<SUBMISSION>
<ACCESSION-NUMBER>0000950123-04-004315
<TYPE>PRER14A
<PUBLIC-DOCUMENT-COUNT>4
<FILING-DATE>20040406
<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>PRER14A
<ACT>34
<FILE-NUMBER>000-26063
<FILM-NUMBER>04721018
</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>PRER14A
<SEQUENCE>1
<FILENAME>y93480p2prer14a.htm
<DESCRIPTION>AMENDMENT #2 TO PRELIMINARY PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>AMENDMENT #2 TO PRELIMINARY PROXY STATEMENT</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV align="center">
<B><FONT size="4">UNITED STATES</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>
</DIV>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

<P align="center">
<B><FONT size="4">SCHEDULE 14A INFORMATION</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center">
<B>(AMENDMENT NO.&nbsp;2)</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center">
<B><FONT size="2">(RULE 14a-101)</FONT></B>

<DIV align="center">
<B><FONT size="2">SCHEDULE 14A INFORMATION</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Proxy Statement Pursuant to Section&nbsp;14(a)
of the Securities</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Exchange Act of 1934</FONT></B>
</DIV>

<P align="left">
<FONT size="2">Filed by the
Registrant&nbsp;<FONT face="wingdings">&#254;</FONT>
</FONT>

<P align="left">
<FONT size="2">Filed by a Party other than the
Registrant&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">Check the appropriate box:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2"><FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp;Preliminary
    Proxy Statement
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;Confidential,
    for Use of the Commission Only (as permitted by
    Rule&nbsp;14a-6(e)(2))
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;Definitive
    Proxy Statement
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;Definitive
    Additional Materials
    </FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <FONT size="2"><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;Soliciting
    Material Pursuant to &#167;240.14a-11(c) of &#167;240.14a-12
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="6">BARNESANDNOBLE.COM INC.</FONT></B>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

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

<P align="center">


<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

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

<TR valign="top">
    <TD><FONT size="2"><FONT face="wingdings">&#111;</FONT></FONT></TD>
    <TD align="left">
    <FONT size="2">No fee required.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2"><FONT face="wingdings">&#254;</FONT></FONT></TD>
    <TD align="left">
    <FONT size="2">Fee computed on table below per Exchange Act
    Rules&nbsp;14a-6(i)(1) and 0-11.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)</FONT></TD>
    <TD align="left">
    <FONT size="2">Title of each class of securities to which
    transaction applies:
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Class&nbsp;A
Common Stock, par value $0.001 per share
</FONT>

<DIV align="right">
<HR size="1" width="87%" align="right" noshade>
</DIV>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

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

</TABLE>

<P align="left">
<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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;44,141,587
shares of common stock and stock options to purchase 8,501,221
shares of common stock
</FONT>

<DIV align="right">
<HR size="1" width="87%" align="right" noshade>
</DIV>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)</FONT></TD>
    <TD align="left">
    <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>
    <TD width="13%"></TD>
    <TD width="87%"></TD>
</TR>

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

</TABLE>

<P align="right">
<HR size="1" width="87%" align="right" noshade>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

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

</TABLE>

<DIV align="left">
<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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$149,849,026
</FONT>
</DIV>

<DIV align="right">
<HR size="1" width="87%" align="right" noshade>
</DIV>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

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

</TABLE>

<DIV align="left">
<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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$12,122.79
</FONT>
</DIV>

<DIV align="right">
<HR size="1" width="87%" align="right" noshade>
</DIV>
<!-- 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>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2"><FONT face="wingdings">&#254;</FONT></FONT></TD>
    <TD align="left">
    <FONT size="2">Fee paid previously with preliminary materials.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2"><FONT face="wingdings">&#111;</FONT></FONT></TD>
    <TD align="left">
    <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>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)</FONT></TD>
    <TD align="left">
    <FONT size="2">Amount Previously Paid:
    </FONT></TD>
</TR>

</TABLE>

<P align="right">
<HR size="1" width="87%" align="right" noshade>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

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

</TABLE>

<P align="right">
<HR size="1" width="87%" align="right" noshade>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)</FONT></TD>
    <TD align="left">
    <FONT size="2">Filing Party:
    </FONT></TD>
</TR>

</TABLE>

<P align="right">
<HR size="1" width="87%" align="right" noshade>
<P>

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

<TR>
    <TD width="12%"></TD>
    <TD width="88%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4)</FONT></TD>
    <TD align="left">
    <FONT size="2">Date Filed:
    </FONT></TD>
</TR>

</TABLE>

<P align="right">
<HR size="1" width="87%" align="right" noshade>

<!-- 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">Our Financial Projections</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#011">Position of the Barnes &#38; Noble Parties as to the Fairness of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#012">Purposes and Reasons for the Merger; Consideration of Alternatives; Structure of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#013">Presentations of Barnes &#38; Noble&#146;s Financial Advisor</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#014">Effects of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#015">Plans for the Company</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#016">Interests of Directors and Officers in the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#017">Certain Relationships and Related Transactions</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#018">Provisions for Unaffiliated Stockholders</A></TD></TR>
<TR><TD colspan="9"><A HREF="#019">THE MERGER</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#020">Effective Time of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#021">Payment of Merger Consideration and Surrender of Stock Certificates</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#022">Risks That the Merger Will Not Be Completed</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#023">Merger Financing; Sources of Funds</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#024">Certain U.S. Federal Income Tax Consequences</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#025">Litigation Relating to the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#026">Regulatory Matters</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#027">Accounting Treatment</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#028">Estimated Fees and Expenses of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#029">Appraisal Rights</A></TD></TR>
<TR><TD colspan="9"><A HREF="#030">THE SPECIAL MEETING</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#031">Date, Time and Place of the Special Meeting</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#032">Matters to be Considered at the Special Meeting</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#033">Vote Required</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#034">Record Date, Voting Rights, Quorum and Revocability of Proxies</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#035">Expenses of Proxy Solicitation</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#036">Adjournments and Postponements</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#037">Exchanging Stock Certificates</A></TD></TR>
<TR><TD colspan="9"><A HREF="#038">THE MERGER AGREEMENT</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#039">Effective Time of the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#040">The Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#041">Merger Consideration</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#042">Stock Options</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#043">Surrender of Certificates and Payment Procedures</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#044">Representations and Warranties</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#045">Covenants</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#046">Conditions to Completing the Merger</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#047">Termination</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#048">Amendment and Waiver</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#049">Fees and Expenses</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#050">Governing Law</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#051">Assignment</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#052">Our Actions</A></TD></TR>
<TR><TD colspan="9"><A HREF="#053">SUMMARY HISTORICAL FINANCIAL DATA</A></TD></TR>
<TR><TD colspan="9"><A HREF="#054">MARKET PRICE AND DIVIDENDS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#055">PRINCIPAL STOCKHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#056">CERTAIN TRANSACTIONS INVOLVING OUR COMMON STOCK</A></TD></TR>
<TR><TD colspan="9"><A HREF="#057">OTHER MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#058">STOCKHOLDER PROPOSALS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#059">INDEPENDENT ACCOUNTANTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#060">WHERE YOU CAN FIND MORE INFORMATION</A></TD></TR>
<TR><TD colspan="9"><A HREF="#061">ANNEX A</A></TD></TR>
<TR><TD colspan="9"><A HREF="#062">ANNEX B</A></TD></TR>
<TR><TD colspan="9"><A HREF="#063">ANNEX C</A></TD></TR>
<TR><TD colspan="9"><A HREF="#064">ANNEX D</A></TD></TR>
<TR><TD colspan="9"><A HREF="#065">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">
<IMG src="y93480p2y9348002.gif" alt="(BARNES AND NOBLE LOGO)">

<P align="center">
<B><FONT size="4">BARNESANDNOBLE.COM INC.</FONT></B>

<DIV align="center">
<B><FONT size="2">76 Ninth Avenue</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">New York, New York 10011</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;414-6000</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

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

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="right">
<B><FONT size="2">[</FONT></B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>]</B>,
2004
</FONT>

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 &#38; Noble, Inc., B&#38;N.com Holding Corp.,
B&#38;N.com Acquisition Corp. and barnesandnoble.com inc.,
providing for the acquisition of barnesandnoble.com inc. by
Barnes &#38; Noble, Inc. If our stockholders adopt the merger
agreement, B&#38;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 &#38; Noble, Inc., B&#38;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 &#38; Noble, Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 our unaffiliated
stockholders. <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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 March&nbsp;15, 2004, Barnes &#38;
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 &#38; Noble, Inc. is sufficient under Delaware law to
adopt the merger agreement and approve the merger.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Sincerely,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Marie J. Toulantis <BR>
     Chief Executive Officer
    </FONT></TD>
</TR>

</TABLE>

<!-- 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">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.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This proxy statement is dated
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>,
2004 and is first being mailed to our stockholders beginning on
or about
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>,
2004.
</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">
<FONT size="2">
<IMG src="y93480p2y9348002.gif" alt="(BARNES&#38;NOBLE LOGO)">
</FONT>
</DIV>

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

<DIV align="center">
<B><FONT size="2">76 Ninth Avenue</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">New York, New York 10011</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;414-6000</FONT></B>
</DIV>

<P align="center">
<HR size="1" width="27%" align="center" noshade>

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

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

<P align="center">
<HR size="1" width="27%" align="center" noshade>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&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&nbsp;&#38; Noble, Inc., B&#38;N.com Holding Corp.,
B&#38;N.com Acquisition Corp. and barnesandnoble.com inc.,
pursuant to which Barnes &#38; 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&nbsp;&#38; Noble, Inc.,
B&#38;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&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Only our stockholders of record at the close of
business on
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</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 March&nbsp;15, 2004, Barnes
&#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#151; Appraisal
Rights.&#148;
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Sincerely,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Marie J. Toulantis
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chief Executive Officer
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">New York, New York
</FONT>

<DIV align="left">
<B><FONT size="2">[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</FONT></B><FONT size="2">,
2004
</FONT>
</DIV>

<!-- 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">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.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#151;
that is, without a stock certificate&nbsp;&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">If you have any questions or need assistance
in voting your shares of our common stock, please
contact:</FONT></B>

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

<DIV align="center">
<B><FONT size="2">76 Ninth Avenue</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">New York, New York 10011</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Attn: Investor Relations, Kevin M.
Frain</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(212)&nbsp;414-6000</FONT></B>
</DIV>

<!-- 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">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Our Financial Projections
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Position of the Barnes &#38; 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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Presentations of Barnes &#38; Noble&#146;s
    Financial Advisor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">i
</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="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SUMMARY HISTORICAL FINANCIAL DATA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="left">
<FONT size="2">ANNEX A&nbsp;&#151; AGREEMENT AND PLAN OF MERGER
</FONT>

<P align="left">
<FONT size="2">ANNEX B&nbsp;&#151; DELAWARE GENERAL CORPORATION
LAW SECTION 262&nbsp;&#151; APPRAISAL <BR>
 RIGHTS
</FONT>

<P align="left">
<FONT size="2">ANNEX C&nbsp;&#151; OPINION OF CREDIT SUISSE
FIRST BOSTON LLC
</FONT>

<P align="left">
<FONT size="2">ANNEX D&nbsp;&#151; INFORMATION RELATING TO THE
COMPANY, B&#38;N.COM AND THE <BR>
 BARNES&nbsp;&#38; NOBLE PARTIES
</FONT>

<P align="center"><FONT size="2">ii
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<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">
<B><FONT size="2">SUMMARY TERM SHEET</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This summary highlights the material information
contained elsewhere in this proxy statement. 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;58.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">barnesandnoble.com inc.</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">barnesandnoble.com inc. is a holding company
whose sole asset is its approximate 29.6% 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. The
Company is soliciting your proxy in connection with the proposed
merger involving the Company and Barnes&nbsp;&#38; Noble, Inc.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">barnesandnoble.com llc</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">barnesandnoble.com llc is a leading
Internet-based retailer of books, music and DVD/video.
barnesandnoble.com llc is referred to as &#147;B&#38;N.com&#148;
in this proxy statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Barnes&nbsp;&#38; Noble, Inc.</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble, Inc. is the world&#146;s
largest bookseller, operating 647&nbsp;Barnes&nbsp;&#38; Noble
bookstores in 49&nbsp;states and 195&nbsp;B.&nbsp;Dalton
Bookseller stores, primarily in regional shopping malls as of
January&nbsp;31, 2004. Barnes&nbsp;&#38; Noble, Inc. also has
approximately a 64% interest in GameStop Corp., the
nation&#146;s largest video-game and entertainment software
specialty retailer with over 1,500&nbsp;stores.
Barnes&nbsp;&#38; Noble, Inc., through its wholly owned
subsidiary B&#38;N.com Holding Corp., beneficially owned
119,138,502&nbsp;shares of our capital stock representing
approximately 72.95% of our outstanding equity interest and
approximately 96.3% of our voting interest as of March&nbsp;15,
2004. Barnes&nbsp;&#38; Noble, Inc. is referred to as
&#147;Barnes&nbsp;&#38; Noble&#148; in this proxy statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">B&#38;N.com Holding Corp.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B&#38;N.com Holding Corp. is a wholly owned
subsidiary of Barnes&nbsp;&#38; Noble, whose sole assets consist
of membership units in B&#38;N.com and common stock in the
Company. B&#38;N.com Holding Corp. is referred to as
&#147;B&#38;N Holding&#148; in this proxy statement.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">B&#38;N.com Acquisition Corp.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B&#38;N.com Acquisition Corp., a wholly owned
subsidiary of B&#38;N Holding, was created solely for the
purpose of effecting the merger. In the merger, B&#38;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&nbsp;&#38; Noble. B&#38;N.com Acquisition
Corp. is referred to as &#147;B&#38;N Acquisition&#148; in this
proxy statement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble, B&#38;N Holding and
B&#38;N Acquisition are sometimes referred to as the
&#147;Barnes&nbsp;&#38; Noble Parties&#148; in this proxy
statement.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the merger agreement,
Barnes&nbsp;&#38; 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&nbsp;&#38; Noble,
B&#38;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&#38;N Acquisition, with and into the
Company. All outstanding options to
</FONT>

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

<DIV align="left">
<FONT size="2">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&#38;N
Holding, and B&#38;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>
</DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of our directors also serve as directors
of Barnes&nbsp;&#38; 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&nbsp;&#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Vote Required (See Page 44)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 March&nbsp;15, 2004, Barnes&nbsp;&#38; 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 March&nbsp;15, 2004, our
directors and executive officers together beneficially owned
approximately 11,416,521&nbsp;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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After careful consideration, and in light of the
factors described in the section of this proxy statement
entitled &#147;SPECIAL FACTORS&nbsp;&#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
our unaffiliated stockholders. <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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 our
unaffiliated stockholders, see the sections of this proxy
statement entitled &#147;SPECIAL FACTORS&nbsp;&#151; Reasons for
the Special Committee&#146;s Determination; Fairness of the
Merger&#148; and &#147;&#151;&nbsp;Reasons for our Board of
Directors&#146; Determination; Fairness of the Merger.&#148;
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Opinion of the Special Committee&#146;s
Financial Advisor (See Page&nbsp;19)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; Noble and its affiliates and
directors and officers of each of the Company and
Barnes&nbsp;&#38; 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&nbsp;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
</FONT>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Position of the Barnes &#38; Noble Parties as
to the Fairness of the Merger (See Page&nbsp;25)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Barnes &#38; 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;SPECIAL FACTORS&nbsp;&#151; Reasons for the
Special Committee&#146;s Determination; Fairness of the
Merger&#148; and &#147;&#151;&nbsp;Reasons for our Board of
Directors&#146; Determination; Fairness of the Merger.&#148;
Based on these factors and certain other factors described under
&#147;SPECIAL FACTORS&nbsp;&#151; Position of the
Barnes&nbsp;&#38; Noble Parties as to the Fairness of the
Merger,&#148; the Barnes&nbsp;&#38; Noble Parties believe that
the merger is both procedurally and substantively fair to our
unaffiliated stockholders. The Barnes &#38; Noble Parties
reached this conclusion independent of Barnes &#38; Noble&#146;s
obligation, pursuant to a purchase agreement, to pay
Bertelsmann&nbsp;AG, referred to as &#147;Bertelsmann&#148; in
this proxy statement, additional consideration if our
stockholders received more than $3.05 per share in cash in the
merger.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Interests of Directors and Officers in the
Merger (See Page&nbsp;32)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Barnes&nbsp;&#38; Noble has agreed to assume or
    guarantee certain employment agreements and deferred
    compensation plans of the Company and B&#38;N.com; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">following the merger, Barnes&nbsp;&#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Effects of the Merger (See Page 31)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of the merger, B&#38;N
Acquisition will merge with and into the Company with the
Company surviving the merger. Barnes&nbsp;&#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

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

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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 align="center"><FONT size="2">3
</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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Conditions to our Obligations.
</FONT></I><FONT size="2">Our obligations to complete the merger
also are subject to the satisfaction or waiver of other
conditions, including the following:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the representations and warranties of the
    Barnes&nbsp;&#38; Noble Parties contained in the merger
    agreement are true and correct in all material respects;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each Barnes&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we shall have received a certificate of a senior
    officer of Barnes&nbsp;&#38; Noble certifying that the above
    conditions have been fulfilled.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Conditions to the Obligations of the
Barnes&nbsp;&#38; Noble Parties. </FONT></I><FONT size="2">The
obligations of the Barnes&nbsp;&#38; Noble Parties to complete
the merger also are subject to the satisfaction or waiver of
other conditions, including the following:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our representations and warranties contained in
    the merger agreement are true and correct in all material
    respects;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Barnes&nbsp;&#38; Noble shall have received a
    certificate of one of our senior officers certifying that the
    above conditions have been fulfilled; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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&#38;N.com, taken as a whole.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Termination (See Page&nbsp;51)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by mutual written consent at any time prior to
    adoption of the merger agreement at the special meeting;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by Barnes&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by Barnes&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by Barnes&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

</TABLE>

<P align="center"><FONT size="2">4
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">representation, warranty, covenant or agreement
    on the part of a Barnes&nbsp;&#38; Noble Party such that the
    closing conditions cannot be satisfied.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Certain U.S.&nbsp;Federal Income Tax
Consequences (See Page&nbsp;40)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Litigation Relating to the Merger (See
Page&nbsp;40)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following Barnes&nbsp;&#38; Noble&#146;s
announcement of its initial offer on November&nbsp;7, 2003,
fifteen separate complaints were filed in the Delaware Court of
Chancery to commence class action lawsuits on behalf of our
stockholders against Barnes&nbsp;&#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Appraisal Rights (See Page&nbsp;41)</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

<DIV align="center">
<FONT size="2">76 Ninth Avenue
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">New York, New York 10011
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Attn: Investor Relations, Kevin M. Frain
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">(212)&nbsp;414-6000
</FONT>
</DIV>

<P align="center"><FONT size="2">5
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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

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

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

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

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

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

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">When and where is the special
    meeting?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <FONT size="2">The special meeting will be held on
    <B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>,
    2004, at 10:00&nbsp;a.m. local time, at
    <B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;].</B>
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">What am I being asked to vote on?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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&#38;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&nbsp;&#38; Noble.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">What will I receive in the merger?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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 &#38; Noble, B&#38;N Holding and their respective
    subsidiaries will not receive any consideration in the merger.
    However, they will own all of our outstanding common stock
    following the completion of the merger.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Who is entitled to vote at the special
    meeting?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <FONT size="2">Holders of record of our common stock at the
    close of business on
    <B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</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>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">What vote is required to approve the merger
    agreement and the merger?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT size="2">A:&nbsp;</FONT></TD>
    <TD align="left">
    <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 March&nbsp;15, 2004, Barnes&nbsp;&#38; 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 March&nbsp;15, 2004 will vote in favor of the merger.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">What do I need to do now?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">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?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">May I vote in person?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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
    </FONT></TD>
</TR>

</TABLE>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<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>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">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>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">May I change my vote after I have mailed my
    signed proxy card or otherwise voted by proxy?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">If my shares are held in &#147;street
    name&#148; by my broker, will my broker vote my shares for
    me?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Should I send in my stock certificates
    now?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <FONT size="2">No.&nbsp;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.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">What happens if I sell my shares before the
    special meeting?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">When do you expect the merger to be
    completed?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Q:</FONT></B></TD>
    <TD align="left">
    <B><FONT size="2">Who can help answer my questions?</FONT></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">A:</FONT></TD>
    <TD align="left">
    <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>

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

<DIV align="center">
<FONT size="2">76 Ninth Avenue
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">New York, New York 10011
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Attn: Investor Relations, Kevin&nbsp;M. Frain
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">(212)&nbsp;414-6000
</FONT>
</DIV>

