As filed with the Securities and Exchange Commission on February 22, 2001
Registration No. 333-54810
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MICROSOFT CORPORATION
(Exact name of registrant as specified in its charter)
---------------
Washington 7372 91-1144442
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
One Microsoft Way
Redmond, Washington 98052-6399
(425) 882-8080
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
John Seethoff
Associate General Counsel, Finance and Operations
One Microsoft Way
Redmond, Washington 98052-6399
(425) 882-8080
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Timothy S. Hearn Richard B. Dodd
Dorsey & Whitney LLP Christopher H. Cunningham
220 South Sixth Street Preston Gates & Ellis LLP
Minneapolis, Minnesota 55402-1498 701 Fifth Avenue, Suite 5000
(612) 340-2600 Seattle, Washington 98104-7078
(206) 623-7580
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, 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 of 1933, 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(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]__________
---------------
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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[LOGO OF GREAT PLAINS]
Dear Shareholder:
We invite you to attend a special meeting of Great Plains' shareholders,
which will be held on Wednesday, March 28, 2001, at 2 p.m. Central time, at
Ramada Plaza Suites, 1635 42nd Street S.W., Fargo, North Dakota. At the
meeting, shareholders will be asked to approve a merger agreement that will
combine Great Plains with Microsoft Corporation. In the merger, you will be
entitled to receive 1.1 shares of Microsoft common stock for each share of
Great Plains common stock you own. Microsoft's common stock is traded on the
Nasdaq Stock Market under the symbol MSFT.
Thank you in advance for participating in this important shareholder vote.
To vote, please complete, sign and date the enclosed proxy card and return it
in the enclosed postage-paid envelope or you may vote your shares using a toll-
free telephone number or over the Internet, using instructions provided on the
proxy card. If you attend the meeting, you may vote in person if you wish, even
if you have previously voted.
YOUR VOTE IS VERY IMPORTANT. The merger cannot be completed unless the
holders of at least a majority of the outstanding shares of Great Plains common
stock as of Wednesday, February 21, 2001, the record date, approve the merger
agreement. Your vote is important because failing to vote will have the effect
of voting against the merger agreement.
The Great Plains board of directors has approved the merger agreement and
unanimously recommends that you vote "FOR" approval of the merger agreement.
The board of directors has determined that the merger is advisable and fair to,
and in the best interests of, Great Plains and its shareholders. Great Plains'
board of directors also believes that the merger provides additional
opportunities and potential benefits for Great Plains team members, channel
partners and customers.
Attached is a notice of special meeting to shareholders and a proxy
statement/prospectus, which describes the merger in detail. For your
convenience, the first three, blue-colored pages of the proxy
statement/prospectus contain frequently asked questions and related answers
about the proposed merger. Please review the proxy statement/prospectus
carefully. In particular, you should carefully consider the discussion in the
section entitled "Risk Factors" beginning on page 15.
If you would like assistance in completing your proxy card, or if you have
any questions about the procedure for voting your shares described in the
attached proxy statement/prospectus, please contact Great Plains Investor
Relations at (701) 281-6780.
We look forward to seeing many of you on March 28, 2001. And, to all Great
Plains shareholders, we thank you for your support along our journey of
delivering on the Great Plains mission of improving the lives and business
success of partners and customers.
This proxy statement of Great Plains and prospectus of Microsoft is dated
February 22, 2001 and is first being mailed to Great Plains shareholders on or
about February 27, 2001.
Sincerely,
/s/ Douglas J. Burgum
Douglas J. Burgum
Chairman and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Microsoft common stock to be
issued in connection with the merger or passed upon the adequacy or
accuracy of this proxy statement/prospectus. Any representation to the
contrary is a criminal offense.
[LOGO OF GREAT PLAINS]
1701 S.W. 38th Street
Fargo, North Dakota 58103
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
----------------
To the shareholders of Great Plains Software, Inc.:
We will hold a special meeting of shareholders of Great Plains Software,
Inc. on Wednesday, March 28, 2001, at 2 p.m. Central time, at Ramada Plaza
Suites, 1635 42nd Street S.W., Fargo, North Dakota, for the following purpose:
To consider and vote upon a proposal to approve the Agreement and Plan
of Reorganization, dated as of December 21, 2000, among Microsoft
Corporation, Rubicon Acquisition Corporation, a wholly owned subsidiary of
Microsoft, and Great Plains and the transactions contemplated thereby.
Under the merger agreement, Great Plains will become a wholly owned
subsidiary of Microsoft and each outstanding share of Great Plains common
stock (other than dissenters' shares) will be converted into the right to
receive 1.1 shares of Microsoft common stock. This proposal is more fully
described in the attached proxy statement/prospectus, which you should read
carefully.
We will conduct no other business at the Great Plains shareholders' special
meeting except business that may be properly brought before the special meeting
and that is within the purpose described above.
We cannot complete the merger unless the holders of a majority of the shares
of Great Plains common stock outstanding on the record date vote to approve the
merger agreement. Holders of Great Plains common stock are entitled to assert
dissenters' rights with respect to the merger under chapter 302A of the
Minnesota Business Corporation Act.
All holders of record of Great Plains common stock at the close of business
on February 21, 2001, the record date for the special meeting, are entitled to
vote at the special meeting or any adjournment or postponement of the meeting.
By Order of the Board of Directors
of Great Plains Software, Inc.
/s/ Bradley J. Burgum
Bradley J. Burgum
Secretary
Fargo, North Dakota
February 22, 2001
Whether or not you plan to attend the meeting, please complete, sign and
date the enclosed proxy card and mail it promptly in the postage-paid
envelope provided. You can revoke your proxy at any time before it is
voted.
PROXY STATEMENT/PROSPECTUS
CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE MICROSOFT/GREAT PLAINS MERGER............. 1
SUMMARY OF THIS PROXY STATEMENT/PROSPECTUS................................ 4
SUMMARY OF THE TRANSACTION................................................ 6
The merger.............................................................. 6
Great Plains' reasons for the merger; recommendation of Great Plains'
board of directors..................................................... 6
Merger consideration.................................................... 6
Treatment of options.................................................... 6
Treatment of employee stock plans and other benefit plans............... 6
Opinion of Great Plains' financial advisor.............................. 7
Great Plains special meeting............................................ 7
Votes required for approval............................................. 7
Conditions to completion of the merger.................................. 7
No other negotiations involving Great Plains............................ 8
Termination of the merger agreement..................................... 8
Termination fees........................................................ 9
Great Plains management voting agreements............................... 9
Interests of Great Plains' directors, executive officers and certain
employees in the merger................................................ 9
Restrictions on the ability to sell Microsoft stock..................... 10
Tax consequences of the merger.......................................... 10
Accounting treatment of the merger...................................... 10
Regulatory approvals required to complete the merger.................... 10
Dissenters' rights...................................................... 10
Differences in rights of Great Plains and Microsoft shareholders........ 11
Comparative market price information.................................... 11
SELECTED FINANCIAL DATA OF MICROSOFT AND GREAT PLAINS..................... 12
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA............. 14
RISK FACTORS.............................................................. 15
Risks related to the merger............................................. 15
Risks related to Microsoft's business................................... 16
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION.......................... 20
THE GREAT PLAINS SPECIAL MEETING.......................................... 22
Date, time, place and purpose of Great Plains' special meeting.......... 22
Record date; outstanding shares; shares entitled to vote................ 22
Quorum; vote required................................................... 22
Recommendation of Great Plains' board of directors...................... 22
Voting of proxies....................................................... 22
Voting electronically via Internet or telephone......................... 23
How to revoke your proxy................................................ 23
Share ownership of management........................................... 23
Abstentions and broker nonvotes......................................... 23
Proxy solicitation...................................................... 24
Dissenters' rights...................................................... 24
THE MERGER................................................................ 25
Background of the merger................................................ 25
Great Plains' reasons for the merger.................................... 26
Recommendation of Great Plains' board of directors...................... 28
i
Page
----
Opinion of Great Plains' financial advisor.............................. 28
Microsoft's reasons for the merger...................................... 35
Structure of the merger; completion and effectiveness of the merger..... 36
Merger consideration; conversion of Great Plains common stock........... 36
Treatment of options and employee stock purchase and benefit plans...... 37
Interests of Great Plains' directors, executive officers and certain
employees in the merger................................................ 37
Restrictions on sales by affiliates of Great Plains and Microsoft....... 39
Material United States federal income tax consequences of the merger.... 39
Accounting treatment of the merger...................................... 41
Regulatory filings and approvals required to complete the merger........ 41
Exchange of Great Plains stock certificates for Microsoft stock
certificates........................................................... 41
Listing of Microsoft common stock; delisting and deregistration of Great
Plains common stock.................................................... 42
Operations after the merger............................................. 42
THE MERGER AGREEMENT...................................................... 43
Conditions to completion of the merger.................................. 43
Representations and warranties.......................................... 44
Conduct of business before closing of the merger........................ 45
Exclusivity............................................................. 47
Termination of the merger agreement..................................... 47
Termination fees........................................................ 48
Extension; waiver....................................................... 49
Amendments.............................................................. 49
RELATED AGREEMENTS........................................................ 50
Great Plains management voting agreements............................... 50
Affiliate letters....................................................... 50
COMPARISON OF RIGHTS OF HOLDERS OF GREAT PLAINS COMMON STOCK AND MICROSOFT
COMMON STOCK............................................................. 51
Anti-Takeover Legislation............................................... 51
Directors' Standard of Care and Personal Liability...................... 53
Limitation or Elimination of Directors' Personal Liability.............. 53
Indemnification......................................................... 54
Shareholder Voting...................................................... 54
Appraisal Rights in Connection with Corporate Reorganizations and Other
Actions................................................................ 55
Cumulative Voting for Directors......................................... 55
Conflicts of Interest................................................... 55
Classified Board of Directors........................................... 55
Removal of Director..................................................... 56
Vacancies on Board of Directors......................................... 56
Annual Meetings of Shareholders......................................... 56
Special Meetings of Shareholders........................................ 56
Voluntary Dissolution................................................... 57
Involuntary Dissolution................................................. 57
Inspection of Shareholder Lists......................................... 57
Amendment of the Bylaws................................................. 57
Amendment of the Articles............................................... 57
Proxies................................................................. 58
Preemptive Rights....................................................... 58
Dividends............................................................... 58
Shareholders' Action Without a Meeting.................................. 58
Stock Repurchases....................................................... 58
RIGHTS OF DISSENTING GREAT PLAINS SHAREHOLDERS............................ 59
ii
Page
----
Who may exercise appraisal rights...................................... 59
Requirements for exercising appraisal rights........................... 59
Appraisal procedure.................................................... 60
SHARE OWNERSHIP OF PRINCIPAL SHAREHOLDERS, MANAGEMENT AND DIRECTORS OF
GREAT PLAINS............................................................ 62
LEGAL MATTERS............................................................ 64
EXPERTS.................................................................. 64
SHAREHOLDER PROPOSALS.................................................... 64
DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROXY
STATEMENT/PROSPECTUS.................................................... 65
WHERE YOU CAN FIND MORE INFORMATION...................................... 66
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION......................... 66
ANNEXES
ANNEX A--Agreement and Plan of Reorganization
ANNEX B--Opinion of Goldman, Sachs & Co.
ANNEX C--Minnesota Dissenters' Rights Statutes
iii
REFERENCE TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Microsoft and Great Plains from documents that are
not included in or delivered with this proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from
Microsoft or Great Plains, as the case may be, at the following addresses and
telephone numbers:
Microsoft Corporation Great Plains Software, Inc.
One Microsoft Way 1701 S.W. 38th Street
Redmond, Washington 98052 Fargo, North Dakota 58103
Phone: (800) 285-7772 Phone: (701) 281-6780
Attention: Investor Relations Attention: Pam Kloster, Investor
Relations
Email: msft@microsoft.com Email: pam.kloster@greatplains.com
Fax: (425) 936-8000 Fax: (701) 492-1018
If you would like to request documents, please do so by Wednesday, March 21,
2001 in order to ensure timely delivery of the documents.
iv
QUESTIONS AND ANSWERS ABOUT THE MICROSOFT/GREAT PLAINS MERGER
Q: What is the merger?
A: In the merger a wholly owned subsidiary of Microsoft Corporation will
merge with and into Great Plains Software, Inc., and Great Plains will
become a wholly owned subsidiary of Microsoft.
Q: Why are Microsoft and Great Plains proposing to merge?
A: The merger will expand Microsoft's product offerings to include Great
Plains' e-business solutions for interconnecting business communities.
These e-business solutions automate processes among financials,
distribution, enterprise reporting, project accounting, electronic
commerce, human resources and payroll, manufacturing, sales and marketing
management, customer service and support functions. For Great Plains'
shareholders, the merger offers the opportunity to receive a premium for
their shares based upon the market prices of Great Plains and Microsoft
common stock immediately prior to the public announcement of the merger.
The merger also offers Great Plains' shareholders the opportunity to
continue to participate in the growth of the business conducted by
Microsoft and Great Plains following the merger and to benefit from the
potential appreciation in value of Microsoft common stock.
Q: What will I receive in the merger?
A: For each share of Great Plains common stock you own, you will receive 1.1
shares of Microsoft common stock. For example, if you own 100 shares of
Great Plains common stock, you will receive 110 shares of Microsoft common
stock. Microsoft will not issue fractional shares of its common stock.
Instead of any fractional shares, you will receive cash based on the
average market price of Microsoft common stock over a specified period of
time before the closing of the merger.
Q: Does the board of directors of Great Plains recommend voting in favor of
the merger agreement?
A: Yes. After careful consideration, Great Plains' board of directors has
determined that the terms of the merger are fair to, and in the best
interests of, Great Plains and its shareholders and unanimously recommends
that you vote in favor of the merger agreement.
Q: What vote is required to approve the merger?
A: The holders of at least a majority of the outstanding shares of Great
Plains common stock must approve the merger agreement. Microsoft
shareholders are not required to approve the merger and will not vote on
the merger.
You are entitled to cast one vote per share of Great Plains common stock you
owned at the close of business on February 21, 2001, the record date for the
special meeting.
As of the record date, the holders of approximately 22.4% of the outstanding
shares of common stock have already agreed to vote in favor of the merger
pursuant to voting agreements entered into in connection with the execution
of the merger agreement. These shareholders have already given irrevocable
proxies to Microsoft to vote in favor of the merger.
Q: Are there risks I should consider in deciding whether to vote for the
merger?
A: Yes. For example, Great Plains shareholders will receive 1.1 shares of
Microsoft common stock for each share of Great Plains common stock they
own, regardless of the market price of either Microsoft common stock or
Great Plains common stock at the effective time of the merger. The market
value of Microsoft common stock is likely to fluctuate, and no one can
accurately predict what the market value will be either at the effective
time of the merger or after the merger. In evaluating the merger, you
should carefully consider this and other factors discussed in the section
entitled "Risk Factors" beginning on page 15.
1
Q: What do I need to do now?
A: You should cast your vote on the merger agreement by completing, signing
and dating your proxy card. You should return your completed proxy card as
soon as possible in the enclosed postage-paid envelope. If you return your
signed proxy card but do not include instructions on how to vote, your
shares will be voted "FOR" approval of the merger agreement. Instead of
returning your proxy by mail, you may vote your shares through a toll-free
number or over the Internet. Instructions for using these convenient
services are provided on the enclosed proxy card. You can also attend the
special meeting and vote in person.
If you abstain from voting or do not vote, it will have the effect of voting
against approval of the merger agreement.
THE BOARD OF DIRECTORS OF GREAT PLAINS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT.
Q: What do I do if I want to change my vote?
A: At any time before your proxy is voted at the special meeting, you can
change your vote. First, you can send Mellon Investor Services LLC, the
firm that Great Plains has retained to provide proxy solicitation
services, a written notice stating that you would like to revoke your
proxy. Second, you can complete and send a later-dated signed proxy card
to Mellon Investor Services. Third, if you voted by telephone or over the
Internet, you can follow the revocation procedures provided at the time of
your vote on the Internet voting site or telephone voting system. Finally,
you can attend the special meeting and vote in person.
Q: If my Great Plains shares are held in "street name" by my broker, will my
broker vote my shares for me?
A: Your broker will vote your shares only if you provide instructions on how
to vote. You should fill out the voter instruction form sent to you by
your broker with this proxy statement/prospectus. If you do not give
instructions to your broker, your shares will not be voted, which will
have the effect of voting against the merger.
Q: Should I send in my Great Plains stock certificates now?
A: No. After the merger is completed, we will send you written instructions
for exchanging your Great Plains stock certificates for Microsoft stock
certificates. Please do not send in your stock certificates with your
proxy card.
Q: When do you expect the merger to be completed?
A: We are working toward completing the merger as quickly as possible. We
hope to complete the merger in the second calendar quarter of 2001, if
regulatory approvals and other required matters are completed at that
time.
Q: Will I recognize a taxable gain or loss on the transaction?
A: Microsoft and Great Plains intend the merger to qualify as a tax-free
reorganization under the Internal Revenue Code. Accordingly, we expect
that if the merger is completed, Great Plains shareholders should not
recognize a gain or loss for United States federal income tax purposes as
a result of the merger, except that you will recognize a gain or loss with
respect to cash received instead of a fractional share or with respect to
cash received upon exercise of dissenters' rights. However, we urge you to
consult your own tax advisor to determine the tax consequences particular
to your situation.
2
Q: Will Great Plains employee stock options become Microsoft stock options?
A: Yes. Employee stock options to purchase shares of Great Plains common
stock will be assumed by Microsoft and will automatically become options
to purchase shares of Microsoft common stock. The number of shares subject
to each option and the exercise price per share will be adjusted to
reflect the 1.1 exchange ratio, with options for fractional shares being
rounded to the nearest whole Microsoft share. Vesting schedules for
employee options will not be affected by the merger.
Q: Whom should I call with questions?
A: If you have any questions about the merger or if you need additional
copies of the proxy statement/prospectus, you should contact:
Pam Kloster
Investor Relations
Great Plains Software Inc.
Phone: (701) 281-6780
Fax: (701) 492-1018
Email: pam.kloster@greatplains.com
If you have any questions regarding Microsoft, you should contact:
Investor Relations
Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052
Phone: (800) 285-7772
Fax: (425) 936-8000
Email: msft@microsoft.com
You may also obtain additional information about Microsoft and Great Plains
from documents we file with the Securities and Exchange Commission, by
following the instructions in the section entitled "Where you can find more
information" on page 66.
3
SUMMARY OF THIS PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should carefully read this
entire proxy statement/prospectus, including the documents attached to this
proxy statement/prospectus, and the other documents to which we refer you, as
described in the section entitled "Where You Can Find More Information"
beginning on page 66. We have included page references in parentheses to direct
you to a more complete description of some of the topics presented in this
summary.
The Companies
[MICROSOFT LOGO]
Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052
(425) 882-8080
http://www.microsoft.com
Microsoft (Nasdaq: MSFT) develops, manufactures, licenses and supports a
wide range of software products for a multitude of computing devices. Microsoft
software includes scalable operating systems for servers, personal computers
(PCs) and intelligent devices, server applications for client/server
environments, knowledge worker productivity applications and software
development tools. Microsoft's online efforts include the MSN(TM) network of
Internet products and services and alliances with companies involved with
broadband access and various forms of digital interactivity. Microsoft also
licenses consumer software programs, sells hardware devices, provides
consulting services, trains and certifies system integrators and researches and
develops advanced technologies for future software products.
Microsoft's business strategy emphasizes the development of a broad line of
software products for information technology professionals, knowledge workers,
developers and consumers, marketed through multiple channels of distribution.
On February 14, 2001, Microsoft filed its financial results for the second
quarter of fiscal year 2001, ended December 31, 2000, with the SEC on Form 10-
Q. Net income for the quarter was $2.62 billion and diluted earnings per share
were $0.47. Revenues totaled $6.59 billion, an 8% increase over $6.11 billion
for the comparable quarter of the prior year. Net income for the quarter rose
8% and diluted earnings per share grew 7% to $0.47, from $0.44 in the second
quarter of the prior year.
For additional information about Microsoft's business, see Microsoft's
Annual Report on Form 10-K for the fiscal year ended June 30, 2000 and other
documents Microsoft has filed with the SEC, which are incorporated into this
proxy statement/prospectus by reference. See "Where you can find more
information" on page 66. The information on Microsoft's Web site is not part of
this proxy statement/prospectus.
4
[LOGO OF GREAT PLAINS]
Great Plains Software, Inc.
1701 S.W. 38th Street
Fargo, North Dakota 58103
(701) 281-6500
http://www.greatplains.com
Great Plains (Nasdaq: GPSI) was founded in 1981 and was incorporated
as a Minnesota corporation in 1983. Great Plains completed its initial
public offering in June 1997 and a secondary offering in March 1999.
Great Plains develops, markets, sells and supports interconnected
business management solutions that automate processes across the back
office functions of financials, distribution, enterprise reporting,
project accounting, human resources and payroll, manufacturing and the
front office applications of sales and marketing management, customer
service and support. In addition, Great Plains provides solutions
across electronic commerce, self-service and Web-based analytics. Great
Plains' solutions are designed to meet the business application needs
of small to medium-sized businesses, generally defined as having
between $1 million and $500 million in annual revenue. Over 135,000
customers are currently improving their businesses with Great Plains,
and 6,000 new customers joined the Great Plains community this last
year. Great Plains solutions are available in eight languages, leverage
the Internet and are optimized for Microsoft technologies. Great
Plains' solutions are fully and seamlessly integrated across the
application areas of back office, front office and e-business.
Great Plains' worldwide network of 2,000 independent partner
organizations dramatically expands the company's ability to reach and
serve small and medium sized businesses. Great Plains considers the
partnership with these value added resellers, system integrators,
consultants, solution developers, application solution providers,
accounting firms and e-business implementation providers to be one of
the company's strongest assets. Great Plains has 2,000 team members
worldwide and has been named four times to the "Top 100 Companies to
Work for in America" list.
On January 16, 2001, Great Plains filed its financial results for
the second quarter of fiscal year 2001, ended November 30, 2000, with
the SEC on Form 10-Q. Revenues for the quarter ended November 30, 2000
were $75.5 million, a 59.5% increase over revenues for the second
quarter of fiscal 2000 of $47.4 million. Net income (loss) for the
second quarter of fiscal 2001 was $(10.5) million, compared to net
income for the second quarter of fiscal 2000 of $4.4 million. Diluted
earnings (loss) per share for the second quarter of fiscal 2001 were
$(0.52), compared to diluted earnings per share for the second quarter
of fiscal 2000 of $0.27. Excluding the amortization of acquired
intangibles and the related tax effect, pro forma net income was $4.2
million for the second quarter of fiscal 2001, compared to $4.6 million
for the second quarter of fiscal 2000. Pro forma diluted earnings per
share for the second quarter of fiscal 2001 were $0.20, compared to
$0.28 for the second quarter of fiscal 2000.
For additional information about Great Plains' business, see Great
Plains' Annual Report on Form 10-K for the fiscal year ended May 31,
2000 and other documents Great Plains has filed with the SEC, which are
incorporated into this proxy statement/prospectus by reference. See
"Where you can find more information" on page 66. The information on
Great Plains' Web site is not part of this proxy statement/prospectus.
5
SUMMARY OF THE TRANSACTION
The merger (see page 25)
In the merger, a wholly owned subsidiary of Microsoft will merge with and
into Great Plains, and Great Plains will become a wholly owned subsidiary of
Microsoft.
The merger agreement is attached to this proxy statement/prospectus as Annex
A. We encourage you to carefully read the merger agreement and the discussion
of the merger and merger agreement in this proxy statement/prospectus.
Great Plains' reasons for the merger (see page 26)
In reaching its decision to approve and adopt the merger agreement and to
unanimously recommend that Great Plains shareholders approve the merger
agreement, Great Plains' board of directors identified reasons why the merger
should be beneficial to Great Plains and its shareholders, employees, partners
and customers. In the course of deliberations, Great Plains' board also
reviewed with its executive management team and its legal and financial
advisors a number of additional factors relevant to the merger. Great Plains'
board also considered and balanced against the potential benefits of the merger
a number of potentially negative factors.
Recommendation of Great Plains' board of directors (see page 28)
After careful consideration, Great Plains' board of directors approved the
merger agreement and unanimously recommends that you vote "FOR" approval of the
merger agreement.
Merger consideration (see page 36)
You will be entitled to receive 1.1 shares of Microsoft common stock for
each share of Great Plains common stock you own. Microsoft will not issue
fractional shares of stock. You instead will receive cash for fractional shares
based on the average market price of Microsoft common stock over a specified
period of time before the closing of the merger.
Treatment of options (see page 37)
Outstanding options to purchase shares of Great Plains common stock will
become options to purchase shares of Microsoft common stock on the same terms
and conditions as the Great Plains options. Microsoft has agreed to use good
faith efforts to ensure that Great Plains options which qualified as "incentive
stock options" as defined by the Internal Revenue Code prior to the merger will
qualify as incentive stock options for Microsoft common stock after the merger.
Great Plains options that do not qualify as incentive stock options will
convert into options for Microsoft common stock that are similarly non-
qualified. The number of shares subject to each option and the exercise price
per share will be adjusted to reflect the 1.1 exchange ratio. Option vesting
schedules and exercisability will not be affected by the merger.
Treatment of employee stock plans and other benefit plans (see page 37)
Immediately before the effective time of the merger, Great Plains will
terminate or modify according to Microsoft's direction all of Great Plains'
various stock option and stock purchase plans. This termination will not result
in any loss of rights for those employees who purchased stock or have already
been granted options or other awards under these plans. Microsoft has the right
to require Great Plains to modify or terminate its other employee benefits
plans; however it is currently anticipated that Great Plains will maintain its
own separate non-stock based benefits plans for the immediate future without
modification.
6
Opinion of Great Plains' financial advisor (see page 28; Annex B)
Great Plains' board of directors received an opinion from Great Plains'
financial advisor, Goldman, Sachs & Co., that, subject to the matters and
assumptions set forth in that opinion, as of December 21, 2000, the exchange
ratio in connection with the merger was fair from a financial point of view to
holders of Great Plains common stock.
Great Plains special meeting (see page 22)
The special meeting of Great Plains' shareholders will be held on Wednesday,
March 28, 2001, at 2 p.m. Central time, at Ramada Plaza Suites, 1635 42nd
Street S.W., Fargo, North Dakota. At the meeting, you will be asked to approve
a merger agreement that will cause Great Plains to become a wholly owned
subsidiary of Microsoft. You can vote at the special meeting only if you owned
shares of Great Plains common stock at the close of business on February 21,
2001, the record date.
Votes required for approval (see page 22)
The holders of at least a majority of the outstanding shares of Great Plains
common stock must approve the merger agreement. Great Plains' shareholders are
entitled to cast one vote for each share of Great Plains common stock they
owned as of the record date. Each of Great Plains' directors and executive
officers, who collectively held the power to vote approximately 22.4% of Great
Plains' outstanding common stock as of the record date, have already agreed to
vote their shares in favor of the merger.
Microsoft's shareholders are not required to approve the merger and will not
vote on the merger.
Conditions to completion of the merger (see page 43)
Great Plains' and Microsoft's respective obligations to effect the merger
are subject to the prior satisfaction or waiver of specific conditions. The
conditions that must be satisfied or waived before the completion of the merger
include the following, subject to exceptions and qualifications:
. Great Plains' shareholders approve the merger agreement as required by
Minnesota law;
. no statute, regulation, order, decree or injunction prevents the merger;
. Great Plains and Microsoft receive all material consents and approvals
for the merger;
. Great Plains' and Microsoft's respective representations and warranties
in the agreement are true and correct except in respects that do not have
a material adverse effect;
. no material adverse change has occurred with respect to Great Plains'
business condition or the economic or business benefits expected from the
merger;
. both Great Plains and Microsoft materially perform their obligations
under the merger agreement;
. both Great Plains and Microsoft receive required legal opinions,
including opinions that the merger will be treated as a tax-free
reorganization for federal income tax purposes; and
. certain specified employees of Great Plains remain employed by Great
Plains immediately prior to closing.
7
No other negotiations involving Great Plains (see page 47)
Until the merger is completed or the merger agreement is terminated, Great
Plains has agreed, with limited exceptions, not to directly or indirectly take
any of the following actions with any party other than Microsoft:
. solicit, encourage, initiate or participate in any negotiations,
inquiries or discussions regarding any offer or proposal to acquire Great
Plains;
. enter into any agreement related to an acquisition of Great Plains;
. make any public statement, recommendation or solicitation in support of
an acquisition of Great Plains; or
. disclose any customarily nonpublic information about Great Plains in
connection with an acquisition of Great Plains.
However, Great Plains' board of directors may recommend to shareholders that
they tender their shares in connection with a tender offer by an acquiror other
than Microsoft if the board determines in good faith that its fiduciary duty to
its shareholders requires such a recommendation. In addition, upon notice to
Microsoft, the board may give information to a third party which has made an
unsolicited acquisition proposal that the board reasonably believes is
financially more favorable to Great Plains and its shareholders than the merger
with Microsoft.
Great Plains has agreed that it will inform Microsoft of the status and
details of any unsolicited acquisition proposal or request for disclosure of or
access to nonpublic information that it receives.
Termination of the merger agreement (see page 47)
Even if Great Plains' shareholders approve the merger agreement, Microsoft
and Great Plains can mutually agree at any time to terminate the merger
agreement without completing the merger. In addition, subject to
qualifications, the merger agreement may be terminated by either Great Plains
or Microsoft under any of the following circumstances:
. if the merger is not completed by September 30, 2001 (subject to
extension to March 31, 2002, if Microsoft and Great Plains have agreed to
pursue litigation against any administrative or judicial action or
proceeding challenging the merger on the basis that it violates antitrust
law);
. if Great Plains' shareholders do not approve the merger agreement;
. if the terminating party is not in material breach of any representation,
warranty, covenant or agreement contained in the merger agreement and the
other party breaches a representation, warranty, covenant or agreement in
the merger agreement and the breach has a material adverse effect on the
non-breaching party or on the benefits of the merger and has not been
cured or the breaching party is not using best efforts to cure the breach
within twenty days after notice is given to the breaching party;
. if either party determines it is not in its best interests to contest any
administrative or judicial action or proceeding challenging the merger on
the basis that it violates antitrust law; or
. if a final permanent injunction or other court order prohibiting the
merger is issued and is not appealable.
In addition, the merger agreement may also be terminated by Microsoft if:
. Great Plains' board withdraws or modifies in an adverse manner its
approval or recommendation of the merger; or
. Great Plains or its representatives engage in the prohibited behavior,
described above, regarding potential acquisitions of Great Plains by
parties other than Microsoft.
8
Termination fees (see page 48)
Microsoft has agreed to pay Great Plains a termination fee of $40 million if
Great Plains is not then in material breach of the merger agreement and Great
Plains terminates the agreement as a result of a material breach by Microsoft
of its representations, warranties, covenants or agreements and that breach has
not been cured or Microsoft is not using its best efforts to cure the breach
within twenty days after notice is given to Microsoft.
Great Plains has agreed to pay Microsoft a termination fee of $40 million if
Microsoft is not then in material breach of the merger agreement and Microsoft
terminates the merger agreement for any of the following reasons:
. Great Plains or its representatives engage in the prohibited behavior,
described above, regarding potential acquisitions of Great Plains by
parties other than Microsoft;
. Great Plains' board of directors withdraws or adversely modifies its
approval or recommendation of the merger;
. Great Plains agrees to an acquisition by a party other than Microsoft in
a transaction that will result in a change in the beneficial ownership of
more than 50% of the voting power of Great Plains' capital stock; or
. Great Plains materially breaches a representation, warranty, covenant or
agreement in the merger agreement and the breach has not been cured or
Great Plains is not using its best efforts to cure the breach within
twenty days after notice is given to Great Plains.
In addition, Microsoft has agreed to pay Great Plains a termination fee of
$5 million if:
. certain antitrust approvals have not been obtained before September 30,
2001 (subject to extension until March 31, 2002 if Great Plains and
Microsoft have agreed to pursue litigation against any administrative or
judicial action or proceeding challenging the merger on the basis that it
violates antitrust law); or
. either party terminates the agreement as a result of an administrative or
judicial action or proceeding challenging the merger on the basis that it
violates antitrust law and that party determines that it is not in its
best interest to contest the proceeding.
Great Plains management voting agreements (see page 50)
As a condition to the merger, Microsoft required all of Great Plains'
directors and executive officers, who collectively held the power to vote
approximately 22.4% of Great Plains' outstanding common stock as of the record
date, to enter into voting agreements with Microsoft. The voting agreements
require Great Plains' directors and executive officers to vote all of their
shares in favor of the merger agreement. These shareholders have given
irrevocable proxies to Microsoft to vote in favor of the merger. Great Plains'
directors and executive officers also agreed not to sell or otherwise dispose
of any shares of Great Plains common stock they own or acquire until the
expiration of the voting agreement, unless the transferee of the shares agrees
to the same restrictions.
Interests of Great Plains' directors, executive officers and certain employees
in the merger (see page 37)
When considering the recommendation of Great Plains' board of directors, you
should be aware that some of Great Plains' directors and executive officers
have interests in the merger that are different from, or in addition to, yours.
For directors, these interests include accelerated vesting of stock options and
indemnification rights. Additional interests of executive officers include
potential severance benefits and other employment-
9
related benefits. Great Plains' board of directors was aware of and considered
these interests in approving the merger agreement and recommending that Great
Plains' shareholders approve the merger agreement.
Restrictions on the ability to sell Microsoft stock (see page 39)
All shares of Microsoft common stock received by you in connection with the
merger will be freely transferable unless you are considered an affiliate of
either Great Plains or Microsoft under the Securities Act of 1933. Shares of
Microsoft common stock held by affiliates may be sold only pursuant to an
effective registration statement or an exemption from registration under the
Securities Act. Microsoft has received letter agreements from each of Great
Plains' executive officers and directors, each of whom may be considered an
affiliate of Great Plains, agreeing to abide by these restrictions.
In addition, Doug Burgum, the chairman and chief executive officer of Great
Plains, has entered into an agreement under which he has agreed that certain
percentages of the Microsoft common stock to be issued in the merger to him
shall be restricted from transfer until the fourth anniversary of the merger.
The time periods during which these restrictions apply will be extended by an
additional year under the agreement if Mr. Burgum ceases to be employed by
Great Plains or Microsoft prior to the second anniversary of the merger.
Tax consequences of the merger (see page 39)
Microsoft and Great Plains intend the merger to qualify as a tax-free
reorganization under the Internal Revenue Code. It is a condition to the
completion of the merger that both parties receive an opinion from their
respective tax counsel that the merger will so qualify. We expect that none of
Great Plains, Microsoft or their respective shareholders will recognize a gain
or loss for United States federal income tax purposes, except with respect to
cash received in lieu of fractional shares of Microsoft common stock or with
respect to cash received upon exercise of dissenters' rights. Because tax
matters are complicated, however, we urge you to consult your own tax advisor
to understand fully how the merger will affect you, including how any state,
local or foreign tax laws may apply to you.
Accounting treatment of the merger (see page 41)
Microsoft expects to account for the merger using the purchase method of
accounting under generally accepted accounting principles.
Regulatory approvals required to complete the merger (see page 41)
The merger is subject to antitrust laws, including the reporting and waiting
period provisions of the Hart-Scott-Rodino Act. On January 19, 2001, each of
Microsoft and Great Plains made the required premerger notification filings
with the Federal Trade Commission and the Antitrust Division of the Department
of Justice. On February 14, 2001, Microsoft and Great Plains received
notification of the early termination of the waiting period under the Hart-
Scott-Rodino Act.
Due to the international scope of Microsoft's and Great Plains' businesses,
regulatory filings will also be required in certain European and other
jurisdictions. Microsoft and Great Plains do not expect those non-U.S. filings
to affect the expected timing of the merger.
Dissenters' rights (see page 59; Annex C)
Under Minnesota law, Great Plains' shareholders have the right to dissent
from the merger and to receive payment in cash for the fair value of their
shares of Great Plains common stock. To preserve their rights, Great Plains'
shareholders who wish to exercise their statutory dissenters' rights must
precisely follow the procedures described in Sections 302A.471 and 302A.473 of
the Minnesota Business Corporation Act, attached to this proxy
statement/prospectus as Annex C.
10
Differences in rights of Great Plains and Microsoft shareholders (see page 51)
The rights of Great Plains' shareholders are governed by Minnesota law and
Great Plains' articles of incorporation and bylaws. When the merger is
completed, Great Plains' shareholders will become shareholders of Microsoft.
Because Microsoft is a Washington corporation, following the merger the rights
of former Great Plains' shareholders will be governed by Washington law. In
addition, following the merger the rights of Great Plains' shareholders will be
governed by Microsoft's articles of incorporation and bylaws, which differ from
Great Plains' articles of incorporation and bylaws.
Comparative market price information (see page 20)
Shares of both Microsoft common stock and Great Plains common stock are
listed on the Nasdaq Stock Market. On December 20, 2000, the last full trading
day before the public announcement of the proposed merger, Microsoft's common
stock closed at $41.50 per share and Great Plains' common stock closed at
$35.3125 per share. On February 21, 2001, the last full trading day for which
closing prices were available at the time of the printing of this proxy
statement/prospectus, Microsoft's common stock closed at $56.25 per share and
Great Plains' common stock closed at $62.25 per share. We urge you to obtain
current market quotations.
11
SELECTED FINANCIAL DATA OF MICROSOFT AND GREAT PLAINS
The following tables provide selected financial data of Microsoft and Great
Plains, which were derived from the audited financial statements of Microsoft
and Great Plains for their last five fiscal years. The data should be read in
conjunction with the financial statements, related notes and other financial
information of Microsoft and Great Plains that are incorporated by reference
into this proxy statement/prospectus. The Microsoft table provides selected
financial data of Microsoft as of December 31, 2000 and for the six months
ended December 31, 2000 and 1999, which were derived from the unaudited
financial statements of Microsoft. In the opinion of Microsoft management, the
unaudited statements include all adjustments, consisting only of normal
recurring items, necessary for their fair presentation in conformity with U.S.
generally accepted accounting principles. Interim results are not necessarily
indicative of results for a full year. The Great Plains table also provides
selected financial data of Great Plains as of November 30, 2000 and for the six
months ended November 30, 2000 and 1999, which were derived from unaudited
financial statements of Great Plains. In Great Plains' opinion, the unaudited
financial statements include all adjustments necessary for the fair
presentation of Great Plains' financial position and results of operations for
those periods. The historical results for the six-month periods may not be
indicative of the results of operations for a full year.
Selected financial data of Microsoft
Six Months
Ended December
Fiscal Year Ended June 30, 31,
--------------------------------------- ---------------
1996 1997 1998 1999 2000 1999(2) 2000(2)
------- ------- ------- ------- ------- ------- -------
(in millions, except per share data)
Income Statement Data:
Revenue................. $ 9,050 $11,936 $15,262 $19,747 $22,956 $11,496 $12,385
Net income.............. 2,195 3,454 4,490 7,785 9,421 4,627 4,830
Basic earnings per
share.................. 0.46 0.72 0.92 1.54 1.81 0.90 0.91
Diluted earnings per
share.................. 0.43 0.66 0.84 1.42 1.70 0.84 0.87
June 30,
--------------------------------------- December 31,
1996 1997 1998 1999 2000 2000(2)
------- ------- ------- ------- ------- ---------------
(in millions, except per share data)
Balance Sheet Data:
Cash and short-term
investments............ $ 6,940 $ 8,966 $13,927 $17,236 $23,798 $26,889
Total assets............ 10,093 14,387 22,357 38,625 52,150 57,691
Stockholders' equity.... 6,908 10,777 16,627 28,438 41,368 46,422
Historical book value
per share(1)........... $ 1.45 $ 2.24 $ 3.37 $ 5.57 $ 7.83 $ 8.72
Shares used in computing
book value per share... 4,776 4,816 4,940 5,109 5,283 5,321
- --------
(1) Historical book value per share is computed by dividing total stockholders'
equity by the number of common shares outstanding at the end of the period.
