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0= UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 1= BEFORE THE HONORABLE WILLIAM H. ORRICK, JUDGEAMERICAN BOOKSELLERS ) 2= ASSOCIATION, INC., ET AL., ) ) 3= PLAINTIFFS, ) ) 4= VS. ) NO. C 98-1059 WHO ) 5= BARNES & NOBLE, INC., ) 6= ET AL., ) 7= ) 8= DEFENDANTS. ) 9=____________________________) 10= SAN FRANCISCO, CALIFORNIA 11= THURSDAY, APRIL 12, 2001 12= TRANSCRIPT OF COURT TRIAL -VOL. 4 13= APPEARANCES: 14= FOR PLAINTIFFS: FARELLA, BRAUN & MARTEL LLP 15= 235 MONTGOMERY STREET, 30TH FLOOR 16= SAN FRANCISCO, CALIFORNIA 94104 17= BY: DOUGLAS R. YOUNG 18= ADAM DAWSON 19= CLAUDIA LEWIS 20= HOLLY SUTTON 21= (APPEARANCES CONTINUED ON FOLLOWING PAGE.) 22= REPORTED BY: LEO T. MANKIEWICZ, CSR 5297 RMR, CRR 23= RAYNEE H. MERCADO, CSR 8258 RMR, CRR 24= OFFICIAL REPORTERS 25= APPEARANCES: (CONTINUED) FOR PLAINTIFFS: JENNER & BLOCK 26= 601 13TH STREET N. W. WASHINGTON, D. C. 20005 27= BY: DAVID W. DEBRUIN BRUCE V. SPIVA 28= DANIEL MACH JANIS KESTENBAUM 29= WILLIAM HOHENGARTEN KEVIN STACK 30= SHILPA SATOSKARFOR DEFENDANTS: O'MELVENY & MYERS LLP 31=( BARNES & NOBLE) 1999 AVENUE OF THE STARS, 7TH FLOOR LOS ANGELES, CALIFORNIA 90067-6035 32= BY: DANIEL M. PETROCELLI DAVID R. GARCIA 33= ALAN RADER PILLSBURY WINTHROP LLP 34= 50 FREMONT STREET POST OFFICE BOX 7880 35= SAN FRANCISCO, CALIFORNIA 94120-7880 BY: PAUL R. GRIFFIN 36= SUSAN WHITECOTTON 37= FOR DEFENDANTS: SKJERVEN, MORRILL, MAC PHERSON 38=( BORDERS GROUP) FRANKLIN & FRIEL 39= THREE EMBARCADERO CENTER, 28TH FLOOR 40= SAN FRANCISCO, CALIFORNIA 94111 41= BY: REGINALD D. STEER 42= ANDREW D. MASTIN 43= RICHARD J. NELSON 44= MORRISON & FOERSTER 45= 425 MARKET STREET 46= SAN FRANCISCO, CALIFORNIA 94105-2482 47= BY: PENELOPE PREOVOLOS 48= JUDSON LOBDELL 49= (APPEARANCES CONTINUED ON FOLLOWING PAGE.)

50= THE COURT: GOOD MORNING, COUNSEL. 51= MR. YOUNG: GOOD MORNING, YOUR HONOR. 52= THE COURT: JUST BEFORE YOU --53= MR. YOUNG: YES. 54= THE COURT: I'VE GOT A LAW AND MOTION CALENDAR TODAY 55= AT 2: 00 O'CLOCK, SO I'LL BE STOPPING AT 1: 00 O'CLOCK. AND NEXT 56= WEEK, WE'LL GO FROM 9: 00 TO 2: 00 INSTEAD OF 8: 30 TO 1: 30. 57= NOW, MR. YOUNG. 58= MR. YOUNG: THANK YOU, YOUR HONOR. THAT WAS THE 59= SUBJECT I WANTED TO RAISE WITH THE COURT. WE HAVE TWO WITNESSES 60= SCHEDULED FOR TODAY. AT OUR CURRENT PACE, WE ARE ACTUALLY A 61= LITTLE AHEAD OF THE ESTIMATE WHICH WE GAVE TO THE COURT. 62= THE COURT: GOOD. 63= MR. YOUNG: WHICH I THINK IS GOOD NEWS. AND 64= DEPENDING UPON HOW LONG THE CROSSES GO, IT'S CONCEIVABLE THAT WE 65= WOULD FINISH BEFORE 1: 00 O'CLOCK, BUT I WANTED AN OPPORTUNITY, 66= IF IT WOULD PLEASE THE COURT, AT THE END OF THE DAY PERHAPS TO 67= GIVE YOU SOME SENSE OF WHERE WE ARE FOR NEXT WEEK. 68= THE COURT: THAT WOULD BE MUCH APPRECIATED. 69= MR. YOUNG: THANK YOU. 1
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70= THE COURT: AND I HATE TO USE THAT PHRASE "LIGHT AT 71= THE END OF THE TUNNEL," BUT I GUESS IT'S TOO SOON TO SEE ANY 72= LIGHT. 73= 74= 75= MR. YOUNG: THANK YOU. 76= THE COURT: IF YOU SEE ANY, LET ME KNOW. 77= MR. YOUNG: WE WILL, YOUR HONOR. 78= THE COURT: ALL RIGHT. MR. BARRINGER, WILL YOU 79= PLEASE TAKE THE STAND. 80= DIRECT EXAMINATION (RESUMED) 81= MR. HOHENGARTEN: GOOD MORNING, YOUR HONOR. 82= Q. GOOD MORNING, MR. BARRINGER. 83= A. GOOD MORNING. 84= Q. YESTERDAY, YOU TESTIFIED THAT YOUR PRIMARY COMPETITORS AT 85= THIS TIME --OR LITTLE PROFESSOR'S PRIMARY COMPETITORS AT THIS 86= TIME ARE BARNES & NOBLE, BORDERS AND MEDIA PLAY. WHAT MAKES YOU 87= BELIEVE THAT BARNES & NOBLE IS --IS A COMPETITOR OF LITTLE 88= PROFESSOR? 89= A. WELL, THEY CARRY CERTAINLY THE SAME PRODUCT THAT WE DO, AND 90= WHEN I MAKE THAT REFERENCE, I'M TALKING ABOUT THE STORE CLOSEST 91= TO US. SAME PRODUCT. THEY'RE CLOSE TO US. I GO IN THERE, I 92= SEE MANY OF THE SAME PEOPLE THAT I SEE IN MY STORE. AND 93= BASICALLY THE BIGGEST THING IS THE DAY THAT THEY ARRIVED, I SAW 94= MY SALES START TO PLUMMET. 95= Q. OKAY. YOU MENTIONED PROXIMITY. COULD YOU REMIND THE COURT 96= HOW FAR AWAY THE CLOSEST BARNES & NOBLE IS TO YOU? 97= A. 1.8 MILES. 98= Q. FOR THE COURT REPORTER, PLEASE LET ME FINISH MY QUESTION. 99= SORRY. 100= AND YOU MENTIONED SIMILAR PRODUCT. HAVE YOU EVER 101= VISITED THE BARNES & NOBLE STORE CLOSEST TO LITTLE PROFESSOR? 102= A. ON A REGULAR BASIS. 103= Q. WHEN WAS THE LAST TIME YOU WERE THERE? 104= A. ABOUT TWO MONTHS AGO. 105= Q. DID YOU HAVE AN OPPORTUNITY TO OBSERVE THE PRODUCTS, THE 106= BOOKS THAT THEY SELL? 107= A. YES, I DID. 108= Q. AND HOW WOULD THAT INVENTORY COMPARE TO THE BOOKS THAT 109= LITTLE PROFESSOR SELLS? 110= A. VERY SIMILAR. 111= Q. ARE THEY ALL THE SAME, OR ARE THERE DIFFERENCES? 112= A. THERE ARE DIFFERENCES. SOMETIMES THEY HAVE TITLES THAT WE 113= DON'T. AND, INDEED, SOMETIMES WE HAVE TITLES THAT THEY DON'T. 114= Q. DID YOU HAVE AN OPPORTUNITY TO OBSERVE THE CUSTOMERS WHO 115= WERE IN THE BARNES & NOBLE STORE WHEN YOU WERE THERE? 116= A. YES, I DID. 117= Q. DID YOU RECOGNIZE ANYBODY? 118= A. NOT THE LAST TIME, I DON'T BELIEVE, BUT FREQUENTLY, I DO. 119= Q. YOU MENTIONED THAT YOU HAD SEEN CUSTOMERS IN THE BARNES & 120= NOBLE STORE. IS THAT ON VISITS TO THE STORE? 121= A. ON MY VISITS TO THEIR STORE, I HAVE SEEN SOME OF MY 122= CUSTOMERS BUY --123= Q. CAN YOU DESCRIBE ANY PARTICULAR TIMES THAT THAT OCCURRED? 124= A. ONE WAS EXTREMELY HUMOROUS. SHE'D BEEN IN OUR STORE EARLIER 125= THAT MORNING AND COMMENTED HOW GLAD SHE WAS THAT WE WERE STILL 126= THERE AND DOING SO WELL. AND THEN MY WIFE AND SOME FRIENDS OF 127= OURS WENT THERE THAT EVENING, AND SHE WAS IN THE CHECKOUT LINE 128= WITH HER ARMS LOADED WITH BOOKS. 129= Q. AND YOU ALSO MENTIONED IMPACT ON YOUR SALES. COULD YOU 130= TURN --SORRY. LET ME ASK FIRST, DOES THE LITTLE PROFESSOR 131= REGULARLY MAINTAIN RECORDS OF ITS SALES? 132= A. YES, WE DO. 133= Q. WHAT FORM DO THOSE RECORDS TAKE? 134= A. OUR BASIC ITEM IS A DAILY SUMMARY SHEET IN WHICH WE RECORD 135= THE PREVIOUS DAY'S SALES BY CATEGORY AND TRY TO DO A COMPARISON 136= TO THE SAME DAY A YEAR AGO. 137= WE USE THAT THEN TO MAKE IT INTO A WEEKLY SALES 138= SUMMARY SHEET THEN WE TAKE IT THROUGH THE MONTH BEFORE WE TURN 139= IT OVER TO OUR ACCOUNTANT. 2
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140= Q. OKAY. AND WHERE DOES THE DATA FOR THE DAILY SALES SUMMARY 141= SHEET COME FROM? 142= A. FROM THE CASH REGISTER TAPE CLOSING. 143= Q. AND YOU SAID YOU ULTIMATELY TURN THAT INFORMATION OVER TO 144= YOUR ACCOUNTANT. WHAT DOES THE ACCOUNTANT DO WITH IT? 145= A. HE USES THAT AS HIS BASIS FOR PROFIT AND LOSS STATEMENT. 146= Q. AND HAVE YOU REGULARLY REVIEWED THE SALES REPORTS AND PROFIT 147= AND LOSS STATEMENTS FOR LITTLE PROFESSOR? 148= A. ON A MONTHLY BASIS. 149= Q. PLEASE OPEN THE BINDER IN FRONT OF YOU TO TAB 13, WHICH IS

150= PLAINTIFF'S EXHIBIT 276. 151= A. I HAVE IT. 152= Q. DO YOU RECOGNIZE THIS DOCUMENT? 153= A. I DO. 154= Q. CAN YOU TELL ME WHAT IT IS? 155= A. THIS IS A DAILY SUMMARY SHEET FROM JANUARY OF '96. 156= Q. AND IS THIS THE RECORD YOU WERE DESCRIBING THAT IS CREATED 157= FROM YOUR POINT OF PURCHASE SALES INFORMATION? 158= A. THAT'S CORRECT. 159= Q. IF YOU'D BRIEFLY GLANCE AT TABS 14 THROUGH 18, JUST TO 160= IDENTIFY, ARE THOSE SIMILAR RECORDS FOR OTHER YEARS? 161= A. (REVIEWING DOCUMENTS.) 162= YES, THEY ARE. 163= Q. AND WOULD YOU TURN TO TAB 7, PLEASE. 164= A. I HAVE IT. 165= Q. WHICH IS PLAINTIFF'S EXHIBIT 261. DO YOU RECOGNIZE THIS 166= DOCUMENT? 167= A. YES. THIS IS MY PROFIT AND LOSS STATEMENT THE YEAR ENDED 168= AUGUST 31ST, 1996. 169= Q. AND THIS IS AS DOCUMENT CREATED BY LITTLE PROFESSOR'S 170= ACCOUNTANT? 171= A. THAT'S CORRECT. 172= Q. AND YOU SUPPLY THE ACCOUNTANT WITH SALES INFORMATION TO 173= COMPILE --IN PART TO COMPILE THE DOCUMENT? 174= A. WE GIVE HIM SALES INFORMATION, OUR CHECK STUBS, OUR ACCOUNTS 175= PAYABLE, ACCOUNTS RECEIVABLE. 176= Q. AND TAB 8, PLAINTIFF'S EXHIBIT 262, IS THAT ALSO A LITTLE 177= PROFESSOR FINANCIAL STATEMENT? 178= A. IT IS. 179= Q. LOOK AT TAB 9, EXHIBIT 264. CAN YOU IDENTIFY WHAT THIS IS? 180= A. (REVIEWING DOCUMENT.) 181= THIS IS A COPY OF OUR CORPORATE INCOME TAX RETURN FOR 182= THE YEAR 1993-'94, FISCAL YEAR. 183= Q. DID LITTLE PROFESSOR --WAS A FINANCIAL STATEMENT FOR THAT 184= YEAR CREATED FOR LITTLE PROFESSOR? 185= A. I --YES. 186= Q. DO YOU KNOW WHERE THAT FINANCIAL STATEMENT IS? WERE YOU 187= ABLE TO FIND IT FOR THIS CASE? 188= A. IF IT'S NOT HERE, NO, I DON'T. WE SEARCHED FOR IT. DID NOT 189= FIND IT. 190= Q. IS THE INFORMATION IN THE TAX --WHERE DOES THE SALES 191= INFORMATION OR THE GROSS RECEIPTS SALES INFORMATION AND THE TAX 192= RETURN COME FROM? 193= A. AGAIN, I BELIEVE, MY ACCOUNTANT USES THE SAME INFORMATION 194= THAT WE'VE GIVEN HIM ON A MONTHLY BASIS. IT COMES RIGHT OUT OF 195= HIS COMPUTER TO FILE THE TAXES. 196= Q. OKAY. AND ARE THE DOCUMENTS AT TABS 10 THROUGH 13 SIMILARLY 197= LITTLE PROFESSOR'S TAX RETURNS AND FINANCIAL STATEMENTS? 198= A. (REVIEWING DOCUMENTS.) 199= YES, THEY ARE. 200= Q. OKAY. I'D LIKE YOU NOW TO LOOK AT TAB 5, WHICH IS 201= PLAINTIFF'S EXHIBIT 2610. 202= A. (REVIEWING DOCUMENT.) 203= I HAVE IT. 204= Q. DO YOU RECOGNIZE THIS DOCUMENT? 205= A. YES, I DO. 206= Q. CAN YOU DESCRIBE IT, PLEASE? 207= A. IT IS A SUMMARY OF THE GROSS SALES FOR OUR STORE IN Could not acquire words on page 5 208= CHARLOTTE FOR THE FISCAL YEARS 1990 THROUGH '95-'96 --I'M 209= SORRY --1990-'91 THROUGH FISCAL YEAR 1995-'96. 3
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210= Q. AND DOES THE FISCAL YEAR OF LITTLE PROFESSOR BEGIN ON 211= SEPTEMBER 1ST AND END ON AUGUST 31ST? 212= A. YES, IT DOES. 213= Q. AND DO YOU KNOW WHERE THE INFORMATION IN THE GROSS SALES 214= COLUMN COMES FROM FOR THIS EXHIBIT? 215= A. AGAIN, FROM OUR PROFIT AND LOSS SHEET. 216= Q. AND HAVE YOU CHECKED THIS FOR ACCURACY? 217= A. YES, I HAVE. 218= Q. YOU SAID THAT THE BARNES & NOBLE ON SHARON ROAD OPENED IN 219= SEPTEMBER OF 1993; IS THAT CORRECT? 220= A. THAT'S CORRECT. 221= Q. LOOKING AT EXHIBIT 5, WHAT WERE LITTLE PROFESSOR'S SALES IN 222= THE PRIOR FISCAL YEAR ENDING AUGUST 31ST, 1993? 223= A. $1,325,293. 224= Q. AND HAD THERE BEEN A TREND IN SALES LEADING UP TO THAT 225= POINT? 226= A. WE HAD INCREASED EVERY YEAR FOR 17 YEARS. 227= Q. AND THEN IN THE FISCAL YEAR SEPTEMBER 1ST, 1993, TO 228= AUGUST 31ST, 1994, WHAT WERE LITTLE PROFESSOR'S SALES? 229= A. WE HAD FALLEN TO $1,103,146. 230= Q. AND FOR THE FOLLOWING YEARS, WAS THERE A TREND IN SALES? 231= A. IT CONTINUED TO GO DOWN EACH YEAR. 232= Q. DO YOU HAVE AN UNDERSTANDING OF WHAT THE CAUSE OF THAT 233= DECLINE WAS? 234= A. THE ONLY THING THAT WAS DIFFERENT WAS NEW COMPETITION. 235= Q. AND BY NEW COMPETITION, YOU'RE REFERRING TO ...? 236= A. THE BARNES & NOBLE AND THEN LATER THE BORDERS AND THEN LATER 237= THE MEDIA PLAY. 238= Q. OKAY. COME BACK TO THAT IN A SECOND. YOU JUST MENTIONED 239= THE BORDERS, AND YOU SAID BEFORE THAT YOU BELIEVE LITTLE 240= PROFESSOR COMPETES WITH BORDERS. WHY DO YOU BELIEVE THAT? 241= A. WELL, THE SAME ITEMS THAT I MENTIONED BEFORE, THE PROXIMITY 242= TO OUR STORE, THE FACT THAT WE'RE SHARING THE SAME CUSTOMER BASE 243= THAT WE HAVE VERY SIMILAR PRODUCT LINES, AND THE SALES DROP. 244= Q. HAVE YOU ALSO VISITED BORDERS STORES? 245= A. YES, I HAVE. 246= Q. HOW FREQUENTLY HAVE YOU DONE THAT? 247= A. AGAIN, BASICALLY ON A MONTHLY TO QUARTERLY BASIS, SOMETIMES 248= MORE FREQUENTLY IN THE CHRISTMAS SEASON. 249= Q. AND DID YOU HAVE AN OPPORTUNITY TO OBSERVE THE BOOKS BEING 250= SOLD IN THE BORDERS STORE? 251= A. YES, I DID. 252= Q. IS THAT THE BORDERS STORE ON --YOU SAID IT WAS SHARON ROAD 253= AND --WHAT WAS THE -- 254= A. SHARON AND COLONY. THERE'S ONLY ONE BORDERS. 255= Q. OKAY. 256= A. SO FAR. 257= Q. AND HOW DID THE PRODUCT OR BOOKS IN THE SHARON ROAD BORDERS 258= COMPARE WITH WHAT LITTLE PROFESSOR OFFERS? 259= A. VERY, VERY SIMILAR. 260= Q. DID YOU ALSO HAVE AN OPPORTUNITY TO OBSERVE THE CUSTOMERS IN 261= THIS STORE? 262= A. YES, I DID. 263= Q. DID YOU RECOGNIZE ANY CUSTOMERS WHO SHOP AT LITTLE 264= PROFESSOR? 265= A. YES, I DID. 266= Q. AND REFERRING BACK AGAIN TO THE CHART BEHIND TAB 5, WHICH 267= FISCAL YEAR DID THE BORDERS OPEN? 268= A. THEY OPENED IN FISCAL YEAR '93 TO '94. 269= Q. AND COULD YOU REMIND US OF THE MONTH? 270= A. IT WAS JUST THE --THE SATURDAY AFTER THANKSGIVING, SO THE 271= END OF NOVEMBER '93. 272= Q. TWO MONTHS AFTER THE BARNES & NOBLE OPENED ON --273= A. APPROXIMATELY. APPROXIMATELY. 274= Q. DO YOU BELIEVE THAT THE MEDIA PLAY STORE THAT OPENED 275= CONTRIBUTED TO YOUR DECLINE IN SALES IN THE --I'M SORRY. 276= THAT'S WITHDRAWN. 277= LET'S TURN TO TAB --I'M SORRY. 278= WE WERE JUST LOOKING AT TAB 5 BEFORE. LET'S TURN TO 279= TAB 6, WHICH IS EXHIBIT 2611. 4
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350= A. WE FELT WE HAD TO COMPETE. WE FELT CUSTOMERS WERE DEMANDING 351= DISCOUNTING. 352= Q. WHY DIDN'T YOU KEEP --STICK WITH THE 40 PERCENT DISCOUNT? 353= A. COULDN'T AFFORD TO. 354= Q. WAS IT POSSIBLE TO MAKE A PROFIT ON THOSE BOOKS DISCOUNTED 355= AT 40 PERCENT? 356= A. NO, WE ACTUALLY LOST ON THOSE. 357= Q. WHEN YOU ADOPTED THE 40 PERCENT DISCOUNT POLICY, DID IT HAVE 358= ANY IMPACT ON YOUR SALES OF THE DISCOUNTED BOOKS? 359= A. YES, IT DID. THE DISCOUNTED BOOKS STARTED GOING BACK UP. 360= THIS WAS THE NEW YORK TIMES LIST. IT IMMEDIATELY STARTED DOING 361= A TURNAROUND. 362= Q. OKAY. YOU SAY "GOING BACK UP," DO YOU MEAN --363= A. DAILY SALES. 364= Q. DO YOU KNOW WHAT THE TREND IN LITTLE PROFESSOR'S PROFITS --365= NET PROFITS HAS BEEN IN THE PERIOD SINCE THE BARNES & NOBLE AND 366= BORDERS OPENED ON SHARON ROAD? 367= A. THEY SUFFERED EVEN MORE THAN SALES DID. 368= Q. DOES LITTLE PROFESSOR PAY SALARIES TO YOURSELF? 369= A. YES. 370= Q. AND HAS THERE BEEN A TREND IN THOSE SALARIES? 371= A. YES, I'VE REDUCED MY SALARY MANY OF THOSE YEARS. 372= Q. WHY DID YOU DO THAT? 373= A. I HAD TO TO GIVE SOME STAFF SOME LONG OVERDUE INCREASES, AND 374= WE JUST SIMPLY HAD TO MAKE ENDS MEET. 375= Q. ARE THERE PRESENTLY ANY WALDEN STORES IN THE CHARLOTTE AREA? 376= A. I BELIEVE THERE IS ONE IN PLACE KNOWN AS CAROLINA MALL. 377= Q. WOULD YOU TURN BACK TO TAB 3 PLEASE, PLAINTIFF'S EXHIBIT 378= 2522. 379= A. I HAVE IT. 380= Q. AND THIS IS YOU PREVIOUSLY IDENTIFIED AS A MAP OF THE 381= CHARLOTTE AREA. THERE'S A WALDENBOOKS IDENTIFIED ON THE UPPER 382= RIGHT OF THE MAP, AND ALSO I BELIEVE THE LABEL'S CUT OFF, BUT ON 383= THE LEFT. ARE EITHER OF THOSE THE STORES YOU'RE REFERRING TO? 384= A. NO, THEY BOTH CLOSED. 385= Q. WHERE IS THE WALDENBOOKS THAT'S STILL OPEN? 386= A. AT THE INTERSECTION --IT WOULD BE THE SOUTHWEST QUADRANT 387= WHERE IT'S MARKED "PINEVILLE" AT THE INTERSECTION OF INTERSTATE 388= 485 AND NORTH CAROLINA ROUTE 51. 389= Q. THANK YOU. 390= NOW, WANT TO TURN TO THE PERIOD 1994 TO THE PRESENT, 391= FOCUS ON THAT. SINCE 1994, WHAT ROLE HAVE YOU PERSONALLY PLAYED 392= IN PURCHASING BOOKS FOR THE LITTLE PROFESSOR? 393= A. FROM '94 UNTIL JULY OF '99 --IN FACT, EVEN A LITTLE BIT 394= AFTER THAT, LET'S SAY THROUGH FALL OF '99, I WAS THE PRIMARY 395= PURCHASER. 396= Q. DID YOU MEET WITH PUBLISHERS' REPRESENTATIVES? 397= A. ALL THE TIME. 398= Q. SINCE JULY 1999, HAVE YOU HAD ANY ROLE IN THE PURCHASING OF 399= THE BOOKS? 400= A. ONLY THROUGH THE FALL OF '99. 401= Q. HAVE YOU PLAYED ANY ROLE IN THE RECEIVING OF BOOKS AT YOUR 402= STORE? 403= A. YES. 404= Q. CAN YOU DESCRIBE THE RECEIVING PROCESS BRIEFLY AND THE PAPER 405= WORK INVOLVED? 406= A. WELL, WHEN A BOX OF BOOKS COMES IN, THEY'RE BROUGHT INTO THE 407= BACK ROOM. BOX IS UNPACKED. WE TAKE THEM BOOK BY BOOK AND 408= MATCH IT AGAINST THE PACKING LIST, MAKE SURE THAT THE BOOK IS 409= NOT DAMAGED. WE THEN ENTER ALL OF THIS INTO THE COMPUTER TO PUT 410= IT INTO OUR DATABASE. 411= Q. NOW, YOU MENTIONED A PACKING LIST. COULD YOU DESCRIBE FOR 412= THE COURT WHAT A PACKING LIST IS. 413= A. A PACKING LIST IS A PIECE OF PAPER OR NUMBER OF PIECES OF 414= PAPER ACCOMPANYING THE SHIPMENT THAT SHOWS WHAT IS SUPPOSED TO 415= BE INSIDE THE CARTONS THAT WE RECEIVED. 416= Q. IS THE DISCOUNT PERCENTAGE RECEIVED FROM THE SUPPLIER SHOWN 417= ON THE PACKING LIST? 418= A. ALMOST ALWAYS. 419= Q. AND WHEN YOU RECEIVED BOOKS, WOULD YOU OBSERVE WHAT THOSE 420= DISCOUNTS WERE? 6
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421= A. YES. WE --WE USUALLY GO THROUGH IT TO MAKE SURE THAT WE 422= WERE NOT SHORTED IN TERMS OF DISCOUNTING, THAT WE BOUGHT AT THE 423= TERMS THAT WE WERE SUPPOSED TO GET THE BOOKS AT. 424= Q. AND SINCE JULY 1999, HAVE YOU CONTINUED TO PLAY ANY ROLE IN

425= THE RECEIVING PROCESS OR THE REVIEW PACKING LISTS? 426= A. ONLY AT CHRISTMASTIME. I WAS IN HELPING. 427= Q. SINCE JULY OF 1999, DO YOU STILL HAVE OCCASION TO LEARN THE 428= TERMS UNDER WHICH LITTLE PROFESSOR PURCHASES BOOKS? 429= A. OH, ABSOLUTELY. I'M IN THE STORE AT LEAST ONCE A WEEK, AND 430= I MEET WITH THE STAFF, AND THEY SHARE WITH ME ANY OF THE CHANGES 431= THAT ARE GOING ON. 432= Q. IN CONNECTION WITH THIS LITIGATION, DID YOU TAKE ANY STEPS 433= TO VERIFY YOUR DISCOUNTS FROM SUPPLIERS? 434= A. YES, I DID. 435= Q. COULD YOU DESCRIBE WHAT THOSE STEPS WERE. 436= A. LOOK AT INVOICES TO GO THROUGH THEM TO SEE TO COMPARE THEM 437= TO THE RED BOOK TO SEE IF WE WERE GETTING WHAT WE WERE SUPPOSED 438= TO BE GETTING. 439= Q. THOSE ARE INVOICES IN LITTLE PROFESSOR'S RECORDS? 440= A. THAT IS CORRECT. 441= Q. HOW ARE THOSE INVOICES ORGANIZED? 442= A. ORGANIZED BY PUBLISHER. 443= Q. AND ARE THEY MAINTAINED BY LITTLE PROFESSOR IN THE ORDINARY 444= COURSE OF ITS BUSINESS? 445= A. YES. 446= Q. AS A RECORD OF TERMS WITH WHICH YOU DEAL WITH PUBLISHERS? 447= A. YES. 448= Q. IF YOU TURN TO THE VERY BACK OF THE BINDER, TAB 26, 449= PLAINTIFF'S EXHIBIT 2591. 450= A. YES, I HAVE IT. 451= Q. AND THIS IS A LIST OF BOOK PUBLISHERS AND WHOLESALERS, 452= CORRECT? 453= A. THAT IS CORRECT. 454= Q. FROM WHICH OF THE COMPANIES ON THIS LIST DOES LITTLE 455= PROFESSOR PRESENTLY PURCHASE BOOKS? 456= A. (REVIEWING DOCUMENT.) 457= JUST A POINT OF CLARIFICATION. WHEN YOU SAY 458=" PRESENTLY," DO YOU MEAN THIS VERY DAY, OR YEAR --459= Q. IN THE YEAR 2001? 460= A. ALL OF THEM. 461= Q. ALL OF THEM? 462= A. ALL OF THEM. 463= Q. HAS THAT BEEN TRUE FOR THE ENTIRE PERIOD EACH YEAR FROM 1994 464= TO THE PRESENT? 465= A. I BELIEVE IT DOES. THERE MAY HAVE BEEN A PUBLISHER OR TWO 466= THAT WE DIDN'T BUY FROM ONE YEAR ALONG THE LINE, BUT GENERALLY, 467= I'D SAY YES. 468= Q. DID YOU PURCHASE FROM EACH OF THESE VENDORS --HOW --LET ME 469= WITHDRAW THAT. 470= WHAT PROPORTION OF LITTLE PROFESSOR'S PURCHASES ARE 471= FROM THESE VENDORS? 472= A. THESE ARE MY MAJOR SUPPLIERS. I WOULD THINK 70, 80 PERCENT. 473= Q. DOES LITTLE PROFESSOR PURCHASE HARDCOVER BOOKS FROM EACH OF 474= THE VENDORS LISTED HERE? 475= A. I'M NOT SURE THAT EACH OF THESE VENDORS DO --THAT ALL OF 476= THESE VENDORS DO HARDCOVERS, IF THEY DO, WE PURCHASE THEM. 477= Q. OKAY. DOES LITTLE PROFESSOR PURCHASE TRADE PAPER BOOKS FROM 478= ALL OF THE VENDORS LISTED HERE? 479= A. YES, WE DO. 480= Q. DOES LITTLE PROFESSOR PURCHASE MASS MARKET BOOKS FROM ALL OF 481= THE VENDORS? 482= A. YES, WE DO. 483= Q. DO THEY ALL SELL MASS MARKET BOOKS? 484= A. THAT, I'M NOT SURE OF. I SHOULD SAY THAT IF THEY PRODUCE 485= THEM, WE BUY FROM THEM. 486= Q. AND DOES LITTLE PROFESSOR PURCHASE AUDIO BOOKS FROM EACH OF 487= THE VENDORS? 488= A. AGAIN, IF THEY PRODUCE THEM, YES, WE DO. 489= Q. DOES LITTLE PROFESSOR ALSO PURCHASE FRONT LIST AND BACKLIST 490= BOOKS? 7
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491= A. YES. 492= Q. HOW FREQUENTLY DOES LITTLE PROFESSOR ORDER BOOKS FROM THESE 493= VENDORS? 494= A. IT WOULD VARY FROM VENDOR TO VENDOR. 495= Q. WHAT IS THE MOST FREQUENT PURCHASE SCHEDULE? 496= A. WHEN I LOOK AT INGRAM AND BAKER & TAYLOR, FROM THEM, WE 497= WOULD ORDER FREQUENTLY FOUR TO FIVE TIMES A WEEK. 498= Q. AND THOSE ARE BOOK WHOLESALERS, RIGHT? 499= A. THAT'S CORRECT. 500= Q. FROM THE PUBLISHERS, WHAT WOULD BE THE MOST FREQUENT 501= PURCHASE SCHEDULE? 502= A. RANDOM HOUSE, WHICH WE WOULD ORDER PROBABLY THREE TIMES A 503= WEEK. SIMON & SCHUSTER WOULD BE TWO OR THREE TIMES A WEEK. 504= PUTNAM, ONCE A WEEK. HARPERCOLLINS, TWICE A WEEK. THOSE WOULD 505= BE THE -- 506= I'D LIKE TO CORRECT MY TESTIMONY, THOUGH. I'M SORRY. 507= I DIDN'T SEE THE BREAKDOWN. MACMILLAN COMPUTER. WE DO NOT 508= ORDER FROM MACMILLAN COMPUTER. 509= Q. OKAY. 510= A. SORRY. 511= Q. THANK YOU. 512= WHAT WOULD BE THE LEAST FREQUENTLY YOU WOULD 513= PURCHASE --LITTLE PROFESSOR WOULD PURCHASE FROM ANY OF THE -- 514= THE PUBLISHERS LISTED HERE? 515= A. PROBABLY ONCE A YEAR. 516= Q. WHICH PUBLISHERS WOULD THAT BE TRUE FOR? 517= A. WESTERN. 518= Q. ANY OTHERS? 519= A. POSSIBLY LPC, LOGAN PUBLISHERS CONSORTIUM. 520= Q. NOW, COULD YOU DESCRIBE BRIEFLY HOW LITTLE PROFESSOR 521= PURCHASES FRONT LIST BOOKS. 522= A. FRONT LIST IS ALMOST UNIVERSALLY DONE BY SITTING DOWN WITH 523= THE PUBLISHERS' REP AS HE OR SHE MAKES THEIR VISIT. 524= Q. AND HOW FREQUENTLY DOES THAT OCCUR? 525= A. AGAIN, IT WOULD VARY FROM PUBLISHER TO PUBLISHER. SOME WE 526= SEE TWICE A YEAR. SOME WE SEE AS MANY AS FOUR TIMES A YEAR. 527= Q. DO YOU ORDER BOOKS FOR A SEVERAL-MONTH PERIOD AT THAT POINT? 528= A. YES. 529= Q. COULD YOU EXPLAIN THAT PROCESS? 530= A. AGAIN, THE PUBLISHERS HAVE THEIR OWN PUBLISHING SEASONS. 531= AND WE WOULD BE BUYING --FOR EXAMPLE, OUR CHRISTMAS BOOKS, THE 532= REASON I SAID SOME WE SEE FOUR TIMES A YEAR, RANDOM HOUSE IS AN 533= IMMEDIATE ONE THAT COMES TO MIND WHERE THE REP WOULD COME IN 534= PROBABLY IN LATE JULY OR EARLY AUGUST, AND HE WOULD THEN BEGIN 535= SELLING THE LIST FOR THE CHRISTMAS SEASON --HOLIDAY SEASON. 536= BECAUSE THEIR LIST IS SO LARGE, HE MAY COME BACK A SECOND TIME 537= AND MAKE TWO VISITS TO SELL THAT ONE LIST. THEN HE'D BE BACK 538= AGAIN IN THE SPRING, SELLING THE BOOKS --OR ACTUALLY RIGHT 539= AFTER CHRISTMAS, HE'D BE BACK SELLING THE SPRING LIST AND THE 540= SUMMER LIST. 541= Q. AND WHEN YOU PLACE THE FRONT LIST ORDER WITH THE PUBLISHER'S 542= REPRESENTATIVE, ARE THOSE BOOKS IMMEDIATELY SHIPPED TO YOU? 543= A. NO, BECAUSE MOST OF THE BOOKS HADN'T BEEN PRINTED YET. 544= Q. WHEN DOES LITTLE PROFESSOR RECEIVE THE BOOKS ORDERED THEN 545= FROM THE REPRESENTATIVE? 546= A. AS THE BOOKS ARE PRINTED AND DISTRIBUTED BY THE PUBLISHER. 547= Q. WHEN THEY ARE RELEASED? 548= A. YES. 549= Q. HOW DOES LITTLE PROFESSOR PLACE ITS ORDERS WITH SUPPLIERS? 550= AND BY THAT I MEAN, IS IT ELECTRONIC OR ON THE PHONE OR BY FAX 551= OR LETTER? 552= A. FRONT LIST OR BACKLIST? 553= Q. IS THERE A DISTINCTION? 554= A. YES. 555= Q. FRONT -- 556= A. FRONT LIST IS DONE INVARIABLY WITH THE REP. HE OR SHE SITS 557= THERE WITH THEIR ORDER FORM. SOMETIMES IT IS ELECTRONIC BECAUSE 558= THEY HAVE COMPUTERS, SOME OF THEM. THEY TAKE THE ORDER, PUT IT 559= IN THE COMPUTER, AND THEN THEY TRANSMIT IT TO THE PUBLISHER. 560= OTHER PUBLISHERS HAVE JUST A PAPER ORDER FORM, AND WE 8
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561= GO THROUGH AND DECIDE HOW MANY COPIES WE WANT. HE OR SHE THEN 562= NOTATES THAT ON THE ORDER FORM AND SENDS IT IN, I THINK, ON A 563= WEEKLY BASIS AS THEY MAKE THEIR TRIPS AND GIVES ME A COPY OF IT. 564= Q. AND THAT'S FOR FRONT LIST BOOKS? 565= A. THAT'S FOR FRONT LIST. 566= Q. AND BACKLIST BOOKS? 567= A. BACKLIST, AS I SAY, WE DO THAT THREE, FOUR TIMES A WEEK. WE 568= DO THAT ELECTRONICALLY. 569= Q. NOW, DO YOU HAVE AN UNDERSTANDING OF WHERE PUBLISHERS AND 570= WHOLESALERS SHIP BOOKS FROM TO THE LITTLE PROFESSOR? 571= A. YES, I DO. 572= Q. LOOKING AT THE LIST IN FRONT OF YOU, ARE THOSE --DO ANY OF 573= THOSE SHIPMENTS COME FROM WITHIN NORTH CAROLINA? 574= A. NO, THEY DO NOT.