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

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

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

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

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is a Delaware corporation with its
executive offices located at 76&nbsp;Ninth Avenue, New York, New
York 10011. Its telephone number is (212)&nbsp;414-6000. The
Company is a holding company whose sole asset is its approximate
29.6% interest in B&#38;N.com and whose sole business is acting
as sole manager of B&#38;N.com. The Company is soliciting your
proxy in connection with the proposed merger involving the
Company and Barnes&nbsp;&#38; Noble.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A detailed description of the Company&#146;s
business and financial results is contained in our Annual Report
on Form&nbsp;10-K for the fiscal year ended December&nbsp;31,
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&nbsp;D to this proxy statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B&#38;N.com is a Delaware limited liability
company with its executive offices located at 76&nbsp;Ninth
Avenue, New York, New York 10011. Its telephone number is
(212)&nbsp;414-6000.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B&#38;N.com is a leading Internet-based retailer
of books, music and DVD/video. Since opening its online store
(www.bn.com) in March 1997, B&#38;N.com has attracted more than
17.0&nbsp;million customers in 230 countries. B&#38;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&#38;N.com offers its customers fast
delivery, easy and secure ordering and rich editorial content.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A detailed description of B&#38;N.com&#146;s
business and financial results are contained in our Annual
Report on Form&nbsp;10-K for the fiscal year ended
December&nbsp;31, 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&#38;N.com&#146;s directors and executive
officers is set forth in Annex&nbsp;D to this proxy statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Barnes &#38; Noble, Inc.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble is a Delaware corporation
with its executive offices located at 122&nbsp;Fifth Avenue, New
York, New York 10011. Its telephone number is
(212)&nbsp;633-3300. Information about Barnes&nbsp;&#38;
Noble&#146;s directors and executive officers is set forth in
Annex D to this proxy statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble is the world&#146;s
largest bookseller, operating 647&nbsp;Barnes&nbsp;&#38; Noble
bookstores in 49&nbsp;states as of January&nbsp;31, 2004. It
also operates 195&nbsp;B.&nbsp;Dalton Bookseller stores,
primarily in regional shopping malls as of January&nbsp;31,
2004. Barnes&nbsp;&#38; Noble offers titles from more than
50,000 publisher imprints, including thousands of small,
independent publishers and university presses. Barnes&nbsp;&#38;
Noble also has approximately a 64% interest in GameStop Corp.,
the nation&#146;s largest video-game and entertainment-software
specialty retailer with over 1,500&nbsp;stores.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble, through B&#38;N Holding,
beneficially owned 119,138,502&nbsp;shares of our capital stock
representing approximately 72.95% of our outstanding equity
interest and approximately 96.3% of our voting interest as of
March&nbsp;15, 2004. The shares of our capital stock
beneficially owned by Barnes&nbsp;&#38; Noble through B&#38;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&#38;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&#38;N.com.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">8
</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">
<B><FONT size="2">B&#38;N.com Holding Corp.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B&#38;N Holding is a Delaware corporation with
its executive offices at 122&nbsp;Fifth Avenue, New York, New
York 10011. Its telephone number is (212)&nbsp;633-3300.
B&#38;N&nbsp;Holding is a wholly owned subsidiary of
Barnes&nbsp;&#38; Noble whose sole assets consist of membership
units in B&#38;N.com and common stock in the Company.
Information about B&#38;N&nbsp;Holding&#146;s directors and
executive officers is set forth in Annex&nbsp;D to this proxy
statement.
</FONT>

<P align="left">
<B><FONT size="2">B&#38;N.com Acquisition Corp.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B&#38;N Acquisition is a Delaware corporation
with its executive offices at 122&nbsp;Fifth Avenue, New York,
New York 10011. Its telephone number is (212)&nbsp;633-3300.
B&#38;N&nbsp;Acquisition, a wholly owned subsidiary of
B&#38;N&nbsp;Holding, was created solely for the purpose of
effecting the merger. In the merger, B&#38;N&nbsp;Acquisition
will be merged with and into the Company, with the Company
surviving the merger as an indirect wholly owned subsidiary of
Barnes&nbsp;&#38; Noble. Information about
B&#38;N&nbsp;Acquisition&#146;s directors and executive officers
is set forth in Annex&nbsp;D to this proxy statement.
</FONT>

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

<P align="center">
<B><FONT size="2">CAUTIONARY STATEMENT CONCERNING</FONT></B>

<DIV align="center">
<B><FONT size="2">FORWARD-LOOKING INFORMATION</FONT></B>
</DIV>

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

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

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

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

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

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Background of Barnes &#38; Noble&#146;s
    Investment in the Company</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to October&nbsp;31, 1998,
B&#38;N.com&#146;s business was conducted by a wholly owned
subsidiary of Barnes &#38; Noble. Through a series of
transactions in the fall of 1998 and the spring of 1999, Barnes
&#38; Noble and Bertelsmann 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&#38;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&#38;N.com
in exchange for a 20.0% ownership interest in B&#38;N.com.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 &#38; Noble, discussed our possible financing
alternatives, including bank financing with guarantees from
Barnes &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In August 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At a meeting of the Barnes &#38; 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
&#38; Noble board for Barnes &#38; 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 &#38; Noble board approved the purchase.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;1, 2002, Barnes &#38; 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 &#38; 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 &#38; 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 &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with Barnes &#38; Noble&#146;s
participation in this stock acquisition program, on
November&nbsp;1, 2002, Barnes &#38; 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 increasing or decreasing
its
</FONT>

<P align="center"><FONT size="2">10
</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="left">
<FONT size="2">investment in the Company. In connection with the
stock acquisition program, Barnes &#38; Noble, through B&#38;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 &#38; Noble&#146;s acquisition of our common stock
pursuant to this stock acquisition program.
</FONT>
</DIV>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Barnes &#38; Noble Acquires
    Bertelsmann&#146;s Interest in the Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the spring of 2003, Mr.&nbsp;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&nbsp;&#38;&nbsp;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
&#38; Noble. As a result, Mr.&nbsp;Riggio and Bertelsmann
discussed the possibility that Barnes &#38; Noble acquire
Bertelsmann&#146;s interest prior to any significant capital
infusion into the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 &#38; Noble and
Bertelsmann. Mr.&nbsp;Riggio also indicated to our board that,
in connection with Barnes &#38; Noble&#146;s consideration of
any capital investment in the Company, Barnes &#38; Noble may
also consider acquiring Bertelsmann&#146;s ownership interest in
the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After the July&nbsp;17, 2003 meeting of our
board, Bertelsmann again discussed with Mr.&nbsp;Riggio the
possibility that Barnes&nbsp;&#38; Noble purchase
Bertelsmann&#146;s interest in the Company. A meeting of the
Barnes&nbsp;&#38; 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 &#38;
Noble board the benefits to be derived from such an acquisition.
After discussion, the Barnes &#38; Noble board authorized the
acquisition of Bertelsmann&#146;s interest in the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes &#38; Noble and Bertelsmann entered into
negotiations that culminated in the execution of a purchase
agreement, dated July&nbsp;29, 2003, whereby Barnes&nbsp;&#38;
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&#38;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&nbsp;&#38;
Noble is required to pay Bertelsmann additional consideration in
the event that at any time prior to September&nbsp;15, 2006
Barnes&nbsp;&#38; 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&nbsp;&#38; Noble. The purchase by Barnes&nbsp;&#38; Noble
of Bertelsmann&#146;s entire interest in the Company was
consummated on September&nbsp;15, 2003. Barnes&nbsp;&#38; Noble
subsequently transferred all shares and membership units
purchased from Bertelsmann to B&#38;N Holding.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reintegrating the Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes &#38; Noble&#146;s management and the
Barnes&nbsp;&#38; Noble board of directors have from time to
time in the past reviewed Barnes&nbsp;&#38; Noble&#146;s options
with respect to its investment in the Company. Barnes&nbsp;&#38;
Noble&#146;s management began to explore the possibility of the
proposed merger and reintegrating the Company with
Barnes&nbsp;&#38; Noble during the week of September&nbsp;22,
2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;29, 2003, Mr.&nbsp;Riggio
informed William F. Reilly, Chairman of the audit committee of
our board of directors, that Barnes&nbsp;&#38; Noble was
contemplating making an offer to take the Company private and
was determining an appropriate price for an offer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In view of Barnes&nbsp;&#38; 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 Higgins,
</FONT>

<P align="center"><FONT size="2">11
</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="left">
<FONT size="2">was authorized to exercise all of the powers of
our board of directors with respect to Barnes&nbsp;&#38;
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>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From the week of September&nbsp;22, 2003 through
October 2003, Barnes&nbsp;&#38; Noble&#146;s management
continued to review with Barnes&nbsp;&#38; 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&nbsp;&#38; 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 &#38; Noble and discussed with
Citigroup the possible structure, associated costs and potential
benefits to Barnes &#38; Noble of such a transaction. After a
number of discussions regarding the various options concerning
the Company, Barnes &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A meeting of the Barnes &#38; 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&nbsp;&#38; Noble, attended the meeting and Citigroup made
a presentation to the Barnes&nbsp;&#38; Noble board of directors
and provided the Barnes&nbsp;&#38; Noble board of directors
written materials which are summarized under the section of this
proxy statement entitled &#147;&#151; Presentations of
Barnes&nbsp;&#38; Noble&#146;s Financial Advisor.&#148;
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;&nbsp;Purposes and Reasons for the Merger;
Consideration of Alternatives; Structure of the
Merger&nbsp;&#151; The Barnes&nbsp;&#38; Noble Parties&#148; for
a discussion of the alternatives considered by Barnes&nbsp;&#38;
Noble. The Barnes&nbsp;&#38; Noble board of directors concluded
that reintegration could, on appropriate financial terms, enable
Barnes&nbsp;&#38; 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&nbsp;&#38; Noble. See the section
of this proxy statement entitled &#147;&#151;&nbsp;Purposes and
Reasons for the Merger; Consideration of Alternatives; Structure
of the Merger&nbsp;&#151; The Barnes&nbsp;&#38; Noble
Parties&#148; for a more detailed discussion of the
Barnes&nbsp;&#38; Noble Parties&#146; purposes of, and reasons
for, the merger. Following further discussion and deliberation,
the Barnes&nbsp;&#38; 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&nbsp;&#38; Noble did not
own. Additionally, the Barnes&nbsp;&#38; Noble board of
directors authorized management to inform the Company that
Barnes&nbsp;&#38; 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 &#38; Noble would
underwrite at an appropriate discount to market.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Shortly following the November&nbsp;6, 2003
meeting of the Barnes&nbsp;&#38; Noble board of directors,
representatives of Barnes&nbsp;&#38; Noble informed Marie J.
Toulantis, our Chief Executive Officer, and Ms.&nbsp;Higgins
that Barnes&nbsp;&#38; Noble planned to formally announce its
proposal and issue a press release on November&nbsp;7, 2003.
</FONT>

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">November&nbsp;7, 2003
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B><U><FONT size="2">BY FAX</FONT></U></B></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Ms.&nbsp;Patricia Higgins and Mr.&nbsp;Jan
    Michiel Hessels
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Special Committee of the Board of Directors
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">c/o barnesandnoble.com inc.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">76 Ninth Avenue, 11th Floor
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">New York, NY 10011
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">Dear Patricia and Jan Michiel:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">Barnes &#38; Noble, Inc. (&#147;Barnes &#38;
    Noble&#148;) is pleased to propose a merger (the
    &#147;Merger&#148;) with barnesandnoble.com inc. (&#147;Barnes
    &#38; Noble.com&#148;) in which all shareholders of Barnes &#38;
    Noble.com (other than B&#38;N.com Holding Corp.) would receive
    $2.50 in cash for each share of Barnes&nbsp;&#38; Noble.com (the
    &#147;Shares&#148;) that they own. At this price,
    Barnes&nbsp;&#38; 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&nbsp;&#38;
    Noble.com. As a result of the Merger, Barnes &#38; Noble.com
    would become a wholly owned subsidiary of Barnes &#38; Noble.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">Please note that we remain committed to providing
    interim financing to Barnes&nbsp;&#38; 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></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">Consummation of the Merger would be subject to
    the (i)&nbsp;approval of the Special Committee of the Board of
    Directors of Barnes &#38; 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&nbsp;&#38; 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></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">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></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">We reserve the right to rescind or amend this
    offer at any time prior to the satisfaction of the Conditions.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">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></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Very truly yours,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <u><U><FONT size="2">/s/ Leonard Riggio&nbsp;</u></FONT></U></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Leonard Riggio
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chairman
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;7, 2003, shortly following
delivery of the letter to the special committee, Barnes &#38;
Noble issued a press release publicly announcing its proposal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following Barnes &#38; 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 &#38;
Noble in the Delaware Court of Chancery. The complaints
generally alleged that our directors and Barnes&nbsp;&#38; Noble
had violated their fiduciary duties owed to our unaffiliated
stockholders in connection with the merger and sought, among
other things, to enjoin
</FONT>

<P align="center"><FONT size="2">13
</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="left">
<FONT size="2">Barnes&nbsp;&#38; 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&nbsp;&#151; Litigation Relating to the
Merger.&#148;
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the second week of November 2003, the
special committee met with its legal and financial advisors to
consider, among other things, Barnes&nbsp;&#38; Noble&#146;s
proposal and the special committee&#146;s fiduciary duties in
responding to Barnes&nbsp;&#38; 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 special committee was
apprised of the shareholder complaints filed against the
Company, our directors and Barnes &#38; Noble in connection with
Barnes&nbsp;&#38; Noble&#146;s proposal. During that same time,
the special committee, together with its legal and financial
advisors, met with Barnes &#38; Noble&#146;s legal and financial
advisors. Citigroup reviewed for the special committee and its
legal and financial advisors Barnes &#38; Noble&#146;s proposal.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From mid- to late November 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;2, 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&nbsp;&#38;
Noble&#146;s offer of $2.50 per share in cash. At the
December&nbsp;2, 2003 meeting, Credit Suisse First Boston
discussed the same financial analyses that were included in
Credit Suisse First Boston&#146;s written presentation to the
special committee on January&nbsp;8, 2004, which is referred to
as the January&nbsp;8, 2004 presentation, that is summarized
under the caption &#147;&#151; Opinion of the Special
Committee&#146;s Financial Advisor,&#148; except that the later
presentation was updated to reflect more recent and additional
data as described below. In that regard, the December&nbsp;2,
2003 presentation included stock trading prices as of
November&nbsp;28, 2003 (compared to stock trading prices as of
January&nbsp;6, 2004 that were included in the January&nbsp;8,
2004 presentation); accounted for the Company&#146;s
cash-in-hand and number of shares outstanding as of
November&nbsp;17, 2003 (compared to the Company&#146;s
cash-in-hand and number of shares outstanding as of
January&nbsp;7, 2004 that were accounted for in the
January&nbsp;8, 2004 presentation); and 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, 2000 and
December&nbsp;1, 2003 (compared to the corresponding data for
transactions completed between January&nbsp;1, 1998 and
December&nbsp;1, 2003 that were reviewed in the January&nbsp;8,
2004 presentation). Also, on December&nbsp;2, 2003, the special
committee received a draft of the merger agreement from Barnes
&#38; Noble.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The special committee held telephonic meetings
with its legal and financial advisors during the second and
third weeks of December 2003 to discuss the draft merger
agreement received from Barnes&nbsp;&#38; Noble as well as
developments since the prior special committee meeting and its
views with respect to the adequacy of Barnes &#38; Noble&#146;s
offer. During this time, Barnes&nbsp;&#38; Noble informed the
special committee that Barnes&nbsp;&#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;17, 2003, Barnes &#38; 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 2003 to
discuss the status of the negotiations with Barnes&nbsp;&#38;
Noble. During the week of December&nbsp;23, 2003, the special
committee&#146;s legal and financial advisors held numerous
conference calls with representatives of Barnes&nbsp;&#38; Noble
with respect to the merger agreement and the offer price. During
the course
</FONT>

<P align="center"><FONT size="2">14
</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="left">
<FONT size="2">of these discussions, the special
committee&#146;s advisors indicated to Barnes&nbsp;&#38;
Noble&#146;s representatives that the special committee would be
willing to consider a per share price of $3.10 in cash.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;6, 2004, Barnes &#38; 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&nbsp;&#38; Noble&#146;s revised offer and at the
conclusion of this meeting the special committee instructed its
advisors to notify Barnes&nbsp;&#38; 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 &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
&#38; Noble and its affiliates and certain officers and
directors of each of the Company and Barnes &#38; Noble) was
fair, from a financial point of view, to such holders. The
special committee also was notified that Barnes &#38; Noble had
reached a settlement with the plaintiffs in the shareholder
litigation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 our unaffiliated stockholders. 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 our unaffiliated stockholders 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;8, 2004, the parties executed the
merger agreement and the Company and Barnes &#38; Noble issued
press releases announcing the execution of the merger agreement.
</FONT>

<!-- link2 "Recommendation of the Special Committee and our Board of Directors" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain of our directors also serve as directors
of Barnes &#38; 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 &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 our unaffiliated stockholders. 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="center"><FONT size="2">15
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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, our unaffiliated stockholders. <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>

<!-- link2 "Reasons for the Special Committee&#146;s Determination; Fairness of the Merger" -->
<DIV align="left"><A NAME="007"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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 caused our
    shares over the last three&nbsp;years to trade at price levels
    substantially below the merger consideration are not likely to
    change in the foreseeable future;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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&nbsp;6, 2003 (the last day of trading before
    public announcement of Barnes &#38; Noble&#146;s initial offer)
    and an 8.9% premium over the per share consideration paid by
    Barnes &#38; Noble to Bertelsmann in July 2003; and our common
    stock had not traded above $3.05 during the past
    three&nbsp;years;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the negotiations with respect to the merger
    consideration that, among other things, led to an increase in
    Barnes &#38; 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 &#38;
    Noble, $3.05 per share was the highest price that Barnes &#38;
    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 &#38; Noble during
    the negotiation process, Barnes&nbsp;&#38; Noble&#146;s
    obligation, pursuant to a purchase agreement, to pay Bertelsmann
    additional compensation in the event the merger consideration
    exceeded $3.05 per share in cash, and the experience of the
    special committee and its advisors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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 &#38; Noble and its affiliates
    and directors and officers of each of the Company and Barnes
    &#38; Noble);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the likelihood that the merger would close as a
    result of Barnes &#38; Noble having the necessary capital to
    finance the merger without having to obtain financing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

</TABLE>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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 &#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our board of directors established a special
    committee to consider and negotiate the merger agreement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the special committee is composed of independent
    directors who do not serve as directors of Barnes &#38; Noble;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the special committee was granted the full
    authority of our board of directors to evaluate Barnes &#38;
    Noble&#146;s proposal and any alternative transactions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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 &#38; Noble
    and its legal and financial advisors, on the other hand; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

</TABLE>

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

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

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

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">gains from all cash transactions are generally
    taxable to our stockholders for U.S. federal income tax purposes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the fact that Barnes &#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="center"><FONT size="2">17
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although the special committee considered our net
book value and going concern value in determining the fairness
of the merger to our unaffiliated stockholders, the special
committee noted the following:
</FONT>
<P>

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

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

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our net book value ($0.32 per share as of
    December&nbsp;31, 2003), 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; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">to the extent our going concern value, which was
    based on the discounted cash flow analysis performed by Credit
    Suisse First Boston using the management case scenario ($1.49 to
    $2.13 per share as of January&nbsp;8, 2004), 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The special committee also noted that, given
Barnes&nbsp;&#38; Noble&#146;s interest in the Company and its
intention to continue to conduct the Company&#146;s business as
a subsidiary of Barnes&nbsp;&#38; Noble, a liquidation of the
Company was not a viable option and, therefore, did not perform
a liquidation analysis of the Company to derive the
Company&#146;s liquidation value. In addition, the special
committee noted that even if a liquidation of the Company was a
viable option, selling the Company&#146;s business as an ongoing
operation to Barnes &#38; Noble in the merger would in all
likelihood 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 the Company&#146;s business.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 unaffiliated stockholders
for all of the reasons set forth above under
&#147;&#151;&nbsp;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 &#38; Noble or its
affiliates or is employed by us. The merger consideration of
$3.05 per share in cash was the highest price Barnes &#38; Noble
indicated it was willing to pay following extensive negotiations
between the special committee, Barnes &#38; Noble and their
respective legal and financial advisors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 &#38; Noble.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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
&#38; Noble and its affiliates and officers and directors of
each of Barnes &#38; Noble and the Company. On January&nbsp;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 &#38; Noble and its affiliates and officers and
directors of each of Barnes &#38; Noble and the Company.
</FONT>

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

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

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 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 &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A copy of Credit Suisse First Boston&#146;s
written presentation to the special committee has been attached
as Exhibit&nbsp;(c)(2) to the Schedule&nbsp;13E-3 filed with the
Securities and Exchange Commission in connection with
</FONT>

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

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock Trading History</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an 8.9% premium to the price that
    Barnes&nbsp;&#38; Noble paid on July&nbsp;29, 2003 to acquire
    all of Bertelsmann&#146;s interest in the Company and
    B&#38;N.com.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Discounted Cash Flow Analysis</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<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>

<DIV align="left">
<FONT size="2">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>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="11%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Implied Values Per Share of the Company&#146;s Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Merger Consideration</FONT></B></TD>
</TR>

<TR>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Increased</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Management Case</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Competition Case</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Growth Case</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">$1.49 to $2.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">0.40 to $0.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.03 to $4.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.05</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

