Prepared by MERRILL CORPORATION

A transfer of the Surrendered Securities is made to the Company or any subsidiaries; or

The transfer of the Surrendered Securities complies with Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act"); or

The transfer of the Surrendered Securities is pursuant to an effective registration statement under the Securities Act, or

The transfer of the Surrendered Securities is pursuant to another available exemption from the registration requirement of the Securities Act.

0000912057-01-533276.txt : 20011009 0000912057-01-533276.hdr.sgml : 20011009 ACCESSION NUMBER: 0000912057-01-533276 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20010924 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BEST BUY CO INC CENTRAL INDEX KEY: 0000764478 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [5731] IRS NUMBER: 410907483 STATE OF INCORPORATION: MN FISCAL YEAR END: 0301 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-70060 FILM NUMBER: 1743712 BUSINESS ADDRESS: STREET 1: 7075 FLYING CLOUD DR CITY: EDIN PRARIE STATE: MN ZIP: 55344 BUSINESS PHONE: 6129472000 MAIL ADDRESS: STREET 1: P O BOX 9312 CITY: MINNEAPOLIS STATE: MN ZIP: 55440-9312 FORMER COMPANY: FORMER CONFORMED NAME: BEST BUYS CO INC DATE OF NAME CHANGE: 19900809 S-3 1 a2059091zs-3.htm S-3 Prepared by MERRILL CORPORATION
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As filed with the Securities and Exchange Commission on September 24, 2001

Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

BEST BUY CO., INC.
(Exact name of registrant as specified in its charter)

MINNESOTA		41-0907483
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
BBC INSURANCE AGENCY, INC. (Exact name of registrant as specified in its charter)
MINNESOTA		41-2000251
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
BBC INVESTMENT CO. (Exact name of registrant as specified in its charter)
NEVADA		41-1822871
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
BBC PROPERTY CO. (Exact name of registrant as specified in its charter)
MINNESOTA		41-1788391
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
BEST BUY STORES, L.P. (Exact name of registrant as specified in its charter)
DELAWARE		41-1822872
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
BEST BUY PURCHASING LLC (Exact name of registrant as specified in its charter)
MINNESOTA		41-1989010
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

BESTBUY.COM, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1953804
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
BEST BUY CONCEPTS, INC. (Exact name of registrant as specified in its charter)
NEVADA		41-1842145
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
MAGNOLIA HI-FI, INC. (Exact name of registrant as specified in its charter)
WASHINGTON		91-0857815
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
MUSICLAND STORES CORPORATION (Exact name of registrant as specified in its charter)
DELAWARE		41-1623376
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
THE MUSICLAND GROUP, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1307776
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
MEDIA PLAY, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1728077
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
MG FINANCIAL SERVICES, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1734969
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
MLG INTERNET, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1922797
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

MUSICLAND RETAIL, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1758283
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
ON CUE, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1728078
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
REQUEST MEDIA, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1698455
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
SUNCOAST GROUP, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1824095
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
SUNCOAST MOTION PICTURE COMPANY, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1824093
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
SUNCOAST RETAIL, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1824096
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
TMG CARIBBEAN, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1659705
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

TMG-VIRGIN ISLANDS, INC. (Exact name of registrant as specified in its charter)
DELAWARE		41-1762477
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
REDLINE ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter)
MINNESOTA		41-1928228
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
(952) 947-2000
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)

Joseph M. Joyce
Senior Vice President and General Counsel
Best Buy Co., Inc.
7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
(952) 947-2000
(Name and address, including zip code, and telephone
number, including area code, of agent for service of process)

Copies to:

Anne M. Rosenberg
Robins, Kaplan, Miller & Ciresi L.L.P.
2800 LaSalle Plaza
800 LaSalle Avenue
Minneapolis, Minnesota 55402
(612) 349-8500

Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement
as determined by market conditions.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / /

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /x/

If this Registration Statement is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering: / /

If this Registration Statement is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / /

CALCULATION OF REGISTRATION FEE


Title of each class of securities to be registered	Amount to be registered(1)	Proposed maximum offering price per unit or share(2)	Proposed maximum aggregate offering price(2)	Amount of registration fee

Best Buy Co., Inc. Convertible Debentures due June 27, 2021	$492,400,000	$645.00	$317,598,000	$79,399.50

Guarantees of each Registrant other than Best Buy Co., Inc.	N/A	(3)	(3)	(3)

Best Buy Co., Inc. Common Stock ($.10 par value)	(4)	(4)	(4)	(4)

(1): The debentures were issued at an initial issue price of $683.80 per $1,000 principal amount at maturity, which represents an aggregate initial issue price of $336,703,120 and an aggregate initial principal amount at maturity of $492,400,000.
(2): Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) on the basis of the average of the bid and asked prices of the debentures on the PORTAL system on September 21, 2001.
(3): No separate consideration will be received for the guarantees of each Registrant other than Best Buy Co., Inc. with respect to the debentures and, pursuant to Rule 457(n), no fee is payable with respect thereto.
(4): Includes such indeterminate number of shares of Best Buy Co., Inc. common stock as shall be issuable upon conversion of the debentures registered hereby, which are not subject to an additional registration fee pursuant to Rule 457(i).

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Subject to Completion, dated September 24, 2001

Information contained in this prospectus is not complete and may be changed. The Selling Securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS

$492,400,000

BEST BUY CO., INC.
Convertible Debentures due June 27, 2021
Convertible into
Common Stock
Guaranteed as to Payment of Principal and Interest
by Certain Subsidiaries of Best Buy Co., Inc.

We issued the debentures in a private placement in June 2001 to persons reasonably believed to be "qualified institutional buyers" as defined in Rule 144A under the Securities Act of 1933, as amended, or the Securities Act. This prospectus will be used by selling securityholders to resell their debentures and the shares of common stock issuable upon conversion of their debentures.

The debentures are our unsecured unsubordinated obligations. We issued the debentures at an issue price of $683.80 per debenture. The issue price represents an initial yield to maturity of 2.75% per annum, which will be reset (but not below 2.75% or above 3.75%) on December 27, 2003, December 27, 2008 and December 27, 2013. We are paying a portion of the yield to maturity as cash interest at a rate of 1.00% per annum on the issue price in the manner described herein semi-annually in arrears on June 27 and December 27 of each year, commencing December 27, 2001. If an increased yield to maturity is in effect for a particular semi-annual period, we will pay a portion of the increased yield to maturity as cash interest at a rate of up to 0.25% per annum (up to 0.125% per semi-annual period of the accreted value, as defined herein, of the debentures and the remaining increased yield to maturity, if any, will accrete and will be payable at maturity, redemption or the date of purchase. We may elect to pay additional cash interest on the debentures in lieu of accreting interest on the debentures following a tax event (as defined herein). The debentures are guaranteed by our restricted subsidiaries in the manner described herein. The debentures are designated for trading in The Portal^SM Market, a subsidiary of The Nasdaq Stock Market, Inc.

On or after June 27, 2004, we may redeem for cash all or part of the debentures that have not previously been converted or purchased at a price equal to the accreted value of the debentures plus accrued and unpaid cash interest up to but not including the date of redemption. Holders may require us to purchase all or part of their debentures on June 27, 2004, June 27, 2009 and June 27, 2014 at a price equal to the accreted value of the debentures plus accrued and unpaid cash interest up to but not including the date of purchase. We may choose to pay the purchase price in cash, shares of our common stock or a combination of cash and shares of our common stock. In addition, upon a change of control (as defined herein), each holder may require us to purchase for cash all or a portion of such holder's debentures.

Holders may surrender their debentures for conversion into shares of our common stock at a conversion rate of 7.8714 shares of our common stock per debenture. This is equivalent to an initial conversion price of $86.87 per share, subject to adjustment in some events. Holders may surrender their debentures for conversion if any of the following conditions is satisfied:

•: if the closing sale price of our common stock for at least 20 trading days in the 30 trading day period ending on the trading day prior to the day of surrender is more than the applicable percentage (which will initially be 120% and will decline over the life of the debentures to 110% as described herein) of the accreted conversion price (as defined herein) per share of our common stock at such preceding trading day;
•: if our senior long-term unsecured credit ratings are downgraded by Moody's Investors Service, Inc. to below Ba1 and by Standard & Poor's Rating Services to below BB+;
•: if we have called the debentures for redemption; or
•: upon the occurrence of specified corporate transactions.

The outstanding shares of our common stock are listed on the New York Stock Exchange under the symbol "BBY." On September 21, 2001, the closing sale price on the New York Stock Exchange for our common stock was $43.40.

Investing in the debentures and our common stock involves risks. See "Risks Related to the Debentures" on page 12.

We will not receive any of the proceeds from the sale of the debentures or the underlying common stock by any of the selling securityholders. The debentures and the underlying common stock may be offered in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices. In addition, the underlying common stock may be offered from time to time through ordinary brokerage transactions on the New York Stock Exchange. See "Plan of Distribution." The selling securityholders may be considered "underwriters" as defined in the Securities Act. Any profits realized by the selling securityholders may be considered to be underwriting commissions. If the selling securityholders use any broker-dealers, any commissions paid to broker-dealers and, if broker-dealers purchase any debentures or underlying common stock as principals, any profits received by the broker-dealers on the resale of the debentures or the underlying common stock, may be considered to be underwriting discounts or commissions under the Securities Act.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is , 2001.

TABLE OF CONTENTS

		Page
Note Regarding Forward-Looking Statements		3
Where You Can Find More Information		4
Summary		5
Risks Related to the Debentures		12
Selected Consolidated Financial Information		13
Ratio of Earnings to Fixed Charges		14
Use of Proceeds		14
Price Range of Common Stock and Dividends		15
Description of Debentures		16
Description of Common Stock and Preferred Stock		34
Certain United States Federal Income Tax Considerations		36
Selling Securityholders		43
Plan of Distribution		45
Validity of Securities		47
Experts		47

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. You should assume that the information appearing in this prospectus or any documents incorporated by reference is accurate only as of the date on the front cover of the applicable document. Our business, financial condition, results of operations and prospects may have changed since that date.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Section 27A of the Securities Act and Section 21E of the Exchange Act of 1934, as amended (the "Exchange Act"), provide a "safe harbor" for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this prospectus or in any document incorporated by reference in this prospectus are forward-looking statements and may be identified by the use of words such as "believe," "expect," "anticipate," "plan," "estimate," "intend" and "potential." Such statements reflect our current view with respect to future events and are subject to certain risks, uncertainties and assumptions. A variety of factors could cause our actual results to differ materially from the anticipated results expressed in such forward-looking statements, including, among other things:

•: general economic conditions;
•: acquisitions and development of new businesses;
•: product availability;
•: sales volumes;
•: profit margins;
•: weather;
•: availability of suitable real estate locations; and
•: the impact of labor markets and new product introductions on our overall profitability.

You should review our Current Report on Form 8-K filed on May 16, 2001, that describes additional important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements made in this prospectus.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other information with SEC under the Exchange Act. You may read and copy this information at the following location of the SEC:

Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, DC 20549

You may also obtain copies of this information at prescribed rates by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, DC 20549.

The SEC also maintains a web site that contains reports, proxy statements and other information about issuers, like us, who file electronically with the SEC. The address of that site is www.sec.gov.

You can also inspect reports, proxy statements and other information about our company at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

We incorporate by reference into this prospectus the information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We are incorporating by reference the documents set forth below that we have filed with the SEC and our future filings with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Exchange Act until the sale of all of the debentures covered by this prospectus. These documents contain important information about us and our financial condition.

•: Annual Report on Form 10-K for year ended March 3, 2001;
•: Proxy Statement for the 2001 Regular Meeting of Shareholders, dated May 17, 2001;
•: Quarterly Report on Form 10-Q for the quarter ended June 2, 2001;
•: Current Report on Form 8-K filed June 26, 2001;
•: Current Report on Form 8-K filed July 19, 2001;
•: Current Report on Form 8-K filed August 24, 2001; and
•: Current Report on Form 8-K filed September 19, 2001.

Documents incorporated by reference are available from us without charge, excluding all exhibits, except that if we have specifically incorporated by reference an exhibit in this prospectus, the exhibit will also be provided without charge. You may obtain documents incorporated by reference in this prospectus by requesting them in writing or by calling us at the following address or telephone number:

Best Buy Co., Inc.
7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
(952) 947-2000
Attn: Investor Relations Department

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information that is different from what is contained in this prospectus. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the cover page of this prospectus. Neither the delivery of this prospectus nor the sale of the debentures creates any implication to the contrary.

SUMMARY

The following summary may not contain all of the information that may be important to you. You should read the entire prospectus, as well as information incorporated by reference, before making an investment decision. When used in this prospectus, in each case unless otherwise specified, the terms "Best Buy," "we," "our" and "us" refer to Best Buy Co., Inc. and its consolidated subsidiaries, and the term "Best Buy Retail" refers to the operations of Best Buy engaged in the retail sale of products under the brand names Best Buy and BestBuy.com. In this prospectus, we refer to a number of Web sites maintained by Best Buy. These Web sites are not a part of this prospectus.

Best Buy

We are the nation's number one specialty retailer of consumer electronics, home office equipment, entertainment software and appliances, with revenues for our fiscal year ended March 3, 2001, of $15.3 billion ($17.1 billion on a pro forma basis as though the acquisition of Musicland Stores Corporation had been completed as of the beginning of the fiscal year). We operate retail stores and commercial Web sites under the brand names Best Buy (BestBuy.com), Media Play (MediaPlay.com), On Cue (OnCue.com), Sam Goody (SamGoody.com), Suncoast (Suncoast.com) and Magnolia Hi-Fi (MagnoliaHiFi.com).

We began in 1966 as an audio components retailer, and in the early 1980s, with the introduction of the videocassette recorder, expanded into video products. In 1983, we revised our marketing strategy and began using mass-merchandising techniques, including offering a wider variety of products and operating stores under a "superstore" format. In 1989, we dramatically changed our method of retailing by introducing a self-service, noncommissioned, discount-style store format designed to give the customer more control over the purchasing process. The Best Buy store format has continued to evolve to include more interactive displays and, for some products, a higher level of customer service, with the latest version expected to result in a more effective labor model and improved merchandising.

As of our most recent fiscal year end, we operated 419 Best Buy Retail stores in 41 states, each averaging 45,400 square feet with average annual sales per store of nearly $39 million. In addition, in fiscal 2001, Best Buy Retail re-launched its commercial Web site, BestBuy.com, which sells products over the Internet in all of Best Buy Retail's principal product categories except appliances. We view the site as part of a fully integrated "clicks-and-mortar" strategy for Best Buy, offering a consistent and synchronized experience across both stores and Internet channels while tapping the unique advantages of each.

In the fourth quarter of fiscal 2001, we acquired both Musicland Stores Corporation, one of the largest national retailers of pre-recorded music, movies and other entertainment-related products, and Magnolia Hi-Fi, Inc., a Seattle-based retailer of top-of-the-line consumer electronics, including audio and video home theater systems. Musicland operates through mall-based music and video stores under the brand names Sam Goody and Suncoast, rural On Cue stores and metropolitan, large-format Media Play stores. Musicland adds approximately 1,300 stores in 49 states, the District of Columbia, the Commonwealth of Puerto Rico and the Virgin Islands, with 8.8 million total retail square feet. Magnolia adds 13 stores in Washington, Oregon and California that average 10,200 square feet with average annual sales per store of $8.4 million.

Our vision is to be at the intersection of technology and life. Our business strategy is to bring technology and consumers together in a retail environment that focuses on educating consumers on the features and benefits of technology and entertainment while maximizing overall profitability. We believe that Best Buy Retail stores offer consumers meaningful advantages in store environment, product value, selection and service, all of which further Best Buy Retail's objective of achieving a significant market share in the markets it serves. The acquisitions of Musicland and Magnolia give us access to new distribution channels, new customers and the ability to leverage Best Buy Retail's core competencies to

their operations. We also expect to accrue additional benefits from the cross merchandising of products and information sharing across distribution channels.

We are a Minnesota corporation whose principal executive offices are located at 7075 Flying Cloud Drive, Eden Prairie, Minnesota 55344. Our telephone number is (952) 947-2000.

For additional information regarding our business, please see our Annual Report on Form 10-K for the fiscal year ended March 3, 2001 and our other filings with the SEC which are incorporated by reference into this prospectus. See "Where You Can Find More Information."

Recent Developments

On July 13, 2001, our wholly-owned indirect subsidiary, The Musicland Group, Inc., initiated a cash tender offer and consent solicitation with respect to its outstanding 9.875% senior subordinated notes due in 2008. Approximately 97% of the outstanding notes had been tendered prior to the expiration of the tender offer on August 10, 2001. The aggregate purchase price paid on the notes was approximately $166 million, which includes consent payments and accrued interest. The tender offer required holders tendering the notes to consent to the removal of restrictive covenants and certain events of default that were included in the original indenture when the notes were issued. These particular provisions were removed in accordance with the consent of more than a majority in principal amount of the notes.

On August 14, 2001, we announced our plans to acquire Future Shop Ltd., the largest Canadian retailer of consumer electronics, for $580 million (Canadian), or approximately $377 Million (U.S.) as of such date. The acquisition is to be made pursuant to a cash tender offer initiated August 23, 2001, for all outstanding Future Shop shares at a price of $17.00 (Canadian), or approximately $11.05 (U.S.) as of such date, per share. Burnaby, B.C.-based Future Shop operates 88 stores throughout Canada. Holders of approximately 68.6% of the Future Shop common stock, on a fully-diluted basis, have agreed to deposit and not withdraw their Future Shop shares pursuant to the tender offer, subject to termination in certain circumstances. Following consummation of the acquisition, expected to occur in October 2001 subject to regulatory approvals, Future Shop will operate as our separate Canadian subsidiary.

The Debentures

Debentures		$492,400,000 aggregate principal amount at maturity of our Convertible Debentures due June 27, 2021, each debenture having a principal amount at maturity of $1,000, subject to an upward adjustment as described below.
Maturity		June 27, 2021.
Yield to Maturity; Cash Interest		The debentures accrete in value such that the initial yield to maturity is 2.75% per annum, which will be reset on December 27, 2003, December 27, 2008 and December 27, 2013 to a rate per annum equal to the five-year treasury rate (as defined herein) minus 1.90%. In no event, however, will the yield to maturity be reset below 2.75% per annum or above 3.75% per annum.
		We pay a portion of the yield to maturity as cash interest on the debentures at a rate of 1.00% per annum on the issue price of the debentures, payable semi-annually in arrears on June 27 and December 27 of each year, commencing December 27, 2001.
		If an increased yield to maturity is in effect for a particular semi-annual period, we will also pay a portion of the increased yield to maturity as cash interest at a rate of up to 0.25% per annum (up to 0.125% per semi-annual period) of the accreted value of the debentures and the remaining increase, if any, will accrete and will be payable at maturity, redemption or the date of purchase.
		We will compute accretion and cash interest for each semi-annual period ending on June 12 and December 12 of each year on the basis of a 360-day year comprised of twelve 30-day months.

Optional Conversion to Semi-Annual Coupon Debentures upon a Tax Event		From and after the occurrence of a tax event, at our option, additional cash interest will accrue on each debenture from the date on which we exercise such option at a rate per annum equal to the yield to maturity then in effect in respect of the debentures less the portion of the yield to maturity paid as cash interest on the restated principal amount of each debenture (i.e., the accreted value of the debenture plus any accrued and unpaid cash interest to the date we exercise such option) and will be payable semi-annually on each interest payment date to holders of record at the close of business on each regular record date immediately preceding such interest payment date. The additional cash interest rate will also be subject to the same reset provisions described above under "Yield to Maturity; Cash Interest." Such additional cash interest will be computed on the basis of a 360-day year comprised of twelve 30-day months, will initially accrue from the option exercise date (as defined herein) and thereafter from the most recent date to which such interest has been paid or duly provided and will be payable semi-annually in arrears on June 27 and December 27 of each year. In such an event, the redemption price, purchase price and change of control purchase price will be adjusted as described herein. However, there will be no changes in a holder's conversion rights.
Conversion Rights		For each debenture surrendered for conversion, a holder will receive 7.8714 shares of our common stock. The conversion rate will be adjusted for certain reasons specified in the indenture, but will not be adjusted for accretion. Upon conversion, a holder will not receive any cash payment representing accretion on the debentures or accrued and unpaid cash interest. Instead, accretion on the debentures and accrued and unpaid cash interest will be deemed paid by the common stock received by the holder on conversion.


		Holders may convert their debentures at any time into shares of our common stock if the closing sale price of our common stock for at least 20 trading days in the 30 trading day period ending on the trading day prior to the date of conversion is more than the applicable percentage (which will initially be 120% and will decline by 0.50% on each anniversary of the date of original issue of the debentures over the life of the debentures to 110%) of the accreted conversion price per share of our common stock at such preceding trading day. Even if the foregoing condition is not satisfied, holders may convert their debentures if our senior long-term unsecured credit ratings are downgraded by Moody's and S&P to below Ba1 and BB+, respectively. In addition, debentures called for redemption may be surrendered for conversion until the close of business on the business day prior to the redemption date, or if we make a significant distribution to holders of our common stock or if we are a party to specified consolidations, mergers or transfers or leases of all or substantially all of our assets, holders may surrender debentures for conversion. The ability to surrender debentures for conversion will expire at the close of business on June 27, 2021, unless the debentures previously have been redeemed or purchased.
		We have the option to designate a financial institution to which debentures surrendered for conversion by a holder of debentures will be initially offered by the conversion agent for exchange in lieu of us converting those debentures. In order to accept debentures surrendered for conversion, the designated institution must agree to exchange for those debentures a number of shares of our common stock equal to the number of shares the holder of those debentures would receive upon conversion, plus cash for any fractional shares. If the designated institution declines to accept for exchange any debentures in whole or in part, or if the designated institution agrees to accept any debentures for exchange but does not timely deliver the related shares of our common stock, those debentures or parts of debentures will be converted.
Ranking		The debentures are our unsecured unsubordinated obligations and rank equal in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. The indenture for the debentures does not contain restrictions on the incurrence of indebtedness, including additional senior indebtedness, by us.
Subsidiary Guarantors		All of our restricted subsidiaries (as defined herein) have guaranteed the debentures. Each guarantee ranks equal in right of payment with all other existing and future unsecured and unsubordinated indebtedness of the guarantor. The guarantee of a guarantor will be automatically released upon certain events.
Sinking Fund		None.

Redemption of Debentures at Our Option		We may redeem all or a portion of the debentures for cash at any time on or after June 27, 2004, at a redemption price equal to the accreted value of the debentures plus accrued and unpaid cash interest up to but not including the date of redemption. "Accreted value" for a debenture means, as of any date, the sum of the issue price of such debenture and the accretion in value on such debenture based on the yield to maturity from time to time in effect less the portion of the yield to maturity paid as cash interest from the date of issuance up to but not including such redemption date.
Purchase of Debentures at the Option of the Holder		Holders may require us to purchase all or a portion of their debentures on June 27, 2004, June 27, 2009 or June 27, 2014 at a purchase price equal to the accreted value of the debentures plus accrued and unpaid cash interest up to but not including the purchase date.
Change of Control		We may choose to pay the purchase price in cash, shares of our common stock or a combination of cash and common stock. If a change of control (as defined herein) occurs, each holder of debentures will have the right, at the holder's option, to require us to purchase for cash all or a portion of such holder's debentures at a purchase price equal to the accreted value of the debentures plus accrued and unpaid cash interest up to but not including the change of control purchase date.
Events of Default		If there is an event of default on the debentures, an amount equal to the accreted value (or, if applicable, the restated principal amount upon the occurrence of a tax event) of the debentures, plus accrued and unpaid cash interest in respect of the debentures, may be declared immediately due and payable. These amounts automatically become due and payable in certain circumstances.
DTC Eligibility		The debentures were issued in book-entry form and are represented by permanent global certificates deposited with a custodian for and registered in the name of a nominee of The Depository Trust Company ("DTC") in New York, New York. Beneficial interests in any such securities will be shown on, and transfers will be effected only through, records maintained by DTC and its direct and indirect participants and any such interest may not be exchanged for certificated securities, except in limited circumstances.

United States Federal Income Tax Considerations		We treat the debentures as indebtedness subject to the U.S. Treasury regulations governing contingent payment debt instruments. Each holder agrees, for U.S. federal income tax purposes, to treat the debentures as "contingent payment debt instruments" and to be bound by our application of the Treasury Regulations that govern contingent payment debt instruments, including our determination that the rate at which interest will be deemed to accrue for federal income tax purposes is 6.75%, which is the rate comparable to the rate at which we have determined we would borrow on a noncontingent, nonconvertible borrowing with terms and conditions otherwise comparable to the debentures (including the level of subordination, term, timing of payments and general market conditions). Accordingly, each holder is required to accrue interest on a constant yield to maturity basis at that rate, with the result that the holder will recognize taxable income significantly in excess of any cash received while the debentures are outstanding. In addition, a holder will recognize ordinary income upon a conversion of a debenture into our common stock equal to the excess, if any, between the value of our common stock received on the conversion and the sum of the original purchase price of the holder's debenture, accretion thereon and accrued and unpaid cash interest, as well as ordinary income or loss upon sale of the debenture. However, there is some uncertainty as to the proper application of the Treasury regulations that govern contingent payment debt instruments to a holder of a debenture, and if our treatment were successfully challenged by the Internal Revenue Service, it might be determined that, among other differences, a holder should have accrued interest income at a lower rate, should not have recognized ordinary income upon the conversion, and should have recognized capital rather than ordinary income or loss upon a taxable disposition of its debenture.
		HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX TREATMENT OF THE DEBENTURES AND WHETHER A PURCHASE OF THE DEBENTURES IS ADVISABLE IN LIGHT OF THE AGREED UPON TAX TREATMENT AND THE HOLDER'S PARTICULAR TAX SITUATION.
Transfer Restrictions		The debentures, the guarantees and the shares of our common stock issuable upon conversion of the debentures may not be offered or sold except pursuant to a transaction registered in accordance with or exempt from, to the registration requirements of the Securities Act and applicable state laws.

RISKS RELATED TO THE DEBENTURES

Prospective investors should carefully consider the following formation with the other information contained in this prospectus before purchasing the debentures.

You should consider the United States federal income tax consequences of owning the debentures.

While the proper tax treatment of a holder of the debentures is uncertain, we and each holder have agreed in the indenture to treat the debentures as "contingent payment debt instruments" and to be bound by our application of the Treasury regulations that govern contingent payment debt instruments. Pursuant to this agreement, a holder will be required to accrue interest on a constant yield to maturity basis at a rate comparable to the rate at which we would borrow in a noncontingent, nonconvertible borrowing (6.75%). A holder will recognize taxable income significantly in excess of cash received while the debentures are outstanding. In addition, under the indenture, a holder will recognize ordinary income, if any, upon a sale, exchange, conversion or redemption of the debentures at a gain. See "Certain United States Federal Income Tax Considerations."

An active trading market for the debentures may not develop.

We cannot assure you that an active trading market for the debentures will develop or as to the liquidity or sustainability of any such market, the ability of holders to sell their debentures or the price at which holders of the debentures will be able to sell their debentures. Future trading prices of the debentures will depend on many factors, including, among other things, prevailing interest rates, our operating results, the price of our common stock and the market for similar securities.

We may not be able to raise the funds necessary to finance a change in control purchase.

Upon the occurrence of specific kinds of changes in control events occurring on or before June 27, 2021, holders of debentures may require us to purchase their debentures for cash. However, it is possible that we would not have sufficient funds at that time to make the required purchase of debentures. See "Description of Debentures—Purchase at Option of Holder Upon a Change of Control."

The value of the conversion rights associated with the debentures may be substantially lessened or eliminated if we are a party to a merger, consolidation or other similar transaction.

If we are a party to a consolidation, merger or transfer or lease of all or substantially all of our assets pursuant to which our common stock would be converted into cash, securities or other assets, the debentures would become convertible solely into such cash, securities or other assets. As a result, the value of the conversion rights associated with the debentures may be substantially lessened or eliminated since you would no longer be able to convert your debenture into shares of our common stock. See "Description of Debentures—Conversion Rights—Conversion Rate and Delivery of Our Common Shares."

Our business is subject to quarterly fluctuations and seasonality.

Similar to most retailers, our business is seasonal, with revenues and earnings being generally lower during the first half of each fiscal year and greater during the second half of each fiscal year, which includes the year-end holiday season. In addition, our working capital needs are seasonal, with our greatest working capital requirements occurring during the second half of each fiscal year. Accordingly, our operating results may be affected by holiday spending patterns, as well as the timing of new store openings and general economic conditions.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth our selected consolidated financial information and certain operating data for the last five fiscal years. This information was derived from our audited consolidated financial statements.

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States, and our financial statements have been audited by Ernst & Young LLP, independent auditors. The following information is only a summary. It should be read in conjunction with our audited consolidated financial statements and related notes and "Management's Discussion and Analysis of Results of Operations and Financial Condition" in our Annual Report on Form 10-K for the fiscal year ended March 3, 2001, and all subsequent SEC filings, each as incorporated by reference into this prospectus.

		Fiscal Year(1)
		1997			1998			1999			2000			2001(2)			Pro Forma 2001(3)
		($ in thousands, except per share amounts and operating data)
Statement of Earnings Data
Revenues		$	7,757,692		$	8,337,762		$	10,064,646		$	12,494,023		$	15,326,552		$	17,078,464
Gross profit			1,045,890			1,311,688			1,814,523			2,393,429			3,059,093			3,710,328
Selling, general and administrative expenses			1,005,675			1,145,280			1,463,281			1,854,170			2,454,785			3,023,200
Operating income			40,215			166,408			351,242			539,259			604,308			687,128
Net earnings (loss)			(6,177	)		81,938			216,282			347,070			395,839			417,229
Net earnings (loss) per share:
	Basic	$	(.04	)	$	.47		$	1.09		$	1.70		$	1.92		$	2.02
	Diluted	$	(.04	)	$	.46		$	1.03		$	1.63		$	1.86		$	1.96
Balance Sheet Data
Working capital		$	563,083		$	666,172		$	662,111		$	453,411		$	213,965			—
Total assets			1,740,399			2,070,371			2,531,623			2,995,342			4,839,587			—
Long-term debt, including current portion			238,016			225,322			60,597			30,650			295,949			—
Convertible preferred securities			230,000			229,854			—			—			—			—
Shareholders' equity			428,796			535,712			1,033,945			1,095,985			1,821,928			—
Operating Data
EBITDA(4)		$	107,031		$	234,737		$	424,867		$	642,966		$	771,675			—
Comparable store sales change(5)			(4.7	)%		2.0	%		13.5	%		11.1	%		4.9	%		—
Inventory turns(6)			4.6			5.6			6.6			7.2			7.6			—
Average revenues per store(7)		$	29,300		$	29,600		$	33,700		$	37,200		$	38,900			—
Number of stores:
	Best Buy Retail		272			284			311			357			419			—
	Musicland		—			—			—			—			1,309			—
	Magnolia		—			—			—			—			13			—
Total retail square footage (000s):
	Best Buy Retail		12,026			12,694			14,017			16,205			19,010			—
	Musicland		—			—			—			—			8,772			—
	Magnolia		—			—			—			—			133			—

(1): Our fiscal year is a 52/53 week period ending on the Saturday closest to the last day of February each year. Fiscal 2001 included 53 weeks and ended on March 3, 2001. All other periods presented included 52 weeks.
(2): During the fourth quarter of fiscal 2001, we acquired the common stock of Musicland Stores Corporation and Magnolia Hi-Fi, Inc. The results of operations of those businesses are included from their dates of acquisition.
(3): Pro forma information for fiscal 2001 shows unaudited pro forma results of operations of Best Buy Retail and Musicland for fiscal 2001 as though that acquisition had been completed as of the beginning of the fiscal year and includes amortization of goodwill. The information above does not necessarily represent what actual results would have been, had the acquisition taken place at the beginning of the fiscal year. Expenses associated with

post-acquisition integration and store transformation activities are not included in the pro forma results. Additionally, anticipated changes to operations, including the impact of changes in product assortment at Musicland stores and expected expense savings and synergies, are not reflected.

(4): EBITDA means operating income plus depreciation and amortization. EBITDA is presented because we believe it is an indicator of our ability to incur and service debt and is used by our lenders in determining compliance with financial covenants. However, EBITDA should not be considered as an alternative to cash flow from operating activities as a measure of liquidity or as an alternative to net income as a measure of operating results in accordance with generally accepted accounting principles. Our definition of EBITDA may differ from definitions of EBITDA used by other companies.
(5): Comparable stores are stores open at least 14 full months and for all periods presented reflect Best Buy Retail stores only.
(6): Inventory turns reflect Best Buy Retail stores only and are calculated based upon a monthly average of inventory balances.
(7): Average revenues per store reflect Best Buy Retail stores only and are based upon total revenues for the period divided by the weighted average number of stores open during such period.

RATIO OF EARNINGS TO FIXED CHARGES

Our ratio of earnings to fixed charges for each of the periods shown is as follows:

		Three Months Ended				Fiscal Year
		6/2/2001		5/27/2000		1997		1998		1999		2000		2001
Ratio of earnings to fixed charges		3.15		6.73		0.89		2.51		5.56		8.62		7.62

We have computed the ratios of earnings to fixed charges shown above by dividing earnings available for fixed charges by fixed charges. For this purpose, "earnings available for fixed charges" consist of pretax income (loss) from continuing operations before extraordinary items plus fixed charges and amortization of capitalized interest, less capitalized interest. "Fixed charges" consist of interest expense, capitalized interest and an estimate of the interest within rental expense. We were unable to cover approximately $10.1 million fixed charges in fiscal 1997.

In the fourth quarter of fiscal 2001, we acquired both Musicland and Magnolia. These acquisitions were accounted for as purchases, with the company as the acquiror for accounting purposes. The ratio of earnings to fixed charges for fiscal 2001 include the earnings and fixed charges of Musicland and Magnolia only for a portion of the fourth quarter of fiscal 2001. The ratios of earnings to fixed charges for fiscal 1997, 1998, 1999 and 2000 include only the earnings and fixed charges of the Best Buy Retail operations.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the debentures or the underlying common stock by the selling securityholders.

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

Our common stock is listed and traded on the New York Stock Exchange under the symbol "BBY." The following table sets forth, for the periods indicated, the high and low sale prices per share of our common stock as quoted on the New York Stock Exchange.

	High		Low
Fiscal 2000:
First quarter ended May 29, 1999	$	57.38	$	40.50
Second quarter ended August 28, 1999		80.50		44.25
Third quarter ended November 27, 1999		72.81		45.88
Fourth quarter ended February 26, 2000		67.00		42.00
Fiscal 2001:
First quarter ended May 27, 2000	$	88.88	$	47.25
Second quarter ended August 26, 2000		80.69		57.50
Third quarter ended November 25, 2000		74.13		30.50
Fourth quarter ended March 3, 2001		51.00		21.00
Fiscal 2002:
First quarter ended June 2, 2001	$	62.35	$	33.63
Second quarter ended September 1, 2001		69.90		53.18
Third quarter (through September 21, 2001)		60.95		43.00

The stock market generally, and the stocks of companies in the retailing industry in particular have, from time to time, experienced substantial price and volume fluctuations. These fluctuations may be unrelated to the operating performance of particular companies. Various factors and events, such as announcements by us or our competitors of monthly sales figures and comparable store sales results, expansion plans, the loss of a major supplier, changes in general economic conditions or other factors, may also contribute to stock price volatility. Most retailers, including the company, derive a significant portion of their revenues and earnings during the year-end holiday season, and the price of our common stock may be subject to fluctuation based upon general expectations for holiday spending levels and patterns.

We have not paid cash dividends historically on our common stock and do not presently intend to pay any dividends on our common stock for the foreseeable future. Our bank line of credit and certain other financing arrangements restrict our ability to pay dividends on our common stock.

DESCRIPTION OF DEBENTURES

The debentures were issued under an indenture, dated as of June 27, 2001, between us and Wells Fargo Bank Minnesota, National Association, as trustee (the "trustee"). A copy of the indenture may be obtained from us upon written request. The statements under this caption relating to the indenture and the debentures are summaries and do not purport to be complete. These summaries make use of a number of terms defined in the indenture and are qualified in their entirety by express reference to the indenture. The indenture will be qualified under the Trust Indenture Act of 1939 and the terms of the debentures will include those made a part of the indenture by reference to such act. For purposes of this section, the terms "we," "us" and "our" means only Best Buy Co., Inc. and not its subsidiaries.

General

The debentures are our general unsecured unsubordinated obligations and have an aggregate principal amount at maturity of $492,400,000, subject to an upward adjustment as described below. The debentures were initially offered at an issue price to investors of $683.80 per debenture, with an initial principal amount at maturity of $1,000 per debenture. The principal amount at maturity of each debenture may exceed $1,000 in the event there is a reset in the yield to maturity to a rate in excess of 3.00% per annum. The debentures will accrete in value such that the initial yield to maturity will be 2.75% per annum. The debentures will mature on June 27, 2021 unless earlier redeemed at our option, converted into our common stock at the option of the holder or repurchased by us at the option of the holder.

We will pay a portion of the yield to maturity as cash interest at a rate of 1.00% per annum on the issue price (which represents approximately 0.684% per annum on the initial principal amount at maturity) semi-annually in arrears on June 27 and December 27, commencing December 27, 2001, to the registered holders of record on the preceding June 12 and December 12, respectively. Such cash interest will be calculated on the basis of a 360-day year of twelve 30-day months.

On December 27, 2003, December 27, 2008 and December 27, 2013, the yield to maturity on the debentures will be reset to a rate per annum equal to the five-year treasury rate minus 1.90%. However, in no event will the yield to maturity be reset below 2.75% per annum or above 3.75% per annum. If an increased yield to maturity is in effect for a particular semi-annual period, we will pay a portion of the increased yield to maturity as cash interest at a rate of up to 0.25% per annum (up to 0.125% per semi-annual period) of the accreted value of the debentures and the remaining increase, if any, will accrete and will be payable at maturity, redemption or the date of purchase.

The "five-year treasury rate" means, with respect to any reset date, the U.S. Treasury yield displayed on the Bloomberg Service screen accessed by the command which is currently "GT5 [GOVT] HP [GO]" (currently page 066) (or any successor or substitute page and command of such service providing rate quotations comparable to those currently provided on such page of such service) specified as the last reported yield applicable to U.S. Treasury Notes at the close of business on the date that is 120 days prior to such reset date (or, if such date is not a business day, on the next succeeding date which is a business day) or, if such yield is not available at such time for any reason, the "five-year treasury rate" with respect to such reset date shall mean the rate (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as the case may be, and applied on a daily basis) for direct obligations of the United States of America having a maturity that is equal to five years, as published weekly by the Federal Reserve Board in "Federal Reserve Statistical Release H.15(519)—Selected Interest Rates" or any successor publication, specified as the closing rate applicable to five-year U.S. Treasury Notes for the date that is 120 days prior to such reset date (or if such date is not a business day, on the next succeeding date which is a business day).

The debentures and the indenture are guaranteed by each of our restricted subsidiaries. Our future restricted subsidiaries, if any, will be required to guarantee the debentures and the indenture under the

circumstances described below under "—Obligation to Provide Subsidiary Guarantees." Our unrestricted subsidiaries (which refers to any of our subsidiaries properly designated as such by our board of directors) will not be required to provide guarantees of the debentures and the indenture. Claims against the assets of any unrestricted subsidiary will be effectively junior to the claims of that subsidiary's own creditors, whether or not those creditors' claims are secured by liens on the assets of that subsidiary.

The guarantees (i) are senior unsecured obligations of each of the guarantors; (ii) rank equal in right of payment with all other existing and future unsecured and unsubordinated indebtedness of each the guarantors; and (iii) will be automatically released upon the occurrence of specified events, as discussed below under "—Subsidiary Guarantees."

The indenture will not contain any restrictions on the payment of dividends or the repurchase of our securities or any financial covenants. The indenture will contain no covenants or other provisions to afford protection to holders of debentures in the event of a highly leveraged transaction or a change in control of us except to the extent described under "—Purchase at Option of Holder Upon a Change of Control."

See "—Book-Entry Delivery and Form" for information regarding the form, documents and mechanics for transferring the debentures.

Subsidiary Guarantees

Each of our current (and, if any, future) restricted subsidiaries have jointly and severally guaranteed our obligations under the debentures and the indenture, subject to release as described in the following paragraph. A "restricted subsidiary" is any subsidiary of ours other than an unrestricted subsidiary. Each guarantee ranks equal in right of payment with all other existing and future unsecured and unsubordinated indebtedness of that guarantor, including obligations under our existing credit facility. The obligations of each guarantor under its guarantee is limited as necessary to prevent that guarantee from constituting a fraudulent conveyance under applicable law.

The guarantee of a restricted subsidiary of the debentures and the indenture will be released automatically upon:

•: the release of all payment obligations of that restricted subsidiary relating to any existing or future indebtedness under one or more of our Credit Facilities (as defined in the indenture), of that subsidiary or any of our other restricted subsidiaries; provided, that in the event that any indebtedness under one or more Credit Facilities is subsequently incurred or guaranteed by that released restricted subsidiary, we will cause that subsidiary to unconditionally guarantee all of our obligations under the debentures and the indenture on the terms set forth in the indenture and execute and deliver further documents as described below under "—Obligation to Provide Subsidiary Guarantees;" or
•: the sale or disposition, whether by consolidation, merger, stock purchase, asset sale or otherwise, of that restricted subsidiary, or substantially all of its assets, to a person other than us or a subsidiary; provided that we shall have delivered to the trustee an officers' certificate to the effect that immediately after, and taking into account, that sale or disposition, no default or event of default shall have occurred and be continuing under the indenture; and provided further that a termination will occur only to the extent that all obligations of that restricted subsidiary in respect of any indebtedness under all of our Credit Facilities or those of any of our restricted subsidiaries, and under all of its pledges of assets or other security interests which secure indebtedness under all of our Credit Facilities and those of any of our restricted subsidiaries, shall also terminate upon such sale or disposition; or
•: upon legal or covenant defeasance of our obligations under the indenture; or

•: if we properly designate that restricted subsidiary as an unrestricted subsidiary.

All but one of our subsidiaries existing on the issue date of the debentures were restricted subsidiaries. Except as set forth in the following sentence, all of our future subsidiaries will be restricted subsidiaries for purposes of the indenture. Our board of directors may designate any of our subsidiaries as an unrestricted subsidiary and therefore not subject to the covenant of the indenture concerning becoming a guarantor. Notwithstanding the foregoing, our board of directors may not

(1) designate, or continue the designation, as an unrestricted subsidiary any subsidiary that owns any shares of capital stock of a restricted subsidiary;

(2) designate, or continue the designation, as an unrestricted subsidiary any subsidiary if such designation or continued designation would result in a withdrawal or downgrade of any ratings of the debentures then in effect;

(3) cause or permit any restricted subsidiary to transfer or otherwise dispose of any shares of capital stock of a restricted subsidiary to any unrestricted subsidiary, unless that unrestricted subsidiary will be redesignated as a restricted subsidiary; or

(4) designate, or continue the designation, as an unrestricted subsidiary, any subsidiary that is or becomes obligated with respect to any indebtedness of us or any of our restricted subsidiaries through the incurrence of a Contingent Obligation (as defined in the indenture) or otherwise or pledges assets or provides other security interests to secure the payment or performance of any indebtedness of us or any of our restricted subsidiaries.

Conversion Rights

General

Holders may surrender debentures at any time for conversion into shares of our common stock at an initial conversion rate of 7.8714 shares of common stock per debenture (subject to adjustment as described below) if any of the following conditions is satisfied:

•: if the closing sale price of our common stock for at least 20 trading days in the 30 trading day period ending on the trading day prior to the day of surrender is more than the applicable percentage of the accreted conversion price per share of our common stock at such preceding trading day;
•: if our senior long-term unsecured credit rating is downgraded by Moody's and S&P to below Ba1 and BB+, respectively;
•: if we have called the debentures for redemption; or
•: upon the occurrence of specified corporate transactions.

We describe each of these conditions in greater detail below.

Conversion Upon Satisfaction of Market Price Condition

Holders may surrender debentures for conversion into shares of our common stock if the closing sale price of our common stock on the New York Stock Exchange, or if the shares are not then quoted on the New York Stock Exchange, such other principal national securities exchange on which our common stock is listed, for at least 20 trading days in a period of 30 consecutive trading days ending on the trading day prior to the day of surrender, exceeds the applicable percentage of the accreted conversion price per share of our common stock on that preceding trading day. The "applicable percentage" will initially be 120% and will decline by 0.50% on each anniversary of the date of original issue of the debentures over the life of the debentures to 110% on the stated maturity of the debentures. The "accreted conversion price" per share of our common stock as of any day equals the

quotient of the accreted value of a debenture, divided by the number of shares of our common stock issuable upon conversion of such debenture on that day.

The conversion agent (which will initially be the trustee) will, on our behalf, determine daily if the debentures are convertible as a result of the Market Price (as defined in the indenture) of our common stock and will notify us and the trustee accordingly.

Conversion Upon a Ratings Downgrade

If at any time each of Moody's and S&P has downgraded our senior long-term unsecured credit rating to below Ba1 and BB+, respectively, then, so long as such downgrade is in effect, holders may surrender their debentures for conversion into our common stock.

Conversion Upon Notice of Redemption

A holder may surrender for conversion a debenture called for redemption at any time prior to the close of business on the business day prior to the redemption date, even if it is not otherwise convertible at such time. If a holder has already delivered a purchase notice with respect to a debenture, however, the holder may not surrender that debenture for conversion until the holder has withdrawn the notice in accordance with the indenture.

Conversion Upon Specified Corporate Transactions

Even if the market price contingency described above under "—Conversion Upon Satisfaction of Market Price Condition" has not occurred, if we elect to distribute to all holders of our common stock:

•: certain rights or warrants entitling them to subscribe for or purchase our common stock at less than the current Market Price on the record date for such issuance; or
•: cash, debt securities (or other evidence of indebtedness) or other assets (excluding dividends or distributions described in the first and third bullet points in the description below of adjustments to the conversion rate), which distribution has a per share value exceeding 15% of the current Market Price of our common stock as of the trading day immediately preceding the declaration date for such distribution, we must notify the holders of debentures at least 20 days prior to the ex-dividend date for such distribution. Once we have given such notice, holders may surrender their debentures for conversion at any time until the earlier of the close of business on the business day prior to the ex-dividend date or our announcement that such distribution will not take place.

In addition, if we are party to a consolidation, merger or transfer or lease of all or substantially all of our assets pursuant to which our common stock would be converted into cash, securities or other assets, a holder may surrender debentures for conversion at any time from and after the date which is 15 days prior to the anticipated effective date of the transaction until 15 days after the actual date of such transaction. If we are a party to a consolidation, merger or transfer or lease of all or substantially all of our assets pursuant to which our common stock is converted into cash, securities or other assets, then at the effective time of the transaction, the right to convert a debenture into our common stock will be changed into a right to convert it into the kind and amount of cash, securities or other property which the holder would have received if the holder had converted its debenture immediately prior to the transaction (assuming, in a case in which our shareholders may exercise rights of election, that a holder of debentures would not have exercised any rights of election as to the stock, other securities or other property or assets receivable in connection therewith and received per share the kind and amount received per share by a plurality of nonelecting shares). If the transaction also constitutes a "change of control," as defined below, the holder can require us to purchase all or a portion of its debentures as described under "—Purchase at Option of Holder Upon a Change of Control."

Conversion Rate and Delivery of Our Common Shares

The initial conversion rate is 7.8714 shares of our common stock per debenture, subject to adjustment upon the occurrence of certain events described below. This is the equivalent to an initial conversion price of $86.87 per share of our common stock based on the issue price of the debentures. A holder of a debenture otherwise entitled to a fractional share will receive cash equal to the then-current market value of such fractional share. No payment or adjustment will be made for accrued and unpaid interest on a converted debenture or for dividends or distributions on any of our common stock issued upon conversion of a debenture. Our delivery to the holder of the fixed number of shares of our common stock into which the debenture is converted, together with any cash payment for fractional shares, will be deemed to satisfy our obligation to pay the accreted value of the debenture and the accrued and unpaid cash interest attributable to the period from the issue date to the conversion date. As a result, the accretion on the debenture and accrued and unpaid cash interest will be deemed to be paid in full rather than canceled, extinguished or forfeited.

If a holder surrenders debentures for conversion during the period after any interest record date and prior to the corresponding interest payment date, the holder must pay us the cash interest payable on those debentures, unless they have been called for redemption on a redemption date within the period or on the interest payment date. The holder may not convert debentures called for redemption after the close of business on the business day preceding the date fixed for redemption, unless we default in payment of the redemption price. We will not issue fractional shares of common stock on a conversion. Rather, we will pay the converting holder in cash any amount equal to the fair market value of the fractional share.

We will adjust the conversion rate for:

•: dividends or distributions on shares of our common stock payable in shares of our common stock or other capital stock of the company;
•: subdivisions, combinations or certain reclassifications of our common stock;
•: distributions to all holders of our common stock of certain rights entitling them to purchase shares of common stock for a period expiring within 60 days after the record date for such distribution at less than the quoted price at the time; and
•: distributions to all holders of our common stock of our assets or debt securities or certain rights to purchase our securities, but excluding cash dividends or other cash distributions from current or retained earnings unless the annualized amount thereof per share exceeds 5% of the closing sale price of our common stock on the day preceding the date of declaration of such dividend or other distribution.

We will not adjust the conversion rate, however, if holders of debentures are to participate in the transaction without conversion, or in certain other cases.

No adjustment in the conversion rate will be required unless such adjustment would require a change of at least 1% in the conversion price then in effect; provided that any adjustment that would otherwise be required to be made will be carried forward and taken into account in any subsequent adjustment. From time to time, we may voluntarily increase the conversion rate for a period of at least 20 days.

