<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1997
REGISTRATION NO. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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LOGILITY, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 7379 58-2281338
(STATE OR JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
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470 EAST PACES FERRY ROAD, N.E.
ATLANTA, GEORGIA 30305
(404) 261-9777
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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HENRY B. LEVI, ESQ.
GAMBRELL & STOLZ, L.L.P.
SUITE 4300, SUNTRUST PLAZA
303 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30308
(404) 577-6000
FACSIMILE: (404) 221-6501
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE AND
FACSIMILE NUMBERS, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copy to:
WILLIAM B. ASHER, JR., ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
125 HIGH STREET
BOSTON, MASSACHUSETTS 02110
(617) 248-7000
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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 any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT (1) PRICE (1) FEE
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<S> <C> <C> <C> <C>
Common Stock, no par value ........ 2,530,000 Shares(2) $13.00 $32,890,000.00 $9,967.00
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
under Rule 457(o).
(2) Includes 330,000 shares which the Underwriters have the option to purchase
solely to cover over-allotments, if any.
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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED , 1997
2,200,000 SHARES
LOGO
OF LOGILITY, INC. APPEARS HERE
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by the
Company. Prior to this offering, there has been no public market for the Common
Stock of the Company. Following this offering, American Software, Inc. will own
approximately 84% of the outstanding shares of Common Stock (assuming no
exercise of the Underwriters' over-allotment option). See "Relationship with
American Software and Certain Transactions."
It is currently estimated that the initial public offering price of the
Common Stock will be between $11.00 and $13.00 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Common Stock has been approved for quotation on the
Nasdaq National Market, upon completion of this offering, under the symbol
"LGTY."
SEE "RISK FACTORS" COMMENCING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
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<S> <C> <C> <C>
Per Share................................ $ $ $
Total (3)................................ $ $ $
</TABLE>
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $850,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 330,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
Price to Public will total $ , the Underwriting Discount will
total $ and Proceeds to Company will total $ . See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any orders in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
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Montgomery Securities Cowen & Company
, 1997
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
<PAGE>
Title: Make Collaborative Planning A Reality With Logility
Graphic:
The centerpiece of the diagram is a five-sided pyramid. The face panel is
horizontally divided into five segments, with the top segment blank and
the remaining four segments containing, from top to bottom, the words "Global,"
"Region," "Territory," and "Customer." The panel immediately left of the face
panel is divided into three horizontal segments, containing, from top to bottom,
the words "Batch," "Lot," and "SKU." The panel immediately right of the face
panel is also divided into three horizontal segments, containing, from top to
bottom, the words "Pallet," "Cube," and "Unit." The two smaller panels on the
far left and far right sides of the pyramid are each divided into three
horizontal segments and neither panel contains any writing.
Beneath the face panel are two stylized pictures. One picture depicts an
individual sitting at a desk entering or reviewing data on a PC and to the
center-left of the picture is contained the word "sales." The other picture
depicts an individual entering or reviewing data on a PC and the bottom of the
picture contains the word "distributors." Between the picture of the
distributor and the face panel of the pyramid is a globe of the world containing
the word "web." The globe is connected to the face panel of the pyramid and the
picture of the distributor by a wave, and the words "Chicago," "Munich," and
"Melbourne" surround the globe and the PC.
Beneath the panel immediately left of the face panel is a stylized picture
of an individual sitting at her desk reviewing or entering data on a PC. The
bottom of the picture contains the word "manufacturing." Beneath the panel
immediately right of the face panel is a stylized picture of an individual
holding his hard-hat in one hand and leaning over a PC while reviewing data on
the PC. The bottom of the picture contains the word "logistics."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OFFERED
HEREBY, INCLUDING THE ENTRY OF STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS
OR THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
Title: Logility Value Chain Solutions
Diagram:
The center of the diagram contains an oval within which are contained eight
smaller circles. The center of the oval contains the words "Logility Value
Chain Solutions" and the eight smaller circles contain the following words:
Demand Planning, Replenishment Planning, Manufacturing Planning, Transportation
Planning, Transportation Management, WarehousePRO, Inventory Planning and Event
Planning. Between the smaller circles and the outer boundary of the oval, to
the center-left are the words "Demand Chain Voyager(TM)" and to the center-right
are the words "Supply Chain Voyager(TM)."
