GREAT PLAINS SOFTWARE INC, S-1, 1997-03-05

GREAT PLAINS SOFTWARE INC
S-1, 1997-03-05

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1997

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GREAT PLAINS SOFTWARE, INC.

(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
MINNESOTA 7372 45-0374871
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>

1701 S.W. 38TH STREET
FARGO, NORTH DAKOTA 58103
(701) 281-0550

(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

DOUGLAS J. BURGUM
GREAT PLAINS SOFTWARE, INC.
1701 S.W. 38TH STREET
FARGO, NORTH DAKOTA 58103
(701) 281-0550

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:

<TABLE>
<S> <C>
JAY L. SWANSON MARK G. BORDEN
DORSEY & WHITNEY LLP JEFFREY A. STEIN
PILLSBURY CENTER SOUTH HALE AND DORR LLP
220 SOUTH SIXTH STREET 60 STATE STREET
MINNEAPOLIS, MINNESOTA 55402-1498 BOSTON, MASSACHUSETTS 02109
(612) 340-2600 (617) 526-6000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /

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

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

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

<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH PROPOSED MAXIMUM MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value...................... 3,450,000 shares $13.00 $44,850,000 $13,591
</TABLE>

(1) Including 450,000 shares of Common Stock which the Underwriters have the
option to purchase solely to cover over-allotments, if any.

(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 5, 1997

3,000,000 SHARES

LOGO

GREAT PLAINS SOFTWARE, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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All of the 3,000,000 shares of Common Stock offered hereby are being sold by
the Company. Prior to this offering, there has been no public market for the
Common Stock. It is currently estimated that the initial public offering price
per share will be between $11.00 and $13.00. For factors to be considered in
determining the initial public offering price, see "Underwriting."

Shares of Common Stock are being reserved for sale at the initial public
offering price to resellers of the Company's products and services, directors,
officers and employees of the Company and certain other persons. See
"Underwriting." Such resellers, directors, officers, employees and other persons
will purchase, in the aggregate, not more than 15% of the Common Stock offered
hereby.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

Application has been made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "GPSI."

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Per Share...................................... $ $ $
Total (3)...................................... $ $ $
</TABLE>

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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."

(2) Before deducting estimated expenses of $480,000 payable by the Company.

(3) The Company has granted to the Underwriters an option for 30 days to
purchase up to an additional 450,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."

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The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that certificates
for the shares will be ready for delivery in New York, New York, on or about
, 1997 against payment therefor in immediately available funds.

----------------

GOLDMAN, SACHS & CO.

HAMBRECHT & QUIST

PIPER JAFFRAY INC.
---------

The date of this Prospectus is , 1997.
<PAGE>
Graphic and Text Appearing on Inside Front Cover of Prospectus:

This page contains a rendering of a figure standing on the Earth holding a
flashlight. The beam of the flashlight illuminates the sky over which the
following text is printed: "Mission Statement: To improve the life and
business success of partners and customers by providing superior financial
management software, services and tools."

This page contains a picture of a computer monitor displaying a model of the
Earth with figures ascending ladders to the top of the Earth which dissolves
into pixels. On the far left-hand side of the page, the following text is
printed: "New technology in and of itself is often little more than a
passing curiosity. But new technology bent to a purpose can become a
powerful tool that truly improves the lot of those who use it. Since 1981
Great Plains Software has identified the best new technologies and used them
to craft innovative financial management solutions that fulfill the purpose
of our Mission Statement. Beyond our use of the latest technologies our
foundation remains based in the strong values of an earlier time and an
unblushing commitment to the service of our customers and distribution
partners throughout the world." The Company's name and its sun and wheat
logo are printed below this text.

2
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND
AFTER THE OFFERING. IN ADDITION, IN CONNECTION WITH THIS OFFERING, CERTAIN
UNDERWRITERS (AND SELLING GROUP MEMBERS) ALSO MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET, IN
ACCORDANCE WITH RULE 103 UNDER THE SECURITIES EXCHANGE ACT OF 1934. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

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ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the shares of Common Stock offered hereby. As permitted by the rules
and regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus as to the contents of any agreement or
other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is made to the copy of such
agreement filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. A copy of the Registration
Statement, including exhibits and schedules thereto, may be inspected by anyone
without charge at the Commission's principal office in Washington, D.C. and
copies of all or any part thereof may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's regional offices located at Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade
Center, New York, New York 10048, upon payment of certain fees prescribed by the
Commission. The Commission also maintains a World Wide Web site which provides
online access to reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at the
address "http://www.sec.gov."

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The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent accountants and will
make available copies of quarterly reports for the first three quarters of each
fiscal year containing unaudited financial statements.

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Great Plains Software-Registered Trademark-, Dynamics
C/S+-Registered Trademark-, Great Plains Dynamics-Registered Trademark- and
Dexterity-Registered Trademark- are registered trademarks of the Company in the
United States and other countries. Great Plains Accounting, the Company's
sun/wheat logo, DynamicTools, Dynamics Continuum, Stampede, the trademarks for
the Company's Internet applications and various other word and logo marks are
trademarks of the Company and are the subject of pending trademark and service
mark applications in the United States and other countries. This Prospectus also
includes names, trademarks, service marks and registered trademarks and service
marks of companies other than the Company.

3
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. INVESTORS SHOULD CAREFULLY CONSIDER THE
INFORMATION SET FORTH UNDER THE HEADING "RISK FACTORS." UNLESS OTHERWISE
INDICATED HEREIN, ALL INFORMATION IN THIS PROSPECTUS (I) HAS BEEN ADJUSTED TO
GIVE EFFECT TO AN AMENDMENT AND RESTATEMENT OF THE COMPANY'S ARTICLES OF
INCORPORATION TO BECOME EFFECTIVE IMMEDIATELY PRIOR TO THIS OFFERING, PROVIDING
FOR, AMONG OTHER THINGS, AN INCREASE IN THE AUTHORIZED SHARES OF CAPITAL STOCK
OF THE COMPANY, (II) HAS BEEN ADJUSTED TO REFLECT THE PRO FORMA CONVERSION OF
ALL OUTSTANDING SHARES OF THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK
(THE "SERIES A PREFERRED STOCK") AND SERIES B CONVERTIBLE PREFERRED STOCK (THE
"SERIES B PREFERRED STOCK" AND, TOGETHER WITH THE SERIES A PREFERRED STOCK, THE
"PREFERRED STOCK") INTO AN AGGREGATE OF 1,847,627 SHARES OF COMMON STOCK UPON
CLOSING OF THE OFFERING, (III) HAS BEEN ADJUSTED TO GIVE EFFECT TO A
FOUR-FOR-THREE SPLIT OF THE OUTSTANDING COMMON STOCK, IN THE FORM OF A STOCK
DIVIDEND, TO BE EFFECTIVE IMMEDIATELY PRIOR TO THIS OFFERING AND (IV) ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. SEE "DESCRIPTION OF CAPITAL
STOCK" AND "UNDERWRITING."

THE COMPANY

Great Plains Software, Inc. (the "Company") is a leading provider of
Microsoft Windows NT client/ server financial management software for mid-sized
businesses. The Company's award-winning products and services automate essential
accounting functions and enhance the strategic value of financial information.
The Company's products and services are sold and implemented exclusively by its
extensive network of independent sales and support organizations throughout the
United States, Canada and select international markets.

The Company's client/server product lines, Dynamics C/S+ and Dynamics,
consist of a suite of financial applications, such as general ledger, accounts
receivable, accounts payable, payroll and sales order and purchase order
processing, and a suite of development and customization tools. The Company's
client/server products are designed to meet the broad spectrum of financial
management needs of the corporate or middle market (the "Corporate Market"),
which generally consists of mid-sized businesses with $1 million to $250 million
in revenues and 10 to 2,500 employees.

In order to meet the needs of the Corporate Market, the Company designs,
develops, markets, sells and supports client/server products that are
cost-effective, scalable and easy to customize and use. The Company's
client/server products are optimized for Microsoft technologies, most notably
Windows NT, Windows 95 and SQL Server, which are increasingly becoming the
standard in the Corporate Market. Moreover, by utilizing emerging Internet
technologies, the Company's financial management systems provide employees
throughout a business with quick, cost-effective and security-enhanced access to
information, and facilitate order placement and sharing of business information
with key customers and suppliers.

The Company has made a significant investment in building an experienced,
knowledgeable and highly motivated domestic and international service and
distribution network, which consists of value added resellers (VARs), systems
integrators, Big Six and other accounting firms, independent software vendors
(ISVs) and specialized software consultants (together, the "Partners"). Through
its Partner network, the Company provides customers with trained and
knowledgeable software professionals who are available locally to implement its
systems as well as provide ongoing service and support. Most of the Partners
customize the Company's systems to fit individual business needs, and some
Partners develop software applications that integrate with and extend the
functionality of the Company's products to meet the requirements of specific
industries.

The Company believes that prompt and effective service and technical support
are essential elements of a complete financial management software solution and
dedicates significant resources to delivering timely, reliable and
cost-effective service to its customers and Partners. The Company has received
numerous industry awards for its customer and Partner service.

The Company was founded in 1981 and was incorporated as a Minnesota
corporation in 1983. The Company's offices are located at 1701 S.W. 38th Street,
Fargo, North Dakota 58103, and its telephone number is (701) 281-0550.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company................ 3,000,000 shares

Common Stock to be outstanding after the 12,769,604 shares(1)
offering.........................................

Use of proceeds.................................... For general corporate purposes,
including working capital, product
development, capital expenditures and
possible acquisitions. See "Use of
Proceeds."

Proposed Nasdaq National Market symbol............. "GPSI"
</TABLE>

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(1) Based on the number of shares of Common Stock outstanding on February 21,
1997. Excludes 1,027,800 shares of Common Stock issuable upon exercise of
stock options outstanding as of February 21, 1997, at a weighted average
exercise price of $4.92 per share, of which options to purchase 298,873
shares were then exercisable. Also excludes 1,212,020 shares reserved for
issuance under the Company's 1997 Stock Incentive Plan, 1983 Incentive Stock
Option Plan and Outside Directors' Stock Option Plan. See "Capitalization,"
"Management--Director Compensation" and "--Benefit Plans" and "Description
of Capital Stock."

SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues............................... $21,204 $28,871 $29,114 $37,897 $42,271 $19,152 $24,754
Operating income (loss)...................... (287) 1,329 (9,976) 629 3,262 1,415 1,749
Income tax provision (benefit)(1)............ 8 102 (27) 45 (4,099) 3 750
Net income (loss)(1)......................... (407) 921 (10,330) 124 7,461 1,451 1,201
Pro forma net income per share(2)(3)......... $ .77 $ .12
Pro forma weighted average number of shares
and common equivalent shares
outstanding(2)(3).......................... 9,743,969 9,840,336
</TABLE>

<TABLE>
<CAPTION>
NOVEMBER 30, 1996
--------------------------------
PRO FORMA
PRO FORMA(3) AS ADJUSTED(3)(4)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 8,648 $ 41,648
Working capital................................................................ 2,207 35,207
Total assets................................................................... 24,150 57,150
Deferred revenues.............................................................. 7,775 7,775
Total stockholders' equity..................................................... 7,861 40,861
</TABLE>

5
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(1) Net income for the year ended May 31, 1996 includes an income tax benefit of
$4.1 million or $.42 per share related to the reversal of a valuation
allowance. The reversal reflects the recognition of net operating loss
carryforwards and other deferred tax assets and was a result of management's
analysis of the Company's current levels of earnings and future outlook,
which increased the likelihood of the Company realizing its deferred tax
assets. For subsequent periods, the Company has provided for income taxes
utilizing federal and state statutory income tax rates. See Note 9 of Notes
to Consolidated Financial Statements.

(2) For an explanation of the determination of the number of shares used in
computing pro forma net income per share, see Note 1 of Notes to
Consolidated Financial Statements.

(3) Gives effect to the conversion of all shares of the Company's Preferred
Stock into an aggregate of 1,847,627 shares of Common Stock upon the closing
of the offering made hereby. See Note 1 of Notes to Consolidated Financial
Statements.

(4) Adjusted to reflect the sale of 3,000,000 shares of Common Stock offered
hereby at an assumed public offering price of $12.00 per share after
deducting the underwriting discount and the estimated offering expenses
payable by the Company.

6
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED BY THIS PROSPECTUS.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY

The Company's quarterly revenue and operating results have varied in the
past, and are likely to vary in the future. The Company operates with little
backlog, and most of its revenues in each quarter result from orders booked in
that quarter. The Company establishes its expenditure levels based on its
expectations as to future revenue, and, if revenue levels are below
expectations, expenses could be disproportionately high. As a result, a drop in
near term demand could significantly affect both revenue and profits in any
quarter. In the future, the Company's operating results may fluctuate for this
reason or as a result of a number of other factors, including increased
expenses, timing of product releases, increased competition, variations in the
mix of sales, announcements of new products by the Company or its competitors
and capital spending patterns of the Company's customers. As a result, there can
be no assurance the Company will be able to maintain profitability on an annual
or quarterly basis.

The Company's business has experienced and may continue to experience
seasonality. In recent years, the Company has recognized a greater percentage of
its revenue and operating income in its fourth fiscal quarter than in any of the
first three fiscal quarters due to a number of factors, including the timing of
product releases and the Company's sales incentive programs. Moreover, due to
fiscal year-end sales incentive programs, the Company has historically
recognized less revenue and operating income in its first fiscal quarter than in
the other quarters.

Because of these factors, the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. Furthermore, it
is possible that in some future quarters the Company's operating results will
fall below the expectations of the Company, market analysts and investors. In
such event, the price of the Company's Common Stock would likely be materially
and adversely affected.

DEPENDENCE ON NEW PRODUCTS; RAPID TECHNOLOGICAL CHANGE; PRODUCT DEVELOPMENT RISK

The market for the Company's products is characterized by rapid
technological advances and evolving industry standards and can be significantly
affected by new product introductions, changing customer requirements and market
activities of industry participants. The life cycles of the Company's products
are difficult to estimate, and the Company's position in the current market
could be undermined by rapid product advances. The Company's future success will
depend upon its ability to continue to improve existing products and to develop
and introduce products with new or enhanced capabilities that address the
increasingly sophisticated needs of its customers and keep pace with
technological and competitive developments. Among other things, the emergence of
the Internet as an alternative computing platform and distribution medium may
adversely affect the demand for client/ server products and alter current
software utilization, distribution and pricing patterns. There can be no
assurance that the Company will be able to successfully develop and market new
or enhanced products or respond effectively to technological changes or new
product announcements by others. Further, the Company may face challenges with
customers who are slower to adopt new technologies or otherwise commit resources
to convert to a client/server solution. Any failure by the Company to anticipate
or respond adequately to technological developments and customer requirements,
or any significant delays in product development or introduction, could result
in a loss of competitiveness and revenue.

Delays in the release of new and upgraded versions of the Company's software
products could have a significantly negative impact on the Company's sales and
results of operations. Because of the complexities inherent in developing
software products as sophisticated as those sold by the Company

7
<PAGE>
and the lengthy testing periods associated with such products, no assurance can
be given that future product introductions by the Company will not be delayed.
In addition, complex software programs may contain undetected errors or bugs
when they are first introduced or as new versions are released. There can be no
assurance that errors will not be found in the Company's existing or future
products, with the possible result of delays in or loss of market acceptance of
these products, diversion of the Company's resources, injury to the Company's
reputation and increased service and warranty expenses.

RELIANCE ON MICROSOFT TECHNOLOGY

The Company's software products are designed for Microsoft technologies,
including Windows NT, Windows 95 and SQL Server. In addition, the Company's
products utilize other Microsoft technologies, including Internet Information
Server, FrontPage, Visual Basic and Visual Basic for Applications. Although the
Company believes that Microsoft technologies are and will be widely utilized by
Corporate Market businesses, no assurance can be given that these businesses
will actually adopt such technologies as anticipated or will not in the future
migrate to other computing technologies that the Company does not support.
Moreover, the Company's strategy will require that the Company's products and
technology be compatible with new developments in Microsoft's technology.

RELIANCE ON THIRD-PARTY SUPPLIERS

The Company's products utilize certain software licensed to it by
third-party software developers. Although the Company believes that there are
alternatives for these products, any significant interruption in the supply of
such third-party software could have a material adverse impact on the Company's
sales unless and until the Company can replace the functionality provided by
these products. In addition, the Company is to a certain extent dependent upon
such third parties' abilities to enhance their current products, to develop new
products on a timely and cost-effective basis and to respond to emerging
industry standards and other technological changes. There can be no assurance
that the Company would be able to replace the functionality provided by the
third party software currently offered in conjunction with the Company's
products in the event that such software becomes obsolete or incompatible with
future versions of the Company's products or is otherwise not adequately
maintained or updated. The absence of or any significant delay in the
replacement of that functionality could have a material adverse effect on the
Company's business, results of operations and financial condition.

DECLINE IN SALES OF DOS- AND MACINTOSH-BASED PRODUCTS

The Company has shifted its focus from a product based on DOS, Macintosh and
local area network (LAN) technologies, Great Plains Accounting, to products
based on Windows and client/server technologies. As a result of this shift and
the decrease in general market demand for DOS- and Macintosh-based products, the
Company's revenues from its Great Plains Accounting product have been declining
and are expected to decline for the foreseeable future. There can be no
assurance that the decline in revenues from sales of Great Plains Accounting
will not have a material adverse effect on the Company's business, results of
operations and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

RELIANCE UPON PARTNER DISTRIBUTION CHANNEL; RISKS ASSOCIATED WITH EXPANDING
DISTRIBUTION

The Company relies exclusively upon its Partner network to provide marketing
and sales opportunities. There can be no assurance that the Company's Partners
will aggressively market the Company's products or will maintain their
relationships with the Company. The failure of the Company to maintain its
existing Partner relationships, or to establish new Partner relationships in the
future, because of a divergence of interests, or for any other reason, could
have a material adverse effect on the Company's business, results of operations
and financial condition.

8
<PAGE>
The Company's ability to achieve significant revenue growth in the future
will depend in large part on adding new Partners and leveraging its
relationships with existing Partners. In addition, an integral part of the
Company's strategy is to add distributors internationally, who in turn recruit
Partners in their territory. The Company is currently investing, and intends to
continue to invest, significant resources to develop these channels. There can
be no assurance that the Company will be able to leverage relationships with
existing Partners and add new Partners and distributors to market the Company's
products effectively. The inability to do so could have a material adverse
effect on the Company's business, results of operations and financial condition.

COMPETITION

In the United States, the Company faces a number of competitors both in the
Dynamics C/S+ segment of the Corporate Market, including Platinum Software
Corporation, and in the Dynamics segment of the Corporate Market, including
Solomon Software, and State of the Art, Inc. In Canada, the Company's primary
competitor is Computer Associates International, Inc. (AccPac and AccPac 2000).
Outside North America, the Company also faces a number of other competitors,
several of which have significant share in their home markets. In addition, the
Company competes for Corporate Market business with companies primarily
targeting businesses larger than those comprising the Corporate Market; several
of these competitors, which principally sell UNIX-based systems, offer or have
announced their intention to deliver Windows NT solutions. The Company's
products also face competition from providers of industry-specific applications
as well as indirect competition from in-house, custom-developed financial
management applications.

Certain of the Company's competitors have substantially greater financial,
marketing or technical resources than the Company. There can be no assurance
that other companies have not developed or marketed or will not develop or
market products that are superior to those of the Company, that are offered at
substantially lower prices than those of the Company or that have or will
achieve greater market acceptance than those of the Company. In addition, there
can be no assurance that alternative methods of delivering financial management
systems will not provide increased competition.

DEPENDENCE ON KEY PERSONNEL

The Company's future success depends to a significant extent on Douglas J.
Burgum, the Company's Chairman of the Board, President and Chief Executive
Officer, Raymond A. August, the Company's Chief Technology Officer and Group
Vice President, and its other executive officers and certain technical,
managerial, sales and marketing personnel. The loss of the services of any of
these individuals or group of individuals could have a material adverse effect
on the Company's business, results of operations and financial condition. None
of the Company's executive officers has entered into an employment contract with
the Company, except for Messrs. Burgum and August, whose employment contracts
expire in June 1997. If neither the Company nor Mr. August inform the other
party of its or his intention not to extend Mr. August's employment contract
before April 30, 1997, the term of the employment agreement will be extended to
June 1, 1999.

Competition for qualified personnel in the software industry is intense. The
future success of the Company will depend in large part on its ability to
attract and retain qualified management and technical employees, and there can
be no assurance that the Company will be able to do so. The Company believes
that the continued employment of a number of key management and technical
personnel is

9
<PAGE>
important to the Company's future success. The Company has from time to time
experienced difficulty in locating and retaining candidates with appropriate
qualifications.

MANAGEMENT OF GROWTH

The Company's growth has resulted in an increase in responsibilities placed
upon the Company's management and has placed added pressures on the Company's
operating and other systems. To manage its growth effectively, the Company will
be required to continue to implement additional systems and controls, and to
expand, train and manage its employee base. There can be no assurance that the
management skills and systems currently in place will be adequate if the Company
continues to grow, or that the Company will be able to implement additional
systems successfully and in a timely manner as required. In addition, the
Company from time to time may seek acquisitions of businesses, products and
technologies that are complementary to those of the Company, or that allow the
Company to enter new markets. Any such acquisition would place additional
strains upon the Company's management resources. See "Business--Employees" and
"Management--Executive Officers and Directors."

DEPENDENCE ON INTELLECTUAL PROPERTY RIGHTS; RISK OF INFRINGEMENT

The Company relies on a combination of trade secret, copyright and trademark
laws, nondisclosure agreements and other contractual provisions and technical
measures to protect its intellectual property rights. There can be no assurance
that these protections will be adequate to prevent the Company's competitors
from copying or reverse-engineering the Company's products, or that the
Company's competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technology. The Company
makes source code available to certain of its Partners and customers. This
availability may increase the likelihood of misappropriation or other misuse of
the Company's intellectual property. The Company has no patents, and existing
copyright laws afford only limited protection for the Company's intellectual
property rights and will not protect such rights in the event competitors
independently develop products similar to those of the Company. While the
Company licenses its Dynamics C/S+ product under signed licenses, the Company
licenses its Dynamics and Great Plains Accounting products primarily under
"shrink wrap" licenses that are not signed by its licensees. These shrink wrap
licenses may be unenforceable under the laws of certain jurisdictions. In
addition, the laws of certain countries in which the Company's products are or
may be licensed do not protect the Company's products and intellectual property
rights to the same extent as the laws of the United States.

Although the Company has never been the subject of a material intellectual
property dispute, there can be no assurance that a third party will not assert
that the Company's technology violates its intellectual property rights in the
future. As the number of software products in the Company's target market
increases and the functionality of these products further overlap, the Company
believes that software developers may become increasingly subject to
infringement claims. Any such claims, whether with or without merit, can be time
consuming and expensive to defend. There can be no assurance that third parties
will not assert infringement claims against the Company in the future with
respect to its current or future products or that any such assertion will not
require the Company to enter into royalty arrangements or litigation that could
be costly to the Company.

INTERNATIONAL SALES AND OPERATIONS

The Company sells its products in key international markets in addition to
the United States and Canada. The Company has recently entered into distribution
arrangements in Western and Eastern Europe, Australasia, Southern Africa, the
Middle East and Southeast Asia. As a result of the royalty structure for the
Company's international Partner network, the Company's gross margin on
international sales is less than its gross margin on domestic sales. The
Company's international business may be affected by such factors as local
economic and market conditions, political and economic instability,

10
<PAGE>
greater difficulty in administering operations, difficulties in enforcing
intellectual property and contractual rights, difficulties in tailoring the
Company's software products to fit local accounting principles, rules,
regulations, language, tax codes and customs, fluctuations in currency exchange
rates and the need for compliance with a wide variety of foreign and United
States export regulations. There can be no assurance that one or more of these
factors will not have a material adverse effect on the Company's international
operations and, consequently, the Company's business, results of operations and
financial condition.

PRODUCT LIABILITY

The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. It is possible, however, that the limitation of liability
provisions contained in the Company's license agreements may not be effective
under the laws of certain jurisdictions. The sale and support of products by the
Company and its Partners may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future.
Furthermore, some of the Company's licenses with customers are governed by laws
of jurisdictions other than the United States, and there can be no assurance
that purported limitations on liability in these licenses would be enforced were
foreign law to govern. A product liability claim brought against the Company
could have a material adverse effect upon the Company's business, results of
operations and financial condition.

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the offering there has been no public market for the Common Stock.
Accordingly, there can be no assurance that an active trading market will
develop or be sustained upon completion of the offering or that the market price
of the Common Stock will not decline below the initial public offering price.
The initial public offering price of the Common Stock will be determined by
negotiations between the Company and the representatives of the Underwriters and
may not be indicative of the prices that will prevail in the public market. See
"Underwriting."

The trading prices of the Company's Common Stock could be subject to wide
fluctuations in response to quarter-to-quarter variations in the Company's
operating results, developments or disputes concerning intellectual property
rights, technological innovations or new products, governmental regulatory
action, general conditions in the accounting and financial management software
industry, increased price competition, changes in earnings estimates by analysts
or other events or factors, many of which are beyond the Company's control. In
addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many
computer software companies and which have often been unrelated to the operating
performance of such companies.

SIGNIFICANT SHAREHOLDERS; ANTI-TAKEOVER CONSIDERATIONS

Upon completion of the offering, the Company's directors and executive
officers beneficially will own in the aggregate approximately 41.6% of the
Company's outstanding Common Stock (plus such additional shares such persons may
purchase in the offering). In addition, certain of the Company's other principal
shareholders (who are affiliated with certain of the Company's directors and
executive officers) beneficially will own in the aggregate approximately 14.0%
of the Company's outstanding Common Stock. See "Principal Shareholders." If
these shareholders vote together as a group, they will be able to substantially
influence the business and affairs of the Company, including the election of
individuals to the Company's Board of Directors, and to otherwise affect the
outcome of certain actions that require shareholder approval, including the
adoption of amendments to the Company's Articles of Incorporation, and certain
mergers, sales of assets and other business acquisitions or dispositions.

Upon completion of the Offering, the Company will have an authorized class
of 30,000,000 shares of undesignated preferred stock, $.01 par value, which may
be issued by the Company's Board of Directors on such terms, and with such
rights, preferences and designations, as the Company's Board

11
<PAGE>
of Directors may determine. In addition, the Company's Bylaws provide for a
Board of Directors elected to staggered terms and establish specific procedures
for calling meetings of shareholders and appointing and removing members of the
Board of Directors. The Company is subject to certain provisions of the
Minnesota Business Corporation Act which restrict certain business combinations.
Some or all of the foregoing factors and other provisions of the Company's
Bylaws could have the effect of discouraging certain attempts to acquire the
Company and, as a result, could deprive the Company's shareholders of
opportunities to sell their shares of Common Stock at prices higher than
prevailing market prices. See "Description of Capital Stock--Preferred Stock"
and "--Provisions of the Company's Restated Articles and Bylaws and the
Minnesota Business Corporation Act."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of significant amounts of Common Stock in the public market or the
perception that such sales will occur could adversely affect the market price of
the Common Stock or the future ability of the Company to raise capital through
an offering of its equity securities. Of the 12,769,604 shares of Common Stock
to be outstanding upon completion of the offering, the 3,000,000 shares offered
hereby will be eligible for immediate sale in the public market without
restriction unless (a) the shares are purchased by "affiliates" of the Company
within the meaning of Rule 144 of the Securities Act of 1933, as amended (the
"Securities Act"), or (b) such shares are directed shares purchased by Partners
in the offering. See "Underwriting."

The remaining 9,769,604 shares of Common Stock held by existing shareholders
upon completion of the offering will be "restricted securities" as that term is
defined in Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act. The Company's directors and officers and certain of its shareholders have
agreed, and the Company's Partners who purchase directed shares in this offering
will agree, that they will not sell, directly or indirectly, any Common Stock
without the prior consent of the representatives of the Underwriters for a
period of 180 days from the date of this Prospectus. Subject to these lock-up
agreements and the provisions of Rules 144, 144(k) and 701, additional shares
will be available for sale in the public market (subject in the case of shares
held by affiliates to compliance with certain volume restrictions) as follows:
(i) 680,582 shares will be available for immediate sale in the public market on
the date of this Prospectus, (ii) 374,181 shares will be eligible for sale 90
days after the date of this Prospectus and (iii) 8,221,970 shares will be
eligible for sale upon the expiration of lock-up agreements 180 days after the
date of this Prospectus. In addition, certain shareholders, representing
approximately 1,793,627 shares of Common Stock, have the right, subject to
certain conditions, to include their shares in future registration statements
relating to the Company's securities and to cause the Company to register
certain Common Stock owned by them. See "Shares Eligible for Future
Sale--Registration Rights" and "Underwriting."

After the date of this Prospectus, the Company intends to file a Form S-8
registration statement under the Securities Act to register all shares of Common
Stock issuable under the Company's stock-based benefit plans. See
"Management--Director Compensation" and "--Benefit Plans." Such registration
statement is expected to become effective immediately upon filing, and shares
covered by that registration statement will thereupon be eligible for sale in
the public markets, subject to Rule 144 limitations applicable to affiliates.
See "Shares Eligible for Future Sale."

NO DIVIDENDS

The Company has never paid or declared a dividend on its capital stock and
does not anticipate doing so for the foreseeable future. See "Dividend Policy."

DILUTION

Purchasers of the shares offered hereby will incur an immediate, substantial
dilution in net tangible book value per share. See "Dilution."

12
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company pursuant to this offering are estimated to
be $33,000,000 ($38,022,000 if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $12.00 per
share after deducting the estimated underwriting discount and offering expenses
payable by the Company. The principal purposes of this offering are to increase
the Company's equity capital, to create a public market for the Common Stock, to
increase the visibility of the Company in the marketplace and to facilitate
future access by the Company to public equity markets.

The Company expects to use the net proceeds from this offering for general
corporate purposes, including the funding of working capital and growth. In
addition, the Company anticipates building or leasing a new facility for
occupancy beginning in fiscal 1999. The Company expects to finance the new
facility with debt financing or through a sale and leaseback transaction. If
debt financing is used to finance the facility, the Company anticipates that it
will make an equity investment of $3,000,000 to $5,000,000 in cash to partially
fund the cost of the facility. If a sale and leaseback transaction is used to
finance the facility, the Company anticipates that no material equity investment
will be made to fund the facility.

The Company may seek acquisitions of businesses, products and technologies
that are complementary to those of the Company, and a portion of the net
proceeds may be used for such acquisitions. While the Company engages from time
to time in discussions with respect to potential acquisitions, the Company has
no plans, commitments or agreements with respect to any material acquisitions as
of the date of this Prospectus, and there can be no assurance that any such
acquisitions will be made.

Pending such uses, the Company intends to invest the net proceeds from this
offering in short-term, investment-grade, interest-bearing securities.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain future earnings to fund the
development and growth of its business.

13
<PAGE>
DILUTION

The pro forma net tangible book value of the Company at November 30, 1996
was $7,298,328 or $.79 per share of Common Stock, after giving effect to the
automatic conversion of all outstanding shares of Preferred Stock into Common
Stock in connection with the offering made hereby. Pro forma net tangible book
value per share is equal to the Company's total tangible assets (total assets
less goodwill and trademarks) less total liabilities, divided by the total
number of shares of Common Stock outstanding, including shares of Common Stock
issued upon the automatic conversion of the Preferred Stock in connection with
the offering made hereby. Pro forma net tangible book value dilution per share
represents the difference between the amount per share paid by purchasers of
shares of Common Stock in the offering made hereby and the pro forma net
tangible book value per share of Common Stock immediately after completion of
the offering. After giving effect to the sale by the Company of the 3,000,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $12.00 per share, and after deducting the estimated underwriting
discount and offering expenses, the pro forma net tangible book value of the
Company as of November 30, 1996 would have been $40,298,328 or $3.30 per share
of Common Stock. This represents an immediate increase in such pro forma net
tangible book value of $2.51 per share to existing shareholders and an immediate
dilution of $8.70 per share to new investors purchasing shares in the offering.
If the initial public offer price is higher or lower, the dilution to new
investors will be, respectively, greater or less. The following table
illustrates this per share dilution:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share............................. $ 12.00
Pro forma net tangible book value per share as of November 30, 1996....... $ 0.79
Pro forma increase per share attributable to new investors................ 2.51
---------
Pro forma net tangible book value per share as of November 30, 1996 after
offering.................................................................. 3.30
---------
Pro forma net tangible book value dilution per share to new investors....... $ 8.70
---------
---------
</TABLE>

The following table summarizes on a pro forma basis as of November 30, 1996,
after giving effect to the automatic conversion of all outstanding shares of
Preferred Stock into Common Stock in connection with the offering made hereby,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price paid per share by
existing shareholders and by new investors (assuming an initial public offering
price of $12.00 per share):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)..................... 9,201,126 75.4% $ 13,016,946 26.6% $ 1.41
New investors................................ 3,000,000 24.6 36,000,000 73.4 $ 12.00
------------- ----- -------------- -----
Total.................................... 12,201,126 100.0% $ 49,016,946 100.0%
------------- ----- -------------- -----
------------- ----- -------------- -----
</TABLE>

- --------------

(1) Excludes (a) 571,513 shares of Common Stock issued pursuant to the exercise
of options between December 1, 1996 and February 21, 1997 with a weighted
average exercise price of $2.41 per share and (b) 1,027,800 shares of Common
Stock issuable pursuant to the exercise of options outstanding at February
21, 1997 at a weighted average exercise price of $4.92 per share, of which
options to purchase 298,873 shares were then exercisable. If such shares are
included or such options are exercised, there will be further dilution to
the new investors. Also excludes 1,212,020 shares reserved for issuance
under the Company's 1997 Stock Incentive Plan, 1983 Incentive Stock Option
Plan and Outside Directors' Stock Option Plan. Includes as outstanding 3,035
shares of Common Stock repurchased by the Company since November 30, 1996.
See "Capitalization," "Management--Director Compensation" and "--Benefit
Plans" and "Description of Capital Stock."

14
<PAGE>
CAPITALIZATION

The following table sets forth the pro forma capitalization of the Company
as of November 30, 1996 (i) to give effect to the conversion of all shares of
Preferred Stock into an aggregate of 1,847,627 shares of Common Stock upon the
closing of the offering made hereby (see Note 1 of Notes to Consolidated
Financial Statements) and (ii) as adjusted to give effect to the sale of
3,000,000 shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $12.00 per share and the receipt and
application of the proceeds therefrom, after deducting the estimated
underwriting discount and offering expenses payable by the Company. See "Use of
Proceeds." This information should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto appearing elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
NOVEMBER 30, 1996
-------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
----------- ------------
(IN THOUSANDS)
<S> <C> <C>

Stockholders' equity:

Preferred Stock, $.01 par value, 30,000,000 shares authorized, none outstanding....... -- --

Common Stock, $.01 par value, 100,000,000 shares authorized, 9,201,126 shares issued
and outstanding, pro forma; and 12,201,126 shares issued and outstanding, pro forma
as adjusted(1)...................................................................... $ 92 $ 122

Additional paid-in capital............................................................ 12,925 45,895

Accumulated deficit................................................................... (5,156) (5,156)
----------- ------------

Total stockholders' equity............................................................ 7,861 40,861
----------- ------------

Total capitalization................................................................ $ 7,861 $ 40,861
----------- ------------
----------- ------------
</TABLE>

- --------------

(1) Excludes (a) 571,513 shares of Common Stock issued pursuant to the exercise
of options between December 1, 1996 and February 21, 1997 and (b) 1,027,800
shares of Common Stock issuable pursuant to the exercise of options
outstanding at February 21, 1997, of which options to purchase 298,873
shares were then exercisable. Also excludes 1,212,020 shares reserved for
issuance under the Company's 1997 Stock Incentive Plan, 1983 Incentive Stock
Option Plan and Outside Directors' Stock Option Plan. Includes as
outstanding 3,035 shares of Common Stock repurchased by the Company since
November 30, 1996. See "Management--Director Compensation" and "--Benefit
Plans" and "Description of Capital Stock."

15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus. The selected consolidated statement of
operations data set forth below for the years ended May 31, 1994, 1995 and 1996,
and the consolidated balance sheet data at May 31, 1995 and 1996 are derived
from, and are qualified by reference to, the audited financial statements
included elsewhere in this Prospectus and should be read in conjunction with
those consolidated financial statements and notes thereto. The selected
consolidated statement of operations data presented below for the years ended
May 31, 1992 and 1993 and the consolidated balance sheet data at May 31, 1992,
1993 and 1994 are derived from audited financial statements not included
elsewhere in this Prospectus. The selected consolidated financial data as of and
for the six months ended November 30, 1995 and 1996 have been derived from
unaudited financial statements of the Company which, in the opinion of
management, include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial information set forth
therein. The results for the six months ended November 30, 1996 are not
necessarily indicative of the results to be expected for the full year or for
any future period.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License............................................. $ 14,985 $ 20,790 $ 19,165 $ 25,050 $27,078 $ 11,849 $15,133
Service............................................. 6,219 8,080 9,949 12,847 15,193 7,303 9,621
--------- --------- --------- --------- --------- --------- ---------
Total revenues...................................... 21,204 28,871 29,114 37,897 42,271 19,152 24,754
Cost of revenues:
License............................................. 3,335 3,101 4,997 4,439 4,913 1,810 2,720
Service............................................. 3,445 3,868 5,479 5,622 5,980 2,838 3,649
--------- --------- --------- --------- --------- --------- ---------
Total cost of revenues.............................. 6,780 6,969 10,476 10,061 10,893 4,648 6,369
--------- --------- --------- --------- --------- --------- ---------
Gross profit...................................... 14,424 21,901 18,638 27,836 31,378 14,504 18,385
Operating expenses:
Sales and marketing................................. 9,472 11,582 14,331 14,013 14,477 6,653 9,714
Research and development............................ 2,769 6,021 10,676 9,308 8,876 4,258 4,489
General and administrative.......................... 2,470 2,969 3,607 3,886 4,763 2,178 2,433
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses.......................... 14,711 20,572 28,614 27,207 28,116 13,089 16,636
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)............................... (287) 1,329 (9,976) 629 3,262 1,415 1,749
Total other expenses (income)......................... 112 306 381 260 (100) (39) (202)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes................. (399) 1,023 (10,357) 369 3,362 1,454 1,951
Income tax provision (benefit)(1)..................... 8 102 (27) 45 (4,099) 3 750
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before cumulative effect of change
in accounting principle......................... (407) 921 (10,330) 324 7,461 1,451 1,201
Cumulative effect of a change in accounting
principle........................................... -- -- -- (200) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................................. $ (407) $ 921 $ (10,330) $ 124 $ 7,461 $ 1,451 $ 1,201
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma net income per share(2)(3).................. $ .77 $ .12
Pro forma weighted average number of shares and common
equivalent shares outstanding(2)(3)................. 9,743,969 9,840,336
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER
30, 1996
MAY 31, ---------
-----------------------------------------------------
1992 1993 1994 1995 1996 ACTUAL
--------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Assets:
Cash and cash equivalents............................ $ 399 $ 1,351 $ 119 $ 2,892 $ 8,256 $ 8,648
Total assets......................................... 7,618 13,407 8,845 15,327 24,361 24,150
Working capital........................................ (4,521) (5,096) (15,400) (4,992) 1,012 2,207
Liabilities and equity:
Deferred revenues.................................... 2,574 4,952 6,897 8,027 9,018 7,775
Long-term debt and capital lease obligations, less
current portion.................................... 1,249 984 1,281 750 20 --
Mandatorily redeemable convertible preferred stock... -- -- -- 8,300 11,502 11,502
Total stockholders' equity(4)........................ (2,173) (1,011) (11,303) (9,066) (4,812) (3,641)

PRO
FORMA(3)
-----------

<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Assets:
Cash and cash equivalents............................ $ 8,648
Total assets......................................... 24,150
Working capital........................................ 2,207
Liabilities and equity:
Deferred revenues.................................... 7,775
Long-term debt and capital lease obligations, less
current portion.................................... --
Mandatorily redeemable convertible preferred stock... --
Total stockholders' equity(4)........................ 7,861
</TABLE>

16
<PAGE>
- --------------

(2) For an explanation of the determination of the number of shares used in
computing pro forma net income per share, see Note 1 of Notes to
Consolidated Financial Statements.

(4) The Company has not declared or paid any dividend for any of the periods
presented. See "Dividend Policy."

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, and the other financial
information included elsewhere in this Prospectus.

OVERVIEW

Great Plains Software is a leading provider of Microsoft Windows NT
client/server financial management software for mid-sized businesses. The
Company's award-winning products and services automate essential accounting
functions and enhance the strategic value of financial information. The
Company's products and services are sold and implemented exclusively by its
extensive network of Partners throughout the United States, Canada and select
international markets.

In 1982, the Company began selling Great Plains Accounting (the "heritage
product"), which is currently a DOS- and Macintosh-based financial management
software system for local area network (LAN) personal computers. In anticipation
of the general market shift to Windows and client/server technologies, the
Company began developing client/server financial management software systems,
and in February 1993, released Dynamics. Dynamics is the Company's client/server
product for Corporate Market businesses that need a Windows client/server system
that is flexible and cost-effective, but does not require information technology
(IT) personnel dedicated to database administration. In July 1994, the Company
released Dynamics C/S+, a Windows client/server system for Corporate Market
businesses that have high volume processing requirements, complex financial
management needs and formal IT departments.

The Company made significant investments in research and development in the
early 1990s to launch its Windows client/server products. In addition, the
Company has made a significant investment in building an experienced and
knowledgeable Partner distribution network to market, implement, support and
service its Dynamics C/S+ and Dynamics products (together, the "client/server
products"). Since the release of the client/server products, the Company's
principal source of revenues has shifted from the heritage product to the
client/server products. Client/server products accounted for 13.8%, 40.2%, 61.4%
and 79.7% of the Company's total revenues for fiscal 1994, 1995 and 1996 and the
six months ended November 30, 1996, respectively.

The Company's revenues are derived from two principal sources: software
license fees ("license fees") and fees for maintenance, technical support,
training and consulting services (collectively, "service fees"). The Company
recognizes revenue in accordance with Statement of Position 91-1, Software
Revenue Recognition. See Note 1 of Notes to Consolidated Financial Statements.
License fee revenues are generally recognized upon shipment of the related
software product. Fees for the Company's maintenance and support plans are
recorded as deferred revenue when billed to the customer and recognized ratably
over the term of the maintenance and support agreement, which is typically one
year. Fees for the Company's training and consulting services are recognized at
the time the services are performed.

The Company's client/server customers are required to purchase a one-year
maintenance plan at the time the product is acquired. A majority of the
client/server customers renew the maintenance plan after the initial term. Under
the maintenance plan, the Company provides client/server customers with product
upgrades in addition to online assistance and information. The Company's
heritage product customers, on the other hand, are not required to purchase a
maintenance plan at the time the product is acquired. In addition, the optional
heritage product maintenance plan does not include significant product upgrades.
The Company has historically released significant upgrades of its heritage
product approximately every two years. Prior to fiscal 1996, when heritage
product revenues represented the principal source of the Company's revenues, the
release of a significant upgrade of the heritage product

18
<PAGE>
had a positive impact on revenues in the quarters following release. As a result
of the shift to client/server products as the Company's principal source of
revenues, the Company expects to experience less fluctuation in total revenues
in the event significant upgrades of its heritage product are released.

The Company currently sells its products outside the United States and
Canada through international Partners and a subsidiary located in the United
Kingdom to markets in the following geographic regions: Western and Eastern
Europe, Australasia, Southern Africa, the Middle East and Southeast Asia. The
Company's client/server products have been sold in approximately 50 countries.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of
total revenues represented by certain items reflected in the Company's
consolidated statement of operations.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------- --------------------
1994 1995 1996 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
License...................................................... 65.8% 66.1% 64.1% 61.9% 61.1%
Service...................................................... 34.2 33.9 35.9 38.1 38.9
--------- --------- --------- --------- ---------
Total revenues............................................. 100.0 100.0 100.0 100.0 100.0
--------- --------- --------- --------- ---------
Cost of revenues:
License...................................................... 17.2 11.7 11.6 9.4 11.0
Service...................................................... 18.8 14.9 14.2 14.9 14.7
--------- --------- --------- --------- ---------
Total cost of revenues..................................... 36.0 26.6 25.8 24.3 25.7
--------- --------- --------- --------- ---------
Gross margin............................................... 64.0 73.4 74.2 75.7 74.3
--------- --------- --------- --------- ---------
Operating expenses:
Sales and marketing.......................................... 49.2 37.0 34.2 34.7 39.2
Research and development..................................... 36.7 24.5 21.0 22.2 18.1
General and administrative................................... 12.4 10.2 11.3 11.4 9.9
--------- --------- --------- --------- ---------
Total operating expenses................................... 98.3 71.7 66.5 68.3 67.2
--------- --------- --------- --------- ---------
Operating income (loss)........................................ (34.3) 1.7 7.7 7.4 7.1
Income tax provision (benefit)................................. (0.1) 0.1 (9.7) 0.0 3.0
Net income (loss).............................................. (35.5)% 0.3% 17.6% 7.6% 4.9%
</TABLE>

REVENUES

REVENUES. Revenues increased from $29.1 million in fiscal 1994 to $37.9
million in fiscal 1995 and to $42.3 million in fiscal 1996, representing
increases of 30.2% and 11.5%, respectively. Revenues increased from $19.2
million for the six months ended November 30, 1995 to $24.8 million for the six
months ended November 30, 1996, representing an increase of 29.2%. These
increases in revenues were primarily due to increased demand for the Company's
client/server products and related service fees.

19
<PAGE>
The following table sets forth for the periods indicated client/server and
heritage product revenues, each as a percentage of total revenues:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------- ------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Client/server product revenues............................. 13.8% 40.2% 61.4% 54.8% 79.7%
Heritage product revenues.................................. 86.2 59.8 38.6 45.2 20.3
</TABLE>

Client/server product revenues, including license and service fees,
increased from $4.0 million in fiscal 1994 to $15.2 million in fiscal 1995 and
to $25.9 million in fiscal 1996, representing increases of 277.7% and 70.4%,
respectively. Client/server product revenues increased from $10.5 million for
the six months ended November 30, 1995 to $19.7 million for the six months ended
November 30, 1996, representing an increase of 88.1%.

The increase in client/server product revenues was offset, in part, by a
decrease in revenues from the Company's heritage product. Heritage product
revenues decreased from $25.1 million in fiscal 1994 to $22.7 million in fiscal
1995 and to $16.4 million in fiscal 1996, representing decreases of 9.6% and
28.0%, respectively. Heritage product revenues decreased from $8.7 million for
the six months ended November 30, 1995 to $5.0 million for the six months ended
November 30, 1996, representing a decrease of 42.0%. The decrease in heritage
product revenues was primarily due to a decrease in demand for DOS- and
Macintosh-based financial management software, which reflects the broader market
trend toward Windows and client/server computing.

The Company's international revenues increased from $2.0 million in fiscal
1994 to $4.1 million in fiscal 1995 and to $4.4 million in fiscal 1996,
representing 6.9%, 10.8% and 10.4% of total revenues, respectively. In addition,
international revenues increased from $1.5 million for the six months ended
November 30, 1995 to $3.6 million for the six months ended November 30, 1996,
representing 7.8% and 14.5% of total revenues, respectively. These increases
resulted from the addition of distribution arrangements in international
markets.

LICENSE. Total license fee revenues increased from $19.2 million in fiscal
1994 to $25.1 million in fiscal 1995 and to $27.1 million in fiscal 1996,
representing increases of 30.7% and 8.1%, respectively. Total license fee
revenues increased from $11.8 million for the six months ended November 30, 1995
to $15.1 million for the six months ended November 30, 1996, representing an
increase of 27.7%. These increases in total license fee revenues are largely
attributable to increased market acceptance of the Company's client/server
products and a broader client/server product offering. The Company added to its
client/server product offering with the release of Dynamics C/S+ in July 1994,
the release of a Microsoft SQL Server edition of Dynamics C/S+ in April 1996 and
the release of additional functionality and applications for the SQL Server
edition in November 1996. Moreover, since the release of the Company's
client/server products, the Company has increased its sales, marketing and
service capacity. These factors have led to both an increase in the number of
client/server software licenses and an increase in the average revenues derived
from individual client/server licenses.

The increase in client/server product license fee revenues was offset, in
part, by a decrease in heritage product license fee revenues. The decrease in
heritage product license fees is primarily a result of decreased demand for DOS-
and Macintosh-based financial management software. In addition, the Company has
historically released significant upgrades of its heritage product approximately
every two years, which had a positive impact on heritage product license fee
revenues in the quarters following release. A significant upgrade of the
heritage product was released in February 1997, which the Company expects to
market principally to the Company's installed base of heritage product
customers. Notwithstanding the positive impact on revenues this release may
have, the Company expects that overall heritage product license fee revenues
will continue to decline. In addition, the Company also

20
<PAGE>
anticipates that fluctuations in heritage product license fee revenues due to
new releases will have a reduced impact on total license fee revenues as
heritage product license fee revenues become a smaller portion of total license
fee revenues.

SERVICE. Service revenues increased from $9.9 million in fiscal 1994 to
$12.8 million in fiscal 1995 and to $15.2 million in fiscal 1996, representing
increases of 29.1% and 18.3%, respectively. In addition, service revenues
increased from $7.3 million for the six months ended November 30, 1995 to $9.6
million for the six months ended November 30, 1996, representing an increase of
31.7%. The increase in the number of licenses for client/server products has
resulted in increases in service revenues. Service revenues as a percentage of
total revenues were 34.2%, 33.9% and 35.9% for fiscal 1994, 1995 and 1996,
respectively. Similarly, service revenues as a percentage of total revenues were
38.1% and 38.9% for the six months ended November 30, 1995 and 1996,
respectively. The increases in service revenues largely reflect increases in the
installed base of customers and renewals of existing maintenance and support
contracts.

COSTS AND EXPENSES

COST OF LICENSE FEES. Cost of license fees consists primarily of the costs
of product manuals, media, shipping and royalties paid to third parties. Cost of
license fees decreased from $5.0 million in fiscal 1994 to $4.4 million in
fiscal 1995 and then increased to $4.9 million in fiscal 1996, representing
26.1%, 17.7% and 18.1% of total license fee revenues in fiscal 1994, 1995 and
1996, respectively. In addition, cost of license fees increased from $1.8
million for the six months ended November 30, 1995 to $2.7 million for the six
months ended November 30, 1996, representing 15.3% and 18.0% of total license
fee revenues for such periods, respectively. The decrease in the cost of license
fees as a percentage of total license fee revenues in fiscal 1995 is a result of
the change in the Company's product mix from the heritage product to the
client/server products. The Company's client/server products generate higher
license fees per individual license than its heritage product, and, as a result,
the cost of license fees as a percentage of total product license fee revenues
is lower for the Company's client/server products than for its heritage product.
In addition, in fiscal 1995, the Company reduced costs for product packaging and
documentation. The increases in cost of license fees in fiscal 1996 and for the
six months ended November 30, 1996 are primarily attributable to the overall
growth in license fee revenues and an increase in royalties paid to third party
vendors. The increase in royalties is primarily due to a new royalty arrangement
entered into in the second half of 1996 with a third party for a report writer
application that is bundled with the Company's client/server products. The
Company anticipates that cost of license fees will increase in dollar amount as
license fee revenues increase, but remain relatively constant as a percentage of
total license fee revenues. However, in the event that the Company enters into
additional royalty arrangements in the future, cost of license fees as a
percentage of total license fee revenues may increase.

COST OF SERVICES. Cost of services consists of the costs of providing
telephone support, training and consulting services to customers and Partners.
Cost of services increased from $5.5 million in fiscal 1994 to $5.6 million in
fiscal 1995 and to $6.0 million in fiscal 1996, representing 55.1%, 43.8% and
39.4% of total service revenues, respectively. In addition, cost of services
increased from $2.8 million for the six months ended November 30, 1995 to $3.6
million for the six months ended November 30, 1996, representing 38.9% and 37.9%
of total service revenues, respectively. The increase in cost of services is
primarily due to the expansion of the Company's customer and Partner service
resources. Cost of services as a percentage of service revenues has decreased as
a result of improved efficiency in operations. The Company anticipates that cost
of services will increase in dollar amount as service revenues increase, but
will remain relatively constant as a percentage of service revenues.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions and travel and promotional expenses. Sales and marketing
expenses have remained relatively constant

21
<PAGE>
at $14.3 million in fiscal 1994, $14.0 million in fiscal 1995 and $14.5 million
in fiscal 1996, representing 49.2%, 37.0% and 34.2% of total revenues,
respectively. Sales and marketing expenses increased from $6.7 million for the
six months ended November 30, 1995 to $9.7 million for the six months ended
November 30, 1996, representing 34.7% and 39.2% of total revenues, respectively.
The decrease in sales and marketing expenses as a percentage of revenues from
fiscal 1994 through fiscal 1996 reflects an increase in sales and marketing
productivity and a corresponding increase in revenues derived from the Company's
client/server products. Since the beginning of fiscal 1997, however, the Company
has increased spending on sales and marketing to promote the Microsoft SQL
Server edition of its Dynamics C/S+ product. The increase in sales and marketing
expenses and sales and marketing expenses as a percentage of total revenues
reflects the hiring of additional sales and marketing personnel, expanded
promotional activities and increased commissions relating to the increase in
client/server product revenues. In addition, the Company has increased sales and
marketing expenditures related to the operation of a United Kingdom sales
subsidiary that was acquired in February 1996.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of compensation of development personnel and depreciation of
equipment. The Company has made significant investments in research and
development with total expenses of $10.7 million in fiscal 1994, $9.3 million in
fiscal 1995 and $8.9 million in fiscal 1996, representing 36.7%, 24.5% and 21.0%
of total revenues, respectively. Research and development expenses remained
relatively constant at $4.3 million for the six months ended November 30, 1995
and $4.5 million for the six months ended November 30, 1996, representing 22.2%
and 18.1% of total revenues, respectively. These research and development
expenses were primarily related to the Company's efforts to release additional
applications for its client/ server products and the Microsoft SQL Server
edition of Dynamics C/S+. More recently, the Company has devoted resources to
the development of Internet-enabled applications. The Company anticipates that
it will continue to devote substantial resources to its research and development
efforts and that research and development expenses will increase in dollar
amount in future periods.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries of
executive, financial, human resource and information services personnel as well
as outside professional fees. General and administrative expenses increased from
$3.6 million in fiscal 1994 to $3.9 million in fiscal 1995 and to $4.8 million
in fiscal 1996, representing 12.4%, 10.2% and 11.3% of total revenues,
respectively. General and administrative expenses increased from $2.2 million
for the six months ended November 30, 1995 to $2.4 million for the six months
ended November 30, 1996, representing 11.4% and 9.9% of total revenues,
respectively. These increases in dollar amounts were primarily due to increased
staffing and related expenses necessary to manage and support the expansion of
the Company's operations. The Company believes that its general and
administrative expenses will increase in dollar amount in the future to support
the expansion of its operations and as a result of expenses associated with
being a public company.

PROVISION (BENEFIT) FOR INCOME TAXES. Provision (benefit) for income taxes
was ($27,000), $45,000, and $(4,099,000) in fiscal 1994, 1995 and 1996,
respectively. For the six months ended November 30, 1995 and 1996, the Company's
provision for income taxes was $3,000 and $750,000, respectively. In fiscal 1994
and 1995, the Company's provision or benefit included the federal alternative
minimum tax and state income taxes. The Company incurred a net loss in fiscal
1994 and, consequently, recorded no federal income tax expense for such period.
The Company had net operating loss carryforwards for federal income tax purposes
of approximately $3.0 million as of May 31, 1996. Prior to May 1996, the Company
determined that the realization of the net operating loss carryforward and other
deferred tax assets did not meet the recognition criteria under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," and,
accordingly, a valuation allowance was established to reserve the net operating
loss carryforward and other deferred tax assets. For fiscal 1996, the Company
recorded a $4.1 million tax benefit related to the reversal of the valuation
allowance. This reversal was based on management's analysis of current levels of
earnings and its future outlook, which

22
<PAGE>
increased the likelihood of the Company realizing its deferred tax assets; thus
the valuation allowance was no longer deemed necessary. In the six months ended
November 30, 1996, the Company recorded an income tax provision consistent with
federal and state statutory income tax rates. The Company expects that the
income tax provision will continue to reflect the statutory tax rates. See Note
9 of Notes to Consolidated Financial Statements.

SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth certain unaudited consolidated financial
information for each of the four quarters in the Company's fiscal year ended May
31, 1996 and for the first two quarters in the Company's fiscal year ending May
31, 1997. In management's opinion, this unaudited quarterly information has been
prepared on the same basis as the audited consolidated financial statements and
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information for the quarters presented,
when read in conjunction with the audited consolidated financial statements and
notes thereto included elsewhere in this Prospectus. The Company believes that
quarter-to-quarter comparisons of its financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance.

SELECTED QUARTERLY OPERATING RESULTS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------
AUGUST 31, NOVEMBER 30, FEBRUARY 29, MAY 31, AUGUST 31, NOVEMBER 30,
1995 1995 1996 1996 1996 1996
----------- -------------- ------------ --------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License.......................... $ 5,535 $ 6,314 $ 5,943 $ 9,286 $ 6,655 $ 8,478
Service.......................... 3,348 3,954 4,114 3,777 4,413 5,208
----------- -------------- ------------ --------- ----------- --------------
Total revenues................. 8,883 10,268 10,057 13,063 11,068 13,686
----------- -------------- ------------ --------- ----------- --------------
Cost of revenues:
License.......................... 805 1,004 1,209 1,895 1,170 1,550
Service.......................... 1,330 1,509 1,522 1,619 1,637 2,012
----------- -------------- ------------ --------- ----------- --------------
Total cost of revenues......... 2,135 2,513 2,731 3,514 2,807 3,562
----------- -------------- ------------ --------- ----------- --------------
Gross profit................... 6,748 7,755 7,326 9,549 8,262 10,124
----------- -------------- ------------ --------- ----------- --------------
Operating expenses:
Sales and marketing.............. 2,867 3,786 3,473 4,351 4,054 5,660
Research and development......... 1,998 2,260 2,093 2,525 2,172 2,318
General and administrative....... 994 1,184 1,218 1,367 1,224 1,209
----------- -------------- ------------ --------- ----------- --------------
Total operating expenses....... 5,859 7,230 6,784 8,243 7,450 9,187
----------- -------------- ------------ --------- ----------- --------------
Operating income................... 889 525 542 1,306 812 937
Other income....................... 3 37 8 52 83 119
----------- -------------- ------------ --------- ----------- --------------
Income before income taxes..... 892 562 550 1,358 895 1,056
Income tax provision (benefit)..... 3 -- -- (4,102) 344 406
----------- -------------- ------------ --------- ----------- --------------
Net income......................... $ 889 $ 562 $ 550 $ 5,460 $ 551 $ 650
----------- -------------- ------------ --------- ----------- --------------
----------- -------------- ------------ --------- ----------- --------------
</TABLE>

The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Such fluctuations may result in volatility in the price
of the Company's Common Stock. The Company establishes its expenditure levels

23
<PAGE>
based on its expectations as to future revenue, and, if revenue levels are below
expectations, expenses can be disproportionately high. As a result, a drop in
near term demand for the Company's products could significantly affect both
revenues and profits in any quarter. In the future, the Company's operating
results may fluctuate for this reason or as a result of a number of other
factors, including increased expenses, timing of product releases, increased
competition, variations in the mix of sales, announcements of new products by
the Company or its competitors and capital spending patterns of the Company's
customers.

The Company's business has experienced and may continue to experience
seasonality. In recent years, the Company has recognized a greater percentage of
its revenue and operating income in its fourth fiscal quarter than in any of the
first three quarters due to a number of factors, including the timing of product
releases and the Company's sales incentive programs. Moreover, due to fiscal
year-end sales incentive programs, the Company has historically recognized less
revenue and operating income in its first fiscal quarter than in the other
quarters.

As a result of these factors, there can be no assurance that the Company
will be able to maintain profitability on a quarterly basis.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically funded operations primarily through cash
provided by operations and the sale of equity securities. Currently, the Company
meets its working capital needs and capital equipment needs with cash provided
by operations.

Cash provided (used) by operating activities was ($1.7) million, ($2.4)
million and $8.3 million for fiscal 1994, 1995 and 1996, respectively. The
increase in cash used by operations in fiscal 1995 was primarily due to an
increase in accounts receivable and a decrease in accounts payable, offset, in
part, by improved profitability. Accounts receivable increased in fiscal 1995
due to the release of a significant, new version of the Company's heritage
product in April 1995. The increase in cash provided by operations in fiscal
1996 was primarily due to increased profitability of the Company's operations
and an increase in deferred revenues. Cash provided by operating activities for
the six-month periods ended November 30, 1995 and 1996 decreased from $2.6
million to $2.1 million. The decrease resulted primarily from a decrease in
deferred revenues.

The Company's investing activities used cash of $1.7 million, $1.2 million
and $2.1 million in fiscal 1994, 1995 and 1996, respectively. For the six months
ended November 30, 1995 and 1996, cash used for investing activities was $1.0
million and $1.3 million, respectively. The principal use of cash in investing
activities was for capital expenditures related to the acquisition of computer
equipment required to support expansion of the Company's operations.

The Company anticipates building or leasing a new facility for occupancy
beginning in fiscal 1999. The Company currently expects that the new facility,
together with related furniture, fixtures and equipment, will cost approximately
$15.0 million, and expects to finance this amount with debt financing or through
a sale and leaseback transaction. If debt financing is used to finance the
facility, the Company anticipates that it will also use $3.0 million to $5.0
million in cash as an equity investment to partially fund the cost of the
facility. If a sale and leaseback transaction is used to finance the facility,
the Company anticipates that no material equity investment will be made to fund
the facility. The building will be located close to the Company's current
facilities and will be used to consolidate employees into one building for
improved productivity, as well as to accommodate anticipated expansion of the
Company's operations.

The Company's financing activities provided (used) cash of $2.2 million,
$6.3 million and ($.8) million during fiscal 1994, 1995 and 1996 respectively.
In fiscal 1995, the cash provided by financing activities included $8.1 million
received in connection with the sale of Series B Preferred Stock and $2.0

24
<PAGE>
million from the sale of Common Stock to employees, partially offset by $3.8
million of payments on the Company's outstanding line of credit and notes
payable. For the six months ended November 30, 1995 and 1996, the Company's
financing activities used cash of $.4 million and $.4 million, respectively. For
fiscal 1996 and the six months ended November 30, 1995 and 1996, financial
activities used cash primarily for payments on capital lease obligations and
notes payable.

The Company's sources of liquidity at November 30, 1996 consisted
principally of cash and cash equivalents of $8.6 million. The Company also has a
$5.0 million revolving line of credit facility with a bank. The line of credit
expires in November 1997 and borrowings made thereunder are subject to certain
covenants. No amounts were outstanding under the line of credit at November 30,
1996. See Note 6 to Consolidated Financial Statements.

The Company believes that the proceeds from this offering, cash generated
from operations and amounts available under the line of credit will be
sufficient to fund its operations for the foreseeable future.

25
<PAGE>
BUSINESS

INDUSTRY BACKGROUND

In recent years, businesses of all sizes have been subjected to heightened
competitive pressures and rapidly changing market conditions. These pressures
and conditions have challenged businesses to increase the speed with which they
make decisions, establish closer relationships with customers and suppliers,
raise the productivity of employees throughout the business and reduce costs.
Many mid-sized and larger businesses are meeting these challenges by leveraging
the increased functionality, flexibility and access to information offered by
financial management systems based on client/server technologies.

In the past, information technology architectures, particularly the
centralization of information on mainframe systems and minicomputers, prevented
businesses from using their financial management systems for purposes other than
maintaining financial records and processing accounting transactions. These
systems were based on a centralized processing and reporting model which was
inflexible and did not allow effective integration with other systems or ready
access to information.

With the advent of client/server technologies, however, businesses are
better able to use information from their financial management systems to
respond to rapidly changing market conditions. The acceptance of client/server
systems has been driven by their ability to combine the ease of use and data
accessibility of personal computers with the high-volume processing and data
storage capabilities of minicomputer and mainframe systems. Client/server-based
financial management systems offer real-time information access and distributed
processing which enable businesses to increase the speed of decision making and
enhance employee productivity. When integrated with Internet technologies,
client/server systems provide employees throughout the business and key
customers and suppliers with access to critical information.

Businesses employing client/server financial management systems can
generally be grouped into two market segments: (i) the corporate or middle
market (the "Corporate Market") and (ii) the enterprise or high-end market (the
"Enterprise Market"). The Corporate Market generally consists of businesses with
$1 million to $250 million in revenues and 10 to 2,500 employees. In contrast,
the Enterprise Market generally consists of companies with revenues in excess of
$250 million and more than 2,500 employees. Although many Corporate Market
businesses have formal information technology (IT) departments, Corporate Market
companies typically have fewer IT resources than Enterprise Market companies. In
addition, whereas Corporate Market businesses have historically employed
financial management systems based on LANs, minicomputers and mainframes,
Enterprise Market companies have principally used mainframe financial management
systems.

Businesses in the Enterprise Market were the first to adopt client/server
architecture as the standard for new implementations of financial management
systems. More recently, businesses in the Corporate Market have also begun to
demand financial management systems based on client/server technology. However,
client/server financial management systems designed for the Enterprise Market
have not been widely implemented by Corporate Market businesses because they are
generally too complex and take too long and cost too much to implement.
Furthermore, the implementation of client/server financial management systems
designed for the Enterprise Market often requires significant business process
re-engineering that is overly burdensome for Corporate Market businesses,
especially smaller Corporate Market businesses.

26
<PAGE>
CORPORATE MARKET FINANCIAL MANAGEMENT SYSTEM NEEDS

Corporate Market businesses have a number of key business requirements that
are different from those of Enterprise Market businesses. The Company believes
that Corporate Market businesses require a client/server financial management
system that is cost-effective, designed for Microsoft technologies, easy to
customize and use and scalable.

Corporate Market businesses generally have fewer IT resources than
businesses in the Enterprise Market. As a result, these businesses require
cost-effective software solutions from vendors that can provide a substantial
amount of assistance during the software system selection and implementation
process as well as ongoing local support and service. These businesses also
require systems that can be rapidly implemented and are easy to learn, use and
modify.

In order to ensure ongoing compatibility, supportability and ease of
maintenance, many Corporate Market businesses are standardizing on Microsoft
technologies, most notably Windows NT, Windows 95 and SQL Server. For example,
according to International Data Corporation estimates, Windows NT is the fastest
growing server operating system for new client/server applications. Many
Corporate Market businesses are requesting a financial management system that
takes full advantage of Microsoft technologies. Systems that are 32-bit and
native to Windows currently offer the optimal Microsoft-standard solution.

Many Corporate Market businesses experience rapid growth and have evolving
business models. These businesses require financial management systems that can
be customized quickly and cost-effectively to accommodate the constantly
changing nature of their business systems and procedures. The Company believes
that financial management systems must allow Corporate Market businesses to
easily modify windows, to integrate third-party solutions and to quickly write
and seamlessly integrate custom applications.

Finally, Corporate Market companies require financial management systems
that can be scaled up as their businesses grow. This requirement is best met by
products that offer broad functionality and scalable processing capabilities,
and that have an open and flexible architecture that can easily incorporate
additional technologies, including Internet technologies which can extend the
availability of information from the financial management system to employees
across the business and to key customers and suppliers.

THE GREAT PLAINS SOFTWARE SOLUTION

The Company designs, develops, markets, sells and supports its client/server
financial management products based on the following principles:

OPTIMIZE PRODUCTS FOR LEADING TECHNOLOGIES. The Company has consistently
focused on identifying leading technologies and integrating them into its
products. In particular, the Company's products are designed for Microsoft
technologies, including Windows NT, Windows 95, SQL Server, Internet Explorer,
Internet Information Server, Visual Basic, Visual Basic for Applications and
C++. Due to their flexible 32-bit open architecture, the Company's products can
also be integrated with technologies from other leading suppliers, such as
Netscape, Citrix Systems, IBM/Lotus and Novell.

LEVERAGE PARTNER NETWORK. The Company has made a significant investment in
building an experienced, knowledgeable and highly motivated Partner network,
which consists of VARs, systems integrators, Big Six and other accounting firms,
ISVs and specialized software consultants. The Company's products are sold and
implemented exclusively through its extensive network of Partners. The Company
believes that its Partners have a significant influence over product choices by
customers, and that the Company's relationships with its Partners are essential
to the Company's success. Through its Partner network, the Company is able to
provide customers with trained and knowledgeable software professionals who are
available locally to implement its systems as well as provide ongoing service
and

27
<PAGE>
technical support. Many of the Partners customize the Company's products to fit
individual business needs and develop software applications that integrate with
and extend the functionality of the Company's products.

PROVIDE AWARD-WINNING SERVICE AND TECHNICAL SUPPORT. The Company believes
that prompt and effective service and technical support are essential elements
of a complete financial management software solution, and dedicates significant
resources to delivering timely, reliable and cost-effective service to its
customers and Partners. The Company has received numerous industry awards for
its customer and Partner service, including the 1996 Positive Performer Grand
National Award for excellence in customer service from Inc. magazine and MCI
Communications.

MEET BROAD SPECTRUM OF CORPORATE MARKET NEEDS. The Company's client/server
product lines, Dynamics C/S+ and Dynamics, are designed to meet the broad
spectrum of financial management needs of the Corporate Market. Dynamics C/S+ is
designed for businesses in the Corporate Market that have high volume processing
requirements, complex financial management needs and formal IT departments.
Dynamics is designed for Corporate Market businesses that need a Windows
client/server solution that is cost-effective and flexible, but does not require
IT personnel dedicated to database administration. Whereas Dynamics C/S+ is
designed for Corporate Market businesses that are typically migrating their
financial management systems from minicomputers and mainframes, Dynamics is
designed for businesses that are migrating from LANs to client/server systems.
The Company's customers can easily and cost-effectively upgrade from Dynamics to
Dynamics C/S+ as their businesses grow and financial management software needs
evolve.

ENABLE RAPID IMPLEMENTATION, EASE OF USE AND CUSTOMIZATION. The Company has
designed its software for rapid implementation. The Company's products, which
are based on the Windows-interface standard, are easy to learn and use. The
Company also offers a suite of tools that allow its customers and Partners to
easily modify and create windows and reports, to integrate third-party solutions
and to quickly write and seamlessly integrate custom applications. In addition,
customers and Partners can accomplish similar customization using
industry-standard, third-party tools, such as Microsoft Visual Basic and Visual
Basic for Applications, Crystal Reports and FRx financial report writer.

IMPROVE INFORMATION ACCESS. The architecture and design of the Company's
client/server products allow customers to quickly and easily access real-time
information. Instead of having to print and analyze reports to locate data,
customers can use the extensive "drill down" capabilities of the products to
gain online access to information contained throughout the financial management
system. In addition, customers can easily transfer information from the
Company's client/server products to desktop applications, such as Microsoft Word
and Excel, for analysis and dissemination.

INTEGRATE AND LEVERAGE INTERNET TECHNOLOGIES. The Company's products employ
Internet technologies to facilitate financial reporting, analysis and
communication both within an organization and with its customers and suppliers.
In addition, Dynamics.Order, the Company's electronic commerce solution, allows
customers of Corporate Market businesses to place and track orders over the
Internet. The Company believes that enabling easy, cost-effective and
security-enhanced communication and information sharing among employees as well
as facilitating order placement with customers are important elements of a
Corporate Market financial management system.

28
<PAGE>
STRATEGY

The Company's strategy is to extend its position as a leading provider of
Microsoft Windows NT client/server financial management systems to the Corporate
Market. The following are the key elements of the Company's strategy:

EXTEND TECHNOLOGY LEADERSHIP. The Company has a strong record of technical
innovation and leadership and intends to continue to invest in the development
of new technologies and products. The Company's client/server product lines,
Dynamics C/S+ and Dynamics, were among the first financial management systems in
the Corporate Market to receive Microsoft Windows 95 (Dynamics C/S+ and
Dynamics) and Microsoft BackOffice (Dynamics C/S+) logo compliance (recognition
from Microsoft that they meet the development criteria for Windows 95 as well as
Microsoft BackOffice technologies, including Windows NT and SQL Server). The
Company believes that its open, componentized, multi-tier client/server
architecture is well-suited for the ongoing integration of new technologies.
This architecture has allowed the Company to be among the first to market
Internet-enabled financial management solutions for Corporate Market businesses.
The Company maintains a research team dedicated to assessing new and emerging
technologies. In addition, the Company intends to maintain its leadership in
providing customization capabilities that are essential to businesses in the
Corporate Market.

EXPAND AND STRENGTHEN PARTNER NETWORK. The Company believes that its
Partner network has been able to penetrate the Corporate Market by providing
high-quality, cost-effective marketing, sales and service. Through its channel
development and recruiting efforts, as well as its training, certification and
performance recognition programs, the Company intends to continue to expand and
strengthen this network. For example, the Company recently instituted a program,
Center for Organizational Excellence (CORE), which offers Partners increased
training, service and support to help them develop and expand their businesses.
The program also provides product and curricula offerings to colleges and
universities designed to increase the number of graduates familiar with the
Company's products. The Company also hosts a number of business and technology
conferences each year, including "Stampede," an annual three-day Partner
conference in Fargo, where the Company is headquartered, that had over 1,000
Partner participants in 1996.

CONTINUE AWARD-WINNING SERVICE AND TECHNICAL SUPPORT. The Company believes
that prompt and effective service and technical support are essential elements
of a complete financial management software system and are vital to maintaining
customer and Partner satisfaction. The Company has received numerous industry
awards for its customer and Partner service, and continues to invest in its
support infrastructure. For example, the Company is expanding its existing
Internet-based technical support to customers and Partners. The Company believes
that its initiatives will further increase the timeliness and effectiveness of
its service and technical support.

SUPPORT DOS-BASED PRODUCTS AND MIGRATE CUSTOMERS TO CLIENT/SERVER. The
Company intends to continue to support customers who use its DOS-based product,
Great Plains Accounting, and to offer specialized pricing programs and tools to
migrate these customers to its client/server products. In addition, the Company
has developed and is marketing migration tools for moving customers from
competitors' DOS-based accounting systems to its client/server financial
management systems.

EXPAND GLOBAL PRODUCT OFFERING AND INFRASTRUCTURE. The Company currently
sells its products through international Partners and a subsidiary located in
the United Kingdom to markets in the following geographic regions: Western and
Eastern Europe, Australasia, Southern Africa, the Middle East and Southeast
Asia. The Company's client/server products have been sold in approximately 50
countries. The Company intends to expand its global infrastructure by entering
into additional international distribution agreements, acquiring certain
existing distributors and pursuing the acquisition of related software products
or companies.

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MAINTAIN GREAT PLAINS SOFTWARE VALUES. Great Plains Software is deeply
committed to developing and sustaining long-term relationships with its
Partners, customers, employees and suppliers. The Company has been built on a
Mission Statement and a set of Shared Values that express this commitment. The
Company believes that a continued commitment to its Mission Statement and these
values results in higher employee, customer and Partner satisfaction.

GREAT PLAINS SOFTWARE MISSION STATEMENT

To improve the lives and business success of Partners and Customers by
providing superior financial management software, services and tools.

GREAT PLAINS SOFTWARE SHARED VALUES

We must:

1. Foster a close relationship with our Partners and Customers that
will result in a better understanding of what they are experiencing;

2. Encourage innovation, independent action, team spirit and personal
growth in all employees;

3. Ensure that everything we do reflects exceptional levels of quality;
and

4. Demonstrate high integrity in all business relationships.

TECHNOLOGY

The Company's products leverage key Microsoft technologies and are based on
the following strategies:

32-BIT OPTIMIZATION FOR WINDOWS NT AND WINDOWS 95. The Company's
client/server products are 32-bit applications optimized for Windows NT and
Windows 95, and are among the few financial management systems that can be
integrated with Visual Basic for Applications, which the Company has licensed
from Microsoft. In addition, as 32-bit applications, the Company's client/server
products are among the few financial management systems that support Windows NT
on both the desktop and the server, which maximizes the performance and fault
tolerance capabilities of Windows NT.

MICROSOFT SQL SERVER OPTIMIZATION. Dynamics C/S+ is optimized for the
latest releases of Microsoft SQL Server and includes over 4,000 stored
procedures to enhance distributed processing, overall performance and data
integrity. The Company's implementation of Microsoft SQL Server and Windows NT
also enhances data accessibility and system scalability.

NATIVE WINDOWS NT AND WINDOWS 95 IMPLEMENTATION. The Company's
client/server products are designed to take full advantage of Windows NT and
Windows 95 capabilities, unlike "screen scraper" products that have a graphical
interface grafted onto DOS-based or legacy software systems. The Company
believes that its design philosophy has resulted in products that are easier to
use and more intuitive because they adhere closely to the same interface
standards as Windows desktop applications. Moreover, as native Windows
applications, the Company's client/server products require less memory and
enable more efficient multi-tasking than screen-scraper products.

COMPONENTIZED FUNCTIONALITY. The business rules, or financial logic, of the
Company's products have been designed and developed into "logic components."
This "componentization" or "object orientation" of the product allows the
Company to use software code multiple times within a product and from product to
product, increasing the speed with which new applications and product extensions
can

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<PAGE>
be developed. The componentized architecture of the Company's products also
allows Company and third-party applications to share a common user interface
thereby creating a seamless and easy to use environment for customers. Moreover,
the Company makes certain components available to ISV Partners, which
facilitates their ability to integrate third party applications into the
Company's client/server products.

MULTI-TIER CLIENT/SERVER ARCHITECTURE. The multi-tier client/server
architecture of the Company's products enhances the processing flexibility and
efficiency of its products by allowing processing to occur on the desktop
computer, the application server or the database server. In addition, this
architecture also enhances scalability and deployment capabilities over wide
area networks and the Internet.

INTERNET INTEGRATION. The Company has deployed and is continuing to develop
Internet products to extend the availability of information from financial
management systems to employees across the business and key customers and
suppliers. The Company's client/server products take advantage of leading
Internet technologies, including Microsoft Internet Explorer, Netscape
Navigator, Microsoft Internet Information Server, FrontPage, ActiveX and Java.

PRODUCTS

The Company's client/server product lines, Dynamics C/S+ and Dynamics,
consist of a suite of financial applications and a suite of customization and
development tools. The Company also offers a DOS- and Macintosh-based product,
Great Plains Accounting.

DYNAMICS C/S+

First released in July 1994, Dynamics C/S+ is the Company's client/server
financial management system for Corporate Market businesses that have high
volume processing requirements, complex financial management needs and formal IT
departments. These businesses require the distributed processing and increased
throughput delivered by Windows NT, Microsoft SQL Server and the multi-tier
architecture of the Company's products. Dynamics C/S+ has received several
industry awards and was one of the first client/server financial management
systems to receive Microsoft Windows 95 and BackOffice logo compliance. The
Dynamics C/S+ implementation of Windows NT allows deployment on either Intel or
Digital's Alpha processor technology.

DYNAMICS

First released in February 1993, Dynamics is the Company's client/server
financial management system for Corporate Market businesses that need a Windows
client/server solution that is flexible and cost-effective, but does not require
IT personnel dedicated to database administration. Dynamics is built on the same
foundation as Dynamics C/S+ and leverages leading Microsoft technologies,
including Microsoft Windows 95, Windows NT and Visual Basic. Dynamics has
received several industry awards and was one of the first client/server
financial management applications to receive Windows 95 logo compliance.

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<PAGE>
The following table provides selected information relating to the Dynamics
C/S+ and Dynamics client/server product lines:

DYNAMICS C/S+ DYNAMICS
--------------------------- ---------------------------
<S> <C> <C>
INITIAL RELEASE DATE July 1994 February 1993
CURRENT VERSION/ 3.15/November 1996 3.2/March 1997
RELEASE DATE
TARGET MARKET:
REVENUES $25 to $250 million $1 to $25 million
EMPLOYEES 250 to 2,500 10 to 250
CLIENT OPERATING SYSTEMS Windows NT Windows NT
Windows 95 Windows 95
Macintosh O/S
SERVER OPERATING SYSTEM(S) Windows NT Windows NT (Intel)
(Intel and Alpha) Novell NetWare
PRIMARY DATABASE Microsoft SQL Server Btrieve Server
AVERAGE SYSTEM CUSTOMER $75,000 $10,000
PURCHASE PRICE
</TABLE>

CLIENT/SERVER PRODUCT FUNCTIONALITY

The Company's client/server product lines, Dynamics C/S+ and Dynamics,
consist of a suite of financial applications and a suite of development and
customization tools. These suites, which are offered across both product lines,
address similar business needs yet provide features and technologies
specifically designed for the distinct requirements of Dynamics C/S+ and
Dynamics customers.

The financial applications offered with both client/server products automate
the critical accounting and distribution functions of Corporate Market
businesses. These applications can be grouped into two categories:

ACCOUNTING APPLICATIONS deliver such essential functionality as general
ledger, accounts receivable, accounts payable, invoicing and payroll. In
addition, one of the Company's Internet applications, Dynamics.View,
provides employees across a business with access to financial information
via a Web browser.

DISTRIBUTION APPLICATIONS provide inventory management, sales order
processing and purchase order processing. In addition, Dynamics.Order, the
Company's electronic commerce application, allows customers of Corporate
Market businesses to place and track orders over the Internet.

The Company's suite of development and customization tools, DynamicTools,
allows customers and Partners to customize and extend the functionality of
Dynamics C/S+ and Dynamics. Key tools in the DynamicTools suite are Dexterity,
Modifier, Visual Basic for Applications, Report Writer, Continuum for Visual
Basic and NetTools. Dexterity enables customers and third party developers to
create applications that seamlessly integrate with, and have the same look and
feel as, the Company's client/server applications. Modifier is used to customize
windows and cursor navigation. The Company's implementation of Visual Basic for
Applications, under license from Microsoft, allows the Company's client/server
products to be integrated with customer-specific or industry-standard
applications or easily customized to fit specific customer needs. Report Writer
allows for the creation and modification of reports. Continuum for Visual Basic
facilitates integration between the Company's client/server products and
Microsoft Visual Basic applications through the use of wizards (online
instruction guides) and point-and-click operations. NetTools facilitates the
integration of the Company's client/server products with leading Internet
technologies.