(2) Unaudited.
12
Selected financial data of Great Plains
Six Months Ended
Fiscal Year Ended May 31, November 30,
------------------------------------------- ----------------
1996 1997 1998 1999 2000 1999(3) 2000(3)
------- ------- ------- -------- -------- ------- --------
(in thousands, except per share data)
Income Statement Data:
Revenue................. $42,271 $57,120 $85,659 $134,907 $194,852 $87,234 $142,613
Total amortization of
acquired intangible
assets................. 29 117 187 1,078 11,979 619 28,235
Operating income
(loss)................. 3,262 5,293 4,376 17,713 4,757 10,316 (24,292)
Income tax provision
(benefit)(1)........... (4,099) 2,207 3,203 8,520 4,850 5,244 10,381
Net income (loss)....... 7,461 3,644 4,447 12,785 5,409 7,864 (33,147)
Basic net income (loss)
per share(2)........... 0.58 (1.78) 0.33 0.90 0.34 0.51 (1.66)
Diluted net income
(loss) per share....... 0.76 0.36 0.32 0.86 0.32 0.49 (1.66)
May 31,
------------------------------------------------------ November 30,
1996 1997 1998 1999 2000 2000(3)
--------- --------- ---------- ---------- ---------- ------------
(in thousands, except per share data)
Balance Sheet Data:
Cash and short-term
investments............ $ 8,256 $ 16,243 $ 66,918 $ 123,683 $ 71,610 $ 64,117
Total assets............ 24,361 33,214 102,845 180,143 347,806 417,045
Long-term debt and
capital lease
obligations, less
current portion........ 20 -- -- -- 3,007 4,074
Mandatorily redeemable
convertible preferred
stock.................. 11,502 28,698 -- -- -- --
Stockholders' equity
(deficit).............. (4,812) (16,277) 69,671 133,193 256,985 290,510
Historical book value
per share(4)........... $ (0.65) $ (2.01) $ 5.08 $ 8.67 $ 14.79 $ 14.36
Shares used in computing
book value per share... 7,359,765 8,080,335 13,720,920 15,362,820 17,375,010 20,226,146
- -------
(1) For the fiscal year ended May 31, 1996, Great Plains recorded an income tax
benefit of $4.1 million related to the reversal of a valuation allowance.
The reversal reflects the recognition of net operating loss carry forwards
and other deferred tax assets and was a result of management's analysis of
Great Plains current level of earnings and future outlook, which increased
the likelihood of Great Plains realizing its deferred tax assets. A
majority of the amortization of acquired intangible assets related to
acquisitions completed in the latter half of fiscal 2000 and the first half
of fiscal 2001 are not deductible for income tax purposes.
(2) For the fiscal years ending May 31, 1996 and 1997, basic net income (loss)
per share is lower than the diluted net income (loss) per share due to the
fact that net income available to common shareholders for the basic
calculation is reduced by the increase in carrying value of the mandatorily
redeemable preferred stock. This increase in carrying value has a greater
impact on the basic calculation than does the inclusion of the preferred
shares in the diluted calculation. The mandatorily redeemable preferred
stock was converted into shares of common stock in June 1997 in connection
with Great Plains' initial public offering.
(3) Unaudited.
(4) Historical book value per share is computed by dividing total stockholders'
equity by the number of common shares outstanding at the end of the period.
13
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following table presents:
. historical and unaudited pro forma combined net income per share and net
tangible book value per share data of Microsoft; and
. historical and unaudited equivalent pro forma net income (loss) per share
and net tangible book value per share data of Great Plains.
The pro forma combined per share data was derived from financial information
of Microsoft and Great Plains incorporated by reference into this proxy
statement/prospectus. The information in the table should be read in
conjunction with the historical financial statements of Microsoft and Great
Plains and the related notes incorporated by reference in this proxy
statement/prospectus. The pro forma data is not necessarily indicative of
amounts which would have been achieved had the merger been consummated at the
beginning of the periods presented and should not be construed as
representative of future operations. The following table contains certain
historical per share data of Microsoft and Great Plains and combined per share
data on an unaudited pro forma basis after giving effect to the merger using
the purchase method of accounting with a ratio of 1.1 shares of Microsoft
common stock issued in exchange for each share of Great Plains common stock.
As of, and As of, and
for the for the
year ended, six months ended,
June 30, 2000 December 31, 2000(1)
------------- --------------------
Microsoft
Book value per share
Historical.............................. $7.83 $8.72
Pro forma............................... $8.04 $8.93
Earnings per share--basic
Historical.............................. $1.81 $0.91
Pro forma............................... $1.75 $0.88
Earnings per share--diluted
Historical.............................. $1.70 $0.87
Pro forma............................... $1.64 $0.84
As of, and As of, and
for the for the
year ended, six months ended,
May 31, 2000 November 30, 2000(1)
------------ --------------------
Great Plains
Book value per share
Historical............................... $14.79 $14.36
Equivalent pro forma(2).................. $ 8.85 $ 9.82
Earnings per share--basic
Historical............................... $ 0.34 $(1.66)
Equivalent pro forma(2).................. $ 1.92 $ 0.97
Earnings per share--diluted
Historical............................... $ 0.32 $(1.66)
Equivalent pro forma(2).................. $ 1.80 $ 0.93
- --------
(1) Unaudited.
(2) Equivalent pro forma book value per share and earnings per share were
derived from the Microsoft pro forma book value per share as of June 30,
2000 and December 31, 2000 and the Microsoft pro forma earnings per share
for the year ended June 30, 2000 and six months ended December 31, 2000.
14
RISK FACTORS
In addition to the other information contained or incorporated by reference
into this proxy statement/prospectus and in the documents to which we refer
you, you should carefully consider the following risk factors in deciding
whether to vote for approval of the merger agreement.
Risks related to the merger
The exchange ratio for Great Plains common stock to be received in the merger
is fixed and will not be adjusted in the event of any change in stock price.
Regardless of the market prices of Microsoft and Great Plains common stock
at the effective time of the merger, Great Plains shareholders will receive 1.1
shares of Microsoft common stock for each share of Great Plains common stock
they own. The market value of Microsoft common stock is likely to change, both
before and after the merger, and no one can accurately predict what the market
value will be at any given time. Market prices of Microsoft and Great Plains
common stock may vary for many reasons, including changes in the business,
operations or prospects of Microsoft or Great Plains, market assessments of the
likelihood that the merger will be completed, the timing of regulatory
considerations and general market and economic conditions. Because the merger
will be completed after the special meeting, the prices of Microsoft and Great
Plains common stock on the date of the special meeting may not be indicative of
their prices on the date the merger is completed. Great Plains cannot terminate
the merger or resolicit the vote of its shareholders based solely on changes in
the value of Microsoft common stock. We urge you to obtain current market
quotations for Microsoft and Great Plains common stock.
Great Plains' directors and executive officers have interests that are
different from, or in addition to, those of other shareholders, which may
influence them to support the merger.
The directors and executive officers of Great Plains participate in
arrangements that provide them with interests in the merger that are different
from, or are in addition to, yours. For directors, these interests include
accelerated vesting of stock options and indemnification rights. Additional
interests of executive officers include potential severance benefits and other
employment-related benefits. As a result, Great Plains' directors and executive
officers could be more likely to support approval of the merger than if they
did not hold these interests. You should consider whether these interests may
have influenced these directors and executive officers to support and recommend
the merger.
Announcement of the merger could negatively impact Great Plains' stock price
and future business and operations.
Great Plains customers may, in response to the announcement of the merger,
delay or defer purchasing decisions. Any delay or deferral in purchasing
decisions by Great Plains customers could have a material adverse effect on
Great Plains' business, regardless of whether or not the merger is ultimately
completed. Some current and prospective Great Plains employees may experience
uncertainty about their future role within the combined companies. This may
adversely affect Great Plains' ability to attract and retain key management,
marketing, technical, sales and other personnel.
Failure to complete the merger could negatively impact Great Plains' stock
price and future business and operations.
If the merger is not completed for any reason, Great Plains may be subject
to a number of material risks, including the following:
. Great Plains may be required to pay Microsoft a termination fee of $40
million;
15
. the price of Great Plains common stock may decline to the extent that the
current market price of Great Plains common stock reflects an assumption
that the merger will be completed; and
. Great Plains must pay its costs related to the merger, including legal
and accounting fees and financial advisory expenses.
Further, if the merger is terminated and Great Plains' board of directors
determines to seek another merger or business combination, it may not be able
to find a partner willing to pay an equivalent or more attractive price than
that which would have been paid in the merger. In addition, while the merger
agreement is in effect, subject to limited exceptions described on page 47 of
this proxy statement/prospectus, Great Plains is prohibited from soliciting,
initiating, participating in any negotiations regarding, or entering into
specified extraordinary transactions, such as a merger, sale of assets or other
business combination with any party other than Microsoft.
The price of Microsoft common stock may be affected by factors different from
those affecting the price of Great Plains common stock.
Upon completion of the merger, the holders of Great Plains common stock will
become holders of Microsoft common stock. Microsoft's business differs from
that of Great Plains, and Microsoft's results of operations and the price of
Microsoft common stock may be affected by factors different from those that
affect Great Plains' results of operations and the price of Great Plains common
stock before the merger, and certain factors may affect the two companies in
different ways and to different degrees. For a discussion of Microsoft's and
Great Plains' businesses and factors to consider in connection with those
businesses, see Microsoft's Annual Report on Form 10-K for the fiscal year
ended June 30, 2000, other documents Microsoft has subsequently filed with the
SEC, Great Plains' Annual Report on Form 10-K for the fiscal year ended May 31,
2000 and other documents Great Plains has subsequently filed with the SEC,
which are incorporated by reference into this proxy statement/prospectus.
Risks related to Microsoft's business
Microsoft's current position in the market for computer software is
continuously threatened because this market is intensely competitive and
technology is constantly changing.
Microsoft is the leading producer of software for personal computers ("PCs")
in the world. Nonetheless, rapid change, uncertainty due to new and emerging
technologies and fierce competition characterize the PC software industry,
which means that Microsoft's market position is always at risk. Microsoft's
ability to maintain its current market share may depend upon its ability to
satisfy customer requirements, enhance existing products, develop and introduce
new products and achieve market acceptance of such products. This process is
challenging since the pace of change continues to accelerate, including with
respect to "open source" software, new computing devices, new microprocessor
architectures, the Internet and Web-based computing models. If Microsoft does
not successfully identify new product opportunities and develop and bring new
products to market in a timely and cost-efficient manner, its business growth
will suffer and demand for its products will decrease.
Further, the PC software industry is inherently complex. New products and
product enhancements can require long development and testing periods.
Significant delays in new product releases or significant problems in creating
new products could damage Microsoft's business.
The competition in the PC software industry is intense and may have multiple
effects. For example, competing companies and systems may gain market share,
which could have the effect of directly or indirectly reducing Microsoft's
existing market share. In addition, competitors, working with new technology,
may arrive at a technology that creates a new market altogether and renders
Microsoft's product offerings obsolete. Microsoft expects that the overall
number of competitors providing niche products that compete with its products
will increase due to the market's attractive growth.
16
While Microsoft works closely with computer manufacturers and developers,
other companies promote their platforms and technologies against Microsoft's
products and existing industry standards. These operating systems, platforms
and products may gain popularity with customers, computer manufacturers and
developers, reducing Microsoft's future revenues. For example, Microsoft is
engaged in intense competition with companies that develop and support
operating systems such as the open source Linux operating system and Unix
operating systems for many business installations. These competitors include
Caldera Systems, Inc., Red Hat, Inc., IBM and Sun Microsystems, Inc. This
increased level of competition may result in price reductions, lower-than-
expected gross margins or Microsoft's inability to maintain its market share,
any of which may result in a loss of revenue and cause Microsoft's business to
suffer.
Because of increasing competition in the PC industry, Microsoft may experience
reduced product sales and lower revenue growth.
The nature of the PC market is changing in ways that may reduce Microsoft's
software sales and its revenue growth. Microsoft earns a portion of its revenue
by licensing its software to PC manufacturers, who install Microsoft
applications during production and sell PCs to consumers that are fully
operational at the time of purchase. Recently, manufacturers have sought to
reach more consumers by developing and producing lower cost PCs that come
without pre-installed software or contain software with reduced functionality
to keep prices down.
In addition to the influx of low-cost PCs, a market has developed for hand-
held computing and communication devices, such as hand-held computers and
wireless communication devices that have the ability to communicate with the
Internet. While these devices are not as powerful or versatile as PCs, they
threaten to erode sales growth in the market for PCs with pre-installed
software. This may affect Microsoft's revenue growth because manufacturers may
choose not to install Microsoft software in these low-cost PCs or consumers may
purchase alternative devices that do not utilize Microsoft software. These
lower-priced devices require Microsoft to provide lower-priced software with a
subset of the original functionality. As a result, Microsoft will experience
slower revenue growth from the sale of software produced for these devices than
from the sale of software for traditional PCs.
In addition, in response to present and future anticipated competitive
pressures in its industry, Microsoft is providing alternative distribution of
its products at a cost lower than if the customer were to purchase the
individual products in a shrink-wrapped box at a traditional retail, mail order
or online store. For example, Microsoft offers suites of software products like
the Microsoft Office suite, which is a collection of stand-alone products such
as Excel, Word, Outlook and PowerPoint. By packaging the products as a suite,
Microsoft offers customers the opportunity to purchase a license to use a
collection of products for less cost than purchasing each of the individually-
licensed products in standard boxes from a retail, mail order or online store.
Additionally, Microsoft is offering products through alternative distribution
channels other than the standard individually shrink-wrapped boxes sold through
traditional retail vendors. These channels include:
. Licensing agreements--customers may purchase multiple-user licenses for a
suite of products for a lower cost than paying for each license
separately;
. Subscriptions--customers may enter into an annual gold license, which
entitles them to automatic upgrades and replacement products for a lower
cost than acquiring upgrades and replacement products on an individual
basis; and
. Downloads over the Internet--customers are able to download service
releases and upgrades as well as other products directly from the
Internet.
As a result of responding to competitive pressures in the marketplace by
offering products through alternative distribution methods, Microsoft may
experience slower revenue growth.
17
Prices of Microsoft products could decrease, which would reduce its net income.
The competitive factors described above may require Microsoft to lower
product prices to meet competition. Since Microsoft's cost of revenue is
already very low, price reductions would reduce its net income.
Developing software is expensive, and the investment in product development
often involves a long payback cycle.
Microsoft's continued success depends in part on its continued ability to
create more versatile software products faster than its competitors. Microsoft
plans to continue significant investments in software research and development.
It also expends significant resources on researching and developing new
technologies such as voice recognition and ClearType software, a software that
provides improved font sharpness and text display on color LCD screens allowing
for better on-screen reading comparable to reading on paper. Microsoft is also
making significant investments in strategic relationships with third parties
where Microsoft has the opportunity to establish leadership in new businesses.
Microsoft anticipates that these investments in research and development will
increase over historical spending levels without corresponding growth in
revenues in the near future. Microsoft cannot assure that significant revenue
from these product opportunities will be achieved for a number of years, if at
all.
Microsoft's profit margins internationally may be threatened by factors in
other countries that are outside of its control and force down the price of its
software relative to its costs.
Microsoft develops and sells its products throughout the world. The prices
of Microsoft products in countries outside of the United States are generally
higher than Microsoft's prices in the United States because of the costs
incurred in localizing software for non-U.S. markets and the higher costs of
producing and selling its products in these countries. Pressures to globalize
Microsoft's pricing structure might require that it reduce the sales price of
its software in other countries, even though the costs of the software continue
to be higher than in the United States. This would reduce Microsoft's margins
and result in overall declines in its revenue growth.
Negative changes in the following factors, among others, could also have an
impact on Microsoft's business and results of operations outside of the United
States:
. software "piracy" trade protection laws, policies and measures and other
regulatory requirements affecting trade and investment;
. unexpected changes in regulatory requirements for software;
. social, political, labor or economic conditions in a specific country or
region;
. difficulties in staffing and managing foreign operations; and
. potential adverse foreign tax consequences.
Microsoft's intellectual property rights may be difficult to protect.
Microsoft diligently defends its intellectual property rights, but
unlicensed copying of software represents a loss of revenue. While this
adversely affects U.S. revenue, revenue loss is even more significant outside
of the U.S., particularly in countries where laws are less protective of
intellectual property rights. Throughout the world, Microsoft actively educates
consumers on the benefits of licensing genuine products and educates lawmakers
on the advantages of a business climate where intellectual property rights are
protected. However, continued efforts may not affect revenue positively.
18
Microsoft cannot predict the outcome or impact of antitrust claims by the U.S.
and several states.
Microsoft is a defendant in a lawsuit filed by the Antitrust Division of the
U.S. Department of Justice and a group of nineteen state attorneys general
alleging violations of the Sherman Act and various state antitrust laws. After
trial, the District Court entered Findings of Fact and Conclusions of Law
stating that Microsoft had violated the Sherman Act and various state antitrust
laws. A judgment was entered on June 7, 2000 that if not stayed or modified,
would require the breakup of Microsoft into two companies and would impose
severe product design and business conduct restrictions. On June 13, 2000,
Microsoft filed an appeal of the judgment. On June 20, 2000, the District Court
entered an order staying the judgment of June 7, 2000 in its entirety until the
appeal therefrom is heard and decided, unless the stay is earlier vacated by an
appellate court. The Court of Appeals will hear oral argument on Microsoft's
appeal on February 26-27, 2001. Although Microsoft believes it will obtain
ultimate relief from the judgment, Microsoft cannot predict with certainty when
or the extent to which such relief will be obtained. The failure to obtain
sufficient relief through the appeal could have a material adverse effect on
the value of Microsoft's common stock and/or the stock of the two resulting
companies if the divestiture is finally approved. For more information
concerning this litigation, particularly the current status of the litigation
which is changing very rapidly, you are encouraged to review Microsoft's other
SEC filings, which are incorporated below under "Where You Can Find More
Information" and copies of orders, motions, briefs and other court filings that
are available at the following websites:
. www.microsoft.com/presspass/trial/default.asp,
. www.usdoj.gov/atr/cases/ms index.htm and
. www.dcd.uscourts.gov/microsoft-all.html.
Microsoft may not be able to maintain its present revenue growth rate or
operating margins.
Microsoft's revenue growth rate in 2001 may not approach the level attained
in prior years. Operating expenses are expected to increase from historical
levels. Because of the fixed nature of a significant portion of such expenses,
coupled with the possibility of slower revenue growth, operating margins may
decrease from historical levels.
19
COMPARATIVE STOCK PRICE AND DIVIDEND INFORMATION
Great Plains common stock has been traded on the Nasdaq Stock Market under
the symbol GPSI since June 20, 1997, the date of Great Plains' initial public
offering. Microsoft common stock has been traded on the Nasdaq Stock Market
under the symbol MSFT since March 13, 1986, the date of Microsoft's initial
public offering.
The following table lists, for the calendar quarters indicated, the high and
low closing prices per share of Great Plains common stock and Microsoft common
stock as reported on the Nasdaq Stock Market. Sales prices in the table have
been adjusted to reflect Microsoft's two-for-one splits of its common stock in
March 1999 and February 1998. The following table provides information for
calendar quarters; Great Plains' fiscal quarters end February 28 (or February
29, as applicable), May 31, August 31 and November 30.
Great Plains Microsoft
Common Stock Common Stock
------------- -------------
High Low High Low
------ ------ ------ ------
Calendar year ended December 31, 1998:
First quarter................................. $36.38 $24.88 $45.47 $31.10
Second quarter................................ 39.25 32.50 54.28 40.94
Third quarter................................. 48.25 31.63 59.81 47.25
Fourth quarter................................ 49.00 30.13 72.00 48.13
Calendar year ended December 31, 1999:
First quarter................................. 48.69 37.94 94.63 68.00
Second quarter................................ 48.94 26.75 95.63 75.50
Third quarter................................. 55.25 38.81 99.44 81.75
Fourth quarter................................ 77.38 51.75 117.94 84.94
Calendar year ended December 31, 2000:
First quarter................................. 82.94 49.06 116.56 89.38
Second quarter................................ 48.63 19.06 111.88 61.44
Third quarter................................. 30.25 17.00 82.00 64.56
Fourth quarter................................ 58.75 25.19 70.88 41.50
Calendar year ending December 31, 2001:
First quarter (through February 21, 2001)..... 70.19 46.81 64.50 43.38
The following table lists the closing prices per share of Microsoft common
stock and Great Plains common stock as reported on the Nasdaq Stock Market on:
. December 20, 2000, the last full trading day preceding the public
announcement that Microsoft and Great Plains had entered into the merger
agreement; and
. February 21, 2001, the last full trading day for which closing prices
were available at the time of the printing of this proxy
statement/prospectus.
The table also lists the equivalent per share price of Great Plains common
stock on those dates. The equivalent per share price is equal to the closing
price of a share of Microsoft common stock on that date multiplied by 1.1, the
number of shares of Microsoft common stock to be issued in connection with the
merger in exchange for each share of Great Plains common stock.
Great Plains
Microsoft Great Plains Equivalent
Common Stock Common Stock Per Share Price
------------ ------------ ---------------
December 20, 2000.................. $41.50 $35.31 $45.65
February 21, 2001.................. 56.25 62.25 61.88
Microsoft believes that Great Plains common stock presently trades on the
basis of the value of the Microsoft common stock expected to be issued in
exchange for Great Plains common stock in the merger,
20
discounted primarily for the uncertainties associated with the merger.
Microsoft cannot state with certainty what factors account for changes in the
market price of Microsoft common stock.
You are advised to obtain current market quotations for Microsoft common
stock and Great Plains common stock. The market prices of Microsoft common
stock and Great Plains common stock at any time before the merger, and the
market price of Microsoft common stock at any time after the merger, may
fluctuate. The exchange ratio will not be adjusted for any increases or
decreases in the market price of Microsoft common stock that occur before the
merger becomes effective. If the market price of Microsoft common stock
decreases or increases before the merger, the value of the Microsoft common
stock to be received in the merger in exchange for Great Plains common stock
will correspondingly decrease or increase.
Neither Great Plains nor Microsoft has ever paid cash dividends on its
shares of common stock. Great Plains has agreed not to pay cash dividends
before the merger without Microsoft's written consent. If the merger is not
completed, Great Plains presently intends that it would continue to retain all
earnings to finance the expansion of its business. Similarly, although
Microsoft's board of directors regularly reviews its dividend policy, Microsoft
has no present intention to pay cash dividends on its common stock before or
after the merger.
21
THE GREAT PLAINS SPECIAL MEETING
Date, time, place and purpose of Great Plains' special meeting
The special meeting of Great Plains' shareholders will be held at 2 p.m.
Central time on Wednesday, March 28, 2001, at Ramada Plaza Suites, 1635 42nd
Street S.W., Fargo, North Dakota. At the meeting, Great Plains' shareholders as
of the record date will be asked to approve the merger agreement with
Microsoft.
Record date; outstanding shares; shares entitled to vote
Only holders of record of Great Plains common stock at the close of business
on the record date, February 21, 2001, are entitled to notice of and to vote at
the special meeting. As of the record date, there were 20,722,098 shares of
Great Plains common stock outstanding, held of record by approximately
525 shareholders. Each holder of Great Plains common stock is entitled to one
vote for each share of Great Plains common stock he or she owned as of the
record date. If you do not vote, either in person or by proxy, it will have the
same effect as voting against the merger agreement.
Quorum; vote required
The required quorum for the transaction of business at the special meeting
is a majority of the shares of Great Plains common stock outstanding on the
record date, represented in person or by proxy.
The affirmative vote of the holders of at least a majority of the
outstanding shares of Great Plains common stock as of the record date is
required to approve the merger agreement.
Recommendation of Great Plains' board of directors
Great Plains' board of directors unanimously recommends that you vote "FOR"
approval of the merger agreement.
Voting of proxies
The Great Plains board of directors requests that you return the proxy card
accompanying this proxy statement/prospectus for use at the meeting. Please
complete, date and sign the proxy card and promptly return it to Mellon
Investor Services LLC, the firm that Great Plains has retained to provide proxy
solicitation services, in the enclosed envelope. All properly signed proxies
received by Mellon Investor Services and not revoked before the vote at the
meeting will be voted at the meeting according to the instructions indicated on
the proxies or, if no instructions are given, to approve the merger agreement.
We do not expect that any matter other than approval of the merger agreement
will be brought before the special meeting. If other matters are properly
presented and are within the purpose of the special meeting, however, the
persons named as proxies will vote in accordance with their judgment with
respect to those matters.
If you have questions or need assistance in completing or submitting your
proxy card, please contact Mellon Investor Services at the following address
and telephone number:
Mellon Investor Services LLC
520 Pike Street, Suite 1220
Seattle, Washington 98101
(800) 610-3775
22
Voting electronically via Internet or telephone
Instead of returning your proxy by mail, you may vote your shares through a
toll-free number or over the Internet. Instructions for using these convenient
services are provided on the enclosed proxy card. Votes cast by proxy through
this process are valid under Minnesota law. Additionally, a large number of
banks and brokerage firms are participating in the ADP Investor Communication
Services online program. This program provides shareholders whose shares are
registered in the name of a participating bank or brokerage firm the
opportunity to vote via the Internet or by telephone. The voting form sent to a
beneficial owner will provide instructions for participating in the ADP program
if those options are available.
How to revoke your proxy
You may revoke your proxy at any time by taking any of the following actions
before your proxy is voted at the meeting:
. delivering to Mellon Investor Services a written notice bearing a date
later than the date of the proxy card, stating that you revoke the proxy;
. signing and delivering to Mellon Investor Services a proxy card relating
to the same shares and bearing a later date;
. if you voted by Internet or telephone, by following the revocation
procedures provided at the time of your vote on the Internet voting site
or telephone voting system; or
. attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy.
Please note, however, that if your shares are held of record by a broker,
bank or other nominee and you wish to vote at the meeting, you must bring to
the meeting a letter from the broker, bank or other nominee confirming your
beneficial ownership of the shares.
Share ownership of management
As of the record date, collectively, Great Plains' directors and executive
officers beneficially owned 4,798,710 shares of Great Plains common stock, or
approximately 23.0% of Great Plains' outstanding shares. All of Great Plains'
executive officers and directors have executed voting agreements with
Microsoft, under which they have agreed to vote their shares in favor of the
merger.
Abstentions and broker nonvotes
Only shares affirmatively voted for approval of the merger agreement,
including shares represented by properly executed proxies that do not contain
voting instructions, will be counted as votes "for" the merger agreement.
Brokers who hold shares of Great Plains common stock in street name for a
customer who is the beneficial owner of those shares may not give a proxy to
vote the customer's shares without specific instructions from the customer.
These nonvoted shares are referred to as broker nonvotes. If your broker holds
your Great Plains stock in street name, your broker will vote your shares only
if you provide instructions on how to vote by filling out the voter instruction
form sent to you by your broker with this proxy statement/prospectus.
Abstentions and broker nonvotes will be included in determining the presence
of a quorum, but will have the same effect as voting against the merger
agreement.
23
Proxy solicitation
The enclosed proxy is solicited by and on behalf of Great Plains' board of
directors. Great Plains will pay the expenses of soliciting proxies to be voted
at the meeting. Following the original mailing of the proxies and other
soliciting materials, Great Plains and its agents also may solicit proxies by
mail, telephone, facsimile or in person. Great Plains has retained a proxy
solicitation firm, Mellon Investor Services LLC, to aid it in the solicitation
process. Great Plains will pay Mellon Investor Services LLC a fee of $6,500,
plus reasonable expenses, for these services. Great Plains intends to reimburse
persons who hold Great Plains stock of record but not beneficially, such as
brokers, custodians, nominees and fiduciaries, for their reasonable expenses in
forwarding copies of proxies and other soliciting materials to, and requesting
authority for the exercise of proxies from, the persons for whom they hold the
shares.
Dissenters' rights
Under Minnesota law, a shareholder has the right to dissent from the merger
and to receive payment in cash for the fair value of shares of Great Plains
common stock held. To preserve your rights if you wish to exercise your
statutory dissenters' rights, you must:
. in addition to and separate from any proxy or vote against approval of
the merger agreement, file a written notice of your intent to demand fair
value for your shares of Great Plains common stock before the shareholder
vote is taken to approve the merger agreement;
. not vote your shares for approval of the merger agreement; and
. follow the statutory procedures for perfecting dissenters' rights under
Minnesota law, which are described in the section entitled "Rights of
dissenting Great Plains shareholders" beginning on page 59.
If you do not satisfy all of these conditions, you cannot exercise
dissenters' rights and will be bound by the terms of the merger agreement.
Voting against, abstaining from voting or failing to vote to approve the merger
agreement does not constitute a demand for appraisal within the meaning of
Minnesota law.
A shareholder's failure to vote against the approval of the merger agreement
will not constitute a waiver of dissenters' rights. However, if a shareholder
returns a signed proxy but does not specify a vote against approval of the
merger agreement or direction to abstain, the proxy will be voted for approval
of the merger agreement, and the shareholder's dissenters' rights will be
waived.
See the section of this proxy statement/prospectus entitled "Rights of
Dissenting Great Plains Shareholders" beginning on page 59 for a more complete
description of dissenters' rights and the procedures to follow to assert these
rights.
You should not send in any certificates representing Great Plains common
stock. Following the effective time of the merger, you will receive
instructions for the surrender and exchange of your Great Plains stock
certificates.
24
THE MERGER
This section of the proxy statement/prospectus describes the proposed
merger. While we believe that this description covers the material terms of the
merger, this summary may not contain all of the information that is important
to you. You should carefully read this entire proxy statement/prospectus and
the other documents to which we refer for a more complete understanding of the
merger.
Background of the merger
Great Plains and Microsoft have enjoyed a close working relationship since
the late 1980's. Great Plains has historically been a developer of products
based on Microsoft platforms. Over the years, Great Plains has worked
extensively with Microsoft to more fully utilize the capabilities of Microsoft
tools, languages, databases and operating systems. More recently, Great Plains
was an initial technical collaborator with Microsoft in the newly announced
.NET technology. Great Plains' current products are very compatible with
Microsoft productivity tools and database offerings, with similar user
interfaces, similar help systems and built-in Microsoft development tools.
Great Plains and Microsoft have also developed joint product solutions and
conducted marketing initiatives from time to time and have purchased and sold
products to each other.
In September of 1999, after a significant amount of joint work and
discussion around the Microsoft .NET platform adoption by Great Plains, Great
Plains and Microsoft executives and key technical leaders met to discuss the
two companies' technical and marketing relationship and to explore the
possibility of the two companies partnering further around key e-commerce and
.Net initiatives. However, there were no business combination discussions at
these meetings.
In March of 2000, Great Plains and Microsoft signed a joint cooperation
agreement to work together in the area of the .NET runtime. At this time Great
Plains was one of the only companies committed to working on this technology.
Accordingly, there was support among Microsoft management that Microsoft should
look into ways of partnering more closely with Great Plains.
During this time Steve Ballmer, the Chief Executive Officer of Microsoft,
and David Vaskevitch, the Senior Vice President of Microsoft's Business
Application Division, began to discuss the formation of a new company division
focused on business applications. Mr. Vaskevitch assumed the role of leading
Microsoft's new business applications division at the end of March 2000 to
focus on Microsoft's efforts in key e-commerce and business applications. Great
Plains was considered a key Microsoft ally in this business sector.
In June 2000, Mr. Vaskevitch proposed to Mr. Ballmer that Microsoft consider
the acquisition of Great Plains to support Microsoft efforts in the business
applications domain. On June 20, 2000, Mr. Ballmer placed a telephone call to
Doug Burgum, Chief Executive Officer of Great Plains, in which they discussed
the upcoming visit to Great Plains by Mr. Vaskevitch, and the possibility of
acquisition of Great Plains by Microsoft. On June 26, 2000, with Mr. Ballmer's
approval, Mr. Vaskevitch and key members of his team visited Great Plains at
their corporate headquarters and reviewed the decision to create a business
applications division within Microsoft, and discussed the current offerings
from Microsoft's bCentral Internet site. Later that day, in a meeting between
Mr. Vaskevitch and Mr. Burgum, the possibility of a business combination with
Great Plains was again discussed.
During the months of July, August and September of 2000, Microsoft and Great
Plains team members held a number of joint meetings intended to compare goals
and objectives of both organizations, as well as to test the cultural and
business method compatibility between the companies. A variety of scenarios
were considered, including Great Plains remaining independent from Microsoft
but expanding the current partnering activities.
On October 16, 2000, Mr. Vaskevitch and his team made a presentation on the
possible business combination to the Strategic Leadership Team, a group
composed of senior Microsoft executives. That group
25
approved moving ahead with acquisition negotiations contingent on the support
of Jeff Raikes, a Group Vice President at Microsoft.
Mr. Ballmer and Mr. Burgum met the next day to further discuss the
opportunities presented by a potential business combination. To further this
process, Mr. Raikes met with Mr. Burgum and other Great Plains executives on
numerous occasions beginning October 21, 2000. Mr. Raikes and Mr. Vaskevitch
presented their thoughts and findings relating to the acquisition to the
Microsoft board of directors on November 9, 2000. The Microsoft board approved
the acquisition of Great Plains pending due diligence.
During this same time, through a number of strategy planning meetings, the
Great Plains management team considered if a business combination could
accelerate the delivery of the next generation of business applications to its
target market of small and medium-size (mid-market) businesses. Concurrent with
these planning meetings, Great Plains' management team informed and consulted
with Great Plains' board of directors through a series of board meetings which
included presentations from both Great Plains' management team and outside
advisors including Goldman Sachs, Great Plains' financial advisor.
On October 20, 2000, Goldman Sachs was formally engaged to act as Great
Plains financial advisor in connection with a possible sale of Great Plains.
Goldman Sachs has been Great Plains' lead investment banker since Great Plains'
June 1997 initial public offering. On October 24, 2000, the Great Plains board
of directors held a meeting to discuss business strategies. Representatives of
Goldman Sachs, who were also present at this meeting, discussed with the Great
Plains board of directors, among other matters, possible strategic and other
business combination opportunities, including a potential strategic transaction
with Microsoft.
During the first half of November 2000, representatives of Great Plains and
Microsoft, in consultation with their respective legal and financial advisors,
engaged in preliminary discussions concerning the possible terms for an
acquisition of Great Plains by Microsoft. On November 17, 2000, Great Plains
and Microsoft management approved a non-binding list of acquisition terms and
agreed to begin their respective due diligence investigations and preparation
of definitive agreements.
Commencing on November 27, 2000, management from Microsoft and Great Plains,
as well as legal counsel and other representatives and advisors of both
companies, worked to facilitate the completion of the due diligence
investigations in anticipation of the acquisition. During this time, Microsoft
and its counsel prepared draft definitive agreements, and the parties and their
legal counsel negotiated final documents.
From December 6 through December 12, 2000, the parties, together with their
counsel, met in Seattle to discuss and negotiate the definitive agreements. On
December 20, the final merger agreement was presented to the Great Plains board
of directors who, after a presentation from Goldman Sachs, approved the
transaction, conditional upon the receipt of a fairness opinion from Goldman
Sachs. Goldman Sachs delivered its fairness opinion early in the morning of
December 21, 2000, and the merger agreement was executed and the transaction
announced that same day.
Great Plains' reasons for the merger
In reaching its decision to approve and adopt the merger agreement and to
unanimously recommend that Great Plains shareholders approve the merger
agreement, Great Plains' board identified reasons why the merger should be
beneficial to Great Plains and its shareholders, employees, partners and
customers. These potential benefits include the following:
. the opportunity for Great Plains shareholders to receive a premium for
their shares based upon the market prices of Great Plains and Microsoft
common stock immediately prior to the public
26
announcement of the merger. Specifically, the exchange ratio in the merger
represented a 29.3% premium over the closing price for Great Plains common
stock on December 20, 2000, the last trading day before Great Plains and
Microsoft announced the merger;
. the ability of Great Plains shareholders to continue to participate in
the growth of the business conducted by Microsoft and Great Plains
following the merger and to benefit from the potential appreciation in
value of shares of Microsoft common stock;
. the larger public float and trading volumes of shares of Microsoft common
stock compared to the public float and trading volumes of shares of Great
Plains common stock, which would provide Great Plains shareholders with
the opportunity to gain greater liquidity in their investment;
. the enhanced ability of Great Plains to execute against its mission
statement (to improve the lives and business success of its partners and
customers) and on its business plan based on the combined resources of
Great Plains and Microsoft; and
. the potential for increased opportunities for Great Plains employees and
partners, and the potential for even better solutions for Great Plains
current and future customers.
In the course of deliberations, Great Plains' board also reviewed with its
executive management team and its legal and financial advisors a number of
additional factors relevant to the merger, including:
. the terms and conditions of the merger agreement, including termination
fees and closing conditions;
. the likelihood that the merger would be completed;
. the expected qualification of the merger as a tax-free reorganization
under Section 368 of the Internal Revenue Code;
. the opinion of Goldman Sachs to the effect that, as of the date of the
merger agreement and subject to the considerations set forth in the
opinion, the 1.1 exchange ratio was fair to shareholders of Great Plains
from a financial point of view. (The full text of the opinion, which
describes assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as Annex B
and Great Plains shareholders are encouraged to read the opinion in its
entirety.);
. information relating to the business, assets, management, competitive
position, operating performance, trading performance and prospects of
each of Great Plains and Microsoft, including the prospects of Great
Plains if it were to continue as an independent company;
. current economic and financial market conditions and historical market
prices, volatility and trading information for Great Plains common stock
and Microsoft common stock;
. the belief, based on presentations by Great Plains' legal and financial
advisors, that the terms of the merger agreement, including the limited
conditions to Microsoft's obligation to close the merger and the ability
of Great Plains to consider proposed alternative business combinations
under certain circumstances, are generally customary for transactions
such as the merger;
. whether strategic alternatives to the merger would enhance long-term
shareholder value; and
. discussions with management as to their due diligence investigations of
Microsoft.
Great Plains' board also considered and balanced against the potential
benefits of the merger a number of potentially negative factors, including,
without limitation, the following:
. the risk that the merger would not be consummated and the effect of the
public announcement of the merger on Great Plains' sales and operating
results and Great Plains' ability to attract and retain key management,
marketing, technical, sales and other personnel;
. the possibility that the market value of Microsoft common stock might
decrease prior to closing, causing less aggregate value to be paid to
Great Plains shareholders;
27
. a recognition that Microsoft common stock is traded at high valuation
multiples, and the risk that those multiples might not be sustained in
the future;
. the fact that shareholders of Great Plains will not receive the full
benefit of any future growth in the value of their equity that Great
Plains may have achieved as an independent company, and the potential
disadvantage to Great Plains shareholders who receive Microsoft common
stock in the event that Microsoft does not perform as well in the future
as Great Plains may have performed as an independent company;
. the possibility that some provisions of the merger agreement, including
the no-solicitation and termination fee payment provisions, might have
the effect of discouraging other persons potentially interested in
merging with or acquiring Great Plains from pursuing such an opportunity;
and
. other matters described in the section entitled "Risk factors" beginning
on page 15.
