SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO RULE 13d-1(A) AND AMENDMENTS THERETO
FILED PURSUANT TO RULE 13d-2(a)
(Amendment No. )*
FUNCO, INC.
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(Name of Issuer)
Common Stock, $.01 par value per share
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(Title of Class of Securities)
360762108
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(CUSIP Number)
Maureen O'Connell
c/o Barnes & Noble, Inc.
122 Fifth Avenue
New York, NY 10011
el. No.: (212) 633-3300
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 4, 2000
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this Schedule
13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or
13d-1(g), check the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. SEE Rule 13d-
7(b) for other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 (the "Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
(Continued on following page(s))
Page 1 of 7 Pages
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SCHEDULE 13D
CUSIP No. 360762108 Page 2 of 7 Pages
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1 NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Barnes & Noble, Inc., 06-119501
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO (1)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
1,218,060 (2)
NUMBER OF --------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
EACH --------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH
0
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,218,060 (2)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BELOW FILLING OUT!
(1) See Item 3 infra.
(2) Or such other number of shares as equals 19.9% of the number of issued
and outstanding shares of Common Stock of the Company. See Item 3
infra.
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Item 1. Security and Issuer.
This statement on Schedule 13D (this "Statement") relates to the
Common Stock, par value $.01 per share (the "Common Stock") of Funco, Inc., a
Minnesota corporation (the "Company"). The principal executive offices of
the Company are located at 10120 West 76th Street, Eden Prairie, MN 55334.
Item 2. Identity and Background.
This Statement is filed on behalf of Barnes & Noble, Inc., a Delaware
corporation (the "Reporting Person"). B&N is a retailer of books and operates
542 Barnes & Noble and 400 B. Dalton bookstores, and Babbage's Etc., LLC, one
of the nation's largest operators of video game and entertainment software
stores. The Reporting Person's principal place of business is located at 122
Fifth Avenue, New York, New York 10011.
During the last five years, the Reporting Person has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
Federal or State securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As an inducement for the Reporting Person to enter into the Merger
Agreement (as defined in Item 4), David Pomije, Chief Executive Officer and a
shareholder of the Company, entered into a Shareholder Agreement, dated as of
May 4, 2000 (the "Shareholder Agreement"), pursuant to which, among other
things, Mr. Pomije represented that he is the record and beneficial owner of
shares of Common Stock which represent more than 19.9% of the issued and
outstanding shares of Common Stock of the Company as of May 4, 2000.
Pursuant to the terms and conditions of the Shareholder Agreement, Mr. Pomije
has agreed to tender all of his shares of Common Stock (but in no event more
than 19.9% of all outstanding shares of Common Stock of the Company, in the
aggregate) in the Offer (as defined in Item 4 below). If for any reason the
shares tendered by Mr. Pomije represent less than 19.9% of the outstanding
shares of Common Stock in the aggregate, Mr. Pomije has also agreed to vote
the shares of Common Stock then held of record by Mr. Pomije or with respect
to which he is the beneficial owner (but not to exceed the amount by which
19.9% of the issued and outstanding shares in the aggregate exceeds the
number of shares tendered by him in the Offer): (a) in favor of the Merger,
the execution and delivery by the Company of the Merger Agreement and the
approval of the terms thereof, the performance by the Company of each of the
actions contemplated by the Merger Agreement and the Shareholder Agreement
and all actions required in furtherance thereof; (b) against any Acquisition
Proposal (as defined in the Merger Agreement) or Alternative Transaction (as
defined in the Merger Agreement); and (c) against any action or agreement
that would impede, frustrate, prevent or nullify the Shareholder Agreement,
or result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under Merger
Agreement or which would result in any of the conditions set forth in Article
VII of the Merger Agreement not being fulfilled. Mr. Pomije has granted an
irrevocable proxy to an officer of the Reporting Person to vote such of his
shares of Common Stock in favor of the Merger (as defined in Item 4 below) at
the shareholders meeting contemplated in the Merger Agreement and against
certain competing proposals and transactions. Mr. Pomije also waived any
dissenters' rights to payment for his shares under the dissenters' rights
provisions of the Minnesota Business Corporation Act with respect to the
Merger. The Shareholder Agreement terminates if either the Merger is
completed or the Merger Agreement is terminated in accordance with its terms.