575= Q. HOW DOES LITTLE PROFESSOR DECIDE WHETHER IT WOULD CHOOSE --576= WHETHER IT WOULD PURCHASE FROM A WHOLESALER VERSUS A PUBLISHER? 577= A. IT'S THE SAME THING THAT YOU'VE ALREADY HEARD, BUT I'LL 578= REPEAT IT AGAIN, THAT IT'S A MATTER OF ECONOMY OF TRYING TO GET 579= A BOOK IN IN A HURRY, KNOWING THAT WE NEED IT, WE DON'T WANT IT 580= MISSING FROM OUR SHELVES, OR IT'S A SPECIAL ORDER AND SO WE GIVE 581= UP DISCOUNT POINTS IN ORDER TO GET IT FROM THE WHOLESALER. 582= CONVERSELY, IF WE CAN WAIT, THEN WE'LL ORDER DIRECT 583= FROM THE PUBLISHER. 584= Q. OKAY. JUST TO BE CLEAR ON THIS, WHAT ARE THE ADVANTAGES OF 585= PUBLISHING FROM A WHOLESALER AND WHAT ARE THE DISADVANTAGES OF 586= PURCHASING FROM A WHOLESALER? 587= A. WELL, THE ADVANTAGES, RAPIDITY OF DELIVERY AND RESTOCKING. 588= THE DISADVANTAGE, THAT WE HAVE TO GIVE UP A LITTLE DISCOUNT 589= POINTS. 590= Q. AND YOU'RE GIVING UP DISCOUNT POINTS COMPARED TO WHAT? 591= A. TO WHAT WE WOULD GET IT REORDERING FROM THE PUBLISHER 592= DIRECT. 593= Q. WHAT TYPICALLY WOULD BE THE AMOUNT OF DISCOUNT THAT YOU 594= WOULD GIVE UP BY ORDERING FROM A WHOLESALER VERSUS ORDERING 595= DIRECT? 596= A. AGAIN, IT WILL VARY FROM PUBLISHER TO PUBLISHER, BUT I WOULD 597= THINK GENERALLY TWO TO FIVE POINTS. 598= Q. IN THE COURSE OF YOUR WORK AT LITTLE PROFESSOR, HAVE YOU 599= EVER CONSULTED THE ABA BOOK BUYER'S HANDBOOK? 600= A. ON A REGULAR BASIS. 601= Q. FOR WHAT PURPOSES? 602= A. TO CHECK DISCOUNTS, SOMETIMES TO FIND OUT WHO I NEED TO 603= CONTACT FOR PUBLICITY, WHAT THEIR SHIPPING AND RETURN POLICIES 604= WERE, MYRIAD OF ITEMS. 605= Q. IS THE ABA BOOK BUYERS HANDBOOK A COMPILATION OF DATA OR 606= FACTS USED BY PERSONS IN THE BOOKSELLING BUSINESS? 607= A. YES, IT IS. 608= Q. AND IS IT RELIED ON BY PERSONS SUCH AS YOURSELF IN THE 609= BOOKSELLING BUSINESS FOR THE PURPOSE OF CARRYING OUT THEIR DAILY 610= BUSINESS? 611= A. YES. 612= Q. NOW, YOU SAID THAT --EARLIER THAT YOU REVIEWED INVOICES TO 613= VERIFY YOUR DISCOUNTS WITH CERTAIN VENDORS; IS THAT RIGHT? 614= A. I THINK I SAID THAT I LOOKED AT PACKING LISTS RATHER THAN 615= INVOICES. THE ONLY TIME I ACTUALLY SEE THE INVOICE ITSELF WAS 616= IF THE BOOKKEEPER HAD A QUESTION ON IT. 617= Q. IN CONNECTION WITH THIS LITIGATION, DID YOU REVIEW ANY? 618= A. YES, I DID. I'M SORRY, YES. 619= Q. HAD THOSE INVOICES BEEN MADE AVAILABLE TO THE PARTIES IN 620= THIS CASE PREVIOUSLY? 621= A. WE MADE EVERYTHING AVAILABLE. 622= Q. AND WHICH VENDOR INVOICE --WHICH VENDORS DID YOU REVIEW 623= INVOICES FOR? 624= A. AVON; BALLANTINE, WHICH, OF COURSE, IS PART OF RANDOM HOUSE; 625= BANTAM DOUBLEDAY DELL; BERKELEY, WHICH IS A PART OF PENGUIN, 626= PUTNAM PENGUIN; HARPERCOLLINS; LITTLE BROWN; PENGUIN; POCKET 627= BOOKS, PART OF SIMON & SCHUSTER; PUTNAM; RANDOM HOUSE; SIMON & 628= SCHUSTER; WILLIAM MORROW, WHICH IS NOW A PART OF HARPERCOLLINS 629= AND INGRAM. 630= Q. AND WHAT DID YOU FIND IN REVIEWING THOSE INVOICES? 9
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631= A. I FOUND THAT OUR INVOICES WERE RIGHT ON THE MONEY AS FAR AS 632= THE DISCOUNT THAT WE WERE SUPPOSED TO GET COMPARED TO THE RED 633= BOOK. 634= Q. OKAY. MAYBE --PARDON ME --IT WOULD HELP TO TAKE AN 635= EXAMPLE. TURN TO TAB 25. 636= A. (REVIEWING DOCUMENTS.) 637= Q. WHICH IS A PORTION OF PLAINTIFF'S EXHIBIT NO. 7, PAGES 2 AND 638= 482 OF THAT EXHIBIT. 639= A. I HAVE IT, YES. 640= Q. DO YOU RECOGNIZE THIS? 641= A. YES, THIS IS A PAGE FROM THE RED BOOK, AND IT SPECIFICALLY 642= DEALS WITH THE TERMS OF INGRAM BOOK COMPANY. 643= Q. AND IS THERE A DISCOUNT SCHEDULE HERE? 644= A. YES, THERE IS. 645= Q. DO YOU HAVE AN UNDERSTANDING OF THAT DISCOUNT SCHEDULE? 646= A. YES. IT'S ON THE LEFT-HAND COLUMN. AND IT IS BASICALLY THE 647= FACT THAT IF I ORDER ONE TO FOUR COPIES OF THE TITLE, I GET 648= 40 PERCENT DISCOUNT; FIVE TO NINE, I GET 41 PERCENT DISCOUNT; 649= AND TEN OR MORE, I GET 42. I'M SORRY --YEAH, 42 PERCENT 650= DISCOUNT. 651= Q. AND IN REVIEWING LITTLE PROFESSOR'S INVOICES, WERE THERE 652= INSTANCES IN WHICH LITTLE PROFESSOR HAD ORDERED ONE TO FOUR 653= COPIES OF A TITLE FROM INGRAM? 654= A. YES. 655= Q. AND WHAT DISCOUNT DID LITTLE PROFESSOR, IN FACT, RECEIVE AS 656= SHOWN ON THE INVOICE? 657= A. 40 PERCENT. 658= Q. HOW FREQUENTLY WERE LITTLE PROFESSOR'S ORDERS IN THAT 659= QUANTITY, ONE TO FOUR TITLES? 660= A. MOST OFTEN, THIS WAS THE QUANTITY. 661= Q. DID LITTLE PROFESSOR ALSO AT TIMES ORDER FIVE TO NINE COPIES 662= OF A TITLE? 663= A. YES, WE DID. 664= Q. AND WHAT WAS THE ACTUAL DISCOUNT AS SHOWN ON THE INVOICES OF 665= THOSE ORDERS? 666= A. 41 PERCENT. 667= MR. PETROCELLI: YOUR HONOR, I JUST HAVE A MILD 668= OBJECTION HERE, BECAUSE RIGHT NOW THE WITNESS IS TESTIFYING 669= ABOUT THE CONTENTS OF INVOICES THAT ARE NOT HERE AND THE 670= INVOICES THEMSELVES ARE THE BEST EVIDENCE OF WHAT THEY SAY. 671= HE'S ASKING WHAT, IN FACT, DO THE INVOICES STATE, AND 672= UNDER THE BEST EVIDENCE RULE, WHEN YOU'RE TRYING TO PROVE THE 673= CONTENTS OF DOCUMENT, YOU HAVE TO HAVE THE DOCUMENT, AND THE 674= DOCUMENT IS UNDER HIS CONTROL, AND SO THERE'S NO REASON WHY IT 675= COULD NOT HAVE BEEN FURNISHED. 676= MR. HOHENGARTEN: I DO NOT BELIEVE THE BEST EVIDENCE 677= RULE APPLIES HERE, BUT I COULD FURNISH INVOICES. THE 678= DEFENDANTS, OF COURSE, HAVE SEEN THE INVOICES. I DO HAVE COPIES 679= WHICH I COULD DISTRIBUTE TO THE COURT AND TO DEFENDANTS, 680= EXAMPLES, IF THAT WOULD BE OF ASSISTANCE. 681= THE COURT: WELL, I THINK THE BEST EVIDENCE RULE DOES 682= APPLY, AND I SUSTAIN THE OBJECTION. 683= MR. HOHENGARTEN: YOUR HONOR, MAY I USE A 684= SUPPLEMENTAL BINDER WITH INVOICES? 685= THE COURT: YOU DO WHATEVER YOU WANT. 686= MR. HOHENGARTEN: WITH YOUR PERMISSION, MAY I HAND IT 687= UP TO YOU AND THE WITNESS? 688= THE COURT: YOU DO WHATEVER --YOU'RE THE LAWYER. 689= YOU PUT ON THE BEST CASE YOU CAN, AND I'M HERE TO RULE. 690= MR. HOHENGARTEN: THANK YOU VERY MUCH, YOUR HONOR. 691= (PAUSE IN THE PROCEEDINGS.) 692= MR. HOHENGARTEN: HAS DEFENDANTS' COUNSEL RECEIVED 693= COPIES? 694= UNIDENTIFIED SPEAKER: YES. 695= (PAUSE IN THE PROCEEDINGS.) 696= MR. HOHENGARTEN: SORRY. ONE MOMENT, JUST WHILE I 697= ORGANIZE. 698= MR. PETROCELLI: YOUR HONOR, JUST ONE OTHER POINT. 699= THESE EXHIBITS THAT HE'S NOW SHOWING THE WITNESS ARE NOT PART OF 700= THE DAILY MEMO. 10
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701= MR. HOHENGARTEN: I'D INTENDED TO USE THEM ON 702= REDIRECT IF NECESSARY. 703= THE COURT: ALL RIGHT. YOU MAY USE THEM. 704= MR. HOHENGARTEN: THANK YOU, YOUR HONOR. 705= (PAUSE IN THE PROCEEDINGS.) 706= MR. HOHENGARTEN: JUST TRYING TO GET TO THE FIRST 707= INGRAM INVOICE HERE. 708= Q. PLEASE TURN TO TAB 21, WHICH IS PLAINTIFF'S EXHIBIT 2631. 709= A. (REVIEWING DOCUMENTS.) 710= I HAVE IT. 711= Q. CAN YOU IDENTIFY THIS DOCUMENT? 712= A. THIS IS A COPY OF AN INVOICE FROM INGRAM BOOK COMPANY DATED 713= 30TH OF OCTOBER, 1997. 714= Q. AND ON THIS DOCUMENT, DOES IT SHOW ANYWHERE THE NUMBER 715= THAT --THE NUMBER OF COPIES OF A TITLE THAT LITTLE PROFESSOR 716= ORDERED AND RECEIVED? 717= A. IN THE FAR LEFT-HAND, IT SHOWS BOTH THE QUANTITY ORDERED AND 718= THE QUANTITY SHIPPED. 719= Q. AND DOES THIS DOCUMENT --DOES THIS INVOICE ALSO SHOW THE 720= DISCOUNT RECEIVED BY LITTLE PROFESSOR? 721= A. YES, IT DOES, IN THE THIRD FROM THE RIGHT-HAND COLUMN. 722= (CONTINUED NEXT PAGE; NOTHING OMITTED.) 723= 724=

725= BY MR. HOHENGARTEN: 726= Q. THERE'S ONE PURCHASE HERE FOR 20 --20 COPIES OF A BOOK. 727= DO YOU SEE THAT? 728= A. YES, I DO. 729= Q. AND WHAT PURCHASE DISCOUNT DID LITTLE PROFESSOR RECEIVE FOR 730= THAT? 731= A. 42 PERCENT. 732= Q. THEN THE OTHER PURCHASES ARE ALL FOR QUANTITIES OF ONE, 733= CORRECT? 734= A. THAT IS CORRECT. 735= Q. AND AS YOU TESTIFIED EARLIER, MOST OF THOSE DISCOUNTS ARE 736= 40 PERCENT, CORRECT? 737= A. THAT IS CORRECT. 738= Q. NOW, THERE'S SOME VARIATIONS FROM THAT. THE VERY FIRST 739= LINE SHOWS A 36 PERCENT DISCOUNT, RIGHT? 740= A. YES, THAT'S WHAT'S KNOWN AS A SHORT DISCOUNT. 741= Q. I THINK THERE'S BEEN TESTIMONY ON THAT BEFORE, BUT COULD 742= YOU BRIEFLY EXPLAIN WHAT A SHORT DISCOUNT IS? 743= A. YES. IT'S BASICALLY THAT INGRAM RECEIVES LESS THAN THEIR 744= NORMAL DISCOUNT FROM THE PUBLISHER, AND HENCE, WHEN THEY PASS 745= IT THROUGH, THEY GET LESS THAN THEIR STANDARD TERM. 746= Q. AND THERE'S ALSO ONE PURCHASE AT 41 PERCENT. DO YOU SEE 747= THAT, THE VERY NEXT LINE? 748= A. YES, I DO. 749= Q. DO YOU KNOW WHY LITTLE PROFESSOR RECEIVED A 41 PERCENT 750= DISCOUNT WHEN ORDERING ONLY ONE COPY OF THAT BOOK? 751= A. I'M SORRY, I DON'T HAVE AN EXPLANATION FOR THAT. I DON'T 752= KNOW. 753= Q. DOES LITTLE PROFESSOR PARTICIPATE IN THE VENDOR OF RECORD 754= PROGRAM? 755= A. THAT IS --YES, SCHOLASTIC PRESS, THAT'S VENDOR OF RECORD, 756= OR IT WAS AT THAT TIME. 757= Q. AND THERE'S ONE PURCHASE ALMOST AT THE BOTTOM SHOWING A 758= 45 PERCENT DISCOUNT? 759= A. THAT IS CORRECT. 760= Q. CAN YOU EXPLAIN WHY LITTLE PROFESSOR RECEIVED A 45 PERCENT 761= DISCOUNT? 762= A. THAT'S AN AUDIO. IT'S A TAPE. 763= Q. IF YOU WOULD TURN TO TAB 22, PLEASE, WHICH IS, AGAIN, A 764= PORTION OF PLAINTIFF'S EXHIBIT NUMBER 4, PAGES 1, 427 AND 428? 765= A. I HAVE IT. 766= Q. AND THIS IS THE ABA RED BOOK BUYERS HANDBOOK FOR INGRAM FOR 767= 1997, CORRECT? 768= A. YES. 769= THE COURT: I'M SORRY, WHICH BINDER ARE WE IN? 770= MR. HOHENGARTEN: WE'RE STILL IN THE SAME BINDER, 771= YOUR HONOR, AND IT'S THE VERY NEXT EXHIBIT AFTER THE ONE -- 11
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772= THE COURT: ALL RIGHT. 773= BY MR. HOHENGARTEN: 774= Q. IS THE 45 PERCENT DISCOUNT FOR AUDIO BOOKS SHOWN ON THIS 775= RED BOOK ENTRY? 776= A. YES, IT IS, BUT IT'S IN THE FINE PRINT UNDERNEATH THE 777= REGULAR SCHEDULE. 778= MR. HOHENGARTEN: I THINK DEFENSE COUNSEL WAS SO 779= GOOD AS TO PROVIDE MAGNIFYING GLASSES BEFORE. I DON'T KNOW IF 780= THE --DOES THE COURT STILL HAVE ONE? 781= THE COURT: YES. 782= MR. HOHENGARTEN: I'M SORRY, I'M NOT AS WELL 783= EQUIPPED, AND I APPRECIATE IT. 784= THE COURT: YES, VERY GOOD. 785= BY MR. HOHENGARTEN: 786= Q. AND YOU SAID IT'S IN THE FINE PRINT? 787= A. YES, IT READS, "SPOKEN, AUDIO AND MULTI-MEDIA TITLES 788= RECEIVE A 45 PERCENT DISCOUNT." 789= Q. OKAY. AND JUST FOR IDENTIFICATION, THE NEXT TAB, TAB 23, 790= WHICH IS PLAINTIFF'S EXHIBIT 2632, IS THAT ALSO AN INVOICE FROM 791= INGRAM BOOK COMPANY? 792= A. YES, IT IS. 793= Q. AND WHAT YEAR IS THAT INVOICE FROM? 794= A. THIS IS FROM JULY, 1998. 795= Q. AND FOR PURCHASES OF ONE TO FOUR COPIES, WHAT IS THE 796= DISCOUNT THAT LITTLE PROFESSOR RECEIVED? 797= A. ONE TO FOUR, 40 PERCENT. 798= Q. AND FOR PURCHASES OF FIVE TO NINE COPIES? 799= A. 41 PERCENT. 800= Q. AND FOR PURCHASES OF 10 OR MORE COPIES? 801= A. 42 PERCENT. 802= Q. WOULD YOU TURN TO TAB 25, PLEASE. 803= A. I HAVE IT. 804= Q. PLAINTIFF'S EXHIBIT 2633. THIS IS AN INVOICE TO LITTLE 805= PROFESSOR FROM INGRAM, FROM THE YEAR 1999, CORRECT? 806= A. THAT IS CORRECT. 807= Q. AND DOES IT SHOW THE SAME DISCOUNTS FOR THE SAME QUANTITY 808= ORDERS AS THE PREVIOUS INVOICES? 809= A. YES, IT DOES. 810= Q. AND IF YOU TURN TO TAB 27, PLAINTIFF'S EXHIBIT 2634. 811= A. I HAVE IT. 812= Q. THIS IS AN INVOICE RECEIVED BY LITTLE PROFESSOR FROM INGRAM 813= IN THE YEAR 2000. 814= A. IT IS. 815= Q. AND DOES IT SHOW THE SAME DISCOUNTS FOR THE SAME QUANTITY 816= PURCHASES AS WE'VE PREVIOUSLY SEEN? 817= A. YES, IT DOES. 818= Q. I SEE ON THE FIRST PAGE, ABOUT A FOURTH OF THE WAY DOWN, A 819= 42 PERCENT DISCOUNT FOR AN ORDER OF ONE COPY, TITLED, "BALLOON 820= ANIMALS." DO YOU SEE THAT? 821= A. I DO. 822= Q. DO YOU HAVE AN UNDERSTANDING OF WHY LITTLE PROFESSOR 823= RECEIVED A 42 PERCENT DISCOUNTS ON THAT PURCHASE? 824= A. YES, THAT IS A VENDOR OF RECORD PURCHASE. 825= Q. AND FURTHER DOWN, "FIBBLESTAX" SHOWS ONE COPY, 42 PERCENT 826= DISCOUNT? 827= A. THAT IS ALSO A VENDOR OF RECORD PURCHASE. 828= MR. HOHENGARTEN: PARDON ME, YOUR HONOR. I THINK IT 829= MAY BE OF ASSISTANCE TO SEE PUBLISHER INVOICES, WHICH LOOK A 830= LITTLE BIT DIFFERENT. 831= Q. PLEASE TURN TO TAB 45, WHICH IS PLAINTIFF'S EXHIBIT 2635. 832= CAN YOU IDENTIFY THIS DOCUMENT? 833= A. THIS IS A PACKING LIST AND INVOICE FROM RANDOM HOUSE. THIS 834= IS ONE OF THREE PAGES THAT IS DATED MARCH 6TH, 1997. 835= Q. FIRST OF ALL, YOU SAID IT'S A PACKING LIST INVOICE. IS IT 836= BOTH KINDS OF DOCUMENTS? COULD YOU EXPLAIN HOW THIS 837= DOCUMENT --WHEN IT'S RECEIVED BY LITTLE PROFESSOR? 838= A. IN RANDOM HOUSE'S CASE, THEY PUT THEM TOGETHER IN THE 839= CARTON, USUALLY GET THREE OR FOUR PAGES OUT THAT ARE IDENTICAL, 840= SO THEY LET THIS SAME PIECE OF PAPER SERVE AS BOTH ITS PACKING 841= LIST AND INVOICE. 12
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842= Q. AND SO IN RECEIVING BOOKS, YOU WOULD SEE THE PACKING LIST 843= AND INVOICE SIMULTANEOUSLY? 844= A. IT'S CORRECT. 845= Q. IN THE COLUMN LABELED "PURCHASE ORDER NUMBER," THERE'S A 846= NUMBER OF DIFFERENT ENTRIES. ARE THOSE PURCHASE ORDERS 847= SELECTED BY LITTLE PROFESSOR, THOUGH NUMBERS? 848= A. NO, THE REP DOES THAT. 849= Q. THE PUBLISHER'S REPRESENTATIVE?

850= A. THE PUBLISHER'S REPRESENTATIVE. 851= Q. DO YOU HAVE ANY UNDERSTANDING THAT --IS THERE ANY MEANING 852= TO THOSE PURCHASE ORDER NUMBERS, OR ARE THEY RANDOM? OR DO YOU 853= UNDERSTAND THEM? 854= A. I DON'T UNDERSTAND THESE AT ALL, NO. THE BOTTOM ONE, 855= SEPTEMBER OR JANUARY THROUGH FEBRUARY LOOKS LIKE THAT THIS IS A 856= QUARTERLY PURCHASE ORDER. PAGE ONE, THE LAST THREE ITEMS. 857= Q. AND BY QUARTERLY PURCHASE ORDER, WHAT'S THAT MEAN? 858= A. THAT THIS WAS PROBABLY GENERATED BY THE PUBLISHER'S 859= REPRESENTATIVE WHEN I SAT DOWN WITH HIM, AND THEY ARE NOW 860= SHIPPING THESE. JUST ABOVE THOSE THREE ITEMS YOU WILL SEE "RH 861= 011097." THAT IS AN ITEM THAT CAME FROM AN ELECTRONICALLY 862= GENERATED ORDER THAT WE PLACED. THAT WAS A KEY THAT WE USED, 863= RANDOM HOUSE. THAT ORDER WAS DONE ON THE FIRST --ON THE 10TH 864= OF JANUARY, 1997. SO THIS APPARENTLY IS A COMBINATION FROM 865= NUMEROUS PURCHASE ORDERS. 866= Q. I SEE, AND JUST TURNING TO THE NEXT PAGE, PAGE 3 OF THE 867= EXHIBIT, SEVERAL OF THE PURCHASE ORDER NUMBERS --IT'S THE SAME 868= NUMBER, HAS "FL" AT THE END. DO YOU KNOW, DOES THAT MEAN 869= ANYTHING? 870= A. THAT IS FRONT Could not acquire words on page 14 LIST. 871= Q. AND ON THE NEXT PAGE, PAGE 4, THE PURCHASE ORDER NUMBER 872= ENDING "BE," DOES THAT MEAN ANYTHING? 873= A. NOT TO ME, NO. 874= Q. THERE IS ALSO IN THE "KEY" COLUMN, INITIALS "FP" NEXT TO A 875= FEW TITLES. 876= A. I BELIEVE THAT IN '97 RANDOM HOUSE RANDOM HOUSE WAS STILL 877= DOING THE FREIGHT PASS-THROUGH, AND THAT MAY BE --ALTHOUGH I 878= CAN'T TESTIFY FOR SURE, THAT MAY BE WHAT THAT MEANS. 879= Q. OKAY, IF YOU TURN TO PAGE 4, RIGHT UNDER THE LAST TITLE 880= LISTED, DO YOU SEE WHERE IT SAYS "FP INDICATES A FREIGHT 881= PASS-THROUGH TITLE THAT IS INVOICED"? 882= A. I DO. 883= Q. DOES THAT REFRESH YOUR RECOLLECTION? 884= A. YES, IT DOES. 885= Q. COULD YOU EXPLAIN FOR THE COURT WHAT FREIGHT PASS-THROUGH 886= IS? ACTUALLY, I'VE FOUND IT A COMPLICATED TOPIC. 887= A. SO DO WE ALL. THERE WAS A TIME WHEN --RANDOM HOUSE IS A 888= CLASSIC EXAMPLE. IT WAS BEFORE THEY WERE WILLING TO GO FREE 889= FREIGHT, AND WE WERE ASKING --SAYING THAT FREIGHT WAS EATING 890= US ALIVE, THAT THEY AGREED THAT FOR HARDBACK BOOKS, THEY WOULD 891= GRANT A 50 CENTS PER BOOK SHARED, BASICALLY, WAS WHAT THEY WERE 892= DOING, IS THAT THEY WERE TAKING THAT OFF OF THE LIST PRICE OF 893= THE BOOK. SO THEY WERE DISCOUNTING FROM LESS THAN LIST PRICE, 894= IN ORDER TO SHARE THE FREIGHT COSTS. 895= Q. PERHAPS IT WOULD BE HELPFUL TO TAKE AN EXAMPLE ON THAT SAME 896= LAST PAGE. THE TITLE EYEWITNESS TO AMERICA, TOWARDS THE 897= BOTTOM, IS THAT ONE THAT'S MARKED AS FREIGHT PASS-THROUGH? 898= A. YES, IT IS. 899= Q. AND HOW WOULD LITTLE PROFESSOR'S PRICE BE CALCULATED -- 900= LITTLE PROFESSOR'S COST BE CALCULATED? 901= A. IT WOULD BE DISCOUNTED FROM THE 29.50, INSTEAD OF, THE 902= PRICE ON THAT BOOK WAS MORE LIKELY $30. THE MANUFACTURER'S 903= SUGGESTED RETAIL WAS $30. 904= Q. SO THE LIST PRICE WAS $30. 905= A. YES. 906= Q. RANDOM HOUSE SUBTRACTED 50 CENTS TO OBTAIN 29.50. 907= A. THAT IS CORRECT. 908= Q. AND THEN LITTLE PROFESSOR'S PURCHASE DISCOUNT, WHICH IS 909= SHOWN HERE AS 47 PERCENT, APPLIED TO THAT 29.50? 910= A. THAT IS CORRECT. 911= Q. SHIFTING TOPICS FOR A SECOND, DO YOU KNOW WHETHER INGRAM 13
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982= A. I DO. 983= Q. AND THERE'S A 50 PERCENT DISCOUNT SHOWN? 984= A. YES, IT IS. 985= Q. DO YOU HAVE AN UNDERSTANDING OF WHY LITTLE PROFESSOR 986= RECEIVED A 50 PERCENT DISCOUNT THERE? 987= A. YEAH, IN THE DESCRIPTION OF THE TITLE IT DOES SAY, 988=" TICK-TOCK, AUDIO." 989= Q. AND IS -- 990= A. AUDIO EARNS 50 PERCENT. 991= Q. I SEE. THAT'S A BOOK ON TAPE? 992= A. THAT'S CORRECT. 993= Q. AND NOW TURNING TO TAB 46, THE RED BOOK ENTRY, IS THAT 994= REFLECTED SOMEWHERE THERE? 995= THE COURT: WELL, IT IS, SO TELL US WHERE. 996= MR. HOHENGARTEN: I'M SORRY, YOUR HONOR, I WAS 997= HOPING --DIDN'T WANT TO -- 998= THE WITNESS: NO, I HAVEN'T FOUND IT YET, I'M SORRY. 999= MR. HOHENGARTEN: --DIRECT THE WITNESS, SO I TOOK A

1000= MOMENT. I BELIEVE IT IS, BUT.... I'LL WITHDRAW THE QUESTION, 1001= AND IF WE TAKE A BREAK BEFORE I'M DONE, PERHAPS I'LL GO BACK TO 1002= IT. 1003= THE COURT: ALL RIGHT. 1004= BY MR. HOHENGARTEN: 1005= Q. I DON'T KNOW IF WE WANT TO SPEND THE TIME GOING THROUGH 1006= EACH OF THE INVOICES HERE INDIVIDUALLY, BUT YOU HAD AN 1007= OPPORTUNITY TO EXAMINE THIS BINDER BEFORE, CORRECT? 1008= A. YES, I DID. 1009= Q. AND IS EACH OF THE INVOICES COLLECTED HERE AN INVOICE THAT 1010= WAS MAINTAINED BY LITTLE PROFESSOR IN THE ORDINARY COURSE OF 1011= ITS BUSINESS? 1012= A. YES. 1013= Q. ABOUT HOW MANY INVOICES DOES LITTLE PROFESSOR MAINTAIN -- 1014= RECEIVE IN A YEAR FROM ALL OF ITS SUPPLIERS? 1015= A. FROM ALL OF ITS SUPPLIERS, IN THE THOUSANDS. 1016= Q. JUST TAKE EXAMPLES WE'VE LOOKED AT FROM THOSE VENDORS. 1017= INGRAM BOOK COMPANY, DO YOU HAVE AN ESTIMATE OF HOW MANY 1018= INVOICES YOU WOULD RECEIVE FROM THEM? 1019= A. PROBABLY ABOUT 300 A YEAR. 1020= Q. DID YOU LOOK AT MORE INVOICES THAN JUST THOSE THAT WE HAVE 1021= HERE IN THE BINDER TODAY? 1022= A. AGAIN, I LOOK AT THE PACKING LIST MORE THAN THE VOICES. 1023= Q. I'M SORRY, IN CONNECTION WITH THE LITIGATION, DID YOU -- 1024= A. YES, YES. 1025= Q. ARE THESE INVOICES TYPICAL? 1026= A. YES, THEY ARE. 1027= MR. HOHENGARTEN: SET ASIDE THE SUPPLEMENTAL BINDER. 1028= MR. PETROCELLI: YOUR HONOR, I NEED TO OBJECT TO ALL 1029= OF THE TESTIMONY REGARDING THE INVOICES OF THAT BINDER, AND 1030= MOVE TO STRIKE THE TESTIMONY. 1031= NONE OF THESE INVOICES WAS INCLUDED ON THE TRIAL 1032= EXHIBIT LIST. THE TRIAL EXHIBIT LIST OF THE PLAINTIFFS STOPPED 1033= AT 2,611. ALL OF THESE ARE NEW EXHIBITS THAT HAVE NEVER BEEN 1034= IDENTIFIED, NOT ONLY ON THE TRIAL EXHIBIT LIST PURSUANT TO YOUR 1035= HONOR'S ORDERS, BUT ALSO NOT ON THE DAILY MEMO, AS WELL. 1036= WHAT'S HAPPENING HERE IS, BECAUSE OF ALL THE 1037= TESTIMONY REGARDING THE NEED FOR INVOICES, THE PLAINTIFFS NOW 1038= ARE SEEKING TO PUT INVOICES IN ON A SELECTIVE BASIS, AND THEY 1039= DID NOT PREVIOUSLY PLAN TO PUT IN AND THAT THEY DID NOT 1040= PREVIOUSLY IDENTIFY. WE'VE HAD NO OPPORTUNITY TO REVIEW THIS. 1041= WE'VE HAD NO ABILITY TO PREPARE TO CROSS-EXAMINE THE WITNESS ON 1042= THESE INVOICES, WE'VE HAD NO OPPORTUNITY TO LOOK FOR ADDITIONAL 1043= ONES THAT BEAR ON THESE, AND THE WHOLE PROCESS STARTS TO BREAK 1044= DOWN. 1045= ALL THEY NEEDED TO DO WAS TO INCLUDE THEM FROM DAY 1046= ONE ON THEIR TRIAL EXHIBIT LIST. WE WOULD NOT HAVE BEEN IN 1047= THIS POSITION. 1048= MR. HOHENGARTEN: YOUR HONOR, AS I SAID BEFORE, WE 1049= HAD INTENDED TO USE THESE ON REDIRECT, IN LIGHT OF THE CROSS 1050= THAT WAS EXPECTED, THAT THEY HAD NOT RECEIVED --THAT THE 1051= WITNESS HAD ONLY REFERENCED THE RED BOOK. IT WAS MY 15
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1052= UNDERSTANDING OF THE COURT'S PRETRIAL PROCEDURES THAT REBUTTAL 1053= MATERIALS DID NOT NEED TO BE INCLUDED IN THE TRIAL LIST. THESE 1054= WERE CERTAINLY PRODUCED. 1055= THE COURT: THAT'S RIGHT, BUT YOU'RE USING IT IN 1056= YOUR CASE IN CHIEF, AND THAT'S NOT ONLY NOT FAIR, IT'S OUT OF 1057= BOUNDS. THE OTHER SIDE IS ENTITLED TO HAVE AN OPPORTUNITY TO 1058= REVIEW EACH INVOICE, DETERMINE IF IT'S USED, HOW TO 1059= CROSS-EXAMINE, AND YOU ARE BLINDSIDING THEM USING AN EXCUSE 1060= THAT YOU'RE GOING TO PUT THESE IN ON REDIRECT, AND IN TRUTH AND 1061= IN FACT, THEY'RE COMING IN IN YOUR CASE IN CHIEF. 1062= SO I SUSTAIN THE OBJECTION. 1063= MR. HOHENGARTEN: VERY GOOD, YOUR HONOR. 1064= Q. BASED ON YOUR EXPERIENCE AT THE LITTLE PROFESSOR, DO YOU 1065= BELIEVE THAT LITTLE PROFESSOR HAS EVER RECEIVED DISCOUNTS OTHER 1066= THAN THOSE IN THE RED BOOK? 1067= A. ONLY INSOFAR AS WE'RE TALKING ABOUT DATED ORDERS AND THAT 1068= SORT OF THING. 1069= Q. WHAT DO YOU MEAN BY "DATED ORDERS"? 1070= A. SEASONAL, SPECIAL ORDERS. 1071= Q. IS THAT THE SAME THING AS A STOCK OFFER? 1072= A. YES, YES. 1073= Q. HOW ARE STOCK OFFERS COMMUNICATED TO LITTLE PROFESSOR? 1074= A. USUALLY DIRECT MAIL FROM THE PUBLISHER, OR THE PUBLISHER'S 1075= REPRESENTATIVE COMES, HE OR SHE BRINGS IT, IN PRINT. IN PRINT. 1076= Q. AND WHAT PORTION OF LITTLE PROFESSOR'S PURCHASES ARE UNDER 1077= STOCK OFFERS? 1078= A. VERY, VERY FEW. 1079= Q. DO YOU HAVE AN EXPLANATION OF WHY THAT IS? 1080= A. IT'S JUST NOT SOMETHING THAT WORKS WELL FOR US. WE DON'T 1081= DO THAT MUCH OF IT. 1082= Q. BUT YOU COULD OBTAIN AN EXTRA DISCOUNT BY ORDERING UNDER A 1083= STOCK OFFER, IS THAT CORRECT? 1084= A. WELL, SOMETIMES IT'S EXTRA DISCOUNT. MORE OFTEN IT'S EXTRA 1085= DATING. IT'S JUST THAT WE HAVE A VERY SMALL STORAGE SPACE AND 1086= WE HAVE TO FIND ROOM IN THE BACK ROOM FOR THEM IF WE ORDER LOTS 1087= OF THEM, AND WE ALSO HAVE FOUND THAT FREQUENTLY WE HAVE TO 1088= RETURN WHAT WE HAVEN'T SOLD. 1089= Q. WOULDN'T IT BE POSSIBLE FOR LITTLE PROFESSOR TO ORDER ALL 1090= OF BOOKS THAT IT NEEDS FOR THE YEAR UNDER A STOCK OFFER? 1091= A. NO. GENERALLY A STOCK OFFER IS LIMITED IN THAT IT MAY BE A 1092= COOKBOOK STOCK OFFER OR IT MAY BE A MASS MARKET STOCK OFFER, 1093= FROM A PARTICULAR PUBLISHER. 1094= Q. YOU ALSO MENTIONED BEFORE THAT LITTLE PROFESSOR PURCHASES 1095= SOME BOOKS FROM INGRAM UNDER THE VENDOR OF RECORD OR V. O. R. 1096= PROGRAM, IS THAT RIGHT? 1097= A. THAT'S CORRECT. 1098= Q. WHAT PROPORTION OF BOOKS THAT THE LITTLE PROFESSOR 1099= PURCHASES FROM INGRAM ARE UNDER THE V. O. R. PROGRAM? 1100= A. AGAIN, IT'S A VERY, VERY SMALL AMOUNT. 1101= Q. IS THERE ANY REASON LITTLE PROFESSOR COULDN'T PURCHASE ALL 1102= OF ITS BOOKS FROM INGRAM UNDER THE V. O. R. PROGRAM? 1103= A. IT WOULD NOT MAKE SENSE TO DO SO BECAUSE OF THE DISCOUNT 1104= DIFFERENTIAL. 1105= Q. COULD YOU EXPLAIN WHAT YOU MEAN BY "DISCOUNT DIFFERENTIAL" 1106= HERE? LET ME ASK, UNDER THE V. O. R. PROGRAM, LITTLE PROFESSOR 1107= COULD RECEIVE A HIGHER DISCOUNT FROM INGRAM THAN IT WOULD 1108= OTHERWISE RECEIVE FROM INGRAM, CORRECT? 1109= A. YES, BUT YOUR QUESTION WAS WHETHER WE WOULD PURCHASE ALL OF 1110= OUR BOOKS. WE GET A HIGHER DISCOUNT FROM SMALLER PUBLISHERS 1111= THAN WE WOULD NORMALLY EARN FROM THEM. WE GET A MUCH LOWER 1112= DISCOUNT THAN WE GET FROM MAJOR PUBLISHERS SUCH AS RANDOM AND 1113= HARPER AND SIMON & SCHUSTER. THERE WE'RE TALKING 47 PERCENT 1114= VERSUS 42 PERCENT. 1115= Q. IF ALL OF YOUR PURCHASES FROM INGRAM WERE UNDER THE V. O. R. 1116= PROGRAM, WOULD YOU HAVE TO GIVE UP PURCHASING AT THAT EXTRA 1117= DISCOUNT FROM THE PUBLISHERS? 1118= A. YES. 1119= Q. WHY IS THAT? 1120= A. THERE, AGAIN, BECAUSE RANDOM HOUSE'S TERMS ARE 47 PERCENT 1121= IF YOU ORDER 25 OR MORE BOOKS. INGRAM'S, EVEN UNDER THE V. O. R. 1122= PROGRAM, IS 42 PERCENT. 16
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1193= Q. CAN YOU GIVE AN EXAMPLE OF THAT? 1194= A. WE HAD A PARTICULAR WHOLESALER WHO ACTUALLY CAME TO US AND 1195= SAID, "I WOULD LIKE MORE OF YOUR BUSINESS," AND THEIR TERMS --1196= CAN WE USE THE NAMES? 1197= Q. PLEASE. YES. 1198= A. IT HAPPENED TO BE BAKER & TAYLOR, AND THEIR REPRESENTATIVE 1199= CAME TO US AND SAID, YOU KNOW, "WE'D LIKE TO HAVE MORE OF YOUR 1200= BUSINESS." AND I TOLD THEM THAT UNTIL THEY WERE EQUAL WITH 1201= INGRAM, THEY WEREN'T GOING TO GET MORE OF OUR BUSINESS, AND IT 1202= WASN'T THAT THE DISCOUNT WAS EXACTLY THE SAME, BUT THE FACILITY 1203= OF LOADING THEIR INFORMATION INTO OUR COMPUTER, THERE WAS A 1204= QUANTUM DIFFERENCE BETWEEN THE TWO. INGRAM, YOU CAN LOAD IT 1205= ELECTRONICALLY. OUR COMPUTER SPEAKS TO THEIR COMPUTER. YOU 1206= PUSH ONE BUTTON, AND IT'S IN OUR COMPUTER, AND WHEN WE RECEIVE, 1207= WE RECEIVE ELECTRONICALLY. WE SCAN WITH A WAND. VERY, VERY 1208= QUICK. 1209= WITH BAKER & TAYLOR, ON THE OTHER HAND, WE HAVE TO 1210= GO THROUGH THE WHOLE PROCESS. PULL THE BOOK OUT, TYPE IN THE 1211= INTERNATIONAL STANDARD BOOK NUMBER, SO THAT WE BUILD A 1212= RECEIVING LIST. CHECK IT, MANUALLY, AND THEN DUMP THE 1213= INFORMATION IN. 1214= INGRAM FOR, LET'S SAY, A FOUR-CARTON SHIPMENT, 1215= INGRAM WOULD TAKE US A HALF A HOUR, BAKER & TAYLOR WOULD TAKE 1216= US TWO HOURS. 1217= Q. AND WHEN YOU SAY, TAKE YOU, YOU MEAN TAKE TO RECEIVE -- 1218= A. WHOEVER IS RECEIVING. THAT'S --TIME IS MONEY. 1219= Q. AND WHAT WAS BAKER & TAYLOR'S RESPONSE? 1220= A. "YES, WE'RE THINKING ABOUT IT." THAT WAS TWO YEARS AGO. 1221= Q. NOW, BAKER & TAYLOR AND INGRAM ARE BOTH WHOLESALERS, RIGHT? 1222= A. YES. 1223= Q. WOULD IT BE POSSIBLE TO SHIFT BUSINESS FROM ONE WHOLESALER 1224= TO ANOTHER? 1225= A. OH, YES. 1226= Q. CAN YOU GET THE SAME TITLES FROM BOTH, ON THE WHOLE? 1227= A. YES. 1228= Q. DO YOU BELIEVE IT WOULD BE SIMILARLY POSSIBLE TO SHIFT 1229= BUSINESS BETWEEN TWO PUBLISHERS, SAY, RANDOM HOUSE AND SIMON & 1230= SCHUSTER? 1231= A. IT WOULD ONLY BE DIFFICULT TO GET THE SAME TITLES. 1232= Q. COULD YOU STOP PURCHASING FROM ONE PUBLISHER AND START 1233= PURCHASING ALL YOUR BOOKS FROM ONE OR A COUPLE THAT GIVE YOU 1234= THE MOST ADVANTAGEOUS TERMS? 1235= A. NOT TO GET THE SAME BOOKS, NO. 1236= Q. IS IT IMPORTANT TO LITTLE PROFESSOR TO HAVE A WIDE 1237= SELECTION OF BOOKS IN THE STORE? 1238= A. YES, IT IS. 1239= Q. DO YOU UNDERSTAND THE TERM "RETAIL DISTRIBUTION CENTER" OR 1240= RDC? 1241= A. I KNOW THE TERM. I'M ACQUAINTED WITH THE TERM. 1242= Q. DOES LITTLE PROFESSOR HAVE AN RDC? 1243= A. NO, WE DO NOT. 1244= Q. HAS THE LITTLE PROFESSOR EVER RECEIVED AN RDC DISCOUNT FROM 1245= ANY SUPPLIER? 1246= A. NO, WE HAVE NOT. 1247= Q. ARE YOU FAMILIAR WITH THE REQUIREMENTS THAT GENERALLY MUST 1248= BE MET TO QUALIFY FOR AN RDC DISCOUNT? 1249= A. I BELIEVE SO. 1250= Q. COULD YOU EXPLAIN WHAT YOUR UNDERSTANDING IS OF WHAT THEY 1251= ARE? 1252= A. YOU NEED TO ORDER IN CASE QUANTITIES, YOU NEED TO HAVE A 1253= SELF --FREE-STANDING BUILDING, YOU NEED TO HAVE A LOADING 1254= DOCK. I THINK THAT'S --YOU NEED TO DISTRIBUTE THAT. 1255= Q. AND BY "DISTRIBUTE," YOU MEAN -- 1256= A. YOU HAVE TO THEN PASS THOSE ON TO SOMEONE ELSE OTHER THAN 1257= THE END USER. 1258= Q. SO A SINGLE --YOU CAN'T JUST BE A SINGLE STORE RECEIVING 1259= BOOKS? 1260= A. NO, NO. 1261= Q. NOW, YOU MENTIONED --I CAN'T RECALL THE EXACT PHRASE YOU 1262= USED, CARTON QUANTITY, OR -- 18
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1263= A. YOU MUST ORDER IN CARTON QUANTITIES. 1264= Q. CAN YOU EXPLAIN WHAT THAT MEANS? 1265= A. CARTON IS A BOX THAT CONTAINS A CERTAIN NUMBER OF THE SAME 1266= TITLE. IN HARDBACKS, IT COULD BE 10 OR 20, DEPENDING ON HOW 1267= THE PUBLISHER PACKS THEM. PAPERBACKS, IT COULD BE A HUNDRED 1268= COPIES OR MORE. ALL THE SAME TITLE, IN EACH BOX. 1269= Q. IS IT POSSIBLE, OR IS IT RATIONAL BUSINESS OPERATION FOR 1270= LITTLE PROFESSOR TO ORDER MANY OF ITS BOOKS IN CARTON QUANTITY? 1271= A. NOT FOR A STORE OUR SIZE. 1272= Q. WHY IS THAT? 1273= A. WE JUST DON'T SELL THAT MANY. WE DON'T NEED THAT MANY. 1274= Q. WHAT PROPORTION OF BOOKS THAT YOU SELL, THE TITLES THAT ARE