Great Plains' board concluded that overall these risks were outweighed by
the potential benefits of the merger, and determined that the merger was fair
to and in the best interests of Great Plains and its shareholders.
The above discussion does not include all of the information and factors
considered by Great Plains' board. In view of the variety of factors considered
in connection with its evaluation of the merger agreement, Great Plains' board
did not find it practicable to and did not quantify or otherwise assign
relative weight to the specific factors considered in reaching its
determination. In addition, individual members of Great Plains' board may have
given different weight to different factors.
Recommendation of Great Plains' board of directors
After carefully evaluating these factors, both positive and negative, Great
Plains' board of directors has determined that the merger is fair to, and in
the best interests of, Great Plains and its shareholders. Great Plains' board
of directors unanimously recommends that you vote "FOR" approval of the merger
agreement.
Opinion of Great Plains' financial advisor
Goldman, Sachs & Co. delivered an oral opinion, subsequently confirmed by
delivery of a written opinion to the board of directors of Great Plains, dated
as of December 21, 2000, that, subject to the matters and assumptions set forth
in the opinion, as of that date, the exchange ratio in connection with the
merger was fair from a financial point of view to the holders of shares of
Great Plains common stock.
The full text of the written opinion of Goldman Sachs, dated as of December
21, 2000, which sets forth the assumptions made, procedures followed, matters
considered and limitations on the review undertaken by Goldman Sachs in
connection with the opinion, is attached as Annex B and is incorporated by
reference in this proxy statement/prospectus. Great Plains shareholders are
urged to, and should read, the opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things:
. the merger agreement;
. the Registration Statement on Form S-1 of Great Plains, dated March 5,
1997;
. annual reports to stockholders and annual reports on Form 10-K of Great
Plains for the three fiscal years ended May 31, 2000;
. annual reports to stockholders and annual reports on Form 10-K of
Microsoft for the five fiscal years ended June 30, 2000;
. various interim reports to stockholders and quarterly reports on Form 10-
Q of Great Plains and Microsoft;
28
. various other communications from Great Plains and Microsoft to their
respective stockholders; and
. various internal financial analyses and forecasts for Great Plains
prepared by the management of Great Plains.
Goldman Sachs also held discussions with members of the senior management of
Great Plains regarding their assessment of the strategic rationale for, and the
potential benefits of, the merger and the past and current business operations,
financial condition and future prospects of Great Plains and Microsoft. In
addition, Goldman Sachs:
. reviewed the reported price and trading activity for the common stock of
Great Plains and Microsoft;
. compared financial and stock market information for Great Plains and
Microsoft with similar information for the securities of other publicly
traded companies;
. reviewed the financial terms of recent business combinations in the
software industry specifically, and in other industries generally; and
. performed other studies and analyses that Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information that was discussed with or reviewed by it.
Goldman Sachs assumed the accuracy and completeness of this information for
purposes of rendering its opinion. Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities of Great Plains or
Microsoft or any of their subsidiaries and was not furnished with an evaluation
or appraisal of any of these assets or liabilities. With the consent of the
Great Plains board of directors, Goldman Sachs took into account Great Plains'
management's views of the risks and uncertainties relating to Great Plains'
ability to achieve the forecasts prepared by its management in the amounts and
time periods contemplated by those forecasts. Microsoft did not make available
to Goldman Sachs its projections of its expected future performance and,
therefore, Goldman Sachs' review of these matters was limited to discussions
with Microsoft's management of specific research analysts' estimates.
With the consent of the Great Plains board of directors, Goldman Sachs did
not conduct an independent evaluation of the pending litigation against
Microsoft, including litigation regarding antitrust and intellectual property
matters, or the resulting liability or other consequences Microsoft may incur
in connection with that litigation. Based on the information contained in
Microsoft's public filings with the Securities and Exchange Commission and on
Microsoft's representations and warranties contained in the merger agreement
and after consulting with counsel to Great Plains, the Great Plains board of
directors directed Goldman Sachs in rendering its opinion to assume that the
pending litigation will not have a material adverse effect on Microsoft's
financial condition or results of operations, the market price of Microsoft
common stock or the conduct of the operations of Microsoft and its
subsidiaries. Goldman Sachs was not requested to solicit, and did not solicit,
interest from other parties with respect to an acquisition of or other business
combination with Great Plains (other than a limited discussion with one party
which expressed an interest in Great Plains). Goldman Sachs provided its
advisory services and opinion for the information and assistance of the board
of directors of Great Plains in connection with its consideration of the
merger. Goldman Sachs' opinion does not constitute a recommendation as to how
any holder of common stock of Great Plains should vote with respect to the
merger.
The following is a summary of the material financial analyses presented by
Goldman Sachs to Great Plains in connection with the rendering of the Goldman
Sachs opinion. This summary does not purport to be a complete description of
the analyses performed by Goldman Sachs. The order of the analyses described,
and the results of those analyses, do not represent the relative importance or
weight given to the analyses by Goldman Sachs.
29
The following summaries of financial analyses include information presented
in tabular format. You should read these tables together with the text of each
summary.
(1) Acquisition Premia Analysis. Goldman Sachs calculated the implied
acquisition premia for the various periods ending December 20, 2000, the date
prior to the date of the announcement of the merger, and for December 20, 2000.
Based on the exchange ratio and the average prices for the periods set forth
below and for December 20, 2000, Goldman Sachs' analysis indicated the
following:
Implied Acquisition Premia on Various Prices for Great Plains
Period Premia
------ ------
52-week high ending on December 20, 2000............................. -45.3%
52-week low ending on December 20, 2000.............................. 185.3%
30 day average ending on December 20, 2000........................... -7.4%
60 day average ending on December 20, 2000........................... 1.9%
90 day average ending on December 20, 2000........................... 17.1%
December 20, 2000.................................................... 29.3%
(2) Relative Stock Price Performance for Selected Comparables. Goldman Sachs
reviewed the change in stock price from October 20, 2000 through December 20,
2000 and from November 8, 2000 through December 20, 2000 for Great Plains and
Microsoft and compared these changes to similar information for selected
indices and companies which included the Nasdaq Composite, JD Edwards,
PeopleSoft, Microsoft and SAP. The results of this analysis are as follows:
Selected
Comparables
Great -------------
Plains Microsoft Mean Median
------ --------- ----- ------
% change in the stock price from October
20, 2000 through December 20, 2000....... 17.7% -36.3% -25.5% -32.7%
% change in the stock price from November
8, 2000 through December 20, 2000........ -21.6% -40.2% -31.5% -27.9%
(3) Selected Companies Comparison. Goldman Sachs reviewed and compared
selected financial information and ratios to corresponding financial
information and ratios for the following enterprise applications, domestic mid-
market and international software companies:
Enterprise Applications Companies Domestic Mid-Market Companies
. International Business Machines, Inc. . Citrix Software Limited
. JD Edwards Company . Epicor Software Corporation
. Microsoft Corporation . Hyperion Solutions Corporation
. Oracle Corporation . Interact Commerce Corporation
. PeopleSoft, Inc. . Made2Manage Systems Inc.
. SAP AG . Mapics Inc.
. Siebel Systems Inc. . Onyx Software Corporation
. Pivotal Corporation
International Companies . QAD Inc.
. Damgaard A/S . Symix Systems, Inc.
. Exact Holding NV
. Navision Software A/S
. Sage Group PLC
30
The multiples and other financial information calculated by Goldman Sachs
were based on the closing prices on December 20, 2000 for shares of Great
Plains and the selected companies common stock and/or the most recent publicly
available information for Great Plains and each of the selected companies. The
price-to-earnings multiples for calendar years 2000 and 2001 and the five-year
earnings per share compound annual growth rate for Great Plains and the
selected companies were based on median estimates provided by the Institutional
Brokers Estimate System, or IBES, except for Microsoft's estimates, which,
following a Microsoft public conference call on December 14, 2000 and
discussions with Microsoft's management, were based on Goldman Sachs public
analyst estimates dated December 15, 2000. Goldman Sachs' analysis of the
selected companies compared the following to the results for Great Plains:
. the December 20, 2000, closing share price as a percentage of the 52-week
high share price;
. the equity market capitalization;
. the multiple of enterprise value to revenues for calendar years 2000 and
2001;
. the price-to-earnings multiples for calendar years 2000 and 2001;
. the five-year earnings per share compound annual growth rate; and
. the quarterly revenue growth for the last publicly reported quarter.
The results of these analyses are summarized as follows:
Selected
Selected Domestic Mid-
Selected Enterprise International Market
Applications Software Software
Companies Companies Companies
Great -------------------- ---------------- --------------
Plains Mean Median Mean Median Mean Median
------ --------- --------- -------- ------ ------ ------
December 20, 2000
closing share price as
a percentage of the 52-
week high share price.. 42.6% 53.1% 50.1% 27.7% 28.0% 25.9% 21.7%
Equity market
capitalization (in
millions).............. $724.9 $88,630.8 $40,241.3 $1,806.7 $609.7 $576.4 $104.1
Enterprise value (in
millions).............. $673.0 $87,856.6 $39,483.3 $1,768.6 $557.2 $530.3 $137.5
Multiple of enterprise
value to revenues
for 2000............... 4.0x 8.3x 6.3x 4.7x 3.7x 3.4x 1.4x
Multiple of enterprise
value to revenues
for 2001............... 2.6x 6.6x 5.1x 3.7x 2.9x 2.4x 0.8x
Price-to-earnings
multiple for calendar
year 2000.............. 37.6x 33.6x 23.2x 51.8x 45.4x 24.1x 20.7x
Price-to-earnings
multiple for calendar
year 2001.............. 27.6x 45.6x 43.2x 30.4x 30.6x 18.0x 17.7x
Five-year earnings per
share compound annual
growth rate............ 37.5% 24.0% 20.0% N/A N/A 37.1% 37.5%
Quarterly revenue growth
for the last publicly
reported quarter....... 12.6% 0.8% 0.5% N/A N/A 11.7% 15.6%
31
(4) Selected Transactions Analysis. Goldman Sachs reviewed fifty selected
transactions in the software industry since 1999. Goldman Sachs analyzed
financial information relating to these transactions, including:
. the implied offer premium as a percentage of the closing price of the
acquired company's shares on the day prior to announcement of the
proposed transaction;
. the implied offer premium as a percentage of the highest price of the
acquired company's shares over the fifty-two weeks prior to announcement
of the proposed transaction;
. the multiple of the implied offer price to the acquired company's sales
for the latest twelve months, or LTM;
. the multiple of the implied offer price to the acquired company's LTM
earnings before interest and taxes, or EBIT; and
. the multiple of the implied offer price to the acquired company's LTM net
income.
The results of this selected transactions analysis are set forth as follows:
High Mean Median Low
------ ----- ------ -----
Implied offer premium as a percentage of the
closing price of the acquired company's
shares on the day prior to announcement of
the proposed transaction................... 196.2% 45.5% 36.7% -36.7%
Implied offer premium as a percentage of the
highest price of the acquired company's
shares over the 52 weeks prior to the
announcement of the proposed transaction... 285.6% 3.5% 0.0% -85.2%
Multiple of the implied offer price to the
acquired company's LTM sales............... 301.5x 45.3x 10.4x 1.0x
Multiple of the implied offer price to the
acquired company's LTM EBIT................ 2375.9x 285.7x 68.1x 16.7x
Multiple of the implied offer price to the
acquired company's LTM net income.......... 1159.2x 246.3x 100.5x 24.1x
Goldman Sachs also calculated similar percentages and multiples implied by
the merger based on a price per share of Microsoft common stock of $41.50, the
closing price on the Nasdaq National Market on December 20, 2000 and, applying
the exchange ratio, the corresponding implied value of $45.65 per share of
Great Plains common stock. The results of these calculations are as follows:
. Implied offer premium as a percentage of the closing price of Great
Plains common stock on December 20, 2000........................... 29.3%
. Implied offer discount as a percentage of the highest price of
Great Plains common stock over the 52 weeks prior to December 20,
2000............................................................... -45.3%
. Multiple of the implied offer price to Great Plains' LTM sales (as
of September 1, 2000).............................................. 4.12x
. Multiple of the implied offer price to Great Plains' LTM EBIT (as
of September 1, 2000).............................................. 95.0x
. Multiple of the implied offer price to Great Plains' LTM net income
(as of September 1, 2000).......................................... 196.8x
32
(5) Discounted Cash Flow Analysis. Goldman Sachs performed a discounted cash
flow analysis by calculating the present value of the future cash flows that
would be produced by Great Plains for 2000 through 2005 based upon Great
Plains' management forecasts. Goldman Sachs calculated the terminal values
based on multiples of estimated 2005 earnings per share, or EPS, ranging from
20x to 28x. Goldman Sachs discounted the cash flows and the terminal values to
a present value based on discount rates ranging from 20% to 30%. Goldman Sachs
applied this analysis to Great Plains on both an enterprise and per share
basis. The results of this analysis are as follows:
Implied Enterprise Value (in millions)
Range of terminal values (calculated as a multiple
of estimated 2005 EPS)
--------------------------------------------------------------------
Discount Rate 20.0x 22.0x 24.0x 26.0x 28.0x
------------- ------ ------ ------ ------ --------
20.0% $768.5 $829.2 $890.0 $950.8 $1,011.5
22.5 707.7 763.2 818.7 874.1 929.6
25.0 653.1 703.8 754.6 805.3 856.1
27.5 603.9 650.4 696.9 743.4 789.9
30.0 559.5 602.1 644.8 687.5 730.2
Implied Equity Value Per Share
Range of terminal values (calculated as a multiple
of estimated 2005 EPS)
------------------------------------------------------------------
Discount Rate 20.0x 22.0x 24.0x 26.0x 28.0x
------------- ------ ------ ------ ------ ------
20.0% $39.62 $42.22 $44.82 $47.43 $50.03
22.5 37.01 39.39 41.77 44.14 46.52
25.0 34.67 36.85 39.02 41.20 43.37
27.5 32.56 34.56 36.55 38.54 40.53
30.0 30.46 32.49 34.32 36.15 37.97
Goldman Sachs also performed discounted cash flow analysis taking into
account a range of sales growth changes from -10.0% to 10.0% and a range of
EBIT margin changes from -4.0% to 4.0%. In performing this analysis, Goldman
Sachs assumed a terminal value of 24x 2005 estimated EPS and a discount rate of
25%. The results of this analysis on both an enterprise and per share basis are
as follows:
Implied Enterprise Value (in millions)
Range of change in sales growth
-------------------------------------------------------------
Range of change
in EBIT margin -10.0% -5.0% 0.0% 5.0% 10.0%
--------------- ------ ------ ------- ------- -------
-4.0% $438.9 $467.9 $ 501.6 $ 540.8 $ 585.9
-2.0 527.7 574.1 628.1 690.5 762.3
0.0 616.4 680.3 754.6 840.3 938.7
2.0 705.2 786.6 881.0 990.0 1,115.1
4.0 793.9 892.8 1,007.5 1,139.7 1,291.4
Implied Equity Value Per Share
Range of change in sales growth
------------------------------------------------------------------
Range of change
in EBIT margin -10.0% -5.0% 0.0% 5.0% 10.0%
--------------- ------ ------ ------ ------ ------
-4.0% $24.46 $25.90 $27.58 $29.53 $31.78
-2.0% 28.88 31.19 33.60 36.28 39.35
0.0% 33.10 35.84 39.02 42.69 46.91
2.0% 36.90 40.39 44.44 49.11 54.47
4.0% 40.71 44.95 49.86 55.53 62.03
33
(6) Present Value of Future Stock Prices Analysis. Based on Great Plains
management projections of calendar year earnings for 2001, 2002 and 2003,
Goldman Sachs calculated a range of potential future prices for shares of Great
Plains common stock assuming trading multiples ranging from 25x to 40x
calendarized EPS. Goldman Sachs calculated the present value of these potential
future share prices using a range of discount rates of 15% to 30%. The results
of this analysis are as follows:
25x EPS Multiple 30x EPS Multiple
-------------------- --------------------
Discount Rate 2001 2002 2003 Discount Rate 2001 2002 2003
------------- ------ ------ ------ ------------- ------ ------ ------
15% $34.13 $34.91 $38.45 15% $40.96 $41.89 $46.14
20 34.13 33.45 35.31 20 40.96 40.14 42.37
25 34.13 32.11 32.54 25 40.96 38.54 39.05
30 34.13 30.88 30.09 30 40.96 37.06 36.10
35x EPS Multiple 40x EPS Multiple
-------------------- --------------------
Discount Rate 2001 2002 2003 Discount Rate 2001 2002 2003
------------- ------ ------ ------ ------------- ------ ------ ------
15% $47.79 $48.87 $53.83 15% $54.62 $55.85 $61.52
20 47.79 46.83 49.43 20 54.62 53.52 56.50
25 47.79 44.96 45.56 25 54.62 51.38 52.07
30 47.79 43.23 42.12 30 54.62 49.41 48.14
(7) Summary Merger Analysis. Goldman Sachs analyzed the financial impact of
the merger to the EPS of Microsoft common stock assuming the completion of the
merger. Based on management estimates for Great Plains' 2001 EPS and, following
a Microsoft public conference call on December 14, 2000 and discussions with
Microsoft's management, on Goldman Sachs public analyst estimates for
Microsoft's 2001 EPS, this analysis indicated that the merger would have a
dilutive effect on Microsoft's 2001 EPS.
(8) Exchange Ratio Analysis. Goldman Sachs reviewed the exchange ratio
history for various periods ending December 20, 2000, including the period
beginning July 1, 1997, the date of Great Plains' initial public offering or
IPO. Goldman Sachs calculated the implied historical exchange ratios of shares
of Great Plains common stock to shares of Microsoft common stock for the
average of the periods set forth below and for December 20, 2000, as follows:
Period Implied Exchange Ratio
------ ----------------------
Since IPO through December 20, 2000................. .63
One year ended December 20, 2000.................... .55
Six months ended December 20, 2000.................. .48
Three months ended December 20, 2000................ .64
One month ended December 20, 2000................... .85
December 20, 2000................................... .85
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all these analyses and did not
attribute any particular weight to any factor or analysis considered by it;
rather, Goldman Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the results of all of
these analyses. No company or transaction used in the above analyses is
directly comparable to Great Plains or Microsoft or the merger.
The analyses were prepared solely for purposes of providing an opinion to
the Great Plains board of directors as to the fairness from a financial point
of view to the stockholders of Great Plains of the exchange ratio to be
received in connection with the merger. The analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based upon forecasts of
34
future results are not necessarily indicative of actual future results, which
may be significantly more or less favorable than those suggested by these
analyses. Because these analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of Great Plains, Microsoft, Goldman Sachs or
any other person assumes responsibility if future results are materially
different from those forecast. As described above, the financial analyses
presented by Goldman Sachs to the Great Plains board of directors was one of
many factors taken into consideration by the Great Plains board of directors in
making its determination to approve the merger.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Great Plains having provided investment banking services to Great
Plains from time to time, including having made an $8.3 million principal
investment in Great Plains in 1994 and having acted as:
. managing underwriter of its initial public offering of 3,000,000 shares
of common stock in March 1997;
. managing underwriter of its public offerings of 588,000 shares of common
stock in April 1998 and 2,000,000 shares of common stock in March 1999;
and
. its financial advisor in connection with, and having participated in
certain of the negotiations leading to, the merger agreement.
Goldman Sachs also has provided investment banking services to Microsoft
from time to time, including having acted as:
. managing underwriter of its public offering of 10,954,616 shares of its
convertible exchangeable preferred stock in December 1996;
. its financial advisor in connection with its equity investment in Titus
Communications Corporation in April 2000; and
. managing underwriter of the initial public offering of 5,200,000 shares
of common stock of Expedia, Inc., a subsidiary of Microsoft, in November
1999.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold positions in securities, including derivative
securities, of Great Plains or Microsoft for its own account and for the
accounts of customers.
Pursuant to a letter agreement dated October 20, 2000, as amended, Great
Plains engaged Goldman Sachs to act as its financial advisor in connection with
a possible sale of Great Plains. Pursuant to the letter agreement, Great Plains
has agreed to reimburse Goldman Sachs for their reasonable out-of-pocket
expenses, including attorneys' fees, and to indemnify Goldman Sachs against
various liabilities, including liabilities under the federal securities laws.
Also pursuant to the terms of that letter agreement, Great Plains has agreed to
pay Goldman Sachs a transaction fee equal to the greater of (1) $8 million or
(2) 0.9% of the total consideration paid in connection with a transaction,
provided that Great Plains will not pay an aggregate amount in excess of $11
million. Under the letter agreement, total consideration is defined as the
amount paid for Great Plains' equity securities (including amounts paid to
holders of options, warrants and convertible securities) plus the principal
amount of Great Plains' unpaid indebtedness for borrowed money as set forth on
the most recent consolidated balance sheet of Great Plains prior to the
consummation of a transaction.
Microsoft's reasons for the merger
Microsoft's board of directors has determined that the merger is in the best
interests of Microsoft and its shareholders. Microsoft's board of directors has
approved the merger and the issuance of shares of Microsoft common stock in the
merger.
35
In reaching its determination, Microsoft's board of directors identified the
following reasons, among others, for entering into the merger agreement:
. Great Plains has built a strong business centered on delivering business
applications to small and medium-sized customers through a global network
of channel partners and Microsoft does not have a similar product
offering;
. The nature of Great Plains' products and its customers creates a natural
complement to the Microsoft bCentral business;
. In the view of Microsoft's management, Great Plains' future growth
prospects will be derived from accelerating small and medium business
efficiency and agility and by automating interconnected business
processes. The combination of Microsoft's Internet technology with Great
Plains' domain expertise and application development capacity in business
management will create solutions that help companies realize this growth
potential; and
. The Great Plains indirect business model which focuses on offering
solutions through value added resellers is very compatible with
Microsoft's own business models and the Great Plains channel will provide
a more business focused distribution channel.
Structure of the merger; completion and effectiveness of the merger
The merger agreement provides for the merger of Rubicon Acquisition
Corporation, a wholly owned subsidiary of Microsoft, with and into Great
Plains. Before the effective time of the merger, Microsoft, Rubicon and Great
Plains will continue to be separate entities.
The merger will be completed when all of the conditions to completion of the
merger are satisfied or waived, including approval of the merger agreement by
Great Plains' shareholders.
At the effective time of the merger, which occurs the day that articles of
merger and an agreement and plan of merger are filed with the Secretary of
State of the states of Washington and Minnesota, Rubicon and Great Plains will
merge. Great Plains will survive the merger as a wholly owned subsidiary of
Microsoft.
Merger consideration; conversion of Great Plains common stock
At the effective time of the merger, each outstanding share of Great Plains
common stock will be automatically converted into the right to receive 1.1
shares of Microsoft common stock. The exchange ratio of 1.1 was determined
through arm's-length negotiations between Microsoft and Great Plains. Up to
24,186,077 shares of Microsoft common stock will be issued in the merger (based
on the number of shares of Great Plains common stock currently outstanding and
assuming that all options to acquire Great Plains common stock that are
currently outstanding and which will be exercisable as of September 30, 2001
are exercised prior to the merger).
No fractional shares of Microsoft common stock will be issued in connection
with the merger. You will receive cash for any fractional share you would
otherwise receive in the merger. The amount of cash that Microsoft will pay you
in lieu of a fractional share is equal to the average closing price of
Microsoft common stock on the Nasdaq Stock Market over the last twenty trading
days ending on the fifth trading day before the closing date, multiplied by the
fraction of a share of Microsoft common stock to which you would otherwise be
entitled. Great Plains shareholders will not receive interest on cash payments
in lieu of fractional shares.
The conversion of Great Plains common stock into the right to receive
Microsoft common stock will occur automatically at the effective time of the
merger. At that time, all shares of Great Plains common stock will no longer be
outstanding, will automatically be canceled and will cease to exist. Subject to
the dissenters' rights described elsewhere in this proxy statement/prospectus,
each holder of shares of Great Plains common stock will cease to have any
rights as a shareholder except the right to receive the Microsoft common stock
into
36
which those shares were converted in the merger and the right to receive cash
for any fractional share of Microsoft common stock.
Treatment of options and employee stock purchase and benefit plans
At the effective time of the merger, each then-outstanding option to
purchase shares of Great Plains common stock will be assumed by Microsoft and
will become an option to purchase shares of Microsoft common stock. The number
of shares of Microsoft common stock for which the assumed option will be
exercisable will be determined by multiplying the number of Great Plains shares
subject to the option by 1.1, and the per share exercise price will be
determined by dividing the per share exercise price of the Great Plains option
by 1.1 (rounded up to the nearest whole cent). To avoid options to purchase
fractional shares, the number of shares of Microsoft common stock subject to an
assumed option will be rounded down to the nearest whole share. The other terms
of the assumed Great Plains options (other than those held by non-employee
directors), including exercisability and vesting schedules, will remain
unchanged.
Microsoft has agreed to use good faith efforts to ensure that Great Plains
options which qualified as "incentive stock options" as defined by the Internal
Revenue Code prior to the merger will qualify as incentive stock options for
Microsoft common stock after the merger. Great Plains options that do not
qualify as incentive stock options will convert into options for Microsoft
common stock that are similarly non-qualified.
Microsoft intends to issue the shares of Microsoft common stock issuable
upon the exercise of assumed Great Plains options under Microsoft's 2001 Stock
Plan, which is subject to a currently effective registration statement on Form
S-8 filed with the SEC. Alternatively, Microsoft may file a registration
statement with the SEC to register the shares of Microsoft common stock to be
issued upon exercise of the assumed Great Plains options. Microsoft will use
its best efforts to maintain the effectiveness of the applicable registration
statement for as long as any assumed Great Plains options remain outstanding.
Microsoft will use commercially reasonable best efforts to give holders of
substituted Microsoft options notice of their new options as soon as
practicable after the effective time of the merger.
Certain options granted under Great Plains' stock option plans accelerate
following a change in control of Great Plains if those options are not assumed
on the same terms and conditions. Because all options under these plans will be
assumed by Microsoft on the same terms, acceleration of options under these
plans will not occur.
Immediately before the effective time of the merger, Great Plains will
terminate or modify according to Microsoft's direction Great Plains' stock
purchase plan. This termination will not result in any loss of rights for those
employees who purchased stock or have already been granted options or other
awards under the plan. On the date of the termination of the plan, all funds
that have been withheld from the wages of Great Plains employees for the
purchase of Great Plains common stock under the plan will be applied to a final
purchase under the Great Plains stock purchase plan. Following the closing,
Microsoft intends that Great Plains employees will be eligible to participate
in Microsoft's employee stock purchase plan subject to the eligibility
requirements set forth in that plan.
After completion of the merger, Microsoft has the right to require Great
Plains to modify or terminate its other employee benefits plans; however, it is
currently anticipated that Great Plains will maintain its own separate non-
stock based benefits plans for the immediate future, without modification.
Interests of Great Plains' directors, executive officers and certain employees
in the merger
When considering the recommendation of Great Plains' board of directors, you
should be aware that some of Great Plains' directors and executive officers
have interests in the merger and have arrangements that are different from, or
are in addition to, their interests as shareholders of Great Plains generally.
These include,
37
among other things, indemnification rights and other benefits and payments
under certain agreements and employee benefit and retention plans.
. Nonemployee directors. Microsoft does not plan to retain any nonemployee
directors of Great Plains following completion of the merger.
Accordingly, pursuant to the terms of the Great Plains Outside Directors
Stock Plan, options to purchase an aggregate of 29,000 shares of Great
Plains common stock held by directors under this plan and not yet vested
as of the record date will accelerate upon the completion of the merger.
These directors will receive no other benefits in connection with the
merger.
. Indemnification. Microsoft has agreed that if the merger is completed,
all rights to indemnification (including payment of litigation expenses)
of current or former directors, officers and employees of Great Plains
and its subsidiaries arising from actions taken before the consummation
of the merger, under Minnesota law and Great Plains' articles of
incorporation and bylaws, will be assumed by Microsoft, continue in full
force and effect for six years from the effective date of the merger and
be guaranteed by Microsoft.
. Employment offer letters. Microsoft has agreed to issue offer letters to
the following officers and senior administrative employees of Great
Plains who might otherwise have been adversely affected by a business
combination:
Name: Title:
----- ------
Coulombe, David Vice President of Strategy and Planning
Edson, David Vice President of Finance and Controller
Erdle, Dennis Senior Vice President of U.S. Operations
Herman, Doug General Counsel
Laybourn, Darren Executive Vice President of Products
O'Hara, David Executive Vice President of International Operations and
Business Development
Olsen, Michael Senior Vice President, Corporate Communications
Reller, Tami Chief Financial Officer
Robertson, Bonnie Vice President of Organizational Development
Slette, Michael Vice President of Human Resources
Uecker-Rust, Jodi Chief Operating Officer
Young, Jeffrey Executive Vice President of Global Operations
Under the terms of these offer letters, employment of these officers
and employees of Great Plains will continue following the merger and they
will receive the same salary and bonus compensation as they do prior to
the merger. In addition to their existing options to acquire Great Plains
common stock that will be assumed by Microsoft in the merger, these
persons, along with all other Great Plains employees, will be eligible to
receive new-hire grants of options to acquire Microsoft common stock
under Microsoft's 2001 Stock Plan. The number of new stock options
offered would be similar to the number Microsoft typically grants to
other new Microsoft employees performing comparable work. The offer
letters also provide that, upon termination of the employee without cause
within twenty-four months after the merger, the employee will be entitled
to receive a payment equal to the greater of the employee's annual base
salary plus annual incentive compensation bonuses paid at 100% of goal
(excluding special compensation such as stock-based compensation) at the
time of such termination or the date of the announcement of the merger.
The offer letters replace the right to certain payments which would have
been due under pre-existing employment arrangements with these officers
and employees that would otherwise be triggered upon (i) a change in
control of Great Plains, and (ii) termination of employment.
. Doug Burgum. Microsoft intends to offer employment to Doug Burgum, Great
Plains' Chairman and Chief Executive Officer, on substantially the same
terms and conditions as his current employment. Doug Burgum will be
President of the Great Plains Division and a Microsoft senior vice
president.
38
. Stock ownership. Under the terms of the merger agreement, at the time the
merger is completed, each outstanding share of Great Plains common stock
will be automatically converted into the right to receive 1.1 shares of
Microsoft common stock. As of February 21, 2001, the record date,
collectively Great Plains' directors and executive officers beneficially
owned 4,639,335 shares, or approximately 22.4%, of Great Plains'
outstanding common stock (not including options, which are described
below).
. Stock options. Under the terms of the merger agreement, at the time the
merger is completed, each outstanding option to purchase shares of Great
Plains common stock issued to employees and directors of Great Plains
will be assumed by Microsoft and will become an option to purchase shares
of Microsoft common stock. The terms of an assumed Great Plains option
held by a Great Plains employee or officer will not be affected by the
merger, except that the number of shares subject to the option and the
exercise price per share will be adjusted to reflect the exchange ratio.
The terms of an assumed Great Plains option held by a non-employee
director will be affected by the merger to the extent that these options
must be exercised within ninety days following the merger.
As of the record date, directors and executive officers of Great
Plains collectively held outstanding options to purchase 399,710 shares
of Great Plains common stock. Of these options, 159,375 are currently
exercisable or will be exercisable within sixty days after the record
date.
Great Plains' board of directors was aware of and considered these interests
in approving the merger agreement and recommending that Great Plains'
shareholders approve the merger agreement.
Restrictions on sales by affiliates of Great Plains and Microsoft
All shares of Microsoft common stock received by Great Plains shareholders
in connection with the merger will be freely transferable unless the
shareholder is considered an affiliate of either Great Plains or Microsoft
under the Securities Act.
Each Great Plains affiliate agreed that he or she will sell, offer to sell
or otherwise dispose of any Microsoft common stock issued in connection with
the merger only under an effective registration statement or in compliance with
Rule 145 or other exemption from registration under the Securities Act.
Microsoft has agreed to use its reasonable efforts to permit affiliate sales
under Rule 145 and Rule 144 and to file all reports required to be filed under
the Securities Exchange Act of 1934.
Material United States federal income tax consequences of the merger
It is a condition to the merger that Great Plains and Microsoft each receive
an opinion from their respective tax counsel that the merger will constitute a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended, and that Microsoft, the wholly owned subsidiary of Microsoft and Great
Plains will each be a party to that reorganization. Great Plains will receive
an opinion of its tax counsel, Dorsey & Whitney LLP, as to certain federal
income tax consequences of the merger to Great Plains shareholders and
Microsoft will receive an opinion of its tax counsel, Preston Gates & Ellis
LLP, as to certain federal income tax consequences of the merger. The Internal
Revenue Service has not been and will not be asked to rule upon the tax
consequences of the merger.
The opinions of Dorsey & Whitney LLP and Preston Gates & Ellis LLP will be
based upon the facts described herein and various representations and covenants
made by Microsoft and Great Plains and will also be subject to various
assumptions and qualifications. The opinions of Dorsey & Whitney LLP and
Preston Gates & Ellis LLP will be based upon the Internal Revenue Code,
existing and proposed Treasury regulations, current administrative rulings and
practice and judicial authority, all of which are subject to change, possibly
with retroactive effect. Unlike a ruling from the Service, an opinion of
counsel is not binding on the Internal Revenue Service and there can be no
assurance, and none is given in this proxy statement/prospectus, that the
39
Service will not take a position contrary to one or more positions reflected
herein or that the opinions will be upheld by the courts if challenged by the
Service.
The following is only a general description of certain anticipated federal
income tax consequences of the merger, without regard to the particular
circumstances of each shareholder of Great Plains. It does not discuss all of
the consequences that may be relevant to Great Plains shareholders subject to
special treatment under the Internal Revenue Code (such as insurance companies,
dealers in securities, exempt organizations or foreign persons) or to
shareholders of Great Plains who acquired their Great Plains common stock in
connection with employee stock options, stock purchase plans or otherwise as
compensation. The following summary does not purport to be a complete analysis
of all potential tax effects of the transactions contemplated by the merger
agreement or the merger itself. No information is provided herein with respect
to the tax consequences, if any, of the merger under state, local or foreign
tax laws.
Each holder of Great Plains common stock is urged to consult his or her own
tax advisor as to the federal income tax consequences of the merger, and also
as to any state, local, foreign or other tax consequences based on his or her
own particular facts and circumstances.
Assuming the merger qualifies as a tax-free reorganization, the following
federal income tax consequences will result from the merger:
. Great Plains, Microsoft and the wholly owned merger subsidiary of
Microsoft will each be a party to the reorganization within the meaning
of Section 368(b) of the Internal Revenue Code.
. No income, gain or loss will be recognized by Great Plains or Microsoft
as a result of the consummation of the merger.
. No gain or loss will be recognized by the holders of Great Plains common
stock upon the exchange of Great Plains common stock solely for Microsoft
common stock pursuant to the merger, except to the extent of cash
received in lieu of fractional shares of Microsoft common stock or in
connection with the exercise of dissenters' rights.
. The basis of the Microsoft common stock received by a shareholder of
Great Plains pursuant to the merger, including any fractional shares
deemed received as described below, will be the same as the basis of the
Great Plains common stock surrendered in exchange therefor.
. The holding period of the Microsoft common stock received by a
shareholder of Great Plains pursuant to the merger will include the
period during which the Great Plains common stock surrendered therefor
was held, provided the Great Plains common stock is a capital asset in
the hands of the Great Plains shareholder at the time of the merger.
. Cash payments made to a holder of Great Plains common stock in lieu of
fractional shares of Microsoft common stock will be treated as if a
fractional share of Microsoft common stock had been issued pursuant to
the merger and then redeemed by Microsoft. A holder of Great Plains
common stock receiving cash in lieu of fractional shares will generally
recognize gain or loss equal to the difference between the shareholder's
basis in the fractional share and the amount of cash received. This gain
or loss will be capital gain or loss provided the Great Plains common
stock was a capital asset in the hands of the Great Plains shareholder at
the time of the merger.
. Cash payments made to a holder of Great Plains common stock who exercises
dissenters' rights will be treated as distributions in redemption of the
shareholder's Great Plains common stock. A holder of Great Plains common
stock receiving cash in connection with the exercise of dissenters'
rights will recognize either (1) gain or loss equal to the difference
between the cash received and the holder's basis in the Great Plains
common stock or (2) dividend income, depending upon whether the deemed
redemption qualifies for sale or exchange treatment under the tests set
forth in Section 302 of the Code. Gain or loss will be capital gain or
loss provided the Great Plains common stock was a capital asset in the
hands of the Great Plains shareholder at the time of the merger.
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Accounting treatment of the merger
The merger will be accounted for using the purchase method of accounting in
accordance with generally accepted accounting principles. Microsoft will be
deemed the acquiror for financial reporting purposes. Under the purchase method
of accounting, the purchase price in the merger is allocated among the Great
Plains assets acquired, including identifiable intangibles, and the Great
Plains liabilities assumed to the extent of their fair market value, with any
excess purchase price being allocated to goodwill.
Regulatory filings and approvals required to complete the merger
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
certain acquisition transactions, including the merger, cannot be consummated
unless specified information has been furnished to the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice and
specific waiting period requirements have been satisfied. On January 19, 2001,
each of Microsoft and Great Plains made the required premerger notification
filings with the Federal Trade Commission and the Antitrust Division of the
Department of Justice. Under the Hart-Scott-Rodino Act, the merger may not be
consummated until the expiration of at least thirty days following the receipt
of the Notifications under the Act, unless the waiting period is earlier
terminated by the FTC and the Antitrust Division or extended by the issuance of
a request for additional information and documents. On February 14, 2001,
Microsoft and Great Plains received notification of the early termination of
the thirty-day waiting period under the Hart-Scott-Rodino Act.
The FTC and the Antitrust Division are charged with enforcing antitrust laws
concerning transactions such as the merger. At any time before or after the
consummation of the merger, the FTC or the Antitrust Division could take such
action under the antitrust laws as it deems appropriate, including seeking to
enjoin the consummation of the merger or seeking the divestiture of assets of
Great Plains or Microsoft. Great Plains and Microsoft believe that the proposed
merger does not violate the antitrust laws. However, a challenge to the merger
on antitrust grounds could be made. If such a challenge is made, it is
uncertain what the results would be. Due to the international scope of
Microsoft's and Great Plains' businesses, regulatory filings will also be
required in certain European and other jurisdictions. Microsoft and Great
Plains do not expect those non-U.S. filings to affect the timing of the merger.
Other than as described in this paragraph and the filing of the actual merger
documents with the Secretary of State of the states of Washington and
Minnesota, Microsoft and Great Plains believe that the merger does not require
the approval of any U.S. federal, state or other agency.
Exchange of Great Plains stock certificates for Microsoft stock certificates
Within fifteen days after the closing of the merger, Microsoft will send a
letter of transmittal to all former Great Plains shareholders. In order to
exchange Great Plains common stock for Microsoft common stock, you must deliver
the letter of transmittal to the exchange agent, Mellon Investor Services LLC.