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GREAT PLAINS ACCOUNTING

The Company's Great Plains Accounting product is available for DOS and
Macintosh operating systems in LAN and single user environments. Great Plains
Accounting includes a suite of financial applications that provides customers
with a broad range of features and functions. The Company's most recent version
of Great Plains Accounting, Version 9.0, released in February 1997, will be
marketed primarily to existing Great Plains Accounting customers. The Company is
actively promoting the migration of its Great Plains Accounting customers to its
client/server products. The Company's revenues from its Great Plains Accounting
product have been declining, and the Company expects that these revenues will
continue to decline in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Revenues."

SALES AND MARKETING

SALES. The Company sells, implements and supports its products exclusively
through its Partner network consisting of VARs, specialized software
consultants, ISVs, systems integrators and Big Six and other accounting firms.
The Company's Partners are independent organizations that perform some or all of
the following functions: sales and marketing; systems implementation and
integration; software development and customization; and ongoing consulting,
training, service and technical support. In many instances, a Partner's primary
source of income is derived from selling, implementing and supporting the
Company's products.

The Company believes that its Partners have a significant influence over
product choices by customers and that its relationships with its Partners are an
essential element in its marketing, sales and implementation efforts. Through
its Partner network, the Company is able to provide customers with trained and
knowledgeable software professionals who are available locally to implement its
systems as well as provide ongoing service and support. Many of the Company's
Partners customize the Company's systems to fit individual business needs and
develop industry-specific software applications that integrate with and extend
the functionality of the Company's products.

The Company actively recruits Partners through channel development groups
and has specialized strategies aimed at recruiting and supporting ISVs and
accounting firms. Partners are required to undergo extensive training and
certification procedures before being authorized to sell and implement the
Company's products and must maintain certain standards and sales volumes to
retain such authorization.

The Company has established cooperative relationships with several
international Partners to further the international distribution of its
products, which involves localizing and translating its products, locating and
training qualified VARs, marketing its products and providing ongoing customer
service and technical support. International Partners typically pay localization
and translation costs for the Company's software in exchange for distribution
rights, while the Company retains ownership of the localized version of the
software. The Company and its international distributors have developed
localized language versions of its client/server products, including Arabic,
Polish, Russian, German and Portuguese, with a Spanish version expected to be
released in the second half of fiscal 1997. In addition, the Company has
developed localized versions for the United Kingdom, Australia, New Zealand,
South Africa and French-speaking Canada. These versions have been modified to
satisfy local accounting or tax requirements and include international features,
such as compatibility with value-added-tax and European Intrastat reporting
requirements, localized charts of accounts, multi-currency capabilities and
transaction code analysis. The Company's product architecture is designed to
facilitate the translation, localization and maintenance of multilingual,
multinational versions.

MARKETING. The Company is focused on building market awareness and
acceptance of the Company and its products as well as on generating qualified
customer and Partner leads. Customer leads are pursued by Partners with
assistance from the Company's sales personnel.

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The Company has a comprehensive marketing strategy with several key
components: image and awareness building, direct marketing to both prospective
and existing customers, a strong Web presence, broad-scale events with strategic
partners and local marketing with Partners. The Company's corporate image
strategy includes national advertising in key financial, business and technology
publications as well as Web-based advertising. The Company's direct marketing
includes ongoing direct mail efforts to existing and prospective customers. For
prospective customers, the Company also offers seminars and self-qualifying
tools to assist them in selecting client/server financial management systems.
Seminars are offered in conjunction with Partners in their local or
industry-specific markets. The Company's Web-based marketing is designed to
generate new leads for the Company. The Company increases product awareness by
sponsoring large scale events and seminars for prospective customers with key
industry partners, such as Microsoft, Digital and IBM. Such events have included
satellite product launch events and video-teleconference-based technical
seminars. Finally, the Company's marketing strategy is designed to take
advantage of the Company's Partner network by including cooperative marketing
programs designed for Partners' local markets.

CUSTOMERS

The Company's client/server products offer functionality and scalability to
suit a wide range of Corporate Market businesses, from fast-growing
entrepreneurial businesses to divisions of large enterprises. In addition, the
Company's client/server products, implemented alone or with an industry-specific
third party application, have been purchased by companies in a wide variety of
industry types, such as:

<TABLE>
<S> <C> <C>
Advertising Healthcare Non-Profit
Broadcasting Hospitality Professional Sports
Computer Software Information Services Publishing
Construction Insurance and Financial Services Retail
Distribution Internet Software and Services Telecommunications
Education Manufacturing Transportation
</TABLE>

CUSTOMER CASE STUDIES

The following case studies illustrate the selection, implementation and use
of Dynamics C/S+ and Dynamics by certain of the Company's customers. Not every
customer implementation of the Company's products achieves the same level of
success.

DOVER CORPORATION CANADA, LTD.

Dover Corporation Canada, Ltd. ("Dover") sells, services and installs
elevators, escalators and industrial conveyor belts throughout Canada. Dover has
approximately 500 employees in its corporate headquarters and 41 branch offices
across Canada. Dover's previous financial management applications were
proprietary and approximately 15 years old. Information flow between the
corporate and branch offices, including accounting and project management
reporting, suffered from a time lag of about 45 days and, as a result,
information available at branch offices often differed from information
available at headquarters.

Dover is replacing its centralized mainframe system with a Dynamics C/S+
solution that will link the financial system in its corporate headquarters with
all 41 branch offices. The system presently has about 110 authorized users, with
more users being added monthly.

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In addition to benefiting from the broad functionality inherent in Dynamics
C/S+, Dover employees across Canada are gaining online access to information in
the Dynamics C/S+ financial management system through a WAN and the Internet.
Furthermore, a Great Plains Software Partner has written an industry-specific
application using DynamicTools which allows Dover to better manage its remote
sales and service force and provide them with real-time integration with
Dynamics C/S+.

PROTECTION ONE ALARM MONITORING, INC.

Protection One Alarm Monitoring, Inc. ("Protection One"), with 953
employees, provides security alarm monitoring services, and sells, installs and
services security alarm systems for residential financial management and small
business subscribers across the western United States. The company is the
largest residential security alarm company in the western United States and
ranks among the largest in the country in terms of customer base.

Security industry software systems such as the system previously used by
Protection One are typically comprised of two or more applications--a financial
package and specialized alarm monitoring software. Protection One determined
that its existing applications were unable to accomodate its expected future
growth. In addition to broad and flexible financial management functionality,
Protection One required a system that integrated seamlessly with several
custom-developed alarm monitoring applications.

The financial management system now used by Protection One integrates
Dynamics C/S+ with industry-specific applications developed by a Great Plains
Software Partner. In particular, the Partner used the Great Plains Software
development tool suite, DynamicTools, to develop a specialized alarm monitoring
solution that seamlessly integrates with Dynamics C/S+ to handle the
approximately 1.5 million alarm signals a month that Protection One receives.
This integrated solution allows appropriate personnel in the organization to
respond to customer inquiries and address alarm signals, including life-
threatening emergencies, that might arise in the alarm monitoring center, and
provides Protection One with a comprehensive and seamlessly integrated
financial, administrative and service management system with a common customer
database.

SBS CORPORATION

SBS Corporation ("SBS"), with 39 employees, provides hardware, software and
services to financial institutions primarily serving the southeastern United
States. SBS offers products and services which enable its customers to provide
optical storage, loan document processing, telephone banking and check imaging
solutions.

The financial management system previously used by SBS was a DOS-based
solution that did not automate key processes. For example, sales proposals and
quotes were created in Microsoft Word, but information was re-entered as a sale
moved forward from proposal to order to billing. This inefficient process made
it difficult to monitor the status of a sale and was labor intensive.

SBS migrated to a Dynamics solution in July 1995 and reports that it has
streamlined processes and measurably increased productivity. SBS relies on the
"enter-data-once" design of Dynamics to automate workflow relating to the sales
process. The Dynamics Sales Order Processing application provides SBS with the
ability to enter data once and use it throughout the sales process, from the
quote stage to orders, back orders, invoices and returns. The status of an order
can be monitored by any Dynamics user. This workflow design has streamlined
processes, improved accuracy and increased staff productivity. In addition, SBS
has been able to integrate its Dynamics system with Microsoft Word and Excel.

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<PAGE>
PARTNER CASE STUDIES

The Company has made a significant investment in building an experienced,
knowledgeable and highly motivated Partner network. The following case studies
describe key characteristics and business attributes for three of the Company's
larger Partners. Not every Partner has experienced or will experience the same
level of success.

THE TAYLOR GROUP

The Taylor Group sells, implements and supports financial and manufacturing
software throughout the northeastern United States. The Taylor Group also
develops, markets and supports its own "plug and play" applications that enhance
Great Plains Software products. These applications are distributed by 172 VARs
around the world that maintain relationships with both The Taylor Group and
Great Plains Software.

Founded as a single-person business in 1987, The Taylor Group had 36
employees as of December 31, 1996, including support technicians, consultants,
systems engineers, programmers and sales and marketing executives. Approximately
60% of the formal training of this staff is obtained through programs offered by
Great Plains Software.

In 1996, the Taylor Group's revenue was evenly divided among sales of Great
Plains Software products, its own software applications that enhance Great
Plains Software products and related services. It discontinued offering
competing products approximately five years ago. As of December 31, 1996, The
Taylor Group was providing service to an installed base of 90 Dynamics
customers, 13 Dynamics C/S+ customers and 129 Great Plains Accounting customers.

FINANCIAL SYSTEMS CONSULTING, INC.

Financial Systems Consulting, Inc. ("FSC") sells, implements and supports
financial management software and provides management consulting services in the
southwestern United States. In business since 1993, FSC was authorized as a
Great Plains Software VAR in November 1995 and currently focuses primarily on
Dynamics C/S+. In the year ended December 31, 1996, its first as a Great Plains
Software Partner, FSC implemented Dynamics C/S+ for 28 customers.

As of December 31, 1996, FSC had 19 employees in offices in Los Angeles, San
Diego, San Francisco and Phoenix. Prior to becoming authorized as a Great Plains
Software VAR, FSC had been a leading reseller of a competing product. During
FSC's first twelve months as a Great Plains Software Partner, approximately 45%
of its revenues were derived from the sale of Great Plains Software products,
third-party applications that enhance Great Plains Software products and related
services.

INTEGRATED ACCOUNTING SYSTEMS, INC.

Integrated Accounting Systems, Inc. ("IAS") was founded in 1989 as a
single-person firm, providing financial management system consulting and
implementation services. In 1992, IAS expanded its business to include the
resale of financial management software. As of December 31, 1996, IAS had grown
to 19 employees and was recognized as one of the fastest growing private
companies in the San Francisco Bay Area for 1996. Since its founding, IAS has
focused exclusively on Great Plains Software products.

In 1996 IAS received approximately 50% of its revenue from service and
support and 50% from software sales, of which approximately 10% was derived from
the sales of third party applications that integrate with Great Plains Software
products. As of December 31, 1996, IAS was providing service to an installed
base of 100 Dynamics customers, 6 Dynamics C/S+ customers and 360 Great Plains
Accounting customers.

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<PAGE>
CUSTOMER AND PARTNER SERVICE

The Company believes that prompt and effective service and technical support
is an important component of a complete financial management system and is
critical to the long-term satisfaction of its customers and Partners. The
Company has received numerous awards for its Partner and customer service,
including the 1996 Positive Performer Grand National Award for excellence in
customer service from Inc. magazine and MCI Communications.

The Company was one of the first personal computer software providers to
introduce fee-based support plans and guaranteed telephone response times. The
Company also maintains profiles and detailed call histories on each of its
customers and Partners. These profiles enable support personnel at the Company
to respond more effectively to service inquiries, allow the Company to better
forecast which customers are likely to purchase new products or upgraded
versions of existing products and assist the Company in developing new
applications and features that accurately address the needs of the marketplace.

The Company provides service and technical support through a service
organization consisting of 128 employees as of January 31, 1997. The Company
provides a variety of training, technical support and service programs for
customers which supplement the primary support provided by Partners. The Company
offers video, teleconference and classroom training as well as technical support
through a toll-free number, its Website and onsite consultations. Telephone
support calls are handled by professional support personnel and have various
guaranteed response times, depending on the type of support plan purchased.
Response times as short as 30 minutes are offered. In addition to its technical
support programs, customers are offered software maintenance programs for an
annual fee. These programs provide customers with product upgrades and online
information and assistance. The Company also offers comprehensive training and
product support to its Partners to ensure that they provide the necessary levels
of technical support and assistance to customers. Finally, the Company offers
its Partners a variety of consulting resources for resale to customers,
including strategic implementation planning, project management and product
customization.

RESEARCH AND DEVELOPMENT

Since its inception, the Company has made substantial investments in
research and development. During the fiscal years 1994, 1995 and 1996, software
development expenses were approximately $10.7 million, $9.3 million and $8.9
million, respectively. As of January 31, 1997, the Company had 159 employees
engaged in research and development.

The Company's research and development efforts employ a standard development
process to guide software development through stages of product concept, market
requirements analysis, product definition, design specification, coding, testing
and release. These efforts are also focused on identifying, developing and
integrating leading technologies into its products to better meet customer
needs.

INTELLECTUAL PROPERTY RIGHTS AND LICENSES

The Company regards certain features of its internal operations, software
and documentation as its intellectual property. The Company relies on a
combination of contract, copyright, trademark and trade secret laws, a mandatory
software registration mechanism and other measures to protect its intellectual
property. The Company has no patents. The Company believes that, because of the
rapid pace of technological change in the computer software industry, trade
secret and copyright protection are less significant than factors such as the
knowledge, ability and experience of the Company's employees, frequent product
enhancements and the timeliness and quality of support services. It is the
Company's policy to file for protection of its basic trademarks and service
marks in countries in which the Company sells its products either directly or
through its international Partners and in countries in which protection is
advisable. Despite these measures there can be no assurance that the Company
will be able to fully

37
<PAGE>
protect its intellectual property. See "Risk Factors--Dependence on Intellectual
Property Rights; Risk of Infringement."

The Company provides its products to customers on a "right-to-use" basis
under non-exclusive licenses, which generally are nontransferable and have a
perpetual term. The Company typically licenses its products solely for the
customer's internal operations.

COMPETITION

The market for the Company's products is highly competitive and rapidly
changing. The Company's primary market consists of businesses in the Corporate
Market. The Company's current and prospective competitors offer a variety of
solutions for this market. The Company experiences significant competition and
expects substantial additional competition from established and emerging
software companies that offer products similar to the Company's products and
target the same customers as the Company. The Company believes it competes on
the basis of (i) product features, functionality, performance and price, (ii)
the capacity and capabilities of Partners, (iii) the quality of customer and
Partner service and technical support, (iv) sales and marketing efforts, (v) new
product and technology introductions, and (vi) company image and stability. The
Company believes it competes effectively on each of these factors.

In the United States, the Company faces a number of competitors both in the
Dynamics C/S+ segment of the Corporate Market, including Platinum Software
Corporation, and in the Dynamics segment of the Corporate Market, including
Solomon Software and State of the Art, Inc. In Canada, the Company's primary
competitor is Computer Associates International, Inc. (AccPac and AccPac 2000).
Outside North America, the Company also faces competition from a number of other
competitors, several of which have significant shares in their home markets. In
addition, the Company competes for Corporate Market business with companies
primarily targeting the Enterprise Market; several of these competitors, which
principally sell UNIX-based systems, offer or have announced their intention to
deliver Windows NT solutions. The Company believes that the products from these
competitors are neither designed nor priced to meet the needs of the Corporate
Market, and that the Company competes effectively against them in the Corporate
Market. The Company's products also face competition from providers of
industry-specific applications as well as indirect competition from in-house,
custom-developed financial management applications.

Certain of the Company's competitors have substantially greater financial,
marketing or technical resources than the Company. There can be no assurance
that other companies have not developed or marketed or will not develop or
market products that are superior to those of the Company, that are offered at
substantially lower prices than those of the Company, or that have or will
achieve greater market acceptance than those of the Company. In addition, there
can be no assurance that alternative methods of delivering financial management
systems will not provide increased competition.

FACILITIES

The Company's principal administrative, marketing, production and product
development facilities consist of an aggregate of approximately 80,000 square
feet at two locations in Fargo, North Dakota. Great Plains Software occupies
these sites under lease agreements that expire at various times through June
1998. Total rent expense was approximately $693,000, $894,000 and $871,000
during fiscal 1994, 1995 and 1996, respectively. The Company is currently
planning to consolidate its two locations into an expanded facility in the
future. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."

38
<PAGE>
PRODUCTION

The principal physical components of the Company's software products are
computer media and manuals. The Company prepares master software disks, manuals
and packaging materials which are then duplicated by the Company and third party
vendors. To date, the Company has not experienced any material difficulties or
delays in the manufacture and assembly of its products or material returns due
to product defects.

EMPLOYEES

As of January 31, 1997, the Company had a total of 550 full and part-time
employees (equating to 537 full time equivalent employees ("FTEs")), including
313 FTEs in sales, marketing, technical support and consulting services, 159
FTEs in research and development and 65 FTEs in administration. None of the
Company's employees are represented by a labor union. Management believes that
its relations with the Company's employees are good.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation arising out of
operations in the normal course of business. As of the date of this Prospectus,
the Company is not a party to any legal proceedings the adverse outcome of
which, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the Company's results of operations or financial
position.

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<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, and their ages and
positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------- --- -----------------------------------------------------------------------
<S> <C> <C>
Douglas J. Burgum.............. 40 Chairman of the Board, President and Chief Executive Officer
Raymond A. August.............. 35 Chief Technology Officer and Group Vice President, Dynamics C/S+
Terri F. Zimmerman............. 33 Chief Financial Officer and Group Vice President
Michael J. Olsen............... 47 Group Vice President, Corporate Communications
Steven K. Sydness.............. 42 Group Vice President, Dynamics
Jodi A. Uecker-Rust............ 35 Group Vice President, Heritage Products
Brian R. Carey................. 39 Vice President, Business Development
Michael A. Slette.............. 40 Vice President, Human Resources and Legal Affairs
Bradley J. Burgum.............. 45 Director and Secretary
Frederick W. Burgum............ 50 Director
William V. Campbell 58 Director
Raymond F. Good................ 68 Director
Sanjeev K. Mehra............... 38 Director
J.A. Heidi Roizen.............. 39 Director
Joseph S. Tibbetts, Jr......... 44 Director
</TABLE>

DOUGLAS J. BURGUM 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.

RAYMOND A. AUGUST has served as Chief Technology Officer and Group Vice
President, Dynamics C/S+ since June 1996. Previously, he served as Chief
Technology Officer and Vice President of Product Strategy from June 1995 to June
1996 and Vice President of Product Development from June 1993 to June 1995.
Prior to joining the Company in October 1992, Mr. August was a Senior Manager in
the Management Consulting Service Practice of Price Waterhouse LLP in New Jersey
and New York. He holds a B.S. in Accounting and Computer Science from the
University of South Carolina. Mr. August is a Certified Public Accountant.

TERRI F. ZIMMERMAN has served as Chief Financial Officer since February 1997
and Group Vice President since June 1996. Previously, she held the position of
Vice President of Finance and Operations from June 1995 to June 1996. Ms.
Zimmerman joined the Company as Director of Finance in September 1994. She was
previously employed by Deloitte & Touche LLP in Minneapolis as a Senior Manager.
Ms. Zimmerman holds a B.A. in Business Administration from the University of
North Dakota. Ms. Zimmerman is a Certified Public Accountant.

MICHAEL J. OLSEN has served as Group Vice President, Corporate
Communications, since June 1996. Mr. Olsen served as Vice President of Corporate
Communications from September 1995 to June 1996. From 1994 to 1995, Mr. Olsen
was Senior Vice President of Himle Horner, Inc., a Minneapolis-based public
relations agency. From 1987 to 1994, he was Vice President of Corporate
Communications for National Car Rental System, an international car rental
company. Prior to such time, he served in various Senior Public Affairs
positions in Washington, D.C. Mr. Olsen holds a B.A. in Speech and Drama from
North Dakota State University.

40
<PAGE>
STEVEN K. SYDNESS has served as Group Vice President, Dynamics since June
1996. Mr. Sydness served as Vice President of Business Development from June
1995 to June 1996, Vice President of Sales from June 1994 to June 1995 and Vice
President of Strategic Planning from June 1993 to June 1994. From February to
November of 1992, Mr. Sydness took a leave of absence from the Company during
which he was a candidate for the United States Senate. Prior to joining Great
Plains Software in January 1987, he was employed by Dr. Henry Kissinger
Associates and the management consulting firm McKinsey & Company, Inc. in their
New York and Tokyo offices. Mr. Sydness holds a B.A. from Principia College and
an M.B.A. from Harvard Business School.

JODI A. UECKER-RUST has served as Group Vice President, Heritage Products
since June 1996. Ms. Uecker-Rust was Vice President of Employee Services from
June 1995 to June 1996, Vice President of Operations, and later Vice President
of Operations and Administration from July 1993 to June 1995 and Director of
Operations from October 1990 to July 1993. Ms. Uecker-Rust joined the Company in
1984 after being employed by Honeywell Inc. in Minneapolis. She holds a B.S. in
Industrial Engineering from North Dakota State University.

BRIAN R. CAREY has served as Vice President of Business Development since
July 1996. Mr. Carey was Vice President of Product Development from June 1995 to
June 1996. He was General Manager and later Vice President and General Manager
of the Small Business Systems Unit of the Company from August 1992 to June 1995.
Mr. Carey joined the Company in June 1989. Before such time, he was employed by
First Interstate Bancorp, where he was Senior Vice President and Manager of the
Retail Banking Division. Previously, Mr. Carey was employed by Xerox Corporation
in Minneapolis as a Sales Executive. He holds a B.S. in Marketing from Moorhead
State University.

MICHAEL A. SLETTE has served as Vice President of Human Resources and Legal
Affairs since June 1996. Mr. Slette was Vice President of Business Development
and Legal Affairs from June 1995 to June 1996 and Vice President of Finance from
June 1988 to June 1995. Mr. Slette joined the Company in 1982 and, prior to such
time, was employed by the Minneapolis-based accounting firm Adrian S. Helgeson &
Co. He holds a B.A. in Business Administration and Accounting from Concordia
College. Mr. Slette is a Certified Public Accountant.

BRADLEY J. BURGUM 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 19 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 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.

FREDERICK W. BURGUM 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.

WILLIAM V. CAMPBELL 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. 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, from 1987 to January 1991. Mr. Campbell has also held senior executive
positions at Apple Computer 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.

41
<PAGE>
RAYMOND F. GOOD has served as a director of the Company since 1988. He is an
independent executive consultant and a director of the Astrocom Corporation, a
publicly-held company based in Minneapolis. From 1986 to 1992, he was a partner
of Regis McKenna. 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.

SANJEEV K. MEHRA 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.

J.A. HEIDI ROIZEN 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 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. 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.

Douglas J. Burgum and Bradley J. Burgum are brothers, and Frederick W.
Burgum is their cousin.

CLASSES OF DIRECTORS

Following this offering, the Board of Directors will be divided into three
classes, each of whose members will serve for a staggered three-year term.
Messrs. Good and Tibbetts and Ms. Roizen will serve in the class whose term
expires in 1997; Messrs. Bradley J. Burgum, Campbell and Mehra will serve in the
class whose term expires in 1998; and Messrs. Douglas J. Burgum and Frederick W.
Burgum will 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.

EXECUTIVE OFFICERS

Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until the next annual meeting of the Board of
Directors and until their successors have been duly elected and qualified.

BOARD COMMITTEES

The Company's Board of Directors has established an Audit Committee and a
Compensation 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.

42
<PAGE>
Messrs. Bradley Burgum (Chairman), Good and Mehra are currently the members of
the Audit Committee. The Compensation Committee is responsible for recommending
compensation and benefits for the executive officers of the Company to the Board
of Directors and for administering the Company's stock plans. Messrs. Good
(Chairman), Frederick Burgum and Mehra are currently the members of the
Compensation Committee.

LIMITATION OF LIABILITY

The Company's Amended and Restated Articles of Incorporation (the "Restated
Articles") limit the liability of directors in their capacity as directors to
the full extent permitted by Minnesota law. Under the Restated Articles and the
Minnesota Business Corporation Act, a director of the Company is not liable to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director, except (i) for any breach of the director's duty of loyalty
to the Company or its shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii) for
dividends, stock repurchases and other distributions made in violation of
Minnesota law or for violations of the Minnesota securities laws, (iv) for any
transaction from which the director derived an improper personal benefit or (v)
for any act or omission occurring prior to the effective date of the provision
in the Restated Articles limiting such liability. These provisions do not affect
the availability of equitable remedies, such as an action to enjoin or rescind a
transaction involving a breach of fiduciary duty, although, as a practical
matter, equitable relief may not be available. Also, the provisions do not limit
the liability of the directors for violations of, or relieve them from the
necessity of complying with, the federal securities law.

DIRECTOR COMPENSATION

Each non-employee director of the Company will receive $1,000 for each
meeting of the Board of Directors and $500 for each committee meeting attended
and an annual $6,000 retainer paid in quarterly installments. The Company also
reimburses non-employee directors for expenses incurred in attending Board
meetings. Non-employee directors of the Company will receive stock options under
the Company's Outside Directors' Stock Option Plan (the "Directors' Plan"),
which will become effective upon consummation of this offering. The Directors'
Plan provides that each non-employee director will receive an automatic grant of
a nonqualified stock option to purchase 15,000 shares of Common Stock upon
initial election to the Board of Directors (vesting in three equal installments
on each of the three 12-month anniversaries following the date of grant). In
addition, each current non-employee director holding office upon completion of
this offering will receive a nonqualified stock option to purchase 3,000 shares
(vesting on the 12-month anniversary following the date of grant). 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 shareholder meeting beginning
with the 1997 annual meeting (vesting in two equal installments on each of the
one-month and 12-month anniversaries following the date of grant). Options
granted under the Directors' Plan expire five years from the date of grant. The
option price for options granted under the Directors' Plan is equal to the fair
market value of a share of Common Stock as of the date of grant. The Company has
reserved a total of 150,000 shares of Common Stock for issuance under the
Directors' Plan, all of which shares are currently available for future grant.

On October 29, 1996, the Company granted Joseph S. Tibbetts, Jr. a
nonqualified 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 February 27, 1997 and March 4, 1997, the Company granted a
nonqualified option to purchase 15,000 shares of Common Stock to each of J.A.
Heidi Roizen and William V. Campbell, respectively. The exercise price of the
options granted to Ms. Roizen and Mr. Campbell will be the initial public
offering price of the shares offered hereby. Each such option vests in three
equal installments on each of the 12-month anniversaries following the date of
grant and expires five years from the date of grant. None of the options granted
to Messrs. Tibbetts and Campbell and Ms. Roizen were issued under the Directors'
Plan.

43
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the year
ended May 31, 1996 by (i) the Company's Chief Executive Officer and (ii) the
five most highly compensated other executive officers who received annual
compensation in excess of $100,000 (together, with the Company's Chief Executive
Officer, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SHARES
---------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER(1) OPTIONS COMPENSATION(2)
- ------------------------------------------ --------- --------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Douglas J. Burgum,
Chairman of the Board, President
and Chief Executive Officer............. $ 240,000 $ 20,000 -- -- $ 5,600

Raymond A. August,
Chief Technology Officer and
Group Vice President.................... 180,000 5,000 -- 13,333 2,157

Terri F. Zimmerman,
Chief Financial Officer,
Group Vice President and
Treasurer............................... 115,000 5,000 -- 26,667 13,044

Brian R. Carey,
Vice President.......................... 115,000 6,400 -- 13,333 1,617

Steven K. Sydness,
Group Vice President.................... 103,000 3,920 -- -- 13,389

Robin Pederson,
Former Senior Vice President, Sales and
Marketing(3)............................ 172,000 77,156 $ 43,844 266,667 7,866
</TABLE>

- --------------

(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), other compensation in the form of perquisites and other
personal benefits has been omitted for each of the Named Executive Officers
(except Mr. Pederson), 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 for each of such Named Executive
Officers in fiscal 1996.

(2) Such amounts include contributions made by the Company to its 401(k) Profit
Sharing Plan on behalf of the Named Executive Officers indicated in the
following amounts: Mr. Burgum, $2,800, Mr. August, $2,157; Ms. Zimmerman,
$2,044; Mr. Carey, $1,617; Mr. Sydness, $2,389; and Mr. Pederson, $3,819.
Such amounts also include the Company's payment of membership fees on behalf
of the Named Executive Officers indicated in the following amounts: Mr.
Burgum, $2,800; Ms. Zimmerman, $11,000; Mr. Sydness, $11,000; and Mr.
Pederson, $4,047.

(3) Mr. Pederson served as the Company's Senior Vice President, Sales and
Marketing from June 1995 until March 1996. The amount of other annual
compensation for Mr. Pederson represents relocation expenses. Of the options
to acquire 266,667 shares granted to Mr. Pederson, options relating to
266,654 shares expired upon Mr. Pederson's resignation of employment with
the Company in March 1996.

44
<PAGE>
OPTION GRANTS

The following table summarizes options granted during the year ended May 31,
1996 to the Named Executive Officers:

OPTION GRANTS DURING YEAR ENDED MAY 31, 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO PRICE APPRECIATION
EMPLOYEES IN EXERCISE FOR OPTION TERM(5)
OPTIONS FISCAL PRICE EXPIRATION -----------------------------
NAME GRANTED(1)(2) YEAR(3) PER SHARE(4) DATE 5% 10%
- ------------------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Burgum.............. -- -- -- -- -- --

Raymond A. August.............. 13,333 2.2% $ 5.20 7/25/01 $ 23,569 $ 53,469

Terri F. Zimmerman............. 26,667 4.3 5.44 1/9/02 49,313 111,876

Brian R. Carey................. 13,333 2.2 5.20 7/25/01 23,569 53,469

Steven K. Sydness.............. -- -- -- -- -- --

Robin Pederson(6).............. 266,667 43.1 5.20 7/25/05 -- --
</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, excluding options shown for Mr. Pederson (see Note 6
below), 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, 1996, the Company granted options to purchase shares
of Common Stock to the Named Executive Officers indicated in the following
amounts: Mr. Burgum, 53,333 shares at an exercise price of $7.71 per share,
and 50,000 shares (conditioned upon consummation of this offering) at an
exercise price equal to the initial public offering price of the shares of
Common Stock offered hereby; Mr. August, 13,333 shares at an exercise price
of $6.41 per share; Ms. Zimmerman, 40,000 shares at an exercise price of
$6.41 per share; and Mr. Sydness, 10,000 shares at an exercise price of
$6.41 per share.

(3) In fiscal 1996, the Company granted employees options to purchase an
aggregate of 619,333 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. The
amounts reflected in the table may not necessarily be achieved.

(6) Of the options to acquire 266,667 shares granted to Mr. Pederson, options to
acquire 266,654 shares expired upon Mr. Pederson's resignation of employment
with the Company in March 1996.

45
<PAGE>
YEAR-END OPTION TABLE

The following table sets forth certain information concerning options to
purchase Common Stock exercised by the Named Executive Officers during fiscal
1996 and the number and value of unexercised stock options held by each of the
Named Executive Officers as of May 31, 1996.

YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT YEAR-END(2) AT YEAR-END(1)
SHARES VALUE ---------------------------- ----------------------------
NAME ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- --------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Burgum............. -- -- 120,000 -- $ 535,050 --

Raymond A. August............. -- -- 34,667 45,333 127,930 $ 128,220

Terri F. Zimmerman............ -- -- 5,333 48,000 12,000 74,000

Brian R. Carey................ 4,000 $ 12,000 5,333 42,667 12,000 96,150

Steven K. Sydness............. -- -- 26,667 26,667 104,175 60,000

Robin Pederson................ 13 16 -- -- -- --
</TABLE>

- --------------

(1) There was no public trading market for the Common Stock as of May 31, 1996.
Accordingly, as permitted by the rules of the Commission, these values have
been calculated on the basis of the fair market value of the Company's
Common Stock as of May 31, 1996, as determined by the Board of Directors,
less the applicable exercise price.

(2) Does not include options to purchase Common Stock granted to Named Executive
Officers after May 31, 1996. See "--Option Grants."

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Douglas J. Burgum
and Raymond A. August, each of which expires on June 1, 1997. If neither the
Company nor Mr. August inform the other party of its or his intention not to
extend Mr. August's employment contract before April 30, 1997, the term of the
employment agreement will be extended to June 1, 1999.

The Company's employment agreement with Mr. Burgum provides that he will
serve as Chief Executive Officer of the Company. The Company, at the discretion
of its Board of Directors, may provide Mr. Burgum with an annual raise and/or
bonus consistent with the Company's practices and subject to Mr. Burgum's
performance. Mr. Burgum's current base salary is $252,000. Mr. Burgum is
eligible to participate, subject to certain limitations, in the Company's
benefit plans for salaried executives. Under the employment agreement, the Board
of Directors may terminate Mr. Burgum's employment for cause (as defined in the
employment agreement). The employment agreement provides that the Company may
terminate Mr. Burgum's employment at any time without cause provided it
continues to pay Mr. Burgum's compensation until the later of one year from such
termination or June 1, 1997. In addition, the employment agreement also contains
nonsolicitation and intellectual property assignment and confidentiality
provisions.

The Company's employment agreement with Mr. August provides that he will
serve as Chief Technology Officer of the Company. The Company's Chief Executive
Officer may provide Mr. August with an annual raise and/or bonus consistent with
the Company practices and subject to Mr. August's performance. Mr. August's
current base salary is $200,000. Mr. August is eligible to participate in the
Company's benefit plans for salaried executives. Under the employment agreement,
the Company may terminate Mr. August's employment, upon a decision of its Chief
Executive Officer, for cause (as defined

46
<PAGE>
in the employment agreement). The employment agreement provides that the Company
may terminate Mr. August's employment at any time without cause provided it
continues to pay, for a two-year period from such termination, Mr. August's
annual base compensation, reduced by any income earned by Mr. August from any
other source (other than investment income or expense reimbursements) during
such two-year period. In addition, the employment agreement also contains
noncompetition, nonsolicitation and intellectual property assignment and
confidentiality provisions.

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 terminated following a change in control of the
Company. Such severance payment will be reduced by any income earned by Ms.
Zimmerman from any other source (other than investment income or expense
reimbursements) during such one-year period.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee of the Company's Board of
Directors are Messrs. Frederick Burgum, Good and Mehra. There are no
compensation committee interlocks which are required to be disclosed by the
rules promulgated by the Commission under the Securities Act.

BENEFIT PLANS

1997 STOCK INCENTIVE PLAN

The Company's 1997 Stock Incentive Plan (the "1997 Incentive Plan") provides
for the granting of (a) stock options, including "incentive stock options"
("Incentive Stock Options") meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and stock options that
do not meet such requirements ("Nonqualified Stock Options"), (b) stock
appreciation rights ("SARs"), (c) restricted stock and restricted stock units,
(d) performance awards, (e) dividend equivalents and (f) other stock-based
awards. The Company has reserved 1,000,000 shares of Common Stock for issuance
under the 1997 Incentive Plan. The 1997 Incentive Plan is administered by the
Compensation Committee of the Company's Board of Directors (the "Committee").
The Committee has the authority to establish rules for the administration of the
1997 Incentive Plan; to select the key employees to whom awards are granted; to
determine the types of awards to be granted and the number of shares of Common
Stock covered by such awards; and to set the terms and conditions of such
awards. The Committee may also determine whether the payment of any amounts
received under any award shall or may be deferred and may authorize payments
representing cash dividends in connection with any deferred award of shares of
Common Stock. Awards may provide that upon the grant or exercise thereof the
holder will receive shares of Common Stock, cash or any combination thereof, as
the Committee shall determine.

In order to meet the requirements of Section 162(m) of the Code, the 1997
Incentive Plan contains a limitation on the number of options that may be
granted to any single optionee in any one calendar year.

The exercise price per share under any stock option or the grant price of
any SAR cannot be less than 100% of the fair market value of the Company's
Common Stock on the date of the grant of such option or SAR. Options may be
exercised by payment in full of the exercise price, either in cash or, at the
discretion of the Committee, in whole or in part by the tendering of shares of
Common Stock or other consideration having a fair market value on the date the
option is exercised equal to the exercise price. Determinations of fair market
value under the 1997 Incentive Plan are made in accordance with methods and
procedures established by the Committee.

The holder of an SAR is entitled to receive the excess of the fair market
value (calculated as of the exercise date or, if the Committee shall so
determine, as of any time during a specified period before or after the exercise
date) of a specified number of shares over the grant price of the SAR.

47
<PAGE>
The holder of restricted stock may have all of the rights of a shareholder
of the Company, including the right to vote the shares subject to the restricted
stock award and to receive any dividends with respect thereto, or such rights
may be restricted. Restricted stock may not be transferred by the holder until
the restrictions established by the Committee lapse. Holders of restricted stock
units have the right, subject to any restrictions imposed by the Committee, to
receive shares of Common Stock (or a cash payment equal to the fair market value
of such shares) at some future date. Upon termination of the holder's employment
during the restriction period, restricted stock and restricted stock units shall
be forfeited, unless the Committee determines otherwise.

If any shares of Common Stock subject to any award or to which an award
relates are not purchased or are forfeited, or if any such award terminates
without the delivery of shares or other consideration, the shares previously
used for such awards become available for future awards under the 1997 Incentive
Plan. Except as otherwise provided under procedures adopted by the Committee to
avoid double counting with respect to awards granted in tandem with or in
substitution for other awards, all shares relating to awards granted are counted
against the aggregate number of shares available for granting awards under the
1997 Incentive Plan.

The Board of Directors may amend, alter or discontinue the 1997 Incentive
Plan at any time, provided that shareholder approval must be obtained for any
change that absent such shareholder approval, (i) would violate any rules or
regulations of the National Association of Securities Dealers, Inc. or any
securities exchange applicable to the Company, or (ii) would cause the Company
to be unable, under the Code, to grant Incentive Stock Options under the 1997
Incentive Plan.

Under the 1997 Incentive Plan, the Committee may permit participants
receiving or exercising awards, subject to the discretion of the Committee and
upon such terms and conditions as it may impose, to surrender shares of Common
Stock (either shares received upon the receipt or exercise of the award or
shares previously owned by the optionee) to the Company to satisfy federal and
state withholding tax obligations. In addition, the Committee may grant, subject
to its discretion and such rules as it may adopt, a bonus to a participant in
order to provide funds to pay all or a portion of federal and state taxes due as
a result of the receipt or exercise of (or lapse of restrictions relating to) an
award.

On February 27, 1997, an option to purchase 50,000 shares at an exercise
price equal to the initial public offering price of the shares offered hereby
was granted under the 1997 Incentive Plan to Douglas J. Burgum, conditioned upon
consummation of this offering. See "Management--Executive Compensation--Option
Grants." Except for such option, no options or other awards have been granted
under the 1997 Incentive Plan.

1983 STOCK OPTION PLAN

The Company's 1983 Incentive Stock Option Plan, as amended (the "1983 Stock
Option Plan"), provides for the grant of options to purchase shares of Common
Stock to any full or part-time employee of the Company. Options granted under
the 1983 Stock Option Plan may qualify as Incentive Stock Options or may be
Nonqualified Stock Options. In connection with the adoption of the Company's
1997 Incentive Plan, the Company will cease granting options under the 1983
Stock Option Plan after consummation of the offering made hereby; however, all
stock options granted prior to adoption of the 1997 Incentive Plan remain
outstanding in accordance with the 1983 Stock Option Plan. See "--1997 Incentive
Plan." The 1983 Stock Option Plan is administered by the Board of Directors or
the Committee. The Board or the Committee has the discretion to select the
optionees and to establish the terms and conditions of each stock option. The
exercise price of an option granted under the 1983 Stock Option Plan must not be
less than the fair market value of the Common Stock on the date the option is
granted, except that, for a proposed optionee who owns more than 10% of the
Company's Common Stock, any Incentive Stock Option granted to such optionee must
have an exercise price not less than 110% of the then fair market value. The
term of each option is determined by the Board or the Committee, but may not
exceed 10 years from the date of grant (or, in the case of an Incentive Stock
Option granted to an

48
<PAGE>
owner of more than 10% of the Common Stock, five years). The 1983 Stock Option
Plan is subject to amendment by the Board of Directors, subject to the
restriction that the Board of Directors may not increase the number of shares
which may be issued under the 1983 Stock Option Plan, decrease the minimum
exercise price of options granted under the 1983 Stock Option Plan, or extend
the maximum option term or the term of the 1983 Stock Option Plan, without the
approval of the shareholders of the Company.

As of February 21, 1997, options to purchase an aggregate of 1,027,800
shares of Common Stock, with a weighted average exercise price of $4.92 per
share were outstanding under the 1983 Stock Option Plan. On February 27, 1997,
options to purchase an aggregate of 62,020 shares at an exercise price equal to
the initial public offering price of the shares offered hereby, were granted
under the 1983 Stock Option Plan to employees of the Company, conditioned upon
consummation of this offering.

EMPLOYEE STOCK PURCHASE PLAN

The Company's 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan")
will become effective upon consummation of this offering and is intended to
qualify as an employee stock purchase plan within the meaning of Section 423 of
the Code. The Stock Purchase Plan covers an aggregate of 400,000 shares of
Common Stock. In order to participate in the Stock Purchase Plan, employees must
meet certain eligibility requirements. Participating employees will be able to
direct the Company to make payroll deductions of up to 10% of their compensation
during a purchase period for the purchase of shares of Common Stock. Each
purchase period, with the exception of the initial offering period, will be six
months. The Stock Purchase Plan will provide participating employees with the
right, subject to certain limitations, to purchase the Company's Common Stock at
a price equal to 85% of the lesser of the fair market value of the Company's
Common Stock on the first day or the last day of the applicable purchase period,
except that the price on the first day of the initial purchase period will be
the initial public offering price of the shares of the Common Stock offered
hereby. The Stock Purchase Plan will terminate on such date as the Board of
Directors may determine, or automatically as of the date on which all of the
shares of Common Stock the Company has reserved for purchase under the Stock
Purchase Plan have been sold.

401(k) PLAN

Effective July 1, 1986, the Company established a 401(k) Profit Sharing Plan
(the "401(k) Plan"). The 401(k) Plan covers employees of the Company who have
reached the age of 18 and have completed six months and 1,000 hours of service.
Eligible employees may begin salary deferrals on the first day following
satisfaction of the eligibility requirements, and become eligible to participate
in the 401(k) Plan on the next January 1, April 1, July 1 or October 1
thereafter. Pursuant to the 401(k) Plan, participants may elect to reduce their
current compensation by up to the lesser of 18% of eligible compensation or the
statutorily prescribed annual limit ($9,500 in 1997), and have the amount of
such reduction (the "Employee Contribution") contributed to the 401(k) Plan. The
trustee under the 401(k) Plan, at the direction of each participant, invests the
Employee Contribution in any of six designated investment options. The 401(k)
Plan is intended to qualify under Section 401 of the Code. As a result, Employee
Contributions to the 401(k) Plan and income earned on all plan contributions are
not taxable to employees until withdrawn, and the Employee Contributions are
deductible by the Company for federal income tax purposes. The Company may make
regular annual contributions ("Regular Contributions") to the 401(k) Plan's
trust fund to be invested solely in Common Stock of the Company as determined by
the Board of Directors. The Company will also make matching contributions
("Matching Contributions") in an amount equal to 25% of the first 8% of each
participant's annual contribution to the 401(k) Plan. Participants are 100%
vested in Employee Contributions and Matching Contributions to the 401(k) Plan.
The Company's Regular Contributions to the 401(k) Plan vest over five years at a
rate of 20% for each year of service. A total of $280,488 in Regular
Contributions and Matching Contributions were made by the Company to the 401(k)
Plan during the year ended December 31, 1996.

49
<PAGE>
CERTAIN TRANSACTIONS

Since June 1994, the Company has issued in financing transactions shares of
Series B Preferred Stock as follows: in June 1994, the Company issued to certain
investment partnerships, of which The Goldman Sachs Group, L.P. are the general
partner or managing general partner (collectively, the "GS Partnerships"),
888,576 shares of Series B Preferred Stock at a price of $7.09 per share and a
warrant to purchase an additional 752,234 shares of Series B Preferred Stock at
a price of $5.32 per share (the "Warrant"); in September 1994, Company issued to
the GS Partnerships 282,088 shares of Series B Preferred Stock at a price of
$7.09 per share; and in May 1995, the Company issued to the GS Partnerships an
additional 174,556 shares of Series B Preferred Stock in exchange for the
Warrant. See "Principal Shareholders." The Series B Preferred Stock will convert
into an aggregate of 1,793,627 shares of Common Stock upon the consummation of
this offering.

Pursuant to a Registration Rights Agreement entered into in June 1994 in
connection with the sale of Series B Preferred Stock to the GS Partnerships in
June 1994 (the "Series B Preferred Stock Financing"), the Company granted the GS
Partnerships certain rights to cause the Company to register for sale shares of
Common Stock acquired upon conversion of the Series B Preferred Stock. See
"Shares Eligible for Future Sale." Pursuant to a Stockholders' Agreement (the
"Stockholders' Agreement") entered into in June 1994 in connection with the
Series B Preferred Stock Financing, the GS Partnerships have the right to
designate one member of the Board of Directors of the Company for so long as the
GS Partnerships and its affiliates (including Goldman, Sachs & Co.) own at least
25% of the outstanding shares of Series B Preferred Stock. Pursuant to the
Stockholders' Agreement, Sanjeev K. Mehra, a Managing Director in the Principal
Investment Area of Goldman, Sachs & Co., an affiliate of the GS Partnerships,
serves as one of the Company's directors. In addition, pursuant to the
Stockholders' Agreement, the Company agreed that, so long as the GS Partnerships
beneficially own 5% or more of the outstanding shares of Series B Preferred
Stock, the Company shall, if the Board of Directors of the Company determines
that it is in the Company's best interests, endeavor to retain Goldman, Sachs &
Co. or an affiliate to perform all financial advisory and investment banking
services for the Company for which an investment banking firm is retained, on
customary terms and consistent with an arms' length transaction. The foregoing
provisions of the Stockholders' Agreement will terminate upon the consummation
of this offering.

Goldman, Sachs & Co. 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 June 1994, the Company issued to the Arthur Companies, Inc. ("Arthur"),
the holder of a majority of the outstanding shares of Common Stock of the
Company at such time, 225,000 shares of Series A Preferred Stock at a price of
$1.00 per share. Frederick W. Burgum and Bradley J. Burgum, directors of the
Company, are principal shareholders and directors of Arthur, and Mr. Frederick
W. Burgum is Chairman of the Board and Chief Executive Officer of Arthur.
Following the sale of the 225,000 shares of Series A Preferred Stock by the
Company to Arthur, all of such shares were transferred to Douglas J. Burgum in
exchange for his entire equity interest in Arthur. The Series A Preferred Stock
will convert into an aggregate of 54,000 shares of Common Stock upon the
consummation of this offering.

Frederick W. Burgum owns land outside of Fargo in Barnes Township, North
Dakota. The Company, in connection with its evaluation of potential sites for
the construction of its planned future operational facility, is considering
purchasing or leasing a portion of such property from Mr. Burgum. Any such
purchase or lease would be entered into on an arms' length basis. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

Pursuant to an agreement between the Company and two trusts with respect to
which Frederick W. Burgum acts as trustee, the Company made total lease payments
of $70,740 to the trusts for 50

50
<PAGE>
notebook computers in each of fiscal 1994, 1995 and 1996. The lease agreement
relating to the computers expires in March 1997.

Raymond F. Good, a director of the Company, was paid a total of $104,700,
$53,900 and $36,800 (plus reimbursement of expenses) in fiscal 1994, 1995 and
1996, respectively, pursuant to consulting agreements with the Company. Mr. Good
and the Company entered into a new one-year consulting agreement in February
1997. The consulting agreement provides that Mr. Good will receive a fee of $125
per hour for up to 40 hours of consulting services provided to the Company per
month. In 1996, Mr. Good exercised an option to purchase 29,333 shares of Common
Stock at an exercise price of $1.95 per share.

In June 1993, the Company loaned $1.0 million to Arthur at an interest rate
of 5% per annum. The entire balance of this loan was repaid in two installments
of $800,000 and $200,000 in August 1993 and September 1993, respectively,
together with aggregate accrued interest of $13,030.

In June 1994, Arthur loaned $1.5 million to the Company at an interest rate
of 7.5% per annum. The entire balance of this loan was repaid in June 1994,
together with accrued interest of $5,000.

During fiscal 1994 and 1995, the Company had loans outstanding from Douglas
J. Burgum, Bradley J. Burgum, Frederick W. Burgum and Katherine K. Burgum (a
director of the Company at such time) in the principal amounts of $125,000,
$125,000, $125,000 and $565,000, respectively. The interest rates on these loans
ranged from 7.25% to 8.5% per annum. The loans were repaid prior to the end of
fiscal 1995. During fiscal 1994 and 1995, Messrs. Douglas J. Burgum, Bradley J.
Burgum and Frederick W. Burgum and Ms. Burgum received total interest payments
from the Company with respect to these loans of $16,500, $16,500, $16,500 and
$77,381, respectively.

51
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 21, 1997 (after giving
effect to the conversion of the outstanding shares of Preferred Stock into
Common Stock upon the closing of the offering made hereby and as adjusted for
the sale of the shares of Common Stock offered hereby) by (i) each person who is
known by the Company to own beneficially more than 5% of the Common Stock, (ii)
each director and Named Executive Officer of the Company and (iii) all directors
and executive officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
SHARES
--------------------------
NUMBER OF SHARES BEFORE AFTER
BENEFICIALLY OWNED(1) OFFERING OFFERING
--------------------- ------------ ------------
<S> <C> <C> <C>
Frederick W. Burgum(2)............................................... 2,448,168 25.1% 19.2%
Douglas J. Burgum(3)................................................. 1,935,171 19.8 15.2
The Goldman Sachs Group, L.P. and related investors(4)............... 1,793,627 18.4 14.0
Bradley J. Burgum(5)................................................. 534,126 5.5 4.2
Julie W. Barner(6)................................................... 508,576 5.2 4.0
Barbara K. Burgum.................................................... 465,385 4.8 3.6
Raymond A. August(7)................................................. 73,501 * *
Steven K. Sydness.................................................... 73,333 * *
Raymond F. Good...................................................... 36,000 * *
Brian R. Carey(8).................................................... 32,000 * *
Terri F. Zimmerman(9)................................................ 25,333 * *
Robin Pederson....................................................... 13 * *
William V. Campbell.................................................. -- -- --
Sanjeev K. Mehra(10)................................................. -- -- --
J. A. Heidi Roizen................................................... -- -- --
Joseph S. Tibbetts, Jr............................................... -- -- --
All directors and executive officers as a group (14 persons)......... 5,348,368 54.3 41.6
</TABLE>

- ----------------

* Less than 1%

(1) Beneficial ownership is determined in accordance with rules of 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 the date hereof ("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. Except as indicated by footnote, the Company believes that the
persons named in this table, based on information provided by such persons,
have sole voting and investment power with respect to the shares of Common
Stock indicated.

(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.

(4) Represents shares owned by certain investment partnerships, of which
affiliates of the GS Partnerships are the general partner or managing
general partner. 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
GS Partnerships disclaim beneficial ownership of the shares owned by such
investment partnerships to the extent attributable to partnership interests
therein held by persons other than the GS Partnerships and its affiliates.
Each of such

52
<PAGE>
investment partnerships shares voting and investment power with certain of
its respective affiliates. The address of the GS Partnerships is 85 Broad
Street, New York, New York 10004.

(5) Includes shares held by certain members of Bradley J. Burgum's household
that are beneficially owned by Mr. Burgum. His address is 1701 S.W 38th
Street, Fargo, North Dakota 58103.

(6) Ms. Barner's address is 1701 S.W. 38th Street, Fargo, North Dakota 58103.

(7) Includes 50,660 shares issuable pursuant to Currently Exercisable Options.

(8) Includes 2,667 shares issuable pursuant to Currently Exercisable Options.

(9) Includes 22,000 shares issuable pursuant to Currently Exercisable Options.

(10) Does not include 1,793,627 shares held by the GS Partnerships.

DESCRIPTION OF CAPITAL STOCK

GENERAL

Effective upon the filing of the Amended and Restated Articles of
Incorporation prior to this offering, the authorized capital stock of the
Company will consist of 100,000,000 shares of Common Stock, $.01 par value per
share, and 30,000,000 shares of preferred stock, $.01 par value per share (the
"preferred stock"), which may be issued in one or more classes.

COMMON STOCK

As of February 21, 1997, there were 9,769,604 shares of Common Stock
outstanding and held of record by 238 shareholders, assuming the conversion of
all shares of the Preferred Stock into an aggregate of 1,847,627 shares of
Common Stock upon the closing of the offering made hereby. Based upon the number
of shares outstanding as of that date and after giving effect to the issuance of
the 3,000,000 shares of Common Stock offered by the Company hereby, there will
be 12,769,604 shares of Common Stock outstanding upon the closing of this
offering.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of the Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares
offered by the Company in this offering will be, when issued and paid for, fully
paid and nonassessable. The rights, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock which the Company may
designate and issue in the future. Upon the closing of this offering, there will
be no shares of preferred stock outstanding.

53
<PAGE>
PREFERRED STOCK

Upon filing of the Restated Articles, the Board of Directors will be
authorized, subject to certain limitations prescribed by law, without further
shareholder approval, to issue from time to time up to an aggregate of
30,000,000 shares of preferred stock in one or more series and to fix or alter
the designations, preferences, rights and any qualifications, limitations or
restrictions of the shares of each such series thereof, including the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices, liquidation
preferences and the number of shares constituting any series or designations of
such series. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change of control of the Company. The Company has no
present plans to issue any shares of Preferred Stock. See "Risk
Factors--Significant Shareholders; Anti-Takeover Considerations."

STOCK OPTIONS

As of February 21, 1997, options to purchase a total of 1,027,800 shares of
Common Stock at a weighted average exercise price of $4.92 per share were
outstanding under the 1983 Stock Option Plan, and a total of 1,212,020 shares
were reserved for future option grants under the 1983 Stock Option Plan, the
1997 Incentive Plan and the Directors' Plan. See "Management--Director
Compensation" and "-- Benefit Plans." All options granted under the 1983 Stock
Option Plan, the 1997 Incentive Plan and the Directors' Plan provide for
antidilution adjustments in the event of certain mergers, consolidations,
reorganizations, recapitalizations, stock dividends, stock splits or other
changes in the corporate structure of the Company.

PROVISIONS OF THE COMPANY'S RESTATED ARTICLES AND BYLAWS AND THE MINNESOTA
BUSINESS CORPORATION ACT

The existence of authorized but unissued preferred stock described above,
and certain provisions of the Restated Articles, the Company's Bylaws and
Minnesota law described below, could have an anti-takeover effect. These
provisions are intended to provide management flexibility, to enhance the
likelihood of continuity and stability in the composition of the Company's Board
of Directors and in the policies formulated by the Board of Directors and to
discourage an unsolicited takeover of the Company if the Board of Directors
determines that such a takeover is not in the best interests of the Company and
its shareholders. However, these provisions could have the effect of
discouraging certain attempts to acquire the Company which could deprive the
Company's shareholders of opportunities to sell their shares of Common Stock at
prices higher than prevailing market prices.

Pursuant to the Company's Bylaws, the Board of Directors of the Company is
divided into three classes serving staggered three-year terms. As a result, at
least two shareholders' meetings will generally be required for shareholders to
effect a change in control of the Board of Directors. In addition, the Company's
Bylaws contain provisions that establish specific procedures for calling
meetings of shareholders and appointing and removing members of the Board of
Directors.

Section 302A.673 of the Minnesota Business Corporation Act generally
prohibits any business combination by the Company, or any subsidiary of the
Company, with any shareholder which purchases 10% or more of the Company's
voting shares (an "interested shareholder") within four years following such
interested shareholder's share acquisition date, unless the business combination
is approved by a committee of all of the disinterested members of the Board of
Directors of the Company before the interested shareholder's share acquisition
date.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock will be Norwest Bank
Minnesota, National Association.

54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, the Company will have an aggregate of
12,769,604 shares of Common Stock outstanding, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options to
purchase Common Stock. Of these shares, the 3,000,000 shares sold in this
offering are freely tradable without restriction or further registration under
the Securities Act of 1933, as amended (the "Securities Act"), except (i) for
shares purchased by Partners pursuant to the directed share program and (ii)
that any shares held by "affiliates" of the Company, as that term is defined in
Rule 144 under the Securities Act ("Rule 144"), may generally only be sold in
compliance with the limitations of Rule 144 described below.

The remaining 9,769,604 shares of Common Stock are deemed "restricted
securities" as defined under Rule 144. Restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which rules are summarized below. Subject to the lock-up agreements
described below and the provisions of Rules 144, 144(k) and 701, additional
shares will be available for sale in the public market (subject in the case of
shares held by affiliates to compliance with certain volume restrictions) as
follows: (i) 680,582 shares will be available for immediate sale in the public
market on the date of this Prospectus, (ii) 374,181 shares will be eligible for
sale 90 days after the date of this Prospectus and (iii) 8,221,970 shares will
be eligible for sale upon the expiration of lock-up agreements 180 days after
the date of this Prospectus.

In general, under Rule 144 as it will be in effect beginning April 29, 1997,
a person (or persons whose shares are aggregated), including an affiliate, who
has beneficially owned shares for at least one year is entitled to sell, within
any three-month period commencing 90 days after the date of this Prospectus, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 127,696 shares immediately
after this offering) or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of such
sale is filed, subject to certain restrictions. In addition, a person who is not
deemed to have been an affiliate of the Company at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were acquired from an affiliate of the Company, such affiliates' holding period
for the purpose of effecting a sale under Rule 144 commences on the date of
transfer from the affiliate.

Rule 701 promulgated under the Securities Act provides that shares of Common
Stock acquired pursuant to written plans such as the 1983 Stock Option Plan may
be resold by persons other than affiliates, beginning 90 days after the date of
this Prospectus, subject only to the manner of sale provisions of Rule 144, and
by affiliates, beginning 90 days after the date of this Prospectus, subject to
all provisions of Rule 144 except its one-year minimum holding period.

Shortly after the date of this Prospectus, the Company intends to file a
Form S-8 registration statements under the Securities Act to register all shares
of Common Stock issuable under the 1983 Stock Option Plan, the 1997 Incentive
Plan, the Directors' Plan and the Stock Purchase Plan (collectively, the "Stock
Plans"). See "Management--Director Compensation" and "--Benefit Plans." Such
registration statement is expected to become effective immediately upon filing,
and shares covered by that registration statement will thereupon be eligible for
sale in the public markets, subject to Rule 144 limitations applicable to
affiliates.

Prior to this offering, there has not been any public market for the Common
Stock of the Company, and no prediction can be made as to the effect, if any,
that market sales of shares of Common Stock or the availability of shares for
sale will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of substantial amounts of Common Stock in the public
market could

55
<PAGE>
adversely affect the market price of the Common Stock and could impair the
Company's future ability to raise capital through the sale of its equity
securities.

All directors and officers and certain shareholders of the Company (holding
an aggregate of 8,714,841 shares of Common Stock) have agreed, and all Partners
purchasing directed shares in this offering will be required to agree, that they
will not, without the prior written consent of the representatives of the
Underwriters, sell or otherwise dispose of any shares of Common Stock or options
to acquire shares of Common Stock during the 180-day period following the date
of this Prospectus. See "Underwriting."

The Company has agreed not to sell or otherwise dispose of any shares of
Common Stock during the 180-day period following the date of the Prospectus,
except the Company may issue, and grant options to purchase, shares of Common
Stock under the Stock Plans. In addition, the Company may issue shares of Common
Stock in connection with any acquisition of another company if the terms of such
issuance provide that such Common Stock shall not be resold prior to the
expiration of the 180-day period referenced in the preceding sentence. See "Risk
Factors--Shares Eligible for Future Sale; Registration Rights."

REGISTRATION RIGHTS

Following the closing of the offering made hereby, the GS Partnerships will
be entitled to certain rights with respect to the registration of the shares of
Common Stock held by them under the Securities Act. See "Principal
Shareholders." Under the terms of the agreement between the Company and the GS
Partnerships, beginning three months after this offering, the GS Partnerships
have the right, subject to certain conditions and limitations, to require the
Company to file a registration statement under the Securities Act in order to
register all or part of their shares of Common Stock. The Company may in certain
circumstances defer such registrations and the underwriters have the right,
subject to certain limitations, to limit the number of shares included in such
registrations. In the event that the Company proposes to register any of its
securities under the Securities Act, either for its own account or for the
account of other security holders, the GS Partnerships are entitled to include
their shares of Common Stock in such registration, subject to certain marketing
and other limitations. Generally, the Company is required to bear the expense of
all such registrations.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Dorsey & Whitney LLP, Minneapolis, Minnesota. Certain
legal matters in connection with the offering will be passed upon for the
Underwriters by Hale and Dorr LLP, Boston, Massachusetts.

EXPERTS

The consolidated balance sheet and the related consolidated statements of
operations, of stockholders' deficit and of cash flows of the Company at May 31,
1995 and 1996 and for each of the two years in the period ended May 31, 1996
included in this prospectus have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.

The statements of operations, of stockholders' deficit and of cash flows of
the Company for the year ended May 31, 1994 appearing in this Prospectus and the
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

56
<PAGE>
GREAT PLAINS SOFTWARE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Price Waterhouse LLP............................................ F-2

Report of Ernst & Young LLP............................................... F-3

Consolidated Balance Sheets as of May 31, 1995 and 1996 and as of November
30, 1996 (unaudited).................................................... F-4

Consolidated Statement of Operations for the years ended May 31, 1994,
1995 and 1996 and for the six months ended November 30, 1995 and 1996
(unaudited)............................................................. F-5

Consolidated Statement of Stockholders' Deficit for the years ended May
31, 1994, 1995 and 1996 and for the six months ended November 30, 1996
(unaudited)............................................................. F-6

Consolidated Statement of Cash Flows for the years ended May 31, 1994,
1995 and 1996 and for the six months ended November 30, 1995 and 1996
(unaudited)............................................................. F-7

Notes to Consolidated Financial Statements................................ F-8
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Stockholders of
Great Plains Software, Inc.

The four-for-three stock split described in Note 14 of the consolidated
financial statements has not been consumated at March 4, 1997. When it has been
consumated, we will be in the position to furnish the following report:

"In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of operations, of stockholders' deficit and
of cash flows present fairly, in all material respects, the financial
position of Great Plains Software, Inc. and its subsidiary at May 31, 1995
and 1996, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above."

PRICE WATERHOUSE LLP

Minneapolis, Minnesota
July 19, 1996

F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
and Stockholders of
Great Plains Software, Inc.

We have audited the accompanying statements of operations, stockholders'
deficit and cash flows of Great Plains Software, Inc. for the year ended May 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations of Great Plains Software,
Inc. and its cash flows for the year ended May 31, 1994.

ERNST & YOUNG LLP

Minneapolis, Minnesota
July 22, 1994

F-3
<PAGE>
GREAT PLAINS SOFTWARE, INC.
CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
NOVEMBER 30, 1996
----------------------------
MAY 31, PRO FORMA
-------------------------- STOCKHOLDERS'
1995 1996 ACTUAL EQUITY
------------ ------------ ------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 2,891,749 $ 8,256,393 $ 8,648,022
Accounts receivable, net.................................... 5,722,292 5,263,588 4,357,640
Inventories................................................. 796,339 454,595 316,207
Prepaid expenses and other assets........................... 940,324 538,555 827,765
Deferred income taxes....................................... -- 4,150,000 3,877,000
------------ ------------ ------------
Total current assets...................................... 10,350,704 18,663,131 18,026,634

Property and equipment, net................................... 4,976,146 5,143,075 5,627,000
Goodwill, net................................................. -- 555,051 496,624
------------ ------------ ------------
Total assets.............................................. $ 15,326,850 $ 24,361,257 $ 24,150,258
------------ ------------ ------------
------------ ------------ ------------

LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable............................................ $ 1,264,983 $ 1,827,509 $ 2,045,721
Accrued expenses............................................ 4,362,813 4,798,977 4,095,610
Salaries and wages payable.................................. 357,692 415,169 466,069
Commissions payable......................................... 421,587 764,514 936,861
Deferred revenue............................................ 8,027,560 9,018,094 7,774,910
Current portion of long-term debt and capital lease
obligations............................................... 863,405 827,238 500,000
Income taxes payable........................................ 45,000 -- --
------------ ------------ ------------
Total current liabilities................................. 15,343,040 17,651,501 15,819,171

Deferred income taxes......................................... -- -- 470,000
Long-term debt and capital lease obligations, less current
portion..................................................... 749,757 19,652 --
------------ ------------ ------------
Total liabilities......................................... 16,092,797 17,671,153 16,289,171

Commitments and contingencies (Note 8)

Mandatorily redeemable convertible preferred stock: 10,000,000
authorized preferred shares, Series B, at redemption value
of $6.17, $8.55 and $8.55, 1,345,220 shares issued and
outstanding; pro forma-none outstanding..................... 8,300,007 11,501,631 11,501,631 --

Stockholders' equity (deficit):
Convertible preferred stock: 10,000,000 authorized preferred
shares; Series A, par value $.01, 225,000 shares issued
and outstanding; pro forma-none outstanding............... 198,800 198,800 198,800 --
Pro forma preferred stock; $0.01 par value; 30,000,000
shares authorized, no shares issued or outstanding........ -- -- -- --
Common stock, par value $.01 per share: 40,000,000 shares
authorized; issued and outstanding shares--7,346,552,
7,359,765 and 7,353,499, respectively: 100,000,000 shares
authorized pro forma; 9,201,126 shares issued and
outstanding............................................... 73,465 73,597 73,535 $ 92,011
Additional paid-in capital.................................. 4,479,782 1,273,414 1,242,980 12,924,935
Accumulated deficit......................................... (13,818,001) (6,357,338) (5,155,859) (5,155,859)
------------ ------------ ------------ --------------
Total stockholders' equity (deficit)...................... (9,065,954) (4,811,527) (3,640,544) 7,861,087
------------ ------------ ------------ --------------
Total liabilities and stockholders' equity (deficit)...... $ 15,326,850 $ 24,361,257 $ 24,150,258
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to the consolidated financial statements.

F-4
<PAGE>
GREAT PLAINS SOFTWARE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
YEAR ENDED MAY 31, ENDED NOVEMBER 30,
---------------------------------------- --------------------------
1994 1995 1996 1995 1996
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
License.......................................... $ 19,164,990 $ 25,050,021 $ 27,077,689 $ 11,849,455 $ 15,133,099
Service.......................................... 9,949,444 12,847,061 15,193,666 7,302,865 9,620,911
------------ ------------ ------------ ------------ ------------
29,114,434 37,897,082 42,271,355 19,152,320 24,754,010
------------ ------------ ------------ ------------ ------------
Cost of revenues:
License.......................................... 4,997,118 4,438,875 4,913,431 1,809,631 2,719,447
Service.......................................... 5,479,344 5,621,969 5,979,858 2,838,608 3,649,359
------------ ------------ ------------ ------------ ------------
10,476,462 10,060,844 10,893,289 4,648,239 6,368,806
------------ ------------ ------------ ------------ ------------
Gross profit................................... 18,637,972 27,836,238 31,378,066 14,504,081 18,385,204
------------ ------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing.............................. 14,331,752 14,013,041 14,477,354 6,652,837 9,714,037
Research and development......................... 10,675,811 9,308,431 8,876,114 4,257,981 4,489,347
General and administrative....................... 3,606,772 3,886,134 4,762,994 2,178,466 2,432,753
------------ ------------ ------------ ------------ ------------
Total operating expenses....................... 28,614,335 27,207,606 28,116,462 13,089,284 16,636,137
------------ ------------ ------------ ------------ ------------
Operating income (loss)............................ (9,976,363) 628,632 3,261,604 1,414,797 1,749,067
Interest expense................................... 274,051 290,368 197,203 84,069 32,346
Related party interest expense..................... 90,842 36,039 -- -- --
Other (income) expense, net........................ 15,938 (66,982) (297,262) (123,040) (234,758)
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes.............. (10,357,194) 369,207 3,361,663 1,453,768 1,951,479
Income tax provision (benefit)..................... (26,813) 45,000 (4,099,000) 3,000 750,000
------------ ------------ ------------ ------------ ------------
Income (loss) before cumulative effect of
change in accounting principle............... (10,330,381) 324,207 7,460,663 1,450,768 1,201,479
Cumulative effect of change in accounting
principle........................................ -- (200,000) -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss).............................. $(10,330,381) $ 124,207 $ 7,460,663 $ 1,450,768 $ 1,201,479
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Unaudited pro forma net income per share........... $ 0.77 $ 0.12
------------ ------------
------------ ------------
Shares used in computing unaudited pro forma net
income per share................................. 9,743,969 9,840,336
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to the consolidated financial statements.

F-5
<PAGE>
GREAT PLAINS SOFTWARE, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
SERIES A PREFERRED COMMON STOCK
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance May 31, 1993.............................. -- -- 6,769,315 $ 67,693
Exercise of stock options....................... -- -- 21,120 211
Repurchase and retirement of common stock....... -- -- (531) (5)
Net loss........................................ -- -- -- --
-------------- -------------- -------------- --------------
Balance May 31, 1994.............................. -- -- 6,789,904 67,899
Exercise of stock options....................... -- -- 77,333 773
Repurchase and retirement of common stock....... -- -- (7,832) (79)
Sale of common stock, less offering costs of
$50,137....................................... -- -- 487,147 4,872
Sale of Series A preferred stock net of issuance
costs of $26,200.............................. 225,000 $ 198,800 -- --
Increase to carrying value of mandatorily
redeemable preferred stock.................... -- -- -- --
Net income...................................... -- -- -- --
-------------- -------------- -------------- --------------
Balance May 31, 1995.............................. 225,000 198,800 7,346,552 73,465
Exercise of stock options....................... -- -- 32,013 320
Repurchase and retirement of common stock....... -- -- (18,800) (188)
Increase to carrying value of mandatorily
redeemable preferred stock.................... -- -- -- --
Net income...................................... -- -- -- --
-------------- -------------- -------------- --------------
Balance May 31, 1996.............................. 225,000 198,800 7,359,765 73,597
Exercise of stock options (unaudited)........... -- -- 2,667 27
Repurchase and retirement of common stock
(unaudited)................................... -- -- (8,933) (89)
Net income (unaudited).......................... -- -- -- --
-------------- -------------- -------------- --------------
Balance November 30, 1996 (unaudited)............. 225,000 $ 198,800 7,353,499 $ 73,535
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------

<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
CAPITAL DEFICIT TOTAL
-------------- -------------- --------------
<S> <C> <C> <C>
Balance May 31, 1993.............................. $ 2,532,953 $ (3,611,827) $ (1,011,181)
Exercise of stock options....................... 42,262 -- 42,473
Repurchase and retirement of common stock....... (3,609) -- (3,614)
Net loss........................................ -- (10,330,381) (10,330,381)
-------------- -------------- --------------
Balance May 31, 1994.............................. 2,571,606 (13,942,208) (11,302,703)
Exercise of stock options....................... 136,222 -- 136,995
Repurchase and retirement of common stock....... (32,522) -- (32,601)
Sale of common stock, less offering costs of
$50,137....................................... 1,961,115 -- 1,965,987
Sale of Series A preferred stock net of issuance
costs of $26,200.............................. -- -- 198,800
Increase to carrying value of mandatorily
redeemable preferred stock.................... (156,639) -- (156,639)
Net income...................................... -- 124,207 124,207
-------------- -------------- --------------
Balance May 31, 1995.............................. 4,479,782 (13,818,001) (9,065,954)
Exercise of stock options....................... 73,324 -- 73,644
Repurchase and retirement of common stock....... (78,068) -- (78,256)
Increase to carrying value of mandatorily
redeemable preferred stock.................... (3,201,624) -- (3,201,624)
Net income...................................... -- 7,460,663 7,460,663
-------------- -------------- --------------
Balance May 31, 1996.............................. 1,273,414 (6,357,338) (4,811,527)
Exercise of stock options (unaudited)........... 6,772 -- 6,799
Repurchase and retirement of common stock
(unaudited)................................... (37,206) -- (37,295)
Net income (unaudited).......................... -- 1,201,479 1,201,479
-------------- -------------- --------------
Balance November 30, 1996 (unaudited)............. $ 1,242,980 $ (5,155,859) $ (3,640,544)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See accompanying notes to the consolidated financial statements.

F-6
<PAGE>
GREAT PLAINS SOFTWARE, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
YEAR ENDED MAY 31, ENDED NOVEMBER 30,
-------------------------------------- ------------------------
1994 1995 1996 1995 1996
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $(10,330,381) $ 124,207 $ 7,460,663 $ 1,450,768 $ 1,201,479
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating
activities:
Cumulative effect of change in accounting
principle................................. -- 200,000 -- -- --
Depreciation and amortization............... 2,450,735 1,861,185 1,921,175 879,156 921,224
Deferred income taxes....................... -- -- (4,150,000) -- 743,000
Changes in operating assets and liabilities:
Accounts receivable....................... 2,337,144 (3,666,099) 458,704 1,396,589 905,948
Inventories............................... (293,465) 9,806 341,744 122,013 138,388
Prepaid expenses and other assets......... (13,795) (540,448) 401,769 135,132 (289,210)
Income tax receivable..................... (85,642) 85,642 -- -- --
Accounts payable and accrued expenses..... 3,287,789 (1,975,187) 498,690 45,738 (485,156)
Salaries, wages and commissions payable... (872,782) 335,942 388,679 (175,246) 223,247
Deferred revenue.......................... 1,945,224 1,130,293 990,534 (1,198,979) (1,243,183)
Income taxes payable...................... (93,359) 45,000 (45,000) (45,000) --
------------ ----------- ----------- ----------- -----------
Net cash provided (used) by operating
activities............................ (1,668,532) (2,389,659) 8,266,958 2,610,171 2,115,737
------------ ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment............. (1,744,262) (1,154,608) (1,990,284) (1,005,622) (1,346,723)
Purchase of foreign subsidiary, net of cash..... -- -- (122,539) -- --
------------ ----------- ----------- ----------- -----------
Net cash used by investment activities.... (1,744,262) (1,154,608) (2,112,823) (1,005,622) (1,346,723)
------------ ----------- ----------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of notes payable and
long-term debt................................ 1,159,108 132,424 -- -- --
Principal payments on notes payable and long
term debt..................................... (987,076) (1,560,925) (197,264) (112,455) (99,335)
Net borrowings (payments) on line of credit..... 2,250,000 (2,250,000) -- -- --
Principal payments on capital lease
obligations................................... (279,305) (417,475) (587,615) (210,103) (247,554)
Repurchases of common stock..................... (3,614) (32,601) (78,256) (53,834) (37,295)
Proceeds from the sale of preferred stock....... -- 8,342,168 -- -- --
Proceeds from issuance of common stock.......... 42,473 2,102,982 73,644 -- 6,799
------------ ----------- ----------- ----------- -----------
Net cash (used) provided by financing
activities.............................. 2,181,586 6,316,573 (789,491) (376,392) (377,385)
------------ ----------- ----------- ----------- -----------
Increase in cash.................................. (1,231,208) 2,772,306 5,364,644 1,228,157 391,629
Cash and cash equivalents at beginning of
period.......................................... 1,350,651 119,443 2,891,749 2,891,749 8,256,393
------------ ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period........ $ 119,443 $ 2,891,749 $ 8,256,393 $ 4,119,906 $ 8,648,022
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Schedule of noncash investing and financing
activities:
Property and equipment acquired under capital
lease agreements.............................. $ 356,164 $ 304,805 $ 18,607 -- --
Interest paid................................... $ 360,153 $ 329,871 $ 196,675 $ 87,525 $ 47,940
</TABLE>

See accompanying notes to the consolidated financial statements.

F-7
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS INFORMATION

Great Plains Software, Inc. is a leading provider of Microsoft Windows NT
client/server financial management software for mid-sized businesses. Its
products and services automate essential accounting functions and enhance the
strategic value of financial information. The Company's products and services
are sold and implemented exclusively by its network of independent sales and
support organizations throughout the United States, Canada and select
international markets.

SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION POLICY AND FOREIGN CURRENCY TRANSLATIONS

The consolidated financial statements include the accounts of the Company
and its subsidiary in the United Kingdom. All significant intercompany accounts
and transactions have been eliminated in consolidation. The functional currency
of the subsidiary has been determined to be the U.S. dollar. Therefore, all
transaction gains and losses resulting from fluctuations in currency exchange
rates are included in operating results.

EXPORT SALES

Export sales represent 10.8% and 10.4% of total revenues for the years ended
May 31, 1995 and 1996 respectively. All export sales are denominated in US
dollars.

INTERIM FINANCIAL INFORMATION

In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial condition of the Company as of November 30, 1996
and the results of operations and cash flows for the six months ended November
30, 1995 and 1996, as presented in the accompanying unaudited consolidated
financial statements. All data as of such date and for such periods included
herein are unaudited.

RECLASSIFICATIONS

Certain amounts in the 1994 financial statements have been reclassified to
conform with the 1995 and 1996 presentation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly liquid investments with
original maturities of three months or less and which are readily convertible to
cash.

F-8
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to credit risk
consist primarily of cash, cash equivalents and accounts receivable. The Company
grants credit to customers in the ordinary course of business. The Company
invests its cash with high quality financial institutions. No single customer or
region represents a significant concentration of credit risk.

CHANGE IN ACCOUNTING PRINCIPLE

The Company adopted Statement of Accounting Standards No. 112 requiring
accrual accounting for the expected cost of providing certain disability
benefits. The cumulative effect of this change in accounting principle at the
beginning of fiscal 1995 was $200,000 and is shown in the consolidated statement
of operations.

REVENUE RECOGNITION AND DEFERRED REVENUE

Software license fees are recognized upon shipment less a reserve for
estimated future returns based on historical experience. Revenue from support
and maintenance service contracts are recorded as deferred revenue when billed
and recognized ratably over the contract period. Other service revenue such as
training and consulting services are recognized as the services are performed.
Prior to 1996 the Company provided credits or coupons in association with the
sale of one product as an inducement to customers to purchase future products or
releases. Revenue equal to the coupon value was deferred until used or expired.

FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash, short-term receivables,
long-term debt, capital lease obligations and payables for which their current
carrying amounts approximate fair market value. Additionally, based upon the
borrowing rates currently available to the Company for debt agreements with
similar terms and average maturities, the carrying amount of debt approximates
its fair market value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Major improvements are
capitalized while maintenance and repairs are expensed currently. Depreciation
is computed using the straight-line method based on the estimated useful lives
of 3 to 5 years for computer equipment and 5 to 10 years for furniture, fixtures
and equipment. Leasehold improvements are amortized over the lesser of the terms
of the related leases or estimated useful life. Purchased computer software,
which is used internally, is amortized over a five year period using the
straight-line method. Amortization expense is included with depreciation expense
in the cash flow statement.

INCOME TAXES

Income taxes are accounted for under the liability method in accordance with
Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting
for Income Taxes." Under the liability method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities reduced by valuation
allowances as necessary.

F-9
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING

The Company accrues, at the time of sales, an estimated liability for
qualified advertising expenses incurred by value added resellers and independent
sales support organizations for which the Company has agreed to reimburse such
parties. Advertising costs are expensed as incurred. Advertising expense was
approximately $2,354,000, $2,061,000 and $1,487,000 for the years ended May 31,
1994, 1995 and 1996, respectively.

RESEARCH AND DEVELOPMENT

Expenditures for software development costs and research are expensed as
incurred. Such costs are required to be expensed until the point that
technological feasibility product is established. The period between achieving
technological feasibility and the general availability of such software has been
short. Consequently costs otherwise capitalizable after technological
feasibility is achieved are generally expensed because they are insignificant to
both total assets and pre-tax results of operations.

UNAUDITED PRO FORMA NET INCOME PER SHARE

Unaudited pro forma net income per share is based on the unaudited pro forma
weighted average number of shares of common stock and common equivalent shares
outstanding for the period. The unaudited pro forma weighted average number of
shares assumes the conversion of the Company's Series A Convertible Preferred
Stock and the Series B Mandatorily Redeemable Convertible Preferred Stock into
1,847,627 shares of common stock effective June 1, 1995. Because of the
significant impact of the assumed conversion on the Company's capital structure
and earnings per share, historical earnings per share has been excluded from the
financial statements as they are not considered meaningful. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 83, options
granted with exercise prices below the initial public offering (IPO) price
during the 12-month period preceding the date of the initial filing of the
Registration Statement have been included in the calculation of pro forma net
income per share, using the treasury stock method based on the IPO price, as if
the options were outstanding for all periods presented.

INVENTORIES

Inventories consisting of media, training materials and packaging supplies
are stated at lower of cost or market, with cost determined on a first-in,
first-out (FIFO) basis.

PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)

If the offering contemplated by this Prospectus is consummated, all of the
Series A Convertible Preferred Stock and the Series B Mandatorily Redeemable
Convertible Preferred Stock outstanding at the closing date will be converted
into shares of common stock. The unaudited pro forma stockholders' equity as of
November 30, 1996, reflects the conversion of all outstanding convertible
preferred stock at November 30, 1996 into 1,847,627 shares of common stock.

RECENTLY ISSUED ACCOUNTING STANDARDS

Effective June 1, 1996, the Company adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." The adoption of this standard had no material effect on the Company's
financial statements. In October 1995, SFAS No. 123, "Accounting for

F-10
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--BUSINESS INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation," was issued. Management has adopted this standard
effective June 1, 1996 by means of disclosure of the pro forma effect of the
compensation components of stock-based compensation. The Company's 1997 annual
report to shareholders will include the disclosure required by this new
standard.

NOTE 2--BUSINESS COMBINATION

During fiscal 1996, the Company acquired a division of Kewill Systems PLC, a
United Kingdom software sales and service provider, for $634,264 consisting of
cash and the assumption of certain liabilities in a transaction accounted for as
a purchase. Accordingly, the results of operations of this division have been
consolidated with those of the Company from its date of acquisition. The net
assets acquired were recorded at their estimated fair market values with the
excess allocated to goodwill, as follows:

<TABLE>
<S> <C>
Software rights acquired......................................... $ 50,000
Goodwill......................................................... 584,264
---------
$ 634,264
---------
---------
</TABLE>

The goodwill associated with this transaction is being amortized on a
straight line basis over five years. The recoverability of unamortized goodwill
is assessed on an ongoing basis by comparing anticipated undiscounted cash flows
to net book value. Goodwill is presented net of accumulated amortization of
$29,213 at May 31, 1996. Pro forma operating results are not presented as the
effect is immaterial.