1275= SOLD IN YOUR STORE, WOULD YOU ESTIMATE YOU'RE ABLE TO ORDER 1276= WHOLE CARTONS? 1277= A. WHAT PROPORTION? IT WOULD BE SO TINY, I CAN'T EVEN GIVE AN 1278= ESTIMATE. 1279= Q. YOU SAID BEFORE THAT RDC AND --LITTLE PROFESSOR HAS NOT 1280= RECEIVED ANY RDC DISCOUNTS. TO YOUR KNOWLEDGE, HAS THE LITTLE 1281= PROFESSOR EVER QUALIFIED FOR AN RDC DISCOUNT FROM A PUBLISHER 1282= OR SUPPLIER? 1283= A. NO, WE HAVE NOT. 1284= Q. TURNING BACK TO THE FIRST BINDER, TAB 24, WHICH IS 1285= PLAINTIFF'S EXHIBIT NUMBER 7, PAGES 2 AND 781 THROUGH 784, IS 1286= THIS THE BOOK BUYER'S HANDBOOK ENTRY FOR SIMON & SCHUSTER FOR 1287= THE YEAR 2000? 1288= A. YES, IT IS. 1289= Q. DO YOU SEE A RETAIL DISTRIBUTION CENTER DISCOUNT SCHEDULE 1290= HERE, IN THE --DIRECT YOUR ATTENTION TO PAGE 782, LEFT COLUMN. 1291= A. YES, I DO. 1292= Q. WHERE IS THAT? 1293= A. IT'S AT THE LEFT-HAND COLUMN. IT BEGINS, "RETAIL 1294= DISTRIBUTION CENTER PLAN." 1295= Q. AND THERE'S A 48 PERCENT DISCOUNT SHOWN THERE? 1296= A. YES, IT IS. 1297= Q. DOES LITTLE PROFESSOR RECEIVE THAT DISCOUNT? 1298= A. NO, WE DO NOT. 1299= Q. DOES LITTLE PROFESSOR INSTEAD RECEIVE THE DISCOUNTS ABOVE 1300= THAT POINT, AND ON PAGE 781, DISCOUNT SCHEDULE? 1301= A. YES, WE DO. 1302= Q. AND IS THAT TRUE FOR ALL PUBLISHERS FROM WHICH LITTLE 1303= PROFESSOR PURCHASES, IT DOES NOT RECEIVE THE RED BOOK ENTRY 1304= SHOWN FOR RDC DISCOUNTS? 1305= A. THAT IS CORRECT. 1306= Q. THE ACTUAL DISCOUNT RECEIVED BY LITTLE PROFESSOR, IS THAT 1307= SHOWN FOR THE DROP SHIPMENTS OR THE NON-RDC ORDERS? 1308= A. THAT'S RIGHT, YES. 1309= Q. HAVE YOU EVER HEARD OF ANY PROGRAM CALLED A HOLIDAY 1310= FEATURED TITLE PROGRAM? 1311= A. NO. 1312= Q. HAS LITTLE PROFESSOR EVER --1313= A. LET ME ASK A QUESTION, JUST FOR CLARIFICATION. YOU SAY, 1314= HOLIDAY FEATURED TITLE PROGRAM? I VAGUELY RECOLLECT SOMETHING 1315= THAT'S DONE THROUGH THE REGIONAL BOOKSELLERS ASSOCIATIONS THAT 1316= MAY USE THAT PHRASE. 1317= Q. WHAT IS YOUR UNDERSTANDING OF THAT PROGRAM? 1318= A. THAT THESE ARE BOOKS THAT ARE IN THE REGIONAL CATALOGS PUT 1319= OUT BY SOUTHEASTERN BOOKSELLERS, AND SO ON. 1320= Q. YOU SAY, SOUTHEASTERN BOOKSELLERS, AND SO ON? 1321= A. THAT HAPPENS TO BE OUR REGION, YES. 1322= Q. IS THAT A WHOLESALER OR A PUBLISHER? 1323= A. NO, THAT'S A REGIONAL ASSOCIATION. 1324= Q. A REGIONAL ASSOCIATION. ARE THERE EXTRA DISCOUNTS ON THOSE 1325= BOOKS? 1326= A. I'M VAGUE ON IT. I THINK FROM TIME TO TIME INGRAM OFFERS A 1327= RETURNABILITY OR SOMETHING LIKE THIS. WE HAVE NOT TAKEN 1328= ADVANTAGE OF IT, SO THAT'S WHY I'M FUZZY ON IT. 1329= Q. IS THE INGRAM EXTRA RETURNABILITY YOU JUST MENTIONED 1330= ASSOCIATED WITH THE SOUTHEASTERN BOOKSELLERS CATALOGS? SORRY, 1331= I'M CONFUSED. 1332= A. I'M CONFUSED ON IT, TOO. 19
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1333= Q. LET ME ASK YOU, DOES LITTLE PROFESSOR EVER RECEIVE 1334= NON-RETURNABLE DISCOUNTS ON SELECT BEST-SELLING HOLIDAY BACK 1335= LIST TITLES? 1336= A. NO. AGAIN, I'M SORRY, I HAVE TO QUALIFY, ONLY BECAUSE IF 1337= THAT IS WHAT IT REFERS TO.... NO, MY ANSWER WOULD STILL BE NO, 1338= SINCE WE DON'T USE THAT PROGRAM, SO NO, WE DO NOT RECEIVE IT. 1339= Q. LET'S TURN BACK TO THE TAB 25 --I'M SORRY --26 IN THE 1340= BLACK BINDER, LIST OF VENDORS. FROM THE VENDORS THAT LITTLE 1341= PROFESSOR PURCHASES FROM, WHICH YOU TESTIFIED WAS ALL BUT 1342= MACMILLAN COMPUTER, HAS LITTLE PROFESSOR EVER RECEIVED FREIGHT 1343= TERMS THAT ARE DIFFERENT FROM THE VENDORS' PUBLISHED TERMS? 1344= A. NO. 1345= Q. HAS LITTLE PROFESSOR EVER RECEIVED RETURNS TERMS THAT ARE 1346= DIFFERENT FROM THE RETURNS TERMS OF THESE VENDORS THAT ARE 1347= PUBLISHED IN THE RED BOOK? 1348= A. NO. 1349= Q. IS IT SOMETIMES POSSIBLE TO PURCHASE BOOKS ON A 1350= NON-RETURNABLE BASIS? 1351= A. YES. 1352= Q. UNDER WHAT CIRCUMSTANCES IS THAT POSSIBLE? 1353= A. A FEW PUBLISHERS HAVE WHAT IS CALLED A BUSINESS PLAN, IN 1354= WHICH THE BOOKS ARE SHIPPED DIRECTLY TO THE CONSUMER, AND THEN 1355= BILLED BACK TO US, AND THOSE ARE SHIPPED OUT NON-RETURNABLE. 1356= Q. ARE THERE --HAS LITTLE PROFESSOR BEEN ABLE TO TAKE 1357= ADVANTAGE OF THAT PLAN? 1358= A. ON VERY RARE OCCASIONS, BECAUSE THE NUMBER IS SO HIGH. 1359= Q. THE NUMBER OF...? 1360= A. THE NUMBER REQUIRED, AND ALSO, IT'S HANDLED QUITE 1361= DIFFERENTLY. IT HAS TO GO --THE ORDER HAS TO GO DIRECTLY TO 1362= THE PUBLISHER'S REP. HE OR SHE THEN VERIFIES THAT THIS IS FOR 1363= A BUSINESS USE, AND SO IT'S --IT'S SEPARATED COMPLETELY FROM 1364= THE OTHERS. 1365= IT IS THEN SENT --FOR EXAMPLE, IF YOU WERE BANK OF 1366= AMERICA, IT WOULD BE SENT DIRECTLY TO YOU. IT WOULD NEVER COME 1367= THROUGH THE STORE AT ALL. THE BILLING WOULD COME TO US, BUT 1368= THESE BOOKS ARE GONE ONCE AND FOR ALL. THEY ARE 1369= NON-RETURNABLE. EVERYBODY CAN TAKE ADVANTAGE OF IT. IT'S 1370= OFFERED TO EVERYONE. 1371= Q. THE BOOKS PURCHASED UNDER THAT KIND OF PLAN ARE NEVER 1372= STOCKED AT LITTLE PROFESSOR'S STORE, IS THAT RIGHT? 1373= A. NOT THOSE PARTICULAR BOOKS. THE TITLE MIGHT BE. 1374= Q. THE TITLE STOCK IS PURCHASED ON A RETURNABLE OR A 1375= NON-RETURNABLE --1376= A. ON A RETURNABLE BASIS. 1377= Q. ARE THERE ANY OTHER CIRCUMSTANCES UNDER WHICH LITTLE 1378= PROFESSOR IS ABLE TO BUY, ON A NON-RETURNABLE BASIS, WHAT 1379= PUBLISHERS OFFER AS NON-RETURNABLE TERMS? 1380= A. THEY DO THAT AGAIN ON REMAINDER TITLES, BUT THEY GIVE A 1381= HIGHER DISCOUNT, AND THAT'S IT, BUT AGAIN, EVERYBODY CAN DO 1382= THAT. 1383= THE COURT: I'M SORRY, WHAT ARE REMAINDER TITLES? 1384= THE WITNESS: REMAINDER TITLES, SIR, ARE BOOKS THAT 1385= ARE EITHER OFFICIALLY OUT OF PRINT AND NOW --RANDOM HOUSE 1386= VALUE LINE WOULD BE A GOOD EXAMPLE, OR THEY ARE BOOKS THAT ARE 1387= PRINTED SOLELY FOR THAT PURPOSE, THAT --IT'S WHAT YOU SEE IN A 1388= PUBLISHER'S WAREHOUSE. IT'S A WAREHOUSE SALE, IS A SIMPLE WAY 1389= TO PUT IT. 1390= BY MR. HOHENGARTEN: 1391= Q. ARE REMAINDERS USUALLY SOLD AT A DIFFERENT DISCOUNT THAN 1392= YOUR TRADE DISCOUNT? 1393= A. ABSOLUTELY. 1394= Q. COULD YOU JUST BRIEFLY DESCRIBE WHAT THE DISCOUNT WOULD 1395= HAVE BEEN? 1396= A. IT COULD BE AS HIGH AS 60 PERCENT. GENERALLY IT'S 1397= 50 PERCENT OR BETTER. 1398= Q. OTHER THAN THE PLAN FOR DIRECT SALES TO BUSINESSES THAT YOU 1399= JUST MENTIONED, HAS ANY VENDOR EVER ALLOWED LITTLE PROFESSOR TO 1400= PURCHASE SOME BOOKS ON A RETURNABLE BASIS AND OTHER BOOKS ON A 1401= NON-RETURNABLE BASIS? 1402= A. NO. 20
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1403= Q. IS THAT TRUE FOR EVERY YEAR FROM 1994 TO THE PRESENT? 1404= A. IT IS. 1405= Q. HAS LITTLE PROFESSOR EVER TAKEN A CREDIT FOR BOOKS THAT IT 1406= INTENDS TO RETURN WITHOUT ACTUALLY RETURNING THOSE BOOKS? 1407= A. NO. 1408= Q. WHEN DOES LITTLE PROFESSOR TAKE CREDITS FOR THE RETURNS 1409= THAT IT MAKES TO SUPPLIERS? 1410= A. WHEN WE'VE PULLED THE BOOKS, PACKED THE BOOKS, AND CREATED 1411= THE PACKING LIST, THE RETURN PACKING LIST, IS GENERALLY WHEN WE 1412= FEEL THEY ARE OUT OF OUR INVENTORY. WE TAKE CREDIT AT THAT 1413= POINT. 1414= Q. DO YOU KNOW WHETHER SUPPLIERS' TERMS, PUBLISHED TERMS, 1415= ALLOW THE LITTLE PROFESSOR TO DO THAT? 1416= A. I THINK THE TERMS ARE NOT WHAT --THEY DO ALLOW IT, BECAUSE 1417= WE'VE DONE IT FOR YEARS AND YEARS AND YEARS. I THINK THEY 1418= WOULD PREFER IT WHEN THEY HAVE ALREADY GENERATED THE CREDITED 1419= IT MEMO. THE REALITY IS THAT THEY ARE SO INCREDIBLY SLOW IN 1420= GENERATING THE CREDIT MEMO, THAT WE ARE FORCED TO DO THAT. 1421= Q. SO YOU DON'T ALWAYS WAIT FOR THE CREDIT MEMO FROM --1422= A. NO. 1423= THE COURT: HOW MUCH MORE HAVE YOU GOT? 1424= MR. HOHENGARTEN: A BIT MORE. FIFTEEN MINUTES,

1425= MAYBE, YOUR HONOR. 1426= THE COURT: ALL RIGHT. THAT WILL BE THE LENGTH OF 1427= OUR FIRST MORNING RECESS. COURT WILL BE IN RECESS UNTIL 10: 15. 1428= (RECESS FROM 10: 00 A. M. TO 10: 15 A. M.) 1429= (CONTINUED ON FOLLOWING PAGE. NOTHING OMITTED.) 1430= 1431= 1432= 1433= 1434= 1435= 1436= 1437= 1438= 1439= 1440= 1441= 1442= 1443= 1444= 1445= 1446= 1447= 1448= 1449= 1450= THE COURT: I'VE JUST BEEN CONCERNED WITH THE --1451= SINCE OUR LITTLE WHAT YOU MIGHT CALL DUST-UP OF THE EXHIBIT LIST 1452= AND SEE THAT WE HAD EXHIBIT LISTS FROM EVERYBODY, AND I DON'T 1453= HAVE AN EXHIBIT LIST FROM BARNES & NOBLE. 1454= HAVE THE DEFENDANTS RECEIVED AN EXHIBIT LIST FROM 1455= BARNES & NOBLE? 1456= MR. HOHENGARTEN: THE PLAINTIFFS HAVE, YOUR HONOR, 1457= YES. 1458= THE COURT: PLAINTIFFS. EXCUSE ME. 1459= MR. HOHENGARTEN: YES. 1460= THE COURT: YOU HAVE? 1461= MR. HOHENGARTEN: WE HAVE, YES. 1462= THE COURT: ALL RIGHT. WELL, WOULD YOU, PLEASE, 1463= FURNISH ME WITH A COPY. WE PERHAPS MISLAID OURS. 1464= MR. PETROCELLI: WE WILL DO SO, YOUR HONOR. 1465= THE COURT: AND MAYBE BY NEXT RECESS OR THE END OF 1466= THE DAY, SOMETHING LIKE THAT, I COULD GET A COPY. 1467= MR. PETROCELLI: WE'RE WORKING ON IT RIGHT NOW. 1468= THANK YOU. 1469= THE COURT: ALL RIGHT. 1470= MR. HOHENGARTEN: SHALL I PROCEED? 1471= THE COURT: YOU MAY PROCEED, YEAH. 1472= BY MR. HOHENGARTEN: 1473= Q. I WANT TO ASK YOU A FEW MORE QUESTIONS ABOUT INGRAM BOOK 21
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1474= COMPANY, MR. BARRINGER. HOW IMPORTANT IS INGRAM TO LITTLE 1475= PROFESSOR'S BUSINESS? 1476= A. VERY, VERY IMPORTANT. 1477= Q. AND WHY IS THAT? 1478= A. THEY ARE A PRIMARY WHOLESALER. THEY DELIVER BOOKS VERY 1479= EXPEDITIOUSLY. WE PUT AN ORDER IN, WE GET IT THE NEXT DAY. AND 1480= MUCH OF OUR BUSINESS IS PREDICATED OP SPECIAL ORDER SERVICE. 1481= Q. DO YOU HAVE ANY IDEA HOW MANY UNITS OR THE ACTUAL BOOKS THAT 1482= LITTLE PROFESSOR ORDERS FROM INGRAM DURING AN AVERAGE WEEK? 1483= A. WELL, OF COURSE, THAT WOULD VARY DEPENDING ON HOW MANY 1484= SPECIAL ORDERS WE GOT IN QUANTITY. BUT I WOULD SAY JUST IN THE 1485= NORMAL COURSE, IT WOULD BE 6-, 700 IN A WEEK, 6-OR 700. 1486= Q. AND DURING THE PERIOD FROM 1994 TO THE PRESENT, WHAT IS THE 1487= DISCOUNT SCHEDULE THAT LITTLE PROFESSOR HAS OPERATED UNDER WITH 1488= INGRAM? 1489= A. IT HAS REMAINED THE SAME, 40 FOR ONE TO FOUR; 41 FOR FIVE TO 1490= NINE; 42 FOR TEN OR MORE. 1491= Q. AND DURING THE PERIOD FROM 1994 TO THE PRESENT, HAS LITTLE 1492= PROFESSOR EVER RECEIVED ANY INCENTIVE PAYMENTS OR INCENTIVE 1493= REBATES FROM INGRAM? 1494= A. NO. 1495= Q. CAN YOU EXPLAIN THE TERMS THAT APPLY WHEN LITTLE PROFESSOR 1496= RETURNS BOOKS TO INGRAM? 1497= A. WE RETURN THEM, WE RECEIVE A PENALTY ON RETURNS. 1498= Q. WHAT RETURNS CREDIT DO YOU RECEIVE? 1499= A. FIFTY PERCENT. 1500= Q. IS IT --IT'S THE OPPOSITE OF A PURCHASE DISCOUNT; THE 1501= HIGHER THE RETURNS DISCOUNT, THE WORSE IT IS FOR THE RETAILER? 1502= A. EXACTLY. 1503= Q. AND HAS THAT BEEN TRUE, NAMELY THAT YOU'RE CREDITED AT 1504= 50 PERCENT THROUGHOUT THE PERIOD FROM 1994 TO THE PRESENT? 1505= A. YES. 1506= Q. HAS INGRAM EVER WAIVED A PENALTY ON RETURNS FOR LITTLE 1507= PROFESSOR? 1508= A. NOT ON NORMAL PURCHASES, NO. 1509= Q. CAN YOU EXPLAIN WHAT YOU MEAN? 1510= A. THEY DO HAVE A PROGRAM THAT THEY USE PERIODICALLY FOR AUTHOR 1511= EVENTS. AND ONE OF THE STIPULATIONS THERE IS THAT WE MAY RETURN 1512= THE BOOKS FOLLOWING THE EVENT WITHOUT PENALTY. 1513= Q. OKAY. AND DO YOU KNOW WHAT PURCHASE DISCOUNT LITTLE 1514= PROFESSOR RECEIVES FOR THOSE AUTHOR EVENT PURCHASES? 1515= A. I BELIEVE IT'S 42 PERCENT, BUT IN THIS CASE, WE PAY THE -- 1516= WE PAY THE FREIGHT IN. THERE IS NO FREE FREIGHT. 1517= Q. COULD LITTLE PROFESSOR PURCHASE MOST OR ALL OF ITS BOOKS 1518= FROM INGRAM UNDER THAT AUTHOR EVENT PROGRAM? 1519= A. NO. 1520= Q. WHY NOT? 1521= A. BECAUSE IT'S ONLY WHEN WE HAVE AN AUTHOR OR SPECIAL EVENT. 1522= THOSE ARE THE ONLY TIME IT APPLIES. 1523= Q. DO YOU HAVE AN IDEA OF WHAT PERCENTAGE OF YOUR PURCHASES 1524= FROM INGRAM WOULD BE UNDER THAT PROGRAM? 1525= A. VERY, VERY, VERY MINUSCULE. 1526= Q. DID INGRAM PROVIDE A CASH DISCOUNT OR OFFER A CASH DISCOUNT 1527= TO LITTLE PROFESSOR? 1528= A. YES, IT DOES. 1529= Q. ON WHAT TERMS? 1530= A. 2 PERCENT TEN DAYS END OF THE MONTH. 1531= Q. SO TO RECEIVE THE CASH DISCOUNT, YOU HAVE TO PAY YOUR BILL 1532= TEN DAYS AFTER THE END OF THE MONTH? 1533= A. THAT IS CORRECT. 1534= Q. AND HAS THAT BEEN THE CASE THROUGHOUT THE PERIOD FROM '94 TO 1535= THE PRESENT? 1536= A. YES, IT HAS. 1537= Q. HAS LITTLE PROFESSOR EVER BEEN OFFERED A 2 PERCENT CASH 1538= DISCOUNT FOR PAYING 25 DAYS AFTER THE END OF THE MONTH? 1539= A. NEVER. 1540= Q. LITTLE PROFESSOR BEEN OFFERED A 2 PERCENT CASH DISCOUNT FOR 1541= PAYING ANY POINT AFTER TEN DAYS AFTER THE END OF THE MONTH? 1542= A. NO, THERE IS NO DISCOUNT AFTER THAT. 1543= Q. DO YOU PAY YOUR BILLS TO INGRAM ON TIME? 22
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1544= A. YES, WE DO. 1545= Q. AND ARE YOU CAPABLE OF RECEIVING BUSINESS INFORMATION 1546= ELECTRONICALLY THROUGH EDI WITH INGRAM? 1547= A. BUSINESS INFORMATION? CLARIFY, PLEASE. 1548= Q. I THINK YOU TESTIFIED BEFORE THAT YOU RECEIVE PACKING LISTS 1549= FROM INGRAM ELECTRONICALLY.

1550= A. THAT'S CORRECT. 1551= Q. AND YOU PLACE ORDERS TO INGRAM ELECTRONICALLY? 1552= A. THAT'S CORRECT. 1553= Q. SO YOU HAVE EDI COMMUNICATIONS WITH INGRAM? 1554= A. YES, WE DO. 1555= Q. YOU MENTIONED BEFORE THAT LITTLE PROFESSOR PURCHASES SOME 1556= BOOKS FROM INGRAM UNDER THE VENDOR OF RECORD PROGRAM, RIGHT? 1557= A. YES, WE DO. 1558= Q. I'M SORRY. I CAN'T RECALL IF YOU SAID WHAT PROPORTION OF 1559= BOOKS PURCHASED FROM INGRAM WERE UNDER THAT PROGRAM? 1560= A. AGAIN, IT'S A VERY SMALL AMOUNT. 1561= Q. AND -- 1562= A. I CAN'T QUANTIFY IT. 1563= Q. AND DO YOU KNOW WHAT DISCOUNT LITTLE PROFESSOR RECEIVES ON 1564= THOSE PURCHASES? 1565= A. 42 PERCENT. 1566= Q. HAS THAT BEEN THE SAME SINCE 1994 TO THE PRESENT, DO YOU 1567= KNOW? 1568= A. I DO NOT KNOW. 1569= Q. ARE YOU FAMILIAR WITH AN INGRAM PROGRAM CALLED THE SCHEDULED 1570= DELIVERY PROGRAM? 1571= A. I'VE HEARD OF IT. I DON'T USE IT. 1572= Q. HOW DID YOU HEAR OF IT? 1573= A. WHEN INGRAM --INGRAM'S REP CAME TO TOWN, SHE MENTIONED THE 1574= POSSIBILITY OF DOING IT. 1575= Q. UH --1576= A. IT WAS PHRASED "WOULD YOU BE INTERESTED." WHEN SHE TOLD ME 1577= THE TERMS, I SAID NO. 1578= Q. WHAT TERMS DID SHE TELL YOU ABOUT? 1579= A. THE TERMS WOULD BE THAT THERE WOULD BE ONE SHIPMENT A WEEK 1580= AND WE WOULD RECEIVE 1 PERCENT ADDITIONAL DISCOUNT. 1581= Q. DO YOU KNOW, WAS THERE ANY WRITTEN BROCHURE THAT YOU SAW? 1582= A. I DID NOT. 1583= Q. AND WHY DID YOU DECIDE NOT TO TAKE ADVANTAGE OF THIS 1584= PROGRAM? 1585= A. WELL, IT JUST NEGATES THE WHOLE JUST-IN-TIME, GET A BOOK IN 1586= IN A HURRY, GET A SPECIAL ORDER FOR THE CUSTOMER TODAY 1587= PHILOSOPHY THAT WE OPERATE WITH. THAT, PLUS THE FACT THAT I 1588= WOULD MUCH RATHER HAVE TO INPUT 4 CARTONS 4 DAYS A WEEK THAN 25 1589= CARTONS AT ONE TIME. 1590= Q. ARE YOU FAMILIAR WITH ANY INGRAM PROGRAM CALLED THE SUMMARY 1591= BILLING PROGRAM? 1592= A. NO, I'M NOT. 1593= Q. HAVE YOU EVER HEARD OF AN INGRAM PROGRAM CALLED BACKLIST 1594= PLUS? 1595= A. NO. 1596= Q. HAVE YOU EVER RECEIVED STOCK OFFERS OR SOMETHING LIKE A 1597= STOCK OFFER FROM INGRAM? 1598= A. NO. 1599= Q. I JUST WANT TO CLARIFY SOMETHING. WE TALKED BEFORE ABOUT 1600= COMMUNICATIONS YOU HAD WITH BAKER & TAYLOR, ASKING IT TO PROVIDE 1601= THE SAME SERVICE LEVEL AS INGRAM. DO YOU RECALL THAT? 1602= A. YES, I DO. 1603= Q. DID --I THINK YOUR --WASN'T ENTIRELY CLEAR FROM YOUR 1604= ANSWER. DID BAKER & TAYLOR EVER MEET YOUR REQUIREMENTS? 1605= A. NO. 1606= Q. NOW, YOU TESTIFIED THAT INGRAM PROVIDES A CASH DISCOUNT. 1607= LOOKING AT TAB 26, THE LIST OF VENDORS, FROM '94 TO THE PRESENT, 1608= HAS LITTLE PROFESSOR RECEIVED A CASH DISCOUNT FROM ANY OF THE 1609= OTHER VENDORS THERE? 1610= A. RANDOM HOUSE AND HARPERCOLLINS OFFER CASH DISCOUNTS, BUT I 1611= DON'T REMEMBER WHAT YEARS THEY DID IT. AND WHATEVER YEARS THEY 1612= DID IT, YES, WE DID. I'M SORRY FOR THE VAGUENESS, BUT I DON'T 1613= KNOW WHAT THOSE YEARS WERE. I THINK IT WAS PRIOR TO '94. 23
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1614= Q. OKAY. WHAT ABOUT THE OTHER WHOLESALERS ON THE LIST, BAKER & 1615= TAYLOR AND KOEN? *** CHKSP*** 1616= A. THEY BOTH OFFER A SIMILAR DISCOUNT, CASH DISCOUNT. 1617= Q. ON WHICH TERMS? 1618= A. TWO PERCENT TEN DAYS, EOM. 1619= Q. AND HAVE YOU EVER --HAS LITTLE PROFESSOR EVER RECEIVED A 1620= CASH DISCOUNT FROM PENGUIN? 1621= A. IT'S POSSIBLE, BUT I DON'T KNOW. 1622= Q. YOU DON'T RECALL EVER HAVING RECEIVED ONE? 1623= A. NO. 1624= Q. AND DO YOU EVER RECEIVE SHIPMENTS FROM VENDORS THAT ARE 1625= MISSING BOOKS OR CONTAIN DAMAGED BOOKS? 1626= A. UNFORTUNATELY, FREQUENTLY. 1627= Q. AND YOU OBTAIN CREDIT FOR THOSE BOOKS, SHORT SHIPMENTS OR 1628= DAMAGES? 1629= A. MOST OF THE TIME. 1630= Q. HOW DO YOU DO THAT? 1631= A. WE MARK ON THE PACKING LIST AS WE ARE UNPACKING THE BOOKS IF 1632= THEY ARE --THERE IS A SHORT OR IF THERE IS DAMAGE. THAT 1633= PACKING LIST THEN GOES TO OUR BOOKKEEPER WHO WILL DO ONE OF TWO 1634= THINGS. EITHER SHE WILL REORDER THE BOOK. SHE GETS ON THE 1635= PHONE AND CALLS INGRAM, IS USUALLY THE ONE. 1636= SHE WILL CALL INGRAM, SAY "WE'RE SHORT A COPY OF 1637= XYZ," OR --AND SHE WILL EITHER ASK FOR CREDIT OR SHE WILL ASK 1638= THEM TO RESHIP THE BOOK. 1639= Q. IS THAT DONE ITEM BY ITEM? 1640= A. ITEM BY ITEM. 1641= Q. IS THAT A COST TO YOUR STORE? 1642= A. SURE. IT'S TIME. 1643= Q. HAVE YOU --HAVE YOU EVER RECEIVED AN AUTOMATIC DISCOUNT OR 1644= DEDUCTION FROM A SUPPLIER FOR SHORTAGES OF DAMAGED BOOKS? 1645= A. NO, I HAVE NOT. 1646= Q. DOES LITTLE PROFESSOR ADVERTISE IN NEWSPAPERS OR OTHER MEDIA 1647= ADVERTISEMENTS? 1648= A. YES, WE DO. 1649= Q. AND DO YOU RECEIVE CO-OP --COOPERATIVE ADVERTISING FUNDS ON 1650= OCCASION FROM PUBLISHERS? 1651= A. ON OCCASION. 1652= Q. IN CONNECTION WITH A MEDIA AD, IS THERE A MAXIMUM AMOUNT 1653= THAT LITTLE PROFESSOR CAN GET FROM A PUBLISHER IN CO-OP FUNDS? 1654= A. THE MAXIMUM WOULD BE WHATEVER WE SPENT. 1655= Q. YOU SPENT ON THE AD? 1656= A. ON THE AD, YES. 1657= Q. IS THAT TRUE FOR ALL OF THE SUPPLIERS LISTED ON THIS EXHIBIT 1658= 2591, TAB 26? 1659= A. (REVIEWING DOCUMENT.) 1660= IN REALITY, THE ONLY ONES THAT WE'VE REALLY GOTTEN 1661= CO-OP FROM ARE FROM THE MAJOR SUPPLIERS, HARPER, RANDOM, SIMON 1662= AND SO ON. AND IN THAT CASE, IT'S TRUE. I'VE NEVER USED CO-OP 1663= FOR MOST OF THESE. 1664= Q. LITTLE PROFESSOR'S NEVER RECEIVED AN AMOUNT IN EXCESS OF ITS 1665= COST OF PLACING AN AD FROM ANY OF THOSE PUBLISHERS? 1666= A. NO. 1667= Q. HAVE YOU EVER RECEIVED MORE CO-OP FROM A PUBLISHER IN A 1668= GIVEN YEAR THAN THE AMOUNT ALLOWED BY ITS PUBLISHED POLICY? 1669= A. NO. 1670= Q. HAS LITTLE PROFESSOR EVER RECEIVED COOPERATIVE ADVERTISING 1671= FUNDS FOR ADVERTISEMENTS WHICH DO NOT CONTAIN --DO NOT PERTAIN 1672= TO THE SPECIFIC BOOKS OF THE PUBLISHER WHO'S SUPPLYING THE 1673= CO-OP? 1674= A. NO. 1675= Q. FROM 1994 TO THE PRESENT, HAS LITTLE PROFESSOR RECEIVED ANY 1676= INCENTIVE OR REBATE FOR INCREASING ITS PURCHASES FROM SUPPLIERS? 1677= A. NO. 1678= Q. HAVE YOU RECEIVED ANY INCENTIVE OR REBATE FOR INCREASING 1679= PURCHASES FROM AVON? 1680= A. PARDON ME FOR A MOMENT. LET ME JUST REVISIT THAT. 1681= AGAIN, I AM NOT SURE OF THE YEAR, BUT AS I LOOK DOWN, 1682= SOME OF THE --PUTNAM, BERKELEY, FOR EXAMPLE. THERE WAS A TIME 1683= WHEN WE DID GET A REBATE FOR INCREASING OUR PURCHASES THERE. 24
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1684= BUT WHETHER THAT WAS IN THIS TIME FRAME, I --I CANNOT TESTIFY 1685= TO THAT. 1686= Q. AND THAT WAS A REBATE RELATED TO INCREASING PURCHASES AS 1687= OPPOSED TO ELIMINATING OR LIMITING RETURNS? 1688= A. I'M NOT SURE. 1689= Q. DO YOU EVER HAVE DISPUTES WITH PUBLISHERS OR WHOLESALERS 1690= REGARDING THE AMOUNTS THAT YOU OWE? 1691= A. FREQUENTLY. 1692= Q. WHAT KIND OF DISPUTES HAVE ARISEN? 1693= A. WELL, THE MOST COMMON IS THAT WE ARE BILLED FOR BOOKS THAT 1694= WE DON'T RECEIVE OR WE ARE NOT CREDITED FOR RETURNS THAT WE HAVE 1695= SHIPPED BACK. 1696= Q. ARE THERE EVER ANY DISPUTES ABOUT WHETHER A BOOK WAS 1697= RETURNABLE, SAY BECAUSE IT MIGHT HAVE BEEN OUT OF PRINT? 1698= A. NO. 1699= Q. DO YOU EVER RETURN BOOKS AFTER THEY'RE DECLARED OUT OF PRINT

