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-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GVYa9M85y4njO+9B2ci38VgxymMaULgprrD8+ehsyyr2+uLn2MpxAYxLGjXZCEMl DBKrkoRizarx083kXfTmrw== 0000912057-01-006567.txt : 20010226 0000912057-01-006567.hdr.sgml : 20010226 ACCESSION NUMBER: 0000912057-01-006567 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010223 EFFECTIVENESS DATE: 20010223 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-8 SEC ACT: SEC FILE NUMBER: 333-56146 FILM NUMBER: 1553493 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-8 1 a2039604zs-8.htm S-8 Prepared by MERRILL CORPORATION www.edgaradvantage.com
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As filed with the Securities and Exchange Commission on February , 2001

Registration Statement No. 333-

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

BEST BUY CO., INC.
(Exact Name of Registrant 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)

1.: The Assumed Musicland 1988 Stock Option Plan of Best Buy Co., Inc.
2.: The Assumed Musicland 1992 Stock Option Plan of Best Buy Co., Inc.
3.: The Assumed Musicland 1994 Stock Option Plan of Best Buy Co., Inc.
4.: The Assumed Musicland 1998 Stock Incentive Plan of Best Buy Co., Inc.

(Full Title of the Plan)

Richard M. Schulze
7075 Flying Cloud Drive
Eden Prairie, MN 55344
(Name and Address of Agent for Service)

(952) 947-2000
(Telephone Number, Including
Area Code, of Agent for Service)

Copy of Communications to:

Anne M. Rosenberg
Robins, Kaplan, Miller & Ciresi L.L.P.
2800 LaSalle Plaza
800 LaSalle Avenue
Minneapolis, MN 55402-2015
(612) 349-8500

CALCULATION OF REGISTRATION FEE


Title of Each Class of Securities To Be Registered	Amount To Be Registered(1)	Proposed Maximum Offering Price Per Share(2)	Proposed Maximum Aggregate Offering Price	Amount Of Registration Fee

Common Stock par value $.10 per share	307,039 shares	$46.60 - $78.72	$17,135,313.89	$4,283.83

(1): An undetermined number of additional shares may be issued if the anti-dilution provisions of the Plan become operative.
(2): Pursuant to Rule 457(h)(1), the aggregate offering price is calculated based on the actual exercise prices of the options assumed by the Registrant.

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.

The following documents filed with the Securities and Exchange Commission are incorporated in this Registration Statement by reference:

1.: Registrant's Annual Report on Form 10-K for the year ended February 26, 2000.
2.: All other reports filed by the Registrant pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "1934 Act") since February 27, 2000.
3.: The description of the Registrant's Common Stock contained in its Registration Statement on Form 8-A filed with the Commission pursuant to Section 12 of the 1934 Act.

All documents hereafter filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act, prior to the filing of a post-effective amendment which indicates that all the securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated herein by reference and to be a part hereof from the date of filing such documents.

Item 4. Description of Securities.

Not applicable.

Item 5. Interests of Named Experts and Counsel.

Elliot S. Kaplan, a director and Secretary of the Registrant, is also a member of the law firm of Robins, Kaplan, Miller & Ciresi L.L.P., which has rendered an opinion as to the legality of the securities being registered.

Item 6. Indemnification of Directors and Officers.

The Registrant 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, the Registrant's Articles of Incorporation provide that a director of the Registrant shall not be personally liable to the Registrant 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 Registrant 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

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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. The 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 the Registrant would be eliminated or limited to the fullest extent permitted by Minnesota law.

As of September 1, 2000, the Registrant obtained a Directors' and Officers' Liability Insurance Policy, with coverage of $100 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 the Registrant under the Securities Act of 1933 (the "1933 Act") or under any underwriting agreement entered into in connection with a public offering of securities.

Item 7. Exemption from Registration Claimed.

Not applicable.

Item 8. Exhibits.

The following are filed as exhibits to this Registration Statement:

Exhibits
4.1		Amended and Restated Articles of Incorporation of the Registrant, as amended, defining the rights of holders of its Common Stock (incorporated by reference to Exhibit 3.1 filed as part of the Registrant's Annual Report on Form 10-K for the fiscal year ended February 26, 1994; and to Exhibit 3.1 filed as part of the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 26, 2000).
4.2		Amended and Restated By-Laws of the Registrant, as amended, defining the rights of holders of its Common Stock (incorporated by reference to Exhibit 4.2 filed as part of the Registrant's Registration Statement on Form S-3 [Reg. No. 33-43065]; Exhibit 3.1 filed as part of the Registrant's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991; Exhibit 3.3 filed as part of the Registrant's Annual Report on Form 10-K for the fiscal year ended February 25, 1995; and Exhibit 3.4 filed as part of the Registrant's Annual Report on Form 10-K for the fiscal year ended March 1, 1997).
4.3		The Assumed Musicland 1988 Stock Option Plan of Best Buy Co., Inc.
4.4		The Assumed Musicland 1992 Stock Option Plan of Best Buy Co., Inc.
4.5		The Assumed Musicland 1994 Stock Option Plan of Best Buy Co., Inc.
4.6		The Assumed Musicland 1998 Stock Incentive Plan of Best Buy Co., Inc.
5		Opinion of Robins, Kaplan, Miller & Ciresi L.L.P. as to the shares of Common Stock being registered.
23.1		Consent of Ernst & Young LLP.
23.2		Consent of Robins, Kaplan, Miller & Ciresi L.L.P. (contained in their opinion filed as Exhibit 5).
24		Power of Attorney (included on signature page hereto).

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Item 9. Undertakings.

The undersigned Registrant hereby undertakes:

a. 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 1933 Act;
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; 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 (i) and (ii), above, 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 Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference in this Registration Statement;

b. That, for the purpose of determining any liability under the 1933 Act, 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;

c. 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;

d. That, for purposes of determining any liability under the 1933 Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act 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 that time shall be deemed to be the initial bona fide offering thereof; and

e. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant 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 Registrant 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 1933 Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Eden Prairie, State of Minnesota, on this 23rd day of February, 2001.

		BEST BUY CO., INC.
		By:	/s/ DARREN R. JACKSON Darren R. Jackson Senior Vice President—Finance, Treasurer and Chief Financial Officer

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints RICHARD M. SCHULZE and DARREN R. JACKSON, and each of them, his true and lawful attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him and in his 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-8 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 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 thereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on February 23, 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/ ALLEN U. LENZMEIER Allen U. Lenzmeier		Director
/s/ BRADBURY H. ANDERSON Bradbury H. Anderson		Director

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/s/ MARK C. THOMPSON Mark C. Thompson		Director
/s/ ELLIOT S. KAPLAN Elliot S. Kaplan		Director
/s/ FRANK D. TRESTMAN Frank D. Trestman		Director
Hatim A. Tyabji		Director
/s/ JAMES C. WETHERBE James C. Wetherbe		Director
/s/ KATHY HIGGINS VICTOR Kathy Higgins Victor		Director
/s/ ROBERT T. BLANCHARD Robert T. Blanchard		Director
/s/ JACK W. EUGSTER Jack W. Eugster		Director

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EXHIBIT INDEX

Exhibits
4.1		Amended and Restated Articles of Incorporation of the Registrant, as amended, defining the rights of holders of its Common Stock (incorporated by reference to Exhibit 3.1 filed as part of the Registrant's Annual Report on Form 10-K for the fiscal year ended February 26, 1994; and to Exhibit 3.1 filed as part of the Registrant's Quarterly Report on Form 10-Q for the quarter ended August 26, 2000).
4.2		Amended and Restated By-Laws of the Registrant, as amended, defining the rights of holders of its Common Stock (incorporated by reference to Exhibit 4.2 filed as part of the Registrant's Registration Statement on Form S-3 [Reg. No. 33-43065]; Exhibit 3.1 filed as part of the Registrant's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991; Exhibit 3.3 filed as part of the Registrant's Annual Report on Form 10-K for the fiscal year ended February 25, 1995; and Exhibit 3.4 filed as part of the Registrant's Annual Report on Form 10-K for the fiscal year ended March 1, 1997).
4.3		The Assumed Musicland 1988 Stock Option Plan of Best Buy Co., Inc.
4.4		The Assumed Musicland 1992 Stock Option Plan of Best Buy Co., Inc.
4.5		The Assumed Musicland 1994 Stock Option Plan of Best Buy Co., Inc.
4.6		The Assumed Musicland 1998 Stock Incentive Plan of Best Buy Co., Inc.
5		Opinion of Robins, Kaplan, Miller & Ciresi L.L.P. as to the shares of Common Stock being registered.
23.1		Consent of Ernst & Young LLP.
23.2		Consent of Robins, Kaplan, Miller & Ciresi L.L.P. (contained in their opinion filed as Exhibit 5).
24		Power of Attorney (included on signature page hereto).

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PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
SIGNATURES
POWER OF ATTORNEY
EXHIBIT INDEX
EX-4.3 2 a2039604zex-4_3.htm EXHIBIT 4.3 Prepared by MERRILL CORPORATION www.edgaradvantage.com
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Exhibit 4.3

THE ASSUMED MUSICLAND
1988 STOCK OPTION PLAN

BEST BUY CO., INC.

THE ASSUMED MUSICLAND
1988 STOCK OPTION PLAN OF
BEST BUY CO., INC.

ARTICLE I
General Purpose of Plan; Definitions

SECTION 1.1 Name and Purpose. The name of this plan is the Assumed Musicland 1988 Stock Option Plan of Best Buy Co., Inc. (the "Plan"). The purpose of the Plan is to enable Best Buy Co., Inc. (the "Company") and any Subsidiaries to retain and attract executives and other key employees who contribute to the Company's success by their ability, ingenuity and industry, and to enable such executives and other key employees to participate in the long-term success and growth of the Company by giving them a proprietary interest in the Company. This Plan was originally adopted by Musicland Stores Corporation ("Musicland"), a Delaware corporation. Pursuant to the terms and conditions of an Agreement and Plan of Merger, dated December 6, 2000 (the "Merger Agreement") by and among the Company, Musicland and EN Acquisition Corp., a Delaware corporation ("Merger Sub"), the Merger Sub merged with and into Musicland on January 31, 2001 at 11:59 p.m. (the "Effective Time"). As a result of the merger, Musicland became a wholly-owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, certain Out of the Money Options (as defined in the Merger Agreement) were assumed by the Company and were converted into options to purchase shares of the Company's common stock at the Effective Time. The Company assumed this Plan to facilitate such assumption and conversion effective as of the Effective Time.

SECTION 1.2 Certain Definitions. For purposes of the Plan, the following terms shall be defined as set forth below:

(a) "Board of Directors" means the Board of Directors of the Company.

(b) "Cause" means a felony conviction of a Participant, or the failure of a Participant to contest prosecution for a felony, or a participant's willful misconduct or dishonesty, any of which is directly and materially harmful to the business or reputation of the Company, or, in regard to any Participant who has an operative employment agreement with the Company, as such term is defined in such employment agreement.

(d) "Committee" means either the Committee referred to in Section 2.1 of the Plan or, if none has been appointed, then the Board of Directors as a whole.

(e) "Company" means Best Buy Co, Inc., a corporation organized under the laws of the State of Minnesota (or any successor corporation).

(f) "Disability" means a Participant's physical or mental incapacity resulting from personal injury, disease, illness or other condition, which (i) prevents him or her from performing his or her duties for the Company, as the same is determined in a uniform manner by the Committee after reviewing any medical evidence or requiring any medical examinations which the Committee considers necessary to its determination and (ii) results in a termination of his or her employment with the Company.

(g) "Non-Employee Director" means a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) as promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, or any successor rule.

(h) "Early Retirement" means a Participant's retirement from active employment with the Company or any Subsidiaries under which the Participant is eligible to draw early retirement benefits from the applicable pension plan of the Company or its Subsidiaries.

(i) "Fair Market Value" as of any date means, during any time when the Stock is not publicly traded, the fair market value of the Stock as the same had been most recently determined by the

Board of Directors in good faith (which determination shall be conclusive) or, in regard to any Participant who has an operative employment agreement with the Company, as such term is defined in such employment agreement, and, during any time when the Stock is publicly traded, the closing price of the Stock on the last trading day immediately preceding such date (as reported by a national stock exchange or quoted on NASDAQ), or if no sale was made on such trading day, the closing market price on the first preceding trading day on which there was a sale.

(j) "Normal Retirement" means retirement from active employment with the Company or its Subsidiaries on or after the normal retirement date specified in the applicable pension plan of the Company or its Subsidiaries.

(k) "Participant" means any employee of the Company or any Subsidiaries selected to receive a grant of a Stock Appreciation Right and/or Stock Option hereunder.

(l) "Retirement" means both Normal Retirement and Early Retirement.

(m) "Stock" means Common Stock, par value $0.10 per share, of Best Buy Co., Inc.