NOTE 3--ACCOUNTS RECEIVABLE

Accounts receivable, net of allowances, consist of the following:

<TABLE>
<CAPTION>
MAY 31,
------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
Gross accounts receivable..................................... $ 7,073,073 $ 7,121,386
Less allowance for doubtful accounts.......................... (254,841) (666,551)
Less allowance for returns.................................... (1,095,940) (1,191,247)
-------------- --------------
$ 5,722,292 $ 5,263,588
-------------- --------------
-------------- --------------
</TABLE>

F-11
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
MAY 31,
------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
Furniture and fixtures....................................... $ 1,440,086 $ 1,443,427
Computers and equipment...................................... 9,833,777 10,784,823
Leasehold improvements....................................... 322,727 331,392
Purchased software for internal use.......................... 782,501 1,094,280
-------------- --------------
12,379,091 13,653,922
Less accumulated depreciation and amortization............... (7,402,945) (8,510,847)
-------------- --------------
$ 4,976,146 $ 5,143,075
-------------- --------------
-------------- --------------
</TABLE>

Depreciation expense for the years ended May 31, 1994, 1995 and 1996 was
$1,382,220, $1,512,782 and $1,892,310, respectively.

The Company leases equipment under long-term lease agreements which are
classified as capital leases. Property and equipment includes the following
leased property:

<TABLE>
<CAPTION>
MAY 31,
---------------------------
1995 1996
------------- ------------
<S> <C> <C>
Property and equipment........................................... $ 1,814,484 $ 350,521
Less accumulated amortization.................................... (1,139,615) (149,613)
------------- ------------
$ 674,869 $ 200,908
------------- ------------
------------- ------------
</TABLE>

NOTE 5--ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
MAY 31,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Accrued vacation payable........................................ $ 839,873 $ 904,498
Co-op advertising accrual....................................... 1,092,502 855,907
Other........................................................... 2,430,438 3,038,572
------------- -------------
$ 4,362,813 $ 4,798,977
------------- -------------
------------- -------------
</TABLE>

NOTE 6--LINE OF CREDIT

The Company has a $5,000,000 revolving line of credit facility with a bank
which provides for interest at prime. Substantially all of the Company's assets
are pledged as collateral on the line of credit which expires on November 15,
1997 and is subject to certain covenants, all of which had been complied with at
May 31, 1996. There were no amounts outstanding at May 31, 1995 or 1996.

F-12
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

<TABLE>
<CAPTION>
MAY 31,
--------------------------
1995 1996
------------- -----------
<S> <C> <C>
Various capital lease obligations with interest rates varying from
4.8% to 11.9%, at May 31, 1996, maturities through October 1997,
repayable in monthly installments and secured by the related
equipment....................................................... $ 816,562 $ 247,554
Term loans bearing interest ranging from 8.0% to 9.5%, at May 31,
1996, repayable in monthly installments ranging from $4,500 to
$6,500 plus accrued interest through December 1996, secured by
various assets and guaranteed by certain stockholders........... 273,087 82,600
Note payable to a third party bearing interest at 1.25% over the
prime rate (9.5% as of May 31, 1996). The principal amount is
due in four quarterly installments to commence upon demand...... 500,000 500,000
Other notes....................................................... 23,513 16,736
------------- -----------
1,613,162 846,890
Current portion of long-term debt................................. 863,405 827,238
------------- -----------
$ 749,757 $ 19,652
------------- -----------
------------- -----------
</TABLE>

Maturities of long-term debt and capital lease obligations by fiscal year
are approximately as follows: fiscal 1997--$827,238; fiscal 1998--$10,529 and
fiscal 1999--$9,123. In addition to these maturities, future interest to be paid
under capital lease obligations at May 31, 1996 was approximately $52,757.

NOTE 8--COMMITMENTS AND CONTINGENCIES

LEASE OBLIGATIONS

Rental expense incurred for operating leases of office facilities and office
equipment was approximately $693,000 in 1994, $894,000 in 1995 and $871,000 in
1996. The rent expense for the years ended May 31 1994, 1995 and 1996 include
$70,740 for computer equipment leased from stockholders. Future minimum rental
payments as of May 31, 1996 for noncancelable operating leases with initial or
remaining terms in excess of one year is payable as follows: fiscal
1997--$813,000 and fiscal 1998--$688,000.

EMPLOYEE STOCK--RIGHT OF FIRST REFUSAL

The Company has a right of first refusal to repurchase shares of common
stock from stockholder employees who leave the Company or violate any terms of
agreements with the Company. The price per share is determined based on a
defined calculation.

LITIGATION

The Company is, from time to time, a party to litigation arising in the
normal course of business. Management believes that none of this litigation will
have a material adverse effect on the financial position or results of
operations or cash flows of the Company.

F-13
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--INCOME TAXES

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
MAY 31,
------------------------------
1995 1996
-------------- --------------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of financial reporting........... $ 500,000 $ 470,000
-------------- --------------
Total deferred tax liabilities............................ 500,000 470,000
-------------- --------------
Deferred tax assets:
Accounts receivable allowances.............................. 511,000 687,000
Deferred revenue............................................ 2,002,000 1,342,000
Cooperative advertising accrual............................. 404,000 317,000
Sales tax accrual........................................... 259,000 211,000
Net operating loss carryforward............................. 1,542,000 950,000
Research and development credit carryforward................ 572,000 573,000
Alternative minimum tax credit carryforward................. 133,000 160,000
Investment tax credit carryforward.......................... 63,000 63,000
Vacation and other.......................................... 506,000 317,000
-------------- --------------
Total deferred tax assets................................. 5,992,000 4,620,000

Valuation allowance........................................... (5,492,000) --
-------------- --------------
Net deferred tax assets................................... 500,000 4,620,000
-------------- --------------
Total net deferred income taxes............................... $ -- $ 4,150,000
-------------- --------------
-------------- --------------
</TABLE>

The provision (benefit) for income taxes is summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------------------------
1994 1995 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Current income taxes:
Federal......................................... $ (2,536,000) $ 1,261,000 $ 595,000
State........................................... (281,813) 110,000 48,000
Net operating loss carry forward................ 2,791,000 (1,326,000) (592,000)
-------------- -------------- --------------
(26,813) 45,000 51,000

Deferred income taxes:
Federal......................................... (3,460,000) 157,000 1,233,000
State........................................... (305,000) 20,000 109,000
-------------- -------------- --------------
(3,765,000) 177,000 1,342,000

Increase (decrease) in valuation allowance........ 3,765,000 (177,000) (5,492,000)
-------------- -------------- --------------
$ (26,813) $ 45,000 $ (4,099,000)
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

F-14
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--INCOME TAXES (CONTINUED)
The differences between the expected tax provision based on the federal
income tax statutory rate and the actual provision for the years presented are
summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED
MAY 31,
--------------------------------------------
1994 1995 1996
-------------- ------------ --------------
<S> <C> <C> <C>
Expected tax provision (benefit) at statutory
rate............................................ $ (3,521,000) $ 126,000 $ 1,143,000
State income taxes, net of federal tax effect..... (342,000) 12,000 111,000
Change in valuation allowance..................... 3,765,000 (177,000) (5,492,000)
Other............................................. 71,187 84,000 139,000
-------------- ------------ --------------
Total......................................... $ (26,813) $ 45,000 $ (4,099,000)
-------------- ------------ --------------
-------------- ------------ --------------
</TABLE>

At May 31, 1996, the Company had available for tax purposes net operating
loss carryforwards of
approximately $2,973,000 which could be used to offset taxable income through
May 2010. Income tax credit carryforwards included in deferred tax assets
generally expire through May 2010.

At May 31, 1994 and 1995, the Company had determined that the realization of
the net operating loss carryforward and other deferred tax assets did not meet
the recognition criteria under SFAS No. 109, and, accordingly, a valuation
allowance was established for the tax benefit of these items. The valuation
allowance was reversed during 1996 due primarily to the utilization of a portion
of the net operating loss carryforwards, and on the basis of an analysis
performed by management which considered all available evidence, both positive
and negative, as well as the weight and importance of such evidence. As a result
of this analysis, management believed it was more likely than not that these tax
benefits would be realized in the future, and, accordingly, reversed the
remaining valuation allowance in the fourth quarter of fiscal 1996.

F-15
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--INCENTIVE STOCK OPTION PLAN

The Company adopted an Employee Incentive Stock Option Plan for certain key
employees in 1983. At May 31, 1996, 2,066,667 shares of common stock had been
reserved for issuance or grant under this plan. The options are granted to
employees at 100% of the fair market value on the date of grant. The fair market
value, rate of exercisability and expiration dates of the options granted are
determined by the Board of Directors at the time of grant. Options generally
vest ratably over five years from date of grant and expire six years after
grant.

The following summary of outstanding options and shares reserved under the
Plan is as follows:

<TABLE>
<CAPTION>
OPTION PRICE
OPTIONS RANGE EXPIRATION
OUTSTANDING PER SHARE DATE
------------ ----------------- --------------
<S> <C> <C> <C>
Outstanding at May 31, 1993................... 1,040,000 $1.70 to $2.72 1995 - 1999

Granted..................................... 52,000 $3.41
Exercised................................... (21,120) $1.96 to $2.42
Canceled/expired............................ (97,333) $2.42 to $2.55
------------

Outstanding at May 31, 1994................... 973,547 $1.70 to $3.41 1995 - 1999

Granted..................................... 187,433 $4.16
Exercised................................... (77,333) $1.70 to $2.55
Canceled/expired............................ (20,000) $1.96 to $4.16
------------

Outstanding May 31, 1995...................... 1,063,647 $1.96 to $4.16 1997 - 2001

Granted..................................... 619,333 $5.20 to $6.41
Exercised................................... (32,013) $1.96 to $2.57
Canceled/expired............................ (321,320) $2.57 to $5.20
------------

Outstanding May 31, 1996...................... 1,329,647 $1.96 to $6.41 1997 - 2002
------------
------------
</TABLE>

As of May 31, 1996 there were currently exercisable options outstanding
covering 775,567 shares, exercisable at prices ranging from $1.96 to $4.16.

NOTE 11--EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution 401(k) Profit Sharing Plan
covering substantially all employees. The Company currently matches 25% of each
participants' contribution up to 8% of their annual salary and can make
discretionary profit sharing contributions to the plan. The Company's
contribution to this plan for the years ended May 31, 1994, 1995 and 1996 was
approximately $186,000, $230,000 and $251,000, respectively.

NOTE 12--RELATED PARTY TRANSACTIONS

NOTE PAYABLE TO STOCKHOLDER

In June 1994, the Company received a $1,500,000 loan from a stockholder
bearing interest at 7.25%. The entire balance plus accrued interest of $5,000
was repaid in June 1994.

F-16
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--RELATED PARTY TRANSACTIONS (CONTINUED)
As of May 31, 1994, the Company had outstanding a series of unsecured notes
aggregating $940,000 with stockholders of the Company. These notes had interest
rates ranging from 7.25% to 8.5% during 1995 and were paid off as of May 31,
1995. Interest expense of $90,842 and $36,039 was recorded on these notes during
fiscal 1994 and 1995, respectively.

A director of the Company was paid $104,700, $53,900 and $36,800 in 1994,
1995 and 1996 (plus reimbursement of expenses), respectively, for consulting
services rendered to the Company pursuant to consulting agreements with the
Company.

STOCK OPTION GRANT BY PRINCIPAL STOCKHOLDERS

In April 1995, certain principal common stockholders granted to an
officer/director of the Company an option to purchase 711,156 shares of common
stock directly from them at an exercise price of $4.16 per share (fair market
value at date of grant). Certain events, including a decision by the Board of
Directors to initiate an initial public offering, accelerate the vesting period.

NOTE 13--STOCKHOLDERS' EQUITY

SERIES A CONVERTIBLE PREFERRED STOCK

In June 1994, the Company sold 225,000 shares of $.01 par value Series A
Convertible Preferred Stock (Series A Preferred Stock) at $1.00 per share to an
officer/director who may convert these shares into 54,000 shares of common stock
at any time after June 15, 1997 at a rate of .24 shares of common stock for each
share of Series A Convertible Preferred Stock. In the event of a public offering
(a "Qualified Public Offering") with aggregate proceeds of at least $10,000,000
and the issuance of 15% of the resulting outstanding shares of the Company, the
Series A Preferred Stock shall be automatically converted to shares of common
stock. The holder of the Series A Preferred Stock is not entitled to dividends
or other distributions, has preference over common stock upon liquidation and
has the right to elect one director.

SERIES B MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

Also in June 1994, the Company entered into an agreement for the sale of
Series B Mandatorily Redeemable Convertible Preferred Stock (Series B Preferred
Stock) and warrants. On June 24, 1994, at the first closing, the Company sold
888,576 of $.01 par value Series B Preferred Stock and contingent warrants to
purchase an additional 752,234 shares of Series B Preferred Stock for an
aggregate purchase price of $6,300,004. On September 22, 1994, the second
closing, the Company sold an additional 282,088 shares of Series B Preferred
Stock for an aggregate purchase price of $2,000,004.

During May 1995, the Company and the holders of the Series B Preferred Stock
agreed to reprice the previously issued shares of Series B Preferred Stock and
eliminate the warrants. The Company issued an additional 174,556 shares of
Series B Preferred Stock in return for the cancellation of the warrants. Thus,
the total Series B Preferred Stock sold in the three transactions was 1,345,220
shares at an average price of $6.17.

Holders of the Series B Preferred Stock may convert their shares into
1,793,627 shares of common stock at any time after the date of issuance. The
holders of Series B Preferred Stock also have the right to require the Company
to redeem their shares at any time after June 24, 1998 at a price of $6.17 per
share

F-17
<PAGE>
GREAT PLAINS SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13--STOCKHOLDERS' EQUITY (CONTINUED)
or, if higher, the fair market value of such shares if the Company has not
undertaken a Qualified Public Offering. The Company carries this Series B
Preferred Stock at fair value which management considers to equal $6.17 and
$8.55 per share at May 31, 1995 and 1996, respectively.

In the event of a Qualified Public Offering, the Series B Preferred Stock
shall be automatically converted to 1,793,627 shares of common stock.

The holders of the Series B Convertible Preferred Stock are not entitled to
dividends or other distributions and have preference over common stock upon
liquidation.

NOTE 14--SUBSEQUENT EVENTS

The Board of Directors met on February 20, 1997 and took the following
actions in connection with the initial public offering of shares of the
Company's common stock: (a) authorized a four-for-three stock split of the
issued and outstanding common stock of the Company, in the form of a stock
dividend, to be effective immediately prior to the public offering (all
references to common stock amounts, shares, per share data and preferred stock
conversion rights included in the financial statements and these notes have been
adjusted to give retroactive effect to the stock split); (b) authorized an
increase in capital stock to 100,000,000 shares of $0.01 par value common stock
and 30,000,000 shares of $0.01 par value preferred stock to be both contingent
and effective upon stockholder approval and the first closing of the initial
public offering of common stock; (c) waived, subject to the successful closing
of an initial public offering, the Company's contractual rights of first refusal
and the rights to repurchase with regard to shares of common stock issued to
employees of the Company; and (d) authorized the certain incentive stock plans
contingent and effective upon stockholder approval and consummation of the
initial public offering. These incentive plans include (i) the 1997 Employee
Stock Purchase Plan providing for the purchase of common stock at a discounted
price, (ii) the 1997 Stock Incentive Plan providing for the grant of stock based
compensation to eligible persons and (iii) the Outside Director's Stock Option
Plan providing for the grant of nonqualified stock options to nonemployee
directors of the Company.

F-18
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company have agreed to sell to each of the Underwriters named below, and each of
such Underwriters, for whom Goldman, Sachs & Co., Hambrecht & Quist LLC and
Piper Jaffray Inc. are acting as representatives, has severally agreed to
purchase from the Company the respective number of shares of Common Stock set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
- ----------------------------------------------------------------------------- ---------------
<S> <C>
Goldman, Sachs & Co..........................................................
Hambrecht & Quist LLC........................................................
Piper Jaffray Inc............................................................

---------------
Total........................................................................ 3,000,000
---------------
---------------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 450,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 3,000,000 shares of Common
Stock offered.

The Company has agreed that, subject to certain exceptions, during the
period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, it will not offer,
sell, contract to sell or otherwise dispose of any shares of Common Stock or of
any other securities of the Company (other than pursuant to the Stock Plans)
which are substantially similar to the shares of Common Stock or which are
convertible or exchangeable into securities which are substantially similar to
the shares of Common Stock without the prior written consent of the
representatives, except for the shares of Common Stock offered in connection
with the offering. In addition, the Company may issue shares of Common Stock in
connection with any acquisition of another company if the terms of such issuance
provide that such Common Stock shall not be resold prior to the expiration of
the 180-day period referenced in the preceding sentence.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed 5% of the total number of shares of Common
Stock offered hereby.

Prior to the offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be negotiated among the
Company and the representatives. Among the factors

U-1
<PAGE>
to be considered in determining the initial public offering price of the Common
Stock, in addition to prevailing market conditions, will be the Company's
historical performance, estimates of business potential and earnings prospects
for the Company, an assessment of the Company's management and the consideration
of the above factors in relation to market valuation of companies in related
businesses.

Certain of Goldman, Sachs & Co.'s affiliates own 1,793,627 shares of Common
Stock, representing 18.4% of the outstanding Common Stock of the Company and,
upon completion of the offering, will own approximately 14.0% of the outstanding
Common Stock. See "Principal Shareholders." Such affiliates are subject to the
180-day lock-up that applies to other shareholders as described above. Subject
to the lock-up provisions described above, Goldman, Sachs & Co. and their
affiliates will be permitted to engage in stabilization, brokerage and ordinary
course of business transactions and will be permitted to sell Common Stock and
related securities in connection with market-making transactions from time to
time, both during and after the 180-day period. See "Shares Eligible for Future
Sale."

The Company has been advised by Goldman, Sachs & Co. that, subject to
applicable laws and regulations, Goldman, Sachs & Co. currently intend to make a
market in the Common Stock following completion of the offering. However, they
are not obligated to do so and any market-making may be discontinued at any time
without notice. In addition, such market-making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act. There can be no
assurance that an active trading market will develop or be sustained following
the completion of the offering. See "Risk Factors-- No Prior Market; Possible
Volatility of Stock Price".

A representative of Goldman, Sachs & Co. serves as a member of the Board of
Directors of the Company. See "Certain Transactions."

At the request of the Company, the Underwriters have reserved shares of the
Common Stock offered hereby for sale at the public offering price to Partners,
directors, officers and employees of the Company and certain other persons. Such
Partners, directors, officers, employees and other persons will purchase, in the
aggregate, less than 15% of the Common Stock offered hereby, of which
approximately 10% are expected to be purchased by Partners. The number of shares
available to the general public will be reduced to the extent that individuals
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the Underwriters to the general public on the same terms as the other
shares offered by this Prospectus. Partners who purchase such reserved shares
will be required to execute a lock-up agreement with the representatives of the
Underwriters pursuant to which they will agree that, without the prior written
consent of the representatives of the Underwriters, they will not sell or
otherwise dispose of any shares of Common Stock during the 180-day period
following the date of this Prospectus.

Under Rule 2720 of the National Association of Securities Dealers, Inc. (the
"NASD"), the Company may be deemed to be an affiliate of Goldman Sachs & Co. For
a description of certain relationships between Goldman Sachs and its affiliates
and the Company, see "Management," "Certain Transactions" and "Principal
Shareholders." The offering is being conducted in accordance with Rule 2720,
which provides that, among other things, when an NASD member participates in the
underwriting of an affiliate's equity securities, the initial public offering
price can be no higher than that recommended by a "qualified independent
underwriter" meeting certain standards. In accordance with this requirement,
Hambrecht & Quist LLC will serve in such role and will recommend a price in
compliance with the requirements of Rule 2720. Hambrecht & Quist LLC will
receive compensation from the Company in the amount of $ for serving in such
role. In connection with the offering, Hambrecht & Quist LLC in its role as
qualified independent underwriter has performed due diligence investigations and
reviewed and

U-2
<PAGE>
participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus is a part. In addition, the Underwriters may
not confirm sales to any accounts over which they exercise discretionary
authority without the prior specific written approval by the customer.

During and after the offering, the Underwriters may purchase and sell Common
Stock in the open market. These transactions may include overallotment,
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Common Stock sold in the offering for their
account may be reclaimed by the syndicate if such securities are repurchased by
the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock,
which may be higher than the price that might otherwise prevail in the open
market. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise, and these activities, if commenced, may be
discontinued at any time.

As permitted by Rule 103 under the Exchange Act, Underwriters or prospective
Underwriters that are market makers ("passive market makers") in the Common
Stock may make bids for or purchases of Common Stock in the Nasdaq National
Market until such time, if any, when a stabilizing bid for such securities has
been made. Rule 103 generally provides that (a) a passive market maker's net
daily purchases of the Common Stock may not exceed 30% of its average daily
trading volume in such securities for the two full consecutive calendar months
(or any 60 consecutive days ending within the 10 days) immediately preceding the
filing date of the registration statement of which this Prospectus forms a part,
(b) a passive market maker may not effect transactions or display bids for the
Common Stock at a price that exceeds the highest independent bid for the Common
Stock by persons who are not passive market makers and (c) bids made by passive
market makers must be identified as such.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.

U-3
<PAGE>
Graphic and Text Appearing on Inside Back Cover of Prospectus:

This page contains a picture of a hand with the index finger pointing
upward. In circular patterns, emanating from the point of the index finger
are the following words and phrases: Windows NT; Client/Server; Leading
Technologies; Customer Service; Internet; Ease of Use; Partner Network;
Openness; Global Markets. Also, in rows across the page, are repeating
patterns of 0 1 0 1.
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information.................................................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Dilution.................................................................. 14
Capitalization............................................................ 15
Selected Consolidated Financial Data...................................... 16
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 18
Business.................................................................. 26
Management................................................................ 40
Certain Transactions...................................................... 50
Principal Shareholders.................................................... 52
Description of Capital Stock.............................................. 53
Shares Eligible for Future Sale........................................... 55
Legal Matters............................................................. 56
Experts................................................................... 56
Index to Consolidated Financial Statements................................ F-1
Underwriting.............................................................. U-1
</TABLE>

--------------

THROUGH AND INCLUDING , 1997 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

3,000,000 SHARES

GREAT PLAINS SOFTWARE, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

[LOGO]

GOLDMAN, SACHS & CO.

HAMBRECHT & QUIST

PIPER JAFFRAY INC.

REPRESENTATIVES OF THE UNDERWRITERS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following fees and expenses will be paid by the Company in connection
with the issuance and distribution of the securities registered hereby and do
not include underwriting commissions and discounts. All such expenses, except
for the SEC registration and NASD fees, are estimated.

<TABLE>
<S> <C>
SEC registration fee............................................. $ 13,591
NASD filing fee.................................................. 4,985
Nasdaq National Market listing fee............................... 50,000
Legal fees and expenses.......................................... 200,000
Accounting fees and expenses..................................... 75,000
Transfer Agent's and Registrar's fees............................ 15,000
Printing and engraving expenses.................................. 100,000
Miscellaneous.................................................... 21,424
---------
Total........................................................ $ 480,000
---------
---------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 302A.521 of the Minnesota Statutes 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 any 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 for the same judgments, penalties or
fines; (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) in the case of
acts or omissions in such person's official capacity for the corporation,
reasonably believed that the conduct was in the best interests of the
corporation, or in the case of acts or omissions in such person's official
capacity for other affiliated organizations, reasonably believed that the
conduct was not opposed to the best interests of the corporation. Section
302A.521 also requires payment by a corporation, upon written request, of
reasonable expenses in advance of final disposition of the proceeding in certain
instances. A decision as to required indemnification is made by a disinterested
majority of the Board of Directors present at a meeting at which a disinterested
quorum is present, or by a designated committee of the Board, by special legal
counsel, by the shareholders or by a court.

Provisions regarding indemnification of officers and directors of the
Company to the extent permitted by Section 302A.521 are contained in the
Company's Bylaws as they will be amended immediately upon closing of the
offering (Exhibit 3.3 hereto), each of which is incorporated herein by
reference.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since January 1, 1994, the Company has issued and sold the following
securities that were not registered under the Securities Act:

In June 1994, the Company issued 225,000 shares of Series A Preferred Stock
to The Arthur Companies, Inc. ("Arthur"), the holder of a majority of the
outstanding shares of Common Stock of Company at such time, for $225,000 in
cash. These shares were subsequently transferred to Douglas J. Burgum, the
Chairman of the Board, President and Chief Executive Officer of the Company, in
exchange for shares of capital stock of Arthur held by Mr. Burgum with a fair
market value of $225,000. The Series A

II-1
<PAGE>
Preferred Stock will convert into an aggregate of 54,000 shares of Common Stock
upon the consummation of this offering.

In June 1994, the Company issued to certain investment partnerships
affiliated with the Goldman Sachs Group, L.P. (the "GS Partnerships"), 888,576
shares of Series B Preferred Stock at a price of $7.09 per share and a warrant
(the "Warrant") to purchase an additional 752,234 shares of Series B Preferred
Stock at a price of $5.32 per share. In September 1994, the Company issued to
the GS Partnerships, 282,088 shares of Series B Preferred Stock at a price of
$7.09 per share. In May 1995, the Company issued to the GS Partnerships 174,556
shares of Series B Preferred Stock in exchange for the Warrant.

During the period from September 1994 to December 1994, the Company issued
to its employees an aggregate of 487,147 shares of Common Stock at a purchase
price of $4.16 per share pursuant to an employee incentive stock sale program.

During the period from January 1, 1994 through February 21, 1997, the
Company issued and sold 696,860 shares of Common Stock to employees at prices
ranging from $1.70 to $5.44 per share upon exercise of stock options granted
pursuant to the Company's 1983 Incentive Stock Option Plan.

The sales of the above securities were deemed to be exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, as transactions by an issuer not involving
a public offering, or pursuant to Rule 701 promulgated under the Securities Act.
The recipients of the securities in each such transaction represented their
intention to acquire the securities for investment purposes only and not with a
view to or for sale in connection with any distribution thereof, and appropriate
legends were affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their relationship
with the Company or otherwise, to information about the Company.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------
<C> <S>
1.1* Underwriting Agreement
3.1 Articles of Incorporation of the Company (current)
3.2 Amended and Restated Articles of Incorporation of the Company (as proposed to be effective
upon closing of the offering)
3.3 Amended Bylaws of the Company
4.1 Form of Certificate of Common Stock
5.1* Opinion of Dorsey & Whitney LLP
10.1 Lease Agreement, dated October 1, 1983, as amended, between the Company and West Acres Office
Park
10.2 Lease Agreement, dated April 20, 1994, between the Company and Norwest Bank North Dakota, N.A.
10.3 Lease Agreement, dated May 2, 1994, as amended, between the Company and Blue Cross Blue Shield
of North Dakota and Lincoln Mutual Life and Casualty Insurance Co.
10.4 1983 Incentive Stock Option Plan, as amended
10.5 1997 Stock Incentive Plan
10.6 Outside Directors' Stock Option Plan
10.7 1997 Employee Stock Purchase Plan
10.8 Non-Incentive Stock Option Agreement, dated April 9, 1991, between the Company and Raymond F.
Good
</TABLE>

II-2
<PAGE>
<TABLE>
<C> <S>
10.9 Employment Agreement, dated June 24, 1994, between the Company and Douglas J. Burgum
10.10 Employment Agreement, dated June 24, 1994, between the Company and Raymond A. August
10.11 Registration Rights Agreement, dated as of June 24, 1994, between the Company and the holders
of registerable securities named therein
10.12 Limited Liability Company Agreement, dated as of February 20, 1996, between the Company and
Douglas J. Burgum
10.13* Agreement between the Company and Terri F. Zimmerman
10.14* Agreement between the Company and Raymond F. Good
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)
24.1 Powers of Attorney
27.1 Financial Data Schedule
</TABLE>

- --------------

* To be filed by amendment.

(b) Financial Statement Schedules

SCHEDULE II--SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 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 Act and will be governed by the final adjudication of
such issue.

The undersigned registrant further undertakes that:

(1) It will provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.

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

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

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fargo,
State of North Dakota, on March 5, 1997.

GREAT PLAINS SOFTWARE, INC.

By: /s/ DOUGLAS J. BURGUM
----------------------------------------
Douglas J. Burgum
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities indicated on March 5, 1997.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------- ----------------------------------------

<C> <S>
/s/ DOUGLAS J. BURGUM Chairman of the Board, President and
- ---------------------------------------- Chief Executive Officer (principal
Douglas J. Burgum executive officer)

/s/ TERRI F. ZIMMERMAN Chief Financial Officer, Group Vice
- ---------------------------------------- President (principal financial officer
Terri F. Zimmerman and principal accounting officer)

BRADLEY J. BURGUM* Director

FREDERICK W. BURGUM* Director

- ---------------------------------------- Director
William V. Campbell

RAYMOND F. GOOD* Director

SANJEEV MEHRA* Director

J. A. HEIDI ROIZEN* Director

JOSEPH S. TIBBETTS, JR.* Director
</TABLE>

*By: /s/ DOUGLAS J. BURGUM
-------------------------
Douglas J. Burgum
ATTORNEY-IN-FACT

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Underwriting Agreement

3.1 Articles of Incorporation, as amended, of the Company (current)

3.2 Amended and Restated Articles of Incorporation of the Company (as proposed to be effective upon closing
of the Offering)

3.3 Amended Bylaws of the Company

4.1 Form of Certificate of Common Stock

5.1* Opinion of Dorsey & Whitney LLP

10.1 Lease Agreement, dated October 1, 1983, as amended, between the Company and West Acres Office Park

10.2 Lease Agreement, dated April 20, 1994, between the Company and Norwest Bank North Dakota, N.A.

10.3 Lease Agreement, dated May 2, 1994, as amended, between the Company and Blue Cross Blue Shield of North
Dakota and Lincoln Mutual Life and Casualty Insurance Co.

10.4 1983 Incentive Stock Option Plan, as amended

10.5 1997 Stock Incentive Plan, including form of option agreement

10.6 Outside Directors' Stock Option Plan

10.7 1997 Employee Stock Purchase Plan

10.8 Non-Incentive Stock Option Agreement, dated April 9, 1991, between the Company and Raymond F. Good

10.9 Employment Agreement, dated June 24, 1994, between the Company and Douglas J. Burgum

10.10 Employment Agreement, dated June 24, 1994, between the Company and Raymond A. August

10.11 Registration Rights Agreement, dated as of June 24, 1994, between the Company and the holders of
registerable securities named therein

10.12 Limited Liability Company Agreement, dated as of February 20, 1996, between the Company and Douglas J.
Burgum

10.13* Agreement between the Company and Terri F. Zimmerman

10.14* Agreement between the Company and Raymond F. Good

23.1 Consent of Price Waterhouse LLP

23.2 Consent of Ernst & Young LLP

23.3 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1)

24.1 Powers of Attorney

27.1 Financial Data Schedule
</TABLE>

- --------------

* To be filed by amendment.

<PAGE>

CERTIFICATE
OF
AMENDMENT OF ARTICLES OF INCORPORATION
OF
GREAT PLAINS SOFTWARE, INC.

I, Bradley Burgum, the Secretary of Great Plains Software, Inc., a
Minnesota corporation (the "Corporation"), do hereby certify that at a meeting
of the shareholders of the Corporation duly called and held on January 26, 1995
in accordance with the laws of the State of Minnesota and the Second Amended and
Restated Articles of Incorporation and bylaws of the Corporation, that the
following resolution effecting a amendment of the Corporation's Second Amended
and Restated Articles of Incorporation was approved by the shareholders of the
Corporation and that such resolution has not been subsequently modified or
rescinded:

RESOLVED, that the Second Amended and Restated Articles of
Incorporation of the Company be amended to add an Article 6 to read in full
as follows:

"ARTICLE 6. CONTROL SHARE ACQUISITIONS

The Corporation shall not be subject to the provisions of Section
302A.671 of the Minnesota Business Corporation Act."

IN WITNESS WHEREOF, I have executed this certificate as of this 26th day of
January, 1995.

/s/ Bradley Burgum
--------------------------
Bradley Burgum, Secretary
<PAGE>

SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
GREAT PLAINS SOFTWARE, INC

ARTICLE 1. NAME

The name of the Corporation is Great Plains Software, Inc.

ARTICLE 2. REGISTERED OFFICE

The name and address of the registered agent and office of the Corporation
in Minnesota is CT Corporation System, 405 Second Avenue South, Minneapolis,
Minnesota 55401.

ARTICLE 3. CAPITAL STOCK

3.1 AUTHORIZED CAPITAL STOCK. The total number of shares of capital stock
that the Corporation is authorized to issue shall be 40,000,000 shares,
consisting of 30,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), and 10,000,000 shares of preferred stock, par value $0.01 per
share ("Preferred Stock").

3.2 COMMON STOCK. All shares of Common Stock shall be voting shares and
shall be entitled to one vote per share. Holders of Common Stock shall not be
entitled to cumulate their votes in the election of directors and shall not be
entitled to any preemptive rights to acquire shares of any class or series of
capital stock of the Corporation. Subject to any preferential rights of holders
of Preferred Stock, holders of Common Stock shall be entitled to receive their
pro rata shares, based upon the number of shares of Common Stock held by them,
of such dividends or other distributions as may be declared by the Board of
Directors from time to time and of any distribution of the assets of the
Corporation upon its liquidation, dissolution or winding up, whether voluntary
or involuntary (such events being herein referred to as a "Liquidation").

3.3 PREFERRED STOCK. The Board of Directors of the Corporation is hereby
authorized to provide, by resolution or resolutions adopted by such Board, for
the issuance of Preferred Stock from time to time in one or more classes and/or
series, to establish the designation and number of shares of each such class or
series, and to fix the relative rights and preferences of the shares of each
such class or series, all to the full extent permitted by Minnesota Statutes,
Section 302A.401, or any successor provision. Without limiting the generality
of the foregoing, the Board of Directors is authorized to provide that shares of
a class or series of Preferred Stock:

A-1
<PAGE>

(a) are entitled to cumulative, partially cumulative or noncumulative
dividends or other distributions payable in cash, capital stock or indebtedness
of the Corporation or other property, at such times and in such amounts as are
set forth in the Board resolutions establishing such class or series or as are
determined in a manner specified in such resolutions;

(b) are entitled to a preference with respect to payment of dividends
over one or more other classes and/or series of capital stock of the
Corporation;

(c) are entitled to a preference with respect to any distribution of
assets of the Corporation upon its Liquidation over one or more other classes
and/or series of capital stock of the Corporation in such amount as is set forth
in the Board resolutions establishing such class or series or as is determined
in a manner specified in such resolutions;

(d) are redeemable or exchangeable at the option of the Corporation and/or
on a mandatory basis for cash, capital stock or indebtedness of the Corporation
or other property, at such times or upon the occurrence of such events, and at
such prices, as are set forth in the Board resolutions establishing such class
or series or as are determined in a manner specified in such resolutions;

(e) are entitled to the benefits of such sinking fund, if any, as is
required to be established by the Corporation for the redemption and/or purchase
of such shares by the Board resolutions establishing such class or series;

(f) are convertible at the option of the holders thereof into shares of
any other class or series of capital stock of the Corporation, at such times or
upon the occurrence of such events, and upon such terms, as are set forth in the
Board resolutions establishing such class or series or as are determined in a
manner specified in such resolutions;

(g) are exchangeable at the option of the holders thereof for cash,
capital stock or indebtedness of the Corporation or other property, at such
times or upon the occurrence of such events, and at such prices, as are set
forth in the Board resolutions establishing such class or series or as are
determined in a manner specified in such resolutions;

(h) are entitled to such voting rights, if any, as are specified in the
Board resolutions establishing such class or series (including, without limiting
the generality of the foregoing, the right to elect one or more directors voting
alone as a single class or series or together with one or more other classes
and/or series of Preferred Stock, if so specified by such Board resolutions) at
all times or upon the occurrence of specified events; and

A-2

<PAGE>

(i) are subject to restrictions on the issuance of additional shares of
Preferred Stock of such class or series or of any other class or series, or on
the reissuance of shares of Preferred Stock of such class or series or of any
other class or series, or on increases or decreases in the number of authorized
shares of Preferred Stock of such class or series or of any other class or
series.

Without limiting the generality of the foregoing authorizations, any of the
rights and preferences of a class or series of Preferred Stock may be made
dependent upon facts ascertainable outside the Board resolutions establishing
such class or series, and may incorporate by reference some or all of the terms
of any agreements, contracts or other arrangements entered into by the
Corporation in connection with the issuance of such class or series, all to the
full extent permitted by Minnesota Statutes. Unless otherwise specified in the
Board resolutions establishing a class or series of Preferred Stock, holders of
a class or series of Preferred Stock shall not be entitled to cumulate their
votes in any election of directors in which they are entitled to vote and shall
not be entitled to any preemptive rights to acquire shares of any class or
series of capital stock of the Corporation.

ARTICLE 4. WRITTEN ACTION BY DIRECTORS

An action required or permitted to be taken at a meeting of the Board of
Directors of the Corporation may be taken by a written action signed, or
counterparts of a written action signed in the aggregate, by all of the
directors unless the action need not be approved by the shareholders of the
Corporation, in which case the action may be taken by a written action signed by
the number of directors that would be required to take the same action at a
meeting of the Board of Directors of the Corporation at which all of the
directors were present.

ARTICLE 5. DIRECTOR LIABILITY

To the fullest extent permitted by the Minnesota Business Corporation Act
as the same exists or may hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or its shareholders for monetary damages
for breach of fiduciary duty as a director.

Any repeal or modification of the foregoing provisions of this Article 5 by
the shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.

A-3
<PAGE>

CERTIFICATE
OF
DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GREAT PLAINS SOFTWARE, INC.

I, Joe Peltier, the Secretary of Great Plains Software, Inc., a Minnesota
corporation (the "Corporation"), do hereby certify that at a meeting of the
Board of Directors of the Corporation held on June 21, 1994 the following
resolution effecting the creation of a series of preferred stock designated as
"Series A Convertible Preferred Stock" was duly approved by the Board of
Directors of the Corporation and that such resolution has not been subsequently
modified or rescinded:

RESOLVED, that the Corporation shall authorize the creation of a
series of shares of preferred stock designated as "Series A Convertible
Preferred Stock" and will reserve 225,000 of the Corporation's authorized
but unissued shares of preferred stock, par value $.01 per share, for
issuance under such series;

FURTHER RESOLVED, that the shares of Series A Convertible Preferred
Stock shall be entitled to the relative rights and preferences described in
the attached Exhibit A.

I further certify that the document attached hereto and marked Exhibit
A and entitled "Great Plains Software, Inc. Certificate of Designation for
Series A Convertible Preferred Stock" is a true and correct copy of the document
referred to in the foregoing resolutions.

IN WITNESS WHEREOF, I have executed this certificate as of this 21st
day of June, 1994.

/s/ Joe Peltier
---------------------------------------
Joe Peltier, Secretary

<PAGE>

EXHIBIT A

GREAT PLAINS SOFTWARE, INC.

----------------------------

CERTIFICATE OF DESIGNATIONS
FOR
SERIES A CONVERTIBLE PREFERRED STOCK

----------------------------

1. DESIGNATION; NUMBER OF SHARES. A series of shares of preferred stock,
par value $.01 per share, of the Corporation shall be designated as "Series A
Convertible Preferred Stock" (the "Series A Convertible Preferred Stock"), and
the number of shares constituting the Series A Convertible Preferred Stock shall
be 225,000. The Series A Convertible Preferred Stock shall have a par value of
$.01 per share.

2. NO CUMULATIVE VOTING; NO PREEMPTIVE RIGHTS. Holders of Series A
Convertible Preferred Stock shall not be entitled to any preemptive rights or to
cumulate their votes in any election of directors.

3. RANK. The Series A Convertible Preferred Stock shall rank prior to
all of the common stock, par value $.01 (the "Common Stock"), of the
Corporation, now outstanding or hereafter issued, as to the distribution of
the assets of the Corporation upon its liquidation, dissolution or winding
up, whether voluntary or involuntary (such events being herein referred to as
a "Liquidation").

4. NO DIVIDENDS OR OTHER DISTRIBUTIONS. The Corporation shall not pay or
declare any dividends or make any other distributions on its outstanding Common
Stock or preferred stock, par value $.01 per share (the "Preferred Stock", which
Preferred Stock includes the Series A Convertible Preferred Stock) so long as
any shares of Series A Convertible Preferred Stock remain outstanding. This
Section 4 shall not be deemed to apply to any distribution of assets upon the
Liquidation of the Corporation.

5. LIQUIDATION PREFERENCE. In the event of a Liquidation of the
Corporation, the holders of Series A Convertible Preferred Stock shall be
entitled to receive out of the assets of the Corporation an amount equal to
$1.00 per share, and no more, before any payment shall be made or any assets
distributed to the holders of Common Stock or any other capital stock of the
Corporation ranking junior to

A-1

<PAGE>

the rights of the Series A Convertible Preferred Stock upon the Liquidation of
the Corporation (such Common Stock and other capital stock being referred to
herein collectively as "Junior Liquidation Stock"); PROVIDED, HOWEVER, that such
rights shall accrue to the holders of Series A Convertible Preferred Stock only
in the event that the Corporation's payments with respect to the preferences of
the holders of capital stock of the Corporation ranking senior to the rights to
the Series A Convertible Preferred Stock upon the Liquidation of the Corporation
(such senior capital stock being referred to herein as "Senior Liquidation
Stock") are fully met. The entire assets of the Corporation available for
distribution after the preferences of any Senior Liquidation Stock upon the
Liquidation of the Corporation are fully met shall be distributed ratably among
the holders of the Series A Convertible Preferred Stock and any other capital
stock of the Corporation which ranks on a parity with the Series A Convertible
Preferred Stock upon the Liquidation of the Corporation in proportion to the
respective preferential amounts to which each is entitled (but only to the
extent of such preferential amounts). After payment in full of the preference
of the shares of the Series A Convertible Preferred Stock upon the Liquidation
of the Corporation, the holders of such shares shall not be entitled to any
further participation in any distribution of assets by the Corporation. Neither
a consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities or
other property will be deemed a Liquidation of the Corporation for purposes of
this Section 5.

6. CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK

(a) AT OPTION OF HOLDERS. Holders of Series A Convertible Preferred
Stock may, at any time after June 15, 1997 and at their option upon surrender of
the certificates therefor, convert any or all of their shares of Series A
Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock (and such other securities and property as they may be entitled to, as
hereinafter provided) at any time after issuance thereof. The right of holders
of Series A Convertible Preferred Stock to convert their shares shall be
exercised by surrendering for such purpose to the Corporation or any transfer
agent for the Series A Convertible Preferred Stock, and at such other office or
offices, if any, as the Board of Directors may designate, certificates
representing shares to be converted, duly endorsed in blank or accompanied by
proper instruments of transfer. Upon the surrender of certificates representing
shares of Series A Convertible Preferred Stock to be converted, duly endorsed or
accompanied by proper instruments of transfer as provided above, the person
converting such shares shall be deemed to be the holder of record of the Common
Stock (and such other securities and property as the holders of Series A
Convertible Preferred Stock may be entitled to upon the conversion thereof, as
hereinafter provided) issuable upon such conversion, and all rights with respect
to the shares surrendered shall forthwith terminate except the right to receive
the Common Stock or other securities, cash or other assets as herein provided.

A-2

<PAGE>

(b) MANDATORY. In the event a primary or secondary sale of shares of
Common Stock to the public pursuant to a registered public offering under the
Securities Act of 1933, as amended, shall be consummated where both (i) the
proposed aggregate public offering price of the shares of Common Stock so
registered is at least $10,000,000 (based on the fair value estimated by the
underwriters) and (ii) as a result of such offering the public (including for
this purpose all purchasers in the underwriting irrespective of any relationship
with the Corporation) will own 15% or more of the shares of Common Stock then
issued and outstanding (such event being herein referred to as a "Conversion
Event"), the Series A Convertible Preferred Stock shall be automatically
converted into fully paid and nonassessable shares of Common Stock (and such
other securities and property as the holders of Series A Convertible Preferred
Stock may be entitled to upon the conversion thereof, as hereinafter provided).
The Corporation shall give prompt notice of such mandatory conversion by first
class mail, postage prepaid, to the holders of record of Series A Convertible
Preferred Stock, addressed to such holders at their last address as shown on
the stock books of the Corporation. The date of such mandatory conversion
(the "Conversion Date") shall be the date of consummation of the Conversion
Event. Each notice of mandatory conversion shall specify the Conversion Date;
the then-effective Conversion Rate (as such term is hereinafter defined); that
the holders of Series A Convertible Preferred Stock were deemed to have become
holders of record of Common Stock (and such other securities and property as the
holders of Series A Convertible Preferred Stock may be entitled to upon the
conversion thereof, as hereinafter provided) on the Conversion Date and that,
from and after the Conversion Date, the Series A Convertible Preferred Stock was
no longer considered outstanding, and that all rights with respect to the shares
of Series A Convertible Preferred Stock so converted terminated on the
Conversion Date, except the right to receive Common Stock or other securities,
cash or other assets as herein provided.

Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not a holder of Series A
Convertible Preferred Stock receives such notice; and failure so to give
such notice, or any defect in such notice, to the holders of any shares of
Series A Convertible Preferred Stock shall not affect the validity of the
mandatory conversion of such Series A Convertible Preferred Stock. On and
after the Conversion Date, each holder of shares of Series A Convertible
Preferred Stock shall surrender the certificate evidencing such shares to
the Corporation, or its agent, at the place designated in such notice and
shall thereupon be entitled to receive the Common Stock or other securities,
cash or other assets receivable in exchange therefor. Notwithstanding that
the certificates evidencing any shares of Series A Convertible Preferred Stock
mandatorily converted into Common Stock shall not have been surrendered after
the Conversion Date, such shares shall no longer be deemed outstanding, and
the holders thereof shall be deemed to have become holders of record of
Common Stock

A-3

<PAGE>

(and such other securities and property as the holders of Series A Convertible
Preferred Stock may be entitled to upon the conversion thereof, as hereinafter
provided) on the Conversion Date.

(c) CONVERSION RATE. Each share of Series A Convertible Preferred
Stock shall be convertible at the office of the Corporation or any transfer
agent for the Series A Convertible Preferred Stock, and at such other office or
offices, if any, as the Board of Directors may designate, into that number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) as shall be equal to the
Conversion Rate, determined as hereinafter provided, in effect at the time of
conversion. Shares of Series A Convertible Preferred Stock may initially be
converted into full shares of Common Stock at the rate of .18 shares of
Common Stock for each share of Series A Convertible Preferred Stock, subject
to adjustment from time to time as provided in Section 7 (such conversion
rate, as so adjusted from time to time, being referred to herein as the
"Conversion Rate").

(d) TAXES. The Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of Common Stock or other securities or property upon conversion of
Series A Convertible Preferred Stock in a name other than that of the holder of
the shares of Series A Convertible Preferred Stock being converted, nor shall
the Corporation be required to issue or deliver any such shares or other
securities or property unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of any such tax
or shall have established to the satisfaction of the Corporation that such tax
has been paid.

(e) RESERVATION OF SHARES. A number of shares of the authorized but
unissued Common Stock sufficient to provide for the conversion of the Series A
Convertible Preferred Stock outstanding upon the basis herein provided shall at
all times be reserved by the Corporation, free from preemptive rights, for such
conversion. If the Corporation shall issue any securities or make any change in
its capital structure that would change the number of shares of Common Stock
into which each share of the Series A Convertible Preferred Stock shall be
convertible as herein provided, the Corporation shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of
shares of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series A Convertible Preferred Stock on the new
basis. The Corporation shall comply with all securities laws regulating the
offer and delivery of shares of Common Stock upon conversion of the Series A
Convertible Preferred Stock and shall use its best efforts to list such shares
on any national securities exchange on which the Common Stock is listed or to
have such shares admitted for quotation on the NASDAQ National Market if the
Common Stock is admitted for quotation thereon.

A-4

<PAGE>

(f) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series A Convertible Preferred Stock but, in lieu of
any fraction of a share of Common Stock that would otherwise be issuable in
respect of the aggregate number of such shares surrendered for conversion at one
time by the same holder, the Corporation shall pay in cash an amount equal to
the product of (a) the Closing Price of a share of Common Stock (as defined in
the next sentence) on the last trading day before the Conversion Date and (b)
such fraction of a share. The "Closing Price" for each day shall be the last
reported sale price regular way or, in case no sale takes place on such day, the
average of the closing bid and asked prices regular way on such day, in either
case as reported on the New York Stock Exchange Composite Tape, or, if the
Common Stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, on the NASDAQ National Market, or,
if the Common Stock is not admitted for quotation on the NASDAQ National Market,
the average of the high bid and low asked prices on such day as recorded by the
National Association of Securities Dealers, Inc. through NASDAQ, or, if the
National Association of Securities Dealers, Inc. through NASDAQ shall not have
reported any bid and asked prices for the Common Stock on such day, the average
of the bid and asked prices for such day as furnished by any New York Stock
Exchange member firm selected from time to time by the Corporation for such
purpose, or, if no such bid and asked prices can be obtained from any such firm,
the fair market value of one share of the Common Stock on such day as determined
in good faith by the Board of Directors of the Corporation.

7. ADJUSTMENTS TO CONVERSION RATE. Notwithstanding anything in this
Section 7 to the contrary, no change in the Conversion Rate shall be made until
the cumulative effect of the adjustments called for by this Section 7 since the
date of the last change in the Conversion Rate would change the Conversion Rate
by more than 1%. However, once the cumulative effect would result in such a
change, then the Conversion Rate shall be changed to reflect all adjustments
called for by this Section 7 and not previously made. Subject to the foregoing,
the Conversion Rate shall be adjusted from time to time as follows:

(a) CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. In case of any
consolidation or merger of the Corporation with any other corporation (other
than a wholly owned subsidiary of the Corporation), or in case of any sale or
transfer of all or substantially all of the assets of the Corporation, or in
case of any share exchange pursuant to which all of the outstanding shares of
Common Stock are converted into other securities or property, the Corporation
shall, prior to or at the time of such transaction, make appropriate provision
or cause appropriate provision to be made so that holders of each share of
Series A Convertible Preferred Stock then outstanding shall have the right
thereafter to convert such share of Series A

A-5

<PAGE>

Convertible Preferred Stock into the kind and amount of shares of stock and
other securities and property receivable upon such consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common Stock
into which such shares of Series A Convertible Preferred Stock could have been
converted (determined without regard to the limitation on optional conversion
set forth in Section 6(a)) immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange. If in connection with
any such consolidation, merger, sale, transfer or share exchange, each holder of
shares of Common Stock is entitled to elect to receive either securities, cash
or other assets upon completion of such transaction, the Corporation shall
provide or cause to be provided to each holder of Series A Convertible Preferred
Stock the right to elect the securities, cash or other assets into which the
Series A Convertible Preferred Stock held by such holder shall be convertible
after completion of any such transaction on the same terms and subject to the
same conditions applicable to holders of the Common Stock (including, without
limitation, notice of the right to elect, limitations on the period in which
such election shall be made and the effect of failing to exercise the election).

(b) SUBDIVISIONS, COMBINATIONS AND RECLASSIFICATIONS. In case the
Corporation shall (i) subdivide its outstanding Common Stock into a greater
number of shares, (ii) combine the shares of its outstanding Common Stock into a
smaller number of shares or (iii) issue by reclassification of its Common Stock
any shares of its capital stock, then in each such case the Conversion Rate in
effect immediately prior thereto shall be proportionately adjusted so that the
holder of any Series A Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive, to the extent permitted by applicable
law, the number and kind of shares of capital stock of the Corporation that such
holder would have owned or have been entitled to receive after the happening of
such event had such Series A Convertible Preferred Stock been converted
immediately prior to the record date for such event (or if no record date is
established in connection with such event, the effective date for such
action). An adjustment pursuant to this subparagraph (b) shall become
effective immediately after the record date in the case of a stock dividend
or distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or reclassification.

(c) RIGHTS AND WARRANTS. In case the Corporation shall issue rights
or warrants to all holders of the Common Stock entitling such holders on the
record date referred to below to subscribe for or purchase Common Stock at a
price per share less than the Closing Price of the Common Stock (as defined in
Section 6) on the record date related to such issuance (the "Current Market
Price"), then in each such case the Conversion Rate in effect on such record
date shall be adjusted in accordance with the formula

A-6

<PAGE>

O + N
C1 = C x ---------
O + N x P
-----
M

where

C1 = the adjusted Conversion Rate.
C = the current Conversion Rate.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the Current Market Price per share of Common Stock on the record date.

Such adjustment shall become effective immediately after the record date for the
determination of shareholders entitled to receive such rights or warrants. If
all of the shares of Common Stock subject to such rights or warrants have not
been issued when such rights or warrants expire, then the Conversion Rate shall
promptly be readjusted to the Conversion Rate that would be in effect had the
adjustment upon the issuance of such rights or warrants been made on the basis
of the actual number of shares of Common Stock issued upon the exercise of such
rights or warrants.

(d) ROUNDING. All calculations hereunder shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.

(e) SUBSEQUENT ADJUSTMENTS. In the event that at any time, as a
result of an adjustment made pursuant to subparagraph (a) or (b) above, the
holder of any Series A Convertible Preferred Stock thereafter surrendered for
conversion shall become entitled to receive securities, cash or assets other
than Common Stock, the number or amount of such securities or property so
receivable upon conversion shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in subparagraphs (a) through (d) above.
Except as otherwise provided above in this Section 7, no adjustment in the
Conversion Rate shall be for distributions or dividends declared and paid or
payable on the Common Stock.

(f) NOTICES. Whenever the Conversion Rate is adjusted as herein
provided, the Corporation shall give prompt notice by mail to the holders of
record of the outstanding Series A Convertible Preferred Stock of such
adjustment, which notice shall set forth the adjustment and the new Conversion
Rate. Notwithstanding the foregoing, failure by the Corporation to give such
notice or a defect in such notice shall not affect the binding nature of such
corporate action of the Corporation.

A-7

<PAGE>

If the Corporation shall propose to take any of the actions specified
in subparagraphs (a), (b) or (c) of this Section 7 at any time after June 15,
1997 and the taking of such action would result in any adjustment in the
Conversion Rate, the Corporation shall cause a notice to be mailed at least 30
days prior to the date on which the books of the Corporation will close or on
which a record will be taken for such action (or if no record date is
established in connection with such action, the effective date of such action)
to the holders of record of the outstanding Series A Convertible Preferred Stock
on the date of such notice. Such notice shall specify the action proposed to be
taken by the Corporation and the date as of which holders of record of the
Common Stock shall participate in any such actions or be entitled to exchange
their Common Stock for securities or other property, as the case may be.
Failure by the Corporation to give such notice or any defect in such notice
shall not affect the validity of the transaction.

(g) EXCEPTIONS. Notwithstanding any other provision of this Section
7, no adjustment in the Conversion Rate need be made (A) for a transaction
referred to in subparagraphs (a), (b) or (c) of this Section 7 if holders of
Series A Convertible Preferred Stock are to participate in the transaction or
distribution on such a basis and with such notice as the Board of Directors
determines in good faith to be fair to the holders of the Series A
Convertible Preferred Stock and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction or (B) after
the Series A Convertible Preferred Stock becomes convertible solely into cash
(and no interest shall accrue on the cash); PROVIDED, HOWEVER, that any
determination by the Board of Directors pursuant to clause (A) above shall
require the concurrence of the director elected by the holders of the Series
A Convertible Preferred Stock pursuant to Section 8(b)(i).

8. VOTING RIGHTS.

(a) GENERAL. Except as otherwise required by law, the holders of the
Series A Convertible Preferred Stock shall vote together with the holders of the
Common Stock on all matters (including without limitation the matters described
in Section 8(b)(ii) and the election of directors by the holders of the Common
Stock) submitted to a vote of the shareholders of the Corporation. Each share
of Series A Convertible Preferred Stock shall be entitled to 10 votes on any
such matter.

(b) SEPARATE VOTING BY HOLDERS OF SERIES A CONVERTIBLE PREFERRED
STOCK. In addition to the voting rights set forth in Section 8(a), the holders
of the Series A Convertible Preferred Stock shall be entitled to a separate
class vote with respect to the following matters:

A-8

<PAGE>

(i) ELECTION OF DIRECTORS. The holders of the Series A Convertible
Preferred Stock will be entitled to vote for and elect one member of the
Corporation's Board of Directors. Such right of the holders of Series A
Convertible Preferred Stock to vote for the election of a director may be
exercised at any annual meeting of the holders of Series A Convertible Preferred
Stock (which annual meeting shall generally be held in conjunction with any
annual meeting of the holders of the Common Stock) or at any special meeting
called for such purpose or at any adjournment thereof until there shall no
longer be any shares of Series A Convertible Preferred Stock outstanding, at
which time the term of office of the director so elected shall terminate
automatically. If at any such annual or special meeting or any adjournment
thereof the holders of a majority of the then outstanding shares of Series A
Convertible Preferred Stock entitled to vote in such election shall be present
or represented by proxy, then the holders of 50% of the shares of Series A
Convertible Preferred Stock present at the meeting and entitled to vote shall be
entitled to elect the director described above. The director so elected shall
serve until the next annual meeting or until such director's successor shall be
elected and shall qualify, unless the term of office of the person so elected as
director shall have terminated by virtue of the conversion or redemption of all
outstanding shares of Series A Convertible Preferred Stock. In case of any
vacancy occurring with respect to the director so elected by the holders of
Series A Convertible Preferred Stock, the holders of the shares of Series A
Convertible Preferred Stock may, at a special meeting of such holders, elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant. In the event of any inconsistency between the provisions of
this Section 8(b)(i) and the bylaws of the Corporation, the provisions of this
Section 8(b)(i) shall be controlling.

(ii) SENIOR AND PARITY CAPITAL STOCK. Without the consent or
affirmative vote of the holders of at least 50% of the outstanding shares of
Series A Convertible Preferred Stock, the Corporation shall not authorize,
create or issue any shares of any other class or series of capital stock ranking
senior to or on a parity with the Series A Convertible Preferred Stock as to
dividends or upon the Liquidation of the Corporation. The affirmative vote or
consent of the holders of at least 50% of the outstanding shares of the Series A
Convertible Preferred Stock shall be required for any amendment, alteration or
repeal, whether by merger or consolidation or otherwise, of the Second Restated
Articles of Incorporation (including any certificate of designations
establishing any class or series of Preferred Stock of the Corporation) if the
amendment, alteration or repeal adversely affects the rights or preferences of
the Series A Convertible Preferred Stock; PROVIDED, HOWEVER, that any increase
in the authorized Preferred Stock of the Corporation or the creation and
issuance of any other capital stock of the

A-9

<PAGE>

Corporation ranking junior to the Series A Convertible Preferred Stock
shall not be deemed to materially affect such powers, preferences or
special rights.

9. STATUS OF SERIES A CONVERTIBLE PREFERRED STOCK UPON RETIREMENT.
Shares of Series A Convertible Preferred Stock which are acquired or redeemed by
the Corporation or converted into shares of Common Stock shall return to the
status of authorized and unissued shares of Preferred Stock of the Corporation
without designation as to series. Upon the acquisition or redemption by the
Corporation or conversion of all outstanding shares of Series A Convertible
Preferred Stock, all provisions of this Certificate of Designation shall cease
to be of further effect. Upon the occurrence of such event, the Board of
Directors of the Corporation shall have the power, and without shareholder
action, to cause Restated Articles of Incorporation of the Corporation or other
appropriate documents to be prepared and filed with the Secretary of State of
the State of Minnesota that reflect the removal of all provisions of this
Certificate of Designation relating to the Series A Convertible Preferred Stock.

STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
JUN 22 1994
/S/ JOAN ANDERSON GROWE

Secretary of State

A-10

<PAGE>

STATE OF MINNESOTA
DEPARTMENT OF STATE

I hereby certify that this is a
true and complete copy of the
document as filed for record in
this office.

DATED: June 22 1994
-------------

/s/ Joan Anderson Growe
- ------------------------
Secretary of State

BY /s/ M. Meck
----------------------

<PAGE>

CERTIFICATE
OF
DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
GREAT PLAINS SOFTWARE, INC.

I, Bradley Burgum, the Secretary of Great Plains Software, Inc., a
Minnesota corporation (the "Corporation"), do hereby certify that: (i) at a
meeting of the Board of Directors of the Corporation held on June 23, 1994 the
following resolution effecting the creation of a series of preferred stock
designated as "Series B Convertible Preferred Stock" was duly approved by the
Board of Directors of the Corporation; (ii) that the creation of such Series was
duly consented to by the holder of all of the outstanding shares of Series A
Convertible Preferred Stock of the Corporation on June 22, 1994; and (iii) that
such resolution and consent remain in full force and effect and have not been
subsequently modified or rescinded:

RESOLVED, that the Corporation shall authorize the creation of a
series of shares of preferred stock designated as "Series B Convertible
Preferred Stock" and will reserve 1,922,898 of the Corporation's authorized
but unissued shares of preferred stock, par value $.01 per share, for
issuance under such series;

FURTHER RESOLVED, that the shares of Series B Convertible Preferred
Stock shall be entitled to the relative rights and preferences described in
the attached Exhibit A.

I further certify that the document attached hereto and marked Exhibit
A and entitled "Great Plains Software, Inc. Certificate of Designation for
Series B Convertible Preferred Stock" is a true and correct copy of the document
referred to in the foregoing resolutions.

IN WITNESS WHEREOF, I have executed this certificate as of this 23rd
day of June, 1994.

/s/ Bradley Burgum
----------------------------------
Bradley Burgum, Secretary
<PAGE>

EXHIBIT A

GREAT PLAINS SOFTWARE, INC.

---------------------------

CERTIFICATE OF DESIGNATIONS
FOR
SERIES B CONVERTIBLE PREFERRED STOCK

---------------------------

1. DESIGNATION; NUMBER OF SHARES. A series of shares of preferred stock,
par value $.01 per share, of the Corporation shall be designated as "Series B
Convertible Preferred Stock" (the "Series B Convertible Preferred Stock"), and
the number of shares constituting the Series B Convertible Preferred Stock shall
be 1,922,898. The Series B Convertible Preferred Stock shall have a par value
of $.01 per share.

2. NO CUMULATIVE VOTING; NO PREEMPTIVE RIGHTS. Holders of Series B
Convertible Preferred Stock shall not be entitled to any preemptive rights or to
cumulate their votes in any election of directors.

3. RANK. The Series B Convertible Preferred Stock shall rank prior to
all of the common stock, par value $.01 (the "Common Stock"), of the
Corporation, now outstanding or hereafter issued, as to the distribution of the
assets of the Corporation upon its liquidation, dissolution or winding up,
whether voluntary or involuntary (such events being herein referred to as a
"Liquidation"). The Series B Convertible Preferred Stock shall rank on a parity
with the outstanding Series A Convertible Preferred Stock, par value $.01 per
share (the "Series A Convertible Preferred Stock"), of the Corporation as to the
distribution of the assets of the Corporation upon its Liquidation.

4. NO DIVIDENDS OR OTHER DISTRIBUTIONS. The Corporation shall not pay or
declare any dividends or make any other distributions on its outstanding Common
Stock or preferred stock, par value $.01 per share (the "Preferred Stock," which
Preferred Stock includes the Series B Convertible Preferred Stock and the Series
A Convertible Preferred Stock) so long as any shares of Series B Convertible
Preferred Stock remain outstanding. This Section 4 shall not be deemed to apply
to any distribution of assets upon the Liquidation of the Corporation.

A-1

<PAGE>

5. LIQUIDATION PREFERENCE. In the event of a Liquidation of the
Corporation, the holders of Series B Convertible Preferred Stock shall be
entitled to receive out of the assets of the Corporation an amount equal to
$7.09 per share, and no more, before any payment shall be made or any assets
distributed to the holders of Common Stock or any other capital stock of the
Corporation ranking junior to the rights of the Series B Convertible
Preferred Stock upon the Liquidation of the Corporation (such Common Stock
and other capital stock being referred to herein collectively as "Junior
Liquidation Stock"); PROVIDED, HOWEVER, that such rights shall accrue to the
holders of Series B Convertible Preferred Stock only in the event that the
Corporation's payments with respect to the preferences of the holders of
capital stock of the Corporation ranking senior to the rights of the Series B
Convertible Preferred Stock upon the Liquidation of the Corporation (such
senior capital stock being referred to herein as "Senior Liquidation Stock")
are fully met the entire assets of the Corporation available for distribution
after the preferences of any Prior Liquidation Stock upon the Liquidation of
the Corporation are fully met shall be distributed ratably among the holders
of the Series B Convertible Preferred Stock and any other capital stock of
the Corporation which ranks on a parity with the Series B Convertible
Preferred Stock, including without limitation the Series A Convertible
Preferred Stock, upon the Liquidation of the Corporation in proportion to the
respective preferential amounts to which each is entitled (but only to the
extent of such preferential amounts). After payment in full of the
preference of the shares of the Series B Convertible Preferred Stock upon the
Liquidation of the Corporation, the holders of such shares shall not be
entitled to any further participation in any distribution of assets by the
Corporation. Neither a consolidation or merger of the Corporation with
another corporation or a sale or transfer of all or part of the Corporation's
assets for cash, securities or other property will be deemed a Liquidation of
the Corporation for purposes of this Section 5.

6. CONVERSION OF SERIES B CONVERTIBLE PREFERRED STOCK

(a) AT OPTION OF HOLDERS. Holders of Series B Convertible Preferred
Stock may, at their option upon surrender of the certificates therefor, convert
any or all of their shares of Series B Convertible Preferred Stock into fully
paid and nonassessable shares of Common Stock (and such other securities and
property as they may be entitled to, as hereinafter provided) at any time after
issuance thereof. The right of holders of Series B Convertible Preferred Stock
to convert their shares shall be exercised by surrendering for such purpose to
the Corporation or any transfer agent for the Series B Convertible Preferred
Stock, and at such other office or offices, if any, as the Board of Directors
may designate, certificates representing shares to be converted, duly endorsed
in blank or accompanied by proper instruments of transfer. Upon the surrender
of certificates representing shares of Series B Convertible Preferred Stock to
be converted, duly endorsed or accompanied by proper instruments of transfer as
provided above, the person converting such shares shall be deemed to be the
holder of record of the Common Stock (and such

A-2

<PAGE>

other securities and property as the holders of Series B Convertible Preferred
Stock may be entitled to upon the conversion thereof, as hereinafter provided)
issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash or other assets as herein provided.

(b) MANDATORY. In the event a primary or secondary sale of shares of
Common Stock to the public pursuant to a registered public offering under the
Securities Act of 1933, as amended, shall be consummated where both (i) the
proposed aggregate public offering price of the shares of Common Stock so
registered is at least $10,000,000 (based on the fair value estimated by the
underwriters) and (ii) as a result of such offering the public (including for
this purpose all purchasers in the underwriting irrespective of any relationship
with the Corporation) will own 15% or more of the shares of Common Stock then
issued and outstanding (such event being herein referred to as a "Conversion
Event"), the Series B Convertible Preferred Stock shall be automatically
converted into fully paid and nonassessable shares of Common Stock (and such
other securities and property as the holders of the Series B Convertible
Preferred Stock may be entitled to upon the conversion thereof, as hereinafter
provided). The Corporation shall give prompt notice of such mandatory
conversion by first class mail, postage prepaid, to the holders of record of
Series B Convertible Preferred Stock, addressed to such holders at their last
addresses as shown on the stock books of the Corporation. The date of such
mandatory conversion (the "Conversion Date") shall be the date of consummation
of the Conversion Event. Each notice of mandatory conversion shall specify the
Conversion Date; the then-effective Conversion Rate (as such term is hereinafter
defined); that the holders of Series B Convertible Preferred Stock were deemed
to have become holders of record of Common Stock (and such other securities and
property as the holders of Series B Convertible Preferred Stock may be entitled
to upon the conversion thereof, as hereinafter provided) on the Conversion Date
and that, from and after the Conversion Date, the Series B Convertible Preferred
Stock was no longer considered outstanding; and that all rights with respect to
the shares of Series B Convertible Preferred Stock so converted terminated on
the Conversion Date, except the right to receive Common Stock or other
securities, cash or other assets as herein provided.

Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not a holder of Series B
Convertible Preferred Stock receives such notice; and failure so to give such
notice, or any defect in such notice, to the holders of any shares of Series B
Convertible Preferred Stock shall not affect the validity of the mandatory
conversion of such Series B Convertible Preferred Stock. On and after the
Conversion Date, each holder of shares of Series B Convertible Preferred Stock
shall surrender the certificate evidencing such shares to the Corporation, or
its agent, at the place designated in such notice and shall thereupon be
entitled to receive the Common Stock or other

A-3

<PAGE>

securities, cash or other assets receivable in exchange therefor.
Notwithstanding that the certificates evidencing any shares of Series B
Convertible Preferred Stock mandatorily converted into Common Stock shall not
have been surrendered after the Conversion Date, such shares shall no longer be
deemed outstanding, and the holders thereof shall be deemed to have become
holders of record of Common Stock (and such other securities and property as the
holders of Series B Convertible Preferred Stock may be entitled to upon the
conversion thereof, as hereinafter provided) on the Conversion Date.

(c) CONVERSION RATE. Each share of Series B Convertible Preferred
Stock shall be convertible at the office of the Corporation or any transfer
agent for the Series B Convertible Preferred Stock, and at such other office or
offices, if any, as the Board of Directors may designate, into that number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) as shall be equal to the
Conversion Rate, determined as hereinafter provided, in effect at the time of
conversion. Shares of Series B Convertible Preferred Stock may initially be
converted into full shares of Common Stock at the rate of one share of Common
Stock for each share of Series B Convertible Preferred Stock, subject to
adjustment from time to time as provided in Section 7 (such
conversion rate, as so adjusted from time to time, being referred to herein as
the "Conversion Rate").

(d) TAXES. The Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of Common Stock or other securities or property upon conversion of
Series B Convertible Preferred Stock in a name other than that of the holder of
the shares of Series B Convertible Preferred Stock being converted, nor shall
the Corporation be required to issue or deliver any such shares or other
securities or property unless and until the person or persons requesting the
issuance thereof shall have paid to the Corporation the amount of any such tax
or shall have established to the satisfaction of the Corporation that such tax
has been paid.

(e) RESERVATION OF SHARES. A number of shares of the authorized but
unissued Common Stock sufficient to provide for the conversion of the Series B
Convertible Preferred Stock outstanding upon the basis herein provided shall at
all times be reserved by the Corporation, free from preemptive rights, for such
conversion. If the Corporation shall issue any securities or make any change in
its capital structure that would change the number of shares of Common Stock
into which each share of the Series B Convertible Preferred Stock shall be
convertible as herein provided, the Corporation shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series B Convertible Preferred Stock on the new
basis. The Corporation shall comply with all securities laws regulating the
offer and delivery of shares of

A-4

<PAGE>

Common Stock upon conversion of the Series B Convertible Preferred Stock and
shall use its best efforts to list such shares on any national securities
exchange on which the Common Stock is listed or to have such shares admitted for
quotation on the NASDAQ National Market if the Common Stock is admitted for
quotation thereon.

(f) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of Series B Convertible Preferred Stock but, in
lieu of any fraction of a share of Common Stock that would otherwise be
issuable in respect of the aggregate number of such shares surrendered for
conversion at one time by the same holder, the Corporation shall pay in cash
an amount equal to the product of (a) the Closing Price of a share of Common
Stock (as defined in the next sentence) on the last trading day before the
Conversion Date and (b) such fraction of a share. The "Closing Price" for
each day shall be the last reported sale price regular way or, in case no
sale takes place on such day, the average of the closing bid and asked prices
regular way on such day, in either case as reported on the New York Stock
Exchange Composite Tape, or, if the Common Stock is not listed or admitted to
trading on such exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or, if the Common
Stock is not listed or admitted to trading any national securities exchange,
on the NASDAQ National Market, if the Common Stock is not admitted for
quotation on the NASDAQ National Market, the average of the high bid and low
asked prices on such day as recorded by the National Association of
Securities Dealers, Inc. through NASDAQ, or, if the National Association of
Securities Dealers, Inc. through NASDAQ shall not have reported any bid and
asked prices for the Common Stock on such day, the average of the bid and
asked prices for such day as furnished by any New York Stock Exchange member
firm selected from time to time by the Corporation for such purpose, or, if
no such bid and asked prices can be obtained from any such firm, the fair
market value of one share of the Common Stock on such day as determined in
good faith by the Board of Directors of the Corporation.

A-5

<PAGE>

pursuant to which all of the outstanding shares of Common Stock are converted
into other securities or property, the Corporation shall, prior to or at the
time of such transaction, make appropriate provision or cause appropriate
provision to be made so that holders of each share of Series B Convertible
Preferred Stock then outstanding shall have the right thereafter to convert such
share of Series B Convertible Preferred Stock into the kind and amount of shares
of stock and other securities and property receivable upon such consolidation,
merger, sale, transfer or share exchange by a holder of the number of shares of
Common Stock into which such shares of Series B Convertible Preferred Stock
could have been converted immediately prior to the effective date of such
consolidation, merger, sale, transfer or share exchange. If in connection with
any such consolidation, merger, sale, transfer or share exchange, each holder of
shares of Common Stock is entitled to elect to receive either securities, cash
or other assets upon completion of such transaction, the Corporation shall
provide or cause to be provided to each holder of Series B Convertible Preferred
Stock the right to elect the securities, cash or other assets into which the
Series B Convertible Preferred Stock held by such holder shall be convertible
after completion of any such transaction on the same terms and subject to the
same conditions applicable to holders of the Common Stock (including, without
limitation, notice of the right to elect, limitations on the period in which
such election shall be made and the effect of failing to exercise the election).

(b) SUBDIVISIONS, COMBINATIONS AND RECLASSIFICATIONS. In case the
Corporation shall (i) subdivide its outstanding Common Stock into a greater
number of shares, (ii) combine the shares of its outstanding Common Stock
into a smaller number of shares or (iii) issue by reclassification of its
Common Stock any shares of its capital stock, then in each such case the
Conversion Rate in effect immediately prior thereto shall be proportionately
adjusted so that the holder of any Series B Convertible Preferred Stock
thereafter surrendered for conversion shall be entitled to receive, to the
extent permitted by applicable law, the number and kind of shares of capital
stock of the Corporation that such holder would have owned or have been
entitled to receive after the happening of such event had such Series B
Convertible Preferred Stock been converted immediately prior to the record
date for such event (or if no record date is established in connection with
such event, the effective date for such action). An adjustment pursuant to
this subparagraph (b) shall become effective immediately after the record
date in the case of a stock dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification.

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<PAGE>

such case the Conversion Rate in effect on such record date shall be adjusted in
accordance with the formula

O + N
C1 = C x -----------
O + N x P
-----
M

where
C1 = the adjusted Conversion Rate.
C = the current Conversion Rate.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the Current Market Price per share of Common Stock on the record
date.

(d) ROUNDING. All calculations hereunder shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.

(e) SUBSEQUENT ADJUSTMENTS. In the event that at any time, as a
result of an adjustment made pursuant to subparagraph (a) or (b) above, the
holder of any Series B Convertible Preferred Stock thereafter surrendered for
conversion shall become entitled to receive securities, cash or assets other
than Common Stock, the number or amount of such securities or property so
receivable upon conversion shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in subparagraphs (a) through (d) above.
Except as otherwise provided above in this Section 7, no adjustment in the
Conversion Rate shall be for distributions or dividends declared and paid or
payable on the Common Stock.

(f) NOTICES. Whenever the Conversion Rate is adjusted as herein
provided, the Corporation shall give prompt notice by mail to the holders of
record of the outstanding Series B Convertible Preferred Stock of such
adjustment, which notice shall set forth the adjustment and the new Conversion
Rate. Notwithstanding the foregoing, failure by the Corporation to give such
notice or a

A-7

<PAGE>

defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.

Whenever the Corporation shall propose to take any of the actions
specified in subparagraphs (a), (b) or (c) of this Section 7 that would result
in any adjustment in the Conversion Rate, the Corporation shall cause a notice
to be mailed at least 30 days prior to the date on which the books of the
Corporation will close or on which a record will be taken for such action (or if
no record date is established in connection with such action, the effective date
of such action) to the holders of record of the outstanding Series B Convertible
Preferred Stock on the date of such notice. Such notice shall specify the
action proposed to be taken by the Corporation and the date as of which holders
of record of the Common Stock shall participate in any such actions or be
entitled to exchange their Common Stock for securities or other property, as the
case may be. Failure by the Corporation to give such notice or any defect in
such notice shall not affect the validity of the transaction.

(g) EXCEPTIONS. Notwithstanding any other provision of this Section
7, no adjustment in the Conversion Rate need be made (A) for a transaction
referred to in subparagraphs (a), (b) or (c) of this Section 7 if holders of
Series B Convertible Preferred Stock are to participate in the transaction or
distribution on such a basis and with such notice as the Board of Directors
determines in good faith to be fair to the holders of the Series B Convertible
Preferred Stock and appropriate in light of the basis and notice on which
holders of Common Stock participate in the transaction or (B) after the Series B
Convertible Preferred Stock becomes convertible solely into cash (and no
interest shall accrue on the cash); PROVIDED, HOWEVER, that any determination by
the Board of Directors pursuant to clause (A) above shall require the
concurrence of at least one of the directors elected by the holders of the
Series B Convertible Preferred Stock pursuant to Section 8(b)(i).

8. VOTING RIGHTS.

(a) GENERAL. Except as otherwise required by law and Section 8(b),
the holders of the Series B Convertible Preferred Stock shall vote together with
the holders of the Common Stock on all matters submitted to a vote of the
shareholders of the Corporation. Each share of Series B Convertible Preferred
Stock shall be entitled to a number of votes (calculated to the nearest 1/100th
of a vote) equal to the number of shares of Common Stock into which such share
of Series B Convertible Preferred Stock was convertible on the record date for
determining the shareholders entitled to vote on any such matter.

(b) SEPARATE VOTING BY HOLDERS OF SERIES B CONVERTIBLE PREFERRED
STOCK. The holders of the Series B Convertible Preferred Stock shall vote as a
separate class with respect to the following matters:

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<PAGE>

(i) ELECTION OF DIRECTORS. If the number of directors elected
by the holders (the "Current Holders") of the Common Stock and the
Series A Convertible Preferred Stock to the Board is six or less, the
holders of the Series B Convertible Preferred Stock will be entitled to
vote for and elect one additional director. If the number of Directors
elected by the Current Holders to the Board is more than six, the
holders of the Series B Convertible Preferred Stock shall be entitled to
vote for and elect two additional directors. Such right of the holders
of Series B Convertible Preferred Stock to vote for the election of
directors may be exercised at any annual meeting of the holders of
Series B Convertible Preferred Stock (which annual meeting shall
generally be held in conjunction with any annual meeting of the holders
of the Common Stock) or at any special meeting called for such purpose
or at any adjournment thereof until there shall no longer be any shares
of Series B Convertible Preferred Stock outstanding, at which time the
term of office of the director or directors so elected shall terminate
automatically. If at any such annual or special meeting or any
adjournment thereof the holders of a majority of the then outstanding
shares of Series B Convertible Preferred Stock entitled to vote in such
election shall be present or represented by proxy, then the holders of
75% of the shares of Series B Convertible Preferred Stock then
outstanding and entitled to vote shall be entitled to elect the number
of additional directors set forth above. The director or directors so
elected shall serve until the next annual meeting or until their
successor or successors shall be elected and shall qualify, unless the
term of office of the person or persons so elected as director shall
have terminated by virtue of the conversion or redemption of all
outstanding shares of Series B Convertible Preferred Stock. In case of
any vacancy occurring among the director or directors so elected by the
holders of Series B Convertible Preferred Stock, the holders of 75% of
the shares of Series B Convertible Preferred Stock then outstanding and
entitled to vote for the election of directors may, at a special meeting
of such holders, elect a successor or successors to hold office for the
unexpired terms of the director or directors whose places shall be
vacant. In the event of any inconsistency between the provisions of this
Section 8(b)(i) and the bylaws of the Corporation, the provisions of
this Section 8(b)(i) shall be controlling.

(ii) SENIOR AND PARITY CAPITAL STOCK. Without the consent or
affirmative vote of the holders of at least 75% of the outstanding
shares of Series B Convertible Preferred Stock, the Corporation shall
not authorize, create or issue any shares of any other class or series
of capital stock ranking senior to or on a parity with the Series B
Convertible Preferred Stock as to dividends or upon the Liquidation of
the Corporation. The affirmative vote or consent of the holders of at
least 75% of the outstanding shares of the Series B Convertible Preferred
Stock shall be required for any amendment,

A-9
<PAGE>

alteration or repeal, whether by merger or consolidation or otherwise, of
the Second Restated Articles of Incorporation (including any certificate
of designations establishing any class or series of Preferred Stock of the
Corporation) if the amendment, alteration or repeal adversely affects
the rights or preferences of the Series B Convertible Preferred Stock;
PROVIDED, HOWEVER, that any increase in the authorized Preferred Stock
of the Corporation or the creation and issuance of any other capital
stock of the Corporation ranking junior to the Series B Convertible
Preferred Stock shall not be deemed to materially affect such powers,
preferences or special rights.

(iii) CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. Without the
consent or affirmative vote of the holders of at least 75% of the
outstanding shares of Series B Convertible Preferred Stock, the
Corporation shall not engage in any transaction that would result in an
adjustment of the Conversion Rate pursuant to Section 7(a) or would
change the securities into which the shares of Series B Convertible
Preferred Stock are convertible.

9. STATUS OF SERIES B CONVERTIBLE PREFERRED STOCK UPON RETIREMENT.
Shares of Series B Convertible Preferred Stock which are acquired or redeemed
by the Corporation or converted into shares of Common Stock shall return to
the status of authorized and unissued shares of Preferred Stock of the
Corporation without designation as to series. Upon (i) the acquisition or
redemption by the Corporation or conversion of all outstanding shares of
Series B Convertible Preferred Stock (unless the Warrants are then
outstanding) or (ii) the occurrence of the event described in Section 6(b),
all provisions of this Certificate of Designation shall cease to be of
further effect. Upon the occurrence of any of such events, the Board of
Directors of the Corporation shall have the power, and without shareholder
action, to cause Restated Articles of Incorporation of the Corporation or
other appropriate documents to be prepared and filed with the Secretary of
State of the State of Minnesota that reflect the removal of all provisions of
this Certificate of Designation relating to the Series B Convertible
Preferred Stock.

[SEAL]

STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED

JUN 24 1994

/s/ Joan Anderson Growe
Secretary of State

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<PAGE>

STATE OF MINNESOTA
DEPARTMENT OF STATE

I hereby certify that this is a
true and complete copy of the
document as filed for record in
this office.