1700= AND NO LONGER RETURNABLE? 1701= A. ONLY BY MISTAKE. 1702= Q. AND WHAT HAPPENS IN THAT CASE? 1703= A. THEY EITHER BOUNCE THE BOOK BACK TO US OR THEY DESTROY IT. 1704= THEY DON'T GIVE US ANY CREDIT FOR IT. 1705= Q. NOW, WHEN YOU HAVE A DISPUTE WITH A PUBLISHER ABOUT WHETHER 1706= YOU'VE RECEIVED BOOKS OR THEY'VE RECEIVED RETURNS, HOW ARE THOSE 1707= DISPUTES RESOLVED? 1708= A. WELL, WE USUALLY WALK IT THROUGH AND TALK IT THROUGH, AND 1709= THIS IS BASICALLY THE BOOKKEEPER'S RESPONSIBILITY, THAT IF 1710= IT'S --IF WE ARE SAYING THAT NO, WE NEVER RECEIVED ONE CARTON 1711= OUT OF THAT SHIPMENT, THEY WILL PRODUCE SOME PROOF OF DELIVERY. 1712= IN WHICH CASE WE SAY, "OKAY, I GUESS WE DID." 1713= CONVERSELY, IF THEY DON'T GIVE US CREDIT FOR 1714= SOMETHING AND WE SAY WE SHIPPED IT OUT, THE BURDEN IS ON US TO 1715= PROVE THAT BY PROOF OF DELIVERY. AND IF SOMEBODY AT THEIR 1716= WAREHOUSE HAS SIGNED FOR IT, THEY GIVE US CREDIT. 1717= Q. SO EACH SIDE PROVIDES PROOF OF DELIVERY ON AN ITEM-BY-ITEM 1718= BASIS OR A CARTON-BY-CARTON BASIS? 1719= A. YES. 1720= Q. HAS ANY VENDOR EVER FORGIVEN A SUM THAT YOU DISPUTED? 1721= A. NO. 1722= Q. HAVE YOU EVER FORGIVEN A SUM THAT ANY VENDOR HAS DISPUTED? 1723= A. UNFORTUNATELY, YES. 1724= Q. UNDER WHAT CIRCUMSTANCES HAVE YOU HAD TO DO THAT? 1725= A. THIS HAD TO DO BASICALLY WITH CO-OP. SOMETIMES THE 1726= RUNAROUND IS SO LONG AND SO DRAWN OUT THAT YOU JUST TOSS IN THE 1727= TOWEL AND SAY IT'S NOT WORTH FIGHTING OVER. 1728= MR. HOHENGARTEN: I'VE NO FURTHER QUESTIONS. 1729= THE COURT: CROSS-EXAMINATION. 1730= MR. NELSON: YOUR HONOR, I HAVE AN EXHIBIT BINDER FOR 1731= THE COURT. 1732= THE COURT: THANK YOU. 1733= MR. NELSON: IF I MAY APPROACH THE WITNESS. 1734= THE COURT: YEAH. 1735= CROSS-EXAMINATION 1736= BY MR. NELSON: 1737= Q. MR. BARRINGER, MY NAME IS RICHARD NELSON, AND I REPRESENT 1738= THE BORDERS GROUP, INC. AND WALDENBOOKS. 1739= A. MR. NELSON. 1740= Q. NOW, MR. BARRINGER, YOU OPENED YOUR STORE IN CHARLOTTE IN 1741= 1977? 1742= A. THAT'S CORRECT. 1743= Q. AND HAVE YOU BEEN ACTIVE IN ANY BUSINESS GROUPS IN 1744= CHARLOTTE? 1745= A. YES, I HAVE. 1746= Q. WHICH GROUPS ARE THOSE? 1747= A. FOR A SHORT TIME, THE CHAMBER OF COMMERCE. 1748= Q. DO YOU FOLLOW LOCAL BUSINESS TRENDS IN CHARLOTTE? 1749= A. YES, I DO. 1750= Q. AND, IN FACT, THE 1990S HAVE BEEN A VERY GOOD DECADE FOR 1751= CHARLOTTE, HAVEN'T THEY? 1752= A. YES, THEY HAVE. 1753= Q. NATION'S BANK IS HEADQUARTERED IN CHARLOTTE? 25
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1754= A. YES. 1755= Q. AND IN 1990'S, NATION BANK ACQUIRED BANK OF AMERICA HERE IN 1756= SAN FRANCISCO; CORRECT? 1757= A. THAT'S TRUE. 1758= Q. AND THEY MOVED THE HEADQUARTERS BACK TO CHARLOTTE? 1759= A. YES. 1760= Q. INDEED, THERE IS A MAJOR UNIVERSITY IN CHARLOTTE, THE 1761= UNIVERSITY OF NORTH CAROLINA AT CHARLOTTE? 1762= A. THAT'S TRUE. 1763= Q. CHARLOTTE HAS ALMOST A HALF MILLION PEOPLE --LITTLE OVER A 1764= HALF MILLION PEOPLE, CORRECT? 1765= A. THAT IS TRUE. 1766= Q. AND IN THE URBAN AREA OF CHARLOTTE, YOU MIGHT HAVE FIND 1767= ABOUT A 1.3 MILLION PEOPLE? 1768= A. THAT'S A REASONABLE COUNT, YES. 1769= Q. IT'S FAIR TO SAY THAT CHARLOTTE IS A GOOD PLACE TO HAVE A 1770= BUSINESS? 1771= A. YES. 1772= Q. NOW, PRIOR TO 1992, YOU MENTIONED THAT THERE WERE TWO 1773= INTIMATE BOOK SHOPS IN TOWN? 1774= A. YES. 1775= Q. WERE THERE ANY BOOK SUPERSTORES IN CHARLOTTE? 1776= A. NO. 1777= Q. SO IT WAS NO SURPRISE THAT BOOKSTORES VIEWED CHARLOTTE AS AN 1778= ATTRACTIVE PLACE TO GO, CORRECT? 1779= A. THAT'S CORRECT. 1780= Q. NOW, YOUR BOOK STORE HAS BEEN IN THE SAME SHOPPING MALL 1781= SINCE 1977, CORRECT? 1782= A. THAT'S CORRECT. 1783= Q. NOW, YOU'VE MOVED SEVERAL TIMES WITHIN THE MALL AND EXPANDED 1784= BUT IT'S BEEN WITHIN THAT SAME AREA; IS THAT RIGHT? 1785= A. TECHNICALLY WE MOVED ONE TIME. 1786= Q. OKAY. AND THAT WAS BACK IN 1990? 1787= A. THAT'S RIGHT. 1788= Q. NOW, WHEN YOU FIRST MOVED INTO YOUR SHOPPING MALL, YOU WERE 1789= IN THE MIDDLE OF A VERY AFFLUENT AREA, CORRECT? 1790= A. YES. 1791= Q. BUT TRENDS IN CHARLOTTE BEING WHAT THEY WERE, THE AFFLUENCE 1792= IN CHARLOTTE HAS MOVED SOUTH OF YOUR MALL, CORRECT? 1793= A. NO, IT'S NOT REALLY TRUE. IT'S JUST EXPANDED. 1794= Q. YOUR AREA HAS GOTTEN A LITTLE BIT OLDER OVER THE YEARS? 1795= A. NO, ACTUALLY IT'S GETTING YOUNGER. 1796= Q. OKAY. WHO IS FRANK BURLESON? 1797= A. FRANK BURLESON IS MY MANAGER. 1798= Q. HOW LONG HAS HE BEEN YOUR MANAGER? 1799= A. EIGHTEEN YEARS. 1800= Q. DOES HE LIVE IN CHARLOTTE? 1801= A. YES, HE DOES. 1802= Q. OKAY. IS HE FAMILIAR WITH THE AREA OF STORE? 1803= A. YES, HE IS. 1804= Q. AND HE'S YOUR MANAGER AT THE STORE EVERY DAY? 1805= A. NOT EVERY DAY. 1806= Q. IS HE THERE FREQUENTLY DURING THE WEEK, THOUGH? 1807= A. YES. 1808= Q. ARE YOU AWARE THAT HE TESTIFIED THAT THE CENTER OF AFFLUENCE 1809= IN CHARLOTTE HAS MOVED SOUTH OF YOUR STORE? 1810= A. NO, I HAVE NO IDEA WHAT HE TESTIFIED. 1811= Q. DO YOU KNOW THE SOUTH PARK AREA? 1812= A. YES, I DO. 1813= Q. IT'S A VERY NICE RETAIL ENVIRONMENT, CORRECT? 1814= A. CORRECT. 1815= Q. THERE'S A INSIDE RETAIL MALL, THE --ACTUALLY THE SOUTH PARK 1816= MALL, RIGHT? 1817= A. YES. 1818= Q. AND IT HAS ANCHOR TENANTS? 1819= A. YES. 1820= Q. DILLARDS, WHICH IS A MAJOR SOUTHERN SORT OF EQUIVALENT OF 1821= MACY'S WOULD YOU SAY? 1822= A. YES. 1823= Q. THE GAP IS IN THE SOUTH PARK MALL? 1824= A. YES. 26
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1825= Q. VARIETY OF OTHERS, OF HIGH-END RETAIL STORES? 1826= A. YES. 1827= Q. THERE ARE RESTAURANTS IN THAT AREA? 1828= A. YES. 1829= Q. AND MOVIE THEATERS? 1830= A. YES. WHICH WE ALSO HAVE IN OUR SHOPPING CENTER. 1831= Q. OKAY. AND ALSO IN THAT SOUTH PARK AREA, THAT'S A --WOULD 1832= YOU TERM THAT A POSH RESIDENTIAL AREA? 1833= A. I DON'T KNOW THAT I'D USE THE WORD "POSH." I LIVE THERE. 1834= Q. WOULD YOU CONSIDER IT -- 1835= (LAUGHTER) 1836= BY MR. NELSON: 1837= Q. WOULD YOU CONSIDER IT A NICE RESIDENTIAL AREA? 1838= A. YES. 1839= Q. THAT'S FINE. AND ACTUALLY THAT'S --SOUTH PARK AREA IS 1840= WHERE THE BORDERS STORE IS LOCATED; IS THAT CORRECT? 1841= A. THAT IS CORRECT. 1842= Q. AND IT'S ALSO WHERE ONE OF BARNES & NOBLE STORES IS LOCATED? 1843= A. YES. 1844= Q. AND IT'S ACTUALLY THE FIRST BARNES & NOBLE STORE THAT CAME 1845= TO CHARLOTTE, THEY WENT TO THE SOUTH PARK AREA, TRUE? 1846= A. TRUE. 1847= Q. AND IS IT FAIR TO SAY THAT THE AREA WHERE --THE LOCATIONS 1848= THAT BORDERS AND BARNES & NOBLE SELECTED IN SOUTH PARK WERE THE 1849= VERY BEST COMMERCIAL AREAS IN CHARLOTTE? 1850= A. UH, I DON'T KNOW WHETHER IT'S RIGHT FOR ME TO ASK YOU TO 1851= QUALIFY WHAT YOU MEAN BY "COMMERCIAL." 1852= Q. WELL, LET ME JUST ASK IT A LITTLE DIFFERENT WAY. WOULD YOU 1853= AGREE THAT THE ORIGINAL BARNES & NOBLE AND THE ORIGINAL BORDERS 1854= PICKED THE BEST LOCATION IN TOWN TO PUT THEIR STORES? 1855= A. NO. 1856= Q. AND WHY NOT? 1857= A. I THINK THE ONE THAT BARNES & NOBLE WENT TO MOST RECENTLY 1858= OUT AT THE ARBORETUM IS A FAR SUPERIOR ONE TO DO BUSINESS. ON A 1859= DAY-TO-DAY BOOK STORE BUSINESS, I PREFER MY LOCATION TO THE 1860= SOUTH PARK JUST BECAUSE OF THE DIFFERENTIAL OF COST PER SQUARE 1861= FOOT. 1862= Q. ARE YOU AWARE THAT YOUR MANAGER FRANK BURLESON ACTUALLY 1863= PREFERS THE AREA THAT BARNES & NOBLE AND BORDERS ARE LOCATED? 1864= A. NO, I'M NOT. 1865= Q. NOW, I'D LIKE TO TURN TO YOUR --THE MAP THAT THEY USED ON 1866= MR. HOHENGARTEN USED IN HIS DIRECT EXAMINATION. AND IT'S THE 1867= BLACK BINDER IN FRONT OF YOU. 1868= AND IT'S EXHIBIT 3 IN THE PLAINTIFF'S BINDER, YOUR 1869= HONOR. 1870= A. I HAVE IT. 1871= Q. OKAY. 1872= NOW, ON THIS MAP, THE WALDENBOOK STORE, WHICH IS 1873= LOCATED AT THE TOP RIGHT WHERE IT SAYS 5643 CENTRAL AVENUE? 1874= A. YES. 1875= Q. OKAY. THAT ONE IS NO LONGER THERE, CORRECT? 1876= A. THAT'S CORRECT. 1877= Q. AND THE WALDENBOOKS STORE --I THINK IT'S A WALDENBOOKS, 1878= IT'S ACTUALLY A BLUE DOT ON SORT OF THE MIDDLE TO THE LEFT, BUT 1879= IT'S CUT OFF --THE DESCRIPTION IS CUT OFF --BUT THAT WAS ALSO 1880= A WALDENBOOKS STORE, CORRECT? 1881= A. YES, IT WAS. 1882= Q. AND THAT IS ALSO CLOSED DOWN; IS THAT CORRECT? 1883= A. THAT'S CORRECT. 1884= Q. AND SO NEITHER OF THOSE STORES COMPETE WITH YOU; IS THAT 1885= CORRECT? 1886= A. THAT'S CORRECT. 1887= Q. AND, IN FACT, SINCE 1977, YOU'VE NEVER VIEWED WALDENBOOKS AS 1888= A COMPETITOR, CORRECT? 1889= A. THAT'S TRUE. 1890= Q. THEY'RE A VERY DIFFERENT KIND OF BOOKSTORE THAN WHAT YOU 1891= ARE? 1892= A. I DON'T KNOW THAT THEY'RE THAT DIFFERENT, BUT THEY DIDN'T -- 1893= THEY WEREN'T A COMPETITOR. 1894= Q. OKAY. NOW, YOU MENTIONED MEDIA PLAY DURING YOUR DIRECT 27
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1895= EXAMINATION. DO YOU REMEMBER THAT? 1896= A. YES, I DO. 1897= Q. OKAY. NOW, THE MEDIA PLAY THAT OPENED IN 1995, IS THAT ON 1898= THIS MAP? 1899= A. NO, IT'S NOT. 1900= Q. OKAY. BUT I MEAN, CAN YOU --CAN YOU LOCATE IT ON THIS MAP? 1901= A. YES. 1902= Q. AND, IN FACT, IF YOU LOOK AT THE RED DOT FOR BORDERS --I'M 1903= SORRY --THE BLUE DOT FOR BORDERS AND THE RED DOT FOR BARNES & 1904= NOBLE ON SHARON ROAD. 1905= A. I SEE THOSE. 1906= Q. OKAY. WHERE WOULD YOU PUT THE MEDIA PLAY --THE FIRST MEDIA 1907= PLAY THAT CAME IN CLOSE TO YOUR STORE, WHERE WOULD YOU PUT THAT 1908= IN RELATION TO THOSE --THOSE PARTICULAR STORES? 1909= A. IF YOU LOOK AT OUR LOCATION AND GO DUE WEST, WHERE IT SAYS 1910= SOUTH BOULEVARD. 1911= Q. I'M WITH YOU. 1912= A. RIGHT AT THE CORNER OF SOUTH BOULEVARD AND --IT'S NOT 1913= MARKED, BUT THE ROAD THAT LEADS FROM PARK ROAD OVER THERE IS 1914= WOODLAWN ROAD. AT THE CORNER OF SOUTH BOULEVARD AND WOODLAWN. 1915= Q. OKAY. AND THAT MEDIA PLAY WAS ABOUT ONE AND A QUARTER MILES 1916= AWAY FROM YOUR STORE? 1917= A. THAT'S CORRECT. 1918= Q. NOW, THERE IS ANOTHER MEDIA PLAY IN CHARLOTTE, TRUE? 1919= A. THERE IS ONE ON THE NORTH SIDE, YES. 1920= Q. IS THAT --1921= A. OUTSIDE THIS MAP AREA. 1922= Q. OKAY. NOW, IS THAT THE ONE ON UNIVERSITY CITY BOULEVARD? 1923= A. THAT'S CORRECT. 1924= Q. OKAY. THERE'S ANOTHER MEDIA PLAY ON INDEPENDENCE BOULEVARD, 1925= TRUE? 1926= A. I DON'T KNOW. 1927= Q. THERE WERE --1928= A. DO YOU HAVE AN ADDRESS ON INDEPENDENCE? 1929= Q. IN FACT, I DO. DOES 10011 EAST INDEPENDENCE BOULEVARD --1930= IT'S DOWN NEAR MATTHEWS? 1931= A. AH. OKAY. THAT'S --THAT'S FAR FROM US. THAT'S IN THE 1932= CHARLOTTE AREA. 1933= Q. AND, IN FACT, IT WOULD BE ON THIS MAP, WHICH IS PLAINTIFF'S 1934= EXHIBIT --BEHIND TAB NUMBER 3, WHICH IS THEIR EXHIBIT 2522. 1935= A. THAT WOULD BE IN THE VERY, VERY FAR RIGHT-HAND QUADRANT, 1936= RIGHT AT THE --RIGHT AT THE BORDER OF 51 AND INDEPENDENCE. 1937= Q. OKAY. BUT, I MEAN, WE'VE INCLUDED THE BARNES & NOBLE DOWN 1938= ON PINEVILLE MATTHEWS ROAD. DO YOU SEE THAT WAY AT THE VERY FAR 1939= QUADRANT DOWN IN THE CENTER DOWN WAY BELOW? 1940= A. YES. 1941= Q. WOULD IT BE FAIR TO SAY THAT THE MEDIA PLAY THAT'S NOT ON 1942= THIS MAP WOULD BE APPROXIMATELY THE SAME DISTANCE FROM YOUR 1943= STORE AS THIS BARNES & NOBLE WHICH --WHICH IS ON THE MAP? 1944= A. PROBABLY NOT IN ACTUAL DRIVING DISTANCE. JUST FOR THE 1945= ABILITY TO GET TO IT, IF YOU'RE TRYING TO COMPARE MY STORE WITH 1946= THEIRS AND COMPETITION, IT WOULD BE MUCH EASIER TO GO FROM 1947= BARNES & NOBLE TO MY STORE THAN IT WOULD BE FROM THIS OTHER 1948= MEDIA PLAY AND MY STORE. 1949= Q. WELL, THIS INDEPENDENCE AVENUE --OR INDEPENDENCE BOULEVARD, 1950= EXCUSE ME, THAT'S JUST AN EXTENSION OF ROUTE 74, CORRECT? 1951= A. THAT IS CORRECT. 1952= Q. IT'S A MAJOR ROAD? 1953= A. IT'S A MAJOR MESSY ROAD TO TRY TO GET THROUGH. 1954= Q. IN FACT, THE BARNES & NOBLE THAT'S LOCATED ON INDEPENDENCE 1955= BOULEVARD, THAT'S IN A VERY BAD RETAIL LOCATION BECAUSE OF THAT, 1956= CORRECT? 1957= A. I AGREE. 1958= Q. NOW, YOU ALSO COMPETE WITH A BOOK STORE CALLED BOOKMARK; IS 1959= THAT RIGHT? 1960= A. THAT'S TRUE. 1961= Q. AND THAT'S --THAT OPENED IN 1995 IN DOWNTOWN, DIDN'T IT? 1962= A. YES, IT DID. 1963= Q. AND THE LOCATION WHERE BOOKMARK IS AT THAT COULD BE FOUND ON 1964= THIS MAP, TRUE? 28
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1965= A. TRUE. 1966= Q. BUT IT'S --BUT IT'S NOT ON THIS PARTICULAR MAP, THOUGH, 1967= RIGHT? 1968= A. NO, IT IS NOT. 1969= Q. NOW, THEY HAVE THE SAME TYPE OF BOOKS THAT YOU HAVE, DON'T 1970= THEY, AT BOOKMARK? 1971= A. YES, THEY DO. 1972= Q. NOW, YOU ALSO COMPETE WITH A STORE CALLED NEWSSTAND 1973= INTERNATIONAL, IS THAT CORRECT? 1974= A. TO SOME DEGREE.

1975= Q. WELL, THEY'RE A VERY WELL-RUN STORE, TRUE? 1976= A. YES, THEY ARE. 1977= Q. AND THEY'RE LOCATED ALSO ON EAST INDEPENDENCE BOULEVARD 1978= WHERE WE JUST TALKED ABOUT THAT BARNES & NOBLE AND THE MEDIA 1979= PLAY, TRUE? 1980= A. THAT'S TRUE. 1981= Q. AND THEY'RE, IN FACT, FAIRLY CLOSE TO THAT BARNES & NOBLE; 1982= ISN'T THAT FAIR TO SAY? 1983= A. YES, IT IS. 1984= Q. COUPLE BLOCKS AWAY? 1985= A. YES. 1986= Q. AND THEY MOVED INTO --INTO TOWN IN THE 1990S AS WELL, 1987= DIDN'T THEY? 1988= A. YES, THEY HAVE TWO LOCATIONS. 1989= Q. THEY HAVE TWO LOCATIONS IN CHARLOTTE? 1990= A. THEY HAD HAVE TWO LOCATIONS. 1991= Q. NOW, THIS LOCATION ON INTERNATIONAL --I'M SORRY --1992= INDEPENDENCE BOULEVARD, THAT'S STILL IN OPERATION, ISN'T IT? 1993= A. YES, IT IS. 1994= Q. AND THEY COMPETE WITH YOU? 1995= A. YES. 1996= Q. NOW, THERE'S ALSO A SAM'S CLUB IN TOWN? 1997= A. YES. 1998= Q. AND THEY HAVE BESTSELLERS. 1999= A. YES. 2000= Q. INDEED, THEY DISCOUNT THEIR BESTSELLERS? 2001= A. YES, THEY DO. 2002= Q. AND SAM'S CLUB COMPETES WITH YOU? 2003= A. YES. 2004= Q. NOW, ALSO I GUESS EVERY SINGLE ONE OF THESE HOUSEHOLDS IN 2005= CHARLOTTE THAT HAS A COMPUTER TERMINAL. THEY HAVE ACCESS TO 2006= AMAZON. COM, DON'T THEY? 2007= A. YES, THEY DO. 2008= Q. AND AMAZON. COM BECAME A PHENOMENON IN THE 1990S? 2009= A. IT DID. 2010= Q. AND AMAZON. COM COMPETES WITH YOU AS WELL? 2011= A. TO A DEGREE. 2012= Q. NOW, THE REASONS THAT YOU DON'T COMPETE WITH THE BARNES & 2013= NOBLE ON INDEPENDENCE BOULEVARD INCLUDE ITS LOCATION; IS THAT 2014= RIGHT? 2015= A. YES. 2016= Q. AND THE AMBIENCE. THE AMBIENCE IS BETTER AT YOUR STORE THAN 2017= IT IS AT THAT PARTICULAR BARNES & NOBLE, CORRECT? 2018= A. THINK THAT'S A PERSONAL PREFERENCE. 2019= Q. BUT THAT'S YOUR OPINION, TRUE? 2020= A. YES. 2021= Q. AND ALSO THE TITLE SELECTION IS BETTER AT YOUR STORE THAN 2022= THAT PARTICULAR BARNES & NOBLE, CORRECT? 2023= A. I CAN'T --I CAN'T ANSWER THAT. I DON'T KNOW. 2024= MR. NELSON: ONE MOMENT, YOUR HONOR. 2025= THE COURT: ALL RIGHT. 2026= (PAUSE IN THE PROCEEDINGS.) 2027= BY MR. NELSON: 2028= Q. WE'LL COME BACK TO THAT IN A LITTLE BIT. 2029= NOW, WOULD YOU SAY THAT THE PARKING AT YOUR STORE IS 2030= THE BETTER THAN THE PARKING AT THAT PARTICULAR BARNES & NOBLE? 2031= A. YOU'RE REFERRING TO THE ONE ON INDEPENDENCE? 2032= Q. I AM, SIR. 2033= A. I'M NOT SURE THAT THE PARKING IS BETTER. THE ACCESSIBILITY 2034= INTO THE LOT --IN AND OUT OF THE LOTS IS BETTER. 29
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2035= Q. AND THAT'S BECAUSE INDEPENDENCE BOULEVARD IS A BUSIER, MORE 2036= CONGESTED ROAD THAN PARK ROAD? 2037= A. ABSOLUTELY. 2038= Q. AND THESE ARE ALL FACTORS THAT PLAY INTO WHAT MAKES A --A 2039= GOOD STORE, A MORE DESIRABLE STORE; IS THAT RIGHT? 2040= A. YES. 2041= Q. NOW, YOUR STORE, I THINK YOU TESTIFIED ON DIRECT 2042= EXAMINATION, HAS A APPROXIMATELY 3600 SQUARE FEET OF RETAIL 2043= SPACE? 2044= A. OF SELLING SPACE OF RETAIL SPACE. 2045= Q. AND THE BORDERS IN TOWN, WHICH IS --I GUESS THE ONLY 2046= BORDERS IN TOWN HAS --IT'S ABOUT 27,000 SQUARE FEET; IS THAT 2047= RIGHT? 2048= A. THAT'S CORRECT. 2049= Q. IT'S MORE THAN SEVEN TIMES BIGGER THAN YOUR STORE? 2050= A. WELL, WE HAVE 4,000-PLUS SQUARE FEET TOTAL STORE. I DON'T 2051= KNOW WHETHER THEY HAVE 27,000 FEET OF SELLING SPACE. I DON'T 2052= KNOW. 2053= Q. FAIR TO SAY, IT'S SIGNIFICANTLY LARGER THAN YOUR STORE? 2054= A. YES. 2055= Q. OKAY. NOW, YOU TESTIFIED YESTERDAY THAT YOU HAVE BETWEEN 2056= 20-AND 25,000 TITLES IN STOCK? 2057= A. THAT'S CORRECT. 2058= Q. AND IT WOULD BE FAIR TO SAY THAT YOU HAVE FEWER TITLES IN 2059= STOCK THAN THE BORDERS STORE IN CHARLOTTE? 2060= A. YES. 2061= Q. AND YOU HAVE FEWER TITLES THAN THE BARNES & NOBLE STORES IN 2062= CHARLOTTE? 2063= A. YES. 2064= Q. AND, IN FACT, I THINK YOU TESTIFIED THAT THE MEDIA PLAY HAS 2065= BETWEEN 10-AND 15,000 SQUARE FEET OF BOOK RETAIL SPACE; IS THAT 2066= RIGHT? 2067= A. YES. YES. 2068= Q. SO PRESUMABLY, THEY HAVE MORE TITLES THAN YOU HAVE AVAILABLE 2069= IN YOUR STORE, TRUE? 2070= A. I'M NOT SURE OF THAT, NO. 2071= Q. BUT YOU ARE SURE OF THE FACT THAT BARNES & NOBLE AND BORDERS 2072= HAVE MORE TITLES THAN YOU HAVE IN YOUR STORE? 2073= A. YES. ACTUALLY FOR THE RECORD, I WOULD SAY THAT MEDIA PLAY 2074= HAS FEWER TITLES THAN WE DO. 2075= Q. DESPITE THE FACT THAT THEY HAVE, WHAT, THREE TIMES THE SPACE 2076= FOR BOOK RETAILING? 2077= A. YES. 2078= Q. OKAY. NOW, YOU'RE A PART OF A FRANCHISE, THE LITTLE 2079= PROFESSOR FRANCHISE? 2080= A. YES. 2081= Q. AND IT'S TRUE THAT THE LITTLE PROFESSOR FRANCHISE AT LEAST 2082= OVER THE '90S HAVE BEEN PROVIDING FEWER SERVICES TO THE 2083= FRANCHISEES? ACTUALLY LET ME ASK IT A DIFFERENT WAY. 2084= YOUR PARTICULAR STORE, YOU HAVE EXPERIENCED IN THE 2085= '90S A DISAGREEMENT WITH LITTLE PROFESSOR WITH REGARD TO THE 2086= SERVICES THEY WERE PROVIDING YOU; IS THAT TRUE? 2087= A. REALLY ONLY THE LAST THREE YEARS. 2088= Q. AND, IN FACT, THE SERVICES THAT THEY PROVIDED HAVE 2089= DETERIORATED DRASTICALLY; IS THAT CORRECT? 2090= A. THAT IS CORRECT. 2091= Q. AND CURRENTLY THOSE SERVICES ARE VIRTUALLY NONEXISTENT? 2092= A. I COULD NOT TESTIFY TO BEING NONEXISTENT, BUT NO. 2093= Q. ARE THE SERVICES ANY BETTER TODAY THAN THEY WERE BACK IN THE 2094= YEAR 2000? 2095= A. NO. 2096= Q. SO THEY HAVEN'T IMPROVED SINCE FEBRUARY 1ST OF 2000, HAVE 2097= THEY? 2098= A. NO, THEY HAVE NOT. 2099= Q. OKAY. NOW, YOU WOULD SAY THAT THE BENEFITS THAT YOU RECEIVE 2100= FOR THE MONEY THAT YOU PAY --WELL, LET ME BACK UP. YOU HAVE TO 2101= PAY A FRANCHISE FEE TO LITTLE PROFESSOR, TRUE? 2102= A. TRUE. 2103= Q. AND THAT VARIES OVER YEARS, BUT IT'S FAIR TO SAY IT'S 2104= FREQUENTLY IN THE 5 DIGITS, $10,000 OR MORE? 30
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2105= A. WELL, THE FEE DOESN'T VARY. THE PERCENTAGE DOESN'T VARY. 2106= YES, IT'S PREDICATED UPON GROSS SALES. 2107= Q. AND --BUT THE AMOUNT OF MONEY THAT YOU PAY AS PART OF YOUR 2108= FRANCHISE FEE IS FREQUENTLY OVER $10,000? 2109= A. YES. 2110= Q. SO --AND YOU WOULD CHARACTERIZE IT THAT THE MONEY THAT YOU 2111= PAY AS PART OF YOUR FRANCHISE FEE DOESN'T COMPENSATE YOU FOR THE 2112= SERVICES THAT YOU RECEIVE FROM --FROM YOUR FRANCHISE, TRUE? 2113= A. NOT ANY LONGER. TRUE. 2114= Q. AT ONE POINT, IT DID, BUT AT SOME POINT IN THE '90S, 2115= YOU'RE --THE AMOUNT OF MONEY THAT YOU'RE PAYING WAS OUTWEIGHED 2116= BY THE SMALL NUMBER OF SERVICES THAT YOU WERE RECEIVING? 2117= A. THAT'S TRUE. 2118= Q. OKAY. NOW, ON DIRECT EXAMINATION, YOU WENT THROUGH SOME OF 2119= YOUR FINANCIAL RECORDS FROM, I BELIEVE, SORT OF THE 1990 TIME 2120= FRAME UP THROUGH 1996. REMEMBER DOING THAT WITH 2121= MR. HOHENGARTEN? 2122= A. YES, I DO. 2123= Q. AND IN 1996 --ACTUALLY 1997, YOU REMAINED IN BUSINESS, 2124= TRUE?

