="font-size: 12.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <IMG src="v16811dev1681102.gif" alt="-s- TERRI K. MAUPIN"></TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Terri K. Maupin</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Secretary</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Seattle, Washington
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
April&nbsp;21, 2006
</DIV>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>You
are cordially invited to attend the Annual Meeting in person.
Whether or not you expect to attend the Annual Meeting, please
complete, date, sign and return the enclosed proxy or vote over
the telephone or the Internet as instructed in these materials,
as promptly as possible in order to ensure your representation
at the Annual Meeting. A return envelope (which is postage
prepaid if mailed in the United States) is enclosed for your
convenience. Even if you have voted by proxy, you may still vote
in person if you attend the Annual Meeting. Please note,
however, that if your shares are held of record by a broker,
bank or other nominee and you wish to vote at the Annual
Meeting, you must obtain a proxy issued in your name from that
record holder.</B>
</DIV>
</DIV>
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<DIV align="center" style="font-size: 14.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>BLUE NILE, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>705 Fifth Avenue South</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>Suite&nbsp;900</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>Seattle, Washington 98104</B>
</DIV>

<DIV align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PROXY STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff;">
<B>FOR THE 2006 ANNUAL MEETING OF STOCKHOLDERS</B>
</DIV>

<DIV align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff;">
<B>Tuesday, May&nbsp;23, 2006</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Why am I receiving these materials?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Blue Nile, Inc. (sometimes referred to as the
&#147;Company&#148; or &#147;Blue Nile&#148;) sent you this
proxy statement and the enclosed proxy card because the Board of
Directors of Blue Nile is soliciting your proxy to vote at the
2006 Annual Meeting of Stockholders (the &#147;Annual
Meeting&#148;). You are invited to attend the Annual Meeting to
vote on the proposals described in this proxy statement.
However, you do not need to attend the Annual Meeting to vote
your shares. Instead, you may simply complete, sign and return
the enclosed proxy card or follow the instructions below to
submit your proxy over the telephone or on the Internet.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Blue Nile intends to mail this proxy statement and accompanying
proxy card on or about April&nbsp;21, 2006 to all stockholders
of record entitled to vote at the Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Who can vote at the Annual Meeting?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Only stockholders of record at the close of business on
March&nbsp;31, 2006 will be entitled to vote at the Annual
Meeting. On this record date, there were 17,431,551&nbsp;shares
of common stock outstanding and entitled to vote.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Stockholder of Record: Shares Registered in Your
    Name</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If on March&nbsp;31, 2006 your shares were registered directly
in your name with Blue Nile&#146;s transfer agent, Mellon
Investment Services, then you are a stockholder of record. As a
stockholder of record, you may vote in person at the Annual
Meeting or vote by proxy. Whether or not you plan to attend the
Annual Meeting, please fill out and return the enclosed proxy
card or vote by proxy over the telephone or on the Internet as
instructed below to ensure your vote is counted.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Beneficial Owner: Shares Registered in the Name of a
    Broker or Bank</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If on March&nbsp;31, 2006 your shares were held, not in your
name, but rather in an account at a brokerage firm, bank,
dealer, or other similar organization, then you are the
beneficial owner of shares held in &#147;street name&#148; and
these proxy materials are being forwarded to you by that
organization. The organization holding your account is
considered to be the stockholder of record for purposes of
voting at the Annual Meeting. As a beneficial owner, you have
the right to direct your broker or other agent on how to vote
the shares in your account. You are also invited to attend the
Annual Meeting. However, since you are not the stockholder of
record, you may not vote your shares in person at the Annual
Meeting, unless you request and obtain a valid proxy from your
broker or other agent.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>What am I voting on?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are two matters scheduled for a vote:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="3%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>1)&nbsp;</TD>
    <TD align="left">
    Election of two directors;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>2)&nbsp;</TD>
    <TD align="left">
    Ratification of Deloitte&nbsp;&#38; Touche LLP as independent
    auditors of the Company for its fiscal year ending
    December&nbsp;31, 2006.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>How do I vote?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You may either vote &#147;For&#148; both nominees to the Board
of Directors or you may &#147;Withhold&#148; your vote for any
nominee you specify. For the other matter to be voted on, you
may vote &#147;For&#148; or &#147;Against&#148; or abstain from
voting. The procedures for voting are fairly simple:
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Stockholder of Record: Shares Registered in Your
    Name</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a stockholder of record, you may vote in person at
the Annual Meeting, vote by proxy using the enclosed proxy card,
vote by proxy over the telephone, or vote by proxy on the
Internet. Whether or not you plan to attend the Annual Meeting,
the Company urges you to vote by proxy to ensure your vote is
counted. You may still attend the Annual Meeting and vote in
person even if you have already voted by proxy.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To vote in person, come to the Annual Meeting and the Company
    will give you a ballot when you arrive.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To vote using the proxy card, simply complete, sign and date the
    enclosed proxy card and return it promptly in the envelope
    provided. If you return your signed proxy card to the Company
    before the Annual Meeting, the Company will vote your shares as
    you direct.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To vote over the telephone, dial toll-free 1-866-540-5760 using
    a touch-tone phone and follow the recorded instructions. Please
    have your proxy card in hand when you call. You will be asked to
    provide the Company number and control number from the enclosed
    proxy card. Your vote must be received by 8:59 PM Pacific Time
    (11:59 PM Eastern Time) on Monday, May&nbsp;22, 2006 to be
    counted.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    To vote on the Internet, go to http://www.proxyvoting.com/nile
    to complete an electronic proxy card. You will be asked to
    provide the Company number and control number from the enclosed
    proxy card. Your vote must be received by 8:59 PM Pacific Time
    (11:59 PM Eastern Time) on Monday, May&nbsp;22, 2006 to be
    counted.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>We provide Internet proxy voting to allow you to vote your
shares on-line, with procedures designed to ensure the
authenticity and correctness of your proxy vote instructions.
However, please be aware that you must bear any costs associated
with your Internet access, such as usage charges from Internet
access providers and telephone companies.</B>
</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Beneficial Owner: Shares Registered in the Name of Broker
    or Bank</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a beneficial owner of shares registered in the name
of your broker, bank, or other agent, you should have received a
proxy card and voting instructions with these proxy materials
from that organization rather than from Blue Nile. Simply
complete and mail the proxy card to ensure that your vote is
counted. Alternatively, you may vote by telephone or on the
Internet as instructed by your broker or bank. To vote in person
at the Annual Meeting, you must obtain a valid proxy from your
broker, bank, or other agent. Follow the instructions from your
broker, bank, or other agent included with these proxy
materials, or contact your broker, bank, or other agent to
request a proxy form.
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>How many votes do I have?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On each matter to be voted upon, you have one vote for each
share of common stock you own as of March&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>What if I return a proxy card but do not make specific
choices?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you return a signed and dated proxy card without marking any
voting selections, your shares will be voted &#147;For&#148; the
election of both nominees for director, and &#147;For&#148; the
ratification of Deloitte&nbsp;&#38; Touche LLP as Blue
Nile&#146;s auditors through December&nbsp;31, 2006. If any
other matter is properly presented at the Annual Meeting, your
proxy (one of the individuals named on your proxy card) will
vote your shares using his or her best judgment.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Who is paying for this proxy solicitation?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Blue Nile will pay for the entire cost of soliciting proxies. In
addition to these mailed proxy materials, Blue Nile&#146;s
directors and employees may also solicit proxies in person, by
telephone, or by other means of communication. Directors and
employees will not be paid any additional compensation for
soliciting proxies. Blue Nile may also reimburse brokerage
firms, banks and other agents for the cost of forwarding proxy
materials to beneficial owners.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>What does it mean if I receive more than one proxy card?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you receive more than one proxy card, your shares are
registered in more than one name or are registered in different
accounts. Please complete, sign and return each proxy card to
ensure that all of your shares are voted.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Can I change my vote after submitting my proxy?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Yes. You can revoke your proxy at any time before the final vote
at the Annual Meeting. If you are the record holder of your
shares, you may revoke your proxy in any one of three ways:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    You may submit another properly completed proxy card with a
    later date.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    You may send a written notice that you are revoking your proxy
    to Blue Nile&#146;s Corporate Secretary at 705 Fifth Avenue
    South, Suite&nbsp;900, Seattle, Washington 98104.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    You may attend the Annual Meeting and vote in person. Simply
    attending the Annual Meeting will not, by itself, revoke your
    proxy.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If your shares are held by your broker or bank as a nominee or
other agent, you should follow the instructions provided by your
broker, bank or other agent.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>When are stockholder proposals due for next year&#146;s
Annual Meeting?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a stockholder, you may be entitled to present proposals in
next year&#146;s proxy materials if you comply with the
requirements of the proxy rules established by the Securities
and Exchange Commission. Proposals by our stockholders intended
to be presented for consideration at Blue Nile&#146;s 2007
Annual Meeting must be received by the Corporate Secretary of
Blue Nile at 705 Fifth Avenue South, Suite&nbsp;900, Seattle,
Washington 98104, by December&nbsp;22, 2006 (120 calendar days
prior to the anniversary of the mailing date of this proxy
statement), in order that they may be included in the proxy
materials relating to that meeting.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A stockholder proposal or nomination for director that will not
be included in next year&#146;s proxy materials, but that a
stockholder intends to present in person at next year&#146;s
Annual Meeting, must comply with the notice, information and
consent provisions contained in the Company&#146;s Bylaws. In
part, the Bylaws provide that to timely submit a proposal or
nominate a director you must do so by submitting the proposal or
nomination, in writing, to the Company&#146;s Corporate
Secretary at the Company&#146;s principal
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
executive offices no later than the close of business on
February&nbsp;22, 2007 (90&nbsp;days prior to the first
anniversary of the 2006 Annual Meeting Date) nor earlier than
the close of business on January&nbsp;23, 2007 (120&nbsp;days
prior to the first anniversary of the 2006 Annual Meeting date).
In the event that the Company sets an Annual Meeting date for
2007 that is not within 30&nbsp;days before or after the
anniversary of the 2006 Annual Meeting date, notice by the
stockholder must be received no earlier than the close of
business on the 120th&nbsp;day prior to the 2007 Annual Meeting
and no later than the close of business on the later of the
90th&nbsp;day prior to the 2007 Annual Meeting or the
10th&nbsp;day following the day on which public announcement of
the date of the 2007 Annual Meeting is first made. The
Company&#146;s Bylaws contain additional requirements to
properly submit a proposal or nominate a director. If you plan
to submit a proposal or nominate a director, please review the
Company&#146;s Bylaws carefully. You may obtain a copy of the
Company&#146;s Bylaws by mailing a request in writing to the
Corporate Secretary of Blue Nile at 705 Fifth Avenue South,
Suite&nbsp;900, Seattle, Washington 98104.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>How are votes counted?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Votes will be counted by the inspector of elections appointed
for the Annual Meeting, who will separately count
&#147;For&#148; and &#147;Withheld&#148; and, with respect to
the proposal other than the election of directors,
&#147;Against&#148; votes, abstentions and broker non-votes.
Abstentions will be counted towards the tabulation of votes cast
on the proposal other than the election of directors, and will
have the same effect as &#147;Against&#148; votes.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If your shares are held by your broker as your nominee (that is,
in &#147;street name&#148;), you will need to obtain a proxy
form from the institution that holds your shares and follow the
instructions included on that form regarding how to instruct
your broker to vote your shares. If you do not give instructions
to your broker, your broker can vote your shares with respect to
both proposals, because both proposals are considered routine
matters. A &#147;broker non-vote&#148; occurs when a broker
expressly instructs on a proxy card that it is not voting on a
matter. Broker non-votes are counted for the purpose of
determining the presence or absence of a quorum, but are not
counted for determining the number of votes cast for or against
a proposal.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>How many votes are needed to approve each proposal?</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Proposal&nbsp;1&nbsp;&#151; Election of Directors.</I> For
    the election of directors, the two nominees receiving the most
    &#147;For&#148; votes (among votes properly cast in person or by
    proxy) will be elected. Only votes &#147;For&#148; or
    &#147;Withheld&#148; will affect the outcome.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Proposal&nbsp;2&nbsp;&#151; Ratification of
    Deloitte&nbsp;&#38; Touche LLP as Independent Auditors.</I> To
    be approved, Proposal&nbsp;No.&nbsp;2, the ratification of
    Deloitte&nbsp;&#38; Touche LLP as Blue Nile&#146;s independent
    auditors for the fiscal year ending December&nbsp;31, 2006, must
    receive a &#147;For&#148; vote from the majority of shares
    present and entitled to vote either in person or by proxy. If
    you &#147;Abstain&#148; from voting, it will have the same
    effect as an &#147;Against&#148; vote. Broker non-votes will be
    counted towards a quorum, but will have no effect in determining
    whether this matter has been approved.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>What is the quorum requirement?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A quorum of stockholders is necessary to hold a valid Annual
Meeting. A quorum will be present if at least a majority of the
outstanding shares are represented by stockholders present at
the Annual Meeting or by proxy. On the record date, there were
17,431,551&nbsp;shares of common stock outstanding and entitled
to vote. Thus, 8,715,776&nbsp;shares of common stock must be
represented by stockholders present at the Annual Meeting or by
proxy to have a quorum.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Votes for and against, abstentions and broker non-votes will
each be counted as present for purposes of determining the
presence of a quorum. If there is no quorum, the chairman of the
Annual Meeting or a majority of the votes present at the Annual
Meeting may adjourn the Annual Meeting to another date.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">4

