<SUBMISSION>
<ACCESSION-NUMBER>0000950123-04-000709
<TYPE>PREM14A
<PUBLIC-DOCUMENT-COUNT>2
<PERIOD>20040123
<FILING-DATE>20040126
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>BARNESANDNOBLE COM INC
<CIK>0001069665
<ASSIGNED-SIC>5735
<IRS-NUMBER>134048787
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>0131
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>PREM14A
<ACT>34
<FILE-NUMBER>000-26063
<FILM-NUMBER>04542214
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>76 NINTH AVE
<STREET2>11TH FL
<CITY>NEW YORK
<STATE>NY
<ZIP>10011
<PHONE>2124146000
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>76 NINTH AVE
<STREET2>11TH FL
<CITY>NEW YORK
<STATE>NY
<ZIP>10011
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>PREM14A
<SEQUENCE>1
<FILENAME>y93480pmprem14a.htm
<DESCRIPTION>BARNESANDNOBLE.COM INC.
<TEXT>
<HTML>
<HEAD>
<TITLE>BARNESANDNOBLE.COM INC.</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="center"><FONT size="4"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B></FONT>

<DIV align="center"><FONT size="3"><B>WASHINGTON, D.C. 20549</B>
</FONT></DIV>

<P align="center"><FONT size="5"><B>SCHEDULE 14A INFORMATION</B></FONT>


<P align="center"><FONT size="2">(RULE 14a-101)<BR>
SCHEDULE 14A INFORMATION<BR>
Proxy Statement Pursuant to Section&nbsp;14(a) of the Securities<BR>
Exchange Act of 1934
</FONT>


<P align="left"><FONT size="2">Filed by the Registrant <FONT face="Wingdings">&#120;</FONT><BR>
Filed by a Party other than the Registrant <FONT face="Wingdings">&#111;</FONT><BR>
Check the appropriate box:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#120;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">Preliminary Proxy Statement
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#111;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2"><B>Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-</B><B>6(e)(2)</B><B>)</B>
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#111;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">Definitive Proxy Statement
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#111;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">Definitive Additional Materials
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#111;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">Soliciting Material Pursuant to &#167;240.14a-11(c) of &#167;240.14a-12
</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="6"><B>barnesandnoble.com inc.</B></FONT><BR>
<HR size="1" noshade>

<DIV align="center"><FONT size="2">(Name of Registrant as Specified in Its Charter)
</FONT>
</DIV>

 <P>
<P align="center"><HR size="1" noshade>

<DIV align="center"><FONT size="2">(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
</FONT>
</DIV>


<P align="left"><FONT size="2">Payment of Filing Fee (Check the appropriate box):
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#111;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">No fee required.
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#120;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.
</FONT></TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(1)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Title of each class of securities to which transaction applies:
</FONT></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:50px; text-indent:-10px"><FONT size="2">Class&nbsp;A Common Stock, par value $0.001 per share
</FONT></DIV></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(2)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Aggregate number of securities to which transaction applies:
</FONT></TD>
</TR>
<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>

<TD><DIV style="margin-left:50px; text-indent:-10px"><FONT size="2">44,141,587 shares of common stock and stock options to
purchase 8,501,221 shares of common stock
</FONT></DIV></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(3)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">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):
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">The transaction value was based upon the sum of (a)&nbsp;the
product of 44,141,587 common shares and the merger
consideration of $3.05 per share and (b)&nbsp;the difference
between (i)&nbsp;the product of the merger consideration of $3.05
per share and the 8,501,221 common shares subject to
outstanding stock options of which the exercise price per
share is less than the per share merger consideration and (ii)
the product of the weighted average exercise price per share
of such stock options and such 8,501,221 common shares. In accordance with Section 14(g) of the Securities Exchange Act
of 1934, as amended, the amount of the filing fee was
determined by multiplying $0.00008090 by the amount calculated
in the preceding sentence.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>

</table>

<P align="center"><FONT size="2">&nbsp;
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(4)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Proposed maximum aggregate value of transaction:
</FONT></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:50px; text-indent:-10px"><FONT size="2">$149,849,026
</FONT></DIV></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(5)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Total fee paid:
</FONT></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:50px; text-indent:-10px"><FONT size="2">$12,122.79
</FONT></DIV></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#111;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">Fee paid previously with preliminary materials.
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="left"><FONT size="2"><FONT face="Wingdings">&#111;</FONT></FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">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.
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(1)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Amount Previously Paid:
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(2)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Form, Schedule or Registration Statement No.:
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(3)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Filing Party:
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>

<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2">(4)</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Date Filed:
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" nowrap align="left"><FONT size="2"></FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">&nbsp;
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><IMG src="y93480pmy9348001.gif" alt="(BARNESANDNOBLE.COM LOGO)"><BR>
<BR>
<B>barnesandnoble.com inc.<BR>
76 Ninth Avenue<BR>
New York, New York 10011<BR>
(212)&nbsp;414-6000</B>
</FONT>


<P align="center"><HR align="center" size="1" noshade width="25%">


<P align="center"><FONT size="2"><B>A MERGER PROPOSAL &#151; YOUR VOTE IS VERY IMPORTANT</B>
</FONT>


<P align="center"><HR align="center" size="1" noshade width="25%">


<P align="right"><FONT size="2"><B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004
</FONT>


<P align="left"><FONT size="2">Dear Stockholder:
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are cordially invited to attend the special meeting of our
stockholders to be held on
<B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>,
2004, at 10:00&nbsp;a.m., local time, at
<B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the special meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of
January&nbsp;8, 2004, among Barnes &#038; Noble, Inc., B&#038;N.com Holding Corp., B&#038;N.com
Acquisition Corp. and barnesandnoble.com inc., providing for the acquisition of
barnesandnoble.com inc. by Barnes &#038; Noble, Inc. If our stockholders adopt the merger
agreement, B&#038;N.com Acquisition Corp. will merge with and into
barnesandnoble.com inc. and each issued and outstanding share of our Class&nbsp;A
common stock (other than shares held by Barnes &#038; Noble, Inc., B&#038;N.com Holding
Corp. and their respective subsidiaries and any shares with respect to which
appraisal rights have been properly perfected under Delaware law) will be
converted into the right to receive $3.05 in cash, without interest
and less any applicable withholding taxes. As a
result of the merger, we will cease to be a publicly traded company and will
become an indirect wholly owned subsidiary of Barnes &#038; Noble, Inc.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
attached proxy statement provides you with detailed information
about the proposed merger and the special meeting. Please give this material
your careful and prompt attention. You also may obtain more information about
us from documents that we have filed with the Securities and Exchange
Commission.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors, upon the recommendation of a special committee
consisting of two independent directors and by unanimous vote and after careful
consideration, (i)&nbsp;has approved the merger agreement and the transactions
contemplated thereby, including the merger and (ii)&nbsp;has determined that the
terms of the merger agreement and the transactions contemplated thereby,
including the merger, are advisable, fair to and in the best interests of
barnesandnoble.com inc. and our stockholders (other than Barnes &#038; Noble, Inc. and
its affiliates). <B>Accordingly, our board of directors unanimously recommends
that our stockholders vote &#147;FOR&#148; the approval and adoption of the merger
agreement and merger.</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The affirmative vote of a majority of the voting power of our outstanding
common stock entitled to vote at the special meeting is required to adopt the
merger agreement and approve the merger. As of December&nbsp;31, 2003, Barnes &#038;
Noble, Inc. controlled approximately 96.3% of our voting power and has
committed to vote in favor of the merger agreement and the merger. The
affirmative vote of the shares controlled by Barnes &#038; Noble, Inc. is sufficient
under Delaware law to adopt the merger agreement and approve the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is important your shares be represented at the special meeting, whether
or not you plan to attend the special meeting. Therefore, please complete,
sign, date and promptly mail your enclosed proxy card or voting instruction
form in the postage-paid envelope. Should you prefer, you may vote by
telephone or via the Internet by following the instructions on the proxy card
or voting instruction form.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Thank you for your cooperation.
</FONT>



<P align="center"><FONT size="2">&nbsp;
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="50%"><FONT size="2">Sincerely,
</FONT>
</TD>
</TR>
</TABLE>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="50%"><FONT size="2">Marie J. Toulantis<BR>
Chief Executive Officer
</FONT>
</TD>
</TR>
</TABLE>



<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved the merger, passed upon the fairness or
merits of the merger, or passed upon the accuracy or adequacy of the disclosure
in this proxy statement. Any representation to the contrary is a criminal
offense.</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This proxy statement is dated <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004 and is first being mailed to our
stockholders beginning on or about <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004.
</FONT>



<P align="center"><FONT size="2">&nbsp;
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><IMG src="y93480pmy9348001.gif" alt="(BARNESANDNOBLE.COM LOGO)">
</FONT>


<P align="center"><FONT size="2"><B>barnesandnoble.com inc.<BR>
76 Ninth Avenue<BR>
New York, New York 10011<BR>
(212)&nbsp;414-6000</B>
</FONT>


<P align="center"><HR align="center" size="1" noshade width="25%">


<P align="center"><FONT size="2"><B>NOTICE OF SPECIAL MEETING OF STOCKHOLDERS</B>
</FONT>


<P align="center"><FONT size="2"><B>TO BE HELD ON &#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;, 2004</B>
</FONT>


<P align="center"><HR align="center" size="1" noshade width="25%">


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
barnesandnoble.com inc., a Delaware corporation, will be held on <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>,
2004, at 10:00&nbsp;a.m. local time, at <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, for the following purposes:
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of January&nbsp;8, 2004, among Barnes &#038;
Noble, Inc., B&#038;N.com Holding Corp., B&#038;N.com Acquisition Corp. and
barnesandnoble.com inc., pursuant to which Barnes &#038; Noble, Inc. will acquire us for
$3.05 in cash, without interest and less any applicable withholding
taxes, per share of our outstanding common stock (other than shares held
by Barnes &#038; Noble, Inc., B&#038;N.com Holding Corp. and their respective
subsidiaries and any shares with respect to which appraisal rights have been
properly perfected under Delaware law), through the merger of its wholly owned
subsidiary, B&#038;N.com Acquisition Corp., with and into barnesandnoble.com inc.
The merger agreement and merger are described in the attached proxy
statement, which you are encouraged to read carefully. A copy of the merger
agreement is included as Annex A to the attached proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;To transact such other matters as may properly come before the special
meeting or any adjournment or postponement of the special meeting and any
matters incidental thereto.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only our stockholders of record at the close of business on <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>,
2004 are entitled to notice of, and to vote at, the special meeting and any
adjournment or postponement thereof. Adoption of the merger agreement requires
the affirmative vote of a majority of the voting power of our outstanding
common stock entitled to vote at the special meeting. As of December&nbsp;31, 2003,
Barnes &#038; Noble, Inc. controlled approximately 96.3% of our voting power and has
committed to vote in favor of the merger agreement and the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you do not vote in favor of the merger agreement and the merger, and
you otherwise comply with the applicable statutory provisions of Delaware law,
you will be entitled to appraisal rights for your shares if the merger is
completed. By properly exercising such appraisal rights, you will be entitled
to receive, in lieu of the $3.05 per share merger consideration, payment in
cash equal to the &#147;fair value&#148; of your shares, as determined in accordance with
Delaware law. A copy of these provisions is included as Annex B to the
attached proxy statement. We also refer you to the information included in the
section of the attached proxy statement entitled &#147;THE MERGER&#151;Appraisal Rights.&#148;
</FONT>


<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="50%"><FONT size="2">Sincerely,
</FONT>
</TD>
</TR>
</TABLE>



<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="50%"><FONT size="2">Marie J. Toulantis<BR>
Chief Executive Officer
</FONT>
</TD>
</TR>
</TABLE>



<P align="left"><FONT size="2">New York, New York<BR>
<B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004
</FONT>



<P align="center"><FONT size="2">&nbsp;
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Whether or not you plan to attend the special meeting, please complete,
sign, date and promptly mail your enclosed proxy card or voting instruction
form in the postage-paid envelope provided. Should you prefer, you may vote by
telephone or via the Internet by following the instructions on your proxy card
or voting instruction form. Remember, if you do not return your proxy card or
vote by telephone or via the Internet or if you abstain from voting, it will
have the same effect as a vote against adoption of the merger
agreement and the merger. You
may revoke your proxy and vote in person if you decide to attend the special
meeting.</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you have certificates representing shares of our common stock, please
do not send your certificates to us at this time. If the merger is completed,
you will be sent instructions regarding the surrender of your certificates to
receive payment for your shares of our common stock. If you hold your shares
of our common stock in book-entry form &#151; that is, without a stock certificate &#151;
you do not need to do anything to receive payment for your shares of our common
stock. In such a case, following completion of the merger, the exchange agent
will automatically mail you the merger consideration in exchange for the
cancellation of your shares of our common stock.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No person has been authorized to give any information or to make any
representations other than those contained in this proxy statement in
connection with the solicitation of proxies made hereby, and, if given or made,
such information or representation must not be relied upon as having been
authorized by barnesandnoble.com inc. or any other person.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>If you have any questions or need assistance in voting your shares of our
common stock, please contact:</B>
</FONT>


<P align="center"><FONT size="2"><B>barnesandnoble.com inc.<BR>
76 Ninth Avenue<BR>
New York, New York 10011<BR>
Attn: Investor Relations, Kevin M. Frain<BR>
(212)&nbsp;414-6000</B>
</FONT>



<P align="center"><FONT size="2">&nbsp;
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>


<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">SUMMARY TERM SHEET</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">THE PARTIES TO THE MERGER</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">SPECIAL FACTORS</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Background of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Recommendation of the Special Committee and our Board of Directors</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Reasons for the Special Committee&#146;s Determination; Fairness of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Reasons for our Board of Directors&#146; Determination; Fairness of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#009">Opinion of the Special Committee&#146;s Financial Advisor</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Position of the Barnes &#038; Noble Parties as to the Fairness of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Purposes and Reasons for the Merger; Consideration of Alternatives; Structure of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Effects of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Plans for the Company</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Interests of Directors and Officers in the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Certain Relationships and Related Transactions</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">Provisions for Unaffiliated Stockholders</A></TD></TR>
<TR><TD colspan="9"><A HREF="#017">THE MERGER</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">Effective Time of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">Payment of Merger Consideration and Surrender of Stock Certificates</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">Risks That the Merger Will Not Be Completed</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">Merger Financing; Sources of Funds</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">Certain U.S. Federal Income Tax Consequences</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#023">Litigation Relating to the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#024">Regulatory Matters</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#025">Accounting Treatment</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#026">Estimated Fees and Expenses of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#027">Appraisal Rights</A></TD></TR>
<TR><TD colspan="9"><A HREF="#028">THE SPECIAL MEETING</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#029">Date, Time and Place of the Special Meeting</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#030">Matters to be Considered at the Special Meeting</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#031">Vote Required</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#032">Record Date, Voting Rights, Quorum and Revocability of Proxies</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#033">Expenses of Proxy Solicitation</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#034">Adjournments and Postponements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#035">Exchanging Stock Certificates</A></TD></TR>
<TR><TD colspan="9"><A HREF="#036">THE MERGER AGREEMENT</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#037">Effective Time of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#038">The Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#039">Merger Consideration</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#040">Stock Options</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#041">Surrender of Certificates and Payment Procedures</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#042">Representations and Warranties</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#043">Covenants</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#044">Conditions to Completing the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#045">Termination</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#046">Amendment and Waiver</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#047">Fees and Expenses</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#048">Governing Law</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#049">Assignment</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#050">Our Actions</A></TD></TR>
<TR><TD colspan="9"><A HREF="#051">SELECTED HISTORICAL FINANCIAL DATA</A></TD></TR>
<TR><TD colspan="9"><A HREF="#052">MARKET PRICE AND DIVIDENDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#053">PRINCIPAL STOCKHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#054">CERTAIN TRANSACTIONS INVOLVING OUR COMMON STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#055">OTHER MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#056">STOCKHOLDER PROPOSALS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#057">INDEPENDENT ACCOUNTANTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#058">WHERE YOU CAN FIND MORE INFORMATION</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#059">ANNEX A</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#060">ANNEX B</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#061">ANNEX C</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#062">ANNEX D</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#063">PROXY CARD</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="center"><FONT size="2"><B>TABLE OF CONTENTS</B>
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="91%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SUMMARY TERM SHEET</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">THE PARTIES TO THE MERGER</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SPECIAL FACTORS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Background of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Recommendation of the Special Committee and our Board of Directors</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reasons for the Special Committee&#146;s Determination; Fairness of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reasons for our Board of Directors&#146; Determination; Fairness of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Opinion of the Special Committee&#146;s Financial Advisor</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Position of the Barnes &#038; Noble Parties as to the Fairness of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purposes and Reasons for the Merger; Consideration of Alternatives; Structure of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effects of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Plans for the Company</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interests of Directors and Officers in the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Certain Relationships and Related Transactions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Provisions for Unaffiliated Stockholders</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">THE MERGER</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effective Time of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Payment of Merger Consideration and Surrender of Stock Certificates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Risks That the Merger Will Not Be Completed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Merger Financing; Sources of Funds</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Certain U.S. Federal Income Tax Consequences</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Litigation Relating to the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Regulatory Matters</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounting Treatment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Estimated Fees and Expenses of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Appraisal Rights</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">THE SPECIAL MEETING</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Date, Time and Place of the Special Meeting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Matters to be Considered at the Special Meeting</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Vote Required</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Record Date, Voting Rights, Quorum and Revocability of Proxies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expenses of Proxy Solicitation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjournments and Postponements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Exchanging Stock Certificates</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">THE MERGER AGREEMENT</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effective Time of the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">The Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Merger Consideration</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stock Options</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Surrender of Certificates and Payment Procedures</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Representations and Warranties</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Covenants</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Conditions to Completing the Merger</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Termination</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amendment and Waiver</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fees and Expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>



<P align="center"><FONT size="2">i
</FONT>

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<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="91%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Governing Law</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Assignment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Our Actions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">SELECTED HISTORICAL FINANCIAL DATA</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">MARKET PRICE AND DIVIDENDS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PRINCIPAL STOCKHOLDERS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CERTAIN TRANSACTIONS INVOLVING OUR COMMON STOCK</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OTHER MATTERS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">STOCKHOLDER PROPOSALS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">INDEPENDENT ACCOUNTANTS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="center"><FONT size="2">ANNEXES
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT size="2">ANNEX A&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">AGREEMENT AND PLAN OF MERGER
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT size="2">ANNEX B&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;DELAWARE GENERAL CORPORATION LAW SECTION 262&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;APPRAISAL
RIGHTS
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT size="2">ANNEX C&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;OPINION OF CREDIT SUISSE FIRST BOSTON LLC
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>
<TR valign="top">
    <TD nowrap><FONT size="2">ANNEX D&nbsp;&nbsp;&nbsp;&#151;&nbsp;&nbsp;&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;INFORMATION RELATING TO THE COMPANY, B&#038;N.COM AND THE
BARNES &#038; NOBLE PARTIES
</FONT></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">ii
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "SUMMARY TERM SHEET" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center"><FONT size="2"><B>SUMMARY TERM SHEET</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This summary does not contain all of the information that may be important
to you. You should carefully read the entire proxy statement, including the
documents which are annexed to, or incorporated by reference into, this proxy
statement. Additional information about the Company has been filed with the
Securities and Exchange Commission and is available as described in the section
of this proxy statement entitled &#147;WHERE YOU CAN FIND MORE
INFORMATION&#148; on page&nbsp;55.
</FONT>


<P align="left"><FONT size="2"><B>The Parties to the Merger:</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>barnesandnoble.com inc.</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;barnesandnoble.com inc. is a holding company whose sole asset is its
approximate 31.3% interest in barnesandnoble.com llc and whose sole business is
acting as sole manager of barnesandnoble.com llc. barnesandnoble.com inc. is
referred to as the &#147;Company,&#148; &#147;we,&#148; &#147;our,&#148; or &#147;us&#148; in this proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>barnesandnoble.com llc</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;barnesandnoble.com llc is a leading Internet-based retailer of books,
music, DVD/video and online courses. barnesandnoble.com llc is referred to as
&#147;B&#038;N.com&#148; in this proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Barnes &#038; Noble, Inc.</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble, Inc. is the world&#146;s largest bookseller, operating 634
Barnes &#038; Noble bookstores in 49 states and 231 B. Dalton Bookseller stores,
primarily in regional shopping malls. Barnes &#038; Noble, Inc. also has
approximately a 65% interest in GameStop Corp., the nation&#146;s largest video-game
and entertainment software specialty retailer with over 1,500 stores. Barnes &#038;
Noble, Inc., through its wholly owned subsidiary B&#038;N.com Holding Corp.,
beneficially owned 119,138,502 shares of our capital stock representing
approximately 73.0% of our outstanding equity interest and approximately 96.3%
of our voting interest as of December&nbsp;31, 2003. Barnes &#038; Noble,
Inc. is referred to as &#147;Barnes &#038; Noble&#148; in this proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>B&#038;N.com Holding Corp.</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B&#038;N.com Holding Corp. is a wholly owned subsidiary of Barnes &#038; Noble,
whose sole assets consist of membership units in B&#038;N.com and common stock in
the Company. B&#038;N.com Holding Corp. is referred to as &#147;B&#038;N Holding&#148; in this
proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>B&#038;N.com Acquisition Corp.</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B&#038;N.com Acquisition Corp., a wholly owned subsidiary of B&#038;N Holding, was
created solely for the purpose of effecting the merger. In the merger, B&#038;N.com
Acquisition Corp. will be merged with and into the Company, with the Company
surviving the merger as an indirect wholly owned subsidiary of Barnes &#038; Noble.
B&#038;N.com Acquisition Corp. is referred to as &#147;B&#038;N Acquisition&#148; in this proxy
statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble, B&#038;N Holding and B&#038;N Acquisition are sometimes referred to
as the &#147;Barnes &#038; Noble Parties&#148; in this proxy statement.
</FONT>


<P align="left"><FONT size="2"><B>Terms of the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the merger agreement, Barnes &#038; Noble will acquire the Company
for $3.05 in cash, without interest and less any applicable
withholding taxes, for each share of our outstanding Class&nbsp;A common stock (other
than shares held by Barnes &#038; Noble, B&#038;N Holding and their respective
subsidiaries and any shares with respect to which appraisal rights have been
properly perfected under Delaware law), through the merger of its wholly owned
subsidiary, B&#038;N Acquisition, with and into the Company. All outstanding
options to purchase shares of our common stock, whether vested or unvested,
will be cancelled, and each holder will be entitled to receive a cash payment
equal to the difference between the exercise price of those options and $3.05
per share, less any applicable withholding taxes. At the closing of the
merger, we will be a direct wholly owned subsidiary of B&#038;N
</FONT>



<P align="center"><FONT size="2">&nbsp;
</FONT>

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<P align="left"><FONT size="2">Holding, and B&#038;N Acquisition will cease to exist as a separate entity.
Shares of our Class&nbsp;A common stock are referred to in this proxy statement as
our &#147;common stock,&#148; unless the context requires otherwise.
</FONT>


<P align="left"><FONT size="2"><B>Special Committee of our Board of Directors</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our directors also serve as directors of Barnes &#038; Noble or its
affiliates. Because these directors have financial and other interests that
may be different from, and in addition to, your interests in the merger, our
board of directors decided that, in order to protect the interests of our
unaffiliated stockholders in evaluating and negotiating the merger agreement, a
special committee of independent directors who are not affiliated with Barnes &#038;
Noble or its affiliates, and who have no financial interest in the merger,
should be formed to perform those tasks and, if appropriate, to recommend the
merger and the terms of the merger agreement to our entire board of directors.
</FONT>


<P align="left"><FONT size="2"><B>Vote Required (See Page&nbsp;39)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger agreement and the merger must be approved and adopted by the
affirmative vote of a majority of the voting power of our common stock
outstanding on the record date for the special meeting described in this proxy
statement. For this vote, abstentions and broker non-votes, as well as shares
that are not voted, will have the same effect as a vote against approval and
adoption of the merger agreement and the merger. As of December&nbsp;31, 2003,
Barnes &#038; Noble controlled approximately 96.3% of the voting power of our common
stock and has committed to vote in favor of the merger agreement and the
merger. In addition, as of December&nbsp;31, 2003, our directors and executive
officers together beneficially owned approximately 11,416,521 shares of our
common stock, which represent approximately 0.95% of the voting power of
our common stock. We anticipate that each of our directors and executive
officers who is a stockholder will vote in favor of the merger.
</FONT>


<P align="left"><FONT size="2"><B>Recommendation of the Special
Committee and our Board of Directors (See Page&nbsp;15)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After careful consideration, and in light of the factors described in the
section of this proxy statement entitled &#147;SPECIAL FACTORS&#151;Reasons for our Board
of Directors&#146; Determination; Fairness of the Merger,&#148; our board of directors,
based on the recommendation of the special committee, has unanimously
determined that the merger agreement and the transactions contemplated thereby,
including the merger, are advisable, fair to, and in the best interests of the
Company and our stockholders (other than Barnes &#038; Noble and its affiliates).
<B>Our board of directors recommends that you vote &#147;FOR&#148; the adoption of the
merger agreement and the merger.</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a discussion of the material factors considered by the special
committee and our board of directors in reaching their conclusions and the
reasons why our board of directors determined that the merger agreement and the
transactions contemplated thereby, including the merger, are advisable, fair
to, and in the best interests of the Company and our stockholders, see the
sections of this proxy statement entitled &#147;SPECIAL FACTORS&#151;Reasons for the
Special Committee&#146;s Determination; Fairness of the Merger,&#148; and &#147;&#151;Reasons for
our Board of Directors&#146; Determination; Fairness of the Merger.&#148;
</FONT>


<P align="left"><FONT size="2"><B>Opinion of the Special
Committee&#146;s Financial Advisor (See Page&nbsp;18)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee received the written opinion of Credit Suisse First
Boston LLC, referred to as &#147;Credit Suisse First Boston&#148; in this proxy
statement, to the effect that, as of January&nbsp;8, 2004, the merger consideration
to be received by the holders of our common stock (other than Barnes &#038; Noble
and its affiliates and directors and officers of each of the Company and Barnes
&#038; Noble) was fair, from a financial point of view, to such holders. The full
text of Credit Suisse First Boston&#146;s written opinion, dated January&nbsp;8, 2004, is
attached as Annex C to this proxy statement. We encourage you to read this
opinion carefully in its entirety for a description of the procedures followed,
assumptions made, matters considered and limitations on the review undertaken.
<B>Credit Suisse First Boston&#146;s opinion was provided to the special committee in
connection with its evaluation of the merger consideration and relates only to
the fairness, from a financial point of view, of the merger consideration, does
not address any other aspect of the proposed merger and does not constitute a
recommendation to any stockholder as to any matters relating to the merger or
any related transaction.</B>
</FONT>



<P align="center"><FONT size="2">2
</FONT>

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<P align="left"><FONT size="2"><B>Interests of Directors and Officers
in the Merger (See Page&nbsp;28)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When considering the recommendation of our board of directors that you
vote for approval and adoption of the merger agreement and the transactions
contemplated thereby, including the merger, you should be aware that certain of
our directors and officers have interests in the merger that are different
from, or in addition to, yours and that may present, or appear to present, a
conflict of interest. These interests include the following:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">some of our directors and executive officers hold our common
stock and have options to purchase our common stock and, as a
result, will receive the merger consideration for these shares and
options;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Barnes &#038; Noble has agreed to assume or guarantee certain
employment agreements and deferred compensation plans of the Company
and B&#038;N.com; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">following the merger, Barnes &#038; Noble will indemnify our
current and former directors and officers and provide these
directors and officers with liability insurance for at least six
years thereafter.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2"><B>Effects of the Merger (See
Page&nbsp;27)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of the merger, B&#038;N Acquisition will merge with and into
the Company with the Company surviving the merger. Barnes &#038; Noble will own
100% of our then-outstanding stock, and you will no longer be a stockholder of,
or have any ownership interest in, the Company. We will no longer be a public
company, and our common stock will no longer be quoted on the NASDAQ National
Market. The registration of our common stock under the Securities Exchange Act
of 1934, as amended, will terminate, and we will cease to file periodic reports
with the Securities and Exchange Commission under the Exchange Act.
</FONT>


<P align="left"><FONT size="2"><B>Conditions to Completing the Merger
(See Page&nbsp;45)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><i>Conditions
to the Obligations of the Parties. </i></b>The obligations of each
party to complete the merger is subject to the satisfaction or waiver of
certain conditions, including the following:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of a temporary restraining order, preliminary or
permanent injunction or other order issued by any court or other
legal restraint or prohibition preventing consummation of the merger
or any statute, rule, regulation or order enacted, entered or
enforced preventing or prohibiting the consummation of the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">approval of the merger agreement by a majority of the votes
entitled to be cast at the special meeting; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">receipt of all material consents, approvals or authorizations
of or filings with governmental entities required for consummation
of the merger.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><i>Conditions
to our Obligations. </i></b>Our obligations to complete the merger
also is subject to the satisfaction or waiver of other conditions, including
the following:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the representations and warranties of the Barnes &#038; Noble
Parties contained in the merger agreement are true and correct in
all material respects;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">each Barnes &#038; Noble Party shall have performed and complied
in all material respects with all its undertakings and agreements
required by the merger agreement to be performed or complied with
prior to or at the closing date; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">we shall have received a certificate of a senior officer of
Barnes &#038; Noble certifying that the above conditions have been
fulfilled.
</FONT></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" nowrap align="left"><FONT size="2">&nbsp;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2"><B><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conditions to
the Obligations of the Barnes &#038; Noble Parties. </i></B>The
obligations of the Barnes &#038; Noble Parties to complete the merger also is subject
to the satisfaction or waiver of other conditions, including the following:
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">our representations and warranties contained in the merger
agreement are true and correct in all material respects;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">we shall have performed and complied in all material respects
with all our undertakings and agreements required by the merger
agreement to be performed or complied with prior to or at the
closing date;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Barnes &#038; Noble shall have received a certificate of one of
our senior officers certifying that the above conditions have been
fulfilled; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">since the date of the merger agreement, there has not been a
&#147;material adverse effect&#148; on the Company and B&#038;N.com, taken as a
whole.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2"><B>Termination (See Page&nbsp;46)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger agreement may be terminated prior to the effective time of the
merger for a number of reasons, including the following:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by mutual written consent at any time prior to adoption of
the merger agreement at the special meeting;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by Barnes &#038; Noble or the Company at any time prior to
adoption of the merger agreement at the special meeting, if the
merger has not been consummated on or prior to July&nbsp;15, 2004;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by Barnes &#038; Noble or the Company at any time prior to the
effective time of the merger, if an administrative agency or
commission or other governmental authority shall have issued a final
nonappealable injunction, order, decree, judgment or ruling
permanently enjoining or otherwise prohibiting the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by Barnes &#038; Noble at any time prior to adoption of the merger
agreement at the special meeting, if our board of directors (upon
the recommendation of the special committee) or the special
committee withdraws, qualifies or modifies its recommendation to our
unaffiliated stockholders or upon a breach of any of our
representations, warranties, covenants or agreements such that the
closing conditions cannot be satisfied; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="left"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by the special committee at any time prior to adoption of the
merger agreement at the special meeting, if it has terminated the
merger agreement because it determines that an unsolicited bona fide
acquisition proposal is more favorable to our unaffiliated
stockholders than the merger and the party making such proposal is
reasonably able to finance the proposed transaction, or upon a
breach of any representation, warranty, covenant or agreement on the
part of a Barnes &#038; Noble Party such that the closing conditions
cannot be satisfied.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2"><B>Certain U.S. Federal Income Tax
Consequences (See Page&nbsp;35)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The conversion of shares of our common stock into cash pursuant to the
merger is a taxable transaction for U.S. federal income tax purposes and may
also be a taxable transaction under applicable state, local or foreign tax
laws. You should consult your own tax advisor about the particular tax
consequences of the merger to you.
</FONT>


<P align="left"><FONT size="2"><B>Litigation Relating to the Merger
(See Page&nbsp;35)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following Barnes &#038; Noble&#146;s announcement of its initial offer on November
7, 2003, fifteen separate complaints were filed in the Delaware Court of
Chancery to commence class action lawsuits on
</FONT>



<P align="center"><FONT size="2">4
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">behalf of our stockholders against Barnes &#038; Noble, the Company and our
directors. These complaints were subsequently consolidated. On January&nbsp;8,
2004, a Memorandum of Understanding was executed by the parties reflecting the
parties&#146; agreement to settle the action. The settlement is contingent upon,
among other things, court approval, the merger consideration being $3.05 per
share in cash and consummation of the merger.
</FONT>


<P align="left"><FONT size="2"><B>Appraisal Rights (See Page 36)</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you so choose, you will be entitled to exercise appraisal rights upon
completion of the merger so long as you take all the steps required to perfect
your rights under Delaware law.
</FONT>


<P align="left"><FONT size="2"><B>Questions</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, after reading this proxy statement, you have additional questions
about the merger or other matters discussed in this proxy statement, need
additional copies of this proxy statement or require assistance with voting
your shares of our common stock, please contact:
</FONT>


<P align="center"><FONT size="2">barnesandnoble.com inc.<BR>
76 Ninth Avenue<BR>
New York, New York 10011<BR>
Attn: Investor Relations, Kevin M. Frain<BR>
(212)&nbsp;414-6000
</FONT>




<P align="center"><FONT size="2">5
</FONT>


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<!-- link1 "QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING" -->
<DIV align="left"><A NAME="001"></A></DIV>

<P align="center"><FONT size="2"><B>QUESTIONS AND ANSWERS ABOUT THE MERGER<BR>
AND THE SPECIAL MEETING</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information provided in question-and-answer format below is for your
convenience and is merely a summary of certain information contained in this
proxy statement. You should carefully read this entire proxy statement,
including each of the annexes attached to this proxy statement and the
documents incorporated by reference herein.
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>When and where is the special meeting?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
The special meeting will be held on <B>&#091; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004, at 10:00&nbsp;a.m. local time, at <B>&#091; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#093;.</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>What am I being asked to vote on?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
You are being asked to consider and vote on a proposal to approve and adopt the merger agreement and the merger. Under the
merger agreement, B&#038;N Acquisition will be merged with and into the Company, with the Company continuing as the surviving
corporation. We will continue to operate after the closing of the merger, but will be wholly owned by Barnes &#038; Noble.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>What will I receive in the merger?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
If the merger is completed, each outstanding share of our common stock that you hold at the completion of the merger will
be converted into the right to receive $3.05 in cash, without
interest and less any applicable withholding taxes (unless you exercise appraisal rights under Delaware
law). Barnes &#038; Noble, B&#038;N Holding and their respective subsidiaries will not receive any consideration in the merger.
However, they will own all our outstanding common stock following the completion of the merger.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Who is entitled to vote at the special meeting?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Holders of record of our common stock at the close of business on <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &#093;</B>, 2004, the record date for the special meeting,
are entitled to vote in person or by proxy on the merger agreement and the merger at the special meeting.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>What vote is required to approve the merger agreement and the merger?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
The merger agreement and the merger must be approved and adopted by a majority of the voting power of our outstanding
common stock entitled to vote at the special meeting. As of
December&nbsp;31, 2003, Barnes &#038; Noble controlled approximately 96.3% of the voting power of
our common stock and has committed to vote in favor of the merger agreement and the merger. In addition, we anticipate
that our directors and executive officers who are stockholders of the
Company and held approximately 0.95% of the
voting power of our common stock as of December&nbsp;31, 2003 will vote in favor of the merger.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>What do I need to do now?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
You should read this proxy statement carefully, including its annexes and the documents incorporated by reference, and
consider how the merger would affect you. Then, simply mark, sign, date and promptly mail the enclosed proxy card in the
postage-paid envelope provided so that your shares can be voted at the special meeting. Should you prefer, you may cast
your vote by telephone or via the Internet in accordance with the instructions on the enclosed proxy card or the voting
instruction form.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>What happens if I do not return a proxy card or otherwise vote by proxy, abstain from voting or do not instruct my broker
holding my shares how to vote?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
If you fail to return your proxy card or cast your vote by telephone or via the Internet, do not instruct your broker how
to vote or you do not vote at the meeting, it will have the same effect as voting against the merger agreement and the
merger.</FONT></TD>
</TR>
</TABLE>
</DIV>

<P align="center"><FONT size="2">6
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>May I vote in person?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Yes. You may attend the special meeting and vote your shares in person whether or not you sign and return a proxy card or
otherwise vote by proxy. If your shares are held of record by a broker, bank or other nominee and you wish to vote at the
special meeting, you must obtain a proxy from the record holder of your shares in order to vote in person at the special
meeting. Please note that stockholders may be asked to present photo identification for admittance to the special
meeting.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>May I change my vote after I have mailed my signed proxy card or otherwise voted by proxy?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Yes. You may change your vote at any time before the vote is taken at the special meeting. You can do this in one of three
ways. First, you can send a written notice to the Secretary of the Company stating that you would like to revoke your
proxy. Second, you can complete and submit a new proxy card by mail or later dated proxy instructions by telephone or via
the Internet. Third, you can attend the special meeting and vote in person at the meeting. Your attendance at the special
meeting will not alone revoke your proxy. If you have instructed a broker, bank or other nominee who is the record holder
of your shares to vote your shares at the special meeting, you must follow directions received from your broker, bank or
nominee to change those instructions.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>If my shares are held in &#147;street name&#148; by my broker, will my broker vote my shares for me?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Your broker will not be able to vote your shares without instructions from you. You should instruct your broker to vote
your shares, following the procedures provided by your broker.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Should I send in my stock certificates now?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
No. If you hold certificates representing shares of our common stock
after the merger is completed, you will receive
detailed written instructions explaining how to exchange your certificates for a cash payment of $3.05, without interest and less any applicable
withholding taxes, for each share of
our common stock evidenced by your certificate, without interest.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>What happens if I sell my shares before the special meeting?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
The record date for the special meeting is earlier than the expected date of the merger. If you own shares of our common
stock on the record date but transfer your shares after the record date but before the merger, you will retain the right to
vote at the special meeting, but the right to receive the merger consideration will pass to the person to whom you
transferred your shares.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>When do you expect the merger to be completed?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
If the merger agreement and the merger are approved and adopted at the special meeting by the requisite votes of our
stockholders, and if the other conditions to the merger are satisfied or waived, we expect to complete the merger as
promptly as possible after the special meeting.</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2"><B>Q:</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<B>Who can help answer my questions?</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">A:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
If you would like additional copies of this proxy statement (which copies will be provided to you without charge) or if you
have questions about the merger, including the procedures for voting your shares, you should contact:</FONT></TD>
</TR>
</TABLE>
</DIV>

<P align="center"><FONT size="2">barnesandnoble.com inc.<BR>
76 Ninth Avenue<BR>
New York, New York 10011<BR>
Attn: Investor Relations, Kevin M. Frain<BR>
(212)&nbsp;414-6000
</FONT>

<P align="center"><FONT size="2">7
</FONT>

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<!-- link1 "THE PARTIES TO THE MERGER" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center"><FONT size="2"><B>THE PARTIES TO THE MERGER</B>
</FONT>

<P align="left"><FONT size="2"><B>barnesandnoble.com inc.</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is a Delaware corporation with its executive offices located
at 76 Ninth Avenue, New York, New York 10011. Its telephone number is (212)
414-6000. The Company is a holding company whose sole asset is its approximate
31.3% interest in B&#038;N.com and whose sole business is acting as sole manager of
B&#038;N.com.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A detailed description of the Company&#146;s business and financial results is
contained in our most recent Quarterly Report on Form 10-Q for the fiscal
quarter ended September&nbsp;30, 2003, which is incorporated by reference into this
proxy statement. See the section in this proxy statement entitled &#147;WHERE YOU
CAN FIND MORE INFORMATION.&#148; Information about our directors and executive
officers is set forth in Annex D to this proxy statement.
</FONT>

<P align="left"><FONT size="2"><B>barnesandnoble.com llc</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B&#038;N.com is a Delaware limited liability company with its executive offices
located at 76 Ninth Avenue, New York, New York 10011. Its telephone number is
(212)&nbsp;414-6000.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B&#038;N.com is a leading Internet-based retailer of books, music and
DVD/video. Since opening its online store (www.bn.com) in March&nbsp;1997, B&#038;N.com
has attracted more than 17.0&nbsp;million customers in 230 countries. B&#038;N.com&#146;s
bookstore includes the largest in-stock selection of in-print book titles with
access to approximately one million titles for immediate delivery, supplemented
by more than 30&nbsp;million listings from its nationwide network of out-of-print,
rare and used book dealers. B&#038;N.com offers its customers fast delivery, easy
and secure ordering and rich editorial content.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A detailed description of B&#038;N.com&#146;s business and financial results are
contained in our most recent Quarterly Report on Form 10-Q for the fiscal
quarter ended September&nbsp;30, 2003, which is incorporated by reference into this
proxy statement. See the section in this proxy statement entitled &#147;WHERE YOU
CAN FIND MORE INFORMATION.&#148; Information about B&#038;N.com&#146;s directors and
executive officers is set forth in Annex D to this proxy statement.
</FONT>