(n) "Stock Appreciation Right" means the right pursuant to an award granted under Article VI herein to surrender to the Company all or a portion of a Stock Option in exchange for an amount, paid in cash or in Stock, equal to the difference between (i) the Fair Market Value, as of the date such Stock Option or such portion thereof is surrendered, of the shares of Stock covered by such Stock Option or such portion thereof, and (ii) the aggregate exercise price of such Stock Option or such portion thereof.

(o) "Stock Option" means any option to purchase shares of Stock granted pursuant to Article V herein; a Stock Option granted pursuant to this Plan is not intended to be an "Incentive Stock Option" within the meaning of Section 422A of the Code.

(p) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

(q) "Vested" means in connection with Stock Options and Stock Appreciation Rights that the time has been reached when the option to purchase stock first becomes exercisable and any accompanying appreciation right may be surrendered for payment.

(r) "Outside Director" means a director who (a) is not a current employee of the Company or any member of an affiliated group which includes the Company; (b) is not a former employee of the Company who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year; (c) has not been an officer of the Company; and (d) does not receive remuneration from the Company, either directly or indirectly, in any capacity other than as a director, except as otherwise permitted under Code Section 162(m) or the regulations promulgated thereunder. For this purpose, remuneration includes any payment in exchange for goods and services. This definition shall be further governed by the provisions of Code Section 162(m) and regulations promulgated thereunder.

ARTICLE II
Administration

SECTION 2.1. Authority and Duties of the Committee.

(a) The Plan shall be administered by the Board of Directors or, in its discretion, by a Committee of not less than three who shall be appointed by the Board of Directors and who shall serve at its pleasure. If at any time no Committee shall be in office, then the functions of the Committee specified in the Plan shall be exercised by the Board of Directors. During any times when the Company's Stock is registered pursuant to Section 12 of the Securities Exchange Act of

1934, the Plan shall be administered by a Committee the members of which shall be Non-Employee Directors and Outside Directors.

(b) The Committee shall have the power and authority to grant to eligible employees, pursuant to the terms of the Plan, Stock Options with or without accompanying Stock Appreciation Rights. However, all such grants are subject to the terms and conditions of the Shareholders Agreement and to any contrary provision of an operative employment agreement between a Participant and the Company.

(i) to select the officers and other key employees of the Company and any Subsidiaries to whom Stock Options and Stock Appreciation Rights may from time to time be granted hereunder;

(ii) to determine whether and to what extent Stock Options and Stock Appreciation Rights are to be granted hereunder;

(iii) to determine the number and class of shares to be covered by each such award granted hereunder;

(iv) to determine the terms and conditions, not inconsistent with the terms of the Plan and any operative employment agreement, of any award granted hereunder (including, but not limited to, any restriction on any Stock Option or other award and/or the shares of Stock relating thereto);

(v) to determine whether, to what extent and under what circumstances Stock and other amounts payable with respect to an award under this Plan shall be deferred either automatically or at the election of the Participant;

(vi) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable;

(vii) to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and

(viii) to otherwise supervise the administration of the Plan.

(d) All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan Participants.

ARTICLE III
Stock Subject to Plan

SECTION 3.1. Limitations. The total number of shares of Stock reserved and available for distribution under the Plan shall be 47,800. However, no more than 54,155 shares of Stock may be reserved or available for distribution in any one calendar year, subject to a cumulative carryover of shortfalls below said limit in each following year. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.

SECTION 3.2. Options Not Exercised. Subject to Section 6.2(d) herein regarding the payment of Stock Appreciation Rights, if any shares that have been optioned ceased to be subject to option, then such shares shall again be available for distribution in connection with future awards under the Plan.

SECTION 3.3. Antidilution. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, split, reverse split, combination, reclassification or other change in corporate structure affecting the Stock, such substitution or adjustment shall be made in the aggregate number of shares reserved for issuance under the Plan and in the number and option price of shares subject to outstanding options granted under the Plan as may be determined to be appropriate by the Committee, in its sole discretion, provided that the number of shares subject to any award shall always

be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right associated with any Stock Option.

ARTICLE IV
Participants

SECTION 4.1. Eligibility. Officers and other key employees of the Company and any Subsidiaries who are responsible for or contribute to the management, growth and/or profitability of the business of Company, but excluding members of the Committee during any times that the Company's Stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934 and also excluding any person who serves only as a director of the Company or any Subsidiaries, are eligible to participate in this Plan by receiving, as a reward for past performance and as an incentive for future performance, grants of Stock Options, with or without accompanying Stock Appreciation Rights, under the Plan. The Participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, and the Committee shall also determine, in its sole discretion (subject however to the provisions of the Shareholders Agreement), the number and class of shares covered by each award to a Participant.

ARTICLE V
Grant of Stock Options

SECTION 5.1. Option Grant and Agreement. Any Stock Option granted under the Plan shall be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written Stock Option Agreement dated as of the date of grant and executed by the Company and by the Participant.

SECTION 5.2. Terms and Conditions of Grants. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, the Shareholders Agreement and any operative employment agreement, as the Committee shall deem desirable:

(a) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but may not be less than the par value thereof.

(b) Option Term. Any unexercised portion of a Stock Option granted hereunder shall expire at the end of the stated term of the Stock Option. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years after the date the option is granted. If a definite term is not specified by the Committee at the time of grant, then the term shall be deemed to be ten years.

(c) Exercisability. Stock Options, or portions thereof, shall first become exercisable at such time or times as determined by the Committee at or after grant, provided, however, that, unless otherwise determined by the Committee at or after grant, no Stock Option shall be exercisable prior to the first anniversary date of the granting of the option. If the Committee provides, in its discretion, that any Stock Option becomes vested only in installments, the Committee may waive such installment exercise provisions at any time. Notwithstanding the foregoing, any Stock Option granted under this Plan shall be exercisable in full, without regard to any installment exercise provisions, beginning sixty (60) days prior to the expected date of occurrence of any of the following events: (i) dissolution or liquidation of the Company, other than in conjunction with a bankruptcy of the Company or any other similar occurrence; (ii) any merger, consolidation, acquisition, separation, reorganization, or similar occurrence, where the Company will not be the surviving entity and the shareholders of the Company will not constitute a majority of the shareholders of the surviving entity; (iii) the transfer of substantially all of the assets of the Company where, immediately after such asset transfer, substantially all of the assets of the Company are held by persons who are not members of the Company's "affiliated group" as such term is defined in Section 1504 of the Code; or (iv) any person or group within the meaning of

Section 13(d) of the Securities Exchange Act of 1934 shall become the beneficial owner, directly or indirectly, of 70% of the Company's outstanding common stock, and, in addition, any unvested portions of any Stock Option shall become immediately exercisable to the extent so provided in any employment agreement entered into between the holder of such Stock Option and the Company either before or after the date of such award.

(d) Method of Exercise. Vested portions of any Stock Option may be exercised in whole or in part at any time during the option term by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by cash payment in full of the purchase price, along with any required tax withholding pursuant to Section 11.3, in any manner satisfactory to the Company. As determined by the Committee, in its sole discretion, before or after grant, payment in full or in part may also be made in the form of unrestricted Stock already owned by the optionee (based on the Fair Market Value of the Stock on the date the option is exercised, as determined by the Committee) subject to any applicable tax and securities laws, regulations and rulings. No shares of Stock shall be issued until full payment thereof has been made. An optionee shall generally have the rights to dividends and other rights of a shareholder with respect to shares subject to a Stock Option only after the optionee has given written notice of exercise, has paid in full for such shares, and, otherwise, met the requirements stated in Section 10.1 of the Plan.

(e) Non-transferability of Options. No Stock Option shall be transferable by the optionee otherwise than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the optionee's lifetime, only by the optionee.

SECTION 5.3. Termination of Grants Prior to Expiration. Unless otherwise provided in any employment agreement entered into between the holder of such Stock Option and the Company either before or after the date of grant, the following early termination provisions shall apply to all Stock Options:

(a) Termination by Death. If an optionee's employment by the Company or its Subsidiaries terminates by reason of his or her death, the Stock Option, whether vested or not, may thereafter be immediately exercised by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution, but only for a period of three years (or such shorter period as the Committee shall specify at the time of grant) from the date of such death, or until the expiration of the stated term of the Stock Option, whichever period is the shorter.

(b) Termination by Reason of Disability. If an optionee's employment by the Company or its Subsidiaries terminates by reason of his or her Disability, any Stock Option held by such optionee, whether vested or not, may thereafter be immediately exercised but only for a period of three years (or such shorter period as the Committee shall specify at the time of grant) from the date of such termination of employment, or until the expiration of the stated term of the Stock Option, whichever period is the shorter; provided, however, that, if the optionee dies within such three-year period (or such shorter period as applicable), any unexercised Stock Option held by such optionee shall thereafter be exercisable by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the three-year period (or such shorter period as applicable) or for a period of twelve months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its stated expiration date.

such optionee shall thereafter be exercisable by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the three-year period (or such shorter period as applicable) or for a period of twelve months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its stated expiration date.

(d) Other Termination. Unless otherwise determined by the Committee, at or after the time of grant, if an optionee's employment by the Company or its Subsidiaries terminates, voluntarily or involuntarily, for any reason other than death, Disability or Retirement, any vested portion of the Stock Option at the time of such termination may be exercised by the optionee for a period of three months from the date of such termination or for the stated term of the Stock Option, whichever period is the shorter, and at the end of such time period the Stock Option shall terminate. Notwithstanding the foregoing to the contrary, if, at the time of any such termination of employment, the Stock is not publicly traded and the Board of Directors has not made a determination of the Fair Market Value of the Stock which is applicable to the termination date, then the time period in which the optionee shall be able to exercise the vested portion of the Stock Option shall be extended until three months after the date, if any, on which such Fair Market Value is determined, but in no event shall any portion of the Stock Option be exercisable after its stated expiration date. No unvested portion of the Stock Option at the time of any such termination from employment shall thereafter become vested.

ARTICLE VI
Stock Appreciation Rights

SECTION 6.1. Grant and Exercise.

(a) Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan, either at the same time or after the grant of said Stock Option.

(b) A Stock Appreciation Right or applicable portion thereof granted with respect to a given Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, except that a Stock Appreciation Right granted with respect to less than the full number of shares covered by a related Stock Option shall not be reduced until the exercise or termination of the related Stock Option exceeds the number of shares not covered by the Stock Appreciation Right.

(c) A Stock Appreciation Right may be exercised by an optionee by surrendering the applicable portion of the related Stock Option. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Stock Appreciation Right have been exercised. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 6.2(b) below. However, the Participant shall be responsible for the payment of any required tax withholding as provided in Section 11.3 herein.

SECTION 6.2. Terms and Conditions. Stock Appreciation Rights shall be subject to the following terms and conditions:

(a) Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate shall be vested and exercisable in accordance with the provisions of Article V herein; provided, however, that during any time that the Company's Stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934, no Stock Appreciation Right granted subsequent to the grant of the related Stock Option shall be exercisable during the first six months of its term, except that this limitation shall not apply in the event of death or Disability of the optionee prior to the expiration of the six-month period;

option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right in its sole discretion to determine the form of payment;

(c) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Article V herein;

(d) Upon the exercise of a Stock Appreciation Right, the Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 3.1 of the Plan on the number of shares of Stock to be issued under the Plan, but only to the extent of the number of shares issued or issuable under the Stock Appreciation Right at the time of exercise based on the value of the Stock Appreciation Right at such time; and

(e) Such other terms and conditions, not inconsistent with the provisions of the Plan, the Shareholders Agreement and any operative employment agreement, as shall be determined from time to time by the Committee.

ARTICLE VII
Transfers and Leaves of Absence

SECTION 7.1. Transfer of Participant. For purposes of the Plan, the transfer of a Participant among the Company and its subsidiaries shall not be deemed a termination of employment.

SECTION 7.2. Effect of Leaves of Absence. For purposes of the Plan, the following leaves of absence shall not be deemed a termination of employment:

(a) a leave of absence, approved in writing by the Company, for military service or sickness, or for any other purpose approved by the Company, if the period of such leave does not exceed ninety (90) days; and

(b) a leave of absence in excess of ninety (90) days approved in writing by the Committee, but only if the employee's right to reemployment is guaranteed either by a statute or by contract, and provided that, in the case of any such leave of absence the employee returns to work within thirty (30) days after the end of such leave.

ARTICLE VIII
Amendment and Discontinuation

SECTION 8.1. Amendment or Discontinuation of the Plan. The Board of Directors may amend, alter, or discontinue the Plan at any time, but no amendment, alteration, or discontinuance shall be made which would impair the rights of a Participant under any Stock Option theretofore granted, without the Participant's express consent thereto, or which without the approval of the stockholders of the Company would:

(a) except as expressly provided in this Plan, materially increase the total number of shares reserved for the purpose of the Plan;

(b) change the class of employees eligible to participate in the Plan, as stated in Article IV herein; or

SECTION 8.2. Amendment of Grants. The Committee may amend the terms of any Stock Option theretofore granted, prospectively or retroactively, but, subject to Section 3.3 herein, no such amendment shall impair the rights of any holder without his or her consent. The Committee may also substitute new Stock options for previously granted options, including previously granted options having higher option prices.

