PERSONAL AND CONFIDENTIAL
- -------------------------

April 21, 1999



Babbage's Etc. LLC
2250 William D. Tate Avenue
Grapevine, TX  76051

Attn:  Mr. R. Richard Fontaine

Ladies and Gentlemen:

In connection with your consideration of a possible transaction with Funco, Inc.
(the "Company"), you have requested information concerning the Company. As a
condition to your being furnished any such information, you agree to treat any
information concerning the Company (whether prepared by the Company, its
advisors or otherwise and whether furnished verbally, in writing or through
other media) which is furnished to you by or on behalf of the Company (herein
collectively referred to as the "Evaluation Material") in accordance with the
provisions of this letter and to take or abstain from taking certain other
actions herein set forth. The term "Evaluation Material" does not include
information which (i) is already in your possession as evidenced by reasonable
documentation in existence prior to disclosure hereunder, provided that such
information is not or should reasonably not be known by you to be subject to
another confidentiality agreement with or other obligation of secrecy to the
Company or another party, or (ii) becomes generally available to the public
other than as a result of a disclosure by you or your directors, officers,
employees, agents or advisors, or (iii) becomes available to you on a
non-confidential basis from a source other than the Company or its advisors,
provided that such source is not or should reasonably not be known by you to be
bound by a confidentiality agreement with or other obligation of secrecy to the
Company or another party. Anything in this letter to the contrary
notwithstanding, the Company may withhold from you any requested Evaluation
Material that the Company deems inadvisable to disclose or the delivery of
which, in the opinion of the Company's counsel, might be deemed to be in
violation of any federal or state law or regulation.

You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company and you and
will not be used for any other purpose whatsoever, and that such information
will be kept confidential by you and your advisors; provided, however, that (i)
any of such information may be disclosed to your directors, officers, employees,
lenders and prospective lenders, advisors and the representatives of your
advisors who need to know such information for the purpose of evaluating any
such possible transaction between the Company and you (it being understood that
such directors, officers, employees, lenders and prospective lenders, advisors
and representatives shall be informed by you of the confidential nature of such
information and shall be directed by you to treat such information
confidentially subject to the terms hereof, and that you shall be responsible
for any breach by any of the foregoing), and (ii) any disclosure of such
information may be made to which the Company consents in writing. You agree to
be responsible for any breach of the provisions of this letter by your
directors, officers, employees, lenders or prospective lenders, advisors and
representatives.




Funco, Inc.
April 21, 1999
Page 2


Babbages Etc. hereby discloses to the Company, and the Company hereby
acknowledges, that Babbage's Etc. competes with the Company by operating stores
(the "Competing Stores") having a concept (and merchandise) similar to the
stores of the Company. Babbages Etc. hereby discloses to the Company its plan to
(i) continue operating the Competing Stores, (ii) open and operate additional
Competing Stores and (iii) update redesign and modify, from time to time, the
concept and merchandise of the Competing Stores, irrespective of the parties
entering into this letter agreement or the possibility of a transaction.

You hereby acknowledge that you are aware, and that you will advise such
directors, officers, employees and representatives who are informed as to the
matters which are the subject of this letter, that the United States securities
laws prohibit any person who has received from or on behalf of an issuer
material, non-public information concerning the matters which are the subject of
this letter from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.

In addition, without the prior written consent of the Company, you will not, and
will direct such directors, officers, employees and representatives not to,
disclose to any person either the fact that discussions or negotiations are
taking place concerning a possible transaction between the Company and you or
any of the terms, conditions or other facts with respect to any such possible
transaction, including the status thereof.