<P align="left"><FONT size="2"><B>Barnes &#038; Noble, Inc.</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble is a Delaware corporation with its executive offices
located at 122 Fifth Avenue, New York, New York 10011. Its telephone number is
(212)&nbsp;633-3300. Information about Barnes &#038; Noble&#146;s directors and executive
officers is set forth in Annex D to this proxy statement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble is the world&#146;s largest bookseller, operating 634 Barnes &#038;
Noble bookstores in 49 states. It also operates 231 B. Dalton Bookseller
stores, primarily in regional shopping malls. Barnes &#038; Noble offers titles
from more than 50,000 publisher imprints, including thousands of small,
independent publishers and university presses. Barnes &#038; Noble also has
approximately a 65% interest in GameStop Corp., the nation&#146;s largest video-game
and entertainment-software specialty retailer with over 1,500 stores.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes
&#038; Noble, through B&#038;N Holding, beneficially owned 119,138,502 shares
of our capital stock representing approximately 73.0% of our outstanding equity
interest and approximately 96.3% of our voting interest as of
December&nbsp;31, 2003. The shares of our capital stock beneficially owned by Barnes
&#038; Noble through B&#038;N Holding consist of the following: (i)&nbsp;4,138,500 shares of
our Class&nbsp;A common stock and (ii)&nbsp;115,000,002 shares of our Class&nbsp;A common
stock which B&#038;N Holding has the right to acquire upon conversion of its (A)&nbsp;one
share of our Class&nbsp;B common stock, which represents the only share of Class&nbsp;B
common stock issued and outstanding, (B)&nbsp;one share of our Class&nbsp;C common stock,
which represents the only share of Class&nbsp;C common stock issued and outstanding,
and (C)&nbsp;115,000,000 membership units in B&#038;N.com.
</FONT>

<P align="center"><FONT size="2">8
</FONT>

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<P align="left"><FONT size="2"><B>B&#038;N.com Holding Corp.</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B&#038;N Holding is a Delaware corporation with its executive offices at 122
Fifth Avenue, New York, New York 10011. Its telephone number is (212)
633-3300. B&#038;N Holding is a wholly owned subsidiary of Barnes &#038; Noble whose
sole assets consist of membership units in B&#038;N.com and common stock in the
Company. Information about B&#038;N Holding&#146;s directors and executive officers is
set forth in Annex D to this proxy statement.
</FONT>

<P align="left"><FONT size="2"><B>B&#038;N.com Acquisition Corp.</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B&#038;N Acquisition is a Delaware corporation with its executive offices at
122 Fifth Avenue, New York, New York 10011. Its telephone number is (212)
633-3300. B&#038;N Acquisition, a wholly owned subsidiary of B&#038;N Holding, was
created solely for the purpose of effecting the merger. In the merger, B&#038;N
Acquisition will be merged with and into the Company, with the Company
surviving the merger as an indirect wholly owned subsidiary of Barnes &#038; Noble.
Information about B&#038;N Acquisition&#146;s directors and executive officers is set
forth in Annex D to this proxy statement.
</FONT>

<!-- link1 "CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION" -->
<DIV align="left"><A NAME="003"></A></DIV>

<P align="center"><FONT size="2"><B>CAUTIONARY STATEMENT CONCERNING<BR>
FORWARD-LOOKING INFORMATION</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This proxy statement, and the documents to which we refer in this proxy
statement, may contain forward-looking statements regarding our expectations.
When used in this proxy statement, the words &#147;anticipate,&#148; &#147;believe,&#148;
&#147;estimate,&#148; &#147;expect,&#148; &#147;intend,&#148; &#147;plan&#148; and similar expressions, as they relate
to the Company or our management, identify forward-looking statements. These
statements are based on the beliefs of our management as well as assumptions
made by and information currently available to our management. These
statements reflect our current views with respect to future events, the
outcomes of which are subject to certain risks, including among others general
economic and market conditions, changes in product demand, the growth rate of
Internet usage and e-commerce, possible disruptions in our computer or
telephone systems, possible increases in shipping rates or interruptions in
shipping service, effects of competition, the level and volatility of interest
rates, the performance of our new product initiatives, the successful
integration of acquired businesses, unanticipated adverse litigation results or
effects, product shortages, changes in tax and other governmental rules and
regulations applicable to the Company and other factors, risks and
uncertainties. Should one or more of these risks or uncertainties materialize,
or should underlying assumptions prove incorrect, actual results or outcomes
may vary materially from those described herein. Unless required by law, we
undertake no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or otherwise. Readers
should carefully review the information and the risk factors set forth in other
reports and documents that we file from time to time with the Securities and
Exchange Commission.
</FONT>

<P align="center"><FONT size="2">9
</FONT>

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<!-- link1 "SPECIAL FACTORS" -->
<DIV align="left"><A NAME="004"></A></DIV>

<P align="center"><FONT size="2"><B>SPECIAL FACTORS</B>
</FONT>

<!-- link2 "Background of the Merger" -->
<DIV align="left"><A NAME="005"></A></DIV>

<P align="left"><FONT size="2"><B>Background of the Merger</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Background of Barnes &#038; Noble&#146;s Investment in the Company</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to October&nbsp;31, 1998, B&#038;N.com&#146;s business was conducted by a wholly
owned subsidiary of Barnes &#038; Noble. Through a series of transactions in the
fall of 1998 and the spring of 1999, Barnes &#038; Noble and Bertelsmann AG,
referred to as &#147;Bertelsmann&#148; in this proxy statement, each held a 50% beneficial
interest in the Company through their ownership of our outstanding share of
Class&nbsp;B and share of Class&nbsp;C common stock as well as a 50% beneficial interest in
B&#038;N.com. On May&nbsp;25, 1999, the Company completed its initial public offering of
28,750,000 shares of Class&nbsp;A common stock raising a total of approximately
$484,382,000. Using the proceeds of our initial public offering, we made a
capital contribution to B&#038;N.com in exchange for a 20.0% ownership interest in
B&#038;N.com.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to significant operating losses and diminishing cash reserves since
our initial public offering, our board of directors began considering
additional capital sources and financing opportunities in the spring of 2001
and continuing through the summer of 2002. At several meetings of our board of
directors, Mr.&nbsp;Leonard Riggio, Chairman of both the Company and Barnes &#038; Noble,
discussed our possible financing alternatives, including bank financing with
guarantees from Barnes &#038; Noble and Bertelsmann, as well as the possible sale of
debt or equity securities of the Company. Based on the Company&#146;s forecasts at
that time, the Company had sufficient cash to meet its needs through the fall
of 2003.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;2002, we received notice from the Nasdaq Stock Market, Inc.
that, for the previous 30 consecutive trading days, the price of our common
stock had closed below the minimum $1.00 per share requirement for continued
inclusion on the NASDAQ National Market. As a result, we had 90 calendar days,
or until November&nbsp;4, 2002, for our common stock to trade at $1.00 or above for
10 consecutive trading days in order to avoid being delisted from the NASDAQ
National Market. Our board of directors again discussed our future cash needs
and the various possible methods of financing our future operations.
Additionally, our board of directors considered the possible delisting from the
NASDAQ National Market and reviewed means to avoid the delisting.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At a meeting of the Barnes &#038; Noble board of directors on September&nbsp;12,
2002, Mr.&nbsp;Riggio noted that our common stock was trading below $1.00 and that
the Company may be subject to delisting from the NASDAQ National Market. At
this meeting, Mr.&nbsp;Riggio also stated that he believed that our common stock was
undervalued and that he was in discussions with Bertelsmann about purchasing
publicly traded shares of our common stock. Although he stated his belief that Bertelsmann
would be supportive, he requested authority from the Barnes &#038; Noble board for
Barnes &#038; Noble to purchase up to $10&nbsp;million of our common stock in the
open market even if Bertelsmann declined to participate. After discussion, the
Barnes &#038; Noble board approved the purchase.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2002, Barnes &#038; Noble publicly announced that, subject to
market conditions, it intended to purchase up to $10&nbsp;million of our common
stock in the open market or through privately negotiated transactions. At the
same time, Barnes &#038; Noble&#146;s management asked Bertelsmann to consider
participating in the stock acquisition program as well. On October&nbsp;23, 2002,
Bertelsmann publicly announced that it intended to purchase, subject to market
conditions and securities law considerations, our common stock in the open
market or through privately negotiated transactions. Barnes &#038; Noble and
Bertelsmann agreed to coordinate their purchases of our common stock in order
to, among other things, comply with the safe harbor provisions of Exchange Act
Rule&nbsp;10b-18. At the same time, Barnes &#038; Noble and Bertelsmann each filed a
Schedule&nbsp;13D with the Securities and Exchange Commission to disclose that they were acting as a &#147;group&#148; for purposes of the
stock acquisition program.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with Barnes &#038; Noble&#146;s participation in this stock
acquisition program, on November&nbsp;1, 2002, Barnes &#038; Noble publicly disclosed
that it intended to review its holdings in the Company on a continuing basis
and, depending upon the price and availability of our common stock, subsequent
developments affecting the Company, the business prospects of the Company,
general stock market and economic conditions, tax considerations and other
factors deemed relevant, may consider
</FONT>

<P align="center"><FONT size="2">10
</FONT>

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<P align="left"><FONT size="2">increasing or decreasing its investment in the Company. In connection
with the stock acquisition program, Barnes &#038; Noble, through B&#038;N Holding,
purchased an aggregate of 3,012,500 shares of our common stock at prices
ranging from $0.76 to $1.75 per share between October&nbsp;2, 2002 and April&nbsp;3,
2003. See the section of this proxy statement entitled &#147;CERTAIN TRANSACTIONS
INVOLVING OUR COMMON STOCK&#148; for more details of Barnes &#038; Noble&#146;s acquisition of
our common stock pursuant to this stock acquisition program.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock has not closed below $1.00 since October&nbsp;22, 2002.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Barnes &#038; Noble Acquires Bertelsmann&#146;s Interest in the Company</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the spring of 2003, Mr. Riggio met with representatives of
Bertelsmann to discuss the Company&#146;s future capital needs and the possibility
of additional capital investments in the Company by Barnes &#038; Noble and
Bertelsmann. In those discussions, Bertelsmann indicated a reluctance to
invest significant additional capital in the Company, as well as a desire to
avoid a dilution of their interest from a significant investment in the Company
by Barnes &#038; Noble. As a result, Mr.&nbsp;Riggio and Bertelsmann discussed the
possibility that Barnes &#038; Noble acquire Bertelsmann&#146;s interest prior to any
significant capital infusion into the Company.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At a meeting of our board of directors held on July&nbsp;17, 2003, the
Company&#146;s future cash needs were discussed. Representatives of Citigroup
Global Markets Inc., referred to as &#147;Citigroup&#148; in this proxy statement,
attended the meeting and reviewed with our board various options for raising
capital to address funding needs, including potential capital infusions from
Barnes &#038; Noble and Bertelsmann. Mr.&nbsp;Riggio also indicated to our board that,
in connection with Barnes &#038; Noble&#146;s consideration of any capital investment in
the Company, Barnes &#038; Noble may also consider acquiring Bertelsmann&#146;s ownership
interest in the Company.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the July&nbsp;17, 2003 meeting of our board, Bertelsmann again discussed
with Mr.&nbsp;Riggio the possibility that Barnes &#038; Noble purchase Bertelsmann&#146;s
interest in the Company. A meeting of the Barnes &#038; Noble board of directors
was held on July&nbsp;21, 2003 to discuss the possible acquisition of Bertelsmann&#146;s
interest. Representatives of Citigroup participated at this meeting and
reviewed with the Barnes &#038; Noble board the benefits to be derived from such an
acquisition. After discussion, the Barnes &#038; Noble board authorized the
acquisition of Bertelsmann&#146;s interest in the Company.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble and Bertelsmann entered into negotiations that culminated
in the execution of a purchase agreement, dated July&nbsp;29, 2003, whereby Barnes &#038;
Noble would acquire for cash and notes all of the shares of our Class&nbsp;A common
stock, together with all of the membership units in B&#038;N.com and the share of
our Class&nbsp;C common stock beneficially owned by Bertelsmann, for an aggregate
purchase price equal to $164,152,802.80, or $2.80 per share or membership unit.
Under the purchase agreement, Barnes &#038; Noble is required to pay Bertelsmann
additional consideration in the event that at any time prior to September&nbsp;15,
2006 Barnes &#038; Noble acquires, subject to certain exceptions, additional equity
in the Company for a per share purchase price in excess of $3.05 if the
purchase price is paid solely in cash, or $3.30 if the purchase price is paid
solely in stock of Barnes &#038; Noble. The purchase by Barnes &#038; Noble of
Bertelsmann&#146;s entire interest in the Company was consummated on September&nbsp;15,
2003. Barnes &#038; Noble subsequently transferred all shares and membership units
purchased from Bertelsmann to B&#038;N Holding.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Reintegrating the Company</I></B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble&#146;s management and the Barnes &#038; Noble board of directors have
from time to time in the past reviewed Barnes &#038; Noble&#146;s options with respect to
its investment in the Company. Barnes &#038; Noble&#146;s management began to explore
the possibility of the proposed merger and reintegrating the Company with
Barnes &#038; Noble during the week of September&nbsp;22, 2003.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;29, 2003, Mr.&nbsp;Riggio informed William F. Reilly, Chairman of the audit committee of our board of
directors, that Barnes &#038; Noble was contemplating making an offer to take the
Company private and was determining an appropriate price for an offer.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In view of Barnes &#038; Noble&#146;s potential proposal, our board of directors
determined that it would be appropriate for our board to appoint a special
committee comprised of independent directors to act on its behalf. On October
24, 2003, the special committee, consisting of Jan-Michiel Hessels and Patricia
</FONT>

<P align="center"><FONT size="2">11
</FONT>

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<P align="left"><FONT size="2">Higgins, was authorized to exercise all of the powers of our board of
directors with respect to Barnes &#038; Noble&#146;s potential proposal and any
transaction resulting from the proposal, including the power to select and
retain legal counsel and an independent financial advisor.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From the week of September&nbsp;22, 2003 through October&nbsp;2003, Barnes &#038; Noble&#146;s
management continued to review with Barnes &#038; Noble&#146;s legal and financial
advisors various strategic alternatives with respect to the Company in light of
its continued economic and strategic challenges. Specifically, Barnes &#038; Noble
engaged Citigroup as its financial advisor in connection with the potential
acquisition of all of our Class&nbsp;A common stock not already owned by Barnes &#038;
Noble and discussed with Citigroup the possible structure, associated costs and
potential benefits to Barnes &#038; Noble of such a transaction. After a number of
discussions regarding the various options concerning the Company, Barnes &#038;
Noble&#146;s management determined that it should continue to explore the
possibility of taking the Company private and the preferred structure for such
a transaction.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;24, 2003, the special committee retained Dewey Ballantine LLP
to act as its legal advisor, and on November&nbsp;4, 2003, the special committee
retained Credit Suisse First Boston as its financial advisor.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A meeting of the Barnes &#038; Noble board of directors was held on November&nbsp;6,
2003 at which various alternatives with respect to the Company were discussed.
Representatives of Citigroup and Bryan Cave LLP, counsel to Barnes &#038; Noble,
attended the meeting. Strategic alternatives discussed included the form of
consideration for the potential transaction and various transaction structures.
See the section of the proxy statement entitled &#147;&#151;Purposes and Reasons for the
Merger; Consideration of Alternatives; Structure of the Merger&#151;The Barnes &#038;
Noble Parties&#148; for a discussion of the alternatives considered by Barnes &#038;
Noble. The Barnes &#038; Noble board of directors concluded that reintegration
could, on appropriate financial terms, enable Barnes &#038; Noble to devote
appropriate management resources to the Company, reduce expenses at the Company
by eliminating the costs of being a public company, and provide certain tax
savings to Barnes &#038; Noble. See the section of this proxy statement entitled
&#147;&#151;Purposes and Reasons for the Merger; Consideration of Alternatives; Structure
of the Merger&#151;The Barnes &#038; Noble Parties&#148; for a more detailed discussion of the
Barnes &#038; Noble Parties&#146; purposes of, and reasons for, the merger. Following
further discussion and deliberation, the Barnes &#038; Noble board of directors
authorized management to propose to take the Company private in a merger that
would pay $2.50 per share for each share of Class&nbsp;A common stock of the Company
that Barnes &#038; Noble did not own. Additionally, the Barnes &#038; Noble board of
directors authorized management to inform the Company that Barnes &#038; Noble
remained committed to providing interim financing to the Company if it required
capital prior to the consummation of the merger, and that in the event that the
merger was not consummated, such interim financing would be repaid through a
rights offering that Barnes &#038; Noble would underwrite at an appropriate discount
to market.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shortly following the November&nbsp;6, 2003 meeting of the Barnes &#038; Noble board
of directors, representatives of Barnes &#038; Noble informed Marie J. Toulantis,
our Chief Executive Officer, and Ms.&nbsp;Higgins that Barnes &#038; Noble planned to
formally announce its proposal and issue a press release on November&nbsp;7, 2003.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;7, 2003, prior to the opening of the markets, Mr.&nbsp;Riggio sent
the following letter to the special committee:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;November&nbsp;7, 2003
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>By
Fax</U></B>
</FONT>

<P align="left" style="margin-left:2%; margin-right:0%"><FONT size="2">Ms.&nbsp;Patricia Higgins and Mr.&nbsp;Jan Michiel Hessels<br>
Special Committee of the Board of Directors<br>
c/o barnesandnoble.com inc.<br>
76 Ninth Avenue, 11th Floor<br>
New York, NY 10011
</FONT>

<P align="center"><FONT size="2">12
</FONT>

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<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dear Patricia and Jan Michiel:
</FONT>

<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble, Inc. (&#147;Barnes &#038; Noble&#148;) is pleased to propose a
merger (the &#147;Merger&#148;) with barnesandnoble.com inc. (&#147;Barnes &#038; Noble.com&#148;)
in which all shareholders of Barnes &#038; Noble.com (other than B&#038;N.com
Holding Corp.) would receive $2.50 in cash for each share of Barnes &#038;
Noble.com (the &#147;Shares&#148;) that they own. At this price, Barnes &#038; Noble
estimates that it would be paying in excess of the approximate net
after-tax price per Share that it paid to Bertelsmann AG in a combination
of cash and notes on September&nbsp;15, 2003 for a 37% interest in Barnes &#038;
Noble.com. As a result of the Merger, Barnes &#038; Noble.com would become a
wholly owned subsidiary of Barnes &#038; Noble.
</FONT>

<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please note that we remain committed to providing interim financing
to Barnes &#038; Noble.com if it requires capital prior to the consummation of
the proposed transaction. In the event the transaction is not
consummated, the interim financing would be taken out by a rights
offering that we would underwrite at an appropriate discount to market.
</FONT>

<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consummation of the Merger would be subject to the (i)&nbsp;approval of
the Special Committee of the Board of Directors of Barnes &#038; Noble.com,
(ii)&nbsp;execution and delivery of a definitive merger agreement and such
other documentation (including regulatory filings) as may be required or
appropriate and (iii)&nbsp;receipt of all necessary third party consents, if
any (together, the &#147;Conditions&#148;). Upon consummation of the Merger,
Barnes &#038; Noble would cause the Shares to be delisted from trading on the
Nasdaq National Market and deregistered under the Securities Exchange Act
of 1934, as amended.
</FONT>

<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of the press release announcing the proposed transaction is
attached for your information. We expect to make this release public
prior to the market opening today.
</FONT>

<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We reserve the right to rescind or amend this offer at any time
prior to the satisfaction of the Conditions.
</FONT>

<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We wish to complete this transaction as soon as possible.
Accordingly, we appreciate your immediate consideration of this proposal
and look forward to your prompt response. We are available to meet with
you and your advisors to discuss the proposed transaction at your
convenience.
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Very truly yours,</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">/s/ Leonard Riggio</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2"><HR size="1" noshade></FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Leonard Riggio</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chairman</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;7, 2003, shortly following delivery of the letter to the
special committee, Barnes &#038; Noble issued a press release publicly announcing
its proposal.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following Barnes &#038; Noble&#146;s public announcement of its proposal to take the
Company private, fifteen substantially similar putative class action lawsuits
were filed on behalf of an alleged class of our unaffiliated stockholders
against the Company, our directors and Barnes &#038; Noble in the Delaware Court of
Chancery. The complaints generally alleged that our directors and Barnes &#038;
Noble had violated their fiduciary duties owed to our unaffiliated stockholders
in connection with the merger and sought, among other things, to enjoin Barnes
&#038; Noble&#146;s proposal or, in the alternative, damages in an unspecified amount and
rescission in the event a merger occurred pursuant to the proposal, as more
fully described in the section of this proxy statement entitled &#147;THE
MERGER&#151;Litigation Relating to the Merger.&#148;
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the second week of November&nbsp;2003, the special committee met with
its legal and financial advisors to consider, among other things, Barnes &#038;
Noble&#146;s proposal and the special committee&#146;s fiduciary duties in responding to
Barnes &#038; Noble&#146;s proposal. The special committee discussed with its legal and
financial advisors the due diligence investigations to be undertaken by each of
its advisors. In addition, the
</FONT>

<P align="center"><FONT size="2">13
</FONT>

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<P align="left"><FONT size="2">special committee was apprised of the shareholder complaints filed against
the Company, our directors and Barnes &#038; Noble in connection with Barnes &#038;
Noble&#146;s proposal. During that same time, the special committee, together with
its legal and financial advisors, met with Barnes &#038; Noble&#146;s legal and financial
advisors. Citigroup reviewed for the special committee and its legal and
financial advisors Barnes &#038; Noble&#146;s proposal.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From mid- to late November&nbsp;2003, the special committee held telephonic
meetings with its legal and financial advisors. During these meetings, the
special committee&#146;s legal and financial advisors updated the special committee
on their respective due diligence investigations. The special committee also
reviewed financial matters relating to the Company, including the Company&#146;s
working capital resources and liquidity needs. During this time, the special
committee&#146;s legal and financial advisors continued their due diligence
investigations.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In early December&nbsp;2003, the special committee held a meeting with its
legal and financial advisors at which Credit Suisse First Boston reviewed with
the special committee on a preliminary basis financial aspects of Barnes &#038;
Noble&#146;s offer of $2.50 per share in cash. On December&nbsp;2, 2003, the special
committee received a draft of the merger agreement from Barnes &#038; Noble.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee held telephonic meetings with its legal and
financial advisors during the second and third weeks of December&nbsp;2003 to
discuss the draft merger agreement received from Barnes &#038; Noble as well as
developments since the prior special committee meeting and its views with
respect to the adequacy of Barnes &#038; Noble&#146;s offer. During this time, Barnes &#038;
Noble informed the special committee that Barnes &#038; Noble was not willing to
sell its shares of our common stock in connection with any transaction
involving the Company and that it was not willing to consummate a transaction
for the shares of our common stock that it did not already own for
consideration other than cash.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;15, 2003, representatives of Credit Suisse First Boston met
with representatives of Citigroup and, as instructed by the special committee,
communicated that Barnes &#038; Noble&#146;s offer of $2.50 in cash was insufficient and
that the special committee would be willing to consider a per share price of
$3.20 in cash.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;17, 2003, Barnes &#038; Noble revised its offer to $2.90 per share
in cash. The special committee met telephonically with its legal and financial
advisors on several occasions from mid- to late December&nbsp;2003 to discuss the
status of the negotiations with Barnes &#038; Noble. During the week of December
23, 2003, the special committee&#146;s legal and financial advisors held numerous
conference calls with representatives of Barnes &#038; Noble with respect to the
merger agreement and the offer price. During the course of these discussions,
the special committee&#146;s advisors indicated to Barnes &#038; Noble&#146;s representatives
that the special committee would be willing to consider a per share price of
$3.10 in cash.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;6, 2004, Barnes &#038; Noble revised its offer to $3.00 per share in
cash. On January&nbsp;7, 2004, the special committee held a telephonic meeting with
its legal and financial advisors to discuss, among other things, Barnes &#038;
Noble&#146;s revised offer and at the conclusion of this meeting the special
committee instructed its advisors to notify Barnes &#038; Noble that the special
committee would be willing to accept $3.05 per share in cash assuming
satisfactory resolution of the terms of the merger agreement. Negotiations
over the terms of the merger agreement continued on January&nbsp;7, 2004, and on
January&nbsp;8, 2004, Barnes &#038; Noble agreed to take the Company private for $3.05
per share in cash, without interest and less any applicable
withholding taxes, and the terms of the merger agreement were finalized.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;8, 2004, the special committee held a telephonic meeting to
discuss the final terms of the merger agreement and the proposed transaction.
At this meeting, representatives of Dewey Ballantine reviewed with the special
committee the terms and conditions of the merger agreement. Also at this
meeting, representatives of Credit Suisse First Boston reviewed with the
special committee its financial analysis of the merger consideration and
rendered to the special committee an oral opinion, which opinion was confirmed
by delivery of a written opinion dated January&nbsp;8, 2004, to the effect that, as
of that date and based on and subject to the matters described in its opinion,
the consideration to be received in the merger by the holders of our common
stock (other than Barnes &#038; Noble and its affiliates and certain officers and
directors of each of the Company and Barnes &#038; Noble) was fair, from a financial
point of view, to such
</FONT>

<P align="center"><FONT size="2">14
</FONT>

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<P align="left"><FONT size="2">holders. The special committee also was notified that Barnes &#038; Noble had
reached a settlement with the plaintiffs in the shareholder litigation.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee then carefully considered the benefits and risks
associated with the proposed transaction to our unaffiliated stockholders and
the special committee&#146;s reasons for the proposed transaction. After
deliberation, the special committee determined that the terms of the merger
agreement and the merger, were advisable, fair to, and in the best interest of
the Company and our stockholders (other than Barnes &#038; Noble and its
affiliates). The special committee then unanimously recommended to our entire
board of directors that the board approve the merger and the transactions
contemplated thereby, including the merger.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the special committee meeting, our board of directors, upon the
recommendation of the special committee, unanimously (i)&nbsp;determined that the
terms of the merger agreement and the transactions contemplated thereby,
including the merger, were advisable, fair to and in the best interests of the
Company and our stockholders (other than Barnes &#038; Noble and its affiliates) and
(ii)&nbsp;resolved to recommend that our stockholders vote to approve and adopt the
merger agreement and the transactions contemplated thereby, including the
merger.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;8, 2004, the parties executed the merger agreement and the
Company and Barnes &#038; Noble issued press releases announcing the execution of
the merger agreement.
</FONT>

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<DIV align="left"><A NAME="006"></A></DIV>

<P align="left"><FONT size="2"><B>Recommendation of the Special Committee and our Board of Directors</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our directors also serve as directors of Barnes &#038; Noble or its
affiliates. Because these directors have financial and other interests that
may be different from, and in addition to, your interests in the merger, our board
of directors decided that, in order to protect the interests of our
unaffiliated stockholders in evaluating and negotiating the merger agreement, a
special committee of independent directors who are not affiliated with Barnes &#038;
Noble or its affiliates, and who have no financial interest in the merger,
should be formed to perform those tasks and, if appropriate, to recommend the
merger and the terms of the merger agreement to our entire board.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee of our board of directors has unanimously determined
that the terms of the merger agreement and the merger are advisable, fair to
and in the best interests of the Company and our stockholders (other than
Barnes &#038; Noble and its affiliates). The special committee unanimously
recommended to our board of directors that the merger agreement and the merger
be approved and adopted. The special committee considered a number of factors
in reaching its determinations and recommendations as more fully described below.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors, acting upon the recommendation of the special
committee, unanimously determined that the merger agreement and the
transactions contemplated thereby, including the merger, are advisable, fair
to, and in the best interests of, the Company and our stockholders (other than
Barnes &#038; Noble and its affiliates). <B>On the basis of the foregoing, our board
of directors has unanimously approved the merger agreement and the merger, and
recommends that our stockholders vote to approve and adopt the merger agreement
and the merger. The recommendation of our board of directors was made after
consideration of all the material factors, both positive and negative, as
described below.</B>
</FONT>

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<DIV align="left"><A NAME="007"></A></DIV>

<P align="left"><FONT size="2"><B>Reasons for the Special Committee&#146;s Determination; Fairness of the Merger</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
determining the fairness of the merger and recommending adoption of the
merger agreement and approval of the merger to our board of directors, the
special committee considered a number of factors which, in the opinion of the
members of the special committee, supported the special committee&#146;s
recommendation, including:
</FONT>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the special committee&#146;s knowledge of our business, assets,
financial condition and results of operations, our competitive
position, the nature of our business and the retail Internet
industry in which we compete and, in particular, its belief that
many of the factors that may have
</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">15
</FONT>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">caused our shares over the last three years to trade at price levels
substantially below the merger consideration are not likely to change
in the foreseeable future;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the relationship between the merger consideration and recent
market prices for our common stock, including: $3.05 per share in
cash represented a 35.6% premium over the closing price on November
6, 2003 (the last day of trading before public announcement of
Barnes &#038; Noble&#146;s initial offer) and an 8.9% premium over the per
share consideration paid by Barnes &#038; Noble to Bertelsmann in July
2003; and our common stock had not traded above $3.05 during the
past three years;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the negotiations with respect to the merger consideration
that, among other things, led to an increase in Barnes &#038; Noble&#146;s
initial offer from $2.50 per share of our common stock to $3.05 per
share of our common stock, and the special committee&#146;s determination
that, following extensive negotiations between the special committee
and Barnes &#038; Noble, $3.05 per share was the highest price that
Barnes &#038; Noble would agree to pay, with the special committee basing
its belief on a number of factors, including the duration and tenor
of negotiations, assertions made by Barnes &#038; Noble during the
negotiation process and the experience of the special committee and
its advisors;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the financial presentation of Credit Suisse First Boston to
the special committee on January&nbsp;8, 2004, including Credit Suisse
First Boston&#146;s opinion as to the fairness, from a financial point of
view and as of the date of the opinion, of the merger consideration
to holders of our common stock (other than Barnes &#038; Noble and its
affiliates and directors and officers of each of the Company and
Barnes &#038; Noble);
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the fact that the merger consideration will be paid in all
cash to our stockholders, eliminating any uncertainties in value to
our stockholders;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the likelihood that the merger would close as a result of
Barnes &#038; Noble having the necessary capital to finance the merger
without having to obtain financing;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the fact that, under the terms of the merger agreement, the
special committee would be entitled, if necessary, to comply with
its fiduciary duties, to consider unsolicited bona fide alternative
proposals and would be entitled to terminate the merger agreement if
it determined that such proposal was more favorable to our
unaffiliated stockholders and the party making such proposal was
reasonably able to finance the proposed transaction;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the fact that, under the terms of the merger agreement, our
board of directors (acting upon the recommendation of the special
committee) or the special committee is not prohibited from
withdrawing, qualifying or modifying its recommendation that our
stockholders vote to approve and adopt the merger agreement and the
merger if the special committee determines that such withdrawal,
qualification or modification is necessary in order for the special
committee to comply with its fiduciary duties;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the special committee&#146;s judgment, in light of the fact that
no third parties had expressed an interest in acquiring the Company
following Barnes &#038; Noble&#146;s public announcement of its initial offer
on November&nbsp;7, 2003, that it was unlikely that any other buyer would
be willing to pay a price equal to or greater than $3.05 per share
in cash; and
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the ability of stockholders who may not support the merger to
exercise appraisal rights under Delaware law.
</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee also determined that the merger is procedurally fair
because, among other things:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">our board of directors established a special committee to
consider and negotiate the merger agreement;
</FONT></TD>
</TR>
</TABLE>


<P align="center"><FONT size="2">16
</FONT>

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<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the special committee is composed of independent directors
who do not serve as directors of Barnes &#038; Noble;
</FONT></TD>
</TR>
</TABLE>

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<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the special committee was granted the full authority of our
board of directors to evaluate Barnes &#038; Noble&#146;s proposal and any
alternative transactions;
</FONT></TD>
</TR>
</TABLE>

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<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the special committee retained and received advice from its
own independent legal and financial advisors in evaluating,
negotiating and recommending the terms of the merger agreement, and
these advisors reported directly to and took direction solely from
the special committee;
</FONT></TD>
</TR>
</TABLE>

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<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the price of $3.05 per share and the other terms and
conditions of the merger agreement resulted from active and lengthy
negotiations between the special committee and its legal and
financial advisors, on the one hand, and Barnes &#038; Noble and its
legal and financial advisors, on the other hand; and
</FONT></TD>
</TR>
</TABLE>

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<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">under Delaware law, our stockholders have the right to demand
appraisal of their shares.
</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In light of the foregoing factors, the special committee determined that
the merger is procedurally fair despite the fact that the terms of the merger
agreement do not require the approval of at least a majority of our
unaffiliated stockholders.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee also considered a variety of risks and other
potentially negative factors concerning the merger. The material risks and
potentially negative factors considered by the special committee were as
follows:
</FONT>

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<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the Company will cease to be a public company and our
stockholders will no longer participate in any potential future
growth;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">while we expect to complete the merger, there can be no
assurances that all conditions to the parties&#146; obligations to
complete the merger agreement will be satisfied and, as a result,
the merger may not be completed;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">gains from all cash transactions are generally taxable to our
stockholders for U.S. federal income tax purposes;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the fact that Barnes &#038; Noble has agreed to vote approximately
96.3% of the voting power of our common stock in favor of approving
the merger means that the proposed merger does not require the
approval of any unaffiliated stockholders; and
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">the possibility of disruption to our operations following the
announcement of the merger, and the resulting effect on us if the
merger does not close.
</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee concluded, however, that these risks and potentially
negative factors could be managed or mitigated by the Company or were unlikely
to have a material impact on the merger, and that, overall, the potentially
negative factors associated with the merger were outweighed by the potential
benefits of the merger.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the special committee considered our net book value, liquidation
value and going concern value in determining the fairness of the merger to our
unaffiliated stockholders, the special committee noted the following:
</FONT>

<P align="center"><FONT size="2">17
</FONT>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">our net book value, which is an accounting concept, generally
has no correlation to the fair value of our shares in the context of
a sale of the Company;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">selling our business as an ongoing operation to Barnes &#038;
Noble in the merger will realize greater value for our unaffiliated
stockholders that is more certain and more immediate than the value
that would otherwise be realized in an orderly liquidation of our
business; and
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">to the extent our going concern value is reflected in the
public market price of our common stock, the merger consideration to
be received by our stockholders represents a premium to our going
concern value.
</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special committee and our board of directors were fully aware of and
considered possible conflicts of interest of certain of our directors and
officers set forth below under &#147;&#151;Interests of Directors and Officers in the
Merger.&#148; The special committee, which consists solely of directors who are not
officers or employees of the Company, and who have no financial interest in the
proposed merger, was aware of these interests and considered them in making its
determination.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After considering these factors, the special committee concluded that the
positive factors relating to the merger outweighed the negative factors.
Because of the variety of factors considered, the special committee did not
find it practicable to quantify or otherwise assign relative weights to, and
did not make specific assessments of, the specific factors considered in
reaching its determination. In addition, individual members of the special
committee may have assigned different weights to various factors. The
determination of the special committee was made after consideration of all of
the factors together.
</FONT>

<!-- link2 "Reasons for our Board of Directors&#146; Determination; Fairness of the Merger" -->
<DIV align="left"><A NAME="008"></A></DIV>

<P align="left"><FONT size="2"><B>Reasons for our Board of Directors&#146; Determination; Fairness of the Merger</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors consists of six directors, two of whom serve on the
special committee. On January&nbsp;8, 2004 following the special committee&#146;s
meeting with its legal and financial advisors, our board of directors, acting
upon the recommendation of the special committee, unanimously approved the
merger agreement and the transactions contemplated thereby, including the
merger. In considering the determination of the special committee, our board
of directors believed that the analysis of the special committee was reasonable
and adopted the special committee&#146;s conclusion and the analysis underlying the
conclusion.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors believes that the merger agreement and the merger
are substantively and procedurally fair to, and in the best interests of, our
stockholders (other than Barnes &#038; Noble and its affiliates) for all of the
reasons set forth above under &#147;&#151;Reasons for the Special Committee&#146;s
Determination; Fairness of the Merger.&#148; In addition, with respect to
procedural fairness, our board of directors established a special committee,
consisting of two independent directors. Neither of the members of the special
committee is employed by or serves as a director of Barnes &#038; Noble or its
affiliates or is employed by us. The merger consideration of $3.05 per share
in cash was the highest price Barnes &#038; Noble indicated it was willing to pay
following extensive negotiations between the special committee, Barnes &#038; Noble
and their respective legal and financial advisors.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In reaching these conclusions, our board of directors considered it
significant that the special committee retained independent legal and financial
advisors who have extensive experience with transactions similar to the merger
and who assisted the special committee in evaluating the merger and in
negotiating with Barnes &#038; Noble.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of the foregoing factors, our board of directors determined that
the merger is procedurally fair despite the fact that the terms of the merger
agreement do not require the approval of at least a majority of our
unaffiliated stockholders.
</FONT>

<!-- link2 "Opinion of the Special Committee&#146;s Financial Advisor" -->
<DIV align="left"><A NAME="009"></A></DIV>

<P align="left"><FONT size="2"><B>Opinion of the Special Committee&#146;s Financial Advisor</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston has acted as financial advisor to the special
committee in connection with the merger. The special committee selected Credit
Suisse First Boston based on Credit Suisse First
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<P align="left"><FONT size="2">Boston&#146;s experience, reputation and familiarity with the business sector
in which the Company conducts its business. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with Credit Suisse First Boston&#146;s engagement, the special
committee requested that Credit Suisse First Boston evaluate the fairness, from
a financial point of view, of the merger consideration to the holders of the
Company&#146;s common stock, other than Barnes &#038; Noble and its affiliates and
officers and directors of each of Barnes &#038; Noble and the Company. On January
8, 2004, at a meeting of the special committee held to evaluate the merger,
Credit Suisse First Boston delivered to the special committee its opinion to
the effect that, as of that date and based on and subject to the matters
described in its opinion, the merger consideration was fair, from a financial
point of view, to the holders of the Company&#146;s common stock, other than Barnes
&#038; Noble and its affiliates and officers and directors of each of Barnes &#038; Noble
and the Company.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>The full text of Credit Suisse First Boston&#146;s written opinion, dated
January&nbsp;8, 2004, to the special committee, which sets forth the procedures
followed, assumptions made, matters considered and limitations on the review
undertaken, is attached as Annex C to this proxy statement and is incorporated
herein by reference. Holders of the Company&#146;s common stock are encouraged to
read this opinion carefully and in its entirety. Credit Suisse First Boston&#146;s
opinion was provided to the special committee in connection with its evaluation
of the merger consideration and relates only to the fairness, from a financial
point of view, of the merger consideration, does not address any other aspect
of the proposed merger and does not constitute a recommendation to any
stockholder as to any matters relating to the merger or any related
transaction. The summary of Credit Suisse First Boston&#146;s opinion in this proxy
statement is qualified in its entirety by reference to the full text of the
opinion.</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In arriving at its opinion, Credit Suisse First Boston reviewed publicly
available business and financial information relating to the Company, as well
as the merger agreement. Credit Suisse First Boston also reviewed other
information, including financial forecasts, that were provided to or discussed
with Credit Suisse First Boston by the Company&#146;s management. Credit Suisse
First Boston also met with the Company&#146;s management to discuss the business and
prospects of the Company. Credit Suisse First Boston considered financial and
stock market data of the Company, and compared those data with similar data for
other publicly held companies in businesses which it deemed similar to that of
the Company. Credit Suisse First Boston considered, to the extent publicly
available, the financial terms of other business combinations and other
transactions which have been effected or announced. Credit Suisse First Boston
also considered other information, financial studies, analyses and
investigations and financial, economic and market criteria which it deemed
relevant.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the information that
it reviewed or considered and relied on that information being complete and
accurate in all material respects. With respect to the financial forecasts for
the Company provided to or discussed with Credit Suisse First Boston by the
Company&#146;s management, Credit Suisse First Boston assumed that the forecasts
were reasonably prepared on bases which reflected the best currently available
estimates and judgments of the Company&#146;s management as to the future financial
performance of the Company. Credit Suisse First Boston also assumed, with the
consent of the special committee, that the merger would be consummated in
accordance with the terms of the merger agreement, without waiver, amendment,
or modification of any material term, condition or agreement contained in the
merger agreement, and that in the course of obtaining any necessary regulatory
and third party approvals and consents for the merger, no delay, limitation,
restriction or condition would be imposed that would have an adverse effect on
the contemplated benefits of the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston was not requested to make, and did not make, an
independent evaluation or appraisal of the assets or liabilities, contingent or
otherwise, of the Company, and Credit Suisse First Boston was not furnished
with any such evaluations or appraisals. Although Credit Suisse First Boston
evaluated the merger consideration from a financial point of view, Credit
Suisse First Boston was
</FONT>