DATED June 24, 1994
------- --

/s/ Joan Anderson Growe
------------------------
Secretary of State

BY /s/ M. Meck
------------------------

<PAGE>

THIRD AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
GREAT PLAINS SOFTWARE, INC.

ARTICLE 1. NAME

The name of the corporation is Great Plains Software, Inc.

ARTICLE 2. REGISTERED OFFICE

The address of the registered agent and office of the corporation in
Minnesota is CT Corporation Systems, 405 Second Avenue South, Minneapolis,
Minnesota 55401.

ARTICLE 3. AUTHORIZED SHARES

3.1 AUTHORIZED CAPITAL STOCK. The total number of shares of capital stock
that the Corporation is authorized to issue shall be 130,000,000 shares,
consisting of 100,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), and 30,000,000 shares of preferred stock, par value $0.01 per
share ("Preferred Stock").

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<PAGE>

(b) are entitled to a preference with respect to payment of dividends
over one or more other classes and/or series of capital stock of the
Corporation;

(d) are redeemable or exchangeable at the option of the Corporation
and/or on a mandatory basis for cash, capital stock or indebtedness of the
Corporation or other property, at such times or upon the occurrence of such
events, and at such prices, as are set forth in the Board resolutions
establishing such class or series or as are determined in a manner specified in
such resolutions;

(f) are convertible at the option of the holders thereof into shares
of any other class or series of capital stock of the Corporation, at such times
or upon the occurrence of such events, and upon such terms, as are set forth in
the Board resolutions establishing such class or series or as are determined in
a manner specified in such resolutions;

(h) are entitled to such voting rights, if any, as are specified in
the Board resolutions establishing such class or series (including, without
limiting the generality of the foregoing, the right to elect one or more
directors voting alone as a single class or series or together with one or more
other classes and/or series of Preferred Stock, if so specified by such Board
resolutions) at all times or upon the occurrence of specified events; and

(i) are subject to restrictions on the issuance of additional shares
of Preferred Stock of such class or series or of any other class or series, or
on the reissuance of shares of Preferred Stock of such class or series or of any
other class or series, or on increases or decreases in the number of authorized
shares of Preferred Stock of such class or series or of any other class or
series.

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<PAGE>

Corporation in connection with the issuance of such class or series, all to the
full extent permitted by Minnesota Statutes. Unless otherwise specified in the
Board resolutions establishing a class or series of Preferred Stock, holders of
a class or series of Preferred Stock shall not be entitled to cumulate their
votes in any election of directors in which they are entitled to vote and shall
not be entitled to any preemptive rights to acquire shares of any class or
series of capital stock of the Corporation.

ARTICLE 4. WRITTEN ACTION BY DIRECTORS

An action required or permitted to be taken at a meeting of the
Board of Directors of the corporation may be taken by a written action
signed, or counterparts of a written action signed in the aggregate, by all
of the directors unless the action need not be approved by the shareholders
of the corporation, in which case the action may be taken by a written action
signed, or counterparts of a written action signed in the aggregate, by the
number of directors that would be required to take the same action at a
meeting of the Board of Directors of the corporation at which all of the
directors were present.

ARTICLE 5. DIRECTOR LIABILITY

To the fullest extent permitted by the Minnesota Business Corporation
Act as the same exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director.

Any repeal or modification of the foregoing provisions of this Article
5 by the shareholders of the corporation shall not adversely affect any rights
or protection of a director of the corporation existing at the time of repeal or
modification.

ARTICLE 6. MINNESOTA CONTROL SHARE ACQUISITION STATUTE

The corporation shall not be subject to the provisions of the
Minnesota Control Share Acquisition Statute (Minnesota Statutes, Section
302A.671), or any successor provision.

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<PAGE>

AMENDED AND RESTATED
BYLAWS
OF
GREAT PLAINS SOFTWARE, INC.

ARTICLE I.
OFFICES, CORPORATE SEAL

Section 1.01. REGISTERED OFFICE. The registered office of the
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or resolution of the directors filed with the Secretary of State of Minnesota
changing the registered office.

Section 1.02. OTHER OFFICES. The corporation may have such other
offices, within or without the State of Minnesota, as the directors shall, from
time to time, determine.

Section 1.03. CORPORATE SEAL. The corporation shall have no seal.

ARTICLE II.
MEETINGS OF SHAREHOLDERS

Section 2.01. PLACE AND TIME OF MEETINGS. Except as provided
otherwise by Minnesota Statutes Chapter 302A, meetings of the shareholders may
be held at any place, within or without the State of Minnesota, as may from time
to time be designated by the directors and, in the absence of such designation,
shall be held at the registered office of the corporation in the State of
Minnesota. The directors shall designate the time of day for each meeting and,
in the absence of such designation, every meeting of shareholders shall be held
at ten o'clock a.m.

Section 2.02. REGULAR MEETINGS.

(a) A regular meeting of the shareholders shall be held on such date
as the Board of Directors shall by resolution establish.

(b) At the regular meeting the shareholders, voting as provided in
the Articles of Incorporation and these Bylaws, shall elect qualified successors
for directors whose terms have expired or are due to expire within six months
after the date of the meeting, and shall transact such other business as may
properly come before them.

(c) To be properly brought before a regular meeting of shareholders,
business must be (1) specified in the notice of the meeting, (2) directed to be
brought before the meeting by the Board of Directors or (3) proposed at the
meeting by a shareholder who (i) was a shareholder of record at the time of
giving of notice provided for in these Bylaws, (ii) is entitled to vote at the
meeting and (iii) gives prior notice of the matter, which must otherwise be a
proper

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<PAGE>

matter for shareholder action, in the manner herein provided. For business to
be properly brought before a regular meeting by a shareholder, the shareholder
must give written notice to the Secretary of the corporation so as to be
received at the principal executive offices of the corporation not later than
the close of business on the fifteenth day following the day on which the notice
of the regular meeting was mailed to shareholders. Such notice shall set forth
(1) the name and record address of the shareholder and of the beneficial owner,
if any, on whose behalf the proposal will be made, (2) the class and number of
shares of the corporation owned by the shareholder and beneficially owned by the
beneficial owner, if any, on whose behalf the proposal will be made, (3) a brief
description of the business desired to be brought before the regular meeting and
the reasons for conducting such business, and (4) any material interest in such
business of the shareholder and the beneficial owner, if any, on whose behalf
the proposal is made. The chair of the meeting may refuse to acknowledge any
proposed business not made in compliance with the foregoing procedure.

Section 2.03. SPECIAL MEETINGS. Special meetings of the shareholders
may be held at any time and for any purpose and may be called by the Chief
Executive Officer, the Chief Financial Officer, any two directors, or by a
shareholder or shareholders holding 10% or more of the shares entitled to vote
on the matters to be presented to the meeting, except that a special meeting for
the purpose of considering any action to directly or indirectly facilitate or
effect a business combination, including any action to change or otherwise
affect the composition of the Board of Directors for that purpose, must be
called by 25% or more of the voting power of all shares entitled to vote. A
shareholder or shareholders holding the requisite percentage of the voting power
of all shares entitled to vote may demand a special meeting of the shareholders
by written notice of demand given to the Chief Executive Officer or Chief
Financial Officer of the corporation and containing the purposes of the meeting.
Within 30 days after receipt of demand by one of those officers, the Board of
Directors shall cause a special meeting of shareholders to be called and held on
notice no later than 90 days after receipt of the demand, at the expense of the
corporation. Special meetings shall be held on the date and at the time and
place fixed by the Chief Executive Officer or the Board of Directors, except
that a special meeting called by or at demand of a shareholder or shareholders
shall be held in the county where the principal executive office is located.
The business transacted at a special meeting shall be limited to the purposes
stated in the notice of the meeting.

Section 2.04. QUORUM, ADJOURNED MEETINGS. The holders of a majority
of the shares entitled to vote shall constitute a quorum for the transaction of
business at any regular or special meeting. In case a quorum shall not be
present at a meeting, those present may adjourn to such day as they shall, by
majority vote, agree upon, and a notice of such adjournment shall be mailed to
each shareholder entitled to vote at least 5 days before such adjourned meeting.
If a quorum is present, a meeting may be adjourned from time to time without
notice other than announcement at the meeting. At adjourned meetings at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally noticed. If a quorum is present, the
shareholders may continue to transact business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.

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<PAGE>

Section 2.05. VOTING. At each meeting of the shareholders every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the Articles of Incorporation or statute
provide otherwise, shall have one vote for each share having voting power
registered in such shareholder's name on the books of the corporation. Jointly
owned shares may be voted by any joint owner unless the corporation receives
written notice from any one of them denying the authority of that person to vote
those shares. Upon the demand of any shareholder, the vote upon any question
before the meeting shall be by ballot. All questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote except if otherwise required by statute, the
Articles of Incorporation, or these Bylaws.

Section 2.06. RECORD DATE. The Board of Directors may fix a time,
not exceeding 60 days preceding the date of any meeting of shareholders, as a
record date for the determination of the shareholders entitled to notice of, and
to vote at, such meeting, notwithstanding any transfer of shares on the books of
the corporation after any record date so fixed. If the Board of Directors fails
to fix a record date for determination of the shareholders entitled to notice
of, and to vote at, any meeting of shareholders, the record date shall be the
20th day preceding the date of such meeting.

Section 2.07. NOTICE OF MEETINGS. There shall be mailed to each
shareholder, shown by the books of the corporation to be a holder of record of
voting shares, at his or her address as shown by the books of the corporation, a
notice setting out the time and place of each regular meeting and each special
meeting, except where the meeting is an adjourned meeting and the date, time and
place of the meeting were announced at the time of adjournment, which notice
shall be mailed at least five days prior thereto; except that notice of a
meeting at which an agreement of merger or exchange is to be considered shall be
mailed to all shareholders of record, whether entitled to vote or not, at least
fourteen days prior thereto. Every notice of any special meeting called
pursuant to Section 2.03 hereof, shall state the purpose or purposes for which
the meeting has been called, and the business transacted at all special meetings
shall be confined to the purpose stated in the notice. The written notice of
any meeting at which a plan of merger or exchange is to be considered shall so
state such as a purpose of the meeting. A copy or short description of the plan
of merger or exchange shall be included in or enclosed with such notice.

Section 2.08. WAIVER OF NOTICE. Notice of any regular or special
meeting may be waived by any shareholder either before, at or after such meeting
orally or in a writing signed by such shareholder or a representative entitled
to vote the shares of such shareholder. A shareholder, by his or her attendance
at any meeting of shareholders, shall be deemed to have waived notice of such
meeting, except where the shareholder objects at the beginning of the meeting to
the transaction of business because the item may not lawfully be considered at
that meeting and does not participate in the consideration of the item at that
meeting.

Section 2.09. WRITTEN ACTION. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action.

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<PAGE>

ARTICLE III.
DIRECTORS

Section 3.01. GENERAL POWERS. The business and affairs of the
corporation shall be managed by or under the direction of the Board of
Directors, except as otherwise permitted by statute.

Section 3.02. NUMBER, QUALIFICATION AND TERM OF OFFICE. The Board of
Directors shall consist of one or more directors. The number of directors shall
be fixed by resolution of the Board of Directors and thereafter shall be
increased or decreased from time to time by resolution of the Board of Directors
or the shareholders. Directors need not be shareholders. The directors shall
be divided into three classes, as nearly equal in number as reasonably possible,
with the term of office of the first class to expire at the 1997 annual meeting
of shareholders, the term of office of the second class to expire at the 1998
annual meeting of shareholders and the term of office of the third class to
expire at the 1999 annual meeting of shareholders. At each annual meeting of
shareholders following such initial classification and election, directors
elected to succeed those directors whose terms expire shall be elected to hold
office for a term of three consecutive years. Each director of the corporation
shall serve until such director's successor shall have been elected and shall
qualify, or until the earlier death, resignation, removal or disqualification of
such director.

Section 3.03. BOARD MEETINGS. Meetings of the Board of Directors may
be held from time to time at such time and place within or without the State of
Minnesota as may be designated in the notice of such meeting.

Section 3.04. CALLING MEETINGS - NOTICE. Meetings of the Board of
Directors may be called by the Chairman of the Board by giving at least
twenty-four hours' notice, or by any other director by giving at least five
days' notice, of the date, time and place thereof to each director by mail,
telephone, telegram or in person. If the day or date, time and place of a
meeting of the Board of Directors has been announced at a previous meeting of
the Board, no notice is required. Notice of an adjourned meeting of the Board
of Directors need not be given other than by announcement at the meeting at
which adjournment is taken.

Section 3.05. WAIVER OF NOTICE. Notice of any meeting of the Board
of Directors may be waived by any director either before, at, or after such
meeting orally or in a writing signed by such director. A director, by his or
her attendance at any meeting of the Board of Directors, shall be deemed to have
waived notice of such meeting, except where the director objects at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened and does not participate thereafter in the
meeting.

Section 3.06. QUORUM. A majority of the directors holding office
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting.

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<PAGE>

Section 3.07. ABSENT DIRECTORS. A director may give advance written
consent or opposition to a proposal to be acted on at a meeting of the Board of
Directors. If such director is not present at the meeting, consent or
opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected.

Section 3.08. CONFERENCE COMMUNICATIONS. Any or all directors may
participate in any meeting of the Board of Directors, or of any duly constituted
committee thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.08 shall be deemed present in person at
the meeting, and the place of the meeting shall be the place of origination of
the conference communication.

Section 3.09. VACANCIES; NEWLY CREATED DIRECTORSHIPS. Vacancies in
the Board of Directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the Board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the Board of Directors as permitted by Section
3.02 may be filled by a two-thirds vote of the directors serving at the time of
such increase; and each director elected pursuant to this Section 3.09 shall be
a director until such director's successor is elected by the shareholders at
their next regular or special meeting.

Section 3.10. REMOVAL. Any director may be removed from office, but
only for cause, by the affirmative vote of the shareholders holding a majority
of the shares entitled to vote at an election of directors. In the event that a
director is so removed, a new director shall be elected at the same meeting. A
director named by the Board of Directors to fill a vacancy may be removed from
office at any time, with or without cause, by the affirmative vote of the
remaining directors if the shareholders have not elected directors in the
interim between the time of the appointment to fill such vacancy and the time of
the removal. In the event that the entire Board or any one or more directors be
so removed, new directors shall be elected at the same meeting.

Section 3.11. COMMITTEES. A resolution approved by the affirmative
vote of a majority of the Board of Directors may establish committees having the
authority of the Board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors.

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<PAGE>

A majority of the members of the committee present at a meeting is a
quorum for the transaction of business, unless a larger or smaller proportion or
number is provided in a resolution approved by the affirmative vote of a
majority of the directors present.

Section 3.12. WRITTEN ACTION. Any action which might be taken at a
meeting of the Board of Directors, or any duly constituted committee thereof,
may be taken without a meeting if done in writing and signed by a majority of
the directors or committee members, unless the Articles provide otherwise and
the action need not be approved by the shareholders.

Section 3.13. COMPENSATION. Directors who are not salaried officers
of this corporation shall receive such fixed sum per meeting attended, such
fixed annual sum and any such other compensation as shall be determined, from
time to time, by resolution of the Board of Directors. The Board of Directors
may, by resolution, provide that all directors shall receive their expenses, if
any, of attendance at meetings of the Board of Directors or any committee
thereof. Nothing herein contained shall be construed to preclude any director
from serving this corporation in any other capacity and receiving proper
compensation therefor.

ARTICLE IV.
OFFICERS

Section 4.01. NUMBER. The officers of the corporation shall consist
of a Chairman of the Board (if one is elected by the Board), a Chief Executive
Officer, Chief Financial Officer, a Secretary (if one is elected by the Board)
and such other officers and agents as may, from time to time, be elected or
appointed by the Board of Directors. Any number of offices may be held by the
same person.

Section 4.02. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Board
of Directors shall elect or appoint, by resolution approved by the affirmative
vote of a majority of the directors present, from within or without their
number, the Chief Executive Officer, Chief Financial Officer and such other
officers as may be deemed advisable, each of whom shall have the powers, rights,
duties, responsibilities, and terms in office provided for in these Bylaws or a
resolution of the Board of Directors not inconsistent therewith. The Chief
Executive Officer, the Chief Financial Officer and all other officers who may be
directors shall continue to hold office until the election and qualification of
their successors, notwithstanding an earlier termination of their directorship.

Section 4.03. REMOVAL AND VACANCIES. Any officer may be removed from
his or her office by the Board of Directors at any time, with or without cause.
Such removal, however, shall be without prejudice to the contract rights of the
person so removed. If there be a vacancy among the officers of the corporation
by reason of death, resignation or otherwise, such vacancy shall be filled for
the unexpired term by the Board of Directors.

Section 4.04. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
one is elected, shall preside at all meetings of the shareholders and directors
and shall have such other duties as may be prescribed, from time to time, by the
Board of Directors.

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<PAGE>

Section 4.05. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall be the chief executive officer and shall have general active management of
the business of the corporation. In the absence of the Chairman of the Board,
he or she shall preside at all meetings of the shareholders and directors. He
or she shall see that all orders and resolutions of the Board of Directors are
carried into effect. He or she shall execute and deliver, in the name of the
corporation, any deeds, mortgages, bonds, contracts or other instruments
pertaining to the business of the corporation unless the authority to execute
and deliver is required by law to be exercised by another person or is expressly
delegated by the Articles or Bylaws or by the Board of Directors to some other
officer or agent of the corporation. He or she shall maintain records of and,
whenever necessary, certify all proceedings of the Board of Directors and the
shareholders, and in general, shall perform all duties usually incident to the
office of the Chief Executive Officer. He or she shall have such other duties
as may, from time to time, be prescribed by the Board of Directors.

Section 4.06. PRESIDENT. The President, if one is elected, shall
have such powers and shall perform such duties as may be prescribed by the Board
of Directors or by the Chief Executive Officer.

Section 4.07. VICE PRESIDENT. Each Vice President, if one or more
are elected, shall have such powers and shall perform such duties as may be
specified in the Bylaws or prescribed by the Board of Directors or by the Chief
Executive Officer. In the event of the absence or disability of the Chief
Executive Officer or the President, Vice Presidents shall succeed to their
powers and duties in the order designated by the Board of Directors.

Section 4.08. SECRETARY. The Secretary, if one is elected, shall be
secretary of and shall attend all meetings of the shareholders and Board of
Directors and shall record all proceedings of such meetings in the minute book
of the corporation. He or she shall give proper notice of meetings of
shareholders and directors. He or she shall perform such other duties as may,
from time to time, be prescribed by the Board of Directors or by the Chief
Executive Officer.

Section 4.09. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall be the chief financial officer and shall keep accurate financial records
for the corporation. He or she shall deposit all moneys, drafts and checks in
the name of, and to the credit of, the corporation in such banks and
depositaries as the Board of Directors shall, from time to time, designate. He
or she shall have power to endorse, for deposit, all notes, checks and drafts
received by the corporation. He or she shall disburse the funds of the
corporation, as ordered by the Board of Directors, making proper vouchers
therefor. He or she shall render to the Chief Executive Officer and the
directors, whenever requested, an account of all his or her transactions as
Chief Financial Officer and of the financial condition of the corporation, and
shall perform such other duties as may, from time to time, be prescribed by the
Board of Directors or by the Chief Executive Officer.

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<PAGE>

Section 4.10. TREASURER. The Treasurer, if one is elected, shall be
responsible for the treasury operations of the corporation and shall be perform
such other duties as may be prescribed by the Board of Directors, the Chief
Executive Officer and the Chief Financial Officer.

Section 4.11. COMPENSATION. The officers of this corporation shall
receive such compensation for their services as may be determined, from time to
time, by resolution of the Board of Directors.

ARTICLE V.
SHARES AND THEIR TRANSFER

Section 5.01. CERTIFICATES FOR SHARES. All shares of the corporation
shall be certificated shares. Every owner of shares of the corporation shall be
entitled to a certificate, to be in such form as shall be prescribed by the
Board of Directors, certifying the number of shares of the corporation owned by
such shareholder. The certificates for such shares shall be numbered in the
order in which they shall be issued and shall be signed, in the name of the
corporation, by the Chief Executive Officer and by the Secretary or an Assistant
Secretary or by such officers as the Board of Directors may designate. If the
certificate is signed by a transfer agent or registrar, such signatures of the
corporate officers may be by facsimile if authorized by the Board of Directors.
Every certificate surrendered to the corporation for exchange or transfer shall
be canceled, and no new certificate or certificates shall be issued in exchange
for any existing certificate until such existing certificate shall have been so
canceled, except in cases provided for in Section 5.04.

Section 5.02. ISSUANCE OF SHARES. The Board of Directors is
authorized to cause to be issued shares of the corporation up to the full amount
authorized by the Articles of Incorporation in such amounts as may be determined
by the Board of Directors and as may be permitted by law. No shares shall be
allotted except in consideration of cash or other property, tangible or
intangible, received or to be received by the corporation under a written
agreement, of services rendered or to be rendered to the corporation under a
written agreement, or of an amount transferred from surplus to stated capital
upon a share dividend. At the time of such allotment of shares, the Board of
Directors making such allotments shall state, by resolution, their determination
of the fair value to the corporation in monetary terms of any consideration
other than cash for which shares are allotted.

Section 5.03. TRANSFER OF SHARES. Transfer of shares on the books of
the corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares. The corporation may treat as the absolute owner
of shares of the corporation, the person or persons in whose name shares are
registered on the books of the corporation.

Section 5.04. LOSS OF CERTIFICATES. Except as otherwise provided by
Minnesota Statutes Section 302A.419, any shareholder claiming a certificate for
shares to be lost, stolen or

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<PAGE>

destroyed shall make an affidavit or that fact in such form as the Board of
Directors shall require and shall, if the Board of Directors so requires, give
the corporation a bond of indemnity in form, in an amount, and with one or more
sureties satisfactory to the Board of Directors, to indemnify the corporation
against any claim which may be made against it on account of the reissue of such
certificate, whereupon a new certificate may be issued in the same tenor and for
the same number of shares as the one alleged to have been lost, stolen or
destroyed.

ARTICLE VI.
DIVIDENDS, RECORD DATE

Section 6.01. DIVIDENDS. Subject to the provisions of the Articles
of Incorporation, of these Bylaws, and of law, the Board of Directors may
declare dividends whenever, and in such amounts as, in its opinion, are deemed
advisable.

Section 6.02. RECORD DATE. Subject to any provisions of the Articles
of Incorporation, the Board of Directors may fix a date not exceeding 120 days
preceding the date fixed for the payment of any dividend as the record date for
the determination of the shareholders entitled to receive payment of the
dividend and, in such case, only shareholders of record on the date so fixed
shall be entitled to receive payment of such dividend notwithstanding any
transfer of shares on the books of the corporation after the record date. The
Board of Directors may close the books of the corporation against the transfer
of shares during the whole or any part of such period.

ARTICLE VII.
BOOKS AND RECORDS, FISCAL YEAR

Section 7.01. SHARE REGISTER. The Board of Directors of the
corporation shall cause to be kept at its principal executive office, or at
another place or places within the United States determined by the Board:

(1) a share register not more than one year old, containing the names
and addresses of the shareholders and the number and classes of
shares held by each shareholder; and

(2) a record of the dates on which certificates or transaction
statements representing shares were issued.

Section 7.02. OTHER BOOKS AND RECORDS. The Board of Directors shall
cause to be kept at its principal executive office, or, if its principal
executive office is not in Minnesota, shall make available at its registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by
Minnesota Statutes Section 302A.461, originals or copies of:

(1) records of all proceedings of shareholders for the last three
years;

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<PAGE>

(2) records of all proceedings of the Board for the last three years;

(3) its articles and all amendments currently in effect;

(4) its bylaws and all amendments currently in effect;

(5) financial statements required by Minnesota Statutes Section
302A.463 and the financial statement for the most recent interim
period prepared in the course of the operation of the corporation
for distribution to the shareholders or to a governmental agency
as a matter of public record;

(6) reports made to shareholders generally within the last three
years;

(7) a statement of the names and usual business addresses of its
directors and principal officers;

(8) any shareholder voting or control agreements of which the
corporation is aware; and

(9) such other records and books of account as shall be necessary and
appropriate to the conduct of the corporate business.

Section 7.03. FISCAL YEAR. The fiscal year of the corporation shall
be determined by the Board of Directors.

ARTICLE VIII.
LOANS, GUARANTEES, SURETYSHIP

The corporation may lend money to, guarantee an obligation of, become
a surety for, or otherwise financially assist a natural or legal person if the
transaction, or a class of transactions to which the transaction belongs, is
approved by the affirmative vote of a majority of the directors present and:

(1) is in the usual and regular course of business of the
corporation;

(2) is with, or for the benefit of, a related corporation, an
organization in which the corporation has a financial interest,
an organization with which the corporation has a business
relationship, or an organization to which the corporation has the
power to make donations;

(3) is with, or for the benefit of, an officer or other employee of
the corporation or a subsidiary, including an officer or employee
who is a director of the corporation or a subsidiary, and may
reasonably be expected, in the judgment of the Board, to benefit
the corporation; or

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<PAGE>

(4) has been approved by the affirmative vote of the holders of
two-thirds of the outstanding shares.

The loan, guarantee, surety contract or other financial assistance may be with
or without interest, and may be unsecured, or may be secured in the manner as a
majority of the directors approve, including, without limitation, a pledge of or
other security interest in shares of the corporation. Nothing in this section
shall be deemed to deny, limit, or restrict the powers of guaranty or warranty
of the corporation at common law or under a statute of the State of Minnesota.

ARTICLE IX.
INDEMNIFICATION OF CERTAIN PERSONS

The corporation shall indemnify such persons, for such expenses and
liabilities, in such manner, under such circumstances, and to such extent as
permitted by Minnesota Statutes Section 302A.521, as now enacted or hereafter
amended.

ARTICLE X.
AMENDMENTS

These Bylaws may be amended or altered by a vote of the majority of
the whole Board of Directors at any meeting provided that notice of such
proposed amendment shall have been given in the notice given to the directors of
such meeting. Such authority in the Board of Directors is subject to the power
of the shareholders to change or repeal such Bylaws by a majority vote of the
shareholders present or represented at any regular or special meeting of
shareholders called for such purpose, and the Board of Directors shall not make
or alter any Bylaws fixing a quorum for meetings of shareholders, prescribing
procedures or removing directors or filling vacancies in the Board of Directors,
or fixing the number of directors or their classifications, qualifications, or
terms of office, except that the Board of Directors may adopt or amend any Bylaw
to increase their number.

ARTICLE XI.
SECURITIES OF OTHER CORPORATIONS

Section 11.01. VOTING SECURITIES HELD BY THE CORPORATION. Unless
otherwise ordered by the Board of Directors, the Chief Executive Officer shall
have full power and authority on behalf of the corporation (a) to attend any
meeting of security holders of other corporations in which the corporation may
hold securities and to vote such securities on behalf of this corporation; (b)
to execute any proxy for such meeting on behalf of the corporation; or (c) to
execute a written action in lieu of a meeting of such other corporation on
behalf of this corporation. At such meeting, the Chief Executive Officer shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities that the corporation possesses. The Board of Directors may,
from time to time, grant such power and authority to one or more other persons
and may remove such power and authority from the Chief Executive Officer upon
any other person or persons.

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<PAGE>

Section 11.02. PURCHASE AND SALE OF SECURITIES. Unless otherwise
ordered by the Board of Directors, the Chief Executive Officer shall have full
power and authority on behalf of the corporation to purchase, sell, transfer or
encumber any and all securities of any other corporation owned by the
corporation, and may execute and deliver such documents as may be necessary to
effectuate such purchase, sale, transfer or encumbrance. The Board of Directors
may, from time to time, confer like powers upon any other person or persons.

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<PAGE>

L E A S E

Landlord: West Acres Office Park

Tenant: Great Plains Software, Inc.

Dated: October 1, 1983

Commencement Date: October 1, 1983

<PAGE>

WEST ACRES OFFICE PARK LEASE

TABLE OF CONTENTS

Paragraph Page
--------- ----

ACCEPTANCE OF PREMISES . . . . . . . . . . . . . . . . 10 4

ACCESS TO PREMISES . . . . . . . . . . . . . . . . . . 39 16

ACCORD AND SATISFACTION. . . . . . . . . . . . . . . . 46 19

ADDITIONAL HOLDINGS TO BE CONSTRUCTED. . . . . . . . . 55 20

ADJACENT EXCAVATION. . . . . . . . . . . . . . . . . . 56 20

ALTERATIONS AND IMPROVEMENTS . . . . . . . . . . . . . 14 5

ASSIGNMENT & SUBLETTING. . . . . . . . . . . . . . . . 13 4

ATTORNMENT . . . . . . . . . . . . . . . . . . . . . . 30 10

BASE RENT. . . . . . . . . . . . . . . . . . . . . . . 6 3

BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . 51 19

BUILDING . . . . . . . . . . . . . . . . . . . . . . . 8 4

COMMENCEMENT AND TERM. . . . . . . . . . . . . . . . . 4 3

COMMON AREA. . . . . . . . . . . . . . . . . . . . . . 3 3

COMMON AREAS DEFINED . . . . . . . . . . . . . . . . . 20 8

CONDEMNATION OF LESS THAN FEE. . . . . . . . . . . . . 34 13

CONSENT AND APPROVAL . . . . . . . . . . . . . . . . . 47 19

CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . 7 3

CONTROL OF COMMON AREAS. . . . . . . . . . . . . . . . 19 7

DAMAGE OR DESTRUCTION. . . . . . . . . . . . . . . . . 32 11

DEFAULT--RIGHT TO RE-ENTER . . . . . . . . . . . . . . 35 14

EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . 33 13

ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . 48 19

<PAGE>

Paragraph Page
--------- ----

ESTOPPEL CERTIFICATE . . . . . . . . . . . . . . . . . 29 10

EXCUSE FOR NONPERFORMANCE. . . . . . . . . . . . . . . 9 4

EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . 60 21

GLASS. . . . . . . . . . . . . . . . . . . . . . . . . 27 10

GOVERNMENTAL REGULATIONS . . . . . . . . . . . . . . . 12 4

HOLDING OVER . . . . . . . . . . . . . . . . . . . . . 41 18

INCREASE IN INSURANCE PREMIUMS . . . . . . . . . . . . 26 9

INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 23 8

JANITORIAL SERVICE . . . . . . . . . . . . . . . . . . 52 20

LEASE YEAR . . . . . . . . . . . . . . . . . . . . . . 5 3

LEGAL EXPENSES . . . . . . . . . . . . . . . . . . . . 38 16

LOSS AND DAMAGE. . . . . . . . . . . . . . . . . . . . 40 17

MAINTENANCE AND REPAIRS. . . . . . . . . . . . . . . . 16 5

NO OPTION. . . . . . . . . . . . . . . . . . . . . . . 57 21

NO PARTNERSHIP RELATION. . . . . . . . . . . . . . . . 49 19

NON-EXCLUSIVE USE. . . . . . . . . . . . . . . . . . . 21 8

NOTICES. . . . . . . . . . . . . . . . . . . . . . . . 50 19

OPTION TO CURE DEFAULT . . . . . . . . . . . . . . . . 45 19

OPTION TO RENEW. . . . . . . . . . . . . . . . . . . . 59 21

OWNERSHIP OF IMPROVEMENTS AND FIXTURES . . . . . . . . 15 5

PREMISES . . . . . . . . . . . . . . . . . . . . . . . 1 2

QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . 43 18

RECORDING--SHORT FORM LEASE. . . . . . . . . . . . . . 58 21

RIGHT TO RELET . . . . . . . . . . . . . . . . . . . . 36 15

<PAGE>

Paragraph Page
--------- ----
RIGHT TO RELOCATE. . . . . . . . . . . . . . . . . . . 54 20

RIGHT TO TERMINATE . . . . . . . . . . . . . . . . . . 37 16

RULES AND REGULATIONS. . . . . . . . . . . . . . . . . 18 7

SEVERABILITY . . . . . . . . . . . . . . . . . . . . . 53 20

SUBORDINATION. . . . . . . . . . . . . . . . . . . . . 31 11

SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . 42 18

SURRENDER OF PREMISES. . . . . . . . . . . . . . . . . 17 6

TENANT'S FIRE INSURANCE. . . . . . . . . . . . . . . . 24 9

TENANT'S LIABILITY INSURANCE . . . . . . . . . . . . . 22 8

USE OF PREMISES. . . . . . . . . . . . . . . . . . . . 2 2

UTILITIES AND CHARGES. . . . . . . . . . . . . . . . . 28 10

WAIVER OF DEFAULT. . . . . . . . . . . . . . . . . . . 44 18

WAIVER OF SUBROGATION. . . . . . . . . . . . . . . . . 25 9

WASTE OR NUISANCE. . . . . . . . . . . . . . . . . . . 11 4

iii

<PAGE>

LEASE

INDENTURE OF LEASE made this lst day of October, 1983, by and between WEST
ACRES OFFICE PARK, a North Dakota general partnership, (called "WAOP" or the
"Landlord"), whose post office address is 1701 38th Street South, Fargo, North
Dakota, and GREAT PLAINS SOFTWARE, INC. (the "Tenant"), whose post office
address is 1701 38th Street South, Fargo, North Dakota 58103

WITNESSETH:

1. PREMISES. In consideration of the rents, covenants, conditions and
agreements reserved and contained in this lease, and to be performed on the part
of the Tenant, Landlord demises and leases to Tenant, and Tenant hires and
leases from Landlord, those certain premises and facilities located in the West
Acres Office Park Building ("Building") in Fargo, North Dakota, which premises
consist of:

(a) Office space on the lower level of the building, including 1,276
square feet,

(b) Office space on the main floor of the building, including 9,267 square
feet,

All called the "Leased Premises." But reserving and excepting to Landlord the
use of the exterior walls and the roof, for such maintenance and repairs as
normally may be required, and the right to install, maintain, use, repair and
replace pipes, ducts, conduits and wire leading through the Leased Premises in
locations which will not materially interfere with Tenant's use thereof and
serving other parts of the Building. The location of the Leased Premises are
outlined and marked on the attached plan of the lower level and main floor of
the Building, marked Exhibit "A" and made a part of this lease.

2. USE OF PREMISES. Tenant shall occupy and use the Leased Premises
solely for its offices plus shipping and production. Tenant shall occupy the
Leased Premises at the commencement of the lease term, and shall occupy said
premises therein

<PAGE>

continuously and uninterruptedly for the purpose above-stated. Tenant shall not
use or permit, or suffer the use of, the Leased Premises for any other purpose.

3. COMMON AREA. The use and occupation by the Tenant of the Leased
Premises shall include the use in common with others entitled thereto of the
open parking areas, service roads, sidewalks, walkways, landscaped areas and all
other common areas and facilities now completed or to be completed; subject,
however, to the terms and conditions of this lease and to reasonable rules and
regulations for the use thereof as prescribed from time to time by Landlord.
Landlord shall provide adequate open parking areas for customers, business
invitees of Tenant and other tenants. In addition, GPS shall have right to use
west sidewalk for UPS and semi truck deliveries.

4. COMMENCEMENT AND TERM. The term of this lease and Tenant's obligation
to pay rent hereunder shall commence on October 1, 1983, (the commencement date)
and unless sooner terminated as permitted by this lease or by law shall end at
midnight on the last day of the 12th calendar month following the lease
commencement date.

5. LEASE YEAR. The term "lease year" means a period of twelve
consecutive full calendar months. The first lease year shall begin on the date
of commencement of the lease term if that date shall occur on the first day of a
calendar month; if not, then the first lease year shall commence upon the first
day of the calendar month next following the day of commencement of the lease
term. Each succeeding lease year shall commence upon the anniversary of the
date of the first lease year.

6. BASE RENT. Beginning with the rent commencement date of this lease,
the Tenant shall pay the Landlord a fixed annual base rent as follows:

(a) For the 1,276 square feet on the lower level, $6.00 per square foot

(b) For the 9,267 square feet located on the main floor level of the
building, $7.50 per square foot.

The fixed annual base rent shall be paid to the Landlord in equal monthly
installments of $6,430 in advance on the first day of each month during the term
of this lease.

7. CONSTRUCTION. Landlord aqrees to perform the fit up improvements of
the interior of Tenant's Leased Premises as follows: construct appropriate
dividing walls, lay carpeting and paint or recover the walls to the extent of
$2.50 per square foot. Tenant agrees to

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<PAGE>

reimburse Landlord for the cost of improvements exceeding the allowance of $2.50
per square foot. Landlord shall submit an itemized list of all costs.

8. BUILDING. Landlord hereby reserves the right at any time to make
alterations or additions to the building in which the Leased Premises are
contained and to build adjoining the same; provided, however, that any
improvements to be made in accordance with this paragraph shall not
substantially interfere with the Tenant's use of the Leased Premises.

9. EXCUSE FOR NONPERFORMANCE. Anything in this lease to the contrary
notwithstanding, if performance of any act or obligation is prevented or delayed
by an Act of God, war, labor disputes, or other cause or causes beyond the
reasonable control of Landlord or Tenant, the time for the performance of the
act or obligation will be extended for the period that such act or performance
is delayed or prevented by any such cause. This provision shall not operate to
excuse Tenant from prompt payment of rent, additional rent or any other payment
or payments required by the terms of this lease.

10. ACCEPTANCE OF PREMISES. Occupancy by Tenant of the Leased Premises,
pursuant to the terms of this lease, shall constitute an acknowledgment by
Tenant that the Leased Premises are in the condition called for by the lease and
that Landlord has performed all of Landlord's work with respect thereto, except
for such items which are not completed or do not conform to the terms of this
lease or any exhibit and as to which Tenant shall have given notice to Landlord
within thirty (30) days after Tenant assumes occupancy. Any disagreement which
may arise between Landlord and Tenant with reference to the work to be performed
by either of them shall be resolved by arbitration.

11. WASTE OR NUISANCE. The Tenant shall not commit or suffer to be
committed any waste upon the Leased Premises or any nuisance or other act or
thing which may disturb the quiet enjoyment of any other tenant in the building
in which the Leased Premises may be located.

12. GOVERNMENTAL REGULATIONS. Tenant shall, at Tenant's sole cost and
expense, comply with and faithfully observe all of the rules, regulations,
ordinances, laws and requirements of county, municipal, state, federal and other
applicable governmental authorities, present or future, which affect the
occupancy or use of, or carrying on of Tenant's business or profession in the
Leased Premises.

13. ASSIGNMENT & SUBLETTING. Tenant shall not assign this lease in whole
or in part, nor sublet all or

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<PAGE>

any part of the Leased Premises, or grant licenses or concessions therein
without the prior written consent of Landlord in each instance. The consent of
Landlord shall not be unreasonably withheld. Notwithstanding any assignment or
subletting, Tenant shall remain fully liable on this lease and shall not be
released from performing any of its terms, covenants and conditions.

14. ALTERATIONS AND IMPROVEMENTS. Without first obtaining Landlord's
written approval and consent and delivering to Landlord at the time approval is
sought, the drawing and specifications for any proposed work, Tenant shall not
make, cause to be made, or contract for any alterations, additions, or
improvements to be made on the Leased Premises, or to install therein any
fixture, floor covering, interior or exterior lighting, plumbing fixtures, or
other structural changes or additions to the premises.

15. OWNERSHIP OF IMPROVEMENTS AND FIXTURES. All alterations,
installations, additions and improvements made upon the Leased Premises by
either party shall, unless Landlord otherwise elects (by giving notice thereof
to Tenant not less than thirty (30) days prior to the expiration or other
termination of this lease), become the property of the Landlord and shall remain
upon and be surrendered with the Leased Premises as a part thereof at the
expiration or sooner termination of this lease. Movable furniture, fixtures and
other personal property installed by the Tenant at its expense shall remain its
property and may be removed at any time, provided Tenant promptly repairs any
damage caused by such removal.

Tenant shall not place or suffer to be placed or maintained anywhere
in the Leased Premises or on any exterior door, wall or window of the Leased
Premises any sign, or advertising matter or other thing of any kind, and will
not place or maintain any decoration, lettering, or advertising matter on the
glass of any window or door of the Leased Premises without first obtaining
Landlord's written approval and consent. Signs shall be harmonious to the
general architectural treatment of the office space in the Building and must
comply with sign criteria specified by Landlord in preliminary drawings and
specifications. Tenant further agrees to maintain such sign, decorations,
lettering, advertising matter or other things as may be approved in good
condition and repair at all times.

16. MAINTENANCE AND REPAIRS. With respect to maintenance and repairs
Tenant agrees as follows:

(a) Throughout the term of this lease, the Tenant, shall, at its sole
expense, take good care of the

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<PAGE>

Leased Premises, maintain them in neat and good order, condition and repair;
make good any injury or breakage done by Tenant or Tenant's agents, employees or
licensees; and make all necessary interior repairs thereto--ordinary wear and
tear excepted. All repairs made by the Tenant shall be at least equal in
quality and class to the original work. It shall not, however, be the
obligation of the Tenant to perform cleaning and routine daily maintenance which
shall be the obligation of the Landlord as provided in paragraph 52 hereof. If
the Landlord is required to make repairs to structural portions of the building
by reason of Tenant's negligent acts or omission to act, or if Tenant refuses
under the terms of this lease, to the reasonable satisfaction of Landlord after
ten (10) days' written notice, then Landlord may make such repairs or conduct
such maintenance without liability to Tenant for any loss or damage that may
accrue to Tenant's property or to the Tenant's business, profession or other use
of the Leased Premises, and upon completion thereof and presentation of a
statement therefor, Tenant shall pay Landlord as additional rent at the time the
next rental payment is due, the Landlord's cost and expenses of making such
repairs or conducting such maintenance, plus fifteen percent (15%) for overhead
and supervision.

(b) The Tenant shall not be obligated to make any repair which is
occasioned by defective materials or workmanship in the construction of the
building or in any of the Landlord's improvements required by this lease and
such repairs shall be made by the Landlord at its own expense. The Landlord
during the term of this lease and any renewal or extension thereof, shall keep
the structural supports and exterior walls of the building, including windows,
doors and passageways from the lobby, street and parking area leading to the
Leased Premises and the adjacent sidewalks and entrance lobby, in good order and
repair and free of snow, ice, rubbish and all obstructions. The Landlord shall
maintain in good working order and repair all plumbing, toilet facilities and
other fixtures and equipment installed for the general supply of hot and cold
water, heat, air conditioning and electricity as provided for in paragraph 28 of
this lease.

17. SURRENDER OF PREMISES. At the expiration of the tenancy hereby
created, Tenant shall surrender the Leased Premises in as good condition and
order as they were when Tenant took possession, ordinary wear and tear and
damage by casualty excepted, and shall return all keys for the Leased Premises
to Landlord and shall inform Landlord of all combinations on locks, safes and
vaults, if any, in the Leased Premises. Tenant shall at its expense remove all
fixtures, furniture, signs and any alterations or improvements made by Tenant as
to which Landlord shall have made the election as provided in the article
entitled

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<PAGE>

"Ownership of Improvements and Fixtures," before surrendering the Leased
Premises as stated in this lease and shall repair any damage to the Leased
Premises caused thereby. Tenant's obligation to observe or perform this
covenant shall survive the expiration or other termination of the term of this
lease.

18. RULES AND REGULATIONS. Landlord reserves the right to promulgate such
reasonable rules and regulations relating to the building, common areas and
facilities, and any part or parts thereof as Landlord may deem appropriate and
for the best interests of the tenants for the common use of the Building.
Tenant agrees to abide by such rules which shall be uniformly applied and to
cooperate in their observance. The rules and regulations, and any amendments or
additions that may be made from time to time, shall be effective and become
binding upon Tenant upon delivery of a copy of them to Tenant.

19. CONTROL OF COMMON AREAS. All common areas and other facilities (as
hereafter defined), provided by Landlord in or about the Building, for the
general use, in common, of tenants, their officers, agents, employees, clients,
customers, and invitees shall be subject to the exclusive control and management
of Landlord, and Landlord shall have the right from time to time to promulgate
and enforce reasonable rules and regulations as it may deem appropriate, with
respect to all facilities and areas mentioned in this paragraph which shall
apply equally and without discrimination to all tenants and permittees.
Landlord shall have the right to construct, maintain and operate lighting
facilities on all said areas and improvements; to police the same; to change the
area, level, location, and arrangement of such facilities; to close all or any
portion of such areas or facilities to such extent as may, in the opinion of
Landlord's counsel, be legally sufficient to prevent a dedication thereof or the
accrual of any rights to any person or the public therein; to close temporarily
all or any portion of the facilities; and to do and perform such other acts in
said areas and improvements as in the use of good business judgment, Landlord
shall determine to be advisable with a view of the improvement of the
convenience and use thereof by Tenants, their officers, agents, employees,
clients, customers, and invitees. Landlord will operate and maintain the common
facilities referred to in this paragraph in such manner as it, in its sole
discretion, shall determine and shall have full right and authority to employ
and discharge all personnel with respect thereto; provided, however, that the
common areas shall be available to the Tenant and its clients, customers, or
invitees at all reasonable times.

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<PAGE>

20. COMMON AREAS DEFINED. "Common areas and common facilities," whether
such terms are used individually or collectively, mean all areas, space,
equipment, signs and special services provided by Landlord for the common or
joint use and benefit of the occupants of the Building and their officers,
employees, agents, clients, customers and other invitees, including without
limitation, the stairs, washrooms, utility rooms, hallways, and elevators.

21. NON-EXCLUSIVE USE. All common areas and facilities not within the
Leased Premises shall be used and occupied by Tenant under a non-exclusive
right, in common with Landlord and all other Tenants in the Building, and if the
amount of such areas be diminished, Landlord shall not be subject to any
liability nor shall Tenant be entitled to any compensation or abatement of rent,
nor shall such diminution of such areas be deemed constructive or actual
eviction.

22. TENANT'S LIABILITY INSURANCE. Tenant shall during the entire lease
term, keep in full force and effect at its own cost, a policy of public
liability and property damage insurance with respect to the Leased Premises and
the business or profession operated by Tenant and any of its subtenants in which
the limits of public liability for bodily injury or death shall be not less than
$250,000 per person, and not less than $500,000 per accident, and not less than
$100,000 property damage in one accident. The insurance policy shall name
Landlord, and any person, firms or corporations, if any, designated by it, as an
assured, and shall contain a clause that the insurer will not cancel or change
the insurance without first giving the Landlord at least thirty (30) days' prior
written notice. The insurance shall be in a responsible company qualified to do
business in North Dakota, as approved by Landlord, and a copy of the policy or
a certificate of insurance shall be delivered to Landlord.

23 . INDEMNIFICATION. Except for claims arising out of acts caused by the
affirmative negligence of the Landlord or its representatives, Tenant covenants
and agrees to indemnify, defend and save Landlord harmless from and against any
and all injury, loss, claims, actions, damages, liability, costs and expense,
including reasonable attorneys fees, in connection with loss of life, personal
or bodily injury, damage to property, or litigation arising from or out of any
occurrence in, upon or at the Leased Premises or the occupancy or use by Tenant
of the Leased Premises, or occasioned anywhere wholly or in part by any act,
neglect, or omission of Tenant, its agents, contractors, employees, servants,
lessees or concessionaires.

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<PAGE>

24. TENANT'S FIRE INSURANCE. Tenant agrees that during the entire term of
this lease it will procure and keep in full force and effect at its own cost,
fire and extended coverage insurance including vandalism and malicious mischief,
to cover all of Tenant's fixtures, furniture, furnishings, equipment, not part
of Tenant's Improvement, as herein defined, to the extent of an amount equal to
at least their actual cash value. Insurance coverage for those installations
and improvements which form a part of Tenant's Improvement, as herein defined,
shall be carried by the Landlord in an amount sufficient to prevent the Landlord
from becoming a co-insurer under the terms of the applicable policies, but, in
any event, in an amount not less than ninety percent (90%) of the full insurable
value as determined from time to time. The term "full insurable value" shall
mean actual replacement cost without deduction for physical depreciation. Such
insurance shall be issued by financially responsible insurers duly authorized to
do business in this state.

25. WAIVER OF SUBROGATION. Each of the parties hereto releases the other
from any claim for recovery for any loss or damage to any of its property which
is insured under valid and collectible insurance policies, to the extent of any
recovery collectible under such insurance. It is further agreed that this
waiver shall apply only when permitted by the applicable insurance policy.

26. INCREASE IN INSURANCE PREMIUMS. [OMITTED]

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<PAGE>

27. GLASS. Tenant agrees to replace all glass when broken if such
breakage is the result of the negligence of the Tenant, its employees, invitees
or licensees.

28. UTILITIES AND CHARGES. Landlord agrees to furnish water, electricity,
sewer and any other utility used or consumed in or about the Leased Premises
during the term of this lease.

Landlord agrees to furnish air conditioning and heat to the Leased
Premises at Landlord's expense for the term of the lease. It is agreed that in
maintaining temperature levels in connection with both heat and air
conditioning, Tenant agrees that Landlord may follow governmental
recommendations as to such temperature levels made in the interest of energy
conservation.

29. ESTOPPEL CERTIFICATE. Landlord and Tenant each agree it will, at any
time and from time to time, within ten (10) business days following written
notice by the other party hereto specifying that it is given pursuant to this
provision, execute, acknowledge and deliver to the party who gave such notice a
statement in writing certifying that this lease is unmodified and in full force
and effect (or if there have been modifications, that the same is in full force
and effect as modified, and stating the modifications), and the dates to which
the rent and any other payments due hereunder from Tenant have been paid in
advance, if any, and stating whether or not to the best of knowledge of the
signer of such certificate the other party is in default in performance of any
covenant, agreement or condition contained in this lease, and if so, specifying
each such default of which the signer may have knowledge.

The failure of either party to execute, acknowledge and deliver to the
other a statement in accordance with the foregoing provisions within the ten
(10) day period shall constitute an acknowledgment by the party given such
notice, which may be relied upon by any person holding or proposing to acquire
an interest in the Building or the Leased Premises or this lease from or through
the other party, that this lease is unmodified and in full force and effect and
that the rent has been duly and fully paid to and including the respective due
dates immediately preceding the date of such notice and shall constitute, as to
any person entitled as stated in this paragraph to rely upon such statements, a
waiver of any default which may exist prior to the date of such notice.

30. ATTORNMENT. Tenant shall, in the event any proceedings are brought
for the foreclosure of, or in the event of exercise of the power of sale under,
any mortgage or deed of trust made by Landlord covering the Leased

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<PAGE>

Premises, attorn in writing to the mortgagee or purchaser at such foreclosure
sale and recognize such purchaser as Landlord under this lease.

31. SUBORDINATION. Tenant agrees that this lease shall be subordinated to
any mortgages or trust deeds that may hereafter be placed upon said Leased
Premises and to any and all advances to be made thereunder, and to the interest
thereon, and all renewals, replacements, and extensions thereof provided that
the mortgagee or trustee thereunder shall agree to recognize Tenant's rights
under this lease as long as Tenant is not in default hereunder. Tenant further
agrees that upon notification by Landlord or mortgagee to Tenant, this lease
shall be or become prior to any mortgages or deeds of trust that may heretofore
or hereafter be placed on said Leased Premises. Tenant shall execute and
deliver whatever instruments may be required for the above purposes, and failing
to do so after demand in writing, does hereby make, constitute and irrevocably
appoint Landlord as its attorney-in-fact and in its name, place, and stead so to
do. This lease may not be further modified without the consent of any such
mortgagee or trustee. Additionally, Tenant agrees to execute estoppel
certificates, from time to time, in form and consent reasonably satisfactory to
such mortgagee or trustee.

32. DAMAGE OR DESTRUCTION. With respect to damage or destruction, the
following provisions shall govern:

(a) Landlord's obligation. If the Leased Premises shall be partially
or totally destroyed or damaged by fire or other insured casualty so as to
become partially or totally untenantable, the same shall be repaired or rebuilt
as soon as reasonably possible at the expense of Landlord, unless Landlord shall
elect not to repair or rebuild as provided hereafter in subparagraph (b), and
should there be a substantial interference with Tenant's business or profession,
a just and proportionate part of the base rent, and of the additional rents,
except that portion of additional rent designated Tenant's Improvement shall be
abated until the premises are repaired or rebuilt.

(b) Landlord's Election. If (i) the Leased Premises or the building
in which the Leased Premises are located, shall be destroyed or damaged by fire
or other insured casualty to the extent of fifty percent (50%), or more of the
cost of replacement thereof under the coverage of Landlord's insurance
(notwithstanding that the Leased Premises may be unaffected by such fire or
other occurrence), or (ii) if the Leased Premises or the building in which they
are located shall be partially or totally destroyed by a cause or casualty other
than one covered by

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<PAGE>

Landlord's insurance, then, in any event, Landlord may, if it so elects,
rebuild or put said Leased Premises and building in good condition and fit for
occupancy within a reasonable time after such destruction or damage (with an
equitable and proportionate adjustment of rent, as provided in the foregoing
paragraph (a), until the premises are ready for occupancy), or it may give
notice terminating this lease as of a date not later than thirty (30) days after
such damage or destruction. If Landlord elects to restore, repair or rebuild,
it shall within sixty (60) days after such damage or destruction, give Tenant
notice of its intention to restore, repair or rebuild and then shall proceed
with reasonable speed to make the repairs or reconstruction. Unless Landlord
elects to terminate this lease, this lease shall remain in full force and
effect; provided, however, that Tenant shall have the right to terminate this
lease, upon not less than sixty (60) days' written notice to Landlord, if
Landlord shall not have commenced the repair or restoration of the Leased
Premises within one hundred twenty (120) days after its notice of election to
repair, restore, or rebuild, or if Landlord shall not have restored, repaired or
rebuilt the Leased Premises suitable for Tenant's use and occupancy within one
(1) year after the fire or other casualty (excluding time lost because of
strikes, material shortages, Acts of God, or other causes beyond Landlord's
control).

(c) Landlord and Tenant Work. If Landlord shall elect or be
obligated to repair or rebuild because of any damage or destruction, Landlord's
obligation shall be limited to rebuilding or restoring the Leased Premises to a
good condition and fit for occupancy substantially the same as prior to the
damage or destruction including the restoration, replacement and rebuilding of
Tenant's Improvement as herein defined; and Tenant shall be obligated to fully
repair or replace all of its fixtures, furniture, equipment and other personal
property, not specifically designated Tenant's Improvement, to the extent that
the same are covered by insurance as provided for in this lease.

(d) Mortgagee as Landlord. In the event that any mortgagee of the
premises shall become the owner of the premises by virtue of a judgment of
foreclosure or deed in lieu of foreclosure and such mortgagee thereby becomes
Landlord, such mortgagee as Landlord, shall have no obligation to repair or
rebuild the building of which the Leased Premises are a part in the event of
damage or destruction as provided for in this paragraph 32, any provisions in
the previous paragraphs of this lease to the contrary notwithstanding.
Provided, however, that in the event a mortgagee becomes Landlord it shall
notify Tenant in writing of its decision not to repair or rebuild and thereafter
Tenant shall have the right to terminate this

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<PAGE>

lease pursuant to the provisions of paragraph 32(b) and further that this
provision shall have no effect on the obligation of the Landlord to make the
repairs and provide the maintenance as provided for in this lease under normal
conditions.

33. EMINENT DOMAIN. If the whole of the Leased Premises shall be taken by
any authority under the power of eminent domain, then the terms of this lease
shall cease as of the day possession shall be taken by such public authority,
and rent shall be paid up to that date with a proportionate refund by Landlord
of such rent (including additional rents) as shall have been paid in advance.
If more than forty percent (40%) of the Leased Premises shall be taken by any
public authority under the power of eminent domain, then the Tenant shall have
the option of terminating this lease as of the day possession shall be taken by
public authority and rent shall be paid to that date. In the event Tenant
elects to remain in possession, or if less than forty percent (40%) shall be so
taken, all of the terms herein provided shall continue in effect except that
rent shall be proportionately and equitably abated, and Landlord shall make all
necessary repairs or alterations to the building of which the Leased Premises
are a part in order to render it tenantable. All damages awarded for such
taking under the power of eminent domain, whether for the whole or a part of the
Leased Premises, shall be the property of the Landlord, whether such damages
shall be awarded as compensation for diminution in value of the leasehold or to
the fee of the building or land upon which the Leased Premises are a part;
provided, however, that Landlord shall not be entitled to the award made to
Tenant for loss of business, depreciation to or cost of removal of stock and
fixtures owned by the Tenant. Provided further, however, that in the event the
whole of the demised premises shall be taken and this lease terminated, the
Tenant shall have no further obligation to the Landlord for that portion of the
additional rent designated the cost of Tenant's Improvement as herein defined.

34. CONDEMNATION OF LESS THAN FEE. In the event of a condemnation of a
leasehold interest in all or a portion of the Leased Premises without the
condemnation of the fee simple title also, this lease shall not terminate and
such condemnation shall not excuse Tenant from full performance of all of its
covenants hereunder, but Tenant in such event shall be entitled to present or
pursue against the condemning authority its claim for and to receive all
compensation or damages sustained by it by reason of such condemnation, and
Landlord's right to recover compensation or damages shall be limited to
compensation for and damages, if any, to its reversionary interest. It being
understood, however, that during such time as Tenant shall be out of possession
of the Leased Premises by reason of

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<PAGE>

such condemnation, the lease shall not be subject to forfeiture for failure to
observe and perform those covenants not calling for the payment of money. In
the event the condemning authority shall fail to keep the premises in the state
of repair required hereunder, to perform any other covenant not calling for the
payment of money, Tenant shall have ninety (90) days after the restoration of
possession to it within which to carry out its obligations under such covenant
or covenants. At any time after such condemnation proceedings are commenced,
Tenant agrees upon request of Landlord to assign to Landlord all compensation
and damages payable by the condemnor to Tenant, to be held by the Landlord in
escrow as security for the full performance of Tenant's covenants hereunder.
Interest earned an such funds held in escrow shall accrue to the benefit of the
Tenant. The compensation and damages received pursuant to said assignment shall
be applied first to the payments of rents and all other sums from time to time
payable by Tenant pursuant to the terms of this lease as such sums fall due, and
the remainder, if any, shall be payable to Tenant at the end of the term hereof
or on restoration of possession to Tenant, whichever shall first occur, it being
understood and agreed that such assignment shall not relieve Tenant of any of
its obligations under this lease with respect to such rents and other sums
except as the same shall be actually received by Landlord.

35. DEFAULT--RIGHT TO RE-ENTER. Timely payment of rent is an essential
part of this lease. In the event of any failure of Tenant to pay any rental due
hereunder when due; or any failure to keep and perform any other of the terms,
conditions, covenants or agreements of this lease as covenanted and agreed to be
observed or performed by the Tenant, the Landlord, prior to taking any other
action, shall give the Tenant written notice specifying the default or defaults.
Tenant shall have ten (10) days after receipt of such notice to correct any
rental default and thirty (30) days to correct any other default or defaults.
In the event such defaults shall continue after written notice of such default
or violation shall have been given to Tenant, or if Tenant or an agent of
Tenant's shall falsify any report required to be furnished to Landlord pursuant
to the terms of this lease or if Tenant or any guarantor of this lease shall
become bankrupt or insolvent, or file any debtor proceedings, including a
petition in bankruptcy; or insolvency or for reorganization or for the
appointment of a receiver or trustee of all or a portion of Tenant's or any such
guarantors property, or makes an assignment for the benefit of creditors, or
petitions for or enters into any arrangements, or if Tenant shall abandon or
vacate the Leased Premises or suffer this lease to be taken under any writ of
execution, then Landlord, besides other rights or remedies it may have,

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shall have the immediate right of re-entry and may remove all persons and
property from the Leased Premises and such property may be removed and stored in
a public warehouse or elsewhere at the cost of and for the account of the
Tenant, all without service of notice or resort to legal process and without
being deemed guilty of trespass, or become liable for any loss or damage which
may be occasioned thereby and without such re-entry working a forfeiture of the
rents due and to be paid or any of the covenants, agreements and conditions to
be kept and performed by the Tenant for the full term of this lease; provided
that if the default be of such nature that it cannot be reasonably cured within
said thirty (30) day period, the Tenant shall in good faith have promptly
commenced the curing of such default within such period, then Tenant may be
deemed not in default hereunder if it shall diligently proceed to cure such
default within any grace period expressly allowed by the Landlord.

In the event the leased premises are sub-let by Tenant and should any
default occur requiring notice as provided for in this paragraph, Landlord
agrees that it will furnish Tenant with a copy of such notice at the same time
it is sent to any sub-Tenant. If such default is not corrected by the
sub-Tenant during the specified period, Tenant shall have an additional period
of ten (10) days to correct the default and, upon correction of such default,
Tenant shall have the right and option to resume actual possession of the
premises as the Tenant under this lease for the unexpired term.

36. RIGHT TO RELET. Should Landlord elect to re-enter, as above provided,
or should it take possession pursuant to legal proceedings or pursuant to any
notice provided for by law, it may either terminate this lease or it may, from
time to time without terminating this lease, make such alterations and repairs
as may be necessary in order to relet the Leased Premises, and relet said Leased
Premises or any part thereof for such term or terms (which may be for a term
extending beyond the term of this lease) and at such rental and upon such other
terms and

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<PAGE>

conditions as Landlord in its sole discretion may deem advisable. Upon each such
reletting all rentals received by Landlord from the reletting shall be applied,
first, to the payment of any indebtedness other than rent due hereunder from
Tenant to Landlord; second, to the payment of any costs and expenses of such
reletting, including brokerage and attorney's fees and costs of such alterations
and repairs; third, to the payment of all rents due and unpaid hereunder; and
the residue, if any, shall be held by Landlord and applied in payment of future
rents as the same may become due and payable hereunder. If such rentals
received from such reletting during any month be less than those required to be
paid during that month by Tenant hereunder, Tenant shall pay any such deficiency
to Landlord. Such deficiency shall be calculated and paid monthly. No such
reentry or taking possession of said premises by Landlord shall be construed as
an election on its part to terminate this lease unless a written notice of such
termination be given by Landlord to Tenant or unless the termination thereof be
decreed by a court of competent jurisdiction.

37. RIGHT TO TERMINATE. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this lease
for such previous breach. Should Landlord at any time terminate this lease for
any breach, it may, in addition to any other remedies it may have, recover from
Tenant all damages it may incur by reason of such breach, including the cost of
recovering the Leased Premises, reasonable attorney's fees, and including the
worth at the time of such termination of the excess, if any, of the amount of
the base rent as well as tax and insurance rent, common area charges and all
other additional rents reserved in this lease for the remainder of the stated
term over the then reasonable rental value of the Leased Premises for the
remainder of the stated term, all of which amounts shall be immediately due and
payable from Tenant to Landlord.

38. LEGAL EXPENSES. In case suit shall be brought for recovery of
possession of the Leased Premises, for the recovery of any rents or any other
amount due under the provisions of this lease, or because of the breach of any
other covenant herein contained on the part of Tenant to be kept or performed,
and a breach shall be established, Tenant shall pay to Landlord all expenses
incurred therefor, including reasonable attorney's fees.

39. ACCESS TO PREMISES. Landlord or its agents shall have the right to
enter the Leased Premises at all reasonable times to examine the same, to show
them to prospective purchasers or lessees of the building, and to make such
repairs, alterations, improvements or additions in the Leased Premises or the
building of which it is a

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part as may be necessary, and Landlord shall be allowed to take all material
into and upon said premises that may be required therefor without the same
constituting an eviction of Tenant in whole or in part, and the rent shall in no
wise abate while said repairs, alterations, improvements or additions are being
made, by reason of loss or interruption of business of Tenant because of the
performance of any such work. Nothing herein contained shall be deemed or
construed to impose upon Landlord any obligation, responsibility or liability
whatsoever, for the care, supervision or repair of the building or of the Leased
Premises, except as otherwise herein specifically provided.

During the three months prior to the expiration of this lease Landlord may
show the premises to prospective tenants and place upon the premises the usual
notices "To Let" and "For Rent" which notices Tenant shall permit to remain
thereon without molestation. If during the last month of the term Tenant shall
have removed all or substantially all of its property therefrom, Landlord may
immediately enter and alter, renovate or redecorate the premises without
elimination or abatement of rent or other compensation and such action shall
have no effect upon this lease.

40. LOSS AND DAMAGE. Landlord, its agents and employees shall not be
liable for, and Tenant waives all claims for, loss or damage to Tenant's
business or damage to person or property sustained by Tenant or any person
claiming through Tenant resulting from any accident or occurrence (unless caused
by or resulting from the negligence of Landlord, its agents, servants or
employees) in or upon the Leased Premises or the building of which it is a part,
or any other area of the Building, including but not limited to claims for
damage resulting from any equipment, machinery or appurtenances becoming out of
repair; injury done or occasioned by wind; any defect in or failure of plumbing,
heating, ventilating or air conditioning equipment, electric wiring or
installation thereof, gas, water and steam pipes, stairs, porches, railings or
walks; brcken glass; the backing up, overflowing or leaking of any sewer pipe or
downspout; the bursting, leaking or running of any tank, tub, washstand, water
closet, waste pipe, drain or any other pipe or tank in, upon or about such
building or Leased Premises; the escape of steam or hot water; water, snow or
ice being upon or coming through the roof, skylight, trapdoor, stairs, doorways,
show windows, walks or any other place upon doorways, show windows, walks or
any other place upon or near such building or the Leased Premises or otherwise;
the falling of any fixture, plaster, tile or stucco; and any act, omission or
negligence of other tenants, licensees or of any other persons in or occupants
of said

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building or of adjoining or contiguous buildings, or of owners or occupants of
adjacent or contiguous property of the Building. Tenant shall give immediate
notice to Landlord or its agent in case of fire, accident, casualty, or other
untoward incident in the Leased Premises or in the building of which the
premises are a part, and of any defects therein or in any fixtures or equipment.

41. HOLDING OVER. Any holding over after the expiration of the term of
this lease, with the consent of the Landlord, shall be construed to be a tenancy
from month to month at the rents herein specified (prorated on a monthly basis)
and shall otherwise be on the terms and conditions herein specified, as far as
applicable.

42. SUCCESSORS. All rights and liabilities herein given to, or imposed
upon, the respective parties hereto shall extend to and bind the respective
heirs, executors, administrators, successors, and assigns of the said parties;
and if there shall be more than one tenant, they shall all be bound jointly and
severally by the terms, covenants, conditions and agreements herein. No rights,
however, shall inure to the benefit of any assignee of Tenant unless the
assignment to such assignee has been approved by Landlord in writing as
hereinbefore provided.

43. QUIET ENJOYMENT. Upon payment by the Tenant of the rents herein
provided and upon the observance and performance of all the covenants, terms and
conditions on Tenant's part to be observed and performed, Tenant shall peaceably
and quietly hold and enjoy the Leased Premises and appurtenances for the lease
term without hindrance or interruption by Landlord or any other person lawfully
claiming by, through or under Landlord, subject, nevertheless, to the other
terms and conditions of this lease, and to all mortgages and underlying leases
of record to which this lease may be or become subject or subordinate.

44. WAIVER OF DEFAULT. The waiver by Landlord of any breach of any term,
covenant or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein.
The subsequent acceptance of rent hereunder by Landlord shall not be deemed to
be a waiver of any existing or preceding breach by Tenant of any term, covenant
or condition of this lease, other than the failure of Tenant to pay the
particular rent accepted, regardless of Landlord's knowledge of such preceding
or existing breach at the time of acceptance of such rent. No covenant, term,
or condition of this lease shall be deemed to have been waived by Landlord,
unless such waiver be in writing signed by Landlord.

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45. OPTION TO CURE DEFAULT. Except as otherwise provided for herein,
Landlord may, at its option, elect to cure at any time, without notice, any
default by Tenant under this lease; and whenever Landlord so elects, and if not
otherwise expressly provided for in this lease, all costs and expenses incurred
by Landlord in curing a default, including, without limitation, reasonable
attorney's fees, together with interest an the amount of costs and expenses so
incurred at the rate of ten percent (10%) per annum, shall be paid by Tenant to
Landlord on demand, and shall be recoverable as additional rent.

46. ACCORD AND SATISFACTION. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any endorsement
or statement on any check or any letter accompanying any check or payment as
rent be deemed an accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the balance of such
rent or pursue any other remedy in this lease provided.

47. CONSENT AND APPROVAL. Whenever under this lease the consent or
approval of either party hereto is required by the other party, such consent or
approval shall not be unreasonably withheld or delayed.

48. ENTIRE AGREEMENT. This lease and the exhibits now or hereafter
attached (as provided herein) and forming a part hereof, set forth all the
covenants, promises, agreements, conditions or understandings, either oral or
written, between them other than are herein set forth. Except as herein
otherwise provided, no subsequent alteration, amendment, change or addition to
this lease shall be binding upon Landlord or Tenant unless reduced to writing
and signed by them.

49. NO PARTNERSHIP RELATION. Landlord does not, in any way or for any
purpose, become a partner of Tenant in the conduct of its business, or
otherwise, or joint adventurer or a member of a joint enterprise with Tenant.

50. NOTICES. Any notice, demand, request or other instrument required to
be given under this lease shall be delivered in person or sent by United States
certified mail, postage prepaid, and shall be addressed: (a) if to Landlord, at
the address first hereinabove given or at such other address as it may designate
by written notice, and (b) if to Tenant, at the Leased Premises or at such other
address as Tenant shall designate by written notice.

51. BROKERAGE. Each of the parties represents and warrants that there
are no claims for brokerage

-19-

<PAGE>

commissions or finder's fees in connection with the execution of this lease,
except as listed below, and each of the parties agrees to indemnify the other
against, and hold it harmless from, all liabilities arising from any such claim
(including, without limitation, the cost of attorney fees in connection
therewith) except as follows: NONE

52. JANITORIAL SERVICE. The Landlord at its expense shall provide daily
general janitorial services for the Leased Premises Monday through Friday,
except for holidays.

53. SEVERABILITY. If any term, covenant or condition of this lease shall,
to any extent, be invalid or unenforceable, the remainder of this lease, or the
application of such term, covenant or condition to person or circumstances other
than those in respect to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this lease shall be
valid and be enforced to the fullest extent permitted by law.

54. RIGHT TO RELOCATE. The purpose of the site plan attached hereto as
Exhibit "B" is to show the approximate location of the leased premises in the
Office Park. Landlord reserves the right at any time to relocate the building
or buildings, automobile parking areas, excess road, utility facilities and
other common areas and facilities shown on said site plan. The relative
location of the leased premises in the Office Park will be maintained as much as
reasonably possible.

55. ADDITIONAL BUILDINGS TO BE CONSTRUCTED. It is contemplated by
Landlord, and understood by Tenant, that the building wherein the leased
premises are constructed which, when all four are completed, will constitute an
integrated office complex of four buildings. In making this statement Landlord
does not warrant that all or any of the additional office buildings will
actually be constructed nor does it state that it will be the actual owner of
any or all of the additional office buildings. The statement concerning
additional construction is made purely for purposes of mutual understanding and
clarity. Wherever in this lease the term, "Office Park" is used and
particularly in reference with its use in connection with its share of tax
increases, insurance increases, operating costs adjustment, and common area
costs, refers only to the building in which the leased premises are situated.

56. ADJACENT EXCAVATION. If any excavation or other building operation
shall be made upon land adjacent to the leased premises, or shall be authorized
to be made, Tenant shall afford to the person causing or authorized to cause

-20-

<PAGE>

such excavation, or construction, license to enter upon the leased premises for
the purpose of doing such work as Landlord shall deem necessary to preserve the
wall or the building of which the leased premises form a part from injury or
damage and to support the same by proper foundations, without any claim for
damages or indemnification against Landlord or diminution or abatement of rent.

57. NO OPTION. This submission of this lease for examination does not
constitute a reservation of or option for the Leased Premises and this lease
becomes effective as a lease only upon execution and delivery thereof by
Landlord and Tenant.

58. RECORDING--SHORT FORM LEASE. Tenant shall not record this lease
without the written consent of Landlord; however, upon the request of either
party the other party shall join in the execution of a memorandum or so-called
"short form" of this lease for the purposes of recordation after Tenant shall
open for business. Said memorandum or short form of lease shall describe the
parties, the Leased Premises and the term of this lease and shall incorporate
this lease by reference.

59. OPTION TO RENEW. Landlord grants to Tenant one separate one (1) year
option to renew this lease after expiration of the original term, subject to
rental adjustment as provided for in this paragraph. To exercise this option,
Tenant must give Landlord written notice of its intention to renew this lease
at least sixty (60) days before the expiration of the lease. The rent for the
additional option year shall be determined by increasing the annual base rent
payable during the initial term of the lease, upwardly in direct proportion to
the percentage of change in the "All-Urban Consumer Price Index" as published
for Minneapolis, Minnesota by the Bureau of Labor Statistics, United States
Department of Labor or such other recognized governmental publication which
states the Consumer Price Index. The base year shall be the index as it
existed on September 30, 1983, and the base shall be used for the option year
by comparing it to the September 30, 1984 index.

AFR means "adjusted fixed rent." The formula for determining the AFR for the
option year shall be as follows:

AFR = Base Rent x CPI in pertinent year
---------------------
CPI in base year

60. EXHIBITS. The exhibits listed in this article and attached or to be
attached to this lease are hereby incorporated in and made a part of this lease.

-21-

<PAGE>

Exhibit A. Floor Plan.
(Paragraph 1)

Exhibit B. Site Plan.
(Paragraph 54)

Exhibit C. Rules and Regulations of Office
Park.

IN WITNESS WHEREOF, the parties have signed this agreement as of
the day and year first above written.

In Presence of: WEST ACRES OFFICE PARK

- --------------------------------------------------------------------------------

/s/ Dennis L. Fuhrman By /s/ Mark B. Foss
- ------------------------- --------------------------
Mark B. Foss,
a general partner

Landlord

GREAT PLAINS SOFTWARE, INC.

/s/ Michael A. Slette By /s/ Douglas J. Burgum
- ------------------------- ----------------------------
Douglas J. Burgum, President
4/18/84

/s/ Michael A. Slette Attest /s/ Joe Peltier
- -------------------------- -------------------------
Secretary

Tenant

-22-

<PAGE>

FLOOR PLAN OF LEASED PREMISES

(Floor Plan Attached)

EXHIBIT A

<PAGE>

SITE PLAN OF WAOP

(Site Plan Attached)

EXHIBIT B

<PAGE>

RULES AND REGULATIONS OF OFFICE PARK

EXHIBIT C

<PAGE>

WEST ACRES OFFICE PARK
1701 38TH STREET SW AMENDMENT
FARGO ND 58103 ---------

THIS AMENDMENT IS TO BE ATTACHED AND WILL CONSTITUTE A PART OF THE LEASE DATED
OCTOBER 1, 1983, BY AND BETWEEN WEST ACRES OFFICE PARK (HEREAFTER REFERRED TO AS
WAOP, A PARTNERSHIP) AS LANDLORD AND GREAT PLAINS SOFTWARE, INC. (HEREAFTER
REFERRED TO AS GPS) AS TENANT, COVERING THE CONTINUING LEASING OF OFFICE SPACE
IN THE WAOP BUILDING. AS HEREIN STATED, GPS SHALL CONTINUE TO LEASE THE
FOLLOWING OFFICE SPACE UNTIL JUNE 30, 1995 AT THE INDICATED RATES:

TOTAL SQUARE COST PER MONTHLY
AREA DESCRIPTION FEET SQUARE FOOT RENTAL
- ---------------- ------------ ------------ ------------
BASEMENT:
1. nw corner 741 $7.00 $432
2. northwest (foss small repro) 520 $7.00 303
3. west conf room 300 $7.00 175
4. northeast 1,275 $7.00 744
5. southwest corner 1,276 $7.00 744
6. south middle 280 $7.00 163

MAIN:
7. north 5,355 $10.85 4,842
8. southwest corner 3,912 $10.85 3,537

TOP:
9. north 5,354 $10.85 4,841
10. south 7,825 $10.85 7,075
----------- -----------
SUBTOTALS 26,838 $22,857
PARKING:
1. garage (four paid at $45, five free) $180
2. outside plug-ins (six paid at $7.50, three free) 45
-----------
TOTAL MONTHLY RENTAL $23,082
--------
--------

ADDITIONALLY, WAOP AND GPS HAVE AGREED TO THE FOLLOWING:

A. AN ANNUAL OPERATING COST ADJUSTMENT SHALL BE IN EFFECT WHICH WILL CONSIST OF
THE DIFFERENCE BETWEEN EACH CALENDAR YEAR'S EXPENSE LESS THE BASE YEAR OF 1992
FOR THE FOLLOWING ITEMS ONLY: (PRORATED BASED UPON SQUARE FOOTAGE)

UTILITIES JANITORIAL
REAL ESTATE TAXES SUPPLIES

B. THERE SHALL BE A SIX MONTH LEASE TERMINATION NOTIFICATION BY GPS OR THE
LEASE SHALL AUTOMATICALLY RENEW FOR ONE ADDITIONAL YEAR.

C. GPS TO PAY 1/2 THE COSTS OF PAVING THE WEST PARKING LOT, WITH A CREDIT
AGAINST RENT FOR ANY YEAR THEREAFTER AT THE % OF CREDIT EQUAL TO THE OCCUPANCY
DURING ANY YEAR THEREAFTER IN RELATION TO THE OCCUPANCY SQUARE FOOTAGE AS OF
DECEMBER 31, 1992 TIMES THE 1/2 AMOUNT PAID BY GPS. (TO CONTINUE THEREAFTER
UNTIL THE AMOUNT PAID BY GPS IS FULLY RECOVERED.)

D. THIS AGREEMENT SHALL BE RETROACTIVE TO JANUARY 1, 1993 AND SHALL CONTINUE
THROUGH JUNE 30, 1995.

WEST ACRES OFFICE PARK GREAT PLAINS SOFTWARE, INC

BY /s/ Dennis L. Fuhrman BY /s/ Douglas J. Burgum
----------------------------- -----------------------------------
landlord tenant

DENNIS L FUHRMAN, GENERAL PARTNER DOUGLAS J BURGUM, PRESIDENT

WITNESS /s/ Michael A. Slette WITNESS /s/ JoDee Geist
------------------------ -------------------------

DATED THIS 20 DAY OF JULY, 1993.
-- ----

<PAGE>

WEST ACRES OFFICE PARK AMENDMENT TO LEASE DATED OCTOBER 1, 1983
1701 38TH STREET SW ----------------------------------------
FARGO ND 58103

<TABLE>
<CAPTION>
TOTAL SQUARE COST PER MONTHLY
AREA DESCRIPTION FEET SQUARE FOOT RENTAL
- ---------------- ---- ----------- ------
<S> <C> <C> <C>
BASEMENT:
1. nw corner 741 $7.63 $471
2. northwest (foss small repro) 520 $7.63 331
3. west conf room 300 $7.63 191
4. northeast 1,275 $7.63 811
5. southwest corner 1,276 $7.63 811
6. south middle 280 $7.63 178

MAIN:
7. north 5,355 $12.50 5,578
8. southwest corner 3,912 $12.50 4,075

TOP:
9. north 5,354 $12.50 5,577
10. south 7,825 $12.50 8,151
--------- ---------
TOTALS 26,838 Total Sq. Feet $26,172 Per Month
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<S> <C>
PARKING:
1. garage (four paid at $45, five free) $180
2. outside plug-ins (six paid at $7.50, three free) 45
---------
TOTAL MONTHLY RENTAL $26,397
------
------
</TABLE>

ADDITIONALLY, WAOP AND GPS HAVE AGREED TO THE FOLLOWING:
- ------------------------------------------------------

A. This amendment shall be effective July 1, 1996, and continue thru June 30,
1998.

B. The rent shall be adjusted at each annual anniversary date by the change in
the Midwest Consumer Price Index as of March 31, 1996...not to exceed 3%
annually.

C. WAOP shall perform the following maintenance...
1. Update bathrooms 3. Eliminate basement sewer odor
2. Paint hallways, where needed 4. Add additional landscaping

D. There will no longer be an annual operating cost adjustment clause.

E. WAOP shall reimburse GPS for their 50% share of the parking lot paving as
per the amendment dated July 20, 1993...consisting of $15,000.

F. GPS must give notice no later than January 1, 1998, if they plan on vacating
these premises on or before June 30, 1998.

WEST ACRES OFFICE PARK GREAT PLAINS SOFTWARE, INC.

BY /s/ D. Fuhrman BY /s/ Jodi Uecker-Rust
-------------------------------- -------------------------------
(as Landlord) (as Tenant)
DENNIS L FUHRMAN, GENERAL PARTNER JODI UECKER-RUST

WITNESS /s/ A. Hogue WITNESS /s/ Lorraine Elliott
--------------------------- --------------------------

DATED THIS 6TH DAY OF August, 1996.

<PAGE>

- -------------------------------------------------------------------------------
[Logo] Norwest Bank North Dakota, N.A.

Jodi Uecker-Rust
Great Plains Software
1701 38th St. S.W.
Fargo, ND 58103

Dear Jodi:

We have received your request to renew your Lease Agreement with Norwest for the
space located at 901 40th Street SW, Fargo, North Dakota. Norwest agrees to
accept you request for renewal for a term of one (1) year.

The rental rate will remain at $3,258.33 monthly. The new expiration date of
the Lease is May 31, 1997. This is the only option to renew contained in the
Lease Agreement. Should Great Plains wish to extend past the new expiration
date of May 31, 1997, please allow sufficient time, 120 days, to negotiate a new
Lease Agreement prior to expiration of the existing Lease.

Sincerely,

/s/ Rick Gartner
Rick Gartner
Vice President

<PAGE>

NORWEST

LEASE WITH

GREAT PLAINS SOFTWARE

<PAGE>

TABLE OF CONTENTS

ARTICLE PAGE

1. Basic Lease Information 3
2. Premises 4
3. Term 4
4. Acceptance of Premises 5
5. Rent 5
6. Operating Cost 5
7. Rentable Area 6
8. Use 6
9. Business Hours 6
10. Repairs by Lessor 6
11. Repairs by Lessee 7
12. Alterations 7
13. Termination 7
14 Signs 8
15. Access 8
16. Utilities and Services 8
17. Assignment and subletting 10
18. Fire and casualty 10
19. Subrogation 11
20. Liability 11
21. Insurance 11
22. Eminent Domain 12
23. Holding Over 12
24. Quiet Enjoyment 12
25. Events of Default 13
26. Default 13
27. Subordination of Lease 14
28. Novation in Event of Sale or Transfer 14
29. Notices 14
30. Rules and Regulations 15
31. Government/Legal Action 15
32. Light and Air 15
33. Brokerage Fees 15
34. Force Majeure 15
35. Substitute Premises 16
36. Miscellaneous Taxes 16
37. Estoppel Certificate 16
38. Miscellaneous 17
39. Invalidity of Particular Provisions 17
40. Governing Law 17
Signatures 18

<PAGE>

EXHIBITS

Demised Space Exhibit A
Lessee Improvement Agreement B
Building Rules & Regulations C

2
<PAGE>

LEASE AGREEMENT ("LEASE")

This Lease, is made and entered into this 20th day of April, 1994 by and between
Lessor and Lessee as described in Article 1.A. and Article 1.B.