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>How can I find out the results of the voting at the Annual
Meeting?</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Preliminary voting results will be announced at the Annual
Meeting. Final voting results will be published in the
Company&#146;s quarterly report on
Form&nbsp;<FONT style="white-space: nowrap">10-Q</FONT> for the
second quarter of the fiscal year ending December&nbsp;31, 2006.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Proposal&nbsp;1</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Election Of
Directors</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Blue Nile&#146;s Board of Directors is divided into three
classes. Each class consists, as nearly as possible, of
one-third of the total number of directors, and each class has a
three-year term. Vacancies on the Board of Directors may be
filled only by persons elected by a majority of the remaining
directors. A director elected by the Board of Directors to fill
a vacancy in a class shall serve for the remainder of the full
term of that class, and until the director&#146;s successor is
elected and qualified. This includes vacancies created by an
increase in the number of directors.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board of Directors presently has eight members. There are
two directors in the class whose terms of office expire in 2006,
Ms.&nbsp;Taylor and Mr.&nbsp;Tai. Ms.&nbsp;Taylor has been
nominated by the Board of Directors and has agreed to stand for
reelection. Mr.&nbsp;Tai has decided not to stand for
reelection. On the recommendation of the Nominating and
Corporate Governance Committee, the Board of Directors has
nominated Anne Saunders to stand for election at the 2006 Annual
Meeting. If elected, Ms.&nbsp;Saunders would be an independent
non-employee director. Ms.&nbsp;Saunders was recommended to the
Nominating and Corporate Governance Committee by the Chief
Executive Officer as a potential board nominee. Ms.&nbsp;Taylor
was previously elected by the stockholders. If elected at the
2006 Annual Meeting, each of Ms.&nbsp;Taylor and
Ms.&nbsp;Saunders would serve until the 2009 Annual Meeting and
until her successor is elected and qualified, or until her
death, resignation or removal. It is the Company&#146;s policy
to strongly encourage directors and nominees for director to
attend the Annual Meeting. Mr.&nbsp;Vadon, Ms.&nbsp;Irvine,
Mr.&nbsp;McAndrews and Mr.&nbsp;Tai attended the Annual Meeting
held in 2005.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the election of directors, the two nominees receiving the
most &#147;For&#148; votes (among votes properly cast in person
or by proxy) will be elected. Only votes &#147;For&#148; or
&#147;Withheld&#148; will affect the outcome. Shares represented
by executed proxies will be voted, if authority to do so is not
withheld, for the election of the nominees named below. In the
event that the nominee should be unavailable for election as a
result of an unexpected occurrence, such shares will be voted
for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve
if elected, and the Company has no reason to believe that any
nominee will be unable to serve.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a brief biography of each nominee and each
director whose term will continue after the Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Nominees for Election
for a Three-year Term Expiring at the 2009 Annual
Meeting</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Mary Alice Taylor</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Mary Alice Taylor,</I> age&nbsp;56, has served as a director
since March 2000 and has been nominated by the Board of
Directors to stand for election at the 2006 Annual Meeting.
Ms.&nbsp;Taylor is an independent business executive. She held a
temporary assignment as Chairman and Chief Executive Officer of
Webvan Group, Inc., an
<FONT style="white-space: nowrap">e-commerce</FONT> company,
from July 2001 to December 2001. Prior to that, she served as
Chairman and Chief Executive Officer of HomeGrocer.com, an
<FONT style="white-space: nowrap">e-commerce</FONT> company,
from September 1999 until she completed a sale of the company to
Webvan Group, Inc. in October 2000. From January 1997 to
September 1999, Ms.&nbsp;Taylor served as Corporate Executive
Vice President of Worldwide Operations and Technology for
Citigroup, Inc., a financial services organization.
Ms.&nbsp;Taylor holds a B.S. in Finance from Mississippi State
University. Ms.&nbsp;Taylor also serves on the boards of
directors of Allstate Corporation, an insurance company,
Autodesk Inc., a design software company, and Sabre Holdings, an
Internet travel services company.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">5
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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Anne Saunders</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Anne Saunders,</I> age 44, has been nominated by the Board of
Directors to stand for election at the 2006 Annual Meeting.
Ms.&nbsp;Saunders has served as the Senior Vice President of
Global Brand Strategy and Communications of Starbucks Coffee
Company, a coffee retailer, since January 2006.
Ms.&nbsp;Saunders previously served in the following positions
at Starbucks Coffee Company: Senior Vice President of Marketing
from June 2005 to January 2006, Vice President of Marketing
Retail - North America from June 2004 to June 2005, Vice
President of Starbucks Interactive from January 2002 to June
2004, and Vice President of Wireless Initiatives from August
2001 to January 2002. Prior to joining Starbucks,
Ms.&nbsp;Saunders served as the Chairman, Chief Executive
Officer and President of eSociety, a
<FONT style="white-space: nowrap">business-to</FONT>-business
<FONT style="white-space: nowrap">e-commerce</FONT> company. She
previously held various executive positions at McCaw
Communications/ AT&#38;T Wireless, a telecommunications company.
Ms.&nbsp;Saunders holds a B.A. in Economics from Northwestern
University and an M.B.A. from Fordham University.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">The Board Of Directors
Recommends</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B><FONT style="font-variant:SMALL-CAPS">A Vote&nbsp;In Favor Of
Each Named Nominee.</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Directors Continuing in
Office Until the 2007 Annual Meeting</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Diane Irvine</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Diane Irvine, </I>age&nbsp;47, has served as Blue Nile&#146;s
Chief Financial Officer since December 1999 and as a director
since May 2001. From February 1994 to May 1999, Ms.&nbsp;Irvine
served as Vice President and Chief Financial Officer of Plum
Creek Timber Company, Inc., a timberland management and wood
products company. From September 1981 to February 1994,
Ms.&nbsp;Irvine served in various capacities, most recently as a
partner, with Coopers and Lybrand LLP, an accounting firm.
Ms.&nbsp;Irvine serves on the board of directors of Davidson
Companies, an investment banking and asset management company.
Ms.&nbsp;Irvine holds a B.S. in Accounting from Illinois State
University and an M.S. in Taxation from Golden Gate University.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Joseph Jimenez</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Joseph Jimenez,</I> age&nbsp;46, has served as a director
since March 2000. Mr.&nbsp;Jimenez has served as Executive Vice
President of H.J. Heinz Company, a food products company, since
September 2001 and as the President and Chief Executive Officer
of Heinz Europe since July 2002. From November 1998 to July
2002, Mr.&nbsp;Jimenez served as President and Chief Executive
Officer of Heinz North America. Mr.&nbsp;Jimenez holds a B.A. in
Economics from Stanford University and an M.B.A. from the
University of California, Berkeley. Mr.&nbsp;Jimenez also serves
on the board of directors of AstraZeneca, PLC, a medicine
development company.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Brian McAndrews</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Brian McAndrews,</I> age&nbsp;47, has served as a director
since April 2004. Mr.&nbsp;McAndrews has served as Chief
Executive Officer and a director of aQuantive, Inc. since
September 1999, and as President of aQuantive, Inc. since
January 2000. From July 1990 to September 1999,
Mr.&nbsp;McAndrews worked for ABC, Inc., a broadcasting and
communications company, holding executive positions at ABC
Sports, ABC Entertainment and ABC Television Network, and most
recently he served as Executive Vice President and General
Manager of ABC Sports. From 1984 to 1989, Mr.&nbsp;McAndrews
served as a product manager for General Mills, Inc., a leading
consumer products manufacturer. Mr.&nbsp;McAndrews holds an
M.B.A. from Stanford University and a B.A. from Harvard
University.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">6
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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Directors Continuing in
Office Until the 2008 Annual Meeting</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Mark Vadon</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Mark Vadon, </I>age&nbsp;36, co-founded Blue Nile and has
served as Chairman of the Board of Directors, Chief Executive
Officer and President since its inception. From December 1992 to
March 1999, Mr.&nbsp;Vadon was a consultant for Bain&nbsp;&#38;
Company, a management consulting firm. Mr.&nbsp;Vadon holds a
B.A. in Social Studies from Harvard University and an M.B.A.
from Stanford University.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Joanna Strober</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Joanna Strober,</I> age&nbsp;37, has served as a director
since May 1999. Ms.&nbsp;Strober has served as the Director of
Private Equity at Sterling Stamos Capital Management, a
registered investment advisor, since August 2005. From June 2004
to August 2005, Ms.&nbsp;Strober served as the Managing Director
of Pacific Community Ventures, a private equity firm. From
January 2003 until June 2004, Ms.&nbsp;Strober served as the
Managing Director at Symphony Technology Group, an enterprise
software investment firm. From April 1996 to December 2002,
Ms.&nbsp;Strober held various positions at Bessemer Venture
Partners, a private venture capital firm, most recently serving
as a General Partner from January 2000 to December 2002. From
August 1994 to March 1996, Ms.&nbsp;Strober was an associate at
Venture Law Group, a corporate law firm. Ms.&nbsp;Strober holds
a B.A. in Political Science from the University of Pennsylvania
and a J.D. from the University of California, Los Angeles.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>W.&nbsp;Eric Carlborg</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>W.&nbsp;Eric Carlborg,</I> age&nbsp;42, has served as a
director since February 2005. From September 2005 to March 2006,
Mr.&nbsp;Carlborg served as Chief Financial Officer of Provide
Commerce, Inc., an
<FONT style="white-space: nowrap">e-commerce</FONT> company.
From July 2001 to October 2004, Mr.&nbsp;Carlborg served as a
managing director at Merrill Lynch&nbsp;&#38; Co., a financial
services company. From January 2000 to June 2001,
Mr.&nbsp;Carlborg served as the Chief Financial Officer at IKANO
Communications, Inc., a provider of Internet products and
services. Mr.&nbsp;Carlborg holds an M.B.A. from the University
of Chicago and a B.A. in Economics from the University of
Illinois.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Independence of The
Board of Directors</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As required under the Nasdaq Stock Market (&#147;Nasdaq&#148;)
listing standards, a majority of the members of a listed
company&#146;s Board of Directors must qualify as
&#147;independent,&#148; as affirmatively determined by the
Board of Directors. The Board of Directors consults with the
Company&#146;s counsel to ensure that the Board of
Directors&#146; determinations are consistent with all relevant
securities and other laws and regulations regarding the
definition of &#147;independent,&#148; including those set forth
in pertinent listing standards of the Nasdaq, as in effect from
time to time.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Consistent with these considerations, after review of all
relevant transactions and relationships between each director,
or any of his or her family members, and the Company, its senior
management and its independent auditors, the Board of Directors
has affirmatively determined that all of the Company&#146;s
directors are independent directors within the meaning of the
applicable Nasdaq listing standards, except for Mr.&nbsp;Vadon,
the Chief Executive Officer of the Company and Ms.&nbsp;Irvine,
the Chief Financial Officer of the Company.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Information Regarding
the Board of Directors and its Committees</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;27, 2004, the Board of Directors documented the
governance practices followed by the Company and its Board of
Directors in the Corporate Governance Policies of the Board of
Directors (the &#147;Governance Policies&#148;). The Governance
Policies provide the Board of Directors with the necessary
authority to review and evaluate the Company&#146;s business
operations, as needed, and they are designed to facilitate the
Board of Directors&#146; independent decision making authority.
The Governance Policies are intended to align the interests of
directors and management with those of the Company&#146;s
stockholders. The
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">7

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
Governance Policies, among other things, set forth the practices
the Board of Directors will follow with respect to the selection
of directors, the independence of the directors, meetings of the
Board of Directors, committees of the Board of Directors and the
responsibilities of the Board of Directors. The Governance
Policies were adopted to, among other things, reflect changes to
the Nasdaq listing standards and Securities and Exchange
Commission rules adopted to implement provisions of the
Sarbanes-Oxley Act of 2002. The Corporate Governance Policies of
the Board of Directors, as well as the charters for each
committee of the Board, may be viewed at <U>www.bluenile.com</U>
in the corporate governance section of its investor relations
page.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As required under applicable Nasdaq listing standards, in fiscal
year 2005, the Company&#146;s independent directors met four
times in regularly scheduled executive sessions at which only
independent directors were present. The lead independent
director, Mary Alice Taylor, presided over the executive
sessions. Persons interested in communicating with the
independent directors with their concerns or issues may address
correspondence to a particular director or to the independent
directors generally, in care of the Blue Nile Corporate
Secretary at 705 Fifth Avenue South, Suite&nbsp;900, Seattle,
Washington 98104<FONT style="font-variant:SMALL-CAPS">.
</FONT>If no particular director is named, letters will be
forwarded, depending on the subject matter, to the Chair of the
Audit, Compensation or Nominating and Corporate Governance
Committee, as applicable.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board of Directors has three committees: an Audit Committee,
a Compensation Committee and a Nominating and Corporate
Governance Committee. The following table provides membership
and meeting information for fiscal year 2005 for each of the
committees of the Board of Directors:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Audit</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Nominating and Corporate Governance</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. W. Eric Carlborg**</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ms. Diane Irvine</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Joseph Jimenez</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Brian McAndrews</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ms. Joanna Strober</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD align="left" valign="bottom" nowrap>*</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Augustus Tai***</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD align="left" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ms. Mary Alice Taylor****</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD align="left" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>X</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Mark Vadon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="13">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total meetings in fiscal year 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;&nbsp;*&nbsp;</TD>
    <TD align="left">
    Committee Chairperson</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;&nbsp;**&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Carlborg was appointed chair of the Audit Committee on
    February&nbsp;1, 2006. Ms.&nbsp;Taylor served as chair prior to
    Mr.&nbsp;Carlborg.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;***&nbsp;</TD>
    <TD align="left">
    In connection with Mr.&nbsp;Tai&#146;s decision not to stand for
    re-election to the Board at the 2006 Annual Meeting,
    Mr.&nbsp;Jimenez has been appointed to serve as chair of the
    Compensation Committee immediately following the Annual Meeting.
    If Ms.&nbsp;Saunders is elected to the Board at the Annual
    Meeting, she will serve as a member of the Compensation
    Committee.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>****&nbsp;</TD>
    <TD align="left">
    Lead Outside Director. Immediately following the Annual Meeting,
    Ms.&nbsp;Taylor will serve as chair of the Nominating and
    Corporate Governance Committee. Ms.&nbsp;Strober served as chair
    prior to Ms.&nbsp;Taylor.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Below is a description of each committee of the Board of
Directors. Each committee has authority to engage legal counsel
or other experts or consultants, as it deems appropriate to
carry out its responsibilities. The Board of Directors has
determined that each member of each committee meets the
applicable rules and regulations regarding
&#147;independence&#148; and that each member is free of any
relationship that would interfere with his or her individual
exercise of independent judgment with regard to the Company.
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Audit
Committee</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee of the Board of Directors oversees the
Company&#146;s corporate accounting and financial reporting
process. For this purpose, the Audit Committee performs several
functions. The Audit Committee, among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    evaluates the performance of and assesses the qualifications of
    the independent auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    determines and approves the engagement of the independent
    auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    evaluates the systems of internal control over financial reports;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews and approves the retention of the independent auditors
    to perform any proposed permissible non-audit services;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    monitors the rotation of partners of the independent auditors on
    the Company&#146;s audit engagement team as required by law;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    confers with management and the independent auditors regarding
    the effectiveness of internal controls over financial reporting;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establishes procedures, as required under applicable law, for
    the receipt, retention and treatment of complaints received by
    the Company regarding accounting, internal accounting controls
    or auditing matters and the confidential and anonymous
    submission by employees of concerns regarding questionable
    accounting or auditing matters;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    meets to review the Company&#146;s annual audited financial
    statements and quarterly financial statements with management
    and the independent auditor, including reviewing the
    Company&#146;s disclosures under &#147;Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations.&#148;</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Four directors comprise the Audit Committee: Mr.&nbsp;Carlborg,
Mr.&nbsp;Jimenez, Ms.&nbsp;Strober and Ms.&nbsp;Taylor. The
Audit Committee met five times during fiscal year 2005. The
Audit Committee has adopted a written Audit Committee charter
that is attached as <B>Appendix&nbsp;A </B>to these proxy
materials and is available on Blue Nile&#146;s website,
<U>www.bluenile.com</U> in the corporate governance section of
its investor relations page.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board of Directors annually reviews the Nasdaq listing
standards definition of independence for Audit Committee members
and has determined that all members of the Company&#146;s Audit
Committee are independent (as independence is currently defined
in Rule&nbsp;4350(d)(2)(A)(i) and (ii)&nbsp;of the Nasdaq
listing standards). The Board of Directors has determined that
Mr.&nbsp;Carlborg and Ms.&nbsp;Taylor each qualify as an
&#147;audit committee financial expert,&#148; as defined in
applicable SEC rules. The Board made a qualitative assessment of
Mr.&nbsp;Carlborg and Ms.&nbsp;Taylor&#146;s level of knowledge
and experience based on a number of factors, including their
formal education, prior experience, business acumen and
independence. On February&nbsp;1, 2006, Ms.&nbsp;Taylor resigned
as the chair of the Audit Committee, and Mr.&nbsp;Carlborg was
appointed chair of the Audit Committee.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Compensation
Committee</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Compensation Committee of the Board of Directors reviews and
approves the overall compensation strategy and policies for the
Company. The Compensation Committee, among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews and approves corporate performance goals and objectives
    relevant to the compensation of the Company&#146;s executive
    officers and other senior management;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews and approves the compensation and other terms of
    employment of the Company&#146;s Chief Executive Officer;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews and approves the compensation and other terms of
    employment of the other executive officers;&nbsp;and</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    administers the Company&#146;s stock option and purchase plans,
    pension and profit sharing plans, stock bonus plans, deferred
    compensation plans and other similar programs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company also has a Stock Award Committee, currently
consisting of Mr.&nbsp;Vadon and Ms.&nbsp;Irvine, that may award
stock options to employees who are not officers within ranges
determined by the Compensation Committee. Three directors
comprise the Compensation Committee: Mr.&nbsp;Tai,
Mr.&nbsp;Jimenez and Mr.&nbsp;McAndrews. In connection with
Mr.&nbsp;Tai&#146;s decision not to stand for re-election to the
Board at the 2006 Annual Meeting, Mr.&nbsp;Jimenez has been
appointed to serve as chair of the Compensation Committee
immediately following the Annual Meeting. If Ms.&nbsp;Saunders
is elected to the Board at the Annual Meeting, she will serve as
a member of the Compensation Committee. All members of the
Company&#146;s Compensation Committee are independent (as
independence is currently defined in Rule&nbsp;4200(a)(15) of
the Nasdaq listing standards). The Compensation Committee met
eight<B><FONT style="font-variant:SMALL-CAPS"> </FONT></B>times
during fiscal year 2005. The Compensation Committee has adopted
a written Compensation Committee charter that is attached as
<B>Appendix&nbsp;B </B>to these proxy materials and is available
on Blue Nile&#146;s website, <U>www.bluenile.com</U> in the
corporate governance section of its investor relations page.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Nominating and
Corporate Governance Committee</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee of the Board
of Directors is responsible for, among other things:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    identifying, reviewing and evaluating candidates to serve as
    directors of the Company (consistent with criteria approved by
    the Board);</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and evaluating incumbent directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    recommending candidates to the Board for election to the Board
    of Directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    making recommendations to the Board regarding the membership of
    the committees of the Board;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    assessing the performance of management and the Board;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developing a set of corporate governance principles for the
    Company.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Three directors comprise the Nominating and Corporate Governance
Committee: Ms.&nbsp;Strober, Ms.&nbsp;Taylor and
Mr.&nbsp;McAndrews. Immediately following the Annual Meeting,
Ms.&nbsp;Taylor will serve as chair of the Nominating and
Corporate Governance Committee. All members of the Nominating
and Corporate Governance Committee are independent (as
independence is currently defined in Rule&nbsp;4200(a)(15) of
the Nasdaq listing standards). The Nominating and Corporate
Governance Committee met three times during fiscal year 2005.
The Nominating and Corporate Governance Committee has adopted a
written Nominating and Corporate Governance Committee charter
that is attached as <B>Appendix&nbsp;C </B>to these proxy
materials and is available on Blue Nile&#146;s website,
<U>www.bluenile.com</U> in the corporate governance section of
its investor relations page.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee reviews the
experience and characteristics appropriate for members of the
Board of Directors and director candidates in light of the Board
of Directors&#146; composition at the time and skills and
expertise needed at the Board and committee levels. The
Nominating and Corporate Governance Committee also intends to
consider such factors as possessing relevant expertise upon
which to be able to offer advice and guidance to management,
having sufficient time to devote to the affairs of the Company,
demonstrated excellence in his or her field, having the ability
to exercise sound business judgment and having the commitment to
rigorously represent the long-term interests of the
Company&#146;s stockholders. However, the Nominating and
Corporate Governance Committee retains the right to modify these
qualifications from time to time. In the case of incumbent
directors whose terms of office are set to expire, the
Nominating and Corporate Governance Committee reviews such
directors&#146; overall service to the Company during their
term, including the number of meetings attended, level of
participation, quality of performance and any other
relationships and transactions that might impair such
directors&#146; independence. In the case of new director
candidates, the Nominating and Corporate Governance Committee
also determines whether the nominee must be
&#147;independent&#148; under Nasdaq listing
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
standards, applicable SEC rules and regulations and the advice
of counsel, if necessary. The Nominating and Corporate
Governance Committee uses its network of contacts to compile a
list of potential candidates, but may also engage, if it deems
appropriate, a professional search firm. The Nominating and
Corporate Governance Committee conducts any appropriate and
necessary inquiries into the backgrounds and qualifications of
possible candidates after considering the function and needs of
the Board of Directors. The Nominating and Corporate Governance
Committee meets to discuss and consider such candidates&#146;
qualifications and then selects a nominee for recommendation to
the Board of Directors by majority vote. To date, the Nominating
and Corporate Governance Committee has not paid a fee to any
third party to assist in the process of identifying or
evaluating director candidates. To date, the Nominating and
Corporate Governance Committee has not rejected a timely
director nominee from a stockholder or stockholders holding more
than 5% of Blue Nile&#146;s voting stock.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Nominating and Corporate Governance Committee will consider
properly submitted director candidates recommended by
stockholders. The Nominating and Corporate Governance Committee
does not intend to alter the manner in which it evaluates
candidates based on whether the candidate was recommended by a
stockholder or not. Stockholders who wish to recommend
individuals for consideration by the Nominating and Corporate
Governance Committee to become nominees for election to the
Board of Directors may do so by delivering a written
recommendation to the Nominating and Corporate Governance
Committee at the following address: 705 Fifth Avenue South,
Suite&nbsp;900, Seattle, Washington 98104, Attention: Corporate
Secretary, at least 120&nbsp;days prior to the anniversary date
of the mailing of the Company&#146;s proxy statement for the
last Annual Meeting of Stockholders. Recommendations must
include the full name of the proposed candidate, a description
of the proposed candidate&#146;s business experience for at
least the previous five years, complete biographical
information, a description of the proposed candidate&#146;s
qualifications as a director and a representation that the
recommending stockholder is a beneficial or record owner of the
Company&#146;s stock. Any such submission must be accompanied by
the written consent of the proposed candidate to be named as a
nominee and to serve as a director if elected. No such
recommendation of a candidate to the Nominating and Corporate
Governance Committee shall be deemed to satisfy the nomination
requirements set forth in our Bylaws.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Meetings of the Board
of Directors</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board of Directors met nine times during the last fiscal
year. Each Board member attended 75% or more of the aggregate of
the meetings of the Board and of the committees on which he or
she served, held during the period for which he or she was a
director or committee member.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Stockholder
Communications With The Board Of Directors</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s Board of Directors has adopted a formal
process by which stockholders may communicate with the Board or
any of its directors. Stockholders who wish to communicate with
the Board may do so by sending written communications addressed
to the Corporate Secretary of Blue Nile at 705 Fifth Avenue
South, Suite&nbsp;900, Seattle, Washington 98104. All
communications will be compiled by the Corporate Secretary of
the Company and submitted to the Board of Directors or the
individual directors on a periodic basis.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Code Of
Ethics</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has adopted the Blue Nile, Inc. Code of Ethics that
applies to all officers, directors and employees. The Code of
Ethics is available on the Blue Nile website at
<U>www.bluenile.com</U> in the corporate governance section of
its investor relations page. If the Company makes any
substantive amendments to the Code of Ethics or grants any
waiver from a provision of the Code of Ethics to any executive
officer or director, the Company will promptly disclose the
nature of the amendment or waiver on its website.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">11