To be effective, the letter of transmittal must be properly completed, signed
and submitted to the exchange agent in the return envelope mailed with the
letter of transmittal and accompanied by (a) the certificates as to which the
exchange is proposed to be made or (b) an appropriate guarantee of delivery of
the certificates from a firm that is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or a commercial bank or trust company having an office or correspondent in the
United States, provided that you do in fact deliver the certificates to the
exchange agent within three Nasdaq trading days after the date the guarantee of
delivery is executed.
Microsoft has the reasonable discretion, which it may delegate in whole or
in part to the exchange agent, to determine whether any letter of transmittal
has been properly completed, signed and submitted or revoked and to disregard
immaterial defects in the form of election or letter of transmittal. The
exchange agent will make those computations contemplated by the merger
agreement, and, in the absence of manifest error, all such computations will be
conclusive and binding on the holders of Great Plains common stock.
As soon as practicable after receipt of your properly completed letter of
transmittal, the exchange agent will deliver to you a certificate representing
the appropriate number of shares of Microsoft common stock, together with a
check representing the cash payment for any fractional share.
41
Listing of Microsoft common stock; delisting and deregistration of Great Plains
common stock
If the merger is completed, Microsoft is obligated to use commercially
reasonable best efforts to cause the shares of Microsoft common stock that will
be issued in connection with the merger, and the shares of Microsoft common
stock that will be issued on exercise of assumed Great Plains options, to be
quoted on the Nasdaq Stock Market or listed on the same national securities
exchange as Microsoft common stock is then listed. Great Plains common stock
will be delisted from the Nasdaq Stock Market and will be deregistered under
the Exchange Act.
Operations after the merger
After the merger, Great Plains will continue to operate as the Great Plains
Division of Microsoft, reporting jointly to Jeff Raikes, Group Vice President
of Microsoft's Productivity and Business Services Group, and David Vaskevitch,
Senior Vice President of the Business Application Division at Microsoft. The
Productivity and Business Services Group is charged with delivering business
productivity solutions that empower knowledge workers. The Business Application
Division is engaged in developing and delivering a core set of business
management software applications and Internet services to small and medium size
businesses.
Doug Burgum, Great Plains' Chairman and Chief Executive Officer, will be
President of the Great Plains Division and a Microsoft senior vice president.
42
THE MERGER AGREEMENT
This section of the proxy statement/prospectus describes the merger
agreement. While we believe that the description covers the material terms of
the merger agreement, this summary may not contain all of the information that
is important to you. We urge you to carefully read the merger agreement, which
is incorporated by reference into this proxy statement/prospectus and attached
to this proxy statement/prospectus as Annex A.
Conditions to completion of the merger
The obligations of each of Microsoft and Great Plains to effect the merger
are subject to the satisfaction before the closing date of specific conditions,
any or all of which may be waived by the party for whose benefit the condition
runs, including:
. the approval by Great Plains' shareholders of the merger agreement as
required by Minnesota law;
. the obtaining of all legally required consents and approvals, including
expiration of all applicable waiting periods under the Hart-Scott-Rodino
Act, except when the failure to obtain a consent would not have a
material adverse effect on the consummation of the merger or the business
condition of Microsoft or Great Plains;
. the effectiveness of the registration statement relating to the Microsoft
common stock to be issued in connection with the merger;
. the absence of any statute, rule, regulation, order, decree or injunction
prohibiting the merger or which imposes a condition which would
materially adversely impact Great Plains' business or the expected
benefits of the transaction;
. the absence of any governmental action or proceeding challenging or
seeking to restrain the merger or material damages or seeking to impose
conditions on the merger that would materially impact Microsoft's ability
to operate Great Plains' business;
. the accuracy of the other party's representations and warranties in the
agreement, except in respects that do not have a material adverse effect,
and the receipt by each party of a certificate to that effect from a
designated executive officer of the other party;
. the performance by both parties of their obligations under the merger
agreement, except for breaches that would not have a material adverse
effect on the other party, and the receipt by each party of a certificate
to that effect from a designated executive officer of the other party;
. receipt by each of Great Plains and Microsoft of an opinion from its tax
counsel that the merger will qualify as a tax-free reorganization for
federal income tax purposes;
. the execution of certain other related agreements;
. receipt by each of Great Plains and Microsoft of a legal opinion from the
other party's legal counsel;
. each of certain key officers and senior managers of Great Plains, not
less than 90% of Great Plains' employees engaged in development and
support and at least 80% of all other employees of Great Plains shall
remain employed by Great Plains;
. Great Plains shareholders holding not more than 5% of Great Plains common
stock shall have asserted dissenters rights under applicable law; and
. certain change in control agreements that would provide for cash payments
to certain officers and senior managers of Great Plains shall have been
amended to Microsoft's satisfaction in accordance with the merger
agreement.
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Representations and warranties
The merger agreement contains customary representations and warranties of
each of Great Plains, Microsoft and Rubicon Acquisition Corporation relating
to, among other things:
. organization and related matters;
. capital structure;
. authorization, execution, delivery, performance and enforceability of the
merger agreement and related matters;
. an absence of defaults and violations under charter documents,
instruments and laws;
. documents filed by the parties with the SEC and the accuracy of the
information contained in those documents;
. the accuracy of information supplied by the parties for inclusion in
filings and other documents contemplated by the merger agreement;
. an absence of defaults which would have a material adverse effect on
business conditions of the parties under obligations of the parties;
. an absence of undisclosed material adverse changes;
. disclosures made in the merger agreement or in connection with the
merger;
. an absence of undisclosed liabilities;
. the vote required for approval of the merger agreement and the
consummation of the transactions contemplated by the merger agreement;
and
. brokers and finders fees.
Great Plains has made additional customary representations and warranties
relating to, among other things:
. litigation;
. ownership of Great Plains' subsidiaries;
. an absence of violations of any applicable law, rule, regulation,
judgment, decree or order of any governmental entity;
. employee benefits and other employment matters;
. major contracts;
. taxes;
. interests of officers and directors of Great Plains;
. technology and intellectual property rights;
. real property;
. material relations;
. the receipt of a fairness opinion from Great Plains' financial advisor;
. change in control agreements;
. leases;
. environmental matters; and
. absence of illegal or unreported or unrecorded payments.
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Conduct of business before closing of the merger
Microsoft and Great Plains have each agreed that until the earlier of the
termination of the merger agreement or the effective time of the merger, except
as expressly contemplated by the merger agreement or with the prior written
consent of the other party, it will take specified actions and decline to take
specified actions, as described below.
Each of Microsoft and Great Plains has agreed that it will, among other
things:
. not take any action that would breach its respective representations and
warranties under the merger agreement;
. use its commercially reasonable best efforts to obtain all consents and
approvals required for the consummation of the transactions contemplated
by the merger agreement;
. take all reasonable steps to (a) make the filings required under the
Hart-Scott-Rodino Act with respect to the merger, (b) comply in a timely
manner with any request under the Hart-Scott-Rodino Act for additional
information from the FTC, the Antitrust Division of the Department of
Justice or other governmental entity with respect to those filings and
(c) cooperate with the other party in connection with those filings and
in connection with resolving any investigation or other inquiry of any
agency or other governmental entity under any antitrust laws with respect
to those filings, the merger or any other relevant transaction;
. take all reasonable (a) steps to resolve any objections asserted by any
governmental entity with respect to the merger and (b) actions required
to cause the expiration of the notice periods under the Hart-Scott-Rodino
Act or other antitrust laws with respect to the merger and any other
relevant transactions;
. use its commercially reasonable best efforts to effectuate the
transactions contemplated by the merger agreement and fulfill the
conditions to the closing of the merger, subject to certain exceptions;
. use its commercially reasonable best efforts to cause their respective
accountants to issue customary "comfort letters" in connection with this
proxy statement/prospectus;
. allow reasonable mutual access to their respective business books and
records and other business information;
. prepare and file a registration statement for the Microsoft common stock
issuable in the merger on Form S-4, including this proxy
statement/prospectus;
. take any necessary action so that the acquisition of Microsoft common
stock or options and the disposition of Great Plains common stock or
options by Great Plains employees subject to Section 16 of the Exchange
Act and by Great Plains directors will be exempt from the short-swing
profit liability rules of Section 16(b) and Rule 16b-3 of the Exchange
Act;
. notify the other party of any material adverse events;
. work together to develop appropriate communications to employees of Great
Plains regarding the merger, and to develop a transition plan;
. take all reasonable actions necessary to comply with any legal
requirements related to the merger, and disclose to each other the
information relevant to the legal requirements; and
. cooperate with respect to public announcements related to the merger.
Great Plains has agreed that it and each of its significant subsidiaries
will carry on their businesses in the ordinary course consistent with past
practice, and use all reasonable efforts consistent with past practice to
preserve intact their business organizations, keep available the services of
their present officers, consultants and employees and preserve their
relationships with customers, suppliers, distributors and others having
business
45
with them. Great Plains will promptly notify Microsoft of any event that is not
in the ordinary course of business of Great Plains or its subsidiaries and is
materially adverse to Great Plains' business condition. In addition, Great
Plains has agreed that, except as previously disclosed to Microsoft, neither it
nor any of its subsidiaries will, without the prior written consent of
Microsoft:
. alter or accelerate any exercisability, vesting or similar provisions of
stock option or benefit plans or authorize cash payments in exchange for
awards under those plans, except in the ordinary course of business;
. grant any severance pay to any officer, director or employee, except in
the ordinary course consistent with past practice;
. except in the ordinary course of business consistent with past practices,
transfer to any outside person or entity any rights to Great Plains'
intellectual property;
. enter into or amend any agreement granting a third party exclusive
marketing or manufacturing rights;
. commence or settle any claim, action or proceeding, except in the
ordinary course of business or in immaterial amounts and except for
specified types of lawsuits;
. enter into leases that extend beyond December 21, 2002 and obligate Great
Plains to pay aggregate gross rent in excess of $1 million;
. extend any offers of employment for a position of vice president or
higher without consulting with Microsoft;
. declare or pay any dividends or make any other distributions with respect
to its capital stock, split or reclassify its capital stock, issue or
authorize the issuance of any other securities in respect of or in
substitution for its capital stock, or repurchase or otherwise acquire
any of its capital stock other than repurchasing vested stock from former
employees;
. issue or agree to issue any capital stock, options, warrants, calls,
conversion rights or other similar securities, subject to certain limited
exceptions;
. accelerate any options to acquire Great Plains stock;
. amend its corporate charter documents;
. acquire or agree to acquire any corporation, partnership or other
business organization or assets that are material to Great Plains'
business condition;
. dispose of any assets, except in the ordinary course of business or in
immaterial amounts;
. incur material indebtedness;
. enter into or materially amend any material employee benefit plans or,
except in the ordinary course of business, enter into employment
agreements or increase employee remuneration; or
. settle any material claims, actions or proceedings, except in the
ordinary course of business.
In addition, Great Plains has agreed that it will:
. call a special meeting of Great Plains shareholders for the consideration
and approval of the merger agreement and the transactions contemplated by
the merger agreement;
. provide Microsoft with such information for inclusion in this proxy
statement/prospectus and the related registration statement as Microsoft
may reasonably request;
. without the loss of any vested benefits but without accelerating any
unvested rights (except as required by law), terminate or modify any
employee benefit plans as directed by Microsoft immediately before the
effective time of the merger or take such action as may be directed by
Microsoft to merge those plans with Microsoft employee benefit plans at
the effective time of the merger; and
46
. promptly file all tax returns and pay all taxes required to be filed or
paid before the closing of the merger.
Microsoft has agreed that it will:
. use its commercially reasonable best efforts to cause the shares of
Microsoft common stock to be issued in connection with the merger and
upon the exercise of assumed Great Plains options to be quoted at the
effective time on the Nasdaq Stock Market or listed on the same national
exchange as Microsoft common stock is listed; and
. implement certain compensation and bonus arrangements for Great Plains
employees following the merger. See "Interests of Great Plains' directors
and executive officers in the merger" on page 37.
Exclusivity
Great Plains has agreed that, subject to limited exceptions, it will not,
and will use its commercially reasonable best efforts to ensure that none of
its officers, directors, agents, representatives or affiliates will not, take
or cause or permit any subsidiary to take any of the following actions with any
party other than Microsoft:
. solicit, encourage, initiate or participate in any negotiations,
inquiries or discussions regarding any offer or proposal to acquire all
or a significant part of Great Plains' or its subsidiaries' business,
assets or capital shares;
. enter into any agreement related to an acquisition of all or a
significant part of Great Plains' or its subsidiaries' business, assets
or capital shares;
. authorize or announce any public statement, recommendation or
solicitation in support of an acquisition of all or a significant part of
Great Plains' or its subsidiaries' business, assets or capital shares; or
. disclose any customarily nonpublic information about Great Plains in
connection with an acquisition of all or a significant part of Great
Plains' or its subsidiaries' business, assets or capital shares.
However, Great Plains' board of directors may recommend to shareholders that
they tender their shares in connection with a tender offer by an acquiror other
than Microsoft if the board determines in good faith and after consultation
with legal counsel that its fiduciary duty to its shareholders so requires. In
addition, the board may give information to a third party who has made an
unsolicited acquisition proposal that the board reasonably believes is
financially more favorable to Great Plains and its shareholders than the merger
with Microsoft, as long as Great Plains notifies Microsoft three business days
before furnishing the information. Great Plains will promptly inform Microsoft
of any inquiry or proposal that it receives with respect to an acquisition
transaction or any request by any person for nonpublic information concerning
Great Plains or any of its subsidiaries, and will provide Microsoft with the
material facts relating to the offer, proposal or request, including the
identity of the third party making the inquiry or proposal. After that
notification, Great Plains is obligated to inform Microsoft of additional
material facts as they arise and to provide Microsoft with any additional
information Great Plains gives to the third party.
Termination of the merger agreement
Even if Great Plains' shareholders approve the merger agreement, the merger
agreement may be terminated by the mutual agreement of the parties at any time
before the effective time of the merger. In addition, the merger agreement may
be terminated by either Great Plains or Microsoft under any of the following
circumstances:
. if the terminating party is not in material breach of any representation,
warranty, covenant or agreement and the other party breaches a
representation, warranty, covenant or agreement in the merger agreement,
if the breach has a material adverse effect on the business of the non-
breaching party or on the benefits of the merger and the breach has not
been cured or best efforts are not being employed to cure the breach
within twenty days after notice is given to the breaching party;
47
. if the merger has not been consummated before September 30, 2001 (subject
to extension until March 31, 2002 if Great Plains and Microsoft have
agreed to pursue litigation against any administrative or judicial action
or proceeding challenging the merger on the basis that it violates
antitrust law);
. if Great Plains shareholders have voted on but not approved the merger
agreement;
. if there exists an administrative or judicial action or proceeding
challenging the merger on the basis that it violates antitrust law and
either party determines that it is not in its best interest to contest or
resist the proceeding; or
. if any permanent injunction or other order preventing the merger has
become final and non-appealable.
In addition, Microsoft may terminate the merger agreement if:
. Great Plains' board of directors withdraws or modifies, in a manner
adverse to Microsoft, its approval or recommendation of the merger; or
. Great Plains or its representatives take any action prohibited by the
exclusivity provisions of the merger agreement.
Termination fees
Microsoft has agreed to pay Great Plains a termination fee of $40 million if
Great Plains is not then in material breach of the merger agreement and Great
Plains terminates the agreement as a result of a material breach by Microsoft
of its representations, warranties, covenants or agreements and that breach has
not been cured or Microsoft is not using its best efforts to cure the breach
within twenty days after notice is given to Microsoft.
Great Plains has agreed to pay Microsoft a termination fee of $40 million if
Microsoft is not then in material breach of the merger agreement and Microsoft
terminates the agreement for any of the following reasons:
. Great Plains' board of directors has withdrawn or modified, in a manner
adverse to Microsoft, its approval or recommendation of the merger;
. Great Plains or its representatives have taken any action prohibited by
the provisions of the merger agreement regarding potential acquisitions
of Great Plains by parties other than Microsoft;
. Great Plains has entered an agreement with any person other than
Microsoft to a transaction that will result in a change in the beneficial
ownership of more than 50% of the voting power of Great Plains capital
stock before or within twelve months after the termination of the merger
agreement; or
. Great Plains has materially breached its representations, warranties,
covenants or agreements in the merger agreement and that breach has not
been cured or Great Plains is not using its best efforts to cure the
breach within twenty days after notice is given to Great Plains.
The termination fee from Great Plains may increase the likelihood of the
completion of the merger in accordance with the terms of the merger agreement.
The termination fee may also discourage persons from making an offer to acquire
all of or a significant interest in Great Plains by increasing the cost of an
acquisition.
In addition, Microsoft has agreed to pay Great Plains a termination fee of
$5 million if
. the required antitrust approvals have not been obtained before September
30, 2001 (subject to extension until March 31, 2002 if Great Plains and
Microsoft have agreed to pursue litigation against any administrative or
judicial action or proceeding challenging the merger on the basis that it
violates antitrust law); or
48
. either party terminates the agreement as a result of an administrative or
judicial action or proceeding challenging the merger on the basis that it
violates antitrust law and that party determines that it is not in its
best interest to contest or resist the proceeding.
Extension; waiver
At any time before the effective time of the merger, any party to the merger
agreement may, to the extent legally allowed, extend the time for the
performance of any other party's obligations under the merger agreement, waive
any inaccuracies in the representations and warranties of any other party in
the merger agreement or related documents and waive compliance with any of the
agreements, conditions or covenants in the merger agreement that are for the
benefit of the waiving party.
Amendments
The merger agreement may be amended by Microsoft and Great Plains at any
time before or after approval by Great Plains' shareholders, except that, after
shareholder approval, Great Plains and Microsoft may not make any amendment
that by law requires the further approval of Great Plains' shareholders without
obtaining that approval.
49
RELATED AGREEMENTS
This section of the proxy statement/prospectus describes agreements related
to the merger agreement, including the Great Plains management voting
agreements and letters of Great Plains affiliates. While we believe that these
descriptions cover the material terms of these agreements, these summaries may
not contain all of the information that is important to you. You should read
the related agreements, which are attached to this proxy statement/prospectus
or filed as an exhibit to the registration statement filed by Microsoft with
the SEC, of which this proxy statement/prospectus is a part.
Great Plains management voting agreements
As a condition to the merger agreement, Microsoft required Great Plains'
directors and executive officers to enter into voting agreements. These voting
agreements require, without any additional consideration, Great Plains'
directors and executive officers to vote all of the shares of Great Plains
common stock they beneficially own in favor of the merger. As of February 21,
2001, the record date, Great Plains' directors and executive officers
collectively held the power to vote 4,639,335 shares of Great Plains common
stock, which represented approximately 22.4% of Great Plains' outstanding
common stock. In connection with the agreement, Great Plains' directors and
executive officers granted an irrevocable proxy to the directors of Microsoft,
giving the Microsoft directors the right to vote the shares covered by the
voting agreement as described above.
The voting agreement will expire on the earlier of the termination of the
merger agreement in accordance with its terms or the completion of the merger.
Affiliate letters
Each Great Plains affiliate also agreed that he or she will sell, offer to
sell or otherwise dispose of any Microsoft common stock issued in connection
with the merger only under an effective registration statement or in compliance
with Rule 145 or other exemption from registration under the Securities Act.
Microsoft has agreed to use its reasonable efforts to permit affiliate sales
under Rule 145 and Rule 144 and to file all reports required to be filed under
the Securities Exchange Act of 1934.
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COMPARISON OF RIGHTS OF HOLDERS OF GREAT PLAINS
COMMON STOCK AND MICROSOFT COMMON STOCK
After completion of the merger, the holders of Great Plains common stock
will become shareholders of Microsoft. Before the merger, the rights of
shareholders of Great Plains are governed by Minnesota law, Great Plains'
articles of incorporation and Great Plains' bylaws. After the merger, as
Microsoft shareholders, their rights will be governed by Washington law and
Microsoft's articles of incorporation and bylaws, as those documents currently
exist or may exist in the future.
The following discussion summarizes the material differences between the
rights of holders of Microsoft common stock and holders of Great Plains common
stock under the articles of incorporation and bylaws of Microsoft and Great
Plains. This summary is not complete and is qualified in its entirety by
reference to Microsoft's articles of incorporation and bylaws, Great Plains'
articles of incorporation and bylaws and the relevant provisions of Washington
and Minnesota law. Copies of the charter documents are attached as exhibits to
Great Plains' and Microsoft's filings with the SEC. See "Documents incorporated
by reference into this proxy statement/prospectus" on page 65 and "Where you
can find more information" on page 66.
Although Washington and Minnesota corporation laws currently in effect are
similar in many respects, certain differences will affect the rights of the
Company's shareholders if the merger is consummated. The following discussion
summarizes certain differences considered by management to be significant and
is qualified in its entirety by reference to the full text of the Minnesota
Business Corporation Act and the Washington Business Corporation Act.
Anti-Takeover Legislation
Both Minnesota and Washington law contain provisions intended to protect
shareholders from individuals or companies attempting a takeover of a
corporation in certain circumstances. The anti-takeover provisions of the laws
of Minnesota and Washington differ in a number of respects, and it is not
practical to summarize all of those differences here. However, the following is
a summary of certain significant differences.
Control Share Acquisition. The Minnesota control share acquisition statute,
Section 302A.671 of the Minnesota Business Corporation Act, establishes various
disclosure and shareholder approval requirements to be met by individuals or
companies attempting a takeover of an "issuing public corporation" such as
Great Plains. Washington has no comparable provision. However, Great Plains has
elected not to be governed by this statute through Great Plains' articles of
incorporation in accordance with Section 302A.671.
Business Combinations. While there is no Washington statute comparable to
Section 302A.671 of the Minnesota Business Corporation Act, both Minnesota and
Washington have business combination statutes that are intended primarily to
deter highly leveraged takeover bids which propose to use the target's assets
as collateral for the offeror's debt financing or to liquidate the target, in
whole or in part, to satisfy financing obligations.
The Minnesota statute, Section 302A.673 of the Minnesota Business
Corporation Act, provides that an issuing public corporation such as Great
Plains may not engage in certain business combinations with any person that
becomes an interested shareholder by acquiring beneficial ownership of 10% or
more of the voting stock of that corporation for a period of four years
following the date that the person became an interested shareholder unless,
prior to that date, a committee of the corporation's disinterested directors
approve either the business combination or the acquisition of shares.
Only defined types of "business combinations" are prohibited by the
Minnesota statute. In general, the definition includes: any merger or exchange
of securities of the corporation with the interested shareholder; certain
sales, transfers or other disposition of assets of the corporation to an
interested shareholder; transfers by
51
the corporation to interested shareholders of shares that have a market value
of 5% or more of the value of all outstanding shares, except for a pro rata
transfer made to all shareholders; any liquidation or dissolution of, or
reincorporation in another jurisdiction of, the corporation which is proposed
by the interested shareholder; certain transactions proposed by the interested
shareholder or any affiliate or associate of the interested shareholder that
would result in an increase in the proportion of shares entitled to vote owned
by the interested shareholder and transactions whereby the interested
shareholder receives the benefit of loans, advantages, guarantees, pledges or
other financial assistance or tax advances or credits from the corporation.
For purposes of selecting a committee, a director or person is
"disinterested" under the Minnesota Statute if the director or person is
neither an officer nor an employee, nor has been an officer or employee within
five years preceding the formation of the committee of the issuing public
corporation, or of a related corporation. The committee must consider and act
on any written, good faith proposal to acquire shares or engage in a business
combination. The committee must consider and take action on the proposal and
within thirty days render a decision in writing regarding the proposal.
In contrast to the Minnesota provisions, Washington law (Chapter 19 of the
Washington Business Corporation Act) prohibits a "target corporation," with
certain exceptions, from engaging in certain "significant business
transactions" (such as a merger or sale of assets) with an "acquiring person"
who acquires 10% or more of the voting securities of a target corporation for a
period of five years after such acquisition, unless the transaction is approved
by a majority of the members of the target corporation's board of directors
prior to the date of the acquisition. Target corporations include domestic
corporations with a class of voting shares registered with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 (the
"Exchange Act"). Foreign corporations required to have a certificate of
authority to transact business in Washington are also subject to the statute
if: (i) the corporation has a class of voting shares registered with the SEC
pursuant to the Exchange Act; (ii) its principal executive office is located in
Washington; (iii) (A) more than 10% of its shareholders of record resident in
Washington, (B) more than 10% of its shares are owned by Washington residents
or (C) one thousand or more shareholders of record reside in Washington; (iv) a
majority of its employees, together with those of its subsidiaries, are
residents of Washington, or the corporation, together with its subsidiaries,
employs more than one thousand residents in Washington and (v) a majority of
the corporation's tangible assets, together with those of its subsidiaries, are
located in Washington or the corporation and its subsidiaries have more than
$50 million worth of tangible assets in Washington. A target corporation that
meets the definition may not "opt out" of this statute.
Only certain "significant business transactions" are prohibited under
Washington law. A significant business transaction is defined broadly to
include any of the following: (i) any merger or consolidation with the
acquiring person; (ii) any sale, transfer or other disposition of assets to the
acquiring person if the assets have a market value equal to or greater than 5%
of the aggregate market value of all of the corporation's assets; (iii) the
termination of 5% or more of the employees of the target corporation employed
in Washington; (iv) any issuance, transfer or redemption of shares, options,
warrants or rights to acquire shares of the corporation to the acquiring
person, except for transfers in a conversion or exchange or a pro rata
distribution; (v) the liquidation or dissolution of a target corporation
proposed by or pursuant to an agreement with the acquiring person; (vi) a
reclassification of securities involving, proposed by or pursuant to an
agreement with an acquiring person or (vii) any receipt by the acquiring person
of any loans, advances, guarantees, pledges and other financial benefits.
In both Minnesota and Washington, an interested shareholder or acquiring
person is one who owns 10% of the outstanding shares, and in both states, a
person is deemed to beneficially own shares which that person has the right to
acquire pursuant to the exercise of stock options, warrants or other rights. An
acquiring person must wait five years in Washington to engage in prohibited
business combinations, while the waiting period is only four years in
Minnesota. Washington also has a potentially broader definition of a business
combination, which encompasses a larger variety of transactions.
52
Under both statutes, an otherwise prohibited business combination may be
permitted only by advance board or board committee approval. In addition, the
Washington statute provides that if the corporation proposes a merger or sale
of assets, or does not oppose a tender offer, all acquiring persons are
released from the five year prohibition and may compete with the company-
sponsored transaction in certain circumstances. The Minnesota statute does not
have a comparable provision.
Under both Minnesota and Washington law, covered corporations may not opt
out of the business combination statute.
Other Anti-Takeover Provisions. The Minnesota Business Corporation Act
includes three other provisions that may be applicable in the takeover context
that are not included in the Washington Business Corporation Act. These
provisions address a corporation's use of golden parachutes, greenmail and the
standard of conduct of the board of directors in connection with the
consideration of takeover proposals.
Section 302A.255, Subdivision 3, of the Minnesota Business Corporation Act
prohibits a publicly-held corporation from entering into or amending agreements
(commonly referred to as "golden parachutes") that increase current or future
compensation of any officer or director during any tender offer or request or
invitation for tenders.
Section 302A.553, Subdivision 3, of the Minnesota Business Corporation Act
limits the ability of a corporation to repurchase shares at a price above
market value (commonly referred to as "greenmail"). The statute provides that a
publicly-held corporation is prohibited from purchasing or agreeing to purchase
any shares from a person who beneficially owns more than 5% of the voting power
of the corporation if the shares had been beneficially owned by that person for
less than two years, and if the purchase price would exceed the market value of
those shares. However, such a purchase will not violate the statute if the
purchase is approved at a meeting of the shareholders by a majority of the
voting power of all shares entitled to vote or if the corporation makes an
offer of at least equal value per share to all holders of shares of the class
or series and to all holders of any class or series into which the securities
may be converted.
Section 302A.251, Subdivision 5, of the Minnesota Business Corporation Act
authorizes the board of directors, in considering the best interests of the
corporation (including with respect to a proposed acquisition of an interest in
the corporation), to consider the interest of the corporation's employees,
customers, suppliers and creditors, the economy of the state and nation,
community and social considerations and the long-term as well as short-term
interests of the corporation and its shareholders, including the possibility
that these interests may be best served by the continued independence of the
corporation.
Directors' Standard of Care and Personal Liability
Both the Minnesota Business Corporation Act and the Washington Business
Corporation Act provide that a director shall discharge the director's duties
in good faith, in a manner the director reasonably believed to be in the best
interests of the corporation and with the care an ordinarily prudent person in
a like position would have exercised under similar circumstances. A director
who so performs those duties may not be held liable by reason of being a
director or having been a director of the corporation.
Limitation or Elimination of Directors' Personal Liability
The Minnesota Business Corporation Act provides that, if the articles of
incorporation so provide, the personal liability of a director for breach of
fiduciary duty as a director may be eliminated or limited, but that the
articles may not limit or eliminate such liability for (a) any breach of the
director's duty of loyalty to the corporation or its shareholders, (b) acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (c) the payment of unlawful dividends, stock repurchases or
redemptions, (d) any transaction in which the director received an improper
personal benefit, (e) certain violations of the Minnesota securities laws and
(f) any act or omission occurring prior to the date when the provision in the
articles
53
eliminating or limiting liability becomes effective. Great Plains' articles of
incorporation contain a provision eliminating the personal liability of its
directors for monetary damages for breach of fiduciary duty as a director,
subject to the foregoing limitations, and specifying that any repeal or
modification of these limits on director liability may not adversely affect any
right or protection of a director existing at the time of such repeal or
modification.
The Washington Business Corporation Act provides that the Articles of
Incorporation may not eliminate or limit the liability of a director for: (i)
acts or omissions involving intentional misconduct or a knowing violation of
law; (ii) approval of certain distributions contrary to law or (iii) any
transaction from which the director personally receives a benefit in money,
property or services to which the director is not legally entitled. In
Microsoft's Articles of Incorporation, these limits on director liability are
deemed to be contract rights that are to be automatically amended as authorized
by changes in applicable law so that the liability of a director shall be
eliminated or limited to the fullest extent not prohibited by applicable law,
and any repeal or modification of the relevant provision of Microsoft's
Articles of Incorporation shall not adversely affect any right or protection of
a director of Microsoft with respect to any acts or omissions of such director
occurring prior to such repeal or modification. Neither the Minnesota Business
Corporation Act nor the Washington Business Corporation Act limit a director's
liability for violation of certain federal laws including the federal
securities laws.
Indemnification
Except as limited by a corporation's articles of incorporation or bylaws,
the Minnesota Business Corporation Act generally provides for mandatory
indemnification of persons acting in an official capacity on behalf of the
corporation if such a person acted in good faith, received no improper personal
benefit, acted in a manner the person reasonably believed to be in or not
opposed to the best interest of the corporation, and, in the case of a criminal
proceeding, had no reasonable cause to believe that the conduct was unlawful.
Great Plains' bylaws provide for indemnification to the full extent provided by
Minnesota law.
Microsoft's Articles of Incorporation provide that Microsoft shall indemnify
its directors and officers for expenses and liabilities incurred by them as a
result of their service as directors and officers, provided that no such
indemnification shall be provided on account of: (i) acts or omissions of the
director or officer finally adjudged to be intentional misconduct or a knowing
violation of the law; (ii) approval of certain distributions contrary to law or
(iii) any transaction with respect to which the director or officer is finally
adjudged to have received a benefit to which he or she was not legally
entitled. This comprehensive language is intended to provide the broadest
indemnification of directors and officers not prohibited by Washington law, and
to authorize indemnification of directors and officers of amounts paid in
settlement of actions brought on behalf of Microsoft, commonly known as
derivative actions.
Microsoft's Board of Directors believes that the potential personal
liability that can result from derivative actions arising out of an
individual's service as a director or officer of a corporation is a major
concern for individuals who are asked to serve in such positions. Microsoft's
Board of Directors has concluded that by providing indemnification to
Microsoft's directors and officers for amounts paid in settlement of derivative
actions, subject to the restrictions set forth in the Washington Business
Corporation Act, Microsoft will be able to effectively maintain its ability to
recruit and retain individuals who possess the qualities and experience
necessary to serve as directors and officers of Microsoft.
Microsoft is not aware of any pending or threatened litigation to which the
above-described limitation of directors' liability would apply.
Shareholder Voting
Under Minnesota law, action on certain matters, including the sale, lease or
exchange of all or substantially all of the corporation's property or assets,
mergers and consolidations and voluntary dissolution, must be approved by the
affirmative vote of the holders of a majority of the voting power of all shares
entitled
54
to vote. Washington law provides, however, that unless specified to the
contrary in the articles of incorporation, the affirmative vote of two-thirds
of all votes entitled to be cast is required for approval in the case of a
merger, consolidation, sale of all or substantially all of its assets not in
the ordinary course of its business or dissolution, instead of a simple
majority, which is the Minnesota requirement. Microsoft's Articles of
Incorporation provide that only a majority of votes entitled to be cast is
required for approval of a merger, share exchange, sale of substantially all of
Microsoft's assets or dissolution.
Appraisal Rights in Connection with Corporate Reorganizations and Other Actions
Under Minnesota law and Washington law, shareholders have the right, in some
circumstances, to dissent from certain corporate transactions by demanding
payment in cash for their shares equal to the fair value as determined by
agreement with the corporation or by a court in an action timely brought by the
dissenters. Both laws generally afford dissenters' rights upon certain
amendments to the articles that materially and adversely affect the rights or
preferences of the shares of the dissenting shareholder, upon the sale of
substantially all corporate assets and upon merger or exchange by a
corporation, regardless of whether the shares of the corporation are listed on
a national securities exchange or widely held. See "Rights of Dissenting Great
Plains Shareholders" on page 59.
Cumulative Voting for Directors
Minnesota law provides that each shareholder entitled to vote for directors
has the right to cumulate those votes in the election of directors by giving
written notice of intent to do so, unless the corporation's articles of
incorporation provide otherwise. Great Plains' articles of incorporation
prohibit such accumulation of votes in elections of directors. Under Washington
law, no such cumulative voting exists, unless the certificate of incorporation
provides otherwise. Microsoft's Articles of Incorporation do not provide for
cumulative voting in elections of directors.
Conflicts of Interest
Under Minnesota law, a contract or transaction between a corporation and one
or more of its directors, or an entity in or of which one or more of the
corporation's directors are directors, officers or legal representatives or
have a material financial interest, is not void or voidable solely by reason of
the conflict, provided that (i) the contract or transaction is fair and
reasonable at the time it is authorized, approved or ratified, (ii) the
material facts of the contract or transaction are fully disclosed to or known
by the shareholders and approved by (a) the holders of two-thirds of the voting
power of shares entitled to vote held by disinterested shareholders or (b) the
unanimous affirmative vote of all shareholders, whether or not entitled to
vote, (iii) it is authorized in good faith by a majority of the disinterested
members of the board of directors holding a quorum after disclosure of the
relationship or interest or (iv) the contract or transaction is a merger
approved in accordance with the Minnesota Business Corporation Act.
The Washington Business Corporation Act sets forth a safe harbor for
transactions between a corporation and one or more of its directors. A
conflicting interest transaction may not be enjoined, set aside or give rise to
damages if: (i) it is approved by a majority of qualified directors; (ii) it is
approved by the affirmative vote of all qualified shares or (iii) at the time
of commitment, the transaction was fair to the corporation. For purposes of
this provision, "qualified director" is one who does not have: (a) a
conflicting interest respecting the transaction or (b) a familial, financial,
professional or employment relationship with a second director which
relationship would reasonably be expected to exert an influence on the first
director's judgment when voting on the transaction. "Qualified shares" are
defined generally as shares other than those beneficially owned, or the voting
of which is controlled, by a director who has a conflicting interest respecting
the transaction.
Classified Board of Directors
Both Minnesota and Washington permit a corporation's articles or bylaws to
provide for a classified board of directors. Washington permits electing one or
more directors by the holders of one or more specified classes
55
or series of shares. In addition, the statute permits staggered terms for
directors, up to a maximum of three separate groups. Minnesota law does not
limit the number of classes. Great Plains' bylaws provide for a classified
board of directors under which directors are elected to three-year terms, with
one-third of the directors being elected each year. Microsoft's articles and
bylaws do not provide for election of directors by class or series or in
staggered terms.
Removal of Director
Under Minnesota and Washington law, in general, unless a corporation's
articles provide otherwise, a director may be removed with or without cause by
the affirmative vote of a majority of the shareholders. Under Minnesota law,
the bylaws may also establish a different standard for removal of directors.
Great Plains' bylaws provide that in order for the shareholders to remove a
director it must be for cause and by the affirmative vote of a majority of the
shareholders holding a majority of the shares entitled to vote at an election
of directors. 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 the vacancy and the
time of the removal.
Vacancies on Board of Directors
Under Minnesota law, unless the articles or bylaws provide otherwise, (a) a
vacancy on a corporation's board of directors may be filled by the vote of a
majority of directors then in office, although less than a quorum; and (b) a
newly created directorship resulting from an increase in the number of
directors may be filled by the board. Any director so elected shall hold office
only until a qualified successor is elected at the next regular or special
meeting of shareholders.
Under Washington law, a vacancy on a corporation's board of directors may be
filled by a majority of the remaining directors, even if less than a quorum, or
by the affirmative vote of a majority of the outstanding voting shares, unless
otherwise provided in the articles of incorporation or bylaws. A newly created
directorship, resulting from an increase in the number of directors, may be
filled by the board. A director's term continues until the next annual
shareholders' meeting.
Annual Meetings of Shareholders
Minnesota law provides that if a regular meeting of shareholders has not
been held during the immediately preceding fifteen months, a shareholder or
shareholders holding 3% or more of the voting power of all shares entitled to
vote may demand a regular meeting of shareholders. Washington law provides that
the corporation shall hold meetings at a time stated or fixed in the bylaws.
Microsoft's Bylaws provide that the annual meeting be held at a time and date
within 150 days of the end of the fiscal year, to be determined by the board or
an authorized committee of the board.
Special Meetings of Shareholders
Minnesota law and Great Plains' bylaws provide that the chief executive
officer, the chief financial officer, two or more directors, a person
authorized in the articles or bylaws to call a special meeting or a shareholder
holding 10% or more of the voting power of all shares entitled to vote, may
call a special meeting of the shareholders, except that a special meeting
concerning a business combination must be called by 25% of the voting power of
all shares entitled to vote. Under Washington law, the board of directors or
those persons authorized by the corporation's articles of incorporation or
bylaws may call a special meeting of the corporation's shareholders, as well as
shareholders holding 10% of the voting power. Under Washington law, the right
of shareholders of a public company to call a special meeting may be limited by
the articles of
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incorporation. Microsoft's articles of incorporation provide that special
meetings are to be held only upon notice given by the board of directors.
Voluntary Dissolution
Minnesota law provides that a corporation may be dissolved by the voluntary
action of holders of a majority of a corporation's shares entitled to vote at a
meeting called for the purpose of considering such dissolution. Washington law
provides that voluntary dissolution of a corporation first must be deemed
advisable by a majority of the board of directors and then approved by two-
thirds of the outstanding shares entitled to vote (or a lesser vote as stated
in articles, but not less than a majority.)
Involuntary Dissolution
Minnesota law provides that a court may dissolve a corporation in an action
by a shareholder where: (a) the situation involves a deadlock in the management
of corporate affairs and the shareholders cannot break the deadlock; (b) the
directors have acted fraudulently, illegally or in a manner unfairly
prejudicial to the corporation; (c) the shareholders are divided in voting
power for two consecutive regular meetings to the point where successor
directors are not elected; (d) there is a case of misapplication or waste of
corporate assets or (e) the duration of the corporation has expired. Washington
law does not have a parallel provision.