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

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

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">E-commerce</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Book/Video/Music Retailers</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">&#149;&nbsp;Amazon.com, Inc.<BR>
    &#149;&nbsp;drugstore.com, inc<BR>
    &#149;&nbsp;eBay Inc.<BR>
    &#149;&nbsp;InterActiveCorp<BR>
    &#149;&nbsp;Netflix, Inc.<BR>
    &#149;&nbsp;1-800-FLOWERS.COM, Inc.<BR>
    &#149;&nbsp;Overstock.com, Inc.<BR>
    &#149;&nbsp;Priceline.com Incorporated
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149;&nbsp;Barnes &#38; Noble<BR>
    &#149;&nbsp;Best Buy Co., Inc.<BR>
    &#149;&nbsp;Blockbuster, Inc.<BR>
    &#149;&nbsp;Borders Group, Inc.<BR>
    &#149;&nbsp;Circuit City Stores, Inc.<BR>
    &#149;&nbsp;Hollywood Entertainment Corporation
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Implied Values Per Share of</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">the Company&#146;s Common Stock</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Merger Consideration</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade width="50%"></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade width="50%"></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <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 align="center" valign="top">
    <FONT size="2">$3.05
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

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

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

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Acquiror</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Target</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">&#149;&nbsp;Barnes &#38; Noble<BR>
    <BR>
    &#149;&nbsp;InterActiveCorp<BR>
    &#149;&nbsp;InterActiveCorp<BR>
    &#149;&nbsp;InterActiveCorp<BR>
    &#149;&nbsp;InterActiveCorp<BR>
    &#149;&nbsp;Credit Suisse First Boston, Inc.<BR>
    &#149;&nbsp;Vivendi<BR>
    &#149;&nbsp;Autobytel, Inc.<BR>
    &#149;&nbsp;General Electric Company<BR>
    &#149;&nbsp;Staples, Inc.<BR>
    &#149;&nbsp;The Walt Disney Company<BR>
    &#149;&nbsp;Vitamin Shoppe Industries Inc.<BR>
    &#149;&nbsp;barnesandnoble.com inc.<BR>
    &#149;&nbsp;Bertelsmann<BR>
    &#149;&nbsp;Webvan Group, Inc.<BR>
    &#149;&nbsp;CMGI, Inc.
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149;&nbsp;Bertelsmann&#146;s Interest in the
    Company and<BR>&nbsp;&nbsp;B&#38;N.com<BR>
    &#149;&nbsp;Hotels.com<BR>
    &#149;&nbsp;Expedia, Inc. (2003)<BR>
    &#149;&nbsp;Ticketmaster<BR>
    &#149;&nbsp;Expedia, Inc. (2001)<BR>
    &#149;&nbsp;CSFBdirect<BR>
    &#149;&nbsp;MP3.com, Inc.<BR>
    &#149;&nbsp;Autoweb.com, Inc.<BR>
    &#149;&nbsp;NBC Internet, Inc.<BR>
    &#149;&nbsp;Staples.com<BR>
    &#149;&nbsp;The Walt Disney Internet Group<BR>
    &#149;&nbsp;VitaminShoppe.com<BR>
    &#149;&nbsp;Fatbrain.com, Inc.<BR>
    &#149;&nbsp;CDnow, Inc.<BR>
    &#149;&nbsp;HomeGrocer.com, Inc.<BR>
    &#149;&nbsp;uBid, Inc.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Implied Values Per Share of</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">the Company&#146;s Common Stock</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Merger Consideration</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade width="50%"></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade width="50%"></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <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="center" valign="bottom">
    <FONT size="2">$3.05
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Minority Buy-out Premiums
    Analysis</FONT></I></B></TD>
</TR>

</TABLE>

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

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Percentage of Shares Acquired</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Transactions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">30-40%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">20-30%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Less than 20%</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Median Premium
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

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

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

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

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; Noble&#146;s
public announcement of its offer
</FONT>

<P align="center"><FONT size="2">23
</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="left">
<FONT size="2">to acquire all of the Company&#146;s outstanding
common stock that it did not already own. This analysis showed
the following:
</FONT>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Closing Price of</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">the Company&#146;s</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Indicative Premium</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">on November 6, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">10.0%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">15.0%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">20.0%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">25.0%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">30.0%</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade width="50%"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT size="2">$2.25
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Factors</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Credit Suisse First Boston noted in its
presentation that Barnes&nbsp;&#38; Noble had identified the
following rationale for the proposed merger:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Governance and
    Trading.</FONT></I><FONT size="2"> Acquiring the public float of
    the Company would eliminate ongoing issues regarding:
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Continued corporate governance;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Affiliated party transactions; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Illiquid, micro-capitalization.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Tax Savings.</FONT></I></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Based on Barnes &#38; Noble&#146;s initial offer
    of $2.50 per share, carry forward and utilization of the
    Company&#146;s net operating losses (subject to Internal Revenue
    Code section 382 limitation) would result in tax savings having
    an estimated present value of approximately $20.4&nbsp;million,
    or $0.51 per share not already owned by Barnes&nbsp;&#38; Noble
    as of August&nbsp;8, 2003; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Barnes&nbsp;&#38; Noble would need to own only
    80% of the Company in order to realize these tax benefits.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Theoretical Savings.</FONT></I><FONT size="2">
    Barnes &#38; Noble noted the elimination of separate, redundant
    public company costs which were estimated to be approximately
    $2.5&nbsp;million, and the following other synergies that were
    not quantified:
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="5%"></TD>
    <TD width="1%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Revenue synergies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Brand-enhancement synergies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Marketing synergies; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Integration savings.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Miscellaneous</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; 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&nbsp;&#38; 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>

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

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

<!-- link2 "Our Financial Projections" -->
<DIV align="left"><A NAME="010"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not, as a matter of course, publicly
disclose financial forecasts. However, in connection with the
merger, we provided Credit Suisse First Boston the following
financial projections prepared by our management. These
projections were not prepared with a view towards public
disclosure or compliance with published guidelines of the
Securities and Exchange Commission, the guidelines established
by the American Institute of Certified Public Accountants for
Prospective Financial Information or generally accepted
accounting principles. Our certified public accountants have not
examined or compiled any of these projections or expressed any
conclusion or provided for any form of assurance with respect to
the projections and, accordingly, assume no responsibility for
them. These projections are not fact and should not be relied
upon as being indicative of future results. You are cautioned
not to place undue reliance on these projections.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These projections below constitute
forward-looking statements and involve numerous risks and
uncertainties. While presented with numerical specificity, these
projections reflect numerous assumptions made by our management,
many of which are inherently uncertain and subject to change. In
addition, factors such as industry performance and general
business, economic, regulatory, market and financial conditions,
all of which are difficult to predict, may cause these
projections or the underlying assumptions to be inaccurate.
Accordingly, it is expected that there will be differences
between actual and projected results, and actual results may be
materially greater or less than those contained in the
projections. Neither the Company nor any of its affiliates,
advisors or representatives has made or makes any representation
to any person regarding the Company&#146;s ultimate performance
compared to the information contained in these projections.
Except to the extent required under applicable securities laws,
we do not intend to update or otherwise revise these projections
to reflect circumstances existing after the date when made or to
reflect the occurrence of future events even in the event any or
all of the assumptions underlying these projections are shown to
be in error.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Fiscal Year Ending December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2005</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2006</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(Dollars in Millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">424.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">464.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">487.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross Profits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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>
    <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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fulfillment &#38; Customer Service
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales &#38; Marketing &#38; Editorial
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Website &#38; Technology Development
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">General &#38; Administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><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 align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Operating Expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EBITDA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation &#38; Amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">EBIT
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Interest Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating Loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><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 align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital Expenditures
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link2 "Position of the Barnes &#38; Noble Parties as to the Fairness of the Merger" -->
<DIV align="left"><A NAME="011"></A></DIV>

<P align="left">
<B><FONT size="2">Position of the Barnes &#38; Noble Parties as
to the Fairness of the Merger</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the rules of the Securities and Exchange
Commission, the Barnes&nbsp;&#38; Noble Parties are required to
express their belief as to the fairness of the proposed merger
to our unaffiliated stockholders. The Barnes &#38; 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;&nbsp;Reasons for the
Special Committee&#146;s Determination; Fairness of the
Merger&#148; and &#147;&#151;&nbsp;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&nbsp;&#38; Noble Parties believe that the
merger is both procedurally and substantively fair to our
unaffiliated stockholders. The Barnes&nbsp;&#38; Noble Parties
reached this
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">25
</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="left">
<FONT size="2">conclusion independent of Barnes&nbsp;&#38;
Noble&#146;s obligation, pursuant to a purchase agreement, to
pay Bertelsmann additional consideration if our stockholders
received more than $3.05 per share in cash in the merger.
Barnes&nbsp;&#38; Noble has agreed to cause B&#38;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>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The liquidation of our assets was not considered
by the Barnes &#38; 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&nbsp;&#38; Noble
and remain a component of Barnes&nbsp;&#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, the Barnes &#38; 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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the financial and other terms of the merger were
    determined through arm&#146;s-length negotiations between Barnes
    &#38; Noble and the special committee and its legal and
    financial advisors, all of which are unaffiliated with
    Barnes&nbsp;&#38; Noble;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">under Delaware law, our stockholders have the
    right to demand appraisal of their shares; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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&nbsp;&#38;
    Noble&#146;s initial offer) and an 8.9% premium over the per
    share consideration paid by Barnes&nbsp;&#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Barnes&nbsp;&#38; 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&nbsp;&#38; Noble Parties as to
the fairness of the merger includes the material factors
considered by the Barnes&nbsp;&#38; Noble Parties.
Barnes&nbsp;&#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link2 "Purposes and Reasons for the Merger; Consideration of Alternatives; Structure of the Merger" -->
<DIV align="left"><A NAME="012"></A></DIV>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Company</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our purpose for engaging in the merger is to
enable our stockholders (other than Barnes&nbsp;&#38; Noble,
B&#38;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&nbsp;&#38; 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&nbsp;&#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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, which we estimate to be approximately
$2.5&nbsp;million. 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&nbsp;&#38; Noble and that during the course of the
special committee&#146;s negotiations with Barnes&nbsp;&#38;
Noble and
</FONT>

<P align="center"><FONT size="2">26
</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="left">
<FONT size="2">its representatives, Barnes&nbsp;&#38; Noble
indicated that it would not be willing to sell its shares of our
common stock in any proposed transaction.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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;&nbsp;Background of the Merger,&#148;
&#147;&#151;&nbsp;Recommendation of the Special Committee and
our Board of Directors,&#148; &#147;&#151;&nbsp;Reasons for the
Special Committee&#146;s Determination; Fairness of the
Merger&#148; and &#147;&#151;&nbsp;Reasons for our Board of
Directors&#146; Determination; Fairness of the Merger.&#148;
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Barnes&nbsp;&#38; Noble
    Parties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purpose of the Barnes&nbsp;&#38; 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&nbsp;&#38; Noble and the Company have determined to be
fair to our unaffiliated stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After analysis conducted by Barnes&nbsp;&#38;
Noble&#146;s management and an evaluation by the
Barnes&nbsp;&#38; Noble board of directors, together with its
financial advisor, Barnes&nbsp;&#38; Noble determined that the
benefits perceived at the time of our initial public offering
had significantly diminished and that the potential advantages
to Barnes&nbsp;&#38; 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&nbsp;&#38; 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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ability of Barnes&nbsp;&#38; Noble to utilize
    our management team to the extent that it deems it advisable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">enabling Barnes&nbsp;&#38; 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 as more fully described in the section
    of this proxy statement entitled &#147;&#151;&nbsp;Certain
    Relationships and Related Transactions;&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">with respect to new transactions and
    interactions, Barnes&nbsp;&#38; 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&nbsp;&#38;
    Noble and the Company and without the requirement of ensuring
    that these transactions occur on arms-length terms;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a present value tax benefit to Barnes&nbsp;&#38;
    Noble estimated to be approximately $30&nbsp;million based on
    the estimated utilization of the Company&#146;s net operating
    losses and deductions for the Company&#146;s portion of
    B&#38;N.com&#146;s current operating losses; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">as the Company is expected to require additional
    capital requirements in the near future, facilitating
    Barnes&nbsp;&#38; Noble&#146;s ability to provide such capital
    support.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Consideration of Alternatives</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Once Barnes&nbsp;&#38; Noble determined to
reintegrate the Company, Barnes&nbsp;&#38; 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&nbsp;&#38; Noble also considered the factors
described in the section of this proxy statement entitled
&#147;&#151;&nbsp;Position of the Barnes&nbsp;&#38; Noble
Parties as to the Fairness of the Merger&#148; as well as
various alternatives to the merger discussed below.
</FONT>

<P align="center"><FONT size="2">27
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble, together with its
financial advisor, considered alternatives to a cash merger.
Among the alternatives, Barnes&nbsp;&#38; Noble considered
issuing shares of Barnes&nbsp;&#38; Noble common stock in
exchange for the shares of our common stock that
Barnes&nbsp;&#38; Noble does not already own. However, given the
relatively small size of the transaction, Barnes&nbsp;&#38;
Noble&#146;s management did not believe that the substantial
time, costs and complexity of an exchange offer were justified.
Barnes&nbsp;&#38; Noble also determined that issuing stock
instead of paying cash would have a significantly greater
dilutive effect on Barnes&nbsp;&#38; Noble&#146;s stockholders.
Additionally, given Barnes&nbsp;&#38; Noble&#146;s substantial
size and capitalization, an exchange of Barnes&nbsp;&#38; 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&nbsp;&#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, Barnes&nbsp;&#38; Noble considered
a cash tender offer. However, Barnes&nbsp;&#38; 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&nbsp;&#38; Noble in the merger
by 22% over the price that Barnes&nbsp;&#38; Noble initially
offered.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Due to the Company&#146;s additional working
capital requirements, Barnes&nbsp;&#38; Noble also considered
having the Company engage in a rights offering.
Barnes&nbsp;&#38; 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&nbsp;&#38; Noble has indicated to the Company that
Barnes&nbsp;&#38; 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&nbsp;&#38; Noble would
underwrite at an appropriate discount to market.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Structure of the Merger</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The transaction has been structured as a merger
of B&#38;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&nbsp;&#38; Noble in its proposal.
</FONT>

<!-- link2 "Presentations of Barnes &#38; Noble&#146;s Financial Advisor" -->
<DIV align="left"><A NAME="013"></A></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<B><FONT size="2">Presentations of Barnes &#38; Noble&#146;s
Financial Advisor</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV>&nbsp;</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Presentation to the Barnes &#38; Noble
    Board of Directors</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes &#38; Noble retained Citigroup as its
financial advisor in connection with the possible acquisition of
all of the shares of the Company not owned by Barnes &#38;
Noble, directly or indirectly. Barnes &#38; Noble and Citigroup
entered into a formal engagement agreement on October&nbsp;31,
2003. Citigroup is one of Barnes &#38; Noble&#146;s advisors for
financial advisory and financing services and other investment
banking services. In selecting Citigroup as its financial
advisor, Barnes &#38; Noble considered primarily
Citigroup&#146;s qualifications and knowledge of the business
affairs of Barnes &#38; Noble, as well as Citigroup&#146;s
performance in connection with Barnes &#38; Noble&#146;s
acquisition of Bertelsmann&#146;s entire interest in the Company
and the reputation of Citigroup as an internationally recognized
investment banking firm that has substantial experience in
transactions similar to the proposed merger. In connection with
Citigroup&#146;s services, Barnes &#38; Noble has agreed to pay
Citigroup customary fees.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At the request of Barnes &#38; Noble, Citigroup
made a presentation at a meeting of the board of directors of
Barnes &#38; Noble on November&nbsp;6, 2003. At this meeting,
Citigroup reviewed and discussed the following:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The terms of Barnes&nbsp;&#38;
Noble&#146;s acquisition of Bertelsmann&#146;s entire interest
in the Company:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the financial terms of the Bertelsmann
    transaction, showing that the $2.80 per share purchase price
    paid to Bertelsmann consisted of two components:
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$1.87 per share for Bertelsmann&#146;s interest
    in the Company; and
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$0.93 per share for the tax benefits that Barnes
    &#38; Noble would receive by acquiring Bertelsmann&#146;s entire
    interest in the Company
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the two components of the $0.93 tax benefit:
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="89%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">deduction of suspended partnership losses; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">amortization of step-up from Bertelsmann
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the additional consideration payable to
    Bertelsmann if the purchase price in the merger exceeded $3.05
    per share in cash.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The strategic rationale of acquiring
the shares of the Company not already owned by Barnes&nbsp;&#38;
Noble, which included the following:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the potential synergies of the merger associated
    with eliminating redundant costs;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the potential tax benefits of the merger;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the potential benefits of streamlining corporate
    governance by the elimination of any potential conflict
    associated with affiliated party transactions; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other than the tax benefits described below, the
    benefit of any potential synergies were not quantified.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The approximate $0.57 per share tax
benefit to Barnes&nbsp;&#38; Noble in acquiring the shares of
the Company not already owned by Barnes &#38; Noble:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the two components of a hypothetical purchase
    price of $2.44 per share in the merger:
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="89%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$1.87 per share for remaining shares of the
    Company (same base value as the Bertelsmann transaction); and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$0.57 per share for the tax benefits that
    Barnes&nbsp;&#38; Noble would receive, based on the present
    value of the carry forward and utilization of the Company&#146;s
    net operating losses.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;Accretion/dilution to Barnes &#38;
Noble for the fiscal years ending February 2005 and 2006 at
different premia and with different forms of consideration (cash
vs. stock):
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">estimated on a preliminary basis that an all cash
    transaction would be ($0.04) to ($0.06) dilutive to Barnes &#38;
    Noble&#146;s earnings per share at purchase prices between $2.40
    and $3.20 per share. Calculated that $6 to $8&nbsp;million of
    pre-tax synergies would be required to achieve neutral EPS
    dilution; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">estimated on a preliminary basis that an all
    stock transaction would be ($0.10) and ($0.16) dilutive to
    Barnes &#38; Noble&#146;s earnings per share at purchase prices
    between $2.40 and $3.20 per share. Calculated that $15 to
    $22&nbsp;million of pre-tax synergies would be required to
    achieve neutral EPS dilution.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;Summarized the process of making a
proposal to the special committee, the Company retaining
independent legal and financial advisors, negotiating a fair
price with the special committee through its independent
advisors, filing a proxy statement and obtaining a vote of the
Company&#146;s stockholders.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The full text of the presentation of Citigroup
to the Barnes &#38; Noble board of directors, dated
November&nbsp;6, 2003, has been attached as Exhibit (c)(3) to
the Schedule&nbsp;13E-3 filed with the Securities and Exchange
Commission in connection with the merger and is qualified in its
entirety by reference to this exhibit.</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV>&nbsp;</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Presentation to the Special
    Committee</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;12, 2003, during a meeting of
the special committee, together with its legal and financial
advisors, and Barnes&nbsp;&#38; Noble&#146;s legal and financial
advisors, Citigroup made a presentation to the special
committee. At this meeting, Citigroup reviewed and discussed the
following:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The key terms of the proposed
transaction as presented in the letter to the special committee
dated November&nbsp;7, 2003. See the section of this proxy
statement entitled &#147;&#151;&nbsp;Background of the
Merger&#148; for the full text of the letter.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">29
</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="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The financial terms of
Barnes&nbsp;&#38; Noble&#146;s acquisition of Bertelsmann&#146;s
interest in the Company, showing that the $2.80 per share
purchase price paid to Bertelsmann consisted of two components:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$1.87 per share for Bertelsmann&#146;s interest
    in the Company; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$0.93 per share for the tax benefits that
    Barnes&nbsp;&#38; Noble would receive by acquiring
    Bertelsmann&#146;s entire interest in the Company.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The two components of the $0.93 tax
benefit:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">deduction of suspended partnership losses; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">amortization of step-up of Bertelsmann.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The additional consideration payable
to Bertelsmann if the purchase price in the merger exceeded
$3.05 per share in cash.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The approximate $0.51 per share tax
benefit to Barnes&nbsp;&#38; Noble in acquiring the shares of
the Company not already owned by Barnes &#38; Noble, which
included the following:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the value of tax benefits differed from the tax
    benefit described in its presentation to the Barnes &#38; Noble
    board of directors due to:
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="89%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">use of a revised share count; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">use of proposed $2.50 per share purchase price as
    opposed to $2.80 per share purchase price
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the source of the $0.51 tax benefit based on the
    present value of the carry forward and utilization of the
    Company&#146;s net operating losses.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;A proposed purchase price of $2.50
for the shares of the Company not already owned by Barnes &#38;
Noble was calculated as follows:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$1.87 per share for the shares of the Company not
    already owned by Barnes &#38; Noble (same base value as the
    Bertelsmann transaction);
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$0.51 per share for the tax benefits;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">$0.63 premium to the implied $1.87 value for the
    shares of the Company not already owned by Barnes &#38; Noble;
    and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the $2.50 per share proposed purchase price
    represented a premium to:
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>
<P>