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<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Report of the Audit
Committee of the Board of Directors(1)</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As described more fully in its charter, the purpose of Blue
Nile, Inc.&#146;s (&#147;Blue Nile&#148;) Audit Committee (the
&#147;Audit Committee&#148;) is to act on behalf of Blue
Nile&#146;s Board of Directors (the &#147;Board&#148;) in
fulfilling the Board&#146;s oversight responsibilities with
respect to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    Blue Nile&#146;s corporate accounting, financial reporting
    practices and audits of financial statements;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the quality and integrity of Blue Nile&#146;s financial
    statements and reporting;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the systems of internal control over financial reports;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the qualifications, independence and performance of any firm or
    firms of certified public accountants engaged as Blue
    Nile&#146;s independent outside auditors;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the performance of Blue Nile&#146;s internal audit function.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee is made up solely of independent directors,
as defined in the rules of The Nasdaq Stock Market, Inc. The
composition of the Audit Committee, the attributes of its
members and its responsibilities, as reflected in its charter,
are intended to be in accordance with applicable requirements
for corporate audit committees. A copy of the Audit
Committee&#146;s charter is attached as <B>Appendix&nbsp;A
</B>to these proxy materials and is available on Blue
Nile&#146;s website, <U>www.bluenile.com</U> in the corporate
governance section of its investor relations page. The Audit
Committee reassesses the adequacy of the Audit Committee charter
on an annual basis.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It is the responsibility of Blue Nile&#146;s management to
prepare Blue Nile&#146;s financial statements and periodic
reports and the responsibility of Blue Nile&#146;s outside
independent auditors to audit those financial statements. Blue
Nile&#146;s independent outside auditing firm for fiscal year
2005 was PricewaterhouseCoopers LLP (&#147;PwC&#148;). The Audit
Committee has ultimate authority and responsibility to select,
compensate, evaluate and, when appropriate, replace the
independent outside auditing firm. In accordance with existing
Audit Committee policy and applicable law, all services to be
provided by Blue Nile&#146;s outside independent auditors are
subject to pre-approval by the Audit Committee. This includes
audit services, audit-related services, tax services and other
services. In some cases, pre-approval is provided by the full
Audit Committee, and relates to a particular category or group
of services and is subject to a specific budget. In other cases,
the Chair of the Audit Committee has the delegated authority
from the Committee to pre-approve additional services, and such
pre-approvals are then communicated and ratified by the full
Audit Committee. Applicable law prohibits an issuer from
obtaining certain non-audit services from its auditing firm so
as to avoid certain potential conflicts of interest. Blue Nile
has not obtained any of these services from PwC. See
&#147;Ratification of Selection of Independent Auditors&#148;
for more information regarding fees paid to PwC for services in
fiscal years 2004 and 2005.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of fulfilling its responsibilities, the Audit Committee
reviewed and discussed the audited consolidated financial
statements for fiscal year 2005 with management. The Audit
Committee also discussed with PwC those matters relating to
PwC&#146;s judgments about the quality, as well as the
acceptability, of Blue Nile&#146;s accounting principles as
required to be discussed with PwC by Statement on Auditing
Standards No.&nbsp;61, as amended, <I>Communication with Audit
Committees.</I> In addition, the Audit Committee received the
written disclosures and the letter required by Independent
Standards Board Statement No.&nbsp;1, <I>Independence
Discussions with Audit Committee,</I> and has discussed
PwC&#146;s independence with representatives of the firm.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

</DIV>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
(1)&nbsp;Notwithstanding anything to the contrary set forth in
any of our previous filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended,
that might incorporate future filings, including this proxy
statement, in whole or in part, the following report shall not
be incorporated by reference into any such filings.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">12
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Based on the Audit Committee&#146;s review of the audited
consolidated financial statements and its discussions with
management and PwC, the Audit Committee has recommended that the
Board include the audited consolidated financial statements for
the fiscal year ended January&nbsp;1, 2006 in Blue Nile&#146;s
Annual Report on
Form&nbsp;<FONT style="white-space: nowrap">10-K.</FONT>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;4, 2006, the Audit Committee of the Board of
Directors approved the appointment of Deloitte&nbsp;&#38; Touche
LLP as the Company&#146;s independent auditors to audit the
Company&#146;s financial statements for the fiscal year ending
December&nbsp;31, 2006 in place of PricewaterhouseCoopers LLP.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the Company&#146;s audits for the fiscal
years ended January&nbsp;2, 2005 and January&nbsp;1, 2006, and
in the subsequent period before PricewaterhouseCoopers
LLP&#146;s dismissal on April&nbsp;4, 2006, there were no
disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, that would have
caused PricewaterhouseCoopers LLP to report the disagreement if
it had not been resolved to the satisfaction of
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP&#146;s
reports on the financial statements for the past two fiscal
years did not contain an adverse opinion or disclaimer of an
opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. PricewaterhouseCoopers
LLP&#146;s letter to the Securities and Exchange Commission
stating its agreement with the statements in this paragraph is
filed as an exhibit to the Company&#146;s Current Report on
Form&nbsp;<FONT style="white-space: nowrap">8-K</FONT> dated
April&nbsp;4, 2006.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Respectfully submitted,</TD>
</TR>

<TR>
    <TD style="font-size: 24.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    W. Eric Carlborg, Chairman</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Joseph Jimenez</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Joanna Strober</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Mary Alice Taylor</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Date: April&nbsp;21, 2006
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Proposal&nbsp;2</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Ratification Of
Selection Of Independent Auditors</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee of the Board of Directors has selected
Deloitte&nbsp;&#38; Touche LLP as the Company&#146;s independent
auditors for the fiscal year ending December&nbsp;31, 2006 and
has further directed that management submit the selection of
independent auditors for ratification by the stockholders at the
Annual Meeting. Representatives of Deloitte&nbsp;&#38; Touche
LLP are expected to be present at the Annual Meeting. They will
have an opportunity to make a statement if they so desire and
will be available to respond to appropriate questions.
PricwaterhouseCoopers LLP audited the Company&#146;s fiscal
2001, 2002, 2003, 2004 and 2005 financial statements.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the Annual Meeting. They will have an opportunity to
make a statement if they so desire and will be available to
respond to appropriate questions.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Neither the Company&#146;s Bylaws nor other governing documents
or law requires stockholder ratification of the selection of
Deloitte&nbsp;&#38; Touche LLP as the Company&#146;s independent
auditors. If the stockholders fail to ratify the selection,
however, the Audit Committee of the Board of Directors will
reconsider whether or not to retain that firm. Regardless of the
outcome of the stockholder vote, the Audit Committee of the
Board of Directors in its discretion may direct the appointment
of different independent auditors at any time during the year if
it determines that such a change would be in the best interests
of the Company and its stockholders.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">13

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote
at the Annual Meeting will be required to ratify the selection
of Deloitte&nbsp;&#38; Touche LLP. Abstentions will be counted
toward the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as a vote against
this proposal. Broker non-votes are counted towards a quorum,
but are not counted for any purpose in determining whether this
matter has been approved.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Principal Accountant
Fees and Services </FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table represents aggregate fees billed or expected
to be billed to the Company for the fiscal years ended
January&nbsp;1, 2006 and January&nbsp;2, 2005, by
PricewaterhouseCoopers LLP, the Company&#146;s principal
accountant for each of these fiscal years. All fees described
below were approved by the Audit Committee.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Fiscal Year Ended</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;1, 2006</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>January&nbsp;2, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Audit Fees(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>517,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>566,572</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Audit-related Fees(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax Fees(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,914</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All Other Fees(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>327,648</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Fees</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>585,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>939,134</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Audit fees include services for verifying the consolidated
    financial statements of the Company, along with reviews of the
    interim financial information of the Company and its
    Forms&nbsp;<FONT style="white-space: nowrap">10-K</FONT>
    and&nbsp;<FONT style="white-space: nowrap">10-Q.</FONT> Audit
    fees also include fees related to the audit of the
    Company&#146;s internal controls over financial reporting with
    the objective of obtaining reasonable assurance about whether
    effective internal control over financial reporting was
    maintained in all material respects and the attestation of
    management&#146;s report on the effectiveness of the
    Company&#146;s internal control over financial reporting. The
    fiscal year 2004 audit fees include the audits of the fiscal
    2001, 2002, 2003 and 2004 financial statements, and the review
    of interim information for fiscal 2002, 2003 and 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Audit related fees include services that are reasonably related
    to the performance of the audit or review of financial
    statements not included in &#147;Audit Fees&#148; above.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Tax fees in both fiscal 2005 and 2004 relate to federal and
    state tax return preparation and federal, state and foreign tax
    planning and consulting.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Other fees in fiscal year 2005 consist primarily of fees related
    to a subscription service. Other fees in fiscal year 2004
    consist primarily of fees related to the filing of the
    Company&#146;s registration statement on
    Form&nbsp;<FONT style="white-space: nowrap">S-1</FONT> in May
    2004 and fees related to a subscription service.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Pre-Approval Policies
and Procedures</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee has adopted policies and procedures for the
pre-approval of audit and non-audit services rendered by Blue
Nile&#146;s independent auditor. The policy generally
pre-approves specified services in the defined categories of
audit services, audit-related services, and tax services up to
specified amounts. Pre-approval may also be given as part of the
Audit Committee&#146;s approval of the scope of the engagement
of the independent auditor or on an individual explicit
case-by-case basis before the independent auditor is engaged to
provide each service. The pre-approval of services may be
delegated to one or more of the Audit Committee&#146;s members,
but the decision must be reported to and ratified by the full
Audit Committee at its next scheduled meeting. As such, the
engagement of PricewaterhouseCoopers LLP to render all of the
services described in the categories above was approved by the
Audit Committee in advance of rendering those services or
approved by a delegate and subsequently ratified by the Audit
Committee at its next scheduled meeting.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">14

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Audit Committee has determined that the rendering of
services other than audit services by PricewaterhouseCoopers LLP
is compatible with maintaining the principal accountant&#146;s
independence.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Change In Independent
Public Accountant</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;4, 2006, the Audit Committee of the Board of
Directors approved the appointment of Deloitte&nbsp;&#38; Touche
LLP as the Company&#146;s independent auditors to audit the
Company&#146;s financial statements for the fiscal year ending
December&nbsp;31, 2006 in place of PricewaterhouseCoopers LLP.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In connection with the Company&#146;s audits for the fiscal
years ended January&nbsp;2, 2005 and January&nbsp;1, 2006, and
in the subsequent period before PricewaterhouseCoopers
LLP&#146;s dismissal on April&nbsp;4, 2006, there were no
disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, that would have
caused PricewaterhouseCoopers LLP to report the disagreement if
it had not been resolved to the satisfaction of
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP&#146;s
reports on the financial statements for the past two fiscal
years did not contain an adverse opinion or disclaimer of an
opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. PricewaterhouseCoopers
LLP&#146;s letter to the Securities and Exchange Commission
stating its agreement with the statements in this paragraph is
filed as an exhibit to the Company&#146;s Current Report on
Form&nbsp;<FONT style="white-space: nowrap">8-K</FONT> dated
April&nbsp;4, 2006.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">The Board Of Directors
Recommends</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B><FONT style="font-variant:SMALL-CAPS">A Vote&nbsp;In Favor Of
Proposal&nbsp;2.</FONT></B>
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Security Ownership
Of</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B><FONT style="font-variant:SMALL-CAPS">Certain Beneficial
Owners And Management</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth certain information regarding the
ownership of the Company&#146;s common stock as of
March&nbsp;17, 2006, except as otherwise indicated, by:
(i)&nbsp;each director and nominee for director; (ii)&nbsp;each
of our named executive officers (as defined herein);
(iii)&nbsp;all executive officers, directors and nominees for
director of the Company as a group; and (iv)&nbsp;all those
known by the Company to be beneficial owners of more than five
percent of its common stock. Unless otherwise noted below, the
address of each beneficial owner listed in the table is
c/o&nbsp;Blue Nile, 705 Fifth Avenue South, Suite&nbsp;900,
Seattle, Washington 98104.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>