1. BASIC LEASE INFORMATION: The following basic lease information is a part of
this Lease, but does not constitute the entire Lease. Lessee acknowledges that
it has read all exhibits which are a part hereof and agrees that this Lease,
including the basic lease information and all exhibits reflect the entire
understanding and reasonable expectations of Lessor regarding the Premises.
Lessee also acknowledges that it has had the opportunity to review this Lease
prior to execution with legal counsel and/or such other advisors as Lessee deems
appropriate.

In addition to the terms which are defined elsewhere in this Lease, the
following defined terms are used in this Lease:
A. LESSOR: Norwest Bank North Dakota, N.A.
------------------------------------------------------
406 Main Avenue
------------------------------------------------------
Fargo, ND 58126
------------------------------------------------------

B. LESSEE: Great Plains Software
------------------------------------------------------
1701 38th Street SW
------------------------------------------------------
Fargo, ND 58103
------------------------------------------------------

C. LEASED PREMISES: The Rentable Area, as defined in Article 7, located
within the Building, as defined in Article 1. D., consisting of
approximately 4,600 usable square feet as shown on Exhibit A to this
Lease.

D. BUILDING: The building which is located at: 901 40th Street SW, Fargo,
ND 58103, known as Village Square Office Park.

E. LEASE TERM: 2 Years and 0 Months, beginning on the Commencement
Date, as defined in Article 1. F, and ending on the Expiration Date,
as defined in Article 1. G.

This Agreement may be renewed by Lessee, with Lessors concurrence, for
one (1) additional term of one (1) year. In order to renew the
Agreement for the additional term, Lessee must provide Lessor with
written notice of its election to renew at least one-hundred twenty
(120) days prior to the expiration of the current term. Lessor upon
receipt of notice to renew, will promptly notify Lessee if Lessor
elects not to renew this agreement.

F. COMMENCEMENT DATE: June 1, 1994
------------------------------------------------

G. EXPIRATION DATE: May 31, 1996
------------------------------------------------
H. SECURITY DEPOSIT: 0
------------------------------------------------
I. MONTHLY RENT: $3,258.33 per month equaling an annual rent of
$39,100

3
<PAGE>

J. LEASE PAYMENT ADDRESS:

Norwest Bank North Dakota, N.A.
----------------------------------------------------------
406 Main Avenue
----------------------------------------------------------
Finance Dept. M.S. 7038
----------------------------------------------------------
Fargo, ND 58126
----------------------------------------------------------

K. USE: For use as: GENERAL OFFICE
---------------------------------------------------

L. BUILDING POWER STANDARDS: Electrical distribution systems for power
and lighting to the Leased Premises and special electrical systems are
not to exceed 6 watts per square foot.

M. PROPERTY: That certain parcel of land on which the Building is
located situated in the County of Cass State of North Dakota, and
legally described as follows: E 110, Lot 1, Block 5, W 240, Lot 2

N. LESSOR NOTIFICATION ADDRESS:
Norwest Bank North Dakota, N.A.
----------------------------------------------------------
406 Main Avenue
----------------------------------------------------------
Properties Department M.S. 7041
----------------------------------------------------------
Fargo, ND 58126
----------------------------------------------------------

If any other provision of this Lease contradicts any definition in this
Article, the other provision will prevail.

The following exhibits are attached to this Lease and are made parts of
this Lease:

Exhibit A - Leased Premises
Exhibit B - Lessee Improvement Agreement
Exhibit C - Building Rules and Regulations
Addendum

2. LEASED PREMISES: In consideration of the obligation of Lessee to pay rent
as herein provided, and in consideration of the other terms, provisions and
covenants hereof, Lessor hereby demises and leases to Lessee, and Lessee hereby
takes from Lessor, the Leased Premises as described in Article 1. C., which is
located in the Building as described in Article 1. D., together with all rights,
privileges, easements, appurtenances and immunities belonging to or in any way
pertaining to the Leased Premises, and together with the right to use in common
with Lessor and other lessees in the Building, and its and their employees,
agents, representatives and invitees, any common areas and facilities of the
Building.

3. LEASE TERM: The Lease Term shall be as described in Article 1. E. .

4
<PAGE>

4. ACCEPTANCE OF PREMISES: Lessee acknowledges that it has inspected the
Leased Premises and accepts it in its present condition as suitable for the
purpose for which it is leased, and further acknowledges that no representations
as to the repair of the Leased Premises nor promises to alter, remodel or
improve the Leased Premises have been made by Lessor, except as may be provided
on Exhibit B attached hereto and incorporated herein. In the event there are
leasehold improvements which are to be completed by Lessor, and Lessor does not
complete leasehold improvements and deliver possession of the Leased Premises on
or before said Commencement Date, or if Lessor is unable for reasons beyond
Lessor's control to deliver possession of the Leased Premises by such date,
Lessor shall not thereby be deemed to be in default hereunder, and shall not
thereby be liable to Lessee for any loss, damage, cost and expense suffered or
incurred by Lessee, nor shall the Commencement Date of the Lease or the Lease
Term of the Lease be affected or changed thereby, and Lessee agrees to accept
possession of the Leased Premises at such time as Lessor is able to tender the
same; provided, however, that Lessor hereby waives payment of Monthly Rent, as
defined in Article 5, covering any period prior to the tendering of possession
to Lessee hereunder, except as otherwise provided on Exhibit B attached hereto.

Lessee shall pay a Security Deposit as described in Article 1. H., upon
execution of this Lease. Said Security Deposit shall be held by Lessor during
the Lease Term of this Lease. On the condition that the Leased Premises have
been returned to Lessor in condition required by this Lease and all obligations
of Lessee hereunder have been complied with by the Lessee, Lessor shall return
the Security Deposit without interest to Lessee upon expiration of this Lease.
If such conditions have not been complied with, Lessor may use said Security
Deposit for the purpose of fulfilling said conditions.

5. MONTHLY RENT: Lessee shall pay to Lessor during the Lease Term a Monthly
Rent as described in Article 1. I. plus any Additional Rent as herein defined
and as adjusted from time to time in accordance with the provisions of this
Lease, payable in advance on the first day of each month during the Lease Term
in lawful money of the United States to Lessor without any deduction or set off
whatsoever, at the Lease Payment Address as described in Article 1. J..
Additional Rent is hereby defined as, but not limited to, charges for services
above building standards and late charges. Appropriate adjustment of Lessee's
Additional Rent shall be made on the basis of actual cost, without markup, for
disproportionate services (whether greater or lesser than standard services) to
Lessee or to other lessees.

6. OPERATING COST: Subject to Article 16, operating costs are included as
part of Monthly Rent and will not be treated in any other fashion.

7. RENTABLE AREA: Rentable Area shall be determined by Building Owners and
Managers Association ("BOMA") standards for measuring floor area in office
buildings as follows:

A. Rentable Area of a single tenancy floor, whether above or below grade shall
be computed by measuring to the inside finish of permanent outer Building
walls, or from the glass line

5
<PAGE>

where at lease 50% of the outer Building wall is glass. Rentable Area shall
include all area within the outside walls, excluding stairs, elevator
shafts, flues, pipe shafts, vertical ducts, air conditioning rooms, fan
rooms, janitor closets, and such other rooms and their enclosing walls not
actually available to the Lessee for furnishings and personnel. Toilet
rooms within and exclusively serving only that floor shall be included in
Rentable Area.

B. Rentable Area for a partial floor shall include all space within the
demising walls (measured from the midpoint of demising walls and in the
case of exterior walls, measured as set forth in (7 A) above), excluding
vertical penetrations such as building stairs, fire towers, elevator
shafts, flues, vents, stacks, pipe shafts, and vertical ducts, plus
Lessee's proportionate share of the common areas such as lobbies,
corridors, toilet and mechanical rooms, telephone and electrical closets,
and service areas in the Building. Vertical penetrations which are for a
specific use of Lessee, such as special stairs or elevators, shall be
included as Rentable Area. No deductions from Rentable Area will be made
for columns or projections necessary to the support of the Building.

8. USE: The Leased Premises shall be used for the purpose as described in
Article 1. K. No part of the Leased Premises shall be used for any purpose
which constitutes a nuisance or which is illegal, offensive, termed hazardous by
insurance companies or which may make void or voidable any insurance on the
Building or which may increase the premiums therefor, or which will interfere
with the general safety, comfort and convenience of the Lessor or other lessees
of the Building. There shall be no sale of food or beverages by any means
without the prior written consent of Lessor. LESSEE SHALL NOT PERMIT
INTOXICATING LIQUORS TO BE KEPT OR SOLD IN THE LEASED PREMISES. It is
understood that Lessor may occupy portions of the Building in the conduct of the
Lessor's business. In such event, all references herein to other lessees of the
Building shall be deemed to include Lessor as an occupant or lessee.

9. BUSINESS HOURS: Business Hours used herein shall mean the hours the Lessor
is customarily open for business, Traditional Holidays, as herein defined,
excepted. The following dates shall constitute Traditional Holidays as said
term is used in this Lease:

(1) New Year's Day
(2) Memorial Day
(3) Independence Day
(4) Labor Day
(5) Thanksgiving Day
(6) Christmas Day

If in the case a different day shall be observed other than the respective
day above-described, then that day which constitutes the day generally observed
by national banks in the city in which the Leased Premises is located, shall
constitute the Traditional Holiday under this Lease.

10. REPAIRS BY LESSOR: Lessor shall at its expense maintain in good repair,
reasonable wear and tear excepted, only the roof, foundation and the structural
soundness of the exterior

6
<PAGE>

walls of the Building and those portions of the plumbing, heating, air
conditioning, and electrical systems located within, but not serving
exclusively, the Leased Premises. Lessee shall repair and pay for any damage
caused by the act or negligence of Lessee or Lessee's employees, agents,
representatives, customers or invitees, or caused by Lessee's default hereunder.
The term "walls" as used herein shall not include windows, glass or plate glass
doors. Lessee shall immediately give Lessor written notice of defect or need
for repairs, after which Lessor shall have reasonable opportunity to repair same
or cure such defect. Lessor's liability hereunder shall be limited to the cost
of such repairs or curing of such defects.

11. REPAIRS BY LESSEE: Lessee shall at its own cost and expense maintain all
other parts of the Leased Premises in good repair, reasonable wear and tear
excepted, and shall take good care of the Leased Premises and its fixtures and
permit no waste of any kind. Lessee will keep the whole of the Leased Premises
in a safe, clean, and sanitary condition, and will at the expiration of the
Lease Term or other termination of this Lease, surrender the same to Lessor in
the same order and condition as said Leased Premises was in at the commencement
of the Lease Term, reasonable wear and tear excepted.

12. ALTERATIONS: Lessee shall not make any alterations of, or additions to,
the Leased Premises without the prior written consent of Lessor. Lessee will
not permit any mechanics', laborers' or material men's liens to stand against
the Leased Premises, Building or the Property for any labor or material
furnished to or for the account of Lessee, or claimed to have been so furnished
in connection with any work performed or claimed to have been performed in, or
about the Leased Premises.

Notwithstanding anything to the contrary contained in this Lease, Lessor
shall in all events have the right to prescribe the weight and position of any
safes and other heavy equipment placed in or on the Leased Premises by Lessee.
Any and all damage or injury to the Leased Premises or the Building caused by
moving the property of Lessee in or out of the Leased Premises, or due to the
same being in or on the Leased Premises, shall be repaired by Lessee at its sole
cost and expense. No equipment, fixtures, furniture or other bulky matter will
be received into or carried in the Building, except at such places and in such
manner as approved by Lessor, and all moving of Lessee's property in or out of
the Leased Premises shall be done only after Lessee has received Lessor's
consent and then under the direct control and supervision of Lessee.

13. TERMINATION: At the termination of this Lease, Lessee shall, if Lessor so
elects, remove all alterations and additions erected by Lessee, other than those
identified on Exhibit B attached hereto and incorporated herein, and restore the
Leased Premises to its original condition. If not so removed by Lessee such
improvements shall be delivered up to the Lessor with the Leased Premises. All
movable office furnishings and trade fixtures installed by Lessee may be removed
by Lessee at the termination of this Lease if Lessee so elects, and shall be
removed if required by Lessor. All such removal and restoration shall be
accomplished in a good and workmanlike manner so as not to damage the primary
structure or structural qualities of the Leased Premises and Building. Personal
property remaining in the Leased Premises at the expiration of the Lease Term or
other termination of this Lease shall be deemed abandoned, and

7
<PAGE>

Lessor may dispose of the same in a manner Lessor deems most expedient. Lessee
shall reimburse Lessor for any expenses incurred by Lessor with respect to
removal or storage of abandoned property and with respect to restoring said
Leased Premises to good order, condition and repair.

If the Leased Premises are not surrendered at the end of the Lease Term or
sooner termination thereof, Lessee shall indemnify Lessor against loss or
liability resulting from delay by Lessee in so surrendering the Leased Premises,
including, without limitation, claims made by any succeeding tenants founded on
such delay and any attorneys' fees resulting therefrom. Lessee shall promptly
surrender all keys for the Leased Premises to Lessor at the place then fixed for
the payment of rent and shall inform Lessor of combinations on any vaults, locks
and safes on the Leased Premises.

14. SIGNS: Lessee shall not display, inscribe, print, maintain, or affix any
signs or other advertising matter or material on the Property, or on the
exterior of the Building or on the interior of the Building, or in any window of
the Building or the Leased Premises, without the prior written consent of the
Lessor. The Lessor shall have the right to install and maintain a sign or signs
on the Property, or on the exterior or interior of the Building. The Lessor
shall have the right to change the name or street address of the Building.

15. ACCESS: Lessor, its agents and representatives shall be entitled to keep
pass keys to the Leased Premises and, upon reasonable notice, shall have the
right to enter and inspect the Leased Premises at reasonable times, and in the
case of emergency at any time and without notice, for the purpose of
ascertaining the condition thereof or in order to make such repairs as may be
required to be made by Lessor under the terms of this Lease or as Lessor may
deem necessary. During the period that is six (6) months prior to the end of
the Lease Term hereof, unless notified by Lessee of it's intent to extend said
Lease, Lessor and Lessor's agents and representatives shall have the right to
enter the Leased Premises at reasonable times for the purpose of showing the
Leased Premises and shall have the right to display on the Leased Premises a
sign which indicates that the Leased Premises are available. Any such entry by
Lessor shall never be deemed an eviction or disturbance of Lessee's possession
of the Leased Premises, or render Lessor liable to Lessee for damages, or
relieve Lessee from performance of Lessee's obligations under this Lease.

The right of entry reserved shall not be deemed to impose any greater
obligation on Lessor to clean, maintain, repair or change the Leased Premises
than is specifically provided in this Lease. The Lessor, its agents and
representatives may at any time in case of emergency enter the Leased Premises
and do such acts as Lessor may deem proper in order to protect the Leased
Premises, the Property, the Building, or any occupants of the Building.

16. UTILITIES AND SERVICES:

A. AIR CONDITIONING AND HEAT: Lessor shall furnish air conditioning and heat
to the Leased Premises for normal purposes only during Business Hours.
Lessee agrees not to use any apparatus or device, in or upon or about the
Leased Premises, which in any way

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<PAGE>

may increase the amount of such services usually furnished or supplied to
the Leased Premises, and Lessee further agrees not to connect any apparatus
or device with the conduits or pipes, or other means, by which such
services are supplied, for the purpose of using additional or unusual
amounts of such services, without the prior written consent of Lessor.
Should Lessee use such services to excess or request the use of such
services at other than Business Hours, Lessor reserves the right to charge
for such services. which shall be payable as Additional Rent. Should
Lessee fail to make payment upon demand of Lessor, such failure shall
constitute a breach of the obligation to pay Additional Rent under this
Lease and shall entitle Lessor the rights hereinafter granted for such
breach.

B. ELECTRICAL SERVICE: Lessor shall maintain electrical facilities to provide
sufficient power for typewriters and other office machines of similar low
electrical consumption, but not including electricity required for
electronic data processing equipment or special lighting which is in excess
of Building Power Standards as described in Article 1. L.

Lessee will obtain prior written approval from Lessor before installing
electrical equipment including but not limited to electrical heating,
refrigeration equipment, electronic data processing machines, or machines
or equipment using current which will in any way increase the amount of
electricity normally furnished for use in a general office space. Lessee
will pay for the additional electricity, any installation cost, and any
other costs associated with the additional use.

C. KEYS: Lessor shall furnish Lessee with two (2) keys for each door entering
the Leased Premises. Additional keys ordered by Lessee will be at the
expense of Lessee. All such keys shall remain the property of the Lessor.
No additional locks shall be allowed on any door of the Leased Premises
without Lessor's written permission, and Lessee shall not make, or permit
to be made, any duplicate keys, except those approved or furnished by
Lessor. Upon termination of this Lease, Lessee shall surrender to Lessor
all keys to the Leased Premises, and give to Lessor the combination of all
locks for safes, safe cabinets and vault doors, if any, which will remain
in the Leased Premises.

D. ELEVATORS: If the Building has a passenger elevator which provides service
to the Leased Premises, Lessor shall furnish passenger elevator service
whenever the Building is open. Lessor shall have the right to stop the
operation of said elevators whenever alterations, improvements or repairs
therein or in the machinery or appliances connected therewith shall be
necessary or desirable and shall not be liable for damages for any such
stoppage of service.

E. JANITORIAL: Lessor shall furnish such janitor service as, in the sole
judgment of Lessor, is necessary for the comfortable use and occupancy of
the Leased Premises, except on Saturdays, Sundays and Traditional Holidays.
All janitorial services shall be performed in accordance with work
schedules established by the Lessor. Providing that the amount of trash
(paper waste) does not exceed what would be customary for a general office
of the size of the Leased Premises, trash removal shall be furnished by the
Lessor. If Lessee has a significant increase in paper waste or
periodically disposes of large containers, additional costs incurred by the
Lessor for the Lessee's actions shall be passed back to the Lessee as
Additional Rent. Failure to reimburse Lessor for said costs will be

9
<PAGE>

considered a default under the terms of this Lease. If the Lessor
implements a trash recycling program which affects the janitorial service
as provided under this Lease, and Lessor provides at it's cost the
necessary equipment to participate, Lessee will participate in said
program.

F. WATER: Lessor shall provide water for drinking, lavatory and toilet
purposes only.

G. WASTE: Lessee shall not waste electricity, water, heat or air conditioning
or any other utility, and shall cooperate fully with Lessor to insure the
most effective operation of the Building's heating and air conditioning,
which shall include closing venetian blinds and drapes and keeping all
windows closed when air conditioning is in use, and shall refrain from
attempting to adjust any controls other than room thermostats, if any,
installed for Lessee's use.

H. TEMPORARY INTERRUPTION OF SERVICES: Lessor shall not be liable to Lessee,
its agents, employees, representatives, customers or invitees for any
inconvenience, loss or damage or for any injury to any person or property
caused by or resulting from any casualties, riots, strikes, picketing,
accidents, breakdowns or any cause beyond Lessor's reasonable control, or
from any temporary failure or lack of services and Lessee shall indemnify
Lessor and hold Lessor harmless from any claim or damage because of such
inconvenience, loss, damage or injury. No variation, interruption or
failure of such services incident to the making of repairs, alterations or
improvements or due to casualties, riots, strikes, picketing, accidents,
breakdowns or any cause beyond Lessor's reasonable control or temporary
failure or lack of such services shall be deemed an eviction of Lessee or
relieve Lessee from any of Lessee's obligations hereunder.

17. ASSIGNMENT AND SUBLETTING: Lessee shall not have the right to assign this
Lease, or to sublet the whole or any part of the Leased Premises without the
prior written consent of Lessor, which shall not be unreasonably withheld. Upon
each request made by Lessee to Lessor for Lessor's consent hereunder, Lessee
shall pay to Lessor a processing fee not to exceed, in each instance, $250.00.
Notwithstanding any permitted assignment or subletting, Lessee shall at all
times remain fully responsible and liable for the payment of the Monthly Rent
and Additional Rent herein specified and for compliance with all of its other
obligations under the terms, provisions and covenants of this Lease. Lessor
shall have the right to assign any of its rights under this Lease, and upon any
such assignment, and provided that the assignee assumes all of Lessor's
obligations hereunder, Lessor shall be relieved of any and all such obligations.

18. FIRE AND CASUALTY: If the Building or any part thereof is damaged or
destroyed by fire or other casualty, the Lessor shall have the right to
terminate this Lease, provided it gives written notice thereof to the Lessee
within ninety (90) days after such damage or destruction. Such notice shall
state Lessor's intention to terminate this Lease not less than ninety (90) days
after Lessee's receipt of such notice. If a portion of the Leased Premises is
damaged by fire or other casualty and this Lease is not thereby terminated, the
Lessor shall, at its expense, restore the Leased Premises exclusive of any
improvements or other changes made to the Leased Premises by Lessee, to as near
the condition which existed immediately prior to such damage or destruction as

10
<PAGE>

reasonably possible, and Monthly Rent shall abate during such period of time as
the Leased Premises are untenantable in the proportion that the untenantable
portion of the Leased Premises bears to the entire Leased Premises. The Lessor
shall not be responsible to the Lessee for damage to, or destruction of, any
furniture, equipment, improvements or other changes made by the Lessee in, on or
about the Leased Premises regardless of cause of damage or destruction.

19. SUBROGATION: Lessor and Lessee each hereby release the other from any and
all liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any of the extended coverage casualties covered by the
insurance maintained hereunder even if such loss or damage shall have been
caused by the fault or negligence of the other party, provided, however, that
this release shall be applicable and in force and effect only with respect to
loss or damage occurring during such times as the releasor's insurance policies
shall contain a clause or endorsement to the effect that any release shall not
adversely affect or impair said policies or prejudice the right of the releasor
to recover thereunder. Lessor and Lessee each agree that it will request its
insurance carrier to include in its policies such a clause or endorsement.

20. LIABILITY: With the exception of those claims arising out of Lessor's
gross negligence or willful misconduct, Lessor shall not be liable to Lessee, or
those claiming through or under Lessee, for injury, death or property damage
occurring in, on, or about the Property, the Building, the Leased Premises and
appurtenances thereto, and Lessee shall indemnify Lessor and hold it harmless
from any claim or damage arising out of any injury, death or property damage
occurring in, on or about the Leased Premises to Lessee or an employee, customer
or invitee of Lessee.

21. INSURANCE:

A. Lessor agrees to purchase in advance, and to carry in full force and effect
the following insurance:

1) "All risk" property insurance coverage on the Building, exclusive of
Lessee's leasehold improvements, in such amount as Lessor deems
prudent.

2) Comprehensive general public liability insurance covering the
Property, in a combined single limit amount of not less than
$2,000,000.00, and written on an "occurrence" basis.

B. Lessee agrees to purchase in advance, and to carry in full force and effect
the following insurance:

1) "All risk" property insurance covering the full replacement value of
all of Lessee's leasehold improvements, trade fixtures and personal
property within the Leased Premises.

2) Comprehensive general public liability insurance covering all acts of
Lessee, its employees, agents, representatives and guests on or about
the Leased Premises, containing

<PAGE>

a contractual liability endorsement, in a combined single limit amount
of not less than $2,000,000.00 and written on an "occurrence" basis.

3) All policies must contain a clause which requires the insurer to
provide thirty (30) days notice to Lessor prior to cancellation of the
policy.

C. In addition, if at any time Lessee allows said insurance to lapse, Lessor,
upon notification, can place said insurance on behalf of Lessee and
immediately bill Lessee for the amount of the insurance premium. Any such
premium will become a part of the Additional Rent owing at the time the
premium is billed and will qualify for all rights of collection as afforded
by this Lease.

22. EMINENT DOMAIN: If the entire Building is taken by eminent domain, this
Lease shall automatically terminate as of the date of taking. If a portion of
the Building is taken by eminent domain, Lessor shall have the right to
terminate this Lease by giving written notice thereof to Lessee within ninety
(90) days after the date of taking. Such notice shall state Lessor's intention
to terminate this Lease not less than ninety (90) days after Lessee's receipt of
such notice. If a portion of the Leased Premises is taken by eminent domain and
this Lease is not thereby terminated, Lessor shall, at its expense, restore the
Leased Premises, exclusive of any improvements or other changes made to the
Leased Premises by Lessee, to as near the condition which existed immediately
prior to the date of taking as reasonably possible, and Monthly Rent shall abate
during such period of time as the Leased Premises are untenantable, in the
proportion that the untenantable portion of the Leased Premises bears to the
entire Leased Premises. All damages awarded for a taking under the power of
eminent domain, whether for the whole or a part of the Leased Premises, shall
belong to, and be the property of, Lessor, whether such damages shall be awarded
as compensation for diminution in value to the leasehold estate hereby created
or to the fee of the Leased Premises provided, however, that Lessor shall not be
entitled to any award made to Lessee for loss of business, fair value of, and
cost of removal of stock and fixtures. The term "eminent domain" shall include
the exercise of any similar governmental power and any purchase or other
acquisition in lieu of condemnation.

23. HOLDING OVER: Should Lessee, or any of its successors in interest, hold
over the Leased Premises or any part thereof, after the expiration of the Lease
Term, such holding over shall constitute and be construed as a tenancy from
month-to-month only. The inclusion of the preceding sentence shall not be
construed as Lessor's permission for Lessee to hold over. The monthly rent
during such month-to-month tenancy shall be at one and one half (1 1/2) times
the amount set forth in Article 1. I.

24. QUIET ENJOYMENT: Lessor represents and warrants that it has full right and
authority to enter into this Lease and that Lessee, upon paying the Monthly Rent
and Additional Rent herein set forth and performing its other covenants and
agreements herein set forth, shall peaceably and quietly have, hold and enjoy
the Leased Premises for the Lease Term without hindrance or molestation from the
Lessor, subject to the term and provisions of this Lease.

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<PAGE>

25. EVENTS OF DEFAULT: The following events shall be deemed to be events of
default by Lessee under this Lease:

A. Lessee shall fail to pay any installments of the Monthly Rent herein
provided or any other charge payable hereunder within five (5) days of the
respective due date.

B. Lessee shall become insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.

C. Lessee shall file or have filed against it a petition under any section or
chapter of the United States Bankruptcy Code, as amended, or under any
similar law or statute of the United States or any state thereof, or Lessee
shall be adjudged bankrupt or insolvent in proceedings filed against Lessee
thereunder.

D. A receiver or trustee shall be appointed for all or substantially all of
the assets of Lessee.

E. Lessee shall desert or vacate any substantial portion of the Leased
Premises.

F. Lessee shall fail to comply with any term, provision or covenant of this
Lease (other than the foregoing in this Article 25) and shall not cure such
failure within ten (10) days of receiving written notice of failure thereof
to Lessee.

26. DEFAULT: Lessee hereby agrees that if an Event of Default occurs, then, in
addition to all other rights and remedies available to Lessor by law or by other
provisions hereof, at Lessor's option, Lessor may annul and cancel this Lease as
to all future rights of Lessee. Lessee further agrees that in case of any such
termination Lessee will indemnify the Lessor against all loss of Monthly Rent
and Additional Rent and other damage which Lessor may incur by reason of such
termination, including, but not limited to, costs of restoring and repairing the
Leased Premises and putting the same in Rentable condition, costs of renting the
Leased Premises to another tenant, loss or diminution of rents and other damage
which Lessor may incur by reason of such termination and all reasonable
attorneys fees and expenses incurred in enforcing any of the terms of this
Lease. Neither acceptance of Monthly Rent or Additional Rent by Lessor, with or
without knowledge of breach, nor failure of Lessor to take action on account of
any breach hereof, or to enforce its rights hereunder shall be deemed a waiver
of any breach, and absent written notice or consent, said breach shall be a
continuing one.

In the event Lessee fails to pay any installment of Monthly Rent or
Additional Rent hereunder as and when such installment is due, or any other
charge payable hereunder as and when such charge is due, Lessee, if permitted by
law, shall pay to Lessor on demand a late charge in an amount equal to five
percent (5%) of such installment or other charge, or $25.00, whichever is
greater, and failure to pay such late charge within ten (10) days after demand
therefore shall be an Event of Default hereunder. The provision for such late
charge shall be in addition to all Lessor's other rights and remedies hereunder
or at law and shall not be construed as liquidated damages or as limiting
Lessor's remedies in any manner.

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<PAGE>

27. SUBORDINATION OF LEASE: The rights of the Lessee under this Lease shall be
and are subject and subordinate at all times to all ground leases, and or
underlying Leases, if any, now or hereafter in force against the Building, and
to the lien of any mortgage or mortgages now or hereafter in force against such
leases and/or the Building, and to all advances made or hereafter to be made
upon the security thereof, and to all renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, that Lessee's rights
under this Lease and possession of the Leased Premises shall not be disturbed so
long as tenancy is not in default hereunder. This Paragraph 27 is self-
operative and no further instrument of subordination shall be required. In
confirmation of such subordination Lessee shall promptly execute such further
instruments as may be requested by the Lessor. Lessee at the option of any
mortgagees, or the Lessor under any such ground lease or underlying leases,
agrees to attorn to such mortgagee or Lessor in the event of a foreclosure sale
or deed in lieu thereof or termination by the Lessor of any such lease. Failure
of the Lessee to execute any of the above instruments within fifteen (15) days
upon written request to do so by the Lessor, shall constitute a breach of this
Lease and the Lessor will be entitled to, at its option; i) execute, acknowledge
and deliver any such instrument on behalf of Lessee as Lessee's attorney-in-fact
(Lessee hereby constituting and irrevocably appointing Lessor as Lessee's
attorney-in-fact for such purpose) and/or, ii) cancel this Lease and terminate
the Lessee's interest therein.

28. NOVATION IN EVENT OF SALE OR TRANSFER: In the event of the sale of the
Property or the Building or the transfer of the title thereto, Lessor shall be
relieved of all of the covenants and obligations created by this Lease, except
as to breaches thereof occurring prior to such sale or transfer, and such sale
or transfer shall automatically result in the purchaser or transferee assuming
and agreeing to carry out all of the covenants and obligations of Lessor herein
from and after such sale or transfer.

29. NOTICES: Each provision of this Lease or of any applicable governmental
laws, ordinances, regulations and other requirements with referenced to the
sending, mailing or delivery of any notice or the making of any payment by
Lessor to Lessee or by Lessee to Lessor shall be deemed to be complied with,
when and if, the following steps are taken:

A. All payments required to be made by Lessee to Lessor hereunder shall be
payable to Lessor at the address set forth in Article 1. J. or at such
other addresses Lessor may specify from time to time by written notice
delivered in accordance herewith.

B. Any notice or document required or permitted to be delivered hereunder
shall be deemed to be delivered, whether actually received or not, when
deposited in the United States mail, postage prepaid, certified or
registered mail, addressed to the parties hereto at the respective
addresses set out opposite their names as shown in Article 1. N. for
Lessor, and 1. B. for Lessee, or at such other address as they have
theretofore specified by written notice delivered in accordance herewith:

C. Any notice of document required or permitted to be delivered hereunder by
Lessor to Lessee also shall be deemed to be delivered if and when delivered
personally to Lessee at the Leased Premises.

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<PAGE>

30. RULES AND REGULATIONS: Lessee shall observe such rules and regulations as
set forth in Exhibit C which from time to time may be put in effect by Lessor
for the general safety, comfort and convenience of Lessor, occupants and tenants
of the Building.

31. GOVERNMENTAL/LEGAL ACTION: Wherever in this Lease any terms, covenants or
conditions are required to be kept or performed by the Lessor, the Lessor shall
be deemed to have kept and performed such terms, covenants and conditions
notwithstanding any action taken by the Lessor, if such action is pursuant to
any governmental regulations, requirements, directives or requests, or if the
Lessor deems such action to be for the benefit of our national interest or the
general public.

A. Without limiting the generality of the foregoing, the Lessor may reduce the
quantity and quality of all utility and other services and impose such
regulations as the Lessor deems necessary in order to conserve energy, and
may change the normal hours of operation of the Building. Utility in the
sense of this paragraph includes, but is not limited to heating, cooling,
electricity, water and all the sources of energy needed to provide such.

B. Throughout the Term of this Lease, Lessee shall observe and comply with all
governmental codes, laws, requirements, rules, orders, ordinances and
regulations, and orders or recommendations of insurance carriers or fire
insurance rating organizations applicable to the Leased Premises or the
business conducted therein, hereinafter called "Legal Requirements",
whether or not any work necessary to be done in order to comply with such
Legal Requirements be ordinary, extraordinary or otherwise, is required by
any existing or future Legal Requirement, or is within the present
contemplation of Lessor and Lessee, including, but not limited to, any
demolition, reconstruction, alteration or repair of any part of the Leased
Premises. It is the intention of the parties that Lessee shall and does
hereby assume the entire responsibility of complying with all Legal
Requirements which affect the Leased Premises. If any alterations are
required, they shall be completed in accordance with Article 12.

32. LIGHT AND AIR: Lessee has no right to light or air over the Property or
any premises adjoining the Building.

33. BROKERAGE FEES: Lessee represents and warrants that it has dealt with no
broker, agent or other person in connection with this Lease and Lessee hereby
indemnifies and holds harmless from and against any claims by any other broker,
agent or other person claiming a commission or other form of compensation by
virtue of having dealt with Lessee with regard to this Lease. The provisions of
this paragraph shall survive the expiration or termination of this Lease.

34. FORCE MAJEURE: If either party hereto shall be delayed or hindered in or
prevented from the performance of any act required hereunder by reason of
strikes, lockouts, labor troubles,

15
<PAGE>

inability to procure material, failure of power, restrictive governmental laws
or regulations, riots, insurrection, war or other reason of a like nature not
the fault of the party delayed in performing work or doing acts required under
this Lease, the period for the performance of any such act shall be extended for
a period equivalent to the period of such delay. Notwithstanding the foregoing,
the provisions of this Article 34 shall at no time operate to excuse Lessee from
any obligations for payment of Monthly Rent, Additional Rent or any other
payments required by the terms of this Lease when same are due, and all such
amounts shall be paid when due.

35. SUBSTITUTE PREMISES: If the Leased Premises contain an area of 2,000
square feet or less, Lessor shall have the right at any time during the Lease
Term hereof, upon giving Lessee not less than sixty (60) days prior written
notice, to provide and furnish Lessee with space elsewhere in the Building of
approximately the same size as the Leased Premises and remove and place Lessee
in such space, with Lessor to pay all reasonable costs and expenses incurred as
a result of such relocation of Lessee. Should Lessee refuse to permit Lessor to
move Lessee to such new place at the end of said sixty (60) day period, Lessor
shall have the right, but not the obligation, to cancel and terminate this Lease
effective ninety (90) days from the date of original notification by Lessor. If
Lessor moves Lessee to such new space, this Lease and each and all of its terms,
covenants and conditions shall remain in full force and effect and shall be
deemed applicable to such new space, and such new space shall thereafter be
deemed to be the Leased Premises as though Lessor and Lessee had entered into an
express written amendment of this Lease with respect thereto; provided, however,
that Monthly Rent payable hereunder shall be increased or decreased, as the case
may be, by the product of the difference in the number of square feet of
Rentable Area in such new place and the number of square feet of Rentable Area
in the Leased Premises subject to this Lease immediately prior to such move
times the Monthly Rent prior to such move divided by the Rentable Area of the
Leased Premises prior to such move.

36. MISCELLANEOUS TAXES: Lessee shall pay prior to delinquency all taxes
assessed against or levied upon its fixtures, furnishing, equipment and personal
property of Lessee located in the Leased Premises, if nonpayment thereof shall
or would give rise to a lien on the Property, the Building or any part thereof,
and when possible, Lessee shall cause said fixtures, furnishings, equipment and
personal property to be assessed and billed separately from the property of
Lessor. In the event any or all of Lessee's fixtures, furnishings, equipment
and personal property shall be assessed and taxed with the property of Lessor,
Lessee shall pay to Lessor its share of such taxes within ten (10) days after
delivery to Lessee by Lessor of a statement in writing setting forth the amount
of such taxes applicable to Lessee's fixtures, furnishings, equipment or
personal property.

37. ESTOPPEL CERTIFICATE: Lessee agrees, within ten (10) days after request of
Lessor, to deliver to Lessor, or Lessor's designee,, including without
limitation, the present or any future holder of any mortgage(s) and/or deed(s)
or trust and/or ground lease(s) and/or underlying lease(s) on the Leased
Premises, or any prospective purchaser of the Property, Leased Premises or the
Building, an estoppel certificate stating that this Lease is in full force and
effect, the date to which Monthly Rent, Additional Rent and other charges have
been paid, the unexpired Lease Term, whether or not Lessor is in default
hereunder, and the nature of any such default, and such other matters pertaining
to this Lease as may be reasonably requested by Lessor.

16
<PAGE>

If Lessee fails or refuses to execute, acknowledge and deliver any such
instrument within fifteen (15) days after written demand, Lessor will be
entitled to execute, acknowledge and deliver any such instrument on behalf of
Lessee as Lessee's attorney-in-fact (Lessee hereby constituting and irrevocably
appointing Lessor as Lessee's attorney-in-fact for such purpose).

38. MISCELLANEOUS:

A. Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.

B. The terms, provisions and covenants and conditions contained in this Lease
shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors
and permitted assigns, except as otherwise herein expressly provided.

C. Failure of Lessor to insist, in any or more instances, upon strict
performance of any term, covenant or condition of this Lease, or to
exercise any option herein contained shall not be construed as a waiver, or
a relinquishment for the future, or such term, covenant, condition or
option, but the same shall continue and remain in full force and effect.
The receipt by Lessor of Monthly Rent and Additional Rent with knowledge of
a breach in any of the terms, covenants or conditions of the Lease to be
kept or performed by Lessee shall not be deemed waiver of such breach, and
Lessor shall not be deemed to have waived any provision of this Lease
unless expressed in writing and signed by Lessor.

39. INVALIDITY OF PARTICULAR PROVISIONS: If any clause or provision of this
Lease is or becomes illegal, invalid, or unenforceable because of present or
future laws or any rule or regulation of any governmental body or entity,
effective during its term, the intention of the parties hereto is that the
remaining parts of this Lease shall not be affected thereby unless such
illegality, invalidity, or unenforceability is, in the sole determination of
Lessor, essential to the rights of both parties in which event Lessor has the
right to terminate this Lease on written notice to Lessee.

40. GOVERNING LAW: This lease shall be governed by and interpreted under the
laws of the state in which the Leased Premises is located.

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<PAGE>

IN WITNESS WHEREOF, THE LESSOR AND LESSEE HAVE EXECUTED THIS LEASE ON THE DAY
AND YEAR FIRST WRITTEN ABOVE

LESSOR: LESSEE:

BY: NORWEST BY: /s/ Jodi Uecker-Rust
----------------------------- ------------------------------
ITS: ITS: Vice President, Operations
----------------------------- ------------------------------

BY: /s/ Rick Gartner BY:
----------------------------- ------------------------------
ITS: Vice President ITS:
----------------------------- ------------------------------

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LEASED PREMISES

[Floor Plan]

EXHIBIT A

19
<PAGE>

LESSEE IMPROVEMENT AGREEMENT

There are no improvements warranted or implied in conjunction with this Lease.
Lessee has accepted the Leased Premises "as is".

EXHIBIT B

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<PAGE>

BUILDING RULES AND REGULATIONS:

At times, it may be necessary to implement certain operating rules to govern
occupancy of the Building in a manner which is beneficial to the occupants of
the Building including both Lessor and Lessee. A true, correct and complete
copy of the Rules and Regulations for the Building as of the date of this Lease
is as follows below.

1. The sidewalks, driveways, parking areas, entries, passages, stairways and
elevators shall not be obstructed by Lessee, its agents, contractors, licensees
or invitees or used by them for any purpose other than ingress and egress to and
from the Leased Premises.

2. Furniture, equipment or supplies shall be moved in or out of the Building
only upon the stairway or entrance designated by Lessor and then only during
such hours and in such manner as may be prescribed by Lessor.

3. Subject to Lessor's written approval, Lessee shall not place upon any
portion of a floor in the Leased Premises a floor load exceeding fifty (50)
pounds per square foot.

4. Lessee assumes responsibility for protecting the Leased Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Leased Premises closed and secured after normal Business
Hours.

5. No animals shall be allowed anywhere in the Leased Premises or Building at
any time except those necessary to aid the disabled.

6. Lessee shall not allow anything to be placed on the outside window ledges
of the Building, nor shall anything be thrown by Lessee, it agents or employees,
out of the windows or doors, or down the stairways, elevator shaft, or skylights
of the Building.

7. Lessee, it agents, contractors, licensees or invitees will cooperate with
the Lessor in the removal and temporary parking of any vehicles to allow for
maintenance of any parking lots associated with the Property, Building or Leased
Premises.

EXHIBIT C

<PAGE>

LEASE

THIS LEASE, Made this 2nd day of May, 1994 by and between BLUE CROSS BLUE SHIELD
OF NORTH DAKOTA, A CORPORATION and LINCOLN MUTUAL LIFE AND CASUALTY INS. CO., A
CORPORATION whose post office address is 711 Second Avenue North, P.O. Box 1918,
Fargo, North Dakota 58107, (hereinafter referred to as "Landlord" whether one or
more) and GREAT PLAINS SOFTWARE INC, A CORPORATION, whose post office address is
1701 38th Street Southwest, Fargo, North Dakota, (hereinafter referred to as
"Tenant").

WITNESSETH, that the Landlord hereby leases to the Tenant, upon the terms
herein set forth, those certain premises in the City of Fargo, County of Cass,
and State of North Dakota, more fully described as follows, to-wit:

Approximately 23,366 square feet located in the Village Square Office Park
(hereinafter "Office Park") and illustrated on attached Exhibit 1 a floor
plan with this portion of the leased premises outlined in red.

and

Approximately 9,231 square feet located in the Village Square Office Park
(hereinafter "Office Park") and illustrated on attached Exhibit 1 a floor
plan with this portion of the leased premises outlined in green.

and

Approximately 15,874 square feet located in the Village Square Office Park
(hereinafter "Office Park") and illustrated on attached Exhibit 1 a floor
plan with this portion of the leased premises outlined in blue.

(Hereinafter be referred to as the "Premises")

1. NEW LEASE. This Lease supersedes any and all prior leases or memorandums of
lease by and between the Landlord and Tenant pertaining to the Premises or any
portion thereof.

2. COMMON AREA USE. The use and occupation by the Tenant of the Premises
shall include the non-exclusive use, in common with others entitled thereto, of
the Common Areas located in and about the Office Park the present boundaries of
which are depicted on an attached site plan marked Exhibit 2 (hereinafter Common
Areas). Tenant's use of the Common Areas shall be subject to the limitations
and restrictions set forth in this Lease and further subject to reasonable rules
and regulations for the use of Common/Areas as adopted from time to time by
Landlord.

<PAGE>

3. BUILDING CHANGES. Landlord hereby reserves the absolute right, which
will, however, be reasonably exercised, at any time and from time to time, to
make alterations or additions to, and to build basements or additional stories
on the buildings comprising the Office Park, including without limitation, the
building in which the Premises is contained, and to build adjoining the same.
Landlord also reserves the right to construct other buildings or improvements
upon the property upon which the Office Park is located from time to time and to
make alterations thereof or additions thereto and to build basements or
additional stories on any such building or buildings and to build adjoining
same.

4. RIGHT TO RELOCATE. The purpose of the floor plan attached hereto as Exhibit
1 and the site plan attached as Exhibit 2 is to show the approximate location of
the Premises in the Office Park. Landlord reserves the right, which will,
however, be reasonably exercised, at any time to add to and relocate the various
buildings, automobile parking areas, access roads, utility facilities, walk ways
and other Common Areas and facilities shown on said Exhibits. The relative
location of the Premises in the Office Park will be maintained as much as
reasonably possible.

5. ACCEPTANCE OF PREMISES. TENANT ACKNOWLEDGES THAT TENANT HAS EXAMINED THE
PREMISES AND THAT IT IS IN THE CONDITION CALLED FOR BY THIS LEASE AND THAT
LANDLORD HAS PERFORMED ALL OF LANDLORD'S REQUIRED WORK, IF ANY, WITH RESPECT
THERETO. If such work is all completed the Exhibit shall be marked "NONE".
TENANT AGREES THAT THE PREMISES AND ANY IMPROVEMENTS OR PERSONAL PROPERTY
LEASED, TRANSFERRED OR SOLD UNDER OR IN CONNECTION WITH THIS LEASE ARE LEASED,
TRANSFERRED OR SOLD, AS IS, WITH ALL FAULTS AND WITHOUT ANY EXPRESS OR IMPLIED
WARRANTIES INCLUDING WARRANTIES OF MERCHANTABILITY.

6. LANDLORD'S ACCESS TO PREMISES. Landlord or its agents shall have the right
to enter the Premises at all reasonable times to examine the same, to show them
to prospective purchasers or tenants of the building, and to make such repairs,
alterations, improvements or additions in the Premises or the building of which
it is a part as may be necessary, and Landlord shall be allowed to take all
material into and upon the Premises that may be required therefor without the
same constituting an eviction of Tenant in whole or in part, and rent shall in
no wise abate while said repairs, alterations, improvements, or additions are
being made, by reason of loss or interruption of business of Tenant because of
the performance of any such work. Nothing herein contained shall be deemed or
construed to impose upon Landlord any obligation, responsibility or liability
whatsoever, for the care, supervision or repair of the building or of the
Premises, except as otherwise herein specifically provided.

During the six months prior to the expiration of this Lease

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Landlord may show the Premises to prospective tenants and place upon the
Premises the usual notices "To Let" or "For Rent" which notices Tenant shall
permit to remain thereon without molestation. If during the last month of the
term Tenant shall have removed all or substantially all of its property
therefrom, Landlord may immediately enter and alter, renovate or redecorate the
Premises without elimination or abatement of rent or other compensation and such
action shall have no effect upon this Lease.

Landlord agrees not to inspect any portion of the Premises or any materials
contained therein which are clearly and conspicuously marked CONFIDENTIAL by the
Tenant. If access to any portion of the Premises so marked is required by
Landlord, it shall obtain the prior written consent of the Tenant and Tenant
shall be present on the occasion of such examination.

7. QUIET ENJOYMENT. Upon payment by the Tenant of the rents herein provided,
and upon the observance and performance of all the covenants, terms and
conditions on Tenant's part to be observed and performed, Tenant shall peaceably
and quietly hold and enjoy the Premises for the term of this Lease without
hindrance or interruption by Landlord or any other person lawfully claiming by,
through or under Landlord, subject, nevertheless, to the other terms and
conditions of this Lease, and to all mortgages and underlying leases of record
to which this Lease is, or may be or become subject or subordinate.

8. TERM AND COMMENCEMENT DATE. This lease is for a term beginning April 1,
1994 and ending on June 30, 1996.

9. RENTAL. The TENANT agrees to pay the LANDLORD rental of $25,768.00 per-
month in advance on the day of each month during the term of this lease. If
this lease does not commence on the first of the month TENANT shall pay a pro
rata share of a month's rental for the period proceeding the first of the
following month. TENANT shall pay a late payment fee of fifteen percent (15%)
of the delinquent payment or fifteen dollars ($15.00) which ever is less.

10. RENT. Rent shall be calculated upon the basis of $6.25 per square foot of
space within the Premises. Said amount shall be paid in twelve equal monthly
installments in advance each lease year with the first monthly installment due
the first day of the first calendar month following the commencement date. On
the commencement date the Tenant shall pay a pro rated rental based upon the
number of days remaining in the month in which the commencement date occurs.
Such pro rated sum shall be equal to one-twelfth of the annual rent times a
fraction, the numerator of which is the number of the days in such month on or
after the Commencement Date of this Lease, and the denominator of which is the
total number of days in such month.

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<PAGE>

11. LEASE YEAR. The term "Lease Year" means each consecutive period of twelve
(12) full calendar months during the term of this Lease commencing on the
Commencement Date, if that date shall occur on the first day of a calendar
month; if not, then the first Lease Year shall commence upon the first day of
the first calendar month following the Commencement Date. Each succeeding Lease
Year shall commence upon the anniversary date of the first Lease Year.

12. VERIFICATION OF TERM - FLOOR AREA - RENT. When the Commencement Date has
been determined, Landlord and Tenant shall execute and deliver a statement, in
duplicate, specifying the Commencement Date, the actual number of square feet of
floor area in the Premises, and, the rent payable under this Lease, which
completed statement shall be attached to and constitute a part of this Lease, as
Exhibit 3. In determining the floor area of the Premises and all other areas in
the Office Park which are available from time to time for the exclusive use and
occupancy by a tenant of Landlord: i) measurements from outside walls and store
fronts shall be made from the exterior of the wall or store front; ii)
measurements from walls adjacent to other leasable areas of the Office Park
shall be made from the mid-point of the wall; iii) each two square feet of
basement space shall be counted as one square foot of floor area; iv) if any
portion of mezzanine or upper floor space is used for displaying or selling
merchandise, each two square feet of the floor area of the entire mezzanine or
upper floor space shall be counted as one square foot of floor area, otherwise
the entire area of mezzanine or upper floor space will be excluded from floor
area. Failure of Landlord and Tenant to execute Exhibit 3 shall not affect
either party's obligations under this Lease.

13. USE OF LEASED PREMISES: Tenant shall occupy and use the Premises solely for
the purpose of conducting its computer software business and all reasonably
related activities.

14. ALTERATIONS AND IMPROVEMENTS. Without first obtaining Landlord's written
approval and consent Tenant shall not make, cause to be made, or contract for
any alterations, additions, or improvements to the Premises, or to install
therein any trade fixture, exterior sign, floor covering, interior or exterior
lighting, plumbing fixtures, heating and air conditioning equipment, shades or
awnings, or make any changes to the store front, or other structural changes or
additions to the Premises or mechanical systems serving the Premises. At the
time Tenant requests Landlord's consent for any such improvement, alteration, or
addition, Tenant shall deliver to Landlord Tenant's drawings and specifications
for the proposed work, together with all other documentation required by
Landlord's then current design criteria. All work undertaken must be in
accordance with Landlord's design criteria in effect at the time the improvement
or modification is made. The consent required in this paragraph shall not be

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unreasonably withheld and the Landlord shall act upon such requests within a
reasonable time.

It is specifically understood that the Landlord will install the following
improvements and Tenant will consent thereto subject to reviewing the plans and
cost thereof:

(a) Demising wall - between Tenant's space and common area.

(b) Additional rest rooms.

(c) HVAC equipment to provide for adequate heating and cooling for 150-200
people and 1 1/2 personal computers per person.

Tenant shall pay the first $15,000.00 of the total cost of constructing and
installing items (a) through (c) and Landlord will pay the excess provided it
has approved the plans and total cost.

Tenant shall be fully responsible for the cost of all alterations and
improvements other than specified above.

15. OWNERSHIP OF IMPROVEMENTS AND FIXTURES. All alterations, installations,
additions and improvements made upon or for the benefit of the Premises by
either party shall, unless Landlord otherwise elects (by giving notice thereof
to Tenant not less than thirty days prior to the expiration or other termination
of this Lease), become the property of Landlord and shall remain upon and be
surrendered with the Premises as a part thereof at the expiration or sooner
termination of this Lease. Movable furniture, trade fixtures and other personal
property (including but not limited to furniture, power poles and electrical
cabling track) not affixed to the Premises which is acquired by Tenant at its
expense shall remain its property and may be removed at any time, provided
Tenant promptly repairs any damage caused by such removal.

16. SIGNS - DISPLAYS. Tenant will not place or suffer to be placed or
maintained anywhere in the Office Park or on any exterior door, wall or window
of the Premises any sign, awning or canopy, or advertising matter or other thing
of any kind, and will not place or maintain any decoration, lettering or
advertising matter on the glass of any window or door of the Premises without
first obtaining Landlord's written approval and consent. Prior to the
Commencement Date Tenant shall, at its expense, install all signs required by
and in compliance with Landlord's design criteria. Tenant further agrees to
maintain such sign, awning, canopy, decoration, lettering, advertising matter or
other thing as may be approved in good condition and repair at all times.

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<PAGE>

17. REAL ESTATE TAXES AND INSURANCE PREMIUMS. The Landlord will pay all real
estate taxes and special assessments in regard to the Office Park including the
Premises.

18. TENANT'S FIRE INSURANCE. Tenant agrees that during the entire term of
this lease Tenant will procure and keep in full force and effect at Tenant's own
expense fire and extended coverage insurance on Tenant's own property including
Tenant's leasehold improvements. Landlord agrees to keep the building housing
the leased premises insured for fire and extended coverage but the amount of
such insurance shall be in the sole discretion of Landlord.

19. LIABILITY INSURANCE. Tenant shall, during the entire lease term, keep in
full force and effect at Tenant's own cost a policy of public liability and
property damage insurance with respect to the Premises in which the limits of
public liability for bodily injury or death shall not be less than $1,000,000.00
single limit. The insurance policy shall name Landlord and any persons, firms
or corporations designated by Landlord as an insured and shall contain a clause
that the insurer will not cancel or change the insurance without first giving
the Landlord at least ten (10) days prior written notice. The insurance shall
be in a responsible company qualified to do business in the State of North
Dakota, approved by Landlord and a copy of the policy or certificate of
insurance shall be delivered to Landlord.

20. UTILITIES AND JANITORIAL SERVICES. The Tenant will pay all heat and
utilities including but not limited to water, garbage, sewage and electricity
used or consumed in and about the Premises or provided in connection therewith
and for janitorial services in the leased premises EXCEPT Landlord will pay the
electricity for HVAC. The Landlord will provide control by Tenant of
temperature control/setting of HVAC system.

21. REPAIRS AND MAINTENANCE - LANDLORD'S OBLIGATION. Landlord shall, within a
reasonable period after receipt of written notice from Tenant, make or cause to
be made necessary structural repairs to the exterior foundations and exterior
walls of the Premises (but excluding the exterior of, and the frames surrounding
all windows, doors, plate glass, storefronts and signs) and shall keep or cause
to be kept in good order, condition and repair the exterior walls, foundations
and roofs of the buildings constituting the Office Park, except for reasonable
wear and tear.

22. REPAIRS AND MAINTENANCE - TENANT'S OBLIGATION. Tenant shall, at its
expense, keep, replace and maintain the Premises (including maintenance of
storefronts, exterior entrances and signs, all glass, and show window moldings)
and all partitions, doors, store fronts, fixtures, equipment and appurtenances
thereof (including lighting, heating and plumbing fixtures, interior walls,
interior surfaces of exterior walls, and any air handling equipment or air

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conditioning system) in clean, neat and good order, condition and repair
(including reasonably periodic painting and decorating), damage by unavoidable
casualty excepted. If Landlord is required to make repairs to said structural
portions by reason of Tenant's, its agents' or employees' acts or omission to
act, or if Tenant refuses or neglects to repair, maintain or replace property as
required hereunder to the reasonable satisfaction of Landlord after ten days
written notice, then Landlord may make such repairs or modifications without
liability to Tenant for any loss or damage that may accrue to Tenant's
merchandise, fixtures, or other property or to Tenant's business by reason
thereof, and upon completion thereof and presentation of bill therefor, Tenant
shall pay Landlord, as additional rent, at the time the next rent payment is
due, the Landlord's cost and expense for making such repairs, plus 15% for
overhead and supervision. Landlord and Landlord's agents shall be entitled at
any reasonable time to enter, inspect and examine the Premises for the purpose
of verifying Tenant's compliance with this Section.

23. PLATE GLASS. Tenant agrees to replace all plate glass and all other glass,
if and when broken on said Premises. However, Tenant shall not be liable for
plate glass if destroyed through negligence of the Landlord or its agents or
servants and the Tenant shall have the right of insuring the plate glass if it
so desires.

24. COMMON AREAS DEFINED. Common areas are defined as the parking areas,
streets, fire corridors, driveways, walkways, curbs, gutters, drainage areas,
landscaped areas, access roads, retaining walls, truck serviceways or tunnels,
loading docks, pedestrian malls, (enclosed or open), courts, stairs, escalators,
elevators, ramps and sidewalks, comfort and first aid stations, customer service
areas, washrooms, management offices, utility rooms, community hall or
auditorium, bus stops, and parcel pick-up stations, and the like, designated by
Landlord for common use or benefit of tenants, occupants and other patrons of
the Office Park and their employees, agents, servants, customers and other
invitees. Common Areas may be located either within the Office Park or on land
adjacent to the Office Park which is made available for the common use or
benefit of tenants of the Office Park.

25. CONTROL OF ALL COMMON AREAS. All Common Areas and other common facilities
provided by Landlord are for the general use or benefit, in common with other
tenants, their officers, agents, employees, customers, and invitees and shall be
subject to the exclusive control and management of Landlord, and Landlord shall
have the right from time to time to promulgate and enforce reasonable rules and
regulations, as it may deem appropriate, with respect to all Common Areas which
shall apply equally and without discrimination to all tenants and permittees.
Landlord shall have the right to construct, maintain and operate lighting
facilities on

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<PAGE>

all said areas and improvements; to police the same; to change the area, level,
location and arrangement of parking areas and other Common Area facilities; to
build multi-story or underground parking facilities; to restrict parking by
tenants, their officers, agents and employees to employee parking areas; to
enforce parking charges (by operation of meters or otherwise), with appropriate
provisions for free parking ticket validating by tenants; to construct, remove,
and modify utility lines within the Common Areas; to grant easements through
Common Areas; to close all or any portion of said areas or facilities to such
extent as may, in the opinion of Landlord's counsel, be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any person or the
public therein; to grant occupants of adjacent properties and others access
easements to Common Areas and the right to use all Common Areas; to close
temporarily all or any portion of the parking areas or common facilities, to
regulate non-customer parking; to allow concessions, kiosks, mall shows and
displays (provided the same do not substantially interfere with the access to
the Premises) and to do and perform such other acts in and to said areas and
improvements as in the use of good business judgment, Landlord shall determine
to be advisable with a view to the improvement of the convenience and use
thereof by tenants, their officers, agents, employees, invitees, and customers.
Landlord will operate and maintain the common facilities referred to above in
such manner as it, in its sole discretion, shall determine and shall have full
right and authority to employ and discharge all personnel with respect thereto.

It is specifically agreed that the Landlord will make available adequate parking
for customers and employees on a non-reserved basis in the North parking lot
adjacent to the Office Park. At no time will the Landlord request additional
payment for non-reserved parking for employees.

26. NON-EXCLUSIVE USE OF COMMON AREAS. Tenant's right to use all Common Areas
is a non-exclusive right, in common with Landlord, all other tenants in the
Office Park, and all other to whom Landlord may through easements, operating
agreements, leases, or agreement, authorize to use the Common Areas.

27. MODIFICATION OF COMMON AREAS. Landlord reserves the absolute right to
designate additional land or improvements as Common Areas, withdraw land or
improvements from Common Areas, to sell or lease areas formerly designated as
Common Areas, to change the boundaries of Common Areas, and to construct, modify
and remove buildings or other improvements on Common Areas. If the area of such
Common Areas is diminished, Landlord shall not be subject to any liability nor
shall Tenant be entitled to any compensation or abatement of rent, nor shall
such diminution of such areas be deemed constructive or actual eviction.
Landlord agrees, however, to provide within the limits of the Office Park,
parking area or areas

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in a sufficient amount to meet all applicable governmental laws, codes and
regulations.

28. INDEMNIFICATION. Tenant covenants and agrees to indemnify, defend and save
Landlord harmless from and against any and all injury, loss, claims, damages,
liability, costs and expenses, including reasonable attorney's fees, in
connection with loss of life, personal or bodily injury, damage to property, or
litigation arising from or out of any occurrence, in, upon or at the Premises or
occasioned anywhere wholly or in part by any act, neglect or omission of Tenant
or Tenant's agents.

29. WASTE OR NUISANCE. Tenant shall not commit or suffer to be committed any
waste upon the Premises or any nuisance or other act or thing which may disturb
the quiet enjoyment of any other persons in the area, including but not limited
to neighbors of the Tenant.

30. GOVERNMENTAL REGULATION AND RESTRICTIVE COVENANTS. Tenant shall, at
Tenant's sole cost and expense, comply with and faithfully observe all of the
rules, regulations, ordinances, laws and requirements of county, municipal,
state, federal and other applicable governmental authorities, present or
future, which affect the occupancy of use of the Premises.

31. ASSIGNMENT AND SUBLETTING. The Tenant may not assign this lease or
sublease in whole or in part the Premises without the prior written consent
of the Landlord. In the event the Landlord grants written consent to the
Tenant for assignment or sublease, the Tenant shall, in any event, remain
liable for the performance of all of the covenants of this lease. The
consent required in this section shall not be unreasonably withheld.

32. CHANGE OF OWNERSHIP. If Tenant is a corporation, partnership, business
trust, or other form of business association at any time during the term of this
Lease, and there exists any transfer by sale, assignment, bequest, inheritance,
operation of law or other disposition so as to result in the loss of or a change
in the voting control of Tenant by the person or persons owing a majority of the
voting control prior to such transfer, such change shall be considered a
Transfer of this Lease under Section 29 and any such transfer without the
written consent of Landlord shall constitute an event of default under this
Lease. The provisions of this Section shall not apply to a corporation whose
entire outstanding voting stock is listed on a national securities exchange or
to a corporation if at least eighty (80) percent of the entire outstanding
voting stock is owned by another corporation whose entire outstanding voting
stock is listed on a national securities exchange. A "national securities
exchange", as referred to herein, shall have the same meaning as defined in the
Securities Exchange Act of 1934, as amended.

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33. WAIVER OF SUBROGATION. Landlord and Tenant each hereby release and waive
any and all rights of recovery from each other and their respective officers,
employees, agents and representatives for loss of or damages to their respective
property or the property of others under their respective control, arising from
any cause insured under any policy of fire and extended coverage insurance
carried by such party to the extent such loss or damage is recoverable under
such policy (an "Insured Loss") and without regard to the negligence of the
other party that may have contributed to the loss or damage. Tenant further
agrees to release all other occupants of the Office Park under lease or
operating agreement with Landlord, their officers, employees, agents and
representatives from any and all rights of recovery from such other parties for
loss of or damages to Tenant's property or the property of others under Tenant's
control, arising from any Insured Loss, under any policy of insurance carried by
Tenant, provided that such party has a similar waiver in its lease. Under no
circumstances shall Landlord be obligated to obtain similar provisions in
agreements with other occupants of the Office Park or incur any liability for
the failure to procure or insure that other stores have similar provisions in
their leases or operating agreements with Landlord.

34. DAMAGE AND DESTRUCTION - LANDLORD'S OBLIGATION. If the Premises is
partially or totally destroyed or damaged by fire or other insured casualty so
as to become partially or totally untenantable, Landlord shall repair and
rebuild the same as required by Section 34, except that Landlord shall have no
obligation to repair and rebuild if: i) Landlord is unable to obtain all
necessary permits and approvals therefor, including, without limitation,
permits and approvals required from any agency or body administering
environmental laws, rules or regulations; ii) Landlord terminates this Lease as
authorized by Section 33; or iii) Tenant is in default under this Lease.

35. DAMAGE AND DESTRUCTION - OPTION TO TERMINATE. If (a) the Office Park, or
the Premises, shall be destroyed or damaged by fire or other insured casualty to
the extent of 25% or more of the cost of replacement thereof under the
coverage of Landlord's insurance (notwithstanding that the Premises may be
unaffected by such fire or other occurrence), or (b) if the Premises shall be
partially or totally destroyed during the last three years of the term of this
Lease, or (c) if the Office Park or the Premises shall be partially or totally
destroyed by a cause or casualty other than one covered by Landlord's insurance,
or (d) if Landlord's mortgagee shall require that the insurance proceeds be
applied against the principal balance of Landlord's mortgage, then in such
event, Landlord, may, if it so elects, rebuild the Premises, or it may give
notice terminating this Lease as of a date not later than sixty (60) days after
such damage or destruction. If Landlord elects to restore, repair or rebuild
the Premises, Landlord shall,

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within sixty days after such damage or destruction, give Tenant notice of its
intention to restore, repair or rebuild the Premises and then shall proceed with
reasonable speed to make the repairs to or to rebuild the Premises. Unless
Landlord elects to terminate this Lease, this Lease shall remain in full force
and effect, provided, however, that Tenant shall have the right to terminate
this Lease, upon not less than sixty days written notice to Landlord, if
Landlord shall not have restored, repaired or rebuilt the Premises suitable for
Tenant's use and occupancy within two years after the fire or other casualty
(excluding time lost because of strikes, material shortages, Acts of God, or
other causes beyond Landlord's control).

36. DAMAGE AND DESTRUCTION - LANDLORD'S RECONSTRUCTION. If Landlord shall
elect or be obligated to repair or rebuild the Premises because of any damage or
destruction, Landlord shall reconstruct the shell of the Premises to
substantially the condition as it existed prior to the damage or destruction,
provided that Landlord shall not be required to make any repairs to the extent
such repairs are not fully covered by the insurance proceeds attributable to the
Premises actually received by Landlord under insurance policies carried by
Landlord, and subject to Tenant's obligation under Section 35. For the purposes
of this provision, the shell of the Premises shall include the structural
framing material, roof, unfinished concrete floor slab, side walls and a rear
wall with exposed masonry or exposed studs extending from the floor slab to roof
deck. Landlord shall make sanitary sewer, storm sewer, water and electrical
service available to the Premises to the extent provided prior to the damage or
destruction. All work to be performed by Landlord shall be done in such manner
that upon completion thereof, that portion of the Premises repaired or rebuilt
shall contain substantially the same amount of floor area as immediately prior
to the damage or destruction. Tenant agrees to cooperate and assist Landlord in
the restoration and reconstruction of the Premises.

37. DAMAGE AND DESTRUCTION - TENANT'S RECONSTRUCTION. If Landlord does not
elect to terminate this Lease as provided in Section 33, Tenant shall, at its
own cost and expense promptly and diligently commence to fully repair, replace
and restore those portions of the Premises Landlord is not required to repair
under Section 34, including, but without limitation, all walls, partitions,
doors, floor coverings, painting and decorating, store front, plumbing and
electrical systems and fixtures, telephone, heating, ventilating and cooling
facilities, signs and other leasehold improvements (whether or not constructed
by tenant), trade fixtures, furnishings, equipment, merchandise, signs and other
personal property to a condition equal to, or better than, that existing prior
to its damage or destruction. All construction shall be in accordance with
plans and specifications approved by Landlord which satisfy Landlord's then
current design criteria.

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38. DAMAGE AND DESTRUCTION - INSURANCE PROCEEDS. All proceeds payable from
Landlord's insurance policies with respect to the Premises shall belong to and
shall be payable to Landlord. If Landlord does not elect to terminate this
Lease, as provided in Section 33, Landlord shall, subject to the rights of
Landlord's mortgagee, disburse and apply so much of any insurance recovery as
shall be necessary to pay and reimburse Landlord for the costs incurred by
Landlord with respect to Landlord's restoration work referred to in Section 34.

39. DAMAGE AND DESTRUCTION - TENANT'S OBLIGATIONS - RENT ADJUSTMENT. Should the
Premises be rendered totally or partially untenantable as a result of any fire
or other insured casualty, a just and proportionate part of the rent, but not of
additional rents shall be abated until the earlier of: i) sixty (60) days after
completion by Landlord of the restoration work Landlord is required to perform
under Section 34, or ii) Tenant's reopening of the Premises for normal business
following such fire or other casualty, or iii) the date the Premises would have
been open for normal business had Tenant promptly and diligently proceeded to
complete its reconstruction under Section 35; or iv) in the event Landlord
terminates this Lease, until the date of termination. If rent is abated shall
be computed upon the basis of the rent as abated. Tenant shall continue the
operation of its business to the extent reasonably practicable from the
standpoint of good business during any period of reconstruction or repair of the
Premises. In no event shall Landlord be liable for interruption to the business
of Tenant or for damage to or repair, reconstruction or restoration of any items
belonging to Tenant or within the Premises.

40. CONDEMNATION - CONTINUATION OF LEASE. If title to the whole of the
Premises shall be conveyed or condemned by right of eminent domain for any
public or quasi-public use, then this Lease shall cease and terminate as of the
date that possession is taken by the condemning authority. If less than all of
the area of the Premises shall be so taken under eminent domain, the term of
this Lease shall cease only with respect to the part so taken or conveyed, as of
the day possession shall be taken by such authority; provided, however, that if
the area taken amounts to more than 25% of the floor area of the Premises,
either party shall have the right to terminate this Lease upon notice in writing
within 30 days after such taking of possession. If more than 50% of the floor
area of the building in which the Premises are located shall be so condemned or
conveyed, whether or not any portion of the Premises shall be taken or conveyed,
or if more than 25% of the total floor area in the Office Park shall be so
condemned or conveyed, or if so much of the parking areas and Common Area
facilities shall be so taken or conveyed that a reasonable number of parking
spaces and sufficient other Common Area facilities, necessary, in Landlord's
judgment, for the continued effective operation of the Office Park shall not be
available for use by tenants and patrons of the Office

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Park, or if required by Landlord's mortgagee, or if Landlord's mortgage requires
the condemnation award to be applied to Landlord's loan, then, in any such
event, Landlord may, by notice in writing to Tenant delivered on or before the
day of surrendering possession to the condemning authority, terminate this
Lease, and rent shall be paid or refunded as of the date of termination. Tenant
shall have no claim against Landlord for the bonus value of any unexpired
portion of the term of this Lease.

41. CONDEMNATION - RENTAL OBLIGATION AFTER TAKING. In the event this lease
should terminate by reason of any taking or conveyance as aforesaid of the
Premises or the Office Park, or any portion thereof, Tenant shall pay rent to
the day when possession shall be taken by such authority, with an appropriate
refund by Landlord of such rent as may have been paid in advance for a period
subsequent to such date. If this Lease shall continue in effect as to any
portion of the Premises not so taken or conveyed, the rent shall be reduced to a
fair and equitable amount based on the floor area of the Premises remaining
after such taking (or conveyance) as compared to the floor area in the Premises
prior to such taking, and all additional rents shall thereafter be computed on
the basis of such remaining floor area.

42. CONDEMNATION - RESTORATION. If this Lease shall continue, Landlord shall,
subject to the limitations set forth below, make all necessary repairs or
alterations so as to constitute the portion of the remaining building a complete
architectural unit, and the remaining Premises a complete operating unit.
Landlord shall also restore or replace the parking areas and other common
facilities as nearly as practicable to the area and condition they were in prior
to any such taking. There shall be no abatement of rent during such repairs and
restoration except to the extent otherwise provided above. Landlord's
obligation under this Section shall be limited to an equitable portion of the
condemnation award paid to Landlord and not applied by Landlord's mortgagee to
the reduction of debt.

43. CONDEMNATION - RIGHT TO AWARD. All compensation awarded or paid for any
taking or conveyance, as aforesaid, whether for the whole or a part of the
Premises or otherwise, shall be the property of Landlord, whether such
compensation shall be awarded as compensation for diminution in the value of the
leasehold or of the fee, and Tenant hereby assigns to Landlord all of Tenant's
right, title and interest in and to any and all such compensation. Tenant shall
have the right to claim and recover from the condemning authority, but not from
Landlord, (except to the extent that any compensatory items of Tenant's damages
are specifically included in Landlord's condemnation award), such compensation
as may be separately awarded or recoverable by Tenant in Tenant's own right on
account of any and all damage to Tenant's business by reason of the condemnation
and for or on account of any cost or loss to which

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Tenant might be put in repairing, restoring or removing Tenant's merchandise,
furniture, and trade fixtures, as well as for the unamortized cost (amortized on
a straight line basis over the term of this Lease) of Tenant's leasehold
improvements to the extent Landlord has not contributed to the cost thereof.

44. CONDEMNATION OF LESS THAN A FEE. In the event of a condemnation of a
leasehold interest in all or a portion of the Premises without the condemnation
of the fee simple title also, this Lease shall not terminate and such
condemnation shall not excuse Tenant from full performance of all of its
covenants hereunder, but Tenant in such event shall be entitled to present or
pursue against the condemning authority its claim and to receive all
compensation or damages sustained by it by reason of such condemnation, and
Landlord's right to recover compensation or damages shall be limited to
compensation for and damages, if any, to its reversionary interest; it being
understood, however, that during such time as Tenant shall be out of possession
of the Premises by reason of such condemnation, this Lease shall not be subject
to forfeiture for failure to observe and perform those covenants not calling for
the payment of money. In the event the condemning authority shall fail to keep
the Premises in the state of repair required hereunder, or to perform any other
covenant not calling for the payment of money, Tenant shall have ninety days
after the restoration of possession to it within which to carry out its
obligations under such covenant or covenants. During such time as Tenant shall
be out of possession of the Premises by reason of such leasehold condemnation,
Tenant shall pay to Landlord, in lieu of rent provided for hereunder, and in
addition to any other payments required of Tenant hereunder, an annual rent
equal to the average annual rent paid by Tenant for the period from the
commencement of the term until the condemning authority shall take possession,
or during the preceding three full calendar years, whichever period is shorter.
At any time after such condemnation proceedings are commenced, Tenant agrees,
upon request of Landlord, to assign to Landlord all compensation and damages
payable by the condemnor to Tenant, to be held without liability for interest
thereon as security for the full performance of Tenant's covenants hereunder,
such compensation and damages received pursuant to said assignment to be applied
first to the payment of rents and all other sums from time to time payable by
Tenant pursuant to the terms of this Lease as such sums fall due, and the
remainder, if any, to be payable to Tenant at the end of the term hereof or on
restoration of possession to Tenant, whichever shall first occur, it being
understood and agreed that such assignment shall not relieve Tenant of any of
its obligations under this Lease with respect to such rents and other sums
except as the same shall be actually received by Landlord.

45. HAZARDOUS MATERIALS - DEFINITION. Tenant covenants and agrees that Tenant
shall at all times from and after delivery of

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possession of the Premises to Tenant, be responsible and liable for, and be in
complete and strict compliance with, all "Governmental" laws, ordinances, rules
and regulations relating to "Environmental Protection", "Environmental Matters"
and "Industrial Hygiene" (as such terms are hereinafter defined) arising,
directly or indirectly, out of the use of "Hazardous Materials" in, on, under or
about the Premises or the Office Park by Tenant, its agents, servants,
employees, licensees, contractors, subtenants and concessionaires. The term
"Governmental" as used herein shall include, without limitation, federal, state,
and local governments, and political subdivisions and regulatory agencies of
federal, state, and local governments. The term "Hazardous Materials" as used
herein shall include, without limitation, whether now or subsequently listed in
any Governmental listing or publication defining hazardous materials' substances
defined as: 'hazardous substances', 'hazardous materials, or toxic
substances' in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601, ET SEQ.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, ET SEQ.; the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ.; and any
subsequent amendments thereto, or replacement statutes thereof and ordinances,
rules and regulations adopted and publications promulgated pursuant to said
laws. The terms "Environmental Protection", "Environmental Matters" and
"Industrial Hygiene" as used herein shall include, without limitation, any
matter which affects the environment or which may affect the environment, the
use of sophisticated electrical and/or mechanical equipment, chemical,
electrical, radiological or nuclear processes, radiation, sonar and sound
equipment, use of lasers, and laboratory analysis and materials. Tenant shall
be deemed to be (1) the person in control, (2) an operator of the Premises and
(3) the person in charge with respect to the Premises for purposes of reporting
requirements under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended. Tenant agrees (i) that should it or its
agents, servants, employees, licensees, contractors, subtenants or
concessionaires know of the release or threatened release of any Hazardous
Materials, in, on, under or about the Premises, including, without limitation,
the release or threatened release of any Hazardous Materials in connection with
Tenant's work, or in connection with any alterations, replacements,
installations, improvements and/or additions made by Tenant to the Premises or
any part thereof during the term of this Lease, that it will promptly notify
Landlord of such release or threatened release, and (ii) that it will provide
all warnings of exposure to Hazardous Materials in, on, under or about the
Premises, as required by law, including, but not limited to, all laws
hereinabove referred to in this Section as the same may be amended from time to
time, all ordinances, rules and regulations adopted and publications promulgated
thereunder, and all future laws or case decisions to the same effect.

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46. HAZARDOUS MATERIALS - COMPLIANCE WITH LAWS. Tenant further covenants and
agrees, at its sole cost and expense, to procure, maintain in effect, and comply
with all conditions of any and all permits, licenses, and approvals issued by
governmental agencies for Tenant's use of Hazardous Materials in, on, under or
about the Premises. Tenant shall prior to any use of the Premises affecting
Environmental Protection, Environmental Matters and Industrial Hygiene or
involving the use of Hazardous Materials, in, on, under or about the Premises,
notify Landlord in writing of the intended use of such Hazardous Materials and
promptly provide Landlord evidence of compliance with all Governmental laws,
ordinances, rules and regulations pertaining to such use. Tenant shall in all
respects handle, treat, deal with and manage any and all Hazardous Materials in,
on, under or about the Premises in strict conformity with all applicable
Governmental laws, ordinances, rules and regulations relating to Hazardous
Materials, Environmental Protection and Industrial Hygiene.

47. HAZARDOUS MATERIALS - ENVIRONMENTAL AUDIT AND REMOVAL. Landlord shall have
the right, upon written notice to Tenant ("Landlord's Notice"), at any time and
from time to time during the term of this Lease, including, without limitation,
(i) prior to the expiration or earlier termination of the term of this Lease, or
(ii) in conjunction with a proposed assignment of this Lease or a proposed
sublease of all or a part of the Premises requested by Tenant pursuant to the
provisions of this Lease (in which event, Tenant's satisfaction of its
obligations under this Section shall be a condition precedent to Landlord's
consent to any such proposed assignment or sublease), to require Tenant, at its
sole cost and expense, to cause an environmental audit and survey (the "Survey")
to be made of the Premises, not later than fifteen (15) days following
Landlord's Notice, by an environmental consulting firm (the "Consulting Firm")
approved and/or designated by Landlord to determine whether the Premises
contains any Hazardous Materials. Tenant shall, upon completion of such Survey,
promptly furnish to Landlord a copy of such Survey prepared by the Consulting
Firm. In the event said Survey shall disclose the presence of Hazardous
Materials in, on, under or about the Premises, and if Landlord determines, based
upon the original approved plans for Tenant's Work, or on the basis of any
subsequent plans and specifications submitted to Landlord pursuant to the terms
of this Lease, or on the basis of other information and data available to
Landlord, that the existence of said Hazardous Materials arose out of or is in
any way connected with the construction, use, manufacture, storage, sale,
release or disposal of Hazardous Materials or products containing Hazardous
Materials by Tenant, its agents, servants, employees, licensees, contractors,
subtenants or concessionaires during the period of Tenant's occupancy of the
Premises (the "Tenant Installed Hazardous Materials"), (i) Tenant shall, at its
sole cost and expense, cause all of said Tenant Installed Hazardous Materials to
be removed from in, on, under or about the Premises

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and transported from the Office Park for use, storage or disposal in compliance
with all applicable laws by a hazardous materials abatement contractor (the
"Abatement Contractor") licensed in the state in which the Office Park is
located and approved by Landlord. In the event such removal and disposal of the
Tenant Installed Hazardous Materials is performed by Tenant after the expiration
or earlier termination of the term of this Lease, Tenant shall be deemed to be
occupying the Premises as a licensee at a monthly charge in an amount equal to
average rent for the last twelve months of the term of this Lease, which sum
shall be charged to Tenant by Landlord until the date Landlord receives
certification from the Abatement Contractor that all Tenant Installed Hazardous
Materials have been removed from in, on, under or about the Premises and
transported from the Office Park for use, storage or disposal, or (ii) Landlord
may, at its sole option upon written notice to Tenant, cause all of said Tenant
Installed Hazardous Materials to be removed from in, on, under or about the
Premises and transported from the Office Park for use, storage or disposal, in
compliance with all applicable laws, by a hazardous materials abatement
contractor selected by Landlord, in which event, the costs and expenses of such
removal and disposal, as reasonably estimated by Landlord, shall be paid to
Landlord by Tenant, as additional rent, within ten (10) days after receipt of an
invoice therefor. In the event Tenant fails to timely perform its obligations
under this Section, Landlord shall have the right (but shall not be obligated)
to perform Tenant's obligations under this Section, in which event, Tenant shall
pay to Landlord, as additional rent, promptly, upon demand, the costs and
expenses thereof; provided, however, in the event Landlord performs Tenant's
obligations hereunder after the expiration or earlier termination of the term of
this Lease, Tenant shall pay to Landlord, in addition to the foregoing costs and
expenses, a monthly charge in an amount equal to the monthly charge determined
pursuant to the provisions of this Section from the date of expiration or
earlier termination of the term of this Lease until the date Landlord has
completed Tenant's obligations under this Section. Landlord and Tenant agree
that the foregoing monthly charge represents a reasonable estimate of the
financial losses suffered by Landlord by Tenant's failure to timely perform its
obligations under this Section.

In the event that the environmental audit and survey does not disclose the
existence of any hazardous materials and the report by the Consulting Firm
further states that the request for the audit and survey (Survey) was requested
by Landlord without any reasonable factual basis for the belief that such
hazardous material did exist then and in that event the cost of the audit and
survey (Survey) shall be paid by the Landlord.

48. HAZARDOUS MATERIALS - LANDLORD'S APPROVAL. Tenant shall not

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take any remedial action in response to the presence of Hazardous Materials in,
on, under or about the Premises, nor enter into any settlement agreement,
consent decree or other compromise in respect to any Claims [as such term is
hereinafter defined in Section 43 relating to Hazardous Materials in any way
connected with the Premises], without first notifying Landlord of Tenant's
intention to do so and affording Landlord ample opportunity to appear, intervene
or otherwise appropriately assert Landlord's interest with respect thereto.

49. HAZARDOUS MATERIALS - INDEMNITY. Without limiting anything herein
contained Tenant shall indemnify and hold Landlord harmless from and against any
and all claims, demands, losses, liabilities, penalties, damages, costs and
expenses, including without limitation, attorneys' fees and costs (collectively
"Claims"), arising out of or in any way connected with the use, manufacture,
storage, sale, release or disposal of Hazardous Materials or products containing
Hazardous Materials by Tenant, its agents, servants, employees, licensees,
contractors, subtenants or concessionaires in, on, under or about the Premises
during the period of its occupancy of the Premises including, without
limitation; (i) any Claim by a federal, state or local Governmental agency or a
private citizen arising out of or in any way connected with the environmental
condition of the Premises; (ii) any Claim by any successor tenant, its agents,
servants, employees, licensees, contractors, subtenants or concessionaires,
arising out of or in any way connected with the environmental condition of the
Premises; and (iii) the cost of any required or necessary repair, cleanup or
detoxification and the preparation of any closure or other required plans in
connection therewith. The indemnity obligations of Tenant under this Section
shall survive the expiration or earlier termination of the term of this Lease.

