<PAGE>
[LOGO]
August 20, 1997
To Our Shareholders,
Please join us for the Annual Meeting of Shareholders of Great Plains Software,
Inc. (the "Company") for 1997 on Wednesday, September 10, 1997, at 12:00 Noon
local time. This meeting will be held at the Ramada Plaza Suites, 1635 42nd
Street S.W., Fargo, North Dakota, 58103.
During this shareholders' meeting, we will discuss and act upon the matters
described in the accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement. We will also discuss the Company's fiscal 1997 results. Certain
members of the Board of Directors and officers, and representatives of Price
Waterhouse LLP, the Company's independent auditors, will be available to answer
any questions you may have during and following the meeting.
Whether or not you plan to attend this meeting, please complete, date and sign
the enclosed proxy card and return it promptly in the enclosed envelope to
ensure that your shares will be represented at the meeting.
We look forward to seeing you on September 10th.
Warm Regards,
/s/ Douglas J. Burgum
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Douglas J. Burgum
Chairman of the Board,
President and Chief Executive Officer
Great Plains Software, Inc.
<PAGE>
[LOGO]
GREAT PLAINS SOFTWARE, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 10, 1997
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Great Plains Software, Inc. (the
"Company") will be held on Wednesday, September 10, 1997, at 12:00 noon, local
time, at the Ramada Plaza Suites, 1635 42nd Street S.W., Fargo, North Dakota,
for the following purposes:
1. To elect three directors to serve for three-year terms or until their
respective successors are elected and qualify;
2. To approve the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending May 31, 1998; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Holders of record of the Company's Common Stock as of the close of business
on August 11, 1997 are entitled to notice of and to vote at the meeting and any
adjournment thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU LATER DESIRE TO REVOKE
YOUR PROXY, YOU MAY DO SO AT ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors
Bradley J. Burgum
Secretary
August 20, 1997
<PAGE>
GREAT PLAINS SOFTWARE, INC.
1701 S.W. 38TH STREET
FARGO, NORTH DAKOTA 58103
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 10, 1997
This Proxy Statement is furnished in connection with the solicitation of
the enclosed proxy by the Board of Directors of Great Plains Software, Inc. (the
"Company") for use at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held on Wednesday, September 10, 1997, at 12:00 noon, local time, at the
Ramada Plaza Suites, 1635 42nd Street S.W., Fargo, North Dakota, and at any
adjournment thereof, for the purposes set forth in the Notice of Annual Meeting
of Shareholders. This Proxy Statement and the form of proxy enclosed are being
mailed to shareholders with the Company's Annual Report to Shareholders
commencing on or about August 20, 1997.
SOLICITATION OF PROXIES
The Company is paying the costs of solicitation, including the cost of
preparing and mailing this Proxy Statement. Proxies are being solicited
primarily by mail, but in addition, the solicitation by mail may be followed by
solicitation in person, or by telephone or facsimile, by regular employees of
the Company without additional compensation. The Company will reimburse
brokers, banks and other custodians and nominees for their reasonable
out-of-pocket expenses incurred in sending proxy materials to the Company's
shareholders.
VOTING RIGHTS AND PROCEDURES
Only shareholders of record of the Common Stock of the Company at the close
of business on August 11, 1997 will be entitled to vote at the Annual Meeting.
As of that date, a total of 13,402,842 shares of Common Stock were outstanding,
each share being entitled to one vote. There is no cumulative voting.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the shares of Common Stock will constitute a quorum for the
transaction of business at the Annual Meeting. If a shareholder returns a proxy
withholding authority to vote the proxy with respect to a nominee for director,
then the shares of the Common Stock covered by such proxy shall be deemed
present at the Annual Meeting for purposes of determining a quorum and for
purposes of calculating the vote with respect to such nominee, but shall not be
deemed to have been voted for such nominee. If a shareholder abstains from
voting as to any matter, then the shares held by such shareholder shall be
deemed present at the meeting for purposes of determining a quorum and for
purposes of calculating the vote with respect to such matter, but shall not be
deemed to have been voted in favor of such matter. If a broker returns a
"non-vote" proxy, indicating a lack of authority to vote on such matter, then
the shares covered by such non-vote shall be deemed present at the Annual
Meeting for purposes of determining a quorum but shall not be deemed to be
present and entitled to vote at the Annual Meeting for purposes of calculating
the vote with respect to such matter.