ARTICLE IX
Unfunded Status of the Plan

SECTION 9.1. Unfunded Status. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan with respect to awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

ARTICLE X
Stock Certificates

SECTION 10.1. Delivery of Stock Certificates. The Company shall not be required to issue or deliver any certificates for shares of Stock purchased upon the exercise of any Vested Stock Option, or portion thereof, granted hereunder prior to the fulfillment of all of the following conditions:

(a) Payment in full for the shares and for any required tax withholding as provided in Sections 5.2(d) and 11.3 of the Plan;

(b) The completion of any registration or other qualification of such shares under any federal or state laws or under the rulings or regulations of the SEC or any other regulating body which the Committee in its sole discretion shall deem necessary or advisable;

(d) In the event the Stock is not registered under the Securities Act of 1933, qualification of the exercise of the Stock Option as a private placement under said Act; and

(e) The obtaining of any approval or other clearance from any federal or state governmental agency which the Committee shall in its sole discretion determine to be necessary or advisable.

SECTION 10.2. Applicable Restrictions on Stock.

(a) Shares of Stock purchased upon the exercise of any Stock Option may also be subject to such stock transfer orders and other restrictions as the Committee may determine necessary or advisable under the rules, regulations and other requirements of the SEC, any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law.

(b) Said shares of Stock shall include the restrictive legends the Committee may deem appropriate to include.

ARTICLE XI
General Provisions

SECTION 11.1. No Implied Right to Employment. The adoption of this Plan shall not confer upon any employee of the Company or its Subsidiaries any right to continued employment, nor shall it interfere in any way with the right of the Company or its Subsidiaries to terminate the employment of any of its employees at any time.

SECTION 11.2. Other Compensation Plans. Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.

SECTION 11.3. Tax Withholding. Each Participant shall, no later than the date as of which the value of a Stock Option or Stock Appreciation Right first becomes includible in the gross income of the Participant for income tax purposes, pay to the Company, or make arrangements satisfactory to the

Company, regarding payment of, any federal, state, or local taxes of any kind required by law to be withheld with respect to the award. If approved by the Committee, such arrangements may include, (i) authorizing the Company to retain from the number of shares of Stock that would otherwise be deliverable to the Participant, or (ii) delivering to the Company from shares of unrestricted Stock already owned by the Participant, that number of shares having an aggregate Fair Market Value equal to the tax payable by the Participant, subject to any applicable tax and securities laws, regulations and rulings. The obligations of the Company under the Plan shall be conditional on such payment, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to a Participant.

ARTICLE XII
Effective Date of the Plan

The Plan became effective on the date it was approved by a vote of the holders of a majority of the total outstanding Stock August 25, 1988.

ARTICLE XIII
Term of the Plan

No Stock Option or Stock Appreciation Right shall be granted pursuant to the Plan on or after the tenth anniversary of the date of stockholder approval August 25, 1998, but awards theretofore granted may extend beyond that date.

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THE ASSUMED MUSICLAND 1988 STOCK OPTION PLAN OF BEST BUY CO., INC.
ARTICLE I General Purpose of Plan; Definitions
ARTICLE II Administration
ARTICLE III Stock Subject to Plan
ARTICLE IV Participants
ARTICLE V Grant of Stock Options
ARTICLE VI Stock Appreciation Rights
ARTICLE VII Transfers and Leaves of Absence
ARTICLE VIII Amendment and Discontinuation
ARTICLE IX Unfunded Status of the Plan
ARTICLE X Stock Certificates
ARTICLE XI General Provisions
ARTICLE XII Effective Date of the Plan
ARTICLE XIII Term of the Plan
EX-4.4 3 a2039604zex-4_4.htm EXHIBIT 4.4 Prepared by MERRILL CORPORATION www.edgaradvantage.com
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Exhibit 4.4

This document constitutes part of a prospectus covering securities that have been
registered under the Securities Act of 1933.

THE ASSUMED MUSICLAND
1992 STOCK OPTION PLAN

of

BEST BUY CO., INC.

THE ASSUMED MUSICLAND
1992 STOCK OPTION PLAN OF
BEST BUY CO., INC.

ARTICLE I
General Purpose of Plan; Definitions

SECTION 1.1. Name and Purpose. The name of this plan is the Assumed Musicland 1992 Stock Option Plan of Best Buy Co., Inc. (the "Plan"). The purpose of the Plan is to enable Best Buy Co., Inc. (the "Company") and any Subsidiaries to retain and attract executives and other key employees who contribute to the Company's success by their ability, ingenuity and industry, and to enable such executives and other key employees to participate in the long-term success and growth of the Company by giving them a proprietary interest in the Company. This Plan was originally adopted by Musicland Stores Corporation ("Musicland"), a Delaware corporation. Pursuant to the terms and conditions of an Agreement and Plan of Merger, dated December 6, 2000 (the "Merger Agreement") by and among the Company, Musicland and EN Acquisition Corp., a Delaware corporation ("Merger Sub"), the Merger Sub merged with and into Musicland on January 31, 2001 at 11:59 p.m. (the "Effective Time"). As a result of the merger, Musicland became a wholly-owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, certain Out of the Money Options (as defined in the Merger Agreement) were assumed by the Company and were converted into options to purchase shares of the Company's common stock at the Effective Time. The Company assumed this Plan to facilitate such assumption and conversion effective as of the Effective Time.

SECTION 1.2. Certain Definitions. For purposes of the Plan, the following terms shall be defined as set forth below:

(a) "Board of Directors" means the Board of Directors of the Company.

(d) "Committee" means either the Committee referred to in Section 2.1 of the Plan or, if none has been appointed, then the Board of Directors as a whole.

(e) "Company" means Best Buy Co. Inc., a corporation organized under the laws of the State of Minnesota (or any successor corporation).

(i) "Fair Market Value" as of any date means, during any time when the Stock is not publicly traded, the fair market value of the Stock as the same had been most recently determined

by the Board of Directors in good faith (which determination shall be conclusive) or, in regard to any Participant who has an operative employment agreement with the Company, as such term is defined in such employment agreement, and, during any time when the Stock is publicly traded, the closing price of the Stock on the last trading day immediately preceding such date (as reported by a national stock exchange or quoted on NASDAQ), or if no sale was made on such trading day, the closing market price on the first preceding trading day on which there was a sale.

(k) "Participant" means any employee of the Company or any Subsidiaries selected to receive a grant of a Stock Appreciation Right and/or Stock Option hereunder.

(l) "Retirement" means both Normal Retirement and Early Retirement.

(m) "Stock" means the Common Stock, par value $0.10 per share, of the Company.

(r) "Outside Director" means a director who (a) is not a current employee of the Company or any member of an affiliated group which includes the Company; (b) is not a former employee of the Company who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year; (c) has not been an officer of the Company; and (d) does not receive remuneration from the Company, either directly or indirectly, in any capacity other than as a director, except as otherwise permitted under Code Section 162(m) or the regulations promulgated thereunder. For this purpose, remuneration includes any payment in exchange for goods or services. This definition shall be further governed by the provisions of Code Section 162(m) and regulations promulgated thereunder.

ARTICLE II
Administration

SECTION 2.1. Authority and Duties of the Committee.

(a) The Plan shall be administered by the Board of Directors or, in its discretion, by a Committee of not less than three Board members who shall be appointed by the Board of Directors and who shall serve at its pleasure. If at any time no Committee shall be in office, then the functions of the Committee specified in the Plan shall be exercised by the Board of Directors. During any times when the Company's Stock is registered pursuant to Section 12 of the Securities

Exchange Act of 1934, the Plan shall be administered by a Committee the members of which shall be Non-Employee Directors and Outside Directors.

(i) to select the officers and other key employees of the Company and any Subsidiaries to whom Stock Options and Stock Appreciation Rights may from time to time be granted hereunder;

(ii) to determine whether and to what extent Stock Options and Stock Appreciation Rights are to be granted hereunder;

(iii) to determine the number and class of shares to be covered by each such award granted hereunder;

(vi) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable;

(vii) to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and

(viii) to otherwise supervise the administration of the Plan.

(d) All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan Participants.

ARTICLE III
Stock Subject to Plan

SECTION 3.1. Limitations. The total number of shares of Stock reserved and available for distribution under the Plan shall be 56,712. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.

SECTION 3.2. Options Not Exercised. Subject to Section 6.2 (d) herein regarding the payment of Stock Appreciation Rights, if any shares that have been optioned ceased to be subject to option, then such shares shall again be available for distribution in connection with future awards under the Plan.

ARTICLE IV
Participants

ARTICLE V
Grant of Stock Options

(a) Option Price. The option price per share of Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant but may not be less than the par value thereof.

any employment agreement entered into between the holder of such Stock Option and the Company either before or after the date of such award.

(d) Method of Exercise. Vested portions of any Stock Option may be exercised in whole or in part at any time during the option term by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by cash payment in full of the purchase price, along with any required tax withholding pursuant to Section 11.3, in any manner satisfactory to the Company. As determined by the Committee, in its sole discretion, before or after grant, payment in full or in part may also be made in the form of unrestricted Stock already owned by the optionee (based on the Fair Market Value of the Stock on the date the option is exercised, as determined by the Committee) subject to any applicable tax and securities laws, regulations and rulings. No shares of Stock shall be issued until full payment therefor has been made. An optionee shall generally have the rights to dividends and other rights of a shareholder with respect to shares subject to a Stock Option only after the optionee has given written notice of exercise, has paid in full for such shares, and, otherwise met the requirements stated in Section 10.1 of the Plan.

(c) Termination by Reason of Retirement. If an optionee's employment by the Company or its Subsidiaries terminates by reason of his or her Retirement, any Stock Option held by such optionee, whether vested or not, may thereafter be immediately exercised but only for a period of three years (or such shorter period as the Committee shall specify at the time of grant) from the date of such termination of employment, or until the expiration of the stated term of the Stock Option, whichever period is the shorter; provided, however, that, if the optionee dies within such three-year period (or such shorter period as applicable), any unexercised Stock Option held by such optionee shall thereafter be exercisable by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the three-year period (or such shorter period as applicable) or

for a period of twelve months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its stated expiration date.

ARTICLE VI
Stock Appreciation Rights

SECTION 6.1. Grant and Exercise.

(a) Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan, either at the same time or after the grant of said Stock Option.

(c) A Stock Appreciation Right may be exercised by an optionee by surrendering the applicable portion of the related Stock Option. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Stock Appreciation Right have been exercised. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 6.2 (b) below. However, the Participant shall be responsible for the payment of any required tax withholding as provided in Section 11.3 herein.

SECTION 6.2. Terms and Conditions. Stock Appreciation Rights shall be subject to the following terms and conditions:

(b) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive up to, but not more than, an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock over the option price per share specified in the related option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right in its sole discretion to determine the form of payment;

(c) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Article V herein;

ARTICLE VII
Transfers and Leaves of Absence

SECTION 7.1. Transfer of Participant. For purposes of the Plan, the transfer of a Participant among the Company and its subsidiaries shall not be deemed a termination of employment.

SECTION 7.2. Effect of Leaves of Absence. For purposes of the Plan, the following leaves of absence shall not be deemed a termination of employment:

(b) a leave of absence in excess of ninety (90) days, approved in writing by the Committee, but only if the employee's right to reemployment is guaranteed either by a statute or by contract, and provided that, in the case of any such leave of absence the employee returns to work within 30 days after the end of such leave.

ARTICLE VIII
Amendment and Discontinuation

(a) except as expressly provided in this Plan, materially increase the total number of shares reserved for the purpose of the Plan;

(b) change the class of employees eligible to participate in the Plan, as stated in Article IV herein;

(d) materially increase benefits accruing to participants.

ARTICLE IX
Unfunded Status of the Plan

ARTICLE X
Stock Certificates

(a) Payment in full for the shares and for any required tax withholding as provided in Sections 5.2(d) and 11.3 of the Plan;

(d) In the event the Stock is not registered under the Securities Act of 1933, qualification of the exercise of the Stock Option as a private placement under said Act; and

(e) The obtaining of any approval or other clearance from any federal or state governmental agency which the Committee shall in its sole discretion determine to be necessary or advisable.

SECTION 10.2. Applicable Restrictions on Stock.

(a) Shares of Stock purchased upon the exercise of any Stock Option, or portion thereof, may be subject to such stock transfer orders and other restrictions as the Committee may determine necessary or advisable under the rules, regulations and other requirements of the SEC, any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law.

