OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
FUNCO, INC.
AT
$24.75 NET PER SHARE
BY
B&N ACQUISITION CORPORATION,
A WHOLLY-OWNED INDIRECT SUBSIDIARY OF
BARNES & NOBLE, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JUNE 13, 2000, UNLESS THE OFFER IS EXTENDED.
May 16, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by B&N Acquisition Corporation, a Minnesota
corporation ("Purchaser") and a wholly-owned indirect subsidiary of Barnes &
Noble, Inc., a Delaware corporation ("Parent"), to act as Information Agent in
connection with Purchaser's offer to purchase all of the outstanding shares of
Common Stock, par value $.01 per share (the "Shares"), of Funco, Inc., a
Minnesota corporation (the "Company"), at a price of $24.75 per Share, net to
the seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated May 16, 2000 (the "Offer to
Purchase"), and the related Letter of Transmittal (the "Letter of Transmittal,"
which, together with the Offer to Purchase and any amendments or supplements
thereto, constitute the "Offer") enclosed herewith.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (A) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BEFORE THE EXPIRATION DATE OF THE OFFER A NUMBER OF
SHARES WHICH, TOGETHER WITH SHARES ALREADY OWNED, DIRECTLY OR INDIRECTLY, BY
PARENT OR PURCHASER, WOULD REPRESENT IN THE AGGREGATE, AT LEAST 51% OF THE TOTAL
VOTING POWER OF THE OUTSTANDING SECURITIES OF THE COMPANY ENTITLED TO VOTE IN
THE ELECTION OF DIRECTORS OR IN A MERGER, CALCULATED ON A FULLY DILUTED BASIS,
ON THE DATE OF PURCHASE AND (B) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE
WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED.
Enclosed for your information and for forwarding to your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee,
are copies of the following documents:
1. The Offer to Purchase;
2. The Letter of Transmittal for your use and for the information of your
clients;
3. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9;
4. The Notice of Guaranteed Delivery (to be used to accept the Offer if the
certificates evidencing Shares ("Share Certificates") and all other
required documents cannot be delivered to The Bank of New York (the
"Depositary") by the Expiration Date (as defined in the Offer to
Purchase));
5. A printed form of letter that may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions
with regard to the Offer; and
6. A return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER AND
WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
JUNE 13, 2000, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
Share Certificates or timely confirmation of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer Facility (as
defined in Section 3 of the Offer to Purchase), (ii) the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees, or an Agent's Message (as defined in the Offer to
Purchase) in connection with a book-entry transfer, and (iii) any other
documents required by the Letter of Transmittal.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of May 4, 2000 (the "Merger Agreement"), by and among the Company, Parent and
Purchaser, pursuant to which, on the same business day as and promptly following
the satisfaction or waiver of certain conditions, Purchaser will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned indirect subsidiary of Parent. At the Effective Time (as defined in
the Offer to Purchase) of the Merger, each outstanding Share (other than
(i) Shares held of record by Parent or Purchaser or any direct or indirect
wholly-owned subsidiary of Parent and (ii) Shares held by shareholders of the
Company, if any, who properly exercise, preserve and protect dissenters' rights
under the Minnesota Business Corporation Act) will be converted into the right
to receive $24.75 per Share, or any higher price that may be paid per Share in
the Offer, in cash, without interest, as set forth in the Merger Agreement and
described in the Offer to Purchase.
The Board of Directors of the Company and a special committee of such
Board, formed in accordance with Section 302A.673 of the Minnesota Business
Corporation Act, have unanimously approved the Merger Agreement, the Offer and
the Merger. The Board of Directors of the Company and its special committee have
determined that the Offer and Merger are fair to and in the best interests of
the Company and its shareholders and unanimously recommend that the shareholders
of the Company accept the Offer and tender their Shares.
If a shareholder desires to tender Shares pursuant to the Offer and such
shareholder's Share Certificates are not immediately available or such
shareholder cannot deliver the Share Certificates and all other required
documents to reach the Depositary prior to the Expiration Date, or such
shareholder cannot complete the procedure for delivery by book-entry transfer on
a timely basis, such Shares may nevertheless be tendered by following the
guaranteed delivery procedure specified in Section 3 of the Offer to Purchase.
No fees or commissions will be paid to any broker or dealer or other person
(other than the Information Agent or the Depositary as described in the Offer to
Purchase) for soliciting tenders of Shares pursuant to the Offer. Purchaser
will, however, upon request, reimburse brokers, dealers, commercial banks and
trust companies for reasonable and necessary costs and expenses incurred by them
in forwarding materials to their customers. Purchaser will pay all stock
transfer taxes applicable to its purchase of Shares pursuant to the Offer,
subject to Instruction 6 of the Letter of Transmittal.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, and any other required
documents, should be sent to the Depositary by 12:00 midnight, New York City
time, on Tuesday, June 13, 2000.
Any questions you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
undersigned at the address and telephone number set forth on the back cover of
the Offer to Purchase.
Very truly yours,
MACKENZIE PARTNERS, INC.,
As Information Agent
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF PURCHASER, PARENT, THE COMPANY, THE INFORMATION
AGENT, THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
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