Shares of the Company's Common Stock represented by proxies in the
accompanying form will be voted in the manner directed by a shareholder. If no
direction is given, the proxy will be voted for the election of the
nominees for director named in this Proxy Statement and for
approval of the appointment of Price Waterhouse LLP as the Company's
independent auditors.
<PAGE>
A shareholder may revoke a proxy at any time prior to its exercise by
giving to an officer of the Company a written notice of revocation of the
proxy's authority, by submitting a duly elected proxy bearing a later date or by
delivering a written revocation at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of August 11, 1997 by (i) each person
who is known by the Company to own beneficially more than 5% of the Common
Stock, (ii) each director, nominee and executive officer of the Company named in
the Summary Compensation Table under the heading "Executive Compensation" below
and (iii) all directors and executive officers of the Company as a group.
Unless otherwise noted, the shareholders listed in the table have sole voting
and investment powers with respect to the shares of Common Stock owned by them.
Percentage of
Number of Shares Outstanding
Beneficially Owned(1) Shares
--------------------- -------------
Frederick W. Burgum(2) . . . . . . . . 2,448,168 18.3%
Douglas J. Burgum(3) . . . . . . . . . 1,935,171 14.4
The Goldman Sachs Group, L.P.
and related investors(4). . . . . . 1,793,627 13.4
Bradley J. Burgum(5) . . . . . . . . . 536,525 4.0
Raymond A. August(6) . . . . . . . . . 84,168 *
Steven K. Sydness(7) . . . . . . . . . 89,633 *
Raymond F. Good. . . . . . . . . . . . 36,000 *
Jodi A. Uecker-Rust(8) . . . . . . . . 58,389 *
Terri F. Zimmerman(9). . . . . . . . . 36,333 *
William V. Campbell. . . . . . . . . . 0 0
Sanjeev K. Mehra(10) . . . . . . . . . 0 0
J. A. Heidi Roizen . . . . . . . . . . 1,000 *
Joseph S. Tibbetts, Jr.(11). . . . . . 4,000 *
All directors and executive officers
as a group (15 persons)(12) . . . . 5,418,554 40.1
- -------------------------
- -------------------------
*Less than 1%
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission (the "Commission"), and includes
generally voting power and/or investment power with respect to
securities. Shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of August 11, 1997 ("Currently
Exercisable Options") are deemed outstanding for computing the percentage
beneficially owned by the person holding such options but are not deemed
outstanding for computing the percentage beneficially owned by any other
person.
(2) Includes shares held by certain members of Frederick W. Burgum's
household that are beneficially owned by Mr. Burgum. His address is 1701
S.W. 38th Street, Fargo, North Dakota 58103.
(3) Includes shares held by certain members of Douglas J. Burgum's household
that are beneficially owned by Mr. Burgum. His address is 1701 S.W. 38th
Street, Fargo, North Dakota 58103.
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<PAGE>
(4) Represents shares owned by certain investment partnerships, of which
affiliates of The Goldman Sachs Group, L.P. are the general partner,
managing general partner or investment manager (the "GS Partnerships").
Includes 1,577,523 shares held of record by GS Capital Partners, L.P.;
109,900 shares held of record by Bridge Street Fund 1994, L.P.; and
106,204 shares held of record by Stone Street Fund 1994, L.P. The Goldman
Sachs Group, L.P. disclaims beneficial ownership of the shares owned by
such investment partnerships to the extent attributable to partnership
interests therein held by persons other than The Goldman Sachs Group,
L.P. and its affiliates. Each of such investment partnerships shares
voting and investment power with certain of its respective affiliates.
The address of The Goldman Sachs Group, L.P. is 85 Broad Street, New
York, New York 10004. Does not include shares of Common Stock which
may be deemed to be beneficially owned by Goldman, Sachs & Co. as a
result of ordinary course trading activities or shares of Common Stock
held in client accounts ("Managed Accounts") with respect to which
Goldman, Sachs & Co. or its employees have voting or investment
discretion, or both. As of August 15, 1997, there were no shares of
Common Stock held as a result of ordinary course trading activities and
there were 52,850 shares of Common Stock held in Managed Accounts.
Goldman, Sachs & Co. disclaims beneficial ownership of the shares of
Common Stock held in Managed Accounts.
(5) Includes shares held by certain members of Bradley J. Burgum's household
that are beneficially owned by Mr. Burgum.
(6) Includes 61,333 shares issuable pursuant to Currently Exercisable
Options.
(7) Includes 8,667 shares issuable pursuant to Currently Exercisable Options
and shares held by certain members of Steven K. Sydness's household that
are beneficially owned by Mr. Sydness.