(b) Said shares of Stock shall include any restrictive legends the Committee may deem appropriate to include.

ARTICLE XI
General Provisions

ARTICLE XII
Effective Date of the Plan

This Plan was adopted by the Board of Directors of Musicland on January 15, 1992 and approved by the shareholders of Musicland on January 22, 1992, both contingent upon the consummation of the Company's initial public offering. Upon consummation of the initial public offering, the effective date of the Plan shall be deemed to be January 15, 1992.

ARTICLE XIII
Term of the Plan

No further Stock Option or Stock Appreciation Right shall be granted pursuant to the Plan after the Effective Time, but awards theretofore granted may extend beyond that date.

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THE ASSUMED MUSICLAND 1992 STOCK OPTION PLAN of BEST BUY CO., INC.
THE ASSUMED MUSICLAND 1992 STOCK OPTION PLAN OF BEST BUY CO., INC.
ARTICLE I General Purpose of Plan; Definitions
ARTICLE II Administration
ARTICLE III Stock Subject to Plan
ARTICLE IV Participants
ARTICLE V Grant of Stock Options
ARTICLE VI Stock Appreciation Rights
ARTICLE VII Transfers and Leaves of Absence
ARTICLE VIII Amendment and Discontinuation
ARTICLE IX Unfunded Status of the Plan
ARTICLE X Stock Certificates
ARTICLE XI General Provisions
ARTICLE XII Effective Date of the Plan
ARTICLE XIII Term of the Plan
EX-4.5 4 a2039604zex-4_5.htm EXHIBIT 4.5 Prepared by MERRILL CORPORATION www.edgaradvantage.com
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Exhibit 4.5

THIS DOCUMENT CONSTITITES PART OF A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITES ACT OF 1933.

THE ASSUMED MUSICLAND
1994 STOCK OPTION PLAN

BEST BUY CO., INC.

THE ASSUMED MUSICLAND
1994 EMPLOYEE STOCK OPTION PLAN
OF BEST BUY CO., INC.

ARTICLE I
General Purpose of Plan; Definitions

SECTION 1.1. Name and Purpose. The name of this plan is the Assumed Musicland 1994 Stock Option Plan of Best Buy Co., Inc. (the "Plan"). The purposes of the Plan are to enable Best Buy Co., Inc. (the "Company") and any Subsidiaries to retain and attract executives and other key employees who contribute to the Company's success by their ability, ingenuity and industry and to give such executives and other key employees a proprietary interest in the Company, thereby enabling them to participate in the long-term success and growth of the Company and aligning their interests with those of the Company's public stockholders. This Plan was originally adopted by Musicland Stores Corporation ("Musicland"), a Delaware corporation. Pursuant to the terms and conditions of an Agreement and Plan of Merger, dated December 6, 2000 (the "Merger Agreement") by and among the Company, Musicland and EN Acquisition Corp., a Delaware corporation ("Merger Sub"), the Merger Sub merged with and into Musicland on January 31, 2001 at 11:59 p.m. (the "Effective Time"). As a result of the merger, Musicland became a wholly-owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, certain Out of the Money Options (as defined in the Merger Agreement) were assumed by the Company and were converted into options to purchase shares of the Company's common stock at the Effective Time. The Company assumed this Plan to facilitate such assumption and conversion effective as of the Effective Time.

SECTION 1.2. Certain Definitions. For purposes of the Plan, the following terms shall be defined as set forth below:

(a) "Board of Directors" means the Board of Directors of the Company.

(d) "Committee" means the entity administering the Plan as provided in Section 2.1 of the Plan or, if none has been appointed, then the Board of Directors as a whole.

(e) "Company" means Best Buy Co, Inc., a corporation organized under the laws of the State of Minnesota (or any successor corporation).

(f) "Date of Grant" means the date on which the Musicland Board of Directors originally granted the awards outstanding pursuant to this Plan.

(g) "Disability" means a Participant's physical or mental incapacity resulting from personal injury, disease, illness or other condition, which (i) prevents him or her from performing his or her duties for the Company, as the same is determined in a uniform manner by the Committee after reviewing any medical evidence or requiring any medical examinations which the Committee considers necessary to its determination, and (ii) results in a termination of his or her employment with the Company.

(h) "Non-Employee Director" means a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) as promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, or any successor rule.

(i) "Early Retirement" means a Participant's retirement from active employment with the Company or any Subsidiaries under which the Participant is eligible to draw early retirement benefits from the applicable pension plan of the Company or its Subsidiaries.

(j) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(l) "Fair Market Value" means the average of the highest and lowest price of a share of Stock on the Date of Grant if the Date of Grant is a trading date, or, if not, on the most recently completed trading date prior to the Date of Grant, as reported on the consolidated tape for New York Stock Exchange listed securities.

(m) "Incentive Stock Option" or "ISO" means a Stock Option that is designated by the Committee as such and which meets the requirements of Section 422 of the Code, or any successor provision, at the time of grant.

(n) "Nonqualified Stock Option" or "NQSO" means a Stock Option that is not intended to meet the requirements of Section 422 of the Code at the time of grant and which is governed by Section 83 of the Code.

(o) "Normal Retirement" means retirement from active employment with the Company or its Subsidiaries on or after the normal retirement date specified in the applicable pension plan of the Company or its Subsidiaries.

(p) "Outside Director" means a director who (a) is not a current employee of the Company or any member of an affiliated group which includes the Company; (b) is not a former employee of the Company who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year; (c) has not been an officer of the Company; and (d) does not receive remuneration from the Company, either directly or indirectly, in any capacity other than as a director, except as otherwise permitted under Code Section 162(m) or the regulations promulgated thereunder. For this purpose, remuneration includes any payment in exchange for goods or services. This definition shall be further governed by the provisions of Code Section 162(m) and regulations promulgated thereunder.

(q) "Participant" means any employee of the Company or any Subsidiaries selected to receive a grant of a Stock Appreciation Right and/or Stock Option hereunder.

(r) "OUADRO" means a qualified domestic relations order as defined by the Code or Title I of ERISA.

(s) "Retirement" means both Normal Retirement and Early Retirement.

(t) "SEC" means the Securities and Exchange Commission.

(u) "Stock" means the Common Stock, par value $.01 per share, of Musicland Stores Corporation.

(v) "Stock Appreciation Rights" means the right pursuant to an award granted under Article VII herein to surrender to the Company all or a portion of a Stock Option in exchange for an amount, paid in cash or in Stock, equal to the difference between (i) the Fair Market Value, as of the date such Stock Option or such portion thereof is surrendered, of the shares of Stock covered by such Stock Option or such portion thereof, and (ii) the aggregate exercise price of such Stock Option or such portion thereof.

(w) "Stock Option" means any right to purchase a specified number of shares of Stock at a fixed price which is granted pursuant to Article V herein and may be either an Incentive Stock Option or a Nonqualified Stock Option.

(x) "Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last

corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

(y) "Vested" means in connection with Stock Options and Stock Appreciation Rights that the time has been reached when the option to purchase stock first becomes exercisable and any accompanying appreciation right may be surrendered for payment.

ARTICLE II
Administration

SECTION 2.1. Authority and Duties of the Committee.

(a) The Plan shall be administered by a Committee of not less than two Board members who shall be appointed by the Board of Directors and who shall serve at its pleasure. All of the members of the Committee shall be Non-Employee Directors and Outside Directors.

(b) The Committee shall have the power and authority to grant to eligible employees, pursuant to the terms of the Plan, Stock Options with or without accompanying Stock Appreciation Rights. However, all such grants are subject to the terms and conditions of any contrary provision of an operative employment agreement between a Participant and the Company.

(i) to select the officers and other key employees of the Company and any Subsidiaries to whom Stock Options and Stock Appreciation Rights may from time to time be granted hereunder;

(ii) to determine whether and to what extent Stock Options and Stock Appreciation Rights are to be granted hereunder;

(iii) to determine the number and class of shares to be covered by each such award granted hereunder, subject to the limit set forth in Section 5.2.(c) below;

(vi) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable;

(vii) to interpret the terms and provisions of the Plan and any award issued under the Plan (and any agreements relating thereto); and

(viii) to otherwise supervise the administration of the Plan.

(d) All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan Participants.

SECTION 2.2. Delegation of Authority. The Committee may delegate its powers and duties under the Plan to the Chief Executive Officer of the Company, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion, provided, however, that the Committee shall not delegate its powers and duties under the Plan with regard to awards to the Company's executive officers and any other participants subject to Section 16 of the Exchange Act. In addition, the Committee may delegate to any other person or persons purely ministerial duties, and it may employ attorneys, consultants, accountants or other professional advisers.

ARTICLE III
Stock Subject to Plan

SECTION 3.1. Limitations. The total number of shares of Stock reserved and available for distribution under the Plan shall be 19,340. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.

SECTION 3.2. Options Not Exercised. Subject to Section 7.2(d) herein regarding the payment of Stock Appreciation Rights, if any shares that have been optioned cease to be subject to option, then such shares shall again be available for distribution in connection with future awards under the Plan.

ARTICLE IV
Participants

SECTION 4.1. Eligibility. Officers and other executive, managerial, professional, technical or administrative employees of the Company and any Subsidiaries who are responsible for or contribute to the management, growth and/or profitability of the business of Company, but excluding members of the Committee and any person who serves only as a director of the Company or any Subsidiaries, are eligible to participate in this Plan by receiving, as a reward for past performance and as an incentive for future performance, grants of Stock Options, with or without accompanying Stock Appreciation Rights, under the Plan. The Participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, and the Committee shall also determine, in its sole discretion, the number and class of shares covered by each award to a Participant.

ARTICLE V
Grant of Stock Options

SECTION 5.1. Option Grant and Agreement. Any Stock Option granted under the Plan shall be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written Stock Option Agreement dated as of the Date of Grant and executed by the Company and by the Participant.

SECTION 5.2. Terms and Conditions of Grants. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan and any operative employment agreement, as the Committee shall deem desirable:

(a) Option Price. The option price per share of Stock purchasable under a Stock Option shall the Fair Market Value as of the Date of Grant.

(b) Option Term. Any unexercised portion of a Stock Option granted hereunder shall expire at the end of the stated term of the Stock Option. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than ten years after the Date of Grant. If a definite term is not specified by the Committee at the time of grant, then the term shall be deemed to be ten years.

(c) Option Amount. No one participant may receive one or more new grants in any one calendar year covering in the aggregate more than 500,000 shares of Stock.

(d) Exercisability. Stock Options, or portions thereof, shall first become exercisable at such time or times as determined by the Committee at or after grant, provided, however, that, unless otherwise determined by the Committee at or after grant, no Stock Option shall be exercisable prior to the first anniversary date of the granting of the option. If the Committee provides, in its discretion, that any Stock Option becomes vested only in installments, the Committee may waive such installment exercise provisions at any time. Notwithstanding the foregoing, any Stock Option granted under this Plan shall be exercisable in full, without regard to any installment exercise provisions, beginning sixty (60) days prior to the expected date of occurrence of any of the following events: (i) dissolution or liquidation of the Company, other than in conjunction with a bankruptcy of the Company or any other similar occurrence; (ii) any merger, consolidation, acquisition, separation, reorganization, or similar occurrence, where the Company will not be the surviving entity and the shareholders of the Company will not constitute a majority of the shareholders of the surviving entity; (iii) the transfer of substantially all of the assets of the Company where, immediately after such asset transfer, substantially all of the assets of the Company are held by persons who are not members of the Company's "affiliated group" as such term is defined in Section 1504 of the Code; or (iv) any person or group within the meaning of Section 13(d) of the Securities Exchange Act of 1934 shall become the beneficial owner, directly or indirectly, of 30% or more of the Company's outstanding common stock, and, in addition, any unvested portions of any Stock Option shall become immediately exercisable to the extent so provided in any employment agreement entered into between the holder of such Stock Option and the Company either before or after the date of such award.

(e) Method of Exercise. Vested portions of any Stock Option may be exercised in whole or in part at any time during the option term by giving written notice of exercise to the Company specifying the number of shares to be purchased. Such notice shall be accompanied by cash payment in full of the purchase price, along with any required tax withholding pursuant to Section 13.3, in any manner satisfactory to the Company. As determined by the Committee, in its sole discretion, before or after grant, payment in full or in part may also be made in the form of unrestricted Stock already owned by the optionee (based on the Fair Market Value of the Stock on the date the option is exercised) subject to any applicable tax and securities laws, regulations and rulings. No shares of Stock shall be issued until full payment therefor has been made. An optionee shall generally have the rights to dividends and other rights of a shareholder with respect to shares subject to a Stock Option only after the optionee has given written notice of exercise, has paid in full for such shares, and, otherwise met the requirements stated in Section 12.1 of the Plan.