In the event that we are a party to a merger, consolidation or transfer or lease of all or substantially all of our assets pursuant to which our common stock would be converted into cash, securities or other assets, each debenture would become convertible into the cash, securities or other property receivable by a holder of the number of shares of our common stock into which such debenture was convertible immediately prior to such transaction. This change could substantially lessen or eliminate the value of the conversion privilege associated with the debentures in the future. For

example, if we were acquired in a cash merger, each debenture would become convertible solely into cash and would no longer be convertible into securities whose value would vary depending on our future prospects and other factors.

Holders of the debentures may, in certain circumstances, be deemed to have received a distribution subject to United States federal income tax as a dividend in the event of:

•: a taxable distribution to holders of our common stock which results in an adjustment of the conversion rate; or
•: an increase in the conversion rate at our discretion.

See "Certain United States Federal Income Tax Considerations—U.S. Holders—Constructive Dividends."

The right of conversion attaching to any debenture may be exercised (a) if such debenture is represented by a global debenture, by book-entry transfer to the conversion agent through the facilities of DTC, or (b) if such debenture is represented by a certificated debenture, by delivery of such debenture at the specified office of the conversion agent, accompanied, in either case, by a duly signed and completed notice of conversion and appropriate endorsements and transfer documents if required by the conversion agent. The conversion date will be the date on which the debenture and all of the items required for conversion shall have been so delivered and the requirements for conversion have been met. A holder delivering a debenture for conversion will be required to pay any taxes or duties payable in respect of the issue or delivery of our common stock upon conversion in a name other than that of the holder.

A certificate for the number of full shares of our common stock into which any debenture is converted, together with any cash payment for fractional shares, will be delivered through the conversion agent as soon as practicable following the conversion date. For a discussion of the United States federal income tax treatment of a holder receiving shares of our common stock upon conversion, see "Certain United States Federal Income Tax Considerations—U.S. Holders—Sales, Exchange, Conversion or Redemption."

If we exercise our option to restate the principal amount at maturity of the debentures following a tax event, the holder will be entitled on conversion to receive the same number of shares of our common stock such holder would have received if we had not exercised our option. See "—Tax Event."

Exchange In Lieu of Conversion

We have the option to designate a financial institution to which debentures surrendered for conversion by a holder of debentures will be initially offered by the conversion agent for exchange in lieu of our converting the debentures. When a holder surrenders debentures for conversion, the conversion agent will cause the debentures first to be offered to a financial institution chosen by us for exchange in lieu of conversion. We expect that when the debentures are convertible, the designated institution will submit to the conversion agent a non-binding offer to accept debentures surrendered for conversion. In order to accept debentures surrendered for conversion, the designated institution must agree to exchange for such debentures a number of shares of our common stock equal to the number of such shares the holder of such debentures would receive upon conversion, plus cash for any fractional shares. If the institution accepts any such debentures, it will deliver the appropriate number of shares of our common stock to the conversion agent and the conversion agent will deliver those shares to the holder who surrendered the debentures. The designation of an institution to which debentures may be submitted for exchange does not require the institution to accept any debentures from the conversion agent. If the designated institution declines to accept any debentures in whole or in part, those debentures or parts of debentures will be converted into shares of our common stock as the close of business on the business day following the business day on which the debentures are

surrendered for conversion. If the designated institution agrees to accept any debentures for exchange but does not timely deliver the related common shares, the debentures will be converted and the shares of our common stock will be delivered. Any debentures accepted for exchange by the designated institution will remain outstanding until maturity or until redeemed, converted or purchased by us at the option of the holder.

We anticipate that we will initially designate Credit Suisse First Boston Corporation as the institution to which offers described above will be made, although we may change this designation at any time.

Maturity; Redemption of Debentures at Our Option Prior to Maturity

We must repay the debentures at their stated maturity on June 27, 2021, at a price equal to the accreted value (or if the principal amount at maturity of the debentures has been restated following the occurrence of a tax event, at a price equal to the restated principal amount) of the debentures plus accrued and unpaid cash interest up to but not including the stated maturity, unless earlier redeemed by us, purchased by us at your option, or converted. Beginning on June 27, 2004, we may redeem the debentures at our option, in whole at any time, or in part from time to time for cash at a redemption price equal to the accreted value for the debentures plus accrued and unpaid cash interest up to but not including the date of redemption. We will give not less than 15 days nor more than 60 days notice of redemption by mail to holders of debentures.

The table below shows redemption prices of a debenture on June 27, 2004, at each June 27 thereafter prior to maturity and at maturity on June 27, 2021, assuming that neither a reset of the yield to maturity nor a tax event occurs. These prices reflect the issue price of a debenture plus the accretion in value on such debenture, based on the yield to maturity from time to time in effect less the portion of the yield to maturity paid as cash interest, from the date of issuance up to but not including such date. The redemption price of a debenture redeemed between such dates will include any additional increase in the accreted value plus any accrued and unpaid cash interest since the immediately preceding redemption date set forth below up to but not including the redemption date.

Redemption Date	(1) Issue Price	(2) Accretion in Value from Date Of Issuance	(3) Redemption Price (1) + (2)
June 27, 2004	$683.80	$ 37.15	$ 720.95
June 27, 2005	683.80	50.23	734.03
June 27, 2006	683.80	63.66	747.46
June 27, 2007	683.80	77.47	761.27
June 27, 2008	683.80	91.66	775.46
June 27, 2009	683.80	106.25	790.05
June 27, 2010	683.80	121.24	805.04
June 27, 2011	683.80	136.64	820.44
June 27, 2012	683.80	152.47	836.27
June 27, 2013	683.80	168.74	852.54
June 27, 2014	683.80	185.46	869.26
June 27, 2015	683.80	202.64	886.44
June 27, 2016	683.80	220.30	904.10
June 27, 2017	683.80	238.45	922.25
June 27, 2018	683.80	257.09	940.89
June 27, 2019	683.80	276.26	960.06
June 27, 2020	683.80	295.96	979.76
At maturity	683.80	316.20	1,000.00

If the principal amount at maturity of the debentures has been restated following the occurrence of a tax event, the debentures will be redeemable at a redemption price equal to the restated principal amount of the debentures plus accrued and unpaid cash interest up to but not including the date of redemption. See "—Tax Event."

Holders may convert debentures or portions of debentures called for redemption even if the market price contingency described under "—Conversion Rights" has not occurred, until the close of business on the day that is two business days prior to the redemption date.

If we redeem less than all of the outstanding debentures, the trustee will select the debentures to be redeemed on a pro rata basis in principal amounts at maturity of $1,000 (which $1,000 amount is subject to an upward adjustment) or integral multiples of $1,000 (or such increased amount). If a portion of a holder's debentures is selected for partial redemption and the holder converts a portion of the debentures, the converted portion will be deemed to be the portion selected for redemption.

Purchase of Debentures at the Option of the Holder

On June 27, 2004, June 27, 2009 and June 27, 2014, each holder may require us to purchase any outstanding debentures for which such holder has properly delivered and not withdrawn a written purchase notice, subject to certain additional conditions. Holders may submit their debentures for purchase to the paying agent (which will initially be the trustee) at any time from the opening of business on the date that is 20 business days prior to the purchase date until the close of business on the fifth business day prior to the purchase date.

We will purchase each outstanding debenture for which such holder has properly delivered and not withdrawn a written purchase notice at a purchase price equal to the accreted value of such debenture, together with accrued and unpaid cash interest up to but not including the purchase date.

We will purchase each outstanding debenture for which such holder has properly delivered and not withdrawn a written purchase notice at a purchase price equal to the purchase prices set forth below (assuming that neither a reset of the yield to maturity nor a tax event occurs).

Purchase Date		Purchase Price
June 27, 2004		$720.95
June 27, 2009		790.05
June 27, 2014		869.26

If the purchase date is on or after an interest record date but on or prior to the related interest payment date, cash interest will be paid to the record holder on the relevant record date.

We may, at our option, elect to pay the purchase price in cash or shares of our common stock valued at the market price (as defined below) or any combination thereof. See "—Election to Pay Purchase Price in Shares of Our Common Stock."

If prior to a purchase date the principal amount at maturity of the debentures has been restated following the occurrence of a tax event, the purchase price for the debentures being purchased will be equal to the restated principal amount of such debentures plus accrued and unpaid cash interest up to but not including the purchase date. See "—Tax Event."

For a discussion of the tax treatment of a holder receiving cash on the purchase of debentures, see "Certain United States Federal Income Tax Considerations—U.S. Holders—Sale, Exchange, Conversion or Redemption."

Required Notices and Procedure

On a date not less than 20 business days prior to each purchase date, we will be required to give notice to all holders at their addresses shown in the register of the registrar (which will initially be the trustee), and to beneficial owners as required by applicable law, stating, among other things:

•: the purchase price per debenture;
•: whether we will pay the purchase price for the debentures in cash, common stock or any combination thereof, specifying the applicable percentages of each;
•: if we elect to pay in common stock, the method for calculating the market price of our common stock; and
•: the procedures that holders must follow to require us to purchase their debentures.

Simultaneously with our notice of purchase, we will disseminate a press release containing this information through any two of the following three news services: Reuter's Economic Services, Bloomberg Business News and Dow Jones & Company Inc. We will also publish this information on our BestBuy.com Web site or through such other public medium as we may use at that time.

The purchase notice given by each holder electing to require us to purchase debentures must be given so as to be received by the paying agent no later than the close of business on the fifth business day prior to the purchase date and must state:

•

the certificate numbers of the holder's debentures to be delivered for purchase or, if such debentures are not in certificated form, appropriate depository procedures;

•

the aggregate principal amount at maturity of debentures to be purchased;

•

that the debentures are to be purchased by us pursuant to the applicable provisions of the debentures; and

•

if we elect, pursuant to the notice we are required to give, to pay any or all of the purchase price in shares of our common stock, but instead must pay the purchase price entirely in cash because one or more of the conditions to payment of any or all of the purchase price in our common stock (described below in "—Election to Pay Purchase Price in Shares of Our Common Stock") is not satisfied prior to the close of business on the purchase date, whether such holder elects:

(1): to withdraw the purchase notice as to some or all of the debentures to which it relates, stating the principal amount at maturity and certificate numbers of the debentures as to which such withdrawal shall relate; or
(2): to receive cash in such event in respect of the entire purchase price for all debentures or portions of debentures subject to such purchase notice.

If the holder fails to indicate in the purchase notice and in any written notice of withdrawal, a choice with respect to the election described in the final bullet point above, the holder will be deemed to have elected to receive cash in respect of the entire purchase price for all debentures subject to the purchase notice in these circumstances.

A holder may withdraw any purchase notice by delivering a written notice of withdrawal to the paying agent prior to the close of business on the second business day prior to the purchase date. The notice of withdrawal shall state:

•: the certificate numbers of the debentures being withdrawn or, if such debentures are not in certificated form, appropriate depository procedures;
•: the aggregate principal amount at maturity of the debentures being withdrawn; and

•: the aggregate principal amount at maturity, if any, of the debentures that remain subject to the purchase notice.

Payment of the purchase price for a debenture for which a purchase notice has been delivered and not validly withdrawn is conditioned upon book-entry transfer or delivery of the debenture, together with necessary endorsements, to the paying agent at any time after delivery of the purchase notice. Payment of the purchase price for the debenture will be made promptly following the later of the purchase date or the time of book-entry transfer or physical delivery of the debenture.

If the paying agent holds money or securities sufficient to pay the purchase price of a debenture on the business day following the purchase date in accordance with the indenture, then, immediately after the purchase date, the debenture will cease to be outstanding, the debenture will cease to accrete in value and cash interest on such debenture will cease to accrue, whether or not book-entry transfer is made or the debenture is delivered to the paying agent. Thereafter, all other rights of the holder will terminate, other than the right to receive the purchase price upon book-entry transfer or delivery of the debenture.

Our ability to purchase debentures with cash may be limited by the terms of our existing bank line of credit and certain other financing arrangements.

We may not purchase any debentures at the option of holders if an event of default described under "—Events of Default" below has occurred and is continuing.

In connection with any purchase offer, we will comply with the provisions of Rule 13e-4, Rule 14e-1 and any other tender offer rules under the Exchange Act which may then be applicable and file Schedule TO or any other required schedule under the Exchange Act.

Election to Pay Purchase Price in Shares of Our Common Stock

If we elect to pay the purchase price, in whole or in part, in shares of our common stock, the number of shares of common stock to be delivered by us will be equal to the portion of the purchase price to be paid in shares of common stock divided by the market price.

We will pay cash based on the market price for all fractional shares of common stock in the event we elect to deliver shares of common stock in payment, in whole or in part, of the purchase price.

The "market price" of our common stock on any purchase date means the average of the sale prices of our common stock for the five trading day period ending on the third business day (if the third business day prior to the applicable purchase date is a trading day or, if not, then on the last trading day immediately prior thereto) prior to such purchase date, appropriately adjusted to take into account the occurrence, during the period commencing on the first of such trading days during such five trading day period and ending on such purchase date, of certain events with respect to our common stock that would result in an adjustment of the conversion rate.

The "sale price" of our common stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in composite transactions for the principal United States securities exchange on which our common stock is traded or, if our common stock is not listed on a United States national or regional securities exchange, as reported by the Nasdaq National Market.

A "trading day" means each day on which the securities exchange or quotation system which is used to determine the sale price is open for trading or quotation.

Because the market price of our common stock is determined prior to the applicable purchase date, holders of debentures bear the market risk with respect to the value of our common stock to be received from the date such market price is determined to such purchase date. We may pay the purchase price or any portion of the purchase price in our common stock only if the information necessary to calculate the market price is published in a daily newspaper of national circulation.

Upon determination of the actual number of shares of our common stock issuable in accordance with the foregoing provisions, we will disseminate a press release containing this information through any two of the following three news services: Reuter's Economic Services, Bloomberg Business News and Dow Jones & Company Inc. We will also publish this information on our BestBuy.com Web site or through such other public medium as we may use at that time.

Our right to purchase debentures, in whole or in part, with shares of our common stock is subject to our satisfying various conditions, including:

•: the listing of such shares of our common stock on the principal United States securities exchange on which our common stock is then listed or, if not so listed, on Nasdaq;
•: the registration of our common stock under the Securities Act and the Exchange Act, if required; and
•: any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration.

If such conditions are not satisfied with respect to a holder prior to the close of business on the purchase date, we will pay the purchase price of the debentures of such holder entirely in cash. We may not change the form or components or percentages of components of consideration to be paid for the debentures once we have given the notice that we are required to give to holders of debentures, except as described in the first sentence of this paragraph.

Purchase at Option of Holder Upon a Change of Control

If a change of control (as defined below) occurs, each holder of debentures will have the right, at such holder's option, to require us to purchase all of such holder's debentures, or any portion thereof, that is an integral multiple of $1,000 principal amount at maturity (which $1,000 amount is subject to an upward adjustment), on the date (the "change of control purchase date") selected by us that is not less than 10 nor more than 30 days after the final surrender date (as defined below), at a price equal to the accreted value for such debentures plus accrued and unpaid cash interest up to but not including the change of control purchase date. If, prior to the change of control purchase date, we elect to restate the principal amount at maturity of the debentures following a tax event, the purchase price will be equal to the restated principal amount of the debentures plus accrued and unpaid cash interest up to but not including the change of control purchase date. See "—Tax Event."

Unless we shall previously have called for redemption of all of the debentures, within 30 days after the occurrence of a change of control, we are obligated to deliver to the trustee and mail (or cause the trustee to mail) to all holders of record of the debentures a notice (the "company notice") describing, among other things, the occurrence of such change of control and of the purchase right arising as a result thereof. We must cause a copy of the company notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. To exercise the purchase right, a holder of debentures must, on or before the date which is, subject to any contrary requirements of applicable law, 60 days after the date of mailing of the company notice (the "final surrender date"), give irrevocable written notice of the holder's exercise of such right and surrender the debentures (if such debentures are represented by a global debenture, by book-entry transfer to the conversion agent through the facilities of DTC) with respect to which the right is being exercised, duly endorsed for transfer to us, at any place where principal is payable. The submission of such notice together with such

debentures pursuant to the exercise of a purchase right will be irrevocable on the part of the holder (unless we fail to purchase the debentures on the change of control purchase date) and the right to convert the debentures will expire upon such submission.

The term "change of control" shall mean any of the following:

•: any person, including our affiliates and associates, other than us or our employee benefit plans, files a Schedule 13D or Schedule TO, or any successor schedule, form or report, under the Exchange Act, disclosing that such person has become the beneficial owner of 50% or more of the voting power of our common stock or other capital stock into which our common stock is reclassified or changed, with certain exceptions; or
•: any share exchange, consolidation or merger is consummated pursuant to which our common stock would be converted into cash, securities or other property, in each case other than any share exchange, consolidation or merger of our company in which the holders of our common stock immediately prior to the share exchange, consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of all classes of capital stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger.

The right to require us to purchase the debentures as a result of the occurrence of a change of control could create an event of default under our future senior indebtedness. Failure by us to purchase the debentures when required will result in an event of default with respect to the debentures. The indenture does not permit our board of directors to waive its obligation to purchase debentures at the option of holders in the event of a change of control.

The holders' right to require us to purchase the debentures upon the occurrence of a change of control could, in certain circumstances, make more difficult or discourage a potential takeover of the company and, thus, removal of incumbent management. The change of control purchase right, however, is not the result of management's knowledge of any specific effort to accumulate shares of our common stock or to obtain control of us by means of a merger, tender offer, solicitation or otherwise. Instead, the change of control purchase feature is a standard term contained in other similar debt offerings and the terms of such feature have resulted from negotiations between us and the initial purchasers.

We could in the future enter into certain transactions, including highly leveraged recapitalizations, that would not constitute a change of control and would, therefore, not provide the holders with the protection of requiring us to purchase the debentures.

Rule 13e-4 under the Exchange Act requires the dissemination of certain information to security holders in the event of an issuer tender offer and may apply in the event that the purchase option becomes available to holders of the debentures. We will comply with this rule to the extent applicable at that time.

Tax Event

From and after the date of the occurrence of a tax event (as defined below), we may elect to have additional cash interest accrue on the debentures at the rate per annum equal to the yield to maturity then in effect in respect of the debentures less the portion of the yield to maturity paid as cash interest on a principal amount at maturity per debenture (the "restated principal amount") equal to the accreted value of the debentures plus any accrued and unpaid cash interest to the date on which we exercise the option described herein (the "option exercise date"). The additional cash interest rate will be subject to the reset provisions described under "—General."

Such additional cash interest will accrue from the option exercise date and will be payable in cash semi-annually on the interest payment dates of June 27 and December 27 of each year to holders of

record at the close of business on the June 12 or the December 12 immediately preceding the interest payment date. The additional cash interest will be computed on the basis of a 360-day year comprised of twelve 30-day months and will initially accrue from the option exercise date and thereafter from the last date to which cash interest has been paid or duly provided.

A "tax event" means that we have received an opinion from independent tax counsel experienced in such matters to the effect that, on or after June 22, 2001, as a result of:

•: any amendment to, or change (including any announced prospective change) in, the laws (or rules or regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein; or
•: any amendment to, or change in, an interpretation or application of such laws, rules or regulations by any legislative body, court, governmental agency or regulatory authority,

in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation is issued or announced or which action is taken, on or after June 22, 2001, there is more than an insubstantial risk that interest (including amounts reflecting accretion in value of the debentures and accrued and unpaid cash interest) payable on the debentures either:

•: would not be deductible on a current accrual basis; or
•: would not be deductible under any other method,

in either case in whole or in part, by us (by reason of deferral, disallowance, or otherwise) for United States federal income tax purposes.

Federal legislation has previously been proposed to change the tax law to defer the deduction of original issue discount on convertible debt instruments until the issuer pays the original issue discount. Congress did not enact these proposed changes. If a similar proposal were ever reintroduced, enacted and made applicable to the debentures in a manner that would limit our ability to either:

•: deduct the interest, including accrued interest, payable on the debentures on a current accrual basis; or
•: deduct the interest, including accrued interest, payable on the debentures under any other method for United States federal income tax purposes,

such enactment would result in a tax event and the terms of the debentures would be subject to modification at our option as described above.

The modification of the terms of debentures by us upon a tax event, as described above, could possibly alter the timing of income recognition by holders of the debentures with respect to the semi-annual payments of cash interest due on the debentures after the option exercise date.

Obligation to Provide Subsidiary Guarantees

The debentures and the indenture will be guaranteed by each of our current and future restricted subsidiaries, subject to release as described under "—Subsidiary Guarantees." Except as otherwise described under "—Subsidiary Guarantees," if at any time when there are debentures outstanding

•: we or any restricted subsidiary organize, acquire or otherwise invest in another person that becomes a restricted subsidiary or becomes obligated with respect to any indebtedness under one or more Credit Facilities of us or any of our restricted subsidiaries through the incurrence of a Contingent Obligation or otherwise;
•: any unrestricted subsidiary becomes obligated with respect to any indebtedness under one or more Credit Facilities of us or any of our restricted subsidiaries through the incurrence of a

Contingent Obligation or otherwise or pledges assets or provides other security interests to secure any indebtedness under one or more Credit Facilities of us or any of our restricted subsidiaries; or

•: any unrestricted subsidiary shall be designated as a restricted subsidiary

then, unless that subsidiary has already provided a guarantee of the debentures and the indenture in accordance with the terms of the indenture or has been properly designated (and continues to be so properly designated) as an unrestricted subsidiary, we will cause that subsidiary to

•: execute and deliver to the trustee a supplemental indenture in form reasonably satisfactory to the trustee pursuant to which that subsidiary will unconditionally guarantee all of our obligations under the debentures and the indenture on the terms of the guarantee set forth in the indenture, and
•: deliver to the trustee an opinion of counsel that the supplemental indenture and the guarantee provided by that subsidiary pursuant to the indenture as so supplemented has been duly authorized, executed and delivered by that subsidiary and constitutes the legal, valid and binding obligation of that subsidiary, enforceable against that subsidiary in accordance with its terms, subject to customary exceptions.

Thereafter, that subsidiary will be a guarantor for all purposes of the indenture as it relates to the debentures and the indenture. Each guarantee will provide that it will be released automatically under the circumstances described under "—Subsidiary Guarantees."

Events of Default

The following are "events of default": (a) a default by us or any guarantor in the payment of accrued and unpaid cash interest on any debenture that continues for 30 days or more after such payment is due, (b) a default by us or any guarantor in the payment of principal (or, if the principal amount at maturity of the debentures has been restated following a tax event, the restated principal amount) of any debenture or of the redemption price, purchase price or change of control purchase price in respect of any debenture when due, (c) a default by us or any guarantor in the performance of any other covenants or agreements in the indenture that continues for 90 days after written notice to us by the trustee or the holders of at least 25% in principal amount at maturity of outstanding debentures, (d) failure by us or any guarantor to make any payment when due, including any applicable grace period, in respect of our indebtedness or the indebtedness of any guarantor for borrowed money, which failure results in acceleration of any such indebtedness which is in an amount in excess of $50 million, (e) a default by us or any guarantor with respect to any of our indebtedness or the indebtedness of any guarantor for borrowed money, which default results in acceleration of any such indebtedness which is in an amount in excess of $50 million, (f) any guarantee shall be held to be unenforceable or invalid or shall cease to be in full force and effect (other than due to a restricted subsidiary being designated by the board of directors as an unrestricted subsidiary if permitted by the indenture), and (g) certain events of bankruptcy, insolvency or reorganization with respect to us or any guarantor.

If an event of default shall occur and be continuing and if it is known to the trustee, the trustee is required to mail to each holder of the debentures a notice of the event of default within 90 days after such default occurs. Except in the case of a default in payment of the principal (or, if the principal amount at maturity of the debentures has been restated following a tax event, the restated principal amount), redemption price, purchase price or change of control purchase price of, or accrued interest on, any debenture, the trustee may withhold the notice if and so long as the trustee in good faith determines that withholding the notice is in the interests of the holders of the debentures.

If an event of default shall occur and be continuing, the trustee or the holders of not less than 25% in principal amount at maturity of outstanding debentures may declare an amount equal to the

accreted value of the debentures (or, if the principal amount at maturity of the debentures has been restated following a tax event, the restated principal amount) plus accrued and unpaid cash interest in respect of the debentures to be immediately due and payable. If the event of default relates to bankruptcy, insolvency or reorganization with respect to us or any guarantor, the debentures will automatically become immediately due and payable, subject to applicable law.

Holders of the debentures may not enforce the indenture or debentures except as provided in the indenture. Subject to the provisions of the indenture relating to the duties of the trustee in case an event of default shall occur and be continuing, the trustee will be under no obligation to exercise any of the rights or powers under the indenture at the request or direction of any holders of the debentures, unless the holders shall have offered the trustee indemnity reasonably satisfactory to it. Subject to the indemnification provisions and certain limitations contained in the indenture, the holders of a majority in principal amount at maturity of the debentures at the time outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred on the trustee. Those holders may, in certain cases, waive any default except a default in payment of the principal amount at maturity (or, if the principal amount at maturity of the debentures has been restated following a tax event, the restated principal amount), redemption price, purchase price or change of control purchase price of, or accrued interest on, any debenture or a failure to comply with certain provisions of the indenture relating to conversion of the debentures.

We are required to furnish the trustee annually with a certificate as to our compliance with the conditions and covenants provided for in the indenture.

Discharge

The indenture provides that we may terminate our obligations and the obligations of the guarantors under the indenture at any time by delivering all outstanding debentures to the trustee for cancellation if we have paid all sums payable by us under the indenture. At any time within one year before the maturity of the debentures or the redemption of all the debentures, we may terminate our substantive obligations and the obligations of the guarantors under the indenture, other than our obligations to pay the principal amount at maturity (or, if the principal amount at maturity of the debentures has been restated following a tax event, the restated principal amount) of, and accrued and unpaid cash interest on, the debentures, by depositing with the trustee money or U.S. Government obligations sufficient to pay all remaining indebtedness on the debentures when due.

Merger and Consolidation

We may not (1) consolidate with or merge into any other person or convey, transfer, sell or lease our properties and assets substantially as an entirety to any person (other than a guarantor), (2) permit any person to consolidate with or merge into us or (3) permit any person to convey, transfer, sell or lease that person's properties and assets substantially as an entirety to us unless:

•: in the case of (1) and (2) above, the person formed by the consolidation or into which we are merged or the person to which our properties and assets are so conveyed, transferred, sold or leased, shall be a corporation, limited liability company, partnership or trust organized and existing under the laws of the United States, any State within the United States or the District of Columbia and, if we are not the surviving person, the surviving person assumes the payment of the accreted value of and accrued and unpaid cash interest on the debentures and the performance of our other covenants under the indenture; and
•: in all cases, immediately after giving effect to the transaction, no event of default, and no event that, after notice or lapse of time or both, would become an event of default, will have occurred and be continuing.

Modification and Waiver

Subject to certain exceptions, supplements of and amendments to the indenture or the debentures may be made by us, the guarantors and the trustee with the consent of the holders of not less than a majority in aggregate principal amount at maturity of the outstanding debentures and any existing default or compliance with any provisions may be waived with the consent of the holders of at least a majority in aggregate principal amount at maturity of the outstanding debentures. Without the consent of any holders of the debentures, we, the guarantors and the trustee may amend or supplement the indenture or the debentures to cure any ambiguity, defect or inconsistency, to provide for the assumption of our obligations to holders of the debentures, to make certain changes with respect to conversion rights in case of a merger or acquisition otherwise in compliance with the indenture, to add or remove a restricted subsidiary guarantee in accordance with the terms of the indenture, or to make any change that does not materially adversely affect the rights of any holder of the debentures. Without the consent of the holders of each debenture affected thereby, an amendment, supplement or waiver may not (a) change the stated maturity date of any debenture, or adversely affect the right to convert any debenture, (b) reduce the principal amount at maturity, restated principal amount, issue price, redemption price, purchase price or change of control purchase price of, or alter the manner or rate of accretion or accrual of cash interest (or extend the time for payment of interest) on any debenture, (c) change the currency for payment in respect of any debenture, (d) impair the right to institute suit for the enforcement of any payment on or with respect to any debenture, (e) reduce the above stated percentage of outstanding debentures necessary to amend or supplement the indenture or waive defaults or compliance, (f) make any changes in the ranking or priority of any debenture or any guarantee, (g) make any change in any guarantee of the debentures and the related sections of the indenture that would adversely affect the holders of the debentures or release any guarantor from its obligations under its guarantee or the indenture, except in accordance with the indenture, or (h) modify (with certain exceptions) any provisions of the indenture relating to modification and amendment of the indenture or waiver of compliance with conditions and defaults thereunder.

Concerning the Trustee

Wells Fargo Bank Minnesota, National Association, the trustee under the indenture, has been appointed by us as the initial paying agent, conversion agent and registrar with regard to the debentures. We may maintain deposit accounts and conduct other banking transactions with the trustee or its affiliates in the ordinary course of business, and the trustee and its affiliates may from time to time in the future provide us with banking and financial services in the ordinary course of their business.

In case an event of default shall occur (and shall not be cured) and holders of the debentures have notified the trustee, the trustee will be required to exercise its powers with the degree of care and skill that a prudent person would exercise under the circumstances in the conduct of such person's own affairs. Subject to such provisions, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request of any of the holders of debentures, unless the holders shall have offered to the trustee indemnity reasonably satisfactory to it.

Governing Law

The indenture, the debentures and the guarantees are governed by and will be construed in accordance with the laws of the State of New York.

Book-Entry, Delivery and Form

The debentures were initially issued in the form of one or more global securities. The global security was deposited with the trustee as custodian for DTC and registered in the name of a nominee

of DTC. Except as set forth below, the global security may be transferred, in whole and not in part, only to DTC or another nominee of DTC. You may hold your beneficial interests in the global security directly through DTC if you have an account with DTC or indirectly through organizations which have accounts with DTC. Debentures in definitive certificated form (called "certificated securities") will be issued only in certain limited circumstances described below.

DTC has advised us that it is:

•: a limited purpose trust company organized under the laws of the State of New York;
•: a member of the Federal Reserve System;
•: a "clearing corporation" within the meaning of the New York Uniform Commercial Code; and
•: a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act.

DTC was created to hold securities of institutions that have accounts with DTC (called "participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC's participants include securities brokers and dealers, which may include the initial purchasers, banks, trust companies, clearing corporations and certain other organizations. Access to DTC's book-entry system is also available to others such as banks, brokers, dealers and trust companies (called "indirect participants") that clear through or maintain a custodial relationship with a participant, whether directly or indirectly.

We expect that pursuant to procedures established by DTC, upon the deposit of the global security with DTC, DTC will credit on its book-entry registration and transfer system the principal amount at maturity of debentures represented by such global security to the accounts of participants. The accounts to be credited will be designated by the initial purchasers. Ownership of beneficial interests in the global security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the global security will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by DTC (with respect to participants' interests), the participants and the indirect participants. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. These limits and laws may impair the ability to transfer or pledge beneficial interests in the global security.

Beneficial owners of interests in global securities who desire to convert their interests into common stock should contact their brokers or other participants or indirect participants through whom they hold such beneficial interests to obtain information on procedures, including proper forms and cut-off times, for submitting requests for conversion.

So long as DTC, or its nominee, is the registered owner or holder of a global security, DTC or its nominee, as the case may be, will be considered the sole owner or holder of the debentures represented by the global security for all purposes under the indenture and the debentures. In addition, no beneficial owner of an interest in a global security will be able to transfer that interest except in accordance with the applicable procedures of DTC. Except as set forth below, as an owner of a beneficial interest in the global security you will not be entitled to have the debentures represented by the global security registered in your name, will not receive or be entitled to receive physical delivery of certificated securities and will not be considered to be the owner or holder of any debentures under the global security. We have been advised that under existing industry practice, if an owner of a beneficial interest in the global security desires to take any action that DTC, as the holder of the global security, is entitled to take, DTC would authorize the participants to take such action and the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them.

We will make payments on the debentures represented by the global security registered in the name of and held by DTC or its nominee to DTC or its nominee, as the case may be, as the registered owner and holder of the global security. Neither we, the trustee, nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the global security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

We expect that DTC or its nominee, upon receipt of any payment of principal of or interest on the global security, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount at maturity of the global security as shown on the records of DTC or its nominee. We also expect that payments by participants or indirect participants to owners of beneficial interests in the global security held through such participants or indirect participants will be governed by standing instructions and customary practices and will be the responsibility of such participants or indirect participants. We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the global security for any debenture or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between DTC and its participants or indirect participants or the relationship between such participants or indirect participants and the owners of beneficial interests in the global security owning through such participants.

Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds.

DTC has advised us that it will take any action permitted to be taken by a holder of debentures only at the direction of one or more participants to whose account the DTC interests in the global security is credited and only in respect of such portion of the aggregate principal amount at maturity of debentures as to which such participant or participants has or have given such direction. However, if DTC notifies us that they are unwilling to be a depository for the global security or ceases to be a clearing agency or there is an event of default under the debentures, DTC will exchange the global security for certificated securities which it will distribute to its participants and which will be legended, if required, as set forth under the heading "Transfer Restrictions."

Although DTC is expected to follow the foregoing procedures in order to facilitate transfers of interests in the global security among participants of DTC, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee will have any responsibility or liability for the performance by DTC or the participants or indirect participants of their respective obligations under the rules and procedures governing their respective operations.

DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK

Common Stock

We are authorized to issue 1,000,000,000 shares of common stock, par value $.10 per share. Each share of common stock is entitled to participate pro rata in distributions upon liquidation, subject to the rights of holders of preferred stock, and to one vote on all matters submitted to a vote of shareholders. The holders of common stock may receive cash dividends as declared by the board of directors out of legally available funds, subject to the rights of any holders of preferred stock. See "Price Range of Common Stock and Dividends" for a description of certain restrictions on the payment of cash dividends. The outstanding shares of common stock are, and the shares of common stock issued upon conversion of the debentures will be, fully paid and nonassessable. Holders of common stock have no preemptive or similar equity preservation rights, and cumulative voting of shares in the election of directors is prohibited. The holders of more than 50% of the outstanding shares of common stock have the voting power to elect all directors and, except as is discussed at "—Certain Company Charter and By-law Provisions," to approve mergers, sales of assets and other corporate transactions.

The transfer agent and registrar for our common stock is EquiServe Trust Company, N.A.

Preferred Stock

We are authorized to issue up to 400,000 shares of preferred stock, par value $1.00 per share. Our articles of incorporation provide that shares of preferred stock may be issued from time to time, in one or more series, with such designations, relative rights, preferences, limitations, dividend rights, redemption prices, liquidation prices, conversion rights, sinking or purchase fund rights or other privileges as our board of directors may establish.

The issuance of preferred stock could affect the rights of holders of common stock. For example, issuance of the preferred stock could result in a class of securities outstanding that will have preferences with respect to dividends and in liquidation over the common stock and could (upon conversion or otherwise) enjoy all of the rights appurtenant to common stock. There are no issued and outstanding shares of preferred stock. There are no agreements or understandings for the issuance of preferred stock and we have no present intent to issue preferred stock.

Certain Company Charter and By-law Provisions

Our articles of incorporation and By-laws contain certain "anti-takeover" provisions that could have the effect of delaying or preventing certain changes in control of the company and thereby deprive shareholders of an opportunity to sell their shares at a premium over prevailing market prices.

Our directors are elected for two-year, staggered terms, such that only a portion of our directors are elected in any year. This provision of the by-laws, together with a provision discussed below that is contained in our articles of incorporation and governs removal of directors, could have the effect of delaying for a period of one year or more a change in control of the company, by delaying a potential acquirer's ability to elect a majority of the board of directors, depending upon the number of directors next up for election following any such acquisition. Cumulative voting of shares in the election of directors is prohibited by the articles of incorporation.

Our articles of incorporation (i) provide for a "supermajority" vote requiring 80% shareholder approval of certain business combinations with "related persons," unless the combination has been approved by a majority of the board of directors; (ii) provide that a "fair price" be paid to all shareholders by requiring the approval of 66²/3% of shareholders not including a "related person" for certain business combinations with the "related person" unless the transaction is approved by a majority of the board of directors or each shareholder receives cash consideration equal to the highest price paid by the "related person" in acquiring any of our shares; (iii) give the directors the right to

consider non-financial factors of any proposed business combination; (iv) provide that the provisions described above cannot be amended without an 80% vote (or 66²/3% in the case of the "fair price" amendment) of shareholders; (v) provide for removal of directors only for cause or upon the vote of 80% of shares entitled to vote at an election of directors; and (vi) forbid the payment of "greenmail," or the payment of a premium to redeem stock accumulated by an investor at the expense of other shareholders who are not afforded the same opportunity.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is intended to be a general summary of some of the United States federal income tax consequences of the ownership and disposition of debentures and our common stock into which the debentures may be converted. Due to the complexity of the tax laws of the United States and other taxing jurisdictions, the uncertainty, in some instances, as to the manner in which such laws apply to holders, and possible changes in law, it is particularly important that each holder consult with its own tax advisor regarding the tax treatment of the ownership and disposition of debentures and common stock into which the debentures may be converted under the laws of any federal, state, local or other taxing jurisdiction.

This summary is based upon laws, regulations, rulings and decisions currently in effect, all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. There can be no assurance that the Internal Revenue Service will not challenge one or more of the conclusions described herein, and we have not obtained, nor do we intend to obtain, a ruling from the Internal Revenue Service with respect to the United States federal income tax consequences of acquiring or holding debentures or common stock. Moreover, this summary deals only with purchasers who hold debentures or common stock into which debentures have been converted as "capital assets" within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"), and does not purport to deal with persons in special tax situations, such as financial institutions, insurance companies, S corporations, regulated investment companies, tax exempt investors, dealers in securities and currencies, U.S. expatriates, persons holding debentures as a position in a "straddle," "hedge," "conversion transaction," "constructive sale" or other integrated transaction for tax purposes, persons who own, directly or indirectly, 10% or more of our voting power, or U.S. holders, as defined below, whose functional currency is not the U.S. dollar. Further, this discussion does not address the consequences under United States alternative minimum tax rules, United States federal estate or gift tax laws (except as specifically described below with respect to non-U.S. holders), the laws of any U.S. state or locality, or any foreign tax laws.

Prospective purchasers of the debentures are urged to consult their own tax advisors concerning the consequences, in their particular circumstances, of ownership and disposition of the debentures, and common stock into which the debentures may be converted, under the U.S. federal tax laws and the laws of any relevant state, local or non-United States taxing jurisdiction.

As used herein, the term "U.S. holder" means a beneficial owner of debentures or common stock into which debentures have been converted that is, for United States federal income tax purposes:

•: a citizen or individual resident of the United States;
•: a corporation, or other entity that has elected to be treated as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
•: an estate, the income of which is subject to United States federal income tax regardless of its source; or
•: a trust if, in general, a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have authority to control all of its substantial decisions.

As used herein, the term "non-U.S. holder" means a beneficial owner, other than a partnership, of debentures or common stock into which debentures have been converted that is not a U.S. holder for United States federal income tax purposes.

If a partnership, including for this purpose any entity treated as a partnership for United States tax purposes, is a beneficial owner of debentures or common stock into which debentures have been

converted, the treatment of a partner in the partnership will generally depend upon the status of the partner and upon the activities of the partnership. A holder of debentures that is a partnership, and partners in such a partnership, should consult their tax advisors about the United States federal income tax consequences of holding and disposing of debentures and common stock into which debentures have been converted.

Classification of the Debentures

We will treat the debentures as indebtedness subject to the Treasury regulations governing contingent payment debt instruments ("CPDI") for U.S. federal income tax purposes. Pursuant to the terms of the indenture, we and each holder of the debentures must, for United States federal income tax purposes, treat the debentures in such a manner and each holder is bound by our application of those regulations to the debentures, including our determination of the rate at which interest will be deemed to accrue on the debentures for United States federal income tax purposes. The remainder of this discussion assumes that the debentures will be treated in accordance with that agreement and our determinations. However, the proper United States federal income tax treatment of a holder of a debenture is uncertain in various respects, and no assurance can be given that the IRS will not assert that the debentures should be treated differently. Such treatment could affect the amount, timing and character of income, gain or loss in respect of an investment in debentures. In particular, it might be determined that a holder should have accrued interest income at a lower rate, should not have recognized income or gain upon the conversion, and should have recognized capital gain or loss upon a taxable disposition of its debentures.

U.S. Holders

Accrual of Interest on the Debentures

Under the rules governing CPDIs, a United States person generally will be required to accrue interest income on the debentures, in the amounts described below, regardless of whether the U.S. holder uses the cash or accrual method of tax accounting. Accordingly, U.S. holders will be required to include interest in taxable income in each year in excess of the accruals on the debentures and in excess of any interest payments actually received in that year.

The CPDI regulations provide that a U.S. holder must accrue an amount of ordinary interest income, as original issue discount for United States federal income tax purposes, for each accrual period prior to and including the maturity date of the debentures that equals:

(1): the product of (i) the adjusted issue price (as defined below) of the debentures as of the beginning of the actual period; and (ii) the comparable yield to maturity (as defined below) of the debentures, adjusted for the length of the accrual period;
(2): divided by the number of days in the accrual period; and
(3): multiplied by the number of days during the accrual period that the U.S. holder held the debentures.

A debenture's issue price is the first price at which a substantial amount of the debentures is sold to the public, excluding sales to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers. The adjusted issue price of a debenture is its issue price increased by any interest income previously accrued, determined without regard to any adjustments to interest accruals described below, and decreased by the projected amount of any payments previously made with respect to the debentures.

Under the rules governing contingent payment debt obligations, we are required to establish the "comparable yield," and we have determined that the comparable yield for the debentures is the

annual yield we would incur, as of the initial issue date, on a fixed rate nonconvertible debt security with no contingent payments, but with terms and conditions otherwise comparable to those of the debentures. Accordingly, we have determined the comparable yield to be 6.75% compounded semi-annually.

We are required to provide to U.S. holders, solely for United States federal income tax purposes, a schedule of the projected amounts of payments on the debentures. This schedule must produce the comparable yield. The projected payment schedule for the debentures includes estimates for payments of interest and an estimate for a payment at maturity taking into account the conversion feature. U.S. holders may obtain the projected payment schedule by submitting a written request for such information to: Best Buy Co., Inc., 7075 Flying Cloud Drive, Eden Prairie, Minnesota 55344, Attention: Treasury Department.

Under the indenture, each U.S. holder for United States federal income tax purposes is required to use the comparable yield and the schedule of projected payments in determining its interest accruals, and the adjustments thereto described below, in respect of the debentures.

THE COMPARABLE YIELD AND THE SCHEDULE OF PROJECTED PAYMENTS ARE NOT DETERMINED FOR ANY OTHER PURPOSE OTHER THAN FOR THE DETERMINATION OF A U.S. HOLDER'S INTEREST ACCRUALS AND ADJUSTMENTS THEREOF IN RESPECT OF THE DEBENTURES FOR UNITED STATES FEDERAL INCOME TAX PURPOSES AND DO NOT CONSTITUTE A PROJECTION OR REPRESENTATION REGARDING THE ACTUAL AMOUNTS PAYABLE WITH RESPECT TO THE DEBENTURES.

Amounts treated as interest under the CPDI regulations are treated as original issue discount for all purposes of the Code.

Adjustments to Interest Accruals on the Debentures

If, by reason of a resetting of the yield to maturity on the debentures, a U.S. holder is to receive payments with respect to the debentures that exceed the total amount of projected payments for the related period, the U.S. holder will incur a "net positive adjustment" under the CPDI regulations. Although it is not entirely clear, it is likely that the net positive adjustment will equal the excess of the present value of the payments for the reset period over the present value of the projected payments for that period (determined without taking into account adjustments for payments made after all remaining contingent payments on the debentures become fixed), discounting at the comparable yield. Any such adjustment will be treated as additional interest in the tax year to which it relates. Conversely, if by reason of a resetting of the yield to maturity on the debentures, a U.S. holder is to receive payments with respect to the debentures for a reset period that are less than the total amount of projected payments for the related period, the U.S. holder will incur a "net negative adjustment" under the CPDI regulations. Although it is not entirely clear, it is likely that the net negative adjustment will equal the present value of the projected payments in excess of the present value of the redetermined payments (determined without taking into account adjustments for payments made after all remaining contingent payments on the debentures become fixed), discounting at the comparable yield. Any such adjustment will (a) reduce the U.S. holder's interest income on the debentures for that taxable year, and (b) to the extent of any excess after the application of (a), give rise to an ordinary loss to the extent of the U.S. holder's interest income on the debentures during the prior taxable years, reduced to the extent such interest was offset by prior net negative adjustments. The CPDI regulations require that adjustments for payments made after all remaining contingent payments on the debentures become fixed be taken into account in a reasonable manner over the relevant period as an additional net positive or negative adjustment as the case may be.

Purchase for Premium or Discount

If a U.S. holder purchases a debenture at a premium or discount to the debenture's adjusted issue price at the time of purchase, the U.S. holder must reasonably allocate any differences between the adjusted issue price of the debenture at the time of the purchase and the price paid by the U.S. holder to daily portions of interest or projected payments over the remaining term of the debenture. If the price paid by the U.S. holder is less than the adjusted issue price at the time of purchase, the amount of the difference allocated to a daily portion of interest or to a projected payment is treated as a positive adjustment on the date the daily portion accrues or the payment is made. If the price paid by the U.S. holder is greater than the adjusted issue price at the time of purchase, the amount of the difference allocated to a daily portion of interest or to a projected payment is treated as a negative adjustment on the date the daily portion accrues or the payment is made. U.S. holders should consult their own tax advisors concerning the operation of these rules and the allocation of the premium or discount.

Sales, Exchange, Conversion or Redemption

Generally, the sale, exchange, redemption or other disposition of a debenture will result in taxable gain or loss to a U.S. holder. In addition, as described above, our calculation of the comparable yield and the schedule of projected payments for the debentures includes the receipt of common stock upon conversion as a contingent payment with respect to the debentures. Accordingly, we intend to treat the receipt of our common stock by a U.S. holder upon the conversion of a debenture as a contingent payment under the CPDI regulations. As described above, holders are generally bound by our determination of the comparable yield and the schedule of projected payments. Under this treatment, a conversion will also result in taxable gain or loss to the U.S. holder. The amount of gain or loss on a taxable sale, exchange, conversion, redemption or other disposition will be equal to the difference between (a) the amount of cash plus the fair market value of any other property received by the U.S. holder, including the fair market value of any of our common stock received, and (b) the U.S. holder's adjusted tax basis in the debenture. A U.S. holder's adjusted tax basis in a debenture should generally be equal to the U.S. holder's original purchase price for the debenture, increased by any interest income previously accrued by the U.S. holder and any net positive adjustment to interest accruals described above, and decreased by the amount of any projected payments previously made on the debentures to the U.S. holder and any net negative adjustment to interest accruals described above. Gain recognized upon a sale, exchange, conversion, redemption or other disposition of a debenture will generally be treated as ordinary interest income; any loss will be ordinary loss to the extent of interest on the debentures included in income for the year of sale or any prior period, and thereafter, capital loss (which will be long-term if the debenture is held for more than one year). The deductibility of net capital losses by individuals and corporations is subject to limitations. All holders should consult their tax advisors regarding the treatment of capital gains and losses.

A U.S. holder's tax basis in our common stock received upon a conversion of a debenture will equal the then current fair market value of such common stock. The U.S. holder's holding period for the common stock received will commence on the day immediately following the date of conversion, not on the date of acquisition of the debentures.

Dividends on Common Stock

If a U.S. holder converts debentures into common stock, in general, distributions on the common stock that are paid out of our current or accumulated earnings and profits, as defined for United States federal income tax purposes, will constitute dividends and will be includible in income by a holder and taxable as ordinary income when received or accrued, in accordance with that holder's method of accounting for United States federal income tax purposes. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated first as a tax-free return of the U.S.

holder's investment, up to the holder's basis in the common stock. Any remaining excess will be treated as capital gain.

Constructive Dividends

The conversion price of the debentures is subject to adjustment under certain circumstances. Under Section 305 of the Code and the Treasury regulations issued thereunder, an adjustment in the conversion price, or the failure to make such an adjustment, may under particular circumstances be treated as a constructive taxable dividend to U.S. holders of our debentures or common stock to the extent of our current or accumulated earnings and profits. Adjustments to the conversion price made pursuant to a bona fide reasonable adjustment formula which has the effect of preventing the dilution of the proportionate interest of a U.S. holder of debentures in our earnings and profits generally should not result in a constructive distribution where the adjustment does not compensate the U.S. holder of debentures for taxable distributions to our shareholders. However, in other circumstances, adjustments (or the failure to make adjustments) may result in a constructive distribution to U.S. holders of debentures or common stock, taxable to the holders even though they did not receive any cash or property. For example, if at any time we make a distribution of property to our shareholders that would be taxable to the shareholders as a dividend for United States federal income tax purposes and, in accordance with the anti-dilution provisions of the debentures, the conversion rate of the debentures is increased, such increase may be deemed to be the payment of a taxable dividend to holders of the debentures. Conversely, if an event occurs that dilutes the interests of holders of our debentures and the conversion price is not adjusted, the resulting increase in the proportionate interests of holders of common stock could be treated as a taxable stock dividend to the holders of our common stock.

Backup Withholding and Information Reporting

Non-exempt U.S. holders may be subject to information reporting with respect to certain "reportable payments," including payments of principal and interest on debentures, dividends on common stock and the proceeds of the sale or other disposition of the debentures or common stock. Non-exempt U.S. holders that are subject to information reporting and that do not provide appropriate information when requested may be subject to backup withholding at a 31% rate. U.S. holders should consult their tax advisors regarding the applicability of backup withholding.

We will report to the U.S. holders of debentures and common stock and to the IRS the amount of any "reportable payments" for each calendar year and the amount of tax withheld, if any, with respect to such payments.