<P align="center"><FONT size="2">19
</FONT>

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<P align="left"><FONT size="2">not requested to, and it did not, recommend the specific consideration to
be received in the merger, which consideration was determined between the
special committee, on the one hand, and Barnes &#038; Noble, on the other hand.
Credit Suisse First Boston&#146;s opinion was necessarily based on information
available to it and financial, economic, market and other conditions as they
exist and can be evaluated on the date of its opinion. Credit Suisse First
Boston was not requested to, and it did not, solicit third party indications of
interest in acquiring all or any part of the Company. Credit Suisse First
Boston&#146;s opinion did not address the relative merits of the merger as compared
to other transactions or business strategies that may be available to the
Company, and it did not address the underlying business decision of the Company
to proceed with the merger. Although subsequent developments may affect its
opinion, Credit Suisse First Boston does not have any obligation to update,
revise or reaffirm its opinion. No other limitations were imposed on Credit
Suisse First Boston with respect to the investigations made or procedures
followed by Credit Suisse First Boston in rendering its opinion.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In preparing its opinion to the special committee, Credit Suisse First
Boston performed a variety of financial and comparative analyses, including
those described below. The summary of Credit Suisse First Boston&#146;s analyses
described below is not a complete description of the analyses underlying Credit
Suisse First Boston&#146;s opinion. The preparation of a fairness opinion is a
complex process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances and, therefore, a fairness opinion is not readily
susceptible to partial analysis or summary description. In arriving at its
opinion, Credit Suisse First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor that it considered.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors
or focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying its analyses and
opinion.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In its analyses, Credit Suisse First Boston considered industry
performance, general business, economic, market and financial conditions and
other matters, many of which are beyond the control of the Company. No
company, transaction or business used in Credit Suisse First Boston&#146;s analyses
as a comparison is identical to the Company or the proposed merger, and an
evaluation of the results of those analyses is not entirely mathematical.
Rather, the analyses involve complex considerations and judgments concerning
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the companies, business segments
or transactions analyzed. The estimates contained in Credit Suisse First
Boston&#146;s analyses and the ranges of valuations resulting from any particular
analysis are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable
than those suggested by the analyses. In addition, analyses relating to the
value of businesses or securities do not purport to be appraisals or to reflect
the prices at which businesses or securities actually may be sold.
Accordingly, the estimates used in, and the results derived from, Credit Suisse
First Boston&#146;s analyses are inherently subject to substantial uncertainty.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston&#146;s opinion and financial analyses were only one
of many factors considered by the special committee in its evaluation of the
proposed merger and should not be viewed as determinative of the views of the
special committee or the Company&#146;s management with respect to the merger or the
merger consideration.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of Credit Suisse First Boston&#146;s written presentation to the special
committee has been attached as Exhibit (c)(2) to the Schedule&nbsp;13E-3 filed with
the Securities and Exchange Commission in connection with the merger and the
summary described below is qualified by reference to this Exhibit. Credit
Suisse First Boston&#146;s written presentation will be available for inspection and
copying at the Company&#146;s principal executive offices during regular business
hours by any interested stockholder or any representative of the stockholder
who has been so designated in writing and may be inspected and copied at the
office of, and obtained by mail from, the Securities and Exchange Commission.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the material financial analyses underlying
Credit Suisse First Boston&#146;s opinion dated January&nbsp;8, 2004 delivered to the
special committee in connection with the merger. <B>The financial analyses
summarized below include information presented in tabular format. In order to
fully understand Credit Suisse First Boston&#146;s financial analyses, the tables
must be read together</B>
</FONT>



<P align="center"><FONT size="2">20
</FONT>

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<P align="left"><FONT size="2"><B>with the text of each summary. The tables alone do not constitute a
complete description of the financial analyses. Considering the data in the
tables below without considering the full narrative description of the
financial analyses, including the methodologies and assumption underlying the
analyses, could create a misleading or incomplete view of Credit Suisse First
Boston&#146;s financial analyses.</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stock Trading History</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston analyzed the prices at which the Company&#146;s
common stock traded during the period from January&nbsp;6, 2003 through January&nbsp;6,
2004. Credit Suisse First Boston noted that the merger consideration of $3.05
per share was higher than the highest closing price of the Company&#146;s common
stock during this period and represented:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">a 5.2% premium to the closing price of the Company&#146;s common
stock on January&nbsp;6, 2004;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">a 35.6% premium to the closing price of the Company&#146;s common
stock on November&nbsp;6, 2003, which was the last trading day prior to
Barnes &#038; Noble&#146;s public announcement of its offer to acquire all of
the Company&#146;s outstanding common stock that it did not already own;
and
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">an 8.9% premium to the price that Barnes &#038; Noble paid on July
29, 2003 to acquire all of Bertelsmann&#146;s interest in the Company and
B&#038;N.com.
</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Discounted Cash Flow Analysis</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston performed a discounted cash flow analysis of
the Company to calculate the estimated present value of the stand-alone,
unlevered, after-tax free cash flows that the Company could generate over
calendar years 2004 through 2008 based on three scenarios:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">a management case, which was based on internal estimates of
the Company&#146;s management for calendar years 2003 through 2006 and
extrapolated for calendar years 2007 through 2008 based on guidance
from the Company&#146;s management;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">an increased competition case, which was a sensitivity case
that included adjustments to the management case estimates based on
guidance from the Company&#146;s management, reflecting negative sales
growth and lower gross margins in calendar years 2004 and 2005, and
higher promotional and marketing spending; and
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">a growth case, which was a sensitivity case that included
adjustments to the management case estimates based on guidance from
the Company&#146;s management, reflecting sales growth consistent with
the total growth of the online book industry, higher gross margins,
and higher marketing, merchandising and customer service spending.
</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston applied a range of earnings before interest,
taxes, depreciation and amortization, commonly referred to as EBITDA, terminal
value multiples of 12.0x to 16.0x to the Company&#146;s calendar year 2008 estimated
EBITDA. The present value of the cash flows and terminal values were
calculated using discount rates ranging from 15% to 20%. This analysis
indicated the following implied values per share of the Company&#146;s common stock,
as compared to the merger consideration:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center" colspan="9"><FONT size="1"><B>Implied
Values Per Share of the Company&#146;s Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Merger Consideration</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left" colspan="9"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Increased</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Management Case</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Competition Case</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Growth Case</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="2">$1.49 to $2.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD nowrap align="right"><FONT size="2">0.40 to $0.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD nowrap align="right"><FONT size="2">3.03 to $4.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>

<P align="center"><FONT size="2">21
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Comparable Companies Analysis</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Using publicly available information, Credit Suisse First Boston reviewed
the market values and trading multiples of the following publicly traded
companies in the e-commerce and book/video/music retail industries:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="70%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="1"><B>E-commerce</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="1"><B>Book/Video/Music Retailers</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Amazon.com, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Barnes &#038; Noble</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
drugstore.com, inc
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Best Buy Co., Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
eBay Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Blockbuster, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
InterActiveCorp
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Borders Group, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Netflix, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Circuit City Stores, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
1-800-FLOWERS.COM, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Hollywood Entertainment Corporation</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Overstock.com, Inc.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Priceline.com Incorporated</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston compared the enterprise values, calculated as
equity value plus total debt and minority interests, less cash, of the Company
and the comparable companies, as a multiple of estimated revenues and EBITDA
for 2003 and 2004, as well as projected sales and earnings growth rates and
profitability measures of the Company and the comparable companies. Credit
Suisse First Boston then applied a range of revenue multiples derived from its
analysis of the comparable companies from 0.50x to 1.25x to calendar year 2003
estimated revenue data of the Company. All multiples were based on closing
stock prices on January&nbsp;6, 2004. Estimated financial data for the comparable
companies were based on publicly available research analysts&#146; estimates.
Estimated financial data for the Company were based on estimates of the
Company&#146;s management. This analysis indicated the following implied values per
share of the Company&#146;s common stock, as compared to the merger consideration:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="60%">
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Implied Values Per Share of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>the Company&#146;s Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Merger Consideration</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">$1.51 to $3.36</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="2">$ 3.05</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Precedent Transaction Analysis</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Using publicly available information, Credit Suisse First Boston reviewed
purchase price multiples in the following 16 selected transactions involving
e-commerce companies:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="70%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="1"><B>Acquiror</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="left"><FONT size="1"><B>Target</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Barnes &#038; Noble
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Bertelsmann&#146;s
Interest in the Company and B&amp;N.com</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
InterActiveCorp
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Hotels.com</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
InterActiveCorp
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Expedia, Inc. (2003)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
InterActiveCorp
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Ticketmaster</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
InterActiveCorp
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Expedia, Inc. (2001)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Credit Suisse First Boston, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">CSFBdirect</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vivendi
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">MP3.com, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Autobytel, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Autoweb.com, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
General Electric Company
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">NBC Internet, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Staples, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Staples.com</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
The Walt Disney Company
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">The Walt Disney Internet Group</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vitamin Shoppe Industries Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">VitaminShoppe.com</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
barnesandnoble.com inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Fatbrain.com, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Bertelsmann AG
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">CDnow, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Webvan Group, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">HomeGrocer.com, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&#149;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
CMGI, Inc.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&#149;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">uBid, Inc.</FONT></TD>
</TR>
</TABLE>
</DIV>



<P align="center"><FONT size="2">22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston compared enterprise value in each of the
selected transactions as a multiple of the target company&#146;s latest 12&nbsp;months
revenues, EBITDA and earnings before interest and taxes. Credit Suisse First
Boston then applied a range of revenue multiples derived from its analysis of
the selected transactions from 0.80x to 1.40x to corresponding latest 12&nbsp;months
revenue data of the Company. All multiples for the selected transactions were
based on publicly available financial information. Estimated financial data
for the Company were based on internal estimates of the Company&#146;s management.
This analysis indicated the following implied values per share of the Company&#146;s
common stock, as compared to the merger consideration:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Implied Values Per Share of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>the Company's Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Merger Consideration</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">$2.29 to $3.69</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Minority Buy-out Premiums Analysis</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Using publicly available information, Credit Suisse First Boston reviewed
the premiums paid as a percentage of the closing stock prices prior to the
transaction announcement date in minority buy-out transactions completed in the
United States between January&nbsp;1, 1998 and December&nbsp;1, 2003 with transaction
values greater than $50&nbsp;million. This analysis showed the following:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Percentage of Shares Acquired</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>All</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Transactions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>30-40%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>20-30%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Less than 20%</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Median Premium</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Average Premium</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">High Premium</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">140.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">135.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">104.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">140.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Low Premium</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29.1</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29.1</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(0.7</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(11.6</FONT></TD>
    <TD nowrap><FONT size="2">%)</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston then reviewed the following implied per share
purchase prices calculated using premiums ranging from 10% to 30% based upon
the closing price of the Company&#146;s common stock on November&nbsp;6, 2003, which was
the last trading day prior to Barnes &#038; Noble&#146;s public announcement of its offer
to acquire all of the Company&#146;s outstanding common stock that it did not
already own. This analysis showed the following:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Closing Price of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>the Company&#146;s</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Common Stock</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>on November 6, 2003</B></FONT></TD>
    <TD nowrap align="center" colspan="21"><FONT size="1"><B>Indicative Premium</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="left" colspan="21"><HR size="1" noshade></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>10.0%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>15.0%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>20.0%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>25.0%</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>30.0%</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD align="center"><FONT size="2">$2.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Miscellaneous</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has agreed to pay Credit Suisse First Boston customary fees
for its financial advisory services in connection with the merger. The Company
also has agreed to reimburse Credit Suisse
</FONT>



<P align="center"><FONT size="2">23
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">First Boston for its reasonable and customary out-of-pocket expenses,
including the reasonable fees and expenses of its outside legal counsel and any
other advisor retained by Credit Suisse First Boston, and to indemnify Credit
Suisse First Boston and related parties against liabilities, including
liabilities under the federal securities laws, arising out of its engagement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Credit Suisse First Boston and its affiliates in the past have provided
and may in the future provide investment banking and other financial services
to Barnes &#038; Noble, unrelated to the merger, for which services Credit Suisse
First Boston and its affiliates have received, and expect to receive,
compensation. In the ordinary course of business, Credit Suisse First Boston
and its affiliates may actively trade the debt and equity securities of both
Barnes &#038; Noble and the Company for their own accounts and for the accounts of
customers and, accordingly, may at any time hold long or short positions in
those securities.
</FONT>

<!-- link2 "Position of the Barnes &#038; Noble Parties as to the Fairness of the Merger" -->
<DIV align="left"><A NAME="010"></A></DIV>

<P align="left"><FONT size="2"><B>Position of the Barnes &#038; Noble Parties as to the Fairness of the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the rules of the Securities and Exchange Commission, the Barnes &#038;
Noble Parties are required to express their belief as to the fairness of the
proposed merger to our stockholders who are unaffiliated with the Barnes &#038;
Noble Parties. The Barnes &#038; Noble Parties have considered the factors examined
by the special committee and our board of directors described in the sections
of this proxy statement entitled &#147;&#151;Reasons for the Special
Committee&#146;s Determination; Fairness of the Merger&#148; and &#147;&#151;Reasons
for our Board of Directors&#146; Determination; Fairness of the Merger.&#148; Based on
these factors and certain other factors described below, the Barnes &#038; Noble
Parties believe that the merger is both procedurally and substantively fair to
our unaffiliated stockholders. Barnes &#038; Noble has agreed to cause B&#038;N Holding
to vote its approximately 96.3% voting interest in the Company in favor of
adoption of the merger agreement and the merger at the special meeting.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The liquidation of our assets was not considered by the Barnes &#038; Noble
Parties to be a viable course of action based on their interest in the Company
continuing to conduct its business as a subsidiary of Barnes &#038; Noble and remain
a component of Barnes &#038; Noble&#146;s overall strategy. Therefore, no appraisal of
liquidation value was sought for purposes of valuing the consideration payable
in the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, the Barnes &#038; Noble Parties formed their belief that the
merger is procedurally and substantively fair to our unaffiliated stockholders
based on, among other things, the following factors:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the financial and other terms of the merger were determined
through arm&#146;s-length negotiations between Barnes &#038; Noble and the
special committee and its legal and financial advisors, all of which
are unaffiliated with Barnes &#038; Noble;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">that the merger consideration is all cash, thus eliminating
any uncertainties in valuing the consideration to be received by our
stockholders;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">under Delaware law, our stockholders have the right to demand
appraisal of their shares; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the relationship between the $3.05 merger consideration and
recent market prices for our common stock, including: $3.05 per
share in cash represented a 35.6% premium over the closing price on
November&nbsp;6, 2003 (the last day of trading before public announcement
of Barnes &#038; Noble&#146;s initial offer) and an 8.9% premium over the per
share consideration paid by Barnes &#038; Noble to Bertelsmann in July
2003; and our common stock had not traded above $3.05 during the
past three years.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Barnes &#038; Noble Parties have found it impracticable to assign, nor did
they assign, relative weight to the individual factors considered in reaching
their conclusion as to fairness. The foregoing discussion of the information
and factors considered by the Barnes &#038; Noble Parties as to the fairness of the
merger is not intended to be exhaustive, but is believed to include the
material factors considered by the
Barnes &#038; Noble Parties. Barnes &#038; Noble&#146;s views as to the fairness of the
merger to our unaffiliated stockholders should not be construed as a
recommendation to any stockholder as to whether such stockholder should vote in
favor of the merger agreement and the merger.
</FONT>



<P align="center"><FONT size="2">24
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "Purposes and Reasons for the Merger; Consideration of Alternatives; Structure of the Merger" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="left"><FONT size="2"><B>Purposes and Reasons for the Merger; Consideration of Alternatives; Structure of the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The Company</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our purpose for engaging in the merger is to enable our stockholders
(other than Barnes &#038; Noble, B&#038;N Holding and their respective subsidiaries) to
receive $3.05 per share in cash, without interest and less any
applicable withholding taxes, representing a substantial premium to the
market price of our common stock prior to Barnes &#038; Noble&#146;s initial offer. In
addition, the merger provides our unaffiliated stockholders immediate liquidity
for their investment in the Company. Shares of our common stock have been
trading at a relatively low trading volume. We believe that this is due to its
relatively low market capitalization and share price and the fact that the
Barnes &#038; Noble Parties hold a large portion of our outstanding shares and we
have not attracted meaningful analyst coverage. The merger will provide our
unaffiliated stockholders with immediate liquidity at a specified price for
their shares without the usual transaction costs associated with open market
sales.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we believe that obtaining $3.05 per share in cash, without interest and less any
applicable withholding taxes, for our
stockholders in the merger is preferable to attempting to achieve a future
price in excess of that amount as an independent publicly traded company. As a
private company, we will not continue to incur significant audit, legal and
other costs and fees associated with remaining a public company. Similarly,
our management will no longer be required to continue to devote the significant
time required to comply with our public reporting obligations. We also believe
that it is unlikely that a third party would be willing to consummate a
superior offer with us given our relationship with Barnes &#038; Noble and that
during the course of the special committee&#146;s negotiations with Barnes &#038; Noble
and its representatives, Barnes &#038; Noble indicated that it would not be willing
to sell its shares of our common stock in any proposed transaction.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are undertaking the merger now primarily because it presents the most
viable alternative for the Company at this time, the benefits of which may not
be available to our unaffiliated stockholders in the future, and for the
reasons set forth in the sections of this proxy statement entitled &#147;&#151;Background
of the Merger,&#148; &#147;&#151;Recommendation of the Special Committee and our Board of
Directors,&#148; &#147;&#151;Reasons for the Special Committee&#146;s Determination; Fairness of
the Merger&#148; and &#147;&#151;Reasons for our Board of Directors&#146; Determination; Fairness
of the Merger.&#148;
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The Barnes &#038; Noble Parties</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purpose of the Barnes &#038; Noble Parties for engaging in the merger is to
acquire all of the shares of our common stock that they do not currently own,
terminate our status as a publicly traded company, and afford our unaffiliated
stockholders the opportunity to dispose of their shares of our common stock for
cash at a value that the special committee and the respective boards of
directors of Barnes &#038; Noble and the Company have determined to be fair to our
unaffiliated stockholders.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After analysis conducted by Barnes &#038; Noble&#146;s management and an evaluation
by the Barnes &#038; Noble board of directors, together with its financial advisor,
Barnes &#038; Noble determined that the benefits perceived at the time of our
initial public offering had significantly diminished and that the potential
advantages to Barnes &#038; Noble of repurchasing the shares of our common stock
held by our unaffiliated stockholders outweighed the advantages of continuing
to maintain the Company as a separate publicly-traded entity. Barnes &#038; Noble
believes the advantages of a recombination of the two companies currently
include, but are not limited to, the following:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">elimination of separate and redundant costs, including audit
and legal costs, and management&#146;s commitment of time and resources
associated with the Company being a stand-alone public company
subject to the reporting requirements under federal securities laws;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the ability of Barnes &#038; Noble to utilize our management team
to the extent that it deems it advisable;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">enabling Barnes &#038; Noble to no longer provide the Company with
pricing on inventory and services on favorable terms as required
to provide under existing related-party agreements
</FONT></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">25
</FONT>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">as more fully described in the section of this proxy statement
entitled &#147;&#151;Certain Relationships and Related Transactions;&#148;
</FONT></TD>
</TR>
</TABLE>

<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">with respect to new transactions and interactions, Barnes &#038;
Noble will be free to deal with the Company without the necessity of
involving the audit committees of the board of directors of both
Barnes &#038; Noble and the Company and without the requirement of
ensuring that these transactions occur on arms-length terms;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">a present value tax benefit to Barnes &#038; Noble of
approximately $<B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093; </B>million based on the estimated utilization
of the Company&#146;s net operating losses and deductions for the
Company&#146;s portion of B&#038;N.com&#146;s current operating losses; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">as the Company is expected to require additional capital requirements
in the near future, facilitating Barnes &#038; Noble&#146;s ability to provide
such capital support.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Consideration of Alternatives</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once Barnes &#038; Noble
determined to reintegrate the Company, Barnes &#038; Noble decided to structure the
transaction as a cash merger in order to provide a prompt and orderly transfer of
complete ownership of the Company with reduced transaction costs and minimal
risk that the contemplated transaction will not be finalized. In choosing this
structure, Barnes &#038; Noble also considered the factors described in the section
of this proxy statement entitled &#147;&#151;Position of the Barnes &#038;
Noble Parties as to the Fairness of the Merger&#148; as well as various alternatives
to the merger discussed below.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble, together with its financial advisor, considered
alternatives to a cash merger. Among the alternatives, Barnes &#038; Noble
considered issuing shares of Barnes &#038; Noble common stock in exchange for the
shares of our common stock that Barnes &#038; Noble does not already own. However,
given the relatively small size of the transaction, Barnes &#038; Noble&#146;s management
did not believe that the substantial time, costs and complexity of an exchange
offer were justified. Barnes &#038; Noble also determined that issuing stock
instead of paying cash would have a significantly greater dilutive effect on
Barnes &#038; Noble&#146;s stockholders. Additionally, given Barnes &#038; Noble&#146;s
substantial size and capitalization, an exchange of Barnes &#038; Noble common stock
for shares of our common stock would not have resulted in our stockholders
retaining in any material way the indirect benefits of ownership of the
Company&#146;s business. Furthermore, Barnes &#038; Noble has expressed that because it
paid cash to Bertelsmann in connection with its buy-out of Bertelsmann&#146;s entire
interest in the Company, the payment of stock could be perceived as treating
our unaffiliated stockholders less favorably.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, Barnes &#038; Noble considered a cash tender offer. However,
Barnes &#038; Noble ultimately determined that a merger was in the best interests of
our unaffiliated stockholders because, through the special committee, they were
indirectly afforded the opportunity to negotiate the financial and other terms
of the merger, which our unaffiliated stockholders would not have been able to
do in a cash tender offer. This negotiation ultimately increased the
consideration payable by Barnes &#038; Noble in the merger by 22% over the price
that Barnes &#038; Noble initially offered.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to the Company&#146;s additional working capital requirements, Barnes &#038;
Noble also considered having the Company engage in a rights offering. Barnes &#038;
Noble did not consider this a preferable alternative largely because it would
have required a significant additional investment in the Company without any of
the benefits that would be derived from the merger. However, Barnes &#038; Noble
has indicated to the Company that Barnes &#038; Noble remains committed to providing
interim financing to the Company if the Company requires capital prior to the
consummation of the merger and, in the event that
the merger is not consummated, this interim financing would be taken out
by a rights offering that Barnes &#038; Noble would underwrite at an appropriate
discount to market.
</FONT>



<P align="center"><FONT size="2">26
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Structure of the Merger</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transaction has been structured as a merger of B&#038;N Acquisition with
and into the Company in order to permit the acquisition of the Company in a
single step and the preservation of our identity. The merger was structured as
a cash transaction because that was the consideration offered by Barnes &#038; Noble
in its proposal.
</FONT>


<!-- link2 "Effects of the Merger" -->
<DIV align="left"><A NAME="012"></A></DIV>


<P align="left"><FONT size="2"><B>Effects of the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the merger agreement, Barnes &#038; Noble will acquire the Company
for $3.05 in cash, without interest and less any applicable
withholding taxes, per share of our common stock (other than shares held by
Barnes &#038; Noble, B&#038;N Holding and their respective subsidiaries and any shares
with respect to which appraisal rights have been properly perfected under
Delaware law), through the merger of its wholly owned subsidiary, B&#038;N
Acquisition, with and into the Company. At the closing of the merger, the
Company will be an indirect wholly owned subsidiary of Barnes &#038; Noble and B&#038;N
Acquisition will cease to exist as a separate entity. As a result, Barnes &#038;
Noble and its subsidiaries will be entitled to all benefits resulting from the
Company&#146;s net book value and net earnings, including all income generated by
the Company&#146;s operations, if any, and any future increase in the Company&#146;s
value. Similarly, Barnes &#038; Noble also will bear the risk of all losses
generated by the Company&#146;s operations and any decrease in the value of the
Company after the merger. As a result of the acquisition of Bertelsmann&#146;s
interest in the Company in September&nbsp;2003, whether or not the merger is
consummated, the Company&#146;s financial results are consolidated with those of
Barnes &#038; Noble, which will remain a public company listed on the New York Stock
Exchange.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an additional consequence of the closing of the merger, our shares of
common stock will no longer be quoted on the NASDAQ National Market or publicly
traded or quoted on any other securities exchange or market. Furthermore, the
registration of our common stock under the Exchange Act will be terminated upon
application to the Securities and Exchange Commission after the merger.
Termination of the registration of our common stock under the Exchange Act will
substantially reduce the information required to be furnished by us to our
stockholders and would make certain provisions of the Exchange Act no longer
applicable to us. These include the short-swing profit recovery provisions of
Section&nbsp;16(b), the requirement to furnish proxy statements in connection with
stockholders&#146; meetings under Section 14(a) and the related requirement to
furnish an annual report to stockholders.
</FONT>

<!-- link2 "Plans for the Company" -->
<DIV align="left"><A NAME="013"></A></DIV>

<P align="left"><FONT size="2"><B>Plans for the Company</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is expected that, following the consummation of the merger, the
operations and business of the Company will be conducted substantially as they
are being conducted currently. Except as otherwise described in this proxy
statement, or as may be effected in connection with the reintegration of the
operations of Barnes &#038; Noble and the Company, Barnes &#038; Noble has informed us
that it has no current plans or proposals or negotiations which relate to or
would result in (i)&nbsp;an extraordinary corporate transaction, such as a merger
(other than the merger), reorganization or liquidation involving the Company;
(ii)&nbsp;any purchase, sale or transfer of a material amount of our assets; (iii)
any material change in our present dividend policy, indebtedness or
capitalization (other than a possible capital contribution prior to or
following consummation of the merger); (iv)&nbsp;any change in our management or any
change in any material term of the employment contract of any of our executive
officers; or (v)&nbsp;any other material change in our business or structure. It is
expected that, following the consummation of the merger, our board of directors
will consist of Messrs.&nbsp;Leonard Riggio, Stephen Riggio, Matthew Berdon and
William Sheluck, Jr.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the foregoing, Barnes &#038; Noble has informed us that,
following the consummation of the merger, it expects to review the Company&#146;s
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel to determine which changes may be necessary to best
organize and reintegrate the activities of the Company and Barnes &#038; Noble.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the merger is not completed because the conditions to the merger are
not satisfied or waived, we expect that our current management will continue to
operate our business substantially as presently operated. However, Barnes &#038;
Noble has informed us that, if the merger is not completed, it will re-evaluate
the role of the Company within Barnes &#038; Noble&#146;s overall corporate strategy.
</FONT>



<P align="center"><FONT size="2">27
</FONT>

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<!-- link2 "Interests of Directors and Officers in the Merger" -->
<DIV align="left"><A NAME="014"></A></DIV>

<P align="left"><FONT size="2"><B>Interests of Directors and Officers in the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In considering the recommendation of the special committee to our board of
directors and the recommendation of our board of directors, you should be aware
that some of our directors and officers may have interests in the merger that
may be different from, or in addition to, yours as a stockholder generally and
may create potential conflicts of interests. These interests are described
below and in the section of this proxy statement entitled &#147;PRINCIPAL
STOCKHOLDERS&#148; and set forth in Annex D to this proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors appointed the special committee, consisting solely
of independent directors who are not officers, directors, or employees of
Barnes &#038; Noble or its affiliates or employed by us, to evaluate, negotiate and
recommend the merger agreement and to evaluate whether the merger is in the
best interests of our stockholders who are unaffiliated with Barnes &#038; Noble and
its affiliates. The special committee was aware of these differing interests
and considered them, among other matters, in evaluating and negotiating the
merger agreement and the merger and in recommending to our board of directors
that the merger agreement be adopted and the merger be approved. In addition,
each of the members of our board of directors was aware of these interests and
considered them, among other matters, in approving the merger agreement and the
merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compensation of Members of the Special Committee</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the members of the special committee will be compensated for
serving as a member of the special committee. This compensation was authorized
by our board of directors in order to compensate the members of the special
committee for the significant additional time commitment that was required of
them in connection with fulfilling their duties and responsibilities as members
of the special committee. It is payable whether or not the merger is
completed. Each of Mr.&nbsp;Hessels and Ms.&nbsp;Higgins has received or will receive
$75,000 for their service on the special committee. The members of the special
committee also will be reimbursed for their reasonable out-of-pocket expenses
related to his or her services on the special committee. In addition, the
Company agreed to indemnify and hold harmless each member of the special
committee with respect to his or her service on, and any matter or transaction
considered by, the special committee to the fullest extent authorized or
permitted by law.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Merger Consideration to Be Received by Directors and Executive Officers</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2003, our directors and executive officers beneficially
owned, in the aggregate, 11,416,521 shares of our common stock, or
approximately 20.07% of the outstanding shares of our common stock.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, our directors and executive officers hold, in the aggregate, stock options to acquire
approximately 8,672,084 shares of our common stock. The merger agreement
provides that, immediately prior to the merger, all options, whether or not
vested, will be cashed out at a price equal to the excess, if any, of the
merger consideration over the per share exercise price of each option, less any
applicable withholding taxes. All other options will be cancelled without
payment. Accordingly, our directors and executive officers will be able to
receive the same cash consideration for their options as all of our other
option holders.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon the issued shares and outstanding options to purchase shares
beneficially owned by our directors and executive officers (which includes
shares not owned directly by such directors and executive officers), the
following are the anticipated proceeds for our directors and executive officers
from the merger, less any applicable withholding taxes:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Name of Director or</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Merger</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Executive Officer</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Proceeds</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leonard Riggio</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,144,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stephen Riggio</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,272,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Marie J. Toulantis</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,887,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">David C. Willen</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">760,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>



<P align="center"><FONT size="2">28
</FONT>

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<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="62%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Name of Director or</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Merger</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Executive Officer</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Proceeds</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Kevin M. Frain</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">757,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">David Gitow</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">806,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Daniel A. Blackman</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">618,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Michael N. Rosen</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">183,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Jan-Michiel Hessels</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Patricia Higgins</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">William F. Reilly</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">152,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>

<P align="left"><FONT size="2">For further information regarding the beneficial ownership of our securities by
our directors and executive officers, see the section of this proxy statement
entitled &#147;PRINCIPAL STOCKHOLDERS.&#148;
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Employment and Other Agreements</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble agreed to assume or guarantee payment of all our
obligations under the employment agreement with Marie J. Toulantis for her
services as Chief Executive Officer entered into as of October&nbsp;31, 2002 and
expiring on October&nbsp;31, 2005. The agreement provides for a minimum annual
salary of $600,000 and an annual bonus in accordance with our annual bonus
compensation plan established by the compensation committee of our board of
directors. The employment agreement also provides for reimbursement for all
expenses incurred in the performance of her duties and responsibilities under
the employment agreement, a car allowance, disability insurance and a severance
arrangement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble also agreed to assume or guarantee our obligations under
B&#038;N.com&#146;s deferred compensation plan which is a non-qualified plan, eligibility
for which is limited to &#147;eligible executives,&#148; who include: (i)&nbsp;our employees
who became B&#038;N.com employees on November&nbsp;1, 1998 and were eligible to
participate in the Barnes &#038; Noble deferred compensation plan on October&nbsp;31,
1998; and (ii)&nbsp;our employees whose base salary for a calendar year exceeds
$130,000. An eligible executive may elect in each year he or she is an
eligible executive to defer no less than $5,000 and no more than 50% of his or
her base salary to a deferral account. The deferral account of each eligible
executive who elects to participate in the deferred compensation plan is
credited or debited with investment earnings or losses based upon the
performance of the investment fund or index selected by the participant from
among alternatives selected by an administrative committee appointed by the
compensation committee of our board of directors.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A participant is entitled to a distribution of his or her deferral account
upon retirement or following termination of employment, as elected by the
participant, but no later than the beginning of the year in which the
participant would attain age 70 1/2. A participant may elect whether to
receive the distribution in a lump sum or, at retirement, in annual
installments over not more than fifteen (15)&nbsp;years.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Indemnification; Directors&#146; and Officers&#146; Insurance</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain limitations contained in the merger agreement, for a
period of at least six years following the merger, Barnes &#038; Noble has agreed to
indemnify and hold harmless each of the present and former directors and
officers of the Company and B&#038;N.com against any and all claims, losses,
liabilities, damages, judgments, fines, fees, costs or expenses in respect of
any matters existing or occurring at or prior to the effective time of the
merger (to the fullest extent permitted by applicable law and our amended and
restated certificate of incorporation or amended and restated by-laws), or any
other applicable indemnification agreements.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble will provide, for a six-year period, our current and former
directors and officers with an insurance policy that provides coverage for
events occurring at or prior to the effective time of the
merger that is no less favorable than our policy currently in place, or,
if substantially equivalent insurance coverage is unavailable, the most
advantageous insurance policy obtainable for an annual premium equal to 300% of
our annual premium currently in place for such insurance; provided that, Barnes
&#038; Noble shall not be required to pay an annual premium for such policy in
excess of 300% of the annual premium currently
</FONT>



<P align="center"><FONT size="2">29
</FONT>

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<P align="left"><FONT size="2">in place for such insurance. Alternatively, Barnes &#038; Noble may procure
&#147;tail insurance coverage&#148; to cover our current and former directors and
officers for events occurring at or prior to the effective time of the merger,
which coverage shall be no less favorable than the existing directors&#146; and
officers&#146; insurance policy, and Barnes &#038; Noble will maintain such coverage for
a period of not less than six years after the effective time of the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we entered into an indemnification agreement with the members
of the special committee in respect of their service on the special committee.
</FONT>

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<DIV align="left"><A NAME="015"></A></DIV>

<P align="left"><FONT size="2"><B>Certain Relationships and Related Transactions</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, B&#038;N.com has entered into agreements with Barnes &#038; Noble and
its affiliates. We believe that the transactions and agreements discussed
below (including renewals of any existing agreements) between B&#038;N.com and its
affiliates are at least as favorable to B&#038;N.com as could be obtained from
unaffiliated parties. The numbers referred to below are in thousands.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Supply Agreement</I></B>. B&#038;N.com entered into a Supply Agreement, dated October
31, 1998, as amended, with Barnes &#038; Noble, whereby Barnes &#038; Noble has agreed to
supply inventory to B&#038;N.com through Barnes &#038; Noble&#146;s distribution facilities
and purchasing departments. Pursuant to the Supply Agreement, Barnes &#038; Noble
charges B&#038;N.com its actual cost to acquire the inventory plus any incremental
overhead incurred by Barnes &#038; Noble in connection with providing such
merchandise supply services. B&#038;N.com purchased $106,167 and $126,217 from
Barnes &#038; Noble representing 34.0% and 45.0% of our merchandise purchases for
the years ended December&nbsp;31, 2002 and 2001, respectively. Furthermore, B&#038;N.com
purchased $77,671 from Barnes &#038; Noble representing 36.0% of our merchandise
purchases for the nine months ended September&nbsp;30, 2003. The charges for
incremental overhead for the years ended December&nbsp;31, 2002 and 2001 were $2,519
and $2,369, respectively. The charges for incremental overhead for the nine
months ended September&nbsp;30, 2003 were $2,545. At December&nbsp;31, 2002 and 2001,
$48,261 and $44,160, respectively, remained payable to Barnes &#038; Noble in
connection with these purchases. At September&nbsp;30, 2003, $51,715 remained
payable to Barnes &#038; Noble in connection with these purchases.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Services Agreement</I></B>. Under a Services Agreement, dated October&nbsp;31, 1998,
as amended, between B&#038;N.com and Barnes &#038; Noble, B&#038;N.com receives various
administrative services from Barnes &#038; Noble, including, among other things,
services for payroll processing, benefits administration, insurance (property
and casualty, medical, dental and life) and tax administration. In accordance
with the terms of the Services Agreement, B&#038;N.com reimburses Barnes &#038; Noble in
an amount equal to the third-party expenses it incurs to fund and provide such
services, plus any incremental internal costs. B&#038;N.com was charged $3,491 and
$4,144 for such services during the years ended December&nbsp;31, 2002 and 2001,
respectively. B&#038;N.com was charged $1,349 for such services during the nine
months ended September&nbsp;30, 2003.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Calendar Club Purchases</I></B>. B&#038;N.com purchased merchandise directly from
Calendar Club, L.L.C., a company engaged in the wholesaling and retailing of
calendars, in which Barnes &#038; Noble owns a 73.9% interest. B&#038;N.com&#146;s purchases
from Calendar Club, L.L.C were $1,740 and $1,110 for the years ended December
31, 2002 and 2001, respectively. B&#038;N.com&#146;s purchases from Calendar Club, L.L.C
were $1,207 for the nine months ended September&nbsp;30, 2003.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>New Jersey Warehouse Sublease</I></B>. B&#038;N.com subleases from Barnes &#038; Noble
approximately one-third of a 300,000 square foot warehouse facility located in
New Jersey. B&#038;N.com was charged by Barnes &#038; Noble $498 and $486 for such
subleased space during the years ended December&nbsp;31, 2002 and 2001,
respectively. B&#038;N.com was charged, by Barnes &#038; Noble, $419 for such subleased
space during the nine months ended September&nbsp;30, 2003. The amount paid to
Barnes &#038; Noble by B&#038;N.com approximates the cost per square foot paid by Barnes
&#038; Noble as tenant pursuant to its lease of the space from an unaffiliated third
party.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Music Supply and Database Services</I></B>. Since 1999, B&#038;N.com has used AEC One
Stop Group, Inc., referred to as &#147;AEC,&#148; as its main music supplier, and as one
of its suppliers of DVD/video. AEC is among the largest wholesale distributors
of music, videos and DVDs in the United States. AEC also provides B&#038;N.com with
a music, DVD and video product database. Subsequent to the initial supply
</FONT>