The Reporting Person did not pay additional consideration to Mr. Pomije in
connection with the execution and delivery of the Shareholder Agreement. A
copy of the Shareholder Agreement is attached as Exhibit B to this Statement
and incorporated herein by reference.
Page 3 of 7 Pages
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Item 4. Purpose of Transaction.
(a)-(b) Pursuant to an Agreement and Plan of Merger, dated as of May
4, 2000 (the "Merger Agreement"), by and among the Company, the Reporting
Person and B&N Acquisition Corporation, a Minnesota corporation and wholly-
owned indirect subsidiary of the Reporting Person (the "Purchaser"),
Purchaser will acquire all of the Company's outstanding shares of common
stock for $24.75 per share.
As a first step in the transaction, the Purchaser will commence a
cash tender offer (the "Offer") by May 18, 2000 for all outstanding shares of
Common Stock of the Company (the "Shares") for $24.75 per share. Completion
of the Offer is subject to the satisfaction of certain conditions which
include, among other things, the following: (i) there shall have been
validly tendered and not withdrawn a number of Shares which, together with
all Shares already owned, directly or indirectly, by the Reporting Person or
the Purchaser, represents at least 51% of the total voting power of the
Company's outstanding Shares entitled to vote in the election of directors or
in a merger, calculated on a fully diluted basis on the date of purchase, and
(ii) the expiration or early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Following the completion of the Offer (and subject to certain
conditions), Purchaser will be merged with and into the Company, with the
Company surviving as a wholly-owned indirect subsidiary of the Reporting
Person (the "Merger"). In the Merger, those shareholders of the Company who
did not tender their Shares (other than the Reporting Person or Purchaser or
any other direct or indirect wholly-owned subsidiary of the Reporting Person
or the Company and shareholders exercising dissenters' rights) will be
entitled to receive the same price per Share that is offered in the Offer for
each Share held by them.
(c) Other than as a result of the Merger described in Item 4 (a)-(b)
above, the Reporting Person does not presently have any plans or proposals
that relate to or would result in a sale or transfer of a material amount of
assets of the Company or its subsidiary.
(d) The purpose of the Offer, the Merger and the Merger Agreement is
to enable the Reporting Person to acquire control of the equity interest of
the Company. The Merger Agreement provides that, promptly following the
purchase of and payment for that number of Shares which satisfies the Minimum
Condition (as defined in the Merger Agreement) pursuant to the Offer, and
from time to time thereafter, the Reporting Person will be entitled to
designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company (the "Company Board") as will give the
Reporting Person representation on the Company Board (and on each committee
of the Company Board) equal to the product of (A) the total number of
directors on the Company Board (giving effect to any increase in the number
of directors pursuant to the Merger Agreement) multiplied by (B) the
percentage that the number of Shares purchased by the Purchaser in the Offer
bears to the total number of Shares outstanding; provided, however, that
until the Effective Time (as defined in the Merger Agreement), the Reporting
Person and Purchaser shall use best efforts to assure that at all times there
shall be at least two directors on the Company Board who were directors on
May 4, 2000 and who are not employees of the Company.
(e) Other than as a result of the Merger described in Item 4 (a)-(b)
above, the Reporting Person does not presently have any plans or proposals
which relate to or would result in any material change in the present
capitalization or dividend policy of the Company.
(f) Other than as a result of the Merger described in Item 4(a)-(b)
above, and with respect to any potential integration and consolidation of the
business of the Company with the businesses of the Reporting Person, the
Reporting Person does not presently have any plans or proposals that relate
to or would result in any material change in the Company's business or
corporate structure.