<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Beneficial Ownership(1)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2" align="center" nowrap><B>Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Percent of Total</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    FMR Corp.(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,353,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    82&nbsp;Devonshire Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Boston, MA 02109</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Baron Capital Group, Inc.(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,747,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    767 Fifth Avenue</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York, NY 10153</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Morgan Stanley(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,742,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    1585 Broadway</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York, NY 10036</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital Research and Management Company(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,189,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    333 South Hope Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Los Angeles, CA 90071</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Orbis Investment Management Limited, Orbis Asset Management
    Limited(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,005,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    34 Bermudiana Road</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hamilton, HM&nbsp;11, Bermuda</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SMALLCAP World Fund, Inc.(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>985,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    333 South Hope Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Los Angeles, CA 90071</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Delaware Management Holdings(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>977,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005 Market Street</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Philadelphia, PA 19103</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Vadon(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,712,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diane Irvine(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>357,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Susan Bell(11)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Darrell Cavens(12)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Terri Maupin(13)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Paquin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>487,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joseph Jimenez(14)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mary Alice Taylor(15)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Augustus Tai(16)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Joanna Strober(17)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Brian McAndrews(18)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    W. Eric Carlborg(19)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All executive officers and directors as a group (13 persons)(20)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,988,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD align="left">
    Less than one percent.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    This table is based upon information supplied by officers,
    directors and principal stockholders and Schedules 13D and 13G
    filed with the Securities and Exchange Commission (the
    &#147;SEC&#148;). Unless otherwise indicated in the footnotes to
    this table and subject to community property laws where
    applicable, the Company believes that each of the stockholders
    named in this table has sole voting and investment power with
    respect to the shares indicated as beneficially owned.
    Applicable percentages are based on 17,468,960&nbsp;shares
    outstanding on March&nbsp;17, 2006, provided that any additional
    shares of common stock that a stockholder has the right to
    acquire within 60&nbsp;days after March&nbsp;17, 2006 are deemed
    to be outstanding for the purpose of calculating that
    stockholder&#146;s percentage beneficial ownership.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    FMR Corp. reported to the SEC on its
    form&nbsp;Schedule&nbsp;13G/ A on February&nbsp;14, 2006 that it
    beneficially owned 2,353,118&nbsp;shares of the Company&#146;s
    common stock as of December&nbsp;31, 2005. The
    2,353,118&nbsp;shares, represents 2,119,818&nbsp;shares held by
    Fidelity Management&nbsp;&#38; Research Company
    (&#147;Fidelity&#148;), a wholly-owned subsidiary of FMR Corp.
    and 233,300&nbsp;shares held by Fidelity Management Trust
    Company (&#147;Fidelity Trust&#148;), a wholly-owned subsidiary
    of FMR Corp. Edward C. Johnson 3d and FMR Corp., through its
    control of Fidelity, and the funds each has sole power to
    dispose of the 2,119,818&nbsp;shares owned by Fidelity. Neither
    FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has
    the sole power to vote or direct the voting of the shares owned
    directly by Fidelity, which power resides with Fidelity&#146;s
    Board of Trustees. Edward C. Johnson 3d and FMR Corp., through
    its control of Fidelity Trust, each has sole dispositive power
    over 233,300&nbsp;shares and sole power to vote or to direct the
    voting of 233,3000&nbsp;shares. Members of the Edward C. Johnson
    family, through their ownership of approximately 49% of the
    voting power of FMR Corp. and the execution of a
    shareholders&#146; voting agreement, may be deemed under the
    Investment Company Act of 1940, to form a controlling group with
    respect to FMR Corp.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Baron Capital Group, Inc. reported to the SEC on its
    form&nbsp;Schedule&nbsp;13G/ A on February&nbsp;13, 2006 that it
    beneficially owned 1,747,949&nbsp;shares of the Company&#146;s
    common stock as of December&nbsp;31, 2005. The
    1,747,949&nbsp;shares represents 1,665,900&nbsp;shares held by
    BAMCO, Inc., a subsidiary of Baron Capital Group, Inc., and
    82,049&nbsp;shares held by Baron Capital Management, Inc., a
    subsidiary of Baron Capital Group, Inc. Ronald Baron owns a
    controlling interest in Baron Capital Group, Inc. and may be
    deemed to share power to vote and dispose of the shares held by
    the Baron Capital Group, Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Morgan Stanley reported to the SEC on its
    form&nbsp;Schedule&nbsp;13G on January&nbsp;10, 2006 that it
    beneficially owned 1,742,050&nbsp;shares of the Company&#146;s
    common stock as of December&nbsp;31, 2005. Morgan Stanley is a
    parent holding company. The 1,742,050&nbsp;shares represent
    1,641,283&nbsp;shares beneficially owned by Morgan Stanley
    Investment Management Inc., an Investment Adviser registered
    under Section&nbsp;203 of the Investment Advisers Act of 1940
    and a wholly owned subsidiary of Morgan Stanley.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Capital Research and Management Company reported to the SEC on
    its form Schedule&nbsp;13G on February&nbsp;10, 2006 that it
    beneficially owned 1,189,780&nbsp;shares of the Company&#146;s
    common stock as of December&nbsp;31, 2005. Capital Research and
    Management Company, an investment adviser registered under
    Section&nbsp;203 of the Investment Advisers Act of 1940 is
    deemed to be the beneficial owner of the 1,189,780&nbsp;shares
    as a result of acting as investment adviser to various
    investment companies registered under Section&nbsp;8 of the
    Investment Company Act of 1940.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Orbis Investment Management Limited (&#147;OIML&#148;) and Orbis
    Asset Management Limited (&#147;OAML&#148;) reported to the SEC
    on its form&nbsp;Schedule&nbsp;13G on February&nbsp;16, 2006
    that it beneficially owned 1,005,208&nbsp;shares of the
    Company&#146;s common stock as of December&nbsp;31, 2005. OIML
    and OAML are together deemed to constitute a &#147;group&#148;
    for the purposes of Section&nbsp;13(d)(3) of the Securities and
    Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;).
    OIML is the beneficial owner of 995,208&nbsp;shares and OAML is
    the beneficial owner of 10,000&nbsp;shares.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">17

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    SMALLCAP World Fund, Inc. reported to the SEC on its
    form&nbsp;Schedule&nbsp;13G on February&nbsp;10, 2006 that it
    beneficially owned 985,375&nbsp;shares of the Company&#146;s
    common stock as of December&nbsp;31, 2005. SMALLCAP World Fund,
    Inc. an investment company registered under the Investment
    Company Act of 1940, which is advised by Capital Research and
    Management Company, is the beneficial owner of the
    985,375&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Delaware Management Holdings reported to the SEC on its
    form&nbsp;Schedule&nbsp;13G on February&nbsp;9, 2006 that it
    beneficially owned 977,255&nbsp;shares of the Company&#146;s
    common stock as of December&nbsp;31, 2005. Delaware Management
    Holdings is a parent holding company in accordance with
    Rule&nbsp;<FONT style="white-space: nowrap">240.13d-1</FONT>
    (b)(1)(ii)(G) promulgated under the Exchange Act and has filed
    as a group.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Includes 271,666&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Includes 1,160&nbsp;shares held by Douglas Royan Irvine as
    Custodian for the benefit of Laura Anne Irvine under the
    Washington Uniform Gift to Minors Act, 1,160&nbsp;shares held by
    Douglas Royan Irvine as Custodian for the benefit of David
    Douglas Irvine under the Washington Uniform Gift to Minors Act,
    1,160&nbsp;shares held by Douglas Royan Irvine as Custodian for
    the benefit of Jessica Leigh Irvine under the Washington Uniform
    Gift to Minors Act and 146,802&nbsp;shares of common stock
    issuable upon the exercise of options that are exercisable
    within 60&nbsp;days after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Includes 78,389&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Includes 92,282&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Includes 16,199&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Includes 35,666&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)&nbsp;</TD>
    <TD align="left">
    Includes 35,666&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(16)&nbsp;</TD>
    <TD align="left">
    Includes 15,666&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(17)&nbsp;</TD>
    <TD align="left">
    Includes 15,666&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(18)&nbsp;</TD>
    <TD align="left">
    Includes 15,666&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(19)&nbsp;</TD>
    <TD align="left">
    Includes 10,833&nbsp;shares of common stock issuable upon the
    exercise of options that are exercisable within 60&nbsp;days
    after March&nbsp;17, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(20)&nbsp;</TD>
    <TD align="left">
    Includes shares held by Mr.&nbsp;Vadon, Ms.&nbsp;Irvine,
    Ms.&nbsp;Bell, Mr.&nbsp;Cavens, Ms.&nbsp;Maupin and
    Mr.&nbsp;Paquin and the shares described in notes
    (14)&nbsp;through (19) above, 22,491&nbsp;shares held by Blue
    Nile&#146;s executive officers who are not named executive
    officers and 35,481&nbsp;shares issuable pursuant to options
    held by executive officers who are not named executive officers
    that are exercisable within 60&nbsp;days after March&nbsp;17,
    2006.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Section&nbsp;16(</FONT>a)
Beneficial Ownership Reporting Compliance</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;16(a) of the Securities Exchange Act of 1934 (the
&#147;1934&nbsp;Act&#148;) requires the Company&#146;s directors
and executive officers, and persons who own more than ten
percent of a registered class of the Company&#146;s equity
securities, to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock and other
equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all
Section&nbsp;16(a) forms they file.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">18

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the Company&#146;s knowledge, based solely on a review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended January&nbsp;1, 2006, all Section&nbsp;16(a)
filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with,
except as set forth below.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During fiscal 2005, all transactions for Ms.&nbsp;Irvine were
timely reported, but her direct holdings as reported
inadvertently included her indirect shareholdings of:
(i)&nbsp;1,160&nbsp;shares held by Douglas Royan Irvine as
Custodian for the benefit of Laura Anne Irvine under the
Washington Uniform Gift to Minors Act;
(ii)&nbsp;1,160&nbsp;shares held by Douglas Royan Irvine as
Custodian for the benefit of David Douglas Irvine under the
Washington Uniform Gift to Minors Act; and
(iii)&nbsp;1,160&nbsp;shares held by Douglas Royan Irvine as
Custodian for the benefit of Jessica Leigh Irvine under the
Washington Uniform Gift to Minors Act. This error was corrected
on a Form&nbsp;4 filed on August&nbsp;12, 2005.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Compensation of
Directors</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each non-employee director of the Company receives an annual
retainer of $10,000 for serving on the Company&#146;s Board of
Directors, an additional $1,000&nbsp;per member for serving on
any committee of the Board of Directors and an additional $1,000
for serving as chairperson of the Audit Committee. The annual
retainer of $10,000 is paid in quarterly installments. At the
discretion of the Company&#146;s Board of Directors, directors
may be permitted to forego all or a portion of their annual
$10,000 cash payment for service on the Board in exchange for a
grant or grants of restricted stock under the 2004 Equity
Incentive Plan having a fair market value equal to the amount of
foregone cash compensation. In the fiscal year ended
January&nbsp;1, 2006, the total compensation paid to
non-employee directors was $71,000; of this amount $41,170 was
paid to the directors in cash and $29,830 was paid to the
directors through a grant of an aggregate of 912&nbsp;shares of
stock in lieu of cash. The members of the Board of Directors are
also eligible for reimbursement for their expenses incurred in
attending Board and committee meetings in accordance with
Company policy.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In March 2004, the Company adopted the 2004 Non-Employee
Directors&#146; Stock Option Plan. Under this plan, upon joining
the Company&#146;s Board of Directors, each non-employee
director receives an option grant to
purchase&nbsp;20,000&nbsp;shares of the Company&#146;s common
stock. The initial grant will vest monthly with respect to
1/30th&nbsp;of the shares subject to the grant for the first
12&nbsp;months following the date of grant and 1/60th&nbsp;of
the shares subject to the grant for the subsequent
36&nbsp;months. Upon joining the Board of Directors in February
2005, Mr.&nbsp;Carlborg was issued an initial grant of
20,000&nbsp;shares of common stock under the Company&#146;s
Non-Employee Directors&#146; Stock Option Plan.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each non-employee director will receive an additional option
grant to purchase&nbsp;16,000&nbsp;shares of the Company&#146;s
common stock upon full vesting of either the option grant they
received in April 2004 under the 1999 Equity Incentive Plan or,
with respect to directors who joined the Board after the April
2004 grant, their initial grant under the 2004 Non-Employee
Directors&#146; Stock Option Plan as well as any such subsequent
additional grants.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each non-employee director will receive an annual option grant
to purchase&nbsp;4,000&nbsp;shares of the Company&#146;s common
stock on the date following each Annual Meeting of stockholders,
which will be reduced pro rata for each full quarter prior to
the grant date during which the director did not serve as a
non-employee director. In 2005, each director received their pro
rata share of the Company&#146;s common stock following the 2005
Annual Meeting of stockholders.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event of a merger of the Company with or into another
corporation or a consolidation, acquisition of assets or other
<FONT style="white-space: nowrap">change-in</FONT>-control
transaction involving the Company, the vesting of options
granted to non-employee directors under the 1999 Equity
Incentive Plan in April 2004 and all options granted under the
2004 Non-Employee Directors&#146; Stock Option Plan will
accelerate in full for the directors who are then providing
services to the Company or the Company&#146;s affiliates.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During fiscal year 2005, no options were exercised by directors
under the 1999 Equity Incentive Plan or the 2004 Non-Employee
Directors&#146; Stock Option Plan.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">19

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Executive
Officers</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below is information regarding Blue Nile&#146;s
executive officers as of March&nbsp;17, 2006.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Vadon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman, Chief Executive Officer and President</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diane Irvine</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Susan Bell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Darrell Cavens</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dwight Gaston</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Terri Maupin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President of Finance, Controller and Corporate Secretary</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Mark Vadon </I>co-founded Blue Nile and has served as
Chairman of the Board of Directors, Chief Executive Officer and
President since its inception. From December 1992 to March 1999,
Mr.&nbsp;Vadon was a consultant for Bain&nbsp;&#38; Company, a
management consulting firm. Mr.&nbsp;Vadon holds a B.A. in
Social Studies from Harvard University and an M.B.A. from
Stanford University.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Diane Irvine </I>has served as Blue Nile&#146;s Chief
Financial Officer since December 1999 and as a director since
May 2001. From February 1994 to May 1999, Ms.&nbsp;Irvine served
as Vice President and Chief Financial Officer of Plum Creek
Timber Company, Inc., a timberland management and wood products
company. From September 1981 to February 1994, Ms.&nbsp;Irvine
served in various capacities, most recently as a partner, with
Coopers and Lybrand LLP, an accounting firm. Ms.&nbsp;Irvine
serves on the board of directors of Davidson Companies, an
investment banking and asset management company. Ms.&nbsp;Irvine
holds a B.S. in Accounting from Illinois State University and an
M.S. in Taxation from Golden Gate University.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Susan Bell </I>has served as Blue Nile&#146;s Senior Vice
President since June 2005. Ms.&nbsp;Bell has held executive
level positions in both marketing and merchandising since she
joined Blue Nile in September 2001. From October 2000 to
February 2001, Ms.&nbsp;Bell served as Vice President of
Merchandising and Marketing for The Body Shop Digital, an
<FONT style="white-space: nowrap">e-commerce</FONT> company.
From July 1984 to July 2000, Ms.&nbsp;Bell served in various
capacities at Eddie Bauer, Inc., a clothing and merchandise
retail company, most recently as Vice President and General
Merchandising Manager. Ms.&nbsp;Bell holds a B.A. in Business
Administration from San&nbsp;Francisco State University.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Darrell Cavens </I>has served as Blue Nile&#146;s Senior Vice
President since June 2005. Mr.&nbsp;Cavens served as Vice
President of Development from October 2003 through June 2005,
and as Blue Nile&#146;s Chief Technology Officer from November
2000 to June 2005. From September 1999 to November 2000,
Mr.&nbsp;Cavens served as Blue Nile&#146;s Director of
Technology. From April 1996 to September 1999, Mr.&nbsp;Cavens
worked as Staff Engineer within the Advanced Development team at
Starwave Corporation, an Internet development company.
Mr.&nbsp;Cavens attended the University of Victoria in Canada
from 1990 to 1994.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dwight Gaston </I>has served as Blue Nile&#146;s Senior Vice
President since September 2005. From July 2003 to March 2005,
Mr.&nbsp;Gaston served as Vice President of Operations, and from
May 1999 to July 2003, Mr.&nbsp;Gaston served as Blue
Nile&#146;s Director of Fulfillment Operations. From June 1992
to June 1995 and from August 1997 to May 1999, Mr.&nbsp;Gaston
was a consultant with Bain&nbsp;&#38; Company, a management
consulting firm. Mr.&nbsp;Gaston holds a B.A. in Economics from
Rice University and an M.B.A. from Harvard University.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Terri Maupin </I>has served as Blue Nile&#146;s Vice
President of Finance and Controller since July 2004 and as
Corporate Secretary since October 2004. From September 2003 to
July 2004, Ms.&nbsp;Maupin served as Blue Nile&#146;s
Controller. From February 2001 to September 2003,
Ms.&nbsp;Maupin served as the Staff Vice President of Finance
and Controller at Alaska Air Group, Inc., the parent company of
airline companies Alaska Airlines, Inc. and Horizon Air
Industries, Inc., and Staff Vice President of Finance and
Controller at Alaska Airlines, Inc. From September 1994 through
January 2001, Ms.&nbsp;Maupin served in various capacities at
Nordstrom, Inc., a clothing and merchandise retail company, most
recently as Director of Financial Reporting. Ms.&nbsp;Maupin
holds a B.A. in Accounting from Western Washington University.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">20
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Compensation of
Executive Officers</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth compensation information earned
by our Chief Executive Officer, the other four most highly
compensated executive officers as of January&nbsp;1, 2006 and
any individual who would have been one of the four most highly
compensated executive officers but was not serving as of
January&nbsp;1, 2006 (we refer to these officers as our
&#147;named executive officers&#148;) as of the end of our last
three fiscal years.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Long-Term</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Annual Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>All Other</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2" align="left" nowrap><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Salary ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Bonus ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Compensation ($)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Vadon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>327,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,920</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman, Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>299,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,677</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    and President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>249,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,107</TD>
    <TD align="left" valign="bottom" nowrap>(3)</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diane Irvine</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>273,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,920</TD>
    <TD align="left" valign="bottom" nowrap>(4)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>265,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,017</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>249,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,924</TD>
    <TD align="left" valign="bottom" nowrap>(6)</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Susan Bell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,085</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,091</TD>
    <TD align="left" valign="bottom" nowrap>(7)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>205,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,338</TD>
    <TD align="left" valign="bottom" nowrap>(8)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,950</TD>
    <TD align="left" valign="bottom" nowrap>(9)</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Darrell Cavens</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>166,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,057</TD>
    <TD align="left" valign="bottom" nowrap>(10)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,684</TD>
    <TD align="left" valign="bottom" nowrap>(11)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>142,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,148</TD>
    <TD align="left" valign="bottom" nowrap>(12)</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Terri Maupin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,598</TD>
    <TD align="left" valign="bottom" nowrap>(13)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Vice President of Finance,</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,334</TD>
    <TD align="left" valign="bottom" nowrap>(14)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Controller and Corporate Secretary</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240</TD>
    <TD align="left" valign="bottom" nowrap>(15)</TD>
</TR>