Outside the oval, there are four stylized pictures at the four corners of
the diagram. Each picture depicts a device or object and each picture contains
two PC screens with data or graphs. Beneath the picture at the upper-left corner
of the diagram is a caption titled "Increasing forecast accuracy including
inventory simulations" and the two PC screens with this picture are connected to
the Demanding Planning and Inventory Planning circles within the oval. Beneath
the picture at the upper-right corner of the diagram is a caption titled
"Optimizing manufacturing & replenishment plans" and the two PC screens with
this picture are connected to the Replenishment Planning and Manufacturing
Planning circles within the oval. Beneath the picture at the lower-right corner
of the diagram is a caption titled "Integrating transportation planning and
management" and the two PC screens with this picture are connected to the
Transportation Planning and Transportation Management circles within the oval.
Beneath the picture at the lower-left corner of the diagram is a caption titled
"Improving warehouse operations with configurable workflows" and the two PC
screens with this picture are connected to the WarehousePRO circle within the
oval. The screens are connected to the circles by shaded beams which expand in
width and fade as they extend from the circles to the PC screens.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Combined Financial Statements and
the Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise
noted herein, all information in this Prospectus (i) reflects a 11,300-for-1
split of the shares of Common Stock effected in August 1997 and (ii) assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting."
THE COMPANY
Logility, Inc. ("Logility" or the "Company") develops, markets and supports
software applications that optimize the operating efficiencies of
manufacturers, suppliers, distributors, retailers and other organizations along
the "value chain." The value chain refers to the complex network of
relationships that organizations maintain with trading partners to source,
manufacture and deliver products to the customer. The Company's solution,
Logility Value Chain Solutions, consists of an integrated software suite that
provides advanced collaborative planning and integrated logistics capabilities
that are designed to reduce inventory costs, improve forecast accuracy,
decrease order cycle times, optimize production scheduling, streamline
logistics operations, reduce transportation costs and improve customer service.
The Company markets its solution primarily to Global 2000 enterprises through a
dedicated sales force and through relationships with third-party vendors and
service providers.
Enterprises are increasingly under pressure to better manage the value chain
as they seek to improve manufacturing efficiency and logistics operations,
while maintaining flexibility and responsiveness to changing market conditions
and customer demands. To manage and facilitate enhanced collaboration among the
various participants in the value chain, organizations are increasingly
deploying value chain management software solutions to address their planning
and execution requirements. Industry sources estimate that the advanced
planning and scheduling market was $350 million in 1996, and is projected to
grow at a compound annual growth rate of 46% to more than $1.6 billion by 2000.
The warehouse management systems software market was approximately $270 million
in 1996, and is projected to grow at a compound annual growth rate of 40% to
more than $1.4 billion by 2001.
Logility Value Chain Solutions is designed to be an end-to-end solution that
synchronizes demand opportunities with supply constraints and logistics
operations, and consists of two solution groups, Logility Planning Solutions
and Logility Execution Solutions. Logility Planning Solutions enables users to
analyze information to more effectively manage demand and respond to changing
market conditions, while optimizing the use of production and distribution
assets. Logility Execution Solutions is designed to enable users to effectively
and efficiently manage the flow of products through distribution centers and
warehouses and ensure that those products are delivered to the right location
using the optimal transportation alternatives available. Logility Value Chain
Solutions is highly modular, allowing for rapid deployment. In addition, the
software is scaleable to meet the management requirements of complex processes
involving tens of thousands of products across multiple sites.