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</FONT>

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<P align="left"><FONT size="2">arrangement between AEC and B&#038;N.com, AEC&#146;s parent corporation was acquired
by an investor group in which Leonard Riggio, Chairman of our board of
directors and B&#038;N.com, became a minority investor. B&#038;N.com was charged by AEC
$40,536 and $29,759 in connection with this agreement for merchandise purchased
during the years ended December&nbsp;31, 2002 and 2001, respectively. B&#038;N.com was
charged by AEC $28,099, representing 13% of our merchandise purchases, during
the nine months ended September&nbsp;30, 2003. In addition, B&#038;N.com was charged by
AEC $403 and $279 for database services during the years ended December&nbsp;31,
2002 and 2001, respectively. B&#038;N.com was charged $252 by AEC for database
services during the nine months ended September&nbsp;30, 2003. At December&nbsp;31, 2002
and 2001, $9,008 and $9,307, respectively, remained payable to AEC. At
September&nbsp;30, 2003, $3,402 remained payable to AEC.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>License Agreements</I></B>. B&#038;N.com licenses the &#147;Barnes &#038; Noble&#148; name under a
royalty free license agreement, dated October&nbsp;31, 1998, as amended, between
B&#038;N.com and Barnes &#038; Noble College Bookstores, Inc., of which Leonard Riggio is
the principal stockholder. Pursuant to the License Agreement, we have been
granted an exclusive license to use the &#147;Barnes &#038; Noble&#148; name and trademark for
the purpose of selling books over the Internet (excluding sales of college
textbooks). Under a separate agreement dated as of January&nbsp;2001, between the
Company and Textbooks.com, Inc., a corporation owned by Leonard Riggio, B&#038;N.com
was granted the right to sell college textbooks over the Internet using the
&#147;Barnes &#038; Noble&#148; name. Pursuant to this agreement, B&#038;N.com pays Textbooks.com,
Inc. a royalty on revenues (net of product returns, applicable sales tax and
excluding shipping and handling) realized by us from the sale of books
designated as textbooks. The term of the agreement is for five years and
renews annually for additional one-year periods unless terminated 12&nbsp;months
prior to the end of any given term. For the years ended December&nbsp;31, 2002 and
2001, we recorded royalty expense of $3,485 and $5,981, respectively, under the
terms of this agreement. For the nine months ended September&nbsp;30, 2003, we
recorded royalty expense of $3,320 under the terms of this agreement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B&#038;N.com has a royalty free non-exclusive license, dated October&nbsp;31, 1998,
as amended, from Barnes &#038; Noble to use Barnes &#038; Noble&#146;s database of book
bibliographic data as well as certain software applications.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Barnes &#038; Noble Membership Program</I></B>. B&#038;N.com and Barnes &#038; Noble commenced a
marketing program in November&nbsp;2000, whereby a customer purchases a subscription
to the Barnes &#038; Noble Membership Program (formerly the &#147;Readers&#146; AdvantageTM
card&#148;) for an annual membership fee of $25.00 which is non-refundable after the
first 30&nbsp;days of the membership term. With this membership card, customers can
receive discounts of 10% on certain Barnes &#038; Noble purchases and 5% on all
B&#038;N.com purchases. B&#038;N.com and Barnes &#038; Noble have agreed to share the
expenses, net of revenue from the sale of the cards, related to this program in
proportion to the discounts customers receive on purchases with each company.
B&#038;N.com&#146;s share of the card revenue generated from this program for the years
ended December&nbsp;31, 2002 and 2001 were $1,359 and $636, respectively. B&#038;N.com&#146;s
share of the card revenue generated from this program for the nine months ended
September&nbsp;30, 2003 was $1,850.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Marketing Services Agreement</I></B>. In 2002, B&#038;N.com entered into an agreement
with Marketing Services (Minnesota) Corp., a wholly owned subsidiary of Barnes
&#038; Noble, for marketing services, which includes the issuance of gift cards.
Under this agreement, B&#038;N.com has received $10,991 for the nine months ended
September&nbsp;30, 2003 from Marketing Services Corp., which represents
reimbursement for gift card purchases made in a Barnes &#038; Noble store and
redeemed on the B&#038;N.com web site.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Shipping and Handling Agreements</I></B>. B&#038;N.com ships, through its fulfillment
centers, customer orders on behalf of Barnes &#038; Noble to Barnes &#038; Noble retail
stores as well as to Barnes &#038; Noble customers&#146; homes. B&#038;N.com charges Barnes &#038;
Noble the costs associated with such shipments plus any incremental overhead
incurred by B&#038;N.com to process these orders. For the years ended December&nbsp;31,
2002 and 2001, B&#038;N.com recorded $1,792 and $987, respectively, as a
reimbursement for shipping and handling from Barnes &#038; Noble. For the nine
months ended September&nbsp;30, 2003, B&#038;N.com recorded $1,458 as a reimbursement for
shipping and handling from Barnes &#038; Noble. In addition, during the year
2001, B&#038;N.com and Barnes &#038; Noble entered into an agreement whereby B&#038;N.com
receives a commission on all items ordered by customers at Barnes &#038; Noble
stores and shipped directly to customers&#146; homes by B&#038;N.com. Commissions for
these sales were recorded as revenue and amounted to $1,280 and $383 for
</FONT>



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</FONT>

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<P align="left"><FONT size="2">the years ended December&nbsp;31, 2002 and 2001, respectively. Commissions for
sales for the nine months ended September&nbsp;30, 2003 were recorded as revenue and
amounted to $878.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Nevada Warehouse Sublease</I></B><B>. </B>Barnes &#038; Noble subleased warehouse space from
B&#038;N.com in Reno, Nevada. B&#038;N.com charged Barnes &#038; Noble $500 and $1,882 for
such subleased space in the years ended December&nbsp;31, 2002 and 2001,
respectively. B&#038;N.com charged Barnes &#038; Noble $0 for such subleased space for
the nine months ended September&nbsp;30, 2003. Additionally, Barnes &#038; Noble
reimbursed B&#038;N.com $6,186 for fixed assets purchased on behalf of Barnes &#038;
Noble for the Reno warehouse. In January&nbsp;2002, B&#038;N.com determined it could not
effectively utilize the full capacity of its Reno, Nevada distribution center.
Accordingly, following approval by our board of directors on January&nbsp;29, 2002,
B&#038;N.com agreed to transfer the Reno warehouse lease and sell B&#038;N.com&#146;s
inventory located in Reno to Barnes &#038; Noble. Barnes &#038; Noble purchased the
inventory from B&#038;N.com at cost for approximately $9,877. The equipment was
sold to Barnes &#038; Noble at its original cost. Barnes &#038; Noble&#146;s board of
directors also approved Barnes &#038; Noble&#146;s assumption of the lease obligation and
the hiring of all of the employees at the Reno warehouse. The Reno lease
assignment and the transfer of the operations of the Reno warehouse to Barnes &#038;
Noble was completed in April&nbsp;2002. In connection with the transfer, B&#038;N.com
agreed to pay one-half of the rent charged for the warehouse through December
31, 2002. B&#038;N.com paid $943 in relation to these expenses for the year ended
December&nbsp;31, 2002.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Textbook Agreements</I></B>. In 2000, B&#038;N.com began purchasing new and used
textbooks directly from MBS Textbook Exchange, Inc., referred to as &#147;MBS,&#148; a
corporation majority owned by Leonard Riggio and one of the nation&#146;s largest
wholesalers of college textbooks. B&#038;N.com&#146;s total purchases for the years
ended December&nbsp;31, 2002 and 2001 were $17,223 and $13,206, respectively.
B&#038;N.com&#146;s total purchases for the nine months ended September&nbsp;30, 2003 were
$12,064. In addition, B&#038;N.com maintains a link on its web site called &#147;Sell
Your Textbooks&#148; which is hosted by MBS and through which B&#038;N.com customers are
able to sell back used books purchased at B&#038;N.com directly to MBS. B&#038;N.com is
paid a commission based on the price paid by MBS to the consumer. Total
commissions received and recorded as revenue for the years ended December&nbsp;31,
2002 and 2001 were $58 and $16, respectively. Total commission received and
recorded as revenue for the nine months ended September&nbsp;30, 2003 was $64.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Strategic Relationship Agreement</I></B>. Under a Strategic Relationship
Agreement, dated as of May&nbsp;1, 2001, between B&#038;N.com and GameStop Corp., a
majority owned subsidiary of Barnes &#038; Noble, B&#038;N.com&#146;s web site refers
customers to the GameStop Corp. web site for purchases of video game hardware,
software and accessories and PC entertainment software. GameStop Corp. pays
B&#038;N.com a referral fee based on its net sales revenue from certain eligible
purchases made by customers as a result of the redirection from the B&#038;N.com web
site. Either party may terminate the Strategic Relationship Agreement on 60
days&#146; notice. Commissions of $65 and $33 were recorded as revenue in the years
ended December&nbsp;31, 2002 and 2001, respectively, under this agreement.
Commission of $7 was recorded as revenue for the nine months ended September
30, 2003, under this agreement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>enews, inc. </I></B>B&#038;N.com has an approximate 46.8% equity stake in enews, inc.,
a company previously engaged in selling magazine subscriptions on the Internet,
and accounted for this investment under the equity method. Substantially all
of the balance of the shares are owned by Barnes &#038; Noble. In July&nbsp;2002, the
board of directors and the stockholders of enews, inc. approved a liquidation
plan. As of September&nbsp;30, 2003, the implementation of the liquidation plan had
been substantially completed and is expected to be concluded by February&nbsp;29,
2004. Prior to the implementation of the liquidation plan, B&#038;N.com fulfilled a
majority of orders for magazine subscriptions through enews, inc. and recorded
a commission on these sales. B&#038;N.com recorded commissions of $909 and $590 for
the years ended December&nbsp;31, 2002 and 2001, respectively, and was reimbursed
$524 and $295, respectively, for expenses incurred on behalf of enews, inc. for
the years ended December&nbsp;31, 2002 and 2001. B&#038;N.com recorded commission of $0
for the nine months ended September&nbsp;30, 2003 and was reimbursed $432 for
expenses incurred on behalf of enews, inc. for the same period.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Michael N. Rosen, Secretary and a director of the Company, also is a
member of Bryan Cave LLP, outside counsel to the Company and B&#038;N.com in
connection with matters unrelated to the proposed merger as well as to Barnes &#038;
Noble.
</FONT>

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<DIV align="left"><A NAME="016"></A></DIV>

<P align="left"><FONT size="2"><B>Provisions for Unaffiliated Stockholders</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the execution of the merger agreement, we did not make
any provisions to either grant unaffiliated stockholders access to our
corporate files or the corporate files of any other party to the merger
agreement or to obtain counsel or appraisal services for our unaffiliated
stockholders at our expense or the expense of any other party to the merger
agreement.
</FONT>


<P align="center"><FONT size="2">32
</FONT>

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<DIV align="left"><A NAME="017"></A></DIV>

<P align="center"><FONT size="2"><B>THE MERGER</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following information describes the material aspects of the merger.
This description is qualified in its entirety by reference to the annexes to
this proxy statement, including the merger agreement itself, which is attached
to this proxy statement as Annex A and is incorporated herein by reference.
You are encouraged to read Annex A in its entirety. See also the section of
this proxy statement entitled &#147;THE MERGER AGREEMENT.&#148;
</FONT>

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<DIV align="left"><A NAME="018"></A></DIV>

<P align="left"><FONT size="2"><B>Effective Time of the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If all of the conditions to the merger are satisfied or, to the extent
permitted, waived, the merger will be consummated and become effective at the
time that a certificate of merger is filed with the Secretary of State of the
State of Delaware or such later time as otherwise agreed by us and Barnes &#038;
Noble and provided in the certificate of merger. If the conditions to the
merger are satisfied or, to the extent permitted, waived, we expect to complete
the merger as soon as practicable after the special meeting.
</FONT>

<!-- link2 "Payment of Merger Consideration and Surrender of Stock Certificates" -->
<DIV align="left"><A NAME="019"></A></DIV>

<P align="left"><FONT size="2"><B>Payment of Merger Consideration and Surrender of Stock Certificates</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to the effective time of the merger, Barnes &#038; Noble will designate a
bank or trust company reasonably acceptable to us to act as exchange agent for
the purpose of making the cash payments provided by the merger agreement.
Immediately prior to the effective time, Barnes &#038; Noble will deposit, or cause
to be deposited, with the exchange agent immediately available funds in an
aggregate amount necessary to pay the merger consideration to our stockholders
(other than Barnes &#038; Noble, B&#038;N Holding and their respective subsidiaries).
The exchange agent will deliver to you your merger consideration according to
the procedure summarized below.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Promptly after the effective time of the merger (but no later that than
five business days after the effective time), the exchange agent will mail to
you a letter of transmittal and instructions advising you of the effectiveness
of the merger and the procedure for surrendering to the exchange agent your
stock certificates in exchange for payment of the merger consideration. Upon
the surrender for cancellation to the exchange agent of your stock
certificates, together with a letter of transmittal, duly executed and
completed in accordance with its instructions, and any other items specified by
the letter of transmittal, the exchange agent will pay to you your merger
consideration and your stock certificates will be cancelled. Payments of
merger consideration also will be reduced by any applicable withholding taxes.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If your stock certificates have been lost, stolen or destroyed, you may be
required to deliver to the exchange agent an affidavit of such loss, theft or
destruction and, if required by the surviving corporation, (i)&nbsp;an indemnity
bond in a reasonable amount that the surviving corporation deems reasonably
necessary as indemnity or (ii)&nbsp;enter into an indemnity agreement reasonably
satisfactory to the surviving corporation to indemnify the surviving
corporation, in order to receive your merger consideration.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the merger consideration, or any portion of it, is to be paid to a
person other than you, it will be a condition to the payment of the merger
consideration that your stock certificates be properly endorsed or otherwise in
proper form for transfer and that you pay to the exchange agent any transfer or
other taxes required by reason of the transfer or establish to our satisfaction
that the taxes have been paid or are not required to be paid. You should not
forward your stock certificates to the exchange agent without a letter of
transmittal, and you should not return your stock certificates with the
enclosed proxy.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At and after the effective time of the merger, you will cease to have any
rights as a stockholder of the Company, except for the right to surrender your
stock certificates, according to the procedure described in the merger
agreement, in exchange for payment of the merger consideration, without
interest, less any applicable withholding taxes, or, if you exercise your
appraisal rights, the right to perfect your right to receive payment for your
shares under Delaware law.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the effective time of the merger, our stock ledger with respect to
shares of our common stock that were outstanding prior to the merger will be
closed and no further registration of transfers of these shares will be made.
</FONT>



<P align="center"><FONT size="2">33
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After six months following the effective time of the merger, the exchange
agent will deliver to us all cash that has not yet been distributed in payment
of the merger consideration, plus any accrued interest, and the exchange
agent&#146;s duties will terminate. Thereafter, you may surrender your stock
certificates to the surviving corporation of the merger and receive the merger
consideration, without interest, less any applicable withholding taxes.
Neither the Barnes &#038; Noble Parties nor the Company will be liable to you for
any merger consideration delivered to a public official under any applicable
abandoned property, escheat or similar law.
</FONT>

<!-- link2 "Risks That the Merger Will Not Be Completed" -->
<DIV align="left"><A NAME="020"></A></DIV>

<P align="left"><FONT size="2"><B>Risks That the Merger Will Not Be Completed</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Completion of the merger is subject to various risks, including, but not
limited to, the following:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">that we will experience a business interruption, incident,
occurrence or event that has a material adverse effect on us and
B&#038;N.com, taken as a whole, that would permit Barnes &#038; Noble to
terminate the merger agreement and abandon the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">that the parties will not have performed in all material
respects their obligations contained in the merger agreement before
the closing date;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">that the representations and warranties made by the parties
in the merger agreement will not be true and correct as of the
closing of the merger in a manner which results in a closing
condition not being satisfied; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">that a court of competent jurisdiction or an administrative,
governmental or regulatory body or commission will have issued a
final nonappealable injunction, order, decree, judgment or ruling,
that permanently enjoins or otherwise prohibits the merger or that a
statute, rule, regulation or order will have been enacted, entered
or enforced which makes the consummation of the merger illegal or
prevents or prohibits the merger.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of various risks to the completion of the merger, there can be
no assurance that the merger will be completed even if the requisite
stockholder approval is obtained.
</FONT>

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<DIV align="left"><A NAME="021"></A></DIV>

<P align="left"><FONT size="2"><B>Merger Financing; Sources of Funds</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble estimates that the amount of funds required to fund the
payment of the merger consideration, including payment with respect of
&#147;in-the-money&#148; options, is approximately $150&nbsp;million. Barnes &#038; Noble intends
to obtain the funds required to pay the merger consideration from cash flow
from operations and from its $500&nbsp;million revolving credit facility, as
amended, with Fleet National Bank as administrative agent thereunder, and the
banks party thereto, a copy of which, including amendments thereto, are
included as Exhibits (b)(1), (b)(2), (b)(3) and (b)(4) to the Schedule&nbsp;13E-3
filed with the Securities and Exchange Commission. The credit facility permits
borrowings at various interest-rate options based on the prime rate or London
Interbank Offer Rate plus applicable margin depending upon the level of Barnes
&#038; Noble&#146;s fixed charge coverage ratio. As of the date of this proxy statement,
Barnes &#038; Noble could borrow money under the credit facility at an interest rate
per annum equal to <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>% of the outstanding principal amount borrowed.
The credit facility contains covenants, limitations and events of default
typical of credit facilities of its size and nature, including financial
covenants, which require Barnes &#038; Noble to meet, among other things, leverage
and fixed charge coverage ratios and which limit capital expenditures.
Negative covenants include limitations on other indebtedness, liens,
investments, mergers, consolidations, sales or leases of assets, acquisitions,
distributions and dividends and other payments in respect of capital stock,
transactions with affiliates, and sale/leaseback transactions. In the event
that Barnes &#038; Noble defaults on these financial covenants, all outstanding
borrowings under the credit facility may become immediately payable and no
further borrowings may be available. The credit facility is secured by Barnes
&#038; Noble&#146;s capital stock in its subsidiaries, and by the accounts receivable and
general intangibles of Barnes &#038; Noble and its subsidiaries. The credit
facility expires on May&nbsp;22, 2006. Barnes &#038; Noble does not anticipate the need
for any alternative financing arrangements and the merger is not subject to any
financing contingency. Barnes &#038; Noble anticipates that it will pay off any
amounts that it draws upon from its credit facility with its funds from
operations.
</FONT>



<P align="center"><FONT size="2">34
</FONT>

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<!-- link2 "Certain U.S. Federal Income Tax Consequences" -->
<DIV align="left"><A NAME="022"></A></DIV>

<P align="left"><FONT size="2"><B>Certain U.S. Federal Income Tax Consequences</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of certain U.S. federal income tax consequences
of the merger relevant to a stockholder whose shares of our common stock are
converted to cash in the merger. This summary is based on the Internal Revenue
Code of 1986, as amended, which is commonly referred to as the Code, Treasury
regulations issued thereunder, judicial decisions and administrative rulings,
each as in effect as of the date hereof and all of which are subject to change,
possibly with retroactive effect. The summary is for general information only
and does not purport to address all of the tax consequences that may be
relevant to particular stockholders in light of their personal circumstances.
The summary applies only to our stockholders who hold their shares of our
common stock as capital assets and may not apply to stockholders subject to
special rules under the Code, including, without limitation, stockholders who
acquired their shares of our common stock pursuant to the exercise of employee
stock options or other compensation arrangements, stockholders who dissent and
exercise appraisal rights, partnerships or other entities treated as
partnerships or flow-through entities for U.S. federal income tax purposes,
retirement plans, insurance companies, tax-exempt organizations, brokers,
dealers, or traders in securities, financial institutions, persons who hold the
shares of our common stock as part of a straddle, hedge, conversion transaction
or other integrated investment or persons that have a functional currency other
than the United States dollar. The summary does not discuss the U.S. federal
income tax consequences to any stockholder who, for U.S. federal income tax
purposes, is a non-resident alien individual, foreign corporation, foreign
partnership or foreign trust or estate, and does not address any state, local
or foreign tax consequences of the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The receipt of cash for shares of our common stock pursuant to the merger
will be a taxable transaction for U.S. federal income tax purposes. In
general, a stockholder who has shares of our common stock converted into cash
pursuant to the merger will recognize gain or loss for U.S. federal income tax
purposes equal to the difference, if any, between the amount of cash received
and the stockholder&#146;s adjusted tax basis in the shares of our common stock
converted into cash pursuant to the merger. Gain or loss will be determined
separately for each block of shares of our common stock (i.e., shares acquired
at the same cost in a single transaction), converted into cash pursuant to the
merger. Such gain or loss generally will be capital gain or loss and generally
will be long-term capital gain or loss if the stockholder has held the shares
of our common stock for more than one (1)&nbsp;year. Certain limitations apply to
the use of capital losses.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the U.S. federal income tax laws, backup withholding at the
applicable rate may apply to cash payments a stockholder receives pursuant to
the merger unless the stockholder (i)&nbsp;provides a correct taxpayer
identification number (which, for an individual stockholder, is the
stockholder&#146;s social security number) and any other required information, or
(ii)&nbsp;comes within certain other exempt categories (for example, in certain
circumstances, a corporation) and, when required, demonstrates this fact, and
otherwise complies with the applicable requirements of the backup withholding
rules. Any amounts withheld generally will be allowed as a credit against the
stockholder&#146;s U.S. federal income tax liability for the year.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Stockholders are urged to consult with their own tax advisors as to the
particular tax consequences to them of the merger, including the applicability
and effect of any state, local, foreign or other tax laws, and changes in tax
laws.</B>
</FONT>

<!-- link2 "Litigation Relating to the Merger" -->
<DIV align="left"><A NAME="023"></A></DIV>

<P align="left"><FONT size="2"><B>Litigation Relating to the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the November&nbsp;7, 2003 announcement of Barnes &#038; Noble&#146;s proposal
to purchase all of the outstanding shares of our common stock at a price of
$2.50 per share in cash, fifteen substantially similar putative class action
lawsuits were filed by individual stockholders of the Company against the
Company, our directors and Barnes &#038; Noble in the Delaware Court of Chancery.
The complaints in these actions, which purported to be brought on behalf of all
of our stockholders excluding the defendants and their affiliates, generally
alleged (i)&nbsp;breaches of fiduciary duty by Barnes &#038; Noble and our directors,
(ii)&nbsp;that the consideration offered by Barnes &#038; Noble was inadequate and
constituted unfair dealing and (iii)&nbsp;that Barnes &#038; Noble, as controlling
stockholder, breached its duty to our remaining stockholders by acting to
further its own interests at the expense of our remaining stockholders. The
complaints sought to enjoin the proposal or, in the alternative, damages in an
unspecified amount and rescission in the event a merger
</FONT>



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</FONT>

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<P align="left"><FONT size="2">occurred pursuant to the proposal. The complaints were eventually
consolidated under the caption In re BarnesandNoble.com, Inc. Shareholders
Litigation, Consolidated Civil Action No.&nbsp;042-N.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;8, 2004, the parties executed a Memorandum of Understanding
reflecting the parties&#146; agreement to settle the action. Pursuant to the terms
of the Memorandum of Understanding, the parties agreed in good faith to execute
as soon as practicable a Stipulation of Settlement providing for, among other
things, the release of all claims of the plaintiffs and other members of the
class against defendants that were or could have been asserted in the action or
in any way arise out of or in connection with the merger. The Stipulation of
Settlement also is to expressly provide that the defendants in the action deny
that they have committed any violation of law whatsoever and are entering into
the Stipulation of Settlement solely to eliminate the burden, expense and
distraction of further litigation and to permit the merger to proceed as
scheduled.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Stipulation of Settlement is further to provide that plaintiffs&#146;
counsel intend to apply to the court for an award of attorney&#146;s fees and that,
absent agreement, defendants reserve the right to oppose the amount of any fee
award that plaintiffs&#146; counsel may seek. The settlement is contingent upon,
among other things, court approval, the merger consideration being $3.05 per
share in cash and consummation of the merger.
</FONT>

<!-- link2 "Regulatory Matters" -->
<DIV align="left"><A NAME="024"></A></DIV>

<P align="left"><FONT size="2"><B>Regulatory Matters</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not believe that any material federal or state regulatory approvals,
filings or notices are required in connection with the merger other than
approvals, filings or notices required under federal securities laws and the
filing of a certificate of merger with the Secretary of State of the State of
Delaware.
</FONT>

<!-- link2 "Accounting Treatment" -->
<DIV align="left"><A NAME="025"></A></DIV>

<P align="left"><FONT size="2"><B>Accounting Treatment</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger will be accounted for under the purchase method of accounting
under which the total consideration paid in the merger will be allocated among
the Company&#146;s consolidated assets and liabilities based on the fair values of
the assets and liabilities assumed.
</FONT>

<!-- link2 "Estimated Fees and Expenses of the Merger" -->
<DIV align="left"><A NAME="026"></A></DIV>

<P align="left"><FONT size="2"><B>Estimated Fees and Expenses of the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whether or not the merger is completed, in general, all fees and expenses
incurred in connection with the merger will be paid by the party incurring
those fees and expenses. The estimated total fees and expenses to be incurred
in connection with the merger are as follows:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="92%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Legal fees and expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investment banker fees and expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Special committee fees and expenses
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounting fees</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Printing, proxy solicitation and mailing expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These expenses will not reduce the merger consideration to be received by
our stockholders.
</FONT>

<!-- link2 "Appraisal Rights" -->
<DIV align="left"><A NAME="027"></A></DIV>

<P align="left"><FONT size="2"><B>Appraisal Rights</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Delaware law, if you do not wish to accept the cash payment provided
for in the merger agreement, you have the right to dissent from the merger and
to receive payment in cash for the fair value of your shares of our common
stock, exclusive of any element of value arising from the accomplishment or
expectation of the merger. Stockholders electing to exercise appraisal rights
must comply with the provisions of Section&nbsp;262 of the Delaware General
Corporation Law in order to perfect their rights. We will require strict
compliance with the statutory procedures.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a stockholder in
order to dissent from the merger and perfect
</FONT>



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</FONT>

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<P align="left"><FONT size="2">appraisal rights. <B>This summary, however, is not a complete statement of
all applicable requirements and is qualified in its entirety by reference to
Section&nbsp;262 of the Delaware General Corporation Law, the full text of which is
set forth in Annex B to this proxy statement.</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;262 requires that stockholders be notified that appraisal rights
will be available not less than 20&nbsp;days before the special meeting to vote on
the merger. A copy of Section&nbsp;262 must be included with such notice. This
proxy statement constitutes our notice to our stockholders of the availability
of appraisal rights in connection with the merger in compliance with the
requirements of Section&nbsp;262. If you wish to consider exercising your appraisal
rights, you should carefully review the text of Section&nbsp;262 contained in Annex
B to this proxy statement since failure to timely and properly comply with the
requirements of Section&nbsp;262 will result in the loss of your appraisal rights
under Delaware law.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you elect to demand appraisal of your shares of our common stock, you
must satisfy each of the following conditions:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">You must deliver to us a written demand for appraisal of your
shares of our common stock before the vote with respect to the
merger is taken. This written demand for appraisal must be in
addition to and separate from any proxy or vote abstaining from or
voting against adoption of the merger agreement. Voting against or
failing to vote for adoption of the merger agreement by itself does
not constitute a demand for appraisal within the meaning of Section
262.
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">You must not vote in favor of adoption of the merger
agreement. A vote in favor of the adoption of the merger agreement,
by proxy or in person, will constitute a waiver of your appraisal
rights in respect of the shares of our common stock so voted and
will nullify any previously filed written demands for appraisal.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you fail to comply with either of these conditions and the merger is
completed, you will be entitled to receive the cash payment for your shares of
our common stock as provided for in the merger agreement, but you will have no
appraisal rights with respect to your shares of our common stock.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All demands for appraisal should be addressed to Vice President &#150; Legal
Affairs at barnesandnoble.com inc., 76 Ninth Avenue, New York, New York 10011,
before the vote on the merger is taken at the special meeting, and should be
executed by, or on behalf of, the record holder of the shares of our common
stock. The demand must reasonably inform us of the identity of the stockholder
and the intention of the stockholder to demand appraisal of his, her or its
shares of our common stock.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To be effective, a demand for appraisal by a holder of our common stock
must be made by, or in the name of, such registered stockholder, fully and
correctly, as the stockholder&#146;s name appears on his or her stock certificate(s)
and cannot be made by the beneficial owner if he or she does not also hold the
shares of record. The beneficial holder must, in such cases, have the
registered owner submit the required demand in respect of those shares.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If shares of our common stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of a demand for
appraisal should be made in that capacity; and if the shares of our common
stock are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the demand should be executed by or for all joint owners.
An authorized agent, including an authorized agent for two or more joint
owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, he or she is acting as agent
for the record owner. A record owner, such as a broker, who holds shares of
our common stock as a nominee for others, may exercise his or her right of
appraisal with respect to the shares of our common stock held for one or more
beneficial owners, while not exercising this right for other beneficial owners.
In that case, the written demand should state the number of shares of our
common stock as to which appraisal is sought. Where no number of shares is
expressly mentioned, the demand will be presumed to cover all shares held in
the name of the record owner.
</FONT>



<P align="center"><FONT size="2">37
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you hold your shares of our common stock in a brokerage account or in
other nominee form and you wish to exercise appraisal rights, you should
consult with your broker or the other nominee to determine the appropriate
procedures for the making of a demand for appraisal by the nominee.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within 10&nbsp;days after the effective date of the merger, we must give
written notice that the merger has become effective to each stockholder who has
properly filed a written demand for appraisal and who did not vote in favor of
the merger or consent to the merger. At any time within 60&nbsp;days after the
effective date, any stockholder who has demanded an appraisal has the right to
withdraw the demand and to accept the cash payment specified by the merger
agreement for his or her shares of our common stock. Within 120&nbsp;days after the
effective date, either we or any stockholder who has complied with the
requirements of Section&nbsp;262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the shares of our
common stock held by all stockholders entitled to appraisal. We have no
obligation to file such a petition in the event there are dissenting
stockholders. Accordingly, the failure of any stockholder to file such a
petition within the period specified could nullify previously written demands
for appraisal.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a petition for appraisal is duly filed by a stockholder and a copy of
the petition is delivered to us, we will then be obligated, within 20&nbsp;days
after receiving service of a copy of the petition, to provide the Delaware
Court of Chancery with a duly verified list containing the names and addresses
of all stockholders who have demanded an appraisal of their shares of our
common stock. After notice to dissenting stockholders, the Delaware Court of
Chancery is empowered to conduct a hearing upon the petition, and to determine
those stockholders who have complied with Section&nbsp;262 and who have become
entitled to the appraisal rights provided thereby. The Delaware Court of
Chancery may require the stockholders who have demanded payment for their
shares to submit their certificates representing shares of our common stock to
the Register in Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with that direction, the
Delaware Court of Chancery may dismiss the proceedings as to that stockholder.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After determination of the stockholders entitled to appraisal of their
shares of our common stock, the Delaware Court of Chancery will appraise the
shares, determining their fair value exclusive of any element of value arising
from the accomplishment or expectation of the merger, together with a fair rate
of interest. When the value is determined, the Delaware Court of Chancery will
direct the payment of such value, with interest thereon accrued during the
pendency of the proceeding, if the Delaware Court of Chancery so determines, to
the stockholders entitled to receive the same, upon surrender by such holders
of the certificates representing those shares of our common stock.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In determining fair value, the Delaware Court of Chancery is required to
take into account all relevant factors. You should be aware that the fair
value of your shares as determined under Section&nbsp;262 could be more, the same or
less than the value that you are entitled to receive under the terms of the
merger agreement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Costs of the appraisal proceeding may be imposed upon us and the
stockholders participating in the appraisal proceeding by the Delaware Court of
Chancery as the Delaware Court of Chancery deems equitable in the
circumstances. Upon the application of a stockholder, the Delaware Court of
Chancery may order all or a portion of the expenses incurred by any stockholder
in connection with the appraisal proceeding, including, without limitation,
reasonable attorneys&#146; fees and the fees and expenses of experts, to be charged
pro rata against the value of all shares entitled to appraisal. Any
stockholder who had demanded appraisal rights will not, after the effective
date, be entitled to vote shares subject to that demand for any purpose or to
receive payments of dividends or any other distribution with respect to those
shares, other than with respect to payment as of a record date prior to the
effective date; however, if no petition for appraisal is filed within 120&nbsp;days
after the effective date of the merger, or if the stockholder delivers a
written withdrawal of his or her demand for appraisal and an acceptance of the
merger within 60&nbsp;days after the effective date of the merger, then the right of
that stockholder to appraisal will cease and that stockholder will be entitled
to receive the cash payment for his, her or its shares of our common stock
pursuant to the merger agreement. Any withdrawal of a demand for appraisal
made more than 60&nbsp;days after the effective date of the merger may only be made
with the written approval of the successor corporation and must, to be
effective, be made within 120&nbsp;days after the effective date.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>In view of the complexity of Section&nbsp;262, stockholders who may wish to
dissent from the merger and pursue appraisal rights should consult their legal
advisors.</B>
</FONT>





<P align="center"><FONT size="2">38
</FONT>

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<!-- link1 "THE SPECIAL MEETING" -->
<DIV align="left"><A NAME="028"></A></DIV>

<P align="center"><FONT size="2"><B>THE SPECIAL MEETING</B>
</FONT>

<!-- link2 "Date, Time and Place of the Special Meeting" -->
<DIV align="left"><A NAME="029"></A></DIV>

<P align="left"><FONT size="2"><B>Date, Time and Place of the Special Meeting</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The special meeting of our stockholders will be held on <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004,
at 10:00&nbsp;a.m. local time, at <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>. We mailed this proxy statement and
accompanying proxy card on or about <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004, to all stockholders
entitled to vote at the special meeting.
</FONT>

<!-- link2 "Matters to be Considered at the Special Meeting" -->
<DIV align="left"><A NAME="030"></A></DIV>

<P align="left"><FONT size="2"><B>Matters to be Considered at the Special Meeting</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the special meeting, our stockholders will be asked to:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">consider and vote upon a proposal to approve and adopt the
merger agreement and the merger; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">transact such other matters as may properly come before the
special meeting and/or any adjournment or postponement of the
special meeting and any matters incidental thereto.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not expect a vote to be taken on any other matters at the special
meeting. However, if any other matters are properly presented at the special
meeting for consideration, the holders of the proxies will have discretion to
vote on these matters in accordance with their best judgment.
</FONT>

<!-- link2 "Vote Required" -->
<DIV align="left"><A NAME="031"></A></DIV>

<P align="left"><FONT size="2"><B>Vote Required</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The affirmative vote of a majority of the voting power of our outstanding
common stock entitled to vote at the special meeting is required to approve and
adopt the merger agreement and the merger. For this vote, abstentions and
broker non-votes, as well as shares that are not voted, will have the same
effect as a vote against approval and adoption of the merger agreement and the
merger. As of December&nbsp;31, 2003, Barnes &#038; Noble controlled approximately 96.3%
of the voting power of our common stock and in the merger agreement committed
to vote its shares in favor of the merger agreement and the merger. In
addition, we anticipate that our directors and executive officers who are
stockholders of the Company and, as of December&nbsp;31, 2003, held
approximately 0.95% of the voting power of our common stock will vote in favor of the
merger.
</FONT>

<!-- link2 "Record Date, Voting Rights, Quorum and Revocability of Proxies" -->
<DIV align="left"><A NAME="032"></A></DIV>

<P align="left"><FONT size="2"><B>Record Date, Voting Rights, Quorum and Revocability of Proxies</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has fixed the close of business on <B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004
as the record date for determination of the holders of our shares entitled to
notice of and to vote at the special meeting. As of
<B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093;</B>, 2004, we had
<B>&#091;&nbsp;&nbsp;&nbsp;&nbsp;&#093; </B>shares outstanding.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each holder of record of our Class&nbsp;A common stock on the record date will
be entitled to one vote for each share held. The presence, in person or by
proxy, of the holders of shares having a majority of the voting power of our
common stock issued and outstanding and entitled to vote at the special meeting
is necessary to constitute a quorum for the transaction of business at the
special meeting.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All votes will be tabulated by the inspector of election appointed for the
special meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Brokers who hold shares in street name for
clients typically have the authority to vote on &#147;routine&#148; proposals when they
have not received instructions from beneficial owners. However, absent
specific instructions from the beneficial owner of the shares, brokers are not
allowed to exercise their voting discretion with respect to the approval and
adoption of non-routine matters, such as the merger agreement and the merger;
proxies submitted without a vote by the brokers on these matters are referred
to as broker non-votes. Abstentions and broker non-votes are counted for
purposes of determining whether a quorum exists at the special meeting.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by sending a
written notice to the Secretary of the Company at our executive offices located
at 76 Ninth Avenue, New York, New York 10011, submitting a duly executed proxy
bearing a later date, voting by telephone or via the Internet at a later date
or attending the special
</FONT>



<P align="center"><FONT size="2">39
</FONT>

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<P align="left"><FONT size="2">meeting and voting in person. Attendance at the special meeting will not,
by itself, revoke a proxy. Furthermore, if a stockholder&#146;s shares are held of
record by a broker, bank or other nominee and the stockholder wishes to vote at
the meeting, the stockholder must obtain from the record holder a proxy issued
in the stockholder&#146;s name.
</FONT>

<!-- link2 "Expenses of Proxy Solicitation" -->
<DIV align="left"><A NAME="033"></A></DIV>

<P align="left"><FONT size="2"><B>Expenses of Proxy Solicitation</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of our common stock
beneficially owned by others to forward to these beneficial owners. We may
reimburse persons representing beneficial owners of common stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by our directors, officers or other regular employees.
No additional compensation will be paid to directors, officers or other regular
employees for their services.
</FONT>

<!-- link2 "Adjournments and Postponements" -->
<DIV align="left"><A NAME="034"></A></DIV>

<P align="left"><FONT size="2"><B>Adjournments and Postponements</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although it is not expected, the special meeting may be adjourned or
postponed. Any adjournment or postponement of the special meeting may be made
without notice, other than by an announcement made at the special meeting, by
approval of the holders of shares of our common stock having a majority of the
voting power of our common stock present in person or represented by proxy at
the special meeting, whether or not a quorum exists.
</FONT>

<!-- link2 "Exchanging Stock Certificates" -->
<DIV align="left"><A NAME="035"></A></DIV>

<P align="left"><FONT size="2"><B>Exchanging Stock Certificates</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please do not send in stock certificates at this time. In the event the
merger is completed, instructions regarding the procedures for exchanging your
stock certificates for the $3.05 per share cash payment, without
interest and less any applicable withholding taxes, will be sent to you.
</FONT>




<P align="center"><FONT size="2">40
</FONT>


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<!-- link1 "THE MERGER AGREEMENT" -->
<DIV align="left"><A NAME="036"></A></DIV>

<P align="center"><FONT size="2"><B>THE MERGER AGREEMENT</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;8, 2004, the Company, Barnes &#038; Noble, B&#038;N Holding and B&#038;N
Acquisition entered into an Agreement and Plan of Merger, or the merger
agreement. The following is a summary of certain terms of the merger agreement
and the merger and is qualified by reference to the complete text of the merger
agreement, which is incorporated by reference and included as Annex A. You are
encouraged to read the entire merger agreement.
</FONT>

<!-- link2 "Effective Time of the Merger" -->
<DIV align="left"><A NAME="037"></A></DIV>

<P align="left"><FONT size="2"><B>Effective Time of the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware in accordance with
Delaware law. We refer to the effective time of the merger in this proxy
statement as the effective time. The filing is expected to occur as soon as
practicable after all of the conditions set forth in the merger agreement have
been satisfied or waived.
</FONT>

<!-- link2 "The Merger" -->
<DIV align="left"><A NAME="038"></A></DIV>

<P align="left"><FONT size="2"><B>The Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the effective time, B&#038;N Acquisition will be merged with and into the
Company, with the Company surviving as a wholly owned subsidiary of B&#038;N
Holding, and the separate existence of B&#038;N Acquisition will cease. We
sometimes refer to the Company following the completion of the merger as the
surviving corporation. At the effective time, the amended and restated
certificate of incorporation of the surviving corporation will be amended in
accordance with the form agreed to among the parties to the merger agreement
and the by-laws of B&#038;N Acquisition as in effect immediately prior to the
effective time will be the by-laws of the surviving corporation.
</FONT>

<!-- link2 "Merger Consideration" -->
<DIV align="left"><A NAME="039"></A></DIV>

<P align="left"><FONT size="2"><B>Merger Consideration</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger agreement provides that each share of our common stock
outstanding immediately prior to the completion of the merger (other than
shares held by Barnes &#038; Noble, B&#038;N Holding and their respective subsidiaries
and shares as to which appraisal rights have been properly exercised), will, at
the completion of the merger, be converted into the right to receive $3.05 per
share in cash, without interest and less any applicable withholding
taxes.
</FONT>

<!-- link2 "Stock Options" -->
<DIV align="left"><A NAME="040"></A></DIV>

<P align="left"><FONT size="2"><B>Stock Options</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger agreement provides that upon the completion of the merger, all
outstanding options to purchase shares of our common stock, whether vested or
unvested, will be converted into the right to receive an amount in cash equal
to the product of the number of shares of our common stock subject to such
option multiplied by the excess, if any, of the merger consideration over the
exercise price per share of each such option, and when so converted, will
automatically be cancelled and retired and will cease to exist.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the options that we have granted contain change of control
provisions that will give rise to their accelerated vesting by virtue of the
merger.
</FONT>

<!-- link2 "Surrender of Certificates and Payment Procedures" -->
<DIV align="left"><A NAME="041"></A></DIV>

<P align="left"><FONT size="2"><B>Surrender of Certificates and Payment Procedures</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to the effective time, an exchange agent will be appointed to handle
the issuance of applicable merger consideration to the holders of our common
stock. Promptly after the merger, the exchange agent will mail to you a letter
of transmittal and instructions explaining how to surrender your stock
certificates. If you surrender your certificates to the exchange agent,
together with a properly completed letter of transmittal and all other
documents the exchange agent may reasonably require, you will receive the
appropriate merger consideration, subject to any required withholding taxes.
Until surrendered in accordance with the foregoing instructions, each
certificate formerly representing our shares, other than shares as to which
appraisal rights have been properly exercised, will only represent the right to
receive the applicable merger consideration. No interest will be paid or will
accrue on the merger consideration payable.
</FONT>



<P align="center"><FONT size="2">41
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the completion of the merger, our stock transfer book will be closed
and there will be no further registration of transfers of our shares. If
certificates of shares are presented after the completion of the merger, they
will be cancelled and exchanged for the right to receive the merger
consideration.
</FONT>

<!-- link2 "Representations and Warranties" -->
<DIV align="left"><A NAME="042"></A></DIV>