2125= A. YES. 2126= Q. AND IN 1998, 1999, YOU REMAINED IN BUSINESS? 2127= A. YES. 2128= Q. AND YOU'RE IN BUSINESS UP TO THIS VERY MOMENT? 2129= A. YES. 2130= Q. THE STORE IS OPEN BACK IN CHARLOTTE? 2131= A. SO FAR AS I KNOW. 2132= Q. OKAY. BUT WE HAVEN'T SEEN YET ANY OF THOSE FINANCIAL 2133= RECORDS PAST AUGUST 31ST OF 1996 SO FAR IN THIS --IN YOUR 2134= TESTIMONY TODAY; IS THAT TRUE? 2135= A. YES. YES. 2136= Q. LET'S TURN TO TAB 1 OF THE DEFENDANT BORDERS BINDER, WHICH 2137= IS THE WHITE BINDER IN FRONT OF YOU, SIR. 2138= A. (REVIEWING DOCUMENTS.) 2139= I HAVE IT. 2140= Q. OKAY. AND JUST FOR THE RECORD, THIS IS PLAINTIFF'S EXHIBIT 2141= NUMBER 260. YOU SEE THAT? 2142= A. YES. 2143= Q. OKAY. AND THIS IS ANOTHER ONE OF YOUR PROFIT AND LOSS 2144= STATEMENTS THAT WE LOOKED AT THIS MORNING? 2145= A. YES, IT IS. 2146= Q. BUT THIS ONE IS FOR THE CALENDAR OR --SORRY --THE FISCAL 2147= YEAR SEPTEMBER '96 THROUGH AUGUST OF '97? 2148= A. THAT'S CORRECT. 2149= Q. OKAY. AND HAVE YOU HAD A CHANCE --I MEAN, THIS IS ONE OF 2150= THE PLAINTIFF'S EXHIBIT, SO PRESUMABLY, YOU HAVE SEEN THIS 2151= DOCUMENT BEFORE? 2152= A. YES, I HAVE. 2153= Q. AND THIS IS --THIS IS AN ACCURATE COPY OF YOUR PROFIT AND 2154= LOSS STATEMENT FOR THAT CALENDAR YEAR? 2155= A. CERTAINLY, BEST OF MY KNOWLEDGE. 2156= Q. OKAY. WELL, WE'LL COME BACK TO THAT, BUT LET'S GO TO --2157= LET'S GO TO TAB 2. AND FOR THE RECORD, THIS IS PLAINTIFF'S 2158= EXHIBIT NO. 259. DO YOU SEE THAT? 2159= A. YES, I DO. 2160= Q. OKAY. AND THIS IS YOUR PROFIT AND LOSS STATEMENT FOR THE 2161= FISCAL YEAR ENDING AUGUST 1998; IS THAT RIGHT? 2162= A. YES, IT IS. 2163= Q. AND ONCE AGAIN, YOU'VE HAD AN OPPORTUNITY PRIOR TO TODAY TO 2164= CONFIRM THAT THIS IS AN ACCURATE COPY OF YOUR PROFIT AND LOSS 2165= STATEMENT, RIGHT? 2166= A. YES. 2167= Q. AND IT IS AN ACCURATE COPY? 2168= A. I TRUST THAT IT IS. 2169= Q. OKAY. AND THEN JUST TO COMPLETE THIS PORTION, LET'S GO TO 2170= TAB 3. 2171= A. (REVIEWING DOCUMENTS.) 2172= Q. AND THIS IS JUST FOR THE RECORD, PLAINTIFF'S EXHIBIT NO. 2173= 258; IS THAT RIGHT? 2174= A. YES, IT IS. 31
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2175= Q. AND THIS IS YOUR PROFIT AND LOSS STATEMENT FOR THE PERIOD OF 2176= 1998 THROUGH AUGUST OF 1999, TRUE? 2177= A. THAT'S TRUE. 2178= Q. AND ONCE AGAIN, YOU HAD AN OPPORTUNITY PRESUMABLY TO ENSURE 2179= PRIOR TO TODAY THAT THIS IS AN ACCURATE COPY OF YOUR PROFIT AND 2180= LOSS STATEMENT? 2181= A. YES. 2182= Q. ALL RIGHT. 2183= WELL, LET'S GO BACK, THEN, TO TAB ONE. AND LOOKING 2184= AT PAGE 6 OF TAB 1, THIS TELLS US THAT IN THE FISCAL YEAR ENDING 2185= AUGUST 31ST, 1997, THE SALES OF YOUR STORE WERE 1,022,438.94, 2186= RIGHT? 2187= A. YES, SIR. 2188= Q. AND THAT'S MORE THAN IT WAS BACK IN THE FISCAL YEAR ENDING 2189= 1996, CORRECT? 2190= A. I WOULD HAVE TO LOOK AT THAT. 2191= Q. WE WILL DO THAT. 2192= A. YOU HAVE MY TESTIMONY, SO -- 2193= Q. WE WILL DO THAT. 2194= SO I'D LIKE TO --TO ASK YOU WHETHER YOU WOULD LIKE 2195= TO AMEND PART OF YOUR TESTIMONY THIS MORNING. LET ME JUST SEE 2196= IF THIS IS ACCURATE. 2197= THIS MORNING, AND FOR THE RECORD AND FOR COUNSEL, ON 2198= PAGE 8 OF THIS MORNING'S TRANSCRIPT, LINES 6 TO 11, IF I COULD 2199= JUST READ THAT TO YOU AND I'LL ASK YOU A QUESTION AFTER. 2200= A. SURE. 2201= Q. THE QUESTION BY MR. HOHENGARTEN WAS AND THEN IN THE FISCAL 2202= YEAR SEPTEMBER 1, 1993 TO AUGUST 31ST, 1994, WHAT WERE LITTLE 2203= PROFESSOR'S SALES? ANSWER, WE HAD FALLEN TO 1,133,146. 2204= QUESTION, AND FOR THE FOLLOWING YEARS, WAS THERE A TREND IN 2205= SALES? ANSWER, IT CONTINUED TO GO DOWN EACH YEAR. 2206= NOW, SIR, DID YOU INTEND TO IMPLY BY THAT THAT IT 2207= CONTINUED TO GO DOWN EACH YEAR UP TO THE CURRENT DATE OR JUST 2208= EACH YEAR THAT HE WAS FOCUSING ON UP THROUGH 1996? 2209= A. THE YEARS HE WAS FOCUSING ON, BECAUSE I KNOW THAT WE DID 2210= TURN AROUND. 2211= Q. INDEED, YOU --I MEAN, YOU MADE A LITTLE MOTION. I DON'T 2212= KNOW IF THE REPORTER WILL CATCH IT, BUT --2213= A. SORRY. 2214= Q. BUT THAT'S FINE. YOU MADE A LITTLE MOTION OF KIND OF A 2215= WAVE --A WAVE UP WITH YOUR FINGER. 2216= A. YES. 2217= Q. AND THAT'S BECAUSE YOUR SALES DID INCREASE AFTER 1996? 2218= A. THAT'S TRUE. 2219= Q. AND SO ON PAGE 11 OF TODAY'S TRANSCRIPT, LINE 16 TO 18, 2220= QUESTION, AND WAS THERE A TREND IN SALES AFTER THE NOVEMBER 1993 2221= TIME. ANSWER, YES, IT WAS CONTINUALLY DOWNHILL. YOU DIDN'T -- 2222= YOU DIDN'T MEAN TO IMPLY BY THAT THAT IT CONTINUED DOWNHILL PAST 2223= THE PERIOD THAT MR. HOHENGARTEN WAS FOCUSING ON, TRUE? 2224= A. NO, I DID NOT MEAN TO IMPLY THAT. 2225= Q. BECAUSE, IN FACT, IF YOU WERE TO DESCRIBE A TREND, IT WOULD 2226= ACTUALLY BE FROM 1996, YOU WOULD ACTUALLY DESCRIBE THAT TREND AS 2227= BEING AN UPHILL TREND, TRUE? 2228= A. YES. 2229= Q. NOW, LET'S TURN TO TAB 2 OF MY BINDER, THE WHITE BORDERS 2230= BINDER. AND THIS IS THE AUGUST 1998 PROFIT AND LOSS STATEMENT. 2231= A. YES. 2232= Q. AND I'D LIKE TO DRAW YOUR ATTENTION TO WHAT THE PLAINTIFFS 2233= HAVE LABELED DOWN AT THE VERY BOTTOM PAGE 5. DO YOU SEE THAT? 2234= A. I DO. 2235= Q. THAT WOULD INDICATE THAT THE PROFITS --I'M SORRY --THE 2236= INCOME BY YOUR STORE FOR THAT FISCAL YEAR WAS $1,045,600.68, 2237= RIGHT? 2238= THE COURT: WAIT. 2239= THE WITNESS: THAT'S CORRECT. 2240= THE COURT: WAIT A MINUTE. I DON'T -- 2241= MR. NELSON: IT'S ON TAB 2. IT'S ON PAGE 5, YOUR 2242= HONOR? 2243= THE COURT: YEAH. 2244= BY MR. NELSON: 2245= Q. AND AT THE VERY TOP, MR. BARRINGER -- 32
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2246= THE COURT: YES. 2247= MR. NELSON: --WHERE IT SAYS "INCOME"? 2248= THE COURT: ALL RIGHT. 2249=

2250= BY MR. NELSON: 2251= Q. AND THAT'S $1,045,600? 2252= THE COURT: YES. 2253= THE WITNESS: YES. 2254= BY MR. NELSON: 2255= Q. AND IF YOU COMPARE THAT TO YOUR INCOME FROM THE PREVIOUS 2256= YEAR, THE INCOME WENT UP, DIDN'T IT? 2257= A. YES, IT DID. 2258= Q. OKAY. AND WE HEARD --WE HEARD TESTIMONY EARLIER, NOT BY 2259= YOU, SIR, BUT BY A DIFFERENT INDIVIDUAL, ABOUT GROSS PROFIT 2260= MARGIN. ARE YOU FAMILIAR WITH THAT TERM? 2261= A. YES, I AM. 2262= Q. OKAY. WHAT WAS YOUR GROSS PROFIT MARGIN IN --IN FISCAL 2263= YEAR ENDING 1998? 2264= A. 38.7 PERCENT. 2265= Q. AND WAS THE STORE PROFITABLE IN THAT FISCAL YEAR? 2266= A. BARELY. 2267= Q. AND BY THAT, YOU WOULD MEAN IT WAS PROFITABLE BY THE MARGIN 2268= OF $11,749? 2269= A. THAT'S CORRECT. 2270= Q. AND THAT YEAR, YOU RECEIVED A SALARY FROM THE BUSINESS OF 2271=$ 77,100? 2272= A. YES, SIR. 2273= Q. CORRECT? 2274= SO YOUR TAKE --AND YOU OWNED A HUNDRED PERCENT STOCK 2275= OF THE COMPANY; IS THAT RIGHT? 2276= A. THAT'S RIGHT. 2277= Q. SO YOUR TAKE FROM THE COMPANY WAS --IN ADDITION TO YOUR 2278= SALARY, WOULD HAVE BEEN THE PROFITS FROM THE COMPANY? 2279= A. NO, SIR. 2280= Q. OKAY. BUT NEVERTHELESS -- 2281= A. --GONE BACK INTO THE INVENTORY. 2282= Q. YOU PUT IT BACK INTO THE BUSINESS? 2283= A. THAT'S CORRECT. 2284= Q. AND THAT ENABLES YOU TO GROW YOUR BUSINESS? 2285= A. YES. 2286= Q. LET'S TURN TO FISCAL YEAR 1999, WHICH IS TAB 3. 2287= A. SIR, BEFORE WE DO THAT, COULD I POINT OUT ONE THING, BOTH 2288=( SIC) FOR THE YEAR THAT WE WERE TALKING ABOUT? 2289= Q. I'D BE HAPPY TO GIVE YOU THAT OPPORTUNITY. WHAT WOULD YOU 2290= LIKE -- 2291= A. THERE IS. I'M SORRY. 2292= Q. WHAT WOULD YOU LIKE TO TELL US? 2293= A. THERE IS AN ITEM CALLED EXTRAORDINARY INCOME OF $22,567, 2294= WHICH WAS THE SETTLEMENT OF A LAWSUIT. 2295= Q. YEAH. 2296= A. AND WITHOUT THAT, OUR PROFITABILITY WOULD HAVE BEEN 2297= CONSIDERABLY LOWER. 2298= Q. OKAY. FAIR ENOUGH. LET'S GO -- 2299= A. INDEED, WE WOULD HAVE HAD A LOSS. 2300= Q. BUT YOUR --YOUR RECEIPTS WOULD HAVE BEEN OVER A MILLION 2301= DOLLARS, TRUE? 2302= A. YEAH, THAT'S TRUE. 2303= Q. OKAY. WHICH IS THE --WHICH IS --WHICH IS ABOVE WHERE YOU 2304= HAD BEEN AFTER THE TIME PERIOD YOU'RE TALKING ABOUT WITH 2305= MR. HOHENGARTEN? 2306= A. YES. 2307= Q. LET'S TURN TO TAB 3, IF YOU WILL, FISCAL YEAR ENDING AUGUST 2308= 1999. 2309= A. GOT IT. 2310= Q. NOW, TURNING TO WHAT THE PLAINTIFFS HAVE LABELED AS PAGE 6 2311= OF THIS, WHICH IS IN TAB 3, WHICH IS OUR EXHIBIT 258. 2312= A. YES, SIR. I HAVE IT. 2313= Q. NOW, WE HAVE --WE HAVE SALES OF THE STORE OF $1,030,000 -- 2314=$ 1,030,427? 2315= A. THAT IS CORRECT. 33
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2316= Q. AGAIN, IT'S ABOVE THE PERIOD OF TIME THAT MR. HOHENGARTEN 2317= WAS FOCUSING ON WITH YOU THIS MORNING? 2318= A. THAT'S RIGHT. 2319= Q. AND I'D LIKE TO DRAW YOUR ATTENTION TO THE GROSS PROFIT 2320= MARGIN FOR THAT YEAR. NOW, THAT WAS 42.9 PERCENT, WASN'T IT? 2321= A. YES, IT WAS. 2322= Q. WOULD YOU CONSIDER THAT A FAVORABLE GROSS PROFIT MARGIN? 2323= A. YES. 2324= Q. IN FACT, IT'S A VERY FAVORABLE GROSS PROFIT MARGIN? 2325= A. YES. 2326= Q. NOW, MR. HOHENGARTEN HAD A CHART WHICH HE TALKED WITH YOU 2327= WHICH SHOWED THE PERIOD OF 1990 THROUGH 1996 AND THE PERCENTAGE 2328= CHANGE IN GROSS SALES. 2329= DO YOU REMEMBER --DO YOU REMEMBER THAT CHART? 2330= A. I REMEMBER THE CHART. 2331= Q. AND THAT --WHAT I'D LIKE TO DO IS LET'S FILL OUT THE REST 2332= OF THE PICTURE. TURN TO --TURN TO TAB 4 ON THE BORDERS BINDER. 2333= A. I HAVE, SIR. 2334= Q. OKAY. AND THAT'S BEEN IDENTIFIED AS 11749, YOUR HONOR. 2335= THE COURT: YES. 2336= MR. NELSON: THIS IS A DEMONSTRATIVE THAT WE'RE 2337= ADDING TODAY. 2338= Q. NOW, THIS PARTICULAR EXHIBIT, 11749, AND TAB 4, WHAT WE HAVE 2339= IS THE FISCAL YEAR, THAT'S THE FIRST CATEGORY, TRUE? 2340= A. YES. 2341= Q. AND THEN THE GROSS SALES IS THE SECOND CATEGORY? 2342= A. YES. 2343= Q. AND, FINALLY, THE PERCENTAGE CHANGE IN GROSS SALES FROM 2344= PREVIOUS YEAR? 2345= A. YES. 2346= Q. NOW, THE GROSS SALES ARE WHAT WE'VE JUST BEEN TALKING ABOUT 2347= AT LEAST FOR THE PERIODS OF '96 THROUGH '99. ARE THOSE THE 2348= NUMBERS THAT WE'VE JUST BEEN TALKING ABOUT? 2349= A. YES. 2350= Q. AND THEN I INCLUDED, THOUGH, IN THIS PARTICULAR 2351= DEMONSTRATIVE, JUST FOR OUR --SORT OF OUR REFERENCE, THE PERIOD 2352= THAT YOU ENDED WITH MR. HOHENGARTEN FROM 1995 THROUGH '96 OF 2353=$ 961,454. YOU SEE THAT? 2354= A. I DO. 2355= Q. NOW, WE ASK A LOT OF THE WITNESSES. WE DON'T NECESSARILY 2356= ASK YOU TO BE A COMPUTER UP THERE. YOU SEE ON THE PERCENTAGE 2357= CHANGE THAT I'VE INDICATED ON THIS DEMONSTRATIVE A PLUS 6.3 2358= PERCENT OF FISCAL YEAR '96-'97 AS COMPARED TO '95-'96? 2359= A. I WILL TRUST YOUR CALCULATOR. 2360= Q. WELL, FACT IS I'VE GOT A CALCULATOR HERE IF YOU WANT TO 2361= CHECK IT, BUT --AND I'D BE HAPPY TO PROVIDE THE CALCULATOR TO 2362= COUNSEL IF THEY WANT TO CHECK IT. 2363= AND, INDEED, THE NEXT FISCAL YEAR WAS EVEN BETTER 2364= THAN --THAN '96-'97 YEAR. IT INCREASED BY 2.2 PERCENT IN THE 2365= '97-'98 FISCAL YEAR, DIDN'T IT? 2366= A. WHICH IS LESS THAN INFLATION. 2367= Q. INCREASED, THOUGH, DIDN'T IT, SIR? 2368= A. YES. 2369= Q. AND THEN IN '98-'99, IT WENT DOWN. SO I'M BEING FAIR HERE. 2370= A. YOU ARE. 2371= Q. IT WENT DOWN 1.4 PERCENT; IS THAT RIGHT? 2372= A. YES. 2373= Q. OKAY. BUT IT WAS STILL AT $1,030,427, TRUE? 2374= A. TRUE. 2375= Q. AND THE MEDIA PLAY --THE MEDIA PLAY THAT'S LOCATED ONE AND 2376= A QUARTER MILES FROM YOUR STORE BACK IN THE '94-'95 TIME PERIOD, 2377= THAT'S STILL THERE? 2378= A. YES, IT IS. 2379= Q. SO YOU'RE STILL COMPETING WITH ALL THOSE STORES THAT WE 2380= TALKED ABOUT? 2381= A. YES. 2382= Q. NOW, IN FACT, IN THAT PERIOD, '94-'94 --I'M SORRY -- 2383= '94-'95, YOU DID SOME REMODELING TO YOUR STORE, DIDN'T YOU? 2384= A. I THINK IT MAY HAVE BEEN '93-'94, BUT IT'S --IT'S --THAT'S 2385= FINE. IN THAT TIME FRAME, YES. 34
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2386= Q. YOU ADDED A FIREPLACE? 2387= A. YES. 2388= Q. AND I THINK WE SAW THE FIREPLACE IN ONE OF THE PHOTOGRAPHS 2389= THAT MR. HOHENGARTEN SHOWED YOU YESTERDAY? 2390= A. YOU DID. 2391= Q. YOU ADDED A COUCH? 2392= A. TRUE. 2393= Q. SOME CHAIRS? 2394= A. YES. 2395= Q. YOU MADE IT MORE COMFORTABLE FOR CUSTOMERS TO COME AND ENJOY 2396= YOUR STORE, TRUE? 2397= A. WE DID. 2398= Q. AND YOU DID THAT IN RESPONSE TO WHAT YOU SAW IN THE BORDERS 2399= AND BARNES & NOBLE STORES; ISN'T THAT RIGHT?

2400= A. YES. 2401= Q. AND IT WAS IN RESPONSE TO SOMETHING THAT YOU PERCEIVED YOUR 2402= CUSTOMERS WANTED. 2403= A. THAT'S CORRECT. 2404= Q. AND BEFORE THAT, THERE WAS NO PLACE IN YOUR STORE FOR 2405= CUSTOMERS TO SIT DOWN? 2406= A. NO, THAT'S NOT TRUE, BUT THERE WERE SOME HARD BENCHES. 2407= Q. EASY TO SAY THAT THE COUCH AND THE CHAIRS WERE MORE 2408= COMFORTABLE THAN THE HARD BENCHES? 2409= A. TO BE PREFERRED. 2410= Q. OKAY. NOW, ARE YOU FAMILIAR WITH A EFFORT IN THE 1990S BY 2411= THE LITTLE PROFESSOR GROUP TO BAND TOGETHER INDIVIDUAL STORES IN 2412= ORDER TO GET VOLUME DISCOUNTS FROM PUBLISHERS? 2413= A. THERE WAS DISCUSSION. IT NEVER EVER HAPPENED. 2414= Q. BUT YOU WERE AWARE OF THAT IDEA BY THE LITTLE PROFESSOR 2415= STORES TO BAND TOGETHER TO NEGOTIATE WITH PUBLISHERS? 2416= A. YES. 2417= Q. AND YOU THOUGHT THAT WAS A GOOD IDEA? 2418= A. NO. 2419= Q. YOU DID NOT THINK IT WAS A GOOD IDEA? 2420= A. I DID NOT THINK IT WAS A GOOD IDEA. 2421= (PAUSE IN THE PROCEEDINGS.) 2422= MR. PETROCELLI: YOUR HONOR, MAY I TAKE THIS MOMENT 2423= TO HAND UP TO THE BARNES & NOBLE TRIAL EXHIBIT LIST? 2424= MR. NELSON: WITH THE COURT'S PERMISSION. 2425= IF I MAY YOUR HONOR, I'M PASSING A --DEPOSITION. 2426= Q. MR. BARRINGER, DO YOU RECALL BEING DEPOSED IN THIS CASE BACK 2427= ON FEBRUARY 1ST, 2000? 2428= A. YES. 2429= Q. AND YOU TESTIFIED UNDER OATH IN THAT DEPOSITION? 2430= A. I DID. 2431= Q. YOU AGREED TO TELL THE TRUTH? 2432= A. I DID. 2433= Q. AND YOU DID TELL THE TRUTH IN THE DEPOSITION TO THE BEST OF 2434= YOUR ABILITY? 2435= A. I DID. 2436= Q. WHAT I'D LIKE TO DO IS CALL YOUR ATTENTION TO PAGE 112 OF 2437= THE TRANSCRIPT I PUT IN FRONT OF YOU. 2438= THE COURT: VOLUME 1 OR VOLUME 2? 2439= MR. NELSON: AND IT'S IN VOLUME ONE, YOUR HONOR. 2440= THE WITNESS: PAGE AGAIN, SIR? 2441= BY MR. NELSON: 2442= Q. PAGE 112. 2443= NOW, DO YOU --I'M SORRY. WHY DON'T YOU GET THERE. 2444= DO YOU -- 2445= A. I'M THERE. 2446= Q. DO YOU REMEMBER BEING SHOWN DURING YOUR DEPOSITION AN 2447= ARTICLE THAT DESCRIBED THIS EFFORT BY THE LITTLE PROFESSOR 2448= FRANCHISE GROUP TO ATTEMPT TO BAND TOGETHER TO GET VOLUME 2449= DISCOUNTS? 2450= A. I DON'T KNOW. I WAS SHOWN A --WOULD YOU SAY IT AGAIN, 2451= PLEASE. 2452= Q. RIGHT. DO YOU REMEMBER BEING SHOWN AN ARTICLE THAT 2453= DESCRIBED WHAT WE'VE JUST BEEN TALKING ABOUT, THE EFFORT BY 2454= LITTLE PROFESSOR IN THE 1990S TO BAND TOGETHER TO NEGOTIATE WITH 2455= PUBLISHERS FOR VOLUME DISCOUNTS? 35
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2456= A. I DON'T REMEMBER BEING SHOWN AN ARTICLE NOW. I DON'T 2457= REMEMBER THAT. 2458= (CONTINUED NEXT PAGE; NOTHING OMITTED.) 2459= 2460= 2461= 2462= 2463= 2464= 2465= 2466= 2467= 2468= 2469= 2470= 2471= 2472= 2473= 2474= 2475= BY MR. NELSON: 2476= Q. WELL, WHAT I'D LIKE TO DO IS READ FOR YOU THE QUESTIONS AND 2477= ANSWERS AT THE DEPOSITION, AND I WOULD JUST LIKE YOU TO JUST 2478= TRACK WHAT I'M READING AND JUST TO MAKE SURE THAT I'M READING 2479= IT CORRECTLY, AND I'M GOING TO READ --ACTUALLY, WE'VE GOT TO 2480= GO BACK TO PAGE 111, SIR. BEGINNING ON LINE 17, WHICH IS 2481= ACTUALLY PART --THERE'S A DESCRIPTION INITIALLY BY THE 2482= ATTORNEY QUESTIONING YOU, BUT BEGINNING ON LINE 17, THAT 2483= ATTORNEY SAID, 2484= "Q. DO YOU KNOW WHAT THE ALLIANCE OF 2485= INDEPENDENT BOOKSELLERS IS? 2486= "A. I KNOW WHAT THE CONCEPT WAS. 2487= "Q. SO IS IT SOMETHING THAT DIDN'T COME INTO 2488= EFFECT? 2489= "A. IT NEVER HAPPENED. 2490= "Q. BUT DO YOU RECALL DISCUSSIONS ABOUT IT? 2491= "A. VAGUELY." 2492= THIS IS NOW ON PAGE 112. 2493= "Q. ABOUT WHAT TIME WAS IT? WHEN WAS THAT, I 2494= SHOULD SAY? 2495= "A. THIS WOULD HAVE BEEN ABOUT THE TIME OF THIS 2496= ONE. I DON'T REMEMBER WHICH YEAR. PROBABLY FOUR 2497= YEARS AGO, FIVE YEARS AGO. 2498= "Q. 1995 SOUNDS ABOUT RIGHT? 2499= "A. CLOSE. 2500= "Q. DO YOU AGREE WITH THE STATEMENT, AMONGST 2501= THE SENTENCES THAT I QUOTED, THAT IF 2502= INDEPENDENT'S --THAT THIS ALLIANCE WORKS, QUOTE, 2503= 'EMPOWERS INDEPENDENTS BY ALLOWING THEM TO BAND 2504= TOGETHER AND BUY IN GREATER VOLUME --'? 2505= "A. I THINK IT WAS A DREAM. 2506= "Q. BUT DO YOU AGREE THAT --I'M SORRY, LET ME 2507= FINISH. '... BUY IN GREATER VOLUME AND PRESUMABLY 2508= RECEIVE VOLUME DISCOUNTS FROM PUBLISHERS. ' IS THAT 2509= A GOOD IDEA? 2510= "A. YES." 2511= DO YOU REMEMBER THAT QUESTIONING AND ANSWERING? 2512= A. YES, I DO. 2513= Q. OKAY. NOW, DID THAT EVER HAPPEN? 2514= A. MY TESTIMONY? 2515= Q. NO --WELL, NO. ACTUALLY, DID THE ALLIANCE EVER COME TO 2516= PASS? 2517= A. NO. 2518= Q. AND DID IT NOT COME TO PASS BECAUSE THERE WAS NO 2519= FOLLOW-THROUGH ON THE PART OF LITTLE PROFESSOR TO MAKE IT 2520= HAPPEN? 2521= A. YES. 2522= Q. THANK YOU. YOU COULD PUT THAT ASIDE, SIR. NOW, 2523= MR. HOHENGARTEN TALKED TO YOU ON DIRECT ABOUT COOPERATIVE 2524= ADVERTISING FUNDS. DO YOU REMEMBER HIM ASKING YOU ABOUT THAT? 2525= A. YES. 36
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2526= Q. DO YOU KEEP TRACK OF COOPERATIVE ADVERTISING FUNDS THAT ARE 2527= AVAILABLE FROM THE PUBLISHERS? 2528= A. YES, WE DO. I'M SORRY, THAT ARE AVAILABLE FROM THE 2529= PUBLISHERS? 2530= Q. THAT'S RIGHT. 2531= A. AVAILABLE TO US FROM THE PUBLISHERS. 2532= Q. AVAILABLE TO YOU. 2533= A. NO. 2534= Q. AND THAT'S BECAUSE YOU FIND IT TOO LABOR-INTENSIVE --2535= A. I JUST WANT TO MAKE SURE WE'RE BOTH SAYING THE SAME THINGS. 2536= Q. THAT'S VERY IMPORTANT. LET ME GO BACK, THEN. YOU 2537= UNDERSTAND THAT MANY, IF NOT MOST, PUBLISHERS OFFER COOPERATIVE 2538= ADVERTISING POOLS. 2539= A. YES. 2540= Q. AND FREQUENTLY, THE POOLS ARE BASED ON THE PRIOR YEAR'S 2541= PURCHASES BY A PARTICULAR RETAILER, TRUE? 2542= A. TRUE. 2543= Q. OKAY. SO IN ANY PARTICULAR YEAR, THE LITTLE PROFESSOR 2544= STORE, THAT YOU OWN, WOULD HAVE AVAILABLE TO IT AN AMOUNT OF 2545= MONEY THAT IT COULD USE FOR ADVERTISING TO DRAW INTO THAT POOL, 2546= CORRECT? 2547= A. TRUE. 2548= Q. OKAY. AND IT'S A FACT THAT YOU DON'T KEEP TRACK OF THE 2549= AMOUNT OF MONEY THAT LITTLE PROFESSOR HAS AVAILABLE TO IT IN

2550= THESE COOPERATIVE POOLS, TRUE? 2551= A. YES, I'D SAY THAT'S TRUE. 2552= Q. AND THAT'S BECAUSE, AS YOU'VE DESCRIBED EARLIER, IT'S TOO 2553= LABOR-INTENSIVE FOR YOU TO DO THAT. 2554= A. YES. 2555= Q. NOW, SIMILARLY, NO ONE AT LITTLE PROFESSOR KEEPS TRACK OF 2556= THE SPECIAL OFFERS THAT ARE AVAILABLE, ISN'T THAT TRUE? 2557= A. THAT'S TRUE. 2558= Q. AND YOU RELY ON PUBLISHERS' REPRESENTATIVES TO TELL YOU 2559= WHAT OFFERS MAY BE AVAILABLE, IS THAT RIGHT? 2560= A. YES. 2561= Q. BUT INDEPENDENT FROM A PUBLISHER REPRESENTATIVE TELLING YOU 2562= THAT AN OFFER IS AVAILABLE, YOU DON'T KEEP TRACK OF THE ONES 2563= THAT YOU RECEIVE VIA FACSIMILE OR WHAT YOU RECEIVE IN THE MAIL 2564= OR WHAT YOU SEE IN PUBLISHERS WEEKLY, TRUE? 2565= A. THAT'S TRUE. 2566= Q. NOW, MARTHA CARMICHAEL IS AN EMPLOYEE OF YOURS? 2567= A. TRUE. IT SHOULD BE ACTUALLY MARTHA LASSITER. 2568= Q. MARTHA LASSITER? 2569= A. SAME PERSON. 2570= Q. AND SHE WORKS IN --WAS SHE YOUR BOOKKEEPER? 2571= A. SHE IS OUR BOOKKEEPER. 2572= Q. IS SHE ALSO DESCRIBES HERSELF AS BEING YOUR ACCOUNTS 2573= PAYABLE DEPARTMENT? 2574= A. THAT'S TRUE. 2575= Q. DO YOU RECALL AN INCIDENT IN WHICH YOU HAD A DISPUTE WITH 2576= MCGRAW-HILL REGARDING --YOU'RE SMILING NOW, SO YOU KNOW WHERE 2577= I'M GOING --REGARDING THE AMOUNT OF FREIGHT THAT MCGRAW-HILL 2578= WAS CHARGING YOU? 2579= A. YES, SIR, I DO. 2580= Q. AND YOU BELIEVE THAT THEY WERE OVERCHARGING YOU FOR THE 2581= AMOUNT OF FREIGHT. 2582= A. YES. 2583= Q. AND IN FACT, I THINK THE AMOUNT OF FREIGHT WAS IN THE 2584= NEIGHBORHOOD OF $56, IS THAT TRUE? 2585= A. THAT'S TRUE. 2586= Q. MARTHA LASSITER -- 2587= A. LET ME CORRECT YOU. IT WAS NOT THE AMOUNT OF FREIGHT THAT 2588= WAS AT DISPUTE. IT WAS THE FACT THAT WE WERE BEING CHARGED 2589= FREIGHT ON SO MANY INDIVIDUAL ORDERS WHEN WE HAD ASKED THEM TO 2590= PUT THEM AND SHIP ONLY THREE AT A TIME OR SHIP ONCE A MONTH, I 2591= THINK THE TERMS WERE. SO COLLECTIVELY, WE'RE IN AGREEMENT 2592= THAT, YES, IT HAD TO DO WITH THE AMOUNT WE WERE OVERCHARGED 2593= FREIGHT, IN OUR JUDGMENT. 2594= Q. AND BY YOUR VIEW, MCGRAW-HILL HAD OVERCHARGED YOU IN THE 2595= NEIGHBORHOOD OF $56. 2596= A. AGAIN, I DON'T WANT TO ENGAGE IN SEMANTICS. THAT'S NOT 37
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2597= REALLY WHAT WE WERE SAYING. WE WERE SAYING THAT THE TOTAL 2598= FREIGHT THAT THESE ORDERS HAD ACCUMULATED WAS WAY TOO HIGH. IF 2599= THEY HAD FOLLOWED OUR DIRECTIONS, WE WOULD HAVE PAID MUCH LESS 2600= FREIGHT. SO I THINK IT'S IMPORTANT THAT WE MAKE THAT 2601= DISTINCTION. 2602= Q. IT IS IMPORTANT, AND SO IN YOUR VIEW, AT LEAST, MCGRAW-HILL 2603= WAS CLAIMING THAT YOU OWED THEM MONEY, THAT YOU DISPUTED. 2604= TRUE? 2605= A. YES. 2606= Q. AND YOU NEGOTIATED --YOU RECALL --YOU OBVIOUSLY RECALL 2607= THIS PARTICULAR INCIDENT, AND YOU KNOW THAT YOUR STORE 2608= NEGOTIATED WITH MCGRAW-HILL ABOUT HOW MUCH THEY WOULD 2609= ULTIMATELY HAVE TO PAY. 2610= A. YES. 2611= Q. AND YOU VIEW IT, I THINK AS YOU DESCRIBED TO 2612= MR. HOHENGARTEN, THAT IT'S OKAY FOR THE RETAILER TO NEGOTIATE 2613= WITH ITS VENDOR WHEN THERE ARE THESE LEGITIMATE DISPUTES. 2614= A. THAT'S CORRECT. 2615= Q. AND YOU WOULD EXPECT THAT THE PUBLISHER, OR THE WHOLESALER 2616= WOULD NEGOTIATE WITH YOU AND PROVIDE YOU WHATEVER INFORMATION 2617= THEY THOUGHT IN ORDER TO CONVINCE YOU THAT YOU WERE WRONG. 2618= A. YES. 2619= Q. AND YOU WOULD DO THE SAME THING TO THEM. 2620= A. YES. 2621= Q. AND THERE'S NOTHING NEFARIOUS OR SECRET ABOUT THAT. 2622= A. NO. 2623= Q. NOW, YOU MENTIONED YOUR PURCHASES FROM INGRAM EARLIER 2624= TODAY, AND THAT INGRAM WAS A MAJOR SUPPLIER FOR YOU, IS THAT 2625= RIGHT? 2626= A. THAT'S RIGHT. 2627= Q. AND THAT YOU SEEK TO PURCHASE ONLY ON THE TERMS THAT ARE 2628= PUBLISHED IN THE ABA'S RED BOOK. I THINK THAT'S ESSENTIALLY 2629= WHAT YOU SAID THIS MORNING, WASN'T IT? 2630= A. TRUE. 2631= Q. NOW, YOU UNDERSTAND THAT INGRAM OFFERS A SET RATE AS A 2632= DISCOUNT OF 40 PERCENT UP TO --PURCHASES UP TO FIVE BOOKS, 2633= 41 PERCENT FROM FIVE TO NINE BOOKS, AND THEN 42 PERCENT BEYOND 2634= THAT. AND THAT'S WITHIN THE RED BOOK. 2635= A. YES. 2636= Q. AND YOU'VE KNOWN THAT BECAUSE THAT'S BASICALLY BEEN IN THE 2637= RED BOOK THROUGHOUT THE 90'S. 2638= A. YES. 2639= Q. BUT IN FACT, YOU HAVE PURCHASED BOOKS AT OVER 42 PERCENT 2640= DISCOUNT, HAVEN'T YOU? 2641= A. NOT TO MY KNOWLEDGE. FROM INGRAM? 2642= Q. THAT'S RIGHT. 2643= A. BOOKS --2644= Q. BOOKS FROM INGRAM, OVER 42 PERCENT. 2645= A. NOT THAT I'M AWARE OF. 2646= Q. AND BECAUSE --AND YOU SAY THAT BECAUSE YOU KNOW THAT -- 2647= A. I'M --2648= Q. --YOU KNOW THAT INGRAM'S, THE TOP DISCOUNT REALLY FOR 2649= BOOKS, PUTTING ASIDE AUDIO, THE TOP DISCOUNT FOR BOOKS IN THE 2650= INGRAM, AT LEAST IN THE ABA RED BOOK, IS 42 PERCENT. RIGHT? 2651= A. YES. YES, OKAY. 2652= Q. SO THAT'S WHY YOU CAN SAY WITH SOME ASSURANCE THAT YOU 2653= DIDN'T BUY ANYTHING FROM INGRAM OVER 42 PERCENT, BECAUSE YOU 2654= KNOW THE RED BOOK SAYS 42 PERCENT FOR BOOKS. 2655= A. NO, THERE IS AN EXCEPTION TO THIS, IN THAT THEY HAVE AT 2656= CHRISTMASTIME A 1 PERCENT KICKER, THAT IF YOU ORDER ON A 2657= SUNDAY, I BELIEVE IT IS, THAT YOU GET AN ADDITIONAL 1 PERCENT 2658= DISCOUNT. SO IF I ORDER 10 BOOKS ON A SUNDAY AT THE CHRISTMAS 2659= SEASON, I WOULD GET 43. 2660= Q. OKAY. AND SIMILARLY, IF YOU ORDERED ONE BOOK --2661= A. I WOULD GET 41. 2662= Q. --YOU WOULD GET 41. 2663= A. YES. 2664= Q. AND THAT'S SOMETHING THAT THEY SEND OUT AND MAKE AVAILABLE 2665= TO ALL RETAILERS, RIGHT? 2666= A. YES. 38
38 Page 39 40
2667= Q. BUT OTHER THAN THAT, CAN YOU THINK OF ANY OTHER EXAMPLES 2668= WHERE YOU PAID, OR --YOU RECEIVED A DISCOUNT GREATER THAN 2669= 42 PERCENT? 2670= A. NO. 2671= Q. OKAY. I'D LIKE TO DRAW YOUR ATTENTION TO TAB 7 OF THE 2672= BOOK. 2673= AND YOUR HONOR, WE'RE ABOUT READY TO LOOK AT SOME 2674= INGRAM INVOICES. I'D LIKE TO JUST ALERT THE COURT AT THE