(8) Includes 5,333 shares issuable pursuant to Currently Exercisable Options.
(9) Includes 28,000 shares issuable pursuant to Currently Exercisable
Options.
(10) Does not include 1,793,627 shares held by the GS Partnerships.
(11) Includes 4,000 shares issuable pursuant to Currently Exercisable Options.
(12) Includes 126,000 shares issuable pursuant to Currently Exercisable
Options.
ELECTION OF DIRECTORS
The Board of Directors of the Company is composed of eight members
divided into three classes. The members of each class are elected to serve
three-year terms with the term of office of each class ending in successive
years. Raymond F. Good, J. A. Heidi Roizen and Joseph S. Tibbetts, Jr. are the
directors in the class whose term expires at the Annual Meeting. The Board of
Directors has nominated Messrs. Good and Tibbetts and Ms. Roizen for election to
the Board of Directors at the Annual Meeting for terms of three years, and each
has indicated a willingness to serve. The other directors of the Company will
continue in office for their existing terms. Bradley J. Burgum, William V.
Campbell and Sanjeev K. Mehra serve in the class whose term expires in 1998, and
Douglas J. Burgum and Frederick W. Burgum serve in the class whose term expires
in 1999. Upon the expiration of the term of a class of directors, directors in
such class will be elected for three-year terms at the annual meeting of
shareholders in the year in which such term expires. The affirmative vote of a
majority of the shares of Common Stock present and entitled to vote at the
Annual Meeting is necessary to elect the nominees for director.
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<PAGE>
The persons named as proxies in the enclosed form of proxy will vote the
proxies received by them for the election of Messrs. Good and Tibbetts and Ms.
Roizen, unless otherwise directed. In the event that any nominee becomes
unavailable for election at the Annual Meeting, the persons named as proxies in
the enclosed form of proxy may vote for a substitute nominee in their discretion
as recommended by the Board of Directors.
Information concerning the incumbent directors is set forth below.
Raymond F. Good
(Nominee with new term
expiring in 2000)....... Mr. Good, 69 years of age, has served as a director
of the Company since 1988. He is an independent
executive consultant. From 1986 to 1992, he was a
partner of Regis McKenna Inc. Mr. Good has also
served as Vice President of Marketing Strategy for
Control Data Corporation, President of Heinz USA,
Chief Executive Officer of The Pillsbury Consumer
Group, and Chairman of the Board and Chief Executive
Officer of Munsingwear, Inc. Earlier in his career,
he served as a management consultant in the New York
office of McKinsey & Company, Inc. Mr. Good is a
veteran of the United States Marine Corps. He holds a
B.S. from the University of Connecticut and an M.B.A.
from Harvard Business School.
J. A. Heidi Roizen
(Nominee with new term
expiring in 2000)....... Ms. Roizen, 39 years of age, has served as a director
of the Company since February 1997. Previously, she
served as Vice President of World Wide Developer
Relations for Apple Computer, Inc. from 1996 to 1997
and as Chief Executive Officer of T/Maker Company
from 1983 to 1996. Ms. Roizen was a member of the
Board of Directors of the Software Publishers
Association from 1987 to 1994 and served as President
of the association from 1988 to 1990. She is a member
of the Stanford University Board of Trustees
Nominating Committee and a Public Governor of the
Pacific Stock Exchange. Ms. Roizen holds a B.A. in
English from Stanford University and an M.B.A. from
the Stanford Graduate School of Business.
Joseph S. Tibbetts, Jr.
(Nominee with new term
expiring in 2000)....... Mr. Tibbetts, 44 years of age, has served as a
director of the Company since October 1996. He has
served as Vice President, Finance and Administration,
Chief Financial Officer and Treasurer of SeaChange
International, Inc., a publicly-held company based in
Maynard, Massachusetts, from June 1996 to the
present. From November 1976 to June 1996, Mr.
Tibbetts was employed as a Certified Public
Accountant by Price Waterhouse LLP. He became a
Partner of the firm in 1986 and the National Director
of its Software Services Group in 1991. Mr. Tibbetts
holds a B.S. in Business Administration from the
University of New Hampshire and is a graduate of the
Stanford Business School Executive Program for
Growing Companies.
Bradley J. Burgum
(Term expires in 1998).. Mr. Burgum, 45 years of age, has served as a director
of the Company since 1984 and as Secretary since
January 1996. Mr. Burgum has practiced law in
Casselton, North Dakota for 20 years and is currently
a shareholder and President of the Burgum & Irby Law
Firm, P.C. He has served on the Board of Directors
for the Arthur Companies, Inc., a privately-held
diversified agribusiness corporation, since 1974. Mr.