<TR>
    <TD colspan="22">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Paquin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>283,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,935</TD>
    <TD align="left" valign="bottom" nowrap>(16)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Former Executive Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>283,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,271</TD>
    <TD align="left" valign="bottom" nowrap>(17)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>282,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,445</TD>
    <TD align="left" valign="bottom" nowrap>(18)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Of this amount, $4,200 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Of this amount, $5,957 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Of this amount, $4,387 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Of this amount, $4,200 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Of this amount, $5,297 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Of this amount, $5,204 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Of this amount, $4,242 is for matching contributions under Blue
    Nile&#146;s 401(k) plan, $720 is for a transportation allowance
    and $3,129 is for medical insurance premiums for dependents.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    Of this amount, $4,105 is for matching contributions under Blue
    Nile&#146;s 401(k) plan, $720 is for a transportation allowance
    and $6,513 is for medical insurance premiums for dependents.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    Of this amount, $3,872 is for matching contributions under Blue
    Nile&#146;s 401(k) plan, $720 is for a transportation allowance
    and $3,358 is for medical insurance premiums for dependents.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">21
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    Of this amount, $3,337 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Of this amount, $2,964 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Of this amount, $2,848 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $300 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Of this amount, $2,878 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Of this amount, $2,614 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $720 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)&nbsp;</TD>
    <TD align="left">
    This amount of $240 is for a transportation allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(16)&nbsp;</TD>
    <TD align="left">
    Of this amount, $4,200 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $2,735 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(17)&nbsp;</TD>
    <TD align="left">
    Of this amount, $5,660 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $2,611 is for a transportation
    allowance.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(18)&nbsp;</TD>
    <TD align="left">
    Of this amount, $4,957 is for matching contributions under Blue
    Nile&#146;s 401(k) plan and $2,488 is for a transportation
    allowance.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Stock Option Grants And
Exercises</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company grants options to its executive officers under its
2004 Equity Incentive Plan. Prior to the adoption of the 2004
Equity Incentive Plan, the Company granted options to its
executive officers under its 1999 Equity Incentive Plan. As of
March&nbsp;17, 2006, (i)&nbsp;options to purchase a total of
845,622&nbsp;shares were outstanding under the 2004 Equity
Incentive Plan and options to
purchase&nbsp;3,430,976&nbsp;shares remained available for grant
under the 2004 Equity Incentive Plan; and (ii)&nbsp;options to
purchase a total of 912,282&nbsp;shares were outstanding under
the 1999 Equity Incentive Plan and options to purchase
0&nbsp;shares remained available for grant under the 1999 Equity
Incentive Plan. The Company has never granted any stock
appreciation rights.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table shows for the fiscal year ended
January&nbsp;1, 2006, certain information regarding options
granted to, exercised by, and held at year end by, each of our
named executive officers.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Option Grants in Last
Fiscal Yea</FONT></B><FONT style="font-variant:SMALL-CAPS">r
</FONT>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="25%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Potential Realizable Value</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>at Assumed Annual Rates</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>of Stock Price</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Appreciation for Option</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap><B>Individual Grants</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Term (1)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>% of Total</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Options to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise or</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Employees</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Base Price</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>in Fiscal</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>($/Sh)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Options (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Year (2)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(3)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Date (4)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>5% ($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>10% ($)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Vadon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>117,000</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>August 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,425,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,147,846</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diane Irvine</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62,000</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>August 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,285,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,257,833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Susan Bell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,000</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>August 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>601,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,523,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Darrell Cavens</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>August 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>414,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,050,914</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Terri Maupin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD align="left" valign="bottom" nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>August 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>630,548</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Paquin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,000</TD>
    <TD align="left" valign="bottom" nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>August 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>995,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,522,193</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Potential realizable values (i)&nbsp;are net of exercise price
    before taxes, (ii)&nbsp;assume that the common stock appreciates
    at the annual rate shown (compounded annually) from the date of
    grant until the</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">22

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    expiration of the ten-year option term, and (iii)&nbsp;assume
    the option is exercised at the exercise price and sold on the
    last day of its term at the appreciated price. These numbers are
    calculated based on SEC rules and do not reflect our estimate of
    future stock price growth.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Based on options to purchase&nbsp;546,475&nbsp;shares of common
    stock granted to employees in fiscal year 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The exercise price of each option was equal to the closing sales
    price of the Company&#146;s common stock as reported on the
    Nasdaq Stock Market for the last market trading day prior to the
    date of grant.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Each of the options granted to the named executive officers has
    a 10&nbsp;year term, subject to earlier termination if the
    optionee&#146;s service with the Company ceases. Under certain
    circumstances following a change of control, the vesting of such
    option grants may accelerate and become immediately exercisable.
    See the section entitled &#147;Employment, Severance and Change
    of Control Agreements&#148; below for a description of the
    Company&#146;s agreements with the named executive officers
    concerning stock options that have been granted to them.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    The options vest over four years with 25% of the shares vesting
    one year from the date of grant and 2.08% of the shares vesting
    each month thereafter.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    The options vest monthly over four years from the vesting
    commencement date. All unvested options granted to
    Mr.&nbsp;Paquin were automatically cancelled in connection with
    Mr.&nbsp;Paquin&#146;s resignation from the Company on
    December&nbsp;31, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents for Blue Nile&#146;s named
executive officers the number and value of securities underlying
unexercised options that were held by those officers as of
January&nbsp;1, 2006. The numbers in the column entitled
&#147;Value of Unexercised In-The-Money Options at
January&nbsp;1, 2006&#148; are based on the fair market value of
Blue Nile&#146;s common stock of $40.31 at January&nbsp;1, 2006,
less the exercise price payable for these shares.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Aggregated Option
Exercises in Last Fiscal Year and Option Values at
January&nbsp;1, 2006</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Number of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Value of Unexercised</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Underlying Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>In-the-Money</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Options at</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>Options at</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>January&nbsp;1, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap><B>January&nbsp;1, 2006</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Shares Acquired</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Value Realized</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Unexercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Unexercisable</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>on Exercise (#)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(#)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(#)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>($)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mark Vadon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>248,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>278,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,664,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,411,022</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diane Irvine</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>138,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,687,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,427,927</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Susan Bell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,990,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>392,914</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Darrell Cavens</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,216,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>561,095</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Terri Maupin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>551,194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Robert Paquin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>246,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,142,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Employment, Severance
and Change of Control Agreements</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of the Company&#146;s named executive officers, except for
Mr.&nbsp;Vadon, has signed offer letters. These offer letters
provide that the officer is an at-will employee. These offer
letters also provide for salary and stock option grants, as well
as other customary benefits and terms.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Options to purchase an aggregate of 40,000&nbsp;shares of Blue
Nile&#146;s common stock granted to Ms.&nbsp;Irvine in 2003, and
options to purchase an aggregate of 100,000&nbsp;shares of Blue
Nile&#146;s common stock granted to Mr.&nbsp;Vadon in 2003 are
subject to accelerated vesting, if, within 12&nbsp;months
following a change of control, the employee:
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">23
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    is terminated without cause;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    voluntarily terminates continuous service following a material
    reduction in such employee&#146;s responsibilities and duties
    without cause;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    voluntarily terminates continuous service following a relocation
    of the principal place where such employee&#146;s
    responsibilities and duties are performed outside of a specified
    radius.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>1999 Equity Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the 1999 Equity Incentive Plan, in the event of a merger
of the Company with or into another corporation or a
consolidation, acquisition of assets or other
<FONT style="white-space: nowrap">change-in</FONT>-control
transaction involving the Company, if the surviving or acquiring
entity does not assume or substitute the stock options, the
vesting of each option issued under the 1999 Equity Incentive
Plan will accelerate in full and the option will terminate if
not exercised prior to the consummation of the transaction, and
under the 1999 Equity Incentive Plan, if the surviving or
acquiring entity assumes or substitutes the stock options, the
vesting on each option shall accelerate as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any portion of each stock option that is not subject to monthly
    vesting, but is subject to vesting based on the expiration of a
    one year period will be treated as if the award had vested
    ratably on a monthly basis from the vesting commencement
    date;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the lesser of (i)&nbsp;twelve and one-half percent of all shares
    subject to such stock grant, or (ii)&nbsp;an amount equal to the
    remaining unvested shares, will vest upon the closing of such
    corporate transaction.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, under the 1999 Equity Incentive Plan, if any
person or entity, or group thereof acting together, acquires
shares representing at least 50% of the voting power entitled to
vote in the election of the Company&#146;s directors, other than
in certain corporate transactions, the vesting of each option
granted under the 1999 Equity Incentive Plan will accelerate in
full for those whose service with the Company or any of the
Company&#146;s affiliates has not terminated.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>2004 Equity Incentive Plan</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the 2004 Equity Incentive Plan, in the event of certain
corporate transactions, if the surviving or acquiring entity
elects not to assume, continue or substitute for options granted
under the 2004 Equity Incentive Plan, the vesting and
exercisability of each option granted under the 2004 Equity
Incentive Plan will accelerate in full for those whose service
with the Company or any of the Company&#146;s affiliates has not
terminated and such options will be terminated if not exercised
prior to the effective date of such corporate transaction.
</DIV>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">24

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<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Equity Compensation
Plan Information </FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Blue Nile currently maintains four compensation plans that
provide for the issuance of Blue Nile&#146;s common stock to
officers and other employees, directors and consultants. These
plans consist of the 1999 Equity Incentive Plan, the 2004 Equity
Incentive Plan, the 2004 Non-Employee Directors&#146; Stock
Option Plan and the 2004 Employee Stock Purchase Plan. Each of
these four plans has been approved by the Company&#146;s
stockholders. The following table sets forth information
regarding outstanding options and shares reserved for future
issuance under the foregoing plans as of January&nbsp;1, 2006:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of Shares</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Number of Shares to</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Remaining Available for</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>be Issued Upon</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Weighted-Average</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Future Issuance Under</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Exercise Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Equity Compensation</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding Options,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Outstanding Options,</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Plans (Excluding Shares</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Warrants and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Warrants and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Reflected in Column&nbsp;(a))</B></TD>
</TR>

<TR style="font-size: 8.0pt;">
    <TD colspan="2" align="left" nowrap><B>Plan Category</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(a)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(b)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>(c)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity compensation plans approved by stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,095,071</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,918,003</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity compensation plans not approved by stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="14">&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,095,071</TD>
    <TD align="left" valign="bottom" nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,918,003</TD>
    <TD align="left" valign="bottom" nowrap>(2)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes outstanding options to
    purchase&nbsp;1,178,217&nbsp;shares of common stock under the
    1999 Equity Incentive Plan, 874,854&nbsp;shares of common stock
    under the 2004 Equity Incentive Plan, 42,000&nbsp;shares of
    common stock under the 2004 Non-Employee Directors&#146; Stock
    Option Plan and 0&nbsp;shares of common stock under the 2004
    Employee Stock Purchase Plan.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    There are 0&nbsp;shares available for grant under the 1999
    Equity Incentive Plan, 2,560,003&nbsp;shares available for grant
    under the 2004 Equity Incentive Plan, 358,000&nbsp;shares
    available for grant under the 2004 Non-Employee Directors&#146;
    Stock Option Plan and 1,000,000&nbsp;shares available for grant
    under the 2004 Employee Stock Purchase Plan. The aggregate
    number of shares of common stock that are reserved for issuance
    under the 2004 Equity Incentive Plan automatically increases on
    the first day of each fiscal year up to and including 2014, by
    five percent of the number of shares of common stock outstanding
    on such date unless the Board of Directors designates a smaller
    number. The aggregate number of shares of common stock that are
    reserved for issuance under the 2004 Non-Employee
    Directors&#146; Plan automatically increases the first day of
    each fiscal year up to and including 2014, by the number of
    shares of common stock subject to options granted during the
    prior calendar year unless the Board of Directors designates a
    smaller number. After the effective date of the first offering
    under the 2004 Employee Stock Purchase Plan, the aggregate
    number of shares of common stock that are reserved for issuance
    under the 2004 Employee Stock Purchase Plan automatically
    increases on the first day of each fiscal year for
    20&nbsp;years, by the lesser of 320,000&nbsp;shares or one and
    one half percent of the number of shares of common stock
    outstanding on each such date, unless the Board of Directors
    designates a smaller number.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">25

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<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Report of the
Compensation Committee of the Board of Directors</FONT></B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B><FONT style="font-variant:SMALL-CAPS">on Executive
Compensation(1)</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As more specifically set forth in the Compensation
Committee&#146;s charter, the purpose of Blue Nile, Inc.&#146;s
(&#147;Blue Nile&#148; or the &#147;Company&#148;) Compensation
Committee (the &#147;Committee&#148;) is to act on behalf of the
Board of Directors (the &#147;Board&#148;) in fulfilling the
Board&#146;s responsibilities to oversee Blue Nile&#146;s
compensation policies, plans and programs and to review and
determine the compensation to be paid to its executive officers.
In fiscal year 2005, the Committee was comprised of three
independent, non-employee directors: Augustus Tai, Joseph
Jimenez and Brian McAndrews. Mr.&nbsp;Tai served as Chair of the
Committee. In connection with Mr.&nbsp;Tai&#146;s decision not
to run for re-election to the Board at the 2006 Annual Meeting,
Mr.&nbsp;Jimenez will serve as Chair of the Committee
immediately following the 2006 Annual Meeting. If
Ms.&nbsp;Saunders is elected to the Board, she will serve as a
member of the Committee. Ms.&nbsp;Saunders would be an
independent non-employee director.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Chair of the Committee reports the Committee&#146;s actions
and recommendations at the Board meetings. The Committee has
access to internal personnel as the Committee deems necessary or
appropriate, and the Committee has the authority to obtain, at
the expense of Blue Nile, advice and assistance from internal or
external legal, accounting or other advisors or consultants as
it deems necessary or appropriate in the performance of its
duties. The Committee regularly meets in executive sessions
without members of management present.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Compensation Philosophy</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Blue Nile&#146;s compensation program is designed to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    attract, retain and motivate outstanding employees by providing
    appropriate levels of risk and reward, assessed on a relative
    basis at all levels within Blue Nile and in proportion to
    individual contribution and performance;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establish incentives for management and employees that further
    the long-term business objectives and the long-term value of
    Blue Nile.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee believes that compensation paid to executive
officers should be closely aligned with the performance of the
Company on both a short-term and long-term basis, and that such
compensation should be designed to attract and retain highly
qualified executives. The Committee believes that the executive
compensation program should be competitive in the market and
should align executives&#146; financial interests with long-term
shareholder value.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Components of Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The three main components of Blue Nile&#146;s executive
compensation for fiscal year 2005 were base salary, cash
incentive bonuses and stock option awards. To assist in its
review of the key elements of executive compensation for 2005,
the Committee engaged an independent compensation consultant who
provided comparative compensation information for equivalent
positions at peer companies. The consultant&#146;s analysis used
several broad comparison groups of peer companies that were
deemed to be relevant comparisons based on industry, size of
company and other factors.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Base Salary.</I> In establishing base salaries for executive
officers, the Committee considers the executive&#146;s level of
responsibility, experience, individual performance and
contribution to Company performance, along with the market
analysis performed by the independent consultant. Base salaries
for Blue Nile executives are reviewed on an annual basis, and
adjustments in base salaries may also be
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

</DIV>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff;">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

</DIV>

<P align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
(1)&nbsp;Notwithstanding anything to the contrary set forth in
any of our previous filings under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended,
that might incorporate future filings, including this proxy
statement, in whole or in part, the following report shall not
be incorporated by reference into any such filings.