<P align="left"><FONT size="2"><B>Representations and Warranties</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have made certain representations and warranties to the Barnes &#038; Noble
Parties, subject to disclosure schedules, documents filed with the Securities
and Exchange Commission and certain materiality thresholds. These include
representations and warranties as to:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">organization, standing and power;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">capitalization;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">interests in other entities;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">authority to execute, deliver and perform the merger agreement;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">no violation of charter documents, material agreements or law
in connection with the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">opinion of a financial advisor and approval by the special committee;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of certain brokerage fees or commissions;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of material misstatements and omissions in this proxy
statement or Schedule&nbsp;13E-3 transaction statement;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Securities and Exchange Commission regulatory compliances,
financial statements and the absence of material misstatements and
omissions in such documents;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of certain changes or events;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of undisclosed material liabilities;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">no violation of law;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of litigation and claims; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">employee arrangements.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Barnes &#038; Noble Parties have made certain representations and
warranties to us, subject to certain materiality thresholds. These include
representations and warranties as to:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">organization, standing and power;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">authority to execute, deliver and perform the merger agreement;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">no violation of charter documents, material agreements or law
in connection with the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of certain brokerage fees or commissions;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of material misstatements or omissions in information
supplied by the Barnes &#038; Noble Parties for inclusion in this proxy
statement or Schedule&nbsp;13E-3 transaction statement; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of knowledge of any facts or circumstances which
would cause our representations and warranties described above to be
materially untrue or incorrect.
</FONT></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">42
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The representations and warranties contained in the merger agreement will
not survive the merger, but they form the basis of specified conditions to the
obligations of the Company and the Barnes &#038; Noble Parties to complete the
merger.
</FONT>

<!-- link2 "Covenants" -->
<DIV align="left"><A NAME="043"></A></DIV>


<P align="left"><FONT size="2"><B>Covenants</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Conduct of Business</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until the completion of the merger, we and B&#038;N.com have agreed to continue
conducting our businesses in the ordinary and usual course of business
consistent with past practices. Moreover, until the completion of the merger,
we and B&#038;N.com may not, without the prior written consent of Barnes &#038; Noble:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">declare, set aside or pay any dividends on or make any other
distributions in respect of, or split, combine, reclassify, issue or
authorize or propose the issuance of, or repurchase, redeem or
otherwise acquire, any shares of its capital stock or membership
units;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">issue, pledge, encumber or sell or authorize the issuance,
pledge, encumbrance or sale of, or purchase or propose to purchase,
any shares of its capital stock or membership units or securities
convertible into, or rights, warrants or options to acquire, any
such shares of capital stock or membership units or other
convertible securities, other than in connection with the exercise
of outstanding options or the exchange or conversion of membership
units, authorize or propose any change in our equity capitalization
or amend any of the economic terms of such securities;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">amend our amended and restated certificate of incorporation,
amended and restated by-laws or other organizational documents;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">merge or consolidate with, or purchase any assets or capital
stock of, another entity, except in the ordinary course of business;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">incur or guarantee any indebtedness for borrowed money,
except pursuant to any current agreements or in the ordinary course
of business;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">make or authorize any capital expenditures, other than
capital expenditures that are in the aggregate no greater than (i)
$5.0&nbsp;million from the date of the merger agreement through March&nbsp;31,
2004 and (ii) $10.0&nbsp;million from the date of the merger agreement
through July&nbsp;15, 2004;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">except as may be required by applicable law or U.S. generally
accepted accounting procedures, change any method, practice or
principle of accounting;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">enter into any new employment agreements with, or increase
the compensation of, any of our officers (vice president or above)
or directors or those of B&#038;N.com, other than as required by law or
written agreements in effect on or prior to the date of the merger
agreement, or otherwise amend in any material respect any existing
agreements with any such person or use its discretion to amend any
employee benefits plan or accelerate the vesting or any payment
under any such plans;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">enter into any transaction with any of our officers (vice
president or above) or directors or those of B&#038;N.com, other than as
provided for in the terms of any agreement in effect on or prior to
the date of the merger agreement;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">settle or compromise certain material litigation, arbitration
or other judicial or administrative dispute or proceeding relating
to either us or B&#038;N.com; or
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">enter into any agreement to, or make any commitment to, take
any of the preceding actions.
</FONT></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">43
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stockholders&#146; Meeting; Recommendation</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As promptly as practicable following the mailing of this proxy statement
to our stockholders, we will call and hold a special meeting of our
stockholders for the purpose of voting upon the adoption and approval of the
merger agreement and the merger. At the special meeting, Barnes &#038; Noble will
cause B&#038;N Holding to vote all of its shares of our common stock in favor of the
adoption and approval of the merger agreement and the merger. Neither our
board of directors nor the special committee may withdraw, qualify or modify
its approval or recommendation of the approval of the merger agreement in a
manner adverse to Barnes &#038; Noble unless: (i)&nbsp;we receive an unsolicited bona
fide acquisition proposal from a third-party, we promptly (but in no event
later than two business days after receipt of the acquisition proposal) notify
Barnes &#038; Noble of the acquisition proposal and the special committee determines
in good faith, after consultation with its legal and financial advisors, that
the acquisition proposal is more favorable to our stockholders (other than
Barnes &#038; Noble and its affiliates) and is made by a third-party which is
reasonably able to finance the transaction contemplated by the proposal or (ii)
the special committee determines in good faith, after consultation with its
legal and financial advisors, that such withdrawal, qualification or
modification is necessary in order for the special committee to comply with its
fiduciary obligations to our stockholders under applicable law.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to our rights to terminate the merger agreement described below
under the section of this proxy statement entitled &#147;&#151;Termination&#148; and
notwithstanding any withdrawal, qualification or modification by our board of
directors or the special committee of its recommendation of the merger
agreement, the merger agreement must be submitted to our stockholders at a
stockholder meeting for the purpose of adopting the merger agreement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Reasonable Efforts</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties to the merger agreement have agreed to use their reasonable
efforts to take all actions necessary or advisable under applicable laws and
regulations and to obtain all necessary governmental or regulatory consents or
approvals necessary to complete the merger. Moreover, the parties have agreed
to cooperate with each other in connection with making all necessary filings
and submissions necessary to complete the merger, including this proxy
statement, and to take all necessary action to deliver such other documents or
instruments as may be reasonably necessary to consummate the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Company Indemnification Provisions</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble will cause the surviving corporation to indemnify and hold
harmless our current and former directors and officers and those of B&#038;N.com and
all other persons who served at our request or the request of B&#038;N.com as a
director or officer of another entity for all expenses and other amounts paid
by reason of actions or omissions or alleged actions or omissions existing or
occurring at or prior to the effective time of the merger to the fullest extent
permitted under applicable law and our amended and restated certificate of
incorporation or amended and restated by-laws or other indemnification
agreements, for a period of not less than six years after the effective time of
the merger.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble will further cause the surviving corporation to purchase an
insurance policy, including run-off coverage, if necessary, consisting of
directors&#146; and officers&#146; liability insurance covering our current and former
directors and officers for events occurring at or prior to the effective time,
on terms and conditions that are no less favorable than our policy currently in
place, or, if substantially equivalent insurance coverage is unavailable, the
most advantageous insurance policy obtainable for an annual premium equal to
300% of our annual premium currently in place for such insurance; provided,
that, among other things, the premium for such policy shall not exceed 300% of
the last annual premium paid prior to the date of the merger agreement for
directors&#146; and officers&#146; insurance currently in place. Alternatively, Barnes &#038;
Noble will be permitted to procure &#147;tail insurance coverage&#148; to cover the
Company&#146;s current and former directors and officers for events occurring at or
prior to the effective time, which coverage shall be no less favorable than the
existing director and officer insurance policy, and Barnes &#038; Noble shall
maintain such coverage for a period of not less than six years after the
effective time of the Merger.
</FONT>



<P align="center"><FONT size="2">44
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stockholder Litigation</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the parties to the merger agreement will give the other the
reasonable opportunity to participate in the defense of any stockholder
litigation against any party or their respective directors and officers, as
applicable, relating to the merger agreement and the transactions contemplated
thereby.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Additional Covenants Regarding the Merger</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the covenants of the merger agreement described above, the
merger agreement contains the following additional covenants:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the preparation and filing of this proxy statement and a
Schedule&nbsp;13E-3 transaction statement;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">reasonable access by Barnes &#038; Noble to information concerning
our operations;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">notification of certain events or communications among the
parties to the merger agreement;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">subject to certain Securities and Exchange Commission
disclosure requirements and applicable laws, consultation among the
parties to the merger agreement prior to making any additional
public announcements concerning the merger; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the provision by Barnes &#038; Noble or the surviving corporation
of employee benefits to our employees or those of B&#038;N.com and the
assumption by Barnes &#038; Noble of all our obligations and those of
B&#038;N.com under certain compensation plans and employment agreements.
</FONT></TD>
</TR>
</TABLE>

<!-- link2 "Conditions to Completing the Merger" -->
<DIV align="left"><A NAME="044"></A></DIV>

<P align="left"><FONT size="2"><B>Conditions to Completing the Merger</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Conditions
to Each Party&#146;s Obligations</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligations of each party to the merger agreement to complete the
merger is subject to the satisfaction or waiver of the following conditions:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">absence of any temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the merger (each party agreeing to use its
reasonable efforts to have any restraining order, injunction or
other order or legal restraint or prohibition lifted), any
proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality seeking any of the
foregoing or any action taken, or any statute, rule, regulation or
order (whether temporary, preliminary or permanent) enacted, entered
or enforced, which makes the consummation of the merger illegal or
prevents or prohibits the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the adoption of the merger agreement shall have been approved
by the requisite vote of our stockholders in accordance with
Delaware law; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">other than filing the certificate of merger with the
Secretary of State of the State of Delaware, all material consents,
approvals and authorizations of and filings with governmental
entities required to be obtained in connection with the merger shall
have been obtained.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Conditions
to our Obligations</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
obligations to complete the merger is subject to the satisfaction or
waiver of the following further conditions:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the representations and warranties made by the Barnes &#038; Noble
Parties in the merger agreement shall be true and correct in all
material respects when made and as of the closing date of the
merger;
</FONT></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">45
</FONT>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">the Barnes &#038; Noble Parties shall have performed and complied
in all material respects with each of their undertakings and
agreements contained in the merger agreement; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">we shall have received a certificate of Barnes &#038; Noble to the
effect that all conditions required to be satisfied at or as of the
closing have been waived or satisfied in all material respects.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Conditions
to the Obligations of the Barnes &#038; Noble Parties</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
obligations of the Barnes &#038; Noble Parties to complete the merger is
subject to the satisfaction or waiver of the following further conditions:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">our representations and warranties made in the merger
agreement shall be true and correct in all material respects when
made and as of the closing date of the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">we shall have performed and complied in all material respects
with our undertakings and agreements contained in the merger
agreement;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Barnes &#038; Noble shall have received a certificate from us to
the effect that all conditions required to be satisfied at or as of
the closing have been waived or satisfied in all material respects;
and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">since the date of the merger agreement, there shall not have
occurred any &#147;material adverse effect&#148; on us and B&#038;N.com, taken as a
whole.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purposes of determining satisfaction of the conditions to the
obligations of the Barnes &#038; Noble Parties described above, a &#147;material adverse
effect&#148; on us and B&#038;N.com, taken as a whole, means any event, fact, violation,
breach, inaccuracy, circumstance or other matter that had or would reasonably
be expected to have a material adverse effect on the business, financial
condition or results of operations of the Company and B&#038;N.com, taken as a
whole, other than any event or condition resulting from: (i)&nbsp;general economic,
business or industry conditions; (ii)&nbsp;the taking of any action permitted or
required by the merger agreement or from the announcement or pendency of the
merger; (iii)&nbsp;a decline in our stock price; or (iv)&nbsp;the delisting of our common
stock from the NASDAQ National Market.
</FONT>

<!-- link2 "Termination" -->
<DIV align="left"><A NAME="045"></A></DIV>

<P align="left"><FONT size="2"><B>Termination</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and Barnes &#038; Noble may agree by mutual written consent to terminate the
merger agreement at any time prior to the approval of the merger agreement by
our stockholders. In addition, the merger agreement may be terminated:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by either us or Barnes &#038; Noble, if the merger is not
completed on or before July&nbsp;15, 2004, unless the non-completion is
caused by the failure to fulfill any of the obligations under the
merger agreement of the party wishing to terminate;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by either us or Barnes &#038; Noble, if a court of competent
jurisdiction or an administrative, governmental or regulatory body
or commission has issued a final nonappealable injunction, order,
decree, judgment or ruling, permanently enjoining or otherwise
prohibiting the merger;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by Barnes &#038; Noble, at any time prior to the approval of the
merger agreement by our stockholders, if our board of directors
(upon the recommendation of the special committee) or the special
committee withdraws, qualifies or modifies its approval or
recommendation of the approval of the merger agreement in a manner
adverse to Barnes &#038; Noble;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by Barnes &#038; Noble, at any time prior to the approval of the
merger agreement by our stockholders, upon a breach of any of our
representations, warranties or covenants under the merger agreement
such that the conditions in the merger agreement will not be
satisfied;
</FONT></TD>
</TR>
</TABLE>



<P align="center"><FONT size="2">46
</FONT>

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<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by the special committee, at any time prior to the approval
of the merger agreement by our stockholders, if (i)&nbsp;we receive an
unsolicited bona fide acquisition proposal from a third party, (ii)
we give Barnes &#038; Noble no less than five days&#146; notice of any and all
such proposals or offers and (iii)&nbsp;the special committee concludes
in good faith, after consultation with its legal and financial
advisors, that such proposal is more favorable to our stockholders,
other than Barnes &#038; Noble and its affiliates, and is made by a third
party which is reasonably able to finance the transaction
contemplated by the proposal; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">by the special committee, at any time prior to the approval
of the merger agreement by our stockholders, upon a breach of any of
the Barnes &#038; Noble Parties&#146; representations, warranties or covenants
under the merger agreement such that the conditions in the merger
agreement will not be satisfied.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to limited exceptions, including the survival of certain
obligations, if the merger agreement is validly terminated it will become null
and void and will be of no further effect with no liability on the part of any
party to the merger agreement or affiliate of that party, unless that party has
breached the merger agreement.
</FONT>

<!-- link2 "Amendment and Waiver" -->
<DIV align="left"><A NAME="046"></A></DIV>

<P align="left"><FONT size="2"><B>Amendment and Waiver</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger agreement may not be amended, modified, altered or
supplemented, except by means of a written instrument executed on behalf of
each party to the merger agreement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At any time prior to the effective time of the merger, any of the parties
to the merger agreement may, by written instrument, (i)&nbsp;extend the time for the
performance of any of the obligations or other acts of any of the other parties
or (ii)&nbsp;waive compliance with any of the agreements of the other parties or
fulfillment of any conditions to its own obligations under the merger
agreement.
</FONT>

<!-- link2 "Fees and Expenses" -->
<DIV align="left"><A NAME="047"></A></DIV>

<P align="left"><FONT size="2"><B>Fees and Expenses</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whether or not the proposed merger is consummated, all fees and expenses
incurred in connection with the merger will be paid by the party to the merger
agreement incurring those fees and expenses.
</FONT>

<!-- link2 "Governing Law" -->
<DIV align="left"><A NAME="048"></A></DIV>

<P align="left"><FONT size="2"><B>Governing Law</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger agreement is governed in all respects by the laws of the State
of Delaware.
</FONT>

<!-- link2 "Assignment" -->
<DIV align="left"><A NAME="049"></A></DIV>

<P align="left"><FONT size="2"><B>Assignment</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No party to the merger agreement may assign any of its rights or delegate
any of its obligations under the merger agreement to any other person without
the prior written consent of the other parties.
</FONT>

<!-- link2 "Our Actions" -->
<DIV align="left"><A NAME="050"></A></DIV>

<P align="left"><FONT size="2"><B>Our Actions</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any action, approval, authorization, waiver or consent taken, given or
made by us, including our board of directors, in respect of the merger
agreement or the merger prior to the effective time of the merger will not be
effective unless such action, approval, authorization, waiver or consent has
received the prior approval of the special committee.
</FONT>



<P align="center"><FONT size="2">47</FONT>

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<!-- link1 "SELECTED HISTORICAL FINANCIAL DATA" -->
<DIV align="left"><A NAME="051"></A></DIV>

<P align="center"><FONT size="2"><B>SELECTED HISTORICAL FINANCIAL DATA</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected historical financial data set forth below as of and for the
fiscal years ended December&nbsp;31, 2002 and 2001 are derived from our audited
consolidated financial statements. Data for the nine-month period ended
September&nbsp;30, 2003 has been derived from our unaudited consolidated financial
statements. Interim operating results are not necessarily indicative of the
results that may be achieved for the entire year. The selected historical data
set forth below should be read in conjunction with &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations&#148; and the consolidated
financial statements and consolidated notes contained in our most recent Annual
Report on Form 10-K for fiscal year ended 2002 and our Quarterly Report on Form
10-Q for the fiscal quarter ended September&nbsp;30, 2003, which have been
incorporated by reference into this proxy statement. See the section of this
proxy statement entitled &#147;WHERE YOU CAN FIND MORE INFORMATION.&#148; More complete
financial information also may be obtained by accessing our public filings with
the Securities and Exchange Commission by following the instructions in the
section of this proxy statement entitled &#147;WHERE YOU CAN FIND MORE INFORMATION.&#148;
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not provided any pro forma data giving effect to the merger as we
do not believe that such information is material to our stockholders in
evaluating the merger and the merger agreement. The merger consideration
consists solely of cash and, if the merger is consummated, our common stock
will cease to be publicly traded. As a result, we do not believe that the
changes to our financial condition resulting from the merger would provide
meaningful or relevant information in evaluating the merger and the merger
agreement since our stockholders (other than Barnes &#038; Noble, B&#038;N Holding and
their respective subsidiaries) will not be stockholders of, and will have no
interest in, the Company following the merger.
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Nine Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Year Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Year Ended</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>September 30,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(Thousands of Dollars, Except Per Share Data)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Statement of Operations Data:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">291,433</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">422,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">404,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cost of sales</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">219,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">327,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">313,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gross profit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">71,518</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">95,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">91,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operating expenses:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fulfillment and customer service</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Marketing, sales and editorial</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">61,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Technology and web site
development</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,168</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">41,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Impairments and other
special charges</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">88,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity in net loss of equity investments
including amortization
of intangibles</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">111,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">170,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">342,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loss from operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(39,668</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(75,272</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(251,407</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest income, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Loss before minority interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(39,482</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(73,657</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(244,366</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">176,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net loss &#151; historical</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(9,941</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(20,132</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(67,386</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic net loss per common share</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1.54</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Basic weighted average
common shares outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,090</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Diluted net loss per share</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.25</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(0.46</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1.54</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</DIV>



<P align="center"><FONT size="2">48</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Nine Months Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Year Ended</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Year Ended</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>September 30,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>(Thousands of Dollars, Except Per Share Data)</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Balance Sheet Data:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">37,959</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">70,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">105,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Working capital</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(23,524</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44,628</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">155,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">209,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">287,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Minority interest</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">105,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,758</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Book value per share</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>



<P align="center"><FONT size="2">49</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "MARKET PRICE AND DIVIDENDS" -->
<DIV align="left"><A NAME="052"></A></DIV>

<P align="center"><FONT size="2"><B>MARKET PRICE AND DIVIDENDS</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock has been traded on the NASDAQ National Market since our
initial public offering on May&nbsp;25, 1999 under the symbol &#147;BNBN.&#148; As of the
record date, <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093; </B>shares of our common stock were issued and outstanding
and we had approximately <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093; </B>stockholders of record and <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>
beneficial stockholders. The following table sets forth, for the periods
indicated, the high and low sales prices per share of our common stock, as
reported by the NASDAQ National Market:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>High</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Low</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Fiscal Year 2004</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First Quarter (through <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>, 2004)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2"><B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Fiscal Year 2003</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fourth Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Third Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Second Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.00</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><I>Fiscal Year 2002</I></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fourth Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">0.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Third Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.99</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Second Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">First Quarter</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1.34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;6, 2003, the last full trading day prior to public
announcement of Barnes &#038; Noble&#146;s initial offer, the last reported sales price
of our common stock was $2.25. On <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>, 2004, the most recent
practicable trading day prior to the date of this proxy statement, the last
reported sales price of our common stock was $<B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>. You should obtain
current market price quotations for shares of our common stock in connection
with voting your shares.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not declared or paid any cash dividends on our capital stock since
our inception and B&#038;N.com has not declared any distributions to its members
since its inception. Neither we nor B&#038;N.com expect to pay any cash dividends
or distributions for the foreseeable future, except we expect to cause B&#038;N.com
to pay distributions to its members to the extent necessary to enable such
members (including us) to pay taxes incurred with respect to taxable income of
B&#038;N.com.
</FONT>



<P align="center"><FONT size="2">50</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link1 "PRINCIPAL STOCKHOLDERS" -->
<DIV align="left"><A NAME="053"></A></DIV>

<P align="center"><FONT size="2"><B>PRINCIPAL STOCKHOLDERS</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have three classes of common stock. Each holder of our Class&nbsp;A common
stock is entitled to one vote per share. Each holder of our Class&nbsp;B common
stock or Class&nbsp;C common stock is entitled to the number of votes per share
equal to: 10, multiplied by the sum of (a)&nbsp;the aggregate number of shares of
Class&nbsp;B and Class&nbsp;C common stock owned by such holder and (b)&nbsp;the aggregate
number of membership units in B&#038;N.com owned by such holder. Barnes &#038; Noble is
the beneficial owner of all of our outstanding Class&nbsp;B and Class&nbsp;C common
stock.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information regarding beneficial
ownership of our common stock as of December&nbsp;31, 2003 by: (i)&nbsp;each person known
by us to own beneficially more than 5% of the outstanding shares of our Class&nbsp;A
common stock; (ii)&nbsp;the directors and executive officers of the Company and
B&#038;N.com and these directors and executive officers as a group; and (iii)&nbsp;the
directors and executive officers of the Barnes &#038; Noble Parties. Unless
otherwise indicated, the address for each of the directors and executive
officers of the Company and the Barnes &#038; Nobles Parties is set forth in Annex D
to this proxy statement.
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percentage of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number of Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Class A Common</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percentage of</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left" colspan="2"><FONT size="1"><B>Name and Address of Beneficial Owner</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Beneficially Owned(1)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Stock(2)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Voting Power(2)(3)</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left" colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Beneficial Holders:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Barnes &#038; Noble, Inc.</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">119,138,502</FONT></TD>
    <TD nowrap><FONT size="2">(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">72.99</FONT></TD>
    <TD nowrap><FONT size="2">%(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">96.3</FONT></TD>
    <TD nowrap><FONT size="2">%(4)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">122 Fifth Avenue</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">New York, New York 10011</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Respective Executive Officers and
Directors of the Company and
B&#038;N.com:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leonard Riggio</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,014,437</FONT></TD>
    <TD nowrap><FONT size="2">(5)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.18</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stephen Riggio</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,580,000</FONT></TD>
    <TD nowrap><FONT size="2">(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Marie J. Toulantis</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,818,000</FONT></TD>
    <TD nowrap><FONT size="2">(7)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">David C. Willen</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">450,500</FONT></TD>
    <TD nowrap><FONT size="2">(8)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Kevin M. Frain</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">462,000</FONT></TD>
    <TD nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">David Gitow</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">401,500</FONT></TD>
    <TD nowrap><FONT size="2">(10)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Daniel A. Blackman</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">420,084</FONT></TD>
    <TD nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Michael N. Rosen</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100,000</FONT></TD>
    <TD nowrap><FONT size="2">(11)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Jan-Michiel Hessels</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,000</FONT></TD>
    <TD nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Patricia Higgins</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,000</FONT></TD>
    <TD nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">William F. Reilly</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">90,000</FONT></TD>
    <TD nowrap><FONT size="2">(11)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">All current executive officers and directors as a group (11
persons)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,416,521</FONT></TD>
    <TD nowrap><FONT size="2">(12)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2"><B>Respective Executive Officers and
Directors of the Barnes &#038; Noble
Parties:</B></FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Leonard Riggio</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,014,437</FONT></TD>
    <TD nowrap><FONT size="2">(5)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.18</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Stephen Riggio</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,580,000</FONT></TD>
    <TD nowrap><FONT size="2">(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.94</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mitchell S. Klipper</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">234,710</FONT></TD>
    <TD nowrap><FONT size="2">(13)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">J. Alan Kahn</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">83,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Lawrence S. Zilavy</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>



<P align="center"><FONT size="2">51
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percentage of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>&nbsp;</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Number of Shares</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Class A Common</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Percentage of</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left" colspan="2"><FONT size="1"><B>Name and Address of Beneficial Owner</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Beneficially Owned(1)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Stock(2)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Voting Power(2)(3)</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left" colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">William F. Duffy</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">830,500</FONT></TD>
    <TD nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mary Ellen Keating</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">David S. Deason</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gary A. King</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,011,190</FONT></TD>
    <TD nowrap><FONT size="2">(14)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

<TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Joseph
J. Lombardi</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Michelle L. Smith</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mark Bottini</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">175</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Michael N. Rosen</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100,000</FONT></TD>
    <TD nowrap><FONT size="2">(11)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Matthew A. Berdon</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">95,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Michael Del Giudice</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">William Dillard, II</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,000</FONT></TD>
    <TD nowrap><FONT size="2">(15)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Irene R. Miller</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Margaret T. Monaco</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,275</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">William Sheluck, Jr.</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">60,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>


<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Represents less than 1%.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Except as indicated in the notes below, shares of common stock subject to options that are currently exercisable or exercisable within 60
days after December&nbsp;31, 2003 are deemed to be outstanding and beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as outstanding for the purpose of computing the percentage
ownership of any other person.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Excludes 4,158,088 shares issued to B&#038;N.com in connection with the merger with Fatbrain.com, LLC.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Represents the percentage of voting power resulting from the effect of all outstanding Class&nbsp;B and Class&nbsp;C common stock, assuming no
conversion of that stock into Class&nbsp;A common stock.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Represents shares of Class&nbsp;B and Class&nbsp;C common stock that are convertible into, and membership units that are exchangeable for, shares
of Class&nbsp;A common stock on a one-for-one-basis at any time at the option of the holder thereof, together with 4,138,500 shares of Class&nbsp;A
common stock beneficially owned by Barnes &#038; Noble through its wholly owned subsidiary, B&#038;N Holding.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(5)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes 600,000 shares each owned by Barnes &#038; Noble College Bookstores, Inc. and MBS Textbook Exchange, Inc. Does not include
119,138,502 shares of Class&nbsp;A common stock beneficially owned by Barnes &#038; Noble. Mr.&nbsp;Riggio is Barnes &#038; Noble&#146;s Chairman of the board of
directors and principal stockholder. Accordingly, he could be considered to beneficially own the shares owned by Barnes &#038; Noble. Mr.
Riggio disclaims any beneficial ownership of such shares.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(6)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes options granted by the Company to purchase 3,380,000 shares of Class&nbsp;A common stock.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(7)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes options granted by the
Company to purchase 3,400,000 shares of Class&nbsp;A common stock.
</FONT></TD>
</TR>

</TABLE>



<P align="center"><FONT size="2">52
</FONT>

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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">


<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(8)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes options granted by the Company to purchase 450,000 shares of Class&nbsp;A common stock.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(9)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">All of these shares are issuable upon the exercise of options granted by the Company.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(10)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes options granted by the Company to purchase 400,000 shares of Class&nbsp;A common stock.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(11)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes options granted by the Company to purchase 40,000 shares of Class&nbsp;A common stock.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(12)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes options granted by the Company to purchase 8,672,084 shares of Class&nbsp;A common stock.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(13)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes 7,700 shares of Class&nbsp;A common stock owned by Mr.&nbsp;Klipper&#146;s wife who has sole voting and dispositive power with respect to these
shares.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(14)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Includes options granted by the Company to purchase 1,011,000 shares of Class&nbsp;A common stock. Also includes 190 shares of Class&nbsp;A common
stock owned by Mr.&nbsp;King&#146;s wife who has sole voting and dispositive power with respect to these shares.
</FONT></TD>
</TR>

<TR><TD><FONT size="2">&nbsp;</FONT></TD></TR>

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">(15)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Barnes &#038; Noble has informed the Company that Mr.&nbsp;Dillard sold all of his shares of Class&nbsp;A common stock on January&nbsp;20, 2004, as more
fully described in the section of this proxy statement entitled &#147;CERTAIN TRANSACTIONS INVOLVING OUR COMMON STOCK.&#148;
</FONT></TD>
</TR>

</TABLE>




<P align="center"><FONT size="2">53
</FONT>

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<!-- link1 "CERTAIN TRANSACTIONS INVOLVING OUR COMMON STOCK" -->
<DIV align="left"><A NAME="054"></A></DIV>

<P align="center"><FONT size="2"><B>CERTAIN TRANSACTIONS INVOLVING OUR COMMON STOCK</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since October&nbsp;1, 2002, as part of Barnes &#038; Noble&#146;s stock acquisition
program, Barnes &#038; Noble, through B&#038;N Holding, has acquired an aggregate of
3,012,500 shares of our common stock, at prices ranging from $0.76 per share to
$1.75 per share. During our fourth quarter of 2002, Barnes &#038; Noble acquired an
aggregate of 1,644,500 shares of our common stock at a weighted average
purchase price of $1.08 per share. During our first quarter of 2003, Barnes &#038;
Noble acquired an aggregate of 1,328,000 shares of our common stock at a
weighted average purchase price of $1.10 per share. During our second quarter
of 2003, Barnes &#038; Noble acquired an aggregate of 40,000 shares our common stock
at a weighted average purchase price of $1.53 per share. The consideration
payable in the merger represents a 282.4%, 277.3% and 199.3% premium to the
weighted average purchase price paid by Barnes &#038; Noble for the shares of our
common stock that it acquired during our fourth quarter of 2002, first quarter
of 2003 and second quarter of 2003, respectively.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;20, 2002, Leonard Riggio, our Chairman of the Board, sold
400,000 shares of our Class&nbsp;A common stock to Marie J. Toulantis, our Chief
Executive Officer, at a purchase price of $1.10 per share.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;15, 2003, Barnes &#038; Noble acquired all of our Class&nbsp;A common
stock, together with all of the membership units in B&#038;N.com and our share of
Class&nbsp;C common stock, beneficially owned by Bertelsmann for an aggregate amount
equal to $164,152,802.80, equivalent to $2.80 per share or membership unit,
subject to possible adjustment as set forth in the stock purchase agreement
related to such acquisition. Barnes &#038; Noble subsequently transferred all
shares and membership units purchased from Bertelsmann to B&#038;N Holding. See the
section of this proxy statement entitled &#147;SPECIAL FACTORS&#151;Background of the
Merger.&#148;
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as described below, there has been no transaction involving shares
of our common stock which was effected during the past 60&nbsp;days by the Company,
B&#038;N.com or, to the best of the knowledge of the Company, any of their
respective directors or executive officers, or by the Barnes &#038; Noble Parties
or, to the best of the knowledge of Barnes &#038; Noble, any of their respective
directors or executive officers.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;20, 2004, William Dillard, II, a director of Barnes &#038; Noble and
B&#038;N Holding, sold 15,000 shares of our Class&nbsp;A common stock on the NASDAQ
National Market at a purchase price of $3.02 per share.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth in this proxy statement, none of the Company or
B&#038;N.com or, to the best of the knowledge of the Company, their respective
directors or executive officers set forth in Annex D to this proxy statement,
or the Barnes &#038; Noble Parties, or to the best of the knowledge of Barnes &#038;
Noble, their respective directors or executive officers set forth in Annex D to
this proxy statement, is a party to any contract, arrangement, understanding,
or relationship with any other person relating, directly or indirectly, to, or
in connection with, the merger with respect to any securities of the Company
(including, without limitation, any contract, arrangement, understanding, or
relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guarantees of
loans, guarantees against loss, or the giving or withholding of proxies,
consents, or authorizations). Except as described in this proxy statement,
there have been no negotiations, transactions or material contacts during the
past two years concerning a merger, consolidation, or acquisition, a tender
offer for, or other acquisition of, any securities of the Company, a contest
for election of directors of the Company, or a sale or other transfer of a
material amount of assets of the Company, between the Barnes &#038; Noble Parties,
or to the best of the knowledge of Barnes &#038; Noble, their respective directors
or executive officers set forth in Annex D to this proxy statement, on the one
hand, and the Company or any of its affiliates, on the other hand. There has
been no underwritten public offering of the shares of the Company during the
past three years that was (i)&nbsp;registered under the Securities Act of 1933, as
amended, or (ii)&nbsp;exempt from registration under the Securities Act pursuant to
Regulation&nbsp;A thereunder.
</FONT>



<P align="center"><FONT size="2">54
</FONT>

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<!-- link1 "OTHER MATTERS" -->
<DIV align="left"><A NAME="055"></A></DIV>

<P align="center"><FONT size="2"><B>OTHER MATTERS</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this proxy statement, we are not aware of any matters to
be presented at the special meeting other than those described in this proxy
statement. However, if other matters should properly come before the special
meeting, it is intended that the holders of proxies solicited hereby will vote
on such matters in their discretion.
</FONT>

<!-- link1 "STOCKHOLDER PROPOSALS" -->
<DIV align="left"><A NAME="056"></A></DIV>

<P align="center"><FONT size="2"><B>STOCKHOLDER PROPOSALS</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the merger is completed, we will no longer be a publicly held company
and there will be no public participation in any future meetings of our
stockholders. However, if the merger is not completed, our stockholders will
continue to be entitled to attend and participate in our stockholders&#146;
meetings. If the merger is not completed, we will inform our stockholders, by
press release or other means determined reasonable, of the date by which
stockholder proposals must be received by us for inclusion in the proxy
materials relating to our 2004 annual meeting, which proposals must comply with
the rules and regulations of the Securities and Exchange Commission then in
effect.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, our amended and restated by-laws provide that stockholders
seeking to bring business before an annual meeting of stockholders, or to
nominate candidates for election as directors at an annual meeting of
stockholders, must provide timely notice thereof in writing. To be timely, a
stockholder&#146;s notice must be delivered to or mailed and received at our
principal executive offices, not less than 30&nbsp;days&#146; nor more than 60&nbsp;days prior
to the annual meeting; provided, that in the event that less than 40&nbsp;days&#146;
notice or prior public disclosure of the date of the annual meeting is given or
made to stockholders, notice by the stockholder to be timely must be received
by the close of business on the 10th day following the date on which notice of
the date of the meeting is given to stockholders or made public, whichever
first occurs. We reserve the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
</FONT>

<!-- link1 "INDEPENDENT ACCOUNTANTS" -->
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<P align="center"><FONT size="2"><B>INDEPENDENT ACCOUNTANTS</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial statements as of December&nbsp;31, 2002 and 2001 incorporated by
reference into this proxy statement have been audited by BDO Seidman, LLP,
independent accountants, as stated in their report included in our Annual
Report on Form 10-K for the year ended December 31, 2002, incorporated by
reference into this proxy statement.
</FONT>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="058"></A></DIV>

<P align="center"><FONT size="2"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
this information at the following locations of the Securities and Exchange
Commission:
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="50%">
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Public Reference Room</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Northeast Regional Office</FONT></TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top"><FONT size="2">450 Fifth Street, N.W.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Citicorp Center</FONT></TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top"><FONT size="2">Room&nbsp;1024</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
13th Floor</FONT></TD>
</TR>

<TR valign="bottom">
    <TD align="left" valign="top"><FONT size="2">Washington, D.C. 20549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
New York, New York 10048</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. You also may obtain copies
of this information by mail from the Public Reference Section of the Securities
and Exchange Commission, 450 Fifth Street, N.W., Room&nbsp;1024, Washington, D.C.
20549, at prescribed rates. Our Securities and Exchange Commission filings
also are available to the public from commercial document retrieval services,
at the web site maintained by the Securities and Exchange Commission at
http://www.sec.gov or at our web site at http://www.barnesandnoble.com/ir.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The merger described in this proxy statement is a &#147;going private
transaction.&#148; We have filed a Section 13(e) Transaction Statement on Schedule
13E-3 with the Securities and Exchange Commission with respect to the merger.
The Schedule&nbsp;13E-3, including all amendments thereto, contains additional
</FONT>



<P align="center"><FONT size="2">55
</FONT>

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<P align="left"><FONT size="2">information about us. The Schedule&nbsp;13E-3, including all amendments and
exhibits filed or incorporated by reference as part of the Schedule&nbsp;13E-3, is
available for inspection and copying at our principal executive offices during
regular business hours, and may be obtained by mail, without charge, by written
request directed to us at the following address:
</FONT>


<P align="center"><FONT size="2">barnesandnoble.com inc.<BR>
76 Ninth Avenue<BR>
New York, New York 10011<BR>
Attn: Investor Relations, Kevin M. Frain<BR>
(212)&nbsp;414-6000
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities and Exchange Commission allows us to &#147;incorporate by
reference&#148; the information we file with it, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this proxy
statement and later information filed with the Securities and Exchange
Commission will update and supersede this information. This proxy statement
incorporates by reference the documents set forth below that we have previously
filed with the Securities and Exchange Commission. The documents contain
important information about us and our financial condition.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We incorporate by reference into this proxy statement our:
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Annual Report on Form 10-K for the year ended December&nbsp;31,
2002, filed on March&nbsp;27, 2003;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Quarterly Report on Form 10-Q for the quarter ended March&nbsp;31,
2003, filed on May&nbsp;15, 2003;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Quarterly Report on Form 10-Q for the quarter ended June&nbsp;30,
2003, filed on August&nbsp;15, 2003;
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Quarterly Report on Form 10-Q for the quarter ended September
30, 2003, filed on November&nbsp;14, 2003; and
</FONT></TD>
</TR>
</TABLE>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" nowrap align="right"><FONT size="2">&#149;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Current Reports on Form 8-K, filed on July&nbsp;30, 2003, November
12, 2003 and January&nbsp;9, 2004.
</FONT></TD>
</TR>
</TABLE>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, all of our filings with the Securities and Exchange
Commission after the date of this proxy statement under Section&nbsp;13(a), 13(c),
14 or 15(d) of the Exchange Act, shall be deemed to be incorporated by
reference into this proxy statement until the closing of the merger. Any
statement contained in this proxy statement or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this proxy statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this proxy
statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>You should rely only on the information contained in this proxy statement.
We have not authorized anyone to provide you with information that is
different from what is contained in this proxy statement. This proxy statement
is dated &#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;, 2004. You should not assume that the information contained
in this proxy statement is accurate as of any date other than such date, and
the mailing of this proxy statement to stockholders shall not create any
implication to the contrary.</B>
</FONT>




<P align="center"><FONT size="2">56
</FONT>


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<!-- link2 "ANNEX A" -->
<DIV align="left"><A NAME="059"></A></DIV>
<P align="right"><FONT size="2"><B>ANNEX&nbsp;A</B></FONT>
<p>&nbsp;
<P align="right"><FONT size="2"><B>EXECUTION COPY</B></FONT>
<p>&nbsp;
<p>&nbsp;

<P align="center"><FONT size="2"><B>AGREEMENT AND PLAN OF MERGER</B>
</FONT>

<P align="center"><FONT size="2"><B>by and among</B>
</FONT>

<P align="center"><FONT size="2"><B>BARNES &#038; NOBLE, INC.,</B>
</FONT>

<P align="center"><FONT size="2"><B>B&#038;N.COM HOLDING CORP.,</B>
</FONT>

<P align="center"><FONT size="2"><B>B&#038;N.COM ACQUISITION CORP.,</B>
</FONT>

<P align="center"><FONT size="2"><B>and</B>
</FONT>

<P align="center"><FONT size="2"><B>BARNESANDNOBLE.COM INC.</B>
</FONT>

<P align="center"><FONT size="2"><B>Dated as of January&nbsp;8, 2004</B>
</FONT>

<P align="center"><FONT size="2">A-1</FONT>
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<A name="toc"><DIV align="CENTER"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
        <TD width="3%"></TD>
        <TD width="3%"></TD>
        <TD width="3%"></TD>
        <TD width="3%"></TD>
        <TD width="3%"></TD>
        <TD width="3%"></TD>
        <TD width="3%"></TD>
        <TD width="3%"></TD>
        <TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">ARTICLE I. The Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">Section&nbsp;1.1. The Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#002">Section&nbsp;1.2. Effective Time</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#003">Section&nbsp;1.3. Closing</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#004">Section&nbsp;1.4. Certificate of Incorporation; By-laws; Directors and Officers</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#005">Section&nbsp;1.5. Effect of Merger on Common Stock</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#006">Section&nbsp;1.6. Dissenting Shares</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#007">Section&nbsp;1.7. Stock Options</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#008">Section&nbsp;1.8. Exchange of Certificates; Payment for Class&nbsp;A Common Stock</A></TD></TR>
<TR><TD colspan="9"><A HREF="#009">ARTICLE II. Representations and Warranties of the Company</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#010">Section&nbsp;2.1. Organization of the Companies</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011"> Section&nbsp;2.2. Capitalization of the Companies</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Section&nbsp;2.3. Subsidiaries of the Companies</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Section&nbsp;2.4. Authorization</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Section&nbsp;2.5. Opinion of Financial Advisor and Approval by the Special Committee</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Section&nbsp;2.6. Brokers and Finders</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">Section&nbsp;2.7. Proxy Statement; Schedule&nbsp;13E-3</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">Section&nbsp;2.8. SEC Documents; Financial Statements; Sarbanes-Oxley</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">Section&nbsp;2.9. Absence of Certain Changes or Events</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#019">Section&nbsp;2.10. No Undisclosed Material Liabilities</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">Section&nbsp;2.11. Compliance with Laws and Court Orders</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">Section&nbsp;2.12. Litigation and Claims</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">Section&nbsp;2.13. Employee Plans</A></TD></TR>
<TR><TD colspan="9"><A HREF="#023">ARTICLE III. Representations and Warranties of the Barnes &#038; Noble Parties</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#024">Section&nbsp;3.1. Organization and Qualification</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#025">Section&nbsp;3.2. Authorization</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#026">Section&nbsp;3.3. Brokers and Finders</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#027">Section&nbsp;3.4. Proxy Statement; Schedule&nbsp;13E-3</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#028">Section&nbsp;3.5. Knowledge</A></TD></TR>
<TR><TD colspan="9"><A HREF="#029">ARTICLE IV. Certain Covenants and Agreements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#030">Section&nbsp;4.1. Certain Actions Pending Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#031">Section&nbsp;4.2. Proxy Statement</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#032">Section&nbsp;4.3. Stockholders&#146; Meeting</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#033">Section&nbsp;4.4. Reasonable Efforts</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#034">Section&nbsp;4.5. Inspection of Records</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#035">Section&nbsp;4.6. Notification of Certain Matters</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#036">Section&nbsp;4.7. Disclosure</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#037">Section&nbsp;4.8. Directors&#146; and Officers&#146; Indemnification</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#038">Section&nbsp;4.9. Stockholder Litigation</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#039">Section&nbsp;4.10. Employee Matters</A></TD></TR>
<TR><TD colspan="9"><A HREF="#040">ARTICLE V. Conditions Precedent</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#041">Section&nbsp;5.1. Conditions to each Party&#146;s Obligation to Effect the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#042">Section&nbsp;5.2. Conditions to the Obligation of the Company to Effect the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#043">Section&nbsp;5.3. Conditions to the Obligation of the Barnes &#038; Noble Parties to Effect the Merger</A></TD></TR>
<TR><TD colspan="9"><A HREF="#044">ARTICLE VI. Termination, Amendment and Waiver</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#045">Section&nbsp;6.1. Termination</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#046">Section&nbsp;6.2. Effect of Termination</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#047">Section&nbsp;6.3. Amendment</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#048">Section&nbsp;6.4. Waiver</A></TD></TR>
<TR><TD colspan="9"><A HREF="#049">ARTICLE VII. Miscellaneous</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#050">Section&nbsp;7.1. Definitions</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#051">Section&nbsp;7.2. Non-survival of Representations and Warranties</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#052">Section&nbsp;7.3. Expenses</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#053">Section&nbsp;7.4. Applicable Law</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#054">Section&nbsp;7.5. Notices</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#055">Section&nbsp;7.6. Entire Agreement</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#056">Section&nbsp;7.7. Assignment</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#057">Section&nbsp;7.8. Headings References</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#058">Section&nbsp;7.9. Construction</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#059">Section&nbsp;7.10. Counterparts</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#060">Section&nbsp;7.11. No Third Party Beneficiaries</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#061">Section&nbsp;7.12. Actions of the Company</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#062">Section&nbsp;7.13. Severability; Enforcement</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->




<P align="center"><FONT size="2"><B>Table of Contents</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="64%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
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<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top" colspan="5"><FONT size="2">ARTICLE I.