Burgum holds a B.S. in Business
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<PAGE>
Economics from North Dakota State University and a
J.D. from the University of North Dakota School of
Law. Mr. Burgum is a Certified Public Accountant.
William V. Campbell
(Term expires in 1998)... Mr. Campbell, 58 years of age, has served as a
director of the Company since March 1997. Mr.
Campbell has been the President and Chief Executive
Officer of Intuit Inc. since April 1994. Mr. Campbell
has also recently joined the Board of Directors of
Apple Computer, Inc. Prior to joining Intuit Inc.,
Mr. Campbell was President and Chief Executive
Officer of GO Corporation, a pen-based computing
software company, from January 1991 to December 1993.
He was the founder, President and Chief Executive
Officer of Claris Corporation, a software subsidiary
of Apple Computer, Inc., from 1987 to January 1991.
Mr. Campbell has also held senior executive positions
at Apple Computer, Inc. and senior management
positions at Kodak and J. Walter Thompson, an
advertising agency in New York. Mr. Campbell also
serves on the Board of Directors of SanDisk, Inc. Mr.
Campbell holds both a B.S. and a M.S. in Economics
from Columbia University. He is presently a director
of the National Football Foundation and Hall of Fame.
Sanjeev K. Mehra
(Term expires in 1998)... Mr. Mehra, 38 years of age, has served as a director
of the Company since June 1994. He is a Managing
Director in the Principal Investment Area of Goldman,
Sachs & Co. and serves on the Boards of Directors of
several privately-held companies. Prior to joining
Goldman, Sachs & Co. in 1986, he was a research
analyst at McKinsey & Company, Inc. from 1982 to
1984. Mr. Mehra holds a B.A. from Harvard University
and an M.B.A. from Harvard Business School.
Douglas J. Burgum
(Term expires in 1999)... Mr. Burgum, 41 years of age, has served as President
of the Company since March 1984, Chief Executive
Officer since September 1991 and Chairman of the
Board since January 1996. Mr. Burgum was an early
investor in the Company, and he initially served as
Vice President and a director from March 1983 to
March 1984. Before joining the Company, Mr. Burgum
was a management consultant in the Chicago office of
McKinsey & Company, Inc. Mr. Burgum holds a B.U.S.
from North Dakota State University and an M.B.A. from
the Stanford University Graduate School of Business.
Frederick W. Burgum
(Term expires in 1999)... Mr. Burgum, 51 years of age, has served as a director
of the Company since 1988. Mr. Burgum has been
Chairman of the Board of the Arthur Companies, Inc.
since 1984 and has served as its Chief Executive
Officer since June 1992. He has served as Senior Vice
President and a director of the First State Bank of
North Dakota since 1972. Mr. Burgum is a veteran of
the United States Army and holds a B.Ph. from the
University of North Dakota.
Douglas J. Burgum and Bradley J. Burgum are brothers, and Frederick W.
Burgum is their cousin.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MESSRS. GOOD
AND TIBBETTS AND MS. ROIZEN AS DIRECTORS OF THE COMPANY.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the 1997 fiscal year, the Board of Directors held six meetings.
During the fiscal year, each director holding office during the fiscal year
attended at least 75% of the total number of meetings of the Board of Directors
and committees of the Board on which he or she served. The Board of Directors
has an Audit Committee and a Compensation Committee, which are described below.
Messrs. Bradley Burgum, Good and Mehra are members of the Audit Committee.
The Audit Committee is responsible for nominating the Company's independent
accountants for approval by the Board of Directors, reviewing the scope, results
and costs of the audit with the Company's independent accountants and reviewing
the financial statements of the Company. The Audit Committee held two meetings
during the 1997 fiscal year.