Special rules applicable to Non-U.S. Holders

Although the following discussion applies specifically to non-U.S. holders, it is not exhaustive. The discussion preceding this section may also apply to non-U.S. holders. Non-U.S. holders should consult their own tax advisors concerning the applicability of the United States federal tax laws and the laws of any relevant state, local or non-United States taxing jurisdiction.

Payment of Interest

Generally, payments of interest to nonresident persons or entities are subject to a United States withholding tax at a rate of 30%, except where an applicable tax treaty provides for the reduction or elimination of such withholding tax and the recipient of the interest payments complies with all certification requirements necessary to qualify for the treaty benefit. However, payments to a non-U.S. holder of interest income that is not effectively connected with a United States trade or business will

not be subject to a United States withholding tax under the "portfolio interest exemption" provided that:

•: the non-U.S. holder does not actually or constructively own (pursuant to the conversion feature of the debentures or otherwise) 10% or more of the combined voting power of all of our classes of stock entitled to vote;
•: the non-U.S. holder is not a "controlled foreign corporation" related to us actually or constructively through stock ownership; and
•: the non-U.S. holder is not a bank which acquired the debentures in consideration for an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business.

The portfolio interest exemption and several of the special rules for non-U.S. holders described below apply only if the non-U.S. holder certifies its nonresident status. A non-U.S. holder can meet this certification requirement by providing a Form W-8BEN or appropriate substitute form to us, or our paying agent. If a non-U.S. holder holds the debenture through a financial institution or other agent acting on the holder's behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent. The agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. For payments made to a foreign partnership, the certification requirements will generally apply to the partners rather than the partnership.

We may be required to report annually to the IRS and to each non-U.S. holder the amount of interest paid to, and the tax withheld, if any, with respect to, each non-U.S. holder.

Except to the extent that an applicable treaty otherwise provides, generally a non-U.S. holder will be taxed in the same manner as a U.S. holder with respect to interest if the interest income is effectively connected with the non-U.S. holder's conduct of a United States trade or business. A corporate non-U.S. holder may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate). Even though such effectively connected interest is subject to income tax, and may be subject to the branch profits tax, it may not be subject to withholding tax if the non-U.S. holder delivers proper certification to the payor.

Conversion of Debentures

In general, a non-U.S. holder will not be subject to United States federal income tax or withholding tax upon the conversion of a debenture into common stock. However, cash (if any) received in lieu of a fractional share will be subject to United States federal income tax if it is U.S. trade or business income. Cash received in lieu of a fractional share may give rise to gain that would be subject to the rules described above under "—Sale, Exchange, Conversion or Redemption."

In general, a non-U.S. holder will not be subject to United States federal income or withholding tax with respect to gain upon the disposition of debentures or common stock, unless:

•: the income or gain is "U.S. trade or business income," which means income or gain that is effectively connected with the conduct by the non-U.S. holder of a trade or business, or, in the case of a treaty resident, attributable to a permanent establishment or a fixed base, in the United States;
•: such non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met;
•: such non-U.S. holder is subject to tax pursuant to the provisions of the Code applicable to certain United States expatriates; or
•: we are, or have been at any time, within the shorter of the five year period preceding such sale or other disposition and the period the non-U.S. holder held the debenture, a United States real

property holding corporation within the meaning of Section 897 of the Code. We do not believe that we are currently a "United States real property holding corporation" within the meaning of Section 897 of the Code and do not expect that we will become one in the future.

U.S. trade or business income of a non-U.S. holder will generally be subject to regular United States income tax in the same manner as if it were realized by a U.S. holder. Non-U.S. holders that realize U.S. trade or business income with respect to the debentures or common stock should consult their tax advisers as to the treatment of such income or gain. In addition, U.S. trade or business income of a non-U.S. holder that is a non-U.S. corporation may be subject to a branch profits tax at a rate of 30%, or such lower rate provided by an applicable income tax treaty.

Dividends

A non-U.S. holder of our common stock will generally be subject to United States federal withholding tax at a 30% rate (or lower rate provided under any applicable income tax treaty) on distributions by us with respect to our common stock that are treated as dividends paid (and on dividends deemed paid on the debentures or common stock, as described above under "—Constructive Dividends"). Except to the extent that an applicable tax treaty otherwise provides, generally a non-U.S. holder will be taxed in the same manner as a U.S. holder on dividends paid (or deemed paid) that are effectively connected with the non-U.S. holder's conduct of a trade or business in the United States, and a corporate non-U.S. holder may also be subject to a United States branch profits tax at a 30% rate or such lower rate as may be specified in an applicable income tax treaty.

Death of a Non-U.S. Holder

An individual who is not a citizen or resident of the United States and who holds a debenture at the time of death will not be required to include the debenture in the individual's gross estate for United States estate tax purposes, provided that interest payments with respect to such debenture would have qualified for the portfolio interest exemption described above. However, if such an individual holds our common stock, actually or beneficially, at the time of the individual's death (or previously transferred the common stock subject to certain retained rights or powers), the common stock will be included in the individual's gross estate and subject to United States federal estate tax unless otherwise provided by an applicable estate tax treaty.

Backup Withholding and Information Reporting

Generally, information reporting and backup withholding do not apply to payments that are subject to the 30% withholding tax on dividends or interest paid to non-U.S. holders, or to interest or dividends that are exempt from that tax by application of a tax treaty or special exception. Also, generally, if payments are made to a non-U.S. holder by a broker upon a sale of debentures or common stock, the payments will not be subject to information reporting or backup withholding. In order to avoid backup withholding, a non-U.S. holder may be required to certify the holder's foreign status. Non-U.S. holders of debentures or common stock should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of exemptions and the procedure for obtaining any available exemption.

THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. THE PROPER TAX TREATMENT OF A HOLDER OF DEBENTURES IS UNCERTAIN IN VARIOUS RESPECTS. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING AND DISPOSING OF THE DEBENTURES AND SHARES OF OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.

SELLING SECURITYHOLDERS

We originally issued the debentures in a private placement in June 2001. The debentures were resold by the initial purchasers to qualified institutional buyers under Rule 144A under the Securities Act. Selling securityholders may offer and sell the debentures and the underlying common stock pursuant to this prospectus.

The following table sets forth:

(1) the name of each selling securityholder who has provided us with notice as of the date of this prospectus pursuant to the registration rights agreement of their intent to sell or otherwise dispose of debentures and/or shares of common stock issuable upon conversion of the debentures pursuant to the registration statement;

(2) the principal amount at maturity of debentures and the number of shares of our common stock issuable upon conversion of the debentures which they may sell from time to time pursuant to the registration statement; and

(3) the amount of outstanding debentures and our common stock beneficially owned by the selling securityholder prior to the offering, assuming no conversion of the debentures.

To our knowledge, no selling securityholder nor any of its affiliates has held any position or office with, been employed by or otherwise has had any material relationship with us or our affiliates during the three years prior to the date of this prospectus.

A selling securityholder may offer all or some portion of the debentures and shares of the common stock issuable upon conversion of the debentures. Accordingly, no estimate can be given as to the amount or percentage of debentures or our common stock that will be held by the selling securityholders upon termination of sales pursuant to this prospectus. In addition, the selling securityholders identified below may have sold, transferred or disposed of all or a portion of their debentures since the date on which they provided the information regarding their holdings in transactions exempt from the registration requirements of the Securities Act.

The information contained under the column heading "Number of Shares of Common Stock That May Be Sold" assumes conversion of the full amount of the debentures held by the holder at the initial rate of 7.8714 shares of common stock per each $1,000 principal amount at maturity of debentures.

Name	Aggregate Principal Amount at Maturity of Debentures Owned before Offering		Aggregate Principal Amount at Maturity of Debentures that may be Sold		Percentage of Debentures that may be Sold		Number of Shares of Common Stock that may be Sold	Percentage of Shares of Common Stock that may be Sold(1)
Alpha U.S. Sub Fund VIII, LLC	$	650,000	$	650,000	*		5,116	*
Arbitex Master Fund, L.P.		4,000,000		4,000,000	*		31,485	*
Commerzbank A.G.		5,000,000		5,000,000	1.0	%	39,357	*
Credit Suisse First Boston Corporation		76,000,000		76,000,000	15.4	%	598,226	*
Deephaven Domestic Convertible Trading Ltd.		18,300,000		18,300,000	3.7	%	144,046	*
D.E. Shaw Investments, L.P.		4,000,000		4,000,000	*		31,485	*
D.E. Shaw Valence, L.P.		16,000,000		16,000,000	3.2	%	125,942	*
First Union National Bank		40,000,000		40,000,000	8.1	%	314,856	*
GLG Market Neutral Fund		17,500,000		17,500,000	3.6	%	137,749	*
Granville Capital Corporation		25,000,000		25,000,000	5.1	%	196,785	*
Knight Securities, LP		1,750,000		1,750,000	*		13,774	*
Lyxor Master Fund		1,000,000		1,000,000	*		7,871	*
Peoples Benefit Life Insurance Company Teamsters		5,000,000		5,000,000	1.0	%	39,357	*
St. Albans Partners Ltd.		5,000,000		5,000,000	1.0	%	39,357	*
Tour Societe Generale		8,000,000		8,000,000	1.6	%	62,971	*
Trident Global Investors Portfolio, LTD		2,000,000		2,000,000	*		15,742	*
USB AG London Branch		15,000,000		15,000,000	3.0	%	118,071	*

White River Securities L.L.C.			5,000,000			5,000,000		1.0	%	39,357		*
Unknown(2)			243,200,000			243,200,000		49.4	%	1,914,324		*

*: Less than 1.0%
(1): Based on 210,859,510 shares of common stock outstanding as of September 1, 2001.
(2): The name "Unknown" represents the remaining selling securityholders. We are unable to provide the names of these securityholders because some of these debentures are currently evidenced by a global note which has been deposited with DTC and registered in the name of Cede & Co. as DTC's nominee.

If, after the date of this prospectus, a securityholder notifies us pursuant to the registration rights agreement of its intent to dispose of debentures pursuant to the registration statement, we may supplement this prospectus to include that information.

PLAN OF DISTRIBUTION

We will not receive any of the proceeds from the sale of the debentures and the underlying common stock offered by this prospectus. The debentures and the underlying common stock may be sold from time to time to purchasers:

•: directly by the selling securityholders; or
•: through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the selling securityholders or the purchasers of the debentures and the underlying common stock.

The selling securityholders and any such broker-dealers or agents who participate in the distribution of the debentures and the underlying common stock may be deemed to be "underwriters." As a result, any profits on the sale of the debentures and the underlying common stock by selling securityholders and any discounts, commissions or concessions received by any such broker-dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act. If the selling securityholders were deemed to be underwriters, the selling securityholders may be subject to statutory liabilities as underwriters under the Securities Act.

If the debentures and the underlying common stock are sold through underwriters or broker-dealers, the selling securityholders will be responsible for underwriting discounts or commissions or agent's commissions.

The debentures and the underlying common stock may be sold in one or more transactions at:

•: fixed prices;
•: prevailing market prices at the time of sale;
•: varying prices determined at the time of sale; or
•: negotiated prices.

These sales may be effected in transactions:

•: on any national securities exchange or quotation service on which the debentures and underlying common stock may be listed or quoted at the time of the sale, including the New York Stock Exchange in the case of the common stock;
•: in the over-the-counter market;
•: in transactions otherwise than on such exchanges or services or in the over-the-counter market; or
•: through the writing of options.

These transactions may include block transactions or crosses. Crosses are transactions in which the same broker acts as an agent on both sides of the trade.

In connection with the sales of the debentures and the underlying common stock or otherwise, the selling securityholders may enter into hedging transactions with broker-dealers. These broker-dealers may in turn engage in short sales of the debentures and the underlying common stock in the course of hedging their positions. The selling securityholders may also sell the debentures and the underlying common stock short and deliver debentures and the underlying common stock to close out short positions, or loan or pledge debentures and the underlying common stock to broker-dealers that in turn may sell the debentures and the underlying common stock.

To our knowledge, there are currently no plans, arrangements or understandings between any selling securityholders and any underwriter, broker-dealer or agent regarding the sale of the debentures and the underlying common stock by the selling securityholders. Selling securityholders may sell any or all of the debentures and the underlying common stock offered by them pursuant to this prospectus. In addition, we cannot assure you that any such selling securityholder will not transfer, devise or gift the debentures and the underlying common stock by other means not described in this prospectus.

The outstanding shares of our common stock trades on the New York Stock Exchange under the symbol "BBY."

There can be no assurance that any selling securityholder will sell any or all of the debentures or the underlying common stock pursuant to this prospectus. In addition, any debentures or underlying common stock covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold under Rule 144 or Rule 144A rather than pursuant to this prospectus.

The selling securityholders and any other person participating in such distribution will be subject to the Exchange Act. The Exchange Act rules include, without limitation, Regulation M, which may limit the timing of purchases and sales of any of the debentures and the underlying common stock by the selling securityholders and any such other person. In addition, Regulation M of the Exchange Act may restrict the ability of any person engaged in the distribution of the debentures and the underlying common stock to engage in market-making activities relating to the particular debentures and the underlying common stock being distributed for a period of up to five business days prior to the commencement of such distribution. This may affect the marketability of the debentures and the underlying common stock and the ability of any person or entity to engage in market-making activities with respect to the debentures and the underlying common stock.

We and the selling securityholders will be indemnified by the others against certain liabilities, including certain liabilities under the Securities Act, or will be entitled to contribution in connection with these liabilities.

We have agreed to pay substantially all of the expenses incidental to the registration, offering and sale of the debentures and the underlying common stock to the public other than commissions, fees and discounts of underwriters, brokers, dealers and agents.

We will use our reasonable efforts to keep the registration statement, of which this prospectus is a part, effective for a period of two years from the date of its effectiveness or such shorter period that will terminate at the earlier of:

•: the sale, pursuant to the registration statement to which this prospectus relates, of all the securities registered under the registration statement; and
•: the time when all the securities registered under the registration statement are no longer restricted securities (as defined in Rule 144 under the Securities Act.

Our obligation to keep the registration statement to which this prospectus relates effective is subject to specified, permitted exceptions. In these cases, we may prohibit offers and sales of the debentures and the underlying common stock pursuant to the registration statement to which this prospectus relates.

VALIDITY OF SECURITIES

The validity of the debentures, the guarantees and the common stock issuable upon conversion will be passed upon for Best Buy by Robins, Kaplan, Miller & Ciresi L.L.P., Minneapolis, Minnesota.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 3, 2001, as set forth in their report, which is incorporated by reference in this prospectus and elsewhere in the registration statement. Such financial statements are, and audited financial statements to be included in subsequently filed documents will be, incorporated by reference in reliance on Ernst & Young LLP's report pertaining to such financial statements (to the extent covered by consents filed with the Securities and Exchange Commission), given on their authority as experts in accounting and auditing. The consolidated financial statements of Musicland Stores Corporation on December 31, 2000 and December 31, 1999 and for each of the three years in the period ended December 31, 2000, included in our Current Report on Form 8-K filed on March 29, 2000 and incorporated by reference in this prospectus, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts (or, as experts in accounting and auditing) in giving said reports.

$492,400,000

BEST BUY CO., INC.

Convertible Debentures due June 27, 2021

Convertible into

Common Stock

Guaranteed as to Payment of Principal and Interest
by Certain Subsidiaries of Best Buy Co., Inc.

PART II INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the registrants in connection with the distribution of the securities being registered. All of the amounts shown are estimates, except the Securities and Exchange Commission registration fee.

Securities and Exchange Commission registration fee		$	79,400
Printing expenses			75,000
Accounting fees and expenses			15,000
Legal fees and expenses			25,000
Trustee and Transfer Agent fees and expenses			12,500
Miscellaneous expenses			3,100

	Total	$	210,000

Item 15. Indemnification of Directors and Officers

Best Buy Co., Inc. is subject to the Minnesota Business Corporation Act, Minnesota Statutes, Chapter 302A. Minnesota Statutes, Section 302A.521, provides that a corporation shall indemnify any person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of such person against judgments, penalties, fines, including, without limitation, excise taxes assessed against such person with respect to an employee benefit plan, settlements and reasonable expenses, including attorneys' fees and disbursements, incurred by such person in connection with the proceeding, if, with respect to the acts or omissions of such person complained of in the proceeding, such person (1) has not been indemnified therefor by another organization or employee benefit plan; (2) acted in good faith; (3) received no improper personal benefit and Section 302A.255 (with respect to director conflicts of interest), if applicable, has been satisfied; (4) in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and (5) reasonably believed that the conduct was in the best interests of the corporation in the case of acts or omissions in such person's official capacity for the corporation, or reasonably believed that the conduct was not opposed to the best interests of the corporation in the case of acts or omissions in such person's official capacity for other affiliated organizations.

In addition, Best Buy Co., Inc.'s articles of incorporation, as amended, provide that a director thereof shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director except for liability (1) for any breach of the director's duty of loyalty to the corporation or its shareholders; (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) for paying a dividend or approving a stock repurchase in violation of Minnesota Statutes, Section 302A.551; (4) for violating the securities registration or anti-fraud provisions of Minnesota Statutes, Section 80A.23; (5) for any transaction from which the director derived an improper personal benefit; or (6) for acts or omissions occurring prior to the date when the relevant provision of the articles of incorporation became effective. The articles of incorporation do not limit directors' liability for violations of the federal securities laws. Best Buy Co., Inc.'s articles of incorporation are consistent with the Minnesota Business Corporation Act and if such act is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of Best Buy Co., Inc. would be eliminated or limited to the fullest extent permitted by Minnesota law.

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As of September 1, 2000, Best Buy Co., Inc. obtained a Directors' and Officers' Liability Insurance Policy, with coverage of $150 million, subject to various deductibles and exclusions from coverage. There is no coverage for liabilities arising in connection with the filing of a registration statement by Best Buy Co., Inc. under the Securities Act or under any underwriting agreement entered into in connection with a public offering of securities.

Item 16. Exhibits

4.1		Indenture, dated as of June 27, 2001, between Best Buy Co., Inc., its Restricted Subsidiaries identified therein as Guarantors, and Wells Fargo Bank Minnesota, National Association.
4.2		Registration Rights Agreement, dated June 27, 2001, between Best Buy Co., Inc., its Restricted Subsidiaries identified therein as Guarantors, Credit Suisse First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
5.1		Opinion of Robins, Kaplan, Miller & Ciresi L.L.P., dated September 21, 2001.
8.1		Opinion of Ernst & Young LLP, dated September 19, 2001, as to certain U.S. Federal income tax matters.
12.1		Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1		Consent of Ernst & Young LLP.
23.2		Consent of Arthur Andersen LLP.
23.3		Consent of Robins, Kaplan, Miller & Ciresi L.L.P. (see Exhibit 5.1).
24.1		Powers of Attorney (included on the signature page).
25.1		Statement of Eligibility and Qualification of Trustee on Form T-1.

Item 17. Undertakings

a. The undersigned registrants hereby undertake:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase and decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrants pursuant to Section 13 or Section 15(d)

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of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

(2) That, for the purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

b. The undersigned registrants hereby undertake that, for purposes of determining any liability under the Securities Act of 1933, each filing of Best Buy Co., Inc.'s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.

c. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the financial adjudication of such issue.

d. The undersigned registrants hereby undertake that:

(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be a part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Best Buy Co., Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BEST BUY CO., INC.
		By:	/s/ RICHARD M. SCHULZE Richard M. Schulze Chairman and Chief Executive Officer

Each person whose signature appears below constitutes and appoints RICHARD M. SCHULZE and DARREN R. JACKSON his/her true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to the Registration Statement on Form S-3, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Best Buy Co., Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ RICHARD M. SCHULZE Richard M. Schulze		Chairman, Chief Executive Officer (principal executive officer) and Director
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance, Treasurer and Chief Financial Officer (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ ROBERT T. BLANCHARD Robert T. Blanchard		Director
/s/ JACK W. EUGSTER Jack W. Eugster		Director

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/s/ KATHY HIGGINS VICTOR Kathy Higgins Victor		Director
/s/ ELLIOT S. KAPLAN Elliot S. Kaplan		Director
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director
/s/ MARK C. THOMPSON Mark C. Thompson		Director
/s/ FRANK D. TRESTMAN Frank D. Trestman		Director
/s/ HATIM A. TYABJI Hatim A. Tyabji		Director
/s/ JAMES C. WETHERBE James C. Wetherbe		Director

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, BBC Insurance Agency, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BBC INSURANCE AGENCY, INC.
		By:	/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of BBC Insurance Agency, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		President (principal executive officer) and Director
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance, Treasurer and Chief Financial Officer (principal financial and accounting officer) and Director
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, BBC Investment Co. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BBC INVESTMENT CO.
		By:	/s/ RICHARD M. SCHULZE Richard M. Schulze Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of BBC Investment Co. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ RICHARD M. SCHULZE Richard M. Schulze		Chairman and Chief Executive Officer (principal executive officer)
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance and Treasurer (principal financial and accounting officer)
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–7

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, BBC Property Co. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BBC PROPERTY CO.
		By:	/s/ RICHARD M. SCHULZE Richard M. Schulze Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of BBC Property Co. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ RICHARD M. SCHULZE Richard M. Schulze		Chief Executive Officer (principal Executive officer) and Director
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance, Treasurer (principal financial and accounting officer) and Director
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–8

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Best Buy Stores, L.P. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BEST BUY STORES, L.P.
		By:	BBC Property Co., General Partner
		By	/s/ RICHARD M. SCHULZE Richard M. Schulze Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of BBC Property Co., General Partner of Best Buy Stores, L.P., in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ RICHARD M. SCHULZE Richard M. Schulze		Chief Executive Officer (principal executive officer) and Director
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance, Treasurer (principal financial and accounting officer) and Director
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–9

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Best Buy Purchasing LLC certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BEST BUY PURCHASING LLC
		By:	/s/ RICHARD M. SCHULZE Richard M. Schulze Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Best Buy Purchasing LLC in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ RICHARD M. SCHULZE Richard M. Schulze		Chief Executive Officer (principal executive officer)
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President (principal financial and accounting officer) and Director
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–10

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, BestBuy.com, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BESTBUY.COM, INC.
		By:	/s/ JOHN C. WALDEN John C. Walden President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of BestBuy.com, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ JOHN C. WALDEN John C. Walden		President (principal executive officer) and Director
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance and Treasurer (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–11

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Best Buy Concepts, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		BEST BUY CONCEPTS, INC.
		By:	/s/ RICHARD M. SCHULZE Richard M. Schulze Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Best Buy Concepts, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ RICHARD M. SCHULZE Richard M. Schulze		Chairman and Chief Executive Officer (principal executive officer)
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance and Treasurer (principal financial and accounting officer)
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–12

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Magnolia Hi-Fi, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		MAGNOLIA HI-FI, INC.
		By:	/s/ JAMES L. TWETEN James L. Tweten President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Magnolia Hi-Fi, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ JAMES L. TWETEN James L. Tweten		President (principal executive officer) and Director
/s/ KURT W. FROST Kurt W. Frost		Senior Vice President and Chief Financial Officer (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–13

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Musicland Stores Corporation certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		MUSICLAND STORES CORPORATION
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Musicland Stores Corporation in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–14

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, The Musicland Group, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		THE MUSICLAND GROUP, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of The Musicland Group, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–15

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Media Play, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		MEDIA PLAY, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Media Play, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–16

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, MG Financial Services, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		MG FINANCIAL SERVICES, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of MG Financial Services, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–17

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, MLG Internet, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		MLG INTERNET, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of MLG Internet, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–18

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Musicland Retail, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		MUSICLAND RETAIL, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Musicland Retail, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–19

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, On Cue, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		ON CUE, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of On Cue, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–20

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Request Media, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		REQUEST MEDIA, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Request Media, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–21

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Suncoast Group, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		SUNCOAST GROUP, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Suncoast Group, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–22

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Suncoast Motion Picture Company, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		SUNCOAST MOTION PICTURE COMPANY, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Suncoast Motion Picture Company, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–23

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Suncoast Retail, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		SUNCOAST RETAIL, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Suncoast Retail, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–24

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, TMG Caribbean, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		TMG CARIBBEAN, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of TMG Caribbean, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–25

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, TMG-Virgin Islands, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		TMG-VIRGIN ISLANDS, INC.
		By:	/s/ KEVIN P. FREELAND Kevin P. Freeland President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of TMG-Virgin Islands, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ KEVIN P. FREELAND Kevin P. Freeland		President (principal executive officer) and Director
/s/ MARC I. GORDON Marc I. Gordon		Vice President of Finance (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ DARREN R. JACKSON Darren R. Jackson		Director
/s/ RICHARD M. SCHULZE Richard M. Schulze		Director

II–26

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Redline Entertainment, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 24th day of September, 2001.

		REDLINE ENTERTAINMENT, INC.
		By:	/s/ GARY L. ARNOLD Gary L. Arnold President

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following directors and officers of Redline Entertainment, Inc. in the capacities indicated on the 24th day of September, 2001.

Signature		Title

/s/ GARY L. ARNOLD Gary L. Arnold		President (principal executive officer) and Director
/s/ DARREN R. JACKSON Darren R. Jackson		Senior Vice President—Finance and Treasurer (principal financial and accounting officer)
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director
/s/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director

II–27

EXHIBIT INDEX

Exhibit No.		Description
4.1		Indenture, dated as of June 27, 2001, between Best Buy Co., Inc., its Restricted Subsidiaries identified therein as Guarantors, and Wells Fargo Bank Minnesota, National Association.
4.2		Registration Rights Agreement, dated June 27, 2001, between Best Buy Co., Inc., its Restricted Subsidiaries identified therein as Guarantors, Credit Suisse First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
5.1		Opinion of Robins, Kaplan, Miller & Ciresi L.L.P., dated September 21, 2001.
8.1		Opinion of Ernst & Young LLP, dated September 19, 2001, as to certain U.S. Federal income tax matters.
12.1		Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
23.1		Consent of Ernst & Young LLP.
23.2		Consent of Arthur Andersen LLP.
23.3		Consent of Robins, Kaplan, Miller & Ciresi L.L.P. (see Exhibit 5.1).
24.1		Powers of Attorney (included on the signature page).
25.1		Statement of Eligibility and Qualification of Trustee on Form T-1.

II–28

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TABLE OF CONTENTS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
WHERE YOU CAN FIND MORE INFORMATION
SUMMARY
Best Buy
The Debentures
RISKS RELATED TO THE DEBENTURES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
RATIO OF EARNINGS TO FIXED CHARGES
USE OF PROCEEDS
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
DESCRIPTION OF DEBENTURES
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
SELLING SECURITYHOLDERS
PLAN OF DISTRIBUTION
VALIDITY OF SECURITIES
EXPERTS
PART II INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

Item 15. Indemnification of Directors and Officers

Item 16. Exhibits

Item 17. Undertakings

SIGNATURES
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SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
SIGNATURES
EXHIBIT INDEX
EX-4.1 3 a2059091zex-4_1.htm EX-4.1 Prepared by MERRILL CORPORATION
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EXECUTION COPY

BEST BUY CO., INC.
as Issuer,

THE SUBSIDIARIES NAMED HEREIN
as Guarantors,

and

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee

INDENTURE

Dated as of June 27, 2001

Convertible Debentures due June 27, 2021

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1	Definitions	1
Section 1.2	Other Definitions	8
Section 1.3	Incorporation by Reference of Trust Indenture Act	9
Section 1.4	Rules of Construction	9
Section 1.5	Acts of Holders	10
ARTICLE II THE SECURITIES
Section 2.1	Form and Dating	11
Section 2.2	Execution and Authentication	12
Section 2.3	Registrar, Paying Agent and Conversion Agent	12
Section 2.4	Paying Agent to Hold Money and Securities in Trust	13
Section 2.5	Securityholder Lists	13
Section 2.6	Transfer and Exchange	13
Section 2.7	Replacement Securities	15
Section 2.8	Outstanding Securities; Determinations of Holders' Action	16
Section 2.9	Temporary Securities	16
Section 2.10	Cancellation	17
Section 2.11	Persons Deemed Owners	17
Section 2.12	Global Securities	17
Section 2.13	CUSIP Numbers	22
Section 2.14	Ranking	22
ARTICLE III REDEMPTION AND PURCHASES
Section 3.1	Company's Right to Redeem; Notices to Trustee	22
Section 3.2	Selection of Securities to Be Redeemed	22
Section 3.3	Notice of Redemption	23
Section 3.4	Effect of Notice of Redemption	24
Section 3.5	Deposit of Redemption Price	24
Section 3.6	Securities Redeemed in Part	24
Section 3.7	Purchase of Securities by the Company at Option of the Holder	24
Section 3.8	Purchase of Securities at Option of the Holder upon Change of Control	31
Section 3.9	Effect of Purchase Notice or Change of Control Purchase Notice	34
Section 3.10	Deposit of Purchase Price or Change of Control Purchase Price	35
Section 3.11	Securities Purchased in Part	35
Section 3.12	Covenant to Comply With Securities Laws Upon Purchase of Securities	35
Section 3.13	Repayment to the Company	36
ARTICLE IV COVENANTS
Section 4.1	Payment of Securities	36
Section 4.2	SEC and Other Reports	36
Section 4.3	Guarantees	37
Section 4.4	Compliance Certificates	37
Section 4.5	Further Instruments and Acts	38
Section 4.6	Maintenance of Office or Agency	38
Section 4.7	Delivery of Certain Information	38
Section 4.8	Calculation of Original Issue Discount	38

ARTICLE V SUCCESSOR CORPORATION
Section 5.1	When Company May Merge or Transfer Assets	39
ARTICLE VI DEFAULTS AND REMEDIES
Section 6.1	Events of Default	40
Section 6.2	Acceleration	41
Section 6.3	Other Remedies	42
Section 6.4	Waiver of Past Defaults	42
Section 6.5	Control by Majority	42
Section 6.6	Limitation on Suits	43
Section 6.7	Rights of Holders to Receive Payment	43
Section 6.8	Collection Suit by Trustee	43
Section 6.9	Trustee May File Proofs of Claim	43
Section 6.10	Priorities	44
Section 6.11	Undertaking for Costs	44
Section 6.12	Waiver of Stay, Extension or Usury Laws	45
ARTICLE VII TRUSTEE
Section 7.1	Duties of Trustee	45
Section 7.2	Rights of Trustee	46
Section 7.3	Individual Rights of Trustee	47
Section 7.4	Trustee's Disclaimer	48
Section 7.5	Notice of Defaults	48
Section 7.6	Reports by Trustee to Holders	48
Section 7.7	Compensation and Indemnity	48
Section 7.8	Replacement of Trustee	49
Section 7.9	Successor Trustee by Merger	50
Section 7.10	Eligibility; Disqualification	50
Section 7.11	Preferential Collection of Claims Against Company	50
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.1	Termination of Company's Obligations	50
Section 8.2	Conditions to Defeasance	51
Section 8.3	Application of Trust Money	52
Section 8.4	Repayment to the Company	52
Section 8.5	Indemnity for Government Obligations	53
Section 8.6	Reinstatement	53
ARTICLE IX AMENDMENTS
Section 9.1	Without Consent of Holders	53
Section 9.2	With Consent of Holders	54
Section 9.3	Compliance with Trust Indenture Act	55
Section 9.4	Revocation and Effect of Consents, Waivers and Actions	55
Section 9.5	Notation on or Exchange of Securities	55
Section 9.6	Trustee to Sign Supplemental Indentures	55
Section 9.7	Effect of Supplemental Indentures	55
ARTICLE X CONVERSION
Section 10.1	Conversion Privilege	56

Section 10.2	Conversion Procedure	56
Section 10.3	Fractional Shares	57
Section 10.4	Taxes on Conversion	57
Section 10.5	Company to Provide Stock	57
Section 10.6	Adjustment for Change in Capital Stock	58
Section 10.7	Adjustment for Rights Issue	58
Section 10.8	Adjustment for Other Distributions	60
Section 10.9	When Adjustment May Be Deferred	62
Section 10.10	When No Adjustment Required	62
Section 10.11	Notice of Adjustment	63
Section 10.12	Voluntary Increase	63
Section 10.13	Notice of Certain Transactions	63
Section 10.14	Reorganization of Company; Special Distributions	64
Section 10.15	Company Determination Final	64
Section 10.16	Trustee's Adjustment Disclaimer	64
Section 10.17	Simultaneous Adjustments	65
Section 10.18	Successive Adjustments	65
ARTICLE XI GUARANTEES
Section 11.1	Guarantees	65
Section 11.2	Execution and Delivery of Guarantees	66
Section 11.3	Guarantors May Consolidate, Etc., on Certain Terms	66
Section 11.4	Release of Guarantees	66
Section 11.5	Limitation on Guarantor Liability; Contribution	67
Section 11.6	Waiver of Subrogation	68
Section 11.7	No Suspension of Remedies	68
Section 11.8	Obligations Reinstated	69
Section 11.9	No Obligation to Take Action Against the Company	69
Section 11.10	Dealing with the Company and Others	69
ARTICLE XII MISCELLANEOUS
Section 12.1	Trust Indenture Act Controls	70
Section 12.2	Notices	70
Section 12.3	Communication by Holders with Other Holders	71
Section 12.4	Certificate and Opinion as to Conditions Precedent	71
Section 12.5	Statements Required in Certificate or Opinion	71
Section 12.6	Separability Clause	71
Section 12.7	Rules by Trustee, Paying Agent, Conversion Agent and Registrar	71
Section 12.8	GOVERNING LAW	71
Section 12.9	No Recourse Against Others	72
Section 12.10	Successors	72
Section 12.11	Multiple Originals	72

EXHIBIT A-1	—	Form of Global Security
EXHIBIT A-2	—	Form of Certificated Security
EXHIBIT B	—	Transfer Certificate
EXHIBIT C	—	Form of Notation on Security Relating to Guarantee
EXHIBIT D	—	Form of Supplemental Indenture Relating to Additional Guarantees

iii

INDENTURE dated as of June 27, 2001 among BEST BUY CO., INC., a Minnesota corporation ("Company"), each of the Subsidiaries named as a "Guarantor" on the signature pages hereto and any Subsidiary (each an "Additional Guarantor") of the Company that executes a supplement to this Indenture in the form of Exhibit D that provides a guarantee of the Securities (as defined below) and this Indenture after the date of this Indenture (each a "Guarantor" and collectively, the "Guarantors") and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association ("Trustee").

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's Convertible Debentures due June 27, 2021:

ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.1 Definitions.

"Accreted Value" for a Security means, as of any date, the sum of the Issue Price of such Security and the accretion in value of such Security as of such date, computed for each semi-annual accretion period by applying the accretion rate then in effect for such Security, based on the yield to maturity then in effect for such Security less the portion of such yield to maturity payable as cash interest on the immediately succeeding Interest Payment Date, to the Issue Price of such Security and to the accretion in value of such Security from the Issue Date up to but not including the beginning of such semi-annual accretion period. Semi-annual accretion periods shall end on (but exclude) an Interest Payment Date, with the first semi-annual accretion period beginning on the Issue Date and ending on (but excluding) the Interest Payment Date on December 27, 2001.

"Additional Interest" has the meaning set forth in the Registration Rights Agreement.

"Affiliate" means, as to any person, any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such person. For the purposes of this definition, "control" when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"Applicable Procedures" means, with respect to any transfer or exchange of beneficial ownership interests in a Global Security, the rules and procedures of the Depositary that are applicable to such transfer or exchange.

"Associate" has the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date hereof.

"Board of Directors" or "Board" means the board of directors of the Company or a Guarantor or any duly authorized committee of such Board.

"Board Resolution" means a copy of one or more resolutions, certified by an Officer of the Company or a Guarantor, as the case may be, to have been duly adopted or consented to by the applicable Board of Directors and to be in full force and effect, and delivered to the Trustee.

"Business Day" means, with respect to any Security, a day other than a day on which banking institutions are authorized by law or regulation to close in the City of New York.

"Capital Lease" means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

"Capital Lease Obligations" means, with respect to any person, any Capital Lease on the face of a balance sheet of such person prepared in accordance with GAAP; the amount of such obligation shall be the capitalized amount thereof, determined in accordance with GAAP; and the stated maturity

thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.

"Capital Stock" for any person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) capital stock or other equity interests issued by that person.

"Certificated Securities" means Securities that are in the form of the Securities attached hereto as Exhibit A-2.

"Common Stock" means the common stock, $.10 par value, of the Company as existing on the date of this Indenture or any other shares of Capital Stock of the Company into which the Common Stock shall be reclassified or changed.

"Company" means Best Buy Co., Inc. and each of its permitted successors pursuant to the applicable provisions of this Indenture.

"Company Request" or "Company Order" means a written request or order signed in the name of the Company by any two Officers.

"Contingent Obligation" means, as applied to any person, any direct or indirect liability, contingent or otherwise, of that person with respect to any Indebtedness of another person, if the purpose or intent thereof by the person incurring the Contingent Obligation is to provide assurance to the obligee of such Indebtedness that such Indebtedness will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such Indebtedness will be protected (in whole or in part) against loss in respect thereof. Contingent Obligations shall include, without limitation, (i) the direct or indirect guarantee, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such person of the obligation of another person, and (ii) any liability of such person for the obligations of another person through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise), (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another, or (c) to make take-or-pay or similar payments, if required regardless of nonperformance by any other party or parties to an agreement, if in the case of any agreement described under subclause (a), (b) or (c) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported.

"Corporate Trust Office" means the principal office of the Trustee at Sixth Street and Marquette Avenue, MAC N9303-110, Minneapolis, Minnesota 554789, or such other office, designated by the Trustee by written notice to the Company and approved by the Company, at which at any particular time its corporate trust business shall be administered.

"Credit Facilities" means one or more debt facilities with banks or other institutional lenders providing for revolving credit and/or term loans, or providing for the support of one or more revolving commercial paper programs, in each case as amended, restated, modified, supplemented, renewed, refunded, refinanced, restructured, replaced, repaid or extended in whole or in part from time to time.

"Default" means any event which is, or after notice or passage of time or both would be, an Event of Default.

"Five-Year Treasury Rate" means, with respect to any Reset Date, the U.S. Treasury yield displayed on the Bloomberg Service screen accessed by the command which is currently "GT5 [GOVT] HP [GO]" (currently page 066) (or any successor or substitute page and command of such Service providing rate quotations comparable to those currently provided on such page of such Service)

specified as the last reported yield applicable to U.S. Treasury Notes at the close of business on the date that is 120 days prior to such Reset Date (or, if such date is not a Business Day, on the next succeeding date which is a Business Day) or, if such yield is not available at such time for any reason, the "Five Year Treasury Rate" with respect to such Reset Date shall mean the rate (expressed as a bond equivalent on the basis of a year of 365 or 366 days, as the case may be, and applied on a daily basis) for direct obligations of the United States of America having a maturity that is equal to five years, as published weekly by the Federal Reserve Board in "Federal Reserve Statistical Release H.15(519)—Selected Interest Rates" or any successor publication, specified as the closing rate applicable to five-year U.S. Treasury Notes for the date that is 120 days prior to such Reset Date (or, if such date is not a Business Day, on the next succeeding date which is a Business Day).

"GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth (i) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (ii) in statements and pronouncements of the Financial Accounting Standards Board; and (iii) in such other statements by such other entity as approved by a significant segment of the accounting profession.

"Global Securities" means Securities that are in the form of the Securities attached hereto as Exhibit A-1, and that are issued to a Depositary, and to the extent that such Securities are required to bear the Legend required by Section 2.6, such Securities shall be in the form of a Restricted Global Security.

"Guarantee" means the Guarantee of the Securities by each of the Guarantors pursuant to Article XI and any additional Guarantee of the Securities to be executed by any Additional Guarantor pursuant to Section 4.3.

"Hedging Obligation" of any person means the obligations of that person under (i) interest rate swap agreements, interest rate cap agreements or interest rate collar agreements; (ii) foreign exchange contracts and currency swap agreements; and (iii) other agreements or arrangements entered into in the ordinary course of business and consistent with past practices designed to protect that person against fluctuations in interest rates or currency exchange rates.

"Holder" or "Securityholder" means a person in whose name a Security is registered on the Registrar's books.

"Indebtedness" of any person means, without duplication:

(1) all obligations of such person for borrowed money or for the deferred purchase price of property or services, and including, without limitation, the face amount available to be drawn under all letters of credit, reimbursement and similar obligations with respect to surety bonds, letters of credit and banks' acceptances, whether or not matured,

(2) all obligations evidenced by notes, bonds, debentures or similar instruments,

(3) all obligations of such person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property),

(4) all Capital Lease Obligations of such person,

(5) all Contingent Obligations of such person,

(6) all Hedging Obligations of such person, and

(7) all Indebtedness referred to in clause (1), (2), (3), (4) or (5) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured

by) any Lien upon or in property (including, without limitation, accounts and contracts rights) owned by such person, even though such person has not assumed or become liable for the payment of such Indebtedness;

provided, however, that Indebtedness shall not include current accounts payable arising in the ordinary course of business.

The amount of any Indebtedness outstanding as of any date shall be (a) the accreted value thereof, in the case of any Indebtedness issued with original issue discount and (b) the principal amount thereof, together with any interest thereon that is more than 30 days past due, in the case of any other Indebtedness.

"Indenture" means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof, including the provisions of the TIA that are deemed to be a part hereof.

"Initial Purchasers" means Credit Suisse First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial purchasers under the Purchase Agreement.

"Issue Date" of any Security means the date on which the Security was originally issued or deemed issued as set forth on the face of the Security.

"Issue Price" of any Security means, in connection with the original issuance of such Security, the initial issue price at which such Security is sold as set forth on the face of such Security.

"Lien" means any pledge, mortgage, lien, security interest, hypothecation, assignment for security interest or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, any agreement to give a security interest or any Capital Lease).

"Obligations" means any principal, accrued and unpaid cash interest (including any Additional Interest and any accrued and unpaid cash interest accruing on or after the filing of any petition in bankruptcy or for reorganization, whether or not a claim for post-filing interest is allowed in such proceeding), penalties, fees, indemnifications, guarantees, reimbursements, damages and other liabilities payable in respect of the Securities and the Indenture.

"Officer" means the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of the Company or a Guarantor, as the case may be.

"Officers' Certificate" means a written certificate containing the information specified in Sections 12.4 and 12.5, signed in the name of the Company by any two Officers of the Company, and delivered to the Trustee. An Officers' Certificate given pursuant to Section 4.4 shall be signed by an authorized financial or accounting Officer of the Company but need not contain the information specified in Sections 12.4 and 12.5.

"Opinion of Counsel" means a written opinion containing the information specified in Sections 12.4 and 12.5, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company or the Trustee.

"person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof and, for purposes of Article IV, shall include any syndicate or group which would be deemed to be a "person" under Section 13(d)(3) of the Exchange Act as in effect on the date of the original execution of this Indenture.

"Purchase Agreement" means the Purchase Agreement dated June 22, 2001 among the Company, the Guarantors and the Initial Purchasers.

"Redemption Date" shall mean the date specified in a notice of redemption on which the Securities may be redeemed in accordance with the terms of the Securities and this Indenture.

"Registration Rights Agreement" means the Registration Rights Agreement dated June 27, 2001 among the Company, the Guarantors and the Initial Purchasers.

"Responsible Officer" shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

"Restricted Global Security" means a permanent Global Security in the form of the Security attached hereto as Exhibit A-1, and that is deposited with and registered in the name of the Depositary, representing Securities sold in reliance on Rule 144A.

"Restricted Security" means a Security required to bear the restrictive legend set forth in the form of Security in the form of Exhibit A-1 and Exhibit A-2 of this Indenture.

"Restricted Subsidiary" means any Subsidiary of the Company other than an Unrestricted Subsidiary.

"Rule 144" means Rule 144 under the Securities Act (or any successor provision), as it may be amended from time to time.

"Rule 144A" means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time.

"Rule 144(k)" means Rule 144(k) under the Securities Act (or any successor provision), as it may be amended from time to time.

"SEC" means the Securities and Exchange Commission.

"Securities" means any of the Company's Convertible Debentures due June 27, 2021, as amended or supplemented from time to time, issued under this Indenture.

"Securityholder" or "Holder" means a person in whose name a Security is registered on the Registrar's books.

"Stated Maturity", when used with respect to any Security, means June 27, 2021.

"Subsidiary" means any person of which at least a majority of the outstanding Voting Stock shall at the time directly or indirectly be controlled by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries.

"TIA" means the Trust Indenture Act of 1939 as in effect on the date of this Indenture; provided, however, that in the event the TIA is amended after such date, TIA means, to the extent required by any such amendment, the TIA as so amended.

"Trustee" means the party named as the "Trustee" in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor. The foregoing sentence shall likewise apply to any subsequent such successor or successors.

"Unrestricted Subsidiary" means, on any date, any Subsidiary of the Company designated as an Unrestricted Subsidiary by the Board of Directors of the Company; provided that all of the Subsidiaries of the Company existing on the date of this Agreement shall initially be designated as Restricted

Subsidiaries and, provided further that the Board of Directors (i) shall not designate, or continue the designation, as an Unrestricted Subsidiary any Subsidiary that owns any Subsidiary that owns any shares of Capital Stock of a Restricted Subsidiary, (ii) shall not designate, or continue the designation, as an Unrestricted Subsidiary any Subsidiary if such designation or continued designation would result in a withdrawal or downgrade of any rating of the Securities then in effect, (iii) shall not, nor shall it cause or permit any Restricted Subsidiary to, transfer or otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary to any Unrestricted Subsidiary (unless such Unrestricted Subsidiary shall in connection therewith be redesignated as a Restricted Subsidiary) or (iv) shall not designate, or continue the designation, as an Unrestricted Subsidiary, any Subsidiary that is or becomes obligated with respect to any Indebtedness of the Company or any Restricted Subsidiary through the incurrence of a Contingent Obligation or otherwise or pledges assets or provides other security interests to secure the payment or performance of any Indebtedness of the Company or any Restricted Subsidiary. Any designation of a Subsidiary as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complies with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary as of such date.

"Voting Stock" of a person means Capital Stock of such person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such person (irrespective of whether or not at the time Capital Stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

Section 1.2 Other Definitions.

Term:		Defined in:
"Accreted Conversion Price"		Exhibit A-1
"Act"		1.5
"Additional Guarantor"		Preamble
"Adjusted Net Assets"		11.5(b)
"Agent Members"		2.12(e)
"Applicable Percentage"		Exhibit A-1
"Average Sale Price"		10.7
"beneficial owner"		3.8(a)
"cash"		3.7(b)
"Change of Control"		3.8(a)
"Change of Control Company Notice"		3.8(b)
"Change of Control Purchase Date"		3.8(a)
"Change of Control Purchase Notice"		3.8(c)
"Change of Control Purchase Price"		3.8(a)
"Closing Sales Price"		3.7(d)
"Company Notice"		3.7(e)
"Company Notice Date"		3.7(c)
"Conversion Agent"		2.3
"Conversion Date"		10.2
"Conversion Rate"		10.1
"covenant defeasance"		8.1(b)
"Depositary"		2.1(a)

"DTC"		2.1(a)
"Event of Default"		6.1
"Exchange Act"		3.7(d)
"Ex-Dividend Time"		10.7
"Extraordinary Cash Dividend"		10.8
"Final Surrender Date"		3.8(a)
"Funding Guarantor"		11.5(b)
"Guarantor"		Preamble
"Institutional Accredited Investors"		2.1(b)
"Interest Payment Date"		Exhibit A-1
"legal defeasance"		8.1(b)
"Legend"		2.6(f)
"Market Price"		3.7(d)
"Notice of Default"		6.1
"Option Exercise Date"		Exhibit A-1
"Paying Agent"		2.3
"Purchase Date"		3.7(a)
"Purchase Notice"		3.7(a)
"Purchase Price"		3.7(a)
"QIB"		2.1(a)
"Rate Reset"		Exhibit A-1
"Redemption Price"		3.1
"Registrar"		2.3
"Relevant Cash Dividends"		10.8
"Reset Date"		Exhibit A-1
"Restated Principal Amount"		Exhibit A-1
"Rule 144A Information"		4.7
"Securities Act"		3.7(d)
"Spin-off"		10.8
"Tax Event"		Exhibit A-1
"Time of Determination"		10.7
"trading day"		3.7(d)
"U.S. Government Obligations"		8.1(a)

Section 1.3 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

"Commission" means the SEC.

"indenture securities" means the Securities.

"indenture security holder" means a Securityholder.

"indenture to be qualified" means this Indenture.

"indenture trustee" or "institutional trustee" means the Trustee.

"obligor" on the indenture securities means the Company.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

Section 1.4 Rules of Construction. Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles as in effect from time to time;

(3) "or" is not exclusive;

(4) "including" means including, without limitation; and

(5) words in the singular include the plural, and words in the plural include the singular.

Section 1.5 Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.

(b) The fact and date of the execution by any person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to such officer the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Trustee deems sufficient.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

(e) If the Company shall solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.

ARTICLE II
THE SECURITIES

Section 2.1 Form and Dating. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 and Exhibit A-2, which are a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule or usage; provided that any such notation, legend or endorsement required by usage is in a form acceptable to the Company. The Company shall provide any such notations, legends or endorsements to the Trustee in writing. Each Security shall be dated the date of its authentication.

(a) Restricted Global Securities. Securities offered and sold within the United States to qualified institutional buyers as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued, initially in the form of a Restricted Global Security, which shall be deposited with the Trustee at its Corporate Trust Office, as custodian for the Depositary (as defined below) and registered in the name of The Depository Trust Company ("DTC") or the nominee thereof (DTC, or any successor thereto, and any such nominee being hereinafter referred to as the "Depositary"), duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount at maturity of the Restricted Global Securities may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary as hereinafter provided.

(b) Global Securities in General. Each Global Security shall represent such of the outstanding Securities as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Securities from time to time endorsed thereon and that the aggregate amount of outstanding Securities represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges, redemptions and conversions.