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

<TR>
    <TD width="10%"></TD>
    <TD width="1%"></TD>
    <TD width="89%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Company&#146;s trading price of $2.25 per
    share as of November&nbsp;6, 2003;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the 30 prior trading days to November&nbsp;6,
    2003 of $2.45 per share;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the 60 prior trading days to November&nbsp;6,
    2003 of $2.20 per share; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the 90 prior trading days to November&nbsp;6,
    2003 of $2.34 per share.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;The strategic rationale of acquiring
the shares of the Company not already owned by Barnes &#38;
Noble, which included the following:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the potential synergies of the merger associated
    with eliminating redundant costs;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the potential tax benefits of the merger; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the potential benefits of streamlining corporate
    governance by the elimination of any potential conflict
    associated with affiliated party transactions.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<FONT size="2">Other than the tax benefits described below, the
benefit of any potential synergies were not quantified.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;Comparable company trading multiples:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">reviewed the following firm values for the
    Company, Amazon.com, Inc., Borders Group, Inc. and Barnes &#38;
    Noble as multiples of calendar year 2003 estimated sales and
    EBITDA:
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">The Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amazon</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Borders</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Barnes&nbsp;&#38; Noble</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Firm Value / Sales
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.0x</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" valign="bottom" nowrap><FONT size="2">4.8x</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" valign="bottom" nowrap><FONT size="2">0.5x</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" valign="bottom" nowrap><FONT size="2">0.4x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Firm Value / EBITDA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23.5x</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.5x</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" valign="bottom" nowrap><FONT size="2">5.9x</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" valign="bottom" nowrap><FONT size="2">5.4x</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><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 align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">indicated that the Company&#146;s fundamental
    operating performance and prospects in terms of growth and
    profitability were generally inferior to each of the comparables.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">30
</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="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#149;&nbsp;Reviewed premiums paid in other
minority buyout transactions, which showed that:
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="1%"></TD>
    <TD width="93%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">60.0% of minority buyouts with a shareholder vote
    were consummated at less than a 20% premium; and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">47.1% of minority buyouts with a tender or
    exchange offer were consummated at less than a 20% premium.
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The full text of the presentation of Citigroup
to the special committee, dated November&nbsp;12, 2003, has been
attached as Exhibit (c)(4) to the Schedule 13E-3 filed with the
Securities and Exchange Commission in connection with the merger
and is qualified in its entirety by reference to this
exhibit.</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon written request, you or your designated
representative may inspect and obtain copies of Citigroup&#146;s
presentations at the principal executive offices of
Barnes&nbsp;&#38; Noble, during regular business hours, and at
your own expense. To obtain a copy of either of the
presentations, contact Barnes&nbsp;&#38; Noble at 122&nbsp;Fifth
Avenue, New York, NY 10011 Attn.: Investor Relations.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In preparing the presentations, Citigroup relied
upon the accuracy and completeness of all financial, accounting
and other information reviewed by it and assumed such accuracy
and completeness for purposes of the presentations. Citigroup
was not asked to make, and did not assume responsibility for
making, any independent evaluation or appraisal of the Company
or its assets and liabilities, and did not verify, and has not
assumed any responsibility for making any independent
verification of, the information Citigroup reviewed. Citigroup
was not asked to and has not delivered a fairness opinion to
Barnes &#38; Noble in connection with the merger.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link2 "Effects of the Merger" -->
<DIV align="left"><A NAME="014"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the merger agreement,
Barnes&nbsp;&#38; 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&nbsp;&#38; Noble, B&#38;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&#38;N Acquisition,
with and into the Company. At the closing of the merger, the
Company will be an indirect wholly owned subsidiary of
Barnes&nbsp;&#38; Noble and B&#38;N Acquisition will cease to
exist as a separate entity. As a result, the interest of
Barnes&nbsp;&#38; Noble and its subsidiaries in the
Company&#146;s net book value and net earnings will increase
from approximately 73% to 100%. This will constitute an
approximately $10&nbsp;million increase in Barnes&nbsp;&#38;
Noble&#146;s interest in our net book value and will entitle
Barnes&nbsp;&#38; Noble to all future income generated by the
Company&#146;s operations, if any, and any future increase in
the Company&#146;s value. Similarly, Barnes&nbsp;&#38; 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 2003,
whether or not the merger is consummated, the Company&#146;s
financial results are consolidated with those of
Barnes&nbsp;&#38; Noble, which will remain a public company
listed on the New York Stock Exchange.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;14(a) and the
related requirement to furnish an annual report to stockholders.
</FONT>

<!-- link2 "Plans for the Company" -->
<DIV align="left"><A NAME="015"></A></DIV>

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

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

<P align="center"><FONT size="2">31
</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="left">
<FONT size="2">in this proxy statement, or as may be effected in
connection with the reintegration of the operations of
Barnes&nbsp;&#38; Noble and the Company, Barnes&nbsp;&#38; 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)&nbsp;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,&nbsp;Jr.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Notwithstanding the foregoing, Barnes&nbsp;&#38;
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&nbsp;&#38; Noble.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; Noble has informed us that, if the merger is
not completed, it will re-evaluate the role of the Company
within Barnes&nbsp;&#38; Noble&#146;s overall corporate strategy.
</FONT>

<!-- link2 "Interests of Directors and Officers in the Merger" -->
<DIV align="left"><A NAME="016"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors appointed the special
committee, consisting solely of independent directors who are
not officers, directors, or employees of Barnes&nbsp;&#38; 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&nbsp;&#38; 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>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Compensation of Members of the Special
    Committee</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="center"><FONT size="2">32
</FONT>

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

<DIV>&nbsp;</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Merger Consideration to be Received by
    Directors and Executive Officers</FONT></I></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of March&nbsp;15, 2004, our directors and
executive officers beneficially owned, in the aggregate,
11,416,521&nbsp;shares of our common stock, or approximately
20.03% of the outstanding shares of our common stock.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our directors and executive officers hold, in the
aggregate, stock options to acquire approximately
8,672,084&nbsp;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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="82%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name of Director or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Merger</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Executive Officer</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Proceeds</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,144,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">4,272,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">5,887,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">760,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">757,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">806,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">618,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">183,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">152,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<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>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Employment and Other
    Agreements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble agreed to assume or
guarantee payment of all our obligations under the employment
agreement with Marie&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; Noble also agreed to assume or
guarantee our obligations under B&#38;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&#38;N.com employees
on November&nbsp;1, 1998 and were eligible to participate in the
Barnes&nbsp;&#38; 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="center"><FONT size="2">33
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;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>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Indemnification; Directors&#146; and
    Officers&#146; Insurance</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to certain limitations contained in the
merger agreement, for a period of at least six years following
the merger, Barnes&nbsp;&#38; Noble has agreed to indemnify and
hold harmless each of the present and former directors and
officers of the Company and B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; 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&nbsp;&#38; Noble shall
not be required to pay an annual premium for such policy in
excess of 300% of the annual premium currently in place for such
insurance. Alternatively, Barnes&nbsp;&#38; 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 &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>

<!-- link2 "Certain Relationships and Related Transactions" -->
<DIV align="left"><A NAME="017"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the past, B&#38;N.com has entered into
agreements with Barnes&nbsp;&#38; Noble and its affiliates. We
believe that the transactions and agreements discussed below
(including renewals of any existing agreements) between
B&#38;N.com and its affiliates are at least as favorable to
B&#38;N.com as could be obtained from unaffiliated parties. The
numbers referred to below are in thousands.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Supply Agreement.</FONT></I><FONT size="2">
B&#38;N.com entered into a Supply Agreement, dated
October&nbsp;31, 1998, as amended, with Barnes&nbsp;&#38; Noble,
whereby Barnes&nbsp;&#38; Noble has agreed to supply inventory
to B&#38;N.com through Barnes&nbsp;&#38; Noble&#146;s
distribution facilities and purchasing departments. Pursuant to
the Supply Agreement, Barnes&nbsp;&#38; Noble charges
B&#38;N.com its actual cost to acquire the inventory plus any
incremental overhead incurred by Barnes&nbsp;&#38; Noble in
connection with providing such merchandise supply services.
B&#38;N.com purchased $114,172 and $106,167 from
Barnes&nbsp;&#38; Noble representing 35.0% and 34.0% of our
merchandise purchases for the years ended December&nbsp;31, 2003
and 2002, respectively. The charges for incremental overhead for
the years ended December&nbsp;31, 2003 and 2002 were $3,705 and
$2,519, respectively.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Services Agreement.</FONT></I><FONT size="2">
Under a Services Agreement, dated October&nbsp;31, 1998, as
amended, between B&#38;N.com and Barnes&nbsp;&#38; Noble,
B&#38;N.com receives various administrative services from
Barnes&nbsp;&#38; 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&#38;N.com reimburses Barnes&nbsp;&#38; Noble in an
amount equal to the third-party expenses it incurs to fund and
provide such services, plus any incremental internal costs.
B&#38;N.com was charged $1,990 and $3,491 for such services
during the years ended December&nbsp;31, 2003 and 2002,
respectively.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Calendar Club
Purchases.</FONT></I><FONT size="2"> B&#38;N.com purchased
merchandise directly from Calendar Club, L.L.C., a company
engaged in the wholesaling and retailing of calendars, in which
Barnes &#38; Noble owns a 73.9%
</FONT>

<P align="center"><FONT size="2">34
</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="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">interest. B&#38;N.com&#146;s purchases from
Calendar Club, L.L.C. were $1,320 and $1,740 for the years ended
December&nbsp;31, 2003 and 2002, respectively.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">New Jersey Warehouse
Sublease.</FONT></I><FONT size="2"> B&#38;N.com subleases from
Barnes&nbsp;&#38; Noble approximately one-third of a 300,000
square foot warehouse facility located in New Jersey.
B&#38;N.com was charged by Barnes&nbsp;&#38; Noble $561 and $498
for such subleased space during the years ended
December&nbsp;31, 2003 and 2002, respectively. The amount paid
to Barnes &#38; Noble by B&#38;N.com approximates the cost per
square foot paid by Barnes&nbsp;&#38; Noble as tenant pursuant
to its lease of the space from an unaffiliated third party.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Music Supply and Database
Services.</FONT></I><FONT size="2"> Since 1999, B&#38;N.com has
used AEC&nbsp;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&#38;N.com with a music, DVD and video product
database. Subsequent to the initial supply arrangement between
AEC and B&#38;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&#38;N.com, became a minority investor.
B&#38;N.com was charged by AEC $52,257 and $40,536 in connection
with this agreement for merchandise purchased during the years
ended December&nbsp;31, 2003 and 2002, respectively. In
addition, B&#38;N.com was charged by AEC $490 and $403 for
database services during the years ended December&nbsp;31, 2003
and 2002, respectively. At December&nbsp;31, 2003 and 2002,
$7,939 and $9,008, respectively, remained payable to AEC.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">License Agreements.</FONT></I><FONT size="2">
B&#38;N.com licenses the &#147;Barnes&nbsp;&#38; Noble&#148;
name under a royalty-free license agreement, dated
October&nbsp;31, 1998, as amended, between B&#38;N.com and
Barnes &#38; 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&nbsp;&#38; 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 2001, between the Company and Textbooks.com, Inc., a
corporation owned by Leonard Riggio, B&#38;N.com was granted the
right to sell college textbooks over the Internet using the
&#147;Barnes&nbsp;&#38; Noble&#148; name. Pursuant to this
agreement, B&#38;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, 2003 and 2002, we
recorded royalty expense of $3,984 and $3,485, respectively,
under the terms of this agreement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B&#38;N.com has a royalty-free non-exclusive
license, dated October&nbsp;31, 1998, as amended, from
Barnes&nbsp;&#38; Noble to use Barnes &#38; Noble&#146;s
database of book bibliographic data as well as certain software
applications.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Barnes&nbsp;&#38; Noble Membership
Program.</FONT></I><FONT size="2"> B&#38;N.com and Barnes &#38;
Noble commenced a marketing program in November 2000, whereby a
customer purchases a subscription to the Barnes &#38; Noble
Membership Program (formerly the &#147;Readers&#146;
Advantage<SUP>TM</SUP> 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&nbsp;&#38; Noble
purchases and 5% on all B&#38;N.com purchases. B&#38;N.com and
Barnes&nbsp;&#38; 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&#38;N.com&#146;s share of the card revenue
generated from this program for the years ended
December&nbsp;31, 2003 and 2002 were $2,691 and $1,359,
respectively.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marketing Services
Agreement.</FONT></I><FONT size="2"> In 2002, B&#38;N.com
entered into an agreement with Marketing Services (Minnesota)
Corp., a wholly owned subsidiary of Barnes&nbsp;&#38; Noble, for
marketing services, which includes the issuance of gift cards.
Under this agreement, B&#38;N.com has received $10,568 and
$2,669 as of December&nbsp;31, 2003 and 2002, respectively, from
Marketing Services Corp., which represents reimbursement for
gift card purchases made in a Barnes&nbsp;&#38; Noble store and
redeemed on the B&#38;N.com web site.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Shipping and Handling
Agreements.</FONT></I><FONT size="2"> B&#38;N.com ships, through
its fulfillment centers, customer orders on behalf of
Barnes&nbsp;&#38; Noble to Barnes&nbsp;&#38; Noble retail stores
as well as to Barnes&nbsp;&#38; Noble customers&#146; homes.
B&#38;N.com charges Barnes&nbsp;&#38; Noble the costs associated
with such shipments plus any incremental overhead incurred by
B&#38;N.com to process these orders. For the years ended
December&nbsp;31, 2003 and 2002, B&#38;N.com
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">35
</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="left"><FONT size="1">

</FONT></DIV>

<DIV align="left">
<FONT size="2">recorded $2,357 and $1,792, respectively, as a
reimbursement for shipping and handling from Barnes&nbsp;&#38;
Noble. In addition, during the year 2001, B&#38;N.com and
Barnes&nbsp;&#38; Noble entered into an agreement whereby
B&#38;N.com receives a commission on all items ordered by
customers at Barnes&nbsp;&#38; Noble stores and shipped directly
to customers&#146; homes by B&#38;N.com. Commissions for these
sales were recorded as revenue and amounted to $1,434 and $1,280
for the years ended December&nbsp;31, 2003 and 2002,
respectively.
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Nevada Warehouse
Sublease.</FONT></I><B><FONT size="2">
</FONT></B><FONT size="2">Barnes&nbsp;&#38; Noble subleased
warehouse space from B&#38;N.com in Reno, Nevada. B&#38;N.com
charged Barnes&nbsp;&#38; Noble $500 for such subleased space in
the year ended December&nbsp;31, 2002. Additionally,
Barnes&nbsp;&#38; Noble reimbursed B&#38;N.com $6,186 for fixed
assets purchased on behalf of Barnes&nbsp;&#38; Noble for the
Reno warehouse. In January 2002, we 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, we agreed to
transfer the Reno warehouse lease and sell B&#38;N.com&#146;s
inventory located in Reno to Barnes&nbsp;&#38; Noble. Barnes
&#38; Noble purchased the inventory from B&#38;N.com at cost for
approximately $9,877. The equipment was sold to
Barnes&nbsp;&#38; Noble at its original cost. Barnes&nbsp;&#38;
Noble&#146;s board of directors also approved Barnes &#38;
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&nbsp;&#38; Noble was completed in April
2002. In connection with the transfer, B&#38;N.com agreed to pay
one-half of the rent charged for the warehouse through
December&nbsp;31, 2002. B&#38;N.com paid $943 in relation to
these expenses for the year ended December&nbsp;31, 2002.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Textbook Agreements.</FONT></I><FONT size="2">
In 2000, B&#38;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&#38;N.com&#146;s total purchases for the years
ended December&nbsp;31, 2003 and 2002 were $13,829 and $17,223,
respectively. In addition, B&#38;N.com maintains a link on its
web site called &#147;Sell Your Textbooks&#148; which is hosted
by MBS and through which B&#38;N.com customers are able to sell
back used books purchased at B&#38;N.com directly to MBS.
B&#38;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, 2003 and 2002 were
$75 and $58, respectively.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Strategic Relationship
Agreement.</FONT></I><FONT size="2"> Under a Strategic
Relationship Agreement, dated as of May&nbsp;1, 2001, between
B&#38;N.com and GameStop Corp., a majority owned subsidiary of
Barnes &#38; Noble, B&#38;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&#38;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&#38;N.com
web site. Either party may terminate the Strategic Relationship
Agreement on 60&nbsp;days&#146; notice. Commissions of $8 and
$65 were recorded as revenue in the years ended
December&nbsp;31, 2003 and 2002, respectively, under this
agreement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">enews, inc.</FONT></I><FONT size="2">
B&#38;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&nbsp;&#38; Noble. In July 2002, the
board of directors and the stockholders of enews, inc. approved
a liquidation plan. The implementation of the liquidation plan
was concluded by February&nbsp;29, 2004. Prior to the
implementation of the liquidation plan, B&#38;N.com fulfilled a
majority of orders for magazine subscriptions through enews,
inc. and recorded a commission on these sales. B&#38;N.com
recorded commissions of $909 for the year ended
December&nbsp;31, 2002 and was reimbursed $488 and $524,
respectively, for expenses incurred on behalf of enews, inc. for
the years ended December&nbsp;31, 2003 and 2002.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2003 and 2002, $71,957 and
$48,261, respectively, remained payable to Barnes&nbsp;&#38;
Noble in connection with the transactions described above.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Michael&nbsp;N. Rosen, Secretary and a director
of the Company, also is a member of Bryan Cave LLP, outside
counsel to the Company and B&#38;N.com in connection with
matters unrelated to the proposed merger as well as to
Barnes&nbsp;&#38; Noble.
</FONT>

<P align="center"><FONT size="2">36
</FONT>

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

<!-- link2 "Provisions for Unaffiliated Stockholders" -->
<DIV align="left"><A NAME="018"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">37
</FONT>

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

<!-- link1 "THE MERGER" -->
<DIV align="left"><A NAME="019"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;A and is incorporated herein by
reference. You are encouraged to read Annex&nbsp;A in its
entirety. See also the section of this proxy statement entitled
&#147;THE MERGER AGREEMENT.&#148;
</FONT>

<!-- link2 "Effective Time of the Merger" -->
<DIV align="left"><A NAME="020"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; 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="021"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the effective time of the merger,
Barnes&nbsp;&#38; 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&nbsp;&#38; 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&nbsp;&#38; Noble, B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">38
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; 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="022"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">that we will experience a business interruption,
    incident, occurrence or event that has a material adverse effect
    on us and B&#38;N.com, taken as a whole, that would permit
    Barnes&nbsp;&#38; Noble to terminate the merger agreement and
    abandon the merger;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<!-- link2 "Merger Financing; Sources of Funds" -->
<DIV align="left"><A NAME="023"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes&nbsp;&#38; 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&nbsp;&#38; 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&nbsp;(b)(1), (b)(2), (b)(3) and&nbsp;(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&nbsp;&#38; Noble&#146;s fixed charge coverage
ratio. As of the date of this proxy statement, Barnes&nbsp;&#38;
Noble could borrow money under the credit facility at an
interest rate per annum equal to
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</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&nbsp;&#38; 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&nbsp;&#38;
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&nbsp;&#38; Noble&#146;s capital
stock in its subsidiaries, and by the accounts receivable and
general intangibles of Barnes&nbsp;&#38; Noble and its
subsidiaries. The credit facility expires on May&nbsp;22, 2006.
Barnes&nbsp;&#38; Noble does not anticipate the need for any
alternative financing arrangements and the merger is not subject
to any financing contingency. Barnes&nbsp;&#38; 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">39
</FONT>

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

<!-- link2 "Certain U.S. Federal Income Tax Consequences" -->
<DIV align="left"><A NAME="024"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following is a summary of certain
U.S.&nbsp;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.&nbsp;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.&nbsp;federal income tax
consequences to any stockholder who, for U.S.&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The receipt of cash for shares of our common
stock pursuant to the merger will be a taxable transaction for
U.S.&nbsp;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.&nbsp;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&nbsp;(1)&nbsp;year.
Certain limitations apply to the use of capital losses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the U.S.&nbsp;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.&nbsp;federal income tax liability for the year.
</FONT>

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

<!-- link2 "Litigation Relating to the Merger" -->
<DIV align="left"><A NAME="025"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following the November&nbsp;7, 2003 announcement
of Barnes&nbsp;&#38; Noble&#146;s proposal to purchase all of
the outstanding shares of our common stock at a price of
$2.50&nbsp;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&nbsp;&#38; 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&nbsp;&#38; Noble and our directors,
(ii)&nbsp;that the consideration offered by Barnes&nbsp;&#38;
Noble was inadequate and constituted unfair dealing and
(iii)&nbsp;that Barnes&nbsp;&#38; 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 occurred
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The parties subsequently agreed that
plaintiffs&#146; counsel will apply to the court for an award of
attorney&#146;s fees and costs in the amount of $600,000 and
that defendants will not object to a fee award up to that
amount. It was further agreed that defendants would pay or
reimburse the costs of mailing. The settlement is contingent
upon, among other things, court approval, the merger
consideration being $3.05&nbsp;per share in cash and
consummation of the merger.
</FONT>