Messrs. Good, Frederick Burgum and Mehra are members of the Compensation
Committee. The Compensation Committee is responsible for determining the
compensation and benefits for the executive officers of the Company and for
administering the Company's stock plans. The Compensation Committee held two
meetings during the 1997 fiscal year.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives $1,000 for each meeting
of the Board of Directors and $500 for each committee meeting attended, and an
annual retainer of $6,000 paid in quarterly installments. The Company also
reimburses non-employee directors for expenses incurred in attending Board
meetings. Non-employee directors of the Company also receive stock options
under the Company's Outside Directors' Stock Option Plan (the "Directors'
Plan"). On June 19, 1997 (the effective date of the Company's initial public
offering of Common Stock), each non-employee director was granted a
non-qualified stock option to purchase 3,000 shares at an exercise price of
$16.00 per share (vesting on the 12-month anniversary following the date of
grant). In addition, an option to purchase 4,000 shares of Common Stock will be
granted to each incumbent non-employee director on the date of each annual
meeting of shareholders beginning with the Annual Meeting (vesting in two equal
installments on each of the one-month and 12-month anniversaries following date
of grant). The Directors' Plan also provides that each non-employee director
initially elected to the Board after June 19, 1997 will receive a non-qualified
stock option to purchase 15,000 shares of Common Stock upon such initial
election (vesting in three equal installments on each of the three 12-month
anniversaries following the date of grant). Options granted under the
Directors' Plan have an exercise price equal to the fair market value of the
Common Stock as of the date of grant, and such options expire five years from
the date of grant.
In fiscal 1997, certain directors were also granted stock options prior to
the effective date of the Directors' Plan. None of such options were granted
under the Directors' Plan. On October 29, 1996, the Company granted Mr.
Tibbetts a non-qualified stock option to purchase 20,000 shares of Common Stock.
The exercise price of the option granted to Mr. Tibbetts is $6.41 per share, and
such option vests in five equal installments on each of the five 12-month
anniversaries following the date of grant and expires six years from the date of
grant. On June 19, 1997, the Company granted non-qualified stock options to
purchase 15,000 shares of Common Stock to each of Ms. Roizen and Mr. Campbell.
The exercise price of such options is $16.00. Each such option will vest in
three equal installments on each of the 12-month anniversaries following the
date on which the Board of Directors authorized the grant, and expires five
years from that date.
Directors who are also employees of the Company are not separately
compensated for any services provided as a director.
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<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three outside directors and is responsible for developing and
approving the Company's compensation program for the Chief Executive Officer and
the other executive officers of the Company. In addition, the Committee
administers the Company's 1997 Stock Incentive Plan, 1983 Incentive Stock Option
Plan and annual cash incentive compensation program. The overall objective of
the Company's executive compensation program is to provide total compensation
that will attract and retain highly qualified executives.
COMPENSATION PHILOSOPHY
The philosophy of the Committee regarding the compensation of the executive
officers consists of the following premises:
- - Base salary and benefits should be competitive with other software and
technology companies of comparable size.
- - Incentive compensation should be directly related to the Company's
achievement of specified financial and other performance targets.
- - Long-term ownership of the Company's Common Stock should provide an
important link between the executives and shareholders of the Company by
creating incentives for the executives to realize the long-term goal of
increasing shareholder value.
EXECUTIVE OFFICER COMPENSATION PROGRAM
BASE SALARY AND BENEFITS
In order to attract and retain executives, the Company strives to offer
competitive salaries and employee benefits, including its 1997 Employee Stock
Purchase Plan, health care plans, Section 401(k) Profit Sharing Plan and other
employee benefit programs. The Committee sets base salary levels for executives
by comparison to industry compensation data for other software and technology
companies with revenues in the same range as those of the Company. The
Committee generally sets base salaries between the 25th percentile and 75th
percentile, taking into account the executive's experience and level of
responsibility.
ANNUAL INCENTIVE COMPENSATION
The Company's annual incentive program allows an executive officer (other
than the Chief Executive Officer) to earn additional cash compensation in an
amount up to 30% to 40% of base salary (depending upon the specific plan
approved for each executive officer) if target level performance goals are met.
The Chief Executive Officer may earn an additional amount up to 60% of base
salary if target level performance goals are met. The total incentive
compensation payable for each executive officer is based 80% on objective
performance criteria and 20% on discretionary performance criteria, as
determined by the Committee. Threshold, target and maximum goals are set by the
Committee for each of the following objective performance criteria: operating
income, revenue, revenue per employee and customer satisfaction. Incentive
compensation is paid only if the threshold level of operating income is
attained, which reflects the Committee's philosophy that incentive compensation
payments are merited only if the Company meets base level profitability goals.