Any adjustment of the aggregate principal amount at maturity of a Global Security to reflect the amount of any increase or decrease in the amount of outstanding Securities represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.12 and shall be made on the records of the Trustee and the Depositary.

(c) Book-Entry Provisions. This Section 2.1(c) shall apply only to Global Securities deposited with or on behalf of the Depositary.

The Company shall execute and the Trustee shall, in accordance with this Section 2.1(c), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depositary, (b) shall be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions and (c) shall bear legends substantially to the following effect:

"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF."

(d) Certificated Securities. Securities not issued as interests in the Global Securities shall be issued in certificated form substantially in the form of Exhibit A-2 attached hereto.

Section 2.2 Execution and Authentication. The Securities shall be executed on behalf of the Company by any Officer. The signature of the Officer on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals who were at the time of the execution of the Securities Officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of authentication of such Securities.

No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of an authorized officer, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.

The Trustee shall authenticate and deliver the Securities for original issue in an aggregate principal amount at maturity of up to $506,000,000 (subject to upward adjustment as described in the Securities) upon one or more Company Orders without any further action by the Company.

The Securities shall be issued only in registered form without coupons and only in denominations of $1,000 of principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount).

Section 2.3 Registrar, Paying Agent and Conversion Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), an office or agency where Securities may be presented for purchase or payment ("Paying Agent") and an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars, one or more additional paying agents and one or more additional conversion agents. The term Paying Agent includes any additional paying agent, including any named pursuant to Section 4.6. The term Conversion Agent includes any additional conversion agent, including any named pursuant to Section 4.6.

The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent, Conversion Agent or co-registrar (other than the Trustee). The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.7. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar, Conversion Agent or co-registrar.

The Company initially appoints the Trustee as Registrar, Conversion Agent and Paying Agent in connection with the Securities.

Section 2.4 Paying Agent to Hold Money and Securities in Trust. Except as otherwise provided herein, on or prior to each due date of payments in respect of any Security, the Company shall deposit with the Paying Agent a sum of money (in immediately available funds if deposited on the due date) or shares of Common Stock sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money and shares of Common Stock held by the Paying Agent for the making of payments in respect of the Securities and shall notify the Trustee of any default by the Company in making any such payment. At any time during the continuance of any such default, the Paying Agent shall, upon the written request of the Trustee,

forthwith pay to the Trustee all money and shares of Common Stock so held in trust. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent, it shall segregate the money and shares of Common Stock held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money and shares of Common Stock held by it to the Trustee and to account for any funds and Common Stock disbursed by it. Upon doing so, the Paying Agent shall have no further liability for the money or shares of Common Stock.

Section 2.5 Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall cause to be furnished to the Trustee at least semiannually on June 24 and December 24 a listing of Securityholders dated within 15 days of the date on which the list is furnished and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders.

Section 2.6 Transfer and Exchange. (a) Subject to Section 2.12, upon surrender for registration of transfer of any Security, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at the office or agency of the Company designated as Registrar or co-registrar pursuant to Section 2.3, the Company and the Guarantors shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities and related Guarantees of any authorized denomination or denominations, of a like aggregate principal amount at maturity. The Company shall not charge a service charge for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of the Securities from the Securityholder requesting such transfer or exchange.

At the option of the Holder, Securities may be exchanged for other Securities of any authorized denomination or denominations, of a like aggregate principal amount at maturity, upon surrender of the Securities to be exchanged, together with a written instrument of transfer satisfactory to the Registrar duly executed by the Securityholder or such Securityholder's attorney duly authorized in writing, at such office or agency. Whenever any Securities are so surrendered for exchange, the Company and the Guarantors shall execute, and the Trustee shall authenticate and deliver, the Securities and the related Guarantees which the Holder making the exchange is entitled to receive.

The Company shall not be required to make, and the Registrar need not register, transfers or exchanges of Securities selected for redemption (except, in the case of Securities to be redeemed in part, the portion thereof not to be redeemed) or any Securities in respect of which a Purchase Notice or Change of Control Purchase Notice has been given and not withdrawn by the Holder thereof in accordance with the terms of this Indenture (except, in the case of Securities to be purchased in part, the portion thereof not to be purchased) or any Securities for a period of 15 days before the mailing of a notice of redemption of Securities to be redeemed.

(b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.12 and this Section 2.6(b). Transfers of a Global Security shall be limited to transfers of such Global Security in whole or in part, to the Depositary, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee.

(c) Successive registrations and registrations of transfers and exchanges as aforesaid may be made from time to time as desired, and each such registration shall be noted on the register for the Securities.

(d) Any Registrar appointed pursuant to Section 2.3 shall provide to the Trustee such information as the Trustee may reasonably require in connection with the delivery by such Registrar of Securities upon transfer or exchange of Securities.

(e) No Registrar shall be required to make registrations of transfer or exchange of Securities during any periods designated in the text of the Securities or in this Indenture as periods during which such registration of transfers and exchanges need not be made.

(f) If Securities are issued upon the transfer, exchange or replacement of Securities subject to restrictions on transfer and bearing the legends set forth on the forms of Security attached hereto as Exhibit A-1 and Exhibit A-2 setting forth such restrictions (collectively, the "Legend"), or if a request is made to remove the Legend on a Security, the Securities so issued shall bear the Legend, or the Legend shall not be removed, as the case may be, unless there is delivered to the Company and the Registrar such satisfactory evidence, which shall include an Opinion of Counsel, as may be reasonably required by the Company and the Registrar, that neither the Legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A or Rule 144 or that such Securities are not "restricted" within the meaning of Rule 144. Upon (i) provision of such satisfactory evidence, or (ii) notification by the Company to the Trustee and Registrar of the sale of such Security pursuant to a registration statement that is effective at the time of such sale, the Trustee, at the written direction of the Company, shall authenticate and deliver a Security that does not bear the Legend. If the Legend is removed from the face of a Security and the Security is subsequently held by the Company or an Affiliate of the Company, the Legend shall be reinstated.

Section 2.7 Replacement Securities. If (i) any mutilated Security is surrendered to the Trustee, or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Security, and there is delivered to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company and the Guarantors shall execute and upon its written request the Trustee shall authenticate and deliver, in exchange for any such mutilated Security or in lieu of any such destroyed, lost or stolen Security, a new Security and related Guarantees of like tenor and principal amount at maturity, bearing a certificate number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, or is about to be purchased by the Company pursuant to Article III, the Company in its discretion may, instead of issuing a new Security, pay or purchase such Security, as the case may be.

Upon the issuance of any new Securities under this Section 2.7, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Every new Security issued pursuant to this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

The provisions of this Section 2.7 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 2.8 Outstanding Securities; Determinations of Holders' Action. Securities outstanding at any time are all the Securities authenticated by the Trustee except for those cancelled by it, those paid

pursuant to Section 2.7, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. A Security does not cease to be outstanding because the Company, a Guarantor or an Affiliate thereof holds the Security; provided, however, that in determining whether the Holders of the requisite principal amount at maturity of Securities have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company, any Guarantor or any other obligor upon the Securities or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so disregarded. Subject to the foregoing, only Securities outstanding at the time of such determination shall be considered in any such determination (including, without limitation, determinations pursuant to Articles VI and IX).

If a Security is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Security is held by a bona fide purchaser.

If the Paying Agent holds, in accordance with this Indenture, on a Redemption Date, or on the Business Day following a Purchase Date or a Change of Control Purchase Date, or on Stated Maturity, money or securities, if permitted hereunder, sufficient to pay Securities payable on that date, then immediately after such Redemption Date, Purchase Date, Change of Control Purchase Date or Stated Maturity, as the case may be, such Securities shall cease to be outstanding, cash interest on such Securities shall cease to accrue and such Securities shall cease to accrete in value; provided that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made.

If a Security is converted in accordance with Article X, then from and after the time of conversion on the Conversion Date, such Security shall cease to be outstanding, cash interest, if any, shall cease to accrue on such Security and such Security shall cease to accrete in value.

Section 2.9 Temporary Securities. Pending the preparation of definitive Securities, the Company and the Guarantors may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities and related Guarantees which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities and related Guarantees in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities and related Guarantees may determine, as conclusively evidenced by their execution of such Securities and related Guarantees.

If temporary Securities and related Guarantees are issued, the Company and the Guarantors shall cause definitive Securities and related Guarantees to be prepared without unreasonable delay. After the preparation of definitive Securities and related Guarantees, the temporary Securities and related Guarantees shall be exchangeable for definitive Securities and related Guarantees upon surrender of the temporary Securities and related Guarantees at the office or agency of the Company designated for such purpose pursuant to Section 2.3, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities and related Guarantees the Company and the Guarantors shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount at maturity of definitive Securities and related Guarantees of authorized denominations. Until so exchanged the temporary Securities and related Guarantees shall in all respects be entitled to the same benefits under this Indenture as definitive Securities and related Guarantees.

Section 2.10 Cancellation. All Securities surrendered for payment, purchase by the Company pursuant to Article III, conversion, redemption or registration of transfer or exchange shall, if surrendered to any person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities

previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee. The Company may not issue new Securities to replace Securities it has paid or delivered to the Trustee for cancellation or that any Holder has converted pursuant to Article X. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of by the Trustee in accordance with the Trustee's customary procedure.

Section 2.11 Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of the Security or the payment of any Redemption Price, Purchase Price or Change of Control Purchase Price in respect thereof, and interest thereon, for the purpose of conversion and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

Section 2.12 Global Securities. (a) Notwithstanding any other provisions of this Indenture or the Securities, (A) transfers of a Global Security, in whole or in part, shall be made only in accordance with Section 2.6 and Section 2.12(a)(i), (B) transfers of a beneficial interest in a Global Security for a Certificated Security shall comply with Section 2.6 and Section 2.12(a)(ii) below, and (C) transfers of a Certificated Security shall comply with Section 2.6 and Sections 2.12(a)(iii) and (iv) below.

(i) Transfer of Global Security. A Global Security may not be transferred, in whole or in part, to any person other than the Depositary or a nominee or any successor thereof, and no such transfer to any such other person may be registered; provided that this clause (i) shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security. No transfer of a Security to any person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such person. Nothing in this Section 2.12(a)(i) shall prohibit or render ineffective any transfer of a beneficial interest in a Global Security effected in accordance with the other provisions of this Section 2.12(a).

(ii) Restrictions on Transfer of a Beneficial Interest in a Global Security for a Certificated Security. A beneficial interest in a Global Security may not be exchanged for a Certificated Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a transfer of a beneficial interest in a Global Security in accordance with Applicable Procedures for a Certificated Security in the form satisfactory to the Trustee, together with:

(A) so long as the Securities are Restricted Securities, certification in the form set forth in Exhibit B;

(B) written instructions to the Trustee to make, or direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect a decrease in the aggregate principal amount at maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such decrease; and

(C) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the Legend,

then the Trustee shall cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate principal amount at maturity of the Securities represented by the Global Security to be decreased by the aggregate principal amount at maturity of the Certificated Security to be issued, shall issue such Certificated Security and shall debit or cause to be debited to the account of the person

specified in such instructions a beneficial interest in the Global Security equal to the principal amount at maturity of the Certificated Security so issued.

(iii) Transfer and Exchange of Certificated Securities. When Certificated Securities are presented to the Registrar with a request:

(A) to register the transfer of such Certificated Securities; or

(B) to exchange such Certificated Securities for an equal principal amount at maturity of Certificated Securities of other authorized denominations,

the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Certificated Securities surrendered for transfer or exchange:

(1) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and

(2) so long as such Securities are Restricted Securities, such Securities are being transferred or exchanged pursuant to an effective registration statement under the Securities Act or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable:

(A) if such Certificated Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or

(B) if such Certificated Securities are being transferred to the Company, a certification to that effect; or

(C) if such Certificated Securities are being transferred pursuant to an exemption from registration, (i) a certification to that effect (in the form set forth in Exhibit B, if applicable) and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the Legend.

(iv) Restrictions on Transfer of a Certificated Security for a Beneficial Interest in a Global Security. A Certificated Security may not be exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below.

Upon receipt by the Trustee of a Certificated Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with:

(A) so long as the Securities are Restricted Securities, certification, in the form set forth in Exhibit B, that such Certificated Security is being transferred to a QIB in accordance with Rule 144A; and

(B) written instructions directing the Trustee to make, or to direct the Registrar to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount at maturity of the Securities represented by the Global Security, such instructions to contain information regarding the Depositary account to be credited with such increase,

then the Trustee shall cancel such Certificated Security and cause, or direct the Registrar to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Registrar, the aggregate principal amount at maturity of Securities represented by the Global Security to be increased by the aggregate principal amount at maturity of the Certificated Security

to be exchanged, and shall credit or cause to be credited to the account of the person specified in such instructions a beneficial interest in the Global Security equal to the principal amount at maturity of the Certificated Security so cancelled. If no Global Securities are then outstanding, the Company and the Guarantors shall execute and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Global Security and related Guarantees in the appropriate principal amount at maturity.

(b) Subject to Section 2.12(c), every Security shall be subject to the restrictions on transfer provided in the Legend including the delivery of an opinion of counsel, if so provided. Whenever any Restricted Security is presented or surrendered for registration of transfer or for exchange for a Security registered in a name other than that of the Holder, such Security must be accompanied by a certificate in substantially the form set forth in Exhibit B, dated the date of such surrender and signed by the Holder of such Security, as to compliance with such restrictions on transfer. The Registrar shall not be required to accept for such registration of transfer or exchange any Security not so accompanied by a properly completed certificate.

(c) The restrictions imposed by the Legend upon the transferability of any Security shall cease and terminate when such Security has been sold pursuant to an effective registration statement under the Securities Act or transferred in compliance with Rule 144 or, if earlier, upon the expiration of the holding period applicable to sales thereof under Rule 144(k). Any Security as to which such restrictions on transfer shall have expired in accordance with their terms or shall have terminated may, upon a surrender of such Security for exchange to the Registrar in accordance with the provisions of this Section 2.12 (accompanied, in the event that such restrictions on transfer have terminated by reason of a transfer in compliance with Rule 144, by an opinion of counsel having substantial experience in practice under the Securities Act and otherwise reasonably acceptable to the Company, addressed to the Company and in form acceptable to the Company, to the effect that the transfer of such Security has been made in compliance with Rule 144), be exchanged for a new Security, of like tenor and aggregate principal amount at maturity, which shall not bear the restrictive Legend. The Company shall inform the Trustee of the effective date of any registration statement registering the Securities under the Securities Act. The Trustee shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the aforementioned opinion of counsel or registration statement.

(d) As used in the preceding two paragraphs of this Section 2.12, the term "transfer" encompasses any sale, pledge, transfer, loan, hypothecation, or other disposition of any Security.

(e) The provisions of clauses (i), (ii), (iii), (iv) and (v) below shall apply only to Global Securities:

(i) Notwithstanding any other provisions of this Indenture or the Securities, except as provided in Section 2.12(a)(ii), a Global Security shall not be exchanged in whole or in part for a Security registered in the name of any person other than the Depositary or one or more nominees thereof, provided that a Global Security may be exchanged for Securities registered in the names of any person designated by the Depositary in the event that (i) the Depositary has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or such Depositary has ceased to be a "clearing agency" registered under the Exchange Act, and a successor Depositary is not appointed by the Company within 90 days or (ii) an Event of Default has occurred and is continuing with respect to the Securities. Any Global Security exchanged pursuant to clause (i) above shall be so exchanged in whole and not in part, and any Global Security exchanged pursuant to clause (ii) above may be exchanged in whole or from time to time in part as directed by the Depositary. Any Security issued in exchange for a Global Security or any portion thereof shall be a Global Security; provided that any such Security so issued that is registered in the name of a person other than the Depositary or a nominee thereof shall not be a Global Security.

(ii) Securities issued in exchange for a Global Security or any portion thereof shall be issued in definitive, fully registered form, without interest coupons, shall have an aggregate principal amount at maturity equal to that of such Global Security or portion thereof to be so exchanged, shall have the related Guarantees executed by the Guarantors and attached thereto, shall be registered in such names and be in such authorized denominations as the Depositary shall designate and shall bear the applicable legends provided for herein. Any Global Security to be exchanged in whole shall be surrendered by the Depositary to the Trustee, as Registrar. With regard to any Global Security to be exchanged in part, either such Global Security shall be so surrendered for exchange or, if the Trustee is acting as custodian for the Depositary or its nominee with respect to such Global Security, the principal amount at maturity thereof shall be reduced, by an amount equal to the portion thereof to be so exchanged, by means of an appropriate adjustment made on the records of the Trustee. Upon any such surrender or adjustment, the Trustee shall authenticate and deliver the Security and related Guarantees issuable on such exchange to or upon the order of the Depositary or an authorized representative thereof.

(iii) Subject to the provisions of clause (5) below, the registered Holder may grant proxies and otherwise authorize any person, including Agent Members (as defined below) and persons that may hold interests through Agent Members, to take any action which a holder is entitled to take under this Indenture or the Securities.

(iv) In the event of the occurrence of any of the events specified in clause (1) above, the Company shall promptly make available to the Trustee a reasonable supply of Certificated Securities in definitive, fully registered form, without interest coupons.

(v) Neither any members of, or participants in, the Depositary (collectively, the "Agent Members") nor any other persons on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security registered in the name of the Depositary or any nominee thereof, or under any such Global Security, and the Depositary or such nominee, as the case may be, may be treated by the Company, the Guarantors, the Trustee and any agent of the Company or the Trustee as the absolute owner and holder of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Guarantors, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or such nominee, as the case may be, or impair, as between the Depositary, its Agent Members and any other person on whose behalf an Agent Member may act, the operation of customary practices of such persons governing the exercise of the rights of a holder of any Security.

Section 2.13 CUSIP Numbers. The Company may issue the Securities with one or more "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company shall promptly notify the Trustee of any change in the CUSIP numbers.

Section 2.14 Ranking. The Indebtedness of the Company and the Guarantors arising under or in connection with this Indenture and every outstanding Security and related Guarantee issued under this Indenture from time to time constitutes and shall constitute the senior unsecured general obligations of the Company and the Guarantors, ranking equally with other existing and future senior unsecured Indebtedness of the Company and the Guarantors and ranking senior to any future subordinated Indebtedness of the Company and the Guarantors.

ARTICLE III
REDEMPTION AND PURCHASES

Section 3.1 Company's Right to Redeem; Notices to Trustee. The Company, at its option, may redeem the Securities in accordance with the provisions of Section 5 of the Securities in whole or in part, at any time or from time to time, on or after June 27, 2004 for a redemption price per Security equal to the Accreted Value plus accrued and unpaid interest up to but not including the Redemption Date, or if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, at a redemption price per Security equal to the Restated Principal Amount plus accrued and unpaid cash interest up to but not including the Redemption Date (in either such case, the "Redemption Price). If the Company elects to redeem Securities pursuant to Section 5 of the Securities, it shall notify the Trustee in writing of the Redemption Date, the principal amount at maturity of Securities to be redeemed and the Redemption Price.

The Company shall give the notice to the Trustee provided for in this Section 3.1 by a Company Order, at least 20 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee).

Section 3.2 Selection of Securities to Be Redeemed. If less than all the Securities are to be redeemed, unless the procedures of the Depositary provide otherwise, the Trustee shall select the Securities to be redeemed by lot, on a pro rata basis or by another method the Trustee considers fair and appropriate (so long as such method is not prohibited by the rules of any stock exchange on which the Securities are then listed). The Trustee shall make the selection at least 15 days but not more than 60 days before the Redemption Date from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal amount at maturity of Securities that have denominations larger than $1,000.

Securities and portions of Securities that the Trustee selects shall be in principal amounts at maturity of $1,000 (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount). Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of the Securities to be redeemed.

If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed may be treated by the Trustee as outstanding for the purpose of such selection.

Section 3.3 Notice of Redemption. At least 15 days but not more than 60 days before a Redemption Date, the Company shall mail a notice of redemption by first-class mail, postage prepaid, to each Holder of Securities to be redeemed.

The notice shall identify the Securities to be redeemed and shall state:

(1) the Redemption Date;

(2) the Redemption Price per Security;

(3) the Conversion Rate per Security;

(4) the name and address of the Paying Agent and Conversion Agent;

(5) that Securities called for redemption may be converted at any time before the close of business on the Business Day immediately prior to the Redemption Date;

(6) that Holders who want to convert their Securities must satisfy the requirements set forth in Section 7 of the Securities;

(7) that Securities called for redemption must be surrendered to the Paying Agent to collect the Redemption Price;

(8) if fewer than all of the outstanding Securities are to be redeemed, the certificate numbers, if any, and principal amounts at maturity of the particular Securities to be redeemed;

(9) that, unless the Company defaults in making payment of such Redemption Price, cash interest, if any, on such Securities shall cease to accrue and such Securities shall cease to accrete in value on and after the Redemption Date; and

(10) the CUSIP number(s) of the Securities.

At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense, provided that the Company makes such request at least three Business Days prior to the date by which such notice of redemption must be given to Holders in accordance with this Section 3.3.

Section 3.4 Effect of Notice of Redemption. Once notice of redemption is given, Securities called for redemption become due and payable on the Redemption Date and at the Redemption Price per Security stated in the notice except for Securities which are converted in accordance with the terms of this Indenture. Upon surrender to the Paying Agent, such Securities shall be paid the Redemption Price per Security stated in the notice.

Section 3.5 Deposit of Redemption Price. Prior to 11:00 a.m. (New York City time), on the Redemption Date, the Company shall deposit with the Paying Agent (or if the Company or a Subsidiary or an Affiliate of either of them is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the Redemption Price of all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which on or prior thereto have been delivered by the Company to the Trustee for cancellation or have been converted. The Paying Agent shall as promptly as practicable return to the Company any money not required for that purpose because of conversion of Securities pursuant to Article X. If such money is then held by the Company in trust and is not required for such purpose it shall be discharged from such trust.

Section 3.6 Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate and deliver to the Holder a new Security in an authorized denomination equal in principal amount at maturity to the unredeemed portion of the Security surrendered.

Section 3.7 Purchase of Securities by the Company at Option of the Holder.

(a) General. Securities shall be purchased by the Company pursuant to Section 6 of the Securities at the option of the Holder on June 27, 2004, June 27, 2009 and June 27, 2014 (each, a "Purchase Date"), at a purchase price per Security equal to the Accreted Value plus accrued and unpaid cash interest up to but not including such Purchase Date or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, at a purchase price per Security equal to the Restated Principal Amount plus accrued and unpaid cash interest up to but not including the Purchase Date (in either such case, the "Purchase Price"). Purchases of Securities hereunder shall be made, at the option of the Holder thereof, upon:

(i) delivery to the Paying Agent by the Holder of a written notice of purchase (a "Purchase Notice") during the period beginning at any time from the opening of business on the

date that is 20 Business Days prior to the relevant Purchase Date until the close of business on the fifth Business Day prior to such Purchase Date stating:

(A) the certificate number of the Security which the Holder will deliver to be purchased or the appropriate Depositary procedures if Certificated Securities have not been issued,

(B) the portion of the principal amount at maturity of the Security which the Holder will deliver to be purchased, which portion must be in principal amounts at maturity of $1,000 (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount),

(C) that such Security shall be purchased by the Company as of the Purchase Date pursuant to the terms and conditions specified in Section 6 of the Securities and in this Indenture, and

(D) in the event the Company elects, pursuant to Section 3.7(b), to pay the Purchase Price, in whole or in part, in shares of Common Stock but such portion of the Purchase Price shall ultimately be paid to such Holder entirely in cash because any of the conditions to payment of the Purchase Price in shares of Common Stock is not satisfied prior to the close of business on the relevant Purchase Date, as set forth in Section 3.7(d), whether such Holder elects (i) to withdraw such Purchase Notice as to some or all of the Securities to which such Purchase Notice relates (stating the expected principal amount at maturity and certificate numbers, if any, of the Securities as to which such withdrawal shall relate), or (ii) to receive cash in respect of the entire Purchase Price for all Securities (or portions thereof) to which such Purchase Notice relates; and

(ii) delivery of such Security to the Paying Agent prior to, on or after the Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent, such delivery being a condition to receipt by the Holder of the Purchase Price therefor; provided, however, that such Purchase Price shall be so paid pursuant to this Section 3.7 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof in the related Purchase Notice, as determined by the Company.

If a Holder, in such Holder's Purchase Notice and in any written notice of withdrawal delivered by such Holder pursuant to the terms of Section 3.9, fails to indicate such Holder's choice with respect to the election set forth in clause (D) of Section 3.7(a)(i), such Holder shall be deemed to have elected to receive cash in respect of the entire Purchase Price for all Securities subject to such Purchase Notice in the circumstances set forth in such clause (D).

The Company shall purchase from the Holder thereof, pursuant to this Section 3.7, a portion of a Security, if the principal amount at maturity of such portion is $1,000 (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount). Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security.

Any purchase by the Company contemplated pursuant to the provisions of this Section 3.7 shall be consummated by the delivery of the consideration to be received by the Holder promptly following the later of the Purchase Date and the time of delivery of the Security. Unless the Company defaults in paying the Purchase Price, cash interest, if any, on the Securities subject to a Purchase Notice shall cease to accrue and the Securities shall cease to accrete in value on the Purchase Date.

Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Purchase Notice contemplated by this Section 3.7(a) shall have the right to withdraw such Purchase Notice at any time prior to the close of business on the second Business Day prior to the Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 3.9.

The Paying Agent shall promptly notify the Company of the receipt by it of any Purchase Notice or written notice of withdrawal thereof.

(b) Company's Right to Elect Manner of Payment of Purchase Price for Payment. The Securities to be purchased on any Purchase Date pursuant to Section 3.7(a) may be paid for, in whole or in part, at the election of the Company, in U.S. legal tender ("cash") or shares of Common Stock, or in any combination of cash and shares of Common Stock, subject to the conditions set forth in Sections 3.7(c) and (d). The Company shall designate, in the Company Notice delivered pursuant to Section 3.7(e), whether the Company will purchase the Securities for cash or shares of Common Stock, or, if a combination thereof, the percentages of the Purchase Price of Securities in respect of which it will pay in cash or shares of Common Stock; provided that the Company shall pay cash for fractional interests in shares of Common Stock. For purposes of determining the existence of potential fractional interests, all Securities subject to purchase by the Company held by a Holder shall be considered together (no matter how many separate certificates are to be presented). Each Holder whose Securities are purchased pursuant to this Section 3.7 shall receive the same percentage of cash or shares of Common Stock in payment of the Purchase Price for such Securities, except (i) as provided in Section 3.7(d) with regard to the payment of cash in lieu of fractional shares of Common Stock and (ii) in the event that the Company is unable to purchase the Securities of a Holder or Holders for shares of Common Stock because any necessary qualifications or registrations of the shares of Common Stock under applicable state securities laws cannot be obtained, the Company may purchase the Securities of such Holder or Holders for cash. The Company may not change its election with respect to the consideration (or components or percentages of components thereof) to be paid once the Company has given its Company Notice to Holders except pursuant to this Section 3.7(b) or pursuant to Section 3.7(d) in the event of a failure to satisfy, prior to the close of business on the last Business Day prior to the Purchase Date, any condition to the payment of the Purchase Price, in whole or in part, in shares of Common Stock.

At least three Business Days before each Company Notice Date, the Company shall deliver an Officers' Certificate to the Trustee specifying:

(i) the manner of payment selected by the Company,

(ii) the information required by Section 3.7(e) in the Company Notice,

(iii) if the Company elects to pay the Purchase Price, or a specified percentage thereof, in shares of Common Stock, that the conditions to such manner of payment set forth in Section 3.7(d) have been or will be complied with; and

(iv) whether the Company desires the Trustee to give the Company Notice required by Section 3.7(e).

(c) Purchase with Cash. At the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.7(a) has been given, or a specified percentage thereof, may be paid by the Company with cash equal to the aggregate Purchase Price of such Securities. The Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.7(a) has been given shall, for all other Purchase Dates, be paid in cash. The Company Notice, as provided in Section 3.7(e), shall be sent to Holders (and to beneficial owners as required by applicable law) not less than 20 Business Days prior to such Purchase Date (the "Company Notice Date").

(d) Payment by Issuance of shares of Common Stock. At the option of the Company, the Purchase Price of Securities in respect of which a Purchase Notice pursuant to Section 3.7(a) has been given, or a specified percentage thereof, may be paid by the Company by the issuance of a number of shares of Common Stock equal to the quotient obtained by dividing (i) the portion of the Purchase

Price to be paid in shares of Common Stock by (ii) the Market Price of one share of Common Stock as determined by the Company in the Company Notice, subject to the next succeeding paragraph.

The Company shall not issue fractional shares of Common Stock in payment of the Purchase Price. Instead, the Company shall pay cash based on the Market Price for all fractional shares. It is understood that if a Holder elects to have more than one Security purchased, the number of shares of Common Stock shall be based on the aggregate amount of Securities to be purchased.

If the Company elects to purchase the Securities by the issuance of shares of Common Stock, the Company Notice, as provided in Section 3.7(e), shall be sent to the Holders (and to beneficial owners as required by applicable law) not later than the Company Notice Date.

The Company's right to exercise its election to purchase Securities through the issuance of shares of Common Stock shall be conditioned upon:

(i) the Company's not having given its Company Notice of an election to pay entirely in cash and its giving of timely Company Notice of an election to purchase all or a specified percentage of the Securities with shares of Common Stock as provided herein;

(ii) the registration of such shares of Common Stock under the Securities Act of 1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case, if required;

(iii) the listing of such shares of Common Stock on the principal national securities exchange on which the shares of Common Stock are listed or, if the shares of Common Stock is not then listed on a national or regional securities exchange, as reported by the Nasdaq National Market;

(iv) any necessary qualification or registration under applicable state securities laws or the availability of an exemption from such qualification and registration; and

(v) the receipt by the Trustee of an Officers' Certificate and an Opinion of Counsel each stating that (A) the terms of the issuance of the shares of Common Stock are in conformity with this Indenture and (B) the shares of Common Stock to be issued by the Company in payment of the Purchase Price in respect of Securities have been duly authorized and, when issued and delivered pursuant to the terms of this Indenture in payment of the Purchase Price in respect of the Securities, shall be validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, free from preemptive rights, and, in the case of such Officers' Certificate, stating that the conditions above and the condition set forth in the second succeeding sentence have been satisfied and, in the case of such Opinion of Counsel, stating that the conditions in clauses (i) through (iv) above have been satisfied.

Such Officers' Certificate shall also set forth the number of shares of Common Stock to be issued for each $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) and the Closing Sales Price of a share of Common Stock on each trading day during the period commencing on the first trading day of the period during which the Market Price is calculated and ending on the third day prior to the applicable Purchase Date. The Company may pay the Purchase Price (or any portion thereof) in shares of Common Stock only if the information necessary to calculate the Market Price is published in a daily newspaper of national circulation. If the foregoing conditions are not satisfied with respect to a Holder or Holders prior to the close of business on the Purchase Date, and the Company has elected to purchase the Securities pursuant to this Section 3.7 through the issuance of shares of Common Stock, the Company shall pay the entire Purchase Price of the Securities of such Holder or Holders in cash.

The "Market Price" of Common Stock on a Purchase Date means the average of the Closing Sales Prices of the shares of Common Stock for the five trading day period ending on the third Business Day prior to such Purchase Date (if the third Business Day prior to such Purchase Date is a trading day, or

if not, then on the last trading day immediately prior to the third Business Day), appropriately adjusted to take into account the occurrence, during the period commencing on the first of the trading days during the five trading day period and ending on such Purchase Date, of any event described in Sections 10.6, 10.7 or 10.8; subject, however, to the conditions set forth in Sections 10.9 and 10.10.

The "Closing Sales Price" of the shares of Common Stock on any date means the closing per share sale price (or, if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average ask prices) on such date as reported in composite transactions for the principal United States securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a United States national or regional securities exchange, as reported by the Nasdaq National Market. In the absence of such quotations, the Company shall be entitled to determine the sales price on the basis of such quotations as it considers appropriate.

"trading day" means each day on which the securities exchange or quotation system that is used to determine the Closing Sales Price is open for trading or quotation.

Upon determination of the actual number of shares of Common Stock to be issued upon redemption of Securities, the Company shall (i) disseminate a press release containing such information through any two of Reuter's Economic Services, Bloomberg Business News and Dow Jones & Company Inc. and (ii) publish such information on its BestBuy.com or other successor Web site or through such other public medium as it may use at that time.

(e) Notice of Election. In connection with any purchase of Securities pursuant to Section 6 of the Securities, the Company shall give notice to Holders setting forth information specified in this Section 3.7(e) (the "Company Notice").

In the event the Company has elected to pay the Purchase Price (or a specified percentage thereof) with shares of Common Stock, the Company Notice shall:

(1) state that each Holder will receive shares of Common Stock with a Market Price determined as of a specified date prior to the Purchase Date equal to such specified percentage of the Purchase Price of the Securities held by such Holder (except any cash amount to be paid in lieu of fractional shares);

(2) set forth the method of calculating the Market Price of the shares of Common Stock; and

(3) state that because the Market Price of shares of Common Stock will be determined prior to the Purchase Date, Holders of the Securities will bear the market risk with respect to the value of the shares of Common Stock to be received from the date such Market Price is determined to the Purchase Date.

In any case, each Company Notice shall include a form of Purchase Notice to be completed by a Holder and shall state:

(i) the Purchase Price per Security and the Conversion Rate per Security and any adjustments thereto;

(ii) the name and address of the Paying Agent and the Conversion Agent;

(iii) that Securities as to which a Purchase Notice has been given may be converted if they are otherwise convertible only in accordance with Article X and Section 7 of the Securities if the applicable Purchase Notice has been withdrawn in accordance with the terms of this Indenture;

(iv) that Securities must be surrendered to the Paying Agent to collect payment;

(v) that the Purchase Price for any Security as to which a Purchase Notice has been given and not withdrawn shall be paid promptly following the later of the Purchase Date and the time of surrender of such Security as described in (iv);

(vi) the procedures the Holder must follow to exercise its put rights under this Section 3.7 and a brief description of those rights;

(vii) briefly, the conversion rights of the Securities;

(viii) the procedures for withdrawing a Purchase Notice (including, without limitation, for a conditional withdrawal pursuant to the terms of Section 3.7(a)(1)(D) or Section 3.9);

(ix) that, unless the Company defaults in making payment on Securities for which a Purchase Notice has been submitted, cash interest, if any, on such Securities shall cease to accrue and such Securities shall cease to accrete in value on the Purchase Date; and

(x) the CUSIP number of the Securities.

At the Company's request, the Trustee shall give such Company Notice in the Company's name and at the Company's expense; provided, however, that, in all cases, the text of such Company Notice shall be prepared by the Company.

Simultaneously with the delivery of a Company Notice, the Company shall (i) disseminate a press release containing the information stated in such Company Notice through any two of Reuter's Economic Services, Bloomberg Business News and Dow Jones & Company Inc. and (ii) publish the information stated in such Company Notice on its BestBuy.com or other successor Web site or through such other public medium as it may use at that time.

(f) Covenants of the Company. All shares of Common Stock delivered upon purchase of the Securities shall be newly issued shares or treasury shares, shall be duly authorized, validly issued, fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim.

(g) Procedure upon Purchase. The Company shall deposit cash (in respect of a cash purchases under this Section 3.7 or for fractional interests, as applicable) or shares of Common Stock, or a combination thereof, as applicable, at the time and in the manner as provided in Section 3.10, sufficient to pay the aggregate Purchase Price of all Securities to be purchased pursuant to this Section 3.7. As soon as practicable after the Purchase Date, the Company shall deliver to each Holder entitled to receive shares of Common Stock through the Paying Agent, a certificate for the number of full shares of Common Stock issuable in payment of the Purchase Price and cash in lieu of any fractional interests. The person in whose name the certificate for the shares of Common Stock is registered shall be treated as a holder of record of Common Stock on the Business Day following the Purchase Date. Subject to Section 3.7(d), no payment or adjustment shall be made for dividends on the shares of Common Stock the record date for which occurred on or prior to the Purchase Date.

(h) Taxes. If a Holder of a purchased Security is paid in shares of Common Stock, the Company shall pay any documentary, stamp or similar issue or transfer tax due on such issue of Common Stock. However, the Holder shall pay any such tax which is due because the Holder requests the Common Stock to be issued in a name other than the Holder's name. The Paying Agent may refuse to deliver the certificates representing the shares of Common Stock being issued in a name other than the Holder's name until the Paying Agent receives a sum sufficient to pay any tax which will be due because the shares of Common Stock are to be issued in a name other than the Holder's name. Nothing herein shall preclude any income tax withholding required by law or regulations.

Section 3.8 Purchase of Securities at Option of the Holder upon Change of Control.

(a) If a Change of Control occurs, the Securities not previously purchased by the Company or any portion of the principal amount at maturity thereof shall be purchased by the Company, at the option of the Holder thereof, on the Change of Control Purchase Date at a purchase price per Security equal to the Accreted Value plus accrued and unpaid cash interest up to but not including the Change of Control Purchase Date or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, at a purchase price per Security equal to the Restated Principal Amount plus accrued and unpaid cash interest up to but not including the Change of Control Purchase Date (in either such case, the "Change of Control Purchase Price"), subject to satisfaction by or on behalf of the Holder of the requirements set forth in Section 3.8(c).

"Change of Control Purchase Date" shall mean the date selected by the Company for the purchase of the Securities that is not less than 10 and not more than 30 days after the Final Surrender Date.

"Final Surrender Date" shall mean the date which is, subject to any contrary requirements of applicable law, 60 days after the date of mailing of the Change of Control Company Notice.

A "Change of Control" shall be deemed to have occurred at such time after the Securities are originally issued as either of the following events shall occur:

(i) there is a report filed on Schedule 13D or TO (or any successor schedule, form or report) pursuant to the Exchange Act, disclosing that any person (for the purposes of this Section 3.8 only, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the voting power of the Common Stock then outstanding; provided that a person shall not be deemed beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or

(ii) there shall be consummated any share exchange, consolidation or merger of the Company pursuant to which the Common Stock would be converted into cash, securities or other property, in each case other than a share exchange, consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the share exchange, consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of all classes of Capital Stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger.

Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred by virtue of the Company, any Subsidiary, any employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary, or any person holding Common Stock for or pursuant to the terms of any such employee benefit plan, filing or becoming obligated to file a report under or in response to Schedule 13D or Schedule TO (or any successor schedule, form or report) under the Exchange Act disclosing beneficial ownership by it of shares of Common Stock, whether in excess of 50% or otherwise.

(b) No later than 30 days after the occurrence of a Change of Control, the Company shall mail a written notice of the Change of Control (the "Change of Control Company Notice") by first-class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law). The Company must cause a copy of such Change of Control Company Notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. The Change of Control Company Notice shall include a form of Change of Control Purchase Notice to be completed by the Holder and shall state:

(1) briefly, the events causing a Change of Control and the date of such Change of Control;

(2) the Final Surrender Date;

(3) the Change of Control Purchase Date;

(4) the Change of Control Purchase Price per Security;

(5) the name and address of the Paying Agent and the Conversion Agent;

(6) the Conversion Rate per Security and any adjustments thereto;

(7) that the Securities as to which a Change of Control Purchase Notice has been given may not be converted, even if they are otherwise convertible pursuant to Article X, if the Change of Control Purchase Notice has been delivered (unless the Company defaults in payment of the Change of Control Purchase Price on the Change of Control Purchase Date and the Holder revokes its Change of Control Purchase Notice);

(8) that the Securities must be surrendered to the Paying Agent to collect payment;

(9) that the Change of Control Purchase Price for any Security as to which a Change of Control Purchase Notice has been duly given shall be paid only if the Holder of such Security, on or before the Final Surrender Date, surrenders such Security as described in (8);

(10) briefly, the procedures the Holder must follow to exercise rights under this Section 3.8;

(11) briefly, the conversion rights, if any, of the Securities;

(12) that, unless the Company defaults in making payment of such Change of Control Purchase Price on the Change of Control Purchase Date, cash interest, if any, on such Securities shall cease to accrue and the Securities shall cease to accrete in value on and after the Change of Control Purchase Date; and

(13) the CUSIP number(s) of the Securities.

(c) A Holder may exercise its rights specified in Section 3.8(a) upon delivery of a written notice of purchase (a "Change of Control Purchase Notice") to the Paying Agent at any time on or prior to the Final Surrender Date, stating:

(1) the certificate number of the Security which the Holder will deliver to be purchased or the appropriate Depositary procedures if Certificated Securities have not been issued,

(2) the portion of the principal amount at maturity of the Security which the Holder will deliver to be purchased, which portion must be $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount); and

(3) that such Security shall be purchased pursuant to the terms and conditions specified in Section 6 of the Securities.

The delivery of such Security to the Paying Agent with such Change of Control Purchase Notice (together with all necessary endorsements) at the offices of the Paying Agent on or prior to the Final Surrender Date shall be a condition to the receipt by the Holder of the Change of Control Purchase Price therefor; provided, however, that such Change of Control Purchase Price shall be so paid pursuant to this Section 3.8 only if the Security so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change of Control Purchase Notice.

The delivery of such Security with such Change of Control Purchase Notice shall be irrevocable (unless the Company defaults in payment of the Change of Control Purchase Price for the Securities on the Change of Control Purchase Date) and the right to convert such Security shall expire when such Security and such Change of Control Purchase Notice are delivered (unless the Company defaults in payment of the Change of Control Purchase Price for the Securities on the Change of Control Purchase Date and such delivery is revoked).

The Company shall purchase from the Holder thereof, pursuant to this Section 3.8, a portion of a Security if the principal amount at maturity of such portion is $1,000 (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount). Provisions of this Indenture that apply to the purchase of all of a Security also apply to the purchase of such portion of such Security.

Any purchase by the Company contemplated pursuant to the provisions of this Section 3.8 shall be consummated by the delivery of the consideration to be received by the Holder on the Change of Control Purchase Date.

The Paying Agent shall promptly notify the Company of the receipt by it of any Change of Control Purchase Notice or written withdrawal thereof.

Section 3.9 Effect of Purchase Notice or Change of Control Purchase Notice. Upon receipt by the Paying Agent of the Purchase Notice or Change of Control Purchase Notice specified in Section 3.7(a) or Section 3.8(c), as applicable, the Holder of the Security in respect of which such Purchase Notice or Change of Control Purchase Notice, as the case may be, was given shall (unless, in the case of a Purchase Notice, such Purchase Notice is withdrawn as specified in the following two paragraphs) thereafter be entitled to receive solely the Purchase Price or Change of Control Purchase Price, as the case may be, with respect to such Security. Such Purchase Price or Change of Control Purchase Price shall be paid to such Holder, subject to receipts of funds and/or securities by the Paying Agent, (i) in the case of such Purchase Price, promptly following the later of (x) the Purchase Date with respect to such Security (provided that the conditions in Section 3.7(a) have been satisfied) and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 3.7(a) and (ii) in the case of such Change of Control Purchase Price, promptly following the Change of Control Purchase Date with respect to such Security (provided that the conditions in Section 3.7(c) have been satisfied). Securities in respect of which a Purchase Notice or Change of Control Purchase Notice has been given by the Holder thereof may not be converted pursuant to Article X on or after the date of the delivery of such Purchase Notice or Change of Control Purchase Notice unless, in the case of a Purchase Notice, such Purchase Notice has first been validly withdrawn as specified in the following two paragraphs.

A Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent in accordance with the Purchase Notice at any time prior to the close of business on the second Business Day prior to the Purchase Date specifying:

(1) the certificate number of the Security which the Holder will deliver to be purchased or the appropriate Depositary procedures if Certificated Securities have not been issued,

(2) the principal amount at maturity of the Security with respect to which such notice of withdrawal is being submitted, and

(3) the principal amount at maturity, if any, of such Security which remains subject to the original Purchase Notice and which has been or will be delivered for purchase by the Company.

A written notice of withdrawal of a Purchase Notice may be in the form set forth in the preceding paragraph or may be in the form of (i) a conditional withdrawal contained in a Purchase Notice pursuant to the terms of Section 3.7(a)(1)(D) or (ii) a conditional withdrawal containing the information set forth in Section 3.7(a)(1)(D) and the preceding paragraph and contained in a written notice of withdrawal delivered to the Paying Agent as set forth in the preceding paragraph.

There shall be no purchase of any Securities pursuant to Section 3.7 or 3.8 if there has occurred (prior to, on or after, as the case may be, the giving, by the Holders of such Securities, of the required Purchase Notice or Change of Control Purchase Notice, as the case may be) and is continuing an Event of Default. The Paying Agent shall promptly return to the respective Holders thereof any Securities (x) with respect to which a Purchase Notice has been withdrawn in compliance with this Indenture, or (y) held by it during the continuance of an Event of Default in which case, upon such return, the Purchase Notice or Change of Control Purchase Notice with respect thereto shall be deemed to have been withdrawn.

Section 3.10 Deposit of Purchase Price or Change of Control Purchase Price. Prior to 11:00 a.m. (New York City time) on the Business Day following the Purchase Date or the Change of Control Purchase Date, as the case may be, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 2.4) an amount of cash (in immediately available funds if deposited on such Business Day) or Common Stock, if permitted hereunder, sufficient to pay the aggregate Purchase Price or Change of Control Purchase Price, as the case may be, of all the Securities or portions thereof which are to be purchased as of the Purchase Date or Change of Control Purchase Date, as the case may be.

Section 3.11 Securities Purchased in Part. Any Certificated Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and deliver to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder in aggregate principal amount at maturity equal to, and in exchange for, the portion of the principal amount at maturity of the Security so surrendered which is not purchased.

Section 3.12 Covenant to Comply With Securities Laws Upon Purchase of Securities. When complying with the provisions of Section 3.7 or 3.8 (provided that such offer or purchase constitutes an "issuer tender offer" for purposes of Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act at the time of such offer or purchase), the Company shall (i) comply with Rule 13e-4 and Rule 14e-1 (or any successor provision) under the Exchange Act, (ii) file the related Schedule TO (or any successor schedule, form or report) under the Exchange Act, and (iii) otherwise comply with all Federal and state securities laws so as to permit the rights and

obligations under Sections 3.7 and 3.8 to be exercised in the time and in the manner specified in Sections 3.7 and 3.8.

Section 3.13 Repayment to the Company. The Trustee and the Paying Agent shall return to the Company any cash or shares of Common Stock that remain unclaimed, together with interest or dividends, if any, thereon (subject to the provisions of Section 7.1(f)), held by them for the payment of the aggregate Purchase Price or Change of Control Purchase Price, as the case may be; provided, however, that to the extent that the aggregate amount of cash or shares of Common Stock deposited by the Company pursuant to Section 3.10 exceeds the aggregate Purchase Price or Change of Control Purchase Price, as the case may be, of the Securities or portions thereof which the Company is obligated to purchase as of the Purchase Date or Change of Control Purchase Date, as the case may be, then, unless otherwise agreed in writing with the Company, promptly after the Business Day following the Purchase Date or Change of Control Purchase Date, as the case may be, the Trustee shall return any such excess to the Company together with interest or dividends, if any, thereon (subject to the provisions of Section 7.1(f)).

ARTICLE IV

COVENANTS

Section 4.1 Payment of Securities. The Company shall promptly make all payments in respect of the Securities on the dates and in the manner provided in the Securities or pursuant to this Indenture. Any amounts of cash or shares of Common Stock to be given to the Trustee or Paying Agent, shall be deposited with the Trustee or Paying Agent by 11:00 a.m. New York City time by the Company. The principal and accrued and unpaid cash interest, if any, in respect of a Security shall be considered paid on the applicable date due if on such date the Trustee or the Paying Agent holds, in accordance with this Indenture, cash or securities, if permitted hereunder, sufficient to pay all such amounts then due.

Section 4.2 SEC and Other Reports. The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, it shall continue to provide the Trustee with reports containing substantially the same information as would have been required to be filed with the SEC had the Company continued to have been subject to such reporting requirements. In such event, such reports shall be provided at the times the Company would have been required to provide reports had it continued to have been subject to such reporting requirements. The Company also shall comply with the other provisions of TIA Section 314(a). Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely conclusively on Officers' Certificates).

Section 4.3 Guarantees. Except as otherwise specified in Section 11.4, the Company shall cause each Restricted Subsidiary (which includes any Subsidiary that ceases to be an Unrestricted Subsidiary) to jointly and severally unconditionally guarantee the Obligations of the Company under the Securities and this Indenture pursuant to the terms of this Section 4.3 and Article XI. Any Restricted Subsidiary that has not already provided a Guarantee in accordance with the terms of this Indenture, and any former Guarantor that is required to deliver a Guarantee pursuant to the second sentence of Section 11.4(a), shall execute a supplement to this Indenture as described in clause (a) below and shall deliver an Opinion of Counsel as described in clause (b) below.

Except as otherwise specified in Section 11.4, if at any time when the Securities are outstanding,

(i) the Company or any Restricted Subsidiary shall organize, acquire or otherwise invest in another person that becomes a Restricted Subsidiary or becomes obligated with respect to any Indebtedness under one or more Credit Facilities of the Company or any Restricted Subsidiary through the incurrence of a Contingent Obligation or otherwise, or

(ii) any Unrestricted Subsidiary becomes obligated with respect to any Indebtedness under one or more Credit Facilities of the Company or any Restricted Subsidiary through the incurrence of a Contingent Obligation or otherwise or pledges assets or provides other security interests to secure any Indebtedness under one or more Credit Facilities of the Company or any Restricted Subsidiary, or

(iii) any Unrestricted Subsidiary shall be designated as a Restricted Subsidiary,

then, unless that Subsidiary has already provided a Guarantee in accordance with the terms of this Indenture or has been properly designated (and continues to be so properly designated) as an Unrestricted Subsidiary, the Company shall cause such Subsidiary to (a) execute and deliver to the Trustee a supplement to this Indenture substantially in the form of Exhibit D pursuant to which such Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Securities and this Indenture on the terms set forth in this Indenture and (b) deliver to the Trustee an Opinion of Counsel that such supplement to this Indenture has been duly authorized, executed and delivered by such Subsidiary and constitutes a legal, valid, binding and enforceable obligation of such Subsidiary enforceable against such Subsidiary in accordance with its terms, subject to customary exceptions. Thereafter, such Subsidiary shall be a Guarantor for all purposes of this Indenture as it relates to the Securities and this Indenture.