<!-- link2 "Regulatory Matters" -->
<DIV align="left"><A NAME="026"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="027"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="028"></A></DIV>

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

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

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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><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 align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

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

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

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

<!-- link2 "Appraisal Rights" -->
<DIV align="left"><A NAME="029"></A></DIV>

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

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

<P align="center"><FONT size="2">41
</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="left">
<FONT size="2">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&nbsp;B to this proxy statement.</B>
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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&nbsp;262.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All demands for appraisal should be addressed to
Vice President&nbsp;&#151; Legal Affairs at barnesandnoble.com
inc., 76&nbsp;Ninth Avenue, New York, New York&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="center"><FONT size="2">42
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">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.</FONT></B>

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

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

<!-- link1 "THE SPECIAL MEETING" -->
<DIV align="left"><A NAME="030"></A></DIV>

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

<!-- link2 "Date, Time and Place of the Special Meeting" -->
<DIV align="left"><A NAME="031"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The special meeting of our stockholders will be
held on
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>,
2004, at 10:00&nbsp;a.m. local time, at
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>.
We mailed this proxy statement and accompanying proxy card on or
about
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</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="032"></A></DIV>

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

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

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">consider and vote upon a proposal to approve and
    adopt the merger agreement and the merger; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="033"></A></DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 March&nbsp;15, 2004,
Barnes &#38; 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 March&nbsp;15, 2004, held approximately 0.95% of the voting
power of our common stock will vote in favor of the merger.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link2 "Record Date, Voting Rights, Quorum and Revocability of Proxies" -->
<DIV align="left"><A NAME="034"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors has fixed the close of
business on
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</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>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>,
2004, we had
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>
shares outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;Ninth Avenue, New York, New York&nbsp;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
meeting and voting in person. Attendance at the special meeting
will not, by itself, revoke a proxy. Furthermore, if a
stockholder&#146;s
</FONT>

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

<!-- link2 "Expenses of Proxy Solicitation" -->
<DIV align="left"><A NAME="035"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="036"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="037"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;per share cash payment, without interest and
less any applicable withholding taxes, will be sent to you.
</FONT>

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

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

<!-- link1 "THE MERGER AGREEMENT" -->
<DIV align="left"><A NAME="038"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;8, 2004, the Company,
Barnes&nbsp;&#38; Noble, B&#38;N Holding and B&#38;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&nbsp;A. You are encouraged to
read the entire merger agreement.
</FONT>

<!-- link2 "Effective Time of the Merger" -->
<DIV align="left"><A NAME="039"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="040"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At the effective time, B&#38;N Acquisition will
be merged with and into the Company, with the Company surviving
as a wholly owned subsidiary of B&#38;N Holding, and the
separate existence of B&#38;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&#38;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="041"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 &#38; Noble,
B&#38;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&nbsp;per share in cash, without interest and less
any applicable withholding taxes.
</FONT>

<!-- link2 "Stock Options" -->
<DIV align="left"><A NAME="042"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="043"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">46
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="044"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have made certain representations and
warranties to the Barnes &#38; 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>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">organization, standing and power;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">interests in other entities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">authority to execute, deliver and perform the
    merger agreement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">no violation of charter documents, material
    agreements or law in connection with the merger;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">opinion of a financial advisor and approval by
    the special committee;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">absence of certain brokerage fees or commissions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">absence of material misstatements and omissions
    in this proxy statement or Schedule&nbsp;13E-3 transaction
    statement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">absence of certain changes or events;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">absence of undisclosed material liabilities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">no violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">absence of litigation and claims; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">employee arrangements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Barnes&nbsp;&#38; 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>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">organization, standing and power;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">authority to execute, deliver and perform the
    merger agreement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">no violation of charter documents, material
    agreements or law in connection with the merger;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">absence of certain brokerage fees or commissions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">absence of material misstatements or omissions in
    information supplied by the Barnes&nbsp;&#38; Noble Parties for
    inclusion in this proxy statement or Schedule&nbsp;13E-3
    transaction statement; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <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="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 &#38; Noble Parties to complete the
merger.
</FONT>

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

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

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

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Conduct of Business</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Until the completion of the merger, we and
B&#38;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&#38;N.com may not, without the prior written consent of
Barnes&nbsp;&#38; Noble:
</FONT>
<P>

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

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">amend our amended and restated certificate of
    incorporation, amended and restated by-laws or other
    organizational documents;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">make or authorize any capital expenditures, other
    than capital expenditures that are in the aggregate no greater
    than (i)&nbsp;$5.0&nbsp;million from the date of the merger
    agreement through March&nbsp;31, 2004 and
    (ii)&nbsp;$10.0&nbsp;million from the date of the merger
    agreement through July&nbsp;15, 2004;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">except as may be required by applicable law or
    U.S.&nbsp;generally accepted accounting procedures, change any
    method, practice or principle of accounting;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <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&#38;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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any transaction with any of our
    officers (vice president or above) or directors or those of
    B&#38;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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">settle or compromise certain material litigation,
    arbitration or other judicial or administrative dispute or
    proceeding relating to either us or B&#38;N.com; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter into any agreement to, or make any
    commitment to, take any of the preceding actions.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Stockholders&#146; Meeting;
    Recommendation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;&#38; Noble
will cause B&#38;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&nbsp;&#38; 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 &#38; Noble of the acquisition
</FONT>

<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="left">
<FONT size="2">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&nbsp;&#38; 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)&nbsp;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>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to our rights to terminate the merger
agreement described below under the section of this proxy
statement entitled &#147;&#151;&nbsp;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>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Reasonable Efforts</FONT></I></B></TD>
</TR>

</TABLE>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Company Indemnification
    Provisions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes &#38; Noble will cause the surviving
corporation to indemnify and hold harmless our current and
former directors and officers and those of B&#38;N.com and all
other persons who served at our request or the request of
B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes &#38; 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 &#38; 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 &#38; Noble shall maintain such coverage for
a period of not less than six years after the effective time of
the Merger.
</FONT>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Stockholder Litigation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="center"><FONT size="2">49
</FONT>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Additional Covenants Regarding the
    Merger</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the preparation and filing of this proxy
    statement and a Schedule&nbsp;13E-3 transaction statement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">reasonable access by Barnes&nbsp;&#38; Noble to
    information concerning our operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">notification of certain events or communications
    among the parties to the merger agreement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the provision by Barnes &#38; Noble or the
    surviving corporation of employee benefits to our employees or
    those of B&#38;N.com and the assumption by Barnes&nbsp;&#38;
    Noble of all our obligations and those of B&#38;N.com under
    certain compensation plans and employment agreements.
    </FONT></TD>
</TR>

</TABLE>

<!-- link2 "Conditions to Completing the Merger" -->
<DIV align="left"><A NAME="046"></A></DIV>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Conditions to Each Party&#146;s
    Obligations</FONT></I></B></TD>
</TR>

</TABLE>

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

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

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Conditions to our Obligations</FONT></I></B></TD>
</TR>

</TABLE>

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

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

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the representations and warranties made by the
    Barnes&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the Barnes &#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">we shall have received a certificate of Barnes
    &#38; 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="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>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Conditions to the Obligations of the Barnes
    &#38; Noble Parties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The obligations of the Barnes &#38; Noble Parties
to complete the merger are subject to the satisfaction or waiver
of the following further conditions:
</FONT>
<P>

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

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

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

<TR>
    <TD>&nbsp;</TD>
</TR>

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

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Barnes &#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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&#38;N.com, taken as a whole.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the purposes of determining satisfaction of
the conditions to the obligations of the Barnes &#38; Noble
Parties described above, a &#147;material adverse effect&#148;
on us and B&#38;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&#38;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="047"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and Barnes &#38; 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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by either us or Barnes&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by either us or Barnes&nbsp;&#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by Barnes&nbsp;&#38; 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 &#38; Noble;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">by Barnes &#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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)&nbsp;we give Barnes &#38;
    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 &#38; 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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <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 &#38; Noble Parties&#146;
    representations, warranties or
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">51
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<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>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">covenants under the merger agreement such that
    the conditions in the merger agreement will not be satisfied.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="048"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="049"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="050"></A></DIV>

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

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

<!-- link2 "Assignment" -->
<DIV align="left"><A NAME="051"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="052"></A></DIV>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">52
</FONT>

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

<!-- link1 "SUMMARY HISTORICAL FINANCIAL DATA" -->
<DIV align="left"><A NAME="053"></A></DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The summary historical financial data set forth
below as of and for the fiscal years ended December&nbsp;31,
2003, 2002 and 2001 are derived from our audited consolidated
financial statements. The summary 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&nbsp;10-K for the fiscal year ended 2003, which has been
incorporated by reference into this proxy statement. Copies of
our Annual Report may be inspected or obtained at our web site
or by accessing our public filings with the Securities and
Exchange Commission. See the section of this proxy statement
entitled &#147;WHERE YOU CAN FIND MORE INFORMATION&#148; for
instructions.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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 &#38; Noble, B&#38;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="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(Thousands of Dollars, Except Per Share Data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">424,815</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">422,827</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">404,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">320,627</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">313,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">104,188</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">91,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">36,595</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" valign="bottom" nowrap><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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">30,390</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">61,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">30,725</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" valign="bottom" nowrap><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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">25,548</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">32,362</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">27,467</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" valign="bottom" nowrap><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" valign="bottom" nowrap><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 align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">88,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">28,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><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 align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">150,725</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">342,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(46,537</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(75,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(251,407</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">226</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">7,041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(46,311</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(73,657</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(244,366</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">34,965</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">176,980</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss&nbsp;&#151; historical
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,346</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,132</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(67,386</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><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 align="left"><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 align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.28</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.54</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">40,707</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">43,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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 align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.28</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.54</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ratio of earnings to fixed charges(a)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Working capital (deficit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,747</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">44,628</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">347,918</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">287,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">172,516</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">105,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">12,971</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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">42,758</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

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

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

<TR valign="top">
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The ratio of earnings to fixed charges has not
    been provided since the ratio would be less than 1:1 for all
    periods presented. To achieve an earnings to fixed charges ratio
    of 1:1, the Company would have to generate income.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">53
</FONT>
<!-- PAGEBREAK -->
<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="054"></A></DIV>

<P align="center">
<B><FONT size="2">MARKET PRICE AND DIVIDENDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>&nbsp;shares
of our common stock were issued and outstanding and we had
approximately
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>&nbsp;stockholders
of record and
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>&nbsp;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="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">High</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Low</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Fiscal Year 2004</FONT></I></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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Second Quarter (through
    <B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>,
    2004)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">[&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD align="left" valign="bottom" nowrap><B><FONT size="2">]</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><B><FONT size="2">[&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD align="left" valign="bottom" nowrap><B><FONT size="2">]</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">3.05</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" valign="bottom" nowrap><FONT size="2">2.88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Fiscal Year 2003</FONT></I></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 align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">1.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">1.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">0.97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Fiscal Year 2002</FONT></I></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>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">0.43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">0.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">1.34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;6, 2003, the last full trading
day prior to public announcement of Barnes &#38; Noble&#146;s
initial offer, the last reported sales price of our common stock
was $2.25. On
<B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</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>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</B>.
You should obtain current market price quotations for shares of
our common stock in connection with voting your shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have not declared or paid any cash dividends
on our capital stock since our inception and B&#38;N.com has not
declared any distributions to its members since its inception.
Neither we nor B&#38;N.com expect to pay any cash dividends or
distributions for the foreseeable future, except we expect to
cause B&#38;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&#38;N.com.
</FONT>

<P align="center"><FONT size="2">54
</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="055"></A></DIV>

<P align="center">
<B><FONT size="2">PRINCIPAL STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&#38;N.com owned by such holder.
Barnes&nbsp;&#38; Noble is the beneficial owner of all of our
outstanding Class&nbsp;B and Class&nbsp;C common stock.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth certain
information regarding beneficial ownership of our common stock
as of March&nbsp;15, 2004 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&#38;N.com and these
directors and executive officers as a group; and (iii)&nbsp;the
directors and executive officers of the Barnes&nbsp;&#38; Noble
Parties. Unless otherwise indicated, the address for each of the
directors and executive officers of the Company and the
Barnes&nbsp;&#38; Nobles Parties is set forth in Annex&nbsp;D to
this proxy statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class A</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and Address of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially Owned(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock(2)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Voting Power(2)(3)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Beneficial Holders:</FONT></B></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>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Barnes &#38; Noble, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,138,502</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72.95</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%(4)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%(4)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">122 Fifth Avenue<BR>
    New York, New York 10011
    </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>
    <TD colspan="14"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Respective Executive Officers and Directors of
    the Company and B&#38;N.com:</FONT></B></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>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leonard Riggio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,014,437</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(5)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">3,580,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.92</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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">3,818,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(7)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.38</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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">450,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(8)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">462,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">401,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(10)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">420,084</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(11)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">90,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(11)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,416,521</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(12)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20.03</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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="14"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Respective Executive Officers and Directors of
    the Barnes &#38; Noble Parties:</FONT></B></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 bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leonard Riggio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,014,437</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(5)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">3,580,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(6)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.92</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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">234,710</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(13)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(9)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,011,190</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(14)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="center"><FONT size="2">55
</FONT>

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

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class A</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name and Address of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficially Owned(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock(2)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Voting Power(2)(3)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><FONT size="2">100,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(11)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(15)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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" valign="bottom" nowrap><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" valign="bottom" nowrap><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" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents less than 1%.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <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&nbsp;days after March&nbsp;15, 2004 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="1">

</FONT></TD></TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Excludes 4,158,088 shares issued to B&#38;N.com
    in connection with the merger with Fatbrain.com,&nbsp;LLC.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <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 &#38;
    Noble through its wholly owned subsidiary, B&#38;N Holding.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 600,000 shares each owned by Barnes
    &#38; 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&nbsp;&#38; Noble.
    Mr.&nbsp;Riggio is Barnes&nbsp;&#38; 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&nbsp;&#38; Noble. Mr.&nbsp;Riggio disclaims any
    beneficial ownership of such shares.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(7)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes options granted by the Company to
    purchase 3,400,000 shares of Class&nbsp;A common stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(8)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(9)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">All of these shares are issuable upon the
    exercise of options granted by the Company.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD><FONT size="2">(10)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(11)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(12)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(13)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(14)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(15)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Barnes &#38; 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">56
</FONT>

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

<!-- link1 "CERTAIN TRANSACTIONS INVOLVING OUR COMMON STOCK" -->
<DIV align="left"><A NAME="056"></A></DIV>

<P align="center">
<B><FONT size="2">CERTAIN TRANSACTIONS INVOLVING OUR COMMON
STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since October&nbsp;1, 2002, as part of
Barnes&nbsp;&#38; Noble&#146;s stock acquisition program,
Barnes&nbsp;&#38; Noble, through B&#38;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&nbsp;&#38; 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&nbsp;&#38; 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&nbsp;&#38; Noble acquired an aggregate of
40,000&nbsp;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&nbsp;&#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;20, 2002, Leonard Riggio, our
Chairman of the Board, sold 400,000&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;15, 2003, Barnes&nbsp;&#38;
Noble acquired all of our Class&nbsp;A common stock, together
with all of the membership units in B&#38;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&nbsp;&#38; Noble subsequently
transferred all shares and membership units purchased from
Bertelsmann to B&#38;N Holding. See the section of this proxy
statement entitled &#147;SPECIAL FACTORS&nbsp;&#151; Background
of the Merger.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&#38;N.com or, to the best of the knowledge of the Company, any
of their respective directors or executive officers, or by the
Barnes&nbsp;&#38; Noble Parties or, to the best of the knowledge
of Barnes&nbsp;&#38; Noble, any of their respective directors or
executive officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;20, 2004, William
Dillard,&nbsp;II, a director of Barnes&nbsp;&#38; Noble and
B&#38;N Holding, sold 15,000&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as set forth in this proxy statement, none
of the Company or B&#38;N.com or, to the best of the knowledge
of the Company, their respective directors or executive officers
set forth in Annex&nbsp;D to this proxy statement, or the
Barnes&nbsp;&#38; Noble Parties, or to the best of the knowledge
of Barnes&nbsp;&#38; Noble, their respective directors or
executive officers set forth in Annex&nbsp;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&nbsp;&#38; Noble Parties, or to the
best of the knowledge of Barnes&nbsp;&#38; Noble, their
respective directors or executive officers set forth in
Annex&nbsp;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">57
</FONT>

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

<!-- link1 "OTHER MATTERS" -->
<DIV align="left"><A NAME="057"></A></DIV>

<P align="center">
<B><FONT size="2">OTHER MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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="058"></A></DIV>

<P align="center">
<B><FONT size="2">STOCKHOLDER PROPOSALS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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" -->
<DIV align="left"><A NAME="059"></A></DIV>

<P align="center">
<B><FONT size="2">INDEPENDENT ACCOUNTANTS</FONT></B>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The financial statements as of December&nbsp;31,
2003, 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&nbsp;10-K for the year ended December&nbsp;31,
2003, incorporated by reference into this proxy statement.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->
<DIV align="left"><A NAME="060"></A></DIV>

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

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

<P align="center">
<FONT size="2">Public Reference Room
</FONT>

<DIV align="center">
<FONT size="2">450 Fifth Street, N.W.
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Room&nbsp;1024
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Washington, D.C. 20549
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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&nbsp;Fifth Street, N.W.,
Room&nbsp;1024, Washington,&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The merger described in this proxy statement is a
&#147;going private transaction.&#148; We have filed a
Section&nbsp;13(e) Transaction Statement on Schedule&nbsp;13E-3
with the Securities and Exchange Commission with
</FONT>

<P align="center"><FONT size="2">58
</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="left">
<FONT size="2">respect to the merger. The Schedule&nbsp;13E-3,
including all amendments thereto, contains additional
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>
</DIV>

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

<DIV align="center">
<FONT size="2">76 Ninth Avenue
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">New York, New York 10011
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">Attn: Investor Relations, Kevin M. Frain
</FONT>
</DIV>

<DIV align="center">
<FONT size="2">(212)&nbsp;414-6000
</FONT>
</DIV>

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

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We incorporate by reference into this proxy
statement our Annual Report on Form&nbsp;10-K for the year ended
December&nbsp;31, 2003, filed on March&nbsp;15, 2004.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">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
[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;],
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.</FONT></B>

<P align="center"><FONT size="2">59
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "ANNEX A" -->
<DIV align="left"><A NAME="061"></A></DIV>

<P align="right">
<B><FONT size="2">ANNEX A</FONT></B>

<P align="right">
<B><FONT size="2">EXECUTION COPY</FONT></B>

<P align="center">
<B><FONT size="2">AGREEMENT AND PLAN OF MERGER</FONT></B>

<P align="center">
<B><FONT size="2">by and among</FONT></B>

<P align="center">
<B><FONT size="2">BARNES &#38; NOBLE, INC.,</FONT></B>

<P align="center">
<B><FONT size="2">B&#38;N.COM HOLDING CORP.,</FONT></B>

<P align="center">
<B><FONT size="2">B&#38;N.COM ACQUISITION CORP.,</FONT></B>

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

<P align="center">
<B><FONT size="2">BARNESANDNOBLE.COM INC.</FONT></B>

<P align="center">
<B><FONT size="2">Dated as of January&nbsp;8, 2004</FONT></B>

<P align="center"><FONT size="2">A-1
</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">
<B><FONT size="2">Table of Contents</FONT></B>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">ARTICLE I. The Merger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">The Merger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Effective Time
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Closing
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Certificate of Incorporation; By-laws; Directors
    and Officers
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.5.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Effect of Merger on Common Stock
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.6.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Dissenting Shares
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.7.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Stock Options
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 1.8.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Exchange of Certificates; Payment for
    Class&nbsp;A Common Stock
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">ARTICLE II. Representations and Warranties of the
    Company
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Organization of the Companies
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Capitalization of the Companies
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Subsidiaries of the Companies
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Authorization
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.5.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Opinion of Financial Advisor and Approval by the
    Special Committee
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.6.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Brokers and Finders
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.7.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Proxy Statement; Schedule&nbsp;13E-3
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.8.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">SEC Documents; Financial Statements;
    Sarbanes-Oxley
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.9.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Absence of Certain Changes or Events
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.10.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">No Undisclosed Material Liabilities
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.11.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Compliance with Laws and Court Orders
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.12.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Litigation and Claims
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 2.13.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Employee Plans
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">ARTICLE III. Representations and Warranties of
    the Barnes &#38; Noble Parties
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 3.1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Organization and Qualification
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 3.2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Authorization
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 3.3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Brokers and Finders
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 3.4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Proxy Statement; Schedule&nbsp;13E-3
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 3.5.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Knowledge
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">ARTICLE IV. Certain Covenants and Agreements
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Certain Actions Pending Merger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Proxy Statement
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Stockholders&#146; Meeting
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Reasonable Efforts
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.5.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Inspection of Records
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.6.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Notification of Certain Matters
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.7.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Disclosure
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.8.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Directors&#146; and Officers&#146; Indemnification
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.9.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Stockholder Litigation
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 4.10.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Employee Matters
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