Once the threshold level of operating income is reached, incentive compensation
is paid based on actual operating income, revenue, revenue per employee and
customer satisfaction as measured against the threshold, target and maximum
goals for each of such performance criteria. Threshold performance results in
payment of 25% of the target level bonus. A maximum incentive bonus equal to
150% of the target level bonus can be
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<PAGE>
earned if performance meets or exceeds the maximum goal for each performance
criterion used under the plan. The operating income and revenue goals are based
on both quarterly and annual performance, while the other goals are based solely
on annual performance. The discretionary criteria for the executive officers
(other than the Chief Executive Officer) are established by the Committee in
conjunction with the Chief Executive Officer. In fiscal 1997, total incentive
compensation earned as a percentage of target bonus amounts was between 90% and
114% for the executive officers.
STOCK OPTION PROGRAM
Stock options are awarded in the Committee's discretion to executive
officers based upon historical and potential contributions to the success of the
Company, an evaluation of market survey data with respect to grants of stock
options by comparable companies and consideration of the number of stock options
already held by each executive officer. Generally, stock options have an
exercise price equal to the fair market value of the Common Stock on the date of
grant.
CHIEF EXECUTIVE OFFICER COMPENSATION
In fiscal 1997, Douglas J. Burgum received a base salary of $252,000, an
amount representing approximately the 75th percentile of base salaries for chief
executive officers of other software and technology companies with revenues
comparable to those of the Company. Mr. Burgum was paid approximately $150,000
of incentive compensation under the Company's annual incentive compensation
program, which represented approximately 100% of his target bonus for the fiscal
year. Approximately 20% of the amount of incentive compensation paid to Mr.
Burgum was based upon discretionary criteria as determined by the Committee,
primarily Mr. Burgum's leadership during the fiscal year. In addition, in
January 1997, Mr. Burgum was granted a stock option to purchase 53,333 shares of
the Company's Common Stock. The option has an exercise price equal to 110% of
the fair market value of the Common Stock on the date of grant. On February 27,
1997, an option to purchase an additional 50,000 shares, contingent upon the
completion of the Company's initial public offering, at an exercise price equal
to the initial public offering price of the Company's Common Stock, was
authorized to be granted to Mr. Burgum under the Company's 1997 Stock Incentive
Plan, and on June 19, 1997, this option was granted at an exercise price equal
to $16.00 per share. The Committee granted the stock options to Mr. Burgum
based upon his significant contributions to the Company's success through his
vision, leadership and long-term dedication.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company's 1997 Stock Incentive Plan complies with Section 162(m) of the
Internal Revenue Code of 1986, as amended, in order that compensation resulting
from stock options and certain other awards under such plan will not be counted
toward the $1,000,000 limit on the deductibility of compensation under
Section 162(m). Section 162(m) should not affect the deductibility of
compensation paid to the Company's executive officers for the foreseeable
future.
Raymond F. Good, Chairman
Frederick W. Burgum
Sanjeev K. Mehra
Members of the Compensation Committee
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the years
ended May 31, 1997 and 1996, by the Company's Chief Executive Officer and the
four other most highly compensated executive officers.
<TABLE>
<CAPTION>
LONG TERM
COMPEN-
SATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
------------------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) OPTIONS COMPENSATION(2)
- --------------------------- ---- ---------- ----------- ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Burgum. . . . 1997 $252,000 $150,472 $0 53,333 $3,145
Chairman of the Board, 1996 240,000 20,000 0 0 5,600 (3)
President and Chief
Executive Officer
Raymond A. August. . . . 1997 200,000 75,797 0 13,333 3,007
Chief Technology Officer 1996 180,000 5,000 0 13,333 2,157
and Group Vice President,
Dynamics C/S+
Terri F. Zimmerman . . . 1997 135,000 45,757 0 40,000 2,691
Chief Financial Officer 1996 115,000 5,000 0 26,667 13,044 (3)
and Group Vice President,
Finance and Operations
Steven K. Sydness. . . . 1997 125,000 50,812 0 10,000 2,687
Group Vice President . 1996 103,000 3,920 0 0 13,389 (3)
Jodi A. Uecker-Rust. . . 1997 125,000 45,174 0 6,667 2,682
Group Vice President . 1996 81,469 3,540 0 0 1,625
</TABLE>
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(1) In accordance with the rules of the Commission, other compensation in the
form of perquisites and other personal benefits has been omitted because
the aggregate amount of such perquisites and other personal benefits
constituted less than the lesser of $50,000 or 10% of the total of annual
salary and bonuses in each fiscal year for each of the executive officers
named above.
(2) Except as otherwise noted, the amounts reported represent the Company's
contributions to its 401(k) Profit Sharing Plan on behalf of the executive
officers.
(3) Such amounts include the Company's payment of membership fees on behalf of
the executive officers in the following amounts: Mr. Burgum, $2,800; Ms.