<P align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">26
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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
considered at the time of a change in responsibilities. The base
salaries for executives are designed to be competitive (which we
define as approximately the 50th&nbsp;percentile) compared with
prevailing market rates at peer companies for equivalent
positions. In addition to reviewing executive officers&#146;
compensation against the comparison group of peer companies, the
Committee also seeks input from the chief executive officer
regarding total compensation for the other executive officers
reporting directly to him.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Annual Incentive Bonuses.</I> The Company has a cash
incentive program for executive officers that provides variable
cash incentives upon the achievement of financial and other
performance objectives. The cash incentive bonuses are designed
to be competitive (which we define as approximately
50th&nbsp;percentile) compared with prevailing market rates at
peer companies for equivalent positions. For 2005, 60% of the
aggregate target bonus pool was established based on the
achievement of the Company&#146;s free cash flow objectives for
the fiscal year with the remainder of the pool established based
on the achievement of other quantitative and qualitative
objectives set forth by the Committee, including individual and
Company performance objectives and other financial objectives.
The maximum that could be awarded to an executive officer was
200% of the target bonus. After the end of the fiscal year 2005,
the Committee reviewed Blue Nile&#146;s achievement of the
established performance targets and awarded a total of $113,752
to Blue Nile&#146;s executive officers, including its chief
executive officer, and the Committee approved bonus payments
ranging from 30% to 100% of the individual bonus targets.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Long-Term Incentive Compensation&nbsp;&#151; Equity
Awards.</I> The Committee believes that equity awards tie
compensation to the long-term performance of the Company and to
the creation of stockholder value, and serve to closely align
the long-term interests and financial incentives of its
executive officers with those of the Company&#146;s stockholders.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In past years and in 2005, long-term incentive compensation of
executive officers took the form of stock option awards. The
Committee believes in the importance of equity ownership for all
executive officers and employees, for purposes of incentive,
retention and alignment with stockholders. In determining the
size of stock option grants to executive officers, the Committee
considers the value of total compensation for comparable
positions at peer companies and factors such as the
recipient&#146;s level of responsibility, individual and Company
performance, and the individual&#146;s anticipated level of
future contributions to the Company&#146;s success. In fiscal
year 2005, the executive officers (excluding the chief executive
officer) were granted options to purchase between 12,000 and
62,000&nbsp;shares of Blue Nile&#146;s common stock, which
ranged from 2.2&nbsp;percent to 11.35&nbsp;percent of the total
options granted to Company employees. The exercise price of
options granted to executives and other employees generally is
the closing sales price of Blue Nile&#146;s common stock on the
last market trading day preceding the option grant award date.
Executives receive value from these grants only if Blue
Nile&#146;s common stock appreciates over the long term. In
general, the equity awards granted to executive officers vest
over a <FONT style="white-space: nowrap">4-year</FONT> period as
follows: 1/4th&nbsp;of the shares vest one year after the
vesting commencement date and 1/48th&nbsp;of the shares vest
monthly thereafter.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Other Benefits</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Blue Nile does not maintain any non-qualified deferred
compensation plans, defined benefit pension plans or
supplemental retirement plans for its executive officers. The
Company has a tax-qualified 401(k) defined contribution
retirement plan (&#147;401(k) Plan&#148;) that is available to
all eligible employees. The 401(k) Plan is a defined
contribution plan designed to allow employees to accumulate
retirement funds through employee and Company contributions. All
Company contributions are made in cash and are invested in funds
as directed by the participant, with the participant being able
to select from a variety of mutual funds. Blue Nile does not
offer participants the opportunity to invest in shares of Blue
Nile stock through the 401(k) Plan. For 2005, Blue Nile&#146;s
contributions to the 401(k) Plan for all eligible employees,
including executive officers, equaled 50% of the amount
contributed by the employee up to 4% of such employee&#146;s
compensation. The Company contribution has a four year vesting
period whereby 25% of such contribution vests annually.
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Chief Executive Officer Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Base Salary.</I> During fiscal year 2005, Mark Vadon received
a base salary of $327,725. His base salary was $300,000 until
the Committee increased his salary 28% to $385,000 in September
2005. This increase moved Mr.&nbsp;Vadon&#146;s base salary
closer to the median percentile of base salaries of chief
executive officers at peer companies. When establishing
Mr.&nbsp;Vadon&#146;s salary, the Committee reviewed the factors
listed above in the &#147;Base Salary&#148; section of this
report, with particular focus on Blue Nile&#146;s financial
performance and Mr.&nbsp;Vadon&#146;s personal performance.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Annual Incentive Bonuses.</I> For fiscal year 2005,
Mr.&nbsp;Vadon was awarded an incentive bonus equal to $30,000,
which represented 41% of his target bonus amount. Because the
Company&#146;s free cash flow objective for the fiscal year was
not met, the bonus payout was below the target amount. The
individual performance component of Mr.&nbsp;Vadon&#146;s bonus
was above target, based on the achievement of the performance
objectives set forth by the Committee (listed above in the
&#147;Annual Incentive Bonuses&#148; section of this report).
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Long-Term Incentive Compensation&nbsp;&#151; Equity
Awards.</I> In August 2005, Mr.&nbsp;Vadon was granted an option
to purchase&nbsp;117,000&nbsp;shares of Blue Nile&#146;s common
stock at an exercise price of $32.97 (the closing sales price of
Blue Nile&#146;s common stock on the last market trading day
prior to the day the option grant was awarded) under Blue
Nile&#146;s 2004 Equity Incentive Plan. When determining the
stock option grant, the Committee considered the factors listed
above in the &#147;Long-Term Incentive Compensation&#148;
section of this report, with a particular focus on Blue
Nile&#146;s financial performance and Mr.&nbsp;Vadon&#146;s
personal performance. The grant of an option to
purchase&nbsp;117,000&nbsp;shares of Blue Nile&#146;s common
stock represented 21.41% of the total options granted to
employees in fiscal year 2005. The August 2005 option grant
vests as follows: 1/4th&nbsp;of the shares vest one year after
the vesting commencement date of August&nbsp;31, 2005, and
1/48th&nbsp;of the shares vest monthly thereafter.
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Tax Treatment of Stock Options and Restricted Stock Purchase
Rights</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;162(m) of the Internal Revenue Code (the
&#147;Code&#148;) limits Blue Nile to a deduction for federal
income tax purposes of no more than $1&nbsp;million of
compensation paid to each of the Named Executive Officers in a
taxable year. Compensation above $1&nbsp;million may be deducted
if it is &#147;performance-based compensation&#148; within the
meaning of the Code. However, Section&nbsp;162(m) contains an
exception to this deduction limit for compensation paid pursuant
to a compensation plan or agreement that existed during the
period in which a company was not publicly held. This exception
applies until the earliest of (i)&nbsp;the expiration of the
plan or agreement, (ii)&nbsp;the material modification of the
plan or agreement, (iii)&nbsp;issuance of all shares or other
compensation reserved under the plan, or (iv)&nbsp;the first
meeting of stockholders at which directors are to be elected
occurring after the close of the third calendar year following
the calendar year in which Blue Nile&#146;s initial public
offering occurs. The Company&#146;s compensation plans and
agreements were in existence prior to Blue Nile&#146;s initial
public offering, and none of the events specified above has yet
occurred. Accordingly, the Committee believes that compensation
paid pursuant to its compensation plans and agreements is not
subject to the deduction limitation under Section&nbsp;162(m).
Therefore, the Committee has not yet established a policy for
determining which forms of incentive compensation awarded to its
Named Executive Officers shall be designed to qualify as
&#147;performance-based compensation.&#148; The Committee
intends to comply with Code Section&nbsp;162(m) in the future to
the extent consistent with the best interests of Blue Nile.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Respectfully submitted,</TD>
</TR>

<TR>
    <TD style="font-size: 24.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Augustus Tai (Chairman)</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Joseph Jimenez</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Brian McAndrews</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Date: April&nbsp;21, 2006
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Compensation Committee
Interlocks and Insider Participation</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
None of Blue Nile&#146;s executive officers serves as a member
of the board of directors or compensation committee of any
entity that has one or more executive officers who serve on Blue
Nile&#146;s Board of Directors or Compensation Committee. No
interlocking relationship exists between Blue Nile&#146;s Board
of Directors or Compensation Committee and the board of
directors or compensation committee of any other company, nor
has any interlocking relationship existed in the past.
</DIV>

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<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Performance Measurement
Comparison(1)</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following graph compares the cumulative total stockholder
return on the Company&#146;s common stock with the cumulative
total return of the Nasdaq Market Index and Hemscott&#146;s
Internet Software and Services Group Index for the period
beginning on May&nbsp;20, 2004, the date of the Company&#146;s
public offering, through January&nbsp;1, 2006, the
Company&#146;s 2005 fiscal year end.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN(2)</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="v16811dev1681101.gif" alt="PERFORMANCE GRAPH">
</DIV>

<DIV align="left" style="font-size: 3.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    This Section is not &#147;soliciting material,&#148; is not
    deemed &#147;filed&#148; with the SEC and is not to be
    incorporated by reference in any filing of the Company under the
    1933&nbsp;Act or the 1934&nbsp;Act whether made before or after
    the date hereof and irrespective of any general incorporation
    language in any such filing.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Assumes $100 was invested on May&nbsp;20, 2004, at the closing
    price on the date of Blue Nile&#146;s initial public offering,
    in Blue Nile&#146;s common stock and each index, and all
    dividends have been reinvested. No cash dividends have been
    declared on Blue Nile&#146;s common stock. Stockholder returns
    over the indicated period should not be considered indicative of
    future stockholder returns.</TD>
</TR>

<TR>
    <TD style="font-size: 3.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Coredata formally changed its name to Hemscott, Inc. in 2005.</TD>
</TR>

</TABLE>

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<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Certain Relationships
and Related Transactions</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has entered into indemnity agreements with certain
officers and directors which provide, among other things, that
the Company will indemnify such officer or director, under the
circumstances and to the extent provided for therein, for
expenses, damages, judgments, fines and settlements he or she
may be required to pay in actions or proceedings to which he or
she is, or may be, made a party by reason of his or her position
as a director, officer or other agent of the Company, and
otherwise to the fullest extent permitted under Delaware law and
the Company&#146;s Bylaws.
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Annual Report on
Form&nbsp;<FONT style="white-space: nowrap">10-K</FONT></FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>A copy of the Company&#146;s Annual Report on
Form&nbsp;<FONT style="white-space: nowrap">10-K</FONT> for the
year ended January&nbsp;1, 2006, accompanies this Proxy
Statement. It is also available on the Company&#146;s website,
<U>www.bluenile.com</U> in the financial information section of
the investor relations page. An additional copy will be
furnished without charge to stockholders of record upon request
by mail to Investor Relations at Blue Nile, 705 Fifth Avenue
South, Suite&nbsp;900, Seattle Washington 98104.</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Householding of Proxy
Materials</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers) to satisfy the delivery
requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those
stockholders. This process, which is commonly referred to as
&#147;householding,&#148; potentially means extra convenience
for stockholders and cost savings for companies.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This year, a number of brokers with account holders who are Blue
Nile stockholders will be &#147;householding&#148; Blue
Nile&#146;s proxy materials. A single proxy statement will be
delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected
stockholders. Once you have received notice from your broker
that they will be &#147;householding&#148; communications to
your address, &#147;householding&#148; will continue until you
are notified otherwise or until you revoke your consent. If, at
any time, you no longer wish to participate in
&#147;householding&#148; and would prefer to receive a separate
proxy statement and annual report, please notify your broker,
direct your written request to Blue Nile, Inc., Corporate
Secretary at 705 Fifth Avenue South, Suite&nbsp;900, Seattle,
Washington 98104 or contact Terri K. Maupin, the Corporate
Secretary, at
(206)&nbsp;336-6700<FONT style="font-variant:SMALL-CAPS">.
</FONT> Stockholders who currently receive multiple copies of
the proxy statement at their address and would like to request
&#147;householding&#148; of their communications should contact
their broker.
</DIV>

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<B><FONT style="font-variant:SMALL-CAPS">Other Matters</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Board of Directors knows of no other matters that will be
presented for consideration at the Annual Meeting. If any other
matters are properly brought before the Annual Meeting, it is
the intention of the persons named in the accompanying proxy to
vote on such matters in accordance with their best judgment.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    By Order of the Board of Directors,</TD>
</TR>

<TR>
    <TD style="font-size: 12.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <IMG src="v16811dev1581100.gif" alt="-s- MARK VADON"></TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Mark Vadon</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Chairman of the Board, Chief Executive <BR>
     Officer and President</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Seattle, Washington
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
April&nbsp;21, 2006
</DIV>

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<DIV align="right" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>Appendix&nbsp;A</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Blue Nile, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CHARTER OF THE AUDIT COMMITTEE</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Purpose and
Policy</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary purpose of the Audit Committee (the
&#147;Committee&#148;) of the Board of Directors (the
&#147;Board&#148;) of Blue Nile, Inc. (the &#147;Company&#148;)
shall be to act on behalf of the Board in fulfilling the
Board&#146;s oversight responsibilities with respect to:
(i)&nbsp;the Company&#146;s corporate accounting, financial
reporting practices and audits of financial statements;
(ii)&nbsp;the quality and integrity of the Company&#146;s
financial statements and reports; (iii)&nbsp;the qualifications,
independence and performance of any firm or firms of certified
public accountants engaged as the Company&#146;s independent
outside auditors (the &#147;Auditors&#148;); (iv)&nbsp;the
performance of the Company&#146;s internal audit function; and
(v)&nbsp;the Company&#146;s systems of internal control over
financial reporting.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The policy of the Committee, in discharging these obligations,
shall be to maintain and foster an open avenue of communication
between the Committee, the Auditors and the Company&#146;s
financial management and internal audit teams.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Composition</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until such time as the Company is subject to the reporting
requirements of Section&nbsp;13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the &#147;Reporting
Date&#148;), the Committee shall consist of at least two
(2)&nbsp;members of the Board. On and after the Reporting Date,
the Committee shall consist of at least three (3)&nbsp;members
of the Board. No Committee member shall be an employee of the
Company and each member shall be free from any relationship that
would interfere with the exercise of his or her independent
judgment, as determined by the Board, in accordance with the
applicable independence requirements of The Nasdaq Stock Market
(&#147;Nasdaq&#148;) and the rules and regulations of the
Securities and Exchange Commission (&#147;SEC&#148;), including
any exceptions permitted by such requirements. At least one
member shall satisfy any applicable Nasdaq and SEC financial
experience requirements as in effect from time to time. The
members of the Committee shall be appointed by and serve at the
discretion of the Board. Vacancies occurring on the Committee
shall be filled by the Board. The Committee&#146;s Chairperson
shall be designated by the Board or, if it does not do so, the
Committee members shall elect a Chairperson by vote of a
majority of the full Committee.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Operating Principles
and Processes</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fulfilling its functions and responsibilities, the Committee
should give due consideration to the following operating
principles and processes:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Communication</I>&nbsp;&#151; Regular and meaningful contact
    with the Board, members of senior management and independent
    professional advisors to the Board and its various committees,
    as applicable, shall be encouraged as a means of strengthening
    the Committee&#146;s knowledge of relevant current and
    prospective corporate accounting and financial reporting issues.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Committee Education/Orientation</I>&nbsp;&#151; Developing
    with management and participating in a process for systematic
    review of important accounting and financial reporting issues
    and trends in accounting and financial reporting practices that
    could potentially impact the Company shall be encouraged to
    enhance the effectiveness of the Committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Information Needs</I>&nbsp;&#151; The Committee members shall
    communicate to the Chief Executive Officer or his or her
    designees the Committee&#146;s expectations, and the nature,
    timing, and extent of any specific information or other
    supporting materials requested by the Committee for its meetings
    and deliberations.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Meeting Agendas</I>&nbsp;&#151; Committee meeting agendas
    shall be the responsibility of the Committee chairperson with
    input from the Committee members and other members of the Board
    as well as, to the extent deemed appropriate by the chairperson,
    from members of senior management and outside advisors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Meetings </FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee will hold at least four (4)&nbsp;regular meetings
per year and additional meetings as the Committee deems
appropriate. Meetings may be called by the Chairperson of the
Committee or the Chairman of the Board.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Minutes and
Reports</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Minutes of each meeting will be kept and distributed to each
member of the Committee, members of the Board who are not
members of the Committee and the Secretary of the Company. The
Chairperson of the Committee will report to the Board from time
to time, or whenever so requested by the Board. In addition, the
Chairperson of the Committee or his or her delegate shall be
available to answer any questions the other directors may have
regarding the matters considered and actions taken by the
Committee.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Authority</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee shall have full access to all books, records,
facilities and personnel of the Company as deemed necessary or
appropriate by any member of the Committee to discharge his or
her responsibilities hereunder. The Committee shall have
authority to retain, at the Company&#146;s expense, advice and
assistance from internal and external legal, accounting or other
advisors or consultants as it deems necessary or appropriate in
the performance of its duties. The Company shall make available
to the Committee all funding necessary for the Committee to
carry out its duties, including, without limitation, the payment
of such expenses. The Committee shall have authority to require
that any of the Company&#146;s personnel, counsel, Auditors or
investment bankers, or any other consultant or advisor to the
Company attend any meeting of the Committee or meet with any
member of the Committee or any of its special legal, accounting
or other advisors and consultants.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Responsibilities</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee&#146;s responsibility is one of oversight. The
members of the Audit Committee are not employees of the Company,
and they do not perform, or represent that they perform, the
functions of management or the independent auditors. The
Committee relies on the expertise and knowledge of management,
the internal auditor and the independent registered accounting
firm in carrying out its oversight responsibilities. The
management of the Company is responsible for preparing accurate
and complete financial statements in accordance with generally
accepted accounting principles and for establishing and
maintaining appropriate accounting principles and financial
reporting policies and satisfactory internal control over
financial reporting. The independent registered accounting firm
is responsible for auditing the Company&#146;s annual
consolidated financial statements and the effectiveness of the
Company&#146;s internal control over financial reporting and
reviewing the Company&#146;s quarterly financial statements. It
is not the responsibility of the Committee to prepare or certify
the Company&#146;s financial statements or guarantee the audits
or reports of the independent auditors, nor is it the duty of
the Audit Committee to certify that the independent auditor is
&#147;independent&#148; under applicable rules. These are the
fundamental responsibilities of management and the independent
auditors.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The operation of the Committee will be subject to the provisions
of the Bylaws of the Company and Delaware General Corporation
Law, each as in effect from time to time. The Committee shall
oversee the Company&#146;s financial reporting process on behalf
of the Board, shall have direct responsibility for the
appointment, compensation, retention and oversight of the
Auditors and shall report the results of its activities to the
Board. The Committee&#146;s functions and procedures should
remain flexible to address
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
changing circumstances most effectively. To implement the
Committee&#146;s purpose and policy, the Committee shall, to the
extent the Committee deems necessary or appropriate, be charged
with the following functions and processes with the
understanding, however, that the Committee may supplement or
(except as otherwise required by applicable laws or rules)
deviate from these activities as appropriate under the
circumstances:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>1.&nbsp;</B>To evaluate the performance of the Auditors, to
    assess their qualifications including their internal
    quality-control procedures and any material issues raised by
    that firm&#146;s most recent internal quality-control or peer
    review or any investigations by regulatory authorities and to
    determine whether to retain or to terminate the existing
    Auditors or to appoint and engage new Auditors for the ensuing
    year.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>2.</B>&nbsp;To determine and approve engagements of the
    Auditors, prior to commencement of each such engagement, to
    perform all proposed audit, review and attest services,
    including the scope of and plans for the audit, the adequacy of
    staffing, the compensation to be paid to the Auditors and the
    negotiation and execution, on behalf of the Company, of the
    Auditors&#146; engagement letters, which approval may be
    pursuant to preapproval policies and procedures, including the
    delegation of preapproval authority to one or more Committee
    members so long as any such preapproval decisions are presented
    to the full Committee at the next scheduled meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>3.</B>&nbsp;To determine and approve engagements of the
    Auditors, prior to commencement of each such engagement (unless
    in compliance with exceptions available under applicable laws
    and rules related to immaterial aggregate amounts of services),
    to perform any proposed permissible non-audit services,
    including the scope of the service and the compensation to be
    paid therefor, which approval may be pursuant to preapproval
    policies and procedures established by the Committee consistent
    with applicable laws and rules, including the delegation of
    preapproval authority to one or more Committee members so long
    as any such preapproval decisions are presented to the full
    Committee at the next scheduled meeting.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>4.</B>&nbsp;To monitor the rotation of the partners of the
    Auditors on the Company&#146;s audit engagement team as required
    by applicable laws and rules and to consider periodically and,
    if deemed appropriate, adopt a policy regarding rotation of
    auditing firms.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>5.</B>&nbsp;At least annually, to receive and review written
    statements from the Auditors delineating all relationships
    between the Auditors and the Company, to consider and discuss
    with the Auditors any disclosed relationships and any
    compensation or services that could affect the Auditors&#146;
    objectivity and independence as required by Independent
    Standards Board Standard No.&nbsp;1, and to assess and otherwise
    take appropriate action to oversee the independence of the
    Auditors.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>6.</B>&nbsp;To consider and, if deemed appropriate, adopt a
    policy regarding Committee preapproval of employment by the
    Company of individuals formerly employed by the Company&#146;s
    Auditors and engaged on the Company&#146;s account.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>7.&nbsp;</B>On and after the Reporting Date, to review, upon
    completion of the audit, the financial statements proposed to be
    included in the Company&#146;s Annual Report on
    Form&nbsp;<FONT style="white-space: nowrap">10-K</FONT> to be
    filed with the Securities and Exchange Commission and to
    recommend whether or not such financial statements should be so
    included.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>8.&nbsp;</B>To discuss with management and the Auditors the
    results of the annual audit, including the Auditors&#146;
    assessment of the quality, not just acceptability, of accounting
    principles, the reasonableness of significant judgments and
    estimates (including material changes in estimates), any
    material audit adjustments proposed by the Auditors and
    immaterial adjustments not recorded, the adequacy of the
    disclosures in the financial statements and any other matters
    required to be communicated to the Committee by the Auditors
    under the standards of the Public Accounting Oversight Board
    (United States).</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>9.&nbsp;</B>On and after the Reporting Date, to discuss with
    management and the Auditors the results of the Auditors&#146;
    review of the Company&#146;s quarterly financial statements,
    prior to public disclosure of quarterly financial information,
    if practicable, or filing with the Securities and Exchange
    Commission of the Company&#146;s Quarterly Report on
    Form&nbsp;<FONT style="white-space: nowrap">10-Q,</FONT> and any
    other matters required to be communicated to the Audit Committee
    by the Auditors under the standards of the Public Accounting
    Oversight Board (United States).</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>10.&nbsp;</B>On and after the Reporting Date, to review and
    discuss with management and the Auditors, as appropriate, the
    Company&#146;s disclosures contained under the caption
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; in its periodic
    reports to be filed with the Securities and Exchange Commission.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>11.&nbsp;</B>To review and discuss with management and the
    Auditors, as appropriate, earnings press releases, as well as
    the substance of financial information and earnings guidance
    provided to analysts and ratings agencies, which discussions may
    be general discussions of the type of information to be
    disclosed or the type of presentation to be made.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>12.</B>&nbsp;To review with management and the Auditors
    significant issues that arise regarding accounting principles
    and financial statement presentation, including critical
    accounting policies and practices, alternative accounting
    policies available under GAAP related to material items
    discussed with management and any other significant reporting
    issues and judgments.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>13.</B>&nbsp;To review and discuss with management and the
    Auditors, as appropriate, the Company&#146;s guidelines and
    policies with respect to risk assessment and risk management,
    including the Company&#146;s major financial risk exposures and
    the steps taken by management to monitor and control these
    exposures.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>14.</B>&nbsp;To evaluate the cooperation received by the
    Auditors during their audit examination, including any
    significant difficulties with the audit or any restrictions on
    the scope of their activities or access to required records,
    data and information.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>15.</B>&nbsp;To review with the Auditors and, if appropriate,
    management, any management or internal control letter issued or,
    to the extent practicable, proposed to be issued by the Auditors
    and management&#146;s response, if any, to such letter, as well
    as any additional material written communications between the
    Auditors and management.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>16.</B>&nbsp;To review with the Auditors communications
    between the audit team and the firm&#146;s national office with
    respect to accounting or auditing issues presented by the
    engagement.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>17.</B>&nbsp;To review with the Auditors and management any
    conflicts or disagreements between management and the Auditors
    regarding financial reporting, accounting practices or policies
    and to resolve any such conflicts regarding financial reporting.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>18.</B>&nbsp;To confer with the Auditors and with the
    management of the Company regarding the scope, adequacy and
    effectiveness of internal auditing and financial reporting
    controls in effect including any special audit steps taken in
    the event of material control deficiencies, responsibilities,
    budget and staff of the internal audit function and review of
    the appointment or replacement of the senior internal audit
    executive or manager.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>19.</B>&nbsp;Periodically, to meet in separate sessions with
    the Auditors, the internal auditors and management to discuss
    any matters that the Committee, the Auditors, the internal
    auditors or management believe should be discussed privately
    with the Committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>20.</B>&nbsp;To consider and review with management, the
    Auditors, outside counsel, as appropriate, and, in the judgment
    of the Committee, such special counsel, separate accounting firm
    and other consultants and advisors as the Committee deems
    appropriate, any correspondence with regulators or governmental
    agencies and any published reports that raise material issues
    regarding the Company&#146;s financial statements or accounting
    policies.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>21.</B>&nbsp;To establish procedures, when and as required by
    applicable laws and rules, for the receipt, retention and
    treatment of complaints received by the Company regarding
    accounting, internal accounting controls or auditing matters and
    the confidential and anonymous submission by employees of
    concerns regarding questionable accounting or auditing matters.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>22.</B>&nbsp;To review with counsel, the Auditors and
    management, as appropriate, any significant regulatory or other
    legal or accounting initiatives or matters that may have a
    material impact on the Company&#146;s financial statements,
    compliance programs and policies if, in the judgment of the
    Committee, such review is necessary or appropriate.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>23.</B>&nbsp;To review the results of management&#146;s
    efforts to monitor compliance with the Company&#146;s programs
    and policies designed to ensure adherence to applicable laws and
    rules, as well as to its Code of Conduct, including
    (i)&nbsp;review and approval of related-party transactions as
    required by Nasdaq rules and (ii)&nbsp;to the extent permitted
    by the rules of Nasdaq and the SEC, the consideration and
    determination of whether to approve proposed waivers of the Code
    of Conduct applicable to the Company&#146;s directors and
    executive officers.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>24.&nbsp;</B>To investigate any matter brought to the
    attention of the Committee within the scope of its duties if, in
    the judgment of the Committee, such investigation is necessary
    or appropriate.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>25.&nbsp;</B>On and after the Reporting Date, to prepare the
    report required by the rules of the Securities and Exchange
    Commission to be included in the Company&#146;s annual proxy
    statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>26.&nbsp;</B>To review and assess the adequacy of this
    charter annually and recommend any proposed changes to the Board
    for approval.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>27.&nbsp;</B>To report to the Board of Directors with respect
    to material issues that arise regarding the quality or integrity
    of the Company&#146;s financial statements, the Company&#146;s
    compliance with legal or regulatory requirements, the
    performance or independence of the Company&#146;s Auditors, the
    performance of the Company&#146;s internal audit function or
    such other matters as the Committee deems appropriate from time
    to time or whenever it shall be called upon to do so.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>28.&nbsp;</B>To perform such other functions and to have such
    powers as may be necessary or appropriate in the efficient and
    lawful discharge of the foregoing.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
It shall be the responsibility of management to prepare the
Company&#146;s financial statements and periodic reports and the
responsibility of the Auditors to audit those financial
statements. These functions shall not be the responsibility of
the Committee, nor shall it be the Committee&#146;s
responsibility to ensure that the financial statements or
periodic reports are complete and accurate, conform to GAAP or
otherwise comply with applicable laws.
</DIV>