(f) Form. Unless the grant of a Stock Option hereunder is designated at the time of grant as an ISO, it shall be deemed to be an NQSO. Notwithstanding the foregoing, ISOs shall be subject to the terms and conditions stated in Article VI of the Plan.

SECTION 5.3. Termination of Grants Prior to Expiration. Unless otherwise provided in any employment agreement entered into between the holder of such Stock Option and the Company either before or after the Date of Grant and subject to Article VI hereof with respect to ISOs, the following early termination provisions shall apply to all Stock Options:

such termination of employment, or until the expiration of the stated term of the Stock Option, whichever period is the shorter; provided, however, that, if the optionee dies within such three-year period (or such shorter period as applicable), any unexercised Stock Option held by such optionee shall thereafter be exercisable by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the three-year period (or such shorter period as applicable) or for a period of twelve months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its stated expiration date.

ARTICLE VI
Special Rules Applicable to Incentive Stock Options

SECTION 6.1. Ten Percent Stockholder. Notwithstanding any other provision of this Plan to the contrary, no grantee may receive an ISO under the Plan if such grantee, at the time the award is granted, owns (after application of the rules contained in Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of the Company's stock, unless (i) the option price for such ISO is at least 110 % of the Fair Market Value on the Date of Grant and (ii) such ISO is not exercisable on or after the fifth anniversary of the Date of Grant.

SECTION 6.2. Limitation on Grants. The aggregate fair market value (deter-mined with respect to each ISO at the time such ISO is granted) of the shares of Stock with respect to which ISOs are exercisable for the first time by a grantee during any calendar year (under this Plan or any other plan adopted by the Company) shall not exceed $100,000.

SECTION 6.3. Non-transferability. No ISO granted hereunder shall be transferable otherwise than by will or by the laws of descent and distribution.

SECTION 6.4. Termination of Employment. No ISO may be exercisable more than three months following termination of employment for any reason (including retirement) other than death or disability, nor more than one year following termination of employment for the reason of disability.

SECTION 6.5 Holding Period. Stock acquired upon the exercise of an ISO must be held for a minimum period of two years from the Date of Grant and one year from the date of exercise, otherwise the disposition shall constitute a taxable "disqualifying disposition."

SECTION 6.6. Subject to Code Amendments. The foregoing limitations are designed to comply with the requirements of Section 422 of the Code and shall be automatically amended or modified to comply with amendments or modifications to Section 422 or any successor provisions. Any ISO which fails to comply with Section 422 of the Code shall be treated as a NQSO.

ARTICLE VII
Stock Appreciation Rights

SECTION 7.1. Grant and Exercise.

(a) Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan, either at the same time or after the grant of said Stock Option.

(c) A Stock Appreciation Right may be exercised by an optionee by surrendering the applicable portion of the related Stock Option. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 7.2(b) below. However, the Participant shall be responsible for the payment of any required tax withholding as provided in Section 13.3 herein.

SECTION 7.2. Terms and Conditions. Stock Appreciation Rights shall be subject to the following terms and conditions:

(b) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive up to, but not more than, an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right in its sole discretion to determine the form of payment;

(c) Stock Appreciation Rights shall be transferable only when and to the extent that the underlying Stock Option would be transferable under Article V herein;

(e) Such other terms and conditions, not inconsistent with the provisions of the Plan and any operative employment agreement, as shall be determined from time to time by the Committee.

ARTICLE VIII
Transfers and Leaves of Absence

SECTION 8.1 Transfer of Participant. For purposes of the Plan, the transfer of a Participant among the Company and its Subsidiaries shall not be deemed a termination of employment.

SECTION 8.2. Effect of Leaves of Absence. For purposes of the Plan, the following leaves of absences shall not be deemed a termination of employment:

(b) a leave of absence in excess of ninety (90) days, approved in writing by the Committee, but only if the employee's right to reemployment is guaranteed either by a statute or by contract, and provided that, in the case of any such leave of absence, the employee returns to work within 30 days after the end of such leave.

ARTICLE IX
Transferability of Awards

SECTION 9.1. Grants Deemed Non-transferable. The Committee may determine, at or after the time of grant, that NQSOs and SARs are transferable to members of the grantee's immediate family. If not specified at the time of grant, the grant will be deemed to be non-transferable. Stock Options and SARs which are non-transferable may be exercised only by the grantee and may not be transferred other than by will or by the laws of descent and distribution or pursuant to a QUADRO. Non-transferable awards are exercisable during a participant's lifetime only by the participant or, as permitted by applicable law, the participant's guardian or other legal representative. Other than a transfer to an immediate family member, if permitted, no award may be assigned, pledged, hypothecated or otherwise alienated or encumbered (whether by operation of law or otherwise) and any attempt to do so shall be null and void.

ARTICLE X
Amendment and Discontinuation

SECTION 10.1. Amendment or Discontinuation of the Plan. The Board of Directors may amend, alter, or discontinue the Plan at any time, but no amendment, alteration, or discontinuance shall be made which would impair the rights of a Participant under any Stock Option theretofore granted, without the Participant's express consent thereto, or which without the approval of the stockholders of the Company would:

(a) except as expressly provided in this Plan, materially increase the total number of shares reserved for the purpose of the Plan;

(b) change the class of employees eligible to participate in the Plan, as stated in Article IV herein;

(d) materially increase benefits accruing to participants.

SECTION 10.2. Amendment of Grants. The Committee may amend the terms of any Stock Option theretofore granted, prospectively or retroactively, but, subject to Section 3.3 herein, no such amendment shall impair the rights of any holder without his or her consent. The Committee may also substitute new Stock Options for previously granted Stock Options, including previously granted Stock Options having higher option prices.

ARTICLE XI
Unfunded Status of the Plan

SECTION 11.1. Unfunded Status. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan with respect to awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

ARTICLE XII
Stock Certificates

SECTION 12.1. Delivery of Stock Certificates. The Company shall not be required to issue or deliver any certificates for shares of Stock purchased upon the exercise of any Vested Stock Option, or portion thereof, granted hereunder prior to the fulfillment of all of the following conditions:

(a) Payment in full for the shares and for any required tax withholding as provided in Sections 5.2(d) and 13.3 of the Plan;

(d) In the event the Stock is not registered under the Securities Act of 1933, qualification of the exercise of the Stock Option as a private placement under said Act; and

(e) The obtaining of any approval or other clearance from any federal or state governmental agency which the Committee shall in its sole discretion determine to be necessary or advisable.

SECTION 12.2. Applicable Restrictions on Stock.

(b) Said shares of Stock shall include any restrictive legends the Committee may deem appropriate to include.

ARTICLE XIII
General Provisions

SECTION 13.1. No Implied Right to Employment. The adoption of this Plan shall not confer upon any employee of the Company or its Subsidiaries any right to continued employment, nor shall it interfere in any way with the right of the Company or its Subsidiaries to terminate the employment of any of its employees at any time.

SECTION 13.2. Other Compensation Plans. Nothing contained in this Plan shall prevent the Board of Directors from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.

SECTION 13.3. Tax Withholding. Each Participant shall, no later than the date as of which the value of a Stock Option or Stock Appreciation Right first becomes includible in the gross income of the Participant for income tax purposes, pay to the Company, or make arrangements satisfactory to the

SECTION 13.4. Successors. All obligations of the Company with respect to awards granted under the Plan shall be binding on any successor to the Company, whether as a result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of the Company.

SECTION 13.5. Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

SECTION 13.6. Governing Law. To the extent not preempted by federal law, the Plan and all award agreements pursuant thereto shall be construed in accordance with and governed by the laws of the State of Minnesota.

ARTICLE XIV
Effective Date of the Plan

SECTION 14.1. Plan Adoption. This Plan was adopted by the Board of Directors of Musicland on January 31, 1994, subject to shareholder approval which occurred on May 10, 1994. The effective date of the Plan is January 31, 1994.

ARTICLE XV
Term of the Plan

SECTION 15.1. Ten-Year Term. No further Stock Option or Stock Appreciation Right shall be granted pursuant to the Plan after the Effective Time, but awards theretofore granted may extend beyond that date.

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THE ASSUMED MUSICLAND 1994 EMPLOYEE STOCK OPTION PLAN OF BEST BUY CO., INC.
ARTICLE I General Purpose of Plan; Definitions
ARTICLE II Administration
ARTICLE III Stock Subject to Plan
ARTICLE IV Participants
ARTICLE V Grant of Stock Options
ARTICLE VI Special Rules Applicable to Incentive Stock Options
ARTICLE VII Stock Appreciation Rights
ARTICLE VIII Transfers and Leaves of Absence
ARTICLE IX Transferability of Awards
ARTICLE X Amendment and Discontinuation
ARTICLE XI Unfunded Status of the Plan
ARTICLE XII Stock Certificates
ARTICLE XIII General Provisions
ARTICLE XIV Effective Date of the Plan
ARTICLE XV Term of the Plan
EX-4.6 5 a2039604zex-4_6.htm EXHIBIT 4.6 Prepared by MERRILL CORPORATION www.edgaradvantage.com
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Exhibit 4.6

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933

THE ASSUMED MUSICLAND

1998 STOCK INCENTIVE PLAN

BEST BUY CO., INC.

THE ASSUMED MUSICLAND
1998 STOCK INCENTIVE PLAN
OF BEST BUY CO., INC.

ARTICLE I
General Purpose of Plan; Definitions

SECTION 1.1. Name and Purpose. The name of this plan is the Assumed Musicland 1998 Stock Incentive Plan of Best Buy Co., Inc. (the "Plan"). The purpose of the Plan is to enable Best Buy Co., Inc. (the "Company") and its Affiliates to (i) attract and retain directors, officers and other employees who contribute to the Company's success by providing incentive compensation opportunities competitive with other companies, (ii) motivate Plan participants to achieve long term success and growth of the Company, and (iii) align the interests of the Plan participants with those of the Company's public shareholders. This Plan was originally adopted by Musicland Stores Corporation ("Musicland"), a Delaware corporation. Pursuant to the terms and conditions of an Agreement and Plan of Merger, dated December 6, 2000 (the "Merger Agreement") by and among the Company, Musicland and EN Acquisition Corp., a Delaware corporation ("Merger Sub"), the Merger Sub merged with and into Musicland on January 31, 2001 at 11:59 p.m. (the "Effective Time"). As a result of the merger, Musicland became a wholly-owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, certain Out of the Money Options (as defined in the Merger Agreement) were assumed by the Company and were converted into options to purchase shares of the Company's common stock at the Effective Time. The Company assumed this Plan to facilitate such assumption and conversion effective as of the Effective Time.

SECTION 1.2. Certain Definitions. For purposes of the Plan, the following terms are defined as set forth below:

(a) "Affiliate" means any corporation, partnership, joint venture or other entity controlling, controlled by, or under common control with the Company as determined by the Board of Directors in its discretion.

(b) "Award" means any grant under this Plan of a Stock Option, Stock Appreciation Right, Restricted Stock or Performance Stock to any Plan participant.

(c) "Board of Directors" means the Board of Directors of Best Buy Co., Inc., with any individual members thereof being referred to as a "Director."

(d) "Cause" means any failure by a participant to perform substantially his or her duties with the Company, after reasonable notice to the participant of such failure, conduct by a participant that is in material competition with the Company or conduct by a participant that breaches his or her duty of loyalty to the Company or that is materially injurious to the Company, monetarily or otherwise, which conduct may include, but is not limited to, (i) disclosing or misusing any confidential information pertaining to the Company or an Affiliate; (ii) attempting, directly or indirectly, to induce any employee or agent of the Company to be employed or perform services elsewhere or (iii) disparaging the Company or any of its respective officers or directors. The determination of whether any conduct, action or failure to act constitutes "Cause" is made by the Committee in its sole discretion, provided that, with respect to any Director, "Cause" only refers to removal of the Director by the shareholders for cause under Delaware law.

(e) "Code" means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code includes a reference to any regulation promulgated thereunder and to any successor provision.

(f) "Committee" means the entity administering the Plan as provided in Section 2.1 of the Plan or, if none has been appointed, then the Board of Directors as a whole.

(g) "Company" means Best Buy Co., Inc., a corporation organized under the laws of the State of Minnesota (or any successor corporation) and its consolidated subsidiaries.

(h) "Date of Grant" means the date on which Musicland originally granted an Award under this Plan.

(i) "Disability" means a participant's physical or mental incapacity resulting from personal injury, disease, illness or other condition, which (i) prevents him or her from performing his or her duties for the Company, as the same is determined by the Committee or its designee after reviewing any medical evidence or requiring any medical examinations which the Committee or its designee considers necessary to its determination, and (ii) results in a termination of his or her employment with the Company.

(j) "Early Retirement" means a participant's retirement from active employment with the Company on or after the age of 60 with at least ten years of service or on or after the age of 55 with at least 15 years of service.

(k) "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

(l) "Exercise Price" means the purchase price of a share of Stock covered by a Stock Option.