Inspection of Shareholder Lists
Under Minnesota law, a shareholder, beneficial owner or a holder of a voting
trust certificate of a publicly held corporation has, upon written demand
stating the purpose and acknowledged or verified by a notary public or by other
proper means under Minnesota law, a right at any reasonable time to examine and
copy the corporation's share register and other corporate records reasonably
related to the stated purpose and described with reasonable particularity in
the written demand upon demonstrating the stated purpose to be a proper
purpose. The acknowledged or verified demand must be directed to the
corporation at its registered office in Minnesota or at its principal place of
business. A proper purpose is one reasonably related to the person's interest
as a shareholder, beneficial owner or a holder of a voting trust certificate of
the corporation. Under Washington law, any shareholder has an absolute right,
upon written demand, to examine and copy, in person or by a legal
representative, at any reasonable time, the corporation's share register.
Amendment of the Bylaws
Minnesota law provides that, unless reserved by the articles to the
shareholders, the power to adopt, amend or repeal a corporation's bylaws is
vested in the board, subject to the power of the shareholders to adopt, amend
or repeal the bylaws. After adoption of initial bylaws, the board of a
Minnesota corporation cannot adopt, amend or repeal a bylaw fixing a quorum for
meetings of shareholders, prescribing procedures for removing directors or
filling vacancies in the board or fixing the number of directors or their
classifications, qualifications or terms of office, but may adopt or amend a
bylaw to increase the number of directors. Washington law provides that either
the board or shareholders may amend the bylaws.
Amendment of the Articles
Under Minnesota law, before the shareholders may vote on an amendment to the
articles of incorporation, either a resolution to amend the articles must have
been approved by the affirmative vote of the majority of the directors present
at the meeting where such resolution was considered or the amendment must have
been proposed by shareholders holding 3% or more of the voting power of the
shares entitled to vote. Amending the articles of incorporation requires the
affirmative vote of the holders of the majority of the voting power present and
entitled to vote at the meeting (and of each class, if entitled to vote as a
class), unless the articles of incorporation require a larger proportion.
Minnesota law provides that a proposed amendment may be voted upon by the
holders of a class or series even if the articles of incorporation would deny
that right, if among other things, the proposed amendment would increase or
decrease the aggregate number of authorized shares of
57
the class or series, change the rights or preferences of the class or series,
create a new class or series of shares having rights and preferences prior and
superior to the shares of that class or series or limit or deny any existing
preemptive right of the shares of the class or series.
The Washington Business Corporation Act authorizes a corporation's board of
directors to make various changes to its articles of incorporation without
shareholder approval including changes of corporate name, changes of the number
of outstanding shares necessary to effectuate a stock split or stock dividend
in the corporation's own shares and changes of the par value of its shares.
Other amendments to a corporation's articles of incorporation must be
recommended to the shareholders by the board of directors, unless the board
determines that because of a conflict of interest or other special
circumstances it should make no recommendation and communicates the basis for
its determination to the shareholders with the amendment. For the amendment to
be adopted, it must be approved by a majority of all votes entitled to be cast
by each voting group that has a right to vote on the amendment.
Proxies
Both Minnesota law and Washington law permit proxies of definite duration.
In the event the proxy does not specify its duration, under both Minnesota and
Washington law it is valid for eleven months. Under Minnesota and Washington
law, no appointment of a proxy is irrevocable unless the appointment is coupled
with an interest in the shares or in the corporation.
Preemptive Rights
Under both Minnesota and Washington law, shareholders have preemptive rights
to acquire a certain fraction of the unissued securities or rights to purchase
securities of a corporation before the corporation may offer them to other
persons, unless the corporation's articles of incorporation otherwise provide.
Great Plains' articles of incorporation provide that no such preemptive right
exists in Great Plains' shareholders. Microsoft's articles of incorporation
provide that Microsoft's shareholders have no preemptive rights.
Dividends
Generally, under both Minnesota and Washington law, a corporation may pay a
dividend if its board determines that the corporation will be able to pay its
debts in the ordinary course of business after paying the dividend and if,
among other things, the dividend payment does not reduce the remaining net
assets of the corporation below the aggregate preferential amount payable in
the event of liquidation to the holders of the shares having preferential
rights, unless the payment is made to those shareholders in the order and to
the extent of their respective priorities.
Shareholders' Action Without a Meeting
Under both Minnesota and Washington law, any action required or permitted to
be taken at a shareholders' meeting may be taken without a meeting by written
consent signed by all of the shareholders entitled to vote on such action. This
power can be restricted by a Washington corporation's articles. Microsoft's
articles of incorporation do not restrict such shareholder action without a
meeting.
Stock Repurchases
A Minnesota corporation may acquire its own shares if, after the
acquisition, it is able to pay its debts as they become due in the ordinary
course of business and if enough value remains in the corporation to satisfy
all preferences of senior securities. Under Washington law, a corporation may
purchase or redeem shares of any class so long as the purchase does not (a)
impair the corporation's ability to pay its debts as they become due in the
ordinary course of business, or (b) cause its total assets to become less than
its total liabilities (plus, unless the corporation's articles of incorporation
provide otherwise, preferential rights of senior securities).
58
RIGHTS OF DISSENTING GREAT PLAINS SHAREHOLDERS
The following is a brief summary of the rights of holders of Great Plains
common stock to dissent from the merger and receive cash equal to the "fair
value" of their Great Plains common stock instead of receiving shares of
Microsoft common stock. This summary is not exhaustive, and you should read
Sections 320A.471 and 302A.473 of the Minnesota Business Corporation Act, which
are attached to this proxy statement/prospectus as Annex C.
If you are contemplating the possibility of dissenting from the merger, you
should carefully review the text of Annex C, particularly the procedural steps
required to perfect dissenters' rights, which are complex. You should also
consult your legal counsel. If you do not fully comply with the procedural
requirements of the statute, you will lose your dissenters' rights.
Who may exercise appraisal rights
Under Minnesota law, shareholders of Great Plains have the right, by fully
complying with the applicable provisions of Sections 301A.471 and 302A.473, to
dissent with respect to the merger and to receive from Great Plains payment in
cash for the "fair value" of their shares after the merger is completed. The
term "fair value" means the value of the shares immediately before the
effective time of the merger and may be less than, equal to or greater than the
market price of the Microsoft common stock to be issued to nondissenting
shareholders for their Great Plains common stock if the merger is consummated.
All references in this summary to a "shareholder" or "you" are to a
shareholder of Great Plains as of February 21, 2001, the record date for the
special meeting. A person having beneficial ownership of shares that are held
of record in the name of another person, such as a broker, nominee, trustee or
custodian, must act promptly to cause the record holder to follow the steps
summarized below in a proper and timely manner if the beneficial owner wishes
to perfect any dissenters' rights.
Requirements for exercising appraisal rights
Shareholders who desire to exercise their dissenters' rights must:
. file a written notice of intent to demand fair value for his, her or its
shares with Great Plains before the shareholder vote is taken to approve
the merger agreement. This written demand must be in addition to and
separate from any proxy or vote against approval of the merger agreement;
. not vote his, her or its shares in favor of the merger agreement; and
. follow the statutory procedures for perfecting dissenters' rights, which
are described below.
If you do not satisfy all of these conditions, you cannot exercise
dissenters' rights and will be bound by the terms of the merger agreement.
Voting against, abstaining from voting or failing to vote to approve the merger
agreement does not constitute a demand for appraisal within the meaning of
Minnesota law.
A shareholder's failure to vote against the approval of the merger agreement
will not constitute a waiver of dissenter's appraisal rights. However, if a
shareholder returns a signed proxy but does not specify a vote against approval
of the merger agreement or direction to abstain, the proxy will be voted for
approval of the merger agreement, and the shareholder's dissenter's appraisal
rights will be waived.
A shareholder must assert dissenters' rights with respect to all of the
shares registered in the holder's name except where certain shares are
beneficially owned by another person but registered in the holder's name. If a
record owner, such as a broker, nominee, trustee or custodian, wishes to
dissent with respect to shares beneficially owned by another person, the
shareholder must dissent with respect to all of the beneficial owner's shares
and must disclose the name and address of the beneficial owner on whose behalf
dissent is made. Also, a
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beneficial owner of shares who is not the record owner of those shares may
assert dissenters' rights as to the shares held on that person's behalf,
provided that the beneficial owner submits a written consent from the record
owner to Great Plains at or before the time the dissenters' rights are
asserted.
Notices of intent to exercise dissenters' rights should be filed with Great
Plains at: Great Plains Software, Inc., 1701 S.W. 38th Street, Fargo, ND 58103,
Attn: General Counsel.
Appraisal procedure
After the proposed merger has been approved by the shareholders at the
special meeting, Great Plains will send written notice to all shareholders who
have given written notice under the dissenters' rights provisions and have not
voted in favor of the merger as described above. The notice will contain:
. the address where the demand for payment and certificates representing
shares of Great Plains common stock must be sent and the date by which
they must be received;
. any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
. a form for demanding payment that requires certification of the date the
shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired the Great Plains common stock or an interest in it;
and
. a copy of sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act, attached hereto as Annex C, and a brief description of
the procedures to be followed under those provisions.
If you wish to assert dissenters' rights and receive the fair value of your
shares, you must demand payment, deposit your certificates with Great Plains
and provide any other related information specified in the notice from Great
Plains, within thirty days after the notice is given. If you fail to make
demand for payment and deposit your certificates within the thirty-day period,
you will lose the right to receive fair value for your shares under the
dissenters' rights provisions, even if you filed a timely notice of intent to
demand payment.
Except as provided below, after the later of the effective time of the
merger or Great Plains' receipt of a valid demand for payment, Great Plains
will remit to each dissenting shareholder who complied with the requirements of
the Minnesota Business Corporation Act the amount Great Plains estimates to be
the fair value of the shareholder's Great Plains common stock, with interest
starting five days after the effective time of the merger at a rate prescribed
by statute. Great Plains will include the following information with the
payment:
. Great Plains' closing balance sheet and statement of income for the
fiscal year ending no more than sixteen months before the effective date
of the merger, together with the latest available interim financial
statement;
. Great Plains' estimate of the fair value of the shares and a brief
description of the method used to reach that estimate;
. a copy of Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (attached hereto as Annex C); and
. a brief description of the procedures to be followed in demanding
supplemental payment.
Great Plains may withhold payment for any person who was not a shareholder
on December 21, 2000, the date the merger was first announced to the public, or
who is dissenting on behalf of a person who was not a beneficial owner on that
date. If the dissenter has complied with the procedures described above, Great
Plains shall send a statement to the dissenter setting forth the above
information as well as the reason for withholding the remittance and an offer
to pay to the dissenter the estimate of the fair value of the shares, with
interest, as a final settlement of the dissenting shareholder's demand for
payment.
60
If you are dissatisfied with your payment or offer, you may, within thirty
days of the payment or offer for payment, notify Great Plains in writing of and
demand payment of your estimate of the fair value of your shares plus interest,
to the extent that your estimate exceeds Great Plains' payment or offer. Within
sixty days after receipt by Great Plains of any dissenting shareholder's demand
for supplemental payment, Great Plains shall either pay to the dissenter the
supplemental amount demanded or agreed to by the dissenter after discussion
with Great Plains or file a petition in court requesting that the court
determine the fair value of the shares, plus interest. The petition shall be
filed in Hennepin County, Minnesota, and shall name as parties all dissenting
shareholders whose demands remain unsettled.
The court may appoint one or more appraisers to receive evidence and make
recommendations to the court as to the amount of the fair value of the shares.
The court shall determine whether the shareholder or shareholders in question
have fully complied with the requirements of this section, and shall determine
the fair value of the shares, taking into account any and all factors the court
finds relevant, computed by any method or combination of methods that the
court, in its discretion, sees fit to use, whether or not used by Great Plains
or by a dissenter. The fair value of the shares as determined by the court is
binding on all dissenting shareholders. If the court determines that the fair
value of the shares is in excess of any amount remitted by Great Plains, then
the court will enter a judgment for cash in favor of the dissenting
shareholders in an amount by which the value determined by the court, plus
interest, exceeds the amount previously remitted.
The court will determine the costs and expenses of the court proceeding,
including the reasonable expenses and compensation of any appraisers appointed
by the court, and assess them against Great Plains, except that the court may
assess part or all of the costs against any dissenting shareholders whose
actions in demanding supplemental payments are found by the court to be
arbitrary, vexatious or not in good faith. If the court finds that Great Plains
did not substantially comply with the relevant provisions of section 302A.473
of the Minnesota Business Corporation Act, the court may also assess against
Great Plains any fees and expenses of attorneys or experts that the court deems
equitable. The court may also assess those fees and expenses against any party
if the court finds that the party has acted arbitrarily, vexatiously or not in
good faith in bringing the proceedings. The court may award, in its discretion,
fees and expenses of an attorney for the dissenting shareholders out of the
amount awarded to the shareholders, if it finds the services of the attorney
were of substantial benefit to the other dissenting shareholders and that those
fees should not be assessed against Great Plains.
Under subdivision 4 of Section 302A.471 of the Minnesota Business
Corporation Act, a shareholder has no right, at law or in equity, to set aside
the approval of the merger agreement except if the approval is fraudulent with
respect to that shareholder or Great Plains.
61
SHARE OWNERSHIP OF PRINCIPAL SHAREHOLDERS,
MANAGEMENT AND DIRECTORS OF GREAT PLAINS
The following table provides information concerning the beneficial ownership
of Great Plains common stock as of February 21, 2001, the record date, for the
following:
. each person or entity who is known by Great Plains to beneficially own
more than 5% of the outstanding shares of Great Plains common stock;
. each of Great Plains' current directors;
. Great Plains' chief executive officer and its five other executive
officers; and
. all of Great Plains' directors and executive officers as a group.
This table includes percentage ownership data reflecting ownership both
before and after consummation of the merger with Microsoft. The pre-merger
percentage ownership is based on 20,722,098 shares of Great Plains common stock
outstanding as of the record date. The post-merger percentage ownership
includes only the 22,794,307 shares of Microsoft common stock that would be
issued to Great Plains shareholders based on the 20,722,098 shares of Great
Plains common stock outstanding as of the record date. All shares subject to
options exercisable within sixty days after the record date are deemed to be
beneficially owned by the person or entity holding that option and to be
outstanding solely for calculating that person's or entity's percentage
ownership.
Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Pre-Merger Post-Merger
----------------------------- -----------------------------
Number of Shares Percent of Number of Shares Percent of
of Great Plains Great Plains of Microsoft Microsoft
Stock Stock Common Stock Common Stock
Name and Address of Beneficially Beneficially Beneficially Beneficially
Beneficial Owner Owned Owned Owned Owned
------------------- ---------------- ------------ ---------------- ------------
Frederick W. Burgum(1).... 2,451,015 11.8% 2,696,116 *
Douglas J. Burgum(2)...... 1,625,602 7.8% 1,788,162 *
U.S. Trust Corporation and
affiliates(3)............ 1,474,391 7.1% 1,621,830 *
Bradley J. Burgum(4)...... 511,325 2.5% 562,457 *
Jodi A. Uecker-Rust(5).... 64,305 * 70,735 *
Darren C. Laybourn(6)..... 39,144 * 43,058 *
J.A. Heidi Roizen(7)...... 33,000 * 36,300 *
Tami L. Reller(8)......... 24,691 * 27,160 *
Joseph S. Tibbetts,
Jr.(9)................... 23,250 * 25,575 *
Jeffrey A. Young(10)...... 15,647 * 17,211 *
James Leland Strange(11).. 7,259 * 7,984 *
David M. O'Hara(12)....... 3,472 * 3,819 *
All directors and
executive officers as a
group (11 persons)(13) .. 4,798,710 23.0% 5,278,581 *
- --------
* Less than 1%
(1) Includes 17,000 shares issuable pursuant to options. Also 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.
(2) Includes 25,033 shares issuable pursuant to options. Also 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.
62
(3) Based on Schedule 13G filed with the SEC on February 14, 2001. Includes
shares held by United States Trust Company of New York, a subsidiary of
U.S. Trust Corporation. The address of U.S. Trust Corporation is 114 West
47th Street, New York, New York 10036.
(4) Includes 17,000 shares issuable pursuant to options. Also includes shares
held by certain members of Bradley J. Burgum's household that are
beneficially owned by Mr. Burgum.
(5) Includes 13,333 shares issuable pursuant to options.
(6) Includes 4,300 shares issuable pursuant to options.
(7) Includes 32,000 shares issuable pursuant to options.
(8) Includes 6,400 shares issuable pursuant to options. Also includes shares
held by certain members of Tami L. Reller's household that are
beneficially owned by Ms. Reller.
(9) Includes 23,250 shares issuable pursuant to options.
(10) Includes 10,800 shares issuable pursuant to options.
(11) Includes 7,259 shares issuable pursuant to options.
(12) Includes 3,000 shares issuable pursuant to options.
(13) Includes 159,375 shares issuable pursuant to options.
63
LEGAL MATTERS
The validity of the Microsoft common stock to be issued to Great Plains
shareholders in the merger will be passed upon by Preston Gates & Ellis LLP,
Seattle, Washington. It is a condition to the completion of the merger that
Great Plains receive an opinion from Dorsey & Whitney LLP, Minneapolis,
Minnesota, and that Microsoft receive an opinion from Preston Gates & Ellis
LLP, with respect to the tax treatment of the merger.
EXPERTS
The financial statements incorporated in this proxy statement/prospectus by
reference from Microsoft's Annual Report on Form 10-K for the year ended June
30, 2000 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Great Plains incorporated in this proxy
statement/prospectus by reference to the Great Plains' Annual Report on Form
10-K for the year ended May 31, 2000, have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
SHAREHOLDER PROPOSALS
Great Plains will hold an annual meeting of Great Plains shareholders in the
year 2001 only if the merger is not completed before the time of that meeting.
If the merger is not completed, you may present proper proposals for
consideration at the next annual meeting of Great Plains shareholders by
submitting your proposal in writing to the secretary of Great Plains in a
timely manner.
Any proposal by a shareholder to be considered for inclusion in Great
Plains' proxy materials for the 2001 Annual Meeting of Shareholders must have
been received at Great Plains' executive offices, 1701 S.W. 38th Street, Fargo,
North Dakota 58103, no later than the close of business on April 9, 2001.
Proposals should be sent to the attention of the Secretary. In connection with
any matter to be proposed by a shareholder at the 2001 Annual Meeting of
Shareholders, but not proposed for inclusion in Great Plains' proxy materials,
the proxy holders designated by Great Plains for that meeting may exercise
their discretionary voting authority with respect to that shareholder proposal
if appropriate notice of that proposal is not received by Great Plains at its
principal executive offices by April 9, 2001. In order for a shareholder
proposal to be properly brought before the 2001 Annual Meeting of Shareholders,
appropriate notice must have been received by Great Plains at its principal
executive offices by April 9, 2001.
64
DOCUMENTS INCORPORATED BY REFERENCE INTO
THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus incorporates documents by reference that are
not presented in or delivered with this document.
The SEC allows Microsoft and Great Plains to "incorporate by reference"
information into this proxy statement/prospectus, which means that we can
disclose important information to you by referring you to another document
filed separately with the SEC. The information incorporated by reference is
deemed to be part of this proxy statement/prospectus, except for any
information superseded by information included in or incorporated by reference
from subsequently filed documents into this proxy statement/prospectus. This
proxy statement/prospectus incorporates by reference the documents listed below
that Microsoft and Great Plains have previously filed with the SEC. These
documents contain important information about Microsoft's and Great Plains'
business and finances.
Microsoft SEC Filings (File No. 0-14278) Date Filed
---------------------------------------- ----------
Quarterly Report on Form 10-Q for the quarter ended December
31, 2000................................................... February 14, 2001
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000......................................... November 14, 2000
Annual Report on Form 10-K for the fiscal year ended June
30, 2000................................................... September 28, 2000
Definitive Proxy Statement for the annual meeting to be held
November 9, 2000........................................... September 28, 2000
Description of Microsoft's common stock, contained in
Microsoft's Registration Statement on Form S-3/A........... December 13, 1996
Great Plains SEC Filings (File No. 0-22703) Date Filed
------------------------------------------- ----------
Quarterly Report on Form 10-Q for the quarter ended November
30, 2000................................................... January 16, 2001
Amendment to Annual Report on Form 10-K405/A for the fiscal
year ended May 31, 2000.................................... November 3, 2000
Quarterly Report on Form 10-Q for the quarter ended August
31, 2000................................................... October 16, 2000
Annual Report on Form 10-K405 for the fiscal year ended May
31, 2000................................................... August 11, 2000
Definitive additional materials for Proxy Statement for the
annual meeting held September 13, 2000..................... August 11, 2000
Definitive Proxy Statement for the annual meeting held
September 13, 2000......................................... August 11, 2000
Description of Great Plains' common stock, contained in the
registration statement on Form 8-A, including any
amendments or reports filed for the purpose of updating
that description........................................... June 13, 1997
We also incorporate by reference any additional documents that Microsoft or
Great Plains files with the SEC after the date of this proxy
statement/prospectus and before the date of the special meeting.
This proxy statement/prospectus is dated February 22, 2001. You should not
assume that the information contained in this proxy statement/prospectus is
accurate as of any other date, and neither the mailing of the proxy
statement/prospectus to shareholders nor the issuance of Microsoft common stock
in the merger shall create any implication to the contrary. Please note that
Microsoft has supplied all information contained or incorporated by reference
into this proxy statement/prospectus relating to Microsoft, and Great Plains
has supplied all information relating to Great Plains.
You should rely only on the information contained in this document or in
documents to which we have referred you. We have not authorized anyone to
provide you with different information.
65
WHERE YOU CAN FIND MORE INFORMATION
On your written or oral request, Great Plains or Microsoft will provide you,
without charge, with a copy of any of the documents incorporated by reference
into this proxy statement/prospectus, not including exhibits to the information
unless those exhibits are specifically incorporated by reference. You should
make any request for documents by Wednesday, March 21, 2001 to ensure timely
delivery of the documents.
Requests for documents relating to Great Requests for documents relating to
Plains should be directed to: Microsoft should be directed to:
Great Plains Software, Inc. Microsoft Corporation
1701 S.W. 38th Street One Microsoft Way
Fargo, North Dakota 58103 Redmond, Washington 98052
Phone: (701) 281-6780 Phone: (800) 285-7772
Attention: Pam Kloster, Investor Relations Attention: Investor Relations
Email: pam.kloster@greatplains.com Email: msft@microsoft.com
Fax: (701) 492-1018 Fax: (425) 936-8000
Great Plains and Microsoft file annual, quarterly and special reports, proxy
statements and other information with the SEC. Copies of Great Plains' or
Microsoft's reports, proxy statements and other information may be inspected
and copied at the public reference facilities maintained by the SEC:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
Information on the operation of the SEC's public reference rooms may be
obtained by calling the SEC at 1-800-SEC-0330. Copies of these materials can
also be obtained by mail at prescribed rates from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, or by calling the
SEC at 1-800-SEC-0330. The SEC maintains a Web site that includes reports,
proxy statements and other information regarding Microsoft and Great Plains.
The address of the SEC Web site is http://www.sec.gov.
Microsoft has filed a registration statement under the Securities Act with
the SEC to register the Microsoft common stock to be issued to Great Plains'
shareholders in the merger. This proxy statement/prospectus is part of that
registration statement. As allowed by SEC rules, this proxy
statement/prospectus does not contain all of the information you can find in
the registration statement or the exhibits to the registration statement, and
constitutes a prospectus of Microsoft in addition to being a proxy statement of
Great Plains for the special meeting. You may inspect and copy the registration
statement at any of the addresses listed above.
If you have any questions about the merger, please call Great Plains'
investor relations group at (701) 281-6780. You may also call Microsoft's
investor relations group at (800) 285-7772.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This proxy statement/prospectus and the documents incorporated by reference
into this proxy statement/prospectus contain forward-looking statements within
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. All forward-looking statements involve risks and uncertainties. Words
such as "anticipates," "expects," "intends," "plans," "believes," "seeks" and
"estimates" and similar expressions identify forward-looking statements, and
any statements regarding the benefits of the merger and Microsoft's and Great
Plains' financial condition, results of operations and business are forward-
looking statements. These forward-looking statements are not guarantees of
future performance and are subject to risks, contingencies and uncertainties
that could cause actual results to differ materially from the results
contemplated by the forward-looking statements.
66
Factors that may affect such forward-looking statements include:
. the ability to retain Great Plains' key employees after the consummation
of the merger;
. competitive factors in the businesses in which Microsoft and Great Plains
compete;
. changes in governmental regulation; and
. overall economic and business conditions.
Actual results could also differ materially because of factors such as:
changes in the rate of PC shipments; technological shifts; customer demand;
market acceptance of new products and services; competitive products, services
and pricing; changes in product and service mix; delay in product ship
schedules; product life cycles; currency fluctuations; sale terms and
conditions; equity investment volatility; litigation; and other factors
discussed in the Form 10-K and other SEC filings of each of Microsoft and Great
Plains.
For a description of some of the factors or uncertainties in Great Plains'
and Microsoft's respective operations and business environment that could cause
actual results to differ from those discussed in forward-looking statements,
see Microsoft's Annual Report on Form 10-K for the fiscal year ended June 30,
2000, other documents Microsoft has subsequently filed with the SEC, Great
Plains' Quarterly Report on Form 10-Q for the fiscal year ended November 30,
2000 and other documents Great Plains has subsequently filed with the SEC, all
of which are incorporated by reference into this proxy statement/prospectus.
67
ANNEX A
MICROSOFT CORPORATION
GREAT PLAINS SOFTWARE, INC.
RUBICON ACQUISITION CORPORATION
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of December 21, 2000
TABLE OF CONTENTS
ARTICLE I THE MERGER
1.1 Effective Time of the Merger.......................................... A-1
1.2 Closing............................................................... A-1
1.3 Effects of the Merger................................................. A-1
1.4 Tax-Free Reorganization............................................... A-1
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock............................................... A-2
2.1.1 Capital Stock of Sub.......................................... A-2
2.1.2 Cancellation of Company Common Stock.......................... A-2
2.1.3 Conversion of Company Common Stock............................ A-2
2.1.4 Adjustments of Exchange Ratio................................. A-2
2.1.5 Dissenter's Rights............................................ A-2
2.1.6 Fractional Shares............................................. A-3
2.1.7 Certain Restricted Shares..................................... A-3
2.2 Exchange of Certificates.............................................. A-3
2.2.1 Exchange Agent................................................ A-3
2.2.2 Microsoft to Provide Common Stock and Cash.................... A-3
2.2.3 Exchange Procedures........................................... A-3
2.2.4 No Further Ownership Rights in Company Common Stock........... A-4
2.2.5 Return to Microsoft........................................... A-4
2.3 Company Options....................................................... A-4
2.3.1 Conversion to Microsoft Options............................... A-4
2.3.2 Registration.................................................. A-4
2.3.3 Incentive Stock Options....................................... A-5
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Company............................. A-5
3.1.1 Organization, Standing and Power.............................. A-5
3.1.2 Capital Structure............................................. A-6
3.1.3 Authority..................................................... A-6
3.1.4 SEC Documents and Financial Statements........................ A-7
3.1.5 Information Supplied.......................................... A-8
3.1.6 No Defaults................................................... A-8
3.1.7 Litigation.................................................... A-8
3.1.8 No Material Adverse Change.................................... A-8
3.1.9 Absence of Undisclosed Liabilities............................ A-9
3.1.10 No Violations................................................. A-9
3.1.11 Certain Agreements............................................ A-9
3.1.12 Employees..................................................... A-9
3.1.13 Employee Benefit Plans........................................ A-10
3.1.14 Real Property................................................. A-10
3.1.15 Major Contracts............................................... A-10
3.1.16 Taxes......................................................... A-11
3.1.17 Interests of Officers......................................... A-12
3.1.18 Technology and Intellectual Property Rights................... A-13
3.1.19 Material Relations............................................ A-15
3.1.20 Opinion of Financial Advisor.................................. A-15
3.1.21 Vote Required................................................. A-15
3.1.22 Brokers and Finders........................................... A-15
A-i
TABLE OF CONTENTS--(Continued)
3.1.23 Change of Control............................................ A-16
3.1.24 Leases in Effect............................................. A-16
3.1.25 Environmental................................................ A-16
3.1.26 Certain Payments............................................. A-17
3.1.27 Disclosure................................................... A-17
3.1.28 Reliance..................................................... A-17
3.2 Representations and Warranties of Microsoft and Sub.................. A-17
3.2.1 Organization; Standing and Power............................. A-17
3.2.2 Authority.................................................... A-17
3.2.3 Capital Structure............................................ A-18
3.2.4 SEC Documents and Financial Statements....................... A-18
3.2.5 Information Supplied......................................... A-19
3.2.6 No Defaults.................................................. A-19
3.2.7 Absence of Certain Changes or Events......................... A-19
3.2.8 Absence of Undisclosed Liabilities........................... A-19
3.2.9 No Vote Required............................................. A-19
3.2.10 Brokers and Finders.......................................... A-19
3.2.11 Interim Operation of Sub..................................... A-19
3.2.12 Disclosure................................................... A-19
3.2.13 Reliance..................................................... A-20
ARTICLE IV COVENANTS OF COMPANY
4.1 Conduct of Business.................................................. A-20
4.1.1 Ordinary Course.............................................. A-20
4.1.2 Dividends: Changes in Stock.................................. A-21
4.1.3 Issuance of Securities....................................... A-21
4.1.4 Acceleration of Vesting...................................... A-21
4.1.5 Governing Documents.......................................... A-21
4.1.6 Exclusivity; Acquisition Proposals........................... A-21
4.1.7 No Acquisitions.............................................. A-22
4.1.8 No Dispositions.............................................. A-22
4.1.9 Indebtedness................................................. A-22
4.1.10 Plans........................................................ A-23
4.1.11 Claims....................................................... A-23
4.1.12 Agreement.................................................... A-23
4.2 Breach of Representation and Warranties.............................. A-23
4.3 Consents............................................................. A-23
4.4 Commercially Reasonable Best Efforts................................. A-23
4.5 Information for Prospectus/Proxy Statement........................... A-23
4.6 Company Plans........................................................ A-23
4.7 Restrictive Covenants................................................ A-23
4.8 Shareholder Approval................................................. A-23
4.9 Employee Matters..................................................... A-24
4.10 Tax Returns.......................................................... A-24
4.11 Section 16 Approval.................................................. A-24
ARTICLE V COVENANTS OF MICROSOFT
5.1 Breach of Representations and Warranties............................. A-25
5.2 Conduct of Business.................................................. A-25
5.3 Consents............................................................. A-25
5.4 Commercially Reasonable Best Efforts................................. A-25
A-ii
TABLE OF CONTENTS--(Continued)
5.5 Employee Compensation and Benefits................................... A-25
5.6 Nasdaq Listing....................................................... A-25
ARTICLE VI ADDITIONAL AGREEMENTS
6.1 Preparation of S-4................................................... A-26
6.2 Letter of Company's Accountants...................................... A-26
6.3 Letter of Microsoft's Accountants.................................... A-26
6.4 Access to Information................................................ A-26
6.5 Legal Conditions to the Merger....................................... A-26
6.6 Affiliate Agreements................................................. A-27
6.7 HSR Act Filings...................................................... A-27
6.7.1 Filings and Cooperation...................................... A-27
6.7.2 Objections................................................... A-27
6.8 Officers and Directors............................................... A-28
6.9 Expenses............................................................. A-28
6.10 Additional Agreements................................................ A-28
6.11 Public Announcements................................................. A-28
6.12 State Takeover Laws.................................................. A-28
ARTICLE VII CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger........... A-29
7.1.1 Shareholder Approval......................................... A-29
7.1.2 Consents..................................................... A-29
7.1.3 S-4.......................................................... A-29
7.1.4 No Restraints................................................ A-29
7.1.5 No Burdensome Condition...................................... A-29
7.1.6 Tax-Free Reorganization...................................... A-29
7.2 Conditions of Obligations of Microsoft and Sub....................... A-29
7.2.1 Representations and Warranties of Company.................... A-29
7.2.2 Performance of Obligations of Company........................ A-29
7.2.3 Executed Affiliates Agreement................................ A-30
7.2.4 Restrictive Covenant......................................... A-30
7.2.5 Opinion of Company's Counsel................................. A-30
7.2.6 Certain Employees............................................ A-30
7.2.7 Restricted Stock Agreement................................... A-30
7.2.8 Legal Action................................................. A-30
7.2.9 Dissenting Shares............................................ A-30
7.2.10 Modification of Change of Control Agreements................. A-30
7.3 Conditions of Obligation of Company.................................. A-30
7.3.1 Representations and Warranties of Microsoft and Sub.......... A-30
7.3.2 Performance of Obligations of Microsoft and Sub.............. A-30
7.3.3 Legal Action................................................. A-30
7.3.4 Opinion of Microsoft's Counsel............................... A-31
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
8.1 Termination.......................................................... A-31
8.2 Effect of Termination................................................ A-31
8.3 Break-up Fees........................................................ A-32
8.3.1 Company Break-up Fee......................................... A-32
8.3.2 Microsoft Break-up Fee....................................... A-32
8.3.3 HSR Break-up Fee............................................. A-32
A-iii
TABLE OF CONTENTS--(Continued)
8.4 Amendment............................................................ A-32
8.5 Extension, Waiver.................................................... A-32
ARTICLE IX GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements............ A-33
9.2 Notices.............................................................. A-33
9.3 Interpretation....................................................... A-34
9.4 Counterparts......................................................... A-34
9.5 Miscellaneous........................................................ A-34
9.6 No Joint Venture..................................................... A-34
9.7 Governing Law........................................................ A-34
9.8 Enforcement of this Agreement........................................ A-34
A-iv
LIST OF EXHIBITS
Title Number
----- ------------------
Restricted Stock Agreement................................. 2.1.7
Shareholder Agreements..................................... 4.8
Severance Plan............................................. 4.9
Terms and conditions of termination of Company employees
Prior to Closing.......................................... 4.9(A)
Form of Continued Employment Offer......................... 4.9(B)(i) and (ii)
Change of Control Agreements............................... 4.9(C)(i)
Form of Amendment to Change of Control Agreements.......... 4.9(C)(ii)
Expatriate agreements...................................... 4.9(D)
Employment Agreements to be Terminated..................... 4.9(E)
Affiliates Agreement....................................... 6.6
Restrictive Covenant Agreement............................. 7.2.4
Opinion of Dorsey & Whitney LLP............................ 7.2.5
Opinion of Preston Gates & Ellis LLP....................... 7.3.4
A-v
INDEX OF DEFINED TERMS
Term Page Defined
- ---- ------------
Acquisition Transaction......................................... A-21
affiliate....................................................... A-4
Affiliate Agreements............................................ A-27
Antitrust Laws.................................................. A-27
blue sky........................................................ A-7, A-18, A-26
Business Condition.............................................. A-5
Certificate..................................................... A-2
Closing......................................................... A-1
Closing Date.................................................... A-1
Code............................................................ A-1
Company......................................................... A-1
Company Stock Plans............................................. A-6
Company Break-up Fee............................................ A-32
Company Business................................................ A-5
Company Comfort Letter.......................................... A-26
Company Common Shares........................................... A-2
Company Disclosure Schedule..................................... A-5
Company Financial Statements.................................... A-7
Company Intellectual Property................................... A-13
Company Licensed Intellectual Property.......................... A-13
Company Options................................................. A-6
Company Owned Intellectual Property............................. A-13
Company Preferred Stock......................................... A-6
Company Required Statutory Approvals............................ A-7
Company Required Vote........................................... A-29
Company SEC Documents........................................... A-7
Company Section 16 Insider...................................... A-25
Company Shareholder Agreements.................................. A-24
Company Shareholders Meeting.................................... A-24
Company Stock Plans............................................. A-6
Company Voting Debt............................................. A-6
Company's Principals............................................ A-24
Confidentiality Agreement....................................... A-26
Consents........................................................ A-7
Dissenting Shares............................................... A-2
Effective Time.................................................. A-1
Environmental Laws.............................................. A-16
ERISA........................................................... A-10
Exchange Act.................................................... A-7
Exchange Agent.................................................. A-3
Exchange Ratio.................................................. A-2
Governmental Entity............................................. A-7
Hazardous Material.............................................. A-17
HSR Act......................................................... A-7
HSR Break-up Fee................................................ A-32
Incentive Stock Options......................................... A-5
include......................................................... A-34
includes........................................................ A-34
including....................................................... A-34
A-vi
INDEX OF DEFINED TERMS--(Continued)
Page
Term Defined
- ---- -------
Indemnified Parties..................................................... A-28
IRS..................................................................... A-11
Lease................................................................... A-16
Leases.................................................................. A-16
Letter of Transmittal................................................... A-3
Liabilities............................................................. A-9
Material Adverse Effect................................................. A-5
MBCA.................................................................... A-1
Merger.................................................................. A-1
Merger Consideration.................................................... A-2
Merger Documents........................................................ A-1
Microsoft............................................................... A-1
Microsoft Average Closing Price......................................... A-3
Microsoft Break-up Fee.................................................. A-32
Microsoft Comfort Letter................................................ A-26
Microsoft Common Shares................................................. A-2
Microsoft Disclosure Schedule........................................... A-17
Microsoft Financial Statements.......................................... A-17
Microsoft Options....................................................... A-17
Microsoft Preferred Stock............................................... A-17
Microsoft Required Statutory Approvals.................................. A-17
Microsoft SEC Documents................................................. A-17
multiemployer plan...................................................... A-10
Order................................................................... A-27
Owned Real Property..................................................... A-10
Payment Date............................................................ A-32
Plan.................................................................... A-10
plan of reorganization.................................................. A-1
prohibited transaction.................................................. A-10
Prospects............................................................... A-5
Proxy Statement......................................................... A-8
Proxy Statement/Prospectus.............................................. A-8
Real Property........................................................... A-16
Required Statutory Approvals............................................ A-17
Restricted Stock Agreement.............................................. A-3
Return Periods.......................................................... A-11
Returns................................................................. A-11
S-4..................................................................... A-8
SEC..................................................................... A-7
Securities Act.......................................................... A-4
single-employer plan.................................................... A-10
Sub..................................................................... A-1
Subsidiaries............................................................ A-2
Subsidiary.............................................................. A-2
Substituted Microsoft Option............................................ A-4
Superior Proposal....................................................... A-22
Surviving Corporation................................................... A-1
Surviving Corporation's Common Stock.................................... A-1
tax..................................................................... A-11
A-vii
INDEX OF DEFINED TERMS--(Continued)
Page
Term Defined
- ---- -------
taxes................................................................... A-11
Violation............................................................... A-7
WBCA.................................................................... A-1
Year 2000 Compliant..................................................... A-15
A-viii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of December 21, 2000, among
Microsoft Corporation, a Washington corporation ("Microsoft"), Rubicon
Acquisition Corporation, a Washington corporation and a wholly-owned subsidiary
of Microsoft ("Sub"), and Great Plains Software, Inc., a Minnesota corporation
("Company").