Section 4.4 Compliance Certificates. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company (beginning with the fiscal year ending on or about February 28, 2002) an Officers' Certificate, stating whether or not to the best knowledge of the signers thereof, the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.

Section 4.5 Further Instruments and Acts. Upon request of the Trustee, the Company shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

Section 4.6 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency of the Trustee, Registrar, Paying Agent and Conversion Agent where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer, exchange, purchase, redemption or conversion and where notices and demands to or upon the Company or the Guarantors in respect of the Securities, the Guarantees and this Indenture may be served. The office of Wells Fargo Bank Minnesota, National Association, 45 Broadway, 12^th Floor, MAC N2666-120, New York, New York 10006 shall initially be such office or agency for all of the aforesaid purposes. The Company shall give prompt written notice to the Trustee of the location, and of any change in the location, of any such office or agency (other than a change in the location of the office of the Trustee). If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 12.2.

The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York, for such purposes.

Section 4.7 Delivery of Certain Information. At any time when the Company or any Guarantor is not subject to Section 13 or 15(d) of the Exchange Act, upon the request of a Holder or any beneficial owner of Securities or holder or beneficial owner of shares of Common Stock issued upon conversion thereof, or in accordance with Section 3.7(d), the Company or any such Guarantor shall promptly furnish or cause to be furnished Rule 144A Information to such Holder or any beneficial owner of Securities or holder or beneficial owner of shares of Common Stock, or to a prospective purchaser of any such security designated by any such holder, as the case may be, to the extent required to permit compliance by such Holder or holder with Rule 144A in connection with the resale of any such security. "Rule 144A Information" shall be such information as is specified pursuant to Rule 144A(d)(4) under the Securities Act. Whether a person is a beneficial owner shall be determined by the Company to the Company's reasonable satisfaction.

Section 4.8 Calculation of Original Issue Discount. The Company and the Trustee on behalf of the Holders agree (i) that for United States federal income tax purposes the Securities shall be treated as indebtedness subject to the Treasury regulations governing contingent payment debt instruments, (ii) that the Holders shall report original issue discount and interest on the Securities in accordance with the Company's determination of both the "comparable yield" and the "projected payment schedule" and (iii) to be bound by the Company's application of the Treasury regulations that govern contingent payment debt instruments. For this purpose, the "comparable yield" for the Securities is 6.75% compounded semi-annually and the "projected payment schedule" may be obtained by contacting the Company at the address set forth in Section 12.2. The Company shall file with the Trustee no later than the end of each fiscal year of the Company (i) a written notice specifying the amount of original issue discount (including daily rates and accrual periods) accrued on outstanding Securities as of the end of such year and (ii) such other specific information relating to such original issue discount as may then be relevant under the Internal Revenue Code of 1986, as amended from time to time.

ARTICLE V
SUCCESSOR CORPORATION

Section 5.1 When Company May Merge or Transfer Assets. The Company shall not consolidate with or merge with or into any other person or convey, transfer, sell or lease its properties and assets substantially as an entirety to any person (other than a consolidation with or merger with or into a Guarantor or a conveyance, transfer, sale or lease to a Guarantor), permit any person to consolidate with or merge into the Company, or permit any person to convey, transfer, sell or lease that person's properties and assets substantially as an entirety to the Company, unless:

(i) either (A) the Company shall be the continuing corporation or (B) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety (1) shall be a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (2) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, all of the obligations of the Company under the Securities and this Indenture;

(ii) immediately after giving effect to such transaction, no Event of Default, and no event that, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and

(iii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article V and that all conditions precedent herein provided for relating to such transaction have been satisfied.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise) of the properties and assets of one or more Subsidiaries (other than to the Company or another Subsidiary), which, if such assets were owned by the Company, would constitute all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

The successor person formed by such consolidation or into which the Company is merged or the successor person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, the Company shall be discharged from all obligations and covenants under this Indenture and the Securities. Subject to Section 9.6, the Company, the Guarantors, the Trustee and the successor person shall enter into a supplemental indenture to evidence the succession and substitution of such successor person and such discharge and release of the Company.

ARTICLE VI

DEFAULTS AND REMEDIES

Section 6.1 Events of Default. An "Event of Default" occurs if:

(1) the Company or any Guarantor defaults in the payment of accrued and unpaid cash interest (including any Additional Interest and any additional cash interest payable after any election by the Company to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event) on any Security when the same becomes due and payable and the Default continues uncured for a period of 30 days;

(2) the Company or any Guarantor defaults in the payment of (A) principal (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the Restated Principal Amount) of any Security when the same becomes due and payable, whether at maturity, upon redemption or otherwise, (B) the Redemption Price, Purchase Price or Change of Control Purchase Price in respect of any Security when due or (C) any amount due under the applicable Guarantee;

(3) the Company or any Guarantor fails to comply with any of its other covenants or agreements set forth in this Indenture and the Default continues for a period of 90 days after the written notice specified below;

(4) the Company or any Guarantor fails to make any payment when due, including any applicable grace period, in respect of Indebtedness of the Company or any Guarantor (as applicable), which payment is in an amount in excess of $50,000,000 and which failure results in acceleration of such Indebtedness, or the Company or any Guarantor defaults with respect to any Indebtedness of the Company or any Guarantor (as applicable), which default results in acceleration of any such Indebtedness which is in an amount in excess of $50,000,000;

(5) the Company or any Guarantor shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or any Guarantor or for any substantial part of the property of the Company or any Guarantor or make any general assignment for the benefit of creditors; or

(6) a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company or any Guarantor in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee or sequestrator (or similar official) of the Company or any Guarantor or for any substantial part of the property of the Company or any Guarantor or ordering the winding up or liquidation of the affairs of the Company or any Guarantor and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or

(7) any Guarantee or the related Article XI of this Indenture shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason (other than in accordance with the terms of such Guarantee and this Indenture) to be in full force and effect or any Guarantor, or any person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Guarantee and the Indenture.

A Default under clause (3) or (4) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in aggregate principal amount at maturity of the Securities at the time outstanding notify the Company or the Guarantor (as applicable) and the Trustee, of the Default and the Company or the Guarantor (as applicable) does not cure such Default (and such Default is not waived) within the time specified in clause (3) or (4) above after actual receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default".

The Company or the applicable Guarantor shall deliver to the Trustee, within 30 days after it becomes aware of the occurrence thereof, written notice of any event which with the giving of notice or the lapse of time, or both, would mature into an Event of Default under clauses (3), (4), (5), (6) or (7) above, its status and what action the Company or such Guarantor is taking or proposes to take with respect thereto.

Section 6.2 Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.1(5) or (6)) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount at maturity of the Securities at the time outstanding by notice to the Company and the Trustee, may declare the Accreted Value (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the Restated Principal Amount) plus accrued and unpaid cash interest, if any, on all the Securities to be immediately due and payable. Upon such a declaration, such accelerated amount shall be due and payable immediately. If an Event of Default specified in Section 6.1(5) or (6) occurs and is continuing, the Accreted Value (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the Restated Principal Amount) plus accrued and unpaid cash interest, if any, on all the Securities shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in aggregate principal amount at maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder) may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of the Accreted Value (or, if the Company has elected to restate the principal amount of the Securities and pay additional interest following the

occurrence of a Tax Event, the Restated Principal Amount) plus accrued and cash unpaid interest, if any, that have become due solely as a result of acceleration and if all amounts due to the Trustee under Section 7.7 have been paid. No such rescission shall affect any subsequent Default or impair any right consequent thereto.

Section 6.3 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of the Accreted Value (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the Restated Principal Amount) plus accrued and unpaid cash interest, if any, on the Securities or to enforce the performance of any provision of the Securities or this Indenture.

The Trustee may maintain a proceeding even if the Trustee does not possess any of the Securities or does not produce any of the Securities in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

Section 6.4 Waiver of Past Defaults. The Holders of a majority in aggregate principal amount at maturity of the Securities at the time outstanding, by notice to the Trustee (and without notice to any other Securityholder), may waive an existing Default and its consequences except (a) an Event of Default described in Section 6.1(1) or (2), (b) a Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Securityholder affected or (c) a Default which constitutes a failure to convert any Security in accordance with the terms of Article X. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. This Section 6.4 shall be in lieu of Section 316(a)1(B) of the TIA and such Section 316(a)1(B) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 6.5 Control by Majority. The Holders of a majority in aggregate principal amount at maturity of the Securities at the time outstanding may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability unless the Trustee is offered indemnity satisfactory to it. This Section 6.5 shall be in lieu of Section 316(a)1(A) of the TIA and such Section 316(a)1(A) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 6.6 Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless:

(1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing;

(2) the Holders of at least 25% in aggregate principal amount at maturity of the Securities at the time outstanding make a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee security or indemnity satisfactory to the Trustee against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days after receipt of such notice, request and offer of security or indemnity; and

(5) the Holders of a majority in aggregate principal amount at maturity of the Securities at the time outstanding do not give the Trustee a direction inconsistent with the request during such 60-day period.

A Securityholder may not use this Indenture to prejudice the rights of any other Securityholder or to obtain a preference or priority over any other Securityholder.

Section 6.7 Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal or accrued and unpaid cash interest, if any, in respect of the Securities held by such Holder, on or after the respective due dates expressed in the Securities or any Redemption Date, Purchase Date or Change of Control Purchase Date and to convert the Securities in accordance with Article X, or to bring suit for the enforcement of any such payment on or after such respective dates or the right to convert, shall not be impaired or affected adversely without the consent of such Holder.

Section 6.8 Collection Suit by Trustee. If an Event of Default described in Section 6.1(2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to the Securities and the amounts provided for in Section 7.7.

Section 6.9 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or the Guarantors or any other obligor upon the Securities, the Guarantees or the property of the Company or the Guarantors or of such other obligor or their creditors, the Trustee (irrespective of whether the principal or accrued and unpaid cash interest, if any, in respect of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company or the Guarantors for the payment of any such amount) shall be entitled and empowered, by intervention in such proceeding or otherwise,

(1) to file and prove a claim for the whole amount of the principal and accrued and unpaid cash interest, if any, in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel or any other amounts due the Trustee under Section 7.7) and of the Holders allowed in such judicial proceeding, and

(2) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.7.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article VI, it shall pay out the money in the following order:

FIRST: to the Trustee for amounts due under Section 7.7;

SECOND: to Securityholders for amounts due and unpaid on the Securities for the principal or accrued and unpaid cash interest, if any, as the case may be, ratably, without preference or priority of any kind, according to such amounts due and payable on the Securities; and

THIRD: the balance, if any, to the Company.

The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 6.10. At least 15 days before such record date, the Trustee shall mail to each Securityholder and the Company a notice that states the record date, the payment date and the amount to be paid.

Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in aggregate principal amount at maturity of the Securities at the time outstanding. This Section 6.11 shall be in lieu of Section 315(e) of the TIA and such Section 315(e) is hereby expressly excluded from this Indenture, as permitted by the TIA.

Section 6.12 Waiver of Stay, Extension or Usury Laws. Each of the Company and the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive it from paying all or any portion of the principal in respect of the Securities, or any accrued and unpaid cash interest on such amount, as contemplated herein, or which may affect the covenants or the performance of this Indenture; and each of the Company and the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VII

TRUSTEE

Section 7.1 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

(b) Except during the continuance of an Event of Default:

(i) the Trustee need perform only those duties that are specifically set forth in this Indenture and no others; and

(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture, but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein. This Section 7.1(b) shall be in lieu of Section 3.15(a) of the TIA and such Section 315(a) is hereby expressly excluded from this Indenture, as permitted by the TIA.

(c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) this paragraph (c) does not limit the effect of paragraph (b) of this Section 7.1;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and

(iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5.

Subparagraphs (c)(i), (ii) and (iii) shall be in lieu of Sections 315(d)(1), 315(d)(2) and 315(d)(3) of the TIA and such Sections 315(d)(1), 315(d)(2) and 315(d)(3) are hereby expressly excluded from this Indenture, as permitted by the TIA.

(d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 7.1.

(e) The Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense.

(f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee (acting in any capacity hereunder) shall be under no liability for interest on any money received by it hereunder unless otherwise agreed in writing with the Company.

Section 7.2 Rights of Trustee. Subject to its duties and responsibilities under the TIA,

(1) the Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

(2) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate;

(3) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(4) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith which it believes to be authorized or within its rights or powers conferred under this Indenture;

(5) the Trustee may consult with counsel selected by it and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;

(6) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or

indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby;

(7) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;

(8) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation;

(9) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture;

(10) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other person employed to act hereunder; and

(11) the Trustee may request that the Company or a Guarantor deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

Section 7.3 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, Conversion Agent or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

Section 7.4 Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy of this Indenture, the Securities or the Guarantees, shall not be accountable for the Company's use or application of the proceeds from the Securities, and shall not be responsible for any statement in the registration statement for the Securities and the Guarantees under the Securities Act, in any offering document for the Securities and the Guarantees, or in the Indenture, the Securities (other than its certificate of authentication) or the Guarantees, or the determination as to which beneficial owners are entitled to receive any notices hereunder.

Section 7.5 Notice of Defaults. If a Default occurs and if it is known to the Trustee, the Trustee shall give to each Securityholder notice of the Default within 90 days after it occurs or, if later, within 15 days after it is known to the Trustee, unless such Default shall have been cured or waived before the giving of such notice. Notwithstanding the preceding sentence, except in the case of a Default described in Section 6.1(1) or (2), the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Securityholders. The second sentence of this Section 7.5 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso is hereby expressly excluded from this Indenture, as

permitted by the TIA. The Trustee shall not be deemed to have knowledge of a Default unless a Responsible Officer of the Trustee has received written notice of such Default.

Section 7.6 Reports by Trustee to Holders. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail to each Securityholder a brief report dated as of such May 15 that complies with TIA Section 313(a), if required by such Section 313(a). The Trustee also shall comply with TIA Section 313(b).

A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each securities exchange, if any, on which the Securities are listed. The Company agrees to notify the Trustee promptly whenever the Securities become listed on any securities exchange and of any delisting thereof.

Section 7.7 Compensation and Indemnity. The Company agrees:

(a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation shall not be limited (to the extent permitted by law) by any provision of law in regard to the compensation of a trustee of an express trust);

(b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and

(c) to indemnify the Trustee or any predecessor Trustee and their agents for, and to hold them harmless against, any loss, damage, claim, liability, cost or expense (including attorneys' fees and expenses, and taxes (other than taxes based upon, measured by or determined by the income of the Trustee)) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder.

To secure the Company's payment obligations in this Section 7.7, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee, except that held in trust to pay the principal and accrued and unpaid cash interest, if any, with respect to particular Securities.

The Company's payment obligations pursuant to this Section 7.7 shall survive the discharge of this Indenture and the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.1(5) or (6), the expenses, including the reasonable charges and expenses of its counsel, are intended to constitute expenses of administration under any applicable bankruptcy, insolvency or similar law now or hereinafter in effect.

Section 7.8 Replacement of Trustee. The Trustee may resign by so notifying the Company; provided, however, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 7.8. The Holders of a majority in aggregate principal amount at maturity of the Securities at the time outstanding may remove the Trustee by so notifying the Trustee and the Company. The Company shall remove the Trustee if:

(1) the Trustee fails to comply with Section 7.10;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or public officer takes charge of the Trustee or its property; or

(4) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company satisfactory in form and substance to the retiring Trustee and the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.7.

If a successor Trustee does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate principal amount at maturity of the Securities at the time outstanding may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Section 7.9 Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

Section 7.10 Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Sections 310(a)(1) and 310(b). The Trustee (or its parent holding company) shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. Nothing herein contained shall prevent the Trustee from filing with the Commission the application referred to in the penultimate paragraph of TIA Section 310(b).

Section 7.11 Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE VIII

DISCHARGE OF INDENTURE; DEFEASANCE

Section 8.1 Termination of Company's Obligations. (a) The Company may terminate all of its obligations under this Indenture if:

(i) (A) the Securities mature within one year or all of them are to be called for redemption (and the Securities are redeemable) within one year and arrangements satisfactory to the Trustee are made with respect to the giving of the notice of redemption; and

(B) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations sufficient to pay, when due, (i) the principal of and accrued and unpaid cash interest on the Securities payable at Stated Maturity or (ii) the Redemption Price in respect of the Securities, as the case may be; or

(ii) all Securities previously authenticated and delivered (other than destroyed, lost or stolen Securities which have been replaced or paid or Securities for whose payment money or securities have theretofore been held in trust and thereafter repaid to the Company, as provided in Section 8.4) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder.

After a termination of the Company's obligations in accordance with this Section 8.1(a), the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under this Indenture except for those surviving obligations specified in Section 8.1(c).

In order to have money available on a payment date to pay principal of and accrued and unpaid cash interest on, or the Redemption Price of, all of the Securities, as the case may be, the U.S. Government Obligations shall be payable as to principal or interest on or before such payment date in such amounts as will provide the necessary money.

"U.S. Government Obligations" means direct obligations of the United States of America for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option.

(b) Subject to Section 8.1(c) and Section 8.2, the Company at any time may terminate (i) all of the obligations of the Company and the Guarantors under the Securities, the Guarantees and this Indenture ("legal defeasance"); or (ii) the Company's obligations under Section 4.2, Section 4.3, Section 4.4, Section 4.5 and Section 6.1(4) ("covenant defeasance"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option.

If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Section 6.1(3).

Upon satisfaction of the conditions set forth in Section 8.2 and at the request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations of the Company terminated thereby.

(c) However, the obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 2.12, 4.1, 4.6, 7.7 and 7.8 and in this Article VIII and Article X shall survive until the Securities are no longer outstanding and have been paid in full. Thereafter the obligations in Sections 7.7, 8.4 and 8.5 shall survive.

Section 8.2 Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if:

(i) with reference to this Section 8.2, the Company has irrevocably deposited in trust with the Trustee as trust funds solely for the benefit of the Holders of the Securities, for payment of the principal of and accrued and unpaid cash interest on the Securities, money or U.S. Government Obligations or a combination thereof sufficient (unless such funds consist solely of money, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee) without consideration of any reinvestment, assuming that the maximum accretion rate (and corresponding computations of the Accretion Value) or the maximum cash interest rate to which the Securities may be reset pursuant to all remaining Rate Resets will be in effect to Stated Maturity, and after payment of all federal, state and local taxes or other charges and assessments in respect thereof payable by the Trustee, to pay and discharge the principal of and accrued and unpaid cash interest on the outstanding Securities to Stated Maturity (irrevocably provided for under arrangements satisfactory to the Trustee);

(ii) such deposit shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound;

(iii) no Default with respect to the Securities shall have occurred and be continuing on the date of such deposit;

(iv) the Company shall have delivered to the Trustee an Opinion of Counsel that (1) the Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of the Company's exercise of its option under this Section 8.2 and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred and (2) the Holders of the Securities have a valid security interest in the trust funds; and

(v) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, in each case stating that all conditions precedent herein provided relating to the defeasance contemplated by this Section 8.2 have been complied with.

In the case of legal defeasance, the Opinion of Counsel referred to in clause (iv)(1) above must confirm that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable Federal income tax law, in either case, to the effect that, and based thereon, the Holders will not recognize income, gain or loss for Federal income tax purposes as a result of such legal defeasance.

Section 8.3 Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and accrued and unpaid cash interest on, or the Redemption Price of, all of the Securities, as the case may be.

Section 8.4 Repayment to the Company. The Trustee and the Paying Agent shall promptly pay to the Company upon request any excess money or securities held by them at any time.

Subject to the requirements of applicable law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or accrued and unpaid interest, or the Redemption Price in respect of all the Securities, as the case may be, that remains unclaimed for two years; provided that, before being required to make any such repayment, the Trustee or such Paying Agent shall, if the Company so requests and at the expense of the Company, cause to be published once a week for two successive weeks, in each case on any day of the week, in an authorized newspaper in the Borough of Manhattan, The City of New York, or mail to each such Holder, a notice (in such form as may be deemed appropriate by such Trustee or Paying Agent) that said monies remain unclaimed and that, after a date named therein, which shall not be less than 30 days from the date of such publication or mailing, any unclaimed balance of said monies then remaining shall be returned to the Company. After payment to the Company, Securityholders entitled to the money must look to the Company for payment as general creditors unless an applicable abandoned property law designates another Person.

Section 8.5 Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee and each Securityholder against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such obligations.

Section 8.6 Reinstatement. If the Trustee or Paying Agent is unable to apply any money or United States Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and the Guarantors' obligations under this

Indenture, and the Securities and the Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee is permitted to apply all such money or United States Government Obligations in accordance with this Article VIII; provided that if the Company or any Guarantor has made any payment of cash interest on or principal of, or the Redemption Price of, any Securities, as the case may be, because of the reinstatement of its obligations, the Company or such Guarantor, as the case may be, shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or United States Government Obligations held by the Trustee or Paying Agent.

ARTICLE IX

AMENDMENTS

Section 9.1 Without Consent of Holders The Company, the Guarantors and the Trustee may amend or supplement this Indenture, the Securities or the Guarantees without the consent of any Securityholder:

(1) to cure any ambiguity, defect or inconsistency herein or in the Securities that does not materially adversely affect the rights of any Securityholders;

(2) to comply with Section 5.1;

(3) to make any change that does not materially adversely affect the rights of any Securityholder;

(4) to make provision with respect to the conversion rights of Securityholders pursuant to the requirements of Section 10.14;

(5) to add or remove a Guarantee in accordance with the terms of this Indenture or to delete the first sentence of Section 11.4(a) providing for the release of the Guarantees; or

(6) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA.

Section 9.2 With Consent of Holders The Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Securities with the written consent of the Holders of a majority in aggregate principal amount at maturity of the Securities, and the Holders of a majority in aggregate principal amount at maturity of the Securities may waive compliance by the Company or the Guarantors with any provision of this Indenture, the Securities or the Guarantees. However, without the consent of each Securityholder affected, an amendment, supplement or waiver under this Section may not:

(1) change the Stated Maturity of any Security or adversely affect the right of a Holder to convert any Security;

(2) reduce the principal amount at maturity, Restated Principal Amount, Issue Price, Redemption Price, Purchase Price or Change of Control Purchase Price of, or alter the manner or rate of accretion or accrual of cash interest (or extend the time for payment of interest) on any Security;

(3) change the currency for payment in respect of any Security;

(4) impair the right to institute suit for the enforcement of any payment on or with respect to any Security;

(5) reduce the principal amount at maturity of Securities whose Holders must consent to an amendment or supplement of this Indenture or the waiver of defaults or compliance hereunder;

(6) make any change in Section 6.4, 6.7 or this 9.2 (second sentence);

(7) make any change in any Guarantee or Article XI of this Indenture that would adversely affect the Holders or release any Guarantor from its obligations under its Guarantee or this Indenture, except in accordance with the terms of this Indenture; or

(8) make any change in the ranking or priority of any Security or any Guarantee.

It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment or supplement under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing the amendment or supplement.

Section 9.3 Compliance with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall comply with the TIA.

Section 9.4 Revocation and Effect of Consents, Waivers and Actions. Until an amendment, waiver or other action by Holders becomes effective, a consent thereto by a Holder of a Security hereunder is a continuing consent by the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same obligation as the consenting Holder's Security, even if notation of the consent, waiver or action is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment, waiver or action becomes effective. After an amendment, waiver or action becomes effective, it shall bind every Securityholder.

Section 9.5 Notation on or Exchange of Securities. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for outstanding Securities.

Section 9.6 Trustee to Sign Supplemental Indentures. The Trustee shall sign any supplemental indenture authorized pursuant to this Article IX if the amendment contained therein does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign such supplemental indenture. In signing such supplemental indenture the Trustee shall receive, and (subject to the provisions of Section 7.1) shall be fully protected in relying upon, an Officers' Certificate of the Company and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

Section 9.7 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

ARTICLE X

CONVERSION

Section 10.1 Conversion Privilege. A Holder of a Security may convert such Security into shares of Common Stock at any time during the period stated in Section 7 of the Securities. The number of shares of Common Stock issuable upon conversion of a Security per $1,000 principal amount at maturity thereof (subject to upward adjustment in the event of a Rate Reset) (the "Conversion Rate") shall be that set forth in Section 7 in the Securities, subject to adjustment as herein set forth.

A Holder may convert a portion of the principal amount at maturity of a Security if the portion converted is $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount). Provisions of this Indenture that apply to conversion of all of a Security also apply to conversion of a portion of a Security.

Section 10.2 Conversion Procedure To convert a Security a Holder must satisfy the requirements in Section 7 of the Securities. The first Business Day on which the Holder satisfies all those requirements is the conversion date (the "Conversion Date").

As soon as practicable after the Conversion Date, the Company shall deliver to the Holder, through the Conversion Agent, a certificate for the number of full shares of Common Stock issuable upon the conversion or exchange and cash in lieu of any fractional share determined pursuant to Section 10.3. The person in whose name the certificate is registered shall be treated as a shareholder of record as of the close of business on the Conversion Date. Upon conversion of a Security, such person shall no longer be a Holder of such Security.

No payment or adjustment shall be made for dividends on, or other distributions with respect to, any Common Stock except as provided in this Article X. On conversion of a Security, no accrued and unpaid cash interest, if any, or amounts reflecting accretion of the Securities included in the Accreted Value or the Restated Principal Amount (as the case may be), of the Securities, in each case through the Conversion Date, shall be payable with respect to the converted Security and no such cash interest or amounts reflecting accretion of the Securities shall be cancelled, extinguished or forfeited, but rather shall be deemed to be paid in full to the Holder thereof through delivery of the shares of Common Stock (together with the cash payment, if any, in lieu of fractional shares) in exchange for the Security being converted pursuant to the provisions hereof; and the fair market value of such shares of Common Stock (together with any such cash payment in lieu of fractional shares) shall be treated as issued, to the extent thereof, first in exchange for accrued and unpaid cash interest, if any, through the Conversion Date, and the balance, if any, of such fair market value of such shares of Common Stock (and any such cash payment) shall be treated as issued for the Accreted Value or Restated Principal Amount (as the case may be) of the Security being converted pursuant to the provisions hereof. The Company shall not adjust the conversion ratio to account for accrued and unpaid cash interest, if any, or for amounts reflecting accretion of the Securities included in the Accreted Value or Restated Principal Amount (as the case may be). If the Holder converts more than one Security at the same time, the number of shares of Common Stock issuable upon the conversion shall be based on the total Accreted Value or Restated Principal Amount (as the case may be) of the Securities converted.

If the last day on which a Security may be converted is not a Business Day, the Security may be surrendered on the next succeeding Business Day.

Upon surrender of a Security that is converted in part, the Company shall execute, and the Trustee shall authenticate and deliver to the Holder, a new Security in an authorized denomination equal in principal amount at maturity to the unconverted portion of the Security surrendered.

If a Holder surrenders a Security for conversion during the period after any record date and prior to the corresponding Interest Payment Date, such Holder shall pay to the Company an amount equal

to the cash interest payable on such Interest Payment Date on such Security; provided that if such Security (or any portion thereof) shall have been called for redemption on a Redemption Date occurring during such period or on such Interest Payment Date, such Holder shall not be required to make such payment to the Company.

Section 10.3 Fractional Shares. Securityholders shall not receive a fractional share upon conversion of a Security. Instead, the Holder shall receive cash for the current market value of the fractional share. The current market value of a fractional share shall be determined, to the nearest 1/1,000th of a share, by multiplying the Closing Sales Price, on the last trading day immediately prior to the Conversion Date, of a full share by the fractional amount and rounding the product to the nearest whole cent.

Section 10.4 Taxes on Conversion. If a Holder submits a Security for conversion, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon the conversion. However, the Holder shall pay any such tax which is due because the Holder requests the shares to be issued in a name other than the Holder's name. The Conversion Agent may refuse to deliver the certificates representing the shares of Common Stock being issued in a name other than the Holder's name until the Conversion Agent receives a sum sufficient to pay any tax which will be due because the shares are to be issued in a name other than the Holder's name. Nothing herein shall preclude any tax withholding required by law or regulations.

Section 10.5 Company to Provide Stock. The Company shall, prior to issuance of any Securities under this Article X, and from time to time as may be necessary, reserve out of its authorized but unissued shares of Common Stock a sufficient number of shares of Common Stock to permit the conversion of the Securities.

All shares of Common Stock delivered upon conversion of the Securities shall be newly issued shares or treasury shares, shall be duly and validly issued and fully paid and nonassessable, and shall be free from preemptive rights and free of any lien or adverse claim. The Company shall endeavor promptly to comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and shall list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the shares of Common Stock are then listed or quoted.

Section 10.6 Adjustment for Change in Capital Stock. If, after the Issue Date of the Securities, the Company:

(1) pays a dividend or makes another distribution on the Common Stock payable exclusively in shares of Common Stock;

(2) subdivides the outstanding shares of Common Stock into a greater number of shares;

(3) combines the outstanding shares of Common Stock into a smaller number of shares;

(4) pays a dividend or makes a distribution on the Common Stock in shares of its Capital Stock (other than Common Stock or rights, warrants or options for its Capital Stock); or

(5) issues by reclassification of the Common Stock any shares of its Capital Stock (other than Common Stock or rights, warrants or options for its Capital Stock);

then the conversion privilege and the Conversion Rate in effect immediately prior to such action shall be adjusted so that the Holder of a Security thereafter converted may receive the number of shares of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had converted the Security immediately prior to such action.

The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification.

If after an adjustment a Holder of a Security upon conversion of such Security may receive shares of two or more classes of Capital Stock of the Company, the Conversion Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article X with respect to the shares of Common Stock, on terms comparable to those applicable to shares of Common Stock in this Article X.

Section 10.7 Adjustment for Rights Issue. If after the Issue Date of the Securities, the Company distributes any rights, warrants or options to all holders of shares of its Common Stock entitling them, for a period within 60 days after the record date for such distribution, to purchase shares of Common Stock at a price per share less than the Average Sale Price as of the Time of Determination, the Conversion Rate shall be adjusted in accordance with the formula:

R'=

R ×

(O + N)

(O + (N × P)/M)

where:

R' = the adjusted Conversion Rate.

R = the current Conversion Rate.

O = the number of shares of Common Stock outstanding on the record date for the distribution to which this Section 10.7 is being applied.

N = the number of additional shares of Common Stock offered pursuant to the distribution.

P = the offering price per share of the additional shares.

M = the Average Sale Price, minus, in the case of (i) a distribution to which Section 10.6(4) applies or (ii) a distribution to which Section 10.8 applies, for which, in each case, (x) the record date shall occur on or before the record date for the distribution to which this Section 10.7 applies and (y) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 10.7 applies, the fair market value (on the record date for the distribution to which this Section 10.7 applies) of the

(1) Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 10.6(4) distribution, and

(2) assets of the Company or debt securities or any rights, warrants or options to purchase securities of the Company distributed in respect of each share of Common Stock in such Section 10.8 distribution.

The Board of Directors of the Company shall determine fair market values for the purposes of this Section 10.7, except as Section 10.8 otherwise provides in the case of a Spin-off.

"Average Sale Price" means the average of the Closing Sales Prices of the shares of Common Stock for the shorter of

(i) 30 consecutive trading days ending on the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated, or

(ii) the period (x) commencing on the date next succeeding the first public announcement of (a) the issuance of rights, warrants or options or (b) the distribution, in each case, in respect of

which the Average Sale Price is being calculated and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not trading days), or

(iii) the period, if any, (x) commencing on the date next succeeding the Ex-Dividend Time with respect to the next preceding (a) issuance of rights, warrants or options or (b) distribution, in each case, for which an adjustment is required by the provisions of Section 10.6(4), 10.7 or 10.8 and (y) proceeding through the last full trading day prior to the Time of Determination with respect to the rights, warrants or options or distribution in respect of which the Average Sale Price is being calculated (excluding days within such period, if any, which are not trading days).

In the event that the Ex-Dividend Time (or in the case of a subdivision, combination or reclassification, the effective date with respect thereto) with respect to a dividend, subdivision, combination or reclassification to which Section 10.6(1), (2), (3) or (5) applies occurs during the period applicable for calculating "Average Sale Price" pursuant to the definition in the preceding paragraph, "Average Sale Price" shall be calculated for such period in a manner determined by the Board of Directors of the Company to reflect the impact of such dividend, subdivision, combination or reclassification on the Closing Sales Price of the shares of Common Stock during such period.

"Time of Determination" means the time and date of the earlier of (i) the determination of stockholders entitled to receive rights, warrants or options or a distribution, in each case, to which this Section 10.7 or Section 10.8 applies and (ii) the time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend" trading for such rights, warrants or options or distribution on a national or regional exchange or market on which the shares of Common Stock are then listed or quoted.

The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the rights, warrants or options to which this Section 10.7 applies. If all of the shares of Common Stock subject to such rights, warrants or options have not been issued when such rights, warrants or options expire, then the Conversion Rate shall promptly be readjusted to the Conversion Rate which would then be in effect had the adjustment upon the issuance of such rights, warrants or options been made on the basis of the actual number of shares of Common Stock issued upon the exercise of such rights, warrants or options.

No adjustment shall be made under this Section 10.7 if the application of the formula stated above in this Section 10.7 would result in a value of R' that is equal to or less than the value of R.

Section 10.8 Adjustment for Other Distributions. If, after the Issue Date of the Securities, the Company distributes to all holders of its shares of Common Stock any of its debt, securities or assets or any rights, warrants or options to purchase securities of the Company (including securities or cash, but excluding (x) distributions of Capital Stock referred to in Section 10.6 and distributions of rights, warrants or options referred to in Section 10.7 and (y) cash dividends or other cash distributions that are paid out of current net earnings or earnings retained in the business as shown on the books of the Company unless such cash dividends or other cash distributions are Extraordinary Cash Dividends) the Conversion Rate shall be adjusted, subject to the provisions of the last paragraph of this Section 10.8, in accordance with the formula:

R' =

R × M

(M-F)

where:

R' = the adjusted Conversion Rate.

R = the current Conversion Rate.

M = the Average Sale Price, minus, in the case of a distribution to which Section 10.6(4) applies, for which (i) the record date shall occur on or before the record date for the distribution to which this Section 10.8 applies and (ii) the Ex-Dividend Time shall occur on or after the date of the Time of Determination for the distribution to which this Section 10.8 applies, the fair market value (on the record date for the distribution to which this Section 10.8 applies) of any Capital Stock of the Company distributed in respect of each share of Common Stock in such Section 10.6(4) distribution.

F = the fair market value (on the record date for the distribution to which this Section 10.8 applies) of the assets, securities, rights, warrants or options to be distributed in respect of each share of Common Stock in the distribution to which this Section 10.8 is being applied (including, in the case of cash dividends or other cash distributions giving rise to an adjustment, all such cash distributed concurrently).

In the event the Company distributes shares of Capital Stock of a Subsidiary, the Conversion Rate shall be adjusted, if at all, based on the market value of the Subsidiary stock so distributed relative to the market value of the Common Stock, as discussed below. The Board of Directors shall determine fair market values for the purposes of this Section 10.8, except that in respect of a dividend or other distribution of shares of Capital Stock of any class or series, or similar equity interests, of or relating to a Subsidiary or other business unit of the Company (a "Spin-off"), the fair market value of the securities to be distributed shall equal the average of the daily Closing Sales Prices of those securities for the five consecutive trading days commencing on and including the sixth day of trading of those securities after the effectiveness of the Spin-off and the average of the Closing Sales Prices shall mean the average Closing Sales Prices for the Common Stock for the same five trading days. In the event, however, that an underwritten initial public offering of the securities in the Spin-off occurs simultaneously with the Spin-off, fair market value of the securities distributed in the Spin-off shall mean the initial public offering price of such securities and the Average Sale Price shall mean the Closing Sales Price for the Common Stock on the same trading day.

The adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution to which this Section 10.8 applies, except that an adjustment related to a Spin-off shall become effective at the earlier to occur of (i) 10 trading days after the effective date of the Spin-off and (ii) the initial public offering of the securities distributed in the Spin-off.

For purposes of this Section 10.8, the term "Extraordinary Cash Dividend" shall mean any cash dividend with respect to the shares of Common Stock the amount of which, together with the aggregate amount of cash dividends on the shares of Common Stock to be aggregated with such cash dividend in accordance with the provisions of this paragraph, equals or exceeds the threshold percentage set forth in the following paragraph. For purposes of the following paragraph, the "Measurement Period" with respect to a cash dividend on the shares of Common Stock shall mean the 365 consecutive-day period ending on the date prior to the Ex-Dividend Time with respect to such cash dividend, and the "Relevant Cash Dividends" with respect to a cash dividend on the shares of Common Stock shall mean the cash dividends on the shares of Common Stock with Ex-Dividend Times occurring in the Measurement Period.

If, upon the date prior to the Ex-Dividend Time with respect a cash dividend on the shares of Common Stock, the aggregate amount of such cash dividend together with the amounts of all Relevant Cash Dividends equals or exceeds on a per share basis 5% of the Closing Sales Price of the shares of Common Stock on the last trading day preceding the date of declaration by the Board of Directors of the cash dividend with respect to which this provision is being applied, then such cash dividend together with all Relevant Cash Dividends, shall be deemed to be an Extraordinary Cash Dividend and for purposes of applying the formula set forth above in this Section 10.8, the value of "F" shall be equal to (y) the aggregate amount of such cash dividend together with the amount of all Relevant Cash Dividends, minus (z) the aggregate amount of all Relevant Cash Dividends for which a prior adjustment in the Conversion Rate was previously made under this Section 10.8.

In making the determinations required by the preceding paragraph, the amount of cash dividends paid on a per share basis and the amount of any Relevant Cash Dividends specified in the preceding paragraph, shall be appropriately adjusted to reflect the occurrence during such period of any event described in Section 10.6.

In the event that, with respect to any distribution to which this Section 10.8 would otherwise apply, the difference "M-F" as defined in the above formula is less than $1.00 or "F" is equal to or greater than "M", then the adjustment provided by this Section 10.8 shall not be made and in lieu thereof the provisions of Section 10.14 shall apply to such distribution.

Section 10.9 When Adjustment May Be Deferred. No adjustment in the Conversion Rate need be made unless the adjustment would require an increase or decrease of at least 1% in the Conversion Rate. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment.

All calculations under this Article X shall be made to the nearest cent or to the nearest 1/1,000th of a share, as the case may be.

Section 10.10 When No Adjustment Required. If the Company adopts a stockholders rights plan under which the Company issues rights providing that each share of Common Stock issued upon conversion of the Security at any time prior to the distribution of separate certificates representing the rights shall be entitled to receive the rights, no adjustment need be made as a result of: (i) the issuance of the rights; (ii) the distribution of separate certificates representing the rights; (iii) the exercise or redemption of the rights in accordance with any rights agreement; or (iv) the termination or invalidation of the rights.

No adjustment need be made for a transaction referred to in 10.6, 10.7, 10.8 or 10.14 if Holders of the Securities may participate in the transaction without conversion on a basis and with notice that the Board of Directors of the Company determines to be fair and appropriate in light of the basis and notice on which holders of shares of Common Stock participate in the transaction. No adjustment need be made for rights to purchase shares of Common Stock pursuant to a Company plan for reinvestment of dividends.

No adjustment need be made for a change in the par value or no par value of the shares of Common Stock.

To the extent the Securities become convertible pursuant to this Article X in whole or in part into cash, no adjustment need be made thereafter as to the cash. Interest shall not accrue on the cash.

Section 10.11 Notice of Adjustment. Whenever the Conversion Rate is adjusted, the Company shall promptly mail to Securityholders a notice of the adjustment. The Company shall file with the Trustee and the Conversion Agent such notice and a certificate from the Company's independent public accountants briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Trustee nor any

Conversion Agent shall be under any duty or responsibility with respect to any such certificate except to exhibit the same to any Holder desiring inspection thereof.

Section 10.12 Voluntary Increase. The Company from time to time may increase the Conversion Rate by any amount at any time for at least 20 days, so long as the increase is irrevocable during such period. Whenever the Conversion Rate is increased, the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice of the increase. The Company shall mail the notice at least 15 days before the date the increased Conversion Rate takes effect. The notice shall state the increased Conversion Rate and the period it will be in effect. A voluntary increase of the Conversion Rate does not change or adjust the Conversion Rate otherwise in effect for purposes of Section 10.6, 10.7 or 10.8.

Section 10.13 Notice of Certain Transactions. If:

(1) the Company takes any action that would require an adjustment in the Conversion Rate pursuant to Section 10.6, 10.7 or 10.8 (unless no adjustment is to occur pursuant to Section 10.10); or

(2) the Company takes any action that would require a supplemental indenture pursuant to Section 10.14; or

(3) there is a liquidation or dissolution of the Company;

then the Company shall mail to Securityholders and file with the Trustee and the Conversion Agent a notice stating the proposed record date for a dividend or distribution or the proposed effective date of a subdivision, combination, reclassification, consolidation, merger, binding share exchange, transfer, liquidation or dissolution. The Company shall file and mail the notice at least 15 days before such date. Failure to file or mail the notice or any defect in it shall not affect the validity of the transaction.

Section 10.14 Reorganization of Company; Special Distributions. If the Company is a party to a transaction subject to Section 5.1 (other than a sale of all or substantially all of the assets of the Company in a transaction in which the holders of shares of Common Stock immediately prior to such transaction do not receive securities, cash or other assets of the Company or any other person) or a merger or binding share exchange which reclassifies or changes its outstanding shares of Common Stock, the person obligated to deliver securities, cash or other assets upon conversion of Securities shall enter into a supplemental indenture. If the issuer of securities deliverable upon conversion of Securities is an Affiliate of the successor Company, that issuer shall join in the supplemental indenture.

The supplemental indenture shall provide that the Holder of a Security may convert it into the kind and amount of securities, cash or other assets which such Holder would have received immediately after the consolidation, merger, binding share exchange or transfer if such Holder had converted the Security immediately before the effective date of the transaction, assuming (to the extent applicable) that such Holder (i) was not a constituent person or an Affiliate of a constituent person to such transaction; (ii) made no election with respect thereto; and (iii) was treated alike with the plurality of non-electing Holders. The supplemental indenture shall provide for adjustments which shall be as nearly equivalent as may be practical to the adjustments provided for in this Article X. The successor Company shall mail to Securityholders a notice briefly describing the supplemental indenture.

If this Section applies, neither Section 10.6 nor 10.7 applies.

If the Company makes a distribution to all holders of its shares of Common Stock of any of its assets, or debt securities or any rights, warrants or options to purchase securities of the Company that, but for the provisions of the last paragraph of Section 10.8, would otherwise result in an adjustment in the Conversion Rate pursuant to the provisions of Section 10.8, then, from and after the record date for determining the holders of shares of Common Stock entitled to receive the distribution, a Holder of

a Security that converts such Security in accordance with the provisions of this Indenture shall upon such conversion be entitled to receive, in addition to the shares of shares of Common Stock into which the Security is convertible, the kind and amount of securities, cash or other assets comprising the distribution that such Holder would have received if such Holder had converted the Security immediately prior to the record date for determining the holders of shares of Common Stock entitled to receive the distribution.

Section 10.15 Company Determination Final. Any determination that the Company or the Board of Directors of the Company must make pursuant to Section 10.3, 10.6, 10.7, 10.8, 10.9, 10.10, 10.14 or 10.17 is conclusive, absent manifest error.

Section 10.16 Trustee's Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article X should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a supplemental indenture under Section 10.14 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. The Trustee shall not be responsible for the Company's failure to comply with this Article X. Each Conversion Agent shall have the same protection under this Section 10.16 as the Trustee.

Section 10.17 Simultaneous Adjustments. In the event that this Article X requires adjustments to the Conversion Rate under more than one of Sections 10.6(4), 10.7 or 10.8, and the record dates for the distributions giving rise to such adjustments shall occur on the same date, then such adjustments shall be made by applying, first, the provisions of Section 10.6, second, the provisions of Section 10.8 and, third, the provisions of Section 10.7.

Section 10.18 Successive Adjustments. After an adjustment to the Conversion Rate under this Article X, any subsequent event requiring an adjustment under this Article X shall cause an adjustment to the Conversion Rate as so adjusted.

ARTICLE XI

GUARANTEES

Section 11.1 Guarantees. Subject to Section 11.5, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Securities and the Obligations of the Company hereunder and thereunder, that: (a) the principal of, and accrued and unpaid cash interest (including any Additional Interest) on, the Securities shall be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on overdue principal, interest on any accrued and unpaid cash interest, if any, and interest on any Additional Interest, if any, on the Securities, and all other payment Obligations of the Company to the Holders or all other Obligations of the Company to the Trustee hereunder or thereunder shall be promptly paid in full and performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other Obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason the Guarantors shall be jointly and severally obligated to pay the same immediately. An Event of Default under this Indenture or the Securities shall constitute an event of default under the Guarantees, and shall entitle the Holders to accelerate the obligations of the Guarantors hereunder in the same manner and to the same extent as the Obligations of the Company. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the

validity or enforceability of the Securities or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same, the release of any Guarantee of any other Guarantor or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Guarantee shall not be discharged except by complete performance of the Obligations contained in the Securities and this Indenture. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of its Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed thereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article VI, such Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of its Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor as provided in Section 11.5 so long as the exercise of such right does not impair the rights of the Holders or the Trustee under the Guarantees or this Indenture.

Section 11.2 Execution and Delivery of Guarantees. (a) To evidence its Guarantee, each Guarantor hereby agrees that a notation of such Guarantee substantially in the form of Exhibit C shall be endorsed by manual or facsimile signature by an Officer of such Guarantor on each Security authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor, by manual or facsimile signature, by an Officer (in each case, whom shall have been duly authorized by all requisite corporate or other actions) of such Guarantor.

(b) Each Guarantor hereby agrees that its Guarantee set forth in Section 11.1 shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee.

(c) If an Officer whose signature is on this Indenture or on any Guarantee no longer holds that office at the time the Trustee authenticates the Security on which such Guarantee is endorsed, such Guarantee shall be valid nevertheless.

(d) The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantees set forth in this Indenture on behalf of the Guarantors.

(e) In the event that the Company designates, creates or acquires any new Restricted Subsidiary subsequent to the date of this Indenture or any other Subsidiary is required to deliver a Guarantee in accordance with Section 4.3, the Company shall cause such Subsidiary to execute a supplement to this Indenture substantially in the form of Exhibit D in accordance with Section 4.3 and this Article XI, to the extent applicable.

Section 11.3 Guarantors May Consolidate, Etc., on Certain Terms. Nothing contained in this Indenture or in any of the Securities shall prevent the consolidation or merger of a Guarantor with or into the Company or another Guarantor or any sale or other disposition of all or substantially all of the assets or Capital Stock of any Guarantor to the Company or another Guarantor. Upon any such consolidation, merger, sale or disposition, the Guarantee given by such Guarantor shall no longer have any force or effect.

Section 11.4 Release of Guarantees. (a) Upon the release of all payment obligations of any Guarantor relating to any existing or future Indebtedness under one or more Credit Facilities of the Company, such Subsidiary or any other Restricted Subsidiary, such Guarantor shall be automatically released and relieved of any obligations under this Indenture and its Guarantee. In the event such Guarantor subsequently incurs or guarantees any Indebtedness under one or more Credit Facilities, the

Company shall cause such released Guarantor to unconditionally guarantee all Obligations under the Securities and this Indenture on the terms set forth in Section 4.3.

(b) In the event of a sale or other disposition of all or substantially all of the assets or Capital Stock (whether by consolidation, merger, stock purchase, asset sale or otherwise) of any Guarantor, in each case, to a person other than the Company or to a person that is not (either before or after giving effect to such transaction) a Subsidiary, then such Guarantor shall be automatically released and relieved of any obligations under this Indenture and its Guarantee; provided that the Company shall have delivered to the Trustee an Officers' Certificate to the effect that immediately after, and taking into account, that sale or disposition, no Default or Event of Default shall have occurred and be continuing under this Indenture; and provided, further, that a termination shall only occur to the extent that all obligations of that Guarantor in respect of any Indebtedness under all Credit Facilities of the Company or any of the Restricted Subsidiaries, and under all of that Guarantor's pledges of assets or other security interests which secured Indebtedness under any Credit Facilities of the Company or any of the Restricted Subsidiaries, shall also terminate upon such sale or disposition.

(c) Upon the proper designation of a Guarantor as an Unrestricted Subsidiary in accordance with the terms of this Indenture, such Guarantor shall be automatically released and relieved of any obligations under this Indenture and its Guarantee.

(d) In the event the Company effects a discharge of this Indenture or a legal defeasance or a covenant defeasance in accordance with Article VIII, each Guarantor shall be released and relieved of any obligations under this Indenture and its Guarantee.

(e) Upon delivery by the Company to the Trustee of an Officers' Certificate to the effect of any of the foregoing, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Guarantee. Any such Guarantor not released from its obligations under its Guarantee shall remain liable for the full amount of the principal of, and accrued and unpaid cash interest (including any Additional Interest) on, the Securities and for the other obligations of such Guarantor under this Indenture as provided in this Article XI.