2675= BEGINNING THAT, AS HAS BEEN THE PRACTICE OF DEFENDANTS FROM THE 2676= VERY BEGINNING OF THIS CASE, ALL THE INVOICES THAT WE WILL BE 2677= USING ARE ON OUR TRIAL EXHIBIT LIST AND HAVE BEEN MADE 2678= AVAILABLE TO THE PLAINTIFFS. SO TAB 7 IS EXHIBIT NUMBER 11286. 2679= Q. DO YOU SEE THAT? 2680= A. I DO. 2681= Q. AND ON PAGE 2 OF THAT EXHIBIT, I'D LIKE TO DRAW YOUR 2682= ATTENTION TO THE BOOK WINDOWS 95 FOR DUMMIES. YOU SEE THAT? 2683= A. I DO. 2684= Q. AND YOU RECEIVED A 43 PERCENT DISCOUNT ON THAT BOOK, 2685= CORRECT? 2686= A. THAT'S WHAT IT SAYS HERE, YES. 2687= Q. DO YOU HAVE ANY REASON TO DOUBT THAT YOU RECEIVED THE 43 2688= DISCOUNT? 2689= A. NO. 2690= Q. AND THAT DISCOUNT IS NOT IN THE ABA'S RED BOOK, TRUE? 2691= A. TRUE. 2692= Q. NOW, YOU'RE ALSO FAMILIAR WITH THE FREIGHT POLICIES OF 2693= INGRAM? 2694= A. YES. 2695= Q. AND THAT THEY PROVIDE FREE FREIGHT FOR ORDERS OVER A 2696= HUNDRED BOOKS THAT ARE SHIPPED FROM YOUR PRIMARY WAREHOUSE. 2697= A. THAT'S TRUE. 2698= Q. NOW, THIS PARTICULAR EXHIBIT, WHICH IS TAB 7, EXHIBIT 2699= 11286, IT SHOWS ON THE INVOICE THAT YOU RECEIVED 79 BOOKS, 2700= CORRECT? 2701= A. THAT'S CORRECT. 2702= Q. OKAY. NOW, THE FREIGHT FOR THIS SHIPMENT WAS $15.60, IS 2703= THAT RIGHT? 2704= A. THAT'S TRUE. 2705= Q. NOW, YOU HAVE A FREIGHT CREDIT HERE OF $15.60. 2706= A. THAT'S TRUE. 2707= Q. OKAY. AND SO YOU RECEIVED FREE FREIGHT FOR THIS SHIPMENT 2708= OF 79 BOOKS, ISN'T THAT TRUE? 2709= A. YES. 2710= Q. AND THAT'S SOMETHING THAT'S NOT --THAT WOULD NOT BE 2711= AVAILABLE FUNDER THE ABA'S RED BOOK, FREE FREIGHT FOR SHIPMENT 2712= UNDER A HUNDRED BOOKS, CORRECT? 2713= A. THAT'S TRUE. 2714= Q. I'D LIKE TO HAVE YOU TURN TO TAB 8, WHICH IS EXHIBIT 11287. 2715= A. YES. 2716= Q. AND THIS IS AN INVOICE FROM INGRAM TO THE LITTLE PROFESSOR 2717= BOOK CENTER, RIGHT? 2718= A. YES. 2719= Q. AND IN FACT, IT WAS --IF YOU LOOK AT THE VERY BOTTOM 2720= RIGHT-HAND OF THE DOCUMENT, IT'S GOT A PRODUCTION NUMBER, WHAT 2721= LAWYERS CALL A BATES STAMP. DO YOU SEE THAT? 2722= A. YES, I DO. 2723= Q. AND THAT'S BECAUSE THESE WERE PRODUCED FROM YOUR FILES, 2724= CORRECT? 2725= A. YES. 2726= Q. NOW, ON THE VERY FIRST PAGE OF THIS PARTICULAR EXHIBIT, 2727= GOING DOWN ABOUT TWO-THIRDS OF THE WAY, YOU SEE, "COMPUTERS 2728= SIMPLIFIED, 3/ E"? 2729= A. YES, I DO. 2730= Q. WHAT WAS YOUR DISCOUNT THAT YOU RECEIVED FROM INGRAM ON 2731= THAT BOOK? 2732= A. FORTY-THREE. 2733= Q. AND WHAT WAS YOUR DISCOUNT FOR THE NEXT BOOK, CREATING 2734= KILLER WEBSITES? 2735= A. FORTY-THREE. 2736= Q. HOW MANY BOOKS DID YOU BUY OF CREATING KILLER WEB SITES? 39
39 Page 40 41
2737= A. ONE. 2738= Q. AND THEN YOU LOOK DOWN, DISCOVER HT USE, OFFICE 97? HOW 2739= MANY OF THOSE BOOKS DID YOU BUY? 2740= A. ONE. 2741= Q. AND WHAT WAS YOUR DISCOUNT? 2742= A. FORTY-THREE. I CAN ONLY ASSUME THAT THIS WAS A SPECIAL 2743= DEAL THAT THEY WERE GIVING OUT ON COMPUTER BOOKS. THESE ARE 2744= ALL COMPUTER BOOKS. 2745= Q. THAT'S, IN FACT, TRUE, ISN'T IT? THEY'RE ALL COMPUTER 2746= BOOKS THAT WE JUST TALKED ABOUT, AND IN FACT, THE ONE WE LOOKED 2747= AT IN THE PREVIOUS EXHIBIT, THAT WAS A COMPUTER BOOK AS WELL. 2748= IT WAS A "WINDOWS FOR DUMMIES" BOOK, RIGHT? 2749= A. YEAH. 2750= Q. AND TAKE A LOOK AT THE VERY NEXT PAGE. IT SAYS PAGE 2 OF 2751= THIS EXHIBIT, UNDER TAB 8. IF YOU SCAN DOWN, YOU'LL SEE THE 2752= TITLE, HTML FOR WWW VISUAL QUICK. IT'S AT 43 PERCENT, IS THAT 2753= RIGHT? 2754= A. I SEE I, YES. 2755= Q. LEARN VISUAL C++, AND THAT'S 43 PERCENT? 2756= A. TRUE. 2757= Q. LOTUS NOTES, 4.5 ADMINISTRATORS, 43 PERCENT. 2758= A. TRUE. 2759= Q. THESE ARE ALL COMPUTER BOOKS. 2760= A. YES. 2761= Q. AND SO FOR COMPUTER BOOKS, YOU WERE RECEIVING 43 PERCENT 2762= DISCOUNTS FROM INGRAM. 2763= A. YES. 2764= Q. OKAY. AND THAT'S NOT SOMETHING THAT YOU FIND IN THE RED 2765= BOOK, TRUE? 2766= A. TRUE. 2767= Q. SO WHEN YOU TESTIFIED EARLIER TODAY THAT WHEN YOU LOOKED 2768= BACK THROUGH ALL YOUR INVOICES AND THAT ALL YOUR INVOICES 2769= MATCHED WHAT WAS IN THE RED BOOK, THAT'S NOT ENTIRELY ACCURATE, 2770= IS IT? 2771= A. NO, IT IS NOT. 2772= MR. NELSON: JUST ONE MOMENT, YOUR HONOR. THANK 2773= YOU, SIR. 2774= MR. RADER: GOOD MORNING, YOUR HONOR. 2775= THE COURT: GOOD MORNING. 2776= MR. RADER: YOUR HONOR, MAY I APPROACH THE WITNESS? 2777= THE COURT: YES, AND WILL YOU STATE YOUR NAME FOR 2778= THE RECORD? 2779= MR. RADER: YES. ALAN RADER, YOUR HONOR. 2780= THE COURT: MR. RADER. 2781= CROSS-EXAMINATION 2782= BY MR. RADER: 2783= Q. GOOD MORNING, MR. BARRINGER. 2784= A. GOOD MORNING, MR. RADER. 2785= Q. MY NAME IS ALAN RADER, I REPRESENT BARNES & NOBLE HERE 2786= TODAY. 2787= MR. BARRINGER, I WAS INTRIGUED LISTENING TO YOUR 2788= DIRECT TESTIMONY WHEN YOU MENTIONED THAT YOU FREQUENTLY CONSULT 2789= THE RED BOOK. ISN'T IT THE CASE THAT AT YOUR DEPOSITION YOU 2790= TESTIFIED THAT THE NUMBER ONE SOURCE OF INFORMATION THAT YOU 2791= LOOKED TO FOR PUBLISHERS' TERMS OF SALE IS VISITS FROM 2792= PUBLISHERS' REPRESENTATIVES? 2793= MR. HOHENGARTEN: OBJECTION, YOUR HONOR. PLAINTIFFS 2794= WOULD LIKE TO KNOW THE LINES AND PAGES -- 2795= THE COURT: WELL, JUST LET HIM FINISH HIS QUESTION, 2796= AND HE NO DOUBT WILL CALL ATTENTION TO IT. 2797= MR. HOHENGARTEN: AS LONG AS HE DOES. 2798= THE COURT: OF COURSE HE WILL. 2799= MR. HOHENGARTEN: I'M SORRY. 2800= BY MR. RADER: 2801= Q. IS THAT CORRECT, MR. BARRINGER? 2802= A. I DON'T KNOW. 2803= Q. WELL, LET ME ASK YOU TO TAKE A LOOK AT THE DEPOSITION THAT 2804= YOU HAVE THERE, AND IF YOU WOULD, TAKE A LOOK AT PAGE 86. 2805= A. THE DEPOSITION? WHAT IS THE TAB I'M AT? 2806= Q. NO, IT'S A DIFFERENT SET. 40
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2807= A. I'M SORRY. 2808= MR. RADER: MAY I APPROACH, YOUR HONOR, TO HELP? 2809= THE COURT: YES. 2810= THE WITNESS: THIS IS WHAT YOU'RE REFERRING TO? 2811= BY MR. RADER: 2812= Q. YES. PAGE 86, PLEASE. 2813= A. OF WHICH VOLUME? 2814= Q. OF THE FIRST VOLUME. 2815= A. OKAY, SIR. I HAVE IT, SIR. 2816= Q. ONE MOMENT, PLEASE. I'M SORRY, PAGE 87. I MISSPOKE. 2817= A. OKAY. 2818= Q. AND IF YOU LOOK AT LINE 6, YOU ARE ASKED, "HOW ELSE DO YOU 2819= GET PUBLISHERS TERMS COMMUNICATED TO YOU?" AND YOU SAID, "BY 2820= FAX DIRECTLY FROM THE PUBLISHER," AND THEN YOU SAID, "CERTAINLY 2821= WITH PUBLISHERS' REPS WHEN THEY CALL, THAT WOULD BE MY NUMBER 2822= ONE SOURCE." CORRECT? 2823= A. CORRECT. 2824= Q. SO IS IT, IN FACT, THE CASE THAT PUBLISHERS ARE YOUR --

2825= PUBLISHERS' REPS, WHEN THEY VISIT, COME TO YOUR STORE, ARE YOUR 2826= NUMBER ONE SOURCE OF INFORMATION? 2827= A. THIS IS WHAT I TESTIFIED. 2828= Q. AND YOU TESTIFIED ACCURATELY, DIDN'T YOU, AT THE TIME? 2829= A. I TESTIFIED HONESTLY. 2830= Q. HONESTLY, CORRECT. AND WHEN YOU WERE ASKED AT THE 2831= DEPOSITION ABOUT HOW YOU LEARN ABOUT TERMS OF SALES FOR 2832= PUBLISHERS AND ASKED TO LIST ALL THE DIFFERENT WAY THAT YOU 2833= LEARN, ISN'T IT CORRECT THAT YOU DIDN'T EVEN MENTION THE RED 2834= BOOK? THAT YOU TALKED ABOUT FAXES FROM PUBLISHERS WEEKLY AND 2835= FAXES FROM PUBLISHERS AND VISITS FROM PUBLISHERS' 2836= REPRESENTATIVES, BUT THE RED BOOK DIDN'T EVEN COME TO MIND FOR 2837= YOU, ISN'T THAT RIGHT? 2838= A. I DON'T KNOW. 2839= Q. LET'S TAKE A LOOK AT THE SAME PAGE, THERE, PAGE 86, AND AT 2840= THE BOTTOM OF PAGE 86, YOU WERE ASKED. 2841= "IS THAT WHERE YOU GET ALL OF YOUR TERMS OF SALE 2842= INFORMATION?" 2843= AND YOU ANSWERED, "NO." AND THEN YOU WERE ASKED 2844= ABOUT PUBLISHERS, AND IF YOU CONTINUE, YOU WERE 2845= ASKED, 2846= "HOW ELSE DO YOU GET PUBLISHERS TERMS 2847= COMMUNICATED TO YOU?" 2848= AND YOU SAID, "BY FAX, DIRECTLY, AND CERTAINLY 2849= PUBLISHERS' REPS." THE SAME TESTIMONY WE LOOKED AT. 2850= SO THE ONLY THREE THINGS YOU MENTIONED AT THE 2851= DEPOSITION WERE FAXES, WHAT YOU GOT FROM PUBLISHERS' REPS, AND 2852= PUBLISHERS WEEKLY, RIGHT? 2853= A. THAT'S TRUE. 2854= Q. SO THE RED BOOK IS SOMETHING YOU KEEP BACK IN THE OFFICE AS 2855= A REFERENCE SOMEPLACE TO LOOK UP PHONE NUMBERS, BUT ISN'T THE 2856= PRIMARY SOURCE FOR YOU. THAT'S RIGHT, ISN'T IT? 2857= A. I THINK THE FACT THAT I FORGOT TO MENTION IT HERE DOES NOT 2858= MEAN THAT'S THE SAME CONCLUSION. UNDER THE PRESSURE OF GIVING 2859= TESTIMONY, SOMETIMES YOU FORGET. 2860= Q. OKAY. NOW, THE RED BOOK ISN'T THE PLACE YOU GO TO TO LEARN 2861= ABOUT STOCK OFFERS, IS IT? 2862= A. NO. 2863= Q. HOW DO YOU LEARN ABOUT THEM? 2864= A. FROM PUBLISHERS' REPS. 2865= Q. WHEN THEY COME AND VISIT YOU? 2866= A. YES. 2867= Q. SIT DOWN AND TALK ABOUT THE TERMS, POSSIBILITIES FOR STOCK 2868= OFFERS? 2869= A. YES. 2870= Q. OKAY. AND YOU MENTIONED THAT YOU TRY AND UPDATE THE RED 2871= BOOK THAT YOU KEEP, THE REFERENCE BOOK THAT YOU KEEP, BY 2872= PUTTING STOCK OFFER INFORMATION INTO IT? 2873= A. NO, I DON'T THINK THAT WAS MY TESTIMONY. WHEN THERE WERE 2874= CHANGES IN PUBLISHERS' TERMS IS WHEN WE CORRECT THE RED BOOK. 2875= Q. DID YOU DO THAT EVERY TIME YOU LEARNED ABOUT A CHANGE IN 2876= TERMS? 41
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2877= A. I WOULDN'T SWEAR THAT EVERY TIME, BUT MOST TIMES. 2878= Q. SO OVER THE COURSE OF A YEAR, AS MORE AND MORE CHANGES CAME 2879= IN, YOUR RED BOOK WOULD CHANGE AS YOU MARK IT UP, IS THAT 2880= RIGHT? 2881= A. TRUE. 2882= Q. OKAY. SO BY --COME THE END OF THE YEAR, IF YOU HAD --IF 2883= YOU COMPARED THE RED BOOK THAT YOU HAD MARKED UP, IT WOULD BE 2884= DIFFERENT THAN A BOOK THAT SOMEONE HAD NOT MARKED UP, RIGHT? 2885= A. YES. 2886= Q. AND THAT'S WHAT YOU NEED TO DO TO KEEP CURRENT WITH TERMS 2887= OF SALE, RIGHT? 2888= A. YES. 2889= Q. OKAY. NOW, WHEN PUBLISHERS' REPRESENTATIVES CAME TO VISIT 2890= YOU AND TOLD YOU ABOUT SOME NEW OFFERS, SOME SPECIAL DEAL, DID 2891= YOU KEEP SOME RECORDS OF WHAT THEY HAD TOLD YOU ABOUT THAT? 2892= A. NO. 2893= Q. THAT WASN'T YOUR PRACTICE? 2894= A. NO. 2895= Q. AND WHEN THEY --WHEN PUBLISHERS' REPS CAME AND TOLD YOU 2896= ABOUT SPECIAL DEALS THEY WERE OFFERING, DID YOU ASK THEM IF 2897= THEY WERE OFFERING THE SAME DEAL TO EVERYONE ELSE IN THE 2898= COUNTRY? 2899= A. NO. 2900= Q. SO YOU HAD NO WAY OF KNOWING WHETHER THAT WAS THE CASE OR 2901= NOT, RIGHT? 2902= A. NO. 2903= Q. AND WHEN YOU GET PUBLISHERS WEEKLY'S AND FLYERS AND FAXES, 2904= YOU KEEP ALL THOSE, AS A MATTER OF COURSE? 2905= A. NO. 2906= Q. AND WHEN PUBLISHERS' REPS COME AND TALK TO YOU, DO YOU KEEP 2907= NOTES OF WHAT THEY TELL YOU? 2908= A. NO. 2909= Q. SO AS --OVER THE COURSE OF A YEAR, YOU REALLY WOULD HAVE 2910= NO WAY OF LOOKING BACK AND KNOWING WHAT THE TERMS OF SALE WERE 2911= AS THEY EVOLVED OVER THE COURSE OF THE YEAR, OTHER THAN LOOKING 2912= AT YOUR INVOICES, RIGHT? 2913= A. THAT'S CORRECT. 2914= Q. AND I KNOW YOU WERE HERE IN THE COURTROOM YESTERDAY, AND 2915= YOU HEARD MS. SEE PROBABLY SAY, AND I QUOTE, IN ANSWER TO THE 2916= QUESTION, "IF YOU WANTED TO KNOW WHAT A BOOKSELLER REALLY PAID 2917= FOR BOOKS, YOU SHOULD LOOK TO THE INVOICES," AND SHE ANSWERED, 2918=" CORRECT." ARE YOU FAMILIAR WITH THAT? REMEMBER THAT? 2919= A. I REMEMBER -- 2920= Q. IN SOME SENSE? 2921= A. I CAN'T SWEAR THAT THAT WAS HER TESTIMONY, BUT YES. 2922= Q. YOU REMEMBER, IN SUBSTANCE, SHE TALKED TO THAT EFFECT, IS 2923= THAT RIGHT? 2924= A. YES. 2925= Q. AND IN THAT OPINION OF MS. SEE'S, THAT WOULD APPLY TO YOUR 2926= BOOKSTORE, AS WELL, THAT IF YOU WANTED TO KNOW WHAT THE TERMS 2927= OF SALE WERE OVER A COURSE OF A YEAR, YOU WOULD NEED TO LOOK AT 2928= YOUR INVOICES. 2929= A. YES. 2930= Q. AND THERE'S REALLY NO OTHER WAY TO DO IT, RIGHT? OTHER 2931= THAN LOOKING AT THE INVOICES. 2932= A. NO. 2933= Q. AND IF YOU WANT TO DETERMINE WHAT YOUR EFFECTIVE DISCOUNT 2934= RATE WAS FOR ALL THE BOOKS YOU PURCHASED FROM A PARTICULAR 2935= PUBLISHER, TO DO IT YOU'D HAVE TO GO LOOK AT THE INVOICES, 2936= RIGHT? 2937= A. YOU'D HAVE TO LOOK AT EVERY SINGLE INVOICE. 2938= Q. RIGHT. NOW, YESTERDAY WHEN YOU STARTED TO TESTIFY EARLY -- 2939= TOWARD THE END OF THE DAY, YOU MENTIONED THAT YOUR STOCK WAS 2940= SIMILAR TO BARNES & NOBLE, WITH ONE EXCEPTION. YOU DON'T CARRY 2941= TEXTBOOKS. 2942= A. YES. 2943= Q. TEXTBOOKS ARE SOLD AT A SHORT DISCOUNT, IS THAT CORRECT? 2944= A. YES, THAT'S CORRECT. 2945= Q. AND AS YOU MENTIONED, THAT'S A RATE SIGNIFICANTLY LOWER 2946= THAN ON TRADE BOOKS, RIGHT? 2947= A. YES. 42
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2948= Q. SO FOR EXAMPLE, IF A TRADE BOOK TYPICALLY SELLS IN THE 2949= 45 PERCENT DISCOUNT RANGE, SHORT DISCOUNT BOOKS ARE OFTEN IN 2950= THE 30 PERCENT RANGE, IS THAT RIGHT? 2951= A. OR LOWER. 2952= Q. OR LOWER. SO IF YOU WANTED TO DO A COMPARISON OF THE 2953= PRICES PAID BY TWO DIFFERENT BOOKSELLERS, ONE WHICH BOUGHT 2954= BOOKS AT SHORT DISCOUNT AND ONE WHICH DIDN'T, YOU'D NEED TO 2955= KNOW HOW MUCH OF EACH THEY BOUGHT TO DO AN ACCURATE COMPARISON, 2956= WOULDN'T YOU? 2957= A. WOULD YOU REPHRASE THE QUESTION? 2958= Q. SURE, SURE. LET ME --MAYBE I CAN DO IT BY REFERENCE TO 2959= SOMETHING ELSE THAT MS. SEE SAID YESTERDAY. 2960= A. OKAY. 2961= Q. I DON'T KNOW IF YOU REMEMBER, PERHAPS YOU REMEMBER THAT SHE 2962= WAS ASKED TO COMMENT ON THE COMPARISON BETWEEN TATTERED COVERS 2963= AND BORDERS, IN TERMS OF THEIR EFFECTIVE DISCOUNT RATE. AND 2964= MR. SPIVA ASKED, 2965= "WOULD YOU NEED TO KNOW THE PURCHASE MIX OF THOSE 2966= TWO COMPANIES IN ORDER TO HAVE AN OPINION ON THAT?" 2967= AND SHE ANSWERED, 2968= "YES, BECAUSE THERE ARE CERTAIN CATEGORIES THAT A 2969= BOOKSTORE CARRIES THAT CARRY A HIGHER DISCOUNT. FOR 2970= INSTANCE, COMPUTER BOOKS FREQUENTLY CARRY MUCH 2971= HIGHER DISCOUNTS. SO IT WOULD BE IMPORTANT TO LOOK 2972= AT THAT, WHAT THE MIX IS." 2973= REMEMBER THAT? 2974= A. YES, I DO. 2975= Q. AND THE SAME WOULD BE TRUE, I SUPPOSE, ABOUT BOOKS THAT 2976= CARRY A LOWER DISCOUNT, LIKE SHORT DISCOUNT BOOKS, RIGHT? 2977= A. YES. 2978= Q. SO IF YOU WANTED TO DO A COMPARISON BETWEEN, SAY, LITTLE 2979= PROFESSOR AND BARNES & NOBLE OR BORDERS, YOU'D HAVE TO LOOK AT 2980= THE PURCHASE MIX OF THE LITTLE BOOKSTORE (SIC) AND YOU'D HAVE 2981= TO LOOK ON THE OTHER HAND AT THE PURCHASE MIX OF BARNES & 2982= NOBLE, IS THAT RIGHT? 2983= A. THAT'S CORRECT. 2984= Q. AND THE ONLY WAY YOU COULD DO THAT WOULD BE TO LOOK AT THE 2985= INVOICES OF EACH OF THOSE STORES, RIGHT? 2986= A. WELL, OTHER THAN THE FACT THAT IF YOU SEE A STORE THAT'S 2987= LOADED WITH TEXTBOOKS, YOU HAVE THE RIGHT TO ASSUME, I THINK, 2988= IN THAT CASE, THAT THEY GOT LESS DISCOUNT. 2989= Q. RIGHT, BUT IF YOU WANT TO GO FROM THAT GENERAL OBSERVATION 2990= TO FIGURE WHAT THE EFFECTIVE DISCOUNT RATE WAS FOR LITTLE 2991= PROFESSOR ON THE ONE HAND, BARNES & NOBLE ON THE OTHER, YOU'D 2992= NEED TO LOOK AT THE INVOICES AND SEE WHAT THE ACTUAL RATE WAS, 2993= AND MULTIPLY IT BY THE NUMBER OF BOOKS, RIGHT? 2994= A. I THINK THAT'S FAIR. 2995= Q. I PUT UP THERE THAT LITTLE BINDER, AND LET ME ASK IF YOU 2996= COULD PLEASE TURN TO TAB 4. AND TAB 4 IS AN INVOICE TO LITTLE 2997= PROFESSOR THAT WAS PREVIOUSLY MARKED AS BORDERS EXHIBIT 10016, 2998= AND THAT'S ON BORDERS EXHIBIT LIST. YOU SEE THAT THERE? 2999= A. NO. I SEE THE INVOICE YOU -- 3000= Q. WHAT'S THE COMPANY? 3001= A. BRIMAX. 3002= Q. RIGHT. AND THIS IS ONE OF YOUR INVOICES, RIGHT? 3003= A. THAT'S CORRECT. 3004= Q. AND WHAT DISCOUNT RATE DOES IT SHOW? 3005= A. 60 PERCENT. 3006= Q. AND THAT'S A PRETTY GOOD DISCOUNT RATE, RIGHT? 3007= A. NOT FOR THIS --THIS IS A REMAINDER LINE. 3008= Q. OKAY. NOW, IF WE WANTED TO --YOU MENTIONED EARLIER THAT 3009= SOMETIMES YOU CHECK THE RED BOOK TO SEE IF AN INVOICE HAS THE 3010= RIGHT DISCOUNT RATE ON IT. YOU REMEMBER THAT? 3011= A. I DID. 3012= Q. NOW, IF YOU WANTED TO CHECK THE INVOICE RATE ON BRIMAX, THE 3013= RED BOOK WOULDN'T DO YOU MUCH GOOD. 3014= A. NOT THIS ONE. IT'S A BRITISH COMPANY. 3015= Q. IT'S NOT LISTED IN THE RED BOOK, IS IT? 3016= A. NO. 3017= Q. HOW WOULD YOU HAVE TO FIND OUT WHAT THE RIGHT PRICE WAS 43
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3018= FROM BRIMAX? 3019= A. YOU WOULD HAVE TO CALL BRIMAX OR DEAL WITH THEIR 3020= PUBLISHERS' REP. 3021= Q. AND THERE ARE OTHER PUBLISHERS THAT FIT IN THAT CATEGORY, 3022= TOO, THAT YOU BUY FROM, AREN'T THERE? 3023= A. POSSIBLY. 3024= Q. UM-HUM. WE TALKED --OR YOU TALKED, RATHER, WITH 3025= MR. HOHENGARTEN A BIT ABOUT INGRAM AND WHAT --LET ME TURN TO 3026= THAT NOW. 3027= YOU SAID THAT IT'S VERY IMPORTANT FOR YOU TO GET 3028= NEXT-DAY SERVICE FROM INGRAM, RIGHT? 3029= A. YES. 3030= Q. AND THAT'S BECAUSE YOUR BUSINESS MODEL DEPENDS ON MEETING 3031= SPECIAL ORDERS PROMPTLY. 3032= A. YES. 3033= Q. SO IF INGRAM OFFERED TO SEND YOU BOOKS ONCE A WEEK RATHER 3034= THAN THE NEXT DAY, IT WOULDN'T BE AS VALUABLE TO YOU, IS THAT 3035= RIGHT? 3036= A. THAT'S CORRECT. 3037= Q. AND YOU WOULDN'T PAY AS MUCH TO INGRAM IF THEY SAID, WE'RE 3038= GOING FROM A ONE-DAY DELIVERY TO A ONE-WEEK DELIVERY, IS THAT 3039= RIGHT? 3040= A. THAT IS CORRECT. 3041= Q. BUT THERE MIGHT BE SOMEBODY ELSE WHO HAD A DIFFERENT 3042= BUSINESS MODEL, RIGHT, ANOTHER LITTLE PROFESSOR BOOKSTORE? 3043= A. YES. 3044= Q. AND THAT OTHER LITTLE PROFESSOR BOOKSTORE MIGHT HAVE A 3045= DIFFERENT BUSINESS MODEL AND MIGHT BE HAPPY TO HAVE BOOKS FROM 3046= INGRAM ONCE A WEEK IN RETURN FOR A BETTER DISCOUNT RATE, RIGHT? 3047= A. CERTAINLY. 3048= Q. AND THEN IF WE WENT TO COMPARE YOUR EFFECTIVE DISCOUNT RATE 3049= TO THAT OTHER LITTLE PROFESSOR BOOKSTORE'S DISCOUNT RATE FROM 3050= INGRAM, WE WOULD SEE A DIFFERENCE IN THE EFFECTIVE DISCOUNT 3051= RATE. THAT IS, THEY'D HAVE A BETTER'S DISCOUNT RATE THAN YOU, 3052= RIGHT? 3053= A. YES. 3054= Q. BUT THAT WOULD MASK THE FACT THAT YOU WERE GETTING BETTER 3055= SERVICE, WOULDN'T IT? 3056= A. IT WOULD. 3057= Q. SO TO DO THE COMPARISON, WE HAVE TO LOOK AT THE WHOLE 3058= PACKAGE, DON'T WE? 3059= A. YES. 3060= Q. THAT THE KIND OF SERVICE AND PRICE THAT A BOOKSTORE 3061= OPERATES ON REFLECTS A BUSINESS MODEL, AND THERE ARE MANY 3062= BUSINESS MODELS THAT ARE EFFECTIVE IN RUNNING BOOKSTORES, 3063= RIGHT? 3064= A. YES. 3065= Q. AND YOU SAID THAT THE INGRAM REPRESENTATIVE WHO CAME TO SEE 3066= YOU OFFERED YOU PARTICIPATION IN THE SCHEDULED DELIVERY 3067= PROGRAM, RIGHT? 3068= A. I DID. 3069= Q. AND YOU DECIDED AGAINST IT BECAUSE IT DIDN'T FIT YOUR 3070= BUSINESS MODEL? 3071= A. YES. 3072= Q. BUT GOING TO THIS OTHER LITTLE PROFESSOR BOOKSTORE THAT I 3073= WAS TALKING ABOUT A MOMENT AGO, IT SOUNDS LIKE IT WOULD FIT 3074= THAT LITTLE PROFESSOR BOOKSTORE'S BUSINESS MODEL PRETTY WELL, 3075= WOULDN'T IT? 3076= MR. HOHENGARTEN: OBJECTION, YOUR HONOR. MR. RADER 3077= IS ASKING HYPOTHETICAL QUESTIONS ABOUT ANOTHER LITTLE PROFESSOR 3078= THAT THERE'S NO EVIDENCE IN THE RECORD ABOUT. 3079= THE COURT: HE'S ASKING QUESTIONS ABOUT A FRANCHISE 3080= OF WHICH THIS GENTLEMAN IS A FRANCHISEE, AND I THINK IT'S 3081= PERFECTLY PROPER FOR HIM TO MAKE THAT INQUIRY, AND THE 3082= OBJECTION IS OVERRULED. 3083= BY MR. RADER: 3084= Q. MR. BARRINGER? 3085= A. WELL, IN RESPONSE TO THAT, QUITE HONESTLY, THE ENTIRE 3086= BUSINESS MODEL OF LITTLE PROFESSOR AS A CHAIN OF FRANCHISEES IS 3087= PREDICATED ON A SIMILAR QUICK DELIVERY. 44
44 Page 45 46
3088= Q. I WANT TO COMPARE TO IT SOMETHING ELSE, THEN. 3089= A. OKAY. 3090= Q. THERE MIGHT BE ANOTHER BOOKSTORE IN CHARLOTTE THAT HAD A 3091= DIFFERENT BUSINESS MODEL WITH IT, THAT WOULD BE HAPPY WITH 3092= DELIVERY ONCE A WEEK FROM INGRAM, IS THAT RIGHT? 3093= MR. HOHENGARTEN: OBJECTION, ASSUMES FACTS NOT IN 3094= EVIDENCE. 3095= THE COURT: OBJECTION'S OVERRULED. 3096= BY MR. RADER: 3097= Q. MR. BARRINGER? 3098= A. YES, THERE MIGHT BE. 3099= Q. AND IF THAT OTHER BOOKSTORE IN CHARLOTTE WAS HAPPY WITH

3100= THAT ONE-WEEK DELIVERY AND GOT A BETTER PRICE FOR IT, AGAIN, 3101= WHEN WE COMPARED YOUR EFFECTIVE DISCOUNT RATE TO THE OTHER 3102= BOOKSTORE'S EFFECTIVE DISCOUNT RATE, THE DIFFERENCE WOULD BE 3103= EXPLAINED BY THE DIFFERENCE IN BUSINESS MODEL, RIGHT? 3104= A. YES. 3105= Q. OKAY. NOW, WHEN YOU WERE VISITED BY THE INGRAM 3106= REPRESENTATIVE, DID THAT PERSON TELL YOU YOU QUALIFIED FOR THE 3107= SCHEDULED DELIVERY PROGRAM BECAUSE OF THE VOLUME OF SALES? 3108= A. I THINK THE FACT THAT SHE OFFERED IT TO ME --I DON'T 3109= KNOW --I DIDN'T KNOW OF ANY QUALIFICATION REQUIREMENTS. SHE 3110= OFFERED IT. 3111= Q. NOW, THIS SCHEDULED DELIVERY PROGRAM THAT WAS OFFERED TO 3112= YOU, THAT'S NOT IN THE RED BOOK, IS IT? 3113= A. NO. 3114= Q. IN FACT, THE TERMS, AT LEAST THE PRICE TERMS ARE BETTER 3115= THAN WHAT'S IN THE RED BOOK, AREN'T THEY? 3116= A. I BELIEVE THEY ARE. I'M NOT SURE. I THINK SO. 3117= Q. WELL, ISN'T YOUR UNDERSTANDING THAT THE PRICE TERM ON 3118= SCHEDULED DELIVERY IS 41 PERCENT FROM THE FIRST BOOK, WHILE IN 3119= THE RED BOOK IT'S 40 PERCENT FROM THE FIRST BOOK? 3120= A. WE DID NOT GET THAT INVOLVED, SO I DON'T HONESTLY KNOW. 3121= Q. OKAY. NOW, STICKING WITH INGRAM FOR A BIT, YOU HAD 3122= MENTIONED THAT YOU HAD NOT HEARD ABOUT THE SUMMARY BILLING 3123= PROGRAM FROM INGRAM, RIGHT? 3124= A. THAT'S CORRECT. 3125= Q. BUT YOU HEARD ABOUT IT FROM COURT HERE YESTERDAY, RIGHT? 3126= A. YES. 3127= Q. AND ISN'T IT CORRECT THAT YOU HEARD THAT THAT PROGRAM WOULD 3128= ALLOW BOOKSELLERS TO IMPROVE THEIR CASH DISCOUNT OPPORTUNITIES 3129= WITH INGRAM BY HAVING A 2, 25 TERMS RATHER THAN 2, 10 TERMS? 3130= A. YES. 3131= Q. HAVING LEARNED ABOUT IT, ARE YOU NOW GOING TO CONTACT YOUR 3132= INGRAM REPRESENTATIVE AND SEE ABOUT SIGNING UP FOR SUMMARY 3133= BILLING? 3134= A. NO, BECAUSE I UNDERSTAND BY THE TESTIMONY THAT YOU MUST 3135= TAKE THE FIRST IN ORDER TO GET THE SECOND, THAT YOU HAVE TO 3136= TAKE THE COMBINED DELIVERY IN ORDER TO GET THE SUMMARY 3137= DISCOUNT. 3138= Q. IF IT WERE THE CASE THAT THAT WERE NOT REQUIRED, IF IT WERE 3139= POSSIBLE TO SIGN UP FOR SUMMARY BILLING ALONE, WOULD YOU THEN 3140= BE INTERESTED IN SIGNING UP? 3141= A. PROBABLY. 3142= Q. BECAUSE IT'S A BETTER TERMS? 3143= A. YES. 3144= Q. SO ARE YOU PLANNING TO CONTACT THE INGRAM REPRESENTATIVE 3145= ABOUT THAT? 3146= A. I DON'T KNOW. 3147= Q. OKAY. NOW, YOU ALSO SPOKE ABOUT THE FACT THAT YOU FROM 3148= TIME TO TIME TAKE ADVANTAGE OF THE V. O. R. PROGRAM. 3149= A. YES. 3150= Q. AND THAT'S NOT IN THE RED BOOK, RIGHT? 3151= A. NO. 3152= Q. AND THOSE TERMS ARE BETTER THAN THE RED BOOK, AREN'T THEY? 3153= A. YES. LET ME JUST QUALIFY THAT, JUST A SMALL AMOUNT? THEY 3154= ARE SOMETIMES BETTER THAN THE RED BOOK. 3155= Q. DEPENDING ON HOW MANY TITLES YOU BOUGHT FROM THE RED BOOK; 3156= IS THAT WHAT YOU MEAN? 3157= A. WELL, DEPENDING ON WHICH PUBLISHER IS USED AS VENDOR OF 45
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3158= RECORD. 3159= Q. NOW, YOUR BOOKSTORE IS A MEMBER OF THE ABA? 3160= A. YES, IT IS. 3161= Q. AND THE ABA PROVIDES CERTAIN SERVICES TO ITS MEMBERS, 3162= RIGHT? 3163= A. YES. 3164= Q. FOR EXAMPLE, IT OFFERS A PROGRAM TO GET BETTER FREIGHT 3165= PRICES, ISN'T THAT RIGHT? 3166= A. YES, IT DOES. 3167= Q. IT'S CALLED THE SMALL PACKAGE SHIPPING PROGRAM? 3168= A. YES. 3169= Q. AND YOU GET A BETTER RATE FROM UPS BY PARTICIPATING IN 3170= THAT? 3171= A. NO, WE GET A BETTER RATE FROM RPS. 3172= Q. RPS, BUT YOU GET A BETTER RATE THAN IS AVAILABLE TO NON-ABA 3173= MEMBERS, CORRECT? 3174= A. YES. 3175= Q. NOW, WE TALKED A LITTLE WHILE AGO ABOUT VISITS THAT YOU 3176= GOT --YOU HAVE FROM PUBLISHERS' REPRESENTATIVES. DO YOU ALSO 3177= HAVE VISITS FROM INDEPENDENT REPS WHO REPRESENT A NUMBER OF 3178= PUBLISHERS? 3179= A. WHAT WE NORMALLY CALL COMMISSION REPS? 3180= Q. UM-HUM. 3181= A. YES. 3182= Q. OKAY. COULD YOU LOOK AT TAB 1 IN THE BOOKLET THAT YOU 3183= HAVE, WHICH WE NOTE IS BORDERS TRIAL EXHIBIT 10007. SEE WHERE 3184= I AM, MR. BARRINGER? 3185= A. I SEE. AGAIN, I DON'T HAVE THE EXHIBIT NUMBER, THAT I KNOW 3186= OF, BUT -- 3187= Q. YOU SEE THE DOCUMENT THAT SAYS, "SPRING, 1998." 3188= A. I DO. 3189= Q. FROM THE HOPKINS GROUP? 3190= A. YES, SIR. 3191= Q. THAT'S A GROUP YOU DO BUSINESS WITH? 3192= A. YES, SIR. 3193= Q. AND THEY'RE A COMMISSION GROUP? 3194= A. THEY'RE A COMMISSION GROUP. 3195= Q. UM-HUM, AND THIS WAS A BROCHURE THEY GAVE YOU IN THIS FORM 3196= IN 1998 WITH THEIR VARIOUS OFFERINGS? 3197= A. YES. 3198= Q. DO YOU SOMETIMES BUY BOOKS FROM THEM? 3199= A. YES. WHEN YOU SAY, "FROM THEM," YOU MEAN THROUGH THE 3200= HOPKINS GROUP OR FROM THESE PUBLISHERS? 3201= Q. FROM THE HOPKINS GROUP. 3202= A. YES. 3203= Q. COULD YOU TURN TO THE NEXT-TO-LAST --WELL, I MISSPOKE. 3204= TURN TO THE THIRD PAGE, AND YOU'LL SEE IN THE MIDDLE THERE'S A 3205= PUBLISHER IDENTIFIED AS HIPPOCRENE. YOU SEE THAT? 3206= A. I SEE THAT. 3207= Q. AND I NOTE IN THE RIGHT-HAND COLUMN WHERE IT'S TITLED, 3208=" RETAIL DISCOUNT," IT SAYS, "SALES REP DISCOUNT," RIGHT? 3209= A. YES. 3210= Q. NOW, IS THAT --IS IT YOUR UNDERSTANDING THAT THAT 3211= NOTATION, "SALES REP DISCOUNT," REFERS TO A SPECIAL DEAL THAT'S 3212= BEING OFFERED BY THE HOPKINS GROUP? 3213= A. YES. 3214= Q. AND DOES IT HAPPEN FROM TIME TO TIME THAT THE HOPKINS GROUP 3215= OR OTHER SALESPEOPLE OFFER YOU SPECIAL DEALS LIKE THIS? 3216= A. YES. 3217= Q. AND PRESUMABLY THOSE ARE AVAILABLE ONLY TO THE CUSTOMERS OF 3218= THE HOPKINS GROUP, CORRECT? 3219= A. NO. THERE WOULD BE --HOW TO EXPLAIN THIS WITHOUT MAKING 3220= IT COMPLICATED? THERE PROBABLY ARE FIVE DIFFERENT COMMISSION 3221= REP GROUPS THAT REPRESENT THIS PARTICULAR PUBLISHER THROUGHOUT 3222= THE UNITED STATES. ALL OF THOSE COMMISSION GROUPS WOULD OFFER 3223= THIS. SO HOPKINS GROUP IS COVERING OUR GEOGRAPHICAL AREA, AND 3224= SOMEBODY ELSE IS COVERING HERE IN SAN FRANCISCO. BUT THE --I 3225= ASSUME THE DEAL WOULD BE EXACTLY THE SAME FOR PEOPLE IN SAN 3226= FRANCISCO AS IT WOULD BE IN CHARLOTTE. 3227= Q. YOU SAY YOU ASSUME THAT. YOU DON'T KNOW. 46
46 Page 47 48
3228= A. NO, I DON'T. 3229= Q. NOW, WHEN IT SAYS, "SALES REP DISCOUNT," THAT'S SOMETHING 3230= THAT'S A SPECIAL OFFER, SPECIAL DEAL? 3231= A. YES. 3232= Q. AND THAT WOULDN'T BE IN THE RED BOOK, WOULD IT? 3233= A. NO. 3234= Q. SO THESE TERMS HERE ARE BETTER THAN THE RED BOOK TERMS FOR 3235= HIPPOCRENE PUBLISHING, RIGHT? 3236= A. I HAVE TO CHECK THE RED BOOK TO FIND OUT. 3237= Q. WHY DON'T YOU LOOK AT TAB 2, SAVE YOU THE TROUBLE, AND LET 3238= YOU KNOW FOR THE RECORD THAT TAB 2 IS A EXCERPT FROM 3239= PLAINTIFF'S EXHIBIT 5, THE ABA BOOK BUYERS HANDBOOK FOR 1998. 3240= A. I FOUND IT. 3241= Q. OKAY, NOW, THAT SHOWS A --IT SHOWS THAT THE SALES REP 3242= DISCOUNT IS BETTER THAN THE RED BOOK, DOESN'T IT? THAT IS, THE 3243= SALES REP DISCOUNT FOR FIVE FOR 24 COPIES IS 44 PERCENT WHILE 3244= IN THE RED BOOK IT'S 40 PERCENT. 3245= A. THAT'S CORRECT. 3246= Q. OKAY, SO IT'S A PRETTY GOOD DEAL. 3247= A. YES. 3248= THE COURT: I'M SORRY, I DON'T SEE IT IN THE RED 3249= BOOK.

