This Subsidiary Formation Agreement (the "Agreement") is made and entered into as of the 23rd day of January, 1997 by and among AMERICAN SOFTWARE, INC., a Georgia corporation ("ASI"), AMERICAN SOFTWARE USA, INC., a Georgia corporation ("USA"), AMERICAN SOFTWARE (UK) LTD., an entity existing under the laws of the United Kingdom ("UK"), AMERICAN SOFTWARE FRANCE S. A., an entity existing under the laws of France ("France"), AMERICAN SOFTWARE ASIA PACIFIC PTE. LTD., an entity existing under the laws of Singapore ("Singapore"), AMERICAN SOFTWARE (JAPAN) KK, an entity existing under the laws of Japan ("Japan"), and AMERICAN SOFTWARE (AUSTRALIA) PTY. LTD., an entity existing under the laws of Australia ("Australia") (ASI, USA, UK, France, Singapore, Japan, and Australia are sometimes collectively referred to herein as the "ASI Entities"), and LOGILITY, INC., a Georgia corporation ("Logility").

WHEREAS, USA, UK, France, Singapore, Japan, and Australia are direct and indirect subsidiaries of ASI; and

WHEREAS, the ASI Entities desire to transfer and assign to Logility, and Logility desires to acquire and assume, certain assets and liabilities of the ASI Entities relating to the business and operations of the Supply Chain Planning products divisions ("SCP") of the ASI Entities.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Definitions. As used in the Agreement, the following terms shall have the following meanings:

(a) "Assumed Liabilities" shall have the meaning ascribed to such term in Section 3 below.

(b) "Business of Logility" shall mean the business and operations of the SCP divisions of the ASI Entities, as currently conducted and proposed to be conducted, and all activities associated therewith.

(c) "Effective Date" shall mean January 23, 1997.

(d) "Intellectual Property" shall mean all (i) patents, patent applications, patent disclosures and all related continuation, continuation-in-part, reissue, re-examination, utility, model, certificate of invention and design patents, patent applications, registrations, and applications for registration; (ii) trademarks, service marks, trade dress, logos, trade names, service names, and corporate names, and all registrations and applications for registration thereof; (iii) copyrights and registrations and applications for registration thereof; (iv) mask works and registrations and applications for registration of the foregoing; (v) computer software, data and documentation; (vi) trade secrets and confidential business information, whether patentable or non patentable and whether or not reduced to practice, know-how, manufacturing and product processes and techniques, research and development information, copyright able works, financial, marketing and business data, pricing and cost information, business and marketing plans, and customer and supplier lists and information; (vii) other proprietary rights relating to all of the foregoing (including without limitation associated goodwill and remedies against infringements thereof and rights of protection of an interest therein under the laws of all jurisdictions); and (viii) copies and tangible embodiment s of all of the foregoing.

(e) "Logility Assets" shall mean all of the assets used or useful in and to the Business of Logility, including without limitation, all (i) Intellectual Property; (ii) to the extent transferable, licenses, franchises, permits, approvals, and other similar authorizations; (iii) books, records, files and papers, whether in hard copy or computer format, including, without limitation, research and development information, materials and analyses prepared by consultants and other third parties, engineering information, sales and promotional literature, manuals and data, sales and purchase correspondence, lists of present and former suppliers, lists of present and former customers, personnel and employment records, and any tax-related information; (iv) goodwill; (v) claims and chose s in action; (vi) accounts, prepaid expenses, notes, and other receivables; (vii) security deposits; (viii) raw materials, parts, work-in-process, finished goods, supplies, and other inventories; (ix) to the extent transferable, all contracts, agreements, leases, licenses, commitments, sales and purchase orders, and other instruments (collectively, "Contracts") set forth on Schedule I attached hereto; (x) rights, claims, credits, causes of action, and rights of set-off against third parties; and (xi) equipment, machinery, improvements, furniture, and fixed assets set forth on Schedule II attached hereto. Notwithstanding anything to the contrary contained in this Agreement, the Logility Assets shall not include any net operating loss, net capital loss, investment tax credit, foreign tax credit, charitable deduction, or any other deduction, credit, or tax attribute which could reduce taxes (including, without limitation, deductions and credits related to alternative minimum taxes) attributable to the Business of Logility from a tax period (or portion thereof) ending on or before the closing date of the issuance by Logility of shares of its Common Stock to the public in an initial public offering registered under the Securities Act of 1933, as amended.

(f) "SCP Division" means those product divisions of the ASI Entities which are engaged in the development and distribution of the software products set forth in Exhibit A attached hereto, including services, maintenance, and support related thereto.

2. Transfer of Logility Assets to Logility. In consideration for the issuance to ASI of One Thousand (1,000) fully paid, non-assessable shares of common stock of Logility, having no par value, the ASI Entities shall assign, transfer, convey, and deliver to Logility, in the form of a capital contribution, the Logility Assets, subject to the Assumed Liabilities which are to be assumed by Logility as set forth in Section 3 below.

3. Assumption of Assumed Liabilities by Logility. In further consideration for the conveyance of the Logility Assets, Logility shall assume and agree to pay, perform, and discharge (a) all debts, obligations, contracts, and liabilities of the ASI Entities related to the Logility Assets under the Contracts; (b) all debts, obligations, contracts, and liabilities related to the Business of Logility under all contracts, agreements, leases, licenses, commitments, sales and purchase orders, and other instruments entered into between an ASI Entity and an end-user between the Effective Date and August 1,1997, together with such other contracts, agreements, leases, licenses, commitments, sales and purchase orders, and other instruments relating to the Business of Logility, as may be agreed upon from time to time by the parties; and (c) all costs and expenses incurred for and on behalf of Logility related to the formation and organization of Logility. All such liabilities shall hereinafter collectively be referred to as the "Assumed Liabilities."

Instruments of Conveyance and Transfer. Concurrently with the execution of this Agreement and effective as of the Effective Date, (i) the parties hereto have entered into (a) a Technology License Agreement in the form of Exhibit B attached hereto; and (b) a Marketing License Agreement in the form of Exhibit C attached hereto; (ii) the ASI Entities have executed and delivered to Logility a Bill of Sale in the form of Exhibit D attached hereto; and (iii) Logility has delivered to ASI a certificate representing One Thousand (1,000) shares of common stock of Logility and such other documents and undertakings as may be necessary to reflect the obligation of Logility to reimburse the ASI Entities for certain expenses as specified in Section 3. Additionally, the parties hereto shall take such other actions and execute and deliver such other documents and instruments, including, without limitation, bills of sale, endorsements, consents, assignments, and other good and sufficient instruments of conveyance and assignment, as shall be reasonably necessary to vest in Logility good......

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