 The Merger
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-5</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">The Merger
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-5</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Effective Time
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-5</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Closing
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-5</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.4.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Certificate of Incorporation; By-laws; Directors and Officers
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-5</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.5.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Effect of Merger on Common Stock
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-6</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.6.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Dissenting Shares
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-7</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.7.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Stock Options
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-7</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;1.8.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Exchange of Certificates; Payment for Class&nbsp;A Common Stock
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-7</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" colspan="5"><FONT size="2">ARTICLE II.



Representations and Warranties of the Company
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-10</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Organization of the Companies
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-10</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Capitalization of the Companies
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-11</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Subsidiaries of the Companies
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-12</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.4.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Authorization
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-12</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.5.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Opinion of Financial Advisor and Approval by the Special Committee
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-13</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.6.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Brokers and Finders
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-13</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.7.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Proxy Statement; Schedule&nbsp;13E-3
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-13</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.8.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">SEC Documents; Financial Statements; Sarbanes-Oxley
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-14</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.9.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Absence of Certain Changes or Events
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-15</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.10.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">No Undisclosed Material Liabilities
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-15</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.11.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Compliance with Laws and Court Orders
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-15</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.12.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Litigation and Claims
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-15</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;2.13.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Employee Plans
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-15</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" colspan="5"><FONT size="2">ARTICLE III.
Representations and Warranties of the Barnes &#038; Noble Parties
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-16</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;3.1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Organization and Qualification
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-16</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;3.2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Authorization
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-16</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;3.3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Brokers and Finders
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-17</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;3.4.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Proxy Statement; Schedule&nbsp;13E-3
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-17</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;3.5.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Knowledge
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-17</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" colspan="5"><FONT size="2">ARTICLE IV.
Certain Covenants and Agreements
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-18</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Certain Actions Pending Merger
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-18</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Proxy Statement
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-19</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Stockholders&#146; Meeting
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-20</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.4.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Reasonable Efforts
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-21</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.5.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Inspection of Records
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-21</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.6.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Notification of Certain Matters
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-22</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.7.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Disclosure
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-22</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.8.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Directors&#146; and Officers&#146; Indemnification
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-22</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.9.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Stockholder Litigation
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-24</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P align="center"><FONT size="2">A-2</FONT>
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    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;4.10.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Employee Matters
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-25</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
   <TD valign="top" colspan="5"><FONT size="2">ARTICLE V.
Conditions Precedent
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-25</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;5.1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Conditions to each Party&#146;s Obligation to Effect the Merger
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-25</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;5.2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Conditions to the Obligation of the Company to Effect the Merger
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-26</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;5.3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Conditions to the Obligation of the Barnes &#038; Noble
Parties to Effect the Merger
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-26</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top" colspan="5"><FONT size="2">ARTICLE VI.


Termination, Amendment and Waiver
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-27</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;6.1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Termination
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-27</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;6.2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Effect of Termination
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-28</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;6.3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Amendment
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-28</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;6.4.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Waiver
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-28</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top" colspan="5"><FONT size="2">ARTICLE VII.
Miscellaneous
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-28</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.1.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Definitions
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-28</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.2.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Non-survival of Representations and Warranties
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-32</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.3.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Expenses
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-32</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.4.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Applicable Law
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-32</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.5.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Notices
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-32</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.6.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Entire Agreement
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-33</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.7.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Assignment
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-33</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.8.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Headings References
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-33</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.9.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Construction
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-33</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.10.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Counterparts
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-34</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.11.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">No Third Party Beneficiaries
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-34</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.12.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Actions of the Company
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-34</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Section&nbsp;7.13.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Severability; Enforcement
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">A-34</FONT></TD>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">A-3</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="center"><FONT size="2"><B>AGREEMENT AND PLAN OF MERGER</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS AGREEMENT AND PLAN OF MERGER</B>, dated as of January&nbsp;8, 2004 (this
&#147;Agreement&#148;), by and among Barnes &#038; Noble, Inc., a Delaware corporation
(&#147;Barnes &#038; Noble&#148;), B&#038;N.com Holding Corp., a Delaware corporation and a wholly
owned subsidiary of Barnes &#038; Noble (&#147;B&#038;N Holding Corp.&#148;), B&#038;N.com Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of B&#038;N Holding
Corp. (&#147;B&#038;N Acquisition Corp.&#148;), and barnesandnoble.com inc., a Delaware
corporation (the &#147;Company&#148;). Certain capitalized terms used in this Agreement
are defined in Section&nbsp;7.1.
</FONT>
<P align="center"><FONT size="2">RECITALS:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble, through B&#038;N Holding Corp., beneficially owns, within
the meaning of Rule&nbsp;13d-3 of the Exchange Act, 119,138,502 shares of capital
stock of the Company (the &#147;Capital Stock&#148;) representing approximately 74.6% of
the outstanding equity interest and approximately 96.6% of the voting interest
in the Company as of the date hereof. The shares of Capital Stock beneficially
owned by Barnes &#038; Noble through B&#038;N Holding Corp. consist of the following:
(i)&nbsp;4,138,500 shares of Class&nbsp;A common stock, par value $0.001 per share, of
the Company (the &#147;Class&nbsp;A Common Stock&#148;) and (ii)&nbsp;115,000,002 shares of Class&nbsp;A
Common Stock which B&#038;N Holding Corp. has the right to acquire upon conversion
of its (A)&nbsp;one share of Class&nbsp;B common stock, par value $0.001 per share, of
the Company (&#147;Class&nbsp;B Common Stock&#148;), which represents the only share of Class
B Common Stock issued and outstanding, (B)&nbsp;one share of Class&nbsp;C common stock,
par value $0.001 per share, of the Company (&#147;Class&nbsp;C Common Stock&#148;), which
represents the only share of Class&nbsp;C Common Stock issued and outstanding, and
(C)&nbsp;115,000,000 membership units (the &#147;Membership Units&#148;) in barnesandnoble.com
llc, a Delaware limited liability company whose sole manager is the Company
(&#147;B&#038;N LLC&#148;).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble, through B&#038;N Acquisition Corp., desires to acquire all
of the shares of Class&nbsp;A Common Stock not owned by it, directly or indirectly,
and to provide for the payment of $3.05 per share in cash for all such shares
of Class&nbsp;A Common Stock, by means of a merger of B&#038;N Acquisition Corp. with and
into the Company in accordance with Section&nbsp;251 of the Delaware General
Corporation Law (the &#147;DGCL&#148;), upon the terms and subject to the conditions of
this Agreement (the &#147;Merger&#148;).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The respective Boards of Directors of the Company, Barnes &#038; Noble, B&#038;N
Holding Corp. and B&#038;N Acquisition Corp. have (and in the case of the Company,
upon the recommendation of a special committee of its Board of Directors (the
&#147;Special Committee&#148;)) approved this Agreement and declared it advisable and in
the best interests of their respective companies and stockholders to consummate
the Merger on the terms and subject to the conditions set forth herein.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement, the Parties
hereby agree as follows:
</FONT>

<P align="center"><FONT size="2">A-4</FONT>



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<P align="center"><FONT size="2">ARTICLE I.
</FONT>

<P align="center"><FONT size="2">The Merger
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.1.
<u>The Merger</u>. At the Effective Time, upon the terms and
subject to the conditions set forth in this Agreement and in accordance with
the DGCL, B&#038;N Acquisition Corp. will be merged with and into the Company, the
separate existence of B&#038;N Acquisition Corp. will cease, and the Company will
continue as the surviving corporation (the &#147;Surviving Corporation&#148;). The
Merger will have the effects as provided by the DGCL and other applicable law.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.2.
<u>Effective Time</u>. On the Closing Date, B&#038;N Acquisition Corp.
and the Company will file with the Secretary of State of the State of Delaware
a certificate of merger (the &#147;Certificate of Merger&#148;) executed in accordance
with the relevant provisions of the DGCL. The Merger will become effective at
such time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware, or at such other time as is permissible in
accordance with the DGCL and as the Parties may agree, as specified in the
Certificate of Merger (the time the Merger becomes effective, the &#147;Effective
Time&#148;).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.3.
<u>Closing</u>. Unless this Agreement shall have been terminated in
accordance with Section&nbsp;6.1, the closing of the Merger (the &#147;Closing&#148;) will
take place at the offices of Bryan Cave LLP, 1290 Avenue of the Americas, New
York, New York 10104 at 10:00&nbsp;a.m. (eastern standard time) on a date to be
mutually agreed to by the Parties, which date shall be no later than the third
business day after the satisfaction of the conditions (other than conditions
that by their nature are to be satisfied at the Closing but subject to such
conditions) provided in Article&nbsp;V, or at such other time and place as the
Parties may agree to in writing (the &#147;Closing Date&#148;).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.4.
<u>Certificate of Incorporation; By-laws; Directors and Officers</u>. At the Effective Time:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the Amended and Restated Certificate of Incorporation of the
Surviving Corporation shall be amended in the Merger to read in its
entirety as set forth in Exhibit&nbsp;A hereto and, until thereafter
amended in accordance with its terms and as provided by the DGCL,
shall be the Amended and Restated Certificate of Incorporation of
the Surviving Corporation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">except as required by Section&nbsp;4.8(a), the By-laws of B&#038;N
Acquisition Corp. as in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation following the
Merger (except that the name of the Surviving Corporation shall be
&#147;barnesandnoble.com inc.&#148;), until thereafter amended as provided in
the DGCL or in the Certificate of Incorporation or By-laws of the
Surviving Corporation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the directors of B&#038;N Acquisition Corp. immediately prior to
the Effective Time shall be the directors of the Surviving
Corporation following the Merger until the earlier of (i)&nbsp;their
death, resignation or removal or (ii)&nbsp;such time as their respective
successors are duly elected or appointed as provided in the
Certificate of Incorporation or By-laws of the Surviving
Corporation; and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-5</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation
until the earlier of (i)&nbsp;their death, resignation or removal or (ii)
such time as their respective successors are duly elected as
provided in the Certificate of Incorporation or By-laws of the
Surviving Corporation.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.5.
<u>Effect of Merger on Common Stock</u>. At the Effective Time, by
virtue of the Merger and without any action on the part of B&#038;N Acquisition
Corp., the Company or the holders of any shares of Class&nbsp;A Common Stock:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">each share of common stock, par value $0.001 per share, of
B&#038;N Acquisition Corp. that is issued and outstanding immediately
prior to the Effective Time shall be converted into and become one
share of common stock, par value $0.001 per share, of the Surviving
Corporation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">subject to Section&nbsp;1.5(c) and Section&nbsp;1.6:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">(i)</FONT></TD>
    <TD width="89%"><FONT size="2">each share of Class&nbsp;A Common Stock that is issued
and outstanding immediately prior to the Effective Time (other
than shares of Class&nbsp;A Common Stock held by B&#038;N Holding Corp.
and Barnes &#038; Noble and their respective subsidiaries) will be
converted into the right to receive $3.05 in cash, without
interest (the &#147;Merger Consideration&#148;), and, when so converted,
will automatically be canceled and will cease to exist;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(ii)</FONT></TD>
    <TD width="96%"><FONT size="2">each holder of a certificate representing any
such shares of Class&nbsp;A Common Stock will cease to have any
rights with respect to such shares of Class&nbsp;A Common Stock to
the extent such certificate represents such shares of Class&nbsp;A
Common Stock, except for the right to receive the Merger
Consideration payable to the shares of Class&nbsp;A Common Stock
formerly represented by such certificate upon surrender of
such certificate in accordance with Section&nbsp;1.8; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(iii)</FONT></TD>
    <TD width="96%"><FONT size="2">in the event that, subsequent to the date of
this Agreement but prior to the Effective Time, the
outstanding shares of Class&nbsp;A Common Stock shall have been
changed into a different number of shares of a different class
as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, split, combination,
exchange, recapitalization or other similar transaction, the
Merger Consideration shall be appropriately adjusted; and</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">each share of Class&nbsp;A Common Stock, Class&nbsp;B Common Stock and
Class&nbsp;C Common Stock that is owned immediately prior to the
Effective Time by B&#038;N Holding Corp. will be canceled and will cease
to exist, no consideration will be delivered in respect of such
shares, and B&#038;N Holding Corp. will cease to have any rights with
respect to any certificates representing any such shares.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-6</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.6.
<U>Dissenting Shares</U>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Notwithstanding anything in this Agreement to the contrary,
shares of Class&nbsp;A Common Stock outstanding immediately prior to the
Effective Time and held by a holder who has demanded and perfected
such holder&#146;s right to appraisal of such shares in accordance with
Section&nbsp;262 of the DGCL (the &#147;Dissenting Shares&#148;) will not be
converted into or represent the right to receive the Merger
Consideration, but their holder will instead be entitled to such
rights as are afforded under the DGCL with respect to Dissenting
Shares, unless such holder fails to perfect or withdraws or
otherwise loses its right to appraisal.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">If any holder of shares of Class&nbsp;A Common Stock who demands
appraisal of such holder&#146;s shares pursuant to the DGCL fails to
perfect or withdraws or otherwise loses such holder&#146;s right to
appraisal, at the later of the Effective Time or upon the occurrence
of such event, such holder&#146;s Dissenting Shares will be converted
into and will represent the right to receive the Merger
Consideration, without interest, in accordance with Section&nbsp;1.5(b).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Company shall give Barnes &#038; Noble:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">(i)</FONT></TD>
    <TD width="89%"><FONT size="2">prompt notice of any written demand for appraisal
or payment of the fair value of any shares of Class&nbsp;A Common
Stock, withdrawals or attempted withdrawals of such demands,
and any other instruments served pursuant to the DGCL received
by the Company; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(ii)</FONT></TD>
    <TD width="96%"><FONT size="2">the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the
DGCL.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Company shall not, except with the prior written consent
of Barnes &#038; Noble, voluntarily make any payment with respect to any
demands for appraisals of Class&nbsp;A Common Stock, offer to settle or
settle any such demands or approve any withdrawal of any such
demands.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.7.
<U>Stock Options</U>. Immediately prior to the Effective Time, each
option to purchase shares of Class&nbsp;A Common Stock granted under any stock
option plan or purchase plan, program or similar arrangement that is
outstanding immediately prior to the Effective Time (each, an &#147;Option&#148;) shall,
whether vested or not vested, be converted into and become the right to receive
from the Surviving Corporation, promptly following the Effective Time, an
amount in cash equal to the
product obtained by multiplying (A)&nbsp;the excess of the Merger Consideration
payable for each share of Class&nbsp;A Common Stock over the exercise price of each
such Option, by (B)&nbsp;the number of shares of Class&nbsp;A Common Stock for which such
Option was exercisable immediately prior to the Effective Time, and when so
converted, will automatically be cancelled and retired and will cease to exist.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1.8.
<U>Exchange of Certificates; Payment for Class&nbsp;A Common Stock</U>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>Exchange Agent</U>. Prior to the Effective Time, Barnes &#038; Noble
will appoint a bank or trust company reasonably acceptable to the
Company to act as exchange</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-7</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">agent (the &#147;Exchange Agent&#148;) for the
payment of the Merger Consideration. Immediately prior to the
Effective Time, Barnes &#038; Noble will have deposited, or caused to be
deposited, with the Exchange Agent, for the benefit of the holders
of shares of Class&nbsp;A Common Stock (other than B&#038;N Holding Corp. and
Barnes &#038; Noble), the aggregate amount of cash payable under Section
1.5(b) in exchange for outstanding shares of Class&nbsp;A Common Stock in
accordance with this Section&nbsp;1.8 (the &#147;Exchange Fund&#148;).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Exchange Procedures</u>.</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">(i)</FONT></TD>
    <TD width="89%"><FONT size="2">Promptly after the Effective Time (but no later
than five (5)&nbsp;business days after the Effective Date), the
Exchange Agent will mail to each holder of record of a
certificate or certificates, which represented outstanding
shares of Class&nbsp;A Common Stock immediately prior to the
Effective Time, whose shares were converted into the right to
receive cash pursuant to Section&nbsp;1.5(b):</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;a letter of transmittal (which will be in customary
form and reviewed by the Company prior to delivery thereof)
specifying that delivery will be effected, and risk of loss
and title to the certificates representing such shares of
Class&nbsp;A Common Stock will pass, only upon delivery of the
certificates representing such shares of Class&nbsp;A Common Stock
to the Exchange Agent, which certificates must be in such
form and have such other provisions as the Exchange Agent may
reasonably specify; and</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;instructions for use in effecting the surrender of
the certificates representing such shares of Class&nbsp;A Common
Stock, in exchange for the Merger Consideration.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">(ii)</FONT></TD>
    <TD width="89%"><FONT size="2">Upon surrender to, and acceptance in accordance
with Section&nbsp;1.8(b)(iii) below by, the Exchange Agent of a
certificate or certificates formerly representing shares of
Class&nbsp;A Common Stock, the holder will be entitled to the
amount of cash into which the number of shares of Class&nbsp;A
Common Stock formerly represented by such certificate or
certificates surrendered have been converted under this
Agreement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(iii)</FONT></TD>
    <TD width="96%"><FONT size="2">The Exchange Agent will accept certificates
formerly representing shares of Class&nbsp;A Common Stock upon
compliance with such reasonable terms and conditions as the
Exchange Agent may impose to effect an orderly exchange of the
certificates in accordance with normal exchange practices.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(iv)</FONT></TD>
    <TD width="96%"><FONT size="2">After the Effective Time, no further transfers
may be made on the records of the Company or its transfer
agent of certificates representing shares of Class&nbsp;A Common
Stock and if such certificates are presented to the Company
for transfer, they will be canceled against delivery of the
Merger</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-8</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="89%"><FONT size="2">Consideration allocable to the shares of Class&nbsp;A Common
Stock represented by such certificate or certificates.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(v)</FONT></TD>
    <TD width="96%"><FONT size="2">If any Merger Consideration is to be remitted to
a name other than that in which the certificate for the Class
A Common Stock surrendered for exchange is registered, no
Merger Consideration may be paid in exchange for such
certificate unless:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;the certificate so surrendered is properly endorsed,
with signature guaranteed, or otherwise in proper form for
transfer; and</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;the Person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to
a Person other than the registered holder of such certificate
or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">(vi)</FONT></TD>
    <TD width="89%"><FONT size="2">Until surrendered as contemplated by this Section
1.8 and at any time after the Effective Time, each certificate
for shares of Class&nbsp;A Common Stock (other than Dissenting
Shares) will be deemed to represent only the right to receive
upon such surrender the Merger Consideration allocable to the
shares represented by such certificate as contemplated by
Section&nbsp;1.5(b). No interest will be paid or will accrue on
any amount payable as Merger Consideration.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>No Further Ownership Rights in
Class&nbsp;A Common Stock</U>. The
Merger Consideration paid upon the surrender for exchange of
certificates formerly representing shares of Class&nbsp;A Common Stock in
accordance with this Section&nbsp;1.8 will be deemed to have been paid in
full satisfaction of all rights pertaining to the shares of Class&nbsp;A
Common Stock formerly represented by such certificates.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>Termination of Exchange Fund</U>. The Exchange Agent will
deliver to the Surviving Corporation any portion of the Exchange
Fund (including any interest and other income received by the
Exchange Agent in respect of all such funds) which remains
undistributed to the holders of the certificates formerly
representing shares of Class&nbsp;A Common Stock upon expiry of the
period of six (6)&nbsp;months following the Effective Time. Any holders
of shares of Class&nbsp;A Common Stock prior to the Merger who have not
complied with this Section&nbsp;1.8 prior to
such time, may look only to the Surviving Corporation for payment
of their claim for Merger Consideration to which such holders may
be entitled.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(e)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>No Liability</U>. No Party will be liable to any Person in
respect of any amount from the Exchange Fund delivered to a public
official in accordance with any applicable abandoned property,
escheat or similar law.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(f)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>Lost Certificates</U>. If any certificate or certificates
formerly representing shares of Class&nbsp;A Common Stock is lost, stolen
or destroyed, the Exchange Agent will issue the Merger Consideration
deliverable in respect of, and in exchange for,</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-9</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">such lost, stolen or
destroyed certificate, as determined in accordance with this Section
1.8, only upon:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">(i)</FONT></TD>
    <TD width="89%"><FONT size="2">the making of an affidavit of such loss, theft or
destruction by the Person claiming such certificate or
certificates to be lost, stolen or destroyed; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(ii)</FONT></TD>
    <TD width="96%"><FONT size="2">if required by the Surviving Corporation, the
posting by such Person of a bond in such reasonable amount as
the Surviving Corporation may reasonably require as indemnity
against any claim that may be made against it with respect to
such certificate; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">(iii)</FONT></TD>
    <TD width="96%"><FONT size="2">if required by the Surviving Corporation, the
entering into an indemnity agreement by such Person reasonably
satisfactory to the Surviving Corporation to indemnify the
Surviving Corporation against any claim that may be made
against it with respect to such certificate.</FONT></TD>
</TR>
</TABLE>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(g)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>Withholding Rights</U>. The Surviving Corporation may deduct and
withhold, or may instruct the Exchange Agent to deduct and withhold,
from the consideration otherwise payable under this Agreement to any
holder of shares of Class&nbsp;A Common Stock such amounts as the
Surviving Corporation is required to deduct and withhold under the
United States Internal Revenue Code of 1986, as amended, or any
similar provision of state, local or foreign tax law with respect to
the making of such payment. Any amounts so deducted and withheld by
the Surviving Corporation or the Exchange Agent will be treated as
having been paid to the holder of the shares of Class&nbsp;A Common Stock
in respect of which such deduction and withholding was made for all
purposes of this Agreement.</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">ARTICLE II.
</FONT>

<P align="center"><FONT size="2">Representations and Warranties of the Company
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth in the Company&#146;s disclosure letter delivered to the
Barnes &#038; Noble Parties in connection with this Agreement (the &#147;Company
Disclosure Letter&#148;) or the SEC Documents filed prior to the date of this
Agreement, the Company hereby represents and warrants to the Barnes &#038; Noble
Parties as follows:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.1. <U>Organization of the Companies</U>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">To the Company&#146;s knowledge
the Company is a corporation duly organized, and the Company is validly existing
and in good standing under the laws of its jurisdiction of
organization and has all the requisite corporate power and authority
to carry on its business as now being conducted and to own, lease,
use and operate the properties owned and used by it. To the
Company&#146;s knowledge B&#038;N LLC is a
limited liability company duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and
has all the requisite limited liability company power and authority
to carry on its business as now being conducted and to own, lease,
use and operate the properties owned and used by it.</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">A-10</FONT>




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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">To the Company&#146;s knowledge, the Company is qualified and in good standing to do business
in each jurisdiction in which the nature of its business requires it
to be so qualified, except to the extent the failure to be so
qualified would not reasonably be expected to have a Material
Adverse Effect on the Company. To the Company&#146;s knowledge, B&#038;N LLC is qualified and in good
standing to do business in each jurisdiction in which the nature of
its business requires it to be so qualified, except to the extent
the failure to be so qualified would not reasonably be expected to
have a Material Adverse Effect on B&#038;N LLC.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.2.
<u>Capitalization of the Companies</u>.
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">As of the date of this Agreement, the authorized capital
stock of the Company consists of (i)&nbsp;750,000,000 shares of Class&nbsp;A
Common Stock; (ii)&nbsp;1,000 shares of Class&nbsp;B Common Stock; (iii)&nbsp;1,000
shares of Class&nbsp;C Common Stock; and (iv)&nbsp;50,000,000 shares of
Preferred Stock, par value $.001 per share (the &#147;Preferred Stock&#148;).
As of January&nbsp;7, 2004, there were 48,280,087 shares of Class&nbsp;A
Common Stock issued and outstanding, one share of Class&nbsp;B Common
Stock issued and outstanding, one share of Class&nbsp;C Common Stock
issued and outstanding and no shares of Preferred Stock issued and
outstanding. As of January&nbsp;7, 2004, there were 14,939,905 shares of
Class&nbsp;A Common Stock issuable upon the exercise of issued and
outstanding Options. All of the issued and outstanding shares of
capital stock of the Company are duly authorized, validly issued,
fully paid and non-assessable. No shares of capital stock of the
Company are held in the treasury of the Company as of the date of
this Agreement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Except for Class&nbsp;A Common Stock issuable upon (i)&nbsp;the
exercise of outstanding Options and (ii)&nbsp;the conversion of
Membership Units, Class&nbsp;B Common Stock or Class&nbsp;C Common Stock,
there are no outstanding options, warrants or other rights of any
kind issued or granted by the Company to acquire (including
preemptive rights) from the Company any additional shares of capital
stock of the Company or securities convertible into or exchangeable
for, or which otherwise confer on the holder thereof any right to
acquire, any such additional shares from the
Company, nor is the Company committed to issue any such option,
warrant, right or security.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">As of January&nbsp;7, 2004, there are issued and outstanding
163,280,087 Membership Units and the Company is the record and
beneficial owner of 48,280,089 Membership Units, which are, to the
Company&#146;s knowledge, free and clear of any Liens. All of the issued
and outstanding Membership Units are duly authorized, validly issued
and fully paid. There are no outstanding options, warrants or other
rights of any kind issued or granted by either of the Companies to
acquire (including preemptive rights) from either of the Companies
any Membership Units or securities convertible into or exchangeable
for, or which otherwise confer on the holder thereof any right to
acquire, any such Membership Units, nor are either of the Companies
committed to issuing any such option, warrant, right or security.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-11</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.3.
<u>Subsidiaries of the Companies</u>. Other than the Company&#146;s
interest in B&#038;N LLC and B&#038;N LLC&#146;s 100% interest in BookQuest LLC, the Companies
do not own, directly or indirectly, any equity securities of any other Person.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.4.
<u>Authorization</u>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Company has all requisite corporate power and authority
to enter into this Agreement and, subject to any necessary approval
of this Agreement by the stockholders of the Company, to carry out
its obligations under this Agreement and to consummate the
transactions contemplated by this Agreement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
by this Agreement have been duly authorized by all requisite
corporate action on the part of the Company (other than the approval
of this Agreement by the stockholders of the Company and filing of
the Certificate of Merger with the Secretary of State of the State
of Delaware as required by the DGCL). Upon the recommendation of
the Special Committee, the Board of Directors of the Company has in
accordance with the requirements of the DGCL unanimously approved
and declared advisable this Agreement and has determined that the
terms of the Merger are fair to, and in the best interests of, the
Company and the Public Stockholders.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery
of this Agreement by each Barnes &#038; Noble Party, constitutes the
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors&#146; rights generally or by general
equitable principles.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Consents</u>.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="89%"><FONT size="2">Assuming that the consents, approvals,
qualifications, orders, authorizations and filings referred to
in Section&nbsp;2.4(d)(ii) have been made or obtained, the
execution, delivery and performance by the Company of this
Agreement will not result in any violation of or be in
conflict with, or result in a breach of, or constitute a
default under:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;any term or provision of any state or federal law,
ordinance, rule or regulation to which either of the
Companies is subject, except for such violations, breaches or
defaults that would not have, together with all such other
violations, breaches and defaults, a Material Adverse Effect
on the Companies, taken as a whole, or prevent the
consummation of the transactions contemplated by this
Agreement; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;the Certificate of Incorporation or By-laws of the
Company or the organizational documents of B&#038;N LLC, as
amended and in effect on the date of this Agreement; or</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-12</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="11%"></TD>
    <TD width="89%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;any Contract or Judgment to which either of the
Companies is a party or by which either of the Companies is
bound, or result in the creation of any Lien upon any of the
properties or assets of either of the Companies, except for
such violations, breaches, defaults or Liens that would not
have, together with all such other violations, breaches,
defaults and Liens, a Material Adverse Effect on the
Companies, taken as a whole, or prevent the consummation of
the transactions contemplated by this Agreement.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="89%"><FONT size="2">No consent, approval, qualification, order or
authorization of, or filing with, any Governmental Entity is
required in connection with the Company&#146;s valid execution,
delivery or performance of this Agreement, or the consummation
of any other transaction contemplated on the part of the
Company under this Agreement, except (1)&nbsp;in connection, or in
compliance, with the Securities Act and the Exchange Act, (2)
the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with
the relevant authorities of other states in which either of
the Companies is qualified to do business, and (3)&nbsp;approvals,
qualifications, orders, authorizations, or filings, in each
case, the failure to obtain which would not have a Material
Adverse Effect on the Companies, taken as a whole, or prevent
the consummation of the transactions contemplated by this
Agreement.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.5.
<u>Opinion of Financial Advisor and Approval by the Special
Committee</u>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">On or prior to the date of this Agreement, the Special
Committee has (i)&nbsp;approved the terms of this Agreement and the
Merger as they relate to the Public
Stockholders, (ii)&nbsp;determined that the Merger is fair to and in the
best interest of the Company and the Public Stockholders, and (iii)
recommended that the Board of Directors of the Company approve this
Agreement and the Merger.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Special Committee has received an opinion of Credit
Suisse First Boston LLC to the effect that, as of the date of such
opinion, the Merger Consideration is fair, from a financial point of
view, to the Public Stockholders.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.6.
<u>Brokers and Finders</u>. Other than Credit Suisse First Boston
LLC, neither of the Companies has employed any broker, finder, advisor or
intermediary in connection with the transactions contemplated by this Agreement
that would be entitled to a broker&#146;s, finder&#146;s or similar fee or commission in
connection with or upon the consummation of the transactions contemplated by
this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.7.
<u>Proxy Statement; Schedule&nbsp;13E-3</u>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">None of the information to be supplied by either of the
Companies for inclusion in the Proxy Statement or the Schedule&nbsp;13E-3
will, in the case of the Schedule&nbsp;13E-3, as of the date thereof and
the date of any amendment thereto and, in the case of the Proxy
Statement, as of the time the Proxy Statement (or any</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-13</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">amendment
thereof or supplement thereto) is filed with the SEC and at the time
the Proxy Statement is mailed to the Company&#146;s stockholders, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they are made, not misleading.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Each of the Proxy Statement and the Schedule&nbsp;13E-3 will, as
of its first date of use, comply as to form in all material respects
with the provisions of the Exchange Act.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.8.
<u>SEC Documents; Financial Statements; Sarbanes-Oxley</U>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">To the Company&#146;s knowledge, the Company has filed with the SEC all reports, schedules,
forms, statements and other documents required to be filed with the
SEC since January&nbsp;1, 2002 (collectively, the &#147;SEC Documents&#148;).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">As of the respective dates that they were filed, the SEC
Documents complied as to form in all material respects with all
applicable requirements of the Securities Act and the Exchange Act,
as the case may be. Except to the extent that information contained
in any SEC Document has been revised or superseded by a later filed
SEC Document, none of the SEC Documents, at the time filed,
contained any untrue statement of a material fact or omitted to
state any material fact required to
be stated in or necessary in order to make the statements in the
SEC Documents, in light of the circumstances under which they were
made, not misleading.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The financial statements of the Company included in the SEC
Documents (i)&nbsp;comply as to form in all material respects with
applicable accounting requirements and the applicable published
rules and regulations of the SEC, (ii)&nbsp;have been prepared in
accordance with GAAP (except, in the case of unaudited statements,
as permitted by applicable instructions or regulations of the SEC
relating to the preparation of quarterly reports on Form&nbsp;10-Q)
applied on a consistent basis during the period involved (except as
may be indicated in the notes to the financial statements), and
(iii)&nbsp;fairly present in all material respects the financial position
of the Company as of the respective dates and the Company&#146;s results
of operations and cash flows for the periods then ended except as
otherwise noted therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Company maintains &#147;disclosure controls and procedures&#148;
(as defined in Rules&nbsp;13a-15(e) and 15d-15(e) of the Exchange Act)
required in order for the Chief Executive Officer and Chief
Financial Officer of the Company to engage in the review and
evaluation process mandated by Section&nbsp;302 of the Sarbanes-Oxley Act
of 2002. The Company&#146;s &#147;disclosure controls and procedures&#148; are
reasonably designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of
the SEC, and that all such information is accumulated and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-14</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">communicated to the Company&#146;s management as appropriate to allow
timely decisions regarding required disclosure. Neither of the
Companies is a party to any off-balance sheet arrangements (as
defined in Item&nbsp;303(c) of Regulation&nbsp;S-K promulgated under the
Exchange Act).</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.9.
<U>Absence of Certain Changes or Events</U>. Since December&nbsp;31,
2002, the Companies have conducted their respective businesses only in the
ordinary course of such businesses, and there has not been any event, fact,
violation, circumstance or other matter that has or have had, or would
reasonably be expected to, either individually or in the aggregate, have a
Material Adverse Effect on the Companies, taken as a whole.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.10. <U>No Undisclosed Material Liabilities</U>. Since September&nbsp;30,
2003, the Companies have not incurred any liabilities of any kind whatsoever,
whether accrued, contingent, absolute or otherwise, which would be required to
be reflected, reserved for or disclosed under GAAP in the consolidated
financial statements of the Company, other than:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">liabilities or obligations reflected, reserved for or
disclosed in the Company&#146;s filed SEC Documents;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">liabilities or obligations which would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect on the Companies, taken as a whole; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">liabilities or obligations incurred under this Agreement or
in connection with the transactions contemplated by this Agreement.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.11. <U>Compliance with Laws and Court Orders</U>. Each of the
Companies is in compliance with and, to the knowledge of each of the Companies,
has not been given notice of any violation of any applicable law, rule
regulation, judgment, injunction, order or decree of any Governmental Entity
applicable to either of the Companies, except for such violations as would not
reasonably be expected to, either individually or in the aggregate, have a
Material Adverse Effect on the Companies, taken as a whole.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.12. <U>Litigation and Claims</U>. Neither of the Companies is subject
to any continuing order of, or written agreement or memorandum of understanding
with, any Governmental Entity or any judgment, order, writ, injunction, decree,
or award of any Governmental Entity or any court or arbitrator, and there is no
claim, action, suit, litigation, proceeding, or arbitration pending or, to the
knowledge of either of the Companies, threatened, except for matters which
would not reasonably be expected to, either individually or in the aggregate,
have a Material Adverse Effect on the Companies, taken as a whole.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2.13. <U>Employee Plans</U>. No Company Plan or Contract exists that
could result in the payment to any present or former employee of either of the
Companies of any money or other property or accelerate or provide any other
rights or benefits to any present or former employee of either of the Companies
as a result of the Merger.
</FONT>