You hereby acknowledge that the Evaluation Material is being furnished to you in
consideration of your agreement that neither you nor your directors, officers,
employees or representatives will (and you and they will not assist or encourage
others to) directly or indirectly, for a period of two (2) years from the date
hereof: (a) submit any proposal for, or otherwise offer to enter into, a
transaction between the Company and you (and/or any person acting in concert
with you in connection with such transaction) involving the acquisition (by
merger, tender offer, purchase, statutory share exchange, or otherwise) of
ownership (including, but not limited to, beneficial ownership) of any assets
(other than acquisition of inventory in the ordinary course of business) or
businesses of the Company or any securities issued by the Company, except
pursuant to a proposal directed and disclosed solely to the Chief Executive
Officer or other officers or directors specifically authorized in writing by the
Company or other designated representatives, and only if the Company shall have
requested in advance the submission of such proposal; (b) except pursuant to a
proposal requested by the Company in advance and made in accordance with clause
(a) above, by purchase or otherwise, acquire, or agree to acquire, ownership
(including, but not limited to, beneficial ownership) of any assets (other than
acquisition of inventory in the ordinary course of business) or businesses of
the Company or of any securities issued by the Company in excess of one percent
(1%) of the outstanding voting securities of the Company or any direct or
indirect rights (including convertible securities) or options to acquire such
ownership (or otherwise act in concert with any person which so acquires, offers
to acquire, or agrees to acquire); (c) make, or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or become a "participant" in an "election contest"
(as such terms are defined or used in Rule 14a-11 under the Exchange Act) with
respect to the Company or seek to advise or influence any person with respect to
the voting of any securities issued by the Company; (d) initiate, propose or
otherwise solicit stockholders for the approval of one or more stockholder
proposals with respect to the Company as described in Rule 14a-8 under the
Exchange Act or induce or attempt to induce any other person to initiate any
stockholder proposal; (e) acquire or affect the control of the Company or
directly or indirectly participate in or encourage the formation of any "group"
(within the meaning of Section 13(d)(3) of the Exchange






Funco, Inc.
April 21, 1999
Page 3

Act) which owns or seeks to acquire ownership of voting securities of the
Company, or to acquire or affect control of the Company; (f) call or seek to
have called any meeting of the stockholders of the Company or execute any
written consent in lieu of a meeting of holders of any securities of the
Company; (g) seek election or seek to place a representative on the Board of
Directors of the Company or seek the removal of any member of the Board of
Directors; (h) otherwise, directly or indirectly, alone or in concert with
others, seek to influence or control the management, Board of Directors or
policies of the Company; or (i) make any public announcement with respect to any
of the foregoing.

You also agree that in addition to any other rights and remedies available at
law or in equity the Company shall be entitled to equitable relief (without
posting bond or other security and without proving actual damages), including
injunction, and reasonable attorneys' fees, in the event of any breach of the
provisions of this letter agreement.

You irrevocably consent to the exclusive jurisdiction of the courts of the State
of Minnesota and of the U.S. District for the District of Minnesota for any
actions or proceedings arising from or related to the matters set forth in this
letter and agree that service of process by United States certified mail, return
receipt requested, expedited delivery service (e.g. Federal Express), or
personal service, to the address set forth above shall be effective with respect
to any such action or proceeding.

Although the Company has endeavored to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of your
investigation, you understand that, other than those set forth in a definitive
agreement between the Company and you, if any, neither the Company nor any of
its representatives or advisors have made or make any representation or warranty
as to the accuracy or completeness of the Evaluation Material. You agree that,
other than those set forth in a definitive agreement between the Company and
you, if any, neither the Company nor its representatives or advisors shall have
any liability to you or any of your lenders, prospective lenders,
representatives or advisors resulting from the use of the Evaluation Material.

At any time upon the Company's request or in the event that you do not proceed
with the negotiation of the transaction which is the subject of this letter
within a reasonable time, you shall promptly redeliver to the Company all
written Evaluation Material or any other written material containing or
reflecting any information in the Evaluation Material (whether prepared by the
Company, its advisors or otherwise) and will not retain any copies, extracts or
other reproductions in whole or in part of such written material. All documents,
memoranda, notes and other writings whatsoever prepared by you or your advisors
based on the information in the Evaluation Material shall be promptly destroyed,
and such destruction shall be certified in writing to the Company by an
authorized officer supervising such destruction.