3250= MR. RADER: YOUR HONOR, IT'S IN THE SECOND PAGE --3251= WELL, PAGE 334 OF THE RED BOOK, AND UNDER DISCOUNT SCHEDULES, 3252= IN THE RIGHT-HAND COLUMN, UNDER HIPPOCRENE BOOKS, IT SAYS, 5 3253= COPIES, 40 PERCENT. IT'S THE --THE PRINT IS BARELY READABLE. 3254= THE COURT: WHERE IS HIPPOCRENE BOOKS? 3255= MR. RADER: EXCUSE ME, YOUR HONOR? 3256= THE COURT: HIPPOCRENE BOOKS IS A NEW PLAYER. 3257= MR. RADER: IT'S A NEW ONE FOR ME, AS WELL. 3258= THE WITNESS: AND FOR ME, AS WELL. 3259= BY MR. RADER: 3260= Q. MR. BARRINGER, LET ME ASK YOU TO TURN TO TAB 3 OF THE SAME 3261= BOOKLET THAT YOU HAVE THERE. 3262= A. I HAVE IT. 3263= Q. AND LET ME NOTE THAT'S BORDERS TRIAL EXHIBIT 10008. AND 3264= THIS IS A COPY, APPEARS TO ME, OF A STOCK OFFER THAT YOU 3265= RECEIVED, RIGHT? 3266= A. I DON'T KNOW. YOU MEAN THE OFFER THAT I RECEIVED? 3267= Q. THAT YOU RECEIVED THIS DOCUMENT, THE OFFER. 3268= A. YES, Could not acquire words on page 48 I'LL --I DON'T KNOW, BUT IF YOU GOT THIS FROM MY 3269= RECORDS, I RECEIVED IT. 3270= Q. WELL, LET ME REPRESENT TO YOU THAT IT WAS PRODUCED BY YOU, 3271= AND YOU IDENTIFIED IT AT YOUR DEPOSITION. 3272= A. THAT'S FINE. 3273= Q. OKAY. AND THIS --YOU RECEIVED STOCK OFFERS LIKE THIS IN 3274= THE MAIL FROM TIME TO TIME, OR BY FAX, IS THAT RIGHT? 3275= A. THAT'S CORRECT. 3276= Q. AND THIS IS FROM SIMON & SCHUSTER? 3277= A. IT IS. 3278= Q. AND THAT'S ONE OF THE BIGGEST PUBLISHING COMPANIES, RIGHT? 3279= A. YES. 3280= Q. AND IT INDICATES THAT THERE'S AN EXTRA 2 PERCENT DISCOUNT? 3281= A. YES. 3282= Q. AND IN THE BIG BOOK BUSINESS THAT'S A PRETTY DECENT 3283= INCREASE IN THE DISCOUNT PRICE, ISN'T IT? 3284= A. YES. 3285= Q. AND IT INDICATES THAT IT'S EFFECTIVE FROM JANUARY 1ST, 1998 3286= THROUGH APRIL 15TH, 1998. DO YOU SEE THAT? 3287= A. YES. 3288= Q. SO IT'S, WHAT, TWO AND-A-HALF MONTHS, THREE MONTHS? 3289= ACTUALLY, THREE AND-A-HALF MONTHS LONG. 3290= A. YES. 3291= Q. AND IT ALSO INDICATES, DOESN'T IT, THAT THIS APPLIES TO ALL 3292= BACK LIST BOOKS OF SIMON & SCHUSTER? 3293= A. YES. 3294= Q. AND GIVEN THAT SIMON & SCHUSTER IS ONE OF THE COUNTRY'S 3295= LARGEST PUBLISHING COMPANIES AND HAS BEEN IN EXISTENCE FOR A 3296= LONG TIME, THE BACK LIST IS QUITE EXTENSIVE, ISN'T IT? 3297= A. YES. 3298= Q. SO THIS WAS AN OPPORTUNITY FOR YOU TO STOCK UP AT A VERY 47
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3369= BUSINESS, DIFFERENT PUBLISHERS HAVE DIFFERENT ARRANGEMENTS, AND 3370= YOU HAVE TO BE AWARE OF THEM TO FIGURE OUT WHAT'S GOING ON, 3371= RIGHT? 3372= A. THAT'S TRUE. 3373= Q. AND A CERTAIN AMOUNT OF IT DEPENDS ON YOUR RELATIONSHIP 3374= WITH YOUR VENDORS, ISN'T THAT RIGHT?

3375= A. YES. 3376= Q. AND THAT'S WHY YOU LIKE TO WORK WITH THE PUBLISHERS' REPS? 3377= A. THAT'S TRUE. 3378= Q. LET ME ASK YOU TO TAKE A LOOK, IF YOU WOULD, AT TAB 5 IN 3379= THE BOOKLET, WHICH IS MARKED AS BARNES & NOBLE EXHIBIT 7854. 3380= A. I HAVE, SIR. 3381= Q. AND AS YOU'LL SEE, THIS IS A MAP OF YOUR AREA, AND WHAT WE 3382= DID, JUST LET ME REPRESENT TO YOU, IS CREATE A MAP THAT LISTED 3383= NOT JUST LITTLE PROFESSOR AND BARNES & NOBLE AND BORDERS BUT 3384= ALSO ALL THE OTHER BOOKSTORES THAT YOU IDENTIFIED IN YOUR 3385= DEPOSITION AS BEING IN YOUR AREA. 3386= AND THESE ARE BOOKSTORES THAT ARE IN YOUR AREA, 3387= AREN'T THEY? 3388= A. WELL, MANY OF THESE ARE GONE. 3389= Q. BUT THEY WERE AT ONE TIME. 3390= A. YES. 3391= (CONTINUED ON FOLLOWING PAGE. NOTHING OMITTED.) 3392= 3393= 3394= 3395= 3396= 3397= 3398= 3399= 3400= BY MR. RADER: 3401= Q. AND UNTIL THE EARLY ' 90S WHEN BARNES & NOBLE AND BORDERS 3402= AND MEDIA PLAY AND SAM'S CLUB CAME INTO YOUR PART OF CHARLOTTE, 3403= LITTLE PROFESSOR WAS --WAS IN SOME SENSE THE ONLY GAME IN TOWN 3404= IN TERMS OF A BIG FULL SERVICE BOOK STORE, RIGHT? 3405= A. NO. 3406= Q. WHO ELSE WAS THERE? 3407= A. WE HAD THE TWO INTIMATES. WE HAD STORES CALLED BOOKENDS. 3408= WE HAD HORIZON BOOKS. WE HAD --WHAT ABOUT --BUT THERE WERE 3409= OTHERS. THERE WERE ABOUT 11 INDEPENDENT BOOKSTORES. 3410= Q. BUT THERE'S A LOT MORE NOW? 3411= A. INDEPENDENT BOOKSTORES? 3412= Q. NO, BOOKSTORES. BOOKSTORES. 3413= A. YEAH. A LOT MORE SQUARE FOOTAGE. 3414= Q. A LOT MORE SQUARE FOOTAGE. 3415= ISN'T IT CORRECT THAT IN CHARLOTTE NOW COMPARED TO 3416= THE EARLY '90S THAT THERE ARE MANY, MANY MORE TIMES AS MANY 3417= BOOKS BEING SOLD AS THERE WERE IN THE EARLY '90S? 3418= A. I THINK THAT WOULD BE PROBABLY FAIR. 3419= Q. SEVERAL TIMES, WOULDN'T YOU SAY? 3420= A. YEAH. 3421= Q. AND NOTWITHSTANDING THAT, LITTLE PROFESSOR'S SALES HAVE 3422= REMAINED OVER THE LAST TEN YEARS RELATIVELY CONSTANT; ISN'T THAT 3423= RIGHT? 3424= A. NO, I WOULDN'T AGREE THAT THEY'VE BEEN CONSTANT. THERE WAS 3425= A SIGNIFICANT DIP. 3426= Q. YOU'RE HIGHER NOW THAN YOU WERE IN THE EARLY '90S, CORRECT, 3427= IN SALES? ISN'T THAT WHAT YOU JUST WENT THROUGH WITH 3428= MR. NELSON? 3429= A. YES. 3430= Q. SO YOUR SALES --NOTWITHSTANDING THE EXISTENCE IN THE AREA 3431= OF BORDERS AND THE SEVERAL BARNES & NOBLE STORES AND SAM'S CLUB 3432= AND MEDIA PLAY, YOUR SALES NOW ARE HIGHER THAN THEY WERE 3433= EARLIER? 3434= A. YES. 3435= Q. SO YOU'VE BEEN A PRETTY GOOD COMPETITOR, ALL THINGS 3436= CONSIDERED, RIGHT? 3437= A. YES. 3438= Q. AT ONE POINT, YOU OWNED AN INTEREST IN ANOTHER LITTLE 49
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3439= PROFESSOR BOOKSTORE; ISN'T THAT RIGHT? 3440= A. THAT'S CORRECT. 3441= Q. ALSO IN CHARLOTTE? 3442= A. NO, IN DURHAM, NORTH CAROLINA. 3443= Q. DID I EVER CONSIDER THE POSSIBILITY OF THE ESTABLISHING A 3444= WAREHOUSE FACILITY SO YOU COULD BUY BOOKS FOR BOTH OF STORES? 3445= A. NO. 3446= Q. BUT THAT WAS SOMETHING THAT YOU MIGHT HAVE DONE, CORRECT? 3447= A. IT WOULD HAVE BEEN POSSIBLE. 3448= Q. WOULD IT HAVE BEEN POSSIBLE? 3449= A. YEAH. 3450= Q. RIGHT. 3451= AND IF YOU HAD DONE THAT, YOU POTENTIALLY COULD 3452= QUALIFY FOR A RDC DISCOUNT, COULDN'T YOU? 3453= A. NO, BECAUSE THE DURHAM STORE CLOSED LONG BEFORE RDC CAME 3454= ALONG. 3455= Q. NOW, YOU'RE PART OF THE GROUP OF FRANCHISEES, THE LITTLE 3456= PROFESSOR GROUP, RIGHT? 3457= A. YES. 3458= Q. HAS THE LITTLE PROFESSOR GROUP EVER CONSIDERED SETTING UP A 3459= RETAIL DISTRIBUTION CENTER SO THAT YOU COULD BUY BOOKS CENTRALLY 3460= AND DISTRIBUTE THEM? 3461= A. YES, THEY DID IN THE BEGINNING. IT WAS CHAOTIC. 3462= Q. COULDN'T MAKE IT WORK? 3463= A. NO. 3464= Q. BUT THE IDEA'S A GOOD ONE, CORRECT? 3465= A. NOT IF IT DIDN'T WORK. 3466= Q. IF IT DOES WORK. IF IT DOES WORK. 3467= A. YES. 3468= Q. BECAUSE THAT WOULD ALLOW YOU TO BUY BOOKS AT A BETTER PRICE, 3469= RIGHT? 3470= A. YES. 3471= Q. AND YOU THINK THE IDEA OF BUYING IN GREATER VOLUME TO GET 3472= VOLUME DISCOUNTS IS A GOOD IDEA, DON'T YOU? 3473= A. YES. 3474= Q. AND IT'S FAIR, ISN'T IT? 3475= A. YES. 3476= MR. RADER: OKAY. NOTHING FURTHER, YOUR HONOR. 3477= THE COURT: ALL RIGHT. REDIRECT. 3478= MR. HOHENGARTEN: JUST TAKE ME A MOMENT TO GET ALL OF 3479= THESE BINDERS UP HERE, YOUR HONOR. 3480= THE COURT: ALL RIGHT. WELL, WE MIGHT TAKE A 3481= TEN-MINUTE RECESS. 3482= (RECESS TAKEN AT 12: 05 P. M.) 3483= (CONTINUED NEXT PAGE; NOTHING OMITTED) 3484= 3485= 3486= 3487= 3488= 3489= 3490= 3491= 3492= 3493= 3494= 3495= 3496= 3497= 3498= 3499= 3500= (PROCEEDINGS RESUME AT 12: 15 P. M.) 3501= THE COURT: BE SEATED. REDIRECT EXAMINATION. 3502= PROCEED. 3503= REDIRECT EXAMINATION 3504= BY MR. HOHENGARTEN: 3505= Q. MR. BARRINGER, IT MAY BE HELPFUL TO PUT TOGETHER TWO 3506= DIFFERENT EXHIBITS WE LOOKED AT TODAY. FIRST, FROM THE 3507= PLAINTIFFS' BINDER, TAB 5. 3508= A. PLAINTIFFS EXHIBITS? 50
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3509= Q. THAT'S RIGHT. I'M SORRY, NOT THAT ONE, THE BLACK 3510= PLAINTIFFS' BINDER. 3511= A. TAB 5? 3512= Q. THAT'S RIGHT. AND THEN FROM THE WHITE BINDERS, WHICH WAS 3513= BORDERS COUNSEL'S BINDER, TAB 4. 3514= SORRY FOR THE PROLIFERATION OF BINDERS. 3515= THE COURT: THAT'S FINE. 3516= THE WITNESS: I HAVE IT. 3517= MR. HOHENGARTEN: SHALL I PROCEED, YOUR HONOR? 3518= THE COURT: YES, PLEASE. 3519= BY MR. HOHENGARTEN: 3520= Q. AND YOU IDENTIFIED THESE TWO EXHIBITS AS SUMMARIES OF YOUR 3521= SALES FROM LITTLE PROFESSOR. TOGETHER THEY GO FROM FISCAL YEAR 3522= 90-91 THROUGH FISCAL YEAR 98-99, CORRECT? 3523= A. I'M SORRY --3524= MR. HOHENGARTEN: MAY I APPROACH THE WITNESS, YOUR

3525= HONOR, JUST TO MAKE SURE HE HAS THE CORRECT...? 3526= THE COURT: YES. 3527= BY MR. HOHENGARTEN: 3528= Q. FIRST OF ALL, LOOKING AT THIS NOW OVERVIEW OF ALL OF THESE 3529= YEARS, WHAT WERE YOUR SALES IN THE LAST YEAR BEFORE BARNES & 3530= NOBLE BORDERS MOVED INTO YOUR --TO CHARLOTTE? 3531= A. 1,325,293. 3532= Q. AND LOOKING ALL THE WAY THROUGH THE YEARS THAT MR. NELSON 3533= NOW HAS SHOWN US IN THE SECOND CHART, HAVE YOUR SALES EVERY 3534= REBOUNDED TO THAT LEVEL? 3535= A. NO, THEY HAVE NOT. 3536= Q. MR. NELSON ASKED YOU SOME QUESTIONS ABOUT THE SERVICES FROM 3537= THE LITTLE PROFESSOR FRANCHISE COMPANY TO YOU, THAT THEY 3538= WERE --AND YOU ANSWERED THAT THERE HAD BEEN DIMINISHMENT IN 3539= SERVICES FROM THEM IN RECENT YEARS. 3540= A. YES. 3541= Q. WHEN DID THAT FALL-OFF OCCUR? 3542= A. IT BEGAN PROBABLY ABOUT FIVE OR SIX YEARS AGO, AND 3543= GRADUALLY DETERIORATED. 3544= Q. SO COULD YOU PLACE A YEAR ON WHEN YOU THINK THE DROP-OFF 3545= BEGAN? 3546= A. IN '88 IT WAS STILL VERY STRONG. THIS BASICALLY FALLS TO A 3547= MANAGEMENT PROBLEM IN THE HOME OFFICE. 3548= Q. DO YOU THINK THOSE PROBLEMS HAVE AFFECTED YOUR SALES IN ANY 3549= WAY? 3550= A. NOT --NOT REALLY. 3551= Q. AND JUST FOR CLARIFICATION, YOU WERE ASKED SOME QUESTIONS 3552= ABOUT YOUR FINANCIALS WHERE YOU READ A LINE OF GROSS INCOME. 3553= IN YOUR FINANCIALS, WHAT DOES GROSS INCOME MEAN? 3554= A. GROSS INCOME IS COAST OF GOODS SOLD. PROBABLY THERE ARE A 3555= FEW OTHER THINGS IN THERE BESIDES THAT, BUT BASICALLY IT'S COST 3556= OF THE GOODS SOLD. 3557= Q. I'M SORRY, THE COST OF GOODS SOLD, OR INCOME RECEIVED FROM 3558= THE --3559= A. SORRY, THE COST OF GOODS --RECEIVED. 3560= Q. IT'S NOT YOUR PROFITS. 3561= A. NO, NO, NO. 3562= Q. NOW, YOU WERE ALSO ASKED BY MR. NELSON WHETHER YOU THOUGHT 3563= IT WAS A GOOD IDEA FOR LITTLE PROFESSOR STORES TO BAND TOGETHER 3564= FOR PURCHASING PURPOSES, AND YOU SAID IT WASN'T, AND THEN YOU 3565= WERE SHOWN A PORTION OF YOUR DEPOSITION, PAGES 111 THROCould not acquire words on page 53 UGH 112. 3566= CAN YOU PULL THAT OUT, PLEASE? I SUGGEST WE FOCUS ON PAGE 112. 3567= A. YES, I HAVE IT. 3568= Q. FROM LINES 8 THROUGH 17. THIS WAS READ IN THE RECORD 3569= BEFORE. FIRST OF ALL, DO YOU BELIEVE THAT YOUR STATEMENT IN 3570= YOUR DEPOSITION WAS INCONSISTENT WITH YOUR TESTIMONY TODAY? 3571= A. NOT --NOT REALLY, BECAUSE --AND AGAIN, I'M HAVING TO GO 3572= BACK TO WHEN I WAS BEING DEPOSED. I THINK THE QUESTION, WELL, 3573= WE HAVE IT RIGHT IN FRONT OF ME, "YOU AGREE --BUY IN GREATER 3574= VOLUME AND PRESUMABLY RECEIVE VOLUME DISCOUNTS FROM PUBLISHERS, 3575= IS THAT A GOOD IDEA," "YES," I THINK THE QUESTION I WAS ASKED 3576= TODAY WAS, DO YOU THINK THE ALLIANCE WAS A GOOD IDEA, AND MY 3577= REPLY WAS NO. I NEVER THOUGHT IT WAS A GOOD IDEA. INDEED, I 3578= WAS OPPOSED TO IT, BASICALLY, BECAUSE OF THE WHOLE LITIGATION 51
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3579= PROBLEM. AND THAT, I THINK, IS WHY IT NEVER GOT OFF THE GROUND 3580= WITH THE LITTLE PROFESSOR. THEY DIDN'T WANT TO GET INTO THAT 3581= CAN OF WORMS. 3582= Q. IF YOU WOULD TURN TO MR. NELSON'S BINDER, THE WHITE BINDER. 3583= A. YES. 3584= Q. HE ASKED YOU SOME QUESTIONS ABOUT INGRAM INVOICES, 3585= BEGINNING ON TAB 7. DO THESE INVOICES SHOW THAT LITTLE 3586= PROFESSOR MADE MANY PURCHASES OF ONE TO FOUR COPIES OF A TITLE 3587= FROM INGRAM? 3588= A. YES, THEY DO. 3589= Q. AND FOR THE VAST MAJORITY OF THOSE PURCHASES, WHAT DISCOUNT 3590= DID LITTLE PROFESSOR ACTUALLY RECEIVE? 3591= A. 40 PERCENT. 3592= Q. IS THAT ALSO TRUE FOR THE INVOICE AT TAB 8? 3593= A. IT IS. 3594= Q. AND THE INVOICE AT TAB 9? 3595= A. IT'S ALSO TRUE. 3596= Q. AND THE INVOICE AT TAB 10? 3597= A. YES. 3598= Q. AND IF I'M NOT MISTAKEN, EACH OF THESE INVOICES IS FROM 3599= 1997, IS THAT CORRECT? I THINK THAT THE DATE MAY BE HIDDEN 3600= UNDER THE EXHIBIT TAB. 3601= A. THEY APPEAR TO ALL BE '97. 3602= Q. AND DURING YOUR CROSS-EXAMINATION, YOU NOTED THAT THERE 3603= WERE SEVERAL COMPUTER BOOKS ON WHICH YOU RECEIVED A 43 PERCENT 3604= DISCOUNT FROM INGRAM, EVEN FOR SMALLISH ORDERS, IS THAT RIGHT? 3605= A. YES. 3606= Q. ARE YOU AWARE OF ANY COMPUTER BOOKS, SPECIAL OR PROGRAM 3607= WITH INGRAM, THAT LITTLE PROFESSOR PARTICIPATED IN AT THAT 3608= TIME? 3609= A. I HONESTLY DON'T KNOW, ONLY BECAUSE MR. BURLESON HANDLED 3610= THE COMPUTER PROFILE. 3611= Q. BUT TO YOUR KNOWLEDGE, OUTSIDE OF COMPUTER BOOKS, THE 3612= 43 PERCENT DISCOUNT IS NOT RECEIVED FROM --BY LITTLE 3613= PROFESSOR. 3614= A. NO. 3615= Q. AND IN FACT, THE ACTUAL DISCOUNT RECEIVED WAS THAT SHOWN IN 3616= THE RED BOOK, IS THAT CORRECT? 3617= A. THAT IS CORRECT. 3618= Q. DO YOU EVER PLACE AN ORDER WITH INGRAM, AND INGRAM THEN 3619= SHIPS FEWER BOOKS THAN ARE IN THAT ORDER, PERHAPS BECAUSE 3620= THEY'RE OUT OF STOCK ON SOME BOOKS? 3621= A. YES, FREQUENTLY. 3622= Q. AND MR. NELSON ASKED YOU WITH RESPECT TO THIS INVOICE 3623= THAT'S AT TAB 7 ON EXHIBIT 11286, HE NOTED THAT THERE ARE ONLY 3624= 79 COPIES OF BOOKS HAD BEEN SHIPPED TO YOU, CORRECT? 3625= A. THAT'S CORRECT. 3626= Q. I'D LIKE YOU TO REFERENCE THE PREVIOUS TAB, TAB 6, FROM 3627= MR. NELSON'S BINDER, WHICH IS THE ABA BOOK BUYERS HANDBOOK FOR 3628= 1997. HERE IT'S DESIGNATED AS DEFENDANTS EXHIBIT 11750. 3629= A. I HAVE IT. 3630= Q. AND DO YOU SEE IN THE UPPER RIGHT-HAND CORNER OF THE ENTRY 3631= FOR INGRAM, IT SAYS, "FREIGHT POLICY, FREE FREIGHT ELIGIBILITY 3632= APPLIES TO ORDERS SHIPPED FROM PRIMARY WAREHOUSE FOR ORDERS 100 3633= OR MORE UNITS." CORRECT? 3634= A. THAT'S CORRECT. 3635= Q. NOW, FROM LOOKING AT THE INVOICE, CAN YOU TELL HOW THE 3636= INVOICE BEHIND TAB 7, CAN YOU TELL HOW LARGE YOUR ORDER TO 3637= INGRAM WAS AS OPPOSED TO THE NUMBER OF BOOKS THAT WERE SHIPPED 3638= TO YOU? 3639= A. NO. 3640= Q. IN YOUR EXPERIENCE, IS IT POSSIBLE THAT YOUR ORDER WAS MORE 3641= THAN A HUNDRED UNITS AND THAT ONLY 79 UNITS WERE IN STOCK? 3642= A. I COULD ALMOST GUARANTEE IT WAS. 3643= Q. DO YOU, IN FACT, CONSULT THE RED BOOK ON A REGULAR BASIS OR 3644= HAVE YOU, IN FACT, DONE SO IN CONNECTION WITH THE LITTLE 3645= PROFESSOR BUSINESS? 3646= A. YES. 3647= Q. WE SAW IN YOUR DEPOSITION TESTIMONY YOU DIDN'T MENTION THE 3648= RED BOOK AS AN IMPORTANT SOURCE YOU CONSULTED, IS THAT RIGHT? 3649= A. THAT'S TRUE. 52
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3720= A. AND YOUR QUESTION IS, ARE ANY OF THESE...? 3721= Q. DOES LITTLE PROFESSOR PURCHASE -- 3722= A. ANY OF THESE THROUGH A COMMISSION REP? 3723= Q. THAT'S RIGHT. 3724= A. YES, YES. CHRONICLE, CONSORTIUM, HARCOURT, HEALTH 3725= COMMUNICATIONS, IPG, LPC, OXFORD. THAT WOULD BE IT. 3726= Q. DO YOU KNOW WHETHER YOU OBTAINED A DIFFERENT DISCOUNT FOR 3727= ANY OF THOSE VENDORS FROM YOUR COMMISSION REP THAN IS OFFERED 3728= IN THE RED BOOK? 3729= A. I DO NOT KNOW. 3730= Q. WOULD YOU TURN TO TAB 3 OF MR. RADER'S BINDER, THE SIMON & 3731= SCHUSTER STOCK OFFER, CORRECT? 3732= A. YES. 3733= Q. YOU TESTIFIED ON CROSS-EXAMINATION THAT PURCHASES COULD BE 3734= MADE UNDER THAT STOCK OFFER FROM JANUARY 1ST THROUGH 3735= APRIL 15TH, CORRECT? 3736= A. YES. 3737= Q. HOW MANY ORDERS CAN YOU PLACE DURING THAT WINDOW UNDER THAT 3738= STOCK OFFER? 3739= A. ONE. 3740= Q. WOULD IT BE POSSIBLE FOR LITTLE PROFESSOR TO STOCK UP FOR 3741= THE WHOLE YEAR, OR NUMBER OF MONTHS, WITH ONE ORDER TO A 3742= PUBLISHER? 3743= A. SINCE THIS IS BACK LIST, WOULD IT BE POSSIBLE? IT WOULD 3744= NOT BE PRACTICAL. 3745= Q. WHY WOULDN'T IT BE PRACTICAL? 3746= A. STORAGE PROBLEM. YOU WOULDN'T WANT TO DO THAT, BECAUSE 3747= EVEN WITH BACK LIST BOOKS, UNLESS YOU PICK PRECISELY THE RIGHT 3748= NUMBER, YOU COULD END UP HAVING FAR MORE THAN YOU NEEDED. 3749= INDEED, THAT'S HAPPENED TO US. A BOOK --I'M SORRY --A BOOK 3750= THAT IS SELLING LIKE CRAZY TODAY MAY DROP DEAD NEXT WEEK. 3751= BECAUSE I BROUGHT A HUNDRED IN NOW, I HAVE TO EAT 95 AND SHIP 3752= THEM BACK. 3753= Q. SO EVEN IF YOU DIDN'T HAVE STORAGE SPACE, WOULD IT MAKE 3754= BUSINESS SENSE TO PURCHASE BOOKS FOR MONTHS AHEAD AT ONE TIME? 3755= A. NO. 3756= Q. IF YOU WERE ABLE TO TAKE THE STOCK OFFER AND PLACE AN ORDER 3757= EACH WEEK UNDER THE STOCK OFFER, WOULD YOU BE ABLE TO MORE 3758= EFFICIENTLY USE THE STOCK OFFER? 3759= A. OF COURSE. 3760= Q. I THINK YOU ALSO SAID THAT A RETAILER TAKES ADVANTAGE OF 3761= SHARED MARKDOWNS THAT THAT COULD REDUCE THAT RETAILER'S COST OF 3762= GOODS, IN CROSS-EXAMINATION. 3763= A. I DID, YES. 3764= Q. WHAT DID YOU MEAN BY "COULD"? 3765= A. I WAS THINKING TO MYSELF HOW LUDICROUS IT IS, BECAUSE FOR 3766= US, EVERY TIME WE'VE TAKEN ADVANTAGE OF IT, I CANNOT THINK OF 3767= ONE TIME THAT WE WERE EVER PAID FOR IT. 3768= Q. SO YOU RECEIVED SHARED MARKDOWNS OFFERS? 3769= A. WE DID EXACTLY WHAT THE STOCK OFFER WAS. WE PROVIDED 3770= COMPUTER PROOF THAT WE HAD MADE THE SALES FOR THOSE PARTICULAR 3771= TITLES WITHIN THE TIME LIMIT THAT THE PUBLISHER DESIGNATED, AND 3772= IT GETS LOST IN THE PAPER SHUFFLE, AND IT NEVER, EVER GETS 3773= CREDITED. 3774= Q. SO LITTLE PROFESSOR DID NOT --DID NOT RECEIVE CREDIT FOR 3775= THOSE. 3776= A. THAT'S CORRECT. 3777= Q. YOU WERE ASKED SOME QUESTIONS ON CROSS-EXAMINATION ABOUT 3778= WHEN YOU TAKE CREDIT FOR YOUR RETURNS. DO YOU RECALL THAT? 3779= A. I DO. 3780= Q. DO YOU KNOW WHEN BARNES & NOBLE TAKES CREDIT FOR ITS 3781= RETURNS? 3782= A. NO. 3783= Q. DO YOU KNOW WHEN BORDERS DOES? 3784= A. NO. 3785= Q. NOW, IF WE COULD TURN TO TAB 5 OF MR. RADER'S BINDER, WHICH 3786= IS DEFENDANTS EXHIBIT 7854, YOU'VE TESTIFIED ON 3787= CROSS-EXAMINATION THAT SOME OF THESE --THE STORES SHOWN HERE 3788= HAD CLOSED. CAN YOU IDENTIFY WHICH ONES? 3789= A. OMNIBUS IS GONE. BIZ BOOKS WAS NEVER A BOOKSTORE, SO FAR 54
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3790= AS I KNOW. IT WAS AN OFFICE THAT JUST SPECIAL-ORDERED FROM 3791= BUSINESSES. WHITE RABBIT BOOKS & THINGS IS GONE. LIVING WORD 3792= IS A BOOKSTORE THAT IS IN A CHURCH BUILDING. IT IS A RELIGIOUS 3793= BOOKSTORE. THE PUBLISHERS WAREHOUSE IS GONE. CAROLINA 3794= CATHOLIC BOOKSHELF IS ALSO A VERY SMALL. IT'S IN A REMODELED 3795= HOME. I THINK THE REST ARE STILL THERE. 3796= Q. OKAY, YOU ALSO TESTIFIED, I BELIEVE, THAT --BEFORE BARNES 3797=& NOBLE AND BORDERS OPENED IN CHARLOTTE, THERE WERE ABOUT 11 3798= INDEPENDENT BOOKSTORES? 3799= A. THAT'S CORRECT.