(m) "Fair Market Value" means the last closing price of the Stock (as reported on the Composite Tape of the New York Stock Exchange, Inc. or as reported by a successor exchange on which the Stock may be listed) prior to the Date of Grant, or the closing price on the Date of Grant if the grant is made after the market closes for such day, or the fair market value as determined by any other method adopted by the Committee, from time to time, which the Committee may deem appropriate under the circumstances, or as may be required in order to comply with or to conform to the requirements of applicable laws or regulations.

(n) "Incentive Stock Option" or "ISO" means a Stock Option that is designated by the Committee as such at the time of grant and which meets the requirements of Section 422 of the Code, or any successor provision, and therefore qualifies for favorable tax treatment.

(o) "Nonqualified Stock Option" or "NQSO" means a Stock Option that does not meet the requirements of Section 422 of the Code and which is governed by Section 83 of the Code.

(p) "Normal Retirement" means retirement from active employment with the Company on or after the age of 65.

(q) "Outside Director" means a Director who meets the definition of "outside director" set forth in Section 162(m) of the Code and regulations promulgated thereunder and the definition of "non-employee director" set forth in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or any successor definitions adopted by the Internal Revenue Service and Securities and Exchange Commission, respectively.

(r) "Performance Stock" is defined in Article IX.

(s) "QUADRO" means a qualified domestic relations order as defined by the Code or Title I of ERISA.

(t) "Reload Option" is defined in Section 5.3.

(u) "Retirement" means both Normal Retirement and Early Retirement.

(v) "Restricted Stock" is defined in Article VIII.

(w) "Stock" means the Common Stock, par value $0.10 per share, of Best Buy Co., Inc.

(x) "Stock Appreciation Rights" or "SAR" means the right pursuant to an Award granted under Article VII herein to surrender to the Company all or a portion of a Stock Option in exchange for an amount, paid in cash or in Stock, equal to the excess of (i) the Fair Market Value, as of the date such Stock Option or such portion thereof is surrendered, of the shares of Stock covered by such Stock Option or such portion thereof, over (ii) the aggregate exercise price of such Stock Option or such portion thereof.

(y) "Stock Option" means any right to purchase a specified number of shares of Stock at a specified price which is granted pursuant to Articles V and VI herein and may be either an Incentive Stock Option, a Nonqualified Stock Option or a Reload Option.

(z) "Vested" means that the time has been reached, in connection with Stock Options and Stock Appreciation Rights, when the option to purchase stock first becomes exercisable and any accompanying appreciation right may be surrendered for payment and, in connection with Restricted Stock, when the shares are no longer subject to forfeiture and restrictions on transferability.

ARTICLE II
Administration

SECTION 2.1. Authority and Duties of the Committee.

(a) A Committee of administers the Plan not less than two Directors who are appointed by the Board of Directors and serve at its pleasure. Unless otherwise determined by the Board of Directors, all of the members of the Committee are Outside Directors.

(b) The Board of Directors as a whole grants Awards to Directors who are not employed by the Company and determines all terms and conditions relating to such Awards.

(c) The Committee has the power and authority to grant Awards pursuant to the terms of the Plan to officers and other employees (including those who also serve as Directors).

(d) In particular, the Committee has the authority, subject to any limitations specifically set forth in this Plan, too:

(i) select the officers and other employees of the Company and its Affiliates to whom Awards are granted;

(ii) determine the types of Awards granted and the timing of such Awards;

(iii) determine the number of shares to be covered by each Award granted hereunder;

(iv) determine the other terms and conditions, not inconsistent with the terms of the Plan and any operative employment agreement, of any Award granted hereunder;

(v) determine whether any conditions or objectives related to Awards have been met;

(vi) subsequently modify or waive any terms and conditions of Awards, not inconsistent with the terms of the Plan and any operative employment agreement;

(vii) determine whether, to what extent and under what circumstances, Stock and other amounts payable with respect to any Award is deferred either automatically or at the election of the participant;

(viii) adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it deems advisable from time to time;

(ix) interpret the terms and provisions of the Plan and any Award (and any agreements relating thereto); and

(x) otherwise supervise the administration of the Plan.

(e) All decisions made by the Committee pursuant to the provisions of the Plan are final and binding on all persons, including the Company, its shareholders and Plan participants.

executive officers. In addition, the Committee may delegate to any other person or persons ministerial duties, and it may employ attorneys, consultants, accountants or other professional advisers.

ARTICLE III
Stock Subject to Plan

SECTION 3.1. Total Shares Limitation. Subject to the provisions of this Article III, the maximum number of shares of Stock reserved and available for distribution under this Plan is 183,187 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.

SECTION 3.2. Other Limitations.

(a) ISO Limitation. The maximum number of shares of Stock available with respect to all options granted under this Plan that are intended to be Incentive Stock Options is 176,832 shares.

(b) Stock Award Limitation. The maximum number of shares of Stock available with respect to all Restricted Stock and Performance Stock Awards granted under this Plan is 176,832 shares.

(c) Participant Limitation. The aggregate number of shares of Stock underlying Awards granted under this Plan to any one participant in any calendar year, regardless of whether such awards are thereafter canceled, forfeited or terminated, cannot exceed 500,000 shares. The foregoing annual limitation is intended to include the grant of all Awards representing "qualified performance-based compensation" within the meaning of Section 162(m) of the Code.

SECTION 3.3. Awards Not Exercised. In the event any outstanding Award, or portion thereof, expires, or is terminated, canceled or forfeited, the shares of Stock that would otherwise be issuable with respect to the unexercised portion of such expired, terminated, canceled or forfeited Award are available for subsequent Awards under the Plan.

SECTION 3.4. Dilution and Other Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it deems equitable, adjust any or all of (i) the number and type of Stock (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Stock (or other securities or other property) subject to outstanding Awards, (iii) the limitations set forth above, and (iv) the purchase or exercise price or any performance measure with respect to any Award; provided, however, that the number of shares of Stock or other securities covered by any Award or to which such Award relates is always a whole number.

ARTICLE IV
Participants

SECTION 4.1. Eligibility. Directors, officers and other regular active employees of the Company and its Affiliates are eligible to participate in this Plan by receiving, as a reward for past performance and as an incentive for future performance, Awards under the Plan. Other than for non-employee Directors whose Awards are determined by the Board of Directors as a whole, the Plan participants may be selected from time to time by the Committee in its sole discretion, or, with respect to employees other than executive officers, by the Chief Executive Officer with proper delegation from the Committee. (See Article XVII of the Plan with respect to shareholder approval requirement.)

ARTICLE V
Stock Option Awards

SECTION 5.1. Option Grant and Agreement. Each Stock Option granted under the Plan (or delegation of authority to the Chief Executive Officer to grant Stock Options) will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written agreement dated as of the Date of Grant and executed by the Company and by the Plan participant. With respect to non-employee Directors, the Board of Directors may establish by resolution or unanimous consent a formula for periodic Stock Option grants and may change the formula at any time and from time to time.

SECTION 5.2. Terms and Conditions of Grants. Stock Options granted under the Plan are subject to the following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies with respect to exercisability and/or with respect to the shares of Stock acquired upon exercise, not inconsistent with the terms of the Plan and any operative employment agreement, as the Committee deems desirable:

(a) Exercise Price. The Exercise Price fixed at the time of grant will not be less than 100% of the Fair Market Value of the Stock as of the Date of Grant. If a variable Exercise Price is specified at the time of grant, the Exercise Price may vary pursuant to a formula or other method established by the Committee which provides a floor of Fair Market Value as of the Date of Grant. Unless pursuant to the antidilution provisions of Section 3.4 of this Plan, no subsequent amendment of an outstanding Stock Option may reduce the Exercise Price to be less than 100% of the Fair Market Value of the Stock as of the Date of Grant.

(b) Option Term. Any unexercised portion of a Stock Option granted hereunder expires at the end of the stated term of the Stock Option. The Committee determines the term of each Stock Option at the time of grant and may thereafter extend the term in its discretion. If a definite term is not specified by the Committee at the time of grant, then the term is deemed to be ten years.

(c) Vesting. Stock Options, or portions thereof, are exercisable at such time or times as determined by the Committee in its discretion at or after grant. If the Committee provides that any Stock Option becomes Vested over a period of time, in full or in installments, the Committee may waive such Vesting provisions at any time. If no other Vesting provision is specified by the Committee at the time of grant, then the Stock Option is deemed to Vest in three installments (as equal as possible to the whole share) on the second, third and fourth anniversaries of the Date of Grant. (Also see Change in Control provisions in Article XI.)

(i) in cash in any manner satisfactory to the Company;

(ii) by tendering (by either actual delivery of shares or by attestation) previously owned shares of Stock acquired at least six months prior to such tender and having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price applicable to such Stock Option exercise, and, with respect to the exercise of NQSO's, including Restricted Stock granted at least six months prior to such tender; or

(iii) by a combination of cash and Common Stock.

If the Exercise Price of a NQSO is paid by tendering Restricted Stock, then the shares of Stock received upon the exercise will contain identical restrictions as the Restricted Stock so tendered. Required tax withholding can only be paid by cash received from the optionee or through a same day sale transaction.

(e) Issuance of Stock. No shares of Stock will be issued until full payment has been made. An optionee will have the rights to dividends and other rights of a shareholder with respect to shares subject to a Stock Option only after the optionee has become the holder of record of such shares issued upon the proper exercise of the Stock Option.

(f) Form. Unless the grant of a Stock Option is designated at the time of grant as an ISO, it is deemed to be an NQSO. ISOs are subject to the terms and conditions stated in Article VI of this Plan.

SECTION 5.3. Grant of Reload Options. If the Committee so provides in its discretion at or after grant, an optionee who exercises all or part of a Nonqualified Stock Option by payment of the Exercise Price with previously owned shares of Stock will be granted an additional Stock Option (a "Reload Option") for a number of shares of Stock equal to the number of shares tendered in the exercise of the original Stock Option. Each Reload Option will have a Date of Grant which is the date as of which the original Stock Option to which it applies is exercised and will Vest on the six-month anniversary of Date of Grant. The Reload Option will have the same expiration and all other terms and conditions as the original Stock Option to which it applies, except that the Exercise Price will be equal to at least 100% of the Fair Market Value as of the Date of Grant.

SECTION 5.4. Termination of Grants Prior to Expiration. Unless otherwise provided in an employment agreement entered into between the holder of a Stock Option and the Company and approved by the Committee, either before or after the Date of Grant, or otherwise specified at or after the time of grant, and subject to Article VI hereof with respect to ISOs, the following early termination provisions apply to all Stock Options:

(a) Termination by Death. If an optionee's employment by the Company or its Affiliates terminates by reason of his or her death, all Stock Options held by such optionee immediately become Vested but thereafter may only be exercised (by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution) for a period of three years (or such other period as the Committee may specify at or after the time of grant) from the date of such death, or until the expiration of the original term of the Stock Option, whichever period is the shorter.

(b) Termination by Reason of Disability. If an optionee's employment by the Company or its Affiliates terminates by reason of his or her Disability, all Stock Options held by such optionee immediately become Vested but thereafter may only be exercised for a period of three years (or such other period as the Committee may specify at or after the time of grant) from the date of such termination of employment, or until the expiration of the original term of the Stock Option, whichever period is the shorter. If the optionee dies within such three-year period (or such other period as applicable), any unexercised Stock Option held by such optionee will thereafter be exercisable by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the three-year period (or other period as applicable) or for a period of twelve months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its original stated expiration date.

(c) Termination by Reason of Retirement. If an optionee's employment by the Company or its Affiliates terminates by reason of his or her Retirement, all Stock Options held by such optionee immediately become Vested but thereafter may only be exercised for a period of three years (or such other period as the Committee may specify at or after the time of grant) from the date of such termination of employment, or until the expiration of the original term of the Stock Option, whichever period is the shorter. If the optionee dies within such three-year period (or such other period as applicable), any unexercised Stock Option held by such optionee will thereafter be exercisable by the legal representative of the optionee's estate, or by the legatee or heir of the optionee pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the three-year period (or such other period as applicable) or for a period of twelve

months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its original stated expiration date.

(d) Involuntary Termination for Cause. If an optionee's employment by the Company or its Affiliates is terminated for Cause, all Stock Options (or portions thereof) which have not been exercised, whether Vested or not, are automatically forfeited upon the close of business on the last day of employment.

(e) Other Termination. If an optionee's employment by the Company or its Affiliates terminates, voluntarily or involuntarily, for any reason other than death, Disability, Retirement or for Cause, any Vested portions of Stock Options held by such optionee at the time of termination may be exercised by the optionee for a period of three months (or such other period as the Committee may specify at or after the time of grant) from the date of such termination or until the expiration of the original term of the Stock Option, whichever period is the shorter. No portion of any Stock Option which is not Vested at the time of such termination will thereafter become Vested.