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

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

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">ARTICLE V. Conditions Precedent
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 5.1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Conditions to each Party&#146;s Obligation to
    Effect the Merger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 5.2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Conditions to the Obligation of the Company to
    Effect the Merger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 5.3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Conditions to the Obligation of the Barnes &#38;
    Noble Parties to Effect the Merger
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">ARTICLE VI. Termination, Amendment and Waiver
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 6.1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Termination
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 6.2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Effect of Termination
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 6.3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Amendment
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 6.4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Waiver
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">ARTICLE VII. Miscellaneous
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.1.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Definitions
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.2.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Non-survival of Representations and Warranties
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.3.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Expenses
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.4.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Applicable Law
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.5.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Notices
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.6.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Entire Agreement
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.7.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Assignment
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.8.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Headings References
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.9.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Construction
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.10.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Counterparts
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.11.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">No Third Party Beneficiaries
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.12.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Actions of the Company
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Section&nbsp; 7.13.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom">
    <FONT size="2">Severability; Enforcement
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A-25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">A-3
</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">
<B><FONT size="2">AGREEMENT AND PLAN OF MERGER</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">THIS AGREEMENT AND PLAN OF
MERGER,</FONT></B><FONT size="2"> dated as of January&nbsp;8,
2004 (this &#147;Agreement&#148;), by and among Barnes &#38;
Noble, Inc., a Delaware corporation (&#147;Barnes &#38;
Noble&#148;), B&#38;N.com Holding Corp., a Delaware corporation
and a wholly owned subsidiary of Barnes &#38; Noble
(&#147;B&#38;N Holding Corp.&#148;), B&#38;N.com Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of
B&#38;N Holding Corp. (&#147;B&#38;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">
<B><FONT size="2">RECITALS:</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#38;
Noble, through B&#38;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 &#38; Noble through B&#38;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&#38;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&nbsp;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&#38;N LLC&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">B.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Barnes &#38;
Noble, through B&#38;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&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">C.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The respective
Boards of Directors of the Company, Barnes &#38; Noble, B&#38;N
Holding Corp. and B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">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">ARTICLE I.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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&#38;N Acquisition Corp. will be merged with and
into the Company, the separate existence of B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Effective
Time</U>. On the Closing Date, B&#38;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="center"><FONT size="2">A-4
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;except as required by
    Section&nbsp;4.8(a), the By-laws of B&#38;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;the directors of B&#38;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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(d)&nbsp;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)&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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&#38;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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;each share of common stock, par value
    $0.001 per share, of B&#38;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;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>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;each share of Class&nbsp;A Common Stock
    that is issued and outstanding immediately prior to the
    Effective Time (other than shares of Class A Common Stock held
    by B&#38;N Holding Corp. and Barnes &#38; 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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;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 align="center"><FONT size="2">A-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>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;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&#38;N Holding
    Corp. will be canceled and will cease to exist, no consideration
    will be delivered in respect of such shares, and B&#38;N Holding
    Corp. will cease to have any rights with respect to any
    certificates representing any such shares.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Dissenting
Shares</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;The Company shall give Barnes &#38;
Noble:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;the opportunity to direct all
    negotiations and proceedings with respect to demands for
    appraisal under the DGCL.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;The Company shall not, except with the
prior written consent of Barnes &#38; 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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;1.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Exchange
of Certificates; Payment for Class&nbsp;A Common Stock</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;<U>Exchange Agent</U>. Prior to the
Effective Time, Barnes &#38; Noble will appoint a bank or trust
company reasonably acceptable to the Company to act as exchange
agent (the &#147;Exchange Agent&#148;) for the payment of the
Merger Consideration. Immediately prior to the Effective Time,
Barnes&nbsp;&#38; 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&#38;N Holding Corp. and Barnes &#38; Noble), the aggregate
amount of cash payable under Section&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;<U>Exchange Procedures</U>.
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;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
    </FONT></TD>
</TR>

</TABLE>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">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="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iv)&nbsp;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 Consideration allocable to the shares of
    Class&nbsp;A Common Stock represented by such certificate or
    certificates.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(v)&nbsp;If any Merger Consideration is to be
    remitted to a name other than that in which the certificate for
    the Class&nbsp;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="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;the certificate so surrendered is
    properly endorsed, with signature guaranteed, or otherwise in
    proper form for transfer; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(vi)&nbsp;Until surrendered as contemplated by
    this Section&nbsp;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 align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;<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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;<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>

<P align="center"><FONT size="2">A-7
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(e)&nbsp;<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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(f)&nbsp;<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, such lost, stolen or
destroyed certificate, as determined in accordance with this
Section&nbsp;1.8, only upon:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(iii)&nbsp;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 align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(g)&nbsp;<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>

<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Except as set forth in the Company&#146;s
disclosure letter delivered to the Barnes&nbsp;&#38; 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&nbsp;&#38; Noble Parties as follows:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Organization
of the Companies</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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&#38;N&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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&#38;N&nbsp;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&#38;N&nbsp;LLC.
</FONT>

<P align="center"><FONT size="2">A-8
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Capitalization
of the Companies</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Subsidiaries
of the Companies</U>. Other than the Company&#146;s interest in
B&#38;N LLC and B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Authorization</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;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 &#38; 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>

<P align="center"><FONT size="2">A-9
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;<U>Consents</U>.
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;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="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;the Certificate of Incorporation or
    By-laws of the Company or the organizational documents of
    B&#38;N LLC, as amended and in effect on the date of this
    Agreement; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;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)&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Opinion
of Financial Advisor and Approval by the Special Committee</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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)&nbsp;recommended that the Board of
Directors of the Company approve this Agreement and the Merger.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Proxy
Statement; Schedule&nbsp;13E-3</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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 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>

<P align="center"><FONT size="2">A-10
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>SEC
Documents; Financial Statements; Sarbanes-Oxley</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;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 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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;liabilities or obligations reflected,
    reserved for or disclosed in the Company&#146;s filed SEC
    Documents;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;liabilities or obligations incurred
    under this Agreement or in connection with the transactions
    contemplated by this Agreement.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">A-11
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;2.13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">ARTICLE III.
</FONT>

<P align="center">
<FONT size="2">Representations and Warranties of the Barnes
&#38; Noble Parties
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes &#38; Noble, B&#38;N Holding Corp. and
B&#38;N Acquisition Corp. (each, a &#147;Barnes &#38; Noble
Party&#148; and together, the &#147;Barnes &#38; Noble
Parties&#148;) hereby jointly and severally represent and
warrant to the Company as follows:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;3.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Organization
and Qualification</U>. Each Barnes &#38; Noble Party is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. B&#38;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&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;3.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Authorization</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Each Barnes &#38; 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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;The execution and delivery of this
Agreement by each Barnes &#38; Noble Party and the consummation
by each Barnes &#38; Noble Party of the transactions
contemplated by this Agreement have been duly authorized by all
corporate action on the part of each Barnes &#38; Noble Party.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;This Agreement has been duly executed
and delivered by each Barnes &#38; 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 &#38; Noble Party, enforceable against each Barnes
&#38; 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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;<U>Consents</U>.
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;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 &#38; 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>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;any term or provision of any state or
    federal law, ordinance, rule or regulation to which any Barnes
    &#38; Noble Party is subject and which violation, breach or
    default would have, together with all
    </FONT></TD>
</TR>

</TABLE>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<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>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">such other violations, breaches and defaults, a
    Material Adverse Effect on the Barnes &#38; Noble Parties, taken
    as a whole, or prevent the consummation of the transactions
    contemplated by this Agreement; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;the Certificate of Incorporation or
    By-Laws of each Barnes &#38; 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 &#38; Noble Party is a
    party or by which any Barnes &#38; Noble Party is bound, or
    result in the creation of any Lien upon any of the properties or
    assets of any Barnes &#38; Noble Party, which breach or default
    would have, together with all such other breaches and defaults,
    a Material Adverse Effect on the Barnes &#38; Noble Parties,
    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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;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 &#38;
    Noble Party, or the consummation of any other transaction
    contemplated on the part of any Barnes &#38; 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 &#38; Noble Parties, taken as a whole, or
    prevent the consummation of the transactions contemplated by
    this Agreement.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;3.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Brokers
and Finders</U>. Other than Citigroup Global Markets, Inc., no
Barnes &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;3.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Proxy
Statement; Schedule&nbsp;13E-3</U>. None of the information to
be supplied by a Barnes &#38; 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 &#38; Noble Party, in light of
the circumstances under which they are made, not misleading.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;3.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Knowledge</U>.
Other than as set forth in the Company Disclosure Letter, the
Barnes &#38; 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">ARTICLE IV.
</FONT>

<P align="center">
<FONT size="2">Certain Covenants and Agreements
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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 &#38; Noble or as expressly contemplated or
permitted by this Agreement:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;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>

</TABLE>

<P align="center"><FONT size="2">A-13
</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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(d)&nbsp;amend its Certificate of Incorporation,
    By-laws or other organizational documents in any manner;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(e)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(f)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(g)&nbsp;make or authorize any capital
    expenditures, other than capital expenditures that are in the
    aggregate no greater than (i)&nbsp;$5.0 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&nbsp;15, 2004;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(h)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(j)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(k)&nbsp;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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(l)&nbsp;the entering into any agreement to, or
    the making of any commitment to, take any of the actions
    prohibited by this Section&nbsp;4.1.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Proxy
Statement</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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
&#38; Noble Parties and their counsel with respect to such
filings and shall afford the Barnes&nbsp;&#38; Noble Parties
reasonable opportunity to
</FONT>

<P align="center"><FONT size="2">A-14
</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="left">
<FONT size="2">review and comment thereon. The Barnes&nbsp;&#38;
Noble Parties will provide the Company with any information for
inclusion in the Proxy Statement and the Schedule&nbsp;13E-3
which may be required under applicable law and which is
reasonably requested by the Company. The Company will promptly
notify the Barnes&nbsp;&#38; 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&nbsp;&#38; 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 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&nbsp;&#38;
Noble Parties and their counsel with respect to such amendment
or supplement and shall afford the Barnes&nbsp;&#38; Noble
Parties reasonable opportunity to review and comment thereon.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Stockholders&#146;
Meeting</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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&nbsp;&#38; Noble
Parties) as promptly as practicable after the mailing of the
Proxy Statement to the stockholders of the Company.
Barnes&nbsp;&#38; Noble hereby agrees to cause B&#38;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&nbsp;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&nbsp;&#38; Noble (an &#147;Adverse Company Board
Recommendation&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;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&nbsp;&#38; Noble to the effect that it received such
Acquisition Proposal as soon as practicable after receipt
thereof, but in no event later than two&nbsp;(2) 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 finance the transaction
contemplated by the Acquisition Proposal (a &#147;Superior
Proposal&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;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
</FONT>

<P align="center"><FONT size="2">A-15
</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="left">
<FONT size="2">of adopting this Agreement and the transactions
contemplated hereby, and nothing contained herein shall relieve
the Company of such obligation.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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&nbsp;&#38; 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&nbsp;&#38; Noble and its counsel, financial
advisors, auditors and other authorized representatives such
financial and 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;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&#38;N LLC or would be reasonably likely to
    cause any of the conditions in Article&nbsp;V not to be
    satisfied or to cause the satisfaction thereof to be materially
    delayed;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(d)&nbsp;any actions, suits, claims,
    investigations or proceedings commenced or, to the knowledge of
    the Party, threatened against any Party or B&#38;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="center"><FONT size="2">A-16
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Directors&#146;
and Officers&#146; Indemnification</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;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 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&#38;N LLC or served at the
request of the Company or B&#38;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;From the Effective Time through the
later of (i)&nbsp;the sixth anniversary of the date on which the
Effective Time occurs and (ii)&nbsp;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&nbsp;&#38; Noble shall cause the
Surviving Corporation to) indemnify and hold harmless each
present and former officer and director of the Company and
B&#38;N LLC, and each person who served at the request of the
Company or B&#38;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&nbsp;&#38; 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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;The Surviving Corporation shall (and
Barnes&nbsp;&#38; Noble shall cause the Surviving Corporation
to) provide, for a period of not less than six (6)&nbsp;years
after the 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&#38;O
Insurance&#148;) that is no less favorable than the existing
policy, or, if substantially equivalent insurance coverage is
unavailable, the most
</FONT>

<P align="center"><FONT size="2">A-17
</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="left">
<FONT size="2">advantageous D&#38;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&#38;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&nbsp;&#38;
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&nbsp;&#38; 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&#38;N LLC that is
covered or potentially covered by insurance, neither the
Surviving Corporation nor Barnes&nbsp;&#38; Noble shall do
anything that would forfeit, jeopardize, restrict or limit the
insurance coverage available for that claim until the final
disposition thereof.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;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)&nbsp;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&nbsp;&#38; Noble&#146;s option,
Barnes&nbsp;&#38; Noble, shall assume the obligations set forth
in this Section&nbsp;4.8.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;4.10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Employee
Matters</U>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Following the Closing Date until
January&nbsp;31, 2005, Barnes &#38; Noble shall, or shall cause
the Surviving Corporation to, provide employee benefits to
employees of the Company or B&#38;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&nbsp;&#38; 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&#38;N&nbsp;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 &#38; Noble.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;Barnes &#38; Noble shall take all
actions necessary to provide that all Employees participating in
an annual bonus plan or policy of the Company or
B&#38;N&nbsp;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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(c)&nbsp;After the Closing Date, Barnes &#38;
Noble agrees to assume or guarantee payment of all obligations
of the Company or B&#38;N&nbsp;LLC to Employees under
(i)&nbsp;the B&#38;N&nbsp;LLC Deferred Compensation Plan and
(ii)&nbsp;any employment agreement between any Employee and the
Company or B&#38;N&nbsp;LLC.
</FONT>

<P align="center"><FONT size="2">A-18
</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">ARTICLE V.
</FONT>

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

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;5.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;<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 enforced, which makes the
    consummation of the Merger illegal or prevents or prohibits the
    Merger.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;<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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;5.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;<U>Representations and Warranties</U>.
    The representations and warranties of each Barnes&nbsp;&#38;
    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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;<U>Agreements</U>. Each
    Barnes&nbsp;&#38; 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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;<U>Certificate</U>. The Company shall
    have received a certificate of a senior executive officer of
    Barnes &#38; Noble, dated the Closing Date, certifying that the
    conditions specified in Section&nbsp;5.2(a) and Section 5.2(b)
    have been fulfilled.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;5.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Conditions
to the Obligation of the Barnes &#38; Noble Parties to Effect
the Merger</U>. The obligation of the Barnes &#38; 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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;<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>

</TABLE>

<P align="center"><FONT size="2">A-19
</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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;<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>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;<U>Certificate</U>. Barnes&nbsp;&#38;
    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&nbsp;5.3(a) and
    Section&nbsp;5.3(b) have been fulfilled.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(d)&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;6.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;at any time prior to adoption of this
    Agreement by the Required Company Stockholder Vote, by the
    mutual written consent of Barnes &#38; Noble and the Company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;by either Barnes &#38; 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>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;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&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(c)&nbsp;at any time prior to adoption of this
    Agreement by the Required Company Stockholder Vote, by Barnes
    &#38; Noble upon written notice to the Company:
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;if there has occurred an Adverse Company
    Board Recommendation; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;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&nbsp;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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(d)&nbsp;at any time prior to adoption of this
    Agreement by the Required Company Stockholder Vote, by the
    Special Committee upon written notice to Barnes &#38; Noble:
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(i)&nbsp;if there has occurred a Termination
    Recommendation; <I>provided that</I>, prior to such termination
    the Special Committee shall have given Barnes &#38; Noble no
    less than five (5)&nbsp;business days notice; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(ii)&nbsp;upon a breach of any representation,
    warranty, covenant or agreement on the part of a Barnes &#38;
    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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;6.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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="center"><FONT size="2">A-20
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;6.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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&#38;N Acquisition Corp. shall be made without
first obtaining such approval.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;6.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(a)&nbsp;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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(b)&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Definitions</U>.
In this Agreement, unless the context otherwise provides, the
following terms have the following meanings:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Adverse Company Board Recommendation&#148;
has the meaning specified in Section&nbsp;4.3(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Barnes &#38; Noble&#148; has the meaning
specified in the introductory paragraph of this Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Barnes &#38; Noble Party&#148; and
&#147;Barnes &#38; Noble Parties&#148; has the meaning specified
in Article&nbsp;III.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;B&#38;N Acquisition Corp.&#148; has the
meaning specified in the introductory paragraph of this
Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;B&#38;N Holding Corp.&#148; has the meaning
specified in the introductory paragraph of this Agreement.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;B&#38;N LLC&#148; has the meaning specified
in Recital A hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Capital Stock&#148; has the meaning
specified in Recital A.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Certificate of Merger&#148; has the meaning
specified in Section&nbsp;1.2.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Class&nbsp;A Common Stock&#148; has the
meaning specified in Recital A.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Class&nbsp;B Common Stock&#148; has the
meaning specified in Recital A.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Class&nbsp;C Common Stock&#148; has the
meaning specified in Recital A.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Closing&#148; has the meaning specified in
Section&nbsp;1.3.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Closing Date&#148; has the meaning
specified in Section&nbsp;1.3.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Companies&#148; means the Company and
B&#38;N LLC.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Company&#148; has the meaning specified in
the introductory paragraph of this Agreement.
</FONT>

<P align="center"><FONT size="2">A-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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Company Disclosure Letter&#148; has the
meaning specified in Article&nbsp;II.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Company Stockholders&#146; Meeting&#148;
has the meaning set forth in Section&nbsp;4.3(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;DGCL&#148; has the meaning specified in
Recital&nbsp;B.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;D&#38;O Insurance&#148; has the meaning
specified in Section&nbsp;4.8(c).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Dissenting Shares&#148; has the meaning
specified in Section&nbsp;1.6(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Effective Time&#148; has the meaning
specified in Section&nbsp;1.2.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Employees&#148; has the meaning specified
in Section&nbsp;4.10.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Exchange Agent&#148; has the meaning
specified in Section&nbsp;1.8(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Exchange Fund&#148; has the meaning
specified in Section&nbsp;1.8(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;GAAP&#148; means accounting principles and
practices generally accepted from time to time in the United
States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Indemnified Party&#148; has the meaning
specified in Section&nbsp;4.8(b).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Judgment&#148; means any judgment, order,
award, writ, injunction or decree of any Governmental Entity or
arbitrator.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Membership Units&#148; has the meaning
specified in Recital A hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Merger&#148; has the meaning specified in
Recital&nbsp;B.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Merger Consideration&#148; has the meaning
specified in Section&nbsp;1.5(b)(i).
</FONT>

<P align="center"><FONT size="2">A-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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Non-Termination Recommendation&#148; has
the meaning specified in Section 4.3(c).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Option&#148; has the meaning specified in
Section&nbsp;1.7.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Party&#148; means each of Barnes &#38;
Noble, B&#38;N Holding Corp., B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Preferred Stock&#148; has the meaning
specified in Section&nbsp;2.2(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Proxy Statement&#148; has the meaning
specified in Section&nbsp;4.2(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Public Stockholders&#148; means all of the
holders of shares of Class&nbsp;A Common Stock, excluding
B&#38;N Holding Corp., Barnes &#38; Noble and their respective
Affiliates and members of management of Barnes &#38; Noble and
the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Required Company Stockholder Vote&#148; has
the meaning specified in Section&nbsp;5.1(b).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Schedule&nbsp;13E-3&#148; has the meaning
specified in Section&nbsp;4.2(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;SEC&#148; means the Securities and Exchange
Commission, and any successor or replacement entity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;SEC Documents&#148; has the meaning
specified in Section&nbsp;2.8(a).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Special Committee&#148; has the meaning
specified in Recital C.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Superior Proposal&#148; has the meaning
specified in Section&nbsp;4.3(b).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Surviving Corporation&#148; has the meaning
specified in Section&nbsp;1.1.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#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, 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Termination Recommendation&#148; has the
meaning specified in Section&nbsp;4.3(b).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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 &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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
</FONT>

<P align="center"><FONT size="2">A-23
</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="left">
<FONT size="2">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>
</DIV>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">If to the Company, to:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">barnesandnoble.com inc.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">76 Ninth Avenue
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">New York, NY 10011
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Attention: Ms.&nbsp;Marie Toulantis
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Fax: (212)&nbsp;414-6107
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">with a copy to:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Dewey Ballantine LLP
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">1301 Avenue of the Americas
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">New York, NY 10019
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Attention:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Morton A.
    Pierce, Esq.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <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="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Fax: (212)&nbsp;259-6333
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">If to any Barnes &#38; Noble Party, to:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Barnes &#38; Noble, Inc.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">122 Fifth Avenue
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">New York, NY 10011
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Attention: Mr.&nbsp;Leonard Riggio
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Fax: (212)&nbsp;675-0413
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">with a copy to:
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Bryan Cave LLP
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">1290 Avenue of the Americas
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">New York, NY 10104
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Attention: Jay M. Dorman, Esq.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Fax: (212)&nbsp;541-1418
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Such names and addresses may be changed by such
notice.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Construction</U>.
</FONT>
<P>