The Evaluation Material shall remain the property of the Company. You agree that
unless and until a definitive agreement between the Company and you with respect
to any transaction referred to in the first paragraph of this letter has been
executed and delivered, neither the Company nor you will be under any legal
obligation of any kind whatsoever to enter into such a transaction by virtue of
this or any written or oral expression with respect to such a transaction by any
of the parties' respective directors, officers, employees, agents or any other
representatives or advisors. However, the agreements herein set forth are and
shall remain in full force and effect during the period(s) set forth herein. The
provisions set forth in this letter agreement, including without limitation,
this paragraph, may be modified or waived only by a separate writing by the
Company and you expressly so modifying or waiving such provisions.





Funco, Inc.
April 21, 1999
Page 4

You understand and acknowledge that the Company is free to engage in any
negotiations whatsoever and with any parties whatsoever for any potential
transaction involving the Company or any of its assets without notice to you.
The Company hereby informs you that it has made no determination to enter into
any transaction referred to in the first paragraph of this letter.

No failure or delay in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise of any right, power or privilege.

In the event that you are requested (by oral questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process) to disclose any Evaluation Material, you agree to notify the
Company promptly of such requests(s) and the documents requested thereby so that
the Company may seek an appropriate protective order and/or waive in writing
your compliance with the provisions of this Agreement. It is further agreed
that, if in the absence of a protective order or the receipt of a waiver
hereunder, you are nonetheless, in the opinion of your counsel, compelled to
disclose such Evaluation Material or else stand liable for contempt or suffer
other censure or penalty from any tribunal or governmental or similar authority,
you may disclose such information without liability hereunder, provided,
however, that you shall give the Company written notice of the information to be
so disclosed as far in advance of its disclosure as is practicable and shall use
reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such portion of the information
required to be disclosed as the Company designates.

You agree that you will have no discussion, correspondence, or other contact
concerning the Company or its securities or any transaction with or concerning
the Company or its securities except with the management of the Company and its
designated representatives, or except as otherwise contemplated by this letter
agreement. It is further acknowledged and agreed that each party reserves the
right, in its sole and absolute discretion, to reject any or all proposals and
to refuse to enter into or to terminate discussions and negotiations with, or
directly or indirectly involving, the other party at any time and shall not be
obligated to enter into any definitive agreement with the other.

You understand and agree that, without the prior written consent of the Company,
you and your subsidiaries, directors, officers, employees, agents and advisors
will not, directly or indirectly, in any manner, request, induce or influence
any employee of the Company to leave his or her employment with the Company or
its affiliates, for a period commencing on the date hereof and terminating two
(2) years after the date hereof. For purposes of this agreement, "affiliate"
shall be defined in accordance with 17 CFR ss.210.1-02(b).

You represent and warrant to us that, except as set forth on Exhibit A attached
hereto, you do not own beneficially or of record, directly or indirectly, any
voting securities of the Company and, to the best of your knowledge, your
affiliates do not own beneficially or of record, directly or indirectly, in the
aggregate more than 1% of the outstanding voting securities of the Company.

This letter agreement shall be governed by and construed in accordance with the
internal laws of the State of Minnesota, without giving effect to the principle
of conflict of laws thereof.





Funco, Inc.
April 21, 1999
Page 5


This letter agreement may be executed in one or more counterparts, each of which
shall be an original with the same effect as if the signatures thereto were upon
one instrument.

Very truly yours,

FUNCO, INC. BY WILLIAM BLAIR & COMPANY,
ITS AUTHORIZED REPRESENTATIVE

By:     /s/ Mitchell L. Marcus
Name:   Mitchell L. Marcus
Title:  Associate

Confirmed and Agreed to:

BABBAGE'S ETC. LLC

By:     /s/ R. Richard Fontaine
Name:   R. Richard Fontaine
Title:  CEO