50. DEFAULT AND REMEDIES - EVENTS OF DEFAULT. Any one or more of the following
occurrences shall constitute an event of default under this Lease by Tenant:

(a) The failure of the Tenant to pay any rental, or additional rental of
any kind or nature due hereunder within five (5) days after the same shall be
due;

(b) The bankruptcy or insolvency of the Tenant or any guarantor of this
Lease, or the filing of any debtor proceedings, including petition in bankruptcy
or insolvency or for reorganization or for the appointment of a receiver or
trustee of all or any portion of Tenant's or any such guarantor's property, or
the making or assignment for the benefit of creditors, or the petitioning or
entering into an arrangement by the Tenant or any guarantor of this Lease;

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for a period of five (5) days;

(d) The taking by any party of this Lease by writ of execution or similar
process;

(e) The failure of the Tenant to keep or perform any of the terms,
conditions, covenants or agreements of this Lease covenanted and agreed to be
observed or performed by Tenant, not otherwise specified as a default or event
of default, for more than 30 days after written notice of such default or
violation shall have been given to Tenant, provided that if the default be of
such a nature that it cannot be reasonably cured within said thirty day period,
and Tenant shall in good faith have promptly commenced the curing of such
default within such period, then Tenant shall be deemed not in default hereunder
if it shall diligently proceed to cure such default within the grace period
expressly allowed by Landlord in writing.

51. DEFAULT AND REMEDIES - REMEDIES FOR DEFAULT. In the event of the
occurrence of an event of default, as defined in Section 48, in addition to all
other rights and remedies available to Landlord under this Lease or under law,
Landlord shall have the following remedies:

(a) At any time following an event of default, Landlord may, at Landlord's
option, elect to terminate this Lease by written notice to Tenant specifying
Landlord's intention to terminate this Lease, which notice may, but need not be,
included in a notice of intention to evict or pleading in an eviction action.
Notice may be served personally or by certified mail or in any manner authorized
for service of any pleading or notice of intention to evict. Following service
of the notice of termination, Tenant shall have the right to reinstate this
Lease by paying to Landlord all rent and additional rentals, late charges and
all other fees and charges payable under this Lease and curing all other events
of default under this Lease, by no later than 11:59 p.m. of the third business
day following either: i) personal delivery of notice of termination to Tenant's
manager or assistant manager; ii) the expiration of one full day after mailing
of notice of termination; or iii) such later day as specified by Landlord in the
notice of termination. For the purpose of this provision, a "business day"
shall be each Monday through Friday, inclusive, other than any federally
recognized banking holiday for New Years, Christmas, Memorial Day, Independence
Day, Fourth of July or Thanksgiving. Landlord shall be under no obligation to
reinstate this Lease if Tenant fails to cure all events of default within the
time and in the manner required herein.

Unless Tenant reinstates this Lease in the time and in the manner provided
above, termination of this Lease will be effective, without further notice and
without the necessity of any legal suit

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or action, upon the expiration of the period Tenant is allowed to reinstate this
Lease. Delivery of Landlord's notice of termination under this provision is
intended to satisfy any common law requirements relating to service of notice of
default or demand for payment of rents prior to terminating a lease, and no
further notice to quit, vacate, demand or legal process shall be necessary to
terminate this Lease, whether or not any additional notice may be required by
law as a condition to obtaining a judicial order evicting Tenant from the
Premises.

Following the effective time of termination, Tenant shall have no further
interest in the Premises or in this Lease, or any right to rents or profits
generated by Landlord from the Premises and, subject to Landlord's right to
recover damages as hereinafter provided. Tenant shall not be liable to Landlord
for rent or additional rents which first accrue after the effective date of
termination. Rents and other charges paid to Landlord for the post-termination
use or occupancy of all or any portion of the Premises shall not reduce Tenant's
obligations to pay all rents and other charges which accrued prior to the
effective date of termination. No attempt by Tenant to cure defaults under this
Lease following expiration of the time to cure defaults shall be valid.
Landlord's acceptance of rent following expiration of the period of curing a
default shall not, unless otherwise agreed by Landlord in writing, constitute
reinstatement of this Lease, and any post-termination rental payments received
or recovered by Landlord shall be applied by Landlord to satisfy Tenant's
obligations under this Lease, without affecting the termination of this Lease.

(b) At any time following an event of default, Landlord, shall, at its
option, have the immediate right to re-enter the Premises, with or without legal
process, and without terminating the Lease. Should Landlord elect to re-enter,
it may take such steps as it deems necessary to secure the Premises and to
exclude Tenant and its agents and employees therefrom; make such alterations and
repairs as may be necessary in order to relet the Premises; and relet the
Premises or any part thereof, on behalf of Tenant, for such term or terms (which
may be for a term extending beyond the term of this Lease) and at such rental
and upon such other terms and conditions as Landlord, in its sole discretion,
may deem advisable. Notwithstanding re-entry by Landlord, and until termination
of this Lease, Tenant's obligations under this Lease shall remain in full force
and effect and, unless Landlord has agreed to lease or otherwise convey all or
any portion of the Premises, Tenant shall have the right to reinstate this Lease
and retake possession of the Premises by curing all events of default and paying
all late charges and legal fees due under this Lease. Any rents collected by
Landlord following re-entry shall be applied as provided hereafter. To the
extent that for any month after reentry, but prior to termination, Landlord
receives net rents, as

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defined below, in excess of Tenant's rental obligation for such month, the
excess shall be held by Landlord as security for Tenant's future obligations to
Landlord under this Lease, and upon satisfaction of those obligations, shall be
applied to the reduction of Tenant's past due obligations to Landlord.

Following re-entry, Landlord shall have no obligation to relet the Premises or
otherwise mitigate Tenant's damages. In the event, notwithstanding this
provision, any court were to impose on Landlord the obligation to mitigate
Tenant's damages subsequent to re-entry, Landlord shall not be required to give
preference to reletting the Premises over any other vacancies in the Office
Park, and Landlord may condition the reletting of the Premises on, among other
reasonable conditions, any one or more of the following: i) the payment of a
fair market rate of rent for the Premises, whether or not that rate is in excess
of the amounts reserved to Landlord under this Lease; ii) the compliance by the
prospective tenant with the use clause and all other material covenants and
agreements in this Lease (except those which cannot legally be performed by
anyone other than Tenant); iii) the making of repairs and improvements to the
Premises necessary to place it in first-class condition; iv) the provision of a
security deposit or guaranty. Re-entry by Landlord solely for the purpose of
securing the Premises and without any effort by Landlord to relet the Premises
after Tenant's abandonment or vacation of the Premises, shall not impose any
obligation on Landlord to mitigate damages.

(c) In the event of the occurrence of an event of default, Landlord shall
have a lien on all of Tenant's trade fixtures, and all other of Tenant's
personal property located on the Premises to secure the payment of all rents due
from Tenant to Landlord under this Lease and all other loss and damage suffered
by Landlord as the result of Tenant's default. Following an event of default,
Landlord may, with or without terminating this Lease or re-entering the
Premises, take possession of such fixtures and personal property, and, in its
sole discretion, sell the same at any public or private sale without notice to
Tenant and apply the proceeds thereof first to the costs of such sale, including
reasonable attorney's fees, and second, to all rentals and other charges due
from Tenant to Landlord under this Lease. Any balance remaining after
satisfying all amounts due and owing from Tenant to Landlord under this Lease,
shall, within a reasonable time, be paid to the Tenant at its address set forth
herein.

(d) Following the occurrence of an event of default, Landlord
shall be entitled to bring an action to enforce any bond, guaranty,
or other collateral agreements, with or without bringing any prior
action against Tenant.

52. DEFAULT AND REMEDIES - RECOVERY OF RENT AND REMOVAL. In addition to all
other rights and remedies of Landlord provided by

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law and under this Lease, following an event of default, Landlord shall have the
right to recover from Tenant, Tenant's successors and assigns, and any co-
obligor, surety or guarantor, or other party legally responsible for Tenant's
obligations under this Lease, all or any portion of Tenant's obligations under
this Lease in the following amounts:

(a) Rent, additional rents, legal fees, and all other charges owing by
Tenant to Landlord under this Lease prior to the effective date of termination
or re-entry; plus,

(b) Damages subsequent to termination of the Lease equal the excess of all
rent, additional rents reserved under this Lease reduced to present value to the
date of the termination, over the rental value of the Premises for the remaining
term of this Lease; plus,

(c) For any period subsequent to re-entry but prior to termination of this
Lease rent, additional rents, legal fees and other charges reserved under this
Lease, as defined below, accrued as of the date of judgment, less the net
rentals received by Landlord from the reletting of all or any portion of the
Premises, after deducting Landlord's costs of reletting the Premises, including
without limitation, leasing commissions, brokerage fees, costs of repairs,
improvements or modifications made to the Premises, legal fees, and other costs
incurred by Landlord in reletting the Premises; plus,

(d) All direct and consequential damages, cost, expense, or loss suffered
by Landlord as a proximate result of the breach by Tenant of any provision of
this Lease for which Landlord is not fully compensated under subsection (a),
plus,

(e) Interest on all rents and damages at the rate provided in Section 54.

53. DEFAULT AND REMEDIES - INTEREST ON AMOUNT OVERDUE. If any installment of
rent or additional rents, or any other amounts due hereunder from Tenant to
Landlord shall not be received by Landlord within ten (10) days after the amount
is due, Tenant shall pay the Landlord interest on the unpaid balance overdue at
a rate equal to the maximum amount permitted to be charged by the Landlord to
the Tenant under North Dakota law, or one and one-half percent per month on the
overdue balance, whichever is less, plus any attorney's fees and other costs of
collection as provided in this Lease. The charging or acceptance of such
interest by Landlord shall in no event constitute a waiver of Tenant's default
with respect to such overdue amount, nor prevent Landlord from exercising any of
its other rights and remedies granted hereunder.

54. DEFAULT AND REMEDIES - LEGAL EXPENSE. If any case, suit or

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proceeding shall be brought by Landlord for recovery of possession of the
Premises, or recovery of any rents or any other amount due under this Lease, or
otherwise as the result of the breach by Tenant of any other obligation under
this Lease, and if such a breach shall be established, Tenant shall be required
to pay to Landlord all expenses incurred as a result thereof, including
reasonable attorney's fees.

55. DEFAULT AND REMEDIES - WAIVER OF DEFAULT. The waiver by Landlord of any
breach of any term, covenant or condition herein contained or the doing of any
matter or payment of any sum by Landlord not required of Landlord by the terms
hereof shall not be deemed to be a waiver or amendment of that term, covenant or
condition or of any subsequent breach of the same or any other term, covenant or
condition herein. The subsequent acceptance of rent hereunder by Landlord shall
not be deemed to be a waiver of any existing or preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord's knowledge of
such preceding or existing breach at the time of acceptance of such rent. No
covenant, term or condition of this Lease shall be deemed to have been waived by
Landlord, unless such waiver be in writing signed by Landlord.

56. DEFAULT AND REMEDIES - OPTION TO CURE DEFAULT. Landlord may, at its
option, elect to cure at any time, without notice, (except as otherwise
provided) , any default by Tenant under this Lease; and whenever Landlord so
selects, and if not otherwise expressly provided for in this Lease, all costs
and expenses incurred by Landlord in curing a default, including, without
limitation, reasonable attorney's fees, together with interest on the amount of
costs and expenses so incurred at the rate of eighteen percent (18%) per annum
or the highest legal rate provided by law to be charged to Tenant, whichever is
lower, shall be paid by Tenant to Landlord on demand, and shall be recoverable
as additional rent.

57. DEFAULT AND REMEDIES - ACCORD AND SATISFACTION. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on account of the earliest stipulated rent, nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment as rent be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such rent or pursue any other remedy in this Lease provided.

58. DEFAULT AND REMEDIES - REMEDIES CUMULATIVE. All remedies provided by
Landlord under this Lease are intended to be cumulative, and any one or more may
be exercised by Landlord, at its option. The exercise by Landlord of any
remedy reserved to Landlord under this Lease or provided by law is not intended
to be

- 23 -

<PAGE>

exclusive of any other available remedy or remedies, but each and every such
remedy shall be in addition to every other remedy now or hereafter existing at
law, in equity or by statute.

59. RULES AND REGULATIONS. Landlord reserves the right to promulgate such
reasonable rules and regulations relating to the Premises, Common Areas and the
Office Park, and any part or parts thereof, as Landlord may deem appropriate and
for the best interests of the tenants. Tenant agrees to abide by such rules,
which shall be uniformly applied, and to cooperate in their observance.
Landlord shall also have the authority to establish in the rules and regulations
reasonable fines and penalties for violations of the rules and regulations
applicable to tenants of the Office Park. The rules and regulations, and any
amendments or additions that may be made from time to time, shall be effective
and become binding upon Tenant upon delivery of a copy of them to Tenant. Tenant
shall be responsible for compliance by its employees, agents and contractors
with all rules and regulations adopted by Landlord. Attached as Exhibit 4 is a
copy of the regulations in effect as of the date hereof.

60. PROTECTION OF LENDERS - ESTOPPEL CERTIFICATE. Landlord and Tenant each
agree that they will, at any time and from time to time, within ten (10)
business days following written notice by the other party hereto specifying that
it is given pursuant to this provision, execute, acknowledge and deliver to the
party who gave such notice a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified, and stating the
modifications) , and the dates to which the rent and any other payments due
hereunder from Tenant have been paid in advance, if any, and stating whether or
not, to the best of knowledge of the signer of such certificate, the other party
is in default in performance of any covenant, agreement or condition contained
in this Lease, and, if so, specifying each such default of which the signer may
have knowledge.

The failure of either party to execute, acknowledge and deliver to the other a
statement in accordance with the foregoing provisions within the ten (10) day
period shall constitute an acknowledgement by the party given such notice, which
may be relied on by any person holding or proposing to acquire an interest in
the Office Park or the Premises or this Lease from or through the other party,
that this Lease is unmodified and in full force and effect and that the rent has
been duly and fully paid to and including the respective due dates immediately
preceding the date of such notice and shall constitute, as to any person
entitled as aforesaid to rely upon such statements, a waiver of any default
which may exist prior to the date of such notice.

61. PROTECTION OF LENDERS - ATTORNMENT. Tenant shall, in the

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<PAGE>

event any proceedings are brought for the foreclosure of, or in the event of
exercise of power of sale under, any mortgage or deed of trust made by Landlord
covering the Premises, attorn in writing to the mortgagee or purchaser at such
foreclosure sale and recognize such purchaser as Landlord under this Lease.

62. PROTECTION OF LENDERS - SUBORDINATION. This Lease and all of Tenant's
rights hereunder shall be subject and subordinate to any and all ground leases
or underlying leases or subleases that include the Premises, including, without
limitation, a sale leaseback lease or leaseback leases to which Landlord is or
may become a party as a tenant or a subtenant, and to the lien of all mortgages,
in all amounts and all advances thereon, which may now or hereafter become a
lien on the Premises, and to all renewals, replacements, modifications,
consolidations and extensions thereof; provided, however, Tenant agrees that any
such lessor or mortgagee may elect to have this Lease be made superior to any
such ground or underlying lease or the lien of its mortgage, and in the event of
such election and upon notification by Landlord or such lessor or mortgagee to
Tenant to that effect, this Lease shall be deemed superior to said ground or
underlying lease or to the lien of any such mortgage, whether or not this Lease
is recorded or whether this Lease is recorded prior or subsequent to the date of
recording of said ground or underlying lease or mortgage. This Lease shall also
be subordinate and subject to the provisions of any easements and operating
agreements affecting the Office Park. Tenant agrees to provide any such
mortgagee or lessor whose name and address has been provided to Tenant with
written notice of any default by Landlord under this Lease. The curing of any
Landlord default by such mortgagee or lessor shall be treated as curing and
performance by Landlord.

Upon request of Landlord, Tenant will within fifteen (15) days thereafter
execute an agreement confirming that this Lease and Tenant's rights thereunder
are subordinate to the lien or interest of any mortgage, trust deed, ground or
other underlying lease or other instrument resulting from any other method of
financing or refinancing (including any sale and leaseback) now or hereafter in
force against the Office Park or the land or buildings of which the Premises are
a part or against any buildings hereafter placed upon the land of which the
Premises are a part, and to all advances made or hereafter to be made upon the
security thereof, provided, however, that such mortgagee or lessor will agree
that, in the event any action is taken to foreclose the lien of the mortgage or
terminate any ground lease, this Lease and all rights of the Tenant under its
terms to use and quiet possession of the Premises, including, but not limited
to, easements, appurtenances and Common Areas and facilities in the Office Park,
shall not be disturbed and shall continue in full force and effect so long as
Tenant shall faithfully discharge each and every obligation on its part to be
kept and performed under the terms of this Lease.

- 25 -

<PAGE>

63. ENTIRE AGREEMENT. This Lease and the exhibits now or hereafter attached
(as provided herein) and forming a part hereof, set forth all the covenants,
promises, agreements, conditions and understandings between Landlord and Tenant
concerning the Premises or matters related thereto, and there are no covenants,
promises, agreements, conditions or understandings, either oral or written,
between them other than are herein set forth. Except as herein otherwise
provided, no subsequent alteration, amendment, change or addition to this Lease
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
them.

64. CAPTIONS. The captions used as headings for the various subject matters
appearing in this Lease are used only as a matter of convenience to help find
subject matters and are not to be construed as part of the Lease provisions nor
in determining the intent of the parties to this Lease.

65. NO PARTNERSHIP RELATION. Landlord is not intended to be in any way or
for any purpose a partner of Tenant in the conduct of its business, or
otherwise, or joint adventurer, or a member of a joint enterprise with Tenant.

66. SEVERABILITY. If any term, covenant or condition of this Lease shall, to
any extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term, covenant or condition to person or circumstances other
than those in respect to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.

67. NO OPTION. The submission of this Lease for examination does not
constitute a reservation of or option for the Premises and this Lease becomes
effective as a Lease only upon execution and delivery thereof by Landlord and
Tenant.

68. RECORDING. Tenant shall not record this Lease without the written consent
of Landlord.

69. HOLDING OVER. Any holding over after the expiration of the term of this
lease or any renewal thereof with the consent of the Landlord, shall be
construed to be a tenancy from month-to-month at the rents herein specified
(pro-rated on a monthly basis) and shall otherwise be on the terms and
conditions herein specified, so far as applicable.

70. SUCCESSORS. All rights and liabilities herein given to, or imposed upon,
the respective parties hereto shall extend to and bind the respective successors
and assigns of the said parties; and they shall all be bound jointly and
severally by the terms, covenants, conditions and agreements herein. No rights,
however, shall inure to the benefit of any assignee of Tenant unless the

- 26 -

<PAGE>

assignment to such assignee has been approved by the Landlord in writing as
hereinbefore provided.

71. OPTION TO RENEW. The Tenant shall have the option to renew the Lease for
an additional five-year period. Tenant shall give written notice of its
intention to renew the Lease at least ninety (90) days prior to the expiration
of the initial term of the Lease. If intention to renew is not received by the
Landlord, the Landlord has no obligation to renew the Lease with the Tenant.
All of the terms and conditions of the Lease shall remain the same during the
renewal period, if any, except for the amount of rent to be paid by the Tenant.

72. RENT DURING RENEWAL PERIOD. The rental during the renewal period shall be
negotiated in good faith by Landlord and Tenant. Any actual increase shall
consider, among other things, the following factors: The cost of funds to
Landlord; changes in consumer prices; increased utility costs for the common
areas; increased repair and maintenance charges as to both the common areas and
other portion of the Office Park for which Landlord is responsible. Despite
these statements (such being only for information purposes) regarding the method
by which Landlord would request an increased rental during any renewal period,
Landlord is not bound to any requirements as to demands for increased rent.

IN WITNESS WHEREOF, the parties hereto have executed this lease as of the
day and year first above written.

Landlord:
Blue Cross Blue Shield of North
Dakota, a corporation

By /s/ Robert Clark
---------------------------------

Its: Executive V.P., Operations
--------------------------

Landlord:
Lincoln Mutual Life and Casualty
Ins. Co., a corporation

By /s/ J. Scott Koltes
---------------------------------

Its: President
--------------------------

- 27 -

<PAGE>

Tenant:
Great Plains Software, Inc., a
corporation

By Jodi Uecker-Rust
-------------------------------------

Its: Vice President, Operations
------------------------------

- 28 -

<PAGE>

EXHIBIT 1 - Floor Plan of Village Square Office Park with the leased premises
outlined in red, green and blue.

EXHIBIT 2 - The floor plan of Village Square Office Park depicting the Common
Areas with such outlined in red.

EXHIBIT 3 - Verification of Term - Floor Area - Village Square Office Park.

EXHIBIT 4 - Rules and regulations relating to Village Square Office Park as of
date of lease to which this exhibit is attached.

- 29 -

<PAGE>

[FLOOR PLAN]

<PAGE>

EXHIBIT 3

VERIFICATION OF TERM;
VERIFICATION OF SQUARE FOOTAGE;
and
VERIFICATION OF MONTHLY AMOUNT OF
AMORTIZED FIXED IMPROVEMENTS

This form is completed by the parties hereto pursuant to the
requirements of the Lease dated the ____ day of _______________, 1994,
between BLUE CROSS BLUE SHIELD OF NORTH DAKOTA, A CORPORATION and LINCOLN MUTUAL
LIFE AND CASUALTY INS. CO., A CORPORATION and GREAT PLAINS SOFTWARE, INC.

AGREED:

For Tenant_________________________ For Landlord_____________________________

___________________________________ _________________________________________

<PAGE>

EXHIBIT 4

RULES AND REGULATIONS

<PAGE>

[LETTERHEAD]

August 10, 1994

Ms. Jodi Uecker-Rust
GREAT PLAINS SOFTWARE, INC.
1701 38th. St. S.W.
FARGO, ND 58103

Dear Jodi,

Reference is made to the Lease dated May 2, 1994 (the "Lease") by and
between Great Plains Software, Inc. (GPS), Blue Cross Blue Shield of North
Dakota (BCBSND) and Lincoln Mutual Life and Casualty Insurance Company (LMLCIC).

As was agreed, BCBSND paid for Landlord and Tenant improvements during
Phase III at Village Square Office Park. The Tenant, GPS, agreed to Reimburse
BCBSND for all tenant improvements. Tenant improvements are summarized in the
attached letter from Tracy Aksamit, AIA, Project Architect, dated March 14,
1994. The total of Tenant improvements is $132,424 dollars.

Great Plains Software, Inc. agrees to pay an additional $6,500 per month to
the rent beginning August 1, 1994 and for the next 22 months as outlined in the
attached amortization schedule based on an interest rate of eight percent. The
final additional payment will be in the amount of $6,298.00.

If the lease is terminated for any reason prior to the ending date of June
30, 1996, the remaining unpaid principal will be due immediately.

BLUE CROSS BLUE SHIELD GREAT PLAINS SOFTWARE, INC.
OF NORTH DAKOTA

By: /s/ Michael B. Unhjem By: /s/ Jodi Uecker-Rust
------------------------------ ------------------------------
Michael B. Unhjem Title: VP Operations
Its President and CEO ---------------------------

LINCOLN MUTUAL LIFE AND CASUALTY
INSURANCE COMPANY

By: /s/ J. Scott Koltes
------------------------------
J. Scott Koltes
Its President

<PAGE>

[LETTERHEAD]

March 14, 1994

Scott Koltes
Lincoln Mutual Life
PO Box 1918
Fargo, ND 58107

Re: Village Square Office Park
Fargo, ND #9116-9, #9116-10

Dear Mr. Koltes:

Per your request the following is an accounting of the pay requests for work
done at Village Square Office Park by YHRSRW projects #9116-9 and #9116-10.

MinKo Construction Grant's Mechanical Fritz Electric
------------------ ------------------ --------------

Landlord Tenant Landlord Landlord Tenant

#9116-9

09/23/93 21,190
10/27/93 6,024 10,708
11/04/93 24,041 5,997
12/01/93 15,966 28,384
12/03/93 20,556 17,203
12/28/93 20,497 18,950
12/29/93 91,216
157
12/30/93 1,635
01/07/94 8,236 14,642
01/25/94 5,512 28,157

#9116-10

01/07/94 2,230
01/21/94 6,153 2,110
----------------------------------------------------------------------
91,796 76,460 95,118 30,226 55,964

<PAGE>

Scott Koltes
March 14, 1994
Page 2

Should you have any questions or comments, please do not hesitate to contact
this writer.

Sincerely,

Yeater Hennings Ruff
Shultz Rokke Welch

By /s/ Tracy Aksamit
--------------------
Tracy Aksamit,
Project Architect

PROJ\9116-9\Koltes

<PAGE>

* * * AMORTIZATION SCHEDULE * * *

TOTAL PAYMENTS: 22 INTEREST: 8 % PRINCIPAL: $132,424.00

PAYMENT # PAYMENT INTEREST PRINCIPAL BALANCE

1 $6,500.00 $882.83 $5,617.17 $126,806.83
2 $6,500.00 $845.38 $5,654.62 $121,152.21
3 $6,500.00 $807.68 $5,692.32 $115,459.89
4 $6,500.00 $769.73 $5,730.27 $109,729.62
5 $6,500.00 $731.53 $5,768.47 $103,961.15
6 $6,500.00 $693.07 $5,806.93 $98,154.22
7 $6,500.00 $654.36 $5,845.64 $92,308.59
8 $6,500.00 $615.39 $5,884.61 $86,423.98
9 $6,500.00 $576.16 $5,923.84 $80,500.14
10 $6,500.00 $536.67 $5,963.33 $74,536.80
11 $6,500.00 $496.91 $6,003.09 $68,533.72
12 $6,500.00 $456.89 $6,043.11 $62,490.61
13 $6,500.00 $416.60 $6,083.40 $56,407.21
14 $6,500.00 $376.05 $6,123.95 $50,283.26
15 $6,500.00 $335.22 $6,164.78 $44,118.48
16 $6,500.00 $294.12 $6,205.88 $37,912.60
17 $6,500.00 $252.75 $6,247.25 $31,665.36
18 $6,500.00 $211.10 $6,288.90 $25,376.46
19 $6,500.00 $169.18 $6,330.82 $19,045.63
20 $6,500.00 $126.97 $6,373.03 $12,672.60
21 $6,500.00 $84.48 $6,415.52 $6,257.09
22 $6,298.80 $41.71 $6,257.09 $0.00

TOTAL AMOUNT REPAID: $142,798.80 TOTAL INTEREST: $10,374.80

<PAGE>

LEASE AMENDMENT

This is an Amendment to the Lease dated May 2, 1994 between Blue Cross Blue
Shield of North Dakota and Lincoln Mutual Life and Casualty Insurance Company
("Landlord") and Great Plains Software, Inc. ("Tenant"). Said Amendment is in
accordance with paragraph 63 of the Lease. In the event that any provision of
the Lease is inconsistent with any provision contained in this Amendment, the
provision(s) of this Amendment shall control.

Tenant acknowledges and agrees that on November 7, 1995, the term of the
Lease was extended to June 30, 1999, as amended below, and that rent for the
Premises was increased by $467 per month for a total monthly rent of $26,235.
Said extension and rent increase was a result of improvements made to the
Premises by Landlord. Said improvements included the addition of a ceiling,
changing the heating and ventilation systems, smoke alarms and the sprinkling
system in the area adjoining Union State Bank.

In consideration of the terms of this Amendment and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows:

In accordance with paragraph 3, Landlord will improve the Premises by
adding ceilings to approximately 28,255 square feet with necessary changes
to the heating air conditioning, ventilation, sprinkler and alarm systems.
Landlord will also add standard lighting fixtures with standard florescent
bulbs and add windows on the north and east side of the northeast area of
leased space.

Paragraphs 8, 9 and 10 are amended to reflect the additional rent due from
Tenant for said improvements, the effective date of the new rent and the
new termination date of the Lease. Effective March 1, 1997, or when the
remodeling work is completed, whichever is sooner. Tenant's rent will
increase by $3,037 per month for a total monthly rent of $29,272 per month.
Said rent will be paid by Tenant until the termination of the Lease on June
30, 1998. Tenant may terminate the Lease by giving six months written
notice to Landlord of Tenant's intent to terminate. Said notice shall be
sent to Landlord by certified mail, return receipt requested.

Paragraphs 20 and 21 are amended to add that all repairs and maintenance of
the rest rooms dedicated to Tenant are the responsibility of Tenant. Tenant
is also responsible for the janitorial services of the former "public"
restrooms. Landlord is responsible for the repair and maintenance of the
fixtures and drains of said "public" rest rooms. All drains that require
mechanical cleaning or water jet cleaning will be the responsibility of
Landlord. Tenant will contact Blue Cross Blue Shield of North Dakota
Building Services Department @ 282-1010 (available 24 hours per day), for
maintenance work that is the responsiblity of Landlord.

Page 1
<PAGE>

Paragraph 22 is amended to add the following:

Rooftop air handlers that are used by both Tenant and Landlord Common Areas
will be the responsibility of Landlord for general maintenance, upkeep and
repair. Major repairs (compressors, fan assemblies, filter dryers,
condenser coils, evaporator coils, component refrigerant lines, heat
exchangers, combustion chambers) and major control components, excluding
individual room and area controls, will be the responsibility of
Landlord for Roof Top Units ("RTU") 1-13.

General repairs (filter changes, seasonal operational adjustment of
thermostats, operating ranges and service calls related to comfort level
issues associated with minor failures of RTU's 1-13), adjustment and
routine maintenance or RTU's 1-13 are the responsibility of Tenant.

RTU's 15-18 are used by both Tenant and the VSOP Common Areas and are
the responsibility of Landlord.

Repair and maintenance of light fixtures (bulbs, ballasts' lenses and
general electrical wiring and switches) are the responsibility of Tenant.

Dated this _______ day of ________________, 1996.

Landlord:
Blue Cross Blue Shield of North Dakota

By: ______________________________
Its: _____________________________

Landlord:
Lincoln Mutual Life and Casualty Insurance Company

By: /s/ J. Scott Koltes
----------------------
Its: President
--------------------
Tenant:
Great Plains Software, Inc.

By: /s/ Terri F. Zimmerman
-------------------------
Its: TERRI F. ZIMMERMAN
GROUP VICE PRESIDENT
FINANCE AND OPERATIONS
-----------------------

Page 2

<PAGE>

GREAT PLAINS SOFTWARE, INC.
1983
INCENTIVE STOCK OPTION PLAN

1. PURPOSE OF THE PLAN

This Incentive Stock Option Plan (the "Plan") is intended to promote
the interests of Great Plains Software, Inc., a Minnesota corporation (the
"Company"), by providing the employees of the Company and any subsidiaries
acquired or established at any time in the future, who are largely responsible
for the management, growth and protection of the business, with incentives and
rewards to encourage them to continue in the employ of the Company or its
subsidiaries, if any. It is intended that the options issued pursuant to this
Plan shall constitute incentive stock options within the meaning of Section 422A
of the Internal Revenue Code of 1954, as amended, as in effect prior to January
1, 1987 (the "1954 Code"), or Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), whichever is applicable. The Plan shall be interpreted
and administered so as to satisfy the requirements of Section 422A of the 1954
Code or Section 422 of the Code, whichever is applicable. References in the
Plan to Section 422 of the Code shall include Section 422A of the 1954 Code, as
applicable.

2. ADMINISTRATION OF THE PLAN

The Plan shall be administered by a committee of the Board of
Directors of the Company consisting of one or more persons (the "Committee").
The Committee shall from time to time designate the employees of the Company and
its subsidiaries, if any, who shall be granted stock options under the Plan and
the number of shares of stock to be optioned to each such employee.

Subject to the terms and conditions of the Plan, the Committee shall
have full authority to administer the Plan, including authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary and further including, with no
limitation on the generality of the foregoing, the authority to accelerate the
exercisability of all or any part of any option granted under the Plan which was
not made immediately and fully exercisable under the terms of its original
grant. Decisions of the Committee shall be final and binding on all parties who
have an interest in the Plan.

3. ELIGIBILITY FOR PARTICIPATION

The persons who shall be eligible to receive options pursuant to the
Plan shall be such key employees (including officers, whether or not they are
directors) of the Company or its subsidiaries, if any, as the Committee shall
select from time to time. "Subsidiary" means any corporation of which the
Company

<PAGE>
owns, directly or indirectly, stock with more than 50% of the total voting power
of all classes of stock of such corporation.

4. STOCK SUBJECT TO THE PLAN

Under this Plan, options may be granted for the Company's Common
Stock, par value $.01 per share (the "Common Stock"). Shares issued upon
exercise of options may be either newly issued shares or treasury shares, at the
discretion of the Company. The aggregate number of shares of Common Stock which
may be issued under the Plan shall not exceed 1,550,000. If any outstanding
option under the Plan for any reason expires or is terminated, the shares of
Common Stock allocable to the unexercised portion of such option may again be
subject to an option under the Plan. The limitation on the number of shares of
Common Stock which may be issued under the Plan or for which options may be
granted to each employee shall be subject to adjustment as provided in Section
5(d) of the Plan.

A person who has been granted an incentive stock option under this
Plan may be granted an additional option or options under the Plan if the
Committee shall so determine; provided, however, that (a) for incentive stock
options granted before January 1, 1987, the aggregate fair market value
(determined as of the time the option is granted) of the Common Stock for which
any employee may be granted such incentive stock options in any calendar year
(under all plans described in subsection (b)(8) of Section 422A of the Code of
his employer corporation and its parent and subsidiary corporations) shall not
exceed $100,000 plus any unused carryover to such year, determined in the manner
set forth in Section 422A(c)(4) of the Code, and (b) for incentive stock options
granted after December 31, 1986, to the extent the aggregate fair market value
(determined at the time the incentive stock option is granted) of the Common
Stock with respect to which all incentive stock options are exercisable for the
first time by an employee during any calendar year (under all plans described in
subsection (d) of Section 422 of the Code of his employer corporation and its
parent and subsidiary corporations) exceeds $100,000, such options shall be
treated as options which do not qualify as incentive stock options within the
meaning of Section 422 of the Code.

5. TERMS AND CONDITIONS OF OPTIONS

Stock options granted pursuant to the Plan shall be authorized by
action of the Committee and shall be evidenced by option agreements in such form
as the Committee shall from time to time approve, which agreements shall comply
with and be subject to the following terms and conditions:

-2-

<PAGE>

(a) OPTION PRICE

The option price of any option granted under the Plan shall be not
less than 100% of the fair market value of the Common Stock on the date of the
grant of such option. For purposes of the preceding sentence and for all other
valuation purposes under the Plan, the fair market value per share of Common
Stock shall be as reasonably determined by the Committee, but shall not be less
than the average of the closing representative bid and asked prices of the
Common Stock as reported on the National Association of Securities Dealers
Automated Quotation System, if applicable, or, if the Common Stock is then
traded on a national securities exchange, the closing price of the Common Stock
on such exchange on the date as of which fair market value is being determined.
If on the date of grant of any option under the Plan the Common Stock is not
publicly traded, the Committee shall make a good faith attempt to satisfy the
option price requirement of this Section 5(a) and in connection therewith shall
take such action as it deems necessary or advisable, including obtaining and
relying on the opinion of one or more completely independent and well-qualified
experts as to the fair market value of such Common Stock and such other facts
and circumstances as it deems relevant.

(b) TERM AND EXERCISE OF OPTIONS

(1) Each option granted under the Plan shall be exercisable on such
date or dates, during such period (not exceeding ten years) and for such number
of shares of Common Stock as shall be determined by the Committee and set forth
in the stock option agreement with respect to such option.

(2) Any option granted under the Plan may be exercised by notifying
the Company in writing of such exercise prior to the termination of such option.
The option price for the number of shares of Common Stock for which the option
is exercised shall become immediately due and payable; provided, however, that
in lieu of cash an optionee may, with the approval of the Committee, exercise
his or her option by tendering to the Company Common Stock owned by such
optionee (and with the certificates therefor registered in his or her name)
having a fair market value equal to the cash exercise price of the shares of
Common Stock being purchased.

(3) No option granted hereunder before January 1, 1987 shall be
exercisable while there is outstanding (within the meaning of the Code Section
422A(c)(7)) any incentive stock option to purchase stock of the Company or a
parent or subsidiary corporation or a predecessor corporation of any of them
which was granted to the optionee prior to the grant of such option hereunder.

-3-

<PAGE>

(4) During the lifetime of the optionee, the option shall be
exercisable only by such optionee and shall not be assignable or transferable by
such optionee otherwise than by will or the laws of descent and distribution.

(1) In the event that an optionee shall cease to be employed by the
Company or its subsidiaries, if any, for any reason the option shall be
automatically terminated as of the date of such termination of employment;
provided that the Committee, in its discretion, may provide in any option
granted pursuant to this Plan that in the event that an optionee shall cease to
be employed by the Company or its subsidiaries, if any, for any reason other
than his or her gross or willful misconduct or death or disability, such
optionee shall have the right to exercise the option at any time within one
month after such termination of employment to the extent of the full number of
shares he or she was entitled to purchase under the option on the date of
termination, subject to the condition that no option shall be exercisable after
the expiration of the term of the option.

(2) In the event that an optionee shall cease to be employed by the
Company or its subsidiaries, if any, by reason of his or her gross or willful
misconduct during the course of his or her employment, including but not limited
to wrongful appropriation of funds of his or her employer or the commission of a
gross misdemeanor or felony, the option shall be terminated as of the date of
such misconduct.

(3) If the optionee shall die while in the employ of the Company or a
subsidiary, if any, or within one month after termination of employment for any
reason other than gross or willful misconduct, or become disabled (within the
meaning of Code Section 22(e)(3)) while in the employ of the Company or a
subsidiary, if any, and such optionee shall not have fully exercised the option,
such option may be exercised at any time within twelve months after such death
or disability by the executors, administrators or guardians of the optionee, as
applicable, or by any person or persons to whom the option is transferred by
will or the applicable laws of descent and distribution, to the extent of the
full number of shares such optionee was entitled to purchase under the option on
the date of such death or disability, subject to the condition that no option
shall be exercisable after the expiration of the term of the option.

(d) ADJUSTMENT UPON CHANGES IN STOCK

If any change is made in the Common Stock through merger,
consolidation, reorganization, recapitalization, stock dividend, split-up,
combination of shares, exchange of shares, change in corporate structure or
otherwise, appropriate adjustments shall be made as to the maximum number of

-4-

<PAGE>
shares subject to the Plan and the number of shares or other consideration and
option prices relating to outstanding options.

(e) RIGHTS AS A STOCKHOLDER

No person shall have any rights as a stockholder with respect to any
shares of Common Stock subject to an option granted pursuant to the Plan until
the date of the issuance of a stock certificate to such optionee for such
shares.

(f) 10% SHAREHOLDER RULE

Notwithstanding any other provision in the Plan, if at the time an
option is otherwise to be granted pursuant to the Plan the optionee owns
directly or indirectly (within the meaning of Code Section 424(d)) Common Stock
of the Company possessing more than 10% of the total combined voting power of
all classes of stock of the Company or its parent or subsidiary corporations, if
any (within the meaning of Code Section 422(b)(6)), the option price of any
option granted to such optionee pursuant to the Plan shall be not less than 110%
of the fair market value of the Common Stock determined as described herein, and
such option by its terms shall not be exercisable after the expiration of five
years from the date such option is granted, all in accordance with the
requirements of Code Section 422(c)(5).

6. SECURITIES MATTERS

The exercise of any option granted hereunder shall only be effective
at such time as counsel to the Company shall have determined that the issuance
and delivery of Common Stock pursuant to such exercise will not violate any
state or federal securities or other laws. The employee desiring to exercise an
option may be required by the Company, as a condition of the effectiveness of
any exercise of an option granted hereunder, to agree in writing that all Common
Stock to be acquired pursuant to such exercise shall be held for his or her own
account without a view to any further distribution thereof, that the
certificates for such shares shall bear an appropriate legend to that effect and
that such shares will not be transferred or disposed of except in compliance
with applicable federal and state laws. The Company may, in its sole
discretion, defer the effectiveness of any exercise of an option granted
hereunder in order to allow the issuance of Common Stock pursuant thereto to be
made pursuant to registration or an exemption from registration or other methods
for compliance available under federal or state securities laws. The Company
shall be under no obligation to effect the registration pursuant to the
Securities Act of 1933 of any Common Stock to be issued hereunder or to effect
similar compliance under any state laws.

-5-

<PAGE>

The Company shall inform the optionee in writing of its decision to
defer the effectiveness of the exercise of an option granted hereunder. During
the period that the effectiveness of the exercise of an option has been
deferred, the optionee may, by written notice, withdraw such exercise and obtain
the refund of any amount paid with respect thereto.

7. AMENDMENT OF THE PLAN

The Board of Directors of the Company may suspend or discontinue the
Plan or revise or amend it in any respect whatsoever; provided, however, that
without approval of the shareholders of the Company no revision or amendment
shall (a) increase the number of shares subject to the Plan, except as provided
in Section 5(d), (b) extend the term of the Plan, (c) extend the term for which
options may be granted beyond ten years, (d) reduce the option price at which
options may be granted to less than 100% of the fair market value of the Common
Stock on the date of the grant, or (e) in any other fashion cause the options
granted hereunder to fail to qualify as incentive stock options within the
meaning of Code Section 422.

8. EFFECTIVE DATE AND TERM OF PLAN

The Plan was adopted by the Board of Directors of the Company on
August 15, 1983, and was approved by the stockholders of the Company within 12
months thereof. The Plan was amended by the Board of Directors of the Company
on December 15, 1986 and April 9, 1991 and thereafter, to the extent necessary,
approved by the stockholders of the Company. The Plan was further amended by
the Board of Directors on December 15, 1994 to increase the number of shares of
Common Stock subject to the Plan and to extend the term of the Plan, and such
amendments to the Plan were thereafter approved by the stockholders of the
Company. The Plan was further amended on September 26, 1995 to increase the
number of shares of Common Stock subject to the Plan, and such amendment to the
Plan shall be approved by the stockholders of the Company within 12 months of
September 26, 1995. The Plan shall terminate on December 15, 2004; PROVIDED,
HOWEVER, that such termination shall in no way affect options granted prior
thereto and then outstanding. Options may be granted under the Plan at any time
prior to the termination of the Plan.

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<PAGE>

FINAL 2/13/97

GREAT PLAINS SOFTWARE, INC.
1997 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE; EFFECT ON PRIOR PLANS.

(a) PURPOSE. The purpose of the Great Plains Software, Inc. 1997
Stock Incentive Plan (the "Plan") is to promote the interests of Great Plains
Software, Inc. (the "Company") and its shareholders by aiding the Company in
attracting and retaining personnel capable of assuring the future success of the
Company, to offer such personnel incentives to put forth maximum efforts for the
success of the Company's business and to afford such personnel an opportunity to
acquire a proprietary interest in the Company.

(b) EFFECT ON PRIOR PLAN. From and after the date on which the
Company's shareholders approve this Plan, no awards or stock options shall be
granted under the Prior Plan. All outstanding stock options granted prior to
the date on which the Company's shareholders approve this Plan shall remain
outstanding in accordance with the terms of the Prior Plan.

SECTION 2. DEFINITIONS.

As used in the Plan, the following terms shall have the meanings set
forth below:

(a) "Affiliate" shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, in each
case as determined by the Committee.

(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent
or Other Stock-Based Award granted under the Plan.

(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.

(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.

(e) "Committee" shall mean a committee of the Board of Directors of
the Company designated by such Board to administer the Plan, which shall consist
of members appointed from time to time by the Board of Directors and shall be
comprised of not less than two directors. Each member of the Committee shall be
a "Non-Employee Director" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Section 162(m) of the Code. The Committee may be
the Compensation Committee of the Board of Directors, provided that the
requirements of this Section are met.

<PAGE>

(f) "Company" shall mean Great Plains Software, Inc., a Minnesota
corporation, and any successor corporation.

(g) "Dividend Equivalent" shall mean any right granted under Section
6(d) of the Plan.

(h) "Effective Date" shall mean the later of (i) the date on which
the Plan is approved by the shareholders of the Company and (ii) the date on
which the Company's registration statement relating to its initial public
offering of Shares is declared effective by the Securities and Exchange
Commission.

(i) "Eligible Person" shall mean any employee, officer, director,
consultant or independent contractor providing services to the Company or any
Affiliate who the Committee determines to be an Eligible Person.

(j) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee.

(k) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision.

(l) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.

(m) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.

(n) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.

(o) "Participant" shall mean an Eligible Person designated to be
granted an Award under the Plan.

(p) "Performance Award" shall mean any right granted under Section
6(c) of the Plan.

(q) "Person" shall mean any individual, corporation, partnership,
association or trust.

(r) "Plan" shall mean this 1997 Stock Incentive Plan, as amended from
time to time.

<PAGE>

(s) "Prior Plan" shall mean the Company's 1983 Incentive Stock Option
Plan, as amended.

(t) "Reload Option" shall mean any Option granted under Section
6(a)(iv) of the Plan.

(u) "Restricted Stock" shall mean any Share granted under Section
6(b) of the Plan.

(v) "Restricted Stock Unit" shall mean any unit granted under Section
6(b) of the Plan evidencing the right to receive a Share (or a cash payment
equal to the Fair Market Value of a Share) at some future date.

(w) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation.

(x) "Shares" shall mean shares of Common Stock, $.01 par value, of
the Company or such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.

(y) "Stock Appreciation Right" shall mean any right granted under
Section 6(e) of the Plan.

SECTION 3. ADMINISTRATION.

(a) POWER AND AUTHORITY OF THE COMMITTEE. The Plan shall be
administered by the Committee. Subject to the express provisions of the Plan
and to applicable law, the Committee shall have full power and authority to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted to each Participant under the Plan; (iii) determine the number of Shares
to be covered by (or with respect to which payments, rights or other matters are
to be calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock or other Awards; (vi)
determine whether, to what extent and under what circumstances Awards may be
exercised in cash, Shares, other securities, other Awards or other property, or
canceled, forfeited or suspended; (vii) determine whether, to what extent and
under what circumstances cash, Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award under the Plan shall
be deferred either automatically or at the election of the holder thereof or the
Committee; (viii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (ix) establish, amend,
suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; and (x) make any
other determination and take any other action that the Committee deems necessary
or desirable for the administration of the Plan. Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations and
other decisions under or with respect to the Plan or any Award shall be within

<PAGE>

the sole discretion of the Committee, may be made at any time and shall be
final, conclusive and binding upon any Participant, any holder or beneficiary of
any Award and any employee of the Company or any Affiliate.

(b) DELEGATION. The Committee may delegate its powers and duties
under the Plan to one or more officers of the Company or any Affiliate or a
committee of such officers, 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 (i) with
regard to officers or directors of the Company or any Affiliate who are subject
to Section 16 of the Securities Exchange Act of 1934, as amended or (ii) in such
a manner as would cause the Plan not to comply with the requirements of Section
162(m) of the Code.

SECTION 4. SHARES AVAILABLE FOR AWARDS.

(a) SHARES AVAILABLE. Subject to adjustment as provided in Section
4(d), the number of Shares available for granting Awards under the Plan shall be
equal to 1,000,000. In addition, any Shares granted under the Plan which are
forfeited back to the Company because of the failure to meet an Award
contingency or condition shall again be available for delivery pursuant to new
Awards granted under the Plan. Any Shares covered by an Award (or portion of an
Award) granted under the Plan, which is forfeited or canceled, expires or is
settled in cash, shall be deemed not to have been delivered for purposes of
determining the maximum number of Shares available for delivery under the Plan.
Likewise, any Shares that are used by a Participant as full or partial payment
to the Company of the purchase price relating to an Award, or in connection with
satisfaction of tax obligations relating to an Award in accordance with the
provisions of Section 8 of the Plan, shall again be available for granting
Awards under the Plan. Further, Shares issued under the Plan through the
settlement, assumption or substitution of outstanding awards or obligations to
grant future awards as a condition of the Company acquiring another entity shall
not reduce the maximum number of Shares available for delivery under the Plan.

(b) ACCOUNTING FOR AWARDS. For purposes of this Section 4, if an
Award entitles the holder thereof to receive or purchase Shares, the number of
Shares covered by such Award or to which such Award relates shall be counted on
the date of grant of such Award against the aggregate number of Shares available
for granting Awards under the Plan.

(c) INCENTIVE STOCK OPTIONS. Notwithstanding the foregoing, the
number of Shares available for granting Incentive Stock Options under the Plan
shall not exceed 1,000,000, subject to adjustment as provided in the Plan and
Section 422 or 424 of the Code or any successor provisions.

(d) ADJUSTMENTS. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an

<PAGE>

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 shall, in such manner as
it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or other property) which thereafter may be made the subject
of Awards, (ii) the number and type of Shares (or other securities or other
property) subject to outstanding Awards and (iii) the purchase or exercise price
with respect to any Award; PROVIDED, HOWEVER, that the number of Shares covered
by any Award or to which such Award relates shall always be a whole number.

(e) AWARD LIMITATIONS UNDER THE PLAN. No Eligible Person may be
granted any Award or Awards, the value of which Awards are based solely on an
increase in the value of the Shares after the date of grant of such Awards, for
more than 200,000 Shares, subject to adjustment as provided in the Plan during
any one calendar year. The foregoing limitation specifically includes the grant
of any "performance-based" Awards within the meaning of Section 162(m) of the
Code.

SECTION 5. ELIGIBILITY.

Any Eligible Person, including any Eligible Person who is an officer
or director of the Company or any Affiliate, shall be eligible to be designated
a Participant. In determining which Eligible Persons shall receive an Award and
the terms of any Award, the Committee may take into account the nature of the
services rendered by the respective Eligible Persons, their present and
potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
directors who are also employees) and an Incentive Stock Option shall not be
granted to an employee of an Affiliate unless such Affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code or any successor provision.

SECTION 6. AWARDS.

(a) OPTIONS. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

(i) EXERCISE PRICE. The purchase price per Share purchasable under
an Option shall be determined by the Committee; PROVIDED, HOWEVER, that
such purchase price shall not be less than 100% of the Fair Market Value of
a Share on the date of grant of such Option.

(ii) OPTION TERM. The term of each Option shall be fixed by the
Committee.

(iii) TIME AND METHOD OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, promissory

<PAGE>

notes, other securities, other Awards or other property, or any combination
thereof, having a Fair Market Value on the exercise date equal to the
relevant exercise price) in which, payment of the exercise price with
respect thereto may be made or deemed to have been made.

(iv) RELOAD OPTIONS. The Committee may grant Reload Options,
separately or together with another Option, pursuant to which, subject to
the terms and conditions established by the Committee and any applicable
requirements of Rule 16b-3 or any other applicable law, the Participant
would be granted a new Option when the payment of the exercise price of a
previously granted option is made by the delivery of Shares owned by the
Participant pursuant to Section 6(a)(iii) hereof or the relevant provisions
of another plan of the Company, and/or when Shares are tendered or
forfeited as payment of the amount to be withheld under applicable income
tax laws in connection with the exercise of an Option, which new Option
would be an Option to purchase the number of Shares not exceeding the sum
of (A) the number of Shares so provided as consideration upon the exercise
of the previously granted option to which such Reload Option relates and
(B) the number of Shares, if any, tendered or withheld as payment of the
amount to be withheld under applicable tax laws in connection with the
exercise of the option to which such Reload Option relates pursuant to the
relevant provisions of the plan or agreement relating to such option.
Reload Options may be granted with respect to Options previously granted
under the Plan or any other stock option plan of the Company, and may be
granted in connection with any Option granted under the Plan or any other
stock option plan of the Company at the time of such grant. Such Reload
Options shall have a per share exercise price equal to the Fair Market
Value as of the date of grant of the new Option. Any Reload Option shall
be subject to availability of sufficient Shares for grant under the Plan.

(b) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The Committee is
hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units
to Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

(i) RESTRICTIONS. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share
of Restricted Stock or the right to receive any dividend or other right or
property with respect thereto or with respect to a Restricted Stock Unit),
which restrictions may lapse separately or in combination at such time or
times, in such installments or otherwise as the Committee may deem
appropriate. Shares of Restricted Stock shall contain a restriction
providing for a vesting period of not less than one year.

(ii) STOCK CERTIFICATES. Any Restricted Stock granted under the Plan
shall be evidenced by issuance of a stock certificate or certificates or
may be in the form of a bookkeeping entry, which certificate or
certificates shall be held by the Company and which bookkeeping entry shall
be evidenced in the records of the Company's transfer agent in an account
maintained for the Participant. Such certificate or certificates, or

<PAGE>

entries on the records of the transfer agent, as the case may be, shall be
registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions and restrictions applicable to
such Restricted Stock. In the case of Restricted Stock Units, no Shares
shall be issued at the time such Awards are granted.

(iii) FORFEITURE; DELIVERY OF SHARES. Except as otherwise determined
by the Committee, upon termination of employment (as determined under
criteria established by the Committee) during the applicable restriction
period, all Shares of Restricted Stock and all Restricted Stock Units at
such time subject to restriction shall be forfeited and reacquired by the
Company; PROVIDED, HOWEVER, that the Committee may, when it finds that a
waiver would be in the best interest of the Company, waive in whole or in
part any or all remaining restrictions with respect to Shares of Restricted
Stock or Restricted Stock Units. Any Share representing Restricted Stock
that is no longer subject to restrictions shall be delivered to the holder
thereof promptly after the applicable restrictions lapse or are waived or
applicable restrictions shall be lifted from the records of the transfer
agent, as the case may be. Upon the lapse or waiver of restrictions and
the restricted period relating to Restricted Stock Units evidencing the
right to receive Shares, such Shares shall be issued and delivered to the
holders of the Restricted Stock Units.

(c) PERFORMANCE AWARDS. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award and any other terms and conditions of any
Performance Award shall be determined by the Committee.

(d) DIVIDEND EQUIVALENTS. The Committee is hereby authorized to
grant to Participants Dividend Equivalents under which such Participants shall
be entitled to receive payments (in cash, Shares, other securities, other Awards
or other property as determined in the discretion of the Committee) equivalent
to the amount of cash dividends paid by the Company to holders of Shares with
respect to a number of Shares determined by the Committee. Subject to the terms
of the Plan and any applicable Award Agreement, such Dividend Equivalents may
have such terms and conditions as the Committee shall determine.

(e) STOCK APPRECIATION RIGHTS. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under
the Plan shall confer on the holder thereof a right to receive upon exercise
thereof the excess of (i) the Fair Market Value of one Share on the date of
exercise (or, if the Committee shall so determine, at any time during a
specified period before or after the date of exercise) over (ii) the grant price
of the Stock Appreciation Right as specified by the Committee, which price shall
not be less than 100% of the

<PAGE>

Fair Market Value of one Share on the date of grant of the Stock Appreciation
Right; PROVIDED, HOWEVER, that such grant price may be less than 100% of the
Fair Market Value of one Share on the date of grant of the Stock Appreciation
Right if such right is granted to replace a stock option of the Company based on
the excess of the Fair Market Value of a Share over the exercise price of such
stock option. Subject to the terms of the Plan and any applicable Award
Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.

(f) OTHER STOCK-BASED AWARDS. The Committee is hereby authorized to
grant to Participants such other Awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
Shares (including, without limitation, securities convertible into Shares), as
are deemed by the Committee to be consistent with the purpose of the Plan;
PROVIDED, HOWEVER, that such grants must comply with Rule 16b-3 and applicable
law. Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including without limitation,
cash, Shares, promissory notes, other securities, other Awards or other property
or any combination thereof), as the Committee shall determine, the value of
which consideration, as established by the Committee, shall not be less than
100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.

(g) GENERAL.

(i) NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for
no cash consideration or for such minimal cash consideration as may be
required by applicable law.

(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in
the discretion of the Committee, be granted either alone or in addition to,
in tandem with or in substitution for any other Award or any award granted
under any plan of the Company or any Affiliate other than the Plan. Awards
granted in addition to or in tandem with other Awards or in addition to or
in tandem with awards granted under any such other plan of the Company or
any Affiliate may be granted either at the same time as or at a different
time from the grant of such other Awards or awards.

(iii) FORMS OF PAYMENT UNDER AWARDS. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by
the Company or an Affiliate upon the grant, exercise or payment of an Award
may be made in such form or forms as the Committee shall determine
(including, without limitation, (i) cash, (ii) check, (iii) other Shares
which have a Fair Market Value on the date of exercise equal to the
aggregate exercise price of said Award, (iv) authorization for the Company
to retain from the total number of Shares as to which the Award is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price of said

<PAGE>

Award, (v) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (vi)
any combination of the foregoing methods of payment or (vii) such other
consideration and method of payment for the issuance of Shares as may be
permitted under applicable laws). Such payments or transfers may be made
in a single payment or transfer, in installments or on a deferred basis, in
each case in accordance with rules and procedures established by the
Committee. Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents with respect to installment or deferred payments.

(iv) LIMITS ON TRANSFER OF AWARDS. Except as otherwise provided in
any applicable Award Agreement (other than an Award Agreement relating to
an Incentive Stock Option) pursuant to terms determined by the Committee,
no Award and no right under any Award shall be transferable by a
Participant otherwise than by will or by laws of descent and distribution
and shall be exercisable during the Participant's lifetime only by the
Participant or, if permissible under applicable law, by the Participant's
guardian or legal representative. Except as otherwise provided in any
applicable Award Agreement, no Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported
pledge, alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.

(v) TERM OF AWARDS. The term of each Award shall be for such period
as may be determined by the Committee.

(vi) RESTRICTIONS; SECURITIES EXCHANGE LISTING. All certificates for
Shares or other securities delivered under the Plan pursuant to any Award
or the exercise thereof shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations and other requirements of the Securities and
Exchange Commission and any applicable federal or state securities laws,
and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares or other securities are traded on a securities exchange, the Company
shall not be required to deliver any Shares or other securities covered by
an Award unless and until such Shares or other securities have been
admitted for trading on such securities exchange.

SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS.

Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:

(a) AMENDMENTS TO THE PLAN. The Board of Directors of the Company
may amend, alter, suspend, discontinue or terminate the Plan; PROVIDED, HOWEVER,
that, notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the shareholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:

<PAGE>

(i) would violate the rules or regulations of the National
Association of Securities Dealers, Inc. or the New York Stock Exchange or
any other securities exchange that are applicable to the Company; or

(ii) would cause the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan.

(b) AMENDMENTS TO AWARDS. The Committee may waive any conditions of
or rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, without the
consent of the Participant or holder or beneficiary thereof, except as otherwise
herein provided.

(c) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.

SECTION 8. INCOME TAX WITHHOLDING; TAX BONUSES.

(a) WITHHOLDING. In order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the Shares otherwise to be delivered upon
exercise or receipt of (or the lapse of restrictions relating to) such Award
with a Fair Market Value equal to the amount of such taxes or (ii) delivering to
the Company Shares other than Shares issuable upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes.

(b) TAX BONUSES. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions).
The Committee shall have full authority in its discretion to determine the
amount of any such tax bonus.

SECTION 9. GENERAL PROVISIONS.

(a) NO RIGHTS TO AWARDS. No Eligible Person, Participant or other
Person shall have any claim to be granted any Award under the Plan, and there is
no obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the

<PAGE>

Plan. The terms and conditions of Awards need not be the same with respect to
any Participant or with respect to different Participants.

(b) AWARD AGREEMENTS. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.

(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.

(d) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate, nor will it affect in any way the right of the Company
or an Affiliate to terminate such employment at any time, with or without cause.
In addition, the Company or an Affiliate may at any time dismiss a Participant
from employment free from any liability or any claim under the Plan, unless
otherwise expressly provided in the Plan or in any Award Agreement.

(e) GOVERNING LAW. The validity, construction and effect of the Plan
or any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the laws of the State of Minnesota.

(f) SEVERABILITY. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.

(g) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.

(h) NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.

(i) HEADINGS. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

<PAGE>

(j) OTHER BENEFITS. No compensation or benefit awarded to or
realized by any Participant under the Plan shall be included for the purpose of
computing such Participant's compensation under any compensation-based
retirement, disability, or similar plan of the Company unless required by law or
otherwise provided by such other plan.

SECTION 10. SECTION 16(b) COMPLIANCE.

The Plan is intended to comply in all respects with Rule 16b-3 or any
successor provision, as in effect from time to time and in all events the Plan
shall be construed in accordance with the requirements of Rule 16b-3. If any
Plan provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative. The Board, in its
absolute discretion, may bifurcate the Plan so as to restrict, limit or
condition the use of any provision of the Plan to participants who are officers
or directors subject to Section 16 of the Securities and Exchange Act of 1934,
as amended, without so restricting, limiting or conditioning the Plan with
respect to other participants.

SECTION 11. SHAREHOLDER APPROVAL; EFFECTIVE DATE OF THE PLAN.

The Plan shall be subject to approval by the shareholders of the
Company prior to the Effective Date. If the Plan is approved by the Company's
shareholders, the Plan shall be effective as of the Effective Date.

SECTION 12. TERM OF THE PLAN.

Awards shall only be granted under the Plan during a ten-year period
beginning on the effective date of the Plan. However, unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
theretofore granted may extend beyond the end of such ten-year period, and the
authority of the Committee provided for hereunder with respect to the Plan and
any Awards, and the authority of the Board of Directors of the Company to amend
the Plan, shall extend beyond the end of such period.

<PAGE>

GREAT PLAINS SOFTWARE, INC.
OUTSIDE DIRECTORS' STOCK OPTION PLAN

1. PURPOSE OF THE PLAN. The purpose of this Great Plains Software, Inc.
Outside Directors' Stock Option Plan is to attract and retain the best available
individuals for service as Directors of the Company and provide additional
incentive to the Outside Directors of the Company to serve as Directors. None
of the options granted hereunder shall be "incentive stock options" within the
meaning of Section 422 of the Code.

2. DEFINITIONS. As used herein, the following definitions shall apply:

(a) "BOARD" shall mean the Board of Directors of the Company.

(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.

(d) "COMPANY" shall mean Great Plains Software, Inc., a Minnesota
corporation.

(e) "CONTINUOUS STATUS AS A DIRECTOR" shall mean the absence of any
interruption or termination of service as a Director.

(f) "DIRECTOR" shall mean a member of the Board.

(g) "EFFECTIVE DATE" shall mean the date on which the Company's
registration statement relating to its initial public offering of Common Stock
becomes effective with the Securities and Exchange Commission.

(h) "EMPLOYEE" shall mean any person, including officers and
Directors, employed by the Company or any parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

(j) "IPO PRICE" shall mean the initial public offering price set
forth on the cover of the Company's final prospectus relating to its initial
public offering of Common Stock.

(k) "OPTION" shall mean a stock option granted pursuant to the Plan.

<PAGE>

(l) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.

(m) "OPTIONEE" shall mean an Outside Director who receives an Option.

(n) "OUTSIDE DIRECTOR" shall mean a Director who is not an Employee.

(o) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.

(p) "PLAN" shall mean this Outside Directors' Stock Option Plan.

(q) "SHARES" shall mean shares of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.

(r) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 425(f) of the Code.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.

4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.

(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.

(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:

(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.

(ii) Each Outside Director shall automatically be granted an
Option (an "Effective Date Grant") to purchase 3,000 shares upon the Effective
Date. Options granted under this Section 4(b)(ii) shall become vested and
thereby exercisable with respect to all shares of Optioned Stock on the twelve
(12) month anniversary of such Effective Date Grant; provided, however, that an
Option that is the subject of the Effective Date Grant shall only vest so long
as the Outside Director remains a Director on the date such option vests.

<PAGE>

(iii) Each Outside Director (other than any Outside Director who
received an Effective Date Grant) shall be automatically granted an Option (an
"Election Date Grant") to purchase 15,000 Shares upon the date on which such
person first becomes a Director, whether through election by the shareholders of
the Company or appointment by the Board of Directors to fill a vacancy. Options
granted under this section 4(b)(iii) shall become vested and thereby exercisable
in three equal installments each on each of the three twelve-month anniversary
dates following such Election Date Grant; provided, however, an Option that is
the subject of the Election Date Grant shall only vest so long as the Outside
Director remains a Director on the date such option vests.

(iv) Each Outside Director shall automatically receive, on the
date of each Annual Meeting of Shareholders held after the Effective Date, an
Option to purchase 4,000 Shares, such Option to vest and thereby become
exercisable in two equal installments, on each of the one-month anniversary of
the date of grant and the one-year anniversary of the date of grant.

(v) The terms of an Option granted hereunder shall be as
follows:

(A) The term of the Option shall be five (5) years.

(B) The Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth
in Section 8 hereof.

(c) POWERS OF THE BOARD. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with Section
7(b) of the Plan, the fair market value of the Common Stock; (ii) to determine
the exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 7(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan; (v) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option previously
granted hereunder; and (vi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.

(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

5. ELIGIBILITY; CONTINUED SERVICE AS DIRECTOR. Options may be granted
only to Outside Directors. All Options shall be automatically granted in
accordance with the terms set forth in Section 4(b) hereof.

The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his directorship at any time.

<PAGE>

6. TERM OF PLAN. The Plan shall become effective on the Effective Date.
It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 12 of the Plan.

7. EXERCISE PRICE AND CONSIDERATION.

(a) EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.

(b) FAIR MARKET VALUE. The fair market value ("Fair Market Value")
of a Share on the Effective Date shall be the IPO Price. On any other dates,
the Fair Market Value shall be determined by the Board in its discretion;
provided, however, that if there is a public market for the Common Stock, the
fair market value per Share shall be the closing price of the Common Stock in
the over-the-counter market on the date of grant of the Option, as reported in
THE WALL STREET JOURNAL (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation System) or, in
the event the Common Stock is traded on the Nasdaq National Market System or
listed on a stock exchange, the fair market value per Share shall be the closing
price on such system or exchange on the date of grant of the Option, as reported
in THE WALL STREET JOURNAL.

(c) FORM OF CONSIDERATION. Subject to compliance with applicable
provisions of Section 16(b) of the Exchange Act, (or other applicable law), the
consideration to be paid for the Shares to be issued upon exercise of an Option,
including the method of payment, shall be determined by the Board and may
consist entirely of (i) cash, (ii) check, (iii) other Shares which have a Fair
Market Value on the date of exercise equal to the aggregate exercise price of
the Shares as to which said Option shall be exercised, (iv) authorization for
the Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (v) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise price,
(vi) any combination of the foregoing methods of payment or (vii) such other
consideration and method of payment for the issuance of Shares as may be
permitted under applicable laws. In making its determination as to the type of
consideration to accept, the Board shall consider whether acceptance of such
consideration may be reasonably expected to benefit the Company.

8. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4(b) hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.

An Option may not be exercised for a fraction of a Share.

<PAGE>

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 10 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he may, but only within five (5) years after the
date he ceases to be a Director of the Company, or by the date of termination of
the Option, whichever is earlier, exercise his Option to the extent that he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise an Option at the date of such termination, or if he
does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.

(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 8(b) above, in the event an Optionee is unable to continue his service
as a Director with the Company as a result of his total and permanent disability
(as defined in Section 22(e)(3) of the Code) he may, but only within seven (7)
months from the date of termination, exercise his Option to the extent he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of termination, or if he
does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.

(d) DEATH OF OPTIONEE. Notwithstanding the provisions of Section
8(b) above, in the event of the death of an Optionee:

(i) during the term of the Option who is at the time of his
death a Director of the Company and who has been in Continuous Status as a
Director since the date of grant of the Option, the Option may be exercised, at
any time within six months following the date of death, by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status as a
Director for six months after the date of death; or

(ii) within thirty (30) days after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within six months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by

<PAGE>

bequest or inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.

9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION OR MERGER.

(a) In the event that the number of outstanding shares of Common
Stock of the Company is changed by a stock dividend, stock split, reverse stock
split, combination, reclassification or similar change in the capital structure
of the Company without consideration, the number of Shares available under this
Plan and the number of Shares subject to outstanding Options and the exercise
price per share of such Options shall be proportionately adjusted, subject to
any required action by the Board or shareholders of the Company and compliance
with applicable securities laws; provided, however, that no certificate or scrip
representing fractional shares shall be issued upon exercise of any Option and
any resulting fractions of a Share shall be ignored. Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive.

(b) In the event of a dissolution or liquidation of the Company, a
merger in which the Company is not the surviving corporation, a transaction or
series of related transactions in which 100% of the then outstanding voting
stock is sold or otherwise transferred, or the sale of substantially all of the
assets of the Company, any or all outstanding Options shall, notwithstanding any
contrary terms of the written agreement governing such Option, accelerate and
become exercisable in full at least ten days prior to (and shall expire on) the
consummation of such dissolution, liquidation, merger or sale of stock or sale
of assets on such conditions as the Board shall determine unless the successor
corporation assumes the outstanding Options or substitutes substantially
equivalent options.

11. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.

12. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuance shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act (or any other applicable law or regulation), the Company shall
obtain shareholder approval of any Plan amendment in such a manner and to such a
degree as required.

(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in

<PAGE>

full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.

13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

14. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of the Shares available
for issuance pursuant to this Plan as shall be sufficient to satisfy the
requirements of the Plan.

15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company prior to the Effective Date.

<PAGE>

GREAT PLAINS SOFTWARE, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN

ARTICLE I. INTRODUCTION

Section 1.01 PURPOSE. The purpose of the Great Plains Software, Inc.
1997 Employee Stock Purchase Plan (the "Plan") is to provide employees of Great
Plains Software, Inc., a Minnesota corporation (the "Company"), and certain
related corporations with an opportunity to share in the ownership of the
Company by providing them with a convenient means for regular and systematic
purchases of the Company's Common Stock, par value $.01 per share, and, thus, to
develop a stronger incentive to work for the continued success of the Company.

Section 1.02 RULES OF INTERPRETATION. It is intended that the Plan
be an "employee stock purchase plan" as defined in Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations
promulgated thereunder. Accordingly, the Plan shall be interpreted and
administered in a manner consistent therewith if so approved. All Participants
in the Plan will have the same rights and privileges consistent with the
provisions of the Plan.

Section 1.03 DEFINITIONS. For purposes of the Plan, the following
terms will have the meanings set forth below:

(a) "ACCELERATION DATE" means the earlier of the date of stockholder
approval or approval by the Company's Board of Directors of (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company
Common Stock would be converted into cash, securities or other property,
other than a merger of the Company in which stockholders of the Company
immediately prior to the merger have the same proportionate ownership of
stock in the surviving corporation immediately after the merger; (ii) any
sale, exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company; or
(iii) any plan of liquidation or dissolution of the Company.

(b) "AFFILIATE" means any subsidiary corporation of the Company, as
defined in Section 424(f) of the Code, whether now or hereafter acquired or
established.

(d) "COMMON STOCK" means the Company's Common Stock, $.01 par value,
as such stock may be adjusted for changes in the stock or the Company as
contemplated by Article XI herein.

<PAGE>

(e) "COMPANY" means Great Plains Software, Inc., a Minnesota
corporation, and its successors by merger or consolidation as contemplated
by Article XI herein.

(f) "CURRENT COMPENSATION" means all salary and wages paid for
purposes of Section 415(c)(3) of the Code by the Company to a Participant
in accordance with the terms of his or her employment.

(g) "EFFECTIVE DATE" means the date on which the Company's
registration statement relating to its initial public offering of Common
Stock is declared effective by the Securities and Exchange Commission.

(h) "FAIR MARKET VALUE" as of a given date means such value of the
Common Stock as reasonably determined by the Committee, but shall not be
less than (i) the closing price of the Common Stock as reported for
composite transactions if the Common Stock is then traded on a national
securities exchange or (ii) the last sale price if the Common Stock is then
quoted on the Nasdaq National Market; provided, however, that the Fair
Market Value on the Effective Date shall be the initial public offering
price set forth on the cover of the final prospectus used in connection
with the Company's initial public offering of Common Stock. If on a given
date the Common Stock are not traded on an established securities market,
the Committee shall make a good faith attempt to satisfy the requirements
of this Section 1.03 and in connection therewith shall take such action as
it deems necessary or advisable.

(i) "PARTICIPANT" means a Permanent Full-Time Employee who is
eligible to participate in the Plan under Section 2.01 and who has elected
to participate in the Plan.

(j) "PARTICIPATING AFFILIATE" means an Affiliate which has been
designated by the Committee in advance of the Purchase Period in question
as a corporation whose eligible Permanent Full-Time Employees may
participate in the Plan.

(k) "PERMANENT FULL-TIME EMPLOYEE" means an employee of the Company
or a Participating Affiliate as of the first day of a Purchase Period,
including an officer or director who is also an employee, but excluding an
employee whose customary employment is less than 20 hours per week.

(l) "PLAN" means the Great Plains Software, Inc. 1997 Employee Stock
Purchase Plan, as amended, the provisions of which are set forth herein.

(m) "PURCHASE PERIOD" means any of the approximate six-month periods
beginning on the first business day in January and July, as appropriate,
and ending on the last business day in June and December, respectively;
provided, however, that the initial Purchase Period will commence on the
Effective Date and will terminate on the last business day preceding the
first business day in January or July, as appropriate,

<PAGE>

immediately following the Effective Date, and that the then current
Purchase Period will end upon the occurrence of an Acceleration Date.

(n) "STOCK PURCHASE ACCOUNT" means the account maintained on the
books and records of the Company recording the amount received from each
Participant through payroll deductions made under the Plan and from the
Company through matching contributions.

ARTICLE II. ELIGIBILITY AND PARTICIPATION

Section 2.01 ELIGIBLE EMPLOYEES. All Permanent Full-Time Employees
shall be eligible to participate in the Plan beginning on the first day of the
first Purchase Period to commence after such person becomes a Permanent
Full-Time Employee. Subject to the provisions of Article VI, each such employee
will continue to be eligible to participate in the Plan so long as he or she
remains a Permanent Full-Time Employee.

Section 2.02 ELECTION TO PARTICIPATE. An eligible Permanent
Full-Time Employee may elect to participate in the Plan for a given Purchase
Period by filing with the Company, in advance of that Purchase Period and in
accordance with such terms and conditions as the Committee in its sole
discretion may impose, a form provided by the Company for such purpose (which
authorizes regular payroll deductions from Current Compensation beginning with
the first payday in that Purchase Period and continuing until the employee
withdraws from the Plan or ceases to be eligible to participate in the Plan).

Section 2.03 LIMITS ON STOCK PURCHASE. No employee shall be granted
any right to purchase Common Stock hereunder if such employee, immediately after
such a right to purchase is granted, would own, directly or indirectly, within
the meaning of Section 423(b)(3) and Section 424(d) of the Code, Common Stock
possessing 5% or more of the total combined voting power or value of all the
classes of the capital stock of the Company.

Section 2.04 VOLUNTARY PARTICIPATION. Participation in the Plan on
the part of a Participant is voluntary and such participation is not a condition
of employment nor does participation in the Plan entitle a Participant to be
retained as an employee.

ARTICLE III. PAYROLL DEDUCTIONS, COMPANY
CONTRIBUTIONS AND STOCK PURCHASE ACCOUNT

Section 3.01 DEDUCTION FROM PAY. The form described in Section 2.02
will permit a Participant to elect payroll deductions of any multiple of 1% but
not less than 1% or more than 10% of such Participant's Current Compensation for
each pay period, subject to such other limitations as the Committee in its sole
discretion may impose. A Participant may cease making payroll deductions at any
time, subject to such limitations as the Committee in its sole discretion may
impose.

<PAGE>

Section 3.02 COMPANY CONTRIBUTIONS. The Company may, in the sole
discretion of the Committee, from time to time contribute to each Participant's
Stock Purchase Account an amount equal to up to 50% of each payroll deduction
credited to such Account. No Company contributions shall be deemed to have been
made until such contributions are credited to the Participant's Stock Purchase
Account as provided in Section 3.03.

Section 3.03 CREDIT TO ACCOUNT. Payroll deductions will be credited
to the Participant's Stock Purchase Account on each payday, and Company
contributions will be credited to the Participant's Stock Purchase Account on
the last business day of the Purchase Period at the time of and in connection
with the purchase of shares of Common Stock in accordance with Articles IV and V
hereof.

Section 3.04 INTEREST. No interest will be paid upon payroll
deductions, Company contributions or on any amount credited to, or on deposit
in, a Participant's Stock Purchase Account.

Section 3.05 NATURE OF ACCOUNT. The Stock Purchase Account is
established solely for accounting purposes, and all amounts credited to the
Stock Purchase Account will remain part of the general assets of the Company or
the Participating Affiliate (as the case may be).

Section 3.06 NO ADDITIONAL CONTRIBUTIONS. A Participant may not make
any payment into the Stock Purchase Account other than the payroll deductions
made pursuant to the Plan.

ARTICLE IV. RIGHT TO PURCHASE SHARES

Section 4.01 NUMBER OF SHARES. Each Participant will have the right
to purchase on the last business day of the Purchase Period all, but not less
than all, of the largest number of whole shares of Common Stock that can be
purchased at the price specified in Section 4.02 with the entire credit balance
in the Participant's Stock Purchase Account, subject to the limitations that (a)
no more than 1,250 shares of Common Stock may be purchased under the Plan by any
one Participant for a given Purchase Period and (b) in accordance with Section
423(b)(8) of the Code, no more than $25,000 in Fair Market Value (determined at
the beginning of each Purchase Period) of Common Stock and other stock may be
purchased under the Plan and all other employee stock purchase plans (if any) of
the Company and the Affiliates by any one Participant for any calendar year. If
the purchases for all Participants would otherwise cause the aggregate number of
shares of Common Stock to be sold under the Plan to exceed the number specified
in Section 10.03, each Participant shall be allocated a pro rata portion of the
Common Stock to be sold.

Section 4.02 PURCHASE PRICE. The purchase price for any Purchase
Period shall be the lesser of (a) 85% of the Fair Market Value of the Common
Stock on the first business day of that Purchase Period or (b) 85% of the Fair
Market Value of the Common Stock on the last business day of that Purchase
Period, in each case rounded up to the next higher full cent.

<PAGE>

ARTICLE V. EXERCISE OF RIGHT

Section 5.01 PURCHASE OF STOCK. On the last business day of a
Purchase Period, the entire credit balance in each Participant's Stock Purchase
Account will be used to purchase the largest number of whole shares of Common
Stock purchasable with such amount (subject to the limitations of Section 4.01),
unless the Participant has filed with the Company, in advance of that date and
subject to such terms and conditions as the Committee in its sole discretion may
impose, a form provided by the Company which requests the distribution of the
entire credit balance in cash.

Section 5.02 CASH DISTRIBUTIONS. Any amount remaining in a
Participant's Stock Purchase Account after the last business day of a Purchase
Period will be paid to the Participant in cash within 30 days after the end of
that Purchase Period.

Section 5.03 NOTICE OF ACCELERATION DATE. The Company shall use its
best efforts to notify each Participant in writing at least ten days prior to
any Acceleration Date that the then current Purchase Period will end on such
Acceleration Date.

ARTICLE VI. WITHDRAWAL FROM PLAN; SALE OF STOCK

Section 6.01 VOLUNTARY WITHDRAWAL. A Participant may, in accordance
with such terms and conditions as the Committee in its sole discretion may
impose, withdraw from the Plan and cease making payroll deductions by filing
with the Company a form provided for this purpose. In such event, the entire
credit balance in the Participant's Stock Purchase Account will be paid to the
Participant in cash within 30 days, provided that in no event shall any
Participant be entitled to withdraw from such Account any Company contributions
credited to such Account at the end of the Purchase Period pursuant to Section
3.03. A Participant who withdraws from the Plan will not be eligible to reenter
the Plan until the beginning of the next Purchase Period following the date of
such withdrawal.

Section 6.02 DEATH. Subject to such terms and conditions as the
Committee in its sole discretion may impose, upon the death of a Participant, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's death occurred and in accordance with Section 5.01, the entire
credit balance in such Participant's Stock Purchase Account will be used to
purchase Common Stock, unless such Participant's estate has filed with the
Company, in advance of that day and subject to such terms and conditions as the
Committee in its sole discretion may impose, a form provided by the Company
which elects to have the entire credit balance in such Participant's Stock
Account distributed in cash within 30 days after the end of that Purchase Period
or at such earlier time as the Committee in its sole discretion may decide,
provided that in no event shall any Participant's estate be entitled to receive
from such Account any Company contributions credited to such Account at the end
of the Purchase Period pursuant to Section 3.03. Each Participant, however, may
designate one or more beneficiaries who, upon death, are to receive the Common
Stock or the amount that otherwise would have been distributed or paid

<PAGE>

to the Participant's estate and may change or revoke any such designation from
time to time. No such designation, change or revocation will be effective
unless made by the Participant in writing and filed with the Company during the
Participant's lifetime. Unless the Participant has otherwise specified the
beneficiary designation, the beneficiary or beneficiaries so designated will
become fixed as of the date of the death of the Participant so that, if a
beneficiary survives the Participant but dies before the receipt of the payment
due such beneficiary, the payment will be made to such beneficiary's estate.

Section 6.03 TERMINATION OF EMPLOYMENT. Subject to such terms and
conditions as the Committee in its sole discretion may impose, upon a
Participant's normal or early retirement with the consent of the Company under
any pension or retirement plan of the Company or Participating Affiliate, no
further amounts shall be credited to the Participant's Stock Purchase Account.
Thereafter, on the last business day of the Purchase Period during which such
Participant's approved retirement occurred and in accordance with Section 5.01,
the entire credit balance in such Participant's Stock Purchase Account will be
used to purchase Common Stock, unless such Participant has filed with the
Company, in advance of that day and subject to such terms and conditions as the
Committee in its sole discretion may impose, a form provided by the Company
which elects to receive the entire credit balance in such Participant's Stock
Purchase Account in cash within 30 days after the end of that Purchase Period,
provided that (i) in no event shall any Participant be entitled to receive from
such Account any Company contributions credited to such Account at the end of
the Purchase Period pursuant to Section 3.03, and (ii) such Participant shall
have no right to purchase Common Stock in the event that the last day of such a
Purchase Period occurs more than three months following the termination of such
Participant's employment with the Company by reason of such an approved
retirement. In the event of any other termination of employment (other than
death) with the Company or a Participating Affiliate, participation in the Plan
will cease on the date the Participant ceases to be a Permanent Full-Time
Employee for any reason. In such event, the entire credit balance in such
Participant's Stock Purchase Account will be paid to the Participant in cash
within 30 days, provided that in no event shall any Participant be entitled to
receive from such Account any Company contributions credited to such Account at
the end of the Purchase Period pursuant to Section 3.03. For purposes of this
Section 6.03, a transfer of employment to any Affiliate, or a leave of absence
which has been approved by the Committee, will not be deemed a termination of
employment as a Permanent Full-Time Employee.