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

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(a)&nbsp;</FONT></TD>
    <TD align="left">
    <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>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">As used in this Agreement, the words
    <I>&#147;include&#148;</I> and <I>&#147;including,&#148;</I> and
    variations thereof, shall not be deemed to be terms of
    limitation, but rather shall be deemed to be followed by the
    words <I>&#147;without limitation.&#148;</I>
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">A-24
</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>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Except as otherwise indicated, all references in
    this Agreement to <I>&#147;Section,&#148; &#147;Sections,&#148;
    &#147;Article&#148;</I> or <I>&#147;Recital&#148;</I> 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="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Actions
of the Company</U>. The Barnes &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;7.13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">[remainder of this page left intentionally blank]
</FONT>

<P align="center"><FONT size="2">A-25
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">IN WITNESS WHEREOF, the Parties have duly
executed this Agreement as of the date first above written.
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">BARNES &#38; NOBLE, INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ Joseph Lombardi
    </FONT></TD>
</TR>

</TABLE>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Joseph Lombardi
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">B&#38;N.COM HOLDING CORP.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ Joseph Lombardi
    </FONT></TD>
</TR>

</TABLE>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Joseph Lombardi
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">B&#38;N.COM ACQUISITION CORP.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ Joseph Lombardi
    </FONT></TD>
</TR>

</TABLE>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Joseph Lombardi
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">BARNESANDNOBLE.COM INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ Marie J. Toulantis
    </FONT></TD>
</TR>

</TABLE>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Marie J. Toulantis
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Chief Executive Officer
    </FONT></TD>
</TR>

</TABLE>

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

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

<!-- link1 "ANNEX B" -->
<DIV align="left"><A NAME="062"></A></DIV>

<P align="right">
<B><FONT size="2">ANNEX&nbsp;B</FONT></B>

<P align="center">
<B><FONT size="2">DELAWARE GENERAL CORPORATION LAW
SECTION&nbsp;262-APPRAISAL RIGHTS</FONT></B>

<P align="left">
<B><FONT size="2">&#167; 262 Appraisal Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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&nbsp;(d) of this section
and who has neither voted in favor of the merger or
consolidation nor consented thereto in writing pursuant to
&#167;&nbsp;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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;&nbsp;251 (other than a merger effected pursuant to
&#167;&nbsp;251(g) of this title), &#167;&nbsp;252,
&#167;&nbsp;254, &#167;&nbsp;257, &#167;&nbsp;258,
&#167;&nbsp;263 or &#167;&nbsp;264 of this title:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;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&nbsp;(f) of &#167;&nbsp;251 of this title.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;Notwithstanding paragraph&nbsp;(1) 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;&nbsp;251, 252, 254, 257, 258, 263 and 264 of this
    title to accept for such stock anything except:
    </FONT></TD>
</TR>

</TABLE>
<P>

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

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">a.&nbsp;Shares of stock of the corporation
    surviving or resulting from such merger or consolidation, or
    depository receipts in respect thereof;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">b.&nbsp;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></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">c.&nbsp;Cash in lieu of fractional shares or
    fractional depository receipts described in the foregoing
    subparagraphs&nbsp;a. and b. of this paragraph; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">d.&nbsp;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&nbsp;a., b. and c. of this paragraph.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(3)&nbsp;In the event all of the stock of a
    subsidiary Delaware corporation party to a merger effected under
    &#167;&nbsp;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></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">B-1
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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&nbsp;(d) and (e) of this section, shall apply as
nearly as is practicable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(d)&nbsp;Appraisal rights shall be perfected as
follows:
</FONT>
<P>

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

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

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(1)&nbsp;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&nbsp;(b) or (c)
    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></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <FONT size="2">(2)&nbsp;If the merger or consolidation was
    approved pursuant to &#167;&nbsp;228 or &#167;&nbsp;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&nbsp;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
    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></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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&nbsp;(a) and (d) hereof and who is otherwise
</FONT>

<P align="center"><FONT size="2">B-2
</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="left">
<FONT size="2">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&nbsp;(a) and (d) 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&nbsp;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>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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&nbsp;(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>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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="center"><FONT size="2">B-3
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(k)&nbsp;From and after the effective date of the
merger or consolidation, no stockholder who has demanded
appraisal rights as provided in subsection&nbsp;(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&nbsp;(e) 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&nbsp;(e) 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(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>

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

<!-- link1 "ANNEX C" -->
<DIV align="left"><A NAME="063"></A></DIV>

<P align="right">
<B><FONT size="2">ANNEX C</FONT></B>

<P align="center">
<B><FONT size="2">[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON
LLC]</FONT></B>

<P align="left">
<FONT size="2">January&nbsp;8, 2004
</FONT>

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

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

<DIV align="left">
<FONT size="2">76&nbsp;Ninth Avenue
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">New York, New York 10011
</FONT>
</DIV>

<P align="left">
<FONT size="2">Members of the Special Committee:
</FONT>

<P align="left">
<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&nbsp;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 &#38; 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&#38;N.com Holding Corp.
(&#147;B&#38;N Holding&#148;) and B&#38;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&#38;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">
<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">
<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 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">
<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
</FONT>

<P align="center"><FONT size="2">C-1
</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="left">
<FONT size="2">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>
</DIV>

<P align="left">
<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">
<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">
<FONT size="2">Very truly yours,
</FONT>

<P align="left">
<FONT size="2">CREDIT SUISSE FIRST BOSTON LLC
</FONT>

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

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

<!-- link1 "ANNEX D" -->
<DIV align="left"><A NAME="064"></A></DIV>

<P align="right">
<B><FONT size="2">ANNEX D</FONT></B>

<P align="center">
<B><FONT size="2">INFORMATION RELATING TO THE COMPANY,
B&#38;N.COM</FONT></B>

<DIV align="center">
<B><FONT size="2">AND THE BARNES &#38; NOBLE PARTIES</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following sets forth certain information
relating to barnesandnoble.com inc. (the &#147;Company&#148;),
barnesandnoble.com llc (&#147;B&#38;N.com&#148;),
Barnes&nbsp;&#38; Noble, Inc. (&#147;Barnes&nbsp;&#38;
Noble&#148;), B&#38;N.com Holding Corp. (&#147;B&#38;N
Holding&#148;), B&#38;N.com Acquisition Corp. (&#147;B&#38;N
Acquisition&#148; and, together with Barnes&nbsp;&#38; Noble and
B&#38;N Holding, the &#147;Barnes&nbsp;&#38; 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">
<B><FONT size="2">barnesandnoble.com inc. and barnesandnoble.com
llc</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is a Delaware corporation with its
executive offices located at 76&nbsp;Ninth Avenue, New York, New
York 10011; (212)&nbsp;414-6000. B&#38;N.com is a Delaware
limited liability company with its executive offices located at
76&nbsp;Ninth Avenue, New York, New York 10011;
(212)&nbsp;414-6000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The names and positions of the directors and
executive officers of the Company and B&#38;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&#38;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&nbsp;Ninth Avenue, New
York, New York 10011. During the last five years, neither the
Company, B&#38;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>

<DIV>&nbsp;</DIV>

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

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Directors and Executive Officers of the
    Company and B&#38;N.com</FONT></I></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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="left" valign="top">
    <FONT size="2">Chairman of the Board
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stephen Riggio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Vice Chairman
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Chief Executive Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Chief Financial Officer and Vice President,
    Operations
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Chief Technology Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">David Gitow
    </FONT></DIV>
    </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" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Vice President and General Manager, Books,
    Music&nbsp;&#38; Video
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director* and Secretary
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director*
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Patricia Higgins
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director*
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director*
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

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

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents that this position is only held at the
    Company.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Material Occupations, Positions, Offices or
    Employment During Previous Five Years</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leonard Riggio </FONT></I><FONT size="2">has
been Chairman of the board of directors of the Company and
B&#38;N.com since its inception in February 1997.
Mr.&nbsp;Riggio is the founder of Barnes&nbsp;&#38; Noble and
has been Chairman of the board of directors and a principal
stockholder of Barnes&nbsp;&#38; Noble since its inception in
1986, and was Chief
</FONT>

<P align="center"><FONT size="2">D-1
</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="left">
<FONT size="2">Executive Officer of Barnes&nbsp;&#38; Noble from
inception through February 2002. Since 1965 Mr.&nbsp;Riggio has
been Chairman of the board of directors, Chief Executive Officer
and the principal stockholder of Barnes&nbsp;&#38; Noble College
Bookstores, Inc. (&#147;B&#38;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 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&nbsp;&#38; Noble.
Mr.&nbsp;Riggio is the brother of Mr.&nbsp;Stephen Riggio.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stephen Riggio </FONT></I><FONT size="2">has
been a director of the Company and B&#38;N.com since inception
and Vice Chairman since January 2000. From January 2000 to
February 2002, Mr.&nbsp;Riggio was also Acting Chief Executive
Officer of the Company and B&#38;N.com, a position he previously
held at B&#38;N.com from inception to December 1998.
Mr.&nbsp;Riggio has been Vice Chairman of Barnes&nbsp;&#38;
Noble since December 1997, a director of Barnes &#38; Noble
since September 1993 and was named Chief Executive Officer in
February 2002. Mr.&nbsp;Riggio was Chief Operating Officer of
Barnes&nbsp;&#38; Noble from February 1995 until December 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Marie J. Toulantis
</FONT></I><FONT size="2">has been Chief Executive Officer of
the Company and B&#38;N.com since February 2002.
Ms.&nbsp;Toulantis was President and Chief Operating Officer of
the Company and B&#38;N.com from May 2001 through February 2002.
Prior to that, Ms.&nbsp;Toulantis was Chief Financial Officer of
the Company and B&#38;N.com from May 1999 through May 2001. From
March 1999 through May 1999 Ms.&nbsp;Toulantis was Chief
Financial Officer of Barnes&nbsp;&#38; Noble and from July 1997
through May 1999 Ms.&nbsp;Toulantis was Executive Vice
President, Finance of Barnes&nbsp;&#38; Noble.
Ms.&nbsp;Toulantis has served on the board of directors of
Hershey Food Corporation since April 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Kevin M. Frain </FONT></I><FONT size="2">has
been Chief Financial Officer and Vice President, Operations of
the Company and B&#38;N.com since February 2002. Mr.&nbsp;Frain
is responsible for all of the finance, distribution, order
fulfillment and customer service functions. From May 2001
through February 2002, Mr.&nbsp;Frain was Vice President,
Finance of the Company and B&#38;N.com. Prior to that
Mr.&nbsp;Frain was the Treasurer of the Company and B&#38;N.com
from April 2000 to May 2001. From January 1999 to April 2000,
Mr.&nbsp;Frain was Director of Finance of the Company and
B&#38;N.com.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">David C. Willen </FONT></I><FONT size="2">has
been Chief Technology Officer of the Company and B&#38;N.com
since May 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&#38;N.com from October 2001
through May 2002. Mr.&nbsp;Willen was Chief Technology Officer
of TheStreet.com, a multimedia provider of financial commentary,
analysis and news, from January 2000 to October 2001.
Mr.&nbsp;Willen developed technology solutions for Bloomberg,
L.P. from January 1999 to January 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">David Gitow </FONT></I><FONT size="2">has been
Vice President, Chief Marketing Officer of the Company and
B&#38;N.com since October 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 1999
through October 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Daniel A. Blackman
</FONT></I><FONT size="2">has been Vice President and General
Manager, Books, Music&nbsp;&#38; Video of the Company and
B&#38;N.com since July 2002. Mr.&nbsp;Blackman is responsible
for merchandising of consumer books, music and DVD/video
products. From October 2001 to July 2002, Mr.&nbsp;Blackman was
Vice President, Books, Music&nbsp;&#38; Video of the Company and
B&#38;N.com. From February 2000 to October 2001,
Mr.&nbsp;Blackman was Vice President, Music, Video&nbsp;&#38;
Software of the Company and B&#38;N.com. From July 1998 to
February 2000, Mr.&nbsp;Blackman was Director of
Music&nbsp;&#38; Video of the Company and B&#38;N.com.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael N. Rosen </FONT></I><FONT size="2">has
been Secretary of B&#38;N.com and Secretary and a director of
the Company and Barnes &#38; Noble since their inception.
Mr.&nbsp;Rosen has been the Chairman of the New York office of
Bryan Cave LLP since their July 2002 combination with Robinson
Silverman Pearce Aronsohn and Berman LLP (&#147;Robinson
Silverman&#148;), counsel to the Company, B&#38;N.com and
Barnes&nbsp;&#38; Noble. Prior to that, Mr.&nbsp;Rosen
</FONT>

<P align="center"><FONT size="2">D-2
</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="left">
<FONT size="2">was Chairman of Robinson Silverman for more than
the past five years. Mr.&nbsp;Rosen is also a director of
B&#38;N College, MBS and GameStop. Mr.&nbsp;Rosen&#146;s
principal business address is 1290&nbsp;Avenue of the Americas,
New York, New York 10104.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Jan-Michiel Hessels
</FONT></I><FONT size="2">has been a director of the Company
since August 1999. Mr.&nbsp;Hessels was Chief Executive Officer
of Royal Vendex KBB N.V. (&#147;Vendex&#148;) from 1990 until
June 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Patricia Higgins </FONT></I><FONT size="2">has
been a director of the Company since July 2000. Ms.&nbsp;Higgins
was President and Chief Executive Officer from September 2000 to
February 2004, and currently is a director, of Switch and Data
Facilities Inc., an international operator of convergent
computer network centers. Ms.&nbsp;Higgins was Vice President
and Chief Information Officer of Alcoa Inc. from January 1997 to
April 1999. Ms.&nbsp;Higgins&#146; principal business address is
1715 North Westshore Boulevard, Suite&nbsp;650, Tampa, Florida
33607.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William F. Reilly
</FONT></I><FONT size="2">has been a director of the Company
since August 1999. Mr.&nbsp;Reilly has been Chief Executive
Officer of Aurelian Communications, a special interest
publisher, since he founded it in February 2002. Mr.&nbsp;Reilly
served as Chairman and Chief Executive Officer of Primedia Inc.,
a specialty media company, from February 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">
<B><FONT size="2">Barnes &#38; Noble, Inc., B&#38;N.com Holding
Corp. and B&#38;N.com Acquisition Corp.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Barnes &#38; Noble is a Delaware corporation with
its executive offices located at 122 Fifth Avenue, New York, New
York 10011; (212)&nbsp;633-3300. B&#38;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&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The names and positions of the directors and
executive officers of the Barnes&nbsp;&#38; 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&nbsp;&#38; 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>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Directors and Executive Officers of the
    Barnes &#38; Noble Parties</FONT></I></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="69%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="Left" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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="left" valign="top">
    <FONT size="2">Founder and Chairman of the Board
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stephen Riggio
    </FONT></DIV>
    </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" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Chief Operating Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">President of the Barnes &#38; Noble Publishing
    Group*
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Executive Vice President of Corporate Finance
    &#38; Strategic Planning
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Executive Vice President, Distribution and
    Logistics
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Senior Vice President, Corporate Communications
    and Public Affairs
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Vice President of Barnes &#38; Noble Development*
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gary King
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Information Officer
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">D-3
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="Left" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Chief Financial Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Vice President, Human Resources
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark Bottini
    </FONT></DIV>
    </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>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director** and Secretary
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael J. Del Giudice
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director**
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director**
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director**
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director**
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <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 align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

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

<TR>
    <TD width="1%"></TD>
    <TD width="2%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents that this position is only held at
    Barnes &#38; Noble.
    </FONT></TD>
</TR>

</TABLE>
<P>

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

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

<TR valign="top">
    <TD><FONT size="2">**&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents that this position is only held at
    Barnes &#38; Noble and B&#38;N Holding.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

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

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

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Material Occupations, Positions, Offices or
    Employment During Previous Five Years</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leonard Riggio </FONT></I><FONT size="2">has
been Chairman of the board of directors of the Company and
B&#38;N.com since February 1997. Mr.&nbsp;Riggio is the founder
of Barnes&nbsp;&#38; Noble and has been Chairman of the board of
directors and a principal stockholder of Barnes&nbsp;&#38; Noble
since its inception in 1986, and was Chief Executive Officer of
Barnes&nbsp;&#38; Noble from inception through February 2002.
Since 1965 Mr.&nbsp;Riggio has been Chairman of the board of
directors, Chief Executive Officer and the principal stockholder
of B&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Stephen Riggio </FONT></I><FONT size="2">has
been a director of the Company and B&#38;N.com since inception
and Vice Chairman since January 2000. From January 2000 to
February 2002, Mr.&nbsp;Riggio was also Acting Chief Executive
Officer of the Company and B&#38;N.com, a position he previously
held at B&#38;N.com from inception to December 1998.
Mr.&nbsp;Riggio has been Vice Chairman of Barnes&nbsp;&#38;
Noble since December 1997, a director of Barnes&nbsp;&#38; Noble
since September 1993 and was named Chief Executive Officer in
February 2002. Mr.&nbsp;Riggio was Chief Operating Officer of
Barnes&nbsp;&#38; Noble from February 1995 until December 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mitchell S. Klipper
</FONT></I><FONT size="2">has been the Chief Operating Officer
of Barnes&nbsp;&#38; Noble since February 2002. Prior to that,
he was the President of Barnes&nbsp;&#38; Noble Development, the
group responsible for selecting, designing and constructing new
store locations, and an Executive Vice President of
Barnes&nbsp;&#38; Noble from December 1995 to February 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">J.&nbsp;Alan Kahn
</FONT></I><FONT size="2">has been the President of the
Barnes&nbsp;&#38; Noble Publishing Group since February 2002.
Mr.&nbsp;Kahn was the Chief Operating Officer of
Barnes&nbsp;&#38; Noble from December 1997 to February 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Lawrence S. Zilavy
</FONT></I><FONT size="2">became Executive Vice President of
Corporate Finance and Strategic Planning of Barnes&nbsp;&#38;
Noble in May 2003. Previously, he was Chief Financial Officer of
Barnes&nbsp;&#38; Noble since June 2002. Prior to joining
Barnes&nbsp;&#38; 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.&nbsp;Francis College Board of Trustees in New York City.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William F. Duffy </FONT></I><FONT size="2">has
been the Executive Vice President of Distribution and Logistics
since February 2002. Prior to that, he was Vice President,
Operations, Fulfillment and Customer Service of the Company from
January 1999 to February 2002. Mr.&nbsp;Duffy was Vice President
of Operations of the Company since its inception in February
1997. He was also Chief Financial Officer of the Company from
its inception to January 1999 and a director of the Company from
its inception to October 1998. Mr.&nbsp;Duffy&#146;s principal
business address is 100 Middlesex Center Boulevard, Jamesburg,
New Jersey 08831.
</FONT>