Section 11.5 Limitation on Guarantor Liability; Contribution. (a) For purposes of this Indenture, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Securities and this Indenture and (ii) the maximum amount that shall result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance under applicable law of any relevant jurisdiction; provided that, it shall be a presumption in any lawsuit or other proceeding in which a Guarantor is a party that the amount guaranteed pursuant to its Guarantee is the amount set forth in clause (i) above unless any creditor, or representative of creditors of such Guarantor, or debtor in possession or trustee in bankruptcy of the Guarantor, otherwise proves in such a lawsuit that the aggregate liability of the Guarantor is the amount set forth in clause (ii) above. In making any determination as to solvency or sufficiency of capital of a Guarantor in accordance with the previous sentence, the right of such Guarantor to contribution from other Guarantors as set forth below, and any other rights such Guarantor may have, contractual or otherwise, shall be taken into account.

(b) In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a "Funding Guarantor") under its Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's Obligations with respect to the Securities or any other Guarantor's obligations with respect to its Guarantee. "Adjusted Net Assets" of such Guarantor at any date shall mean the lesser of the amount by which (i) the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to

all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any other Subsidiary in respect of the obligations of such Guarantor under its Guarantee), but excluding liabilities under the Guarantee of such Guarantor at such date and (ii) the present fair salable value of the assets of such Guarantor at such date exceeds the amount that shall be required to pay the probable liability of such Guarantor on its debts (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any other Subsidiary in respect of the obligations of such Guarantor under its Guarantee), excluding debt in respect of the Guarantee of such Guarantor, as they become absolute and matured.

Section 11.6 Waiver of Subrogation. Until all guaranteed Obligations under this Indenture are paid in full, each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Guarantor's obligations under its Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder of Securities against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Securities shall not have been paid in full, such amount shall have been deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders of the Securities, and shall forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Securities, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it shall receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the waiver set forth in this Section 11.6 is knowingly made in contemplation of such benefits.

Section 11.7 No Suspension of Remedies. Nothing contained in this Article XI shall limit the right of the Trustee or the Holders of Securities to take any action to accelerate the maturity of the Securities pursuant to Article VI or to pursue any rights or remedies hereunder or under applicable law.

Section 11.8 Obligations Reinstated. Except as provided in Section 11.4, the obligations of each Guarantor hereunder shall continue to be effective or shall be reinstated, as the case may be, if at any time any payment which would otherwise have reduced the obligations of any Guarantor hereunder (whether such payment shall have been made by or on behalf of the Company or by or on behalf of a Guarantor) is rescinded or reclaimed from any of the Holders upon the insolvency, bankruptcy, liquidation or reorganization of the Company or any Guarantor or otherwise, all as though such payment had not been made. If demand for, or acceleration of the time for, payment by the Company is stayed upon insolvency, bankruptcy, liquidation or reorganization of the Company, all such Indebtedness otherwise subject to demand for payment or acceleration shall nonetheless be payable by each Guarantor as provided herein.

Section 11.9 No Obligation to Take Action Against the Company. Neither the Trustee nor any other person shall have any obligation to enforce or exhaust any rights or remedies or to take any other steps under any security for the obligations under this Indenture or against the Company or any other person or any property of the Company or any other person before the Trustee is entitled to demand payment and performance by any or all Guarantors of their liabilities and obligations under their Guarantees or under this Indenture.

Section 11.10 Dealing with the Company and Others. The Holders, without releasing, discharging, limiting or otherwise affecting in whole or in part the obligations and liabilities of any Guarantor hereunder and without the consent of or notice to any Guarantor, may

(1) grant time, renewals, extensions, compromises, concessions, waivers, releases, discharges and other indulgences to the Company or any other person;

(2) take or abstain from taking any action in obtaining security or collateral from the Company or in perfecting a security interest in any security or collateral of the Company;

(3) release, discharge, compromise, realize, enforce or otherwise deal with or do any act or thing in respect of (with or without consideration) any and all collateral, mortgages or other security given by the Company or any third party with respect to the obligations or matters contemplated by this Indenture or the Securities;

(4) accept compromises or arrangements from the Company;

(5) apply all monies at any time received from the Company or from any security upon such part of the obligations under this Indenture as the Holders may see fit or change any such application in whole or part from time to time as the Holders may see fit; and

(6) otherwise deal with, or waive or modify their right to deal with, the Company and all other persons and any security as the Holders or the Trustee may see fit.

ARTICLE XII

MISCELLANEOUS

Section 12.1 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

Section 12.2 Notices. Any request, demand, authorization, notice, waiver, consent or communication shall be in writing and delivered in person or mailed by first-class mail, postage prepaid, addressed as follows or transmitted by facsimile transmission (confirmed by guaranteed overnight courier) to the following facsimile numbers:

if to the Company or the Guarantors:

Best Buy Co., Inc..
7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
Attn: Treasury Department
Facsimile No.: (952) 996-4180

if to the Trustee:

Wells Fargo Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479

Telephone No.: (612) 316-4305
Facsimile No.: (612) 667-2160
Attention: Corporate Trust Services

The Company, the Guarantors or the Trustee by notice given to the other in the manner provided above may designate additional or different addresses for subsequent notices or communications.

Any notice or communication given to a Securityholder shall be mailed to the Securityholder, by first-class mail, postage prepaid, at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not received by the addressee.

If the Company mails a notice or communication to the Securityholders, it shall mail a copy to the Trustee and each Registrar, Paying Agent, Conversion Agent or co-registrar.

Section 12.3 Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Guarantors, the Trustee, the Registrar, the Paying Agent, the Conversion Agent and anyone else shall have the protection of TIA Section 312(c).

Section 12.4 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company or any Guarantor to the Trustee to take any action under this Indenture, the Company or such Guarantor, as the case may be, shall furnish to the Trustee:

(1) an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

Section 12.5 Statements Required in Certificate or Opinion. Each Officers' Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(1) a statement that each person making such Officers' Certificate or Opinion of Counsel has read such covenant or condition;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers' Certificate or Opinion of Counsel are based;

(3) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement that, in the opinion of such person, such covenant or condition has been complied with.

Section 12.6 Separability Clause. In case any provision in this Indenture, in the Securities or in the Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 12.7 Rules by Trustee, Paying Agent, Conversion Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar, the Conversion Agent and the Paying Agent may make reasonable rules for their functions.

Section 12.8 GOVERNING LAW. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE, THE SECURITIES AND THE GUARANTEES.

Section 12.9 No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company or any Guarantor shall not have any liability for any obligations of the Company under the Securities or this Indenture or any obligations of such Guarantor under its Guarantee or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities and the Guarantees.

Section 12.10 Successors. All agreements of the Company and the Guarantors in this Indenture, the Securities and the Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor.

Section 12.11 Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed this Indenture on behalf of the respective parties hereto as of the date first above written.

BEST BUY CO., INC.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer and Chief Financial Officer
BBC INSURANCE AGENCY, INC., as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer and Chief Financial Officer
BBC INVESTMENT CO., as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance and Treasurer
BBC PROPERTY CO., as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance and Treasurer
BEST BUY STORES, L.P., as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President

BEST BUY PURCHASING LLC, as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President
BESTBUY.COM, INC., as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer
BEST BUY CONCEPTS, INC., as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer
MAGNOLIA HI-FI, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President and Secretary
MUSICLAND STORES CORPORATION, as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President

THE MUSICLAND GROUP, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
MEDIA PLAY, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
MG FINANCING SERVICES, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
MLG INTERNET, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
MUSICLAND RETAIL, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President

ON CUE, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
REQUEST MEDIA, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
SUNCOAST GROUP, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
SUNCOAST MOTION PICTURE COMPANY, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
SUNCOAST RETAIL, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President

TMG CARIBBEAN, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
TMG-VIRGIN ISLANDS, INC., as Guarantor
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
REDLINE ENTERTAINMENT, INC., as Guarantor
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By:	/s/ MICHAEL T. LECHNER

	Name:	Michael T. Lechner
	Title:	Corporate Trust Officer

EXHIBIT A-1

[FORM OF FACE OF GLOBAL SECURITY]

THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT AND IS SUBJECT TO THE RULES FOR DEBT INSTRUMENTS WITH CONTINGENT PAYMENTS UNDER TREASURY REGULATIONS § 1.1275-4(b). AS REQUIRED UNDER APPLICABLE TREASURY REGULATIONS, BEST BUY CO., INC. (THE "COMPANY") HAS SET FORTH THE "COMPARABLE YIELD" IN SECTION 4.8 OF THE INDENTURE PURSUANT TO WHICH THIS SECURITY IS BEING ISSUED.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE TWO OF THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

THIS SECURITY (OR ITS PREDECESSOR) AND THE RELATED GUARANTEES WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY, THE RELATED GUARANTEES AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY, THE RELATED GUARANTEES AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE SECURITIES MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (i) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii) OUTSIDE THE UNITED STATES IN A TRANSACTION COMPLYING WITH THE PROVISIONS OF RULE 904 UNDER THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER SHALL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. IN ANY CASE, THE HOLDER HEREOF SHALL NOT, DIRECTLY OR

INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTIONS WITH REGARD TO THE SECURITIES EXCEPT AS PERMITTED UNDER THE SECURITIES ACT.

THIS SECURITY, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.

The foregoing legend may be removed from this Security on satisfaction of the conditions specified in the Indenture.

A–1–2

BEST BUY CO., INC.

CONVERTIBLE DEBENTURES DUE JUNE 27, 2021

No.		CUSIP:
Issue Date: June 27, 2001 Issue Price: $683.80 (for each $1,000 principal amount at maturity, subject to adjustment)

BEST BUY CO., INC., a Minnesota corporation, promises to pay to Cede & Co. or registered assigns, the principal amount at maturity of [ ] ($[ ]) on June 27, 2021, subject to adjustment as provided herein.

This Security shall accrete in value as specified on the other side of this Security. This Security shall also bear cash interest in the manner specified on the other side of this Security. This Security is convertible as specified on the other side of this Security.

Additional provisions of this Security are set forth on the other side of this Security.

Dated:	BEST BUY CO., INC.
	By:
		Name: Title:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture.
By:
		Authorized Signatory

Dated:

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[FORM OF REVERSE OF GLOBAL SECURITY]

Convertible Debentures due June 27, 2021

1. Accretion in Value and Cash Interest.

Accretion and Reset; Cash Interest. Except as provided in this Section 1, this Security shall not bear cash interest. This Security shall initially represent the Issue Price and shall accrete in value such that the initial yield to maturity shall be 2.75% per annum through the Stated Maturity. The accretion rate in effect with respect to this Security shall at any time equal the yield to maturity then in effect for this Security less the portion of the yield to maturity paid as cash interest pursuant to the following two paragraphs. The yield to maturity (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the additional cash interest rate) on this Security shall be reset on December 27, 2003, December 27, 2008 and December 27, 2013 (each, a "Reset Date") to a rate per annum equal to the Five-Year Treasury Rate minus 1.90% (a "Rate Reset"). In no event, however, shall the yield to maturity (or the additional cash interest rate, if the principal amount of the Securities shall have been restated following the occurrence of a Tax Event) be reset below 2.75% per annum or above 3.75% per annum. The principal amount of this Security at any time shall equal the Accreted Value (or, if the Company has elected to restate the principal amount of this Security and pay additional cash interest on this Security following the occurrence of a Tax Event, the Restated Principal Amount) of this Security.

A portion of the yield to maturity of the Securities shall be payable as cash interest initially at a rate of 1.00% per annum on the Issue Price. Additional cash interest shall also be payable if the principal amount of the Securities shall have been restated following the occurrence of a Tax Event as described below.

If the yield to maturity of the Securities in effect at the beginning of a semi-annual period exceeds the initial yield to maturity of the Securities as a result of a Rate Reset, the Company shall pay a portion of such increased yield to maturity as cash interest on the Interest Payment Date (as defined below) at the end of such semi-annual period at a rate of up to 0.25% per annum on the Accreted Value of the Securities as of the beginning of such semi-annual period. The remaining portion of such increased yield to maturity shall accrete and shall be payable at Stated Maturity or on any Redemption Date, Purchase Date or Change of Control Purchase Date. If an increased yield to maturity in effect at any time as a result of a Rate Reset is reduced pursuant to a subsequent Rate Reset, such reduction shall be applied by, first, reducing the portion of such increased yield to maturity attributable to an increased accretion rate and, second, reducing the portion of such increased yield to maturity attributable to increased cash interest.

Cash Interest and Accretion Computation and Method of Payment. Any cash interest payable hereunder and any accretion in value of the Securities shall be computed based on a 360-day year of twelve 30-day months and semi-annual periods ending on June 27 and December 27 of each year. Cash interest (including any additional cash interest payable if the principal amount of the Securities shall have been restated following the occurrence of a Tax Event) shall be payable semi-annually in arrears on (but excluding) each June 27 and December 27 (each an "Interest Payment Date") through the Stated Maturity unless the Securities are earlier redeemed or otherwise repaid. Cash interest on the Securities shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from June 27, 2001; provided that, if the Company elects to pay additional cash interest upon the occurrence of a Tax Event as of a date less than 60 days prior to any Interest Payment Date, the first payment of cash interest shall be made on the Interest Payment Date next succeeding such Interest Payment Date. The record date for the payment of cash interest to Holders shall be the close of business on June 12 and December 12 of each year (whether or not a Business Day); provided that

A–1–4

cash interest payable at Stated Maturity or upon redemption or purchase shall be payable to the person to whom principal is payable. The Company shall give notice to the Holders, no later than 15 days prior to each record date, of the amount of cash interest to be paid as of the next Interest Payment Date. Cash interest on the Securities shall be paid to registered holders of the Securities as of the record date.

Tax Event. From and after the date of the occurrence of a Tax Event, the Company will have the option to elect to pay additional cash interest on the Securities at a rate per annum equal to the yield to maturity in effect on the Option Exercise Date (as defined below) less the portion of the yield to maturity paid as cash interest, instead of accreting the value thereof. On the date of the Company's election to pay additional cash interest following a Tax Event (the "Option Exercise Date"), the principal amount of each Security shall be restated and shall equal the Accreted Value of such Security as of the Option Exercise Date plus accrued and unpaid cash interest up to but not including the Option Exercise Date (the "Restated Principal Amount"). Additional cash interest shall accrue on the Restated Principal Amount from the Option Exercise Date and shall be subject to a Rate Reset as described in the first paragraph of Section 1 above.

A "Tax Event" means that the Company shall have received an opinion from a nationally recognized independent tax counsel experienced in such matters to the effect that, on or after June 27, 2001, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or rules or regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein or (b) any amendment to, or change in, an interpretation or application of such laws, rules or regulations by any legislative body, court, governmental agency or regulatory authority, in each case which amendment or change is enacted, promulgated, issued or announced or which interpretation is issued or announced or which action is taken, on or after June 27, 2001, there is more than an insubstantial risk that interest (including amounts reflecting accretion in value of the Securities included in the Accreted Value of the Securities and accrued and unpaid cash interest) payable on the Securities either (i) would not be deductible on a current accrual basis or (ii) would not be deductible under any other method, in either case in whole or in part, by the Company (by reason of deferral, disallowance, or otherwise) for United States Federal income tax purposes.

2. Method of Payment.

Pursuant to the terms and conditions of the Indenture, the Company shall make payments in cash, shares of Common Stock or a combination thereof, as the case may be, in respect of the Redemption Price, Purchase Price, Change of Control Purchase Price and principal of the Securities at Stated Maturity to Holders who surrender Securities to a Paying Agent to collect such payments in respect of the Securities. The Company shall pay cash amounts in money of the United States that at the time of payment is legal tender for payment of public and private debts, or by check payable in such money.

If the principal hereof, including any principal or Accreted Value reflected in the Redemption Price, Purchase Price or Change of Control Purchase Price, as applicable, or any portion thereof is not paid when due (whether upon acceleration pursuant to Section 6.2 of the Indenture, upon the date set for payment of the Redemption Price, Purchase Price, Change of Control Purchase Price or principal upon the Stated Maturity of this Security), then in each such case the overdue amount shall, to the extent permitted by law, bear cash interest at the rate of 2.0% per annum, compounded semi-annually, which interest shall accrue from the date of such overdue amount was originally due to the date of payment of such amount, including interest thereon, has been made or duly provided for. All such interest shall be payable on demand.

A–1–5

3. Paying Agent, Conversion Agent and Registrar.

Initially, Wells Fargo Bank Minnesota, National Association (the "Trustee"), shall act as Paying Agent, Conversion Agent and Registrar. The Company may appoint and change any Paying Agent, Conversion Agent or Registrar without notice, other than notice to the Trustee; provided that the Company shall maintain at least one Paying Agent in the State of New York, City of New York, Borough of Manhattan, which shall initially be an office or agency of the Trustee. The Company or any of its Subsidiaries or any of their Affiliates may act as Paying Agent, Conversion Agent or Registrar.

4. Indenture and Guarantees.

The Company issued the Securities under an Indenture, dated as of June 27, 2001 (the "Indenture"), among the Company, the Guarantors and the Trustee. Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as in effect from time to time. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the TIA for a statement of those terms.

The Securities are general unsecured obligations of the Company limited to $440,000,000 aggregate principal amount at maturity, subject to upward adjustment as provided herein (or $506,000,000 aggregate principal amount at maturity, subject to upward adjustment as provided herein, if the Initial Purchasers exercise their over-allotment option granted under the Purchase Agreement). The Indenture does not limit other indebtedness of the Company, secured or unsecured.

Pursuant to Article XI of the Indenture, the Guarantors have unconditionally guaranteed to each Holder the Obligations of the Company under the Securities and the Indenture. If the Company designates, organizes or acquires a new Restricted Subsidiary subsequent to the date of the Indenture or in the other circumstances described in Section 4.3 of the Indenture, the Company shall cause such Subsidiary to provide a Guarantee in the manner set forth in said Section 4.3. The Guarantees are subject to release as and to the extent provided in Section 11.4 of the Indenture.

5. Redemption at the Option of the Company.

The Securities are redeemable at the option of the Company in whole or in part, at any time or from time to time, on or after June 27, 2004 at a redemption price per Security equal to the Redemption Price. No sinking fund is provided for the Securities.

Notice of redemption must be mailed at least 15 days, but not more than 60 days, before the Redemption Date to the Trustee and each Holder of Securities to be redeemed at the Holder's address as shown on the register kept by the Registrar.

If the Redemption Date is on or after an interest record date but on or prior to the related Interest Payment Date, cash interest shall be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date.

On and after the Redemption Date, cash interest shall cease to accrue on Securities or any portion of them called for redemption and such Securities or any portion thereof called for redemption shall cease to accrete in value; provided that funds in the requisite amount are paid or made available for payment on that date.

6. Purchase By the Company at the Option of the Holder.

Subject to the terms and conditions of the Indenture, the Company shall become obligated to purchase, at the option of the Holder, all or any portion of the Securities held by such Holder on June 27, 2004, June 27, 2009 and June 27, 2014 (each a "Purchase Date") at a purchase price per

A–1–6

Security equal to the Purchase Price (provided that, if the Purchase Date is on or after an interest record date but on or prior to the related Interest Payment Date, interest shall be payable to the Holders in whose names the Securities are registered at the close of business on the relevant record date) upon delivery of a Purchase Notice containing the information set forth in the Indenture, at any time from the opening of business on the date that is 20 Business Days prior to such Purchase Date until the close of business on the fifth Business Day prior to such Purchase Date, and upon delivery of the Securities to the Paying Agent by the Holder as set forth in the Indenture.

The Purchase Price may be paid, at the option of the Company, in cash or by the delivery of Common Stock, or any combination thereof, in the manner described in Section 3.7 of the Indenture.

Holders have the right to withdraw any Purchase Notice by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture.

If cash or securities sufficient to pay the Purchase Price of a Security or portion thereof to be purchased as of the Purchase Date are deposited with the Paying Agent on the Business Day following the Purchase Date, then, immediately after the Purchase Date, such Security shall cease to be outstanding, the Security shall cease to accrete in value and cash interest on such Security shall cease to accrue, whether or not book-entry transfer is made or such Security is delivered to the Paying Agent. Thereafter, the Holder of such Security shall have no other rights other than the right to receive the Purchase Price upon surrender of such Security.

If a Change of Control occurs, each Holder of Securities shall have the right, at the Holder's option, to require the Company to purchase all of such Holder's Securities, or any portion thereof that is an integral multiple of $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) on the Change of Control Purchase Date selected by the Company that is not less than 10 nor more than 30 days after the Final Surrender Date (as defined below), at a purchase price per Security equal to the Change of Control Purchase Price, which Change of Control Purchase Price shall be paid in cash.

Unless the Company shall have theretofore called for redemption all the outstanding Securities, on or before the thirtieth day after the occurrence of a Change of Control, the Company is obligated to mail or cause the Trustee to mail to all Holders of record of the Securities a Change of Control Company Notice describing, among other things, the occurrence of such Change of Control and of the purchase right arising as a result thereof. The Company must deliver a copy of the Change of Control Company Notice to the Trustee and cause a copy of such notice to be published in a newspaper of general circulation in the Borough of Manhattan, The City of New York. To exercise the purchase option, a Holder of Securities must surrender, on or before the date which, subject to any contrary requirements of applicable law, is 60 days after the date of mailing of the Company Notice the Securities with respect to which the right is being exercised, which, in the case of Certificated Securities, must be duly endorsed for transfer to the Company.

The term "Change of Control" shall mean either:

(i) a report is filed on Schedule 13D or TO (or any successor schedule, form or report) pursuant to the Exchange Act, disclosing that any person (for the purposes of this Section 6 only, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the voting power of the Common Stock then outstanding; provided that a person shall not be deemed beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy

A–1–7

delivered in response to a proxy or consent solicitation made pursuant to the applicable rules and regulations under the Exchange Act and (2) is not also then reportable on Schedule 13D (or any successor schedule) under the Exchange Act; or

(ii) any share exchange, consolidation or merger of the Company is consummated pursuant to which the Common Stock would be converted into cash, securities or other property, in each case other than a share exchange, consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the share exchange, consolidation or merger have, directly or indirectly, at least a majority of the total voting power in the aggregate of all classes of Capital Stock of the continuing or surviving corporation immediately after the share exchange, consolidation or merger.

7. Conversion.

A Holder may surrender Securities for conversion into shares of Common Stock on a Conversion Date if, as of such conversion date, the Closing Sales Price of the Common Stock for at least 20 trading days in the 30 day period ending on the trading day prior to the Conversion Date is more than the Applicable Percentage then in effect of the Accreted Conversion Price per share of Common Stock on such Conversion Date. The "Accreted Conversion Price" per share of Common Stock as of any day means the quotient of the Accreted Value of a Security divided by the Conversion Rate on that day. The "Applicable Percentage" means (a) for any date before June 27, 2021, the percentage set forth below opposite such date or opposite the pair of dates between which such date falls, as the case may be, and (b) for June 27, 2021 or any date thereafter, 110.0%.

From (and including	To (but excluding)	Applicable Percentage
June 27, 2001	June 27, 2002	120.0	%
June 27, 2002	June 27, 2003	119.5
June 27, 2003	June 27, 2004	119.0
June 27, 2004	June 27, 2005	118.5
June 27, 2005	June 27, 2006	118.0
June 27, 2006	June 27, 2007	117.5
June 27, 2007	June 27, 2008	117.0
June 27, 2008	June 27, 2009	116.5
June 27, 2009	June 27, 2010	116.0
June 27, 2010	June 27, 2011	115.5
June 27, 2011	June 27, 2012	115.0
June 27, 2012	June 27, 2013	114.5
June 27, 2013	June 27, 2014	114.0
June 27, 2014	June 27, 2015	113.5
June 27, 2015	June 27, 2016	113.0
June 27, 2016	June 27, 2017	112.5
June 27, 2017	June 27, 2018	112.0
June 27, 2018	June 27, 2019	111.5
June 27, 2019	June 27, 2020	111.0
June 27, 2020	June 27, 2021	110.5

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A Holder may also surrender Securities for conversion into shares of Common Stock if at any time each of Moody's Investor Service, Inc. and Standard & Poor's Rating Services has downgraded the Company's senior long-term unsecured corporate credit rating to below Ba1 and BB+, respectively, for so long as such downgrades remain in effect.

In addition, a Holder may surrender for conversion a Security which has been called for redemption pursuant to Section 5 of this Security, even if the foregoing provisions have not been satisfied, and such Securities may be surrendered for conversion until the close of business on the Business Day immediately prior to the Redemption Date; provided that if the Company shall default in payment of the Redemption Price, a Holder may surrender Securities for conversion on or after the related Redemption Date.

In the event that the Company declares a dividend or distribution described in Section 10.7 of the Indenture, or a dividend or distribution described in Section 10.8 of the Indenture where the fair market value of such dividend or distribution per share of Common Stock, as determined in the Indenture, exceeds 15% of the current Market Price of the Common Stock as of the trading day immediately prior to the date of declaration, a Holder may surrender Securities for conversion beginning on the date the Company gives notice to such Holder of such right, which shall be not less than 20 days prior to the Ex-Dividend Time for such dividend or distribution, and such Holder may surrender such Securities for conversion at any time thereafter until the close of business on the Business Day prior to the Ex-Dividend Time or until the Company announces that such distribution shall not take place.

Finally, in the event that the Company is a party to a consolidation, merger, transfer or lease of all or substantially all of its assets or a merger which reclassifies or changes its Common Stock pursuant to which the Common Stock would be converted into cash, securities or other assets as set forth in Section 10.14 of the Indenture, a Holder may surrender Securities for conversion at any time from or after the date the Company announces as the anticipated effective time until 15 days after the actual date of such transaction (assuming, in a case in which the Company's stockholders may exercise rights of election, that a Holder of Securities would not have exercised any rights of election as to the stock, other securities or other property or assets receivable in connection therewith and received per share the kind and amount received per share by plurality of nonelecting shares).

Upon conversion, no payment or adjustment for accrued and unpaid cash interest on or accretion in value of a converted Security (other than the payment of interest to the Holder of a Security at the close of business on a record date pursuant to Section 1 of this Security) or for dividends or distributions on the Common Stock shall be made.

A Security in respect of which a Holder has delivered a Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be converted only if such notice of exercise is withdrawn in accordance with the terms of the Indenture. A Security in respect of which a Holder has delivered a Change of Control Purchase Notice exercising the option of such Holder to require the Company to purchase such Security may be not converted.

The Conversion Rate is initially 7.8714 shares of Common Stock per Security, subject to adjustment in certain events described in the Indenture. A Holder which surrenders Securities for conversion shall receive cash in lieu of any fractional shares of Common Stock.

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To convert a Security, a Holder must (1) complete and sign the conversion notice on the reverse of the Security, (2) surrender the Security to the Conversion Agent, (3) furnish the appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent, and (4) pay any tax or duty which may be payable in respect of any transfer involving the issue or delivery of Common Stock in the name of a person other than the Holder thereof. A Holder may convert a portion of a Security if the portion is $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such increased amount).

The Conversion Rate shall be adjusted for dividends or distributions on shares of Common Stock payable in shares of Common Stock or other Capital Stock; subdivisions, combinations or certain reclassifications of Common Stock; distributions to all holders of Common Stock of certain rights to purchase shares of Common Stock for a period expiring within 60 days at less than the Average Sale Price at the Time of Determination; and distributions to such holders of assets or debt securities of the Company or certain rights to purchase securities of the Company (excluding certain cash dividends or distributions). However, no adjustment need be made if Securityholders may participate in the transaction without conversion or in certain other cases. The Company from time to time may voluntarily increase the Conversion Rate.

If the Company is a party to a consolidation or merger, or a transfer or a lease of all or substantially all of its assets or a merger which reclassifies or changes its outstanding Common Stock, the right to convert a Security into Common Stock may be changed into a right to convert it into securities, cash or other assets of the Company or another person.

8. Conversion Arrangement.

The Company has the option to designate a financial institution to which Securities surrendered for conversion by a Holder of Securities shall be initially offered by the Conversion Agent for exchange in lieu of the Company's converting the Securities. When a Holder surrenders Securities for conversion, the Conversion Agent shall cause the Securities first to be offered to a financial institution chosen by the Company for exchange lieu of conversion. The Company expects that when the Securities are convertible, the designated institution shall submit to the Conversion Agent a non-binding offer to accept Securities surrendered for conversion. In order to accept Securities surrendered for conversion, the designated institution must agree to exchange for such Securities a number of shares of Common Stock equal to the number of such shares the Holder of such Securities would receive upon conversion, plus cash for any fractional shares. If the institution accepts any such Securities, it shall deliver the appropriate number of shares of Common Stock to the Conversion Agent and the Conversion Agent shall deliver those shares to the Holder who surrendered the Securities. The designation of an institution to which Securities may be submitted for exchange does not require the institution to accept any Securities from the Conversion Agent. If the designated institution declines to accept any Securities in whole or in part, those Securities or parts of Securities shall be converted into shares of Common Stock as the close of business on the Business Day following the Business Day on which the Securities are surrendered for conversion. If the designated institution agrees to accept any Securities for exchange but does not timely deliver the related common shares, the Securities shall be converted and the shares of Common Stock shall be delivered. Any Securities accepted for exchange by the designated institution shall remain outstanding.

9. Denominations, Transfer, Exchange.

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appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed in relation thereto by law or permitted by the Indenture.

10. Amendment, Supplement, Waiver.

Subject to certain exceptions, the Indenture or the Securities may be amended or supplemented, with the written consent of the Holders of a majority in aggregate principal amount at maturity of the Securities, and any existing default may be waived with the consent of the Holders of a majority in aggregate principal amount at maturity of the Securities. Without the consent of any Securityholder, the Indenture or the Securities may be amended, inter alia, to cure any ambiguity, defect or inconsistency, to provide for assumption of Company obligations to Securityholders in the case of a merger or acquisition, to make any change that does not materially adversely affect the rights of any Securityholder, or to add or remove a Guarantee in accordance with the terms of the Indenture.

11. Defaults and Remedies.

An Event of Default is default in the payment by the Company or any Guarantor of accrued and unpaid cash interest (including Additional Interest and any additional cash interest payable after any election by the Company to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event) on the Securities continued for 30 days, default by the Company or any Guarantor, as the case may be, in payment of principal (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the Restated Principal Amount) of the Securities or in the payment of any amount due on a Guarantee when due and payable, default in payment of the Redemption Price to be paid upon a redemption at the option of the Company pursuant to Section 5 of this Security or the Purchase Price or Change of Control Purchase Price to be paid upon a redemption at the option of the Holder pursuant to Section 6 of this Security; failure by the Company or any Guarantor for 90 days after certain notice to it to comply with any of its other agreements in the Indenture; default in the payment of Indebtedness of the Company or any Guarantor if such payment exceeds $50,000,000 and such default results in acceleration of such indebtedness; acceleration of payments with respect to Indebtedness of the Company or any Guarantor in excess of $50,000,000; any Guarantee shall be held to be unenforceable or invalid or shall cease to be in full force and effect; and certain events of bankruptcy or insolvency with respect to the Company or any Guarantor. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of the Securities may declare an amount equal to the Accreted Value of the Securities (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the Restated Principal Amount) plus accrued and unpaid cash interest in respect of the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being immediately due and payable upon the occurrence of such Events of Default.

Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. Subject to certain limitations, Holders of a majority in aggregate principal amount at maturity of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest following the occurrence of a Tax Event, the Restated Principal Amount) or accrued and unpaid interest) if it determines that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee.

A–1–11

12. Trustee Dealings With Company.

Wells Fargo Bank Minnesota, National Association, the Trustee and any agent under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee or agent.

13. No Recourse Against Others.

A director, officer, employee or stockholder, as such, of the Company or any Guarantor shall not have any liability for any obligations of the Company or any such Guarantor (as the case may be) under the Securities, the Guarantees or the Indenture (as applicable) or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities and the Guarantees.

14. Authentication.

This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent on the face hereof.

15. Abbreviations.

Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

16. CUSIP Numbers.

Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption.

17. Governing Law.

The laws of the State of New York shall govern the Indenture, the Securities and the Guarantees.

18. Registration Rights.

The Holders of the Securities are entitled to the benefits of a Registration Rights Agreement, dated as of June 27, 2001, among the Company, the Guarantors and Credit Suisse First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as initial purchasers, including the receipt of Additional Interest upon a registration default (as defined in such agreement).

A–1–12

The Company shall furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to:

Best Buy Co. Inc.
7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
Attn: Treasury Department

A–1–13

CONVERSION NOTICE

To Best Buy Co., Inc. (the "Company"):

The undersigned owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion hereof (which is $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) or an integral multiple of $1,000 (or such corresponding increased amount) below designated, into shares of Best Buy Common Stock in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon conversion, together with any cash in payment for fractional shares and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If shares are to be issued in the name of a Person other than the undersigned, the undersigned shall pay all transfer taxes payable with respect thereto.

To convert this Security into Common Stock of the Company, check the box: / /

To convert only part of this Security, state the amount (must be $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) or any whole multiple of $1,000 (or such increased amount in the event of a Rate Reset): $

If you want the stock certificate made out in another Person's name, fill in the form below:

(Insert other Person's social security or tax identification number)

(Print or type other Person's name, address and zip code)

Date:				Your signature:
						(Sign exactly as your name appears on the face of this Security)

Signature Guaranteed:

A–1–14

ASSIGNMENT FORM

To assign this Security or, in the event of conversion, shares of Best Buy Common Stock, fill in the form below:

I or we assign and transfer this Security or, shares of Best Buy Common Stock, to

(Insert assignee's social security or tax identification number)

(Print or type assignee's name, address and zip code)

and irrevocably appoint

agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date:				Your signature:
						(Sign exactly as your name appears on the face of this Security)

Signature Guaranteed:

A–1–15

SCHEDULE OF INCREASES AND DECREASES OF GLOBAL SECURITY

Initial Principal Amount at Maturity of Global Security: ($ ).

Date		Amount of Increase in Principal Amount at Maturity of Global Security		Amount of Decrease in Principal Amount at Maturity of Global Security		Principal Amount at Maturity of Global Security After Increase or Decrease		Notation by Registrar or Security Custodian

A–1–16

EXHIBIT A-2

[FORM OF FACE OF CERTIFICATED SECURITY]

The foregoing legend may be removed from this Security on satisfaction of the conditions specified in the Indenture.

BEST BUY CO., INC.

CONVERTIBLE DEBENTURES DUE JUNE 27, 2021

No.		CUSIP:
Issue Date: June 27, 2001 Issue Price: $683.80 (for each $1,000 principal amount at maturity, subject to adjustment)

BEST BUY CO., INC., a Minnesota corporation, promises to pay to or registered assigns, the principal amount at maturity of [ ] ($[ ]) on June 27, 2021, subject to adjustment as provided herein.

Additional provisions of this Security are set forth on the other side of this Security.

Dated:	BEST BUY CO., INC.
	By:
		Name: Title:

TRUSTEE'S CERTIFICATE OF AUTHENTICATION
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the within-mentioned Indenture.
By:
		Authorized Signatory

Dated:

A–2–2

[FORM OF REVERSE OF GLOBAL SECURITY]
Convertible Debentures due June 27, 2021

1. Accretion in Value and Cash Interest.

A–2–3

2. Method of Payment.

A–2–4

3. Paying Agent, Conversion Agent and Registrar.

4. Indenture and Guarantees.

5. Redemption at the Option of the Company.

6. Purchase By the Company at the Option of the Holder.

A–2–5

The Purchase Price may be paid, at the option of the Company, in cash or by the delivery of Common Stock, or any combination thereof, in the manner described in Section 3.7 of the Indenture.

Holders have the right to withdraw any Purchase Notice by delivering to the Paying Agent a written notice of withdrawal in accordance with the provisions of the Indenture.

The term "Change of Control" shall mean either:

(ii) a report is filed on Schedule 13D or TO (or any successor schedule, form or report) pursuant to the Exchange Act, disclosing that any person (for the purposes of this Section 6 only, as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of 50% or more of the voting power of the Common Stock then outstanding; provided that a person shall not be deemed beneficial owner of, or to own beneficially, (A) any securities tendered pursuant to a tender or exchange offer made by or on behalf of such person or any of such person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange thereunder or (B) any securities if such beneficial ownership (1) arises solely as a result of a revocable proxy

A–2–6

7. Conversion.

A–2–7

From (and including	To (but excluding)	Applicable Percentage
June 27, 2001	June 27, 2002	120.0	%
June 27, 2002	June 27, 2003	119.5
June 27, 2003	June 27, 2004	119.0
June 27, 2004	June 27, 2005	118.5
June 27, 2005	June 27, 2006	118.0
June 27, 2006	June 27, 2007	117.5
June 27, 2007	June 27, 2008	117.0
June 27, 2008	June 27, 2009	116.5
June 27, 2009	June 27, 2010	116.0
June 27, 2010	June 27, 2011	115.5
June 27, 2011	June 27, 2012	115.0
June 27, 2012	June 27, 2013	114.5
June 27, 2013	June 27, 2014	114.0
June 27, 2014	June 27, 2015	113.5
June 27, 2015	June 27, 2016	113.0
June 27, 2016	June 27, 2017	112.5
June 27, 2017	June 27, 2018	112.0
June 27, 2018	June 27, 2019	111.5
June 27, 2019	June 27, 2020	111.0
June 27, 2020	June 27, 2021	110.5

A–2–8

other securities or other property or assets receivable in connection therewith and received per share the kind and amount received per share by plurality of nonelecting shares).

A–2–9

8. Conversion Arrangement.

9. Denominations, Transfer, Exchange.

The Securities are in registered form without coupons in denominations of $1,000 principal amount at maturity (subject to upward adjustment in the event of a Rate Reset) and integral multiples of $1,000 (or such increased amount). A Holder may register the transfer of or exchange Securities in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes or other governmental charges that may be imposed in relation thereto by law or permitted by the Indenture.

10. Amendment, Supplement, Waiver.

11. Defaults and Remedies.

A–2–10

payment of the Redemption Price to be paid upon a redemption at the option of the Company pursuant to Section 5 of this Security or the Purchase Price or Change of Control Purchase Price to be paid upon a redemption at the option of the Holder pursuant to Section 6 of this Security; failure by the Company or any Guarantor for 90 days after certain notice to it to comply with any of its other agreements in the Indenture; default in the payment of Indebtedness of the Company or any Guarantor if such payment exceeds $50,000,000 and such default results in acceleration of such indebtedness; acceleration of payments with respect to Indebtedness of the Company or any Guarantor in excess of $50,000,000; any Guarantee shall be held to be unenforceable or invalid or shall cease to be in full force and effect; and certain events of bankruptcy or insolvency with respect to the Company or any Guarantor. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount at maturity of the Securities may declare an amount equal to the Accreted Value of the Securities (or, if the Company has elected to restate the principal amount of the Securities and pay additional cash interest on the Securities following the occurrence of a Tax Event, the Restated Principal Amount) plus accrued and unpaid cash interest in respect of the Securities to be immediately due and payable. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being immediately due and payable upon the occurrence of such Events of Default.

12. Trustee Dealings With Company.

13. No Recourse Against Others.

14. Authentication.

This Security shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent on the face hereof.

15. Abbreviations.

Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants

A–2–11

with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

16. CUSIP Numbers.

17. Governing Law.

The laws of the State of New York shall govern the Indenture, the Securities and the Guarantees.

18. Registration Rights.

The Company shall furnish to any Securityholder upon written request and without charge a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to:

Best Buy Co. Inc.
7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
Attn: Treasury Department

A–2–12

CONVERSION NOTICE

To Best Buy Co., Inc. (the "Company"):

To convert this Security into Common Stock of the Company, check the box: / /

If you want the stock certificate made out in another Person's name, fill in the form below:

(Insert other Person's social security or tax identification number)

(Print or type other Person's name, address and zip code)

Date:				Your signature:
						(Sign exactly as your name appears on the face of this Security)

Signature Guaranteed:

A–2–13

ASSIGNMENT FORM

To assign this Security or, in the event of conversion, shares of Best Buy Common Stock, fill in the form below:

I or we assign and transfer this Security or, shares of Best Buy Common Stock, to

(Insert assignee's social security or tax identification number)

(Print or type assignee's name, address and zip code)

and irrevocably appoint

agent to transfer this Security on the books of the Company. The agent may substitute another to act for him.

Date:				Your signature:
						(Sign exactly as your name appears on the face of this Security)

Signature Guaranteed:

A–2–14

EXHIBIT B

Convertible Debentures due June 27, 2021

Transfer Certificate

In connection with any transfer of any of the Securities within the period prior to the expiration of the holding period applicable to the sales thereof under Rule 144(k) under the Securities Act of 1933, as amended (the "Securities Act") (or any successor provision), the undersigned registered owner of this Security hereby certifies with respect to $ expected principal amount at maturity (of the above-captioned Securities presented or surrendered on the date hereof (the "Surrendered Securities") for registration of transfer, or for exchange or conversion where the securities issuable upon such exchange or conversion are to be registered in a name other than that of the undersigned registered owner (each such transaction being a "transfer"), that such transfer complies with the restrictive legend set forth on the face of the Surrendered Securities for the reason checked below:

and unless the box below is checked, the undersigned confirms that, to the undersigned's knowledge, such Securities are not being transferred to an "affiliate" of the Company as defined in Rule 144 under the Securities Act (an "Affiliate").

(If the registered owner is a corporation, partnership or fiduciary, the title of the person signing on behalf of such registered owner must be stated.)

B–1

Signature Guaranteed


Participant in a Recognized Signature
Guarantee Medallion Program
By:
		Authorized Signatory

B–2

EXHIBIT C

[FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE]

Subject to Section 11.5 of the Indenture, each Guarantor hereby, jointly and severally, unconditionally guarantees to each Holder of a Security authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the Securities and the Obligations of the Company under the Securities or under the Indenture, that: (a) the principal and accrued and unpaid cash interest and Additional Interest, if any, on, the Securities shall be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on overdue principal, interest on any accrued and unpaid interest, if any, and interest on any Additional Interest, if any, on the Securities and all other payment Obligations of the Company to the Holders or the Trustee under the Indenture or under the Securities shall be promptly paid in full and performed, all in accordance with the terms thereof; and (b) in case of any extension of time of payment or renewal of any Securities or any of such other payment Obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise. Failing payment when so due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately.

The obligations of the Guarantors to the Holders of the Securities and to the Trustee pursuant to this Guarantee and the Indenture are expressly set forth in Article XI of the Indenture, and reference is hereby made to such Indenture for the precise terms of this Guarantee. The terms of Article XI of the Indenture are incorporated herein by reference. This Guarantee is subject to release as and to the extent provided in Section 11.4 of the Indenture.

This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Guarantor and its respective successors and assigns to the extent set forth in the Indenture until full and final payment of all of the Company's Obligations under the Securities and the Indenture, or until released as and to the extent provided in Section 11.4 of the Indenture, and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and not a guarantee of collection.

Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the Obligations contained in the Securities and the Indenture.

This Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Security upon which this Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers.

For purposes hereof, each Guarantor's liability shall be limited to the lesser of (i) the aggregate amount of the Obligations of the Company under the Securities and the Indenture and (ii) the maximum amount that shall result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent transfer or conveyance under applicable law of any relevant jurisdiction.

This Guarantee shall be governed by and construed in accordance with the laws of the State of New York.

C–1

Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated.

		BBC INSURANCE AGENCY, INC.
		By:
				Name: Title:
		BBC INVESTMENT CO.
		By:
				Name: Title:
		BBC PROPERTY CO.
		By:
				Name: Title:
		BEST BUY STORES, L.P.
		By:
				Name: Title:
		BEST BUY PURCHASING LLC
		By:
				Name: Title:
		BESTBUY.COM, INC.
		By:
				Name: Title:

C–2

		BEST BUY CONCEPTS, INC.
		By:
				Name: Title:
		MAGNOLIA HI-FI, INC.
		By:
				Name: Title:
		MUSICLAND STORES CORPORATION
		By:
				Name: Title:
		THE MUSICLAND GROUP, INC.
		By:
				Name: Title:
		MEDIA PLAY, INC.
		By:
				Name: Title:
		MG FINANCING SERVICES, INC.
		By:
				Name: Title:

C–3

		MLG INTERNET, INC.
		By:
				Name: Title:
		MUSICLAND RETAIL, INC.
		By:
				Name: Title:
		ON CUE, INC.
		By:
				Name: Title:
		REQUEST MEDIA, INC.
		By:
				Name: Title:
		SUNCOAST GROUP, INC.
		By:
				Name: Title:
		SUNCOAST MOTION PICTURE COMPANY, INC.
		By:
				Name: Title:

C–4

		SUNCOAST RETAIL, INC.
		By:
				Name: Title:
		TMG CARIBBEAN, INC.
		By:
				Name: Title:
		TMG-VIRGIN ISLANDS, INC.
		By:
				Name: Title:
		REDLINE ENTERTAINMENT, INC.
		By:
				Name: Title:

C–5

EXHIBIT D

[FORM OF SUPPLEMENTAL INDENTURE
RELATING TO ADDITIONAL GUARANTEES]

SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of , among Best Buy Co., Inc. (the "Company"), a corporation duly organized and existing under the laws of the State of Minnesota; the Guarantors party thereto (collectively, the "Existing Guarantors"); , a [corporation], (the "Additional Guarantor" and, together with the Existing Guarantors, the "Guarantors") and Wells Fargo Bank Minnesota, National Association, a national banking association, as trustee (the "Trustee").

W I T N E S S E T H

WHEREAS, the Company and the Existing Guarantors have heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of June 27, 2001, providing for the issuance of Convertible Debentures due June 27, 2021 of the Company (the "Securities");

WHEREAS, Section 4.3 and Article XI of the Indenture provide that under certain circumstances the Company may or must cause certain of its Subsidiaries to execute and deliver to the Trustee a supplement to the Indenture pursuant to which such Subsidiaries shall unconditionally guarantee all of the Company's Obligations under the Securities pursuant to a Guarantee on the terms and conditions set forth herein; and

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Additional Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Securities as follows:

1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. Agreement to Guarantee. The Additional Guarantor hereby agrees, jointly and severally with all other Guarantors, to unconditionally guarantee the Company's Obligations under the Securities and the Indenture on the terms and subject to the conditions set forth in Article XI of the Indenture and to be bound by all other applicable provisions of the Indenture and the Securities. The Additional Guarantor hereby agrees that its Guarantee shall remain in full force and effect notwithstanding any failure to endorse on each Security a notation of such Guarantee. This Guarantee is subject to release as and to the extent provided in Section 11.4 of the Indenture. This Guarantee shall remain in full force and effect irrespective of the release of the Guarantee of any Guarantor other than the Additional Guarantor as provided in Section 11.4 of the Indenture.

3. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, partner, member, shareholder or agent of any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Securities, any Guarantee, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations. Each Holder by accepting a Security waives and releases all such liability. Such waiver and release form a part of the consideration for issuance of the Securities and the Guarantees.

4. Governing Law. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

D–1

5. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

6. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof.

7. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the correctness of the recitals of fact contained herein, all of which recitals are made solely by the Additional Guarantor.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

		[ADDITIONAL GUARANTOR]
		By:
				Name: Title:
		BEST BUY CO., INC.
		By:
				Name: Title:
		BBC INSURANCE AGENCY, INC.,
		By:
				Name: Title:
		BBC INVESTMENT CO.,
		By:
				Name: Title:
		BBC PROPERTY CO.,
		By:
				Name: Title:

D–2

		BEST BUY PURCHASING LLC
		By:
				Name: Title:
		BESTBUY.COM, INC.
		By:
				Name: Title:
		BEST BUY CONCEPTS, INC.
		By:
				Name: Title:
		MAGNOLIA HI-FI, INC.
		By:
				Name: Title:
		MUSICLAND STORES CORPORATION
		By:
				Name: Title:
		THE MUSICLAND GROUP, INC.
		By:
				Name: Title:

D–3

		MEDIA PLAY, INC.
		By:
				Name: Title:
		MG FINANCING SERVICES, INC.
		By:
				Name: Title:
		MLG INTERNET, INC.
		By:
				Name: Title:
		MUSICLAND RETAIL, INC.
		By:
				Name: Title:
		ON CUE, INC.
		By:
				Name: Title:
		REQUEST MEDIA, INC.
		By:
				Name: Title:

D–4

		SUNCOAST GROUP, INC.
		By:
				Name: Title:
		SUNCOAST MOTION PICTURE COMPANY, INC.
		By:
				Name: Title:
		SUNCOAST RETAIL, INC.
		By:
				Name: Title:
		TMG CARIBBEAN, INC
		By:
				Name: Title:
		TMG-VIRGIN ISLANDS, INC.
		By:
				Name: Title:
		REDLINE ENTERTAINMENT, INC.
		By:
				Name: Title:

D–5

		WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
		By:
				Name: Title:

D–6

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EXECUTION COPY

TABLE OF CONTENTS
ARTICLE IV COVENANTS

EXHIBIT A-1

[FORM OF REVERSE OF GLOBAL SECURITY] Convertible Debentures due June 27, 2021

EX-4.2 4 a2059091zex-4_2.htm EXHIBIT 4.2 Prepared by MERRILL CORPORATION
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$492,400,000

BEST BUY CO., INC.