The Company believes that it is a technology leader in the field of value
chain management software solutions and intends to continue to provide
innovative, advanced solutions to the marketplace. The Company believes that it
was one of the earliest providers of planning software solutions on a client-
server platform, one of the first on Windows NT and the first to introduce a
collaborative planning software solution that operates over the Internet. The
Company intends to leverage its installed base of customers to broaden the
utilization of its solution suite, and to sell newly developed modules that
complement the functionality of its existing product line. The Company has a
number of recent marketing or product relationships with leading Enterprise
Resource Planning ("ERP") vendors and systems integrators, including CAPS
Logistics, Oracle, PeopleSoft, Ross
3
<PAGE>
Systems and SAP. The Company intends to utilize these and future relationships
with other service providers, software vendors and systems consulting
organizations, and to leverage its relationship with its parent, American
Software, Inc. ("American Software"), to enhance its indirect distribution
channels.
The Company has licensed one or more modules of Logility Value Chain
Solutions to more than 200 companies worldwide, including Eastman Chemical,
FINA, Heineken USA, Newell, Pharmacia & Upjohn, Pfizer International, Reynolds
Metals, Sony Electronics, Timex and VF Corporation. The Company sells its
products through direct and indirect channels in the United States and Canada
and primarily through indirect channels outside North America. The Company
derived approximately 12% of its revenues in fiscal 1997 from international
sales.
The Company is currently a wholly-owned subsidiary of American Software.
References herein to the Company include, as required by the context, the
business of the Company as conducted by American Software and certain of its
other subsidiaries prior to the transfer of that business to the Company.
References herein to American Software include, as required by the context,
American Software and certain of its subsidiaries. The Company was incorporated
in Georgia on July 25, 1996. Its principal executive offices are located at 470
East Paces Ferry Road, N.E., Atlanta, Georgia 30305, and its telephone number
is (404) 261-9777.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company. 2,200,000 shares
Common Stock to be outstanding after
the offering....................... 13,500,000 shares(1)
Use of proceeds..................... For (i) research and development, (ii)
sales and marketing, (iii) working capital
and other general corporate purposes and
(iv) possible acquisitions.
Nasdaq National Market symbol ...... LGTY
</TABLE>
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(1) Based on the number of shares of Common Stock outstanding as of the date of
this Prospectus. Excludes an aggregate of 295,000 shares of Common Stock
reserved for future option grants under the Company's 1997 Stock Plan. See
"Management--1997 Stock Plan."
4
<PAGE>
SUMMARY COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
----------------------------------
1995 1996 1997
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<S> <C> <C> <C> <C> <C>
COMBINED STATEMENT OF OP-
ERATIONS DATA:
Revenues................ $10,210 $16,633 $21,824
Cost of revenues........ 3,838 6,023 7,158
------- ------- -------
Gross margin............ 6,372 10,610 14,666
------- ------- -------
Operating loss.......... (3,246) (2,874) (1,954)
Net loss................ $(3,246) $(2,874) $(1,954)
======= ======= =======
Net loss per common
share.................. $ (0.29) $ (0.25) $ (0.17)
======= ======= =======
Weighted-average common
shares outstanding..... 11,300 11,300 11,300
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1997
---------------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
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<S> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET
DATA:
Cash and cash equiva-
lents.................. $ 732 $24,434
Working capital......... 557 24,259
Total assets............ 16,367 40,069
Total stockholder's eq-
uity................... 6,668 30,370
</TABLE>
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(1) Gives effect to the sale of the 2,200,000 shares of Common Stock offered
hereby and the application of the net proceeds therefrom.
FORWARD-LOOKING STATEMENTS
Information contained in this Prospectus includes "forward-looking
statements" that are based largely on the Company's current expectations and
are subject to a number of risks and uncertainties. The Company faces many
risks and uncertainties, including without limitation those described in this
Prospectus under the caption "Risk Factors." Because of these risks and
uncertainties, the Company's actual results may differ materially from any
results presented in or implied by the forward-looking statements included in
this Prospectus.
----------------
Logility, Logility Executive Solutions, Logility Planning Solutions, Logility
Value Chain Solutions, Demand Chain Voyager, Supply Chain Voyager and
WarehousePRO are trademarks of the Company. This Prospectus also contains
trademarks and trade names of companies other than the Company.