(f) Non-employee Directors. If a non-employee Director dies or becomes disabled (as determined by the Board of Directors) while serving as a member of the Board of Directors, all Stock Options held by such Director immediately become Vested but thereafter may only be exercised for a period of three years (or such other period as the Board of Directors may specify at or after the time of grant) from the date of such death or resignation due to disability, or until the expiration of the original term of the Stock Option, whichever period is the shorter. If a non-employee Director's resignation (or failure to stand for reelection) occurs for any other reason, any Vested portions of Stock Options held by the Director at the time of resignation (or failure to stand for reelection) may be exercised for a period of three months (or such other period as the Board of Directors may specify at or after the time of grant) from such date or until the expiration of the original term of the Stock Option, whichever period is the shorter. No portion of any Stock Option which is not Vested at the time of such resignation (or failure to stand for reelection) will thereafter become Vested.

ARTICLE VI
Special Rules Applicable to Incentive Stock Options

SECTION 6.1. Eligibility. Notwithstanding any other provision of this Plan to the contrary, an ISO may only be granted to full or part-time employees (including officers and directors who are also employees) of the Company or of an Affiliate, provided that the Affiliate is also a "subsidiary corporation" within the meaning of Section 424(f) of the Code.

SECTION 6.2 Special ISO Rules.

(a) Term. No ISO may be exercisable on or after the tenth anniversary of the Date of Grant, and no ISO may be granted under this Plan on or after the tenth anniversary of the effective date of the Plan. (See Section 17.1 of the Plan.)

(b) Ten Percent Stockholder. No grantee may receive an ISO under the Plan if such grantee, at the time the Award is granted, owns (after application of the rules contained in Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of the Company's stock, unless (i) the option price for such ISO is at least 110% of the Fair Market Value on the Date of Grant and (ii) such ISO is not exercisable on or after the fifth anniversary of the Date of Grant.

(c) Limitation on Grants. The aggregate fair market value (determined with respect to each ISO at the time such ISO is granted) of the shares of Stock with respect to which ISOs are exercisable for the first time by a grantee during any calendar year (under this Plan or any other plan adopted by the Company) shall not exceed $100,000.

(d) Non-transferability. No ISO granted hereunder may be transferred except by will or by the laws of descent and distribution.

(e) Termination of Employment. No ISO may be exercisable more than three months following termination of employment for any reason (including retirement) other than death or disability, nor more than one year following termination of employment for the reason of disability (as defined in Section 422 of the Code).

(f) Holding Period. Stock acquired upon the exercise of an ISO must be held for a minimum period of two years from the Date of Grant and one year from the date of exercise, otherwise the disposition constitutes a taxable "disqualifying disposition."

SECTION 6.3. Subject to Code Amendments. The foregoing limitations are designed to comply with the requirements of Section 422 of the Code and are automatically amended or modified to comply with amendments or modifications to Section 422 or any successor provisions. Any ISO which fails to comply with Section 422 of the Code is automatically treated as a NQSO under this Plan.

ARTICLE VII
Stock Appreciation Rights

SECTION 7.1. SAR Grant and Agreement. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan, either at the same time or after the grant of the Stock Option. Each SAR granted under the Plan (or delegation of authority to the Chief Executive Officer to grant SARs) will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written agreement dated as of the Date of Grant and executed by the Company and by the Plan participant.

SECTION 7.2. Term of SARs. A Stock Appreciation Right, or applicable portion thereof, granted with respect to a given Stock Option or potion thereof terminates and is no longer exercisable upon the termination or exercise of the related Stock Option, or applicable portion thereof.

SECTION 7.3. SAR Exercise. A Stock Appreciation Right may be exercised by an optionee by surrendering the applicable portion of the related Stock Option. Stock Options which have been so surrendered, in whole or in part, are no longer exercisable to the extent the related Stock Appreciation Rights have been exercised and are deemed to have been exercised for the purpose of the limitation set forth in Article III of this Plan on the number of shares of Stock to be issued under the Plan, but only to the extent of the number of shares of Stock actually issued under the Stock Appreciation Right at the time of exercise. Upon exercise and surrender, the optionee is entitled to receive an amount determined in the manner prescribed in Section 7.4 below. However, the participant is responsible for the payment of any required tax withholding as provided in Section 16.3 herein.

SECTION 7.4. Terms and Conditions of SAR Grants. Stock Appreciation Rights are subject to the following terms and conditions:

(a) Stock Appreciation Rights are exercisable only at such time or times and to the extent that the Stock Options to which they relate are Vested and exercisable in accordance with the provisions of Article V of this Plan or otherwise as the Committee may determine at or after the time of grant;

(b) Upon the exercise of a Stock Appreciation Right, an optionee is entitled to receive up to, but not more than, an amount in cash or shares of Stock equal in value to the excess of the Fair Market Value of one share of Stock over the Exercise Price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right is exercised, with the Committee having the right in its discretion to determine the form of payment;

(c) Stock Appreciation Rights are transferable only when and to the extent that the underlying Stock Option would be transferable under Article XII of this Plan; and

(d) Such other terms and conditions, not inconsistent with the provisions of this Plan and any operative employment agreement, as are determined from time to time by the Committee.

ARTICLE VIII
Restricted Stock Awards

SECTION 8.1. Restricted Stock Grant and Agreement. Restricted Stock Awards consist of shares of Stock which are issued by the Company to a participant at a purchase price which may be well below their fair market value but are subject to forfeiture and restrictions on their sale or other transfer by the participant. Each Restricted Stock Award granted under the Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written agreement dated as of the Date of Grant and executed by the Company and by the Plan participant. The timing of Restricted Stock Awards and the number of shares to be issued (subject to Section 3.2(b) of this Plan) is to be determined by the Committee in its discretion. By accepting a grant of Restricted Stock, the participant agrees to remit to the Company when due any required tax withholding as provided in Section 16.3 herein.

SECTION 8.2. Terms and Conditions of Restricted Stock Grants. Restricted Stock granted under the Plan is subject to the following terms and conditions, which need not be the same for each participant, and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of the Plan and any operative employment agreement, as the Committee deems desirable:

(a) Purchase Price. The Committee determines the prices at which shares of Restricted Stock are to be issued to a participant, which may vary from time to time and among participants and which may be below the Fair Market Value of such shares of Stock at the date of grant but may not be less than the par value of the Stock.

(b) Restrictions. All shares of Restricted Stock issued under this Plan will be subject to such restrictions as the Committee may determine, including, without limitation, the following:

(i) a prohibition against the sale, transfer, pledge or other encumbrance of the shares of Restricted Stock, such prohibition to lapse at such time or times as the Committee determines (whether in installments, at the time of the death, Disability or Retirement of the holder of such shares, or otherwise, but see Change in Control provisions in Article XI);

(ii) a requirement that the participant forfeit such shares of Restricted Stock in the event of termination of the participant's employment prior to Vesting; and

(iii) a prohibition against employment of the participant by any competitor of the Company or its affiliates, or against dissemination by the participant of any secret or confidential information belonging to the Company or a subsidiary of the Company.

The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse. However, if the Committee determines that restrictions lapse upon the attainment of specified performance objectives then the provisions of Section 9.2 and 9.3 below will apply.

(c) Delivery of Shares. Shares of Restricted Stock will be registered in the name of the participant and deposited, together with a stock power endorsed in blank, with the Company. Each such certificate will bear a legend in substantially the following form:

"The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the 1998 Stock Incentive Plan of the Company, and an agreement entered into between the registered owner and the Company. A copy of the Plan and agreement is on file in the office of the Secretary of the Company."

At the end of any time period during which the shares of Restricted Stock are subject to forfeiture and restrictions on transfer, such shares will be delivered free of all restrictions to the participant.

(d) Forfeiture of Shares. If a participant who holds shares of Restricted Stock fails to satisfy the restrictions and other conditions relating to the Restricted Stock prior to the lapse or waiver of such restrictions and conditions, the participant is required to forfeit the shares and transfer them back to the Company in exchange for a refund of the consideration paid by the participant or such other amount which may be specifically set forth in the Award agreement.

(e) Voting and Other Rights. During any period in which shares of Restricted Stock are subject to forfeiture and restrictions on transfer, the participant holding such Restricted Stock has all the rights of a stockholder with respect to shares of Stock, including, without limitation, the right to vote such shares and the right to receive any dividends paid with respect to such shares.

ARTICLE IX
Performance Stock Awards

SECTION 9.1. Performance Stock Grant and Agreement. A Performance Stock Award is a right to receive shares of Stock in the future conditioned upon the attainment of specified performance objectives and such other conditions, restrictions and contingencies as the Committee may determine. Each Performance Stock Award granted under the Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written agreement dated as of the Date of Grant and executed by the Company and by the Plan participant. The timing of Performance Stock Awards and the number of shares covered by each Award (subject to Section 3.2(b) of this Plan) is to be determined by the Committee in its discretion. By accepting a grant of Performance Stock, the participant agrees to remit to the Company when due any required tax withholding as provided in Section 16.3 herein.

SECTION 9.2. Performance Objectives. At the time of grant of a Performance Stock Award, the Committee will specify the performance objectives which, depending on the extent to which they are met, will determine the number of shares that will be paid out to the participant. The Committee will also specify the time period or periods (the "Performance Period") during which the performance objectives must be met. The performance objectives and periods need not be the same for each participant nor for each grant. The Committee may use performance objectives based on one or more of the following targets: cash generation, profit, revenue, market share, profit or investment return ratios, shareholder returns and/or specific, objective and measurable non-financial objectives. The Committee may designate a single goal criterion or multiple goal criteria for performance measurement purposes, with the measurement based on absolute Company or business unit performance and/or on performance as compared with that of other publicly traded companies.

SECTION 9.3. Adjustment of Performance Objectives. The Committee may modify, amend or otherwise adjust the performance objectives specified for outstanding Performance Stock Awards if it determines that an adjustment would be consistent with the objectives of the Plan and taking into account the interests of the participants and the public shareholders of the Company. Any such adjustments must comply with the requirements of Section 162(m) of the Code. The types of events which could cause an adjustment in the performance objectives include, without limitation, accounting changes which substantially affect the determination of performance objectives, changes in applicable laws or regulations which affect the performance objectives, and divisive corporate reorganizations, including spin-offs and other distributions of property or stock.

SECTION 9.4. Other Terms and Conditions. Performance Stock Awards granted under the Plan are subject to the following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of the Plan and any operative employment agreement, as the Committee deems desirable:

(a) Delivery of Shares. As soon as practicable after the applicable Performance Period has ended, the participant will receive a payout of the number of shares of Stock earned during the

Performance Period, depending upon the extent to which the applicable performance objectives were achieved. Such shares will be registered in the name of the participant and will be free of all restrictions except for any pursuant to Section 15.2 of this Plan.

(b) Termination. A Performance Stock Award or unearned portion thereof will terminate without the issuance of shares on the termination date specified at the time of grant or upon the termination of employment of the participant during the Performance Period. If a participant's employment by the Company or its Affiliates terminates by reason of his or her death, Disability or Retirement, the Committee in its discretion at or after the time of grant may determine that the participant (or the heir, legatee or legal representative of the participant's estate) will receive a payout of a portion of the participant's then outstanding Performance Stock Awards in an amount which is not more than the number of shares which would have been earned by the participant if 100% of the performance objectives for the current Performance Period had been achieved prorated based on the ratio of the number of months of active employment in the Performance Period to the total number of months in the Performance Period.

(c) Voting and Other Rights. Awards of Performance Stock do not provide the participant with voting rights or rights to dividends prior to the participant becoming the holder of record of shares issued pursuant to an Award. Prior to the issuance of shares, Performance Stock Awards may not be sold, transferred, pledged, assigned or otherwise encumbered.

ARTICLE X
Transfers and Leaves of Absence

SECTION 10.1. Transfer of Participant. For purposes of the Plan, the transfer of a participant among the Company and its Affiliates is deemed not to be a termination of employment.