Page 4 of 7 Pages
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(g) Pursuant to the terms and conditions of the Shareholder
Agreement, Mr. Pomije has agreed to tender all of his Shares of Common Stock
(but in no event more than 19.9% of all outstanding Shares of Common Stock of
the Company, in the aggregate) in the Offer. If for any reason the shares
tendered by Mr. Pomije represent less than 19.9% of the outstanding Shares of
Common Stock in the aggregate, Mr. Pomije has also agreed to vote the Shares
of Common Stock then held of record by Mr. Pomije or with respect to which he
is the beneficial owner (but not to exceed the amount by which 19.9% of the
issued and outstanding Shares in the aggregate exceeds the number of Shares
tendered by him in the Offer): (i) in favor of the Merger, the execution and
delivery by the Company of the Merger Agreement and the approval of the terms
thereof, the performance by the Company of each of the actions contemplated
by the Merger Agreement and the Shareholder Agreement and all actions
required in furtherance thereof; (ii) against any Acquisition Proposal (as
defined in the Merger Agreement) or Alternative Transaction (as defined in
the Merger Agreement); and (iii) against any action or agreement that would
impede, frustrate, prevent or nullify the Shareholder Agreement, or result in
a breach in any respect of any covenant, representation or warranty or any
other obligation or agreement of the Company under Merger Agreement or which
would result in any of the conditions set forth in Article VII of the Merger
Agreement not being fulfilled. Mr. Pomije has granted an irrevocable proxy
to an officer of the Reporting Person to vote such of his Shares of Common
Stock in favor of the Merger at the shareholders meeting contemplated in the
Merger Agreement and against certain competing proposals and transactions.
(h)-(i) Upon consummation of the Merger and Offer, the Company's
Common Stock will be deregistered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), pursuant to Section 12(g)(4) of the Exchange
Act, and will be delisted from The Nasdaq Stock Market.
(j) Other than as set forth above, the Reporting Person does not
presently have any plans or proposals that relate to or would result in an
action similar to any of those enumerated above.
References to, and descriptions of, the Merger, the Offer, the Merger
Agreement and the Shareholder Agreement as set forth herein are qualified in
their entirety by reference to the copies of the Merger Agreement and the
Shareholder Agreement attached as Exhibits A and B, respectively, to this
Statement, and are incorporated herein in their entirely where such
references and descriptions appear.
Item 5. Interest in Securities of the Issuer.
(a)-(b) As a result and subject to the terms of the Shareholder
Agreement and the irrevocable proxy granted to an officer of the Reporting
Person pursuant thereto, the Reporting Person has the sole power to vote an
aggregate of approximately 1,218,060 or such other number of Shares as equals
19.9% of the number of issued and outstanding Shares of Common Stock of the
Company for the limited purposes set forth in Item 3 above. Other than with
respect to the provisions of the Shareholder Agreement, the Reporting Person
does not have the right to vote the Shares on any other matters. The
Reporting Person does not share voting power of any additional Shares of
Common Stock of the Company with regard to the limited purposes as set forth
in Item 3 above and in the Shareholder Agreement. The Reporting Person does
not have any power to dispose or direct the disposition of any Shares of
Common Stock of the Company.
(c) Except as set forth herein, the Reporting Person has not effected
any transaction in the Company's Common Stock during the past 60 days.
(d) No other person is known to the Reporting Person to have the
right to receive or the power to direct the receipt of dividends from, or
proceeds from the sale of, any shares of Common Stock of the Company.
(e) Not applicable.
Page 5 of 7 Pages
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Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Other than the Merger Agreement and the Shareholder Agreement, to the
best knowledge of the Reporting Person, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the Reporting
Person and the Company with respect to any securities of the Company,
including but not limited to, transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to Be Filed as Exhibits.
The following documents are filed as exhibits:
Exhibit A Agreement and Plan of Merger, dated as of May 4, 2000,
by and among Funco, Inc., Barnes & Noble, Inc. and B&N
Acquisition Corporation (Incorporated by reference from
Exhibit No. 2.1 of the Reporting Person's Current Report
on Form 8-K filed May 10, 2000).
Exhibit B Shareholder Agreement, dated as of May 4, 2000, by and
between Barnes & Noble, Inc. and David R. Pomije
(Incorporated by reference from Exhibit No. 2.2 of the
Reporting Person's Current Report on Form 8-K filed May
10, 2000).
Page 6 of 7 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete
and correct.
Date: May 12, 2000 BARNES & NOBLE, INC.
By: /s/ Maureen O'Connell
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Name: Maureen O'Connell,
Title: Chief Financial Officer