<P align="center"><FONT size="2">D-4
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mary Ellen Keating
</FONT></I><FONT size="2">joined Barnes &#38; Noble as Senior
Vice President, Corporate Communications and Public Affairs in
January 1998.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">David S. Deason
</FONT></I><FONT size="2">joined Barnes &#38; Noble in January
1990 as a Director of Real Estate and became Vice President of
Barnes &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Gary King </FONT></I><FONT size="2">joined
Barnes &#38; Noble as Chief Information Officer in May 2002.
Prior to that, Mr.&nbsp;King was Executive Vice President of
Operations and Chief Technology Officer at the Company from
January 1999 to May 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Joseph J. Lombardi
</FONT></I><FONT size="2">became Chief Financial Officer of
Barnes&nbsp;&#38; Noble in May 2003. Previously, he was Vice
President and Controller of Barnes&nbsp;&#38; Noble since May
2002. Prior to joining Barnes&nbsp;&#38; Noble,
Mr.&nbsp;Lombardi was Chief Financial Officer at The Museum
Company Inc. from August 1999 to May 2002. From August 1995
through July 1999, he was the Vice President and Controller of
Toys &#146;R&#146; Us, Inc. Prior to that, he was a partner at
Ernst&nbsp;&#38; Young&nbsp;LLP. Mr.&nbsp;Lombardi is a
certified public accountant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michelle L. Smith
</FONT></I><FONT size="2">became Vice President of Human
Resources for Barnes&nbsp;&#38; Noble in November 1996.
Ms.&nbsp;Smith joined Barnes&nbsp;&#38; Noble in September 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Mark Bottini </FONT></I><FONT size="2">has
been the Vice President and Director of Stores of
Barnes&nbsp;&#38; Noble since October 2003. Previously, he was a
Regional Director of Barnes&nbsp;&#38; Noble in New York since
October 2000. Mr.&nbsp;Bottini served as a Regional Director of
Barnes&nbsp;&#38; Noble in Chicago from April 1999 to October
2000 and a District Manager of Barnes&nbsp;&#38; Noble in New
York from September 1995 to April 1999.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael N. Rosen </FONT></I><FONT size="2">has
been Secretary of B&#38;N.com and Secretary and a director of
the Company and Barnes&nbsp;&#38; Noble since their inception.
Mr.&nbsp;Rosen has been the Chairman of the New York office of
Bryan Cave LLP since their July 2002 combination with Robinson
Silverman, counsel to the Company, B&#38;N.com and
Barnes&nbsp;&#38; 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&#38;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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Matthew A. Berdon
</FONT></I><FONT size="2">has been a director of the Barnes
&#38; Noble since June 1992. Since January 2003, Mr.&nbsp;Berdon
has been the Senior Partner of the financial consulting firm
F.&nbsp;B.&nbsp;&#38; Co.,&nbsp;LLP. From January 1998 through
December 2002, Mr.&nbsp;Berdon was the Chairman of the New York
division of the accounting firm of Urbach Kahn&nbsp;&#38; Werlin
Advisors, Inc. Mr.&nbsp;Berdon&#146;s principal business address
is 19&nbsp;West 44th Street, New York, New York 10036.
</FONT>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Michael J. Del Giudice
</FONT></I><FONT size="2">has been a director of
Barnes&nbsp;&#38; Noble since 1999. Mr.&nbsp;Del Giudice is a
co-founder and Senior Managing Director at Millennium 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 &#38; 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>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William Dillard, II
</FONT></I><FONT size="2">has been a director of Barnes &#38;
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 1998 and he has been a
director of Dillard&#146;s since 1968. He was appointed Chairman
of Dillard&#146;s in May 2002. Mr.&nbsp;Dillard is also a member
of JPMorganChase &#38; Co. National Advisory Board,
JPMorganChase &#38; 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Irene R. Miller </FONT></I><FONT size="2">has
been a director of Barnes &#38; Noble since May 1995.
Ms.&nbsp;Miller has been the Chief Executive Officer of Akim,
Inc., an investment management and consulting firm, since July
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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Margaret T. Monaco
</FONT></I><FONT size="2">has been a director of Barnes &#38;
Noble since May 1995. Ms.&nbsp;Monaco resumed her position as
Principal of Probus Advisors, a management and consulting firm,
in October 2003. Ms.&nbsp;Monaco had been the Chief Operating
Officer of Merrill Lynch Ventures, LLC and KECALP, Inc., wholly
owned subsidiaries of Merrill Lynch &#38; Co., Inc. from
November 1999 to October 2003. She had been the Chief
Administrative Officer from April 1998 to November 1999.
Ms.&nbsp;Monaco had been Principal of Probus Advisors from July
1993 to 1998. Ms.&nbsp;Monaco&#146;s principal business address
is 83 Devon Road, Essex Fells, New Jersey 07021.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">William Sheluck, Jr.
</FONT></I><FONT size="2">has been a director of Barnes &#38;
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>
<!-- link1 "PROXY CARD" -->
<DIV align="left"><A NAME="065"></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>

</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>4
<FILENAME>y93480p2y9348002.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 y93480p2y9348002.gif
M1TE&.#EA1`%"`/?_````````,P``9@``F0``S```_P`S```S,P`S9@`SF0`S
MS``S_P!F``!F,P!F9@!FF0!FS`!F_P"9``"9,P"99@"9F0"9S`"9_P#,``#,
M,P#,9@#,F0#,S`#,_P#_``#_,P#_9@#_F0#_S`#__S,``#,`,S,`9C,`F3,`
MS#,`_S,S`#,S,S,S9C,SF3,SS#,S_S-F`#-F,S-F9C-FF3-FS#-F_S.9`#.9
M,S.99C.9F3.9S#.9_S/,`#/,,S/,9C/,F3/,S#/,_S/_`#/_,S/_9C/_F3/_
MS#/__V8``&8`,V8`9F8`F68`S&8`_V8S`&8S,V8S9F8SF68SS&8S_V9F`&9F
M,V9F9F9FF69FS&9F_V:9`&:9,V:99F:9F6:9S&:9_V;,`&;,,V;,9F;,F6;,
MS&;,_V;_`&;_,V;_9F;_F6;_S&;__YD``)D`,YD`9ID`F9D`S)D`_YDS`)DS
M,YDS9IDSF9DSS)DS_YEF`)EF,YEF9IEFF9EFS)EF_YF9`)F9,YF99IF9F9F9
MS)F9_YG,`)G,,YG,9IG,F9G,S)G,_YG_`)G_,YG_9IG_F9G_S)G__\P``,P`
M,\P`9LP`F<P`S,P`_\PS`,PS,\PS9LPSF<PSS,PS_\QF`,QF,\QF9LQFF<QF
MS,QF_\R9`,R9,\R99LR9F<R9S,R9_\S,`,S,,\S,9LS,F<S,S,S,_\S_`,S_
M,\S_9LS_F<S_S,S___\``/\`,_\`9O\`F?\`S/\`__\S`/\S,_\S9O\SF?\S
MS/\S__]F`/]F,_]F9O]FF?]FS/]F__^9`/^9,_^99O^9F?^9S/^9___,`/_,
M,__,9O_,F?_,S/_,____`/__,___9O__F?__S/___P``````````````````
M````````````````````````````````````````````````````````````
M````````````````````````````````````````````````````````````
M`````````````````````"P`````1`%"```(_P"O"1Q(L*#!@P@3*ES(L*'#
MAQ`?0D/&J:)%3L@B:MS(L:/'CR!#=F05J*3)DR99)419DB!)E@-?LIPITB'%
MBS@K0F,H\R3!F2I7FJQ9L^?,DT$Y(D.V4^.*IU"C/@V4M*'4J2NO:L5J4&N@
M@8&T@MTJ]B`K*U>M5(W8*:=;3DVS7B7HU2Q:J6H/AB6[P@K5A%N_*MS+%ZI@
MAQ/;OEWJL##4O`P)1SUL4++C%5W3CITKT#)?O7PI(W[[MM-"SRN2UBUX=^O:
M:ZBU6D$8^/1EK@QODL;9*2[MVZDCRY8+?#;=LK"1QT8^L#59T0QS]AX(+:?M
MJX=7;^:[=KG6U[4'`_^';E#W;K?3?P,7SKR@=]?'KP9%O=UQ05:W7R=4;-%T
MP>H77<?9-=H)=)M[P/65&78".D8>=?R=1UI&!R6XPH,#D45<<?%))1A]G:W7
M86'&-<0;0N8U&%6&#-;WE!7.X99<@J*%MV%A&`(HH83^%516;`N1I=^,>)44
M(U0CKDBDDDL6YE*"-N%$H4$Z<J*B80:VF*54U^"'UT]E':E@DC*"=MN#YNUX
M7H\L<AFB?`EY62"86HI)YE-ONMGDBS2YV!<K<DYF(DX)I2C><`1J&>B+6S*Y
M)V8"V7DGAGE&Y1=+^J6IYIH^#KAHF73.Z>>%H]Y)*HB/4IJHGI^J*E!%NNW_
M%^"A96GGF6"V*M>>C0BAYJI`56ZZ(YO,B3HJHV9Z2&9V6\V&JJ]!*MOF8X,"
M..5_%UV;+)RY2MLMJP7RNBV6#`4K[(Y3%JNE06(B.:Z,VGWVK+%)4G9DN15=
M`RM"$?KV+I;?DANPNXV26[#!O=);4(3GJMF4NM)6^-F_E$'LU;SK2FQIJ`07
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MR6JWP1W/G,2\]G3I9A&I3D;2E)Z(!'!W`]P>!1=TP/EQ\%75,P@G1O8J"!9D
M@F=2R*>(!YT3DJ=T-`N@6?]`B!C%P!`CUE-:Z;(W.P(*26,MQ.`+IW<B8+TL
M+E-BS$'B@L,</NXKENDA_0PHHD=Y,'_<:4B5!-*6<O&GA!W\VM/LMT(R&DZ*
M$SMBM@:"$8%DT4I^G!(@KZ%%*G+B?5]LD@;-R#(@'FM`A\NCYBPRPCXFQ%P+
MC.-SJ(8K)Z9Q4IACCOCXN#[RO6R0$^'CRP1ID8L!Z2`Q`B,D->E!1]*R8RX,
M';^D\RH:2O`M<3FAP5)(-U<B+G?7HYTA+<+%61%RD(1492#YV$I/&8M!.\3C
MBS99/T_.TB#/>\J0&$:]G;3%<3KJ396F)$S<$)-)J)):50!GO.7ID9E\I-`?
M"2+_R%52LR+,D90===8=KX33CI<9U:_NH[^#:&HG?:R.+QOXS\4QDIO$FQH=
M(7E,>BI4(:.LH1]/29U^3E./S$'-6K+)0VV>"CY4:Q?!3@>1=JW%7$VA"!LS
MR3B=5'20J)%IYMXYTY0.KFKU;)X,??I`!N94@OY\550-:=2,#>U@HH'6\RJ&
MG1?2M*9S8EB/1-BZ&2X,9#NM2(]\)<>,=E*%D*R;1YE'J?[!\"#KPZM)"<E*
M@,9U3E>]1HPTF#->`<^>7X7(,35U0T">\Y?0+.L,@RF6MA+5=%45X/<2>TI6
M:HMUV-IK(?NSJXS%TD\N?>O/#KO1*/X$)H*#),.T11'3_X#6?Y;$7$:'>3(M
MU0UO<P4?[Y#(GRFE,R[6DB9?__D[2$K->V6D*S+=NEO,EBULV+UG9&%H3DM:
MQ"'T60X3!>;;S*)PL]\C9^]VD]&D0C<_[IUN763Z4=WA+[`D=*A9`301M.HV
MG(>YU=-J5]_=WNU["EPO+\V+L'#RJK#A8M!R"@PZU@PH33;<E_H4DT27;C#`
MO8W8;V6W.]2Y2L$[VMI?U]5.RD"8=-A$+'JE,L^S/7./6_1I^V`7)AL)F+K,
MNQ,H[8O4M:%X-_XY:G`>&;SZ&C;$<'6MGTITI,-@6',WSBU[W-2]V#913P3^
MH)(O!5OA*D2]1UY@6<ZB3,&FQ?\D`@7?DZ7URD>1V2=WLBEDU0I2LQJ1QP.:
MLY(8G#(VZ[*ZK;444+"59BE1#4<(]1J87[S:%M7YA!;.8&.=F>/)^E>WTSV2
MH4O<SN99B,DMQ*2"B87([,Y,:)<U=>2\.4L'T[@@5[ZD3F[2X:12V-90J4JI
M$9I''W8ZS2.SD&BDAE`00[G$VA$HIC--(BI99Y*NXRD;_17/.0FU3.U<RZEO
M>4?)HIB&"5IDW8`LYPB+F-9@;DZU]=L^QZ&9ITWU-2<CV>2D/I'8,O;BL7OG
MRPSB[-!NMC&EH:TH>#O*W_O#:TZ8$LC^X':/Y/.IOM%88GD;*X`1?W3`L:>0
M;.O->CC_^HOS,'6?/G5IT;"!^8#;:[NCN%PO**D@`X>U<]*X;<12+G,NBT0I
MFQ\E)D;/>6ZRYDNB./WI4`_)O35^RAA&_>I8%TF"Q=?KK'O]ZU<W^?D0$BP;
M@OWL:/]/QA?3];2[_>T<F0C%<S-WN-O][GC/N][WSO>^^_WO@`^\X`=/^*_'
MN_"(3[SB%R_IXC'^\9"/_-X?+OG*6_[R5Z<\YC?/^<XK%I>>#[WH1\\TTIO^
M])M?$9YUN%#WK/ZU*5G(2X2M<M3;_B$TYI)A=+^BP$BF)*`7>8DL$ZA%QNDQ
MP8[)70)Q%U@;QCG.LI3.;T_]5;4I0V]]:X:BG[*]?&C)4/1+_VM*Y.#IBSDX
MO"65G)P_QNJ[/]/9_^!F!+-\`P7%77+JC/&G=?_D-XK[2H40=V$<Y$(8T](A
M*A$H":AY[U=]>T&`6,%\7K8ET>=QLB1.!$(I\)1^D"(GOU*`&%AZ'*<:GE."
M^-.`[X<DDI&!\7%^F-$2;_(5K4$5CL="V\%$;>(JA/$@&^A.)D@S#(B"M[=\
MXB=.CN=]S-=\LH89%\(G-6A`-WB`6Z*#Y=:#0_6#4BB$#?B`J;&"7H,6P-<7
MCC>`3,@GT6)=5[@SY<8Q0!.%C9*%0:B%J$<MJP(=@P8]1'*!2^8EXE94/JB&
MN!$6(:>`4.1QX,<DB!A\<FA[]9=PKYOA?6ADAX7V@S6V,ZW1(3EH.Y2W,;9C
M'`9(@9CXAJ*XB.ZW%YLQ1$MFBH=3(ESQ>P@XA:'H@94"3AZ"%E2&%>OG94"(
MA:28@K@3@%E"%\87%B!&@B&8)428.B0Q&:.F?IKW*1I$AL?8C%0!?<VX?[U(
M>K4'&T,"@Y'"@T_B$C`B;@GH?<+656YR%B$'>]N(=$/A$I@2CRB1C:@7$``[
`
end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>5
<FILENAME>y93480p2y9348003.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 y93480p2y9348003.gif
M1TE&.#EA50%S`/<``````/______________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M_____________________RP`````50%S```(_@`#"!Q(L*#!@P@3*ES(L*'#
MAQ`C2IQ(L:+%BQ@S:MS(L:/'CR!#BAQ)LJ3)DRA3JES)LJ7+ES!CRIQ)LZ;-
MFSASZMS)LZ?/GT"#"AU*M*C1HTB3*EW*M*G3IU"C2IU*M:K5JUBS:MW*M:O7
MKV##H@1`MFQ9A&;3DBV85F#;`&8'JGTKERY=M',!/-2;4&W?NPSY'HS+EC#<
MO&?K&C:L>*U;Q((5^L7+N/#DE(X?1R:86:[!Q(\+?]X,=S#IT@X[=_X;^/3H
MB*M'G]Z<N3;IV(=GF_Z\U[7HUG55QL8]?#?GR+-OXV4+<35NRPN?_^[M6S-O
MSL>Q3X?._'7WAM*S_@,//O9V\M2TD1L'K[YY^NB'HU<GGSJ^9-!N[\NG3'O]
MQ/#TZ1=@2<29I]URUH7F77X"HM;;=H,IB.!^>TD8(7[5`?B<7ACZ-]^"#88(
MH$<%@IBA8!SRY9IJP'UHXGPHGLA>A19>QR)K(6IWXW8NBD?AC_:=5*)EE?VF
MHHK\X;=<C\<!%F&-$$X8V(#?U98CB`=:*5N10.+XXX@DGL?C?D<R:.*,$JDF
MW7M2>@F?C]<I*..59MHG9IUH=IDDDQP-"2>,'(;FVXYTC@=GDTY2Z=]]E\69
MFX.+8NF98I`&R&>0A4:)F8&2,MJDF^C]Q^EWAU(YZJ0'EHHGEXJJ6BF7_F""
M6BFF>-(JW*F*#HK<FKK)FF>ND4*)ZZQWDII@FYT2ZV>J5PX[[*:?1CHGE*4"
M*JJF&Q8[*ZW/VKIM>!JN&&QQH3);H[;ES;5GHJBVBZBZ>U('+Y%$[II7O8!5
M=I>3*R;:*+_XLANPDI#A*];!"">L\,(,-^SPPQ!'+/'$%%=L\<489ZSQQAQW
M[/''((<L\L@DEVSRR2BGK/+*++?L\LLPQRSSS#37;//-..>L\\X\]^SSST`'
M+?301!=M]-%()ZWTTDPW[?334$?=$H8Q'EOE68@]ZA?6^=I&=5Q<IUBDO=9M
M3=C9@::J)-16KN4VM6I.ZEB9J,U-WJY!ONV9_MYN5_TJF[8QV+><*?JHM]3<
M%DXW=X(&%V/:=C>>7>`>%BYYM(0[[CC=!2Z..*9S0ZY<W(^C6!KGC8GF=>6@
MZ0MZ?*6GGCESE'_NG.+"4NW@X6++J?GD?K^8=]JRY\<[\8/;:5[<MIL^N.>"
MXWUW]+Y7+VCP/%INIX[.(X\D[)Q_7W>@L1J-MM^,A4V?V=JWWG7L]&K=]V+S
M@P\^V/.?3VFCG_?O__\`#*``!TC``AKP@`A,H`(7R,`&.M`GZLN:^LKV.,UX
M37O[RU];)B@_2N7F@K9RGWA$:!SF>8MHD=M>Z%;E/>4-KU;6L]L*_[8[RR5O
M>R44W?B,IQS)X:Y\_CO#VN_L9Z"JK3!PNFJA$8DWQ.3=\'#>X9L.3Y>>,B&I
M=D<C7_&>5SGEJ6E-I]LB[H07NB_JRH=3Q"#LUDA%=YGO49>K7Q>/N$2TP)&-
M]Y.2$]NGQKOI<'&)X>+QH/?&%];PA*2S(OIZ1;DZSE&1?LSA#CU71#SN;FE<
MLR`2D_-%"HKMDY\JHP@[1S;Y@9)@@90>_B94.U8]D"*7>N7(8BG+6MKREKC,
MI2YWR<M>^O*7P`QFR]@7-A>5T52E]!,6RV>74%KKCL-)9K\D9$*=C3%R8++A
M%=6CI39.;HU2W-:2SL7$"Z&.1=WL8_>\V4><D:Y5DD1F@M3XMGK^\4$>I82G
MD:0W0AE6T7#\#**]L/>FU\4);"&T(ANA*)]M:NI)!KV:/55'S8`*])O46@\6
MA37/'Y+OGN7ZX$.GL]$0=A2/RZ3ERIB'.LD8#J)U<^-$KUG.!@'RA&HSG:/$
M5TF/\K!GYRLFN(HI4MFEDI788V8$GS?4_!75@B?-X9$J*,RJ6O6J6,VJ5K?*
>U:YZ]:M@#:M8QTK6LIKUK&A-JUK7RM:V]B0@```[
`
end

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>6
<FILENAME>y93480p2y9348004.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 y93480p2y9348004.gif
M1TE&.#EA[`$W`/<``````/______________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M____________________________________________________________
M_____________________RP`````[`$W```(_@`#"!Q(L*#!@P@3*ES(L*'#
MAQ`C2IQ(L:+%BQ@S:MS(L:/'CR!#BAQ)LJ3)DRA3JES)LJ7+ES!CRIQ)LZ;-
MFSASZMS)LZ?/GT"#"AU*M*C1HTB3*EW*M*G3IU"C2IU*M:K5JUBS:MW*M:O7
MKV##BAU+MJS9LVC3JEW+MJW;MW"G`@`@<"Y=NWCOS@U@EV!?OG3K[@7\E[!A
MA'O[%N9;\*_BQ)`%!P;,F/#@PY0Q^UV\N3)#SII!U^U\.+'DQY/SIKZ,.._`
MR9)/P\9K<#;KV`=MZV8MNC'DP(51XW;]^O+@WHV+ZUT-G/9CW!Y3OYX.?'KR
MT=@K2\<.&W'VV9ZK_G^W'M[Z<<;BRV>OO9Y[=X7OMZ?WZUE]<_+S[;?/;5X_
M^OK:T0?>=0#^1]YH=^'W67_C<>=@@@VJMQ"$$HJ78'K;?70>@@P6:&"#&5((
M7X0?QJ>@8"32=V)F[ZVX7T,F.IB0B!NV2&-R`\)8'X4V\K?CCP2:F*.*+GHG
M8X4O=A=B?MZ%>."!J[VHT87*"2BB@$0VQ]MM,U*FY(Z[.<DC=#E*=V66!$(4
M8W@M?OB?A<?QYIN2;<Z)97%I=NCFFD(2Z:>$,]*&Y'=?HLEAG7<">EN9;G9T
M'X?4G?FD?``RR9]IRBVZHGQ.0GDBET4BVF60>5K&:80W)OKGI9D6FN26_L&Q
MUQYQ'KHJJG^#>FJH=K<2EZ&N(-Y:4:>\HFCDI^O]VIJQ(**ZJ8N,IJ@BGP]A
MR""US3H;H'^]4G?MJ@5V2JRV0P)ZK+79EDMLMT=2"JRR&SDFF[NY+1KG?<)-
MF&R<F`F7KVZ;`3P<LY9E:=R$@I+)I6/+$<H<:K\QW*MJ_"[&F<45)ZQ9:<L9
M9^_$#6\<'*QV#@P?OZ&1;)B\<?4D;,LPQRQSM3/7;//-..>L\\X\]^SSST`'
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M2E"QDJ"42M8H7S6P@K4+DWDZESS8+6Y$`H07K1[5)5N)STPMN]_XHK=!/,T.
M><1C$\%41ZX#^K!<E,<Z$JX^5\,8$5%XI')=#;VEN=<UT$C1HM*XUN*XD<%I
M89!;HA`EEC&[S6Y[?Z/3P]AFJE9IB8R(>QS'SM8OQW&08PPK#=G<"$?&28YL
M*XO8&;W4NWJQ4&(4C-S+P$;(0AKRD(A,I"(7R<A&.O*1D(RD)"=)R4I:\I*8
<S*0F-\G)3GKRDZ`,I2A'2<I2FO*4J#Q*0```.S\_
`
end

</TEXT>
</DOCUMENT>
</SUBMISSION>