Zimmerman, $11,000; and Mr. Sydness, $11,000.
-9-
<PAGE>
STOCK OPTIONS
The following table summarizes stock options granted to the executive
officers named in the Summary Compensation Table above during the Company's
fiscal year ended May 31, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1997
INDIVIDUAL GRANTS
-------------------------------------------------------
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM (5)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED (1)(2) YEAR(3) SHARE (4) DATE 5% 10%
- -------------------- -------------- --------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Douglas J. Burgum. . . . . . 53,333 15.6% $7.71 1/28/02 $113,404 $250,839
Raymond A. August. . . . . . 13,333 3.9 6.41 7/24/02 29,034 65,909
Terri F. Zimmerman . . . . . 10,000 2.9 6.41 7/24/02 21,775 49,432
30,000 8.8 6.41 1/8/03 65,325 148,296
Steven K. Sydness. . . . . . 10,000 2.9 6.41 7/24/02 21,775 49,432
Jodi A. Uecker-Rust. . . . . 6,667 2.0 6.41 7/24/02 14,517 32,955
</TABLE>
- ----------------------------
(1) Each option represents the right to purchase one share of Common Stock.
The options shown in this column are all incentive stock options granted
pursuant to the Company's 1983 Incentive Stock Option Plan. The options
shown in this table generally become exercisable at a rate of 20% annually
over five years from the date of grant. To the extent not already
exercisable, the options generally become exercisable in the event of a
merger in which the Company is not the surviving corporation or a sale of
substantially all of the Company's assets.
(2) Subsequent to May 31, 1997, the Company granted options to purchase 50,000
shares of Common Stock to Mr. Burgum at an exercise price equal to $16.00
per share.
(3) In fiscal 1997, the Company granted employees options to purchase an
aggregate of 341,000 shares of Common Stock.
(4) The exercise price may be paid in cash or in shares of Common Stock with a
market value equal to the exercise price.
(5) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the Commission and do not represent the Company's
estimate or projection of the Company's future Common Stock prices. These
amounts represent certain assumed rates of appreciation in the value of
the Company's Common Stock from the fair value on the date of grant.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the Common Stock and overall stock market
conditions.
-10-
<PAGE>
YEAR-END OPTION TABLE
The following table sets forth certain information concerning options to
purchase Common Stock exercised by the executive officers named in the Summary
Compensation Table above during fiscal year 1997 and the number and value of
unexercised stock options held by such officers as of May 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED VALUE ---------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Burgum. . . . . . 120,000 $534,744 0 53,333 $0 $441,928
Raymond A. August. . . . . . 0 0 50,667 42,666 664,929 486,050
Terri F. Zimmerman . . . . . 0 0 22,000 71,334 240,125 740,712
Steven K. Sydness. . . . . . 33,333 139,090 0 30,000 0 332,625
Jodi A. Uecker-Rust. . . . . 32,000 125,184 0 14,667 0 164,680
</TABLE>
- ------------------------------
(1) There was no public trading market for the Common Stock as of May 31,
1997. Accordingly, as permitted by the rules of the Commission, these
values have been calculated based on a fair market value of $16.00 per
share (the initial public offering price of the Common Stock as determined
on June 19, 1997), less the applicable exercise price.
EMPLOYMENT AGREEMENT
The Company has an agreement with Ms. Zimmerman pursuant to which she
will receive a severance payment equal to her annual base salary in the event
her employment with the Company is involuntarily terminated following a merger,
acquisition or other similar event involving the Company, if such termination
occurs on or prior to September 5, 1999. Such severance payment will be reduced
by any income earned by Ms. Zimmerman from any other source during such one-year
period.
STOCK PERFORMANCE GRAPH
The Company's initial public offering of Common Stock became effective
on June 19, 1997. Accordingly, there was no public market for the Common Stock
during the fiscal year ended May 31, 1997, and no stock performance graph is
included herein.
CERTAIN TRANSACTIONS
Goldman, Sachs & Co. ("Goldman, Sachs") was the lead managing
underwriter in the Company's initial public offering of Common Stock completed
on June 25, 1997. In connection with the initial public offering, Goldman,
Sachs received compensation from the Company in the form of an underwriting
discount. The Company also reimbursed Goldman, Sachs for expenses in connection
with the initial public offering. In addition, Goldman, Sachs has entered into
an agreement with the Company pursuant to which it has provided from time to
time, and expects to provide in the future, investment banking services to the
Company for customary fees and commissions.