<P align="center"><FONT size="2">A-15</FONT>




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<P align="center"><FONT size="2">ARTICLE III.<BR><BR>
Representations and Warranties of the Barnes &#038; Noble Parties
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble, B&#038;N Holding Corp. and B&#038;N Acquisition Corp. (each, a
&#147;Barnes &#038; Noble Party&#148; and together, the &#147;Barnes &#038; Noble Parties&#148;) hereby
jointly and severally represent and warrant to the Company as follows:
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.1.
<U>Organization and Qualification</U>. Each Barnes &#038; Noble Party is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. B&#038;N Acquisition Corp. has been incorporated
solely for the purpose of merging with and into the Company and taking action
incident to the Merger. Except for obligations or liabilities and activities
contemplated by this Agreement, B&#038;N Acquisition Corp. has not incurred any
obligations or liabilities or engaged in any business activities of any kind
prior to the Closing.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.2.
<U>Authorization</U>.
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Each Barnes &#038; Noble Party has all corporate power and
authority to enter into this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated
by this Agreement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The execution and delivery of this Agreement by each Barnes &#038;
Noble Party and the consummation by each Barnes &#038; Noble Party of the
transactions contemplated by this Agreement have been duly
authorized by all corporate action on the part of each Barnes &#038;
Noble Party.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">This Agreement has been duly executed and delivered by each
Barnes &#038; Noble Party and, assuming the due authorization, execution
and delivery of this Agreement by the Company, constitutes the valid
and binding obligation of each Barnes &#038; Noble Party, enforceable
against each Barnes &#038; Noble Party in accordance with its terms,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, or similar laws affecting
creditors&#146; rights generally or by general equitable principles.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>Consents</U>.</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top" align="left"><FONT size="2">(i)</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Assuming that the consents, approvals,
qualifications, orders, authorizations and filings referred to
in Section&nbsp;3.2(d)(ii) have been made or obtained, the
execution, delivery and performance by each Barnes &#038; Noble
Party of this Agreement will not result in any violation of or
be in conflict with, or result in a breach of, or constitute a
default under:</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;any term or provision of any state or federal law,
ordinance, rule or regulation to which any Barnes &#038; Noble
Party is subject and which violation, breach or default would
have, together with all such other violations, breaches and
defaults, a Material Adverse Effect on the Barnes</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-16</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#038; Noble Parties, taken as a whole, or prevent the
consummation of the transactions contemplated by this
Agreement; or</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>
<TR valign="top">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;the Certificate of Incorporation or By-Laws of each
Barnes &#038; Noble Party, as amended and in effect on the date of
this Agreement or the Closing Date, or any Contract or
Judgment to which any Barnes &#038; Noble Party is a party or by
which any Barnes &#038; Noble Party is bound, or result in the
creation of any Lien upon any of the properties or assets of
any Barnes &#038; Noble Party, which breach or default would have,
together with all such other breaches and defaults, a
Material Adverse Effect on the Barnes &#038; Noble Parties, taken
as a whole, or prevent the consummation of the transactions
contemplated by this Agreement.</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top" align="left"><FONT size="2">(ii)</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
No consent, approval, qualification, order or
authorization of, or filing with, any Governmental Entity is
required in connection with the valid execution, delivery or
performance of this Agreement by any Barnes &#038; Noble Party, or
the consummation of any other transaction contemplated on the
part of any Barnes &#038; Noble Party under this Agreement, except
(1)&nbsp;in connection, or in compliance, with the Securities Act
and the Exchange Act, (2)&nbsp;the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware,
and (3)&nbsp;approvals, qualifications, orders, authorizations, or
filings, in each case the failure to obtain which would not
have a Material Adverse Effect on the Barnes &#038; Noble Parties,
taken as a whole, or prevent the consummation of the
transactions contemplated by this Agreement.</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.3.
<U>Brokers and Finders</U>. Other than Citigroup Global Markets,
Inc., no Barnes &#038; Noble Party has employed any broker, finder, advisor or
intermediary in connection with the transactions contemplated by this Agreement
that would be entitled to a broker&#146;s, finder&#146;s, or similar fee or commission in
connection with or upon the consummation of the transactions contemplated by
this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.4.
<U>Proxy Statement; Schedule&nbsp;13E-3</U>. None of the information to
be supplied by a Barnes &#038; Noble Party for inclusion in the Proxy Statement or
Schedule&nbsp;13E-3 will, in the case of the Schedule&nbsp;13E-3, as of the date thereof
and the date of any amendment thereto and, in the case of the Proxy Statement,
as of the time the Proxy Statement (or any amendment thereof or supplement
thereto) is filed with the SEC and at the time the Proxy Statement is mailed to
the Company&#146;s stockholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein with respect to the information provided
by a Barnes &#038; Noble Party, in light of the circumstances under which they are
made, not misleading.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3.5.
<U>Knowledge</U>. Other than as set forth in the Company Disclosure
Letter, the Barnes &#038; Noble Parties are not aware of any facts or circumstances
which would cause the representations and warranties of the Company contained
in this Agreement to be untrue or incorrect in any material respect.
</FONT>
<P align="center"><FONT size="2">A-17</FONT>
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<P align="center"><FONT size="2">ARTICLE IV.<BR><BR>
Certain Covenants and Agreements
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.1. <U>Certain Actions Pending Merger</U>. Prior to the Effective Time
(i)&nbsp;the Companies shall conduct their respective businesses in the ordinary and
usual course of business, consistent with past practice and (ii)&nbsp;neither of the
Companies shall take any of the following actions, except with the prior
written consent of Barnes &#038; Noble or as expressly contemplated or permitted by
this Agreement:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">declare, set aside or pay any dividends on or make any other
distribution in respect of any of its capital stock or Membership
Units;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">split, combine or reclassify any of its capital stock or
Membership Units or issue or authorize or propose the issuance or
authorization of any other securities in respect of, in lieu of, or
in substitution for shares of its capital stock or Membership Units
or repurchase, redeem or otherwise acquire any shares of its capital
stock or Membership Units;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">issue, deliver, pledge, encumber or sell, or authorize the
issuance, delivery, pledge, encumbrance or sale of, or purchase or
propose the purchase of, any shares of its capital stock or
Membership Units or securities convertible into, or rights, warrants
or options to acquire, any such shares of capital stock or
Membership Units or other convertible securities (other than the
issuance upon the exercise of outstanding Options in effect on the
date of this Agreement or the exchange or conversion of Membership
Units or shares of Class&nbsp;B Common Stock or Class&nbsp;C Common Stock, in
each case in accordance with their respective present terms),
authorize or propose any change in its equity capitalization, or
amend any of the financial or other economic terms of such
securities or the financial or other economic terms of any agreement
to which either of the Companies is a party relating to such
securities;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">amend its Certificate of Incorporation, By-laws or other
organizational documents in any manner;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(e)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">merge or consolidate with any other Person, or acquire any
assets or capital stock of any other Person, other than acquisitions
of assets in the ordinary course of business;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(f)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">incur any indebtedness for money borrowed or guarantee any
such indebtedness of another Person other than pursuant to any
current agreement relating to indebtedness for money borrowed or
other than in the ordinary course of business;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(g)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">make or authorize any capital expenditures, other than
capital expenditures that are in the aggregate no greater than (i)
$5.0&nbsp;million from the date of this Agreement through March&nbsp;31, 2004
and (ii) $10.0&nbsp;million from the date of this Agreement through July
15, 2004;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-18</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(h)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">except as may be required by changes in applicable law or
GAAP, change any method, practice or principle of accounting;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">enter into any new employment agreements with, or increase
the compensation of, any officer (vice president or above) or
director of either of the Companies (including entering into any
bonus, severance, change of control, termination, reduction-in-force
or consulting agreement or other employee benefits arrangement or
agreement pursuant to which such person has the right to any form of
compensation from either of the Companies), other than as required
by law or by written agreements in effect on or prior to the date
hereof with such person, or otherwise amend in any material respect
any existing agreements with any such person or use its discretion
to amend any Company Plan or accelerate the vesting or any payment
under any Company Plan;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(j)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">enter into any transaction with any officer (vice president
or above) or director of either of the Companies, other than as
provided for in the terms of any agreement in effect on or prior to
the date hereof;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(k)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">settle or otherwise compromise any material litigation,
arbitration or other judicial or administrative dispute or
proceeding relating to either of the Companies; or</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(l)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">&nbsp;the entering into any agreement to, or the making of any
commitment to, take any of the actions prohibited by this Section
4.1.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.2. <U>Proxy Statement</U>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">As soon as reasonably practicable after the date of this
Agreement, the Company will prepare and file with the SEC, a proxy
statement relating to the Company Stockholders&#146; Meeting (together
with any amendments thereof or supplements thereto and any other
required proxy materials, the &#147;Proxy Statement&#148;) and a Rule&nbsp;13E-3
Transaction Statement on Schedule&nbsp;13E-3 (together with any
amendments thereof or supplements thereto, the &#147;Schedule&nbsp;13E-3&#148;)
relating to the transactions contemplated by this Agreement and will
use its reasonable efforts to respond to any comments of the SEC and
to cause the Proxy Statement to be mailed to the Company&#146;s
stockholders as promptly as practicable; <I>provided, however, </I>that
prior to the filing of the Proxy Statement and the Schedule&nbsp;13E-3,
the Company will consult with the Barnes &#038; Noble Parties and their
counsel with respect to such filings and shall afford the Barnes &#038;
Noble Parties reasonable opportunity to review and comment thereon.
The Barnes &#038; Noble Parties will provide the Company with any
information for inclusion in the Proxy Statement and the Schedule
13E-3 which may be required under applicable law and which is
reasonably requested by the Company. The Company will promptly
notify the Barnes &#038; Noble Parties of the receipt of any comments
from the SEC and of any request by the SEC for amendments or
supplements to the Proxy Statement or the Schedule&nbsp;13E-3 or for
additional information, and will supply the Barnes &#038; Noble Parties
with copies of all correspondence between the Company and any of its
representatives, on the one hand, and the SEC or members of its
staff, on the other</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-19</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">hand, with respect to the Proxy Statement, the Schedule&nbsp;13E-3 or
the transactions contemplated hereby. If at any time prior to the
Company Stockholders&#146; Meeting any event should occur which is
required by applicable law to be set forth in an amendment of, or a
supplement to, the Proxy Statement or the Schedule&nbsp;13E-3, the
Company will prepare and, if appropriate, mail to its stockholders
such amendment or supplement; <I>provided, however, </I>that prior to such
mailing, the Company will consult with the Barnes &#038; Noble Parties
and their counsel with respect to such amendment or supplement and
shall afford the Barnes &#038; Noble Parties reasonable opportunity to
review and comment thereon.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Except under the circumstances described in Section&nbsp;4.3, the
Company through the Company&#146;s Board of Directors (acting upon the
recommendation of the Special Committee) shall recommend to its
Public Stockholders the adoption of this Agreement and the
transactions contemplated hereby and such recommendation shall be
included in the Proxy Statement and the Schedule&nbsp;13E-3.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.3. <U>Stockholders&#146; Meeting</U>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Company will call and hold a meeting of the stockholders of the
Company for the purpose of voting upon the adoption and approval of
this Agreement and the transactions contemplated by this Agreement
(such meeting, the &#147;Company Stockholders&#146; Meeting&#148;). The Company
Stockholders&#146; Meeting will be held (on a date selected by the
Company in consultation with the Barnes &#038; Noble Parties) as
promptly as practicable after the mailing of the Proxy Statement to
the stockholders of the Company. Barnes &#038; Noble hereby agrees to
cause B&#038;N Holding Corp. to vote all shares of its Class&nbsp;A Common
Stock, Class&nbsp;B Common Stock and Class&nbsp;C Common Stock in favor of
the adoption and approval of this Agreement and the transactions
contemplated by this Agreement. Neither the Board of Directors of
the Company nor any committee thereof (including the Special
Committee) shall, except as expressly permitted by this Section
4.3, withdraw, qualify or modify its approval or recommendation of
the approval of this Agreement and the transactions contemplated
hereby in a manner adverse to Barnes &#038; Noble (an &#147;Adverse Company
Board Recommendation&#148;).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Notwithstanding anything to the contrary contained herein, at
any time prior to the adoption of this Agreement by the Required
Company Stockholder Vote, the Board of Directors of the Company
(acting upon the recommendation of the Special Committee) or the
Special Committee may make an Adverse Company Board Recommendation
and terminate this Agreement pursuant to Section&nbsp;6(d)(i) (a
&#147;Termination Recommendation&#148;) if: (i)&nbsp;any Person makes an
Acquisition Proposal; (ii)&nbsp;the Company provides notice to Barnes &#038;
Noble to the effect that it received such Acquisition Proposal as
soon as practicable after receipt thereof, but in no event later
than two (2)&nbsp;business days after receipt thereof; and (iii)&nbsp;the
Special Committee determines in good faith (after consultation with
its legal and financial advisors) that such Acquisition Proposal is
more favorable to the Public Stockholders than the Merger and made
by a Person which is reasonably able to</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">A-20</FONT>




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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">finance the transaction
contemplated by the Acquisition Proposal (a &#147;Superior Proposal&#148;).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Notwithstanding anything to the contrary contained herein, at
any time prior to the satisfaction of the conditions set forth in
Article&nbsp;V, the Board of Directors of the Company (acting upon the
recommendation of the Special Committee) or the Special Committee
may make an Adverse Company Board Recommendation (other than a
Termination Recommendation) (any such Adverse Company Board
Recommendation, a &#147;Non-Termination Recommendation&#148;) if the Special
Committee determines in good faith (after consultation with its
outside legal counsel) that the Non-Termination Recommendation is
necessary in order for the Special Committee to comply with its
fiduciary obligations to the Public Stockholders under applicable
law. Notwithstanding any Non-Termination Recommendation, this
Agreement shall be submitted to the stockholders of the Company at
the Company Stockholders&#146; Meeting for the purpose of adopting this
Agreement and the transactions contemplated hereby, and nothing
contained herein shall relieve the Company of such obligation.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.4.
<U>Reasonable Efforts</U>. Subject to the terms and conditions
herein provided, each of the Parties agrees to (i)&nbsp;use its reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations or
required to be taken by any Governmental Entity or otherwise to consummate and
make effective the transactions contemplated by this Agreement as promptly as
practicable, (ii)&nbsp;obtain from any Governmental Entity any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained
or made by any Party in connection with the authorization, execution and
delivery of this Agreement and the consummation of the Merger, and (iii)&nbsp;as
promptly as practicable, make all necessary filings, and thereafter make any
other required submissions, with respect to this Agreement and the Merger
required under (A)&nbsp;the Exchange Act, and any other applicable federal or state
securities laws, and (B)&nbsp;any other applicable law; provided that the Parties
shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Parties shall use reasonable efforts to furnish to each other all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable law (including all information
required to be included in the Proxy Statement and the Schedule&nbsp;13E-3) in
connection with the transactions contemplated by this Agreement. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each Party to this Agreement shall take all such necessary or desirable
action.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.5. <U>Inspection of Records</U>. From the date hereof to the Effective
Time, the Companies shall (i)&nbsp;allow all designated officers, attorneys,
financial advisors, accountants and other representatives of Barnes &#038; Noble
reasonable access at all reasonable times to the offices, records and files,
correspondence, audits and properties, as well as to all information relating
to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of the Companies and (ii)&nbsp;make
available for inspection by Barnes &#038; Noble and its counsel, financial
advisors, auditors and other authorized representatives such financial and
</FONT>
<P align="center"><FONT size="2">A-21</FONT>
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<P align="left"><FONT size="2">operating data and other information as such persons may reasonably request to
the extent such information is readily available. No investigation by any
Party, whether prior to the execution of this Agreement or pursuant to this
Section&nbsp;4.5, shall affect any representation or warranty in this Agreement of
any Party or any condition to the obligations of any Party.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.6. <u>Notification of Certain Matters</u>. From and after the date of
this Agreement until the Effective Time, each Party shall promptly notify the
other Parties of:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any change or event, or series of changes or events, having,
or which would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on it or B&#038;N LLC or would
be reasonably likely to cause any of the conditions in Article V
not to be satisfied or to cause the satisfaction thereof to be
materially delayed;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the receipt of any material notice or other material
communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions
contemplated hereby;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">the receipt of any material notice or other material
communication from any Governmental Entity in connection with the
transactions contemplated hereby; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">any actions, suits, claims, investigations or proceedings
commenced or, to the knowledge of the Party, threatened against any
Party or B&#038;N LLC which seeks to prohibit or prevent consummation of
the transactions contemplated hereby;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">in each case, to the extent such event or circumstance is or becomes known to
the Party required to give such notice; <i>provided, however</i>, that the delivery of
any notice pursuant to this Section&nbsp;4.6 shall not be deemed to be an amendment
of this Agreement and shall not cure any breach of any representation or
warranty requiring disclosure of such matter prior to the date of this
Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.7. <u>Disclosure</u>. None of the Parties or their respective
Affiliates will issue any press release or otherwise make any public statement
with respect to this Agreement and the transactions contemplated by this
Agreement without the prior consent of the other Party (which consent will not
be unreasonably withheld), except as may be required by applicable law or stock
exchange regulation. The Parties will consult (to the extent reasonably
practicable if disclosure is required by law) with each other before issuing,
and provide each other the opportunity to review and comment upon, any such
press release or other public statement with respect to this Agreement and the
transactions contemplated by this Agreement, whether or not required by law.
The Parties shall agree on the text of a joint press release by which the
Parties will announce the execution of this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.8. <u>Directors&#146; and Officers&#146; Indemnification</u>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Certificate of Incorporation and the By-laws of the
Surviving Corporation will contain the provisions with respect to
indemnification, advancement of expenses and limitation of liability
of directors and officers set forth in the</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-22</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Company&#146;s Amended and
Restated Certificate of Incorporation and By-laws on the date of
this Agreement. These provisions may not be amended, repealed or
otherwise modified for a period of six (6)&nbsp;years following the
Effective Time in any manner that would adversely affect the rights
under the Amended and Restated Certificate of Incorporation and
By-laws of individuals who on or prior to the Effective Time were
directors or officers of the Company or B&#038;N LLC or served at the
request of the Company or B&#038;N LLC as a director or officer of
another corporation, partnership, joint venture, trust, pension or
other employee benefit plan or enterprise, unless such modification
is required by law and then only to the maximum extent required by
such applicable law, and except to make changes permitted by
applicable law that would enlarge the exculpation, rights of
indemnification or advancement of expenses thereunder; <I>provided,
however</I>, that if any claims are asserted or made within such
six-year period, all rights to indemnification (and to advancement
of expenses) hereunder in respect of such claims shall continue,
without diminution, until disposition of all such claims.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">From the Effective Time through the later of (i)&nbsp;the sixth
anniversary of the date on which the Effective Time occurs and (ii)
the expiration of any statute of limitations applicable to any
claim, action, suit, proceeding or investigation referred to below,
the Surviving Corporation shall (and Barnes &#038; Noble shall cause the
Surviving Corporation to) indemnify and hold harmless each present
and former officer and director of the Company and B&#038;N LLC, and each
person who served at the request of the Company or B&#038;N LLC as a
director or officer of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or
enterprise, including each person controlling any of the foregoing
persons (collectively, the &#147;Indemnified Parties&#148; and each, an
&#147;Indemnified Party&#148;), against all claims, losses, liabilities,
damages, judgments, fines, fees, costs or expenses, including
reasonable attorneys&#146; fees and disbursements, incurred in connection
with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or
pertaining to matters existing or occurring at or prior to the
Effective Time (including this Agreement and the transactions and
actions contemplated hereby), whether asserted or claimed prior to,
at or after the Effective Time, to the fullest extent permitted
under applicable law and the Certificate of Incorporation or By-laws
of the Company or indemnification agreements in effect on the date
hereof, including provisions relating to advancement of expenses
incurred in the defense of any claim, action, suit, proceeding or
investigation. Without limiting the foregoing, in the event that
any claim, action, suit, proceeding or investigation is brought
against an Indemnified Party (whether arising before or after the
Effective Time), the Indemnified Party may retain counsel reasonably
satisfactory
to the Surviving Corporation, and the Surviving Corporation shall
(and Barnes &#038; Noble shall cause the Surviving Corporation to)
advance the fees and expenses of such counsel for the Indemnified
Party in accordance with the Certificate of Incorporation or
By-laws of the Company in effect on the date of this Agreement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Surviving Corporation shall (and Barnes &#038; Noble shall
cause the Surviving Corporation to) provide, for a period of not
less than six (6)&nbsp;years after the</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-23</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Effective Time, the Company&#146;s
current and former directors and officers who are currently covered
by the Company&#146;s existing director and officer insurance policy with
an insurance policy (including by arranging for run-off coverage, if
necessary) that provides coverage for events occurring at or prior
to the Effective Time (the &#147;D&#038;O Insurance&#148;) that is no less
favorable than the existing policy, or, if substantially equivalent
insurance coverage is unavailable, the most advantageous D&#038;O
Insurance obtainable for an annual premium equal to 300% of the
annual premium currently in place for the Company for such
insurance; <I>provided, however</I>, that the Surviving Corporation shall
not be required to pay an annual premium for the D&#038;O Insurance in
excess of 300% of the annual premium currently in place for the
Company for such insurance; <I>provided further, however</I>, that in lieu of
the foregoing, any of the Barnes &#038; Noble Parties shall be permitted
to procure &#147;tail insurance coverage&#148; to cover the Company&#146;s current
and former directors and officers who are currently covered by the
Company&#146;s existing director and officer insurance policy that
provides coverage for events occurring at or prior to the Effective
Time, which coverage shall be no less favorable than the existing
director and officer insurance policy, and the Surviving Corporation
shall (and Barnes &#038; Noble shall cause the Surviving Corporation to)
maintain such coverage for a period of not less than six (6)&nbsp;years
after the Effective Time. In the event any claim is made against
present or former directors or officers of the Company or B&#038;N LLC
that is covered or potentially covered by insurance, neither the
Surviving Corporation nor Barnes &#038; Noble shall do anything that
would forfeit, jeopardize, restrict or limit the insurance coverage
available for that claim until the final disposition thereof.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">This Section&nbsp;4.8 shall survive the Effective Time, is
intended to benefit the Surviving Corporation, the Company&#146;s current
and former directors and officers who are currently covered by the
Company&#146;s existing director and officer insurance policy and shall
be enforceable by such persons, their heirs, assigns and
representatives and are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such
person may have by contract or otherwise. In the event the
Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such
consolidation or merger, or (ii)&nbsp;transfers or conveys all or
substantially all of its properties and assets to any Person, then,
and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Corporation, or at Barnes &#038;
Noble&#146;s option, Barnes &#038; Noble, shall assume the obligations set
forth in this Section&nbsp;4.8.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.9. <U>Stockholder Litigation</U>. Each of the Parties shall give the other the reasonable opportunity to
participate in the defense of any stockholder litigation against any Party or
their respective directors and officers, as applicable, relating to this
Agreement and the transactions contemplated hereby.
</FONT>
<P align="center"><FONT size="2">A-24</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4.10. <U>Employee Matters</U>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Following the Closing Date until January&nbsp;31, 2005, Barnes &#038;
Noble shall, or shall cause the Surviving Corporation to, provide
employee benefits to employees of the Company or B&#038;N LLC
(collectively, &#147;Employees&#148;) that are comparable in the aggregate to
the employee benefits provided to Employees immediately prior to the
Closing Date. To the extent that service is relevant for purposes
of eligibility or vesting under any plan, program or arrangement
established or maintained by Barnes &#038; Noble for the benefit of
Employees that is comparable to a plan, program or arrangement in
which any such Employee was entitled to participate prior to the
Closing Date, such plan, program or arrangement shall credit such
Employees for service on or prior to the Closing with the Company or
B&#038;N LLC, as the case may be, for purposes of eligibility or vesting,
but not for benefit accrual or level of benefits. Following the
Closing Date, matching contributions on behalf of the Employees
shall be invested in the same manner as such contributions are
invested on behalf of similarly situated employees of Barnes &#038;
Noble.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Barnes &#038; Noble shall take all actions necessary to provide
that all Employees participating in an annual bonus plan or policy
of the Company or B&#038;N LLC for the 2003 calendar year be paid the
portion of such annual bonus under the terms of the applicable plan
or policy as in effect immediately prior to the Closing Date.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">After the Closing Date, Barnes &#038; Noble agrees to assume or
guarantee payment of all obligations of the Company or B&#038;N LLC to
Employees under (i)&nbsp;the B&#038;N LLC Deferred Compensation Plan and (ii)
any employment agreement between any Employee and the Company or B&#038;N
LLC.</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">ARTICLE V.
</FONT>

<P align="center"><FONT size="2">Conditions Precedent
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.1. <U>Conditions to each Party&#146;s Obligation to Effect the Merger</U>.
The respective obligation of each Party to effect the Merger is subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions (any of which may be waived by the Parties in writing, in whole or
in part, to the extent permitted by applicable law):
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><U>No Injunctions or Restraints; Illegality</U>. No temporary
restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger
shall be in effect (each Party agreeing to use its reasonable
efforts (as set forth in Section&nbsp;4.4 hereof) to have any restraining
order, injunction or other order or legal restraint or prohibition
lifted) nor shall any proceeding brought by an administrative agency
or commission or other governmental authority or instrumentality
seeking any of the foregoing be pending; and there shall not be any
action taken, or any statute, rule, regulation or order (whether
temporary, preliminary or permanent) enacted, entered or</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">A-25</FONT>




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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">enforced, which makes the consummation of the Merger illegal or prevents or
prohibits the Merger.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Approval of Stockholders</u>. The adoption of this Agreement
shall have been approved by the requisite vote of the stockholders
of the Company in accordance with the DGCL (the &#147;Required Company
Stockholder Vote&#148;).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Consents</u>. Other than the filing of the Certificate of
Merger, all material consents, approvals and authorizations of and
filings with Governmental Entities required for the consummation of
the Merger must have been obtained or effected.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.2.
<u>Conditions to the Obligation of the Company to Effect the
Merger</u>. The obligation of the Company to effect the Merger is further subject
to the satisfaction or waiver of each of the following conditions prior to or
at the Closing Date:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Representations and
Warranties</u>. The representations and
warranties of each Barnes &#038; Noble Party contained in this Agreement
shall be true and correct in all material respects (other than
representations and warranties that are qualified as to materiality
or Material Adverse Effect, which representations and warranties
shall be true and correct in all respects) at and as of the Closing
Date as though made at and as of the Closing Date (except to the
extent that such representations and warranties speak as of a
specific date, in which case such representations and warranties
shall be true and correct as of such date).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Agreements</u>. Each Barnes &#038; Noble Party shall have performed
and complied in all material respects with all its undertakings and
agreements required by this Agreement to be performed or complied
with by it prior to or at the Closing Date.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Certificate</u>. The Company shall have received a certificate
of a senior executive officer of Barnes &#038; Noble, dated the Closing
Date, certifying that the conditions specified in Section&nbsp;5.2(a) and
Section&nbsp;5.2(b) have been fulfilled.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5.3.
<u>Conditions to the Obligation of the Barnes &#038; Noble Parties to
Effect the Merger</u>. The obligation of the Barnes &#038; Noble Parties to effect the
Merger is further subject to the satisfaction or waiver of each of the
following conditions prior to or at the Closing Date:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Representations and
Warranties</u>. The representations and
warranties of the Company contained in this Agreement shall be true
and correct in all material respects (other than representations and
warranties that are qualified as to materiality or Material Adverse
Effect, which representations and warranties shall be true and
correct in all respects) at and as of the Closing Date as though
made at and as of the Closing Date (except to the extent that such
representations and warranties speak as of a specific date, in which
case such representations and warranties shall be true and correct
as of such date).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Agreements</u>. The Company must have performed and complied in
all material respects with all of its undertakings and agreements
required by this Agreement to be performed or complied with by it
prior to or at the Closing Date.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-26</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Certificate</u>. Barnes &#038; Noble shall have received a
certificate of a senior executive officer of the Company, dated the
Closing Date, certifying that the conditions specified in Section
5.3(a) and Section&nbsp;5.3(b) have been fulfilled.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2"><u>Material Adverse Effect</u>. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect with
respect to the Companies, taken as a whole.</FONT></TD>
</TR>
</TABLE>

<P align="center"><FONT size="2">ARTICLE VI.
</FONT>

<P align="center"><FONT size="2">Termination, Amendment and Waiver
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.1.
<u>Termination</u>. This Agreement may be terminated and the Merger
may be abandoned as follows:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">at any time prior to adoption of this Agreement by the
Required Company Stockholder Vote, by the mutual written consent of
Barnes &#038; Noble and the Company;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">by either Barnes &#038; Noble or the Company, in each case by
written notice to the other, if:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">at any time prior to adoption of this Agreement
by the Required Company Stockholder Vote, the Merger has not
been consummated on or prior to July&nbsp;15, 2004; provided that
the right to terminate this Agreement under this Section
6.1(b)(i) will not be available to any Party whose failure to
fulfill any obligation under this Agreement has been the cause
of, or resulted in, the failure of the Merger to occur on or
prior to such date; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">at any time prior to the Effective Date, an
administrative agency or commission or other governmental
authority or instrumentality shall have issued a final
nonappealable injunction, order, decree, judgment or ruling,
permanently enjoining or otherwise prohibiting the Merger.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">at any time prior to adoption of this Agreement by the
Required Company Stockholder Vote, by Barnes &#038; Noble upon written
notice to the Company:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">if there has occurred an Adverse Company Board
Recommendation; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in
this Agreement such that the conditions set forth in Section
5.3(a) or Section&nbsp;5.3(b) shall have become incapable of
fulfillment.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">at any time prior to adoption of this Agreement by the
Required Company Stockholder Vote, by the Special Committee upon
written notice to Barnes &#038; Noble:</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-27</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">if there has occurred a Termination
Recommendation; <I>provided that</I>, prior to such termination the
Special Committee shall have given Barnes &#038; Noble no less than
five (5)&nbsp;business days notice; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">upon a breach of any representation, warranty,
covenant or agreement on the part of a Barnes &#038; Noble Party
set forth in this Agreement such that the conditions set forth
in Section&nbsp;5.2(a) or Section&nbsp;5.2(b) shall have become
incapable of fulfillment.</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.2.
<u>Effect of Termination</u>. If this Agreement is terminated as
provided in Section&nbsp;6.1, this Agreement will become null and void (except that
the provisions of Sections&nbsp;4.7, 6.2, 7.3 and 7.4 will survive any termination
of this Agreement), and there will be no liability on the part of any Party or
any of their Affiliates; provided that nothing in this Agreement will relieve
any party from any liability or obligation with respect to any breach of this
Agreement prior to such termination.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.3.
<u>Amendment</u>. This Agreement may be amended only by an
agreement in writing executed by all of the Parties. After the approval of the
adoption of this Agreement by the stockholders of the Company, no amendment
requiring approval of the stockholders of the Company and B&#038;N Acquisition Corp.
shall be made without first obtaining such approval.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6.4.
<u>Waiver</u>. At any time prior to the Effective Time, whether
before or after the satisfaction of the condition set forth in Section&nbsp;5.1(b),
any of the Parties may:
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">extend the time for the performance of any of the obligations
or other acts of any of the other Party or Parties, as the case may
be; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">waive compliance with any of the agreements of the other
Party or Parties, as the case may be, or fulfillment of any
conditions to its own obligations under this Agreement.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">Any agreement on the part of a Party to any such extension or waiver will be
valid only if set forth in an instrument in writing signed on behalf of such
Party by a duly authorized officer.
</FONT>

<P align="center"><FONT size="2">ARTICLE VII.
</FONT>

<P align="center"><FONT size="2">Miscellaneous
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.1.
<u>Definitions</u>. In this Agreement, unless the context otherwise
provides, the following terms have the following meanings:
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Adverse Company Board Recommendation&#148; has the meaning specified in
Section&nbsp;4.3(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Affiliates&#148; means, with respect to any Person, (i)&nbsp;any other Person that
directly or indirectly Controls, is Controlled by or is under common Control
with, such Person, or (ii)&nbsp;any director, officer, partner or member of
management of such Person.
</FONT>
<P align="center"><FONT size="2">A-28</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Acquisition Proposal&#148; means a bona fide, unsolicited, proposal from any
Person (whether or not in writing) which is not withdrawn relating to any (i)
direct or indirect acquisition of all of the shares of Class&nbsp;A Common Stock
owned by the Public Stockholders, (ii)&nbsp;direct or indirect acquisition of all of
the shares of outstanding capital stock or ownership interests of either of the
Companies, (iii)&nbsp;direct or indirect acquisition of all or substantially all of
the assets of either of the Companies, or (iv)&nbsp;merger, consolidation, share
exchange, business combination or similar transaction involving either of the
Companies.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Barnes &#038; Noble&#148; has the meaning specified in the introductory paragraph
of this Agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Barnes &#038; Noble Party&#148; and &#147;Barnes &#038; Noble Parties&#148; has the meaning
specified in Article&nbsp;III.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;B&#038;N Acquisition Corp.&#148; has the meaning specified in the introductory
paragraph of this Agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;B&#038;N Holding Corp.&#148; has the meaning specified in the introductory
paragraph of this Agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;B&#038;N LLC&#148; has the meaning specified in Recital A hereof.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Capital Stock&#148; has the meaning specified in Recital A.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Certificate of Merger&#148; has the meaning specified in Section&nbsp;1.2.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Class&nbsp;A Common Stock&#148; has the meaning specified in Recital A.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Class&nbsp;B Common Stock&#148; has the meaning specified in Recital A.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Class&nbsp;C Common Stock&#148; has the meaning specified in Recital A.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing&#148; has the meaning specified in Section&nbsp;1.3.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Closing Date&#148; has the meaning specified in Section&nbsp;1.3.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Companies&#148; means the Company and B&#038;N LLC.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Company&#148; has the meaning specified in the introductory paragraph of this
Agreement.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Company Disclosure Letter&#148; has the meaning specified in Article&nbsp;II.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Company Plan&#148; means any &#147;employee benefit plan&#148; (within the meaning of
Section&nbsp;3(3) of the Employee Retirement Income Security Act of 1974, as
amended), and any severance, change in control or employment plan, program or
agreement, and vacation, incentive, bonus, stock option, stock purchase, and
restricted stock plan, program or policy and any other employee benefit plan,
agreement, program or other arrangement sponsored or maintained by either of
the Companies, in which present or former employees thereof participate or
either of the Companies has any present or future liability.
</FONT>
<P align="center"><FONT size="2">A-29</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Company Stockholders&#146; Meeting&#148; has the meaning set forth in Section
4.3(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Contract&#148; means any contract, license, lease, commitment, arrangement,
purchase or sale order, undertaking, understanding or other agreement, whether
written or oral.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Control&#148; means the power to direct or cause the direction of management
or policies of a Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;DGCL&#148; has the meaning specified in Recital B.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;D&#038;O Insurance&#148; has the meaning specified in Section&nbsp;4.8(c).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Dissenting Shares&#148; has the meaning specified in Section&nbsp;1.6(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Effective Time&#148; has the meaning specified in Section&nbsp;1.2.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Employees&#148; has the meaning specified in Section&nbsp;4.10.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Exchange Act&#148; means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated under such Act from time to
time.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Exchange Agent&#148; has the meaning specified in Section&nbsp;1.8(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Exchange Fund&#148; has the meaning specified in Section&nbsp;1.8(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;GAAP&#148; means accounting principles and practices generally accepted from
time to time in the United States.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Governmental Entity&#148; means a court, legislature or other agency or
instrumentality or political subdivision of federal, state or local government.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Indemnified Party&#148; has the meaning specified in Section&nbsp;4.8(b).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Judgment&#148; means any judgment, order, award, writ, injunction or decree of
any Governmental Entity or arbitrator.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Lien&#148; means any mortgage, pledge, lien, charge, restriction, claim or
encumbrance of any nature whatsoever, other than Liens for or with respect to
Taxes that are not yet due and payable or delinquent, including any restriction
on use, transfer, voting or other exercise of any attributes of ownership.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Material Adverse Effect&#148;: An event, fact, violation, breach, inaccuracy,
circumstance or other matter will be deemed to have a <I>&#147;Material Adverse Effect&#148;</I>
on a Party if such event, fact, violation, breach, inaccuracy, circumstance or
other matter had or would reasonably be expected to have a material adverse
effect on the business, financial condition or results of operations of the
Party, other than any event or condition resulting from: (A)&nbsp;general economic,
business or industry conditions; (B)&nbsp;the taking of any action permitted or
required by this Agreement or from
</FONT>

<P align="center"><FONT size="2">A-30</FONT>



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<P align="left"><FONT size="2">the announcement or pendency of the Merger;
(C)&nbsp;a decline in a Party&#146;s stock price; or (D)&nbsp;the delisting of the Class&nbsp;A
Common Stock from the NASDAQ National Market.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Membership Units&#148; has the meaning specified in Recital A hereof.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger&#148; has the meaning specified in Recital B.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Merger Consideration&#148; has the meaning specified in Section&nbsp;1.5(b)(i).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Non-Termination Recommendation&#148; has the meaning specified in Section
4.3(c).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Option&#148; has the meaning specified in Section&nbsp;1.7.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Party&#148; means each of Barnes &#038; Noble, B&#038;N Holding Corp., B&#038;N Acquisition
Corp. and the Company, and any other Person that may become a party to this
Agreement from time to time, and &#147;Parties&#148; means all of the foregoing.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Person&#148; means any individual, corporation, joint venture, partnership,
limited liability company, trust, unincorporated organization, Governmental
Entity or other entity.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Preferred Stock&#148; has the meaning specified in Section&nbsp;2.2(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Proxy Statement&#148; has the meaning specified in Section&nbsp;4.2(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Public Stockholders&#148; means all of the holders of shares of Class&nbsp;A Common
Stock, excluding B&#038;N Holding Corp., Barnes &#038; Noble and their respective
Affiliates and members of management of Barnes &#038; Noble and the Company.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Required Company Stockholder Vote&#148; has the meaning specified in Section
5.1(b).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Schedule&nbsp;13E-3&#148; has the meaning specified in Section&nbsp;4.2(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Securities Act&#148; means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated under such Act from time to time.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;SEC&#148; means the Securities and Exchange Commission, and any successor or
replacement entity.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;SEC Documents&#148; has the meaning specified in Section&nbsp;2.8(a).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Special Committee&#148; has the meaning specified in Recital C.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Superior Proposal&#148; has the meaning specified in Section&nbsp;4.3(b).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Surviving Corporation&#148; has the meaning specified in Section&nbsp;1.1.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Taxes&#148; means (i)&nbsp;all federal, state, local or foreign taxes, charges,
fees, imposts, levies or other assessments, including all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license, withholding, payroll,
</FONT>
<P align="center"><FONT size="2">A-31</FONT>
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<P align="left"><FONT size="2">employment,
social security, unemployment, excise, severance, stamp, occupation, property
and estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, (ii)&nbsp;all interest, penalties, fines, additions to tax or additional
amounts imposed by any taxing authority in connection with any item described
in clause (i)&nbsp;or this clause (ii), and (iii)&nbsp;any transferee liability in
respect of any items described in clauses (i)&nbsp;and/or (ii).
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Termination Recommendation&#148; has the meaning specified in Section&nbsp;4.3(b).
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.2.
<U>Non-survival of Representations and Warranties</U>. None of the
representations and warranties in this Agreement or in any instrument delivered
under this Agreement will survive the Effective Time, and none of the Barnes &#038;
Noble Parties and the Company, their respective Affiliates and any of the
officers, directors, employees or stockholders of any of the foregoing, will
have any liability whatsoever with respect to any such representation or
warranty after such time. This Section&nbsp;7.2 will not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.3.
<U>Expenses</U>. Except as contemplated by this Agreement, all
costs and expenses incurred in connection with the Agreement and the
consummation of the transactions contemplated by this Agreement will be the
obligation of the Party incurring such expenses.
</FONT>
<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.4.
<U>Applicable Law</U>. This Agreement will be governed by the laws
of the State of Delaware without regard to the conflicts of law principles
thereof.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.5.
<U>Notices</U>. All notices and other communications under this
Agreement must be in writing and will be deemed to have been duly given or made
as follows: (a)&nbsp;if sent by registered or certified mail in the United States,
return receipt requested upon receipt, five business days after being so sent;
(b)&nbsp;if sent by reputable overnight air courier, two business days after being
so sent; (c)&nbsp;if sent by telecopy transmission, with a copy mailed on the same
day in the manner provided in clause (a)&nbsp;or (b)&nbsp;above, when transmitted and
receipt is confirmed by telephone; or (d)&nbsp;if otherwise actually personally
delivered, when delivered, and shall be sent or delivered as follows:
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="91%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
If to the Company, to:</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
barnesandnoble.com inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
76 Ninth Avenue</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
New York, NY 10011</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Attention: Ms.&nbsp;Marie Toulantis</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Fax: (212)&nbsp;414-6107</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
with a copy to:</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Dewey Ballantine LLP</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
1301 Avenue of the Americas</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
New York, NY 10019</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Attention:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Morton A. Pierce, Esq.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Jack S. Bodner, Esq.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Fax: (212)&nbsp;259-6333</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">A-32</FONT>
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<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="91%">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
If to any Barnes &#038; Noble Party, to:</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Barnes &#038; Noble, Inc.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
122 Fifth Avenue</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
New York, NY 10011</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Attention: Mr.&nbsp;Leonard Riggio</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Fax: (212)&nbsp;675-0413</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
with a copy to:</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Bryan Cave LLP</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
1290 Avenue of the Americas</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
New York, NY 10104</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Attention: Jay M. Dorman, Esq.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Fax: (212)&nbsp;541-1418</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="left"><FONT size="2">Such names and addresses may be changed by such notice.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.6.
<u>Entire Agreement</u>. This Agreement (including the documents
and instruments referred to in this Agreement) contains the entire
understanding of the Parties with respect to the subject matter hereof, and
supersedes and cancels all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting
such subject matter.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.7.
<u>Assignment</u>. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned by any Party
(whether by operation of law or otherwise) without the prior written consent of
the other Party or Parties, as the case may be.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.8.
<u>Headings References</u>. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and will
not affect in any way the meaning or interpretation of this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.9.
<u>Construction</u>.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The Parties agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this
Agreement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">As used in this Agreement, the words &#147;<I>include</I>&#148; and
&#147;<I>including</I>,&#148; and variations thereof, shall not be deemed to be terms
of limitation, but rather shall be deemed to be followed by the
words &#147;<I>without limitation</I>.&#148;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Except as otherwise indicated, all references in this
Agreement to &#147;<I>Section,</I>&#148; &#147;<I>Sections,</I>&#148; &#147;<I>Article</I>&#148; or &#147;<I>Recital</I>&#148; are
intended to refer to the Section, Sections, Article or Recital, as
the case may be, of this Agreement.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">A-33</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.10.
<U>Counterparts</U>. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
will be considered one and the same agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.11.
<U>No Third Party Beneficiaries</U>. Except as provided in Section
1.8 and Section&nbsp;4.8, nothing in this Agreement, express or implied, is intended
to confer upon any Person not a party to this Agreement any rights or remedies
under or by reason of this Agreement.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.12.
<U>Actions of the Company</U>.
The Barnes &#038; Noble Parties agree that any action, approval, authorization,
waiver or consent taken, given or made by the Company (including the Board of
Directors of the Company) in respect of this Agreement or the Merger, prior to
the Effective Date, shall not be effective unless such action, approval,
authorization, waiver or consent shall have received the prior approval of the
Special Committee.
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7.13.
<U>Severability; Enforcement</U>. Any term or provision of this
Agreement that is held invalid or unenforceable in any jurisdiction by a court
of competent jurisdiction will, as to that jurisdiction, be ineffective to the
extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or unenforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be held unenforceable by a court of competent jurisdiction, such
provision shall be interpreted to be only so broad as is enforceable.
</FONT>
<P align="center"><FONT size="2">&#091;remainder of this page left intentionally blank&#093;
</FONT>