SECTION 10.2. Effect of Leaves of Absence. For purposes of the Plan, the following leaves of absences are deemed not to be a termination of employment:

(a) a leave of absence, approved in writing by the Company, for military service, sickness or any other purpose approved by the Company, if the period of such leave does not exceed ninety (90) days;

(b) a leave of absence in excess of ninety (90) days, approved in writing by the Company, but only if the employee's right to reemployment is guaranteed either by a statute or by contract, and provided that, in the case of any such leave of absence, the employee returns to work within 30 days after the end of such leave; and

ARTICLE XI
Effect of Change in Control

SECTION 11.1. Change in Control Defined. "Change of Control" means the occurrence of any of the following:

(a) the acquisition by any person, entity or "group" within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended ("the 1934 Act"), other than the Company or any of its Affiliates, or any employee benefit plan of the Company and/or its Affiliates, of beneficial ownership (within the meaning of Rule 13d-3 under the 1934 Act) of shares of Stock of the Company having twenty five percent (25%) or more of the total number of votes that may be cast for election of the Directors of the Company in a transaction or series of transactions not approved in advance by a vote of at least three-quarters of the Continuing Directors (as defined below);

(b) a change in the composition of the Board of Directors such that at any time a majority of the Board are not Continuing Directors. "Continuing Directors" refers to the individuals who serve

as Directors at the effective date of this Plan and any individual whose term of office as a Director begins thereafter if the nomination or election of such Director was approved in advance by a vote of at least three-quarters of the then serving Continuing Directors (other than a nomination of an individual whose initial assumption of office is in connection with an actual or threatened solicitation with respect to the election or removal of the Directors, as such terms are used in Rule 14a-11 of Regulation 14A under the 1934 Act);

(c) the approval by the shareholders of the Company of a reorganization, merger, consolidation, liquidation or dissolution of the Company or of the sale (in one transaction or a series of transactions) of all or substantially all of the assets of the Company other than a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by a vote of at least three-quarters of the Continuing Directors; or

(d) any other occurrence if at least a majority of the Continuing Directors determine in their discretion that there has been a change in Control of the Company.

SECTION 11.2. Acceleration of Awards. Except as otherwise provided in this Plan or an Award agreement, immediately upon the occurrence of a Change in Control:

(a) all outstanding Stock Options automatically become fully exercisable;

(b) all Restricted Stock Awards automatically become fully Vested; and

(c) all participants holding Performance Stock Awards become entitled to receive a partial payout in an amount which is the number of shares which would have been earned by the participant if 100% of the performance objectives for the current Performance Period had been achieved prorated based on the ratio of the number of months of active employment in the Performance Period to the total number of months in the Performance Period.

Notwithstanding the foregoing, the Committee will retain the right to revoke the automatic acceleration of vesting in connection with any business combination if the acceleration will cause the use of pooling of interests accounting to be disallowed and such accounting is determined to be in the best interests of the Company.

ARTICLE XII
Transferability of Awards

SECTION 12.1. Awards Deemed Non-transferable. Other than pursuant to Section 12.2 below, Awards are deemed to be non-transferable. Awards may be exercised only by the participant and may not be transferred other than by will or by the laws of descent and distribution or, with regard to Vested Awards, pursuant to a QUADRO. Awards are exercisable during a participant's lifetime only by the participant or, as permitted by applicable law, the participant's guardian or other legal representative. No Award may be assigned, pledged, hypothecated or otherwise alienated or encumbered (whether by operation of law or otherwise) and any attempts to do so are null and void.

SECTION 12.2. Limited Transferability of NQSOs. The Committee in its discretion may allow (at or after the time of grant) for the transferability of Vested Nonqualified Stock Options (with or without accompanying Stock Appreciation Rights) only by the participant for no consideration to Immediate Family Members or to a bona fide trust, partnership or other entity controlled by and for the benefit of one or more Immediate Family Members or to a charitable organization qualified under Section 501(c) of the Code. "Immediate Family Members" means the participant's spouse, children, stepchildren, parents, siblings and grandchildren. With respect to children, parents, siblings and grandchildren, the relationship may be natural or adoptive. Any permitted transfer is conditioned on the participant and transferee agreeing to abide by the Company's then current stock option transfer guidelines.

ARTICLE XIII
Amendment and Discontinuation

SECTION 13.1. Amendment or Discontinuation of the Plan. The Board of Directors may amend, alter, or discontinue the Plan at any time, provided that no amendment, alteration, or discontinuance may be made:

(a) which would adversely affect the rights of a participant under any Award granted prior to the date such action is adopted by the Board of Directors without the participant's express consent thereto; and

(b) without shareholder approval, if shareholder approval is required under applicable laws, regulations or exchange requirements (including for the purpose of qualification under Section 162(m) of the Code as "performance-based compensation").

SECTION 13.2. Amendment of Grants. The Committee may amend, prospectively or retroactively, the terms of any outstanding Award or substitute new Awards for previously granted Awards, provided that no amendment or substitution is inconsistent with the terms of this Plan or impairs the rights of any holder without his or her consent.

ARTICLE XIV
Unfunded Status of the Plan

SECTION 14.1. Unfunded Status. The Plan is not funded and is intended to constitute an "unfunded" plan for incentive and deferred compensation. Nothing contained in this Plan gives any participant any rights that are greater than those of a general creditor of the Company. In its discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan with respect to Awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan and no participant acquires any right in or title to any assets, funds or property of the Company. Participants have only a contractual right to benefits under Vested Awards unsecured by any assets of the Company.

ARTICLE XV
Stock Certificates

SECTION 15.1. Delivery of Stock Certificates. The Company is not required to issue or deliver any certificates for shares of Stock issuable with respect to Awards under this Plan prior to the fulfillment of all of the following conditions:

(a) payment in full for the shares and for any required tax withholding (See Section 16.3 of the Plan);

(b) completion of any registration or other qualification of such shares under any federal or state laws or under the rulings or regulations of the Securities and Exchange Commission ("SEC") or any other regulating body which the Committee in its discretion deems necessary or advisable;

(d) in the event the Stock is not registered under the Securities Act of 1933, qualification as a private placement under said Act; and

(e) obtaining of any approval or other clearance from any federal or state governmental agency which the Committee in its discretion determines to be necessary or advisable.

SECTION 15.2. Applicable Restrictions on Stock. Shares of Stock issued with respect to Awards may be subject to such stock transfer orders and other restrictions as the Committee may determine necessary or advisable under the rules, regulations and other requirements of the SEC, any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law and will include any restrictive legends the Committee may deem appropriate to include.

SECTION 15.3. Book Entry. In lieu of the issuance of stock certificates evidencing shares of Sock, the Company may use a "book entry" system in which a computerized or manual entry is made in the records of the Company to evidence the issuance of such shares. Such Company records are, absent manifest error, binding on all parties.

ARTICLE XVI
General Provisions

SECTION 16.1. No Implied Rights to Awards or Employment. No potential participant has any claim or right to be granted an Award under the Plan, and there is no obligation of uniformity of treatment of participants under the Plan. Neither the Plan nor any Award thereunder shall be construed as giving any employee any right to continued employment with the Company or any Affiliate. The Plan does not constitute a contract of employment, and the Company and each Affiliate expressly reserve the right at any time to dismiss a participant free from liability, or any claim under the Plan, except as may be specifically provided in this Plan or in an Award agreement.

SECTION 16.2. Other Compensation Plans. Nothing contained in this Plan prevents the Board of Directors from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.

SECTION 16.3. Tax Withholding. Each participant must, no later than the date as of which the value of an Award first becomes includible in the gross income of the participant for income tax purposes, pay to the Company, or make arrangements satisfactory to the Company regarding payment of, any federal, state or local taxes of any kind required by law to be withheld with respect to the Award. The obligations of the Company under the Plan are conditional on such payment, and the Company, to the extent permitted by law, has the right to deduct any such taxes from any payment of any kind otherwise due to a participant.

SECTION 16.4. Arbitration. All Award agreements will include appropriate provisions respecting mediation and/or arbitration of any disputes thereunder. If arbitrated, notice of demand for arbitration must be given in writing within a reasonable time after the claim or dispute has arisen. Any decision rendered by an arbitrator must be made in accordance with the provisions of the Plan, will be final and judgment may be entered upon it in accordance with applicable law in any court having proper jurisdiction.

SECTION 16.5. Rule 16b-3 Compliance. The Plan is intended to comply with all applicable conditions of Rule 16b-3 of the 1934 Act, as such rule may be amended from time to time. All transactions involving any participant subject to Section 16(a) shall be subject to the conditions set forth in Rule 16b-3, regardless of whether such conditions are expressly set forth in the Plan. Any provision of the Plan that is contrary to Rule 16b-3 does not apply to such participants.

SECTION 16.6. Deferrals. The Committee may unilaterally postpone the exercising of Awards, the issuance or delivery of Stock under any Award or any action permitted under the Plan to prevent the Company or any Affiliate from being denied a Federal income tax deduction with respect to any Award other than an Incentive Stock Option. The Committee, in its discretion, may permit a participant to defer receipt of the payment of cash or the delivery of Stock that would otherwise be delivered to a participant under the Plan. Any deferral elections are subject to such rules and procedures as the Committee may determine.

SECTION 16.7. Successors. All obligations of the Company with respect to Awards granted under the Plan are binding on any successor to the Company, whether as a result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the business and/or assets of the Company.

SECTION 16.8. Severability. In the event any provision of the Plan, or the application thereof to any person or circumstances, is held illegal or invalid for any reason, the illegality or invalidity shall not

affect the remaining parts of the Plan, or other applications, and the Plan is to be construed and enforced as if the illegal or invalid provision had not been included.

SECTION 16.9. Governing Law. To the extent not preempted by federal law, the Plan and all Award agreements pursuant thereto are construed in accordance with and governed by the laws of the State of Minnesota, or, if applicable, the General Corporation Law of the State of Delaware.

ARTICLE XVII
Effective Date of the Plan

SECTION 17.1. Plan Adoption. Subject to the approval of the shareholders of Musicland at the Annual Meeting of Shareholders held in 1998, the effective date of this Plan is the date of its adoption by the Musicland Board of Directors on January 26, 1998. To the extent that Awards are made under the Plan prior to its approval by shareholders, they shall be contingent on shareholder approval of the Plan. No further Awards shall be made under this Plan after the Effective Time.

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THE ASSUMED MUSICLAND 1998 STOCK INCENTIVE PLAN OF BEST BUY CO., INC.
ARTICLE I General Purpose of Plan; Definitions
ARTICLE II Administration
ARTICLE III Stock Subject to Plan
ARTICLE IV Participants
ARTICLE V Stock Option Awards
ARTICLE VI Special Rules Applicable to Incentive Stock Options
ARTICLE VII Stock Appreciation Rights
ARTICLE VIII Restricted Stock Awards
ARTICLE IX Performance Stock Awards
ARTICLE X Transfers and Leaves of Absence
ARTICLE XI Effect of Change in Control
ARTICLE XII Transferability of Awards
ARTICLE XIII Amendment and Discontinuation
ARTICLE XIV Unfunded Status of the Plan
ARTICLE XV Stock Certificates
ARTICLE XVI General Provisions
ARTICLE XVII Effective Date of the Plan
EX-5 6 a2039604zex-5.htm EXHIBIT 5 Prepared by MERRILL CORPORATION www.edgaradvantage.com
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Exhibit 5

Opinion of Robins, Kaplan, Miller & Ciresi L.L.P.

February 23, 2001

Best Buy Co., Inc.
7075 Flying Cloud Drive
Eden Prairie, MN 55344

Ladies and Gentlemen:

In connection with the Registration Statement on Form S-8 (the "Registration Statement") of even date herewith of Best Buy Co., Inc., a Minnesota corporation (the "Company"), relating to a proposed offering of 307,039 shares of the Company's common stock, par value $.10 per share (the "Common Stock"), pursuant to the Assumed Musicland 1988 Stock Option Plan of Best Buy Co., Inc., the Assumed Musicland 1992 Stock Option Plan of Best Buy Co., Inc., the Assumed Musicland 1994 Stock Option Plan of Best Buy Co., Inc. and the Assumed Musicland 1998 Stock Incentive Plan of Best Buy Co., Inc. (collectively, the "Plans"), we, as counsel for the Company, have examined such corporate records and other documents, including the Registration Statement, and have reviewed such matters of law as we have deemed relevant hereto, and, based upon such examination and review, it is our opinion that all necessary corporate action on the part of the Company has been taken to authorize the issuance of 307,039 shares of Common Stock by the Company under the Plans, and that when issued as contemplated in the Registration Statement, such shares will be validly issued, fully paid and nonassessable.

We hereby consent to being named in the Registration Statement, and in the Prospectus related thereto, as counsel for the Company who have passed upon legal matters in connection with the issuance of the Common Stock. We further consent to the filing of this opinion as an exhibit to the Registration Statement.

Yours very truly,

/s/ Robins, Kaplan, Miller & Ciresi L.L.P.

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Opinion of Robins, Kaplan, Miller & Ciresi L.L.P.
EX-23.1 7 a2039604zex-23_1.htm EXHIBIT 23.1 Prepared by MERRILL CORPORATION www.edgaradvantage.com
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Exhibit 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-8) and related prospectus pertaining to the Assumed Musicland 1988 Stock Option Plan of Best Buy Co., Inc., the Assumed Musicland 1992 Stock Option Plan of Best Buy Co., Inc., the Assumed Musicland 1994 Stock Option Plan of Best Buy Co., Inc. and the Assumed Musicland 1998 Stock Incentive Plan of Best Buy Co., Inc. of our report dated March 28, 2000, 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 February 26, 2000, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Minneapolis, Minnesota
February 23, 2001

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Consent of Independent Auditors
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