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein,
Microsoft, Sub and Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, Sub will be merged into Company (the "Merger"). An Agreement and
Plan of Merger and articles, certificates or other appropriate filing documents
(the "Merger Documents") shall be duly prepared, executed and acknowledged by
the parties and thereafter delivered to the Secretaries of State of Minnesota
and Washington, for filing, as provided in the Minnesota Business Corporation
Act (the "MBCA") and the Washington Business Corporation Act (the "WBCA") as
soon as practicable on or after the Closing Date. The Merger shall become
effective upon the acceptance for filing of the Merger Documents by the
Secretaries of State of Minnesota and Washington or at such time thereafter as
is provided in the Merger Documents (the "Effective Time"). Company
acknowledges and agrees that Microsoft will have no obligation to make any
payment or issue any securities pursuant to this Agreement until such filings
have been confirmed in writing.
1.2 Closing. The closing of the Merger (the "Closing") will take place as
soon as practicable but no later than the fifth business day after satisfaction
or waiver of the last to be fulfilled of the conditions set forth in Article
VII that by their terms are not to occur at the Closing (the "Closing Date"),
at the offices of Preston Gates & Ellis LLP, Seattle, Washington, unless
another date or place is agreed to in writing by the parties hereto.
1.3 Effects of the Merger. At the Effective Time, (i) the separate existence
of Sub shall cease and Sub shall be merged with and into Company (Company after
the Merger is sometimes referred to herein as the "Surviving Corporation"),
(ii) the Articles of Incorporation of Company shall be the Articles of
Incorporation of the Surviving Corporation, except that such Articles of
Incorporation shall be amended to provide that the authorized capital stock of
the Surviving Corporation shall be 1,000 shares of Common Stock, $.01 par value
("Surviving Corporation's Common Stock"), until duly amended, (iii) the Bylaws
of Sub shall be the Bylaws of the Surviving Corporation, (iv) the directors and
officers of the Surviving Corporation shall be designated by Microsoft prior to
the Closing, and (v) the Merger shall, from and after the Effective Time, have
all the effects provided by applicable law.
1.4 Tax-Free Reorganization. The Merger is intended to be a reorganization
within the meaning of Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and this Agreement is intended to be a "plan of
reorganization" within the meaning of the regulations promulgated under Section
368 of the Code. Each party hereto agrees to treat the Merger as a
reorganization within the meaning of Section 368 of the Code, and agrees to
treat this Agreement as a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368 of the Code, unless and until there
is a determination, within the meaning of Section 1313 of the Code, that such
treatment is not correct. Each party hereto agrees to act in good faith
consistent with the intent of the parties and the intended treatment of the
Merger as set forth in this Section 1.4.
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ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action (except as provided in Section 4.8 and in this
Section) on the part of the holder of any shares of Company common stock, par
value $0.01 per share ("Company Common Shares"):
2.1.1 Capital Stock of Sub. All issued and outstanding shares of capital
stock of Sub shall continue to be issued and shall be converted into 1,000
shares of Surviving Corporation Common Stock with the stock certificate of
Sub evidencing ownership of such shares of capital stock of the Surviving
Corporation.
2.1.2 Cancellation of Company Common Stock. All Company Common Shares
that are owned directly or indirectly by Company or Microsoft or by any
Subsidiary of Company or Microsoft shall be canceled and no stock of
Microsoft or other consideration shall be delivered in exchange therefor.
For purposes of this Agreement, "Subsidiary" or "Subsidiaries" shall mean
an entity of which, an amount of the voting securities, or other voting
ownership or voting partnership interests of which is sufficient to elect a
majority of its board of directors or other governing body (or, if there
are no such interests, 50% or more of the equity interests of which) is
owned directly or indirectly by Company. Unless otherwise expressly stated
or implied by context, all references to Company shall include each of
Company's Subsidiaries.
2.1.3 Conversion of Company Common Stock. Each Company Common Share
issued and outstanding immediately prior to the Effective Time, other than
Dissenting Shares, as such term is defined in Section 2.1.8, shall, by
virtue of the Merger, be converted into the right to receive 1.1 shares
(the "Exchange Ratio") of common stock, par value $0.0000125 per share, of
Microsoft (the "Microsoft Common Shares") (the "Merger Consideration"). All
such Company Common Shares shall no longer be outstanding and shall cease
to exist, and each certificate (a "Certificate") previously representing
any such shares shall represent only the right to receive (i) whole shares
of Microsoft Common Shares and (ii) cash in lieu of fractional shares, in
each case as provided by this Section 2.1.
2.1.4 Adjustments of Exchange Ratio. If, between the date of this
agreement and the Effective Time, the outstanding Microsoft Common Shares
or Company Common Shares shall have been changed into a different number of
shares or a different class or series or otherwise changed by reason of any
reclassification, recapitalization, split-up, stock dividend, stock
combination, exchange of shares or readjustment or similar transaction, the
Exchange Ratio shall be correspondingly adjusted.
2.1.5 Dissenters' Rights. Notwithstanding any provision of this
Agreement to the contrary, each outstanding Company Common Share, the
holder of which has demanded and perfected such holder's right to dissent
from the Merger and to be paid the fair value of such shares in accordance
with Sections 302A.471 et seq. of the MBCA and, as of the Effective Time,
has not effectively withdrawn or lost such dissenters' rights ("Dissenting
Shares"), shall not be converted into or represent a right to receive the
Merger Consideration into which Company Common Shares are converted
pursuant to Section 2.1.3 hereof, but the holder thereof shall be entitled
only to such rights as are granted by the MBCA. Company shall give
Microsoft (i) prompt written notice of any notice of intent to demand fair
value for any Company Common Shares, withdrawals of such notices, and any
other instruments served pursuant to the MBCA or any other provisions of
Minnesota law and received by the Company, and (ii) to the extent it can
lawfully do so, the opportunity to conduct jointly all negotiations and
proceedings with respect to demands for fair value for Company Common
Shares under the MBCA. Company shall not, except with the prior written
consent of Microsoft, voluntarily make any payment with respect to any
demands for fair value for Company Common Shares or offer to settle or
settle any such demands. To the extent possible, any amounts paid to
holders of Company Common Stock in respect of Dissenting Shares shall be
paid out of assets held by the Company immediately prior to the Effective
Time. If, before the
A-2
Effective Time, such holder fails to perfect or loses any such right to
exercise such holder's dissenters' rights with respect to such Company
Common Shares, each such share of such holder shall be treated as a share
that had been converted as of the Effective Time into the right to receive
the Merger Consideration.
2.1.6 Fractional Shares. No fractional Microsoft Common Shares shall be
issued in the Merger and such fractional interests shall not entitle the
owner thereof to vote. In lieu of any fractional share, each holder of
Company Common Shares who would otherwise be entitled to receive a fraction
of a Microsoft Common Share will be entitled to receive from Company an
amount of cash, without interest, equal to the Microsoft Average Closing
Price multiplied by the fraction of a Microsoft Common Share to which such
holder would otherwise be entitled. The "Microsoft Average Closing Price"
shall mean the average closing price of the Microsoft Common Stock as
publicly reported for the Nasdaq National Market System as of 4:00 p.m.
Eastern Time over the last 20 trading days ending on the fifth trading day
prior to the Closing Date.
2.1.7 Certain Restricted Shares. The Microsoft Common Shares issuable to
Douglas Burgum, Company's Chief Executive Officer, in exchange for his
Company Common Shares will be restricted from transfer as provided in a
Restricted Stock Agreement set forth as Exhibit 2.1.7 (the "Restricted
Stock Agreement"), which shall be executed concurrently with the execution
of this Agreement.
2.2 Exchange of Certificates.
2.2.1 Exchange Agent. Prior to the Closing Date, Microsoft shall appoint
Mellon Investor Services L.L.C., or other bank or trust company reasonably
satisfactory to Company, to act as exchange agent (the "Exchange Agent") in
the Merger.
2.2.2 Microsoft to Provide Common Stock and Cash. Promptly after the
Effective Time, Microsoft shall make available to the Exchange Agent the
certificates representing whole Microsoft Common Shares issued pursuant to
Section 2.1 in exchange for outstanding Company Common Shares and, from
time to time, cash for payment in lieu of fractional shares.
2.2.3 Exchange Procedures. Microsoft shall use its reasonable best
efforts to cause the Exchange Agent, as soon as practicable but in any case
not more than fifteen (15) days after the Closing Date, to mail to each
holder of record as of the Effective Time, other than to those holders of
Dissenting Shares, of a Certificate or Certificates, (i) a letter of
transmittal (the "Letter of Transmittal") (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent)
and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with a duly
executed letter of transmittal and such other documents as the Exchange
Agent shall require, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration, as adjusted,
pursuant to Section 2.1 hereof plus cash in lieu of fractional shares as
provided in Section 2.1.6. The Certificate so surrendered shall forthwith
be canceled. Notwithstanding any other provision of this Agreement, until
holders of Certificates have surrendered them for exchange as provided
herein, (i) no dividends or other distributions shall be paid with respect
to any shares represented by such Certificates and no payment for
fractional shares shall be made, and (ii) without regard to when such
Certificates are surrendered for exchange as provided herein, no interest
shall be paid on any dividends or other distributions or any payment for
fractional shares. Upon surrender of a Certificate, there shall be paid to
the holder of such Certificate the amount of any dividends or other
distributions which theretofore became payable, but which were not paid by
reason of the foregoing, with respect to the number of whole Microsoft
Common Shares represented by the certificate or certificates issued upon
such surrender. If any certificate for Microsoft Common Shares is to be
issued in a name other than that in which the Certificate surrendered in
exchange therefore is registered, it shall be a condition of such exchange
that the person requesting such exchange pay any transfer or other taxes
required by reason of the issuance of certificates for such Microsoft
Common Shares in a name other than that of the registered holder of the
Certificate surrendered, or establish to the satisfaction of the Surviving
A-3
Corporation that such tax has been paid or is not applicable. In connection
with its undertakings pursuant to this Section 2.2.3, the Exchange Agent
shall be entitled to withhold any income taxes as required by the Code.
2.2.4 No Further Ownership Rights in Company Common Stock. All Microsoft
Common Shares and cash delivered upon the surrender for exchange of Company
Common Shares in accordance with the terms hereof shall be deemed to have
been delivered in full satisfaction of all rights pertaining to such
Company Common Shares. After the Effective time there shall be no transfers
on the stock transfer books of Company of Company Common Shares. Upon the
effectiveness of the Merger, all Company Common Shares shall no longer be
outstanding and shall cease to exist, and each Certificate previously
representing any such shares shall represent only the right to receive the
form of Merger Consideration described in Section 2.1.3. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this
Article II. Certificates surrendered for exchange by any person
constituting an "affiliate" of Company for purposes of Rule 145(c) under
the Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until Microsoft receives a written agreement from such person as
provided by Section 6.6.
2.2.5 Return to Microsoft. Any Microsoft Common Shares and any cash made
available to the Exchange Agent and not exchanged for Certificates within
nine (9) months after the Effective Time and any dividends and
distributions held by the Exchange Agent for payment or delivery to the
holders of unsurrendered Certificates representing Company Common Stock and
unclaimed at the end of such nine month period shall be redelivered or
repaid by the Exchange Agent to Microsoft, after which time any holder of
Certificates who has not theretofore delivered or surrendered such
Certificates to the Exchange Agent, subject to applicable law, shall look
as a general creditor only to Microsoft for payment of the Microsoft Common
Shares, cash in lieu of fractional shares, and any such dividends or
distributions. Notwithstanding any provision of this Agreement, none of
Microsoft, the Exchange Agent, the Surviving Corporation or any other party
hereto shall be liable to any holder of Company Common Stock for any
Microsoft Common Shares, cash in lieu of fractional shares or dividends or
distributions delivered to a public official pursuant to applicable
abandoned property, escheat or similar law.
2.3 Company Options.
2.3.1 Conversion to Microsoft Options. At the Effective Time, each of
the then outstanding Company Options (as defined in Section 3.1.2) shall,
by virtue of the Merger and at the Effective Time, and without any further
action on the part of any holder thereof, be converted into an incentive
stock option or a nonstatutory option, depending on the type of Company
Option being converted, to purchase that number of Microsoft Common Shares
determined by multiplying the number of Company Common Shares subject to
such Company Option at the Effective Time by the Exchange Ratio, at an
exercise price per Microsoft Common Share equal to the exercise price per
share of such Company Option immediately prior to the Effective Time
divided by the Exchange Ratio (rounded up to the nearest whole cent) (a
"Substituted Microsoft Option"). If the foregoing calculation results in a
Substituted Microsoft Option being exercisable for a fraction of a
Microsoft Common Share, then the number of Microsoft Common Shares subject
to such option shall be rounded down to the nearest whole number of shares.
Continuous employment with Company shall be credited to the optionee for
purposes of determining the vesting of the number of Microsoft Common
Shares subject to exercise under the optionee's Substituted Microsoft
Option after the Effective Time. All vested options owned by a holder whose
employment or status as a nonemployee director with Company is terminated
on or before the Closing must be exercised within ninety (90) days of their
termination or such other period as may be provided for in the Company
Option and as set forth on Schedule 2.3.1.
2.3.2 Registration. Microsoft shall use its commercially reasonable best
efforts to cause the Microsoft Common Shares issuable upon exercise of the
Substituted Microsoft Options to be registered as of the Effective time on
a then effective Form S-8 promulgated by the SEC or to file a Form S-8
covering such options within ten (10) days of the Effective Time and shall
use its best efforts to maintain the
A-4
effectiveness of such registration statement or registration statements for
so long as such Substituted Microsoft Options remain outstanding. With
respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Exchange Act (as
defined in Section 3.1.3), Microsoft shall administer Company Options
assumed pursuant to this Section 2.3 in a manner that complies with Rule
16b-3 promulgated by the SEC under the Exchange Act, but shall have no
responsibility for such compliance by Company or its predecessors.
Microsoft shall use its commercially reasonable best efforts to give
holders of Substituted Microsoft Options notice of their new options as
soon as practicable after Effective time.
2.3.3 Incentive Stock Options. In the case of any Company Options to
which Section 421 of the Code applies by reason of Section 422 of the Code
("Incentive Stock Options"), the option exercise price, the number of
Microsoft Common Shares purchasable pursuant to such option and the terms
and conditions of exercise of such option shall be determined in order to
comply with Section 424(a) of the Code. Microsoft will make good faith
efforts to ensure, to the extent permitted by the Code and to the extent
required by and subject to the terms of any such Incentive Stock Options,
that Company Options which qualified as Incentive Stock Options prior to
the Effective Time continue to qualify as Incentive Stock Options of
Microsoft after the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Company. Except as disclosed in the
Company SEC Documents (as defined below) or in a disclosure schedule which
identifies by section number the section and subsection to which such
disclosure relates (provided, however, that Company shall be deemed to have
adequately disclosed with respect to any section or subsection any matters that
are clearly described elsewhere in such document if a reader(s) who has not
been actively involved in Company but is generally familiar with the business
software development industry can understand the applicability of such
disclosure to such non-referenced sections or subsections) and is delivered by
Company to Microsoft concurrently with the execution of this Agreement (the
"Company Disclosure Schedule"), whether or not the Company Disclosure Schedule
is referred to in a specific section or subsection and except as specifically
provided for in this Agreement or any agreement attached as an Exhibit hereto,
Company represents and warrants to Microsoft and Sub as follows:
3.1.1 Organization, Standing and Power. Each of Company and its
Subsidiaries is an entity duly organized, validly existing and in good
standing, as applicable, under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority to
own, lease and operate its properties and to carry on its businesses as now
being conducted, and is duly qualified and in good standing to do business
in each jurisdiction in which a failure to so qualify would have a Material
Adverse Effect (as hereinafter defined) on the Business Condition (as
hereinafter defined) of Company. As used in this Agreement, "Business
Condition" with respect to any entity shall mean the financial condition,
results of operations, assets, or prospects (without giving effect to the
consequences of the transactions contemplated by this Agreement) of such
entity and its Subsidiaries taken as a whole. For the purposes of this
Agreement, the term "Material Adverse Effect" means material adverse effect
other than resulting from (i) changes attributable to conditions affecting
the Company Business or the software industry generally (in the case of
Company), or the software industry generally (in the case of Microsoft),
(ii) changes in general economic, political, or regulatory conditions, or
(iii) changes attributable to the announcement or pendency of the Merger.
"Prospects" shall mean developments, facts or conditions which are known to
such entity as of the date of this Agreement and which in the ordinary
course of events would be reasonably expected to have a material effect on
future operations of the business assuming the continuation of the business
as presently conducted by such entity on a stand alone basis. "Company
Business" shall mean the business generally related to development,
licensing and sales of business management software. Company has delivered
to Microsoft complete and correct copies of the Articles of Incorporation,
Bylaws, and minutes of the board (and each committee thereof) of directors
of Company
A-5
and the comparable governing instrument and minutes of each of its
Subsidiaries, in each case, as amended to the date hereof. All Subsidiaries
of Company are identified in the Company Disclosure Schedule.
3.1.2 Capital Structure. The authorized capital stock of Company
consists of 100,000,000 Company Common Shares of which 20,266,146 are
outstanding as of November 30, 2000, 30,000,000 shares of preferred stock,
par value $0.01 per share (the "Company Preferred Stock") of which none are
authorized, designated, or outstanding as of the date hereof, and no shares
are held by Subsidiaries of Company. In addition, as of the date hereof,
1,504,459 Company Common Shares are reserved for issuance upon the exercise
of outstanding stock options ("Company Options") under the 1983 Incentive
Stock Option Plan, the 1997 Stock Incentive Plan, the Outside Directors
Stock Option Plan, the 1997 Employee Stock Purchase Plan, 1997 Non-Employee
Director Stock Option Plan of Solomon Software, Inc, Solomon Software (TLB,
Inc.) Stock Option Plan, the 1991 Employee Stock Option Plan of Smith,
Dennis & Gaylord, the Second TLB, Inc. Key Employees Stock Option Plan Free
Standing Options, FRx Software Corporation 1996 Stock Option Plan, FRx
Software Corporation 1999 Stock Option/Stock Issuance Plan, Realworld
Corporation 1997 Stock Option Plan, and other stock option plans and other
options (the "Company Stock Plans"). All outstanding Company Common Shares
are, and any Company Common Shares issued upon exercise of any Company
Options will be validly issued, fully paid, nonassessable and not subject
to any preemptive rights, or to any agreement to which Company is a party
or by which Company may be bound. Except for 3,104,818 shares of Common
Stock issuable upon the exercise of options outstanding as of November 30,
2000, there are not any options, warrants, calls, conversion rights,
commitments, agreements, contracts, understandings, restrictions,
arrangements or rights of any character to which Company or any Subsidiary
of Company is a party or by which any of them may be bound obligating
Company or any Subsidiary of Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of the capital stock of
Company or of any Subsidiary of Company or obligating Company or any
Subsidiary of Company to grant, extend or enter into any such option,
warrant, call, conversion right, commitment, agreement, contract,
understanding, restriction, arrangement or right. Company does not have
outstanding any bonds, debentures, notes or other indebtedness the holders
of which have the right to vote (or convertible or exercisable into
securities having the right to vote) with holders of Company Common Stock
on any matter ("Company Voting Debt"). Company is the owner, directly or
indirectly, of all outstanding shares of capital stock of each of its
Subsidiaries free and clear of all liens, pledges, security interests,
claims or other encumbrances and all such shares are duly authorized,
validly issued, fully paid and nonassessable. Company has never issued any
stock appreciation rights, stock performance awards, dividend equivalents,
tracking stock or other stock-based or equity-linked securities or a
similar nature.
3.1.3 Authority. Company has all requisite corporate power and authority
to enter into this Agreement and subject, in the case of this Agreement, to
approval of this Agreement by the shareholders of Company and the Company
Required Statutory Approvals (as defined below), to consummate the
transactions contemplated hereby. The execution and delivery by Company of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Company, including the unanimous approval of the Board of Directors of
Company (including the unanimous approval of the non-employee directors of
the Company so as satisfy the requirements of Section 302A.673(d) and
302A.675 of the MBCA), subject only to approval of this Agreement by the
shareholders of Company. The amendment to the Company's Articles of
Incorporation dated February 26, 1995 opting out of the Minnesota Control
Share Statute (MBCA 302A.671 and 302A.449 subd.7), was duly adopted by the
shareholders as reflected in the minutes of the shareholder meeting as of
January 26, 1995. Accordingly, the authorization, execution and delivery of
this Agreement does not, and the consummation of the transactions
contemplated hereunder will not, result in a "control share acquisition" as
defined in Section 302A.011 of the MBCA. Assuming for the purpose of this
Section that no person or entity associated or affiliated with Microsoft is
an "interested shareholder" (as such term is defined in the MBCA) of
Company who has not continuously been an interested shareholder of Company
during the four-year period preceding the Merger, Section 302A.673 of the
MBCA applicable to
A-6
a "business combination" does not, and will not, prohibit the transactions
contemplated hereunder. No other "fair price", "moratorium" or other
similar anti-take-over statute or regulation prohibits the Merger or the
other transactions contemplated by this Agreement. This Agreement has been
duly executed and delivered by Company and constitutes a valid and binding
obligation of Company enforceable in accordance with its terms, except that
such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization or other similar laws relating to enforcement of creditors'
rights generally and (ii) general equitable principles. Subject to the
satisfaction of the conditions set forth in Sections 7.1 and 7.3, the
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby will not, conflict with or result in
any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
the creation of a lien, pledge, security interest, charge or other
encumbrance on assets (any such conflict, violation, default, right, loss
or creation being referred to herein as a "Violation") pursuant to (a) any
provision of the Articles of Incorporation or Bylaws of Company or the
comparable governing instruments of any Subsidiary or (b) any loan or
credit agreement, note, bond, mortgage, indenture, contract, lease, or
other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Company or any Subsidiary of Company or their respective
properties or assets, other than, in the case of (b), any such Violation
which individually or in the aggregate would not have a Material Adverse
Effect on the Business Condition of Company. No consent, approval, order or
authorization of or registration, declaration or filing with or exemption
by (collectively "Consents"), any court, administrative agency or
commission or other governmental authority or instrumentality, whether
domestic or foreign (each a "Governmental Entity"), is required by or with
respect to Company in connection with the execution and delivery of this
Agreement or the consummation by Company of the transactions contemplated
hereby or thereby, except for Consents, if any, relating to (w) the filing
of a premerger notification report and all other required documents by
Microsoft and Company, and the expiration of all applicable waiting
periods, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and any similar required foreign antitrust filings,
(x) the filing with the Securities and Exchange Commission (the "SEC") of
the S-4, including the Proxy Statement/Prospectus (as defined in Section
3.1.5), and such reports and information as may be required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Securities Act and the rules and regulations promulgated by the SEC under
the Exchange Act or the Securities Act, and the declaration of the
effectiveness of the S-4 by the SEC, (y) such filings, authorizations,
orders and approvals as may be required under foreign laws, state
securities laws and the NASD Bylaws or "blue sky" laws, and (z) the filing
of the Merger Documents with the Secretaries of State of the States of
Minnesota and Washington (the filings and approvals referred to in clauses
(w) through (z) are collectively referred to as the "Company Required
Statutory Approvals") and except for such other Consents which if not
obtained or made would not have a Material Adverse Effect on the Business
Condition of Company.
3.1.4 SEC Documents and Financial Statements. Company has furnished or
made available to Microsoft a true and complete copy of each statement,
report, schedule, registration statement and definitive proxy or
information statement filed by Company, or any present or former
Subsidiary, with the SEC since March 5, 1997 (the "Company SEC Documents"),
which are all the documents (other than preliminary material) that Company,
or any present or former Subsidiary, was required to file with the SEC
since such date. As of their respective filing dates, the Company SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Documents,
and none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Company included in the Company SEC Documents (the "Company
Financial Statements") comply as to form in all material respects with all
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto and have been prepared in
accordance with generally accepted
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accounting principles consistently applied (except as may be indicated in
the notes thereto) and fairly present the consolidated financial position
of Company as at the dates thereof and the results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal, recurring audit adjustments not material in scope or
amount). Company currently satisfies the requirements to file on Form S-3
under the Securities Act. There has been no change in Company's accounting
policies or the methods of making accounting estimates or changes in
estimates that are material to Company Financial Statements, except as
described in the notes thereto.
3.1.5 Information Supplied. None of the information supplied or to be
supplied by Company, its auditors, attorneys, financial advisors or other
consultants or advisors for inclusion in (i) the registration statement on
Form S-4, and any amendment thereto, to be filed under the Securities Act
with the SEC by Microsoft in connection with the issuance of the Microsoft
Common Shares in or as a result of the Merger (the "S-4"), or (ii) the
proxy statement and any amendment or supplement thereto to be distributed
in connection with Company's meetings of shareholders to vote upon this
Agreement and the transactions contemplated hereby (the "Proxy Statement"
and, together with the prospectus included in the S-4, the "Proxy
Statement/Prospectus") will, in the case of the Proxy Statement and any
amendment or supplement thereto, at the time of the mailing of the Proxy
Statement and any amendment or supplement thereto, and at the time of the
meeting of shareholders of Company to vote upon this Agreement and the
transactions contemplated hereby, or, in the case of the S-4, as amended or
supplemented, at the time it becomes effective and at the time of any post-
effective amendment thereto and at the time of the meeting of shareholders
of Company, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they are
made, not misleading or necessary to correct any statement in any earlier
filing with the SEC of such Proxy Statement/Prospectus or any amendment or
supplement thereto or any earlier communication (including the Proxy
Statement/Prospectus) to shareholders of Company with respect to the
transactions contemplated by this Agreement. The Proxy Statement/Prospectus
will comply as to form in all material respects with the provisions of all
applicable laws, including the provisions of the Exchange Act and the rules
and regulations of the SEC thereunder, except that Company makes no
representation with respect to information supplied by Microsoft
specifically for inclusion therein.
3.1.6 No Defaults. Neither Company nor any Subsidiary of Company is, or
has received notice that it would be with the passage of time, in default
or violation of any term, condition or provision of (i) the Articles of
Incorporation or Bylaws of Company or any comparable governing instrument
of any Subsidiary of Company; (ii) any judgment, decree or order applicable
to Company or any Subsidiary of Company; or (iii) any loan or credit
agreement, note, bond, mortgage, indenture, contract, agreement, lease,
license or other instrument to which Company or any Subsidiary of Company
is now a party or by which it or any of its properties or assets may be
bound, except for defaults and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on the Business
Condition of Company.
3.1.7 Litigation. There is no claim, action, suit or proceeding pending
or, to the knowledge of Company, threatened, which would, if adversely
determined, individually or in the aggregate, have a Material Adverse
Effect on the Business Condition of Company, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Company having, or which, insofar as reasonably can be
foreseen, in the future could have, any such effect. There is no
investigation pending or, to the knowledge of Company, threatened against
Company, before any foreign, federal, state, municipal or other
governmental department, commission, board, bureau, agency, instrumentality
or other Government Entity. The Company Disclosure Schedule sets forth,
with respect to any such pending action, suit, proceeding, or investigation
to which Company is a party, the forum, the parties thereto, the subject
matter thereof, and the amount of damages claimed.
3.1.8 No Material Adverse Change. Since May 31, 2000, Company has
conducted its business in the ordinary course and there has not been: (i)
any Material Adverse Effect on the Business Condition of Company or any
development or combination of developments of which management of Company
has
A-8
knowledge which is reasonably likely to result in such an effect; (ii) any
damage, destruction or loss, whether or not covered by insurance, having a
Material Adverse Effect on the Business Condition of Company; (iii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of
Company; (iv) any increase or change in the compensation or benefits
payable or to become payable by Company or any Subsidiary to any of their
employees, except in the ordinary course of business consistent with past
practice; (v) any acquisition or sale of a material amount of property of
Company, except in the ordinary course of business; (vi) any increase or
modification in any bonus, pension, insurance or other employee benefit
plan for, or with any of its employees; or (vii) the granting of stock
options, restricted stock awards, stock bonuses, stock appreciation rights
and similar equity based awards other than stock options granted in
connection with the hiring of new employees with the number of shares
having been granted in numbers consistent with Company's past practices and
which will not result in a compensation charge against earnings or the loss
of deductions for federal or state income tax purposes.
3.1.9 Absence of Undisclosed Liabilities. Company has no liabilities or
obligations (whether absolute, accrued or contingent) except (i)
liabilities, obligations or contingencies ("Liabilities") that are accrued
or reserved against in the consolidated balance sheet of Company as of May
31, 2000 or reflected in the notes thereto; or (ii) additional Liabilities
reserved against since May 31, 2000 that (x) have arisen in the ordinary
course of business; and (y) are accrued or reserved against on the books
and records of Company; or (iii) additional Liabilities that have not
arisen in the ordinary course of business, but which Liabilities would not
have a Material Adverse Effect on the Business Condition of Company.
3.1.10 No Violations. The Company Business is not being conducted in
violation of, (whether or not a violation has been asserted), any
applicable law, rule or regulation, judgment, decree or order of any
Governmental Entity which could cause Liability, except for any violations
or practices, which, individually or in the aggregate, have not had and
will not have a Material Adverse Effect on the Business Condition of
Company.
3.1.11 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(i) result in any payment (including, without limitation, severance,
unemployment compensation, parachute payment, bonus or otherwise) becoming
due to any director, employee or independent contractor of Company, from
Company under any Plan (as hereinafter defined), agreement or otherwise,
(ii) materially increase any benefits otherwise payable under any Plan or
agreement, or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
3.1.12 Employees. Company does not have any written contract of
employment or other employment agreement, including oral agreements, with
any of its employees that is not terminable at will by Company. Company has
not made any representations to members of its work force or their
representatives that is inconsistent with the at-will employment
relationship. Company is not a party to any past or pending, or to
Company's knowledge, threatened, labor dispute, organizing drive, union
election or demand for recognition. Company has complied in all material
respects with all applicable federal, state, and local laws, ordinances,
rules and regulations and requirements relating to the employment of labor,
including but not limited to the provisions thereof relating to wages,
hours, collective bargaining, payment of social security, unemployment and
withholding taxes, worker health and safety, plant closing and mass layoffs
and ensuring equality of opportunity for employment and advancement of
minorities and women. There are not claims pending, or to Company's
knowledge, threatened to be brought, in any court or administrative agency
by any former or current Company employees for compensation, pending
severance benefits, vacation time, vacation pay or pension benefits, or any
other claim pending from any current or former employee or any other person
or governmental agency arising out of Company's status as employer, whether
in the form of claims for employment discrimination, harassment, unfair
labor practices, grievances, worker health or safety, wrongful discharge or
otherwise. Company has not terminated the employment of any employee within
the period of ninety (90) days prior to the date of this
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Agreement. Company has no reason to believe that the requisite percentages
of employees set forth in Section 7.2.6 will not accept offer letters or
employment continuation letters.
3.1.13 Employee Benefit Plans. Each material employee benefit plan
("Plan") covering active, former or retired employees of Company is listed
in the Company Disclosure Schedule. Company has provided to Microsoft a
copy of each Plan document (or, if there is no Plan document, a written
description), and where applicable, any related trust agreement, annuity or
insurance contract and, where applicable, the most recent annual reports
(Form 5500) filed with the IRS. To the extent applicable, each Plan
complies, in all material respects, with the requirements of the Employee
Retirement Income Security Act of 1974 as amended ("ERISA"), and the Code,
and any Plan intended to be qualified under Section 401(a) of the Code has
been determined by the IRS to be so qualified and has remained tax-
qualified to this date and its related trust is tax-exempt and has been so
since its creation. No Plan is covered by Title IV of ERISA or Section 412
of the Code. No material "prohibited transaction," as defined in ERISA
Section 406 or Code Section 4975 has occurred with respect to any Plan.
Each Plan has been maintained and administered in material compliance with
its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the
Code, which are applicable to such Plans. There are no pending or
reasonably anticipated material claims against or otherwise involving any
of the Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Plan activities) has been
brought against or with respect to any Plan. All material contributions,
reserves or premium payments to each Plan to the date hereof have been made
or properly accrued. Company has not incurred any liability under Subtitle
C or D of Title IV of ERISA with respect to any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by Company, or any entity which is considered one employer with
Company under Section 4001 of ERISA. Company has not incurred, and will not
incur as a result of the transactions contemplated by this Agreement, any
withdrawal liability under Subtitle E of Title IV of ERISA with respect to
any "multiemployer plan," within the meaning of Section 4001(a)(3) of
ERISA. Company has no obligation for retiree health or life benefits under
any Plan, except as set forth on the Company Disclosure Schedule or as
required by state law or to avoid excise taxes under Section 4980(B) of the
Code. There are no restrictions on the rights of Company to amend or
terminate any Plan without incurring any liability thereunder. Company has
not engaged in, nor is it a successor or parent corporation to an entity
that has engaged in, a transaction described in ERISA Section 4069. There
have been no amendments to, written interpretation of, or announcement
(whether or not written) by Company relating to, or change in employee
participation or coverage under, any Plan that would increase materially
the expense of maintaining such Plan above the level of expense incurred in
respect thereof for the year ended May 31, 2000. No tax under Section 4980B
of the Code has been incurred in respect of any Plan that is a group health
plan, as defined in Section 5000(b)(1) of the Code.
3.1.14 Real Property. All real property owned by Company ("Owned Real
Property") is listed in the Company Disclosure Schedule. Company has good
and marketable title, free and clear of all title defects, security
interests, pledges, options, claims, liens, encumbrances, and restrictions
of any nature whatsoever (including, without limitation, leases,
conditional sale contracts, collateral security arrangements, and other
title or interest-retaining agreements) in fee simple absolute to all Owned
Real Property. There are no condemnation proceedings pending or, to the
Knowledge of Company, threatened in respect to the Owned Real Property.
There are no leases, subleases, licenses, occupancy agreements or other
agreements, oral or written, under which Company is the lessor of any
portion of the Owned Real Property. All Owned Real Property used in the
operation of the Company Business is in satisfactory condition and repair
for the requirements of the Company Business as presently conducted.
3.1.15 Major Contracts. Except as otherwise disclosed in the Company
Disclosure Schedule, Company is not a party to or subject to:
(a) Any union contract, or any employment contract or arrangement
providing for future compensation, written or oral, with any officer,
consultant, director or employee which (i) exceeds
A-10
$150,000 per annum, or (ii) is not terminable by it or its Subsidiary
on 30 days notice or less without penalty or obligation to make
payments related to such termination;
(b) Any joint venture contract or arrangement or any other agreement
which has involved or is expected to involve a sharing of revenues of
$500,000 per annum or more to other persons;
(c) Any lease for real or personal property in which the amount of
payments which Company is required to make on an annual basis exceeds
$250,000 and which has not been filed as an exhibit to the Company SEC
Documents;
(d) Any material agreement, license, franchise, permit, indenture or
authorization which has not been terminated or performed in its
entirety and not renewed which may be, by its terms, terminated,
impaired or adversely affected by reason of the execution of this
Agreement, the closing of the Merger, or the consummation of the
transactions contemplated hereby; or
(e) Any contract containing covenants purporting to materially limit
Company's freedom or that of any Subsidiary of Company to compete in
any line of business in any geographic area.
All contracts, plans, arrangements, agreements, leases, licenses,
franchises, permits indentures, authorizations, instruments and other
commitments listed in the Company Disclosure Schedule pursuant to this
Section 3.1.15 are valid and in full force and effect and Company has not,
nor to the knowledge of Company has any other party thereto, breached any
material provisions of, or is in default in any material respect under the
terms thereof.
3.1.16 Taxes. Company has timely filed (or caused to be filed) all
federal, state, local and foreign tax returns, reports, information
statements and similar statements ("Returns") required to be filed by each
of them, which Returns are true, correct and complete in all material
respects, and paid all taxes required to be paid as shown on such Returns.
All material taxes required to be paid in respect of the periods covered by
such Returns ("Return Periods") by Company have either been paid or fully
accrued on the books of Company. Company has fully accrued all material
unpaid taxes in respect of all periods (or the portion of any such periods)
subsequent to the Return Periods. Company has not taken any position on any
tax return or filing which is or would be subject to penalties under
Section 6662 of the Code. Company has not requested or been granted any
extension of time to file any Return. There is no material difference
between the amounts of the book basis and the tax basis of any assets of
Company that is not reflected in an appropriate accrual of deferred tax
liability on the books of Company. All material elections with respect to
taxes made by or with respect to Company are set forth on the Company
Disclosure Schedule. Company has provided Microsoft true and correct copies
of all Returns, work papers, correspondence with any taxing authority, tax
planning memoranda and other tax data.
No deficiencies or adjustments for any tax have been claimed, proposed,
assessed or, to the Knowledge of Company, threatened. No claim has ever
been made in writing by an authority in a jurisdiction where Company does
not file Returns that Company is or may be subject to taxation by that
jurisdiction. The Company Disclosure Schedule accurately sets forth the
years for which Company's federal and state income tax returns,
respectively, have been audited and any years which are the subject of a
pending audit by the Internal Revenue Service ("IRS") and the applicable
state agencies. Except as so disclosed, Company is not subject to any
pending or threatened tax audit or examination and Company has not waived
or entered in to any other agreement with respect to any statute of
limitation with respect to its taxes or Returns. The Company Financial
Statements contain adequate accruals for all unpaid taxes. For the purposes
of this Agreement, the terms "tax" and "taxes" shall include all federal,
state, local and foreign taxes, assessments, duties, tariffs, registration
fees, and other governmental charges including without limitation all
income, franchise, property, production, sales, use, payroll, license,
windfall profits, severance, withholding, excise, gross receipts and other
taxes, as well as any interest, additions or penalties relating thereto and
any interest in respect of such additions or penalties. The Company
Disclosure Schedule sets forth as of the date hereof a list of all joint
ventures, partnerships, limited liability companies or other business
entities (within the meaning of Treas. Reg. Section 701.7701-3) in
A-11
which the Company has an interest. No consent or agreement has been made
under Section 341(f) of the Code by or on behalf of Company or any
predecessor thereof. Company has no interests in real estate, which would
be subject to any real estate excise, transfer or other similar tax as a
result of the consummation of the transactions contemplated by this
Agreement.
There are no liens for taxes upon the assets of Company except for taxes
that are not yet payable. Company has withheld all material taxes required
to be withheld in respect of wages, salaries and other payments to all
employees, officers and directors and timely paid all such amounts withheld
to the proper taxing authority. Company is not party to any tax sharing or
tax allocation agreements and Company has not been a member of any
affiliated group of corporations within the meaning of Section 1504 of the
Code other than the group of which Company is currently the common parent.
Company does not have and has not had a "permanent establishment" (as
defined in any applicable income tax treaty) in any country other than the
United States. There are no outstanding rulings or requests for rulings
from any taxing authority with respect to Company. Company does not have an
"overall foreign loss" as defined in Section 904(f) of the Code. The use of
any net operating loss carryover, net capital loss carryover, unused
investment credit or other credit carryover of the Company is not subject
to any limitation pursuant to Section 382 of the Code or otherwise. Company
is not and has never been a real property holding corporation within the
meaning of Section 897 of the Code.