<P align="center"><FONT size="2">A-34</FONT>
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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first above written.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">BARNES &#038; NOBLE, INC.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ Joseph Lombardi</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><HR align="left" size="1" width="70%" noshade></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Joseph Lombardi</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Financial Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">B&#038;N.COM HOLDING CORP.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ Joseph Lombardi</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><HR align="left" size="1" width="70%" noshade></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Joseph Lombardi</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Financial Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">B&#038;N.COM ACQUISITION CORP.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ Joseph Lombardi</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><HR align="left" size="1" width="70%" noshade></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Joseph Lombardi</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Financial Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">BARNESANDNOBLE.COM INC.</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By:</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ Marie J. Toulantis</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><HR align="left" size="1" width="70%" noshade></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Marie J. Toulantis</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Chief Executive
Officer</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">A-35</FONT>



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<!-- link2 "ANNEX B" -->
<DIV align="left"><A NAME="060"></A></DIV>
<P align="right"><FONT size="2"><B>ANNEX B</B>
</FONT>

<P align="center"><FONT size="2"><B>DELAWARE GENERAL CORPORATION LAW SECTION 262-APPRAISAL RIGHTS</B>
</FONT>

<P align="left"><FONT size="2"><B>&#167; 262 Appraisal Rights</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d)&nbsp;of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d)&nbsp;of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to &#167; 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder&#146;s shares of stock under the circumstances
described in subsections (b)&nbsp;and (c)&nbsp;of this section. As used in this section,
the word &#147;stockholder&#148; means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words &#147;stock&#148; and
&#147;share&#148; mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words &#147;depository receipt&#148; mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to &#167; 251 (other than a merger effected pursuant to &#167; 251(g)
of this title), &#167; 252, &#167; 254, &#167; 257, &#167; 258, &#167; 263 or &#167; 264 of this title:
</FONT>


<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of
stock, which stock, or depository receipts in respect thereof, at the
record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders to act upon the
agreement of merger or consolidation, were either (i)&nbsp;listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii)&nbsp;held of record by more than 2,000
holders; and further provided that no appraisal rights shall be available
for any shares of stock of the constituent corporation surviving a merger
if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f)
of &#167; 251 of this title.
</FONT>


<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Notwithstanding paragraph (1)&nbsp;of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof
are required by the terms of an agreement of merger or consolidation
pursuant to &#167;&#167; 251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:
</FONT>


<P align="left" style="margin-left:6%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
</FONT>


<P align="left" style="margin-left:6%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. Shares of stock of any other corporation, or
depository receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts at
the effective date of the merger or consolidation will be either
listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system
by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
</FONT>


<P align="left" style="margin-left:6%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
</FONT>


<P align="left" style="margin-left:6%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
</FONT>

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</FONT>

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<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under &#167; 253 of this title is not
owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d)&nbsp;and (e)&nbsp;of this section, shall apply as nearly as is
practicable.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Appraisal rights shall be perfected as follows:
</FONT>


<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at
a meeting of stockholders, the corporation, not less than 20&nbsp;days prior
to the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b)&nbsp;or (c)&nbsp;hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder&#146;s shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for
appraisal of such stockholder&#146;s shares. Such demand will be sufficient if
it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of such
stockholder&#146;s shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided. Within
10&nbsp;days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
</FONT>


<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) If the merger or consolidation was approved pursuant to &#167; 228
or &#167; 253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation, or the surviving or
resulting corporation within ten days thereafter, shall notify each of
the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available for any
or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section.
Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled
to appraisal rights may, within 20&nbsp;days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder&#146;s shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder&#146;s shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i)&nbsp;each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii)&nbsp;the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10&nbsp;days after such
effective date; provided, however, that if such second notice is sent
more than 20&nbsp;days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder&#146;s shares in
accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than
</FONT>

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</FONT>

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<P align="left" style="margin-left:3%; margin-right:0%"><FONT size="2">10&nbsp;days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Within 120&nbsp;days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a)&nbsp;and (d)&nbsp;hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60&nbsp;days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder&#146;s demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120&nbsp;days after the effective
date of the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a)&nbsp;and (d)&nbsp;hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholder&#146;s written request for such a statement is received
by the surviving or resulting corporation or within 10&nbsp;days after expiration of
the period for delivery of demands for appraisal under subsection (d)&nbsp;hereof,
whichever is later.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20&nbsp;days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1&nbsp;week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted such stockholder&#146;s certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court&#146;s decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney&#146;s fees and the
fees and expenses of experts, to be charged pro-rata against the value of all
the shares entitled to an appraisal.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e)&nbsp;of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of such
stockholder&#146;s demand for an appraisal and an acceptance of the merger or
consolidation, either within 60&nbsp;days after the effective date of the merger or
consolidation as provided in subsection (e)&nbsp;of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
</FONT>

<P align="center"><FONT size="2">B-4
</FONT>

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<!-- link2 "ANNEX C" -->
<DIV align="left"><A NAME="061"></A></DIV>

<P align="right"><FONT size="2"><B>ANNEX C</B>
</FONT>


<P align="center"><FONT size="2">&#091;LETTERHEAD OF CREDIT SUISSE FIRST BOSTON LLC&#093;
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">January&nbsp;8, 2004
</FONT>


<P align="left"><FONT size="2">Special Committee of the Board of Directors<BR>
barnesandnoble.com inc.<BR>
76 Ninth Avenue<BR>
New York, New York 10011
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">Members of the Special Committee:
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">You have asked us to advise you with respect to the fairness, from a financial
point of view, to the holders of class A common stock, par value $0.001 per
share (&#147;Company Common Stock&#148;), of barnesandnoble.com inc. (the &#147;Company&#148;),
other than Barnes &#038; Noble, Inc. (the &#147;Acquiror&#148;) and its affiliates and
officers and directors of each of the Acquiror and the Company (&#147;Management
Members&#148;), of the Consideration (as defined below) to be received by such
holders pursuant to the terms of the Agreement and Plan of Merger, dated as of
January&nbsp;8, 2004 (the &#147;Merger Agreement&#148;), among the Company, the Acquiror,
B&#038;N.com Holding Corp. (&#147;B&#038;N Holding&#148;) and B&#038;N.com Acquisition Corp. (the
&#147;Sub&#148;). The Merger Agreement provides, among other things, for the merger (the
&#147;Merger&#148;) of the Company with the Sub pursuant to which the Company will become
a wholly owned subsidiary of the Acquiror and each outstanding share of Company
Common Stock not owned by the Acquiror, B&#038;N Holding or their respective
subsidiaries will be converted into the right to receive $3.05 in cash (the
&#147;Consideration&#148;).
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as the
Merger Agreement. We have also reviewed certain other information, including
financial forecasts, provided to or discussed with us by the Company, and have
met with the Company&#146;s management to discuss the business and prospects of the
Company. We have also considered certain financial and stock market data of
the Company, and we have compared those data with similar data for other
publicly held companies in businesses we deemed similar to the Company and we
have considered, to the extent publicly available, the financial terms of
certain other business combinations and other transactions which have been
effected or announced. We also considered such other information, financial
studies, analyses and investigations and financial, economic and market
criteria which we deemed relevant.
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. With
respect to the financial forecasts, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the Company&#146;s management as to the future financial
performance of the Company. We have also assumed, with your consent, that the
Merger will be consummated in accordance with the terms of the Merger
Agreement, without waiver, amendment or modification of any material term,
condition or agreement therein and that in the course of obtaining any
necessary regulatory and third party approvals and consents for the Merger, no
</FONT>



<P align="center"><FONT size="2">C-1
</FONT>

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<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">delay, limitation, restriction or condition will be imposed that will have an
adverse effect on the contemplated benefits of the Merger. In addition, we
have not been requested to make, and have not made, an independent evaluation
or appraisal of the assets or liabilities (contingent or otherwise) of the
Company, nor have we been furnished with any such evaluations or appraisals.
Our opinion is necessarily based upon the information available to us and
financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. We were not requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the
Company. Our opinion does not address the relative merits of the Merger as
compared to other transactions or business strategies that might be available
to the Company, nor does it address the underlying business decision of the
Company to proceed with the Merger.
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company (the &#147;Special Committee&#148;) in connection with the
Merger and will receive a fee for our services, a significant portion of which
is payable upon delivery of this opinion. From time to time in the past, we
and our affiliates have provided, and in the future we and our affiliates may
provide, investment banking and other financial services to the Acquiror, for
which services we have received, and expect to receive, compensation. In the
ordinary course of our business, we and our affiliates may actively trade the
debt and equity securities of both the Company and the Acquiror for our and our
affiliates&#146; own accounts and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities.
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">It is understood that this letter is for the information of the Special
Committee in connection with its consideration of the Merger and does not
constitute a recommendation to any stockholder as to how such stockholder
should vote or act on any matter relating to the proposed Merger.
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders of Company Common Stock
in the Merger is fair to such holders, other than the Acquiror and its
affiliates and Management Members, from a financial point of view.
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">Very truly yours,
</FONT>


<P align="left" style="margin-left:0%; margin-right:0%"><FONT size="2">CREDIT SUISSE FIRST BOSTON LLC
</FONT>

<P align="center"><FONT size="2">C-2
</FONT>

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<!-- link2 "ANNEX D" -->
<DIV align="left"><A NAME="062"></A></DIV>

<P align="right"><FONT size="2"><B>ANNEX D</B>
</FONT>


<P align="center"><FONT size="2"><B>INFORMATION RELATING TO THE COMPANY, B&#038;N.COM<BR>
AND THE BARNES &#038; NOBLE PARTIES</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following sets forth certain information relating to
barnesandnoble.com inc. (the &#147;Company&#148;), barnesandnoble.com llc (&#147;B&#038;N.com&#148;),
Barnes &#038; Noble, Inc. (&#147;Barnes &#038; Noble&#148;), B&#038;N.com Holding Corp. (&#147;B&#038;N Holding&#148;),
B&#038;N.com Acquisition Corp. (&#147;B&#038;N Acquisition&#148; and, together with Barnes &#038; Noble
and B&#038;N Holding, the &#147;Barnes &#038; Noble Parties&#148;) and management of each such
party that is required under certain rules of the Securities and Exchange
Commission.
</FONT>


<P align="left"><FONT size="2"><B>barnesandnoble.com inc. and barnesandnoble.com llc</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is a Delaware corporation with its executive offices located
at 76 Ninth Avenue, New York, New York 10011; (212)&nbsp;414-6000. B&#038;N.com is a
Delaware limited liability company with its executive offices located at 76
Ninth Avenue, New York, New York 10011; (212)&nbsp;414-6000.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The names and positions of the directors and executive officers of the
Company and B&#038;N.com are set forth below. Each director and executive officer
of the Company is a citizen of the United States, with the exception of
Jan-Michiel Hessels, who is a citizen of the Netherlands. Each director and
executive officer of B&#038;N.com is a citizen of the United States. Except where
indicated, each director&#146;s and executive officer&#146;s principal occupation is as
listed below and principal business address is 76 Ninth Avenue, New York, New
York 10011. During the last five years, neither the Company, B&#038;N.com, nor, to
the best of their knowledge, any of their respective directors or executive
officers (i)&nbsp;has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii)&nbsp;was a party to any judicial or
administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree for final order
enjoining further violations of, or prohibiting activities subject to, federal
or state securities laws, or a finding of any violation of such federal or
state securities laws.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Directors and Executive Officers of the Company and B&#038;N.com</I></B>
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Position</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Leonard Riggio</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chairman of the Board</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Stephen Riggio</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice Chairman</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Marie J. Toulantis</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Executive Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Kevin M. Frain</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Financial Officer and Vice President, Operations</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">David C. Willen</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Technology Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">David Gitow</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice President, Chief Marketing Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Daniel A. Blackman</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice President and General Manager, Books, Music &#038; Video</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Michael N. Rosen</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director* and Secretary</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Jan-Michiel Hessels</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Patricia Higgins</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">William F. Reilly</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director*</FONT></TD>
</TR>
</TABLE>
</DIV>


<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Represents that this position is only held at the Company.
</FONT></TD>
</TR>

</TABLE>



<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Material Occupations, Positions, Offices or Employment During Previous
Five Years</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Leonard Riggio </I>has been Chairman of the board of directors of the Company
and B&#038;N.com since its inception in February&nbsp;1997. Mr.&nbsp;Riggio is the founder of
Barnes &#038; Noble and has been Chairman of the board of directors and a principal
stockholder of Barnes &#038; Noble since its inception in 1986, and was Chief
Executive Officer of Barnes &#038; Noble from inception through February&nbsp;2002.
Since 1965 Mr.&nbsp;Riggio has been Chairman of the board of directors, Chief
Executive Officer and the principal stockholder of Barnes &#038; Noble College
Bookstores, Inc. (&#147;B&#038;N College&#148;), one of the nation&#146;s largest operators of
college bookstores. Since 1985, Mr.&nbsp;Riggio has been Chairman of the board of
directors and a principal beneficial owner of MBS Textbook Exchange, Inc.
(&#147;MBS&#148;), one of the nation&#146;s largest wholesalers of college
</FONT>


<P align="center"><FONT size="2">D-1
</FONT>

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<P align="left"><FONT size="2">textbooks. Mr.&nbsp;Riggio is also a director of GameStop Corp. (&#147;GameStop&#148;), the
nation&#146;s largest specialty retailer of video games and a majority owned
subsidiary of Barnes &#038; Noble. Mr.&nbsp;Riggio is the brother of Mr.&nbsp;Stephen Riggio.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stephen Riggio </I>has been a director of the Company and B&#038;N.com since
inception and Vice Chairman since January&nbsp;2000. From January&nbsp;2000 to February
2002, Mr.&nbsp;Riggio was also Acting Chief Executive Officer of the Company and
B&#038;N.com, a position he previously held at B&#038;N.com from inception to December
1998. Mr.&nbsp;Riggio has been Vice Chairman of Barnes &#038; Noble since December&nbsp;1997,
a director of Barnes &#038; Noble since September&nbsp;1993 and was named Chief Executive
Officer in February&nbsp;2002. Mr.&nbsp;Riggio was Chief Operating Officer of Barnes &#038;
Noble from February&nbsp;1995 until December&nbsp;1997. Mr.&nbsp;Riggio is also a director of
iUniverse, The National Book Foundation, The National Down&#146;s Syndrome Society
and The Association for the Help of Retarded Children. Mr.&nbsp;Riggio is the
brother of Mr.&nbsp;Leonard Riggio.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Marie J. Toulantis </I>has been Chief Executive Officer of the Company and
B&#038;N.com since February&nbsp;2002. Ms.&nbsp;Toulantis was President and Chief Operating
Officer of the Company and B&#038;N.com from May&nbsp;2001 through February&nbsp;2002. Prior
to that, Ms.&nbsp;Toulantis was Chief Financial Officer of the Company and B&#038;N.com
from May&nbsp;1999 through May&nbsp;2001. From March&nbsp;1999 through May&nbsp;1999 Ms.&nbsp;Toulantis
was Chief Financial Officer of Barnes &#038; Noble and from July&nbsp;1997 through May
1999 Ms.&nbsp;Toulantis was Executive Vice President, Finance of Barnes &#038; Noble.
Ms.&nbsp;Toulantis has served on the board of directors of Hershey Food Corporation
since April&nbsp;2003.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Kevin M. Frain </I>has been Chief Financial Officer and Vice President,
Operations of the Company and B&#038;N.com since February&nbsp;2002. Mr.&nbsp;Frain is
responsible for all of the finance, distribution, order fulfillment and
customer service functions. From May&nbsp;2001 through February&nbsp;2002, Mr.&nbsp;Frain was
Vice President, Finance of the Company and B&#038;N.com. Prior to that Mr.&nbsp;Frain
was the Treasurer of the Company and B&#038;N.com from April&nbsp;2000 to May&nbsp;2001. From
January&nbsp;1999 to April&nbsp;2000, Mr.&nbsp;Frain was Director of Finance of the Company
and B&#038;N.com.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>David C. Willen </I>has been Chief Technology Officer of the Company and
B&#038;N.com since May&nbsp;2002. Mr.&nbsp;Willen is responsible for all aspects of systems
and technology. Mr.&nbsp;Willen was Chief Software Architect of the Company and
B&#038;N.com from October&nbsp;2001 through May&nbsp;2002. Mr.&nbsp;Willen was Chief Technology
Officer of TheStreet.com, a multimedia provider of financial commentary,
analysis and news, from January&nbsp;2000 to October&nbsp;2001. Mr.&nbsp;Willen developed
technology solutions for Bloomberg, L.P. from January&nbsp;1999 to January&nbsp;2000.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>David Gitow </I>has been Vice President, Chief Marketing Officer of the
Company and B&#038;N.com since October&nbsp;2001. Mr.&nbsp;Gitow is responsible for all
partner and customer marketing and all marketing analysis and research. Mr.
Gitow served as Chief Marketing Officer of enews, inc. (&#147;enews&#148;) from June&nbsp;1999
through October&nbsp;2001. Prior to joining enews, Mr.&nbsp;Gitow was with AOL Time
Warner for 13&nbsp;years in a variety of positions culminating in his founding and
serving as President of Time Inc. Home Entertainment.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Daniel A. Blackman </I>has been Vice President and General Manager, Books,
Music &#038; Video of the Company and B&#038;N.com since July&nbsp;2002. Mr.&nbsp;Blackman is
responsible for merchandising of consumer books, music and DVD/video products.
From October&nbsp;2001 to July&nbsp;2002, Mr.&nbsp;Blackman was Vice President, Books, Music &#038;
Video of the Company and B&#038;N.com. From February&nbsp;2000 to October&nbsp;2001, Mr.
Blackman was Vice President, Music, Video &#038; Software of the Company and
B&#038;N.com. From July&nbsp;1998 to February&nbsp;2000, Mr.&nbsp;Blackman was Director of Music &#038;
Video of the Company and B&#038;N.com.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Michael
N. Rosen </I>has been Secretary of B&#038;N.com and Secretary and a
director of the Company and Barnes &#038; Noble since their inception. Mr.&nbsp;Rosen has been the Chairman of
the New York office of Bryan Cave LLP since their July&nbsp;2002 combination with
Robinson Silverman Pearce Aronsohn and Berman LLP (&#147;Robinson Silverman&#148;),
counsel to the Company, B&#038;N.com and Barnes &#038; Noble. Prior to that, Mr.&nbsp;Rosen
was Chairman of Robinson Silverman for more than the past five years. Mr.
Rosen is also a director of B&#038;N College, MBS and GameStop. Mr.&nbsp;Rosen&#146;s
principal business address is 1290 Avenue of the Americas, New York, New York
10104.
</FONT>

<P align="center"><FONT size="2">D-2
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Jan-Michiel Hessels </I>has been a director of the Company since August&nbsp;1999.
Mr.&nbsp;Hessels was Chief Executive Officer of Royal Vendex KBB N.V. (&#147;Vendex&#148;)
from 1990 until June&nbsp;2000. Vendex is a multi-billion dollar Netherlands-based
corporation with international retailing operations. Mr.&nbsp;Hessels is also a
director of Schiphol Airport, Royal Vopak N.V., Royal Philips Electronics N.V.,
Euronext N.V., Fortis N.V. and Heineken N.V. Mr.&nbsp;Hessels&#146; principal business
address is Beursplein 5, P.O. Box 19163, 1000 GD, Amsterdam, the Netherlands.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Patricia Higgins </I>has been a director of the Company since July&nbsp;2000. Ms.
Higgins has been President and Chief Executive Officer of Switch and Data
Facilities Inc., an international operator of convergent computer network
centers, since November&nbsp;2000. Ms.&nbsp;Higgins was Vice President and Chief
Information Officer of Alcoa Inc. from January&nbsp;1997 to April&nbsp;1999. Ms.
Higgins&#146; principal business address is 1715 North Westshore Boulevard, Suite
650, Tampa, Florida 33607.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>William F. Reilly </I>has been a director of the Company since August&nbsp;1999.
Mr.&nbsp;Reilly has been Chief Executive Officer of Aurelian Communications, a
special interest publisher, since he founded it in February&nbsp;2002. Mr.&nbsp;Reilly
served as Chairman and Chief Executive Officer of Primedia Inc., a specialty
media company, from February&nbsp;1990 to 1999. Mr.&nbsp;Reilly is a member of the board
of directors of FMC Corporation. Mr.&nbsp;Reilly serves on the board of trustees of
the University of Notre Dame. Mr.&nbsp;Reilly&#146;s principal business address is 375
Park Avenue, New York, New York 10152.
</FONT>


<P align="left"><FONT size="2"><B>Barnes &#038; Noble, Inc., B&#038;N.com Holding Corp. and B&#038;N.com Acquisition Corp.</B>
</FONT>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#038; Noble is a Delaware corporation with its executive offices
located at 122 Fifth Avenue, New York, New York 10011; (212)&nbsp;633-3300. B&#038;N
Holding is a Delaware corporation with its executive offices located at 122
Fifth Avenue, New York, New York 10011; (212)&nbsp;633-3300. B&#038;N Acquisition is a
Delaware corporation with its executive offices located at 122 Fifth Avenue,
New York, New York 10011; (212)&nbsp;633-3300.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The names and positions of the directors and executive officers of the
Barnes &#038; Noble Parties are set forth below. Each director and executive
officer is a citizen of the United States. Except where indicated, each
director&#146;s and executive officer&#146;s principal occupation is as listed below and
principal business address is 122 Fifth Avenue, New York, New York 10011.
During the last five years, neither the Barnes &#038; Noble Parties, nor, to the
best of their knowledge, any of their respective directors or executive
officers (i)&nbsp;has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii)&nbsp;was a party to any judicial or
administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree for final order
enjoining further violations of, or prohibiting activities subject to, federal
or state securities laws, or a finding of any violation of such federal or
state securities laws.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Directors and Executive Officers of the Barnes &#038; Noble Parties</I></B>
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Position</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Leonard Riggio</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Founder and Chairman of the Board</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Stephen Riggio</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice Chairman and Chief Executive Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mitchell S. Klipper</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Operating Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">J. Alan Kahn</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
President of the Barnes &#038; Noble Publishing Group*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Lawrence S. Zilavy</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Executive Vice President of Corporate Finance &#038; Strategic Planning</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">William F. Duffy</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Executive Vice President, Distribution and Logistics</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mary Ellen Keating</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Senior Vice President, Corporate Communications and Public Affairs</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">David S. Deason</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice President of Barnes &#038; Noble Development*</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Gary King</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Information Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Joseph J. Lombardi</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Financial Officer</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Michelle L. Smith</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice President, Human Resources</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Mark Bottini</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Vice President and Director of Stores*</FONT></TD>
</TR>
</TABLE>
</DIV>

<P align="center"><FONT size="2">D-3
</FONT>

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<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><FONT size="1"><B>Name</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Position</B></FONT></TD>
</TR>
<TR  valign="bottom">
    <TD nowrap align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Michael N. Rosen</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director** and Secretary</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Matthew A. Berdon</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Michael J. Del Giudice</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">William Dillard, II</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Irene R. Miller</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Margaret T. Monaco</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director**</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">William Sheluck, Jr.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Director</FONT></TD>
</TR>
</TABLE>
</DIV>


<P>
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR valign="top">
    <TD width="1%" nowrap align="left"><FONT size="2">*</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Represents that this position is only held at Barnes &#038; Noble.
</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">**</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Represents that this position is only held at Barnes &#038; Noble and B&#038;N
Holding.
</FONT></TD>
</TR>

</TABLE>



<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Material Occupations, Positions, Offices or Employment During Previous
Five Years</I></B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Leonard Riggio </I>has been Chairman of the board of directors of the Company
and B&#038;N.com since February&nbsp;1997. Mr.&nbsp;Riggio is the founder of Barnes &#038; Noble
and has been Chairman of the board of directors and a principal stockholder of
Barnes &#038; Noble since its inception in 1986, and was Chief Executive Officer of
Barnes &#038; Noble from inception through February&nbsp;2002. Since 1965 Mr.&nbsp;Riggio has
been Chairman of the board of directors, Chief Executive Officer and the
principal stockholder of B&#038;N College. Since 1985, Mr.&nbsp;Riggio has been Chairman
of the board of directors and a principal beneficial owner of MBS. Mr.&nbsp;Riggio
is also a director of GameStop. Mr.&nbsp;Riggio is the brother of Mr.&nbsp;Stephen
Riggio.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stephen Riggio </I>has been a director of the Company and B&#038;N.com since
inception and Vice Chairman since January&nbsp;2000. From January&nbsp;2000 to February
2002, Mr.&nbsp;Riggio was also Acting Chief Executive Officer of the Company and
B&#038;N.com, a position he previously held at B&#038;N.com from inception to December
1998. Mr.&nbsp;Riggio has been Vice Chairman of Barnes &#038; Noble since December&nbsp;1997,
a director of Barnes &#038; Noble since September&nbsp;1993 and was named Chief Executive
Officer in February&nbsp;2002. Mr.&nbsp;Riggio was Chief Operating Officer of Barnes &#038;
Noble from February&nbsp;1995 until December&nbsp;1997. Mr.&nbsp;Riggio is also a director of
iUniverse, The National Book Foundation, The National Down&#146;s Syndrome Society
and The Association for the Help of Retarded Children. Mr.&nbsp;Riggio is the
brother of Mr.&nbsp;Leonard Riggio.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mitchell S. Klipper </I>has been the Chief Operating Officer of Barnes &#038; Noble
since February&nbsp;2002. Prior to that, he was the President of Barnes &#038; Noble
Development, the group responsible for selecting, designing and constructing
new store locations, and an Executive Vice President of Barnes &#038; Noble from
December&nbsp;1995 to February&nbsp;2002.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>J.&nbsp;Alan Kahn </I>has been the President of the Barnes &#038; Noble Publishing Group
since February&nbsp;2002. Mr.&nbsp;Kahn was the Chief Operating Officer of Barnes &#038;
Noble from December&nbsp;1997 to February&nbsp;2002.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Lawrence S. Zilavy </I>became Executive Vice President of Corporate Finance
and Strategic Planning of Barnes &#038; Noble in May&nbsp;2003. Previously, he was Chief
Financial Officer of Barnes &#038; Noble since June&nbsp;2002. Prior to joining Barnes &#038;
Noble, Mr.&nbsp;Zilavy was Executive Vice President of IBJ Whitehall Bank and Trust
Company from 1992 to 2001. Mr.&nbsp;Zilavy is a member of the board of directors of
The Hain Celestial Group, Inc. He is also a member of the St. Francis College
Board of Trustees in New York City.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>William F. Duffy </I>has been the Executive Vice President of Distribution and
Logistics since February&nbsp;2002. Prior to that, he was Vice President,
Operations, Fulfillment and Customer Service of the Company from January&nbsp;1999
to February&nbsp;2002. Mr.&nbsp;Duffy was Vice President of Operations of the Company
since its inception in February&nbsp;1997. He was also Chief Financial Officer of
the Company from its inception to January&nbsp;1999 and a director of the Company
from its inception to October&nbsp;1998. Mr.&nbsp;Duffy&#146;s principal business address is
100 Middlesex Center Boulevard, Jamesburg, New Jersey 08831.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mary Ellen Keating </I>joined Barnes &#038; Noble as Senior Vice President,
Corporate Communications and Public Affairs in January&nbsp;1998.
</FONT>



<P align="center"><FONT size="2">D-4
</FONT>

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<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>David S. Deason </I>joined Barnes &#038; Noble in January&nbsp;1990 as a Director of
Real Estate and became Vice President of Barnes &#038; Noble Development in January
1997. Mr.&nbsp;Deason serves as a board member of Creative Learning 4 Kids, a
nonprofit educational charity which provides tutorial services and mentoring
for children. Mr.&nbsp;Deason&#146;s principal business address is 1501 LBJ Freeway,
Suite&nbsp;290, Dallas, Texas 75025.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Gary King </I>joined Barnes &#038; Noble as Chief Information Officer in May&nbsp;2002.
Prior to that, Mr.&nbsp;King was Executive Vice President of Operations and Chief
Technology Officer at the Company from January&nbsp;1999 to May&nbsp;2002. Mr.&nbsp;King
serves on the advisory boards of Pace University School of Computer Science and
Information Systems and Exceed Communications International.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Joseph J. Lombardi </I>became Chief Financial Officer of Barnes &#038; Noble in May
2003. Previously, he was Vice President and Controller of Barnes &#038; Noble since
May&nbsp;2002. Prior to joining Barnes &#038; Noble, Mr.&nbsp;Lombardi was Chief Financial
Officer at The Museum Company Inc. from August&nbsp;1999 to May&nbsp;2002. From August
1995 through July&nbsp;1999, he was the Vice President and Controller of Toys &#145;R&#146;
Us, Inc. Prior to that, he was a partner at Ernst &#038; Young LLP. Mr.&nbsp;Lombardi
is a certified public accountant.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Michelle L. Smith </I>became Vice President of Human Resources for Barnes &#038;
Noble in November&nbsp;1996. Ms.&nbsp;Smith joined Barnes &#038; Noble in September&nbsp;1993 as
Director of Human Resources. Ms.&nbsp;Smith is a member of the Society for Human
Resource Management and serves on the Health and Employee Benefits Committee
and Employment Law Committee of the National Retail Federation.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mark Bottini </I>has been the Vice President and Director of Stores of Barnes
&#038; Noble since October&nbsp;2003. Previously, he was a Regional Director of Barnes &#038;
Noble in New York since October&nbsp;2000. Mr.&nbsp;Bottini served as a Regional
Director of Barnes &#038; Noble in Chicago from April&nbsp;1999 to October&nbsp;2000 and a
District Manager of Barnes &#038; Noble in New York from September&nbsp;1995 to April
1999.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Michael
N. Rosen </I>has been Secretary of B&amp;N.com and Secretary and a director of the Company
and Barnes &#038; Noble since their inception. Mr.&nbsp;Rosen has been the Chairman of
the New York office of Bryan Cave LLP since their July&nbsp;2002 combination with
Robinson Silverman, counsel to the Company, B&#038;N.com and Barnes &#038; Noble. Prior
to that, Mr.&nbsp;Rosen was Chairman of Robinson Silverman for more than the past
five years. Mr.&nbsp;Rosen is also a director of B&#038;N College, MBS and GameStop.
Mr.&nbsp;Rosen&#146;s principal business address is 1290 Avenue of the Americas, New
York, New York 10104.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Matthew A. Berdon </I>has been a director of the Barnes &#038; Noble since June
1992. Since January&nbsp;2003, Mr.&nbsp;Berdon has been the Senior Partner of the
financial consulting firm F. B. &#038; Co., LLP. From January&nbsp;1998 through December
2002, Mr.&nbsp;Berdon was the Chairman of the New York division of the accounting
firm of Urbach Kahn &#038; Werlin Advisors, Inc. Mr.&nbsp;Berdon&#146;s principal business
address is 19 West 44th Street, New York, New York 10036.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Michael J. Del Giudice </I>has been a director of Barnes &#038; Noble since 1999.
Mr.&nbsp;Del Giudice is a co-founder and Senior Managing Director at Millenium
Credit Markets LLC, an investment banking firm. He is Chairman of Rockland
Capital Energy Investments LLC, a member of the board of directors of the
Consolidated Edison Company of New York, Inc. and a Trustee of the board of
directors of the New York Racing Association. He is Chairman of the Governor&#146;s
Committee on Scholastic Achievement, an educational non-profit group. Mr.&nbsp;Del
Giudice was Chairman of the board of directors of Orange &#038; Rockland Utilities
Corp. from 1997 to 1999. Mr.&nbsp;Del Giudice&#146;s principal business address is One
Rockefeller Plaza, Suite&nbsp;2330, New York, New York 10020.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>William Dillard, II </I>has been a director of Barnes &#038; Noble since November
1993. Mr.&nbsp;Dillard has been the Chief Executive Officer of Dillard&#146;s, Inc.
(&#147;Dillard&#146;s&#148;) since May&nbsp;1998 and he has been a director of Dillard&#146;s since
1968. He was appointed Chairman of Dillard&#146;s in May&nbsp;2002. Mr.&nbsp;Dillard is also
a member of JPMorganChase &#038; Co. National Advisory Board, JPMorganChase &#038; Co.
Dallas Region Advisory Board and a director of Acxiom Corp. Mr.&nbsp;Dillard&#146;s
principal business address is 1600 Cantrell Road, Little Rock, Arkansas 72201.
</FONT>



<P align="center"><FONT size="2">D-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Irene R. Miller </I>has been a director of Barnes &#038; Noble since May&nbsp;1995. Ms.
Miller has been the Chief Executive Officer of Akim, Inc., an investment
management and consulting firm, since July&nbsp;1997. Ms.&nbsp;Miller is also a director
of Coach, Inc., Inditex, S.A., Oakley, Inc. and The Body Shop International
PLC. Ms.&nbsp;Miller&#146;s principal business address is 186 Riverside Drive, New York,
New York 10024.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Margaret T. Monaco </I>has been a director of Barnes &#038; Noble since May&nbsp;1995.
Ms.&nbsp;Monaco resumed her position as Principal of Probus Advisors, a management
and consulting firm, in October&nbsp;2003. Ms.&nbsp;Monaco had been the Chief Operating
Officer of Merrill Lynch Ventures, LLC and KECALP, Inc., wholly owned
subsidiaries of Merrill Lynch &#038; Co., Inc. from November&nbsp;1999 to October&nbsp;2003.
She had been the Chief Administrative Officer from April&nbsp;1998 to November&nbsp;1999.
Ms.&nbsp;Monaco had been Principal of Probus Advisors from July&nbsp;1993 to 1998. Ms.
Monaco&#146;s principal business address is 83 Devon Road, Essex Fells, New Jersey
07021.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>William Sheluck, Jr. </I>has been a director of Barnes &#038; Noble since November
1993. Mr.&nbsp;Sheluck&#146;s principal address is 36 Greenleaf Farms Road, Newtown,
Connecticut 06470.
</FONT>




<P align="center"><FONT size="2">D-6
</FONT>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<!-- link2 "PROXY CARD" -->
<DIV align="left"><A NAME="063"></A></DIV>


<P align="center"><FONT size="2"><B>barnesandnoble.com inc.</B>
</FONT>


<P align="center"><FONT size="2"><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS</B>
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned hereby appoints <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093; </B>and <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>, and each of
them, as his true and lawful agents and proxies, with full power of
substitution in each, and hereby authorizes them to represent and to vote, as
designated on the reverse side hereof, all of the shares of common stock of
barnesandnoble.com inc. held of record by the undersigned on <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>, 2004,
at the special meeting of stockholders to be held on <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>, 2004, at 10:00
a.m., local time, at <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>, and any adjournment or postponement thereof,
with the same effect as if the undersigned were present and voting such shares,
on all matters as further described in the accompanying proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned acknowledges receipt of the Notice of Special Meeting of
Stockholders dated <B>&#091;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#093;</B>, 2004 and the accompanying proxy statement.
</FONT>


<P align="left"><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO SPECIFICATION IS MADE AS
TO THE PROPOSAL, WITH RESPECT TO SUCH PROPOSAL THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED &#147;FOR&#148; THE APPROVAL OF THE AGREEMENT AND PLAN OF MERGER AND
THE MERGER CONTEMPLATED THEREBY. THE PROXIES, IN THEIR DISCRETION, ARE
AUTHORIZED TO VOTE UPON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
SPECIAL MEETING.
</FONT>


<P align="center"><FONT size="2"><B>By executing this proxy, the undersigned hereby revokes all prior proxies.</B>
</FONT>

<P align="center"><FONT size="2"><B>(Continued, and to be signed and dated on the reverse side.)</B>
</FONT>

<P>
<DIV style="width: 100%; border: 1px solid black; padding: 5px;">
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="100%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>
</DIV>


<P align="center"><FONT size="2"><B>Address Change/Comments (Mark the corresponding box on the reverse side)</B>
</FONT>

<P align="center"><HR size="1" color="black" width="100%">

<DIV align="center"><FONT size="2"><B>&#94;&nbsp;&nbsp;&nbsp;FOLD AND DETACH HERE&nbsp;&nbsp;&nbsp;&#94;</B>
</FONT>
</DIV>

<P align="center"><FONT size="2">&nbsp;
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD valign="top"><FONT size="2">Please Mark Here for Address
Change or Comments<BR>
(See Reverse Side)</FONT></TD>
    <TD align="left" valign="middle">&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">THE BOARD OF DIRECTORS RECOMMENDS A VOTE &#147;FOR&#148; THE FOLLOWING PROPOSAL.
</FONT>


<P><TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" nowrap align="right"><FONT size="2">1.</FONT></TD>
 <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
 <TD><FONT size="2">To approve and adopt the Agreement and Plan of Merger, dated as of
January&nbsp;8, 2004, among Barnes &#038; Noble, Inc., B&#038;N.com Holding Corp.,
B&#038;N.com Acquisition Corp. and barnesandnoble.com inc. and approve the
merger contemplated thereby.
</FONT></TD>
</TR>
</TABLE>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<FONT face="Wingdings">&#111;</FONT>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">FOR
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2"><FONT face="Wingdings">&#111;</FONT>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">AGAINST
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2"><FONT face="Wingdings">&#111;</FONT>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">ABSTAIN
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</DIV>

<P align="left"><FONT size="2">Consenting to receive all future
annual meeting materials and shareholder communications
electronically is simple and fast! Enroll today at
www.melloninvestor.com/ISD for secure online access to your proxy
materials, statements, tax documents and other important shareholder
correspondence.
</FONT>

<P align="left"><FONT size="2">Please Mark, Sign, Date and Return this Proxy Card Promptly Using the
Enclosed Envelope.</FONT>

<P align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">Signature</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<HR size="1" color="black"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Signature</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<HR size="1" color="black"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Date</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
<HR size="1" color="black"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>

<P align="left"><FONT size="2">Please sign exactly as name appears on this proxy card. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
</FONT>



<P align="center"><HR size="1" color="black" width="100%">

<DIV align="center"><FONT size="2"><B>&#94;&nbsp;&nbsp;&nbsp;FOLD AND DETACH HERE&nbsp;&nbsp;&nbsp;&#94;</B>
</FONT>
</DIV>



<P align="center"><FONT size="2">Vote by Telephone or Internet or Mail<BR>
24 Hours a Day, 7 Days a Week
</FONT>


<P align="center"><FONT size="2">Telephone or Internet voting is
available through 11:59&nbsp;PM Eastern Time<BR>
the day prior to special meeting day.
</FONT>


<P align="center"><FONT size="2">Your telephone or Internet vote authorizes the named proxies to vote your<BR>
shares in the same manner as if you marked, signed and returned your proxy card.
</FONT>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2"><B>Telephone</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="middle"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2"><B>Internet</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="middle"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><FONT size="2"><B>1-800-435-6710</B></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="middle"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2"><B>http://www.eproxy.com/bnbn</B>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="middle"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2"><B>Mail</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Use any touch-tone
telephone to vote
your proxy. Have
your proxy card in
hand when you call.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="middle"><FONT size="2">
<B>OR</B>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Use the Internet to
vote your proxy.
Have your proxy
card in hand when
you access the web
site.
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="middle"><FONT size="2"><B>OR</B>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">Mark, sign and date
your proxy card and
return it in the
enclosed
postage-paid
envelope.</FONT></TD>
</TR>
</TABLE>
</DIV>


<P align="center"><FONT size="2">If you vote your proxy by telephone or by Internet,<BR>
you do NOT need to mail back your proxy card.
</FONT>


<P align="center"><FONT size="2">You can view the proxy statement on the Internet at http://www.barnesandnoble.com/ir
</FONT>


<P align="center"><FONT size="2">&nbsp;
</FONT>

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`
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