Convertible Debentures Due June 27, 2021

REGISTRATION RIGHTS AGREEMENT

June 27, 2001

CREDIT SUISSE FIRST BOSTON CORPORATION MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
c/o		Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629

Ladies and Gentlemen:

Best Buy Co., Inc., a Minnesota corporation (the "Company"), proposes to issue and sell to Credit Suisse First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Purchasers"), upon the terms set forth in a purchase agreement dated June 22, 2001 (the "Purchase Agreement"), $492,400,000 initial aggregate principal amount at maturity of its Convertible Debentures due June 27, 2021 (the "Debentures"), to be guaranteed (the "Guarantees") by each of the Guarantors (as defined below). The Debentures will be issued pursuant to an Indenture, dated as of June 27, 2001 (the "Indenture"), among the Company, each of the subsidiary Guarantors party thereto (the "Guarantors" and, collectively with the Company, the "Best Buy Companies") and Wells Fargo Bank Minnesota, National Association, a national banking association, as trustee (the "Trustee"). Under the terms of the Indenture, the Debentures are convertible, in whole or in part, into shares of the Company's common stock, par value $0.10 (the "Conversion Shares", and together with the Debentures and the Guarantees, the "Securities"). As an inducement, the Best Buy Companies agree with the Purchasers, for the benefit of the holders of the Debentures (including, without limitation, the Purchasers), the Conversion Shares and the Guarantees (collectively the "Holders"), as follows:

1. Shelf Registration. (a) The Best Buy Companies shall promptly (but in no event more than 90 days of the First Closing Date (as defined in the Purchase Agreement) such 90^th day being a "Filing Deadline") use their reasonable efforts to file with the Securities and Exchange Commission (the "Commission") and thereafter use their reasonable efforts to cause to be declared effective no later than 180 days after the First Closing Date (such 180^th day being an "Effectiveness Deadline") a registration statement (the "Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), relating to the offer and sale of the Transfer Restricted Securities (as defined herein) by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, however, that no Holder (other than a Purchaser) shall be entitled to have the Securities held by it covered by such Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. "Transfer Restricted Securities" means each Security until (i) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Registration Statement or (ii) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

(b): The Best Buy Companies shall use their reasonable efforts to keep the Registration Statement continuously effective in order to permit the prospectus included therein, as the same may be amended or supplemented from time to time (the "Prospectus"), to be lawfully delivered by the Holders of the relevant Securities, for a period of two years from the date of its effectiveness or such shorter period that will terminate at the earlier of the time when all the Securities covered by the Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act) (in any such case, such period being called the "Shelf Registration Period"). The Best Buy

Companies shall be deemed not to have used their reasonable efforts to keep the Registration Statement effective during the Shelf Registration Period if they voluntarily take any action that they know will or is reasonably likely to result in Holders of Securities covered thereby not being able to offer and sell such Securities during the Shelf Registration Period, unless such action is required by applicable law.

(c): Notwithstanding any other provisions of this Agreement to the contrary, the Best Buy Companies shall cause the Registration Statement and the Prospectus and any amendment or supplement thereto, as of the effective date of the Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Best Buy Companies shall not be liable for any Holder Information (as defined in Section 4(a)).

2. Registration Procedures. In connection with the Shelf Registration contemplated by Section 1 hereof the following provisions shall apply:

(a)

The Best Buy Companies shall (i) furnish to each Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the Prospectus and, in the event that a Purchaser (with respect to any portion of an unsold allotment from the original offering of the Debentures) is participating in the Registration Statement, the Best Buy Companies shall use their reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as such Purchaser reasonably may propose and deliver to the Company at least two business days prior to the filing of such document with Commission, provided, however, that the Best Buy Companies shall not be required to include in any document any statements that in the reasonable opinion of counsel for the Best Buy Companies are not required by applicable law; and (ii) subject to paragraph (l) of this Section 2, include the names of the Holders who propose to sell Securities pursuant to the Registration Statement as selling securityholders and who have returned to the Company a properly completed and signed Selling Security Notice and Questionnaire in the form of Annex A to the Best Buy Companies' Offering Circular dated June 22, 2001 relating to the Debentures (each a "Notice Holder").

(b)

The Best Buy Companies shall give notice to the Purchasers and the Notice Holders of the Securities (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made, if appropriate):

(i): when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;
(ii): of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information related thereto;
(iii): of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose;
(iv): of the receipt by the Best Buy Companies or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(v): of (A) the occurrence or existence of any pending corporate development with respect to the Best Buy Companies or (B) the happening of any event, including, without limitation, any event resulting in a Deferral Period (as defined below), that requires the Best Buy Companies to make changes in the Registration Statement or the Prospectus in order that the Registration Statement or the Prospectus do not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading.

If the Best Buy Companies shall be required to suspend the use of the Prospectus pursuant to clauses (ii)-(v) above, the Company shall give notice to the Notice Holders that the availability of the Shelf Registration Statement is suspended (a "Deferral Notice") and, upon receipt of any Deferral Notice, each Holder agrees not to sell any Transfer Restricted Securities pursuant to the Registration Statement until such Holder's receipt of copies of the supplemented or amended Prospectus provided for in Section 2(h), or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Best Buy Companies will use their reasonable efforts to ensure that the use of the Prospectus may be resumed (x) in the case of clauses (ii), (iii) and (iv) above, as promptly as is practicable, (y) in the case of clause (v)(A) above, as soon as, in the sole judgment of the Company, public disclosure of such development would not be prejudicial to or contrary to the interests of the Company or, if necessary to avoid unreasonable burden or expense, as soon as reasonably practicable thereafter and (z) in the case of clause (v)(B)) above, as soon as, in the discretion of the Best Buy Companies, such suspension is no longer appropriate. The periods during which the availability of the Registration Statement and the Prospectus is suspended (each a "Deferral Period") shall, without the Best Buy Companies incurring any obligation to pay Additional Interest pursuant to Sections 5(a) and (b), not exceed forty-five (45) days in the aggregate in any three (3) month period or one hundred twenty (120) days in the aggregate in any twelve (12) month period.

(c): The Best Buy Companies shall make every reasonable effort during the Shelf Registration Period to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Registration Statement.
(d): The Best Buy Companies shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, one copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference).
(e): The Best Buy Companies shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in the Registration Statement as such person may reasonably request. The Best Buy Companies consent, subject to the provisions of this Agreement, to the use of the Prospectus by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the Prospectus.
(f): Prior to any public offering of the Securities pursuant to any Registration Statement, the Best Buy Companies shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such

states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other reasonable acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that the Best Buy Companies shall not be required to (i) qualify generally to do business in any jurisdiction where they are not then so qualified, (ii) qualify as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Agreement, or (iii) take any action which would subject them to general service of process or to taxation in any jurisdiction where they are not then so subject.

(g): The Best Buy Companies shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement.
(h): Upon the occurrence of any event contemplated by clauses (ii) through (v) of Section 2(b) above during the Shelf Registration Period, the Best Buy Companies shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related Prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, other than Holder Information (as defined below). If the Best Buy Companies notify the Purchasers and the Holders of the Securities in accordance with paragraphs (ii) through (v) of Section 2(b) above to suspend the use of the Prospectus until the requisite changes to the Prospectus have been made, then the Purchasers and the Holders of the Securities shall suspend use of such Prospectus, and the period of effectiveness of the Registration Statement provided for in Section 1 above shall be extended by the number of days from and including the date of the giving of such notice to and including the date when the Purchasers and the Holders of the Securities shall have received such amended or supplemented Prospectus pursuant to this Section 2(h).
(i): Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Debentures and the Conversion Shares registered under the Registration Statement and provide the Trustee with printed certificates for the Debentures in a form eligible for deposit with The Depository Trust Company.
(j): The Best Buy Companies will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Shelf Registration and will make generally available to its securityholders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Best Buy Companies' first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period.
(k): The Best Buy Companies shall cause the Indenture to be qualified under the Trust Indenture Act of 1939 as amended (the "Trust Indenture Act"), in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Best Buy Companies shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture.

(l): The Best Buy Companies may require each Holder of Securities to be sold pursuant to the Registration Statement to furnish to the Best Buy Companies such information regarding the Holder and the distribution of the Securities as the Best Buy Companies may from time to time reasonably require for inclusion in the Registration Statement, and the Best Buy Companies may exclude from such registration the Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request.
(m): The Best Buy Companies shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other reasonable action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration.
(n): The Best Buy Companies shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any disposition pursuant to the Registration Statement (an "Underwriter") and any attorney, accountant or other agent retained by the Holders of the Securities or any Underwriter all relevant financial and other records, pertinent corporate documents and properties of the Best Buy Companies and (ii) cause the Best Buy Companies' officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any Underwriter, attorney, accountant or agent in connection with the Registration Statement, in each case, as shall be reasonably necessary to enable such persons, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering shall be coordinated on behalf of the Purchasers and the other parties hereto, by one counsel designated by the Purchasers.
(o): The Best Buy Companies, if requested by any Holder of Securities covered by the Registration Statement, shall cause (i) their counsel(s) to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the Managing Underwriters (as defined herein), if any, thereof and dated, in the case of the initial opinion, the effective date of such Registration Statement (it being agreed that the matters to be covered by such opinion shall include, without limitation, the due incorporation and good standing of the Best Buy Companies; the qualification of the Best Buy Companies to transact business as foreign corporations, limited liability companies or partnerships, as the case may be; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 2(m) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Best Buy Companies; the absence of governmental approvals required to be obtained in connection with the Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 2(m) hereof; the compliance as to form of such Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence, to such counsel's (s') knowledge, from such Registration Statement and the Prospectus, as then amended or supplemented, and from any documents incorporated by reference therein, of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act), other than Holder Information; (ii) their authorized officer or officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested by any Underwriters, and (iii) their independent public accountants and the independent public

accountants with respect to any other entity for which financial information is provided in the Registration Statement to provide to the selling Holders of the applicable Securities and any Underwriter a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72.

(p): The Best Buy Companies will use their reasonable efforts to (a) if the Securities have been rated prior to the initial sale of such Securities, confirm such ratings will apply to the Securities covered by the Registration Statement, or (b) if the Securities were not previously rated, cause the Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in initial aggregate principal amount at maturity of Debentures covered by the Registration Statement, or by the Managing Underwriters, if any.
(q): In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Best Buy Companies will use their reasonable efforts to assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of Underwriters provided in Section 4 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules.
(r): The Best Buy Companies shall use their reasonable efforts to take all other steps necessary to effect the registration of the Securities covered by the Registration Statement contemplated hereby.
(s): The Company shall cause each Additional Guarantor (as defined in the Indenture) upon the creation or acquisition by the Company of such Additional Guarantor, to execute a counterpart to this Agreement in the form attached hereto as Annex A and to deliver such counterpart, together with an opinion of counsel as to the enforceability thereof against such entity, to the Purchasers no later than five business days following the execution thereof.

3. Registration Expenses. All expenses incident to the Best Buy Companies' performance of and compliance with this Agreement will be borne by the Best Buy Companies, regardless of whether the Registration Statement is ever filed or becomes effective, including without limitation;

(i): all registration and filing fees and expenses;
(ii): all fees and expenses of compliance with federal securities and state "blue sky" or securities laws;
(iii): all expenses of printing, messenger and delivery services and telephone;
(iv): all fees and disbursements of counsel for the Best Buy Companies;

(v): all application and filing fees in connection with listing the Securities on a national securities exchange; and
(vi): all fees and disbursements of independent certified public accountants of the Best Buy Companies (including the expenses of any special audit and comfort letters required by or incident to such performance).

The Best Buy Companies will bear their internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Best Buy Companies.

4. Indemnification. (a) The Best Buy Companies agree, jointly and severally, to indemnify and hold harmless each Holder of the Securities and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each Holder and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to the Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that (i) the Best Buy Companies shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to the Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Best Buy Companies by or on behalf of such Holder specifically for inclusion therein (such information being referred to herein as "Holder Information"), and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary Prospectus relating to the Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a Prospectus relating to such Securities was required to be delivered by such Holder under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the final Prospectus if the Best Buy Companies had previously furnished copies thereof to such Holder; provided further, however, that this indemnity agreement will be in addition to any liability which the Best Buy Companies may otherwise have to such Indemnified Party. The Best Buy Companies shall also, jointly and severally, indemnify Underwriters, their officers and directors and each person who controls such Underwriters within the meaning of the Securities Act or the Exchange Act to the same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders.

(b): Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless the Best Buy Companies and each person, if any, who controls any of the Best Buy Companies within the meaning of the Securities Act or the Exchange Act from and against any losses,

claims, damages or liabilities or any actions in respect thereof, to which the Best Buy Companies or any such controlling persons may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary Prospectus relating to the Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with Holder information pertaining to such Holder; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Best Buy Companies for any legal or other expenses reasonably incurred by the Best Buy Companies or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Best Buy Companies or any of their controlling persons.

(c): Promptly after receipt by an indemnified party under this Section 4 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 4, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party, which consent shall not be unreasonably withheld or delayed), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section 4 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action, and does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.
(d): If the indemnification provided for in this Section 4 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the sale of the Securities, pursuant to the Shelf Registration, or (ii) if allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the

indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Best Buy Companies on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 4(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to the Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Best Buy Companies within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Best Buy Companies.

(e): The agreements contained in this Section 4 shall survive the sale of the Securities pursuant to the Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party.

5. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Debentures and the Conversion Shares, as the case may be, shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iii) below being herein called a "Registration Default"):

(i): If the Registration Statement required by this Agreement is not filed with the Commission on or prior to the Filing Deadline;
(ii): If the Registration Statement has not been declared effective by the Commission by the Effectiveness Deadline; or
(iii): If the Registration Statement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the Prospectus ceases to be usable in connection with resales of Transfer Restricted Securities during the Shelf Registration Period because either (1) any event occurs as a result of which the Prospectus would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (2) it shall be necessary to amend the Registration Statement or supplement the Prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder.

Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary, or is beyond the control of the Best Buy Companies or pursuant to operation of law or as a result of any action or inaction by the Commission.

Additional Interest shall accrue on the Debentures (or on the Conversion Shares, after conversion of the Debentures) from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, (A) at a rate of 0.25% per annum for the first 90-day period after the incurrence of a Registration Default and (B) at a rate of 50% per annum thereafter (the "Additional Interest Rate"). Notwithstanding the foregoing, no Additional Interest shall accrue or be payable as to any Debentures or Conversion Shares from and after the earlier of (x) the date such Securities are no longer Transfer Restricted Securities and (y) the expiration of the Shelf Registration Period.

(b): A Registration Default referred to in Section 5(a)(iii) hereof shall be deemed not to have occurred and be continuing in relation to a Registration Statement or the Prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to the Registration Statement to incorporate annual audited financial information with respect to the Best Buy Companies where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the Prospectus or (y) other material events, with respect to the Best Buy Companies that would need to be described in the Registration Statement or the Prospectus and (ii) in the case of clause (y), the Best Buy Companies are proceeding promptly and in good faith to amend or supplement the Registration Statement and Prospectus to describe such events; provided, however, that in any case, if such Registration Default occurs for a continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day such Registration Default occurs until such Registration Default is cured.
(c): Any amounts of Additional Interest due pursuant to Section 5(a) will be payable with respect to the Debentures and the Conversion Shares issued upon conversion of the Debentures in cash on the regular interest payment dates with respect to the Debentures. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest Rate by the Issue Price (as defined in the Indenture) of the Debentures (or in the case of Conversion Shares, the Issue Price of the Debentures converted into such Conversion Shares) and further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360.

6. Rules 144 and 144A. The Best Buy Companies shall use their reasonable efforts to file the reports required to be filed by them under the Securities Act and the Exchange Act in a timely manner and, if at any time the Best Buy Companies are not required to file such reports, they will, upon the request of any Holder of Securities, make publicly available such other information so long as necessary to permit sales of their Securities pursuant to Rules 144 and 144A under the Securities Act. The Best Buy Companies covenant that they will take such further action as any Holder of Debentures may reasonably request, all to the extent required from time to time to enable such Holder to sell Debentures without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4) under the Securities Act). The Best Buy Companies will provide a copy of this Agreement to prospective purchasers of Debentures identified to the Best Buy Companies by the Purchasers upon request. Upon the request of any Holder of Debentures, the Best Buy Companies shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to require the Best Buy Companies to register any of their securities pursuant to the Exchange Act.

7. Underwritten Registrations. Holders of at least 25% in initial aggregate principal amount at maturity of the Transfer Restricted Securities (in the case of Conversion Shares, the initial aggregate principal amount at maturity of the Debentures into which such Conversion Shares were converted) may elect to have one underwritten offering of the Transfer Restricted Securities. If any of the Transfer Restricted Securities covered by the Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering (the "Managing Underwriters") will be selected by the Holders of a majority in initial aggregate principal amount at maturity of such Transfer Restricted Securities (in the case of Conversion Shares, the initial aggregate principal amount at maturity of the Debentures into which such Conversion Shares were converted) to be included in such offering, provided such Managing Underwriters shall have a national reputation and be reasonably acceptable to the Company.

No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. The Holders participating in any underwritten offering shall be responsible for any expenses customarily borne by selling securityholders, including underwriting discounts and commissions and fees and expenses of counsel to the selling securityholders to the extent not required to be paid by the Best Buy Companies pursuant to Section 3 hereof.

8. Miscellaneous.

(a) Remedies. Each Best Buy Company acknowledges and agrees that any failure by it to comply with its obligations under Section 1 hereof may result in material irreparable injury to the Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Purchasers or any Holder may obtain such relief as may be required to specifically enforce such Best Buy Company's obligations under Section 1 hereof. Each of the Best Buy Companies further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(b) No Inconsistent Agreements. The Best Buy Companies will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Best Buy Companies' securities under any agreement in effect on the date hereof.

(c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Best Buy Companies and the written consent of the Holders of a majority in initial aggregate principal amount at maturity of the Securities (in the case of Conversion Shares, the initial aggregate principal amount at maturity of the Debentures into which such Conversion Shares were converted) affected by such amendment, modification, supplement, waiver or consents.

(d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery:

(1): if to a Holder of the Securities, at the most current address given by such Holder to the Best Buy Companies.

(2): if to the Purchasers:

c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group

With a copy to:

Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, NY 10005-1413
Fax No.: (212) 822-5546
Attention: Arnold B. Peinado, III

(3): if to the Best Buy Companies, to the following address:

c/o Best Buy Co., Inc.
7075 Flying Cloud Drive
Eden Prairie, Minnesota 55344
Fax No.: (952) 996-4180
Attention: General Counsel

With a copy to:

Robins, Kaplan, Miller & Ciresi, LLP
2800 LaSalle Plaza
800 LaSalle Avenue
Minneapolis, MN 55402
Fax No.: (612) 339-4181
Attention: Anne M. Rosenberg

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery.

(e) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Best Buy Companies, on the one hand, and the Purchasers, on the other hand, and shall have the right to enforce such agreements directly as provided herein to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder.

(f) Successors and Assigns. This Agreement shall be binding upon the Best Buy Companies and its successors and assigns.

(g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

(h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

(j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.

(k) Securities Held by the Best Buy Companies. Whenever the consent or approval of Holders of a specified percentage of initial aggregate principal amount at maturity of Securities (in the case of Conversion Shares, the initial aggregate principal amount at maturity of the Debentures into which the Conversion Shares were converted) is required hereunder, Securities held by the Best Buy Companies or their affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage.

(l) Submission to Jurisdiction; Waiver of Immunities. By the execution and delivery of this Agreement, each of the Best Buy Companies (i) submits to the nonexclusive jurisdiction of any federal or state court in the State of New York in any suit or proceeding arising out of or relating to this Agreement, and (ii) agrees that service of process upon the Company shall be deemed in every respect effective service of process upon it in any such suit or proceeding. To the extent that any of the Best Buy Companies may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Best Buy Company hereby irrevocably waives such immunity in respect of this Agreement, to the fullest extent permitted by law.

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Best Buy Companies a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Purchasers and the Best Buy Companies in accordance with its terms.

BEST BUY CO., INC.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer and Chief Financial Officer
BBC INSURANCE AGENCY, INC.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer and Chief Financial Officer
BBC INVESTMENT CO.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance and Treasurer
BBC PROPERTY CO.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance and Treasurer
BEST BUY STORES, L.P.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President

BEST BUY PURCHASING LLC
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President
BESTBUY.COM, INC.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer
BEST BUY CONCEPTS, INC.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer
MAGNOLIA HI-FI, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President and Secretary
MUSICLAND STORES CORPORATION
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
THE MUSICLAND GROUP, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President

MEDIA PLAY, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
MG FINANCING SERVICES, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
MLG INTERNET, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
MUSICLAND RETAIL, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
ON CUE, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
REQUEST MEDIA, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President

SUNCOAST GROUP, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
SUNCOAST MOTION PICTURE COMPANY, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
SUNCOAST RETAIL, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
TMG CARIBBEAN, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
TMG-VIRGIN ISLANDS, INC.
By:	/s/ JOSEPH M. JOYCE

	Name:	Joseph M. Joyce
	Title:	Senior Vice President
REDLINE ENTERTAINMENT, INC.
By:	/s/ DARREN R. JACKSON

	Name:	Darren R. Jackson
	Title:	Senior Vice President—Finance, Treasurer

The foregoing Registration Rights Agreement
is hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

By: CREDIT SUISSE FIRST BOSTON CORPORATION, for the Purchasers

By:		/s/ DAVID N. FRANK

		Name: David N. Frank
		Title: Director

ANNEX A

Counterpart To Registration Rights Agreement

The undersigned hereby absolutely, unconditionally and irrevocably agrees (as a "Guarantor") to use its reasonable efforts to include its Guarantee in any Registration Statement required to be filed by the Company and the Guarantors pursuant to the Registration Rights Agreement, dated as of June 27, 2001 (the "Registration Rights Agreement") by and among Best Buy Co., Inc, a Minnesota corporation, the guarantors named therein and Credit Suisse First Boston Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated; to use its reasonable efforts to cause such Registration Statement to become effective as specified in the Registration Rights Agreement; and to otherwise be bound by the terms and provisions of the Registration Rights Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Counterpart as of , .

		[NAME]
		By:

				Name:
				Title:

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$492,400,000 BEST BUY CO., INC. Convertible Debentures Due June 27, 2021 REGISTRATION RIGHTS AGREEMENT
EX-5.1 5 a2059091zex-5_1.htm EXHIBIT 5.1 Prepared by MERRILL CORPORATION
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EXHIBIT 5.1

[RKMC Letterhead]
September 21, 2001

Best Buy Co., Inc.
7075 Flying Cloud Drive
Eden Prairie, MN 55344

Ladies and Gentlemen:

This opinion is furnished to you in connection with a Registration Statement on Form S-3 (the "Registration Statement"), filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, for the registration of (i) $492,400,000 aggregate principal amount at maturity of Convertible Debentures due June 27, 2021 (the "Debentures") of Best Buy Co., Inc. (the "Company"), (ii) shares of the Company's common stock, par value $0.10 per share (the "Shares") issuable upon conversion of the Debentures, and (iii) guarantees of the Debentures (collectively, the "Guarantees") by each of the Company's Restricted Subsidiaries. For purposes of this opinion, "Restricted Subsidiaries" shall have the meaning set forth therefor in that certain Indenture, dated as of June 27, 2001, between the Company, its subsidiaries identified therein as Guarantors, and Wells Fargo Bank Minnesota, National Association. All of the Debentures, Shares and Guarantees are being registered on behalf of the holders of the Debentures.

We have acted as counsel for the Company and the Restricted Subsidiaries in connection with the preparation and filing of the Registration Statement. For purposes of our opinion, we have examined and relied upon signed copies of the Registration Statement filed with the Commission as of the date hereof and such other documents, records, certificates and other instruments as we have deemed necessary. We have assumed the genuineness and authenticity of all documents submitted to us as originals of all documents submitted to us as copies.

We express no opinion as to the applicability of, compliance with or effect of federal law or the law of any jurisdiction other than the laws of the State of Minnesota and the federal laws of the United States of America.

Based upon the foregoing, we are of the opinion that the Debentures have been duly authorized and validly issued, and constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforceability may be limited by the application of bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the rights of creditors generally and by judicial limitations on the right of specific performance; that the Shares, when issued upon conversion of the Debentures, will be duly authorized, validly issued and fully paid and nonassessable; and that the Guarantees have been duly authorized and validly issued, and constitute valid and binding obligations of the Restricted Subsidiaries, respectively, enforceable against each of the Restricted Subsidiaries, respectively, in accordance with their terms, except as enforceability may be limited by the application of bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the rights of creditors generally and by judicial limitations on the right of specific performance.

This opinion letter is issued as of the date hereof and is limited to the laws now in effect, and in all respects is subject to and may be limited by future legislation, as well as by future case law. We assume no responsibility to keep this opinion current or to supplement it to reflect facts or circumstances which may hereafter come to our attention or any changes in laws which may hereafter occur.

We understand that this opinion is to be used in connection with the Registration Statement. We hereby consent to the filing of this opinion as part of the Registration Statement and to the use of our name therein and in the related prospectus under the caption "Validity of Securities."

		Yours very truly,
		/s/ ROBINS, KAPLAN, MILLER & CIRESI L.L.P.

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EXHIBIT 5.1

EX-8.1 6 a2059091zex-8_1.htm EX-8.1 Prepared by MERRILL CORPORATION
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EXHIBIT 8.1

PRIVILEGED AND CONFIDENTIAL

September 19, 2001

Ms. Connie Kotula
Director of Tax and Payroll
Best Buy Co., Inc.
7075 Flying Cloud Drive
Eden Prairie, MN 55344

Contingent Payment Convertible Debentures

Dear Ms. Kotula:

This letter constitutes our opinion regarding certain federal income tax consequences to Best Buy Co., Inc. (the "Company") of issuing $492,400,000 of Convertible Contingent Debentures due June 27, 2021 (the "Debentures"). In rendering this opinion, we have relied on (1) an Offering Circular dated June 22, 2001 for the Debentures, (2) a letter dated June 26, 2001 from the Company containing certain representations with respect to the Company and the Debentures (the "Company Letter") and (3) a letter dated August 13, 2001 from Credit Suisse First Boston ("CSFB") containing certain representations with respect to the Debentures and supporting financial analysis (the "CSFB Letter"). The scope of this opinion is defined at the end of this letter.

Facts

Each Debenture will have a term of 20 years, a stated principal amount of $1,000,¹ and an issue price of $683.80. The Debentures will be unsecured and unsubordinated obligations of the Company, but will be guaranteed by the Company's restricted subsidiaries. The Debentures are convertible into common stock of the Company at a conversion rate of 7.8714 shares per Debenture, subject to the satisfaction of certain conditions described below.²

¹: The maturity value of each Debenture will exceed $1,000 in the event there is an upward adjustment of the yield to maturity pursuant to a yield to maturity reset (as described and defined below).
²: The conversion rate will be adjusted for: (i) stock dividends or distributions on the Company's common stock; (ii) subdivisions, combinations or certain reclassifications of the Company common stock; (iii) distributions to shareholders of certain stock purchase rights; and (iv) certain other distributions to shareholders (e.g., distributions of the Company's assets or a distribution of debt instruments).

The Debentures also call for cash interest at an initial rate of 1.00 percent per annum applied to the issue price of the Debentures, payable semiannually in arrears on June 27 and December 27 of each year, beginning on December 27, 2001, which results in a semiannual cash payment of $3.42 per $1,000 of the initial stated principal amount. The issue price of each Debenture and the cash interest result in an initial yield to maturity for the Debentures of 2.75 percent.

The yield on the Debentures will be reset on December 27, 2003, December 27, 2008, December 27, 2013 to a rate per annum equal to (i) the interest rate payable 120 days prior to the respective reset dates on the 5-year U.S. Treasury Notes (ii) minus 1.90 percent. However, irrespective of the interest rate determined by the Treasury Note formula described above, the yield will not be reduced below 2.75 percent per annum nor increased above 3.75 percent per annum. Moreover, if an increase in yield occurs, the Company will pay a portion of the increased yield as cash interest at a rate up to 0.25 percent per annum of the accreted value of the Debentures with the remaining increased yield payable at maturity, redemption or the date of purchase. The accreted value of the Debentures is initially the issue price. Thereafter, at the end of any subsequent semiannual period, the new accreted

value is the accreted value at the beginning of that period (i) plus the accrual for that period at the yield in effect for that period (ii) minus the amount of cash interest payable with respect to that period.

The Debentures are convertible into Company common stock if, the closing sales price of the Company common stock for at least 20 trading days in the 30 trading day period ending on the trading day prior to the day of surrender is more than the applicable percentage of the accreted conversion price per share of the Company common stock at the day prior to the day of surrender.³ The applicable percentage will initially be 120 percent and will decline by 0.50 percent on each anniversary of the issue date until the rate is 110 percent at maturity. Once the foregoing contingency is satisfied, the Debentures will thereafter be convertible at any time, through maturity.⁴ The Company's common stock currently trades on the New York Stock Exchange under the symbol "BBY." However, neither the Debentures nor the shares of common stock that are issuable upon conversion have been registered under the Securities Act of 1933, as amended, or any other securities law.

³: The accreted conversion price per share of the Company common stock as of any day will equal the accreted value of the Debenture divided by the number of shares of common stock issuable upon a conversion of a Debenture on that day.
⁴: Furthermore, the conversion contingency is also triggered with certain other occurrences (e.g., the downgrading of the Company's senior long-term unsecured credit rating, the Debentures are called for redemption by the Company, or specified corporate transactions have occurred).

In addition, the Company has the option to designate a financial institution to which Debentures surrendered for conversion will be initially offered by the conversion agent for exchange in lieu of converting the Debentures. The chosen financial institution has the option to purchase the Debentures for the amount of stock that would be required to be tendered on conversion. If the financial institution exercises this option, the Debentures will remain outstanding until maturity, redemption, conversion, or purchase by the Company at the option of the holder.

The Debentures provide that upon conversion, the holder will not receive any cash payment of interest representing accrued original issue discount. The delivery to the holder of the Company common stock into which the Debentures are convertible, together with any cash payment representing the holder's fractional shares, will be deemed to satisfy (i) the Company's obligation to pay the accreted value of the Debentures, and (ii) the accrued but unpaid cash interest attributable to the period from the issue date through the conversion date. As a result, the accretion on the Debenture and the accrued and unpaid cash interest will be deemed to be paid in full rather than cancelled, extinguished, or forfeited.

The holders will have the right to put the Debentures to the Company on the 3^rd, 8^th, and 13^th anniversaries of the issue date (June 27, 2004, 2009 and 2014) at the accreted value of the Debentures plus accrued and unpaid cash interest up to but not including the put date. If a holder exercises this option, the Company has the choice to pay the purchase price of the Debenture in cash or common stock or a combination of both. If the Company elects to pay the put price in stock, the number of shares the Company must delivered is equal to the put price divided by the market price of the shares, which is defined as the average of the closing prices of the shares for the five trading days ending with the third business day prior to the date on which the payment is to be made. The holders also have the option to put the Debentures to the Company for cash at the accreted value of the Debentures plus accrued and unpaid cash interest if a change in control occurs.

In addition, the Company has the option to call the instruments for cash any time after the third anniversary of the issue date (June 27, 2004) at the accreted value of the Debentures plus accrued and unpaid cash interest up to but not including the date of redemption.

In the event of an occurrence of a tax event,⁵ the Company may also elect to have additional cash interest accrue at the rate per annum, equal to the yield to maturity then in effect, less the amount of the yield to maturity paid as cash interest, on a specified principal amount at maturity. The specified principal amount at maturity will be the accreted value of the Debentures plus any accrued and unpaid cash interest to the date the Company exercised the tax event option. The additional cash interest rate will also be subject to the reset provisions discussed above. The additional cash interest will accrue from the option exercise date and will be payable in cash semiannually on the interest payment dates of June 27 and December 27 of each year.

⁵: A "tax event" is defined as: (i) certain opinions from an independent tax counsel (regarding any amendment to, or change in the laws (or rules or regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein; or any amendment to, or change in, an interpretation or application of such laws, rules or regulations by any legislative body, court, governmental agency or regulatory authority) that there is more than an insubstantial risk that interest (including accrued interest) payable on the Debentures either would not be deductible on a current accrual basis or would not be deductible under any other method, in either case in whole or in part, by the Company (by reason of deferral, disallowance, or otherwise) for federal income tax purposes; or (ii) if federal legislation is introduced, enacted and made applicable to the Debentures in a manner that would limit the Company's ability to either deduct the interest, including accrued interest, payable on the Debentures on a current accrual basis; or deduct the interest, including accrued interest, payable on the Debentures under any other method for federal income tax purposes.

The Company will treat the Debentures as indebtedness for federal income tax purposes, as well as for financial accounting purposes, unless and until the Debentures are converted into Company common stock.

Summary of Conclusions

Based on the facts summarized above and set forth in more detail in the Offering Circular, the CSFB Letter, and the analysis below, we are of the following opinions regarding the federal income tax treatment of the Debentures:

(i): The Debentures should be treated as indebtedness of the Company;
(ii): The Debentures should be treated as contingent payment debt instruments ("CPDIs") and not as variable rate debt instruments ("VRDIs");
(iii): Under the CPDI regulations in Reg. §1.1275-4, the Company will be required to account for the Debentures under the noncontingent bond method set forth in Reg. §1.1275-4(b);⁶

⁶

All section references are to the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, unless otherwise indicated.

(iv): In applying the noncontingent bond method, the "comparable yield" should be the yield on a noncontingent, nonconvertible debt obligation that has terms and conditions comparable to the Debentures;
(v): It is more likely than not that the original issue discount ("OID") anti-abuse rule in Reg. §1.1275-2(g) will not apply to deny or limit the deductions otherwise allowable under the contingent debt regulations;
(vi): The interest expense deduction on the Debentures should not be disallowed under section 163(l); and

(vii): Section 249 should not result in a denial of the interest deductions attributable to the Debentures under Reg. §1.1275-4(b)(3)(iii). We express no opinion, however, on the potential application of section 249 to the deduction for any positive adjustment that may arise under Reg. §1.1275-4(b)(3)(iv).

Discussion

I. Treatment of the Debentures As Indebtedness

A. In General

The determination of whether an instrument will be treated as indebtedness for federal income tax purposes is based upon all the surrounding facts and circumstances, evaluated in light of voluminous case law that has considered the distinction between debt and equity.⁷ Factors that are relevant to this determination include, but are not limited to: (i) the right of the holder to receive a sum certain; (ii) a fixed maturity date; (iii) the right to receive fixed interest; (iv) the existence of creditor's rights; (v) subordination to general creditors; (vi) the label placed upon the instrument; and (vi) the treatment of the instrument for non-tax purposes (i.e., financial accounting purposes).

⁷: See, e.g., Notice 94-47, 1994-1 C.B. 357. See also Plumb, The Federal Income Tax Significance of Corporate Debt: A Critical Analysis and a Proposal, 26 Tax L. Rev. 369 (1971).

An effort in the 1980s to replace this case-law determination with a more objective set of rules in tax regulations was unsuccessful and short-lived. The OID regulations, promulgated in the 1990s, reconfirm that the determination of whether a financial instrument or contractual arrangement is treated as indebtedness for federal income tax purposes is based on "general principles of Federal income tax law."⁸

⁸: Reg. §1.1275-1(d). Reg. §1.1275-1(d) also states that "(n)othing in the regulations under sections… 1271 through 1275… shall influence whether an instrument constitutes indebtedness for Federal income tax purposes." Furthermore, the introduction to each set of examples in the CPDI regulations also states: "No inference is intended… as to whether the instrument is a debt instrument for federal income tax purposes." Reg. §§1.1275-4(b)(4)(vi), (b)(7)(vi), (b)(8)(iv), (b)(9)(i)(F), (b)(9)(ii)(H).

In general, a convertible debt instrument is treated as debt for federal income tax purposes unless and until it is converted into equity.⁹ The Internal Revenue Service (the "IRS") has privately ruled that the original issue discount on a zero-coupon convertible subordinated note with a 15-year maturity is deductible by its issuer as it accrues, thus implicitly acknowledging that such an instrument represents indebtedness for federal tax purposes.¹⁰

⁹: See Rev. Rul. 72-265, 1972-1 C.B. 222.
¹⁰: PLR 9211047 (December 18, 1991). The ruling does not explicitly address the debt/equity issue.

B. Analysis

The CSFB Letter represents that the Debentures will not cause the Company to be thinly capitalized, i.e., its debt/equity ratio is approximately comparable to that of other comparably rated retailers. The Company Letter confirms this representation and further represents that (a) the Company possesses, and is expected to continue to possess, the financial capacity to pay timely the principal amount of and contingent and noncontingent interest on the Debentures as such amounts become due solely from cash derived from its operations; (b) the Company will (i) record and at all times prior to conversion or redemption continue to reflect the Debentures as indebtedness on its books and records for financial accounting purpose, (ii) treat the Debentures as indebtedness for all tax

purposes (unless and until they are converted into stock), and (iii) file with its federal income tax return for 2001 a statement under Section 385(c) of the Code characterizing the Debentures as indebtedness; (c) the Debentures were not marketed specifically to existing shareholders of the Company, and the Company does not anticipate that the Debentures will be acquired, to any significant extent, by existing shareholders of the Company; and (d) the Company will not, during the term of the Debentures, issue any class of its capital stock having rights senior to or on a parity with the rights of the Debentures.

Therefore, there would not appear to be any consideration external to the Debentures that would significantly influence the determination of whether the Debentures are properly treated as debt or equity. We turn, then, to the features of the Debentures themselves.

While the conversion right is unquestionably an equity feature of the Debentures, the Debentures have most of the essential characteristics of indebtedness, including a fixed maturity date, a right of the holder to receive (and an obligation of the issuer to pay) a fixed sum on that date, creditor's rights if the instrument is not paid according to its terms, and formal indicia of indebtedness. The Debentures are not subordinated and will rank pari passu with the Company's other unsecured, unsubordinated indebtedness. The Company has represented that they will treat the Debentures as debt for financial statement purposes unless and until converted.

Nevertheless, certain features of the Debentures could be viewed as making the Debentures more like equity than the typical convertible bond. The Debentures have a term of 20 years, which is not unreasonably long but toward the longer end of maturities of instruments that have been respected as debt. The ratio at which the Debentures are convertible is not initially in the money, but the amount by which it is out of the money is far less than the average rate of appreciation in corporate equities over any historical 20-year period. Moreover, the Debentures call for minimum yield of only 2.75 percent and a maximum yield of only 3.75 percent. Thus, the lion's share of the return that the holder expects to receive on its investment is embodied in the conversion feature of the Debentures.

In Rev. Rul. 83-98,¹¹ the IRS ruled that 20-year subordinated adjustable rate convertible notes (ARCNs) were equity on the ground that, if a note was not converted, the investor had a right to get back only 60 percent of the note's issue price. Moreover, the ARCNs were callable for 60 percent of their issue price at any time after the second anniversary of their issue date The conversion ratio, however, was set so that if the stock retained the same value as at the time of issuance, the holder would receive stock equal to the issue price of the obligation. Thus, the stock would have had to fall in value by 40 percent or more in two years for the conversion right not to be exercised.

¹¹: 1983-2 C.B. 40.

In holding that the instruments were properly treated as equity for tax purposes, the IRS stated: "Because of the very high probability that all of the ARCNs issued will be converted into stock, the ARCNs do not in reality represent a promise to pay a sum certain." The IRS was also influenced by the fact that "the guaranteed annual return of $60 with respect to the $1,000 investment is unreasonably low in comparison to the annual return on comparable nonconvertible, noncontingent instruments at the time the ARCNs are issued." (The ruling states that the interest rate on a straight debt of the same issuer would have been 12 percent.) Significantly, the IRS did not cite any cases to support its analysis, other than cases establishing the general proposition that the debt/equity distinction is based on all the facts and circumstances, with no one factor being determinative.

The Debentures here resemble the ARCNs in Rev. Rul. 83-98 in that both are 20-year convertible debt instruments with an interest rate that is far lower than prevailing rates on nonconvertible obligations. However, the Debentures are distinguishable from the ARCNs in several respects. First, the conversion formula on the Debentures requires the Company's stock to appreciate by at least 10 percent in order for the conversion right to be in the money while the conversion right in the ruling

required a 40 percent decline in the stock price for the right not to be in the money. While it may be quite likely that this appreciation will occur over the next 20 years, it is far from a foregone conclusion. Specifically, the CSFB Letter represents that there is less than an 85 percent chance that the conversion right on the Debentures will be exercised and accordingly at least a 15 percent chance that the Company will be obligated to redeem the Debentures for their face amount.¹² Second, the holders of the Debentures have the right to receive the full issue price of the Debentures through the exercise of a put right as early as 3 years after issuance. This contrasts sharply with the ARCNs, which the issuer could call for only 60 percent of their issue price as early as 2 years after issuance. Thus, unlike the situation in the ruling, it cannot be said fairly that in reality the Company has no obligation to pay a sum certain.

¹²: The fact that the Company has the right to use its own stock as a medium for repaying the Debentures upon the exercise of a holder put right might also be considered an equity feature. However, since the number of shares the Company is required to deliver is not fixed on the issue date but rather three trading days before the shares are permitted to be delivered in satisfaction of a holder put, the holder is taking only minimal equity risk as a result of this feature. Cf. Rev. Rul 85-119, 1985-2 C.B. 60. Moreover, it is not applicable at maturity, so the Company has an absolute obligation to pay a sum certain when the Debentures mature.

Because the Debentures have most of the essential features of indebtedness, and because the Company has a real obligation to pay holders of the Debentures an amount equal to the issue price of the Debentures, we are of the opinion that the Debentures should be characterized as valid indebtedness of the Company for federal income tax purposes.

II. Treatment of the Debentures As CPDIs

A. Potential Treatment of the Debentures As VRDIs

In general, any debt instrument that provides for one or more contingent payments is a CPDI and subject to the contingent payment debt regulations in Reg. §1.1275-4.¹³ The contingent payment debt regulations, however, contain exceptions for a number of categories of debt instruments.¹⁴ The first such exception with potential relevance to the Debentures is that the contingent payment debt regulations do not apply to variable rate debt instruments, as defined in Reg. §1.1275-5(a)(2)-(5).¹⁵ However, if a debt instrument provides for a variable rate of interest but does not qualify as a VRDI under the VRDI regulations, then the debt instrument is a CPDI and subject to the contingent payment debt regulations.¹⁶

¹³: Reg. §1.1275-4(a)(1).
¹⁴: Reg. §1.1275-4(a)(2).
¹⁵: Reg. §1.1275-4(a)(2)(ii).
¹⁶: Reg. §1.1275-5(a)(1).

One of the requirement to be a VRDI is that the interest rate on the debt instrument must be set at a "current value" of a qualified floating rate or objective rate.¹⁷ A current value is defined as the value of the qualified floating rate or objective rate on any day no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day.¹⁸ An objective rate is a rate that is determined using a single fixed formula and that is based on objective financial or economic data.¹⁹

¹⁷: To qualify as a VRDI, a debt instrument must meet all of the following three requirements. First, the issue price of the debt instrument cannot exceed the total noncontingent principal payments on the debt instrument by more than the lesser of: (i) 1.5 percent of the total noncontingent principal payments, multiplied by the number of complete years to maturity (or, in the case of an installment obligation, the weighted average maturity); or (ii) 15 percent of the total noncontingent principal payments. Reg. §1.1275-5(c)(2). Second, the debt instrument must provide for stated interest (compounded or paid at least annually) at: (i) one or more qualified floating rates ("QFR") (i.e., any rate with variations that can reasonably be expected to measure contemporaneous variations in the cost of newly borrowed funds in the currency in which the debt instrument is denominated (Reg. §1.1275-5(b)(1)); (ii) a single fixed rate and one or more qualified floating rates; (iii) a single objective rate (i.e., for instruments issued after August 13, 1996, any rate, other than a qualified floating rate, determined by using a single fixed formula and based on objective financial or economic information that is not within the control, or unique to the circumstances, of the issuer or a related party (Reg. §1.1275-5(c)); or (iv) a single fixed rate and a single objective rate that is a qualified inverse floating rate (i.e., a rate: (a) that is equal to a fixed rate minus a qualified floating rate; and (b) the variations in which are reasonably expected to inversely reflect contemporaneous variations in the cost of newly borrowed funds. Reg. §1.1275-5(c)(3). Finally, the debt instrument must provide for any QFR or objective rate to be set at a "current value" of that rate (i.e., the value of the rate on any day that is no earlier than three months prior to the first day on which that value is in effect and no later than one year following that first day. Reg. §1.1275-5(a)(4). Additionally, a VRDI generally may not provide for any principal payments that are contingent within the meaning of Reg. §1.1275-4(a). Reg. §1.1275-5(a)(5).
¹⁸: Reg. §1.1275-5(a)(4).
¹⁹: Reg. §1.1275-5(c)(1)(i).

The interest rate on the Debentures is based on objective financial or economic data, since the interest reset rate is equal to (i) the interest rate payable 120 days prior to the reset dates on the 5-year U.S. Treasury Notes (ii) minus 1.90 percent. However, 120 days is more than three months prior to the first day on which the 5-year Treasury Note's value is in effect. Therefore, the Debentures do not meet the requirements of a VRDI and are not subject to the VRDI rules. Thus, the Debentures are CPDIs and, subject to the further exceptions discussed below, are governed by the contingent payment debt regulations.

B. Debt Instruments with Alternate Payment Schedules

A debt instrument is not a CPDI if it is subject to Reg. §1.1272-1(c).²⁰ That paragraph applies to certain debt instruments that provide for an alternative payment schedule (or schedules) upon the occurrence of a contingency (or contingencies), but only if the timing and amounts of the payments that comprise each payment schedule are known as of the issue date. In the case of the Debentures, there are three interest rate resets, and upon each reset the yield until the succeeding reset (or

maturity) could be any rate between 2.75 and 3.75 percent. Thus, the payments that comprise each payment schedule are not known as of the issue date.²¹

²⁰: Reg. §1.1275-4(a)(2)(iii).
²¹: One could conceivably argue that, since interest rates under the Debentures will be calculated only to the nearest basis point, there are 100 possible payment schedules during each interest reset period, and hence 1 million possible payment schedules overall. This seems an extremely strained reading of Reg. §1.1272-1(c), in that it would make virtually every contingent debt instrument potentially subject to that paragraph rather than the CPDI regulations.

Further, Reg. §1.1272-1(c) applies to a debt instrument only if subparagraph (2), (3) or (5) applies to the instrument. The only one of these with potential application to the Debentures is (c)(2), which says that if a single payment schedule for a debt instrument is significantly more likely than not to occur, the yield and maturity of the instrument are based on this payment schedule.²² The CSFB Letter represents that the forward rate for 5-year Treasuries on each of the reset dates is in excess of 4.65 percent, which implies that there is less than a 50 percent chance that no contingent interest will be paid on the Debentures in each of the three reset periods. The CSFB Letter also represents that there is less than a 50 percent chance that interest will be paid on the Debentures at the maximum permitted rate. It is self-evident that no intermediate payment schedule is significantly more likely than not to occur. Therefore, Reg. §1.1272-1(c) will not apply to the Debentures.

²²: Reg. §1.1272-1(c)(3) deals with mandatory sinking funds and (c)(5) deals with certain options not applicable to the Debentures.

C. Potential Treatment of Contingent Interest on the Debentures As Remote or Incidental

The third potential exception to the CPDI rules that could apply to the Debentures is that a payment is not treated as a contingent payment if, as of the issue date, the contingency is either "remote" or "incidental."²³ Therefore, we must consider whether the contingent interest on the Debentures could be considered remote or incidental.²⁴

²³: Reg. §1.1275-4(a)(5).
²⁴: Because the CPDI regulations provide that a debt instrument is not a CPDI merely because of a conversion feature (see the discussion below), it is our view that a convertible debt instrument would not be treated as a CPDI if its only contingent payments other than the conversion feature were remote or incidental.

A remote contingency means there is a remote likelihood either that the contingency will occur or that it will not occur.²⁵ The regulations do not provide a numerical standard or an example to define more precisely what is a remote contingency. A contingency is incidental if, under all reasonably expected market conditions, the potential amount of the payment is insignificant in comparison to the remaining expected payments to be made on the debt instrument.²⁶ Furthermore, all contingencies must be aggregated and analyzed together to determine if the contingencies are remote or incidental, and if the contingencies in the aggregate are neither remote nor incidental, then none of the individual contingencies is treated as remote or incidental.²⁷

²⁵: Reg. §1.1275-2(h)(2).
²⁶: Reg. §1.1275-2(h)(3).
²⁷: Reg. §1.1275-2(h)(4).

The Debentures call for contingent interest in the form of three accretion-rate resets for successive 5-year periods which can increase the yield to maturity on the Debentures by up to 100 basis points. The formula for the reset yield to maturity is the yield on 5-year Treasury obligations 120 days prior to the reset, minus 1.90 percent. Thus, some contingent interest will be paid or accrued if the Treasury yield is above 4.65 percent and the maximum amount of contingent interest will be paid or accrued if the Treasury yield is above 5.65 percent. The CSFB Letter represents that there is at least a 10 percent probability that the former will occur on at least one of the interest reset dates and that there is at least a 50 percent probability that the latter will not occur on each of the three interest reset dates. In our opinion, this should be sufficient to establish that the interest contingency on the Debentures is not remote.

As noted above, the maximum amount of the contingent yield is 1.00 percent and it is possible that this amount could be paid for up to 15 years. The CSFB letter represents that, for each of the three 5-year reset periods, there is in excess of a 40 percent probability that the maximum amount of contingent interest will be paid or accrued. In our view, this is sufficient to establish that there is a reasonably expected market condition under which the amount of contingent interest will be significant compared to the other payments on the Debentures.²⁸ Hence, the amount of the contingent interest on the Debentures should not be treated as incidental.

²⁸: The maximum amount of contingent interest payable with respect to each of the interest reset periods is difficult to compute because (i) some of the contingent interest is payable in cash while some is in the form of an additional accretion, (ii) the contingent interest and accretion depend on the accreted value of the Debentures, which will increase in each semiannual period and will depend on whether there was any contingent accrual in a prior reset period, and (iii) the amount attributable to contingent accretion will depend on whether the instrument is put, converted or paid in full at maturity. In rough terms, however, the maximum amount of contingent interest and accretion attributable to each interest reset period is 1.00 percent per year, or 5.00 percent for each period. Based on the CSFB Letter, we are of the view that there is a reasonably expected scenario under which the maximum amount of interest will be paid for at least two of the three interest reset periods, which would generally result in contingent payments totaling at least 10 percent of the stated principal amount of the Debentures.

The IRS could take the view that this contingent amount will be paid only if the Debentures are not converted. In our view, this position would be incorrect with Reg. §1.1272-1(e), under which conversion features are ignored in determining the accrual of original issue discount. Even if this view were correct, however, the CSFB Letter concludes that there is less than 85 percent chance that the Debentures will be converted, so there remains a reasonable scenario in which a significant amount of contingent interest will accrue and will actually be paid.