ARTICLE VII. NONTRANSFERABILITY

Section 7.01 NONTRANSFERABLE RIGHT TO PURCHASE. The right to
purchase Common Stock hereunder may not be assigned, transferred, pledged or
hypothecated (whether by operation of law or otherwise), except as provided in
Section 6.02, and will not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition or levy of attachment or similar process upon the right to purchase
will be null and void and without effect.

Section 7.02 NONTRANSFERABLE ACCOUNT. Except as provided in Section
6.02, the amounts credited to a Stock Purchase Account may not be assigned,
transferred, pledged or

<PAGE>

hypothecated in any way, and any attempted assignment, transfer, pledge,
hypothecation or other disposition of such amounts will be null and void and
without effect.

ARTICLE VIII. STOCK CERTIFICATES

Section 8.01 DELIVERY. Promptly after the last day of each Purchase
Period and subject to such terms and conditions as the Committee in its sole
discretion may impose, the Company will cause to be delivered to or for the
benefit of the Participant a certificate representing the Common Stock purchased
on the last business day of such Purchase Period.

Section 8.02 SECURITIES LAWS. The Company shall not be required to
issue or deliver any certificate representing Common Stock prior to registration
under the Securities Act of 1933, as amended, or registration or qualification
under any state law if such registration is required. The Company shall use its
best efforts to accomplish such registration (if and to the extent required) not
later than a reasonable time following the Purchase Period, and delivery of
certificates may be deferred until such registration is accomplished.

Section 8.03 COMPLETION OF PURCHASE. A Participant shall have no
interest in the Common Stock purchased until a certificate representing the same
is issued to or for the benefit of the Participant.

Section 8.04 FORM OF OWNERSHIP. The certificates representing Common
Stock issued under the Plan will be registered in the name of the Participant or
jointly in the name of the Participant and another person, as the Participant
may direct on a form provided by the Company.

ARTICLE IX. EFFECTIVE DATE, AMENDMENT AND
TERMINATION OF PLAN

Section 9.01 EFFECTIVE DATE. The Plan was approved by the Board of
Directors on February 13, 1997 and shall be approved by the stockholders of the
Company prior to the Effective Date.

Section 9.02 PLAN COMMENCEMENT. The initial Purchase Period under
the Plan will commence on the Effective Date. Thereafter, each succeeding
Purchase Period will commence and terminate in accordance with Section 1.03(l).

Section 9.03 POWERS OF BOARD. The Board of Directors may amend or
discontinue the Plan at any time. No amendment or discontinuation of the Plan,
however, shall without stockholder approval be made that: (i) absent such
stockholder approval, would cause Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Act") to become unavailable with respect to the Plan,
(ii) requires stockholder approval under any rules or regulations of the
National Association of Securities Dealers, Inc. or any securities exchange that
are applicable to the Company, or (iii) permit the issuance of Common Stock
before payment therefor in full.

<PAGE>

Section 9.04 AUTOMATIC TERMINATION. Subject to the last sentence of
Section 4.01, the Plan shall automatically terminate when all of the shares of
Common Stock provided for in Section 10.03 have been sold.

ARTICLE X. ADMINISTRATION

Section 10.01 THE COMMITTEE. The Plan shall be administered by a
committee (the "Committee") of two or more directors of the Company, none of
whom shall be officers or employees of the Company and all of whom shall be
"disinterested persons" with respect to the Plan within the meaning of Rule
16b-3 under the Act. The members of the Committee shall be appointed by and
serve at the pleasure of the Board of Directors. The Committee may be the
Compensation Committee of the Board of Directors, provided that the requirements
of the first sentence of this Section 10.01 are met.

Section 10.02 POWERS OF COMMITTEE. Subject to the provisions of the
Plan, the Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan, to establish
deadlines by which the various administrative forms must be received in order to
be effective, and to adopt such other rules and regulations for administering
the Plan as it may deem appropriate. The Committee shall have full and complete
authority to determine whether all or any part of the Common Stock acquired
pursuant to the Plan shall be subject to restrictions on the transferability
thereof or any other restrictions affecting in any manner a Participant's rights
with respect thereto but any such restrictions shall be contained in the form by
which a Participant elects to participate in the Plan pursuant to Section 2.02.
Decisions of the Committee will be final and binding on all parties who have an
interest in the Plan.

Section 10.03 STOCK TO BE SOLD. The Common Stock to be issued and
sold under the Plan may be treasury shares or authorized but unissued shares, or
the Company may purchase Common Stock in the market for sale under the Plan.
Except as provided in Section 11.01, the aggregate number of shares of Common
Stock to be sold under the Plan will not exceed 400,000 shares.

Section 10.04 NOTICES. Notices to the Committee should be addressed
as follows:

Great Plains Software, Inc.
1701 S.W. 38th Street
Fargo, North Dakota 58103
Attention: Vice President, Human Resources

ARTICLE XI. ADJUSTMENT FOR CHANGES
IN STOCK OR COMPANY

Section 11.01 STOCK DIVIDEND OR RECLASSIFICATION. If the outstanding
shares of Common Stock are increased, decreased, changed into or exchanged for a
different number or

<PAGE>

kind of securities of the Company, or shares of a different par value or without
par value, through reorganization, recapitalization, reclassification, stock
dividend, stock split, amendment to the Company's Certificate of Incorporation,
reverse stock split or otherwise, an appropriate adjustment shall be made in the
maximum numbers and kind of securities to be purchased under the Plan with a
corresponding adjustment in the purchase price to be paid therefor.

Section 11.02 MERGER OR CONSOLIDATION. If the Company is merged into
or consolidated with one or more corporations during the term of the Plan,
appropriate adjustments will be made to give effect thereto on an equitable
basis in terms of issuance of shares of the corporation surviving the merger or
of the consolidated corporation, as the case may be.

ARTICLE XII. APPLICABLE LAW

Rights to purchase Common Stock granted under the Plan shall be
construed and shall take effect in accordance with the laws of the State of
Minnesota.

<PAGE>

NON-INCENTIVE STOCK OPTION AGREEMENT

THIS AGREEMENT, made this 9th day of April, 1991 by and between
Great Plains Software, Inc., a Minnesota corporation (the "Company"), and
Raymond F. Good, a director of the Company (the "Optionee").

The Company wishes to grant a stock option to the Optionee and has
taken all necessary actions to grant the following option.

Accordingly, in consideration of the agreement hereinafter set forth,
the parties hereto hereby agree as follows:

1. GRANT OF OPTION

The Company hereby grants to the Optionee the right and option (an
"option") to purchase all or any part of an aggregate of 11,000 shares of Common
Stock, par value $.01 per share, of the Company (the "Common Stock") at the
price of $5.21 per share on the terms and conditions set forth herein. This
option is not intended to be an incentive stock option within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

2. TERM AND EXERCISE

(a) This option shall in all events terminate six (6) years from the
date of grant.

(b) Subject to the provisions of subparagraph (c) below, this option
may be exercised only as follows: (i) during the first year from the date of
grant of this option, this option may not be exercised; (ii) after the date one
year from the date of grant, this option may be exercised with respect to
one fifth of the total number of shares of Common Stock to which this option
relates, (iii) after the date two years from the date of grant, this option may
be exercised with respect to an additional one-fifth of the total number of
shares of Common Stock to which this option relates; (iv) after the date three
years from the date of grant, this option may be exercised with respect to an
additional one-fifth of the total number of shares of Common Stock to which this
option relates; (v) after the date four years from the date of grant, this
option may be exercised with respect to an additional one-fifth of the total
number of shares of Common Stock to which this option relates; and (vi) after
the date five years from the date of grant, this option may be exercised with
respect to the remaining one-fifth of the total number of shares of Common Stock
to which this option relates. In the event that the Optionee does not purchase
in any of the above-described periods the full number of shares of Common Stock
to which he or she is entitled under this option, the Optionee may, subject to
the terms and conditions of Section 3 hereof, purchase such remaining shares at
any subsequent time during the term of this option. During the lifetime of the
Optionee, this

<PAGE>

option shall be exercisable only by the Optionee and shall not be transferable
by the Optionee otherwise than by will or the laws of descent and distribution.

(c) Notwithstanding subparagraph (b) above, this option shall
automatically become exercisable in full in the event, and on the date, that the
Company enters into any agreement to sell, lease or otherwise dispose of all or
substantially all of its assets, or to consolidate or merge into any other
corporation or entity.

3. EFFECT OF CEASING TO BE A DIRECTOR

(a) Except as otherwise provided in subparagraphs (b) and (c) below,
in the event that the Optionee shall cease to be a director of the Company or
its subsidiaries, if any, for any reason, the Board of Directors of the Company
may, in its absolute discretion, terminate this option as of the date of such
cessation or any date thereafter.

(b) In the event that the Optionee shall cease to be a director of
the Company or its subsidiaries, if any, by reason of his or her gross or
willful misconduct during the course of his or her directorship, including but
not limited to the commission of a gross misdemeanor or felony, this option
shall be terminated as of the date of such misconduct.

(c) If the Optionee shall die while a director of the Company or a
subsidiary, if any, or become disabled (within the meaning of Code Section
22(e)(3)) while a director of the Company or a subsidiary, if any, and the
Optionee shall not have fully exercised this option, this option may be
exercised at any time within twelve months after such death or disability by the
executors, administrators or guardians of the Optionee, as applicable or by any
person or persons to whom this option is transferred by will or the applicable
laws of descent and distribution, to the extent of the full number of shares the
Optionee was entitled to purchase under this option on the date of such death or
disability, subject to the condition that this option shall not be exercisable
after the expiration of the term hereof.

4. MANNER OF EXERCISE

(a) This option can be exercised only by the Optionee or other proper
party (as set forth in Section 3 hereof) within the option period by delivering
written notice to the Company at its principal office in Fargo, North Dakota,
stating the number of shares of Common Stock as to which this option is being
exercised and accompanied by payment in full of the option price for all shares
designated in the notice.

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<PAGE>

(b) The Optionee may pay the option price in cash or by bank
check, certified check or personal check or, with the approval of the Board of
Directors, by delivering to the Company Common Stock owned by him or her (and
with the certificates therefor registered in his or her name) having a fair
market value equal to the option price. For these purposes, the fair market
value of the Common Stock shall be the average of the closing representative bid
and asked prices of the Common Stock as reported on the National Association of
Securities Dealers Automated Quotation System, if applicable, or, if the Common
Stock is then traded on a national securities exchange, the closing price of the
Common Stock on such exchange, or, if the Common Stock is not publicly traded,
as otherwise reasonably determined by the Company.

5. ADJUSTMENTS

If the Optionee exercised all or any portion of this option subsequent
to any change in the number of shares or character of the Common Stock through
merger, consolidation, reorganization, recapitalization, stock dividend or
otherwise, the Optionee shall then receive for the aggregate price paid on such
exercise of this option the number and type of securities or other consideration
which he or she would have received if this option had been exercised prior to
the event changing the number or character of outstanding shares.

6. SECURITIES LAW MATTERS

The Optionee hereby represents and agrees that any shares which he may
acquire pursuant to the exercise of this option will be acquired for Optionee's
own account, for long-term investment purposes and not with a view toward the
distribution or sale thereof. Optionee acknowledges that under the terms of the
Plan to which this Agreement is subject, effectiveness of any exercise hereof
and the issuance of shares to the Optionee upon any such exercise of this option
may be delayed in order to permit the Company to comply at such time with
relevant federal and state securities laws in connection with such issuance. The
Optionee acknowledges that the Company is not, and will at no time be, under any
obligation to Optionee to register any shares issued upon exercise hereof under
any federal or state securities laws and that, consequently: (a) at the time of
acquisition such shares may not be registered under either federal or applicable
state securities laws, (b) the Company will be relying upon the foregoing
investment representation of Optionee in agreeing to issue such shares to
Optionee; (c) the transferability of such shares may be subject to restrictions
imposed by all applicable federal and state securities laws on unregistered
shares and (d) the certificates evidencing such shares may be imprinted with an
appropriate legend setting forth such restrictions on transferability.

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<PAGE>

7. RESTRICTION ON TRANSFER OF SHARES

Optionee shall not sell, transfer, exchange, pledge or otherwise
dispose of or encumber any of the shares which the Optionee has acquired
pursuant to this option unless Optionee shall first offer to sell such shares to
the Company in accordance with Section 8 of this Agreement.

8. RIGHT OF FIRST REFUSAL

If Optionee wishes to dispose of or encumber any of the shares
which Optionee has acquired pursuant to this option, Optionee shall deliver
written notice to the Company, which notice shall specify the person to whom
such shares are to be disposed of or encumbered, the purchase price or other
consideration to be received by the Optionee for such shares, and the terms
upon which such purchase price or other consideration is to be paid. The
delivery of such written notice to the Company shall constitute an
irrevocable offer by the Optionee to sell such shares to the Company upon the
same terms and conditions as are specified in the notice or, at the Company's
option, on the terms and conditions set forth in Section 9 hereof. The
Company may accept such offer by delivering a written acceptance to Optionee
within 60 days after receipt of the written notice from Optionee. If the
Company elects to accept such offer, the purchase of the shares shall be
closed within 30 days upon the same terms and conditions as are specified in
Optionee's written notice, or upon the terms set forth in Section 9, if the
Company selects that option. If the Company elects not to accept such offer
or if the Company allows such offer to expire without being accepted,
Optionee shall be able to dispose of or encumber such shares on the terms
specified in the written notice to the Company to the person identified
therein. If such transaction is not consummated within 90 days, such shares
shall again be subject to the restrictions and the purchase option described
in this Section 8.

9. ADDITIONAL REPURCHASE RIGHTS

(a) Upon the occurrence of any one of the following events (the
"Option Events"), the Company shall have the irrevocable right and option to
repurchase all, but not less than all, of the shares which Optionee acquired
pursuant to this option:

(i) In the event of the death of Optionee;

(ii) In the event that Optionee ceases to be a director of the
Company for any reason whatsoever, whether such cessation is
voluntary, involuntary, with or without cause;

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<PAGE>

(iii) In the event that Optionee attempts to transfer any of such
shares in violation of the provisions of Section 7 hereof; or

(iv) In the event that persons holding a majority of the
outstanding shares of the Company's capital stock notify
Optionee, in writing, that they wish to sell their shares to
a bona fide third party who has offered to purchase such
shares, and Optionee does not within 15 days after receipt of
such notice, notify Company and the other shareholders that
Optionee will sell shares on substantially the same terms as
specified in the notice from the majority shareholders.

The Company shall exercise its repurchase right under this Section 9, if at all,
by delivery of a written notice of exercise to Optionee within 60 days after the
later of (i) the date of occurrence of the relevant Option Events or (ii) the
date that the Company receives notice of the occurrence of such Option Event.
The closing of the repurchase of such shares shall take place within 30 days
after delivery of the notice of exercise to the Optionee, and at the closing the
Company shall make payment of the purchase price for such shares against tender
by the Optionee of the certificates evidencing such shares, which certificates
shall be duly endorsed in blank.

(b) The repurchase price payable for the shares pursuant to this
Section 9 shall be as follows:

(i) if the date of occurrence of the Option Event is on or before
the first anniversary of the date such shares were acquired
by exercise of this option (the "Exercise Date"), the
repurchase price per share shall be an amount equal to the
purchase price per share paid to acquire the shares upon
exercise of this option, subject to appropriate adjustment
for the occurrence of any event set forth in Section 5 above
after the Exercise Date;

(ii) if the date of occurrence of the Option Event is after the
first anniversary of the Exercise Date but on or before the
second anniversary of the Exercise Date, the repurchase price
per share shall be equal to 60% of Net Sales Per Share (as
defined below);

(iii) if the date of occurrence of the Option Event is after the
second anniversary of the Exercise Date but on or before the
third anniversary of the Exercise Date, the repurchase price
per share shall be equal to 70% of Net Sales Per Share (as
defined below); and

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<PAGE>

(iv) if the date of occurrence of the Option Event is after the
third anniversary of the Exercise Date, the repurchase price
per share shall be equal to 75% of Net Sales Per Share (as
defined below).

For purposes of this Section 9(b), "Net Sales Per Share" as of the date of
occurrence of the Option Event shall equal the quotient obtained by dividing (i)
the net sales of the Company (defined as gross revenues minus returns) for the
period made up of the twelve consecutive calendar months immediately preceding
the calendar month during which the Option Event occurred, as conclusively shown
by the unaudited monthly financial statements of the Company for such twelve
months, by (ii) the total number of shares of capital stock of the Company
outstanding on the date of occurrence of the Option Events as conclusively shown
by the official stock record of the Company.

10. LEGEND

The Optionee agrees that each certificate representing shares which
the Optionee (or other proper party as set forth in Section 3 hereof) may
acquire pursuant to exercise of this option may be imprinted with a legend
describing the transfer restrictions and repurchase rights set forth in this
Agreement.

11. DEFINITION OF SHARES

As used in Sections 7, 8 and 9 hereof, references to shares which the
Optionee has acquired pursuant to this option shall be deemed to include, in
addition to the shares of Common Stock, $.01 par value, described in Section 1
hereof and acquired by Optionee, any securities received in respect of such
shares in a stock split, stock dividend, reorganization, reclassification or
recapitalization or in a merger or consolidation involving the Company or a sale
of all or substantially all of the Company's assets.

12. MISCELLANEOUS

(a) Neither the granting of this option, nor this Agreement nor any
action taken pursuant to this Agreement shall constitute, or be evidence of, any
agreement or understanding, express or implied, that the Company will retain
Optionee as a director for any period of time, or at any particular rate of
compensation. Optionee shall have none of the rights of a stockholder with
respect to shares of Common Stock subject to this option until such shares shall
have been issued to him or her upon exercise of this option.

(b) The Company shall at all times during the term of this option
reserve and keep available such number of shares of Common Stock as shall be
sufficient to satisfy the requirements of this Agreement.

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<PAGE>

(c) In order to provide the Company with the opportunity to claim the
benefit of any income tax deduction which may be available to it upon the
exercise of this option, and in order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that, if necessary, all applicable federal or state
payroll, withholding, income or other taxes are withheld or collected from
Optionee.

(d) This Agreement shall be construed and enforced in accordance with
the laws of the State of North Dakota.

(e) This Agreement evidences the entire understanding and agreement
of the parties hereto relative to the purchase of the shares by the Optionee.
This Agreement supersedes any and all other agreements and understandings,
whether written or oral, relative to the matters discussed herein. This
Agreement may only be amended by a written document signed by both of the
parties hereto.

(f) The parties hereto agree that the shares relating to this
Agreement constitute a unique asset and that it is impossible to measure in
money the damages that will accrue to the Company in the event that Optionee
fails to comply with the obligations and commitments hereunder. Accordingly, in
the event an action is instituted by the Company to enforce the provisions of
this Agreement, the Company may proceed by specific performance, and Optionee
hereby waives the claim or defense therein that the Company has an adequate
remedy at law.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first set forth above.

GREAT PLAINS SOFTWARE, INC.

By /s/ Michael A Slette
-------------------------
Its V.P. Finance
-------------------------

/s/ Raymond F. Good
-------------------------
Raymond F. Good

-7-

<PAGE>

EMPLOYMENT AGREEMENT

Great Plains Software, Inc. ("Great Plains") and Douglas J. Burgum
("Executive"), President and Chief Executive Officer ("CEO") of Great Plains,
enter into this Employment Agreement ("Agreement") with respect to the terms and
conditions of Executive's employment with Great Plains.

WHEREAS, Executive has served as a Director, the President and CEO of
Great Plains;

WHEREAS, Executive desires to continue his employment as President and
CEO of Great Plains and to obtain the new rights in the terms and conditions of
his employment set forth in this Agreement;

WHEREAS, GS Capital Partners, L.P. and certain other affiliates of The
Goldman Sachs Group, L.P. (collectively, "Goldman Sachs") have agreed to make a
substantial capital investment into Great Plains by purchasing certain Great
Plains convertible preferred stock in reliance on the acknowledgments and
promises Executive has made in this Agreement and because Executive has agreed
to assume the contractual obligations set forth in this Agreement;

NOW THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Great Plains and
Executive agree as follows:

I. DESCRIPTION OF DUTIES.

Executive shall perform all duties normally attendant to his position
and such duties as Great Plains may from time-to-time prescribe. Throughout the
period of employment, Executive shall devote his full-time efforts during normal
business hours to the business and affairs of Great Plains, and shall perform
his assigned duties diligently, faithfully and to the full extent of his
abilities. Executive shall at all times perform his duties with undivided
loyalty and shall not knowingly perform any act contrary to Great Plains' best
interests.

II. TERM OF EMPLOYMENT.

A. Subject to the provisions of Section VI of this Agreement, Great
Plains shall employ Executive as President and CEO of Great Plains from the date
of execution of this Agreement to and including June 1, 1997. This period shall
hereinafter be referred to as the "Term".

<PAGE>

B. Executive acknowledges that this Term of employment constitutes a
valuable benefit of employment to which he was not entitled prior to execution
of this Agreement.

III. EXCLUSIVITY OF EMPLOYMENT.

Executive represents and warrants that there are no agreements or
arrangements, whether written or oral, in effect which would prevent him from
rendering exclusive services to Great Plains during the Term hereof, and that he
has not made and will not make any commitment, agreement or arrangement, or do
any act in conflict with this Agreement. Executive shall devote his full
employment energies, interest, abilities and time to the performance of
obligations hereunder. Executive shall not, without the prior written consent
of the Board of Directors of Great Plains render to others any service of any
kind for compensation, or engage in any business activity that interferes with
Executive's performance of his duties or in any other way conflicts with
Employer's best interests, regardless of whether it is pursued for gain or
profit.

IV. COMPENSATION.

A. Provided that Executive has kept and performed all of his
obligations hereunder Great Plains shall pay to Executive a base salary in the
amount of One Hundred Sixty Seven Thousand and no/100 dollars ($167,000.00) per
annum during the Term of this Agreement, to be paid in accordance with Great
Plains' normal payroll practices and subject to such deductions or withholdings
as are required by law for taxes and similar charges. Executive shall receive
the above-named salary at his regular rate of pay for all hours worked by him in
a week regardless of the number of hours he may work. Great Plains may, at the
sole discretion of its Board of Directors, provide Executive with an annual
raise and/or bonus consistent with Great Plains' annual raise and/or bonus
practices and subject to the performance of Executive.

B. The compensation herein provided for Executive shall constitute
full payment for the services of Executive rendered to Great Plains. Executive
shall not receive any additional compensation for extraordinary services unless
such services, prior to their rendition, are authorized by the Board of
Directors of Great Plains in writing.

C. Employer shall provide to Executive an automobile for use in the
performance of his duties under this Agreement and shall reimburse Executive for
all reasonable costs associated with the use of the automobile for performance
of his duties under this Agreement.

-2-

<PAGE>

D. Employer shall annually afford Executive four (4) weeks of paid
vacation available to the Executive at the beginning of each fiscal year.

V. EXECUTIVE BENEFITS AND EXPENSE REIMBURSEMENT.

A. Executive shall be eligible to participate in Great Plains'
benefits plans for salaried executives including, but not limited to, medical,
life, accidental death and dismemberment and short and long term disability
insurance. Great Plains retains the right to cancel, alter, or amend any of its
employee benefit plans and other fringe benefits which Executive may receive or
may have received.

B. Executive shall be entitled to reimbursement for expenses
reasonably incurred by Executive in connection with the performance of his
duties during the Term, upon presentation of evidence reasonably satisfactory to
Great Plains of the amounts and nature of such expenses.

VI. TERMINATION.

A. Great Plains may terminate this Agreement upon a decision of the
Board of Directors (1) on Executive's death; (2) after ten-days advance written
notice, upon Executive's incapacity or inability to perform his assigned duties
and responsibilities for ninety (90) consecutive days because of an impairment
of Executive's physical or mental health that prevents him from performing any
of the essential functions of his job; or (3) after fourteen-days advance
written notice, for "cause". "Cause" shall mean:

(a) Executive's material breach of any of the terms of this Agreement;

(b) Executive's refusal or failure to comply with reasonable lawful orders
or directives issued by the Board of Directors of Great Plains
consistent with this Agreement, if such refusal or failure is repeated
after notice of refusal or failure;

(d) Executive's material violation of any statutory or common law duty of
loyalty to Great Plains.

-3-

<PAGE>

continued base salary, bonus, or benefits except as required under the law or
under the terms of the benefits plans as existing on the date of termination or
resignation.

VII. CONFIDENTIAL INFORMATION.

A. Executive acknowledges that the successful development,
distribution and marketing of Great Plains' current and future products,
including but not limited to its current and future financial accounting
software products, require substantial time and expense. Such efforts generate
for Great Plains secret information and other valuable and proprietary
information (collectively, "Confidential Information") which gives Great Plains
significant business advantages over others in the software industry who do not
have such information. Confidential Information includes, but is in no way
limited to, the following:

(1) Information relating to the software source and object code, source
code design and configuration, algorithms, user-interface design and
lay-out, development plans, development tools and development
techniques and methods of Great Plains' current and future software
products;

(2) Information relating to the development, lay-out and design of user
manuals and documentation for Great Plains' current and future
software products;

(3) Information relating to the advertising and marketing plans, and
pricing plans and formulae for Great Plains' current and future
products;

(4) Contracts and negotiation strategies and practices involved in the
sale and distribution of Great Plains' current and future products;

-4-

<PAGE>
business relationship, including but not limited to lists of Partners
and Partner contacts;

(6) Information relating to current and prospective user-customers of
Great Plains, including but not limited to user-customer lists and
user-customer service and support data; and

(7) Processes, techniques, methods, policies and practices involved in the
training and development of the personnel of Great Plains.

B. Executive acknowledges that during the course of his employment
with Great Plains he has used and obtained, and will continue to use and obtain,
knowledge of such Confidential Information. Executive acknowledges that Great
Plains has significant business advantages over its competitors in the software
industry due to Great Plains' Confidential Information and relationships with
its Partners.

VIII. RELATIONSHIPS WITH PARTNERS.

Executive acknowledges that Great Plains has undertaken substantial
time and expense in developing its business relationship with its Partners, that
Great Plains has obtained valuable and proprietary information relating to each
of its Partners' unique needs, wishes and concerns, and that Great Plains has
developed substantial goodwill with its Partners as a result of these efforts.
Executive additionally acknowledges that he has obtained and used this valuable
and proprietary information and has participated in, and/or directly supervised,
the development of Great Plains' relationships with its Partners.

IX. PROTECTION OF CONFIDENTIAL INFORMATION.

Executive agrees to undertake the following obligations which he
acknowledges to be reasonably designed to protect Great Plains' legitimate
business interests without restricting or restraining his post-employment
professional, trade and business opportunities:

A. In the event that his employment with Great Plains ends for any reason
and whether voluntarily or involuntarily, Executive will immediately
turn over to Great Plains all of its property, whether in original or
copied form, including but not limited to files, lists, contracts,
notes, manuals, reports, records, tapes, films, graphics, charts,
computer programs and other forms of computer media, or other
documents or things containing, in any form in whole or in part, any
of Great Plains' Confidential Information;

-5-

<PAGE>

B. During his employment with Great Plains, and after the voluntary or
involuntary cessation of his employment with Great Plains for any
reason, Executive agrees forever

(1) to hold in confidence; and

(2) not at any time, in any way, directly or indirectly, to use for
his own benefit or the benefit of some other person, firm,
corporation or other entity, or to divulge, disclose or
communicate to any person, firm, corporation or other entity;

any Confidential Information unless with the written consent of Great
Plains or unless at that time the information has become generally and
lawfully known to Great Plains' competitors. This provision shall in
no way be interpreted to preclude Executive from using, divulging,
disclosing or communicating Confidential Information as required in
the fulfillment of his duties as an employee of Great Plains.

X. NON-SOLICITATION OF EMPLOYEES.

Executive acknowledges that Great Plains has devoted considerable time
and expense to the training and development of its employees. He also
acknowledges that Great Plains' employees use and have substantial exposure to
Great Plains' Confidential Information. Accordingly, in the event that his
employment with Great Plains ends for any reason and whether voluntarily or
involuntarily, he will not for a period of two (2) years after the cessation of
his employment induce, or assist in the inducement of, any management or other
key employee away from Great Plains or from the faithful discharge of any of the
employee's contractual, fiduciary or other obligations to serve Great Plains
with undivided loyalty.

XI. PROTECTION OF NEW IDEAS.

Executive acknowledges that any and all inventions, discoveries,
improvements and patentable or copyrightable works (collectively, "New Ideas")
that are initiated, conceived or made by him during his employment with Great
Plains and that relate to the business or activities of Great Plains are the
property solely of Great Plains, whether or not reduced to writing or practice
during the period of his employment. Executive agrees that he has disclosed as
of the date of execution of this Agreement, and he will continue promptly to
disclose, to Great Plains all New Ideas that he initiated, conceived or made,
either alone or in conjunction with others. Executive agrees that he will
assign to Great Plains all of his rights and interest in any such New Ideas and
will, upon request by Great Plains, and at its expense, execute any and all
applications, assignments or other

-6-

<PAGE>

instruments that Great Plains may deem necessary to apply for and obtain patents
of the United States or any foreign country or to protect otherwise and keep
protected the interest of Great Plains in any New Ideas. Executive's
obligations under this paragraph shall continue until fulfilled, shall not be
affected by the cessation of his employment with Great Plains and shall be
binding on his assigns, executors, administrators and/or other legal
representatives to the extent that any of them can fulfill those left
unfulfilled by Executive.

XII. REMEDIES.

A. Executive agrees that the services to be rendered by him
pursuant to this Agreement, and the acknowledgments, rights and privileges
granted to Great Plains by him pursuant to this Agreement, are of a special,
unique, extraordinary and intellectual character, which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in any action at law, and that a breach by him of any of the terms of
this Agreement will cause great and irreparable injury and damage to Great
Plains. Accordingly, Executive agrees that, in the event that he breaches any
term of this Agreement, Great Plains shall have a right to equitable relief,
including, but not limited to a temporary restraining order, preliminary
injunction, permanent injunction and/or order of specific performance, as a
remedy to enforce this Agreement. Executive agrees that Great Plains shall be
entitled to the remedies of injunction, specific performance and other equitable
relief as available under applicable law to prevent a threatened or potential
breach of this Agreement by him. Executive and Great Plains agree to reimburse
the prevailing party in any legal proceeding for all costs and expenses
including reasonable attorneys' fees incurred in connection with the enforcement
of his or its rights under any provision of this Agreement.

B. Executive agrees that Great Plains may file any litigation
relating to the enforcement of this Agreement in the Fourth Judicial District
Minnesota District Court or the United States District Court for the District of
Minnesota. For purposes of the enforcement of this Agreement, Executive
consents to the personal jurisdiction of the federal and state courts within the
State of Minnesota.

XIII. ASSIGNS AND SUCCESSORS.

Executive agrees that Great Plains' rights under this Agreement shall
inure to the benefit of and shall be binding upon its successors and assigns.
In the event of the merger or consolidation of Great Plains with any other
corporation or corporations, the sale by Great Plains of a major portion of its
assets, or of its business and good will, or any other corporate reorganization
involving Great Plains, this Agreement may be assigned and transferred to such
successor in interest as an asset of Great Plains.

-7-

<PAGE>

XIV. INTEGRATION AND MODIFICATION OF AGREEMENT.

This Agreement, and the Shareholders' Agreement executed
contemporaneously with this Agreement contain the entire understanding of the
parties and supersede all prior written or oral agreements, representations
or understandings. This Agreement may be modified only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.

XV. WAIVER.

Great Plains' failure to insist upon strict compliance with any of the
terms, conditions or covenants expressed in this Agreement shall not be deemed a
waiver of such term, condition or covenant, or any other term, condition or
covenant, nor shall any waiver or relinquishment of any right or power under
this Agreement at one time or times be deemed a waiver or relinquishment of such
right or power or any other right or power at any other time or times.

XVI. INTERPRETATION OF TERMS.

Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law;
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

XVII. MEDIATION OF DISPUTES.

Executive shall not initiate legal proceedings of any nature in any
forum against Great Plains or any of its directors, officers or employees,
relating in any way to this Agreement, Executive's employment with Great Plains,
or the termination of his employment, until 30 days after Great Plains receives
written notice from Executive of the specific nature of any purported claims and
the amount of any purported damages. Executive further agrees that in the event
that Great Plains submits Executive's claim to the American Arbitration
Association or the Center for Public Resources for nonbinding mediation prior to
the expiration of such 30-day period, Executive may not institute legal
proceedings until the earlier of: (A) the completion of mediation efforts with
the good faith participation of Executive in such efforts; or (B) 90 days after
the date on which Great Plains received written notice of Executive's claim.

* * *

-8-

<PAGE>

The parties have read, understand, and freely accept all of the
provisions in this Agreement. The parties represent that each has sought and
received independent legal advice from an attorney of its or his choice with
respect to the meaning of the provisions in this Agreement.

DOUGLAS J. BURGUM GREAT PLAINS SOFTWARE, INC.

/s/ Douglas J. Burgum By: /s/ Michael A. Slette
- -------------------------------- ------------------------------

Dated: June 24, 1994 Dated: June 24, 1994
--------------- ----------------
Moorhead, Minnesota Moorhead, Minnesota

-9-

<PAGE>

EMPLOYMENT AGREEMENT

Great Plains Software, Inc. ("Great Plains") and Ray August
("Executive"), Vice President, Research and Development ("VPRD") of Great
Plains, enter into this Employment Agreement ("Agreement") with respect to the
terms and conditions of Executive's employment with Great Plains.

WHEREAS, Executive has served as the VPRD of Great Plains;

WHEREAS, Executive desires to continue his employment as VPRD of Great
Plains and to obtain the new rights in the terms and conditions of his
employment set forth in this Agreement;

I. DESCRIPTION OF DUTIES.

II. TERM OF EMPLOYMENT.

A. Subject to the provisions of Section VI of this Agreement, Great
Plains shall employ Executive as VPRD of Great Plains from the date of execution
of this Agreement to and including June 1, 1997. This period shall hereinafter
be

<PAGE>

referred to as the "Term". Unless a party hereto shall give notice of non-
renewal to the other party hereto prior to April 30, 1997, the Term shall be
automatically extended to June 1, 1999.

B. Executive acknowledges that this Term of employment constitutes a
valuable benefit of employment to which he was not entitled prior to execution
of this Agreement.

III. EXCLUSIVITY OF EMPLOYMENT.

IV. COMPENSATION.

A. Provided that Executive has kept and performed all of his
obligations hereunder, Great Plains shall pay to Executive a Base Salary
(adjusted as provided below, the "Base Salary") in the amount of One Hundred
Fifty Thousand and no/100 dollars ($150,000.00) per annum during the Term of
this Agreement, to be paid in accordance with Great Plains' normal payroll
practices and subject to such deductions or withholdings as are required by law
for taxes and similar charges. Executive shall receive the above-named salary
at his regular rate of pay for all hours worked by him in a week regardless of
the number of hours he may work. Great Plains' Chief Executive Officer, after
consultation with Executive, may provide Executive with an annual raise in the
Base Salary and/or bonus consistent with Great Plains' annual raise and/or bonus
practices and subject to the performance of Executive.

<PAGE>

C. Employer shall pay Executive Four Hundred and No/100 Dollars
($400.00) per month as reasonable costs associated with the use of an automobile
for performance of his duties under this Agreement.

D. Employer shall annually afford Executive four (4) weeks of paid
vacation available to the Executive at the beginning of each fiscal year.

V. EXECUTIVE BENEFITS AND EXPENSE REIMBURSEMENT.

VI. TERMINATION.

A. Great Plains may terminate this Agreement upon a decision of the
Chief Executive officer of Great Plains (1) on Executive's death; (2) after
fourteen-days advance written notice, upon Executive's incapacity or inability
to perform his assigned duties and responsibilities for ninety (90) consecutive
days because of an impairment of Executive's physical or mental health that
prevents him from performing any of the essential functions of his job; or (3)
after fourteen-days advance written notice, for "cause". "Cause" shall mean:

(a) Executive's material breach of any of the terms of this
Agreement;

(b) Executive's refusal or failure to comply with reasonable lawful
orders or directives issued by the Board of Directors or the
President of Great Plains consistent with this Agreement, if such
refusal or failure is repeated after notice of refusal or
failure;

(d) Executive's material violation of any statutory or common law
duty of loyalty to Great Plains.

<PAGE>

B. If Great Plains terminates this Agreement upon Executive's death,
upon his incapacity or inability, or for "cause" as defined in this Section, or
if Executive voluntarily resigns from his employment with Great Plains during
the Term of this Agreement, Executive and his beneficiaries shall not be
entitled to any continued Base Salary, bonus, or benefits except as required
under the law or under the terms of the benefits plans as existing on the date
of termination or resignation.

C. Employer may terminate this Agreement at any time without "cause"
as defined in this Section before expiration of the Term of this Agreement,
provided that if Great Plains terminates this Agreement without "cause" and not
because of Executive's death or incapacity or inability as defined in this
Section, Great Plains shall pay to Executive the following for two (2) years
following written notice of termination: the Base Salary as set forth in Section
IV of this Agreement less any earned income ("Earned Income") that Executive
receives from any other source (other than investment income or reimbursement
for expenses) during such two-year period. Such payments shall be made in
accordance with Great Plains' normal payroll practices as if Great Plains
continues to employ Executive. In the event that Executive is entitled to
compensation under this Paragraph No. VI.C., Great Plains may reasonably require
that Executive certify his employment and income status on a monthly basis
during the two-year period after his employment with Great Plains ends.

VII. Confidential Information.

(2) Information relating to the development, lay-out and design of user
manuals and documentation for Great Plains' current and future
software products;

<PAGE>

(3) Information relating to the advertising and marketing plans, and
pricing plans and formulae for Great Plains' current and future
products;

(4) Contracts and negotiation strategies and practices involved in the
sale and distribution of Great Plains' current and future products;

(5) Information relating to current and prospective value-added resellers
and other distribution intermediaries (collectively, "Partners") with
which Great Plains has developed, or will attempt to develop, a
business relationship, including but not limited to lists of Partners
and Partner contacts;

(6) Information relating to current and prospective user-customers of
Great Plains, including but not limited to user-customer lists and
user-customer service and support data; and

(7) Processes, techniques, methods, policies and practices involved in the
training and development of the personnel of Great Plains.

VIII. RELATIONSHIPS WITH PARTNERS.

IX. PROTECTION OF CONFIDENTIAL INFORMATION.

Executive agrees to undertake the following obligations which he
acknowledges to be reasonably designed to protect Great Plains' legitimate
business interests without restricting or

<PAGE>

restraining his post-employment professional, trade and business opportunities:

A. In the event that his employment with Great Plains ends for any
reason and whether voluntarily or involuntarily, Executive will
immediately turn over to Great Plains all of its property,
whether in original or copied form, including but not limited to
files, lists, contracts, notes, manuals, reports, records, tapes,
films, graphics, charts, computer programs and other forms of
computer media, or other documents or things containing, in any
form in whole or in part, any of Great Plains' Confidential
Information;

B. During his employment with Great Plains, and after the voluntary
or involuntary cessation of his employment with Great Plains for
any reason, Executive agrees forever

(1) to hold in confidence; and

(2) not at any time, in any way, directly or indirectly, to use
for his own benefit or the benefit of some other person,
firm, corporation or other entity, or to divulge, disclose
or communicate to any person, firm, corporation or other
entity;

any Confidential Information unless with the written consent of
Great Plains or unless at that time the information has become
generally and lawfully known to Great Plains' competitors. This
provision shall in no way be interpreted to preclude Executive
from using, divulging, disclosing or communicating Confidential
Information as required in the fulfillment of his duties as an
employee of Great Plains.

C. Executive agrees that after the date of cessation of his
employment with Great Plains (hereinafter, the "Cessation Date"),
whatever the reason for such cessation of employment, whether
voluntarily or involuntarily and whether before or after the
expiration of the Term, he will not during the Non Competition
Period (as such period is defined below):

(1) Control or own (directly or indirectly) more than 2% of any
outstanding capital stock of any corporation other than
Great Plains which has engaged, is engaged, or which intends
to become engaged, in the business of developing, producing,
manufacturing, marketing and/or selling in the United
States, Canada or the United Kingdom any financial
accounting software product; or

<PAGE>

(2) Serve as

(a) an officer, director, contractor, agent, advisor or
employee of any corporation wherever located; or

(b) a member, contractor, agent, advisor or employee of any
partnership wherever located; or

which has engaged, is engaged, or which intends to become
engaged, in the business of designing, developing,
producing, manufacturing, marketing, selling and/or
supporting in the United States, Canada or the United
Kingdom any financial accounting software product. However,
if a company has divisions or subsidiaries that do not
engage as described above in the business of financial
accounting software products, Executive may work for that
division or subsidiary.

As used in this Agreement, the term "Non-Competition Period"
shall mean (i) if the Cessation Date occurs during the Term, two
years; and (ii) if the Cessation Date occurs after the Term, such
period of time, not to exceed two years, as Great Plains
continues to pay Executive the Base Salary less any Earned
Income.

X. NON-SOLICITATION OF EMPLOYEES.

Executive acknowledges that Great Plains has devoted considerable time
and expense to the training and development of its employees. He also
acknowledges that Great Plains, employees use and have substantial exposure to
Great Plains' Confidential Information. Accordingly, in the event that his
employment with Great Plains ends for any reason and whether voluntarily or
involuntarily, he will not for a period of two (2) years after the cessation of
his employment induce, or assist in the inducement of, any management or other
key employee away from Great Plains or from the faithful discharge of any of the
employee's contractual, fiduciary or other obligations to serve Great Plains
with undivided loyalty.

XI. PROTECTION OF NEW IDEAS.

Executive acknowledges that any and all inventions, discoveries,
improvements and patentable or copyrightable works

<PAGE>

(collectively, "New Ideas") that are initiated, conceived or made by him during
his employment with Great Plains and that relate to the business or activities
of Great Plains are the property solely of Great Plains, whether or not reduced
to writing or practice during the period of his employment. Executive agrees
that he has disclosed as of the date of execution of this Agreement, and he will
continue promptly to disclose, to Great Plains all New Ideas that he initiated,
conceived or made, either alone or in conjunction with others. Executive agrees
that he will assign to Great Plains all of his rights and interest in any such
New Ideas and will, upon request by Great Plains, and at its expense, execute
any and all applications, assignments or other instruments that Great Plains may
deem necessary to apply for and obtain patents of the United States or any
foreign country or to protect otherwise and keep protected the interest of Great
Plains in any New Ideas. Executive's obligations under this paragraph shall
continue until fulfilled, shall not be affected by the cessation of his
employment with Great Plains and shall be binding on his assigns, executors,
administrators and/or other legal representatives to the extent that any of them
can fulfill those left unfulfilled by Executive.

XII. REMEDIES.

A. Executive agrees that the services to be rendered by him pursuant
to this Agreement, and the acknowledgments, rights and privileges granted to
Great Plains by him pursuant to this Agreement, are of a special, unique,
extraordinary and intellectual character, which gives them a peculiar value, the
loss of which cannot be reasonably or adequately compensated in damages in any
action at law, and that a breach by him of any of the terms of this Agreement
will ca-use great and irreparable injury and damage to Great Plains.
Accordingly, Executive agrees that, in the event that he breaches any term of
this Agreement, Great Plains shall have a right to equitable relief, including,
but not limited to a temporary restraining order, preliminary injunction,
permanent injunction and/or order of specific performance, as a remedy to
enforce this Agreement. Executive agrees that Great Plains shall be entitled to
the remedies of injunction, specific performance and other equitable relief as
available under applicable law to prevent a threatened or potential breach of
this Agreement by him. Executive and Great Plains agree to reimburse the
prevailing party in any legal proceeding for all costs and expenses including
reasonable attorneys' fees incurred in connection with the enforcement of his or
its rights under any provision of this Agreement.

<PAGE>

to the personal jurisdiction of the federal and state courts within the State of
Minnesota.

XIII. ASSIGNS AND SUCCESSORS.

Executive agrees that Great Plains' rights under this Agreement shall
inure to the benefit of and shall be binding upon its successors and assigns.
In the event of the merger or consolidation of Great Plains with any other
corporation or corporations, the sale by Great Plains of a major portion of its
assets, or-of its business and good will, or any other corporate reorganization
involving Great Plains, this Agreement may be assigned and transferred to such
successor in interest as an asset of Great Plains.

XIV. INTEGRATION AND MODIFICATION OF AGREEMENT.

This Agreement and the Stock Option Agreements dated October 29, 1992,
and July 14, 1993, contain the entire understanding of the parties and supersede
all other written or oral agreements, representations or understandings. This
Agreement may be modified only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension, or
discharge is sought.

XV. WAIVER.

Great Plains, failure to insist upon strict compliance with any of the
terms, conditions or covenants expressed in this Agreement shall not be deemed a
waiver of such term, condition or covenant, or any other term, condition or
covenant, nor shall any waiver or relinquishment of any right or power under
this Agreement at one time or times be deemed a waiver or relinquishment of such
right or power or any other right or power at any other time or times.

XVI. INTERPRETATION OF TERMS.

Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

<PAGE>

Executive's claim to the American Arbitration Association or the Center for
Public Resources for nonbinding mediation prior to the expiration of such 30-day
period, Executive may not institute legal proceedings until the earlier or: (A)
the completion of mediation efforts with the good faith participation of
Executive in such efforts; or B) 90 days after the date on which Great Plains
received written notice of Executive's claim.

* * *

RAY AUGUST GREAT PLAINS SOFTWARE, INC.

/s/ Raymond August By: Michael A. Slette
- ---------------------------- --------------------------

Dated: June 24, 1994 Dated: June 24, 1994
---------------------- -----------------------
Moorhead, Minnesota Moorhead, Minnesota

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

REGISTRATION RIGHTS AGREEMENT

DATED AS OF JUNE 24, 1994

BY AND AMONG

GREAT PLAINS SOFTWARE, INC.

AND

THE HOLDERS OF REGISTRABLE SECURITIES
NAMED ON THE SIGNATURE PAGES HERETO

- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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This Table of contents is not part of the Agreement to which it is
attached but is inserted for convenience only.

Page
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Section 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1

Section 2. DEMAND REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . 6
(a) DEMANDS FOR REGISTRATION. . . . . . . . . . . . . . . . . . . 6
(b) LIMITATIONS ON DEMAND REGISTRATIONS . . . . . . . . . . . . . 7
(c) REGISTRATION STATEMENT FORM . . . . . . . . . . . . . . . . . 7
(d) REGISTRATION EXPENSES . . . . . . . . . . . . . . . . . . . . 7
(e) PRIORITY IN CUTBACK REGISTRATIONS . . . . . . . . . . . . . . 8
(f) PREEMPTION OF DEMAND REGISTRATION . . . . . . . . . . . . . . 8

Section 3. PIGGYBACK REGISTRATIONS . . . . . . . . . . . . . . . . . . . 8
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES . . . . . . . . . . . 8
(b) REGISTRATION EXPENSES . . . . . . . . . . . . . . . . . . . . 9
(c) PRIORITY IN CUTBACK REGISTRATIONS . . . . . . . . . . . . . . 9

Section 4. REGISTRATION PROCEDURES . . . . . . . . . . . . . . . . . . . 9

Section 5. UNDERWRITTEN OFFERINGS. . . . . . . . . . . . . . . . . . . . 14
(a) UNDERWRITTEN OFFERINGS IN CONNECTION WITH DEMAND REGISTRATION 14
(b) UNDERWRITTEN PIGGYBACK OFFERINGS. . . . . . . . . . . . . . . 15

Section 6. HOLDBACK AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 16
(a) BY THE HOLDERS . . . . . . . . . . . . . . . . . . . . . . . 16
(b) BY THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . 16

Section 7. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 16
(a) INDEMNIFICATION BY THE COMPANY. . . . . . . . . . . . . . . . 16
(b) INDEMNIFICATION BY THE SELLERS. . . . . . . . . . . . . . . . 17
(c) NOTICES OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . 18
(d) CONTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) OTHER INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 20
(f) INDEMNIFICATION PAYMENTS. . . . . . . . . . . . . . . . . . . 20

Section 8. COVENANTS RELATING TO RULE 144. . . . . . . . . . . . . . . . 20

Section 9. NO EXISTING AGREEMENTS. . . . . . . . . . . . . . . . . . . . 21

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Section 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 22
(c) AMENDMENT; TERMINATION. . . . . . . . . . . . . . . . . . . . 22
(d) WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(e) CONSENTS AND WAIVERS BY HOLDERS . . . . . . . . . . . . . . . 23
(f) NO THIRD PARTY BENEFICIARY. . . . . . . . . . . . . . . . . . 23
(g) SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . 23
(h) HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(i) INVALID PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 23
(j) REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(k) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 24
(l) COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 24

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REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT dated as of June 24, 1994 is made
and entered into by and among Great Plains Software, Inc., a Minnesota
corporation (the "Company"), and the Persons named on the signature pages hereto
as Investors (the "Investors"). Capitalized terms not otherwise defined herein
have the meanings set forth in SECTION 1.

WHEREAS, simultaneously herewith the Company is issuing and selling,
and the Investors are purchasing from the Company, 888,576 shares and the
Company is agreeing to issue and sell and the Investors are agreeing to purchase
from the Company, upon the satisfaction of certain conditions, an additional
282,088 shares of Series B Convertible Preferred Stock, par value $.01
(collectively, the "Series B Preferred Stock"), and Warrants (the "WARRANTS") to
purchase 752,234 shares of Series B Preferred Stock pursuant to the Preferred
Stock and Warrant Purchase Agreement dated the date hereof (the "STOCK PURCHASE
AGREEMENT") among the Company and the Investors;

WHEREAS, in order to induce the Investors to enter into the Stock
Purchase Agreement and to purchase shares of Series B Preferred Stock and
Warrants, the Company is entering into this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

SECTION 1. DEFINITIONS.

(a) Except as otherwise specifically indicated, the following terms
will have the following meanings for all purposes of this Agreement:

"AGREEMENT" means this Registration Rights Agreement, as the same
shall be amended from time to time.

"ARTICLES OF INCORPORATION" means the Second Amended and Restated
Articles of Incorporation (including the Certificates of Designations
establishing the Series A Convertible Preferred Stock of the Company and the
Series B Preferred Stock).

"BOARD" means the Board of Directors of the Company.

"BUSINESS DAY" means any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of New York) on which banks are open for
business in New York City.

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"COMMISSION" means the United States Securities and Exchange
Commission, or any successor governmental agency or authority.

"COMMON STOCK" means the Common Stock, par value $.01 per share, of
the Company, as constituted on the date hereof, and any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock.

"COMPANY" has the meaning ascribed to it in the preamble.

"CUTBACK REGISTRATION" means any Demand Registration or Piggyback
Registration to be effected as an underwritten Public Offering in which the
Managing Underwriter with respect thereto advises the Company and the Requesting
Holders in writing that, in its opinion, the number of securities requested to
be included in such registration (including securities of the Company which are
not Registrable Securities) exceeds the number which can be sold in such
offering without a reduction in the selling price anticipated to be received for
the securities to be sold in such Public Offering.

"DEMAND FOR REGISTRATION" has the meaning ascribed to it in SECTION
2(a).

"DEMAND REGISTRATION" means any registration of Registrable Securities
under the Securities Act effected pursuant to a Demand for Registration in
accordance with SECTION 2.

"EFFECTIVE REGISTRATION" means, subject to the last sentence of
SECTION 2(f), a Demand Registration which (i) has been declared or ordered
effective in accordance with the rules of the Commission, and (ii) has been kept
effective for the period of time contemplated by SECTION 4(b). Notwithstanding
the foregoing, a registration that does not become effective after it has been
filed with the Commission solely by reason of the refusal to proceed of the
Holders demanding or requesting such registration shall be deemed to be an
Effective Registration for purposes of this Agreement.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

"HOLDER" means the holder of Registrable Securities, provided that all
references in this Agreement to the Holders shall be deemed to include holders
of shares of Series B Preferred Stock, and each such Holder shall be deemed to
hold the number of Shares that are at the time issuable upon the conversion of
the shares of Series B Preferred Stock held by such Holder pursuant to the terms
of the Articles of Incorporation; PROVIDED, HOWEVER, that unless a Person (i) is
an Investor or (ii)

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holds Shares (assuming the conversion of any shares of Series B Preferred Stock
held by such Person into Shares) that constitute at least 3% of the Total
Shares, such Person shall not be deemed to be a Holder or to hold Registerable
Securities.

"INDEMNIFIED PARTY" means a party entitled to indemnity in accordance
with SECTION 7.

"INDEMNIFYING PARTY" means a party obligated to provide
indemnification in accordance with SECTION 7.

"INSPECTORS" has the meaning ascribed to it in SECTION 4(j).

"INVESTORS" has the meaning ascribed to it in the preamble.

"LOSSES" has the meaning ascribed to it in SECTION 7(a).

"MANAGING UNDERWRITER" means, with respect to any underwritten Public
Offering, the lead managing underwriter for such offering.

"NASD" means the National Association of Securities Dealers, Inc.

"NOTICE OF DEMAND FOR REGISTRATION" has the meaning ascribed to it in
SECTION 2(a).

"NOTICE OF PIGGYBACK REGISTRATION" has the meaning ascribed to it in
SECTION 3(a).

"PERSON" means any natural person, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union
or association.

"PIGGYBACK REGISTRATION" means any registration of equity securities
of the Company under the Securities Act other than (i) a registration in respect
of a dividend reinvestment or similar plan for stockholders of the Company or on
(ii) a registration on Form s-4 or Form S-8 promulgated by the Commission (or
any successor or similar forms thereto) or any other form for a limited purpose,
whether for sale for the account of the Company or for the account of any holder
of securities of the Company (other than Registrable Securities), including a
registration by the Company under the circumstances described in SECTION 2(f).

"PUBLIC OFFERING" means any offering of Shares to the public, either
on behalf of the Company or any of its securityholders, pursuant to an effective
registration statement under the Securities Act.

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"QUALIFIED INDEPENDENT UNDERWRITER" means an underwriter meeting the
requirements of Section 2(1) of Schedule E to the NASD By-Laws as the same may
be amended from time to time.

"QUALIFYING HOLDER" means any Holder who, alone or together with one
or more other Holders, holds Registrable Securities that constitute at least
twelve percent (12%) of the Total Shares.

"RECORDS" has the meaning ascribed to it in SECTION 4(n).

"REGISTRABLE SECURITIES" means the Shares at any time outstanding or
subject to issuance upon conversion of the shares of Series B Preferred Stock
into Shares pursuant to the terms of the Articles of Incorporation and that are
owned by any of the Investors (or any Person that acquires such Shares or such
Series B Preferred Stock from any such Investor). Once issued, Shares shall
cease to be Registrable Securities when (x) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (y) they shall have been distributed to the
public pursuant to Rule 144, or (z) they shall have ceased to be outstanding.

"REGISTRATION EXPENSES" means all expenses incident to the Company's
performance of or compliance with its obligations under this Agreement to effect
the registration of Registrable Securities in a Demand Registration or a
Piggyback Registration, including, without limitation, all registration, filing,
securities exchange listing and NASD fees, all registration, filing,
qualification and other fees and expenses of complying with securities or blue
sky laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for the Company and of
its independent public accountants, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, the reasonable fees and disbursements of a single counsel and single
firm of accountants retained by the Holders of a majority of the Registrable
Securities being registered (provided that the fees and disbursements of such
counsel and accountants for which the Company shall be responsible shall not
exceed $50,000 and the Company shall be responsible for such fees and
disbursements only in the case of the first Demand Registration or, if the first
Demand Registration has not occurred, in the case of a Piggyback Registration
following the election by the Company to effect an underwritten primary
registration in lieu of a Demand Registration, as contemplated by SECTION 2(f),
premiums and other costs of any policies of insurance against liabilities
arising out of the Public Offering of the Registrable Securities being
registered obtained by the Company (it being understood that the Company shall
have no obligation to obtain such insurance) and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting discounts and

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commissions and transfer taxes, if any, in respect of Registrable Securities,
which discounts, commissions, and taxes in respect of Registrable Securities
shall in any Demand or Piggyback Registration be payable by the Holders thereof
PRO RATA among such Holders in proportion to the number of Registrable
Securities being sold by them.

"REQUEST FOR REGISTRATION" means a written request by a Holder to the
Company for registration of Registrable Securities in response to a Notice of
Demand for Registration or a Notice of Piggyback Registration, which request
shall specify the Registrable Securities intended to be disposed of and the
intended method of disposition thereof.

"REQUESTING HOLDERS" means, with respect to any registration, the
Holders demanding or requesting to have Registrable Securities included in a
registration in accordance with Section 2 or 3.

"RULE 144" means Rule 144 promulgated by the Commission under the
Securities Act, and any successor provision thereto.

"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

"SERIES B PREFERRED STOCK" has the meaning ascribed to it in the first
recital to this Agreement.

"SHARES" means the shares of Common Stock.

"STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement of even
date herewith by and among the parties thereto.

"TOTAL SHARES" means the sum of (x) the issued and outstanding Shares
at the date of this Agreement and (y) the Shares issuable upon conversion of the
Series B Preferred Stock (assuming that all authorized shares of Series B
Preferred Stock are outstanding) at the date of this Agreement.

"WARRANT" has the meaning ascribed to it in the first recital of this
Agreement.

(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby, herewith," and derivative or similar
words refer to this entire Agreement; and (iv) the term "Section" refers to the
specified Section

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of this Agreement. Whenever this Agreement refers to a number of days, such
number shall refer to calendar days unless Business Days are specified.

SECTION 2. DEMAND REGISTRATION RIGHTS.

(a) DEMANDS FOR REGISTRATION. At any time after the third
anniversary of the date hereof or such earlier time as the Company shall have
effected a Public Offering, any Qualifying Holder may demand that the Company
use its best efforts to effect the registration under the Securities Act of all
or part of such Qualifying Holder's Registrable Securities. Such demand-for
registration (a "DEMAND FOR REGISTRATION") shall be in writing, delivered to the
Company in accordance with SECTION 11(a), and shall specify the number of
Registrable Securities to be registered and the intended method of disposition
thereof. No later than fifteen (15) Business Days after receipt of such Demand
for Registration, the Company shall give written notice (a "NOTICE OF DEMAND FOR
REGISTRATION") of such Demand for Registration to all other Holders, and shall
use its best efforts to effect the registration under the Securities Act of:

(i) the Registrable Securities included in the Demand for
Registration, and

(ii) all other Registrable Securities as to which any Holder has
delivered to the Company a Request for Registration within fifteen (15)
Business Days after the giving of the Notice of Demand for Registration,

all to the extent required to permit the disposition of the Registrable
Securities so to be registered in accordance with the methods of disposition
specified. At the request of the Holders of a majority of the Registrable
Securities to be registered, the method of disposition of all Registrable
Securities included in such registration shall be an underwritten offering
effected in accordance with SECTION 5(a). Notwithstanding the foregoing, the
Company may postpone taking action with respect to a Demand Registration or may
require that Holders of Registrable Securities cease making sales under an
effective registration for a reasonable period of time (not exceeding one
hundred eighty (180) days, in the case of a Demand Registration, and not
exceeding ninety (90) days, in the case of an effective registration) if, in the
good faith opinion of the Board, effecting the registration or allowing such
sales would adversely affect or require the premature disclosure of a material
financing, acquisition, disposition of assets or stock, merger or other
comparable transaction or would require the Company to make public disclosure of
information the public disclosure of which would have a material adverse effect
upon the Company, PROVIDED that the Company shall not delay such action or
require such cessation pursuant to this sentence more than once in any twelve
(12) month period. Subject to SECTION 2(e), the Company may include in such
registration securities for sale for its own account. Neither the Company nor
any Holder shall have the right to include any securities

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in a registration statement to be filed as part of a Demand Registration unless
(i) such securities are of the same class as the Registrable Securities to be
included in the Demand for Registration (or another class of securities is to be
sold by the Company for its own account and a majority of the demanding Holders
consent to such inclusion in writing), and (ii) if such Demand Registration is
an underwritten offering, the Company and such other Holders agree in writing to
sell, subject to SECTION 2(e), their securities on the same terms and conditions
as apply to the Registrable Securities being sold pursuant to the Demand for
Registration.

(b) LIMITATIONS ON DEMAND REGISTRATIONS. Notwithstanding anything
herein to the contrary, the Company shall not be required to honor a Demand for
Registration if:

(i) the Registrable Securities to be so registered represent less
than twelve percent (12%) of the Total Shares;

(ii) the proposed aggregate Public Offering price for the
Registrable Securities included in the Demand for Registration is less
than $10 million based on the fair value estimated by the underwriters
in the case of an initial Public Offering or the then-current market
price of the Common Stock in the case of a Public Offering other than an
initial Public Offering; or

(iii) such Demand for Registration is received by the Company less
than ninety (90) days following the effective date of any previous
registration of Registrable Securities other than on Form S-8 (or successor
form thereto), regardless of whether any Holder exercised its rights under
this Agreement with respect to such registration.

(c) REGISTRATION STATEMENT FORM. Demand Registrations shall be on
such appropriate registration form selected by the Company as shall be
reasonably acceptable to the Holders of a majority of the Registrable Securities
to which such registration relates, and shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods
specified by the Holders participating therein.

(d) REGISTRATION EXPENSES. The Company will pay all Registration
Expenses incurred in connection with the first Demand Registration. The
Registration Expenses incurred in connection with any subsequent Demand
Registrations shall be allocated among all Persons (including the Company) on
whose behalf securities of the Company are included in such registration, PRO
RATA on the basis of the respective amounts of the securities then being
registered on their behalf.

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(e) PRIORITY IN CUTBACK REGISTRATIONS. If a Demand Registration
becomes a Cutback Registration, the Company shall include in such registration
only the amount of securities which any Managing Underwriter advises the Company
can be sold in such offering without a reduction in the selling price
anticipated to be received for the securities to be sold in such Public
Offering. Securities shall be included in such offering in the following order
of priority: (i) FIRST, the Registrable Securities included in the Demands for
Registration or the Requests for Registration PRO RATA among the Holders making
such Demands for Registration or Requests for Registration in proportion to the
number of Registrable Securities included in their Demands for Registration or
Requests for Registration, and (ii) SECOND, the securities of the Company
included in such registration by the Company for sale for its own account.

(f) PREEMPTION OF DEMAND REGISTRATION. Notwithstanding anything to
the contrary contained herein, and without limitation as to the rights of the
Company to include in a Demand Registration securities for sale for its own
account as provided in SECTION 2(a), at any time within thirty (30) days after
receiving a Demand for Registration, the Company may elect to effect an
underwritten primary registration in lieu of the Demand Registration. If the
Company so elects, the Company shall give prompt written notice to all Holders
of its intention to effect such a registration and shall afford Holders the
rights contained in SECTION 3 with respect to Piggyback Registrations; the
Demands for Registration shall be deemed to have been withdrawn; and such
primary registration shall not be deemed to be an Effective Registration.

SECTION 3. PIGGYBACK REGISTRATIONS.

(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. Notwithstanding any
limitation contained in SECTION 2, if the Company at any time proposes after the
date hereof to effect a Piggyback Registration, including a registration in lieu
of a Demand Registration pursuant to SECTION 2(f), it will each such time give
prompt written notice (a "NOTICE OF PIGGYBACK REGISTRATION") to all Holders of
its intention to do so and of such Holders' rights under this SECTION 3, which
Notice of Piggyback Registration shall include a description of the intended
method of disposition of such securities. If any Holder delivers a Request for
Registration to the Company within fifteen (15) Business Days after the date of
the Notice of Piggyback Registration, the Company will use its best efforts to
include in the registration statement relating to such Piggyback Registration
all Registrable Securities which the Company has been so requested to register.
Notwithstanding the foregoing, if, at any time after giving a Notice of
Piggyback Registration and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder and, thereupon, (i) in the case of a determination
not

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to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any Qualifying Holder to demand that such registration
be effected as a Demand Registration under SECTION 1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other securities. Subject to the provisions of SECTION 2(f), no registration
effected under this SECTION 3 shall relieve the Company of its obligations to
effect a Demand Registration under SECTION 2.

(b) REGISTRATION EXPENSES. The Company will pay all Registration
Expenses incurred in connection with each Piggyback Registration.

(c) PRIORITY IN CUTBACK REGISTRATIONS. If a Piggyback Registration
becomes a Cutback Registration, the Company will include in such registration
the amount of the securities which the Managing Underwriter advises the Company
can be sold in such offering without a reduction in the selling price
anticipated to be received for the securities to be sold in such Public
Offering:

(i) FIRST, the securities proposed by the Company to be sold for its
own account; and

(ii) SECOND, the Registrable Securities included in the Requests for
Registration of Requesting Holders, PRO RATA among such Requesting Holders
in proportion to the number of Registrable Securities included in their
Requests for Registration.

Any securities so excluded shall be withdrawn from and shall not be included in
such Piggyback Registration.

SECTION 4. REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to SECTION 2 or SECTION 3, the
Company will use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended methods of disposition
thereof specified by the Holders participating therein. Without limiting the
foregoing, the Company in each such case will, as expeditiously as possible:

(a) prepare and file with the Commission (in the case of a Demand
Registration), the requisite registration statement to effect such registration
(including such audited financial statements as may be required by the
Securities Act or the rules and regulations promulgated thereunder) and use its
best efforts to cause such registration statement to become effective; PROVIDED,
that as far in advance as practical before filing such registration statement or
any amendment

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thereto, the Company will furnish to counsel for the Requesting Holders' copies
of reasonably complete drafts of all such documents proposed to be filed
(including exhibits), and any such Holder shall have the opportunity to object
to any information pertaining solely to such Holder that is contained therein
and the Company will make the corrections reasonably requested by such Holder
with respect to such information prior to filing any such registration statement
or amendment;

(b) prepare and file with the Commission such amendments and
supplements to such registration statement and any prospectus used in connection
therewith as may be necessary to maintain the effectiveness of such registration
statement and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities included in such registration
statement, in accordance with the intended methods of disposition thereof, until
the earlier of (i) such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement and (ii) one hundred eighty
(180) days after such registration statement becomes effective;

(i) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;

(ii) of any written request by the Commission for amendments or
supplements to such registration statement or prospectus;

(iii) of the notification to the Company by the Commission of its
initiation of any proceeding with respect to the issuance by the Commission
of, or of the issuance by the Commission of, any stop order suspending the
effectiveness of such registration statement; and

(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the applicable securities or blue sky laws of any jurisdiction;

(d) furnish to each seller of Registrable Securities included in such
registration statement such number of conformed copies of such registration
statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in such registration statement (including each
preliminary

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prospectus and any summary prospectus) and any other prospectus filed under Rule
424 promulgated under the Securities Act relating to such Holder's Registrable
Securities, and such other documents, as such seller may reasonably request to
facilitate the disposition of its Registrable Securities;

(e) use its best efforts to register or qualify all Registrable
Securities included in such registration statement under such other securities
or blue sky laws of such jurisdictions as each Holder thereof shall reasonably
request within fifteen (15) days following the original filing of such
registration statement and to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Holders except that the Company shall not for any such purpose be
required (i) to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this paragraph (e)
be obligated to be so qualified, (ii) to consent to general service of process
in any such jurisdiction or (iii) to subject itself to taxation in any such
jurisdiction by reason of such registration or qualification;

(f) use its best efforts to cause all Registrable Securities included
in such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable each Holder
thereof to consummate the disposition of such Registrable Securities;

(g) to the extent any of the following are obtained by or furnished
to the Company or the underwriters, furnish to each Requesting Holder a signed
counterpart, addressed to such Holder (and the underwriters, if any), of

(i) an opinion of counsel for the Company, dated the effective date
of such registration statement (or, if such registration includes an
underwritten Public Offering, dated the date of any closing under the
underwriting agreement), and

(ii) a "cold comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an underwritten
Public Offering, dated the date of any closing under the underwriting
agreement), signed by the independent public accountants who have certified
the Company's financial statements included in such registration statement,

in each case covering the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants letter, with respect to events subsequent to the date of such
financial statements, as are covered in the opinion of issuer's counsel and in
the accountants' letter delivered to the underwriters in the underwritten Public
Offering;

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<PAGE>

(h) notify each Holder whose Registrable Securities are included in
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which any prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of any such Holder promptly prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;

(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months but not more than eighteen
(18) months, beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and not file any amendment or supplement to such Registration
Statement or prospectus to which any such seller or any Requesting Holder shall
have reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the Securities Act
or of the rules or regulations thereunder;

(j) make available for inspection by any Requesting Holder and any
attorney, accountant or other agent retained by such Holder (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "RECORDS") reasonably necessary
to enable the Inspectors to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such registration
statement;

(k) provide a transfer agent and registrar for all Registrable
Securities included in such registration statement not later than the effective
date of such registration statement; and

(l) use its best efforts to cause all Registrable Securities included
in such registration statement to be listed, upon official notice of issuance,
on any securities exchange on which any of the securities of the same class as
the Registrable Securities are then listed.

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<PAGE>

The Company may require each Holder whose Registrable Securities are
being registered to, and each such Holder, as a condition to including
Registrable Securities in such registration, shall, furnish the Company and the
underwriters with such information and affidavits regarding such Holder and the
distribution of such securities as the Company and the underwriters may from
time to time reasonably request in writing in connection with such registration.
At any time during the effectiveness of any registration statement covering
Registrable Securities offered by a Holder, if such Holder becomes aware of any
change materially affecting the accuracy of the information contained in such
registration statement or the prospectus (as then amended or supplemented)
relating to such Holder, it will immediately notify the Company of such change.

Upon receipt of any notice from the Company of the happening of any
event of the kind described in paragraph (h) of this SECTION 4, each Holder will
forthwith discontinue such Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until such Holder receives the copies of the supplemented or amended prospectus
contemplated by paragraph (h) of this SECTION 4 and, if so directed by the
Company, shall deliver to the Company (at the Company's expense) all copies,
other than permanent file copies, then in such Holder's possession of the
prospectus relating to such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice,
the period referred to in paragraph (b) of this SECTION 4 shall be extended by a
number of days equal to the number of days during the period from and including
the giving of notice pursuant to paragraph (h) of this SECTION 4 and to and
including the date when each Holder whose Registrable Securities are included in
such registration statement receives the copies of the supplemented or amended
prospectus contemplated by paragraph (h) of this SECTION 4.

SECTION 5. UNDERWRITTEN OFFERINGS. If a Demand for Registration is
made pursuant to SECTION 2, or if the Company at any time proposes to register
any of its securities in a Piggyback Registration or otherwise, and, in either
case, the securities included in such registration are to be distributed by or
through one or more underwriters, such securities shall be distributed by or
through, and the Company shall enter into a firm commitment underwriting
agreement in customary form with, (i) a Managing Underwriter, (ii) such other
underwriters, reasonably satisfactory to the Company, as may be selected by the
Managing Underwriter to assist or participate in the distribution, and (iii) if
a Qualified Independent Underwriter is required for such registration pursuant
to Schedule E to the NASD By-Laws or otherwise, a Qualified Independent
Underwriter.

(a) UNDERWRITTEN OFFERINGS IN CONNECTION WITH DEMAND REGISTRATION.
If a Demand for Registration is made pursuant to SECTION 2 and the

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distribution of the Registrable Securities included in such Demand for
Registration is to be underwritten, the underwriting agreement shall include,
among other provisions, indemnities to the effect and to the extent provided in
SECTION 7. The Holders whose Registrable Securities are to be distributed by
such underwriters shall be parties to such underwriting agreement. No
Requesting Holder may participate in such underwritten offering unless such
Holder agrees to sell its Registrable Securities on the basis provided in such
underwriting agreement and completes and executes all questionnaires, powers of
attorney, indemnities and other documents reasonably required under the terms of
such underwriting agreement. If any Requesting Holder disapproves of the terms
of an underwriting, such Holder may elect to withdraw therefrom and from such
registration by notice to the Company and the Managing Underwriter, and each of
the remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn (i) in the case of a Cutback Registration, in accordance
with the priorities set forth in SECTION 2(e) and (ii) in all other cases in the
proportion which the number of Registrable Securities being registered by such
remaining Requesting Holder bears to the total number of Registrable Securities
being registered by all such remaining Requesting Holders.

(b) UNDERWRITTEN PIGGYBACK OFFERINGS. If the Company at any time
proposes to register any of its securities in a Piggyback Registration and such
securities are to be distributed by or through one or more underwriters, the
Company will, subject to the provisions of SECTION 3(c), use its best efforts,
if requested by any Holder whose Registrable Securities are included in such
registration to arrange for such underwriters to include the Registrable
Securities to be offered and sold by such Holder among the securities to be
distributed by such underwriters, and such Holders shall be obligated to sell
their Registrable Securities in such Piggyback Registration through such
underwriters on the same terms and conditions as apply to the other Company
securities to be sold by such underwriters in connection with such Piggyback
Registration. The Holders whose Registrable Securities are to be distributed by
such underwriters shall be parties to the underwriting agreement between the
Company and such underwriter or underwriters. No Requesting Holder may
participate in such underwritten offering unless such Holder agrees to sell its
Registrable Securities on the basis provided in such underwriting agreement and
completes and executes all questionnaires, powers of attorney, indemnities and
other documents reasonably required under the terms of such underwriting
agreement. If any Requesting Holder disapproves of the terms of an
underwriting, such Holder may elect to withdraw therefrom and from such
registration by notice to the Company and the Managing Underwriter, and each of
the remaining Requesting Holders shall be entitled to increase the number of
Registrable Securities being registered to the extent of the Registrable
Securities so withdrawn (i) in the case of a Cutback Registration, in accordance
with the priorities set forth in SECTION 3(c) and (ii) in all other cases in the
proportion which the number of Registrable Securities being registered by such
remaining

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<PAGE>

Requesting Holder bears to the total number of Registrable Securities being
registered by all such remaining Requesting Holders.

SECTION 6. HOLDBACK AGREEMENTS.

(a) BY THE HOLDERS. Unless the Managing Underwriter (or, in the case
of a non-underwritten Public Offering, the Company) otherwise agrees, no Holder
shall effect any public sale or distribution (including a sale under Rule 144)
of any Registrable Securities, or any securities convertible into or
exchangeable or exercisable for Registrable Securities, during such period of
time as is sufficient and appropriate, in the opinion of the Managing
Underwriter (or, in the case of a non-underwritten Public Offering, the
Company), in order to complete the sale and distribution of the securities
included in such registration, except as part of such registration statement,
whether or not such Holder participates in such registration.

(b) BY THE COMPANY. Unless any Managing Underwriter otherwise
agrees, the Company shall not effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or
exercisable for such securities, during the fourteen (14) days prior to and the
ninety (90) days after the effective date of the registration statement filed in
connection with an underwritten offering made pursuant to a Demand Registration
or a Piggyback Registration (or for such shorter period of time as is sufficient
and appropriate, in the opinion of any Managing Underwriter or, if there is no
Managing Underwriter, the Company, in order to complete the sale and
distribution of the securities included in such registration), except as part of
such underwritten registration and except pursuant to registrations on Form S-4
or Form S-8 promulgated by the Commission (or any successor or similar forms
thereto).

SECTION 7. INDEMNIFICATION.

(a) INDEMNIFICATION BY THE COMPANY. The Company shall, to the full
extent permitted by law, indemnify and hold harmless each seller of Registrable
Securities included in any registration statement filed in connection with a
Demand Registration or a Piggyback Registration, its directors, officers, and
partners, and each other Person, if any, who controls any such seller within the
meaning of the Securities Act, against any losses, claims, damages, expenses or
liabilities, joint or several (together, "Losses"), to which such seller or any
such director, officer, partner or controlling Person may become subject under
the Securities Act or otherwise, insofar as such Losses (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or

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necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, and the
Company will reimburse such seller and each such director, officer, partner and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such Loss (or action or
proceeding in respect thereof); PROVIDED, that the Company shall not be liable
in any such case to the extent that any such Loss (or action or proceeding in
respect thereof) arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in any such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such seller specifically stating
that it is for use in the preparation thereof, or (ii) such seller's failure to
send or give a copy of the final prospectus to the Persons asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
partner or controlling Person, and shall survive the transfer of such securities
by such seller. The Company shall also indemnify each other Person who
participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors, and partners, and each
other Person, if any, who controls any such participating Person within the
meaning of the Securities Act to the same extent as provided above with respect
to sellers of Registrable Securities.

(b) INDEMNIFICATION BY THE SELLERS. Each Holder whose Registrable
Securities are included or are to be included in any registration statement
filed in connection with a Demand Registration or a Piggyback Registration, as a
condition to including Registrable Securities in such registration statement,
shall, to the full extent permitted by law, indemnify and hold harmless the
Company, its directors and officers, and each other Person, if any, who controls
the Company within the meaning of the Securities Act, against any Losses to
which the Company or any such director or officer or controlling Person may
become subject under the Securities Act or otherwise, insofar as such Losses (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such seller specifically stating that it is for use in the
preparation of

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<PAGE>

such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; PROVIDED, HOWEVER, that the obligation to
provide indemnification pursuant to this SECTION 7(b) shall be several, and not
joint and several, among such Indemnifying Parties on the basis of the number of
Registrable Securities of each such Indemnifying Party included in such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such seller. Such Holders shall also indemnify each other Person
who participates (including as an underwriter) in the offering or sale of
Registrable Securities, their officers and directors and each other Person, if
any, who controls any such participating Person within the meaning of the
Securities Act to the same extent as provided above with respect to the Company.

(c) NOTICES OF CLAIMS. Promptly after receipt by an Indemnified
Party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraph (a) or (b) of this SECTION 7, such
Indemnified Party shall, if a claim in respect thereof is to be made against an
Indemnifying Party pursuant to such paragraphs, give written notice to the
latter of the commencement of such action, PROVIDED that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under the preceding paragraphs of this
SECTION 7, except to the extent that the Indemnifying Party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an Indemnified Party, the Indemnifying Party shall be entitled to
participate in and, unless, in the reasonable judgment of any Indemnified Party,
a conflict of interest between such Indemnified Party and any Indemnifying Party
exists with respect to such claim, to assume the defense thereof, jointly with
any other Indemnifying Party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such Indemnified Party, and after notice
from the Indemnifying Party to such Indemnified Party of its election so to
assume the defense thereof, the Indemnifying Party shall not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation; PROVIDED that the Indemnified Party may participate in such
defense at the Indemnified Party's expense; and PROVIDED FURTHER that the
Indemnified Party or Indemnified Parties shall have the right to employ one
counsel to represent it or them if, in the reasonable judgment of the
Indemnified Party or Indemnified Parties, it is advisable for it or them to be
represented by separate counsel by reason of having legal defenses which are
different from or in addition to those available to the Indemnifying Party, and
in that event the reasonable fees and expenses of such one counsel shall be paid
by the Indemnifying Party. If the Indemnifying Party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel for the Indemnified Parties with
respect to such claim, unless in the reasonable judgment of any Indemnified
Party a

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conflict of interest may exist between such Indemnified Party and any other
Indemnified Parties with respect to such claim, in which event the Indemnifying
Party shall be obligated to pay the fees and expenses of such additional counsel
for the Indemnified Parties or counsels. No Indemnifying Party shall consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation without the consent of the Indemnified Party. No Indemnifying Party
shall be subject to any liability for any settlement made without its consent.

(d) CONTRIBUTION. If the indemnity and reimbursement obligation
provided for in any paragraph of this SECTION 7 is unavailable or insufficient
to hold harmless an Indemnified Party in respect of any Losses (or actions or
proceedings in respect thereof) referred to therein, then the Indemnifying Party
shall contribute to the amount paid or payable by the Indemnified Party as a
result of such Losses (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other hand in connection
with statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, then the
Indemnifying Party shall contribute to the amount paid or payable by the
Indemnified Party as a result of such Losses (or actions or proceedings in
respect thereof) in such proportion as is appropriate to reflect not only the
relative fault of, but also the relative benefits received by, the Indemnifying
Party on the one hand and the Indemnified Party on the other hand in connection
with statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. Relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this paragraph were to be determined by PRO RATA allocation or by
any other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this paragraph. The amount
paid by an Indemnified Party as a result of the Losses referred to in the first
sentence of this paragraph shall be deemed to include any legal and other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any Loss which is the subject of this paragraph.

No Indemnified Party guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution

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from the Indemnifying Party if the Indemnifying Party was not guilty of such
fraudulent misrepresentation.

(e) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding paragraphs of this SECTION 7 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act. The provisions of this SECTION 7 shall be in addition to
any other rights to indemnification or contribution which an Indemnified Party
may have pursuant to law, equity, contract or otherwise.

(f) INDEMNIFICATION PAYMENTS. The indemnification required by this
SECTION 7 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or Losses
are incurred.

SECTION 8. COVENANTS RELATING TO RULE 144. If at any time the
Company is required to file reports in compliance with either Section 13 or
Section 15(d) of the Exchange Act, the Company will (a) file reports in
compliance with the Exchange Act and (b) comply with all rules and regulations
of the Commission applicable in connection with the use of Rule 144 and take
such other actions and furnish each Holder with such other information as such
Holder may reasonably require in order to avail itself of such rule or any other
rule or regulation of the Commission allowing such Holder to sell any
Registrable Securities without registration.

SECTION 9. NO EXISTING AGREEMENTS. The Company represents and
warrants to each other party hereto that there is not in effect on the date
hereof any agreement by the Company (other than this Agreement) pursuant to
which any holders of securities of the Company have a right to cause the Company
to register or qualify such securities under the Securities Act or any
securities or blue sky laws of any jurisdiction.

SECTION 10. MISCELLANEOUS.

(a) NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally, by courier or by facsimile transmission or mailed (first
class postage prepaid) to the parties at the addresses or facsimile numbers set
forth below.

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(i) If to the Company, to:

Great Plains Software, Inc.
1701 Southwest 38th Street
Fargo, North Dakota 58103
Attention: Chief Financial Officer
Facsimile: (701) 281-3752

with copy to:

Dorsey & Whitney
220 South Sixth Street
Minneapolis, Minnesota 55402
Attention: Jay L. Swanson, Esq.
Facsimile: (612) 340-8738

(ii) if to the Investors or any of them, to:

Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Carla Skodinski
Facsimile: (212) 902-3000

with copy to:

Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Thomas A. Cole, Esq.
Facsimile: (312) 853-7036

All such notices, requests and other communications will (x) if
delivered personally or by courier to the address provided in this SECTION
10(a), be deemed given upon delivery, (y) if delivered by facsimile transmission
to the facsimile number provided in this SECTION 10(a), be deemed given when
receipt of transmission has been orally confirmed by the sending party, and (z)
if delivered by first class or registered mail in the manner described above to
the address as provided in this SECTION 10(a), be deemed given three (3)
Business Days after deposit in the United States Mail (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.