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<DIV align="right" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Appendix&nbsp;B</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Blue Nile, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CHARTER OF THE COMPENSATION COMMITTEE</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Purpose and
Policy</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary purpose of the Compensation Committee (the
&#147;Committee&#148;) of the Board of Directors (the
&#147;Board&#148;) of Blue Nile, Inc. (the &#147;Company&#148;)
shall be to act on behalf of the Board in fulfilling the
Board&#146;s responsibilities to oversee the Company&#146;s
compensation policies, plans and programs, and to review and
determine the compensation to be paid to the Company&#146;s
executive officers and directors. The term
&#147;compensation&#148; shall include salary, long-term
incentives, bonuses, perquisites, equity incentives, severance
arrangements, retirement benefits and other related benefits and
benefit plans.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The policy of the Committee shall be as follows:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Compensation Structure.</I> The Committee shall seek to
    maintain an overall compensation structure designed to attract,
    retain and motivate management and other employees by providing
    appropriate levels of risk and reward, assessed on a relative
    basis at all levels within the Company and in proportion to
    individual contribution and performance;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Long-Term Focus.</I> The Committee shall seek to establish
    appropriate incentives for management and employees at all
    levels to further the Company&#146;s long-term strategic plan
    and long-term value as a going concern and to avoid undue
    emphasis on short-term market value.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Composition </FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee shall consist of at least two (2)&nbsp;members of
the Board. Each Committee member shall meet the
(i)&nbsp;independence requirements of the rules of the Nasdaq
National Market (&#147;Nasdaq&#148;); (ii)&nbsp;non-employee
director definition of
Rule&nbsp;<FONT style="white-space: nowrap">16b-3</FONT>
promulgated under Section&nbsp;16 of the Securities Exchange Act
of 1934, as amended (the &#147;Exchange Act&#148;);
(iii)&nbsp;outside director definition of 162(m) of the Internal
Revenue Code of 1986 (the &#147;Code&#148;); and (iv)&nbsp;any
other requirements imposed by applicable law. The members of the
Committee shall be appointed by and serve at the discretion of
the Board. Vacancies occurring on the Committee shall be filled
by the Board. The Committee&#146;s Chairperson shall be
designated by the Board or, if it does not do so, the Committee
members shall elect a Chairperson by vote of a majority of the
full Committee.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Operating Principles
and Processes</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fulfilling its functions and responsibilities, the Committee
should give due consideration to the following operating
principles and processes:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Communication</I>&nbsp;&#151; Regular and meaningful contact
    with the Chairman of the Board, other committee chairpersons,
    members of senior management and independent professional
    advisors to the Board and its various committees, as applicable,
    shall be encouraged as a means of strengthening the
    Committee&#146;s knowledge of relevant current and prospective
    issues with compensation policies, plans and programs.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Committee Education/ Orientation</I>&nbsp;&#151; Developing
    with management and participating in a process for systematic
    review of important compensation issues and trends that could
    potentially impact the Company shall be encouraged to enhance
    the effectiveness of the Committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Information Needs</I>&nbsp;&#151; The Committee members shall
    communicate to the Chief Executive Officer or his or her
    designees the Committee&#146;s expectations, and the nature,
    timing, and extent of any specific information or other
    supporting materials requested by the Committee for its meetings
    and deliberations.</TD>
</TR>

</TABLE>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Meeting Agendas</I>&nbsp;&#151; Committee meeting agendas
    shall be the responsibility of the Committee chairperson with
    input from the Committee members and other members of the Board
    as well as, to the extent deemed appropriate by the chairperson,
    from members of senior management and outside advisors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Meetings</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee will hold at least two (2)&nbsp;regular meetings
per year and additional meetings as the Committee deems
appropriate. Meetings may be called by the Chairperson of the
Committee or the Chairman of the Board. Notwithstanding anything
to the contrary set forth herein, the Chief Executive Officer
may not be present for any portion of any meeting of the
Committee at which the compensation of the Chief Executive
Officer is deliberated or voted upon.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Minutes and
Reports</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Minutes of each meeting will be kept and distributed to each
member of the Committee, members of the Board who are not
members of the Committee and the Secretary of the Company. The
Chairperson of the Committee will report to the Board from time
to time, or whenever so requested by the Board. In addition, the
Chairperson of the Committee or his or her delegate shall be
available to answer any questions the other directors may have
regarding the matters considered and actions taken by the
Committee.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Authority</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee shall have full access to all books, records,
facilities and personnel of the Company as deemed necessary or
appropriate by any member of the Committee to discharge his or
her responsibilities hereunder. The Committee shall have the
authority to obtain, at the expense of the Company, advice and
assistance from internal or external legal, accounting or other
advisors and consultants as it deems necessary or appropriate in
the performance of its duties. The Company shall make available
to the committee all funding necessary for the Committee to
carry out its duties, including, without limitation, the payment
of such expenses. Except as limited by applicable laws, rules
and regulations, the Committee shall have authority to require
that any of the Company&#146;s personnel, counsel, auditors or
investment bankers, or any other consultant or advisor to the
Company attend any meeting of the Committee or meet with any
member of the Committee or any of its special legal, accounting
or other advisors and consultants. In addition, the Committee
shall have sole authority to retain and terminate any
compensation consultant to assist in the evaluation of director,
chief executive officer or senior executive compensation,
including sole authority to approve such consultant&#146;s
reasonable fees and other retention terms, all at the
Company&#146;s expense.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee may form and delegate authority to subcommittees
as appropriate, including, but not limited to, a subcommittee
composed of one or more members of the Board to grant stock
awards under the Company&#146;s equity incentive plans to
persons who are not (a)&nbsp;&#147;Covered Employees&#148; under
Section&nbsp;162(m) of the Code from time to time;
(b)&nbsp;individuals with respect to whom the Company wishes to
comply with Section&nbsp;162(m) of the Code or (c)&nbsp;then
subject to Section&nbsp;16 of the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Responsibilities</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The operation of the Committee will be subject to the provisions
of the Bylaws of the Company and Delaware General Corporation
Law, each as in effect from time to time. The Committee shall
oversee the Company&#146;s compensation strategy and policies as
set forth below. The Committee&#146;s functions and procedures
should remain flexible to address changing circumstances most
effectively. To implement the Committee&#146;s purpose and
policy, the Committee shall, to the extent the Committee deems
necessary or appropriate, be charged with the following
functions and processes with the understanding, however, that
</DIV>

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<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
the Committee may supplement or (except as otherwise required by
applicable laws or rules) deviate from these activities as
appropriate under the circumstances:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>1.&nbsp;</B><I>Overall Compensation Strategy.</I> The
    Committee shall review, modify (as needed) and approve the
    overall compensation strategy and policies for the Company,
    including:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and approving corporate performance goals and
    objectives relevant to the compensation of the Company&#146;s
    executive officers and other senior management;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    evaluating and recommending to the Board the compensation plans
    and programs advisable for the Company, as well as modification
    or termination of existing plans and programs;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establishing policies with respect to equity compensation
    arrangements with the objective of appropriately balancing the
    perceived value of equity compensation and the dilutive and
    other costs of that compensation to the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing regional and industry-wide compensation practices and
    trends to assess the propriety, adequacy and competitiveness of
    the Company&#146;s executive compensation programs among
    comparable companies in the Company&#146;s industry; however,
    the Committee shall exercise independent judgment in determining
    appropriate levels and type of compensation to be paid;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and approving the terms of any employment agreements,
    severance arrangements,
    <FONT style="white-space: nowrap">change-of</FONT>-control
    protections and any other compensatory arrangements for the
    Company&#146;s executive officers and other senior management;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviewing and approving any compensation arrangement for any
    executive officer involving any subsidiary, special purpose or
    similar entity, taking into account the potential for conflicts
    of interest in such arrangements and whether the arrangement has
    the potential to benefit the Company;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    evaluating the efficacy of the Company&#146;s compensation
    policy and strategy in achieving expected benefits to the
    Company and otherwise furthering the Committee&#146;s policies.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>2.&nbsp;</B><I>Compensation of Chief Executive Officer.</I>
    The Committee, meeting in executive session, shall determine, in
    its sole discretion, the compensation and other terms of
    employment of the Company&#146;s Chief Executive Officer and
    shall evaluate the Chief Executive Officer&#146;s performance in
    light of relevant corporate performance goals and objectives,
    taking into account, among other things, the policies of the
    Committee and the Chief Executive Officer&#146;s performance in:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    fostering a corporate culture that promotes the highest levels
    of integrity and the highest ethical standards;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developing and executing the Company&#146;s long-term strategic
    plan and conducting the business of the Company in a manner
    appropriate to enhance long-term stockholder value;</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    achieving the Chief Executive Officer&#146;s individual
    performance goals and objectives;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the achievement of any other corporate performance goals and
    objectives deemed relevant to the Chief Executive Officer as
    established by the Compensation Committee.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    In determining the long-term incentive component of the Chief
    Executive Officer&#146;s compensation, the Committee shall seek
    to achieve an appropriate level of risk and reward, taking into
    consideration the Company&#146;s performance and relative
    stockholder return, the potential benefits and costs to the
    Company, the value of similar incentives given to chief
    executive officers of comparable companies, incentives provided
    to the Chief Executive Officer in past years, and such other
    criteria as the Committee deems advisable. Notwithstanding
    anything to the contrary set forth herein, the Chief Executive
    Officer may not be present for any portion of any meeting of the
    Committee at which the compensation of the Chief Executive
    Officer is deliberated or voted upon.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>3.&nbsp;</B><I>Compensation of Other Officers.</I> The
    Committee shall review and approve the individual and corporate
    performance goals and objectives of the Company&#146;s other
    executive officers (as that term is defined in Section&nbsp;16
    of the Exchange Act and
    Rule&nbsp;<FONT style="white-space: nowrap">16a-1</FONT>
    thereunder) that are periodically established. The Committee
    shall determine the compensation and other terms of employment
    of these officers, taking into consideration the officer&#146;s
    success in achieving his or her individual performance goals and
    objectives and the corporate performance goals and objectives
    deemed relevant to the officer as established by the Committee.
    The Chief Executive Officer may be present during these
    deliberations, but may not vote.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>4.&nbsp;</B><I>Compensation of Directors.</I> The Committee
    shall recommend to the Board the type and amount of compensation
    to be paid or awarded to Board members, including consulting,
    retainer, Board meeting, committee and committee chair fees and
    stock option grants or awards.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>5.&nbsp;</B><I>Administration of Benefit Plans.</I> The
    Committee shall recommend to the Board the adoption, amendment
    and termination of the Company&#146;s stock option plans, stock
    appreciation rights plans, pension and profit sharing plans,
    incentive plans, stock bonus plans, stock purchase plans, bonus
    plans, deferred compensation plans and similar programs. The
    Committee shall have full power and authority to administer and
    delegate the administration of these plans to the extent
    permissible pursuant to applicable laws and regulations,
    establish guidelines, interpret plan documents, select
    participants, approve grants and awards, and exercise such other
    power and authority as may be permitted or required under such
    plans.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>6.&nbsp;</B><I>Insurance Coverage.</I> The Committee shall
    review and establish appropriate insurance coverage for the
    Company&#146;s directors and executive officers.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>7.&nbsp;</B><I>Proxy Statement Report.</I> At such time as
    the Company becomes subject to the reporting requirements of
    Section&nbsp;13(a) or 15(d) of the Exchange Act (the
    &#147;Reporting Date&#148;), the Committee shall prepare any
    report required by the applicable SEC rules and regulations to
    be included in the Company&#146;s annual proxy statement.</TD>
</TR>