Company has not participated in, or cooperated with, an international
boycott within the meaning of Section 999 of the Code. Company is not
required to include in income any adjustment pursuant to Section 481(a) of
the Code (or similar provisions of other law or regulations) in its current
or in any future taxable period, by reason of a change in accounting
method; nor does Company have any knowledge that the IRS (or other taxing
authority) has proposed, or is considering, any such change in accounting
method. Company will not be obligated to make a payment, in connection with
the transactions contemplated hereunder or otherwise, that would be a
"parachute payment" as such term is defined in Section 280G of the Code
without regard to whether such payment is reasonable compensation for
services performed or to be performed in the future; provided, however,
that for purposes of the foregoing, any payments made in connection with
the offer letters to employees and continuing employment with Microsoft
from and after the Closing Date pursuant to Section 4.9 hereof and Exhibits
4.9(B) (i) and (ii) hereto shall not be taken into account. Company will
not be obligated to pay any excise taxes or similar taxes imposed on any
employee or former employee of, or individual providing services to,
Company under Section 4999 of the Code or any similar provisions as a
result of the consummation of the transactions contemplated hereby, either
alone or in connection with any other event. None of the assets of Company
is property that is required to be treated as owned by any other person
pursuant to the "safe harbor lease" provisions of former Section 168(f)(8)
of the Internal Revenue Code of 1954 as amended and in effect immediately
prior to the enactment of the Tax Reform Act of 1986 and none of the assets
of Company is "tax exempt use property" within the meaning of Section
168(h) of the Code. None of the assets of Company secures any debt the
interest on which is tax exempt under Section 103 of the Code.
Company has not constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two (2) years prior to
the date of this Agreement, or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions
contemplated hereunder.
3.1.17 Interests of Officers. None of Company's officers or directors
has, nor to the knowledge of Company does any officer or director of any
Subsidiary have, any material interest in any property, real or personal,
tangible or intangible, including inventions, copyrights, trademarks or
trade names, used in or pertaining to the Company Business, or any
supplier, distributor or customer of Company, except, in the case of
Company, for the normal rights of a shareholder, and except for rights
under existing employee benefit plans.
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3.1.18 Technology and Intellectual Property Rights.
(a) The "Company Intellectual Property" consists of the following:
(i) all patents, trademarks, trade names, service marks, mask
works, domain names, copyrights and any renewal rights, applications
and registrations for any of the foregoing, and all trade dress, net
lists, schematics, technology, manufacturing processes, supplier
lists, trade secrets, know-how, moral rights, computer software
programs or applications (in both source and object code form) owned
by Company;
(ii) all goodwill associated with trademarks, trade names service
marks and trade dress owned by Company;
(iii) all software and firmware listings, and updated software
source code, and complete system build software and instructions
related to all software described herein owned by Company;
(iv) all documents, records and files relating to design, end
user documentation, manufacturing, quality control, sales, marketing
or customer support for all intellectual property described herein
owned by Company;
(v) all other tangible or intangible proprietary information and
materials owned by Company; and
(vi) all license and other rights held by Company in any third
party product, intellectual property, proprietary or personal
rights, documentation, or tangible or intangible property, including
without limitation the types of intellectual property and tangible
and intangible proprietary information described in (i) through (v)
above;
that are being, and/or have been, used, or are currently under
development for use, in the business of Company as it has been, is
currently or is currently anticipated to be (up to the Closing),
conducted. Company Intellectual Property described in clauses (i) to
(v) above is referred to herein as "Company Owned Intellectual
Property" and the Company Intellectual Property described in clause
(vi) above is referred to herein as "Company Licensed Intellectual
Property." Unless otherwise noted, all references to "Company
Intellectual Property" shall refer to both Company Owned Intellectual
Property and Company Licensed Intellectual Property.
(b) The Company Disclosure Schedule lists: (i) all patents,
registered copyrights, mask works, trademarks, service marks, trade
dress, any renewal rights for any of the foregoing, and any
applications and registrations for any of the foregoing, that are
included in the Company Owned Intellectual Property; (ii) all hardware
products and tools, software products and tools, and services that are
currently published, offered, or under development by Company; (iii)
all licenses, sublicenses and other agreements to which Company is a
party and pursuant to which any other person is authorized to have
access to or use the Company Owned Intellectual Property or exercise
any other right with regard thereto (except standard form, unmodified
end user license agreements for Company's commercially distributed
products, entered into between Company and the end users of Company
products); (iv) all Company Licensed Intellectual Property (other than
license agreements for standard "shrink wrapped, off the shelf,"
commercially available, third party products used by the Company but
including any software tools or "open source" licenses); and (v) any
obligations of exclusivity, noncompetition, nonsolicitation, right of
first refusal or first negotiation to which Company is subject.
(c) The Company Intellectual Property consists solely of items and
rights that are either: (i) owned by Company, (ii) in the public
domain, or (iii) rightfully used and authorized for use by Company and
its successors pursuant to a valid license or other agreement. Company
has all rights in the Company Intellectual Property reasonably
necessary to carry out Company's current and anticipated future (up to
the Closing) activities and has or had all rights in the Company
Intellectual
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Property reasonably necessary to carry out Company's former activities,
including without limitation, if necessary to carry out such
activities, rights to make, use, exclude others from using, reproduce,
modify, adapt, create derivative works based on, translate, distribute
(directly and indirectly), transmit, display and perform publicly,
license, rent, lease, assign, and sell the Company Intellectual
Property in all geographic locations and fields of use, and to
sublicense any or all such rights to third parties, including the right
to grant further sublicenses. All software and firmware listings that
are part of the Company Owned Intellectual Property are adequately
commented in accordance with current software industry standards.
(d) Company is not, nor as a result of the execution or delivery of
this Agreement, or performance of Company's obligations hereunder, will
Company be, in violation of any license, sublicense or other agreement
relating to the Company Intellectual Property to which Company is a
party or otherwise bound. Except pursuant to the terms of the
agreements listed in the Company Disclosure Schedule, Company is not
obligated to provide any consideration (whether financial or otherwise)
to any third party, nor is any third party otherwise entitled to any
consideration, with respect to any exercise of rights by Company or its
successors in the Company Intellectual Property.
(e) The use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any Company
Owned Intellectual Property or any other authorized exercise of rights
in or to the Company Owned Intellectual Property by Company or its
licensees does not and will not infringe any copyright, patent, trade
secret, trademark, service mark, trade name, firm name, logo, trade
dress, mask work, moral right, other intellectual property right, right
of privacy, right of publicity or right in personal or other data of
any person. No claims (i) challenging the validity, effectiveness, or
ownership by Company of any of the Company Owned Intellectual Property,
or (ii) to the effect that the use, reproduction, modification,
manufacturing, distribution, licensing, sublicensing, sale or any other
exercise of rights in any Company Owned Intellectual Property by
Company or its licensees infringes, or will infringe on, any
intellectual property or other proprietary or personal right of any
person, have been asserted or, to the knowledge of Company, are
threatened by any person nor, to the knowledge of Company, are there
any valid grounds for any bona fide claim of any such kind. All granted
or issued patents and mask works and all registered trademarks listed
on the Company Disclosure Schedule and all copyright registrations held
by Company are valid, enforceable and subsisting. To the knowledge of
Company, there is no unauthorized use, infringement or misappropriation
of any of the Company Owned Intellectual Property by any third party,
employee or former employee.
(f) No parties other than Company possess any current or contingent
rights to any source code that is part of the Company Owned
Intellectual Property (including, without limitation, through any
escrow account).
(g) The Company Disclosure Schedule lists all parties who have
created any material portion of, or otherwise have any rights in or to,
the Company Owned Intellectual Property other than employees of Company
whose work product was created by them entirely within the scope of
their employment by Company and constitutes works made for hire owned
by Company. Company has secured from all parties who have created any
material portion of, or otherwise have any rights in or to, the Company
Owned Intellectual Property valid and enforceable written assignments
or licenses of any such work or other rights to Company and has
provided true and complete copies of such assignments or licenses to
Microsoft.
(h) The Company Disclosure Schedule includes a true and complete
list of support and maintenance agreements relating to Company Owned
Intellectual Property or to which Company is a party as to Company
Licensed Intellectual Property including the identity of the parties
and the respective dates of such agreements and remedies for their
breach.
(i) Company has obtained legally binding written agreements from all
employees and third parties with whom Company has shared confidential
proprietary information (i) of Company, or
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(ii) received from others which Company is obligated to treat as
confidential, which agreements require such employees and third parties
to keep such information confidential.
(j) Company has obtained any and all necessary consents from
consumers with regard to the Company's collection and dissemination of
personal consumer information in accordance with the privacy policy
published on any website owned and/or operated by or on behalf of
Company. Company's practices regarding the collection and use of
consumer personal information are and have been in accordance with such
privacy policies.
(k) The Company Owned Intellectual Property is, and any products
manufactured and commercially released by Company or currently under
development, are fully Year 2000 Compliant in all material respects and
will not cease to be fully Year 2000 Compliant in any material respect
at any time during or after the calendar year 2000. To the best of
Company's knowledge, the Company Licensed Intellectual Property is
fully Year 2000 Compliant in all material respects and will not cease
to be fully Year 2000 Compliant in any material respect at any time
during or after the calendar year 2000. Schedule 3.1.5(k) sets forth
the tests, inquiries and other activities undertaken by Company up to
Closing, with respect to the Year 2000 Compliant nature of any and all
Company Licensed Intellectual Property. For the purposes of this
Agreement, "Year 2000 Compliant" means that neither the performance nor
the functionality of the applicable Company Intellectual Property or
applicable product has been or will be materially affected by dates
prior to, during or after the calendar year 2000 AD and in particular
(but without limitation):
(i) such Company Intellectual Property or product accurately
receives, provides and processes, and will accurately receive,
provide and process four-digit year date/time data (including
calculating, comparing and sequencing) from, into and between the
twentieth and twenty-first centuries, including calendar years 1999,
2000 and 2001;
(ii) such Company Intellectual Property or product will not
malfunction, cease to function, provide invalid or incorrect results
or cause any interruption in the operation of the business of
Company as a result of any four-digit year date/time data;
(iii) date-based functionality of such Company Intellectual
Property or product behaves and will continue to behave consistently
for dates prior to, during and after the year 2000;
(iv) in all interfaces and data storage of such Company
Intellectual Property or product, the century in any date is and
will be specified either explicitly or by unambiguous algorithms or
inferencing rules; and
(v) the year 2000 was and will continue to be recognized as a
leap year by such Company Intellectual Property or product.
3.1.19 Material Relations. To Company's knowledge, none of the parties
to any of the major contracts identified in the Company Disclosure Schedule
pursuant to Section 3.1.15 have terminated, or in any way expressed an
intent to materially reduce or terminate the amount of its business with
Company in the future.
3.1.20 Opinion of Financial Advisor. Company has received the opinion of
Goldman, Sachs & Co., dated the date hereof, to the effect that, as of such
date and based upon and subject to the matters and assumptions set forth
therein, the Exchange Ratio is fair, from a financial point of view, to
Company's shareholders.
3.1.21 Vote Required. The affirmative vote of the holders of a majority
of the outstanding Company Common Shares is the only vote of the holders of
Company's capital stock necessary to approve this Agreement and the
consummation of the transactions contemplated hereby.
3.1.22 Brokers and Finders. Other than Goldman, Sachs & Co. in
accordance with the terms of its engagement letter, a copy of which has
previously been provided to Microsoft, none of Company nor any
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of its directors, officers or employees has employed any broker or finder
or incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions
contemplated by this Agreement.
3.1.23 Change of Control. With regard to any options, stock, restricted
stock, stock bonus or other awards granted under the Company Stock Plans
which are not exercisable or vested prior to the Effective Time, Company
has not taken any action to make such options or awards exercisable or
vested by reason of the Merger. Company has taken all action necessary
relating to the Company Stock Plans to provide that the occurrence of the
transactions contemplated by this Agreement shall not entitle participants
under such plans to a cash-out or acceleration of the stock options,
restricted stock, stock bonus or other awards granted to them thereunder.
3.1.24 Leases in Effect. All real property leases and subleases as to
which Company or any Subsidiary is a party and any amendments or
modifications thereof which have been filed as exhibits to the Company SEC
Documents or are listed on the Company Disclosure Schedule pursuant to
Section 3.1.15(c) (each a "Lease" and collectively, the "Leases") are
valid, in full force and effect, enforceable, and there are no existing
material defaults on the part of Company, and Company has not received nor
given notice of default or claimed default with respect to any Lease, nor
is there any event that with notice or lapse of time, or both, would
constitute a default thereunder. No consent is required from any party
under any Lease in connection with the completion of the transactions
contemplated by this Agreement, and Company has not received notice that
any party to any Lease intends to cancel, terminate, or refuse to renew the
same or to exercise any option or other right thereunder, except where the
failure to receive such consent, or where such cancellation, termination or
refusal, would not have a Material Adverse Effect on Company's Business
Condition.
3.1.25 Environmental.
(a) There has not been a discharge or release on any real property
owned or leased by Company (the "Real Property") of any Hazardous
Material (as defined below) in violation of any federal, state or local
statute, regulation, rule or order applicable to health, safety and the
environment, including without limitation, contamination of soil,
groundwater or the environment, generation, handling, storage,
transportation or disposal of Hazardous Materials or exposure to
Hazardous Materials ("Environmental Laws"), except for those that would
not, individually or in the aggregate have a material adverse effect on
Company;
(b) No Hazardous Material has been used by Company in the operation
of Company's business in amounts that would violate any Environmental
Laws;
(c) Company has not received from any Governmental Entity or third
party any written request for information, notice of claim, demand
letter, or other notification, notice or information that Company is or
may be potentially subject to or responsible for any investigation or
clean-up or other remediation of Hazardous Material present on any Real
Property;
(d) Company does not have, has not undertaken and is not aware of
any environmental investigations, studies, audits, tests, reviews, or
other analyses, the purpose of which was to discover, identify, or
otherwise characterize the condition of the soil, groundwater, air, or
presence of asbestos at any of the Real Property sites;
(e) To the Knowledge of Company there is no asbestos present in any
Real Property presently owned or operated by Company. No asbestos has
been removed from any Real Property while such Real Property was owned
or operated by Company; and
(f) To the Knowledge of Company there are no underground storage
tanks on, in or under any of the Real Property. No underground storage
tanks have been closed or removed from any Real Property while such
Real Property was owned or operated by Company.
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"Hazardous Material" means any substance (i) that is a "hazardous
waste" or "hazardous substance" under any federal, state or local
statute, regulation, rule, or order, (ii) that is toxic, explosive,
corrosive, flammable, infectious, radioactive, or otherwise hazardous
and is regulated by any Governmental Entity, (iii) the presence of
which on any of the Real Property causes or threatens to cause a
nuisance on any of the Real Property or to adjacent properties or poses
or threatens to pose a hazard to the health or safety of persons on or
about any of the Real Property, or (iv) the presence of which on
adjacent properties could constitute a trespass by Company or the then
current owner(s) of any of the Real Property.
3.1.26 Certain Payments. Neither Company nor to the Knowledge of
Company, any person or other entity acting on behalf of Company has,
directly or indirectly, on behalf of or with respect to Company: (i) made
an unreported political contribution, (ii) made or received any payment
which was not legal to make or receive, (iii) engaged in any transaction or
made or received any payment which was not properly recorded on the books
of Company, (iv) created or used any "off-book" bank or cash account or
"slush fund," or (v) engaged in any conduct constituting a violation of the
Foreign Corrupt Practices Act of 1977.
3.1.27 Disclosure. No representation or warranty made by Company in this
Agreement, nor any document, written information, statement, financial
statement, certificate or exhibit prepared and furnished or to be prepared
and furnished by Company or its representatives pursuant hereto or in
connection with the transactions contemplated hereby, when taken together,
contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
3.1.28 Reliance. The foregoing representations and warranties are made
by Company with the knowledge and expectation that Microsoft and Sub are
placing reliance thereon.
3.2 Representations and Warranties of Microsoft and Sub. Except as disclosed
in the Microsoft SEC Documents (as defined below) or in a disclosure schedule
which identifies by section number the section and subsection to which such
disclosure relates (provided, however, that Microsoft shall be deemed to have
adequately disclosed with respect to any section or subsection any matters that
are clearly described elsewhere in such document if a reader(s) who has not
been actively involved in Microsoft but is generally familiar with the business
software development industry can understand the applicability of such
disclosure to such non-referenced sections or subsections) and is delivered by
Microsoft to Company concurrently with the execution of this Agreement (the
"Microsoft Disclosure Schedule"), whether or not the Microsoft Disclosure
Schedule is referred to in a specific section or subsection and except as
specifically provided for in this Agreement or any agreement attached as an
Exhibit hereto, Microsoft and Sub represent and warrant to Company as follows:
3.2.1 Organization; Standing and Power. Each of Microsoft and Sub is a
corporation duly organized and validly existing under the laws of the State
of Washington. Each of Microsoft and Sub has all requisite power and
authority to own, lease and operate its properties and to carry on its
businesses as now being conducted, and is duly qualified to do business in
each jurisdiction in which a failure to so qualify would have a Material
Adverse Effect on the Business Condition of Microsoft.
3.2.2 Authority. Microsoft and Sub have all requisite corporate power
and authority to enter into this Agreement, and subject to the Microsoft
Required Statutory Approvals (as defined below), to consummate the
transactions contemplated hereby. The execution and delivery by Microsoft
of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Microsoft, including the approval of the Board of Directors of
Microsoft. This Agreement has been duly executed and delivered by Microsoft
and Sub and constitutes a valid and binding obligation of Microsoft and Sub
enforceable in accordance with its terms. Subject to satisfaction of the
conditions set forth in Sections 7.1 and 7.2, the execution and delivery of
this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any Violation (a)
of any provision of the Restated Articles of Incorporation or Bylaws of
Microsoft or Sub or (b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, lease, or
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other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Microsoft or Sub or their respective properties or assets,
other than, in the case of (b), any such Violation which individually or in
the aggregate would not have a Material Adverse Effect on the Business
Condition of Microsoft. No Consent is required by or with respect to
Microsoft or Sub in connection with the execution and delivery of this
Agreement by Microsoft or Sub or the consummation by Microsoft and Sub of
the transactions contemplated hereby or thereby, except for (i) the filing
of a premerger notification report by Microsoft and Company, and the
expiration of all applicable waiting periods, under the HSR Act and any
similar foreign antitrust filings, (ii) the filing of the Proxy
Statement/Prospectus with the SEC pursuant to the Exchange Act and the
Securities Act, and the declaration of the effectiveness thereof by the SEC
and compliance with various state securities or "blue sky" laws, and (iii)
the filing of the Merger Documents with the Secretaries of State of the
States of Minnesota and Washington (the filings and approvals referred to
in clauses (i) through (iii) are collectively referred to as the "Microsoft
Required Statutory Approvals" and together with the Company Required
Statutory Approvals, the "Required Statutory Approvals") and except for
such other Consents which if not obtained or made would not have a Material
Adverse Effect on the value of the Microsoft Common Shares and would not
have a Material Adverse Effect on the Business Condition of Microsoft.
3.2.3 Capital Structure. The authorized capital stock of Microsoft
consists of 12,000,000,000 Microsoft Common Shares of which 5,332,337,924
were outstanding as of October 31, 2000, all of which are duly authorized,
validly issued, fully paid and nonassessable and free of any preemptive
rights in respect thereof, and 100,000,000 shares of preferred stock, par
value $0.01 per share (the "Microsoft Preferred Stock") none of which are
outstanding, and no shares are held by Subsidiaries of Microsoft. In
addition, as of October 31, 2000, there are 680,315,818 Microsoft Common
Shares are reserved for issuance upon the exercise of outstanding stock
options ("Microsoft Options") under the Microsoft 1991 Stock Option Plan.
The authorized capital stock of Sub consists of 10,000 shares of common
stock, par value $.01 per share, all of which are duly authorized, validly
issued, fully paid and nonassessable and free of any preemptive rights in
respect thereof and all of which are owned by Microsoft. The Microsoft
Common Shares to be issued pursuant to the Merger in accordance with
Section 2.1.3 (i) will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute,
Microsoft's Restated Articles of Incorporation or Bylaws or any agreement
to which Microsoft is a party or is bound and (ii) will, when issued, be
registered under the Securities Act and the Exchange Act and registered or
exempt from registration under applicable blue sky laws.
3.2.4 SEC Documents and Financial Statements. Microsoft has furnished or
made available to Company a true and complete copy of each statement,
report, schedule, registration statement and definitive proxy or
information statement filed by Microsoft with the SEC since June 30, 2000
(the "Microsoft SEC Documents"), which are all the documents (other than
preliminary material) that Microsoft was required to file with the SEC
since such date. As of their respective filing dates, the Microsoft SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Microsoft SEC
Documents, and none of the Microsoft SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Microsoft included in the Microsoft
SEC Documents (the "Microsoft Financial Statements") comply as to form in
all material respects with all applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto and
have been prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of
Microsoft and its Subsidiaries as at the dates thereof and the results of
their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal, recurring audit adjustments not
material in scope or amount). There has been no change in Microsoft's
accounting policies or the methods of making accounting estimates or
changes in estimates that are material to Microsoft Financial Statements or
estimates except as described in the notes thereto.
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3.2.5 Information Supplied. None of the information supplied or to be
supplied by Microsoft or its Subsidiaries, auditors, attorneys, financial
advisors, other consultants or advisors or Sub for inclusion in the S-4 or
the Proxy Statement/Prospectus, will, in the case of the Proxy Statement
and any amendment or supplement thereto, at the time of the mailing of the
Proxy Statement and any amendment or supplement thereto, and at the time of
any meeting of shareholders of Company to vote upon this Agreement and the
transactions contemplated hereby, or in the case of the S-4, as amended or
supplemented, at the time it becomes effective and at the time of any post-
effective amendment thereto contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading or necessary to correct any statement
in any earlier filing with the SEC of such Proxy Statement/Prospectus or
any amendment or supplement thereto or any earlier communication (including
the Proxy Statement/Prospectus) to shareholders of Company with respect to
the transactions contemplated by this Agreement. The S-4 and the Proxy
Statement/Prospectus will comply as to form in all material respects with
the provisions of all applicable laws including the provisions of the
Securities Act and the Exchange Act and the rules and regulations of the
SEC thereunder, except that no representation is made by Microsoft with
respect to information supplied by Company specifically for inclusion
therein.
3.2.6 No Defaults. Microsoft has not received notice that it would be
with the passage of time, in default or violation of any term, condition or
provision of (i) the Restated Articles of Incorporation or Bylaws of
Microsoft; (ii) any judgment, decree or order applicable to Microsoft; or
(iii) any loan or credit agreement, note, bond, mortgage, indenture,
contract, agreement, lease, license or other instrument to which Microsoft
is now a party or by which it or any of its properties or assets may be
bound, except for defaults and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on the Business
Condition of Microsoft.
3.2.7 Absence of Certain Changes or Events. Since July 1, 2000, except
as contemplated by or as disclosed in this Agreement, as set forth in the
Microsoft Disclosure Schedule or as disclosed in any Microsoft SEC
Documents filed since July 1, 2000, Microsoft and its Subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been any
Material Adverse Effect on the Business Condition of Microsoft.
3.2.8 Absence of Undisclosed Liabilities. Microsoft and its
Subsidiaries, taken as a whole, have no liabilities or obligations (whether
absolute, accrued or contingent) except (i) Liabilities that are accrued or
reserved against in the consolidated balance sheet of Microsoft and its
Subsidiaries as of June 30, 2000 or reflected in the notes thereto or
disclosed in the financial statements filed as a part of the Microsoft SEC
Documents, (ii) Liabilities that would not have a Material Adverse Effect
on the Business Condition of Microsoft, or (iii) additional Liabilities
reserved against since July 1, 2000 that (x) have arisen in the ordinary
course of business; and (y) are accrued or reserved against on the books
and records of Microsoft and its Subsidiaries.
3.2.9 No Vote Required. No vote of the shareholders of Microsoft is
required by law, Microsoft's Restated Articles of Incorporation or Bylaws
or otherwise in order for Microsoft and Sub to consummate the Merger and
the transactions contemplated hereby.
3.2.10 Brokers and Finders. None of Microsoft or any of its respective
directors, officers or employees has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions or similar payments in connection with the transactions
contemplated by this Agreement.
3.2.11 Interim Operation of Sub. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as
contemplated hereby.
3.2.12 Disclosure. No representation or warranty made by Microsoft or
Sub, nor any document, written information, statement, financial statement,
certificate or exhibit prepared and furnished or to be
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prepared and furnished by Microsoft or its representatives pursuant hereto
or in connection with the transaction contemplated hereby, when taken
together, contains any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements or facts contained
herein or therein not misleading in light of the circumstances under which
they were furnished.
3.2.13 Reliance. The foregoing representations and warranties are made
by Microsoft with the knowledge and expectation that Company is placing
reliance thereon.
ARTICLE IV
COVENANTS OF COMPANY
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Company
agrees (except as expressly contemplated by this Agreement, as specifically
permitted by the Company Disclosure Schedule or with Microsoft's prior written
consent, which shall not be unreasonably withheld) that:
4.1 Conduct of Business.
4.1.1 Ordinary Course. Company shall carry on its business in the usual,
regular and ordinary course in the same manner as heretofore conducted and,
to the extent consistent with such businesses, use all reasonable efforts
consistent with past practice and policies to preserve intact their present
business organizations, keep available the services of their present
officers, consultants, and employees and preserve their relationships with
customers, suppliers, distributors and others having business dealings with
them. Company shall promptly notify Microsoft of any event or occurrence or
emergency not in the ordinary course of business, of Company, and material
and adverse to the Business Condition of Company. Company shall not:
(a) accelerate, amend or change the period of exercisability or
vesting of options, restricted stock, stock bonus or other awards
granted under the Company Stock Plans (including any discretionary
acceleration of the exercise periods of Company's Board of Directors
permitted under such plans) or authorize cash payments in exchange for
any options, restricted stock, stock bonus or other awards granted
under any of such plans;
(b) grant any severance or termination pay to any officer or
director or, except in the ordinary course of business consistent with
past practices, to any employee of Company;
(c) except in the ordinary course of business consistent with past
practices and other than transfers between or among Company and any of
its wholly owned Subsidiaries, transfer to any person or entity any
rights to the Company Intellectual Property Rights;
(d) enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or manufacturing rights of any
type or scope with respect to any hardware or software products of
Company;
(e) commence a lawsuit other than: (i) for the routine collection of
bills; (ii) for software piracy; (iii) in such cases where Company in
good faith determines that failure to commence suit would result in a
material impairment of a valuable aspect of Company's business,
provided Company consults with Microsoft prior to filing such suit; or
(iv) for a breach of this Agreement;
(f) enter into one or more leases which extend for a period of two
years beyond the date of this Agreement and which obligate Company to
pay aggregate gross rent in excess of $1,000,000; and
(g) extend an offer of employment to a candidate for an officer
position at the level of vice president or above without prior
consultation with Microsoft.
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4.1.2 Dividends: Changes in Stock. Company shall not: (i) declare or pay
any dividends on or make other distributions (whether in cash, stock or
property) in respect to any of its capital stock other than transfers
between or among Company and (y) any of its wholly owned Subsidiaries or
(z) Subsidiaries that are 100% beneficially owned by either Company or a
wholly owned Subsidiary of Company; (ii) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
capital stock of Company; (iii) repurchase or otherwise acquire, directly
or indirectly, any shares of its capital stock other than repurchase of
vested stock from former employees; or (iv) propose any of the foregoing.
4.1.3 Issuance of Securities. Other than issuances of Company Common
Shares upon exercise of presently outstanding Company Options, Company
shall not contribute, issue, deliver, or sell, or authorize, propose or
agree to, or commit to the contribution, issuance, delivery, or sale of any
shares of its capital stock of any class, any Company Voting Debt or any
securities convertible into its capital stock or Company Voting Debt, any
options, warrants, calls, conversion rights, commitments, agreements,
contracts, understandings, restrictions, arrangements or rights of any
character obligating it to issue any such shares, Company Voting Debt or
other convertible securities other than the issuance of options for Company
Common Stock to employees under the Company Stock Plans in amounts and on
terms consistent with prior practices, and in any event in an aggregate
amount not in excess of 200,000 shares and to any single person in an
amount not in excess of 20,000 shares.
4.1.4 Acceleration of Vesting. No Company Options subject to vesting
shall accelerate in connection with the Merger. Prior to the Closing, the
Company shall take such steps to ensure that such vesting restrictions
shall continue to apply to Substituted Microsoft Options issued in the
Merger on substantially similar terms and vesting schedules, except that
any stock restrictions which function by way of rights of repurchase shall
be amended so that unvested shares are automatically forfeited upon the
occurrence of a termination event.
4.1.5 Governing Documents. Company shall not, amend its Articles of
Incorporation or Bylaws, nor shall it cause or permit any of its
Subsidiaries to amend any comparable governing instruments of such
Subsidiaries.
4.1.6 Exclusivity; Acquisition Proposals. Unless and until this
Agreement shall have been terminated by either party pursuant to Section
8.1 hereof, Company shall not (and it shall use its best efforts to ensure
that none of its officers, directors, agents, representatives or
affiliates) take or cause or permit any Subsidiary to take, directly or
indirectly, any of the following actions with any party other than
Microsoft and its designees: (i) solicit, encourage, initiate or
participate in any negotiations, inquiries or discussions with respect to
any offer or proposal to acquire all or any significant part of its
business, assets or capital shares whether by merger, consolidation, other
business combination, purchase of assets, tender or exchange offer or
otherwise (each of the foregoing, an "Acquisition Transaction"); (ii)
disclose, other than to Microsoft or its representatives, in connection
with an Acquisition Transaction, any information not customarily disclosed
to any person concerning Company's business or properties or afford to any
person other than Microsoft or its representatives access to its
properties, books or records, except in the ordinary course of business and
as required by law or pursuant to a governmental request for information;
(iii) enter into or execute any agreement relating to an Acquisition
Transaction; or (iv) make or authorize any public statement, recommendation
or solicitation in support of any Acquisition Transaction or any offer or
proposal relating to an Acquisition Transaction other than with respect to
the Merger; provided, however, that the Board of Directors of Company may
recommend that the shareholders of Company tender their shares in
connection with a tender offer to the extent the Board of Directors of
Company by a majority vote determines in its good faith judgment that such
a recommendation is required to comply with the fiduciary duties of the
Board of Directors of Company to shareholders under applicable Minnesota
Law, after receiving the advice of outside legal counsel. In the event
Company shall receive any offer or proposal, directly or indirectly, of the
type referred to in clause (i) above, or any request for disclosure or
access with respect to information of the type referred to in clause (ii)
above, it shall immediately, and prior to taking any action in response
thereto, inform Microsoft as to all material facts
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concerning any such offer, proposal or request including the identity of
the party making the offer, proposal or request, and will thereafter
cooperate with Microsoft by informing Microsoft of additional material
facts as they arise and furnishing to Microsoft any additional information
it furnished to any third party making such proposal or requesting
information. Nothing contained in this Agreement shall prevent the Board of
Directors of Company from (i) furnishing information to, or answering
questions of, a third party which the Board of Directors of Company
reasonably believes has made a bona fide proposal with respect to an
Acquisition Transaction that is a Superior Proposal (as defined below) not
solicited in violation of this Agreement, provided that prior to providing
information, such third party executes an agreement with confidentiality
provisions substantially similar to those then in effect between Company
and Microsoft and provided further that Microsoft is notified three
business day prior to Company's providing of such information to a third
party, or (ii) subject to compliance with the other terms of this Section
4.1.6, considering a proposal with respect to an Acquisition Transaction,
which the Board of Directors of Company reasonably believes to be a bona
fide proposal, that is a Superior Proposal not solicited in violation of
this Agreement. For purposes of this Agreement, a "Superior Proposal" means
any proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, substantially all of
the equity securities of Company entitled to vote generally in the election
of directors, on terms which the Board of Directors of Company reasonably
believes (x) (after consultation with a financial advisor of nationally
recognized reputation) to be more favorable to its shareholders than the
Merger and the transactions contemplated by this Agreement taking into
account at the time of determination any changes to the financial terms of
this Agreement proposed in writing by Microsoft and (y) to be more
favorable to Company than the Merger and the transactions contemplated by
this Agreement after taking into account all pertinent factors deemed
relevant by the Board of Directors of Company under the laws of the State
of Minnesota; provided, however, that a Superior Proposal may be subject to
a due diligence review of confidential information and to other customary
conditions.
(b) Nothing contained in this Section 4.1.6 shall prohibit Company from
taking and disclosing to its shareholders a position required by Rule 14d-9
or 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to its shareholders required by applicable law, rule or
regulation; provided, however, the Board of Directors of Company shall only
recommend that its shareholders tender their shares in connection with a
tender offer to the extent that the Board of Directors of Company by a
majority vote determines in its good faith judgment that such a
recommendation is required to comply with the fiduciary duties of the Board
of Directors of Company to shareholders under applicable Minnesota law,
after receiving the advice of outside legal counsel.
(c) Nothing in contained in this Section 4.1.6 shall be interpreted to
affect or modify in any way the obligations of Company as set forth in
Section 6.1 relating to the preparation of the S-4, or Section 4.8, to
call, hold and conduct a Company shareholder meeting to approve the Merger.
4.1.7 No Acquisitions. Company shall not, and shall not permit any
Subsidiary of Company to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets which are material, individually or
in the aggregate, to the Business Condition of Company.
4.1.8 No Dispositions. Company shall not, and shall not permit any
Subsidiary of Company to, sell, lease, license, transfer, mortgage,
encumber or otherwise dispose of any of their assets or cancel, release, or
assign any indebtedness or claim, except in the ordinary course of business
or in amounts which are not material, individually or in the aggregate, to
the Business Condition of Company.
4.1.9 Indebtedness. Company shall not, and shall not permit any
Subsidiary of Company to, incur any indebtedness for borrowed money by way
of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee, or otherwise in amounts which are material,
individually or in the aggregate, to the Business Condition of Company.
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4.1.10 Plans. Company shall not, and shall not permit any Subsidiary of
Company to, adopt or amend in any material respect any Plan, other than a
modification of vesting provisions as provided in Section 4.1.4 above or
modifications required to maintain a Plan's tax-qualified status, or pay
any pension or retirement allowance not required by any existing Plan.
Company shall not and shall not permit any Subsidiary of Company to, enter
into any employment contracts, pay any special bonuses or special
remuneration to officers, directors, or employees, or increase the
salaries, wage rates or fringe benefits of its officers or employees other
than pursuant to scheduled reviews under Company's normal compensation
review cycle, in all cases consistent with Company's existing policies and
past practice. Company shall not, and shall not permit a Subsidiary of
Company to, contribute, sell, loan or otherwise transfer to a Plan, capital
stock or any other security or securities of Company or any Subsidiary
thereof.
4.1.11 Claims. Company shall not, and shall not permit any Subsidiary of
Company to, settle any claim, action or proceeding, except in the ordinary
course of business or in amounts which are not material, individually or in
the aggregate, to the Business Condition of Company.
4.1.12 Agreement. Company shall not, and shall not permit any Subsidiary
of Company to, agree to take any of the actions prohibited by this Section
4.1.
4.2 Breach of Representation and Warranties. Company will not take any
action which would cause or constitute a breach of any of the representations
and warranties set forth in Section 3.1 or which would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event which would cause or constitute
such a breach or inaccuracy, Company will give detailed written notice thereof
to Microsoft and will use its best efforts to prevent or promptly remedy such
breach or inaccuracy.
4.3 Consents. Company will promptly apply for or otherwise seek, and use its
commercially reasonable best efforts to obtain, all consents and approvals, and
make all filings, required with respect to Company for the consummation of the
Merger, except such consents and approvals as Microsoft and Company agree
Company shall not seek to obtain.
4.4 Commercially Reasonable Best Efforts. Company will use its commercially
reasonable best efforts to effectuate the transactions contemplated hereby and
to fulfill and cause to be fulfilled the conditions to closing under this
Agreement, provided that Company shall in no event be required to agree to the
imposition of, or comply with, any condition, obligation or restriction on
Company or on the Surviving Corporation of the type referred to in Section
7.1.5 hereof.
4.5 Information for Prospectus/Proxy Statement. Company will promptly
provide to Microsoft and its counsel for inclusion within the Proxy
Statement/Prospectus and the S-4 in a form reasonably satisfactory to Microsoft
and its counsel, such information concerning Company, its operations,
capitalization, technology, share ownership and other information as Microsoft
or its counsel may reasonably request.
4.6 Company Plans. Without the loss of any vested benefits but without
accelerating any unvested rights (except as required by law), Company shall
terminate or modify the Plans as may be directed by Microsoft immediately prior
to the Effective Time or take such action as directed by Microsoft to merge
such Plans with the Microsoft plans at the Effective Time.
4.7 Restrictive Covenants. Prior to the Effective Time, the Company's Chief
Executive Officer will execute a Restrictive Covenant Agreement in favor of
Microsoft in the form attached as Exhibit 7.2.4 and Company shall use its best
efforts to secure restrictive covenants from those members of its senior
management as Company's Chief Executive Officer shall, after consultation with
Microsoft, identify as necessary to facilitate a successful transition of the
Company Business after the Closing.
4.8 Shareholder Approval. Company will call a special Shareholders Meeting
to be held as soon as practicable but in no event later than thirty-five (35)
days after the Form S-4 shall have been declared effective
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by the SEC to submit this Agreement, the Merger and related matters for the
consideration and approval of Company's Shareholders ("Company Shareholders
Meeting"). Such approval will be recommended by Company's Board of Directors,
subject to the fiduciary obligations of its directors as set forth in Section
4.1.6; provided that in any event such meeting will be called, held and
conducted, notwithstanding any change in the recommendation of the Company's
Board of Director or any decision of the Company's Board of Directors to
approve another Acquisition Transaction. Concurrently with the execution of
this Agreement, all executive officers and directors of Company, (collectively
the "Company's Principals") have executed Shareholder Agreements in the form of
Exhibit 4.8 ("Company Shareholder Agreements") agreeing, among other things, to
vote in favor of the Merger and against any competing proposals.
4.9 Employee Matters. Prior to the Closing, Microsoft and Company will work
together on developing appropriate communications to Company employees
regarding the Merger, and developing a transition plan in contemplation of the
Closing. Company may not communicate with its employees regarding the Merger or
future terms or conditions pertaining to their employment or termination
thereof without Microsoft's advance approval of any such communication. To the
extent any employees of Company are terminated on or before the Closing other
than at the direction of Microsoft, Company will be responsible for
administering such termination, including payment of severance and the
obtaining of an appropriate release of claims from such employees, in a form
satisfactory to Microsoft. With regard to the termination of employees of
Company prior to Closing at the direction of Microsoft, the terms and
conditions set forth in Exhibit 4.9(A) shall apply. The parties anticipate that
most employees of Company will remain employees of Company following Closing.
Prior to Closing, Company shall present offers of continued employment to such
employees of Company designated by Microsoft; such offers shall be in
substantially the forms set forth in Exhibit 4.9(B)(i) and (ii) and shall be
presented in a manner and at times acceptable to Microsoft. Except as expressly
agreed in writing by Sub or Microsoft, no specific terms and conditions of
employment, including terms and conditions pertaining to length of employment,
are guaranteed. Prior to Closing, Company shall terminate all of the Change of
Control Agreements identified at Exhibit 4.9(C)(i) substantially in the form
attached as Exhibit 4.9(C)(ii) and such amendments shall contain a binding
release and waiver of rights pertaining to such agreement in a form
satisfactory to Microsoft. Prior to Closing, Company shall use its commercially
reasonable best efforts to terminate all expatriate agreements with employees
listed at Exhibit 4.9(D), receive from each party to such agreements a binding
release and waiver of rights pertaining to such agreement in a form
satisfactory to Microsoft, and enter into new expatriate agreements with such
parties in a form acceptable to Microsoft. Prior to Closing, Company shall use
its commercially reasonable best efforts to terminate the agreements listed at
Exhibit 4.9(E) and receive from each individual party to such agreements a
binding release and waiver of rights pertaining to such agreement in a form
satisfactory to Microsoft. Company will use its commercially reasonable best
efforts to obtain acceptances of the requisite number of employees specified in
Section 7.2.6 prior to Closing.