3800= Q. SOME OF THOSE WERE THE INTIMATE BOOKSTORE, IS THAT RIGHT? 3801= A. THERE WERE TWO INTIMATE BOOKSHOPS IN CHARLOTTE. 3802= Q. AND INTIMATE BOOKSTORE IS A GENERAL BOOKSTORE, IS THAT 3803= RIGHT? 3804= A. TRUE. 3805= Q. ARE THOSE STORES STILL IN EXISTENCE? 3806= A. NO. 3807= Q. ARE THERE OTHER INDEPENDENTS THAT WERE OPEN AT THAT TIME 3808= THAT ARE CLOSED? 3809= A. YES. 3810= Q. CAN YOU LIST THEM? 3811= A. HORIZON BOOKS, BOOKENDS, THERE WERE TWO INTIMATES, 3812= BOOKENDS, HORIZON BOOKS, BRANDYWINE BOOKS, ONE OF THE 3813= INTERNATIONAL NEWSSTANDS. THEY USED TO HAVE TWO. THEY'RE DOWN 3814= TO ONE NOW. 3815= Q. ARE THERE ANY SIGNIFICANT INDEPENDENT BOOKSTORES OTHER THAN 3816= THE LITTLE PROFESSOR STILL IN CHARLOTTE? 3817= A. YES, BOOKMARK. 3818= Q. IS THAT THE ONLY ONE? 3819= A. THAT IS A FULL BOOKSTORE. I NEED TO GIVE CREDIT TO 3820= NEWSSTAND INTERNATIONAL, BUT THEY ARE PRIMARILY A MAGAZINE AND 3821= NEWSPAPER STORE. 3822= Q. OKAY. NOW, ONE FINAL QUESTION, FOR THE RECORD: WHAT 3823= PERCENTAGE OF THE PURCHASES THAT YOU MAKE FROM PUBLISHERS WOULD 3824= YOU ESTIMATE ARE, IN FACT, PURCHASED AT THE RED BOOK TERMS? 3825= MR. PETROCELLI: YOUR HONOR, AS PHRASED, I WOULD 3826= OBJECT THAT IT LACKS FOUNDATION, BEST EVIDENCE RULE, WHEN HE 3827= SAID, "IN FACT." 3828= THE COURT: SUSTAINED. 3829= MR. HOHENGARTEN: YOUR HONOR, I HAVE NO FURTHER 3830= QUESTIONS. 3831= THE COURT: RECROSS? 3832= MR. NELSON: NO RECROSS, YOUR HONOR. 3833= MR. PETROCELLI: NO, YOUR HONOR. 3834= MR. RADER: NOTHING, YOUR HONOR. THANKS. 3835= THE COURT: ALL RIGHT, CALL YOUR NEXT WITNESS. 3836= MR. MACH: YOUR HONOR, DANIEL MACH FOR THE 3837= PLAINTIFFS, M-A-C-H. CALL ANN CHRISTOPHERSEN. 3838= THE CLERK: PLEASE RISE AND RAISE YOUR RIGHT HAND. 3839= ANN CHRISTOPHERSEN, 3840= CALLED AS A WITNESS FOR THE PLAINTIFFS, HAVING BEEN DULY SWORN, 3841= TESTIFIED AS FOLLOWS: 3842= THE CLERK: THANK YOU. PLEASE BE SEATED. PLEASE 3843= STATE YOUR FULL NAME AND SPELL YOUR LAST NAME FOR THE RECORD. 3844= THE WITNESS: MY FULL NAME IS ANN CHRISTOPHERSEN. 3845= CHRISTOPHERSEN IS C-H-R-I-S-T-O-P-H-E-R-S-E-N. 3846= DIRECT EXAMINATION 3847= BY MR. MACH: 3848= Q. MS. CHRISTOPHERSEN, BRIEFLY CAN YOU EXPLAIN YOUR 3849= EDUCATIONAL BACKGROUND TO THE COURT? 3850= A. I HAVE A BACHELOR OF ARTS DEGREE AND A MASTER OF ARTS 3851= DEGREE BOTH IN ENGLISH AND AMERICAN LITERATURE. 3852= Q. WHEN DID YOU EARN THOSE DEGREES? 3853= A. I EARNED A B. A. IN 1970 AND AN M. A. IN 1976. 3854= THE COURT: FROM WHAT INSTITUTION? 3855= THE WITNESS: UNDERGRADUATE, INDIANA UNIVERSITY, AND 3856= GRADUATE FROM UNIVERSITY OF ILLINOIS IN CHICAGO. 3857= BY MR. MACH: 3858= Q. WHAT IS YOUR CURRENT OCCUPATION? 3859= A. I'M A BOOKSELLER AND CO-OWNER OF A BOOKSTORE. 55
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3860= Q. AND WHICH BOOKSTORE? 3861= A. WOMEN & CHILDREN FIRST IN CHICAGO. 3862= Q. AND TODAY WHERE IS THAT BOOKSTORE LOCATED WITHIN CHICAGO? 3863= A. IT'S, THE ADDRESS IS 5233 NORTH CLARK STREET. IT'S IN A 3864= NEIGHBORHOOD IN CHICAGO KNOWN AS ANDERSONVILLE. 3865= Q. IS THE BOOKSTORE --IS THE BUSINESS A CORPORATION? 3866= A. IT IS. 3867= Q. AND ARE YOU ONE OF THE OWNERS? 3868= A. I AM. 3869= Q. HOW MANY ARE THERE? 3870= A. TWO OWNERS, TWO SHAREHOLDERS. 3871= Q. HOW LONG HAVE YOU OWNED THE STORE? 3872= A. SINCE 1979. 3873= Q. AT THAT TIME DID YOU BUY AN EXISTING STORE? 3874= A. NO, WE OPENED A NEW STORE. 3875= Q. BRIEFLY, CAN YOU EXPLAIN WHY YOU WENT INTO BOOKSELLING? 3876= A. WELL, MY BUSINESS PARTNER AND I, WHO MET IN GRADUATE 3877= SCHOOL, I GUESS YOU CAN TELL FROM OUR BACKGROUND, HAVE BEEN 3878= SERIOUS STUDENTS OF LITERATURE, READERS ALL OUR LIVES, AND ALSO 3879= WE WERE INTERESTED IN EXERCISING AN ENTREPRENEURIAL SPIRIT, AND 3880= THE COMBINATION OF DOING THAT IN THE CONTEXT OF SELLING BOOKS 3881= SEEMED PERFECT. 3882= Q. TODAY WHAT ARE YOUR RESPONSIBILITIES AT THE STORE? 3883= A. MY RESPONSIBILITIES INCLUDE ALL THE GENERAL MANAGEMENT 3884= RESPONSIBILITIES OF A SMALL BUSINESS. I HIRE EMPLOYEES, I 3885= OVERSEE FINANCIALS, I BUY BOOKS, I ARRANGE AND OVERSEE 3886= MARKETING AND ADVERTISING. 3887= Q. NOW, WHERE WAS THE STORE ORIGINALLY LOCATED, IN THE CURRENT 3888= LOCATION? 3889= A. NO, WE OPENED THE STORE IN A NEIGHBORHOOD IN CHICAGO CALLED 3890= LINCOLN PARK, WHICH IS NEAR THE NORTH SIDE NEIGHBORHOOD. IT 3891= WAS A NEIGHBORHOOD I LIVED IN AT THE TIME, A NEIGHBORHOOD WE 3892= WERE --AND MY BUSINESS PARTNER ALSO, NEIGHBORHOOD THAT WE WERE 3893= VERY FAMILIAR WITH, AND THOUGHT IT WOULD BE A GOOD SPOT FOR A 3894= STORE. 3895= Q. WHEN YOU FIRST OPENED THE STORE, HOW BIG WAS THE IT? 3896= A. IT WAS 800 SQUARE FEET. 3897= Q. AND APPROXIMATELY HOW MANY TITLES DID YOU CARRY? 3898= A. I WOULD ESTIMATE WE CARRIED ABOUT 7,000 TITLES. 3899= Q. AT THE TIME, HOW MANY EMPLOYEES WERE THERE AT THE STORE? 3900= A. THERE WERE TWO FULL-TIME EMPLOYEES, LINDA BUBEN, MY 3901= BUSINESS PARTNER, AND ME, AND WE HAD ANOTHER PART-TIME PERSON. 3902= Q. AND IS LINDA BUBEN THE OTHER PERSON WHO CO-OWNS THE STORE 3903= WITH YOU? 3904= A. THAT'S RIGHT. 3905= Q. NOW, YOU MENTIONED ONE --HOW MANY TOTAL MOVES HAVE THERE 3906= BEEN? 3907= A. WE'VE HAD TWO MOVES. 3908= Q. CAN YOU DESCRIBE THEM, WITH DATES? 3909= A. YES, WE MOVED THE FIRST TIME IN 1985. WE'D OUTGROWN OUR 3910= SPACE AND MOVED TO A LOCATION ABOUT THREE BLOCKS FROM THE 3911= ORIGINAL ONE. IT WAS IN A MORE MAJOR COMMERCIAL STREET, AND WE 3912= DOUBLED THE SELLING SPACE OF THE STORE. AND THEN WE MOVED 3913= AGAIN IN 1990 TO OUR CURRENT LOCATION IN THE ANDERSONVILLE. 3914= Q. AND TODAY, APPROXIMATELY HOW BIG IS THE STORE? 3915= A. THE STORE IS 3500 SQUARE FEET. 3916= Q. WHEN YOU MOVED IN 1990, WAS IT THAT SIZE? 3917= A. NO, WHEN WE MOVED IN 1990, IT WAS 2400 --WE MOVED TO A 3918= 2400 SQUARE FOOT SPACE. 3919= Q. WHEN DID YOU EXPAND? 3920= A. WE EXPANDED IN THE SPRING OF 1990. 3921= Q. AND TODAY, APPROXIMATELY HOW MANY TITLES DO YOU CARRY? 3922= A. TODAY, I WOULD ESTIMATE WE CARRY 35,000 TITLES. 3923= Q. AND HOW MANY EMPLOYEES DO YOU HAVE? 3924= A. WE HAVE SIX FULL-TIME EMPLOYEES AND THAT INCLUDES LINDA AND 3925= ME, AND THREE PART-TIME EMPLOYEES. 3926= Q. MS. CHRISTOPHERSEN, HAS YOUR STORE EVER WON ANY AWARDS OF 3927= ANY KIND? 3928= A. WE'VE BEEN --WE HAD A COUPLE YEARS AGO A FEATURE SPREAD ON 3929= US IN PUBLISHERS WEEKLY. WE WERE NAMED THE BEST BOOKSTORE IN 56
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3930= CHICAGO IN, I THINK, 1997 BY NEW CITY, WHICH IS AN ARTS AND 3931= CULTURE PUBLICATION IN CHICAGO, AND A RECENTLY PUBLISHED BOOK 3932= CALLED THE LITERARY GUIDE TO CHICAGO, WE WERE CALLED ONE OF THE 3933= BEST BOOKSTORES IN THE COUNTRY. 3934= Q. IN GENERAL TERMS, HOW WOULD YOU DESCRIBE YOUR STORE? 3935= A. WELL, WE'RE A SPECIALTY STORE. WE FOCUS ON BOOKS BY AND 3936= ABOUT WOMEN, AND CHILDREN'S BOOKS FOR ALL AGES. THAT INCLUDES 3937= A GREAT BREADTH OF STOCK. 3938= Q. WHAT CATEGORIES OF BOOKS DO YOU SELL? 3939= A. WE SELL FICTION, GENRE FICTION, LIKE MYSTERIES, SCIENCE 3940= FICTION. WE HAVE A LARGE POETRY SECTION, PSYCHOLOGY, ART, 3941= RELIGION AND SPIRITUALITY, LESBIAN AND GAY STUDIES, HEALTH, IF 3942= I DIDN'T MENTION THAT, LITERARY CRITICISM, ESSAYS, TRAVEL, TO 3943= NAME SOME OF THEM. I THINK WE HAVE 25 OR 30 CATEGORIES. 3944= Q. CAN YOU DESCRIBE YOUR CUSTOMER BASE? 3945= A. WELL, OUR CUSTOMARY BASE IS LARGE. WE DRAW FROM -- 3946= CUSTOMERS FROM THE GREATER CHICAGO METROPOLITAN AREA, REALLY 3947= THE REGION OF THE MIDWEST, AND TO A LESSER EXTENT OBVIOUSLY WE 3948= ALSO DRAW NATIONALLY AND EVEN INTERNATIONALLY. 3949= Q. YOU MENTIONED THE GREATER CHICAGO METROPOLITAN AREA. HOW

3950= WOULD YOU DEFINE THAT? 3951= A. I WOULD DEFINE THAT AS BOTH CHICAGO PROPER AND THE 3952= SURROUNDING SUBURBS OF CHICAGO, OF WHICH THERE ARE MANY. 3953= Q. AND APPROXIMATELY HOW MANY MILES AWAY FROM YOUR STORE WOULD 3954= YOU SAY YOUR PRIMARY COMPETITIVE AREA IS? 3955= A. I WOULD SAY 25, 30 MILES. 3956= Q. AND HOW DO YOU KNOW WHERE YOUR CUSTOMERS COME FROM? 3957= A. WELL, ONE OF THE WAYS WE KNOW IS THAT WE HAVE A MEMBERSHIP 3958= PROGRAM AND A MAILING SUBSCRIPTION PROGRAM AT THE STORE. SO WE 3959= HAVE LOTS OF ADDRESSES, AND I KNOW BY VIRTUE OF THE ZIP CODES 3960= IN THOSE ADDRESSES WHERE PEOPLE COME FROM. 3961= Q. HOW DO YOU COMPILE THAT MAILING LIST? 3962= A. PEOPLE EITHER, AS I SAID, JOIN OUR MEMBERSHIP PROGRAM, 3963= WHICH IS A PROGRAM WE'VE HAD IN EFFECT FOR ABOUT 15 YEARS, 16 3964= YEARS, OR THEY SUBSCRIBE TO, AS A SEPARATE MATTER, SUBSCRIBE TO 3965= OUR MAILING LIST, SO THAT THEY CAN KEEP UP WITH THINGS THAT ARE 3966= GOING ON AT THE STORE. 3967= Q. NOW, DOES 25 TO 30 MILES SEEM LIKE A LOT TO DEFINE YOUR 3968= COMPETITIVE AREA? 3969= A. I DON'T THINK SO, IN AN AREA LIKE CHICAGO, BECAUSE THERE'S 3970= A LOT OF MOVEMENT. PEOPLE WHO LIVE IN THE SUBURBS WORK IN THE 3971= CITY. CHICAGO IS A VERY DYNAMIC, INTERESTING CITY, AND PEOPLE 3972= MOVE AROUND. YOU KNOW, THEY COME TO EVENTS AT THE STORE, THEY 3973= VISIT INTERESTING NEIGHBORHOODS. THERE ARE A LOT OF ETHNIC 3974= NEIGHBORHOODS IN CHICAGO, OF WHICH OURS IS ONE, AND THERE'S 3975= JUST A LOT OF MOVEMENT. 3976= Q. YOU MENTIONED YOU MOVED TO THE CURRENT LOCATION IN 1990. 3977= IS THAT CORRECT? 3978= A. THAT'S CORRECT. 3979= Q. IN 1990, WERE THERE ANY BORDERS OR BARNES & NOBLE 3980= SUPERSTORES WITHIN YOUR COMPETITIVE AREA, TO YOUR KNOWLEDGE? 3981= A. JUST ONE. 3982= Q. WHERE WAS THAT? 3983= A. THAT WAS ON THE WEST SIDE OF CHICAGO. WESTERN SIDE. IT 3984= WAS OUTSIDE THE CITY. 3985= Q. WHAT WAS THE NAME OF THE SUBURB? 3986= A. I THINK IT WAS OAK BROOK, OR --YEAH. 3987= Q. I KNOW I JUST ASKED YOU ABOUT BARNES & NOBLE AND BORDERS. 3988= OTHER THAN THOSE STORES, WERE THERE ANY OTHER BOOKSTORES WITHIN 3989= YOUR COMPETITIVE AREA IN 1990? 3990= A. OH, YES, MANY. 3991= Q. APPROXIMATELY HOW MANY? 3992= A. IN OUR COMPETITIVE AREA, IT WOULD BE HARD TO EVEN ESTIMATE. 3993= I WOULD SAY 25, MAYBE MORE. 3994= Q. AND DID YOU COMPETE WITH SOME OF THOSE STORES? 3995= A. SURE. 3996= Q. ARE YOU AWARE OF WHETHER, SINCE 1990, ANY ADDITIONAL BARNES 3997=& NOBLE OR BORDERS STORES MOVED INTO YOUR COMPETITIVE AREA? 3998= A. SINCE 1990? 3999= Q. YES? 57
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4000= A. YES. 4001= Q. AS OF TODAY, APPROXIMATELY HOW MANY BARNES & NOBLE STORES 4002= ARE LOCATED WITHIN YOUR COMPETITIVE AREA? 4003= A. THERE ARE 10 TO 12. 4004= Q. AS OF TODAY, APPROXIMATELY HOW MANY BORDERS STORES ARE 4005= LOCATED WITHIN YOUR COMPETITIVE AREA? 4006= A. THERE ARE 10. 4007= Q. IF WE NARROWED OUR AREA OF FOCUS TO WITHIN ABOUT 5 OR 4008= 6 MILES OF YOUR STORE, HOW MANY BARNES & NOBLE STORES ARE 4009= LOCATED THERE TODAY? 4010= A. FOUR. 4011= Q. AND DO YOU KNOW WHERE THEY ARE? 4012= A. YES. 4013= Q. CAN YOU TELL THE COURT, PLEASE? 4014= A. THERE'S ONE IN EVANSTON, ILLINOIS, WHICH IS THE SUBURB 4015= IMMEDIATELY NORTH OF THE CITY LIMITS. THERE'S ONE ON WEBSTER 4016= STREET IN CHICAGO, THERE'S ONE ON NORTH STATE STREET, AND 4017= THERE'S ONE ON DIVERSEY. 4018= Q. AND AGAIN, THESE ARE STORES THAT ARE WITHIN 6 MILES OF YOUR 4019= STORE? 4020= A. RIGHT. 4021= Q. WITHIN THAT SAME AREA, APPROXIMATELY HOW MANY BORDERS 4022= STORES? 4023= A. THERE ARE THREE. 4024= Q. AND DO YOU KNOW WHERE THEY ARE? 4025= A. YES. ONE'S IN EVANSTON, ON SHERMAN AVENUE. ONE'S IN --ON 4026= NORTH MICHIGAN AVENUE, JUST NORTH OF THE LOOP, THE CENTRAL 4027= BUSINESS DISTRICT IN CHICAGO, AND THERE'S ONE ON NORTH CLARK 4028= STREET. 4029= Q. YOU'VE TESTIFIED THAT APPROXIMATELY 10 BARNES & NOBLE 4030= STORES ARE LOCATED WITHIN YOUR COMPETITIVE AREA, IS THAT 4031= CORRECT? 4032= A. RIGHT. 4033= Q. IN YOUR VIEW, DO YOU COMPETE WITH THOSE STORES? 4034= A. OH, WE MOST CERTAINLY COMPETE WITH THOSE STORES. 4035= Q. HOW DO YOU KNOW THAT? 4036= A. WELL, I KNOW THAT BECAUSE WE CARRY A SUBSTANTIAL NUMBER OF 4037= THE SAME TITLES THOSE STORES CARRY. AS I'VE ALREADY DESCRIBED, 4038= THEY EXIST WITHIN A REGION THAT WE DRAW CUSTOMERS FROM, AND 4039= CUSTOMERS ON OCCASION COME INTO OUR STORE CARRYING BORDERS AND 4040= BARNES & NOBLE BAGS. 4041= Q. YOU TESTIFIED THAT YOU'RE A SPECIALTY STORE, IS THAT 4042= CORRECT? 4043= A. THAT'S CORRECT. 4044= Q. THEN CAN YOU EXPLAIN TO THE COURT HOW YOU --HOW YOU 4045= COMPETE WITH THESE GENERAL BOOKSTORES? 4046= A. WELL, WE'RE A SPECIALTY STORE, WHICH MEANS WE'RE 4047= COMPREHENSIVE IN OUR SPECIALTY, AS I DESCRIBED, BUT 4048= PARTICULARLY THESE DAYS THERE'S A GREAT DEAL OF OVERLAP BETWEEN 4049= THE BOOKS THAT CONSTITUTE OUR SPECIALTY AND THE BOOKS A GENERAL 4050= BOOKSTORE CARRIES, PARTICULARLY IF THAT BOOKSTORE IS LARGE, 4051= CARRIES A HUNDRED THOUSAND TITLES. 4052= IT'S THE CASE THAT MANY OF MY BEST SELLING BOOKS, 4053= I'M SURE, ARE ALSO THE BEST SELLING TITLES IN ANY GENERAL BOOK 4054= STORE. FOR EXAMPLE, AMY TAN, WHO JUST PUBLISHED A NOVEL CALLED 4055= BONESETTER, IS ONE OF MY TOP SELLING NEW FICTION TITLES. I AM 4056= CONFIDENT --IT'S NUMBER 6 ON THE NEW YORK TIMES BEST-SELLER 4057= LIST --I'M CONFIDENT IT'S THERE BECAUSE IT'S ALSO A 4058= BEST-SELLING TITLE IN A GENERAL BOOKSTORE. 4059= Q. HAVE YOU EVER BEEN TO ANY OF THE BARNES & NOBLE STORES THAT 4060= YOU'VE IDENTIFIED AS BEING IN YOUR COMPETITIVE AREA? 4061= A. YES. 4062= Q. OF THE 10 OR SO THAT YOU REFER TO, HOW MANY HAVE YOU BEEN 4063= TO? 4064= A. THREE OR FOUR. 4065= Q. HOW OFTEN HAVE YOU VISITED THOSE STORES? 4066= A. PERIODICALLY OVER THE YEARS SINCE THEY'VE OPENED. 4067= Q. DID YOU GET A SENSE OF THE SELECTION THAT THEY OFFERED? 4068= A. YES. 4069= Q. CAN YOU DESCRIBE IT, BRIEFLY? 4070= A. THOSE STORES HAVE PSYCHOLOGY SECTIONS THAT CONTAIN BOOKS BY 58
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4071= AND ABOUT WOMEN, THEY CONTAIN ART SECTIONS THAT HAVE BOOKS BY 4072= AND ABOUT WOMEN, THEY CONTAIN FICTION SECTIONS THAT --SOME OF 4073= THE MOST PROMINENT NOVELISTS TODAY ARE WOMEN. THEY CARRY MANY 4074= OF THE SAME BOOKS WE DO.

4075= Q. DID THE STORES HAVE A CHILDREN'S SECTION? 4076= A. OH, SURE. 4077= Q. AND DOES YOUR STORE HAVE A CHILDREN'S SECTION? 4078= A. YES, OUR CHILDREN'S SECTION IS A SIGNIFICANT PART OF OUR 4079= BUSINESS. 4080= Q. DOES THE BARNES & NOBLE STORES THAT YOU VISITED HAVE A 4081= WOMEN'S STUDIES SECTION? 4082= A. YES. 4083= Q. AND GAY AND LESBIAN SECTION? 4084= A. YES. 4085= Q. OKAY, NOW, I'M GOING TO ASK SIMILAR QUESTIONS FOR BORDERS. 4086= WE'VE JUST BEEN TALKING ABOUT BARNES & NOBLE. 4087= NOW, YOU'VE TESTIFIED THAT APPROXIMATELY 10 BORDERS 4088= STORES ARE LOCATED WITHIN YOUR COMPETITIVE AREA, IS THAT RIGHT? 4089= A. THAT'S CORRECT. 4090= Q. AND IN YOUR VIEW, DO YOU COMPETE WITH THOSE STORES? 4091= A. WE MOST CERTAINLY COMPETE WITH THOSE STORES. 4092= Q. AND AGAIN, HOW DO YOU KNOW THAT? 4093= A. I KNOW THAT FOR ESSENTIALLY THE SAME REASONS, THAT THEY 4094= EXIST IN A GEOGRAPHIC REGION THAT WE DRAW FROM, THAT THEY CARRY 4095= SUBSTANTIALLY THE SAME TITLES WE CARRY, AND AS I THINK I 4096= MENTIONED BEFORE, CUSTOMERS COME INTO MY STORE BEARING BAGS 4097= WITH BORDERS IMPRINT ON THEM. 4098= Q. HAVE YOU EVER BEEN TO ANY OF THE BORDERS STORES THAT YOU'VE 4099= IDENTIFIED AS BEING WITHIN YOUR COMPETITIVE AREA? 4100= A. YES, I HAVE. 4101= Q. OF THE 10 OR SO THAT YOU'VE REFERRED TO, APPROXIMATELY HOW 4102= MANY HAVE YOU BEEN TO? 4103= A. I'VE BEEN TO THREE. 4104= Q. AND AGAIN, HOW OFTEN HAVE YOU VISITED THOSE STORES? 4105= A. PERIODICALLY OVER THE YEARS THEY'VE BEEN IN BUSINESS. 4106= Q. DID YOU GET A SENSE OF THE SELECTION THAT THEY OFFERED? 4107= A. YES. 4108= Q. CAN YOU DESCRIBE IT? 4109= A. YES. THEY CARRY MANY OF THE SAME BOOKS WE CARRY AT WOMEN & 4110= CHILDREN FIRST. 4111= Q. AND AGAIN, DID THE BORDERS STORES HAVE CHILDREN'S SECTIONS? 4112= A. SIGNIFICANT CHILDREN'S SECTIONS; OF COURSE FICTION 4113= SECTIONS, NEW RELEASE, HARD COVER SECTIONS THAT, AGAIN, 4114= REPLICATE MANY OF THE SAME BOOKS. 4115= Q. WAS THERE ANY POINT DURING THE 1990'S THAT YOU NOTICED A 4116= STEADY INFLUX OF BARNES & NOBLE AND BORDERS STORES IN YOUR 4117= COMPETITIVE AREA? 4118= A. WELL, IT STARTED HEAVILY IN 1992, AND THAT FIGURE OF 10 AND 4119= 12 STORES CONTINUED THROUGH, I THINK, 1998. SO YES, THOSE 4120= YEARS RANGING FROM '92 TO '98. 4121= Q. DID YOU TAKE ANY ACTION AT YOUR STORE IN RESPONSE TO THE 4122= INFLUX OF BORDERS AND BARNES & NOBLE STORES IN YOUR COMPETITIVE 4123= AREA? 4124= A. YES. WHEN BARNES & NOBLE AND BORDERS STARTED, YOU KNOW, 4125= ARRIVING IN CHICAGO IN SIGNIFICANT NUMBERS, WE SAT DOWN AND DID 4126= A CONSIDERABLE ANALYSIS OVER THOSE EARLY YEARS IN PARTICULAR, 4127= STARTED TO SEE A DECLINE IN OUR SALES AFTER HAVING CONSISTENTLY 4128= RISEN IN SALES OVER THE COURSE OF OUR HISTORY, AND WE 4129= CONSIDERED DISCOUNTING, BUT FAIRLY QUICKLY CAME TO THE --WE 4130= HAVE HAD VARIOUS DISCOUNT PROGRAMS AT OUR STORE OVER THE YEARS 4131= BUT CONSIDERED, YOU KNOW, REPLICATING THE KINDS OF DISCOUNT 4132= PROGRAMS WE SAW THOSE BIG NEW COMPETITORS ENACTING. 4133= WE DECIDED IT WAS JUST ECONOMICALLY NOT FEASIBLE TO 4134= DO THAT; THAT IT WOULD BE MORE DAMAGING TO OUR BUSINESS THAN 4135= HELPFUL, BECAUSE ESSENTIALLY WE COULDN'T DISCOUNT BOOKS AT 4136= 40 PERCENT, FOR EXAMPLE, WHEN WE WERE MOSTLY BUYING BOOKS AT 4137= 40 PERCENT. IT GIVES YOU NO OPERATING MARGIN TO WORK WITH. 4138= SO INSTEAD OF THAT, WHAT WE DECIDED TO DO WAS TO 4139= DEVELOP SOME NEW PROGRAMS TO REPLACE THE LOSS OF SALES TO 4140= IN-STORE CUSTOMERS. SO WE DEVELOPED THREE OUTSIDE SALES 59
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4141= PROGRAMS, THAT IS TO SAY, SALES THAT WE COULD TAKE OUTSIDE OF 4142= THE STORE, ESSENTIALLY TO REPLACE SOME OF THAT LOST IN-STORE 4143= BUSINESS. 4144= Q. CAN YOU DESCRIBE THOSE PROGRAMS? 4145= A. YES. ONE THING WE DID WAS START SELLING TEXTBOOKS. THERE 4146= ARE A LOT OF --WE AREN'T IN IMMEDIATE PROXIMITY TO ANY 4147= UNIVERSITIES, BUT WE, YOU KNOW, WE HAVE A NUMBER OF 4148= UNIVERSITIES IN THE CITY, WITHIN A REASONABLE DISTANCE, YOU 4149= KNOW, FIVE, SIX MILES FROM THE STORE. 4150= SO WE STARTED SELLING, CULTIVATING OUR RELATIONSHIPS 4151= WITH PARTICULARLY ENGLISH PROFESSORS AND WOMEN'S STUDIES 4152= PROFESSORS, AND SELLING TEXTBOOKS, ESSENTIALLY. WE TAKE THEM 4153= TO STUDENTS' CLASSES AND MAKE IT CONVENIENT FOR BOTH PROFESSOR 4154= AND STUDENTS THAT WAY. 4155= WE ALSO --CHICAGO PUBLIC SCHOOLS IS A SOURCE OF 4156= BUSINESS, AND WE'VE HAD ALWAYS HAD SOME OF THAT BUSINESS, BUT 4157= WE WORKED TO DEVELOP THAT AND DO MORE SCHOOL SALES. 4158= WE ALSO WORKED, ALTHOUGH LESS SUCCESSFULLY, ON 4159= DEVELOPING A PROGRAM OF CORPORATE SALES TO BUSINESS -- 4160= BUSINESSES IN CHICAGO. 4161= Q. YOU REFERRED TO DISCOUNTING. DOES YOUR STORE DISCOUNT IN 4162= ANY WAY? 4163= A. WE DO. WE HAVE, AS I MENTIONED EARLIER, WE HAVE A 4164= MEMBERSHIP PROGRAM, AND WHAT COMPRISES THAT PROGRAM IS PEOPLE 4165= ESSENTIALLY BUY A MEMBERSHIP, CURRENTLY IT'S $25 FOR A YEAR, 4166= THAT ENTITLES THEM TO A 10 PERCENT DISCOUNT ON BOOKS FOR A 4167= YEAR, AND PUTS THEM ON OUR MAILING LIST AT NO CHARGE, AND GETS 4168= THEM A FEW OTHER BENEFITS. 4169= WE ALSO DISCOUNT --WE HAVE A TEACHER'S DISCOUNT 4170= PROGRAM. WE GIVE TEACHERS WHO ARE SPENDING OUT-OF-POCKET MONEY 4171= FOR BOOKS FOR THEIR CLASSROOM A DISCOUNT. WE DISCOUNT TO BOOK 4172= GROUPS WHO ARE PURCHASING THEIR BOOK GROUP BOOKS THROUGH US. 4173= WE DISCOUNT OUR OWN --WE HAVE A BOOK GROUP THAT MEETS AT OUR 4174= STORE, WE DISCOUNT THE BOOK FOR THAT GROUP. AND WE HAVE 4175= SPECIAL SALES IN THE COURSE OF THE YEAR THAT ARE, IN ESSENCE, A 4176= DISCOUNT. 4177= Q. HAVE THOSE DISCOUNTS CHANGED OVER TIME? 4178= A. NO, ACTUALLY, THOSE HAVE REMAINED PRETTY STEADY AS A 4179= PERCENTAGE. 4180= Q. NOW, YOU'VE LISTED A NUMBER OF FACTORS CONTRIBUTING TO YOUR 4181= CONCLUSION THAT YOU COMPETE WITH THE 20 OR SO BARNES & NOBLE 4182= AND BORDERS STORES WITHIN YOUR COMPETITIVE AREA. 4183= A. RIGHT. 4184= Q. I BELIEVE YOU REFERRED TO YOUR SALES TRENDS. CAN YOU JUST 4185= DESCRIBE BRIEFLY WHAT THOSE SALES TRENDS HAVE BEEN? 4186= A. WELL, WE OPENED, AS I MENTIONED, IN 1979 IN A MODEST-SIZE 4187= SPACE, BUT WE STILL HAD, WE THOUGHT, A PRETTY GOOD FIRST YEAR 4188= SALES, AND OUR TRENDS HAVE BEEN, SINCE WE OPENED THE STORE, A 4189= GROWTH IN GROSS SALES VIRTUALLY EVERY YEAR SINCE WE OPENED, 4190= UNTIL FISCAL YEAR 1993-94. 4191= Q. WHAT HAPPENED THEN? 4192= A. THEN OUR SALES TOOK A SIGNIFICANT DIP, AND REMAINED AT 4193= THAT --ESSENTIALLY AT THAT REDUCED LEVEL FOR THE NEXT FOUR 4194= YEARS. 4195= Q. AND DID THERE COME A TIME WHEN SALES BEGAN TO PICK UP? 4196= A. YES. IN THE LAST QUARTER OF '98, I THINK I MENTIONED WE 4197= EXPANDED THE STORE INTO THE STORE NEXT TO US IN THE SPRING OF 4198= '98, SO OUR LAST QUARTER --OUR LAST QUARTER OF '98, YES, 4199= REFLECTED SOME IMPROVEMENT, AND THEN THE END OF FISCAL YEAR '99 4200= WAS BETTER STILL. 4201= Q. DO YOU ATTRIBUTE THE INCREASE IN SALES TO THE STORE 4202= EXPANSION? 4203= A. YES. YOU KNOW, THAT, AND ALSO OUR OUTSIDE SALES PROGRAMS 4204= HAVE CONTINUED TO GAIN, SO THAT, TOO. 4205= Q. AND GIVEN THAT YOUR SALES STARTED TO INCREASE AT THE VERY 4206= END OF THE 90'S, WOULD YOU SAY THAT AT THAT TIME GOING FORWARD, 4207= THAT YOU NO LONGER COMPETED WITH THE BARNES & NOBLE OR BORDERS 4208= SUPERSTORES IN YOUR AREA? 4209= A. OH, NO, WE STILL CERTAINLY CONTINUE TO COMPETE WITH THOSE 4210= SAME STORES. 60
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4211= Q. AND HOW DO YOU KNOW THAT? 4212= A. FOR THE SAME REASONS. I MEAN, WE STILL DRAW CUSTOMERS FROM 4213= THE REGIONS THAT I DESCRIBED. WE STILL --PROBABLY MORE SO 4214= OVER TIME, THERE'S MORE OVERLAP IN THE TITLES WE CARRY, AND SO 4215= THAT HASN'T CHANGED. 4216= Q. NOW, OTHER THAN BARNES & NOBLE AND BORDERS, THERE ARE OTHER 4217= BOOKSTORES IN YOUR COMPETITIVE AREA, IN THE GREATER CHICAGO 4218= AREA, IS THAT RIGHT? 4219= A. YES, YES. 4220= Q. DO YOU COMPETE WITH THOSE STORES? 4221= A. YES. 4222= Q. OR ANY OF THEM? 4223= A. SOME MORE THAN LESS, BUT WE COMPETE WITH ANY OF THOSE 4224= STORES --BUT WE COMPETE WITH ANYONE WHO CARRIES THE SAME

4225= MERCHANDISE THAT WE DO. 4226= Q. AND THE DECLINE IN SALES AND THE FLATTENING DURING THE 4227= 90'S, DO YOU ATTRIBUTE THAT TO THOSE OTHER STORES, AS WELL? 4228= A. I DON'T ATTRIBUTE THE CHANGE TO THOSE OTHER STORES BECAUSE 4229= ESSENTIALLY THERE WAS NO CHANGE. I MEAN, THE STORES THAT WE 4230= COMPETED WITH IN OUR COMPETITIVE REGION WERE ESSENTIALLY, YOU 4231= KNOW, THERE FOR YEARS. SO THERE WEREN'T ANY NEW INDEPENDENT 4232= STORES OR ANY OTHER KIND OF STORES THAT CAME IN THAT SUDDENLY 4233= PROVIDED A NEW COMPETITOR. 4234= Q. NOW, TWO OF THE BARNES & NOBLE STORES THAT OPENED WITHIN 4235= 6 MILES OF YOUR STORE OPENED IN 1992, IS THAT CORRECT? 4236= A. TWO OF THE STORES DID, YES. 4237= Q. NOW, THE SALES DROP THAT YOU SAID YOU EXPERIENCED, DID THAT 4238= HAPPEN IMMEDIATELY AFTER? 4239= A. NO, IT WASN'T --WE DIDN'T REALLY FEEL THAT IN A BIG WAY 4240= UNTIL FISCAL '93, OUR FISCAL YEAR 93-94. OUR YEAR ENDS IN 4241= JULY. 4242= Q. WHY IS THAT? 4243= A. WELL, YOU KNOW, WE LOOKED AT THAT, AND I THINK THAT --I 4244= THINK THE REASON IS BECAUSE --I MENTIONED THAT WE MOVED TO A 4245= NEW NEIGHBORHOOD IN 1990, AND OUR NEIGHBORHOOD, THOUGH IT WAS A 4246= GOOD ONE WHEN WE MOVED THERE, THE FACT IS, IT'S DEVELOPED 4247= ENORMOUSLY, AND PARTICULARLY IN THE YEARS --THE FIRST FEW 4248= YEARS FOLLOWING OUR MOVE THERE WERE NEW BUSINESSES THAT CAME IN 4249= AND THE NEIGHBORHOOD, YOU KNOW, STARTED PRETTY QUICKLY 4250= DEVELOPING A REPUTATION AS BEING KIND OF AN INTERESTING, YOU 4251= KNOW, REVITALIZED NEIGHBORHOOD IN CHICAGO. SO WE HAD A REAL 4252= BURST OF, JUST, ACTIVITY ON THE STREET IN 92-93 THAT I THINK 4253= PROVIDED US WITH NEW EXPOSURE, NEW CUSTOMERS, YOU KNOW, JUST 4254= TRAFFIC THAT SUSTAINED US, YOU KNOW, IN PART, THAT YEAR. 4255= Q. NOW, YOU MENTIONED THAT THERE ARE APPROXIMATELY 10, I THINK 4256= YOU MAY HAVE SAID APPROXIMATELY 10 TO 12 BARNES & NOBLE STORES 4257= WITHIN YOUR COMPETITIVE AREA, IS THAT CORRECT? 4258= A. YES. 4259= Q. DO YOU HAVE ANY DOUBT THAT YOU COMPETE WITH THEM, TO THIS 4260= DAY? 4261= A. ABSOLUTELY NO DOUBT. 4262= Q. DO YOU HAVE ANY DOUBT THAT YOU COMPETE WITH THE 10 OR SO 4263= BORDERS STORES WITHIN YOUR COMPETITIVE AREA? 4264= A. NO DOUBT. 4265= Q. AND JUST TO SUM UP, CAN YOU EXPLAIN WHY THAT IS? 4266= A. WELL, AT THE RISK OF BEING REPETITIVE, BECAUSE --4267= Q. MY FAULT, IF YOU ARE. 4268= A. --WE DRAW ON THE SAME GEOGRAPHIC REGION, WE SELL 4269= SUBSTANTIALLY THE SAME TITLES, AND CUSTOMERS COME INTO MY STORE 4270= THAT ARE BARNES & NOBLE AND BORDERS CUSTOMERS AS WELL. 4271= THE COURT: I THINK WE'VE REACHED A STOPPING POINT, 4272= AND MR. YOUNG --4273= MR. YOUNG: IF I MAY, YOUR HONOR. WE HAD SAID WE 4274= WOULD TALK A LITTLE BIT ABOUT THE SCHEDULE, BUT I THINK WE'RE 4275= OKAY, AND I CAN BRING YOU UP TO SPEED ON THAT, IF YOU LIKE, 4276= NEXT WEEK. 4277= THE COURT: YES. 4278= MR. YOUNG: MR. HOHENGARTEN WANTED AN OPPORTUNITY TO 4279= ADDRESS THE COURT. 4280= MR. HOHENGARTEN: YOUR HONOR, I WANTED TO APOLOGIZE 61
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4281= TO THE COURT AND TO COUNSEL FOR USING DOCUMENTS IN THE DIRECT 4282= EXAMINATION THAT HAD NOT BEEN MARKED AS TRIAL EXHIBITS. THE 4283= OBJECTION TO THEIR USE WAS APPROPRIATE, AND AS THE COURT MAY 4284= HAVE PERCEIVED, THIS IS MY FIRST TRIAL, MY FIRST DIRECT 4285= EXAMINATION. 4286= THE COURT: I THINK YOU'RE DOING FINE. JUST DON'T 4287= DO THAT AGAIN. 4288= MR. HOHENGARTEN: THANK YOU VERY MUCH, YOUR HONOR. 4289= MR. YOUNG: THANK YOU, YOUR HONOR, AND I HAVE ONE 4290= OTHER REQUEST OF THE COURT. WE'VE HAD A COUPLE OF MOMENTS 4291= TODAY WHERE WE HAD TWO LAWYERS FOR ONE PARTY THAT WERE INVOLVED 4292= IN QUESTIONING AND OBJECTING, AND I WOULD LIKE TO ASK FOR A 4293= RULE THAT ONE LAWYER PER PARTY BE ASSIGNED TO A WITNESS, AND 4294= THAT THAT LAWYER ASK THE QUESTIONS AND MAKE THE OBJECTIONS. 4295= THE COURT: YES. THAT'S PROPER PROCEDURE, AS WE ALL 4296= KNOW, AND -- 4297= MR. YOUNG: THANK YOU. 4298= THE COURT: --AND IF THAT HASN'T BEEN A RULE, IT 4299= NOW IS A RULE. 4300= ALL RIGHT, THE COURT IS IN RECESS UNTIL MONDAY 4301= MORNING, AT 9: 00 O'CLOCK. 4302= (PROCEEDINGS RECESSED AT 1: 00 O'CLOCK P. M.) 4303= 4304= 4305= 4306= 4307= 4308= 4309= 4310= 4311= 4312= 4313= 4314= 4315= 4316= 4317= 4318= 4319= 4320= 4321= 4322= 4323= 4324= 4325= 4326= APPEARANCES: (CONTINUED) 4327= FOR DEFENDANTS: BORDERS GROUP, INC. 4328=( BORDERS GROUP) 100 PHOENIX DRIVE 4329= ANN ARBOR, MICHIGAN 48108-2202 4330= BY: THOMAS D. CARNEY, GENERAL COUNSEL 4331= 4332= 4333= 4334= 4335= 4336= 4337= 4338= 4339= 4340= 4341= 4342= 4343= 4344= 4345= 4346= 4347= 4348= 4349= end= Text 62

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