</TABLE>

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<DIV align="right" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>Appendix&nbsp;C</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>BLUE NILE, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CHARTER OF THE</B>
</DIV>

<DIV align="center" style="font-size: 10.0pt;color: #000000; background: #ffffff;">
<B>NOMINATING AND CORPORATE GOVERNANCE COMMITTEE</B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Purpose and
Policy</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The primary purpose of the Nominating and Corporate Governance
Committee (the &#147;Committee&#148;) of the Board of Directors
(the &#147;Board&#148;) of Blue Nile, Inc. (the
&#147;Company&#148;) shall be to act on behalf of the Board in
fulfilling the Board&#146;s responsibilities to:
(i)&nbsp;identify, review and evaluate candidates to serve as
directors of the Company; (ii)&nbsp;evaluate the composition,
performance and other aspects of the Company&#146;s Board
committees; (iii)&nbsp;make other recommendations to the Board
regarding affairs relating to the directors of the Company;
(iv)&nbsp;develop and review from time to time a plan of
succession for key management; and (v)&nbsp;administer and
oversee all aspects of the Company&#146;s corporate governance
functions on behalf of the Board.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The policy of the Committee, in discharging these obligations,
shall be to select well-qualified director nominees, and develop
and review a set of corporate governance principles that enhance
the overall management of the Company and provide a basis for
governance that serves the best interests of the Company&#146;s
stockholders in building long-term value.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Composition</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee shall consist of at least two (2)&nbsp;members of
the Board. No Committee member shall be an employee of the
Company and each member shall be free from any relationship that
would interfere with the exercise of his or her independent
judgment, as determined by the Board, in accordance with the
applicable independence requirements of The Nasdaq Stock Market
(&#147;Nasdaq&#148;) and the rules and regulations of the
Securities and Exchange Commission (&#147;SEC&#148;), including
any exceptions permitted by such requirements.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The members of the Committee shall be appointed by and serve at
the discretion of the Board. Vacancies occurring on the
Committee shall be filled by the Board. The Committee&#146;s
Chairperson shall be designated by the Board or, if it does not
do so, the Committee members shall elect a Chairperson by vote
of a majority of the full Committee.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Operating Principles
and Processes</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In fulfilling its functions and responsibilities, the Committee
should give due consideration to the following operating
principles and processes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Communication </I>&nbsp;&#151; Regular and meaningful contact
    with the Chairman of the Board, other committee chairpersons,
    members of senior management and independent professional
    advisors to the Board and its various committees, as applicable,
    is important and shall be encouraged as a means of strengthening
    the Committee&#146;s knowledge of relevant current and
    prospective corporate governance issues.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Committee Education/ Orientation </I>&nbsp;&#151; Developing
    with management and participating in a process for systematic
    review of important corporate governance issues and trends in
    corporate governance practices that could potentially impact the
    Company shall be encouraged to enhance the effectiveness of the
    Committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Information Needs </I>&nbsp;&#151; The Committee members
    shall communicate to the Chief Executive Officer or his or her
    designees the Committee&#146;s expectations, and the nature,
    timing, and extent of any specific information or other
    supporting materials requested by the Committee for its meetings
    and deliberations.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Meeting Agendas</I>&nbsp;&#151; Committee meeting agendas
    shall be the responsibility of the Committee chairperson with
    input from the Committee members and other members of the Board
    as well as, to the extent deemed appropriate by the chairperson,
    from members of senior management and outside advisors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Meetings</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee will hold at least one (1)&nbsp;regular meeting
per year and additional meetings as the Committee deems
appropriate. Meetings may be called by the Chairperson of the
Committee or the Chairman of the Board.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Minutes and
Reports</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Minutes of each meeting will be kept and distributed to each
member of the Committee, members of the Board who are not
members of the Committee and the Secretary of the Company. The
Chairperson of the Committee will report to the Board from time
to time, or whenever so requested by the Board. In addition, the
Chairperson of the Committee or his or her delegate shall be
available to answer any questions the other directors may have
regarding the matters considered and actions taken by the
Committee.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Authority </FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Committee shall have full access to all books, records,
facilities and personnel of the Company as deemed necessary or
appropriate by any member of the Committee to discharge his or
her responsibilities hereunder. The Committee shall have
authority to retain, at the Company&#146;s expense, advice and
assistance from internal and external legal, accounting or other
advisors or consultants as it deems necessary or appropriate in
the performance of its duties. The Company shall make available
to the Committee all funding necessary for the Committee to
carry out its duties, including, without limitation, the payment
of such expenses. The Committee shall have authority to require
that any of the Company&#146;s personnel, counsel, Auditors or
investment bankers, or any other consultant or advisor to the
Company attend any meeting of the Committee or meet with any
member of the Committee or any of its special legal, accounting
or other advisors and consultants. The Committee may form and
delegate authority to subcommittees as appropriate.
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><FONT style="font-variant:SMALL-CAPS">Responsibilities</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10.0pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The operation of the Committee will be subject to the provisions
of the Bylaws of the Company and Delaware General Corporation
Law, each as in effect from time to time. The Committee shall
oversee the Company&#146;s nomination and corporate governance
matters as established below and shall report the results of its
activity to the Board. The Committee&#146;s functions and
procedures should remain flexible to address changing
circumstances most effectively. To implement the
Committee&#146;s purpose and policy, the Committee shall, to the
extent the Committee deems necessary or appropriate, be charged
with the following functions and processes with the
understanding, however, that the Committee may supplement or
(except as otherwise required by applicable laws or rules)
deviate from these activities as appropriate under the
circumstances:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>1.</B>&nbsp;Establish criteria for membership on the Board
    and on committees of the Board, including standards for the
    independence of directors to serve on the Board and committees
    of the Board.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>2.</B>&nbsp;Identify, evaluate, review and recommend
    qualified candidates to serve on the Board and on committees of
    the Board.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>3.</B>&nbsp;Evaluate, review and determine whether to
    recommend, upon conclusion of their terms, existing directors
    for re-election to the Board.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10.0pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>4.</B>&nbsp;Consider recommendations for Board nominees and
    proposals submitted by the Company&#146;s stockholders.
    Recommend to the Board appropriate action on any such proposal
    or recommendation and make any disclosures required by
    applicable law in the course of exercising its authority.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>5.</B>&nbsp;Establish any policies, requirements, criteria
    and procedures, including policies and procedures to facilitate
    stockholder communications with the Board.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>6.&nbsp;</B>Evaluate the performance, authority, operations,
    charter and composition of each standing Board committee and the
    performance of each committee member and recommend any changes
    considered appropriate in the authority, operations, charter,
    number or membership of each committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>7.&nbsp;</B>Develop and periodically review and revise as
    appropriate, a management succession plan and related procedures
    and consider and recommend to the Board candidates for successor
    to the Chief Executive Officer of the Company and, with
    appropriate consideration of the Chief Executive Officer&#146;s
    recommendations, candidates for successors to other executive
    officers, in each case when vacancies shall occur in those
    offices.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>8.&nbsp;</B>Establish a process for the periodic review and
    assessment of the performance of the Board and Board committees
    and management, seeking input from senior management, the full
    Board and others, including whether, individually and
    collectively, the directors and management provide the skills
    and expertise appropriate for the Company.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>9.&nbsp;</B>Consider and assess periodically the independence
    of directors, including whether a majority of the Board are
    independent of management within the meaning prescribed by
    Nasdaq and whether the members of the standing committees of the
    Board meet the independence requirements of Nasdaq applicable to
    such committees.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>10.&nbsp;</B>Evaluate the need and, if necessary, develop and
    institute a plan or program for the continuing education of
    directors.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>11.&nbsp;</B>Develop a set of corporate governance principles
    applicable to the Company to be adopted by the Board, and
    periodically review and assess these principles and their
    application and recommend any changes deemed appropriate to the
    Board for its consideration.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>12.&nbsp;</B>Review and make recommendations to the Board
    regarding proposals submitted by shareholders that relate to
    corporate governance matters.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>13.&nbsp;</B>Oversee and review the processes and procedures
    used by the Company to provide accurate, relevant and
    appropriately detailed information to the Board and its
    committees on a timely basis.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>14.&nbsp;</B>Periodically review, discuss and assess the
    performance of the Committee as well as the Committee&#146;s
    role and responsibilities, seeking input from senior management,
    the full Board and others and recommend any changes to the Board.</TD>
</TR>

<TR>
    <TD style="font-size: 6.0pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <B>15.&nbsp;</B>Oversee the Company&#146;s policies and
    practices regarding philanthropic and political activities and
    undertake such additional activities within the scope of its
    primary functions as the Committee may from time to time
    determine.</TD>
</TR>

</TABLE>

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<DIV style="font-family: Helvetica,Arial,sans-serif">



<P><DIV style="position: relative; float: left; width: 5%">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>&nbsp;<BR>
<IMG src="v16811dev1681103.gif" alt="(BLACK BOX)">

</DIV>
</DIV>
<DIV style="position: relative; float: left; margin-left: 2%; width: 86%">
<DIV align="left" style="font-size: 14pt; margin-top: 12pt"><B>PROXY</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF</B>
</DIV>

<DIV align="center" style="font-size: 14pt"><B>BLUE NILE, INC.</B></DIV>



<DIV align="left" style="font-size: 11pt; margin-top: 6pt"><DIV style="text-align: justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned
hereby appoints Mark Vadon and Diane Irvine, and each of them, with
power to act without the other and with power of substitution, as proxies and attorneys-in-fact and
hereby authorizes them to represent and vote, as provided on the other side, all the shares of Blue
Nile, Inc. Common Stock which the undersigned is entitled to vote, and, in their discretion, to
vote upon such other business as may properly come before the Annual Meeting of Stockholders of the
company to be held May&nbsp;23, 2006 or at any adjournment or postponement thereof, with all powers
which the undersigned would possess if present at the Meeting.</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>(Continued and to be marked, dated and signed, on the other side)</B>
</DIV>

<P>
<DIV style="width: 100%; border: 1px solid black; padding: 1px;">

<DIV align="center" style="font-size: 10pt"><B>Address Change/Comments <FONT style="font-size:6pt">(Mark the corresponding box on the reverse side)</FONT></B></DIV>


<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;<BR>
&nbsp;
</DIV>
</DIV>

</DIV>
<DIV style="position: relative; float: right; width: 5%">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;
</DIV>

</DIV>
<BR clear="all"><BR>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><DIV style="border-bottom: 1px dashed #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 8pt"><FONT face="Webdings">&#053;</FONT> <B>Detach here from proxy voting card. </B><FONT face="Webdings">&#053;</FONT></DIV>


<DIV align="center" style="font-size: 18pt; margin-top: 6pt"><B><I>You can now access your Blue Nile, Inc. account online.</I></B>
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt">Access your Blue Nile, Inc. stockholder account online via Investor ServiceDirect <SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> (ISD).
</DIV>

<DIV align="left" style="font-size: 11pt; margin-top: 6pt">Mellon Investor Services LLC, Transfer Agent for Blue Nile, Inc., now makes it easy and convenient
to get current information on your shareholder account.
</DIV>

<DIV align="center">
<TABLE style="font-size: 11pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B> View account status
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B> View payment history for dividends</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B> View certificate history
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B> Make address changes</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B> View book-entry information
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B> Obtain a duplicate 1099 tax form</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>&#149;</B> Establish/change your PIN</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B><I>Visit us on the web at <U>http://www.melloninvestor.com</U></I></B></DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B><I>For Technical Assistance Call 1-877-978-7778 between 9am-7pm<BR>
Monday-Friday Eastern Time</I></B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 6pt"><B><I>Investor ServiceDirect<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> is a registered trademark of Mellon Investor Services LLC</I></B>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: Helvetica,Arial,sans-serif">
<DIV align="center">
<TABLE style="font-size: 6pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="90%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B><FONT style="font-size:8pt"><FONT style="white-space: nowrap">THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED &#147;FOR&#148; THE PROPOSALS</FONT></FONT></B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">Mark Here</FONT><br>
<FONT style="white-space: nowrap">for Address</FONT><br>
<FONT style="white-space: nowrap">Change or</FONT><br>
Comments
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings" style="font-size: 24pt">&#111;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B><FONT style="white-space: nowrap">PLEASE SEE REVERSE SIDE</FONT></B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 7pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">WITHHELD</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">FOR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">FOR ALL</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">FOR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">AGAINST</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">ABSTAIN</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="white-space: nowrap">ITEM 1.</FONT>
&nbsp;<br><br>
Nominees:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ELECTION OF<br>
DIRECTORS<br>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 24pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 24pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">ITEM 2.</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">APPOINTMENT<br>
OF INDEPENDENT<br>
ACCOUNTANTS
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 24pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 24pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 24pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">01 Mary Alice Taylor</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="7" valign="top" align="left">02 Anne Saunders</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P><DIV style="position: relative; float: left; width: 48%">
<DIV align="left" style="font-size: 7pt; margin-top: 6pt">Withheld for the nominees you list below: (Write that<br>
nominee&#146;s name in the space provided below.)
</DIV>

<DIV align="left"><DIV style="font-size: 3pt; margin-top: 16pt; width: 60%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>
<DIV style="position: relative; float: right; width: 48%">
<DIV align="left" style="font-size: 8pt; margin-top: 6pt"><DIV style="text-align: justify">Choose <B>MLink<SUP style="font-size: 85%; vertical-align: text-top">SM</SUP> </B>for fast, easy and secure
24/7 online access to your future proxy materials,
investment plan statements, tax documents and more.
Simply log on to <B>Investor ServiceDirect</B><SUP style="font-size: 85%; vertical-align: text-top"><B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></B></SUP> at
www.melloninvestor.com/isd where step-by-step
instructions will prompt you through enrollment.</DIV>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="89%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="1" align="left" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
</DIV>
<BR clear="all"><BR>
<DIV align="center">
<TABLE style="font-size: 9pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Signature</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Signature</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Date</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 6pt"><B>NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title as such.</B></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><DIV style="border-bottom: 1px dashed #000000; font-size: 1px">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 8pt"><FONT face="Webdings">&#053;</FONT> <B>Detach here from proxy voting card </B><FONT face="Webdings">&#053;</FONT></DIV>


<DIV align="center" style="font-size: 14pt; margin-top: 6pt"><B>Vote by Internet or Telephone or Mail</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 6pt"><B>24 Hours a Day, 7 Days a Week</B>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt"><B>Internet and telephone voting is available through 11:59 PM EST<br>
the day prior to annual meeting day.</B>
</DIV>

<DIV align="center" style="font-size: 11pt; margin-top: 6pt"><B>Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner<br>
as if you marked, signed and returned your proxy card.</B>
</DIV>

<P><DIV style="position: relative; float: left; width: 27%">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 1px;">

<DIV align="center" style="font-size: 12pt"><B>Internet<br>
http://www.proxyvoting.com/nile</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="white-space: nowrap">Use the Internet to vote your proxy.</FONT><br>
<FONT style="white-space: nowrap">Have your proxy card in hand when</FONT><br>
<FONT style="white-space: nowrap">you access the web site.</FONT>
&nbsp;<br>
&nbsp;<br>
&nbsp;
</DIV>
</DIV>

</DIV>
<DIV style="position: relative; float: left; margin-left: 2%; width: 3%">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
<B>OR</B>
</DIV>

</DIV>
<DIV style="position: relative; float: left; margin-left: 2%; width: 27%">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 1px;">

<DIV align="center" style="font-size: 12pt"><B>Telephone<br>
1-866-540-5760</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Use any touch-tone telephone to
vote your proxy. Have your proxy card
in hand when you call.
&nbsp;<br>
&nbsp;<br>
&nbsp;
</DIV>
</DIV>

</DIV>
<DIV style="position: relative; float: left; margin-left: 2%; width: 2%">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;<BR>
&nbsp;<BR>
&nbsp;<BR>
<B>OR</B>
</DIV>

</DIV>
<DIV style="position: relative; float: right; width: 27%">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 3px;">

<DIV align="center" style="font-size: 12pt"><B>Mail</B></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Mark, sign and date<br>
your proxy card<br>
and<br>
return it in the <br>
enclosed postage-paid<br>
envelope.<br>
</DIV>

</DIV>

</DIV>
<BR clear="all"><BR>

<DIV align="center" style="font-size: 12pt; margin-top: 6pt"><B>If you vote your proxy by Internet or by telephone, <BR>you do
NOT need to mail back your proxy card.</B>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>You can view the Annual Report and Proxy Statement<br>
on the internet at: http://www.bluenile.com</B>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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