4.10 Tax Returns. Company shall properly and timely file all Returns with
respect to Company and any Subsidiary required to be filed prior to the Closing
Date and shall pay all taxes required to be paid prior to the Closing Date. All
such Returns shall be prepared consistent with past practice and shall be
subject to the approval of Microsoft, which shall not be unreasonably withheld.
Company shall (i) notify Microsoft promptly if it receives notice of any tax
audit, the assessment of any tax, the assertion of any tax lien, or any
request, notice or demand for taxes by any taxing authority, (ii) provide
Microsoft a description of any such matter in reasonable detail (including a
copy of any written materials received from the taxing authority), and (iii)
take no action with respect to such matter without the consent of Microsoft
which shall not be unreasonably withheld. Company shall not (x) make or revoke
any tax election that may affect Company, (y) execute any waiver of
restrictions on assessment of any tax, or (z) enter into any agreement or
settlement with respect to any tax without the approval of Microsoft, which
shall not be unreasonably withheld.
4.11 Section 16 Approval. On or after the date hereof and prior to the
Effective Time, each of Microsoft and Company shall take all necessary action
such that, with respect to (i) any Company Employee who as of the date hereof
is subject to Section 16 of the Exchange Act and (ii) any member of the
Company's
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Board of Directors (each, a "Company Section 16 Insider"), the acquisition by
any such Company Section 16 Insider of Microsoft Common Shares or Microsoft
stock options and the disposition by any such Company Section 16 Insider of
Company Common Stock or Company Options pursuant to the transactions
contemplated herein shall be exempt from the short-swing profit liability rules
of Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated
thereunder.
ARTICLE V
COVENANTS OF MICROSOFT
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Microsoft
agrees (except as expressly contemplated by this Agreement or with Company's
prior written consent which will not be unreasonably withheld) that:
5.1 Breach of Representations and Warranties. Microsoft will not take any
action that would cause or constitute a breach of any of the representations
and warranties set forth in Section 3.2 or which would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event that would cause or constitute
such a breach or inaccuracy, Microsoft will give detailed notice thereof to
Company and will use its best efforts to prevent or promptly remedy such breach
or inaccuracy.
5.2 Conduct of Business. Microsoft shall promptly notify Company of any
event or occurrence that would constitute a Material Adverse Effect to the
Business Condition of Microsoft no later than the time that the disclosure of
such event or occurrence is made in a Microsoft SEC Document and in any event
prior to the Effective Time.
5.3 Consents. Microsoft will promptly apply for or otherwise seek, and use
its commercially reasonable best efforts to obtain, all consents and approvals,
and make all filings, required for the consummation of the Merger.
5.4 Commercially Reasonable Best Efforts. Microsoft will use its
commercially reasonable best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement, provided that Microsoft shall in no event be
required to agree to the imposition of, or to comply with, any condition,
obligation or restriction on Microsoft or on the Surviving Corporation of the
type referred to in Section 7.1.5 hereof.
5.5 Employee Compensation and Benefits. After the Effective Time, Microsoft
will provide, or cause Company to provide, the compensation and benefits to
Company employees substantially as set forth in Exhibits 4.9(B) (i) and (ii).
5.6 Nasdaq Listing. Microsoft will use commercially reasonable best efforts
(i) to cause the Microsoft Common Shares to be issued in the Merger to be
quoted upon the Effective Time on the Nasdaq National Market or listed on such
national securities exchange as the Microsoft Common Shares are listed and (ii)
to cause the Microsoft Common Shares issued upon the exercise of converted
Company Options to be quoted upon issuance on the Nasdaq National Market or
listed on such national securities exchange as Microsoft Common Shares are
listed.
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ARTICLE VI
ADDITIONAL AGREEMENTS
In addition to the foregoing, Microsoft and Company each agree to take the
following actions after the execution of this Agreement.
6.1 Preparation of S-4. As promptly as practicable after the date hereof,
Microsoft and Company shall prepare and file with the SEC the Proxy Statement
and any other documents required by the Exchange Act in connection with the
Merger, and Microsoft shall prepare and file with the SEC the S-4, in which the
Proxy Statement will be included as a prospectus. Each of Microsoft and Company
shall use its commercially reasonable best efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such
filing. Microsoft shall also take any action required to be taken under any
applicable state securities or "blue sky" laws in connection with the issuance
of the Microsoft Common Shares in the Merger.
6.2 Letter of Company's Accountants. Company shall use its commercially
reasonable best efforts to cause to be delivered to Microsoft a letter (each, a
"Company Comfort Letter") addressed to Microsoft and Company of
PricewaterhouseCoopers LLP, Company's independent auditors, dated the date on
which the S-4 shall become effective and within two business days prior to the
Closing Date, in form and substance reasonably satisfactory to Microsoft and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the S-4.
6.3 Letter of Microsoft's Accountants. Microsoft shall use its commercially
reasonable best efforts to cause to be delivered to Company letters (each a
"Microsoft Comfort Letter") addressed to Company and Microsoft of Deloitte &
Touche LLP, Microsoft's independent auditors, dated the date on which the S-4
shall become effective and within two business days prior to the Closing Date
in form and substance reasonably satisfactory to Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4.
6.4 Access to Information. Subject to appropriate restrictions on access to
information which Company determines in good faith to be proprietary or
competitively sensitive, Company and Microsoft shall, subject to applicable
law, each afford the other and their respective accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of their and their respective
Subsidiaries' properties, books, contracts, commitments and records, and (ii)
all other information concerning the business, properties and personnel of
Company and Microsoft and their respective Subsidiaries, as the other party may
reasonably request which is necessary to complete the transaction and prepare
for an orderly transition to operations after the Effective Time. Company and
Microsoft agree to provide to the other and their respective accountants,
counsel and representatives copies of internal financial statements promptly
upon the request therefore. No information or knowledge obtained in any
investigation pursuant to this Section 6.4 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger. Company and Microsoft
agree that the non-disclosure agreement, dated November 21, 2000 (the
"Confidentiality Agreement"), between Company and Microsoft shall continue in
full force and effect and shall be applicable to all Evaluation Material (as
defined in the Confidentiality Agreement) received pursuant to this Agreement.
6.5 Legal Conditions to the Merger. Each of Microsoft, Sub and Company will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on any of them with respect to the Merger and
will promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon the other. Each of
Microsoft, Sub and Company will take, and will cause its respective
Subsidiaries to take, all reasonable actions to obtain (and to cooperate with
the other parties in obtaining) any consent, approval, order or authorization
of, or any exemption by, any Governmental Entity, or other third party,
required to be obtained or made by Company or Microsoft or their respective
Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement. The
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foregoing shall not require any party to agree to the imposition of, or to
comply with, any condition, obligation or restriction on Microsoft or any of
its Subsidiaries or on the Surviving Corporation of the type referred to in
Section 7.1.5 hereof.
6.6 Affiliate Agreements. Contemporaneously with the execution of this
Agreement, the affiliate agreements (the "Affiliate Agreements") in the form
attached as Exhibit 6.6 have been executed with Company's Principals. Microsoft
shall be entitled to place appropriate legends on the certificate evidencing
any Microsoft Common Shares to be received by Company Principals pursuant to
the terms of this Agreement and to issue appropriate stop transfer instructions
to the transfer agent for Microsoft Common Shares consistent with the terms of
the Affiliates Agreements.
6.7 HSR Act Filings.
6.7.1 Filings and Cooperation. Each of Microsoft and Company shall take
all reasonable steps to: (i) promptly make or cause to be made the filings
required of such party or any of its Affiliates or Subsidiaries under the
HSR Act with respect to the Merger and the other transactions provided for
in this Agreement, (ii) comply in a timely manner with any request under
the HSR Act for additional information, documents, or other material
received by such party or any of its Affiliates or Subsidiaries from the
Federal Trade Commission or the Department of Justice or other Governmental
Entity in respect of such filings, the Merger, or such other transactions,
and (iii) cooperate with the other party in connection with any such filing
and in connection with resolving any investigation or other inquiry of any
such agency or other Governmental Entity under any Antitrust Laws (as
defined in Section 6.7.2) with respect to any such filing, the Merger, or
any such other transaction. With regard to any communication with any
Governmental Entity regarding such filings, each party shall inform the
other party: (i) prior to delivering any material communication to a
Governmental Entity (ii) promptly after receiving any material
communication from a Governmental Entity, and (iii) before entering into
any proposed understanding, undertaking, or agreement with, any
Governmental Entity regarding any such filings, the Merger, or any such
other transactions. Neither party shall participate in any meeting with any
Governmental Entity in respect of any such filings, investigation, or other
inquiry without giving the other party prior notice of the meeting and, to
the extent permitted by such Governmental Entity, the opportunity to attend
and participate.
6.7.2 Objections. Each of Microsoft and Company shall take all
reasonable steps to resolve such objections, if any, as may be asserted by
any Governmental Entity with respect to the Merger or any other
transactions provided for in this Agreement under the HSR Act, the Sherman
Act, as amended, the Clayton Act, as amended, the Federal Trade Commission
Act, as amended, and any other federal, state or foreign statutes, rules,
regulations, orders, or decrees that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or
restraint of trade (collectively, "Antitrust Laws"). In connection
therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging the Merger as
violative of any Antitrust Law, and, if by mutual agreement, Microsoft and
Company decide that litigation is in their best interests, each of
Microsoft and Company shall cooperate to vigorously contest and resist any
such action or proceeding and to have vacated, lifted, reversed, or
overturned any decree, judgment, injunction, or other order, whether
temporary, preliminary, or permanent (each an "Order"), that is in effect
and that prohibits, prevents, or restricts consummation of the Merger. Each
of Microsoft and Company shall take such reasonable action as may be
required to cause the expiration of the notice periods under the HSR Act or
other Antitrust Laws with respect to the Merger and such other transactions
as promptly as possible after the execution of this Agreement.
Notwithstanding anything to the contrary in this Section 6.7.2 or in
Section 6.7.1, (x) neither Microsoft nor any of its Subsidiaries shall be
required to divest any of their respective businesses, product lines, or
assets, or to take or agree to take any other action or agree to any
limitation that would have a Material Adverse Effect on the business of
Microsoft or the business applications division of Microsoft combined with
the Company Business of the Surviving Corporation after Closing, (y)
neither Company nor its Subsidiaries shall be required to divest any of
their respective businesses,
A-27
product lines, or assets, or to take or agree to take any other action or
agree to any limitation would have a Material Adverse Effect on the
Business Condition of Company and (z) neither Microsoft nor Company (nor
any of their Subsidiaries) shall be required to continue to contest or
resist any action or proceeding brought by a Governmental Entity if it
concludes that such action is no longer in its best interest.
6.8 Officers and Directors. Microsoft agrees that all rights to
indemnification (including advancement of expenses) existing on the date hereof
in favor of the present or former officers, directors and employees of Company
("Indemnified Parties") with respect to actions taken in their capacities as
directors, officers or employees of Company prior to the Effective Time, as
provided under Section 302A.521 of the MBCA, in Company's Articles of
Incorporation or Bylaws, shall survive the Merger and continue in full force
and effect for a period of six (6) years following the Effective Time and shall
be guaranteed by Microsoft.
6.9 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expense, except that if the Merger is not consummated expenses incurred in
connection with printing and mailing of the documents distributed or to be
distributed to shareholders of Company and the filing fee with respect to the
S-4 shall be shared equally by Microsoft and Company.
6.10 Additional Agreements. In case at any time after the Effective Time any
further action is reasonably necessary or desirable to carry out the purposes
of this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Constituent Corporations, the proper officers and directors of each
corporation which is a party to this Agreement shall take all such necessary
action. The Company will cooperate as reasonably requested by Microsoft in
developing, reviewing and implementing risk financing solutions, including
without limitation additional insurance, with respect to intellectual property
liability risk, in a form and in amounts reasonably acceptable to Microsoft.
6.11 Public Announcements. Microsoft and Company shall cooperate with each
other in releasing information concerning this Agreement and the transactions
contemplated herein. Where practicable each of the parties shall furnish to the
other drafts of all releases prior to publication. Nothing contained herein
shall prevent either party at any time from furnishing any information to any
governmental agency or from issuing any release when it believes it is legally
required to do so. Company shall consult with Microsoft prior to making any
Company-wide announcements to its employees. Such announcements shall be in
accordance with the employee retention plans specified in Section 4.9 above.
6.12 State Takeover Laws. Company (including all nonemployee directors), and
the Board of Directors of Company, shall grant such approvals and take all
necessary steps to exempt the transactions contemplated by this Agreement from,
or if necessary challenge the validity or applicability of Sections 302A.671,
.673, and .675 of the MBCA to the Merger.
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ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
7.1.1 Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted as required by
Section 302.613 subd. 2 of the MBCA (the "Company Required Vote").
7.1.2 Consents. Other than the filing of the Merger Documents with the
Secretaries of State of the State of Minnesota and Washington, all Consents
legally required for the consummation of the Merger and the transactions
contemplated by this Agreement shall have been satisfied, filed, occurred,
or been obtained, other than such Consents (i) as Microsoft and Company
agree Company shall not seek or obtain, or (ii) the failure of which to
obtain would not have a Material Adverse Effect on the consummation of the
Merger or the other transactions contemplated hereby or on the Business
Condition of Microsoft or Company.
7.1.3 S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order and the Proxy Statement shall not be subject to any proceedings
commenced or threatened by the SEC.
7.1.4 No Restraints. No statute, rule, regulation, executive order,
decree or injunction shall have been enacted, entered, promulgated or
enforced by any United States court or Governmental Entity of competent
jurisdiction which enjoins or prohibits the consummation of the Merger and
shall be in effect.
7.1.5 No Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any Governmental Entity which, in connection
with the grant of any Required Statutory Approval, imposes any restriction,
condition or obligation upon Microsoft, Company or the Surviving
Corporation which would materially adversely impact the Business Condition
of the Company Business or the economic or business benefits of the
transactions contemplated by this Agreement.
7.1.6 Tax-Free Reorganization. Each of Company and Microsoft shall have
received a written opinion from their respective counsel, dated as of the
Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code, and that
Microsoft, Sub and Company will each be a party to that reorganization. In
preparing Company and Microsoft tax opinions, counsel may rely on
reasonable representations related thereto.
7.2 Conditions of Obligations of Microsoft and Sub. The obligations of
Microsoft and Sub to effect the Merger are subject to the satisfaction of the
following conditions unless waived by Microsoft and Sub:
7.2.1 Representations and Warranties of Company. The representations and
warranties of Company set forth in this Agreement shall be true and correct
as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date, except: (i) as otherwise contemplated by
this Agreement, or (ii) in respects that do not have a Material Adverse
Effect on Company's Business Condition or on the benefits of the
transactions provided for in this Agreement. Microsoft shall have received
a certificate signed on behalf of Company by the chief executive officer
and the chief financial officer of Company to such effect on the Closing
Date.
7.2.2 Performance of Obligations of Company. Company shall have
performed all agreements and covenants required to be performed by it under
this Agreement prior to the Closing Date, except for breaches that do not
have a Material Adverse Effect on Company's Business Condition or on the
benefits of the transactions provided for in this Agreement. Microsoft
shall have received a certificate signed on behalf of Company by the chief
executive officer and the chief financial officer of Company to such
effect.
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7.2.3 Executed Affiliates Agreement. Microsoft shall have received from
each person or entity who may be deemed pursuant to Section 6.6 hereof to
be a Company Principal a duly executed Affiliates Agreement substantially
in the form attached hereto as Exhibit 6.6.
7.2.4 Restrictive Covenants. Douglas Burgum shall have executed a
Noncompetition Agreement substantially in the form attached as Exhibit
7.2.4 and not taken any action or expressed any intent to terminate or
modify such agreement.
7.2.5 Opinion of Company's Counsel. Microsoft shall have received an
opinion dated the Closing Date of Dorsey & Whitney LLP, counsel to Company,
substantially in the form attached as Exhibit 7.2.5.
7.2.6 Certain Employees. As of immediately prior to the Closing, those
employees of Company set forth on Schedule 7.2.6(A) and not less than 90%
of employees of Company in development and support as of the date of this
Agreement as set forth on Schedule 7.2.6(B) and at least 80% of all of the
other employees of Company as of the date of this Agreement shall be
employed by Company.
7.2.7 Restricted Stock Agreement. The Restricted Stock Agreement, shall
be in full force and effect and no efforts shall be pending to void or
terminate such agreement.
7.2.8 Legal Action. There shall not be pending any action, proceeding or
other application before any court or Government Entity brought by any
Governmental Entity: (i) challenging or seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement, or seeking
to obtain any material damages; or (ii) seeking to prohibit or impose any
material limitations on Microsoft's or the Surviving Corporation's
ownership or operation of all or any portion of Microsoft's and Company's
combined Company Business or to compel Microsoft or Surviving Corporation
to dispose of or hold separate all or any material portion of Microsoft's
and Surviving Corporation's combined Company Business as a result of the
transactions contemplated by the Agreement, other than in accordance with
the provisions of Section 6.7.2 or other plan, proposed by or consented to,
in writing by Microsoft.
7.2.9 Dissenting Shares. Company shall not have received any notice that
holders which alone or in the aggregate own or beneficially own five
percent (5%) or more of the Company Common Shares then outstanding have
purported to assert dissenter's rights, and shall have delivered a
certificate to Company to such effect.
7.2.10 Modification of Change of Control Agreements. The Change of
Control Agreements identified at Exhibit 4.9(C)(i) shall have been amended
substantially in the form attached as Exhibit 4.9(C)(ii).
7.3 Conditions of Obligation of Company. The obligation of Company to effect
the Merger is subject to the satisfaction of the following conditions unless
waived by Company:
7.3.1 Representations and Warranties of Microsoft and Sub. The
representations and warranties of Microsoft and Sub set forth in this
Agreement shall be true and correct as of the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date, except:
(i) as otherwise contemplated by this Agreement, or (ii) in respects that
do not have a Material Adverse Effect on the Microsoft's Business Condition
or on the benefits of the transactions provided for in this Agreement to be
untrue or incorrect as of the Closing Date. Company shall have received a
certificate signed on behalf of Microsoft by an authorized officer of
Microsoft to such effect on the Closing Date.
7.3.2 Performance of Obligations of Microsoft and Sub. Microsoft and Sub
shall have performed all agreements and covenants required to be performed
by them under this Agreement prior to the Closing Date except for breaches
that do not have a Material Adverse Effect on Microsoft's Business
Condition or on the benefits of the transactions provided for in this
Agreement, and Company shall have received a certificate signed on behalf
of Microsoft by an authorized officer of Microsoft to such effect.
7.3.3 Legal Action. There shall not be overtly threatened or pending any
action, proceeding or other application before any court or Governmental
Entity brought by any person or Governmental Entity
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challenging or seeking to restrain or prohibit the consummation of the
transactions contemplated by this Agreement, or seeking to obtain any
damages caused by such transactions which if successful would have a
material adverse effect on the viability of such transactions.
7.3.4 Opinion of Microsoft's Counsel. Company shall have received an
opinion dated the Closing Date of Preston Gates & Ellis LLP, counsel to
Microsoft, substantially in the form attached as Exhibit 7.3.4.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of matters presented in
connection with the Merger by the shareholders of Company or Sub:
(a) by mutual consent of Microsoft and Company;
(b) by either Microsoft or Company (provided that the terminating party
is not then in material breach of any representation, warranty, covenant or
agreement contained in this Agreement) if there has been a breach of any
representation, warranty, covenant or agreement which has a Material
Adverse Effect on the Business Condition of Company or Microsoft, as the
case may be, or on the benefits of the transaction provided for in this
Agreement, and such breach has not been cured, or best efforts are not
being employed to cure such breach, within twenty (20) days after notice
thereof is given to the party committing such breach;
(c) by either Microsoft or Company if the Merger shall not have been
consummated before September 30, 2001, provided, however if the parties
have agreed to pursue litigation pursuant to Section 6.7.2, such date shall
be extended to March 31, 2002;
(d) by Microsoft or Company if any approval of the shareholders of
Company shall not have been obtained by reason of the failure to obtain the
required vote upon a vote taken at any duly held Company Shareholders
Meeting or any adjournment thereof;
(e) by either Microsoft or Company if any permanent injunction or other
order of a court or other competent authority preventing the Merger shall
have become final and not subject to appeal;
(f) by Microsoft if the Board of Directors of Company shall have
withdrawn or modified in a manner adverse to Microsoft its approval or
recommendation of the Merger, this Agreement or the transactions
contemplated hereby;
(g) by Microsoft if Company or any of the other persons or entities
described in Section 4.1.6 shall take any of the actions that would be
proscribed by Section 4.1.6 other than actions in exercise of Company's
fiduciary duties and satisfying all conditions of Section 4.1.6; or
(h) by either Microsoft or Company if either, pursuant to Section 6.7.2,
has determined that it is not in its best interest to commence litigation
or to continue to contest or resist any action or proceeding.
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors of the party taking such action without any requirement to submit
such action to the shareholders of such party.
8.2 Effect of Termination. In the event of termination of this Agreement by
either Company or Microsoft as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect, and there shall be no liability or
obligation on the part of Microsoft, Sub or Company or their respective
officers or directors, except that (i) the provisions of the last sentence of
Section 6.4 and all of Sections 6.9, 6.11, 8.2, 8.3,
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9.7 and 9.8 and the Confidentiality Agreement shall survive any such
termination and abandonment, and (ii) except as provided in Section 8.3, no
party shall be released or relieved from any liability arising from the willful
breach by such party of any of its representations, warranties, covenants or
agreements as set forth in this Agreement.
8.3 Break-up Fees.
8.3.1 Company Break-up Fee. Company agrees to pay Microsoft, (provided
that Microsoft is not then in material breach of any representation,
warranty, covenant or agreement contained in this Agreement) on the
fifteenth day (or, if such day is not a business day, the next business day
thereafter) following (a) the termination of this Agreement or (b) such
later date as may apply in the case of (ii) below ("Payment Date") by wire
transfer, the sum of $40,000,000 in immediately available funds (the
"Company Break-up Fee") in the event that following the date of the
execution of this Agreement any of the following events shall have
occurred:
(i) Microsoft shall have terminated this Agreement pursuant to
Section 8.1(f) or Section 8.1(g) hereof;
(ii) Company shall have agreed to an Acquisition Transaction which
results in a change in the beneficial owners of more than fifty percent
(50%) of the voting power of the capital stock of Company, before, or
within twelve months after, termination of this Agreement, with any
person, other than Microsoft or any of its affiliates; or
(iii) Microsoft shall have terminated this Agreement pursuant to
Section 8.1(b) hereof, following a material breach of this Agreement by
Company.
8.3.2 Microsoft Break-up Fee. In the event that following the date of
the execution of this Agreement, and at or prior to the termination of this
Agreement, Company shall have terminated this Agreement pursuant to Section
8.1(b) hereof, following a material breach of this Agreement by Microsoft,
then Microsoft agrees to pay Company, (provided that Company is not then in
material breach of any representation, warranty, covenant or agreement
contained in this Agreement) promptly upon such termination by wire
transfer, the sum of $40,000,000 in immediately available funds (the
"Microsoft Break-up Fee").
8.3.3 HSR Break-up Fee. In the event the Closing does not occur because
(i) the condition relating to the termination of the waiting period under
the HSR Act has not been satisfied prior to September 30, 2001, or, if the
parties have elected to pursue litigation pursuant to Section 6.7.2, March
31, 2002, or (ii) either party has terminated this Agreement pursuant to
Section 8.3.1(h), Microsoft shall pay Company (provided that Company is not
then in material breach of any representation, warranty, covenant or
agreement contained in this Agreement) by wire transfer, the sum of
$5,000,000 in immediately available funds (the "HSR Break-up Fee").
The payment of the fees set forth in this Section 8.3 shall be the
exclusive remedy at law or in equity to which either party may be entitled
upon termination of this Agreement.
8.4 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Board of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
shareholders of Company or Microsoft, but after any such shareholder approval,
no amendment shall be made which by law requires the further approval of
shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.5 Extension, Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive
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compliance with any of the agreements, covenants or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to be
conditions to the Merger and shall not survive the Merger, except for the
agreements contained in Article II and in Sections 4.11, 5.4, 6.8 and 6.9 and
the agreements delivered pursuant to this Agreement.
9.2 Notices. All notices, requests, demands or other communications which
are required or may be given pursuant to the terms of this Agreement shall be
in writing and shall be deemed to have been duly given: (i) on the date of
delivery if personally delivered by hand, (ii) upon the third day after such
notice is (a) deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, or (b) sent by a
nationally recognized overnight express courier, or (iii) by facsimile upon
written confirmation (other than the automatic confirmation that is received
from the recipient's facsimile machine) of receipt by the recipient of such
notice:
(a) if to Microsoft or Sub, to:
Microsoft Corporation
One Microsoft Way
Redmond, Washington 98052-6399
Attention: Group Vice President, Productivity and Business Services
With a copy to: Deputy General Counsel, Finance and Operations
Facsimile No.: (206) 869-1327
With an additional copy to:
Preston Gates & Ellis LLP
701 Fifth Avenue, Suite 5000
Seattle, Washington 98104
Attention: Richard B. Dodd
Facsimile No.: (206) 623-7022
(b) if to Company, to:
Great Plains Software, Inc.
1701 S.W. 38th Street
Fargo, ND 58103
Attention: Douglas R. Herman
Facsimile No.: (701) 281-6844
With a copy to:
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, MN 55402-1498
Attention: Timothy S. Hearn
Facsimile No.: (612) 340-2868
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9.3 Interpretation. When a reference is made in this Agreement to Sections
or Exhibits, such reference shall be to a Section or Exhibit to this Agreement
unless otherwise indicated. The words "include," "includes," and "including"
when used therein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The "knowledge of," "the best of
knowledge of," or other derivations of "know" with respect to Company will mean
the knowledge of the officers and directors of Company, in each case assuming
the exercise of reasonable inquiry either directly or by representatives on
his, her or their behalf. This Agreement has been negotiated by the respective
parties hereto and their attorneys and the language hereof will not be
construed for or against either party. A reference to a Section or an Exhibit
will mean a section in, or exhibit to, this Agreement unless otherwise
explicitly set forth.
9.4 Counterparts. This Agreement may be executed in two or more partially or
fully executed counterparts each of which shall be deemed an original and shall
bind the signatory, but all of which together shall constitute but one and the
same instrument. The execution and delivery of a Signature Page-Agreement and
Plan of Reorganization, in the form annexed to this Agreement, by any party
hereto who shall have been furnished the final form of this Agreement shall
constitute the execution and delivery of this Agreement by such party.
9.5 Miscellaneous. This Agreement, the Confidentiality Agreement, and the
documents referred to herein (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder (except as otherwise expressly
provided herein and except that Section 6.8 is for the benefit of Company's
directors and officers and Section 2.3.1 is for the benefit of holders of
Company Stock Options and said Sections are intended to confer rights on such
persons); and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided.
9.6 No Joint Venture. Nothing contained in this Agreement will be deemed or
construed as creating a joint venture or partnership between any of the parties
hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
9.7 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Washington.
9.8 Enforcement of this Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached in any material respect. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement or any related agreement and to enforce specifically the terms and
provisions of this Agreement or any related agreement in the state and federal
courts in Seattle, King County, Washington, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of
the state and federal courts in King County, Washington in the event any
dispute arises out of this Agreement or any related agreement or any
transaction contemplated hereby or thereby, (b) agrees that it will not attempt
to deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, (c) agrees that it will not bring any action
relating to this Agreement or any related agreement or any transaction
contemplated hereby or thereby in any court other than the state and federal
courts in King County, Washington and (d) waives any right to trial by jury
with respect to any action related to or arising out of this
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Agreement or related agreement or any transaction contemplated hereby or
thereby. Neither any action seeking damages pursuant to Section 8.2, nor any
action brought pursuant to this Section 9.8, shall be interpreted as providing
an exclusive remedy to any party.
[The remainder of this page was intentionally left blank]
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SIGNATURE PAGE--AGREEMENT AND PLAN OF REORGANIZATION
IN WITNESS WHEREOF, Microsoft, Sub and Company have caused this Agreement to
be signed by their respective officers thereunder duly authorized, all as of
the date first written above.
MICROSOFT CORPORATION
/s/ Jeffrey Raikes
By __________________________________
RUBICON ACQUISITION CORPORATION
/s/ Keith Dolliver
By __________________________________
GREAT PLAINS SOFTWARE, INC.
/s/ Douglas J. Burgum
By __________________________________
A-36
ANNEX B
OPINION OF GOLDMAN, SACHS & CO.
PERSONAL AND CONFIDENTIAL
December 21, 2000
Board of Directors
Great Plains Software, Inc.
1701 Southwest 38th Street
Fargo, ND 28103
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.01
per share (the "Shares"), of Great Plains Software, Inc. (the "Company") of the
exchange ratio of 1.1 shares of Common Stock, par value $0.0000125 per share
(the "Microsoft Shares"), of Microsoft to be received for each Share (the
"Exchange Ratio") pursuant to the Agreement and Plan of Reorganization, dated
as of December 21, 2000 (the "Agreement"), among Microsoft Corporation
("Microsoft"), Rubicon Acquisition Corporation, a wholly-owned subsidiary of
Microsoft ("Merger Sub"), and the Company. Pursuant to the Agreement, Merger
Sub will be merged with and into the Company (the "Merger") and each
outstanding Share will be converted into the right to receive a number of
Microsoft Shares equal to the Exchange Ratio.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services
to the Company from time to time, including having made an $8.3 million
principal investment in the Company in 1994; having acted as a managing
underwriter of its initial public offering of 3,000,000 Shares in March 1997;
having acted as a managing underwriter of public offerings of 588,000 Shares in
April 1998 and 2,000,000 Shares in March 1999; and having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement. We also have provided certain
investment banking services to Microsoft from time to time, including having
acted as managing underwriter of a public offering of 10,954,616 shares of
convertible exchangeable preferred stock of Microsoft in December 1996; having
acted as financial advisor to Microsoft in connection with its equity
investment in Titus Communications Corporation in April 2000; having acted as a
managing underwriter of the initial public offering of 5,200,000 shares and
Common Stock of Expedia, Inc., a subsidiary of Microsoft, in November 1999. We
also may provide investment banking services to Microsoft in the future.
Goldman, Sachs & Co. provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold positions in securities, including derivative
securities, of the Company or Microsoft for its own account and for the
accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Registration Statement on Form S-1 of the Company, dated March
5, 1997; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and Microsoft for the three fiscal years ended May 31, 2000 and for the
five fiscal years ended June 30, 2000, respectively; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and Microsoft;
certain other communications from the Company and Microsoft to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management (the "Company Forecasts"). We also have held
discussions with members of the senior management of the Company and Microsoft
regarding their assessment of the strategic rationale for, and
B-1
the potential benefits of, the transaction contemplated by the Agreement. We
have held discussions with members of senior management of the Company
regarding their assessment of the past and current business operations,
financial condition and future prospects of the Company. We have also held
discussions with members of senior management of the Company and Microsoft
regarding the past and current business operations, financial condition and
future prospects of Microsoft. In addition, we have reviewed the reported price
and trading activity for the Shares and the Microsoft Shares, compared certain
financial and stock market information for the Company and Microsoft with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the software industry specifically and in other industries
generally and performed such other studies and analyses as we considered
appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or Microsoft or any of their subsidiaries and we
have not been furnished with any such evaluation or appraisal. With your
consent, we have taken into account the views of the Company's management of
the risks and uncertainties relating to the Company's ability to achieve the
Company Forecasts in the amounts and time periods contemplated thereby. As you
are aware, Microsoft did not make available to us its projections of expected
future performance. Accordingly, our review of such matters was limited to
discussions with the management of Microsoft of certain research analysts'
estimates. With your consent, we have not conducted an independent evaluation
of the pending litigation against Microsoft, including litigation regarding
antitrust and intellectual property matters (the "Litigation"), or the
resulting liability or other consequences, if any, Microsoft may incur in
connection with the Litigation. Based on the information contained in
Microsoft's public filings with the Securities and Exchange Commission and its
representations and warranties in the Agreement and after consulting with
counsel to the Company, you have directed us in rendering this opinion to
assume that the Litigation will not have a material adverse effect on
Microsoft's financial condition or results of operations, the market price of
Microsoft Shares or, the conduct of the operations of Microsoft and its
subsidiaries. We were not requested to solicit, and did not solicit, interest
from other parties with respect to an acquisition of or other business
combination with the Company (other than a limited discussion with one party
which expressed an interest in the Company). Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to how any holder of Shares should vote with respect to
such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to the
holders of Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
(Goldman, Sachs & Co.)
B-2
ANNEX C
MINNESOTA DISSENTERS' RIGHTS STATUTES
Minnesota Statutes (S)(S) 302A.471 & 302A.473
302A.471 Rights of dissenting shareholders.
Subdivision 1. Actions creating rights. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares
in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption
of the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares
to acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter,
or to cumulate votes, except as the right may be excluded or limited
through the authorization or issuance of securities of an existing or new
class or series with similar or different voting rights; except that an
amendment to the articles of an issuing public corporation that provides
that section 302A.671 does not apply to a control share acquisition does
not give rise to the right to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the
net proceeds of disposition be distributed to the shareholders in accordance
with their respective interests within one year after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter 322B, to
which the corporation is a constituent organization, except as provided in
subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B, to
which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, except as provided in subdivision 3; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert dissenters'
rights as to less than all of the shares registered in the name of the
shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on
whose behalf the shareholder dissents. In that event, the rights of the
dissenter shall be determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of different
shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms
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of this section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.
Subd. 3. Rights not to apply. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of (1) the surviving
corporation in a merger with respect to shares of the shareholder that are not
entitled to be voted on the merger and are not canceled or exchanged in the
merger or (2) the corporation whose shares will be acquired by the acquiring
corporation in a plan of exchange with respect to shares of the shareholder
that are not entitled to be voted on the plan of exchange and are not exchanged
in the plan of exchange.
(b) If a date is fixed according to section 302A.445, subdivision 1, for the
determination of shareholders entitled to receive notice of and to vote on an
action described in subdivision 1, only shareholders as of the date fixed, and
beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
Subd. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at
law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
302A.473 Procedures for asserting dissenters' rights.
Subdivision 1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If the proposed action must be approved by the
shareholders, a shareholder who is entitled to dissent under section 302A.471
and who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand the
fair value of the shares owned by the shareholder and must not vote the shares
in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was
required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
C-2
(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each dissenting shareholder who has
complied with subdivisions 3 and 4 the amount the corporation estimates to be
the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for
a fiscal year ending not more than 16 months before the effective date of
the corporate action, together with the latest available interim financial
statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person
who was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision
4 and require deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a demand under
subdivision 6, it shall, within 60 days after receiving the demand, either pay
to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest. The petition shall
be filed in the county in which the registered office of the corporation is
located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of the
constituent corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing the
petition, serve all parties with a summons and copy of the petition under the
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rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding
on all shareholders, wherever located. A dissenter is entitled to judgment in
cash for the amount by which the fair value of the shares as determined by the
court, plus interest, exceeds the amount, if any, remitted under subdivision 5,
but shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine the costs and
expenses of a proceeding under subdivision 7, including the reasonable expenses
and compensation of any appraisers appointed by the court, and shall assess
those costs and expenses against the corporation, except that the court may
assess part or all of those costs and expenses against a dissenter whose action
in demanding payment under subdivision 6 is found to be arbitrary, vexatious,
or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously,
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any.
C-4
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Article XII of the Restated Articles of Incorporation of the registrant
authorizes the registrant to indemnify any present or former director or
officer to the fullest extent not prohibited by the Washington Business
Corporation Act, public policy or other applicable law. Sections 23B.8.510 and
.570 of the Washington Business Corporation Act authorizes a corporation to
indemnify its directors, officers, employees or agents in terms sufficiently
broad to permit such indemnification under certain circumstances for
liabilities (including provisions permitting advances for expenses incurred)
arising under the Securities Act of 1933.
The registrant has agreed that if the merger is completed, all rights to
indemnification (including payment of litigation expenses) of current or former
directors, officers and employees of Great Plains and its subsidiaries arising
from actions taken before the consummation of the merger, under Minnesota law
and in Great Plains' articles of incorporation and bylaws, will be assumed by
the registrant, continue in full force and effect for six years from the
effective date of the merger and be guaranteed by the registrant.
In addition, the registrant maintains directors' and officers' liability
insurance under which the registrant's directors and officers are insured
against loss (as defined in the policy) resulting from claims brought against
them for their wrongful acts in such capacities.
Item 21. List of Exhibits.
The exhibits to this registration statement are listed in the Index to
Exhibits on page II-4.
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) (i) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(ii) The registrant undertakes that every prospectus (a) that is filed
pursuant to paragraph (b)(i) immediately preceding, or (b) that purports to
meet the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) 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,
II-1
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 Securities 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
Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
[Remainder of Page Intentionally Left Blank]
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Redmond, State of
Washington on February 21, 2001.
MICROSOFT CORPORATION
/s/ Steven A. Ballmer
By: _________________________________
Steven A. Ballmer
Chief Executive Officer and
Director (Principal Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Steven A. Ballmer Chief Executive Officer, February 21, 2001
____________________________________ Director (Principal
Steven A. Ballmer Executive Officer)
/s/ William H. Gates III Chairman, Chief Software February 21, 2001
____________________________________ Architect, Director
William H. Gates III
* Vice President, Finance,
____________________________________ Chief Financial Officer
John Connors (Principal Financial and
Accounting Officer)
* Director
____________________________________
David F. Marquardt
/s/ Ann McLaughlin Korologos Director February 21, 2001
____________________________________
Ann McLaughlin Korologos
* Director
____________________________________
W. G. Reed, Jr.
* Director
____________________________________
Jon A. Shirley
- --------
* Pursuant to a Power of Attorney dated February 1, 2001
II-3
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
2.1 Agreement and Plan of Reorganization, dated as of December 21, 2000,
among Microsoft Corporation, Rubicon Acquisition Corporation and Great
Plains Software, Inc., incorporated by reference to Annex A to the
proxy statement/prospectus contained in this registration statement*
2.2 Form of Voting Agreement
2.3 Form of Great Plains Affiliate Letter Agreement
3.1 Amended and Restated Articles of Incorporation of Microsoft
Corporation, incorporated by reference to Microsoft's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999
3.2 Bylaws of Microsoft, incorporated by reference to Microsoft's Annual
Report on Form 10-K for the fiscal year ended June 30, 1999
5 Opinion and consent of Preston Gates & Ellis LLP regarding validity of
the shares to be issued*
8 Opinion and consent of Dorsey & Whitney LLP regarding certain tax
matters*
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Preston Gates & Ellis LLP (contained in exhibit 5)*
23.4 Consent of Dorsey & Whitney LLP (contained in exhibit 8)*
23.5 Consent of Goldman, Sachs & Co.
24 Power of Attorney*
99.1 Form of Proxy to be used by shareholders of Great Plains Software,
Inc.
- --------
* Previously filed
II-4