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(b) ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof, and contains the sole and entire agreement between the parties
hereto with respect to the-subject matter hereof.

(c) AMENDMENT; TERMINATION. This Agreement may be amended,
supplemented or modified only by a written instrument (which may be executed in
any number of counterparts) duly executed by or on behalf of each of the Company
and the Holders of two-thirds (2/3) or more of the Registrable Securities then
outstanding or subject to issuance. This Agreement shall be deemed terminated
and shall be of no further force and effect, except for the provisions of
SECTION 7, which provisions shall survive such termination, at such time as
there are no Holders or any Persons who hold Registrable Securities, whichever
is earlier.

(d) WAIVER. Subject to paragraph (e) of this Section 11, any term or
condition of this Agreement may be waived at any time by the party that is
entitled to the benefit thereof, but no such waiver shall be effective unless
set forth in a written instrument duly executed by or on behalf of the party
waiving such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be or
construed as a waiver of the same term or condition of this Agreement on any
future occasion.

(e) CONSENTS AND WAIVERS BY HOLDERS. Any consent of Holders pursuant
to this Agreement, and any waiver by Holders of any provision of this Agreement,
shall be in writing (which may be executed in any number of counterparts) and
may be given or taken by the Holders of two-thirds (2/3) or more of the
Registrable Securities then outstanding or subject to issuance, and any such
consent or waiver so given or taken will be binding on all the Holders.

(f) NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnification under SECTION 7.

(g) SUCCESSORS AND ASSIGNS. The registration rights contained in
this Agreement shall be transferable by any Holder to any Person that acquires
Registrable Securities from such Holder (excluding any Person that acquires such
Registrable Securities in a transaction pursuant to which such securities cease
to be Registrable Securities).

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(h) HEADINGS. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.

(i) INVALID PROVISIONS. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.

(j) REMEDIES. Except as otherwise expressly provided for herein, no
remedy conferred by any of the specific provisions of this Agreement is intended
to be exclusive of any other remedy, and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter if, existing at law or in equity or by statute or otherwise. The
election of any one or more remedies by any party hereto shall not constitute a
waiver by any such party of the right to pursue any other available remedies.

Damages in the event of breach of this Agreement by any party hereto
or any of their respective successors or permitted assigns would be difficult,
if not impossible, to ascertain, and it is therefore agreed that each such
Person, in addition to and without limiting any other remedy or right it may
have, will have the right to an injunction or other equitable relief in any
court of competent jurisdiction, enjoining any such breach, and enforcing
specifically the terms and provisions hereof and each party hereto, on its own
behalf and behalf of its respective successors and permitted assigns, hereby
waives any and all defenses it may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right will not preclude any such Person from pursuing any
other rights and remedies at law or in equity which such Person may have.

(k) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Minnesota applicable to a contract
executed and performed therein, without giving effect to the conflicts of laws
principles thereof.

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(l) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each party hereto, or the duly authorized officer of each party
hereto, as the case may be, as of the date first above written.

GREAT PLAINS SOFTWARE, INC.

By:
-----------------------------------------
President

INVESTORS

GS CAPITAL PARTNERS, L.P., A
DELAWARE LIMITED PARTNERSHIP

By: GS Advisors, L.P., its general partner

By: GS Advisors, Inc., its general
partner

By:
-----------------------------------------

BRIDGE STREET FUND 1994, L.P., A
DELAWARE LIMITED PARTNERSHIP

By: Stone Street Performance Corp., its managing
general partner

By:
-----------------------------------------

STONE STREET FUND 1994, L.P., A
DELAWARE LIMITED PARTNERSHIP

By: Stone Street Performance Corp., its general
partner

By:
-----------------------------------------

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GREAT PLAINS SOFTWARE U.K., LLC

LIMITED LIABILITY COMPANY AGREEMENT

FEBRUARY 20, 1996

<PAGE>

TABLE OF CONTENTS

Article I.
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Name. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Principal Place of Business . . . . . . . . . . . . . . . 1
Section 1.3. Names and Addresses of Members. . . . . . . . . . . . . . 2
Section 1.4. Term of Existence . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Agent for Service of Process. . . . . . . . . . . . . . . 2
Section 1.6. Duties of Members . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Duties of Managers. . . . . . . . . . . . . . . . . . . . 2

Article II.
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Article III.
Purpose and Character of the Business. . . . . . . . . . . . . . . . . 4

Article IV.
Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4.1. Place and Time of Meetings. . . . . . . . . . . . . . . . 4
Section 4.2. Annual Meetings . . . . . . . . . . . . . . . . . . . . . 4
Section 4.3. Special Meetings. . . . . . . . . . . . . . . . . . . . . 4
Section 4.4. Quorum, Adjourned Meetings. . . . . . . . . . . . . . . . 4
Section 4.5. Organization. . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.6. Order of Business . . . . . . . . . . . . . . . . . . . . 5
Section 4.7. Voting. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.8. Inspectors of Election. . . . . . . . . . . . . . . . . . 5
Section 4.9. Certain Actions . . . . . . . . . . . . . . . . . . . . . 6
Section 4.10. Notices of Meetings. . . . . . . . . . . . . . . . . . . 6
Section 4.11. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.12. Waiver of Notice . . . . . . . . . . . . . . . . . . . . 7
Section 4.13. Consents . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.14. Member List. . . . . . . . . . . . . . . . . . . . . . . 7

Article V.
New Members; Units; Securities . . . . . . . . . . . . . . . . . . . . 7
Section 5.1. Admission of New Members. . . . . . . . . . . . . . . . . 7
Section 5.2. Issuance of Units . . . . . . . . . . . . . . . . . . . . 8

Article VI.
Management and Operation of Company Business . . . . . . . . . . . . . . . 8
Section 6.1. Authority of the Members. . . . . . . . . . . . . . . . . 8
Section 6.2. Board of Managers . . . . . . . . . . . . . . . . . . . . 8

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Section 6.3. Number, Qualification; Term of Office; Vote . . . . . . . 8
Section 6.4. Initial Board . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.5. Place of Meetings . . . . . . . . . . . . . . . . . . . . 9
Section 6.6. Special Meetings. . . . . . . . . . . . . . . . . . . . . 9
Section 6.7. Meetings Held Upon Member Demand. . . . . . . . . . . . . 9
Section 6.8. Adjournments. . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.9. Notice of Meetings. . . . . . . . . . . . . . . . . . . . 9
Section 6.10. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.11. Absent Members . . . . . . . . . . . . . . . . . . . . . 10
Section 6.12. Conference Communications. . . . . . . . . . . . . . . . 10
Section 6.13. Removal. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.14. Acts of Managers . . . . . . . . . . . . . . . . . . . . 10
Section 6.15. Written Action . . . . . . . . . . . . . . . . . . . . . 10
Section 6.16. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.17. Committees . . . . . . . . . . . . . . . . . . . . . . . 11
Section 6.18. No Fiduciary Duty. . . . . . . . . . . . . . . . . . . . 11
Section 6.19. Compensation . . . . . . . . . . . . . . . . . . . . . . 11

Article VII.
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.1. Number. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 7.2. Election, Term of Office and Qualifications . . . . . . . 11
Section 7.3. Removal and Vacancies . . . . . . . . . . . . . . . . . . 11
Section 7.4. Chair . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.5. President . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.6. Secretary . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.7. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7.8. Duties of Other Officers. . . . . . . . . . . . . . . . . 12
Section 7.9. Compensation. . . . . . . . . . . . . . . . . . . . . . . 13

Article VIII.
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 8.1. Indemnification . . . . . . . . . . . . . . . . . . . . . 13
Section 8.2. Indemnification Procedures; Survival. . . . . . . . . . . 14

Article IX.
Certificates; Transfers. . . . . . . . . . . . . . . . . . . . . . . . 15
Section 9.1. Certificates for Units. . . . . . . . . . . . . . . . . . 15
Section 9.2. Loss of Certificates. . . . . . . . . . . . . . . . . . . 15
Section 9.3. Registration, Transfer and Exchange . . . . . . . . . . . 15
Section 9.4. Restriction on Transfers. . . . . . . . . . . . . . . . . 16
Section 9.5. Transfer by Legal Process . . . . . . . . . . . . . . . . 16
Section 9.6. Resignation . . . . . . . . . . . . . . . . . . . . . . . 16
Section 10.1. Books; Place; Access . . . . . . . . . . . . . . . . . . 16

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Section 10.2. Financial Information. . . . . . . . . . . . . . . . . . 16
Section 10.3. Tax Information. . . . . . . . . . . . . . . . . . . . . 17
Section 10.4. Tax Elections. . . . . . . . . . . . . . . . . . . . . . 17
Section 10.5. Tax Matters Partner. . . . . . . . . . . . . . . . . . . 17

Article XI.
Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11.1. Procedure Applicable to All Amendments . . . . . . . . . 19
Section 11.2. Voting Requirement . . . . . . . . . . . . . . . . . . . 19
Section 11.3. Approval by Members. . . . . . . . . . . . . . . . . . . 19

Article XII.
Approval of Reorganizations and Bankruptcy . . . . . . . . . . . . . . 20

Article XIII.
Dissolution and Liquidation. . . . . . . . . . . . . . . . . . . . . . 20
Section 13.1. Events Causing Dissolution . . . . . . . . . . . . . . . 20
Section 13.2. Continuation of Business . . . . . . . . . . . . . . . . 21
Section 13.3. Liquidation and Winding Up . . . . . . . . . . . . . . . 21
Section 13.4. Compliance with Timing Requirements of Regulations . . . 21

Article XIV.
Representations, Warranties of the Members . . . . . . . . . . . . . . 22
Section 14.1. Representations and Warranties of the Members. . . . . . 22

Article XV.
Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 15.1. Initial Capital Contributions. . . . . . . . . . . . . . 23
Section 15.2. No Right to Return of Contribution.. . . . . . . . . . . 23
Section 15.3. Additional Capital Contributions . . . . . . . . . . . . 23
Section 15.4. Loans to the Company; No Interest on Capital . . . . . . 23
Section 15.5. Creditor's Interest in the Company . . . . . . . . . . . 23
Section 15.6. Liability of Members . . . . . . . . . . . . . . . . . . 24
Section 15.7. Capital Accounts . . . . . . . . . . . . . . . . . . . . 24

Article XVI.
Allocation of Income, Gains and Losses;
Distributions to Members . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16.1. Allocation of Income, Profits, Gains, Losses and Credits 25
Section 16.2. Other Allocation Rules . . . . . . . . . . . . . . . . . 25
Section 16.3. Limitation on Loss Allocation. . . . . . . . . . . . . . 25
Section 16.4. Special Allocations. . . . . . . . . . . . . . . . . . . 26
Section 16.5. Curative Allocations . . . . . . . . . . . . . . . . . . 27
Section 16.6. Tax Allocations: Section 704(c) of the Code . . . . . . 28

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Section 16.7. Distributions to Members . . . . . . . . . . . . . . . . 28

Article XVII.
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.1. Additional Actions and Documents . . . . . . . . . . . . 28
Section 17.2. Arbitration. . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.3. Notice . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 17.4. Severability . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.6. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17.7. Exercise of Rights . . . . . . . . . . . . . . . . . . . 29
Section 17.8. Binding Effect . . . . . . . . . . . . . . . . . . . . . 29
Section 17.9. Limitation on Benefits of this Agreement. . . . . . . . 29
Section 17.10. Waiver of Partition. . . . . . . . 30
Section 17.11. Entire Agreement . . . . . . . . . 30
Section 17.12. Pronouns . . . . . . . . . . . . . 30
Section 17.13. Headings . . . . . . . . . . . . . 30
Section 17.14. Governing Law. . . . . . . . . . . 30
Section 17.15. Execution in Counterparts. . . . . 30

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LIMITED LIABILITY COMPANY AGREEMENT
OF
GREAT PLAINS SOFTWARE U.K., LLC

THIS LIMITED LIABILITY COMPANY AGREEMENT made and entered into as of
this 20th day of FEBRUARY 1996, by and between the persons named on Schedule A
attached hereto (hereinafter, such persons are referred to collectively as the
"Members" and individually as a "Member");

WITNESSETH THAT:

WHEREAS, the undersigned have caused the formation of Great Plains
Software U.K., LLC, a Delaware limited liability company (the "Company"), of
which the undersigned constitute all of the initial Members; and

WHEREAS, the undersigned have received and approved the business plan
of the Company;

NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements hereinafter set forth, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Members agree as
follows:

Article I.
GENERAL

The parties hereto do hereby agree that this Agreement shall
constitute the "limited liability company agreement" of the Company within the
meaning of Section 18-101(7) of the Delaware Limited Liability Company Act, as
amended (the "Act"), and hereby adopt, approve and ratify the execution and
filing in the office of the Secretary of State of the State of Delaware of the
certificate of formation of the Company by Frederic F. Hillier, an individual
resident of the State of Minnesota, on February 20, 1996 (the "Certificate of
Formation") and acknowledge, approve and ratify his designation as an
"authorized person" of the Company in the Certificate of Formation as
contemplated by Section 18-201(a) of the Act. The parties agree that the
Agreement shall be effective as of the date of filing of the Certificate of
Formation in the office of the Secretary of State and that they shall comply
with the provisions and requirements of the Act and that the Act shall govern
the rights, duties and obligations of the Members, except as otherwise expressly
stated herein.

Section 1.1. NAME. The name of the Company shall be and the
business shall be conducted under the name of "Great Plains Software U.K., LLC"

<PAGE>

Section 1.2. PRINCIPAL PLACE OF BUSINESS. The location of the
principal place of business of the Company shall be Knyvett House, The
Causeway, Staines, Middlesex TW183BA or such other place in the United Kingdom
as the Board of Managers may from time to time determine (the "Principal
Office").

Section 1.3. NAMES AND ADDRESSES OF MEMBERS. The names and
addresses of the Members are as set forth in Schedule A.

Section 1.4. TERM OF EXISTENCE. The Company shall be formed as of
the time of the filing of the Certificate of Formation in the Office of the
Secretary of State of Delaware and its existence shall continue until the
fiftieth anniversary of the filing of the Certificate of Formation of the
Company, unless earlier terminated, dissolved or liquidated in accordance with
the provisions of this Agreement.

Section 1.5. AGENT FOR SERVICE OF PROCESS. The name and address of
the agent for service of process is, until changed by the Board of Managers, The
Corporate Trust Company, located at Corporation Trust Center, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801.

Section 1.6. DUTIES OF MEMBERS. The only duties of the Members to
the Company or to each other in respect of the Company shall be those
established in this Agreement, and there shall be no other express or implied
duties of the Members to the Company or to each other in respect of the Company.

Section 1.7. DUTIES OF MANAGERS. Each Manager shall owe duties of
care and loyalty to the Company and the Members. A Manager shall not be
personally liable to the Company or the Members for monetary damages for
breach of fiduciary duty as a Manager except (a) for any breach of the
Manager's duty of loyalty to the Company or the Members; (b) for acts or
omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; or (c) for any transaction from which such Manager
derived an improper personal benefit.

Article II.
DEFINITIONS

Unless the context otherwise specifies or requires, the terms defined
in this Article II shall, for the purposes of this Agreement, have the meanings
herein specified. Certain other capitalized terms used herein are defined
elsewhere in the Agreement.

"ACT" is defined in the introduction to Article I.

"AGREEMENT" means this Limited Liability Company Agreement, as it may
be amended or supplemented from time to time.

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"BOARD OF MANAGERS" means the Board of Managers of the Company
established pursuant to Article VI.

"CAPITAL ACCOUNTS" means the capital accounts maintained by the
Company for each Member in respect of such Member's Units. The Capital Accounts
shall be maintained in accordance with the capital accounting rules of Section
704 of the Code.

"CAPITAL CONTRIBUTION" means the amount of money or the fair market
value of any property (as agreed by the Members as of the date of contribution)
contributed to the Company by any Member.

"CODE" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder. All references in this Agreement
to a section of the Code or the Treasury Regulations shall be considered to
include any subsequent amendment or replacement of that section.

"COMPANY" means Great Plains Software U.K., LLC, the Delaware limited
liability company formed pursuant to the filing of the Certificate of Formation
in Delaware and the terms of this Agreement.

"COMPANY ASSETS" means all assets and property, whether tangible or
intangible and whether real, personal or mixed, at any time owned by the
Company.

"FISCAL YEAR" means the 12-month accounting period of the Company
ending on May 31 of each year, or such other date as the Board of Managers may
determine from time to time.

"MANAGER" is defined in Section 6.3.

"MEMBERS" means the Persons executing this Agreement until they cease
to be Members and the Persons which are hereafter admitted to the Company as
Members in accordance with this Agreement.

"MEMBER SUPERMAJORITY" means 60% of the number of Units entitled to
vote.

"NAMED OFFICERS" is defined in Section 7.1.

"PERSON" means any natural person, corporation, limited liability
company, association, partnership (whether general or limited), joint venture,
proprietorship, governmental agency, trust, estate, association, custodian,
nominee or any other individual or entity, whether acting in an individual,
fiduciary, representative or other capacity.

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"PRINCIPAL OFFICE" is defined in Section 1.2.

"REORGANIZATION" means (x) any consolidation or merger of the Company
with or into any other Person, whether or not the Company is the surviving
entity, (y) any exchange or other transaction pursuant to which outstanding
Units are converted into other securities, property or money or (z) any sale,
transfer or other disposition of all or substantially all of the Company's
assets in a single transaction or a series of related transactions. A
dissolution or liquidation of the Company pursuant to Article XIII will not
constitute a "Reorganization" within the meaning of this Agreement.

"TRANSFER" is defined in Section 9.4.

"TREASURY REGULATIONS" or "TREAS. REG." refers to the regulations
promulgated by the United States Treasury Department under the Code.

"UNITS" means the interest of the Members in the Company, which Units
represent the ownership interest of the Members in the Company.

Article III.
PURPOSE AND CHARACTER OF THE BUSINESS

The purpose and character of the business of the Company shall be to
sell and distribute the products of Great Plains Software, Inc., a Minnesota
corporation, in the United Kingdom and to undertake and carry on any and all
other lawful business, purpose or activity permitted under the Act and approved
by the Board of Managers.

Article IV.
MEMBERS

Section 4.1. PLACE AND TIME OF MEETINGS. Meetings of the Members
shall be held at the Principal Office or such other location as decided by the
Members from time to time. In the absence of a designation of time, meetings
shall be held at 10:00 a.m. Any or all Members may participate in any meeting
of Members by any means of conference communication through which all Members
may simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, Members
participating pursuant to this provision shall be deemed present in person at
the meeting, and the place of the meeting shall be the place of origination of
the conference communication.

Section 4.2. ANNUAL MEETINGS. The annual meeting of the Members for
the appointment of Managers and for the transaction of any other business as

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may properly come before the meeting shall be held in April of each year on such
business day as the Board of Managers shall determine from time to time.

Section 4.3. SPECIAL MEETINGS. Special meetings of the Members for
any purpose or purposes shall be called by the Secretary at the written demand
of (x)a majority of all Managers, (y) the Chair or (z) Members owning not less
than 35% of the Units outstanding. Such demand shall state the purpose or
purposes of the proposed meeting. Within ten days after the Secretary shall
receive a proper demand to call a meeting, he or she shall cause a meeting to be
duly called on a business day determined by the Secretary within 70 days of the
date of receipt of such request. Business transacted at any special meeting
shall be limited to the purpose or purposes stated in the demand.

Section 4.4. QUORUM, ADJOURNED MEETINGS. Members owning a majority
of the Units outstanding shall constitute a quorum for the transaction of
business at any annual or special meeting of the Members. If a quorum is not
present at a meeting, the Members present and entitled to vote shall adjourn to
such day as they shall agree upon by a vote of the majority in voting interest
present and entitled to vote. Notice of any adjourned meeting need not be given
if the date, time and place thereof are announced at the meeting at which the
adjournment is taken. At adjourned meetings at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If a quorum is present, the Members may continue to
transact business until adjournment notwithstanding the withdrawal of enough
Members to leave less than a quorum.

Section 4.5. ORGANIZATION. At each meeting of the Members, the
Chair or, in his or her absence, the chair chosen by a majority in voting
interest of the Members present and entitled to vote shall act as chair; and the
Secretary or, in his or her absence, any person whom the chair of the meeting
shall appoint, shall act as secretary of the meeting.

Section 4.6. ORDER OF BUSINESS. The order of business at each
meeting of the Members shall be determined by the chair of the meeting, but such
order of business may be changed by the vote of a majority in voting interest of
the Members present and entitled to vote.

Section 4.7. VOTING. Subject to any different voting rights that
may be established for any Unit or class or series of Units, each Member
entitled to vote at a meeting of Members or entitled to express consent in
writing to action without a meeting shall have one vote for each Unit having
voting rights registered in his, her or its name on the books of the Company.
All questions at a meeting shall be decided by a majority vote of the number of
Units entitled to vote represented at the

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meeting at the time of the vote except where otherwise required by the Act or
this Agreement.

Persons holding Units in a fiduciary capacity shall be entitled to
vote the Units so held. If Units stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety or otherwise, or if two or more persons shall
have the same fiduciary relationship respecting the same Units, unless the
Secretary shall have been given written notice to the contrary and shall have
been furnished with a copy of the instrument or order appointing them or
creating a relationship wherein it is so provided, their acts with respect to
voting shall have the following effect: (i) if only one shall vote, his, her or
its act shall bind all; (ii) if more than one shall vote, the act of the
majority voting shall bind all; and (iii) if more than one shall vote, but the
votes shall be evenly split on any particular matter, then, except as otherwise
required by law, each person may vote the Units in question proportionately.

Section 4.8. INSPECTORS OF ELECTION. At each meeting of the
Members, the chair of such meeting shall appoint two inspectors of election, who
shall be natural persons. Each inspector of election so appointed shall execute
the duties of an inspector of election at such meeting with strict impartiality
and according to the best of his or her ability. Such inspectors of election
shall take charge of the ballots at such meeting and after the balloting on any
question shall count the ballots cast and make a report in writing to the
secretary of the meeting of the results. An inspector of election need not be a
Member, and any officer or employee of the Company may be an inspector of
election on any question other than a vote for or against his or her election to
any position with the Company or on any other question in which he or she may be
directly interested.

Section 4.9. CERTAIN ACTIONS. In addition to the actions specified
in other provisions of this Agreement, the following actions shall require the
approval or authorization of a Member Supermajority:

(a) The approval of any Reorganization, any other merger or
consolidation to which the Company or a Subsidiary is a party or the
acquisition of another business by the Company;

(b) The authorization or issuance of any additional Units;

(c) The purchase by the Company of any Unit or an agreement to do so;
PROVIDED, HOWEVER, that the Member whose Units are subject to purchase
shall have no vote in such matter;

(d) The granting of any material lien, charge or encumbrance upon any
of the Company's assets;

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<PAGE>

(e) The borrowing of money;

(f) The making of any distributions to the Members; and

(g) The appointment of the certified public accountants and any
attorneys for the Company.

Section 4.10. NOTICES OF MEETINGS. Every Member shall furnish the
Secretary with a post office address at which notices of meetings and requests
for consents to action without a meeting and all other communications may be
mailed to him, her or it. A written notice of each annual and special meeting
of Members shall be given not less than ten nor more than 60 days before the
date of such meeting to each Member by delivering such notice to him, her or it
personally or depositing the same in the United States mail, postage prepaid,
directed to him, her or it at the post office address shown upon the records of
the Company. Service of notice is complete upon mailing. Personal delivery to
any officer of a corporation or association or to any member of a partnership is
delivery to such corporation, association or partnership. Every notice of a
meeting of Members shall state the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called.

Section 4.11. PROXIES. Each Member entitled to vote at a meeting of
Members or consent to action without a meeting may authorize another Person or
Persons to act for him, her or it by proxy by an instrument executed in writing
and filed with the Secretary. If any such instrument designates two or more
Persons to act as proxies, any proxy may exercise all of the powers conferred by
such written instrument unless the instrument shall otherwise provide. No proxy
shall be valid for more than one year from the date of its execution. Subject
to the above, any proxy may be revoked if an instrument revoking it or a proxy
bearing a later date is filed with the Secretary.

Section 4.12. WAIVER OF NOTICE. Notice of any annual or special
meeting may be waived either before, at or after such meeting in writing signed
by the Member entitled to the notice. Attendance by a Member at a meeting shall
constitute a waiver of notice of such meeting, unless the Member objects at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened, or objects before a vote on an item of business
because the item may not lawfully be considered at that meeting and does not
participate in the consideration of the item at that meeting.

Section 4.13. CONSENTS. Any action that may be taken at a meeting of
the Members may be taken without a meeting and without a vote but only pursuant
to the consent procedures of this Section 4.13. A majority of all Managers, the
Chair or Members owning not less than 35% of the Units outstanding may demand in

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writing that the Secretary request consents of the Members for any proper
purpose or purposes. Such demand shall state the purpose or purposes of the
proposed consents. Within ten days after the Secretary shall receive a proper
demand to request consents, he or she shall cause a request for consent and
related consent form to be mailed to each Member by delivering such documents to
him, her or it personally or depositing the same in the United States mail,
postage prepaid, directed to him, her or it at the post office address shown
upon the records of the Company. Any action shall be approved if consents to
such action in writing, setting forth the actions so taken, shall be signed by
the Members owning outstanding Units having not less than the minimum number of
votes that would be required to authorize or take such action at a meeting at
which all Units entitled to vote thereon were present and voted and filed with
the Secretary. Notice of the taking of the action without a meeting shall be
given to all Members. The action shall become effective upon the mailing of
such notice, but no earlier than five days after the date of mailing of requests
for such consents by the Secretary.

Section 4.14. MEMBER LIST. The Secretary shall prepare, at least ten
days before each meeting of Members and in connection with any request for
consents, a complete list of the Members entitled to vote at such meeting or
express consent, arranged in alphabetical order and showing the address of each
Member and the number of Units registered in the name of each Member. Such list
shall be open to the examination of any Member for any purpose germane to the
meeting or such consents, during ordinary business hours, for a period of at
least ten days prior to the meeting or in the case of consents after the mailing
of requests therefor, at the Principal Office. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof and
may be inspected by any Member who is present.

Article V.
NEW MEMBERS; UNITS; SECURITIES

Section 5.1. ADMISSION OF NEW MEMBERS. The Members may from time to
time admit additional Members to the Company upon the issuance of new Units
pursuant to Section 5.4 or upon a transfer in compliance with Section 9.4. All
Members shall be required to have an interest in the Company represented by one
or more Units. Unless otherwise authorized by the Members in accordance with
this Article V, all Units shall be of one class and series, entitled to vote and
with equal rights and preferences in all matters, and the profits and losses,
and distributions of cash or other assets, of the Company shall be allocated
among the Members of the Company in proportion to the number of Units held by
the Members. The Members, by amendment to this Agreement approved by not less
than a Member Supermajority, may fix (i) the relative rights and preferences of
different classes and series of the Units and (ii) may authorize the issuance of

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securities convertible into, or exchangeable for, and options, warrants and
rights to purchase, Units.

Section 5.2. ISSUANCE OF UNITS. The Members may issue additional
Units from time to time to existing or new Members. Units may be issued for any
consideration, including, without limitation, cash or other property, tangible
or intangible, received or to be received by the Company or services rendered or
to be rendered to the Company. At the time of authorization of the issuance of
additional Units, the Members shall state, by resolution, their determination of
the fair value to the Company in monetary terms of any consideration other than
cash for which Units are to be issued.

Unless the Members otherwise determine by a vote of not less than a
Member Supermajority, Members holding Units shall have the preemptive right to
subscribe for additional Units, securities convertible into or exchangeable for
Units, and options, warrants and rights to purchase Units. Upon any proposed
issuance of such securities, the Board of Managers shall give notice of the
proposed issuance to holders of Units, and such holders shall have the right to
subscribe for such securities for the cash purchase price stated in such notice
on a PRO RATA basis, with the right to oversubscribe for any securities that
would otherwise be unsubscribed because of the failure of one or more Members to
subscribe for their PRO RATA amount. Any securities remaining unsubscribed
after 30 days from the date of such notice may be sold at a cash purchase price
not less than the cash purchase price stated in such notice.

Article VI.
MANAGEMENT AND OPERATION OF COMPANY BUSINESS

Section 6.1. AUTHORITY OF THE MEMBERS. Except as otherwise
expressly provided herein, no Member shall have any authority to act for, or to
assume any obligations or responsibility on behalf of, or bind any other Member
or the Company. Each of the Members represents, warrants and agrees that it
shall disclose in writing to all third parties with whom such Member is in
contact concerning the affairs or the business of the Company that such Member
does not have any authority to act for, or to assume any obligations or
responsibilities on behalf of, the Company unless expressly authorized by the
Board of Managers.

Section 6.2. BOARD OF MANAGERS. The business and affairs of the
Company shall be managed by or under the authority of the Board of Managers,
except as otherwise required by the Act or this Agreement.

Section 6.3. NUMBER, QUALIFICATION; TERM OF OFFICE; VOTE. The
number of members of the Board of Managers shall be up to four (4) (each a
"Manager"). The Managers shall be elected from time to time by the Members.
Each

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of the Managers shall hold office until such Manager's successor shall have been
elected, or until the earlier death, resignation, removal or disqualification of
such Manager. Each Manager shall have one vote in all matters to come before
the Board of Managers.

Section 6.4. INITIAL BOARD. The initial Board of Managers shall be
comprised of the following individuals:

Terri Zimmerman
Steve Sydness

Section 6.5. PLACE OF MEETINGS. Meetings of the Board of Managers
shall be held at the principal executive office of the Company or at such other
place as may be agreed by the members of such Board from time to time.

Section 6.6. SPECIAL MEETINGS. A special meeting of the Board of
Managers may be called for any purpose or purposes at any time by the Chair or
by any Member who holds at least 35% of the outstanding Units and who shall
demand such special meeting by written notice given to the Chair specifying the
purposes of such meeting.

Section 6.7. MEETINGS HELD UPON MEMBER DEMAND. Within five (5)
business days after the Chair receives a valid demand for a meeting of the Board
of Managers from a Member, it shall be the duty of the Chair to cause a special
or regular meeting of Board of Managers, as the case may be, to be duly called
and held on notice no later than five (5) business days after receipt of such
demand. If the Chair fails to cause such a meeting to be called and held as
required by this Section 6.7, the Member or Members making the demand may call
the meeting by giving notice as provided in Section 6.9 at the expense of the
Company.

Section 6.8. ADJOURNMENTS. Any meeting of the Board of Managers may
be adjourned from time to time to another date, time and place. If any meeting
of the Board of Managers is so adjourned, no notice as to such adjourned meeting
need be given if the date, time and place at which the meeting will be
reconvened are announced at the time of adjournment.

Section 6.9. NOTICE OF MEETINGS. Unless otherwise required by law,
written notice of each meeting of the Board of Managers, stating the date, time
and place and, in the case of a special meeting, the purpose or purposes, shall
be given at least five (5) days and not more than ninety (90) days prior to the
meeting to every member of the Board of Managers. A member of the Board of
Managers may waive notice of the date, time, place and purpose or purposes of a
meeting of the Board of Managers. A waiver of notice is effective whether given
before, at or after the meeting, and whether given in writing, orally or by
attendance. Attendance by a

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member of the Board of Managers at a meeting is a waiver of notice of that
meeting, unless the member objects at the beginning of the meeting to the
transaction of business because the meeting is not lawfully called or convened,
or objects before a vote on an item of business because the item may not
lawfully be considered at that meeting and does not participate in the
consideration of the item at that meeting.

Section 6.10. QUORUM. Members of the Board of Managers representing
51% of all votes held by the members of the Board of Managers shall constitute a
quorum for the transaction of business at each meeting of the Board of Managers.

Section 6.11. ABSENT MEMBERS. A member of the Board of Managers may
give advance written consent or opposition to a proposal to be acted on at a
meeting of the Board of Managers. If such member is not present at the meeting,
such consent or opposition to a proposal does not constitute presence for
purposes of determining the existence of a quorum, but such consent or
opposition shall be counted as a vote in favor of or against the proposal and
shall be entered in the minutes or other record of action at the meeting, if the
proposal acted on at the meeting is substantially the same or has substantially
the same effect as the proposal to which the member has consented or objected.

Section 6.12. CONFERENCE COMMUNICATIONS. Any or all of the members
of the Board of Managers may participate in any meeting of the Board of
Managers, or of any duly constituted committee thereof, by any means of
communication through which such members may simultaneously hear each other
during such meeting. For the purposes of establishing a quorum and taking any
action at the meeting, members of the Board of Managers participating pursuant
to this Section 7.11 shall be deemed present in person at the meeting; and the
place of the meeting shall be the place of origination of the conference
telephone conversation or other comparable communication technique.

Section 6.13. REMOVAL. Any member of the Board of Managers may be
removed from office at any time, with or without cause, by the action of the
Member or Members who appointed such member; PROVIDED, HOWEVER, that such
removal shall be without prejudice to any contract rights of such member
pursuant to any employment or other agreement between such member and the
appointing Member(s) or the Company.

Section 6.14. ACTS OF MANAGERS. Except as otherwise provided herein,
the Board of Managers shall take action by the affirmative vote of those
Managers who have the power to vote 51% of all votes held by the Managers, and
any such act shall be deemed to be the action of the Board of Managers for all
purposes of this Agreement and the Act.

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Section 6.15. WRITTEN ACTION. Any action which might be taken at a
meeting of the Board of Managers, or any duly constituted committee thereof, may
be taken without a meeting if done in writing and signed by a number of the
members of the Board of Managers, or committee members, whose approval would be
sufficient to approve the action at a meeting at which all of the members of the
Board of Managers (or such committee) were present.

Section 6.16. PROXIES. A member of the Board of Managers may cast or
authorize the casting of a vote by filing a written appointment of a proxy with
the Chair at or before the meeting at which the appointment is to be effective.
The member may sign or authorize the written appointment by telegram, cablegram
or other means of electronic transmission setting forth or submitted with
information sufficient to determine that the member authorized such
transmission. Any copy, facsimile, telecommunication or other reproduction of
the original of either the writing or transmission may be used in lieu of the
original, PROVIDED that it is a complete and legible reproduction of the entire
original.

Section 6.17. COMMITTEES. (a) A resolution approved by the Board of
Managers may establish committees having the authority of the Board of Managers
in the management of the business of the Company to the extent provided in the
resolution. A committee shall consist of one or more Persons, who need not be
members of the Board of Managers. Committees are subject to the direction and
control of, and vacancies in the membership thereof shall be filled by, the
Board of Managers.

(b) A majority of the members of a committee present at a meeting is
a quorum for the transaction of business, unless a larger or smaller proportion
or number is provided in the resolution of the Board of Managers creating the
committee.

Section 6.18. NO FIDUCIARY DUTY. Persons serving on the Board of
Managers shall not constitute a fiduciary any Member(s) or the Company. No
Person serving on the Board of Managers shall incur any personal liability in
such capacity to the Members or the creditors of the Company.

Section 6.19. COMPENSATION. Members of the Board of Managers shall
not be compensated by the Company for serving in such capacity. The Company
shall bear the expenses, if any, incurred by each Member's respective
representatives in attending meetings of the Board of Managers.

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Article VII.
OFFICERS

Section 7.1. NUMBER. The officers of the Company, all of whom shall
be natural persons, shall consist of a Chair, a President, a Secretary and a
Treasurer ("Named Officers"), and any other officers and agents as the Board of
Managers by a majority vote of all Managers may designate from time to time.
Any person may hold two or more offices.

Section 7.2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. At each
annual meeting of the Board of Managers, all officers shall be elected. Such
officers shall hold office until the next annual meeting of the Managers or
until their successors are elected and qualified, or until such office is
eliminated by amendment of this Agreement, in the case of the Named Officers, or
a vote of the majority of all Managers, in the case of officers other than Named
Officers. An officer who is a Manager shall hold office until the election and
qualification of his or her successor even though he or she may cease to be a
Manager.

Section 7.3. REMOVAL AND VACANCIES. Any officer may be removed from
his or her office with or without cause upon a vote of a majority of the total
number of Managers. Such removal shall be without prejudice to the contract
rights of the person so removed. A vacancy among the officers by death,
resignation, removal or otherwise shall be filled for the unexpired term by the
Board of Managers, unless such office is eliminated.

Section 7.4. CHAIR. The Chair shall preside at all meetings of the
Members and Managers and shall have such other duties as may be prescribed, from
time to time, by the Board of Managers. The Chair shall be a Manager and shall
be elected by the Board of Managers.

Section 7.5. PRESIDENT.

(a) DAY-TO-DAY OPERATIONS. The Company shall be managed by a
President. The Board of Managers delegates to the President the authority to
oversee and supervise the Company's business. Except as otherwise provided in
this Agreement, the President shall be authorized to determine all questions
relating to the day-to-day conduct, operation and management of the business of
the Company. The President shall be responsible to the Board of Managers.

(b) GENERAL. The President shall be entitled to delegate such part
of his or her duties as he or she may deem reasonable or necessary in the
conduct of the business of the Company to one or more employees of the Company,
who shall each have such duties and authority as shall be determined from time
to time by the

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President or as may be set forth in any agreement between such employee and the
Company.

(c) ELECTION. The President shall be elected by the Board of
Managers and shall receive such compensation as may be determined from time to
time by the Board of Managers or as shall be set forth in any written agreement
approved by the Board of Managers.

Section 7.6. SECRETARY. The Secretary shall be secretary of and
shall attend all meetings of the Members and Board of Managers and shall record
all proceedings of such meetings in the minute book of the Company. He or she
shall give proper notice of meetings of Members and the Board of Managers. He
or she shall perform such other duties as may from time to time be prescribed by
the Board of Managers.

Section 7.7. TREASURER. The Treasurer shall keep or cause to be
kept accurate accounts of all moneys of the Company received or disbursed. He
or she shall deposit or cause to be deposited all moneys, drafts and checks in
the name of and to the credit of the Company in such banks and depositaries as
the Board of Managers shall from time to time designate. He or she shall have
power to endorse or cause to be endorsed for deposit or collection all notes,
checks and drafts received by the Company. He or she shall disburse or cause to
be disbursed the funds of the Company as ordered by the President, making proper
vouchers therefor. He or she shall render to the Board of Managers whenever
required an account of all his or her transactions as Treasurer and of the
financial condition of the Company and shall perform such other duties as may
from time to time be prescribed by the Board of Managers.

Section 7.8. DUTIES OF OTHER OFFICERS. The duties of such other
officers and agents as the Board of Managers may designate shall be set forth in
the resolution creating such office or agency or by subsequent resolution.

Section 7.9. COMPENSATION. The officers, agents and employees of
the Company shall receive such compensation for their services as may be
determined from time to time by the Board of Managers or as shall be set forth
in a written agreement.

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Article VIII.
INDEMNIFICATION

Section 8.1. INDEMNIFICATION.

(a) To the fullest extent permitted by law, each Manager and Named
Officer (individually, an "Indemnitee") shall be indemnified, held harmless and
defended by the Company from and against any and all losses, claims, damages,
liabilities, whether joint or several, expenses (including legal fees and
expenses), judgments, fines and other amounts paid in settlement, incurred or
suffered by such Indemnitee, as a party or otherwise, in connection with any
threatened, pending or completed claim, demand, action, suit or proceeding,
whether civil, criminal, administrative or investigative, and whether formal or
informal, arising out of or in connection with the business or the operation of
the Company and by reason of the Indemnitee's status as a Manager or Named
Officer regardless of whether the Indemnitee continues to be a Manager or Named
Officer of the Company at the time any such loss, claim, damage, liability or
other expense is paid or incurred if (i) the Indemnitee acted in good faith and
in a manner he or she reasonably believed to be in the best interests of the
Company and, with respect to any criminal proceeding, had no reasonable cause to
believe that his or her conduct was unlawful, (ii) the Indemnitee's conduct did
not constitute intentional misconduct or a material breach of the terms of this
Agreement and (iii) the Indemnitee's conduct did not involve a transaction from
which the Manager or Named Officer derived an improper personal benefit. The
termination of any action, suit or proceeding by judgment, order, settlement or
upon a plea of NOLO CONTENDERE, or its equivalent, shall not, of itself, create
a presumption that the Indemnitee acted in a manner contrary to the standards
specified in clauses (i), (ii) or (iii) of this Section 8.1(a).

(b) To the fullest extent permitted by law, expenses incurred by an
Indemnitee in defending any claim, demand, action, suit or proceeding subject to
this Section 7.1 shall, from time to time, be advanced by the Company prior to
the final disposition of such claim, demand, action, suit or proceeding upon
receipt by the Company of an undertaking by or on behalf of the Indemnitee to
repay such amount unless it is determined that such Indemnitee is entitled to be
indemnified therefor pursuant to this Section 8.1.

(c) The indemnification provided by this Section 8.1 shall be in
addition to any other rights to which any Indemnitee may be entitled under any
other agreement, pursuant to any vote of the Managers, as a matter of law or
otherwise, and shall inure to the benefit of the heirs, legal representatives,
successors, assigns and administrators of the Indemnities.

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(d) Any indemnification under this Section 8.1 shall be satisfied
solely out of the assets of the Company and no Indemnitee shall have any
recourse against any Member with respect to such indemnification.

(e) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 8.1 merely because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies, if the
transaction was not otherwise prohibited by the terms of this Agreement and the
conduct of the Indemnitee satisfied the conditions set forth in Section 8.1(a).

(f) The Company may, but shall have no obligation to, purchase and
maintain insurance covering any potential liability of the Indemnitees for any
actions or omissions for which indemnification is permitted hereunder, including
such types of insurance (including extended coverage liability and casualty and
workers' compensation) as would be customary for any person engaged in a similar
business, and may name the Indemnitees as additional insured parties thereunder.

Section 8.2. INDEMNIFICATION PROCEDURES; SURVIVAL.

(a) Promptly after receipt by an Indemnitee of notice of the
commencement of any action that may result in a claim for indemnification
pursuant to Section 8.1, the Indemnitee shall notify the Company in writing
within 30 days thereafter; PROVIDED, HOWEVER, that any omission so to notify the
Company will not relieve it of any liability for indemnification hereunder as to
the particular item for which indemnification may then be sought (except to the
extent that the failure to give notice shall have been materially prejudicial to
the Company) nor from any other liability that it may have to any Indemnitee.

(b) An Indemnitee shall have the right to employ separate counsel in
any action as to which indemnification may be sought under any provision of this
Agreement and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnitee unless (i) the
Company has agreed in writing to pay such fees and expenses, (ii) the Company
has failed to assume the defense thereof and employ counsel within a reasonable
period of time after being given the notice required above or (iii) the
Indemnitee shall have been advised by its counsel that representation of such
Indemnitee and other parties by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them. It is understood, however, that the Company shall, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
only one separate firm of attorneys at any time for all such Indemnitees having
actual or potential differing interests with the

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Company, unless but only to the extent the Indemnitees have actual or potential
differing interests with each other.

(c) The Company shall not be liable for any settlement of any such
action effected without its written consent, but if settled with such written
consent, or if there is a final judgment against the Indemnitee in any such
action, the Company agrees to indemnify and hold harmless the Indemnitee to the
extent provided above from and against any loss, claim, damage, liability or
expense by reason of such settlement or judgment.

(d) The indemnification obligations set forth in Section 8.1 and this
Section 8.2 shall survive the termination of this Agreement.

Article IX.
CERTIFICATES; TRANSFERS

Section 9.1. CERTIFICATES FOR UNITS. All Units of the Company shall
be certificated Units. Each Member shall be entitled to a certificate, to be in
such form as shall be prescribed by the Board of Managers, certifying the number
of Units of the Company owned by such Member. The certificates for such Units
shall be numbered in the order in which they shall be issued and shall be
signed, in the name of the Company, by such officers as the Board of Managers
may designate. Every certificate surrendered to the Company for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 9.2.

Section 9.2. LOSS OF CERTIFICATES. Any Member claiming a
certificate for Units to be lost, stolen or destroyed shall make an affidavit of
that fact in such form as the Board of Managers shall require and shall, if the
Board of Managers so requires, give the Company a bond of indemnity in form, in
an amount and with one or more sureties satisfactory to the Board of Managers,
to indemnify the Company against any claim which may be made against it on
account of the reissue of such certificate, whereupon a new certificate may be
issued in the same tenor and for the same number of Units as the one alleged to
have been lost, stolen or destroyed.

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Section 9.3. REGISTRATION, TRANSFER AND EXCHANGE.

(a) The Company shall keep at the Principal Office a register in
which shall be entered the names and addresses of the Members and all Transfers
of outstanding Units.

(b) Subject to this Article IX, each Unit, whether originally or in
substitution for, or upon transfer, exchange or other issuance of any Unit shall
be registered on the effective date of the Transfer, exchange or other issuance;
PROVIDED, HOWEVER, that no registration of any Transfer not made in compliance
with this Article IX shall be made in the register.

(c) Transfer of Units on the books of the Company may be authorized
only by the Member named in the certificate, the Member's legal representative
or the Member's duly authorized attorney-in-fact, and upon surrender of the
certificate or the certificates for such Units. The Company may treat as the
absolute owner of Units of the Company the person or persons in whose name Units
are registered on the books of the Company.

Section 9.4. RESTRICTION ON TRANSFERS. In addition to any
restrictions imposed by the federal securities laws and any applicable state
securities or "blue-sky" laws, no Member may sell, assign, pledge, transfer,
convey or otherwise dispose of (including through any merger, share exchange or
consolidation) (collectively, "Transfer") all or any part of any Unit, whether
for consideration or not, and no Transferee thereof shall have any rights in the
Company or be or have any rights as a Member with respect to all or any part of
any such Interest attempted to be Transferred, and any such attempted Transfer
of all or any part of an Interest shall be entirely null and void, unless (i)
the Members agree to continue the business of the Company pursuant to
Section 13.1(d) if all of the Units of such Member are to be Transferred and
(ii) Members holding at least 51% of the Units that are not being Transferred
consent to the Transfer and the admission of such Transferee as a Member if
such Transfer is to a Person, other than the Company, who is not then a Member.
The appropriate Company records and any certificates representing the Units
shall be noted to prevent any Transfers in violation of this Section 9.4.

Section 9.5. TRANSFER BY LEGAL PROCESS. Upon any involuntary
Transfer of all or any portion of the Units of a Member pursuant to a levy of
execution, foreclosure of pledge, garnishment, attachment, divorce decree,
bankruptcy or other legal process (or by operation of law resulting from the
death, disability, liquidation, dissolution or winding-up of a Member), such
Member shall cease to be a Member, but any successor in title to the transferred
Units shall have no right to become a Member except in compliance with Section
9.4. If such successor does not become a Member, such successor shall be merely
an assignee within the meaning of Section 18-702(b)(1) of the Act.

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Section 9.6. RESIGNATION. No Member shall be entitled to resign or
retire from the Company prior to the dissolution and winding up of the Company
pursuant to Article XIII hereof without the unanimous consent of the other
Members of the Company.

Article X.
BOOKS OF ACCOUNT; REPORTS AND FISCAL MATTERS

Section 10.1. BOOKS; PLACE; ACCESS. The Chair, or the Treasurer if
one is appointed, shall maintain books of account on behalf of the Company at
the Principal Office or such other place as may be designated by the Board of
Managers. All Members shall at all reasonable times have access to and the
right to inspect the same.

Section 10.2. FINANCIAL INFORMATION. The Chair, or the treasurer if
one is appointed, shall cause to be prepared and delivered to each of the
Members summary financial information with respect to each of the first three
quarters of each Fiscal Year. Such quarterly financial information shall be
provided to the Members not later than forty-five (45) days following the end of
each quarter of the Fiscal Year. The Chair, or the treasurer if one is
appointed, also shall cause to be prepared and delivered to each of the Members
an annual financial report that shall describe in reasonable detail the
financial and business activities of the Company and include the financial
statements of the Company for the previous Fiscal Year. Such annual financial
report shall be provided to the Members not later than ninety (90) days
following each Fiscal Year-end and shall not be audited unless the Board of
Managers otherwise decides.

Section 10.3. TAX INFORMATION. Within ninety (90) days after the
close of each Fiscal Year, all necessary tax information shall be transmitted to
all Members.

Section 10.4. TAX ELECTIONS. All elections required or permitted to
be made by the Company under the Code, shall be made by the "TMP" (as such term
is defined in Section 10.5) in consultation with the Company's accountants and
attorneys. In the event of a transfer of all or part of the Interest of any
Member, the Company may, in the sole discretion of the TMP, elect pursuant to
Section 754 of the Code to adjust the basis of the Company Assets.

Section 10.5. TAX MATTERS PARTNER. Great Plains Software, Inc.,
represented by Terri Zimmerman, shall act as the tax matters partner (the
"TMP"), as such term is defined in Section 6231(a)(7) of the Code, and the TMP
is hereby authorized to and shall represent the Company in connection with all
examinations of the Company's affairs by tax authorities, including resulting
administrative and judicial proceedings. The Members and the TMP shall use all
reasonable efforts to

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comply with the responsibilities outlined in this Section 10.5 and in Sections
6222 through 6231 of the Code (including any Treasury Regulations thereunder and
any successor or amendatory provisions thereto for which a tax matters partner
is designated).

(a) TMP NOTICES. Each Member shall furnish the TMP with such
information (including information specified in Section 6230(e) of the Code) as
the TMP may reasonably request to permit the TMP to provide the Internal Revenue
Service with sufficient information to allow proper notice to the Members in
accordance with Section 6223 of the Code. The TMP shall keep each Member
informed of those administrative and judicial proceedings for the adjustment at
the Company level of Company items required by Section 6223(g) of the Code and
the Treasury Regulations thereunder, and such other matters as the TMP, in its
sole discretion, deems appropriate.

(b) INCONSISTENT TAX TREATMENT. Each Member shall notify the TMP in
the event its treatment of any Company item on its federal income tax return is
inconsistent with the treatment of that item on any return filed by or in any
records of the Company within thirty (30) days of the date such Member's return
is filed.

(c) REQUESTS FOR TAX ADJUSTMENTS. No Member shall file, pursuant to
Section 6227 of the Code, a request for an administrative adjustment of limited
liability company items for any Company taxable year without first notifying
each other Member. If each other Member agrees with the requested adjustment,
the TMP shall file the request for administrative adjustment on behalf of the
Company. If unanimous consent of the Members is not obtained within thirty (30)
days, or within the period required to file timely the request for
administrative adjustment, if shorter, any Member, including the TMP (on behalf
of the Company), may file a request for administrative adjustment on its own
behalf.

(d) TAX PROCEEDINGS. The TMP, in its sole discretion, shall
negotiate with the Internal Revenue Service on behalf of the Company during all
aspects of the tax proceeding, including without limitation the examination,
appeals and litigation process. Any Member who intends to file a petition under
Sections 6226, 6228, or other sections of the Code with respect to any Company
item, or other tax matters involving the Company, shall give reasonable notice
to each of the other Members of such intention and the nature of the
contemplated proceeding. In the case where the TMP is the Member intending to
file such petition, the TMP, in its sole discretion, shall choose the forum in
which such petition will be filed. If any Member intends to seek review of any
court decision rendered as a result of a proceeding instituted under the
preceding part of this paragraph (d) of Section 10.5, such Member shall notify
each of the other Members of such intended action. In accordance with its duty
to act in good faith, the TMP may choose to pursue or forego settlement,
litigation or any other proceedings.

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(e) TAX SETTLEMENTS. The TMP shall have the authority to bind
any Member to a settlement agreement without obtaining the written concurrence
of any such Member who would be bound by such agreement. Any Member (other than
the TMP) who enters into a settlement agreement with the Secretary of the
Treasury with respect to any partnership items, as defined by Section 6231(a)(3)
of the Code, shall notify the Members of such settlement agreement and its terms
within ninety (90) days from the date of settlement.

(f) TMP EXPENDITURES, FEES AND INDEMNIFICATION. Subject to
Section 4.9(g), the TMP may engage such legal counsel, certified public
accountants, or others (including, without limitation, experts) on behalf of the
Company as it may determine to be necessary and appropriate. Any other Member
may engage other legal counsel, certified public accountants, or others on such
other Member's own behalf and at such other Member's sole cost and expense. Any
reasonable item of expense, including but not limited to fees and expenses for
legal counsel, certified public accountants, and others (including, without
limitation, experts) that the TMP incurs on behalf of the Company in connection
with any audit, assessment, litigation, or other proceeding regarding any
partnership item, shall constitute expenses of the Company. In the event that
the Company does not have adequate cash or other assets to pay such items of
expense, the TMP shall not be obligated to make capital contributions or loans
to fund such expenses, and the TMP shall be free to resign as the tax matters
partner of the Company pursuant to Section 10.5(g) hereof. The Company shall
indemnify the TMP pursuant to ArticleVIII hereof.

(g) RESIGNATION OF TMP. The TMP may resign as tax matters
partner at any time upon the filing of a signed statement with the Internal
Revenue Service in accordance with Temp. Treas. Reg. Section
301.6231(a)(7)-1T(i) (or any successor provision thereto). The successor tax
matters partner shall be determined pursuant to Temp. Treas. Reg. Sections
301.6231(a)(7)-1T (or any successor provision thereto).

(h) SURVIVAL OF TMP PROVISIONS. The provisions of this Section
10.5, including without limitation the obligation to pay fees and expenses and
the indemnification obligations described in Section 10.5(f) hereof, shall
survive the termination of the Company or the termination of any Member's
interest in the Company and shall remain binding on the Company for a period of
time necessary to resolve with the Internal Revenue Service, the Department of
the Treasury or any state taxing authority any and all matters regarding the
federal or state income taxation of the Company for the applicable tax year(s).

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Article XI.
AMENDMENT

Section 11.1. PROCEDURE APPLICABLE TO ALL AMENDMENTS. The Certificate
of Formation and this Agreement may be amended by the Board of Managers at any
duly called meeting. Any such amendment shall be binding on all of the Members.
Each amendment to this Agreement shall be appropriately designated in a document
included within the minute book of the Company indicating the change made, the
date of any necessary approval and an appropriate certification by the
Secretary. The Secretary shall provide notice of all such amendments to each
Member. There shall be no amendment or rescission of any portion of this
Agreement by implication. Any amendment may be prospective in nature.

Section 11.2. VOTING REQUIREMENT. Any amendment or repeal of any
portion of the Certificate of Formation or this Agreement shall require the vote
of not less than a majority of the Managers in addition to any approval of
Members required by Section 11.3. No amendment of Sections 8.1 or 8.2 shall be
effective as to any particular Indemnitee without the consent of the Indemnitee
affected thereby.

Section 11.3. APPROVAL BY MEMBERS. Any amendment or repeal of the
following provisions of the Certificate of Formation or this Agreement shall
require the vote of not less than a Member Supermajority:

(a) Certificate of Formation:
Article 1
Article 4
Article 5
Article 6

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(b) This Agreement:
Section 1.1--Name
Section 1.4--Duration
Section 1.5--Duties of Members
Section 1.6--Duties of Managers
Section 4.1--Place and Time of Meetings
Section 4.7--Voting
Section 4.9--Certain Actions
Section 5.4--Issuance of Units
Section 9.4--Restrictions on Transfer
Section 13.1--Events Causing Dissolution
Article XI--Amendment
Article XII--Approval of Reorganizations and
Bankruptcy

Article XII.
APPROVAL OF REORGANIZATIONS AND BANKRUPTCY

Without the vote of a Member Supermajority (i) the Company shall not
engage in any Reorganization or (ii) commence any proceedings or the filing of
any petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other federal or state bankruptcy,
insolvency or similar law.

Article XIII.
DISSOLUTION AND LIQUIDATION

Section 13.1. EVENTS CAUSING DISSOLUTION. The Company shall be
dissolved only upon the occurrence of any of the following events:

(a) The expiration of the term set forth in the Certificate of
Formation;

(b) The sale, exchange or any other disposition of all or
substantially all of the Company Assets;

(d) The death, insanity, expulsion, bankruptcy, retirement,
resignation or dissolution of a Member or the occurrence of any other event
(including any Transfer, redemption or forfeiture of all of the Units of such
Member) which terminates the continued membership of a Member in the Company
unless the business of the Company is continued by the consent of such of the
remaining Members who hold the right to vote at least 51% of the Interests held

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by all of the remaining Members within ninety (90) days following the date the
occurrence of any such event; or

(e) The entry of a decree of judicial dissolution under Section
18-802 of the Act.

Section 13.2. CONTINUATION OF BUSINESS. If, upon dissolution of the
Company for any reason described in Section 13.1(d) hereof, the business of the
Company is continued without liquidation and without the winding up of the
affairs of the Company pursuant to the terms thereof, title to Company Assets
shall be vested in the company continuing the business and the allocation and
distribution rules set forth herein shall continue as set forth herein. Upon
such dissolution, no Member, nor any legal representative of any Member, shall
have the right to an account of its Interest or its Capital Account as against
the Company continuing the business, and no Member, nor any legal representative
of any Member, shall have the right to have the value of its Interest or Capital
Account as of the date of dissolution ascertained or have any right as a
creditor or otherwise with respect to the value of its Interest.

Section 13.3. LIQUIDATION AND WINDING UP. If dissolution of the
Company should be caused by reason of (i) any of the events set forth in
paragraphs (a), (b), (c), (e) or (f) of Section13.1 hereof or (ii) any of the
events set forth in paragraph (d) of Section 13.1 hereof and the business of the
Company is not continued pursuant to the terms of such paragraph (d), the
Company shall be liquidated and the Person designated at such time by the Board
of Managers (or other Person or Persons designated by a decree of court) shall
wind up the affairs of the Company. The Person or Persons winding up the
affairs of the Company shall promptly proceed to the liquidation of the Company
Assets and, in settling the accounts of the Company, the Company Assets shall
be distributed in the following order of priority:

(a) To creditors (excluding any Member and the Chair if they
are creditors), to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof), other than liabilities for which reasonable
provision for payment has been made and liabilities for distributions to Members
under Section 5.7 hereof;

(b) To the repayment of outstanding loans from a Member to the
Company;

(c) The balance, if any, to the Members in accordance with their
positive Capital Account balances, after giving effect to all allocations of
gain or loss in accordance with Article XVI hereof.

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Section 13.4. COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In
the event the Company is liquidated within the meaning of Treas. Reg. Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article XI to
the Members who have positive Capital Account balances in compliance with Treas.
Reg. Section 1.704-1(b)(2)(ii)(b)(2).

Article XIV.
REPRESENTATIONS, WARRANTIES OF THE MEMBERS

Section 14.1. REPRESENTATIONS AND WARRANTIES OF THE MEMBERS. Each of
the Members represents and warrants as of the date of this Agreement to each of
the other Members and the Company as follows:

(a) The Units being acquired by such Member are being purchased
for such Member's own account and not with a view to, or for sale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). Such Member
understands that such Units have not been registered under the Securities Act or
any state securities laws by reason of their contemplated issuance in
transactions exempt from the registration and prospectus delivery requirements
thereof and that the reliance of the Company and others upon such exemptions is
predicated in part by the representations and warranties of such Member
contained herein.

(b) Such Member has the requisite power and authority (whether
corporate or otherwise) and legal capacity to enter into, and to carry out its
obligations under, this Agreement.

(c) The execution and delivery by such Member of this Agreement
and the consummation by such Member of the transactions contemplated hereby have
been duly authorized prior to the date of this Agreement by all necessary action
on the part of such Member.

(d) This Agreement has been duly executed and delivered by such
Member and constitutes a valid and binding obligation enforceable against such
Member in accordance with its terms.

(e) Such Member is not subject to, or obligated under, any
provision of (i) any agreement, arrangement or understanding, (ii) any license,
franchise or permit or (iii) any law, regulation, order, judgment or decree that
would be breached or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of such Member's assets would be created,
by such Member's execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, EXCEPT for such agreements
as to which a Member has previously obtained the consent of the other party or
parties thereto.

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(f) No authorization, consent or approval of, waiver or
exemption by, or filing or registration with, any public body, court, third
party or authority is necessary on such Member's part, which has not previously
been obtained by such Member for the consummation of the transactions
contemplated by this Agreement.

(g) No person or entity has or will have, as a result of any act
or omission by such Member any right, interest or valid claim against the
Company or any other Member for any commission, fee or other compensation as a
finder or broker, or in any similar capacity, in connection with the
transactions contemplated by this Agreement.

Article XV.
CAPITAL

Section 15.1. INITIAL CAPITAL CONTRIBUTIONS. On the date of the
execution of this Agreement, the Members shall make the Capital Contributions
indicated opposite their respective names on Schedule A. In exchange for such
Capital Contributions, the Members shall receive the Units set forth opposite
their respective names on Schedule A.

Section 15.2. NO RIGHT TO RETURN OF CONTRIBUTION. No Member shall
have the right to the withdrawal or to the return of his, her or its Capital
Contribution, except upon the dissolution and liquidation of the Company
pursuant to Article XI.

Section 15.3. ADDITIONAL CAPITAL CONTRIBUTIONS. In the event that
the Members who hold the power to vote a majority of the Units at any time or
from time to time determine that contributions to the capital of the Company are
necessary to the conduct of the Company's activities, each of the Members shall
promptly make a cash contribution to the capital of the Company equal to his
share (determined in proportion to the number of Units held by each Member) of
such additional funds. As additional funds are needed for the conduct of the
Company's business, if one Member is unable to or otherwise does not contribute
his share of such funds to the Company, the funds advanced by the other Members
shall be regarded as a loan in accordance with Section15.4.

Section 15.4. LOANS TO THE COMPANY; NO INTEREST ON CAPITAL. The
Members may, but are not obligated to, make loans to the Company from time to
time, as authorized by the Board of Managers. Any such loans shall not be
treated as Capital Contributions to the Company for any purpose hereunder nor
entitle such Member to any increase in its share of the profits and losses and
cash distributions of the Company, but the Company shall be obligated to such
Member for the amount of any such loans pursuant to the terms thereof, as the
same are determined by the Board of Managers and such Member. Interest with
respect to the outstanding

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amount of any loans made by a Member to the Company shall accrue and be payable
at such times and at such rate as shall be determined by the Board of Managers
and such Member. All scheduled principal and interest payments with respect to
any loans from a Member to the Company pursuant to this Section 15.9 shall be
repaid prior to any distributions to any Members pursuant to Section 16.7. No
interest shall be paid on any Capital Contribution to the Company or on any
balance in any Capital Account.

Section 15.5. CREDITOR'S INTEREST IN THE COMPANY. No creditor who
makes a loan to the Company shall have or acquire at any time as a result of
making the loan any direct or indirect interest in the profits, capital or
property of the Company, other than such interest as may be accorded to a
secured creditor. Notwithstanding the foregoing, this provision shall not
prohibit in any manner whatsoever a secured creditor from participating in the
profits of operation or gross or net sales of the Company or in the gain on sale
or refinancing of the Company, all as may be provided in its loan or security
agreements.

Section 15.6. LIABILITY OF MEMBERS. Except as otherwise provided in
the Act, no Member, as such, shall have any personal liability whatsoever to the
Company, any of the other Members or any of the creditors of the Company for the
debts, liabilities, contracts or other obligations of the Company or any of the
Company's losses beyond, with respect to a Member, such Member's Capital
Contribution and, solely to the extent and for the period required by applicable
law, the amount of such Member's Capital Contribution which is returned to it.
Each Unit, on issuance, shall be fully paid and, except as set forth in
Section 15.2, not subject to assessment for additional Capital Contributions.
No Member shall be required to lend any funds to the Company as a condition
to admission or continued membership of such Member in the Company. It is
the intent of the Members that (i) no distribution to any Member (other than
a distribution upon the dissolution and liquidation of the Company) shall be
deemed a withdrawal of capital, even if such distribution represents, for
Federal income tax purposes or otherwise (in full or in part), a distribution
of depreciation or any other non-cash item accounted for as a loss or
deduction from or offset to the Company's income, and (ii) no Member shall be
obligated to pay any such amount to or for the account of the Company or any
creditor of the Company. However, if any court of competent jurisdiction
holds that, notwithstanding the provisions of this Agreement, any
distribution made by the Company to a Member constitutes a withdrawal of
capital, any obligation under applicable law to return the same or any
portion thereof to or for the account of the Company or its creditors shall
be the obligation of such Member.

Section 15.7. CAPITAL ACCOUNTS. A separate Capital Account shall be
maintained for each Member. It is intended that the Capital Accounts of the
Members will be maintained in accordance with the capital accounting rules of

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Treas. Reg. Section 1.704-1(b)(2)(iv) and the provisions of this Agreement
relating to the maintenance of Capital Accounts shall be interpreted and applied
in a manner consistent therewith. In the event the Board of Managers shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto, are computed in order to comply with such
Treasury Regulation, the Board of Managers may make such modification, provided
that any such modifications shall not materially alter the economic agreement of
the Members. In general, the Capital Account of a Member shall be initially
credited with the value of its Capital Contribution to the Company in respect of
its Units. The Capital Account of a Member shall further be credited by the
value of any additional Capital Contributions to the Company made by such Member
from time to time in respect of its Interest, shall be debited by the amount of
any cash distributions made by the Company to such Member on account of any such
Interest and shall be credited with the amount of income and gains and debited
with the amount of losses of the Company allocated to such Member in accordance
with the terms of Article V hereof. In all instances, the capital accounting
rules in Treas. Reg. Section 1.704-1(b)(2)(iv) will determine the proper debits
or credits to the Capital Accounts of the Members. The Board of Managers may,
at its option, increase or decrease the Capital Accounts of the Members to
reflect a revaluation of Company Assets on the Company's books at the times
when, pursuant to Treas. Reg. Section 1.704-1(b)(2)(iv), such adjustments may
occur. The adjustments will, if made, be made in accordance with such Treasury
Regulation, including allocating taxable items, as computed for book purposes,
to the Capital Accounts as prescribed in such Treasury Regulation. In the case
of the transfer of all or a part of the Interest of a Member, the Capital
Account of the transferor Member attributable to the transferred Interest will
carry over to the transferee Member. In the case of termination of the Company
pursuant to Section 708 of the Code, the rules of Treas. Reg. Section
1.704-1(b)(2)(iv) shall govern adjustments to the Capital Accounts. If there
are any adjustments to Company Assets as a result of Sections 732, 734 or 743 of
the Code, the Capital Accounts of the Members shall be adjusted as provided in
Treas. Reg. Section 1.704-1(b)(2)(iv)(m).

Article XVI.
ALLOCATION OF INCOME, GAINS AND LOSSES;
DISTRIBUTIONS TO MEMBERS

The Members agree that the income, profits, gains, losses and tax
credits of the Company shall be allocated, and cash distributions of the Company
shall be made, as follows:

Section 16.1. ALLOCATION OF INCOME, PROFITS, GAINS, LOSSES AND
CREDITS. After giving effect to the special allocations set forth in Section
16.4 hereof, and subject to Section 16.3 hereof, all income, profits, gains,
losses and tax credits of the

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Company shall be allocated to each of the Members holding Units in proportion to
their respective Units in the Company.

Section 16.2. OTHER ALLOCATION RULES. In the event of any changes in
Units during a Fiscal Year, all income, profits, gains, losses and tax credits
from operations of the Company during such Fiscal Year, using such methods of
accounting for depreciation and other items as the Board of Managers determines
to use for federal income tax purposes, shall be allocated to each Member
holding an Interest based on its varying interest in the Company during such
operating year in accordance with Section 706 of the Code. The Board of
Managers shall determine in accordance with Section 706 of the Code whether to
prorate items of income and deduction according to the portion of the Fiscal
Year for which a Member held an Interest or whether to close the books on an
interim basis and divide such operating year into two or more segments.

Section 16.3. LIMITATION ON LOSS ALLOCATION. Notwithstanding
anything in Section 16.1 hereof, no allocation of loss may be made to a Member
if such loss would cause a Member to have a negative balance in its Capital
Account, after such Capital Account is credited by any amounts which the Member
is obligated to restore or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treas. Reg. Section 1.704-2(g)(1) and Treas. Reg.
Section 1.704-2(i)(5) and debited by the items described in Treas. Reg. Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing limitation is intended to
comply with the provisions of Treas. Reg. Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith. In addition, the Members with
deficit Capital Account balances resulting in whole or in part from allocations
of loss or deduction attributable to nonrecourse indebtedness shall be allocated
income or gain in an amount no less than the "minimum gain" and at a time no
later than the time at which the "minimum gain" is reduced below the sum of such
deficit Capital Account balances or as soon thereafter as possible.

Section 16.4. SPECIAL ALLOCATIONS. The following special allocations
shall be made in the following order:

(a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Section
1.704-2(f) of the Treasury Regulations, notwithstanding any other provision of
this Article V, if there is a net decrease in Company minimum gain during any
Fiscal Year, each Capital Account shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent years) in an
amount equal to the associated Member's share of the net decrease in Company
minimum gain (within the meaning of Treasury Regulations Sections 1.704-2(b)(2)
and 1.704-2(d)) determined in accordance with Treasury Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to the Capital
Account of each

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Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2).
This Section 16.4(a) is intended to comply with the minimum gain chargeback
requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.

(b) MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision
of this Article XVI, if there is a net decrease in Member nonrecourse debt
minimum gain, as defined in Treasury Regulations Section 1.704-2(i)(2) and
determined pursuant to Treasury Regulations Section 1.704-2(i)(3), attributable
to a Member nonrecourse debt, as defined in Treasury Regulations Section
1.704-2(b)(4), during any Fiscal Year, the Capital Account of each Member who
has a share of the Member nonrecourse debt minimum gain attributable to such
Member nonrecourse debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Company income and
gain for such Fiscal Year (and if necessary, subsequent Fiscal Years) in an
amount equal to such Member's share of the net decrease in Member nonrecourse
debt minimum gain attributable to such Member nonrecourse debt, determined in
accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to the Capital Account of each Member pursuant
thereto. The items to be so allocated shall be determined in accordance with
Treasury Regulations 1.704-2(i)(4) and 1.704-2(j)(2). This Section 16.4(b) is
intended to comply with the minimum gain chargeback requirement in Treasury
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.

(c) QUALIFIED INCOME OFFSET. If a Member unexpectedly receives an
adjustment, allocation or distribution described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), and such unexpected adjustment,
allocation or distribution puts such Member's Capital Account into a deficit
balance or increases such deficit balance determined after such account is
credited by any amounts which the Member is obligated to restore or is deemed to
be obligated to restore pursuant to the penultimate sentence of Treasury
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and debited by the items
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6)
and for all other allocations tentatively made pursuant to this Article V as if
this Section 16.4(c) were not in this Agreement, the Capital Account of such
Member shall be allocated items of Company income and gain in an amount and
manner sufficient to eliminate such deficit or increase as quickly as possible.
It is intended that this Section 16.4(c) shall meet the requirement that this
Agreement contain a "qualified income offset" as defined in Treasury Regulations
Section 1.704-1(b)(2)(ii)(d) and this Section shall be interpreted and applied
consistently therewith.

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(d) NONRECOURSE DEDUCTIONS. Nonrecourse deductions, within the
meaning of Treasury Regulations Section 1.704-2(b)(1), for any Fiscal Year or
other period shall be specially allocated among the Capital Accounts of the
Members in proportion to their respective Units.

(e) MEMBER NONRECOURSE DEDUCTIONS. Any Member nonrecourse
deductions, within the meaning of Treasury Regulations Sections 1.704-2(i)(1)
and 1.704-2(i)(2), for any Fiscal Year or other period shall be specially
allocated to the Capital Account of the Member who bears the economic risk of
loss with respect to the Member nonrecourse debt to which such Member
nonrecourse deductions are attributable in accordance with Treasury Regulations
Section 1.704-2(i).

(f) SECTION 754 ADJUSTMENT. To the extent an adjustment to the
adjusted tax basis of any Company Asset pursuant to Code Sections 732, 734(b) or
743(b) is required, pursuant to Treasury Regulations Sections
1.704-1(b)(2)(iv)(m)(2) or (4), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the Company Asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Sections of the Treasury Regulations.

Section 16.5. CURATIVE ALLOCATIONS. The allocations set forth in
Sections 16.4(a), (b), (c), (d), (e) and (f) hereof (the "Regulatory
Allocations") are intended to comply with certain requirements of the Treasury
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss, or
deduction pursuant to this Section 16.5. Therefore, notwithstanding any other
provision of this Article V (other than the Regulatory Allocations), the Board
of Managers shall make such offsetting special allocations of Company income,
gain loss, or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 16.1 and
16.2 hereof. In exercising its discretion under this Section 16.5, the Board of
Managers shall take into account future Regulatory Allocations under Sections
16.4(a) and (b) hereof that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 16.4(e) and (f) hereof.

Section 16.6. TAX ALLOCATIONS: SECTION 704(c) OF THE CODE. In
accordance with Section 704(c) of the Code, income, gain, loss and deduction
with respect to any property contributed to the Company shall, solely for tax
purposes, be allocated among the Capital Accounts of the Members so as to take
account of any

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variation between the adjusted basis of such property to the Company for income
tax purposes and its book value, in the same manner as such variations are
treated under Section 704(c) of the Code. Any elections or other decisions
related to such allocations shall be made by the Board of Managers in any manner
that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 16.6 are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of income, gain, loss or
deduction pursuant to any provision of this Agreement.

Section 16.7. DISTRIBUTIONS TO MEMBERS. Subject to any restrictions
imposed by the Act (including but not limited to Section 18-607(a) thereof), any
distributions by the Company shall be made to the Members as of a record date
determined by the Board of Managers (which date shall not be less than ten (10)
nor more than forty-five (45) days before the date of the distribution) in
accordance with their respective Units, but no less frequently than once per
year.

Article XVII.
MISCELLANEOUS PROVISIONS

Section 17.1. ADDITIONAL ACTIONS AND DOCUMENTS. Each of the Members
hereby agrees to take or cause to be taken such further actions, to execute,
acknowledge, deliver and file, or cause to be executed, acknowledged, delivered
and filed such further documents and instruments, and to use all reasonable
efforts to obtain such consents, as may be necessary or as may be reasonably
requested in order to fully effectuate the purposes, terms and conditions of
this Agreement.

Section 17.2. ARBITRATION. All disputes hereunder shall be submitted
to arbitration in Minneapolis, Minnesota in accordance with the rules of the
American Arbitration Association then in existence. The decision of such
arbitration panel shall be final and binding on the parties thereto and may be
enforced in any court of competent jurisdiction.

Section 17.3. NOTICE. Any notice, demand, consent, authorization or
other communication which any Member is required or may desire to give to or
make upon the other Members pursuant to this Agreement shall be in writing and
shall be effective, valid and duly given if mailed by regular mail, postage
prepaid, personally delivered or sent by facsimile, receipt acknowledged; if to
the Company, to the principal office of the Company set forth in Section 1.2
hereof or to such other address as the Company shall notify the Members in
writing; and if to the Members, to their respective addresses set forth in
ScheduleA hereof or in the register maintained by the Company, or to such other
address as any such Member may hereafter designate by notice in writing to the
Chair and Company. Each notice, demand, request or communication which shall be
delivered, mailed or transmitted

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in the manner described above shall be deemed sufficiently given, served, sent
or received for all purposes at such time as it is delivered to the addressee or
at such time as delivery is refused by the addressee upon presentation.

Section 17.4. SEVERABILITY. The invalidity of any one or more
provisions hereof or of any other agreement or instrument given pursuant to or
in connection with this Agreement shall not affect the remaining portions of
this Agreement or any such other agreement or instrument or any part thereof;
and in the event that one or more of the provisions contained herein or therein
should be invalid, or should operate to render this Agreement or any such other
agreement or instrument invalid, this Agreement and such other agreements and
instruments shall be construed as if such invalid provisions had not been
inserted.

Section 17.5. SURVIVAL. It is the express intention and agreement of
the Members that all covenants, agreements, statements, representations,
warranties and indemnities made in this Agreement shall survive the execution
and delivery of this Agreement.

Section 17.6. WAIVERS. Neither the waiver by a Member of a breach of
or a default under any of the provisions of this Agreement, nor the failure of a
Member, on one or more occasions, to enforce any of the provisions of this
Agreement or to exercise any right, remedy or privilege hereunder shall
thereafter be construed as a waiver of any such provisions, rights, remedies or
privileges hereunder.

Section 17.7. EXERCISE OF RIGHTS. No failure or delay on the part of
a Member or the Company in exercising any right, power or privilege hereunder
and no course of dealing between the Members or between a Member and the Company
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly provided are cumulative and not exclusive of any other
rights or remedies which a Member or the Company would otherwise have at law or
in equity or otherwise.

Section 17.8. BINDING EFFECT. Subject to any provisions hereof
restricting assignment, this Agreement shall be binding upon and shall inure to
the benefit of the Members and their respective successors and permitted
assigns.

Section 17.9. LIMITATION ON BENEFITS OF THIS AGREEMENT. It is the
explicit intention of the Members that no person or entity other than the
Members and the Company is or shall be entitled to bring any action to enforce
any provision of this Agreement against any Member or the Company, and that the
covenants, undertakings and agreements set forth in this Agreement shall be
solely for the

-33-
<PAGE>

benefit of, and shall be enforceable only by, the Members (or their respective
heirs, legal representatives, successors and assigns as permitted hereunder) and
the Company; PROVIDED, HOWEVER, that the Indemnitees shall, as intended
third-party beneficiaries thereof, be entitled to the enforcement of Sections
8.1 and 8.2 hereof, but only as insofar as the obligations sought to be enforced
thereunder are those of the Company.

Section 17.10. WAIVER OF PARTITION. The Members agree that the
Company Assets are not and will not be suitable for partition. The Members
hereby waive any right of partition or any right to take any action that
otherwise might be available to them for the purpose of severing their
relationship with the Company or interest in assets held by the Company from the
interest of the other Members.

Section 17.11. ENTIRE AGREEMENT. This Agreement contains the entire
agreement among the Members with respect to the matters contained herein, and
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein.

Section 17.12. PRONOUNS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural,
as the identity of the person or entity may require.

Section 17.13. HEADINGS. Article and Section headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.

Section 17.14. GOVERNING LAW. This Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the laws of the State of
Delaware (but not including the choice of law rules thereof).

Section 17.15. EXECUTION IN COUNTERPARTS. To facilitate execution,
this Agreement may be executed in as many counterparts as may be required; and
it shall not be necessary that the signatures of, or on behalf of, each party,
or that the signatures of all Persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the Persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.

-34-
<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

GREAT PLAINS SOFTWARE, INC.

By /s/ Michael A. Slette
---------------------------------------
Its V.P. Human Resources & Legal Affairs
------------------------------------

/s/ Douglas Burgum
------------------------------------------
Douglas Burgum

-35-
<PAGE>

SCHEDULE A

Name and Address of Capital Agreed Fair
Member Contribution Market Value Units
------ ------------ ------------ -------

Great Plains Software, Inc. Cash $50,000 99

Douglas Burgum Cash $ 500 1

S-1

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated July 19, 1996 relating to
the financial statements of Great Plains Software, Inc., which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the two years ended May 31, 1996 listed under Item 16(b)
of this Registration Statement when such schedule is read in conjunction with
the financial statements referred to in our report. The audits referred to in
such report also included this schedule. We also consent to the reference to us
under the heading "Experts" in such prospectus.

PRICE WATERHOUSE LLP
Minneapolis, Minnesota
March 4, 1997

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated July 22, 1994, in the Registration Statement (Form
S-1, No. 333- ) and related Prospectus of Great Plains Software, Inc. for
the registration of 3,450,000 shares of its common stock.

ERNST & YOUNG LLP

Minneapolis, Minnesota
March 4, 1997

<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Douglas J. Burgum, Terri F. Zimmerman and
Michael A. Slette, with full power to each to act without the other, his true
and lawful attorney-in-fact and agent with full power of substitution, for him
and in his name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-1 of Great Plains Software, Inc. (the
"Company") relating to the sale of shares of the Company's Common Stock that may
be sold by the Company in an underwritten initial public offering and any or all
amendments or post-effective amendments thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, and to file the same with such state
commissions and other agencies as necessary, granting unto each such attorney-
in-fact and agent 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 each such attorney-in-fact and agent, or his substitute,
may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, this Power of Attorney has been signed on this
____ day of February 1997, by the following persons:

/s/ Douglas J. Burgum
------------------------
Douglas J. Burgum

/s/ Bradley J. Burgum
------------------------
Bradley J. Burgum

/s/ Frederick W. Burgum
------------------------
Frederick W. Burgum

/s/ Raymond F. Good
------------------------
Raymond F. Good

/s/ Sanjeev Mehra
------------------------
Sanjeev Mehra

/s/ Joseph Tibbets, Jr.
------------------------
Joseph Tibbets, Jr.

/s/ Terri F. Zimmerman
------------------------
Terri F. Zimmerman

/s/ J. A. Heidi Roizen
------------------------
J. A. Heidi Roizen

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GREAT
PLAINS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>

<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> MAY-31-1996 MAY-31-1996
<PERIOD-START> JUN-01-1996 JUN-01-1995
<PERIOD-END> NOV-30-1996 MAY-31-1996
<CASH> 8,648,022 8,256,393
<SECURITIES> 0 0
<RECEIVABLES> 4,864,611 4,798,977
<ALLOWANCES> 506,971 855,907
<INVENTORY> 316,207 454,595
<CURRENT-ASSETS> 18,026,634 18,663,131
<PP&E> 15,000,645 13,653,922
<DEPRECIATION> 9,373,645 8,510,847
<TOTAL-ASSETS> 24,150,258 24,361,257
<CURRENT-LIABILITIES> 15,819,171 17,651,501
<BONDS> 0 0
11,501,631 11,501,631
198,800 198,800
<COMMON> 73,535 73,597
<OTHER-SE> (3,912,879) (5,083,942)
<TOTAL-LIABILITY-AND-EQUITY> 24,150,258 24,361,257
<SALES> 24,754,010 42,271,355
<TOTAL-REVENUES> 24,754,010 42,271,355
<CGS> 6,368,806 10,893,289
<TOTAL-COSTS> 6,368,806 10,893,289
<OTHER-EXPENSES> 16,636,137 28,116,462
<LOSS-PROVISION> (69,055) 430,830
<INTEREST-EXPENSE> 32,346 197,203
<INCOME-PRETAX> 1,951,479 3,361,663
<INCOME-TAX> 750,000 (4,099,000)
<INCOME-CONTINUING> 1,201,479 7,460,663
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,201,479 7,460,663
<EPS-PRIMARY> 0.12<F1> 0.77<F1>
<EPS-DILUTED> 0.12<F1> 0.77<F1>
<FN>
<F1> Earnings per share represents unaudited pro forma net income per share
calculated using a weighted average number of shares of common stock and common
equivalant shares outstanding assuming the converson of preferred stock into
1,847,627 shares of common stock effective June 1, 1995.
</FN>

</TABLE>