D. Exclusion for Convertible Debt Instruments with No Other Contingencies

A debt instrument is not treated as a CPDI merely because it is convertible into stock of the issuer or of a related party.²⁹ However, there is no general exclusion from the CPDI rules for convertible debt instruments. Therefore, because the Debentures call for contingent payments other than the conversion feature that should not be viewed as remote or incidental, do not qualify as current values of an objective rate, and do not give rise to alternate payment schedules one of which is significantly more likely than not to occur, the Debentures should be treated as CPDIs.

²⁹: Reg. §1.1275-4(a)(4).

III. Federal Income Taxation of the Debentures under the Contingent Payment Debt Instrument Regulations

A. The Noncontingent Bond Method Generally, a CPDI issued for money or publicly traded property must be accounted for under the noncontingent bond method. Under this method, as described in more detail below, interest accrues in the first instance as if the CPDI were a fixed-rate debt instrument (referred to informally as the "comparable noncontingent bond"), and then appropriate adjustments are made to account for the difference between the actual payments on the CPDI and the assumed payments on the comparable noncontingent bond.³⁰ As stated above, the Debentures should be treated as CPDIs, and since they are issued for money and no exceptions apply, the Debentures will be subject to the noncontingent bond method.

³⁰: Reg. §1.1275-4(b)(2).

Applying the noncontingent bond method requires the following steps: (i) determine the comparable yield as of the issue date; (ii) determine the projected payment schedule as of the issue date;³¹ (iii) determine the daily portions of interest; and (iv) adjust the amount of income or deductions for differences between projected and actual contingent payments.³² If the actual amount of a contingent payment becomes fixed at an amount that differs from the projected amount of the payment, the difference results in either a positive or negative adjustment.³³

³¹: The projected payment schedule consists of all noncontingent payments and a projected amount for each contingent payment. Reg. §1.1275-4(b)(4)(ii). The payment schedule is determined as of the debt instrument's issue date and remains fixed throughout the term of the debt instrument. If a debt instrument contains a contingent payment based on market information (defined as any information on which an objective rate can be based under the variable rate debt instrument regulations [see Reg. §1.1275-5(c)(1) or (2)]), a tentative projected payment schedule is established using forward prices for all contingent payments based on market information ("market-based payments"). Reg. §1.1275-4(b)(4)(ii)(A). However, if the contingent payments are not based on market information, then the projected payments are the expected value of the contingent payment as of the issue date. Reg. §1.1275-4(b)(4)(ii)(B).
³²: Reg. §1.1275-4(b)(3)(i)-(iv).
³³: Reg. §1.1275-4(b)(6). A net positive adjustment in a tax year is treated by the taxpayer as additional interest for the taxable year (i.e., ordinary in character). Reg. §1.1275-4(b)(6)(ii). A net negative adjustment first offsets the interest that accrued on the debt instrument for the taxable year based on the projected payment schedule. Reg. §1.1275-4(b)(6)(iii)(A). If the net negative adjustment exceeds the amount of interest accrued on the debt instrument for the tax year under the projected payment schedule, then generally, the excess is then treated as an ordinary loss by the holder (or as ordinary income by the issuer) subject to certain limitations. Reg. §1.1275-4(b)(6)(iii).

B. The Comparable Yield

1. In General

The first step in the noncontingent bond method is to determine the comparable yield, which is defined in Reg. §1.1275-4(b)(4)(i)(A) as "the yield at which the issuer would issue a fixed rate debt instrument with terms and conditions similar to those of the [CPDI]." From this formulation, it is unclear whether the comparable yield should be the yield of a comparable fixed-rate, nonconvertible instrument or a fixed-rate, convertible instrument. That is, it is unclear whether the conversion feature is properly viewed as a contingency on the Debentures or as a "term" or "condition" of the Debentures. In the former case, in determining the comparable yield, the conversion feature would

have to be replaced by a fixed payment with an equivalent value. In the latter case, it would remain a feature of the comparable noncontingent bond.

This is a critical issue in the application of the noncontingent bond method because the yield on a fixed-rate noncontingent convertible obligation comparable to the Debentures would almost certainly be very close to the yield on the Debentures ignoring the contingent interest feature. On the other hand, as set forth in the CSFB Letter, the yield on a comparable nonconvertible obligation would be significantly higher.

2. Arguments for Treating the Conversion Feature as a Contingency in Determining the Comparable Yield

Several arguments support treating the conversion feature of the Debentures as a contingency and hence the comparable yield as a nonconvertible yield. First, a convertible debt instrument is contingent in the ordinary sense of the word. The value of the instrument, and the amount the issuer is required to pay (and the holder is entitled to receive) is contingent on the value of the stock into which the instrument is convertible.

Second, the existence of an exception to the CPDI rules in Reg. §1.1275-4(a)(4) for instruments that are convertible and that have no other contingency implies that a conversion feature is a contingency. Were this not the case, there would be no need for such an exception. Moreover, had the drafters of the regulations intended that a conversion feature not be treated as a contingency on an instrument that otherwise is subject to the CPDI rules, they could have said so simply and directly. Instead, by providing that "a debt instrument does not provide for contingent payments merely because it provides for an option to convert the debt instrument into the stock of the issuer…,"³⁴ the structure of the regulations implies that a conversion feature is a contingency, but if it is the only contingency, the instrument is exempted from the CPDI rules.

³⁴: Reg. §1.1275-4(a)(4), emphasis supplied.

Finally, the definition of "comparable yield" in the CPDI regulation states: "The comparable yield must be a reasonable yield for the issuer and must not be less than the applicable Federal rate" ("AFR").³⁵ Since convertible debt instrument often have a yield less than the AFR, and convertible debt instruments are commonplace, the AFR floor implies that the regulation writers could not have intended that the CPDI comparable yield be the yield on a fixed-rate, convertible debt instrument—otherwise they would have provided an exception to the AFR floor for convertibles.

³⁵: Reg. §1.1275-4(b)(4)(i)(A).

One might dismiss this argument on the ground that the drafters of the CPDI regulations simply might not have been thinking about convertibles when they put in place the AFR floor. However, since the exception in the CPDI regulations for convertibles (discussed above) plainly contemplates that convertibles with contingencies in addition to the conversion feature would be subject to the CPDI rules, it seems a weak argument that the AFR floor was written without convertibles in mind. Moreover, the Tax Sections of the New York State Bar Association (NYSBA) and the American Bar Association (ABA) called this issue to the attention of the regulation writers and no change was made to the final regulations in response to the comments.³⁶ Thus, it seems proper to infer from the AFR floor that the comparable yield for a contingent convertible instrument is the yield on a comparable fixed-rate, nonconvertible instrument.

³⁶: See ABA Comments on Proposed Contingent Payment Regulations, 95 TNT 99-53 (May 15, 1995); NYSBA Comments Re: Proposed Regulations Regarding Contingent Payment Debt Instruments, 95 TNT 96-20 (May 15, 1995).

3. Arguments Against Treating the Conversion Feature as a Contingency in Determining the Comparable Yield

As noted above, the definition of comparable yield provides that the comparable fixed-rate instrument must have "terms and conditions similar to those of the [CPDI]," and a conversion feature is arguably a "term" of the CPDI.³⁷ The CPDI rules could be applied without technical difficulty by construing the conversion feature as a term of both the Debentures and the comparable noncontingent bond, because the rule for determining the accrual of interest and original issue discount on noncontingent convertible debt instruments is quite clear and simple—ignore the conversion feature.³⁸

³⁷: Reg. §1.1275-4(b)(4)(i)(A).
³⁸: Reg. §1.1272-1(e).

The first argument that could be advanced in support of using a convertible yield as the comparable yield (subject to the AFR floor) is that a conversion feature on a debt instrument is not a contingent payment. The tax law has accommodated conversion features for many decades without any suggestion that they were a form of contingent interest. The "exception" to the CPDI rules for convertibles can be explained as an expression of an excess of caution. The choice of formulation for the exception ("instrument not contingent merely because of a conversion feature" versus "conversion feature not a contingency") could be seen as ambiguous but inadvertent.

A second argument is that, if the comparable yield is treated as a nonconvertible yield, then the conversion feature on the Debentures necessarily must be treated as a contingent payment on the Debentures. (See the discussion below.) This treatment is clearly at odds with the historical tax treatment of conversion rights on debt instruments—conversion rights are ignored until exercised and, when exercised, give rise to neither a deduction to the issuer nor taxable gain to the holder.³⁹

³⁹: See Chock Full O'Nuts Corp. v. United States, 453 F.2d 300 (2d Cir. 1971); Hunt Foods and Industries, Inc. v. Commissioner, 57 T.C. 633 (1972), aff'd per curiam, 496 F.2d 532 (9th Cir. 1974); AMF, Inc. v. United States, 476 F.2d 1351 (Ct. Cl. 1973), cert. denied, 417 U.S. 930 (1974); G.C.M. 18436, 1937-1 C.B. 222 (restated in Rev. Rul. 72-265, 1972-1 C.B. 222). See also Reg. §§1.1272-1(e), 1.1273-2(j).

The last argument supporting the comparable yield being a convertible yield is that, given the exclusion of "plain vanilla" convertibles from the CPDI rules, the CPDI rules harmonize best with the rules governing noncontingent convertible instruments if the comparable yield on a convertible CPDI is construed as being a convertible yield. The general purpose of the noncontingent bond method is to achieve, as nearly as possible, tax neutrality between contingent and noncontingent instruments. That is, the noncontingent bond method was designed so that tax considerations would neither encourage nor discourage taxpayers from issuing CPDIs rather than fixed-rate debt instruments.⁴⁰ Construing the comparable yield on a convertible CPDI as a convertible yield achieves this objective while construing the comparable yield as a nonconvertible yield does not. (Of course, given the AFR floor, it is impossible to achieve this objective fully under a literal application of the regulations.)

⁴⁰: While this objective is implicit in the structure of the noncontingent bond method, we are unaware of any explicit statement of this purpose in the preamble to the regulations or in any other guidance issued by the IRS.

4. Reg. §1.1275-6 Hedges

A "§1.1275-6 hedge" is, in general terms, a financial instrument (or combination of instruments) entered into by an issuer or holder of a CPDI such that the combined cash flows of the CPDI and the hedge (referred to as the "synthetic debt instrument") "permit the calculation of a yield to maturity (under the principles of section 1272)" or an instrument that would qualify as variable rate debt instrument under Reg. §1.1275-5.⁴¹ The definition of comparable yield states that if a §1.1275-6 hedge is available to the issuer of a CPDI, the comparable yield is the yield on the synthetic fixed rate debt instrument that would result if the issuer entered into the hedge.

⁴¹: Reg. §1.1275-6(b)(2).

At first, this rule appears to support the view that a comparable yield is necessarily a nonconvertible yield, for the issuer of a convertible debt with contingent interest payments could presumably buy a series of options or similar contracts that would fully hedge both the contingent interest payments and the conversion feature of the instrument. The resulting synthetic debt instrument would have a significant amount of original issue discount and a yield that would be a nonconvertible yield.

However, the issuer might also hedge only the contingent interest features of the instrument, retaining the obligation to satisfy the conversion right. In this case, the cost of the hedge would be much lower and the synthetic debt instrument would have a yield close to the yield on a noncontingent convertible issued by the same issuer with the same other terms and conditions. This synthetic debt instrument would still permit the calculation of a yield to maturity under the principles of section 1272 because, as noted above, a paragraph of the regulations under section 1272 states the conversion features are ignored in applying section 1272.⁴²

⁴²: Reg. §1.1272-1(e).

Hence, the cross-reference to Reg. §1.1275-6 presents exactly the same ambiguity as in the primary definition of comparable yield—is the yield on the synthetic debt instrument a convertible or nonconvertible yield?

5. AFR Presumption and Determination of the Comparable Yield

In addition to the rule that the comparable yield cannot be less than the AFR, the CPDI regulations provide a separate special rule that could also limit the comparable yield to the AFR.⁴³ Reg. §1.1275-4(b)(4)(i)(B) states that if an issue provides for contingent payments not based on market information and the issue is marketed or sold in substantial part to persons for whom the inclusion of interest under the CPDI rules is not expected to have a substantial effect on their U.S. tax liability (i.e., foreign investors, tax-exempts and dealers using mark-to-market accounting), then the comparable yield is presumed to be the AFR.

⁴³: Reg. §1.1275-4(b)(4)(i)(B).

An issuer of a CPDI can overcome this presumption only by clear and convincing evidence that the comparable yield should be a yield higher than the AFR. The regulations state that the presumption may not be overcome with "appraisals or other valuations of nonpublicly traded property."⁴⁴ Furthermore, the regulations state that "[e]vidence used to overcome the presumption must be specific to the issuer and must not be based on comparable issuers or general market conditions."⁴⁵

⁴⁴: Id.
⁴⁵: Id.

As noted above, this rule applies only if the contingencies are not based on "market information." The definition of market information is provided in Reg. §1.1275-4(b)(4)(iii), which cross-references the definition of "objective rate" under the variable rate debt instrument rules. The definition of objective rate excludes information that is unique to the issuer, such as the issuer's stock price, dividends and profits.⁴⁶ Since the contingency for the conversion feature includes information based upon the stock of the Company, which is information unique to the Company, the exception under the variable rate debt instrument rules would apply and hence the contingencies would not be considered to be based on market information.

⁴⁶: Reg. §1.1275-5(c)(1)(ii).

As discussed above, the comparable bond is a fixed-rate debt instrument having terms and conditions similar to those of the CPDI, including the level of subordination, term (i.e., final maturity), timing of payments, and general market conditions. It is somewhat unclear how this rule applies to the Debentures, given their long final maturity date and their put and call features.

In the CSFB Letter, CSFB has provided an analysis of what would be the comparable yield. Key to this determination is CSFB's determination that the Debentures are comparable to a 3-year fixed maturity debt instrument because the Debentures are both puttable and callable 3 years after their issuance. CSFB then determined that the yield on 3-year Treasury debt was 4.33 percent and that a reasonable spread over Treasuries for the Company was 225-250 basis points, producing a comparable yield of between 6.58 and 6.83 percent. The Company determined that it was appropriate to choose the yield within this range that was an even quarter of one percent, i.e., 6.75 percent.

In our view, it is reasonable for the Company to rely on the CSFB Letter and to determine the comparable yield as described in that letter. Because we are not investment bankers, however, we can express no opinion on the question of whether the instruments identified by CSFB are in fact the most nearly comparable noncontingent bonds. Moreover, there can be no assurance that the IRS will accept the determination in the CSFB Letter or the choice of the rate within the range determined by CSFB or that, if the matter were litigated, a court would find CSFB's analysis to constitute "clear and convincing evidence" of the comparable yield. However, in view of the expertise of CSFB as investment bankers, the apparent thoroughness of the analysis in the CSFB Letter, and the fact that the comparable yield as determined in the CSFB Letter was the yield disclosed to holders of the Debentures for purposes of determining the holders' tax consequences, we think that the IRS or a court would likely give significant deference to the determination of comparable yield set forth in the CSFB Letter. We express no view on the appropriateness of choosing the yield within the range specified by CSFB that is an even quarter of a percent (6.75 percent).

The foregoing discussion shows that there is considerable ambiguity on the question of whether the comparable yield on a convertible CPDI is a comparable convertible yield or a comparable nonconvertible yield. In our opinion, however, the arguments in favor of the comparable yield being a comparable nonconvertible are significantly stronger than those in favor of a convertible yield. In particular, we are significantly influenced by the fact that the AFR floor in the CPDI regulations makes it impossible for the comparable yield to be a true convertible yield—the AFR floor would increase the comparable yield to the AFR. Therefore, subject to the OID anti-abuse discussion below, in our opinion, the comparable yield should be the yield on a comparable nonconvertible debt instrument.

6. The OID Anti-Abuse Rule

The regulations dealing with the OID provisions of the Code contain an anti-abuse rule that could significantly affect a court's analysis of the Debentures. The OID anti-abuse rule states: "If a principal purpose in structuring a debt instrument or engaging into a transaction is to achieve a result that is unreasonable in light of the purposes of [the OID sections of the Code] or any related section of the Code, then the [IRS] Commissioner can apply or depart from the regulations under the applicable

sections as necessary or appropriate to achieve a reasonable result."⁴⁷ As to whether a result is "unreasonable," the regulations provide in relevant part: "In the case of a contingent payment debt instrument, [a] significant fact is whether the result is obtainable without the application of §1.1275-4 and any related provisions (e.g., if the debt instrument and the contingency were entered into separately)." No court has had occasion to consider the application of the OID anti-abuse rule to any actual situation, and the only guidance from the IRS consists of the text of the regulations, the examples set forth within the regulations (one of which is discussed below), and one hypothetical example in a recent ruling.⁴⁸

⁴⁷: Reg. §1.1275-2(g)(1).
⁴⁸: Rev. Rul. 2000-12, 2000-1 C.B. 744. The ruling is not relevant to the issue presented here.

If a court were to find the OID anti-abuse rule applicable, then the court is authorized to apply or depart from the provisions of the CPDI rules and, more generally, the OID rules, so as to achieve a reasonable result. The most straightforward way in which a court could do this would be to treat the Debentures in the same manner as if the contingent interest payments were remote or incidental contingencies. That is, the Debentures would be treated in the same manner as noncontingent convertibles, except that the Company would be entitled to additional interest deductions for any contingent interest actually paid. A court could also cite the OID anti-abuse rule as a justification for concluding that the comparable yield is a convertible yield (subject to the AFR floor) even if the stronger technical case is for treating the comparable yield as a nonconvertible yield.

It seems possible that the IRS (and a court) could conclude that a principal purpose of including the contingent interest feature in the Debentures was to make the Debentures subject to the CPDI rules and hence to generate additional interest deductions for the Company.⁴⁹ While CSFB has represented that the contingent interest could have a material effect on the decision of a holder whether to put the instrument under certain market conditions, we think it is unlikely that a court would be persuaded that making the Debentures subject to the CPDI rules was not at least a principal purpose of including the contingent interest feature, especially when the Debentures could easily have been designed to be subject to the VRDI rules rather than the CPDI rules by using a 90-day look-back rather than a 120-day look-back for the interest reset.

⁴⁹: A finding of "a principal purpose" is not equivalent to a finding of "the principal purpose." A court could well construe the former phrase to include a purpose that was of secondary importance but nonetheless highly significant.

The critical question then is whether the result achieved by making the Debentures subject to the CPDI rules is unreasonable. In our view, there is a significant risk that a court would find that the result is unreasonable because it creates an increase in the interest deductions available to the Company significantly in excess of the amount of contingent interest that is expected to be paid under the Debentures.⁵⁰ In other words, in view of the exception from the CPDI rules for convertibles with no other contingencies, a court could find it unreasonable to add a relatively minor contingency to a convertible debt instrument to allow the issuer to obtain interest deductions not only for the expected amount of the contingent interest but also for the conversion feature. As discussed in greater detail below, a court might also find this result to be unreasonable because it in effect gives the Company interest deductions for amounts that the Company can satisfy by transferring its own stock.

⁵⁰: The contingent interest is at most 1.00 percent per year. The comparable yield of 6.75 percent exceeds the minimum yield on the Debentures by 4.00 percent.

In determining whether the tax treatment of the Debentures is "unreasonable," a court likely would be influenced by the sentence in the regulations quoted above to the effect that a factor in

determining whether a result is unreasonable is whether it could be obtained without regard to the CPDI regulations (for example by issuing a fixed-rate debt instrument and a separate contingent financial instrument). In this case, the precise tax result can only be obtained under the CPDI rules. If the Company were to separate out the contingent interest features of the Debentures, the resulting noncontingent convertible debt instrument would accrue interest only at its stated rate,⁵¹ which would likely be the same as or slightly higher than the rate on the Debentures. If the Company were to separate out both the contingent interest features and the conversion right, effectively transforming the conversion right into a warrant, the Company would accrue interest at a market rate close to or equal to the comparable yield, but only on the portion of the issue price of the Debentures allocable to the fixed payment rights under the Debentures.⁵² Depending on the market value of the conversion feature on the Debentures, that portion could be considerably smaller than the entire issue price, with proportionately smaller accruals of OID than under the CPDI rules.

⁵¹: The primary difference is that in an investment unit, the holder can exercise the warrant for cash and remain a creditor of the issuer by continuing to hold the debt, while in a convertible the holder must relinquish its creditor position to become a stockholder. Reg. §§1.1272-1(e), 1.1273-2(j).
⁵²: See Reg. §1.1273-2(h). In an investment unit, OID accrues initially only on the portion of the issue price of the unit that is attributable to the debt component of the unit, while under the CPDI rules the comparable yield accrues on the entire issue price of the debt instrument. For a long-term instrument such as the Debentures, this is a highly significant difference.

On the other hand, it is not clear that applying the CPDI rules to the Debentures (with a nonconvertible yield as the comparable yield) is an unreasonable result. The result is simply that the Company is entitled to deduct interest at a market rate on a CPDI, and that is exactly what the CPDI rules were designed to achieve. Arguably the unreasonable result is the historical tax treatment of convertibles, in which the issuer is allowed to deduct only the stated interest rate while its true cost of borrowing includes the value of the conversion feature.

As noted above, an issuer that wants to obtain a deduction for interest at a full market rate on a financial instrument that is economically quite similar to a convertible can issue an investment unit consisting of a low-coupon debt instrument and a warrant on its own stock. If the value of the warrant is sufficient to allow the investment unit to sell at a price equal to the face amount of the debt, the issuer obtains OID deductions over the life of the debt equal to the value of the warrants. While an investment unit is not economically identical to a convertible,⁵³ and while the OID deductions on an investment unit are not identical to the interest deductions obtained under the CPDI rules,⁵⁴ the investment unit alternative could be quite helpful in persuading a court that the result obtained by the application of the CPDI rules to the Debentures is not unreasonable.

⁵³: The primary difference is that in an investment unit, the holder can exercise the warrant for cash and remain a creditor of the issuer by continuing to hold the debt, while in a convertible the holder must relinquish its creditor position to become a stockholder. As a result, in an investment unit, the debt's value is influenced primarily by changes in prevailing interest rates and the warrant by changes in the value of the issuer's stock, while the value of a convertible is influenced by both factors.
⁵⁴: See footnote 52 above.

In fact, the OID anti-abuse rule contains an example concluding that if an issuer issues a convertible debt instrument rather than an economically equivalent investment unit consisting of a debt and a warrant, the choice will not be considered abusive even if the issuer's motivation was to allow holders of the convertible to avoid having to accrue OID, as they would on the investment unit.⁵⁵ In this transaction, the Company has made essentially the opposite choice—it has chosen a structure that maximizes its interest deductions, with corresponding interest inclusions for any taxable holders of the Debentures.⁵⁶ While the Company admittedly obtains interest deductions greater than it could achieve under the investment unit rules, the example establishes that it is not abusive to choose among economically equivalent (or nearly equivalent) transactions in a manner that achieves the most favorable tax result, as long as that result is one authorized by the regulations.

⁵⁵: Reg. §1.1275-2(g)(3), Example 3.
⁵⁶: The fact that taxable holders will have interest inclusions to match the Company's interest deduction probably would not be sufficient to avoid the anti-abuse rule, for several reasons. First, some holders of the Debentures may not be taxable. Second, holders can offset excess interest accruals by trading the Debentures in the market, realizing offsetting losses, whereas the Company cannot easily retire and reissue the Debentures. Finally, if a court views the result to the Company as inappropriate, it is not clear that it would be persuaded to ignore the abuse because there is an offsetting inappropriate inclusion to other taxpayers in the system (two wrongs don't make a right).

In view of the foregoing, and with particular emphasis on the helpful example in the OID anti-abuse rule, we are of the opinion that it is more likely than not that a court would not apply the OID anti-abuse rule to the Debentures.

7. Business Purpose

The IRS could also challenge the Company's interest deductions under the CPDI rules on the ground that the contingent interest features of the Debentures lacked a business purpose, or that that business purpose was insignificant compared to the tax benefits to the Company of the Debentures being subject to the CPDI rules. Such a challenge, if raised, should not be successful, for several reasons.

First, the CSFB Letter represents that the contingent interest features of the Debentures do serve the purpose of encouraging holders of the Debentures to refrain from putting the Debentures to the Company under certain scenarios. This could allow the Company to continue relatively inexpensive financing at a time when alternative financing costs could be considerably higher.

Second, even assuming that the business purpose of the contingent interest features of the Debentures is insignificant compared to the tax benefits of this feature, no court has ever held that every aspect of a transaction must have a business purpose, only that the transaction as a whole must have a business purpose and economic substance. The essence of tax planning is to minimize adverse tax consequences of business transactions. It is well-established that this sort of tax planning is acceptable.⁵⁷

⁵⁷: E.g., Gregory v. Helvering, 69 F.2d 809 (2d Cir. 1934), aff'd, 293 U.S. 465 (1935).

The IRS could not seriously question that the Debentures as a whole have economic substance and have a substantial nontax business purpose, which is to raise debt capital for the Company at an attractive rate.⁵⁸ Moreover, there would not appear to be any way the IRS could argue that the contingent interest features of the Debentures are a separate transaction—they are an integral feature of the Debentures. Accordingly, the IRS should not prevail in an argument that the tax benefits accorded the Debentures under the CPDI rules should be denied because the contingent interest features lacked a significant nontax business purpose. It is possible, however, that a court could

consider the strength of the Company's asserted business purpose for the contingent interest features of the Debentures in determining whether to apply the OID anti-abuse rule to the Debentures, as discussed in the preceding section.

⁵⁸: The Company Letter represents that this is the business purpose of the issuance of the Debentures.

C. Projected Payment Schedule and Accruals Thereon

We understand that CSFB has agreed to provide the Company with a projected payment schedule for the Debentures. That schedule will set forth a projected amount for each contingent interest payment on the Debentures on the assumption that the Debenture has not been converted, put, called, or otherwise redeemed prior to the time of the payment. The amount of the projected payment on the maturity date of the Debentures is the amount that, when considered with the fixed payments on the Debentures and the projected amounts of the contingent interest payments, produces a yield equal to the comparable yield. In our view, this is a reasonable way to determine the projected payment schedule.

Under Reg. §1.1275-4(b)(3)(iii), the Company is entitled to deduct interest at the comparable yield on the projected payment schedule as if it were a fixed-rate bond, subject to the positive and negative adjustments described below. That is, interest accrues and compounds at the comparable yield on the "adjusted issue price" of the comparable fixed-rate bond. The adjusted issue price of the comparable bond is equal to the issue price of the Debentures increased by interest accruals on the comparable bond at the comparable yield and reduced by payments under the projected payment schedule (not actual payments on the Debentures).

Because a Debenture can be converted or redeemed prior to its final maturity date, it is difficult to determine how the projected payment schedule for the Debentures should reflect the final payment. Although there is no explicit guidance in the CPDI rules (or elsewhere) with respect to CPDIs with timing contingencies such as those arising from the put and call features of the Debentures, and the fact that it is convertible at the option of the holder at any time after certain conditions are met,⁵⁹ we think it is reasonable to address this issue by (i) creating a projected payment schedule as described above, on the assumption that the Debentures will not be put, called or converted prior to maturity, and (ii) when a Debenture is actually converted or redeemed, treating the Debenture as if there were a projected payment on the redemption or conversion date equal to the adjusted issue price of the Debenture on that date.

⁵⁹: Reg. §1.1275-4(b)(9)(iii)(A) states that if a CPDI has put or call options, the projected payment schedule is determined using the principles of Reg. §1.1272-1(c)(5). Under those principles, since the puts and calls on the Debentures are not in-the-money at the time of their issuance, the puts and calls would be ignored in constructing the projected payment schedule. This cross-reference does not resolve the proper treatment of the conversion feature of the Debentures.

D. Positive and Negative Adjustments

Under Reg. §1.1275-4(b)(3)(iv), whenever an issuer of a CPDI makes a payment on the instrument that differs from the corresponding amount in the projected payment schedule, it will have a positive adjustment (in the event the payment exceeds the projected amount) or a negative adjustment (in the event the payment is less than the projected amount). A positive adjustment is treated as additional interest expense in the year of the payment.⁶⁰ A negative adjustment will be treated first as an offset to interest expense on the CPDI for the year of the adjustment, then as ordinary income to the extent of

prior interest deductions arising from the instrument.⁶¹ (Additional rules relating to negative adjustments are not applicable in the case of the Debentures.)

⁶⁰: Reg. §1.1275-4(b)(6)(ii).
⁶¹: Reg. §1.1275-4(b)(6)(iii).

Reg. §1.1275-4(b)(9)(ii) contains a special rule for CPDIs where the amount of a contingent payment can become fixed more than 6 months prior to the time such contingent amount is payable. Because each interest reset on the Debenture will determine the rate of interest accrual for the succeeding 5 years, this rule is applicable to the Debentures.

In general, this special rule treats a positive or negative adjustment as occurring when the amount of the future contingent payment or payments becomes fixed rather than when the payments are made. The amount of the adjustment is the discounted value (discounting at the comparable yield) of the difference between the amount of the payment(s) that becomes fixed and the projected amounts of the payment(s). Thereafter, the projected payment schedule is modified to substitute the amount of the contingent payment that becomes fixed for the originally projected amounts. Special rules apply, however, to contingencies that related to the reasonableness of the interest rate on the CPDI⁶² and where all remaining contingent payments become fixed at once.⁶³

⁶²: Reg. §1.1275-4(b)(9)(ii)(F).
⁶³: Reg. §1.1275-4(b)(9)(ii)(G).

The application of Reg. §1.1275-4(b)(9)(ii) to the Debentures is extremely complex and uncertain in many respects and is beyond the scope of this opinion. We would be pleased to work with the Company to determine the most reasonable approach to applying these complicated rules to the Debentures.

If a Debenture is converted into the Company stock, then consistent with the determination that the comparable yield is a nonconvertible yield, the Company should treat the conversion of the Debenture as a contingent payment on the Debenture in an amount equal to the value of the stock into which the Debenture is converted. Accordingly, if the value of the stock is less than the adjusted issue price of the Debenture at the time of conversion (which, as discussed above, should be treated as the projected payment at the time of the conversion), the Company should recognize income (or an offset to interest expense) in the amount of the shortfall.⁶⁴ If the value of the stock exceeds the adjusted issue price, then the Company should have a positive adjustment. As discussed in Part VI, below, however, we believe there is a significant argument against an interest deduction being allowed for this positive adjustment.

⁶⁴: Moreover, if the Company and the selected financial institution exercise the exchange in lieu of conversion option, and there would have been a negative adjustment if the Debentures were converted instead of exchanged, then, the IRS could argue that the exchange in lieu of conversion option is abusive and possibly attempt to make the Company recognize the negative adjustment at the time of the exchange.

If a Debenture is redeemed for cash, then the Company should have an adjustment (presumably negative) equal to the difference between the redemption amount and adjusted issue price at the time of the redemption. If the redemption amount is equal to the accreted value of the Debenture, the negative adjustment will effectively reverse out all interest deducted under the CPDI rules and will leave the Company with a net deduction equal to any actual contingent interest paid on the Debenture and any actual fixed interest and OID paid with respect to the Debenture.

IV. High Yield Discount Obligations

Section 163(e)(5) provides special rules for OID on applicable high yield discount obligations ("HYDOs"). In general, an interest deduction could be deferred until paid or even permanently disallowed in part if the debt instrument is a HYDO.⁶⁵ An applicable HYDO is defined in section 163(i)(1) as any debt instrument (i) that has a maturity date more than five years from the issue date, (ii) where the yield to maturity on the instrument equals or exceeds the sum of the applicable AFR in effect on the issue date plus 5 percentage points, and (iii) the instrument has "significant OID." A debt instrument is treated as having significant OID for this purpose if, at the end of any accrual period ending after the fifth year from the issue date, the cumulative accrual of interest and OID on the instrument exceeds the sum of the actual interest paid from the issue date until the end of that accrual period and the product of the yield to maturity and the instrument's issue price.⁶⁶

⁶⁵: Section 163(e)(5)(A).
⁶⁶: Section 163(i)(2).

There are no regulations under the HYDO rules and the CPDI regulations do not contain any guidance as to how the HYDO rules should be applied to a CPDI. Specifically, the CPDI regulations provide the that the interest on the comparable noncontingent bond is "deductible by the issuer for each day during the issuer's tax year on which the issuer was primarily liable on the debt instrument" and make no mention of a limitation imposed by the HYDO rules.⁶⁷ Thus, the Company could take the position that the HYDO rules have no application to the Debentures.

⁶⁷: Reg. §1.1275-4(b)(3)(iii).

Nevertheless, the better view would appear to be that if the comparable noncontingent bond constructed under the CPDI rules would be an applicable HYDO if it were actually issued in place of the CPDI, the HYDO rules should apply to defer or limit the interest deductions under the CPDI rules. In the case of the Debentures, the comparable noncontingent bond will have a term longer than 5 years and will clearly have significant OID. Thus, if the comparable yield on the Debentures is greater than the applicable AFR on the issue date plus 5 percentage points, then the Debentures could be subject to the HYDO rules.

The CSFB letter has determined that the comparable yield is between 6.58 and 6.83 percent, and the Company has chosen a yield within this range of 6.75 percent. The AFR for June 2001, based on semiannual compounding, is 5.67 percent.⁶⁸ Hence, the comparable yield is less than the threshold for application of the HYDO rules.

⁶⁸: Rev. Rul. 2001-27, 2001-23 I.R.B. 1298. The AFR for the Debentures is the Federal long-term rate because the Debentures have a term longer than 9 years.

V. Section 163(l)

A. In General

Section 163(l)(1) provides that no deduction is allowed for any interest paid or accrued on a "disqualified debt instrument." A disqualified debt instrument is defined as any indebtedness of a corporation which is payable in equity of the issuer or a related party.⁶⁹ Indebtedness is treated as payable in equity of the issuer or a related party if: (A) a substantial amount of the principal or interest is required to be paid or converted, or at the option of the issuer or related party is payable in, or convertible into the issuer's stock; (B) a substantial amount of the principal or interest is required to be determined, or at the option of the issuer or a related party is determined, by reference to the value of the stock; or (C) the indebtedness is part of an arrangement which is reasonably expected to result

in payment of the debt with or by reference to the stock.⁷⁰ However, these provisions do not apply to convertible debt where the conversion feature is at the option of the holder and there is not substantial certainty of the exercise of an option by the holder or a related party.⁷¹

⁶⁹: Section 163(l)(2).
⁷⁰: See section 163(l)(3)(A)-(C).
⁷¹: Section 163(l)(3) (flush language).

B. Analysis

1. Contingent Interest

As noted above, section 163(l) applies to deny a deduction for interest on a debt instrument having a substantial amount of principal or interest required to be determined by reference to the value of the issuer's stock. Neither the amount of the contingent interest on the Debentures nor the threshold for determining when the interest is required to be paid depends on the value of the Company's stock. Therefore, the Debentures will not be treated as disqualified debt instruments for this reason.

2. Conversion Feature

The flush language of section 163(l)(3) provides in effect that a debt instrument will not be subject to section 163(l) merely because of a conversion feature exercisable at the holder's option unless that option is substantially certain to be exercised. The CSFB Letter states that there is less than an 85 percent chance that holders of the Debentures will exercise their conversion options.

The legislative history of section 163(l) is sparse and there is little guidance interpreting this statute.⁷² The legislative history does state that section 163(l) is not expected to affect debt that is convertible at the holder's option where the conversion price is significantly higher than the market price of the stock on the issue date of the debt. The stock price at which the Debentures are convertible is no less than 110 percent of the price of the stock at the time of issuance.

⁷²: See General Explanation of Tax Legislation Enacted in 1997 (1997 Bluebook). See also PLR 200052027 (September 29, 2000).

It should be noted that "substantial certainty" in the flush language of section 163(l) and "significantly higher" in the legislative history are not defined or illustrated with numerical examples. Nevertheless, based primarily on the representation in the CSFB Letter that the probability of exercise of the conversion option does not exceed 85 percent, it is our opinion that the Debentures should not be subject to section 163(l) by virtue of their conversion feature.

3. Right to Pay in Stock Upon Exercise of a Holder Put

As discussed above, upon the exercise by a holder of its right to put a Debenture to the Company, the Company has the option of satisfying its put obligation in its own shares. The number of shares the Company is obligated to deliver is equal to the put price divided by the market value of a share of Company stock three trading days before the shares are to be delivered. This right does not extend to payment of the Debentures at final maturity.

As with the conversion right, this feature of the Debentures does not give the Company the unilateral right to pay the Debentures in its own stock—the right depends on the exercise of a holder put. The CSFB Letter represents that there is at least a 15 percent chance that the put rights will not be exercised. Thus, in our opinion, the put rights are not substantially certain to be exercised and the Debentures should not be subject to section 163(l) as a result of this feature.⁷³

⁷³: A further argument against application of section 163(l) as a result of this feature of the Debentures is that the number of shares of stock the Company is permitted to deliver to satisfy its obligations under a put is not fixed until three trading days before the stock must be delivered. Thus, the holder takes equity risk in the Company for only the three trading days from the time the number of shares becomes fixed to the time they are delivered. Since the policy underlying section 163(l) is to disallow interest deductions on debt instruments on which the holder is taking substantial equity risk, it would not seem that section 163(l) should apply in a case where the issuer of the debt has the right to pay in its shares unless the number of shares is fixed by the terms of the debt (or at least fixed substantially in advance of the date of delivery of the shares). Note, however, that the statutory language of section 163(l) contains no exception for a case where an issuer is permitted to pay a debt in a number of shares that is fixed on or shortly before the payment date.

4. Arrangement Expected to Result in Debt Paid in Stock

It would not appear that the Debentures could sensibly be viewed as part of an arrangement that is reasonably expected to result in the Debentures being paid in the Company stock. There is no agreement between the Company and the holders of the Debentures other than the Debentures, so only the terms of the Debentures themselves are relevant. If the conversion feature of the Debentures is not substantially certain to be exercised, then it follows that it is not reasonably expected that the Debentures will be paid in the Company stock, given the flush language to section 163(l)(3) discussed above.

Moreover, the Debentures are not at all the type of debt instrument that Congress intended to address in section 163(l). That section was intended to cover instruments that allowed the issuer to be relieved of a portion of its obligation if its stock price declined. On the Debentures, as with all convertibles, the Company remains liable for the full principal amount of the Debentures regardless of any decline in the value of its stock.

5. Summary

Because the Debentures are not literally within the scope of section 163(l) and are not the type of debt instrument Congress intended to be within the scope of section 163(l), the interest deductions on the Debentures should not be denied under this provision.

VI. Section 249

Normally, when a corporation redeems its debt at a premium, it is entitled to a deduction for the premium paid.⁷⁴ Section 249, however, denies a deduction for a premium paid by a corporation to redeem convertible debt, except to the extent the premium does not exceed a normal call premium or to the extent the issuer can prove the premium was attributable to the cost of borrowing and not attributable to the conversion feature.

⁷⁴: Reg. §1.163-7(c)

Section 249 will not apply to the interest accruals on the Debentures under the noncontingent bond method of the CPDI regulations because section 249 applies only to deny a deduction for a premium paid or incurred on the repurchase of a debt instrument.⁷⁵ The IRS could argue, however,

that section 249 should apply to all accruals in excess of the stated interest rate or discount on the Debentures because those deductions are in effect dependent on the value of the issuer's stock (i.e., if the stock doesn't appreciate, they will be reversed out by a negative adjustment). While it is unlikely the IRS could prevail directly on such an argument, it could argue that (i) the accruals under the CPDI rules for convertible debt are inconsistent with the purpose of section 249, (ii) section 249 is related to the OID sections of the Code (because both deal with the proper treatment of interest for tax purposes), and hence (iii) the OID anti-abuse should be applied to prevent accruals of interest under the CPDI rules.

⁷⁵: Section 249(a).

In our opinion, such an argument should not prevail. The deductions under the CPDI rules on the comparable noncontingent bond are not dependent on the actual value of the Company's stock but on the Company's comparable noncontingent borrowing rate. Deducting such interest would seem no more inconsistent with the purposes of section 249 than the deduction of OID on debt that is issued as part of an investment unit. In both cases, the inclusion of a feature that allows the investor to profit from an increase in the value of the issuer's stock gives rise to additional interest deductions based on the initial value of that right, not on the actual value of the right at the time the right is exercised.

The IRS might also take the position that, if a holder exercises its right to convert a Debenture into the Company stock and if at the time of such exercise the value of the stock exceeds the adjusted issue price of the Debenture, section 249 should apply to deny the Company a deduction for the resulting positive adjustment. Once again, the IRS could make the argument directly, or indirectly through the application of the OID anti-abuse rule.

In this case, the direct argument is somewhat stronger than in the case of the comparable yield accruals because the positive adjustment does occur when the instrument matures (assuming a holder waits until maturity to convert). Nevertheless, the deduction still does not occur upon a repurchase of the Debentures, as is required by the statute. On the other hand, allowing the Company a deduction for a positive adjustment that arises from the increase in the value of its stock seems inconsistent with the purposes of section 249. Thus, we think there is a good chance that a court could apply the OID anti-abuse rule to deny a deduction for such a positive adjustment and we express no formal opinion on this point.

Scope of the Opinion

This letter is not intended to be a comprehensive discussion of all the possible federal income tax ramifications resulting from entering into the transaction described above. The scope of this letter is expressly limited to the federal income tax issues discussed herein. This letter does not address any foreign, state, local, estate or gift tax consequences of the transaction, nor does the letter address any other legal or financial accounting aspects of the transaction.

Our opinion is based on an analysis of the Code, Treasury regulations, rulings, and other tax authority which we deem relevant, all in existence on the date hereof, and represent our interpretations of such authority. The foregoing is subject to change, and any change could have a retroactive effect on the opinions expressed herein. Ernst & Young LLP assumes no responsibility to update this letter, or to otherwise notify you, due to any such changes.

The IRS has not issued an advance ruling indicating whether it agrees with these views, nor is the IRS bound by any opinions expressed herein with respect to any aspects of the transaction described herein.

This opinion is intended solely for the benefit of Best Buy Co., Inc. It is not intended to be relied upon by third parties.

Should you have any questions about any of the issues presented in this letter, please do not hesitate to call David Garlock at (202) 327-8733.

		Sincerely,
		/s/ Ernst & Young LLP

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EXHIBIT 8.1

Contingent Payment Convertible Debentures
EX-12.1 7 a2059091zex-12_1.htm EX-12.1 Prepared by MERRILL CORPORATION
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Exhibit 12.1

(Thousands of Dollars)

		Three Months Ended				Fiscal Years
		June 2, 2001		May 27, 2000		Mar. 3, 2001		Feb. 26, 2000		Feb. 27, 1999		Feb. 28, 1998		Mar. 1, 1997
Ratio of Earnings to Fixed Charges:
Earnings:
	Net earnings	$	55,264	$	72,158	$	395,839	$	347,070	$	216,282	$	81,938	$	(6,177	)
	Income taxes		35,500		44,800		245,640		215,500		135,395		51,465		(3,946	)

	Total earnings		90,764		116,958		641,479		562,570		351,677		133,403		(10,123	)

Fixed charges:
	Interest portion of rental expense		36,371		19,665		89,912		68,400		55,980		48,570		41,910
	Interest expense		5,898		758		7,059		5,403		21,177		39,809		52,896

	Total fixed charges		42,269		20,423		96,971		73,803		77,157		88,379		94,806

Less:
	Capitalized interest		0		0		0		0		0		0		0

	Fixed charges in earnings		42,269		20,423		96,971		73,803		77,157		88,379		94,806

Earnings available for fixed charges		$	133,033	$	137,381	$	738,450	$	636,373	$	428,834	$	221,782	$	84,683

Ratio of earnings to fixed charges			3.15		6.73		7.62		8.62		5.56		2.51		0.89

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Exhibit 12.1

Best Buy Co., Inc. Computations of Ratios of Earnings to Fixed Charges for the Three Months Ended June 2, 2001 and May 27, 2000 and for the Five Years Ended March 3, 2001, February 26, 2000 February 27, 1999, February 28, 1998 and March 1, 1997
(Thousands of Dollars)
EX-23.1 8 a2059091zex-23_1.htm EX-23.1 Prepared by MERRILL CORPORATION
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EXHIBIT 23.1

Consent of Independent Auditors

We consent to the reference to our firm under the captions "Selected Consolidated Financial Information" and "Experts" in the Registration Statement (Form S-3) and related Prospectus of Best Buy Co., Inc. for the registration of $492,400,000 of convertible debentures due June 27, 2021 convertible into common stock and to the incorporation by reference therein of our report dated April 2, 2001 with respect to the consolidated financial statements of Best Buy Co., Inc. incorporated by reference in its Annual Report (Form 10-K) for the year ended March 3, 2001, filed with the Securities and Exchange Commission.

		/s/ Ernst & Young LLP
Minneapolis, Minnesota September 21, 2001

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EXHIBIT 23.1

EX-23.2 9 a2059091zex-23_2.htm EX-23.2 Prepared by MERRILL CORPORATION
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EXHIBIT 23.2

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our reports dated January 16, 2001, (except with respect to the matter discussed in Note 2, as to which the date is January 31, 2001) for the years ended December 31, 2000 and 1999 and to all references to our Firm included in this registration statement.

/s/ Arthur Andersen LLP

Minneapolis, Minnesota
September 21, 2001

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EXHIBIT 23.2

Consent of Independent Public Accountants
EX-25.1 10 a2059091zex-25_1.htm EX-25.1 Prepared by MERRILL CORPORATION
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE

/ /

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b) (2)

WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)

A U.S. National Banking Association (Jurisdiction of incorporation or organization if not a U.S. national bank)		41-1592157 (I.R.S. Employer Identification No.)
Sixth Street and Marquette Avenue Minneapolis, Minnesota (Address of principal executive offices)		55479 (Zip code)

Stanley S. Stroup, General Counsel
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)

BEST BUY CO., INC.
(Exact name of obligor as specified in its charter)

Minnesota (State or other jurisdiction of incorporation or organization)		41-0907483 (I.R.S. Employer Identification No.)
7075 Flying Cloud Drive Eden Prairie, Minnesota (Address of principal executive offices)		55344 (Zip code)

Convertible Debentures due 2021
(Title of the indenture securities)

Item 1.	General Information. Furnish the following information as to the trustee:
	(a)	Name and address of each examining or supervising authority to which it is subject.
		Comptroller of the Currency Treasury Department Washington, D.C.
		Federal Deposit Insurance Corporation Washington, D.C.
		The Board of Governors of the Federal Reserve System Washington, D.C.
	(b)	Whether it is authorized to exercise corporate trust powers.
		The trustee is authorized to exercise corporate trust powers.
Item 2.	Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation.
	None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is not in default as provided under Item 13.

Item 15.		Foreign Trustee.		Not applicable.
Item 16.		List of Exhibits.		List below all exhibits filed as a part of this Statement of Eligibility. Wells Fargo Bank incorporates by reference into this Form T-1 the exhibits attached hereto.

Exhibit 1.	a.	A copy of the Articles of Association of the trustee now in effect.***
Exhibit 2.	a.	A copy of the certificate of authority of the trustee to commence business issued June 28, 1872, by the Comptroller of the Currency to The Northwestern National Bank of Minneapolis.*
	b.	A copy of the certificate of the Comptroller of the Currency dated January 2, 1934, approving the consolidation of The Northwestern National Bank of Minneapolis and The Minnesota Loan and Trust Company of Minneapolis, with the surviving entity being titled Northwestern National Bank and Trust Company of Minneapolis.*
	c.	A copy of the certificate of the Acting Comptroller of the Currency dated January 12, 1943, as to change of corporate title of Northwestern National Bank and Trust Company of Minneapolis to Northwestern National Bank of Minneapolis.*
	d.	A copy of the letter dated May 12, 1983 from the Regional Counsel, Comptroller of the Currency, acknowledging receipt of notice of name change effective May 1, 1983 from Northwestern National Bank of Minneapolis to Norwest Bank Minneapolis, National Association.*
	e.	A copy of the letter dated January 4, 1988 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation and merger effective January 1, 1988 of Norwest Bank Minneapolis, National Association with various other banks under the title of "Norwest Bank Minnesota, National Association."*

	f.	A copy of the letter dated July 10, 2000 from the Administrator of National Banks for the Comptroller of the Currency certifying approval of consolidation effective July 8, 2000 of Norwest Bank Minnesota, National Association with various other banks under the title of "Wells Fargo Bank Minnesota, National Association."****
Exhibit 3.	A copy of the authorization of the trustee to exercise corporate trust powers issued January 2, 1934, by the Federal Reserve Board.*
Exhibit 4.	Copy of By-laws of the trustee as now in effect.***
Exhibit 5.	Not applicable.
Exhibit 6.	The consent of the trustee required by Section 321(b) of the Act.
Exhibit 7.	A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. **
Exhibit 8.	Not applicable.
Exhibit 9.	Not applicable.

*		Incorporated by reference to exhibit number 25 filed with registration statement number 33-66026.
**		Incorporated by reference to exhibit number 25 filed with registration statement number 333-64538
***		Incorporated by reference to exhibit T3G filed with registration statement number 022-22473.
****		Incorporated by reference to exhibit number 25.1 filed with registration statement number 001-15891.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, Wells Fargo Bank Minnesota, National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Minneapolis and State of Minnesota on the 4th day of September 2001.

		WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
		/s/ Michael T. Lechner Michael T. Lechner Corporate Trust Officer

EXHIBIT 6

September 4, 2001

Securities and Exchange Commission
Washington, D.C. 20549

Gentlemen:

In accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended, the undersigned hereby consents that reports of examination of the undersigned made by Federal, State, Territorial, or District authorities authorized to make such examination may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.

		Very truly yours,
		WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
		/s/ Michael T. Lechner Michael T. Lechner Corporate Trust Officer

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SIGNATURE
EXHIBIT 6
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