In July 1997, the Board of Directors approved the purchase by the
Company of 43 acres of land owned by Frederick W. Burgum outside of Fargo, North
Dakota for a price of $350,000. The Company expects to purchase such property
from Mr. Burgum as the location for a new facility. The purchase
-11-
<PAGE>
price was determined based on independent appraisals and arms' length
negotiations between the Company and Mr. Burgum. Mr. Burgum did not participate
in any discussions or votes by the Board of Directors regarding the land
acquisition transaction.
Pursuant to an agreement between the Company and two trusts with
respect to which Frederick W. Burgum acts as trustee, the Company made a lease
payment of $53,055 to the trusts for 50 notebook computers in fiscal 1997. The
lease agreement relating to the computers expired in March 1997.
Raymond F. Good entered into a one-year consulting agreement with the
Company in February 1997. The consulting agreement provides that Mr. Good will
receive a fee of $120 per hour for up to 40 hours of consulting services
provided to the Company per month. In fiscal 1997, Mr. Good exercised an option
to purchase 29,333 shares of Common Stock at an exercise price of $1.95 per
share.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Commission. Such executive officers,
directors and greater than 10% beneficial owners are required by the regulations
of the Commission to furnish the Company with copies of all Section 16(a)
reports they file.
Based solely on a review of the copies of such reports furnished to
the Company and written representations from the executive officers and
directors, the Company believes that all Section 16(a) filing requirements
applicable to its executive officers and directors and greater than 10%
beneficial owners were met.
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Price Waterhouse LLP as
independent auditors for the Company for the fiscal year ending May 31, 1998. A
proposal to approve the appointment of Price Waterhouse LLP will be presented at
the Annual Meeting. Representatives of Price Waterhouse LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so, and will be available to answer appropriate questions from
shareholders. If the appointment of Price Waterhouse LLP is not approved by the
shareholders, the Board of Directors is not obligated to appoint other auditors,
but the Board of Directors will give consideration to such unfavorable vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
PROPOSALS FOR THE 1998 ANNUAL MEETING
Any proposal by a shareholder to be presented at the 1998 Annual
Meeting of Shareholders and to be included in the Company's proxy statement must
be received at the Company's executive offices, 1701 S.W. 38th Street, Fargo,
North Dakota 58103, no later than the close of business on April 22, 1998.
Proposals should be sent to the attention of the Secretary.
-12-
<PAGE>
OTHER MATTERS
The Company is not aware of any other matters which may come before
the Annual Meeting. If other matters are properly presented at the Annual
Meeting, it is the intention of the persons named as proxies in the enclosed
proxy to vote in accordance with their judgment as to the best interests of the
Company.
By Order of the Board of Directors
Bradley J. Burgum
Secretary
August 20, 1997
-13-
<PAGE>
<TABLE>
<S> <C>
PROXY
GREAT PLAINS SOFTWARE, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
</TABLE>
The undersigned hereby appoints Douglas J. Burgum and Terri F. Zimmerman
proxies (each with the power to act alone and with the power of substitution),
to vote, as designated below, all shares of Common Stock of Great Plains
Software, Inc. which the undersigned is entitled to vote at the 1997 Annual
Meeting of Shareholders of Great Plains Software, Inc. to be held on Wednesday,
September 10, 1997, at 12:00 noon, local time, at the Ramada Plaza Suites, 1635
42nd Street S.W., Fargo, North Dakota 58103, and any adjournment thereof, and
hereby revokes all former proxies.
1. ELECTION OF DIRECTORS. NOMINEES: Raymond F. Good, J. A. Heidi Roizen and
Joseph S. Tibbetts, Jr.
/ / VOTE FOR all nominees listed / / WITHHOLD AUTHORITY
above, to vote for all nominees listed
except those whose names are above
written below:
- --------------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
AUDITORS OF THE COMPANY.
<TABLE>
<S> <C> <C>
/ / FOR / / AGAINST / / ABSTAIN
</TABLE>
(CONTINUED, AND TO BE SIGNED AND DATED ON THE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT
OR ADJOURNMENTS THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF DIRECTORS AND FOR PROPOSAL 2.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED ADDRESSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
Please sign exactly as your name
appears hereon. Jointly owned
shares will be voted as directed
if one owner signs unless another
owner instructs to the contrary,
in which case the shares will not
be voted. If signing in a
representative capacity, please
indicate title and authority.
Dated: ____________________, 1997
----------------------------------
Signature