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Common Stock offered hereby.
RECENT ORGANIZATION; ABSENCE OF OPERATING HISTORY AS AN INDEPENDENT BUSINESS
The Company is a wholly-owned subsidiary of American Software and initially
conducted its business and operations as the Supply Chain Planning division of
American Software. In January 1997, American Software transferred
substantially all of the client-server value chain management software
operations (including research and development), assets and associated
liabilities of its Supply Chain Planning division to the Company. In August
1997, American Software transferred to the Company its WarehousePRO software
and substantially all of the associated operations and liabilities. Also in
August 1997, American Software transferred to the Company the business,
operations, assets and liabilities of Distribution Sciences, Inc., a wholly-
owned subsidiary of American Software, including the software now known as
Transportation Management and Transportation Planning, by merging that
subsidiary into the Company. Accordingly, the Company has only a limited
independent operating history upon which an evaluation of the Company and its
prospects can be based. The Company's management has no experience, as a
group, operating the Company as a stand-alone business. The inability of the
Company to operate successfully as a separate entity would have a material
adverse effect on the Company's business, operating results and financial
condition.
Certain financial information included in the Company's combined results of
operations have been determined on the basis of allocations of expenses and
other items between American Software and the Company, which allocations
management believes to be reasonable. The financial information included
herein does not necessarily indicate the results of operations, financial
position and cash flows of the Company in the future or what the results of
operations, financial position and cash flows would have been had the Company
been operated as a separate, stand-alone business during the periods
presented.
Because the Company operated as a division of American Software until
January 1997, and the name "Logility" was not used by American Software or the
Company in the marketplace until that time, the Company has had only a short
period to establish name recognition in the market for value chain management
software products. Achieving this name recognition may be delayed by the
Company's continuing ties to American Software as a majority-owned subsidiary.
The Company has in place a marketing campaign to establish and enhance name
recognition for its products and services, but there can be no assurance that
this campaign will be successful. Failure to achieve such name recognition
could deprive the Company of sales opportunities and could have a material
adverse affect on the Company's business, operating results and financial
condition. See "Business--Sales and Marketing."
CONTINUING RELIANCE ON AMERICAN SOFTWARE
Because the Company has historically operated as a division of American
Software, until recently it has received substantially all of its financial,
accounting, marketing and management services from American Software. To date,
all sales of WarehousePRO software products have been made by American
Software's sales force. The Company and American Software have entered into an
agreement whereby American Software has agreed to act as a sales and marketing
agent for the Company. The Company expects that it will rely to a substantial
extent on this continuing sales and marketing relationship with American
Software. In addition, the Company will continue to rely on financial,
accounting and management services provided by American Software. Except as
otherwise described in this Prospectus, American Software has no obligation to
provide these services to the Company. The Company's business, operating
results and financial condition may be adversely affected by a reduction or
discontinuation of services from American Software. See "Relationship with
American Software and Certain Transactions."
6
<PAGE>
SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS AND SEASONALITY;
POTENTIAL QUARTERLY LOSSES
The Company has experienced, and expects to continue to experience,
significant fluctuations in quarterly operating results that may be caused by
many factors, including, among others: the size and timing of orders for the
Company's products; the length of the sales cycle and implementation schedule
for the Company's products, and delays in the implementation process; customer
order deferrals in anticipation of new products and product enhancements;
introduction or enhancement of products by the Company or its competitors;
changes in pricing policy of the Company or its competitors; increased
competition; seasonality of revenue; technological changes in computer systems
and environments; quality control of products sold; readiness of the market to
deploy value chain management products; the Company's success in expanding its
sales, support, service and marketing organizations; personnel changes;
fluctuation in foreign currency exchange rates; mix of license, maintenance and
service revenues; and general economic conditions. Because a significant
portion of the Company's revenues has been, and the Company believes will
continue to be, derived from large orders, the timing of orders and their
fulfillment has caused, and is expected to continue to cause, material
fluctuations in the Company's operating results, particularly on a quarterly
basis. In addition, the Company intends to continue to expand its direct sales
force. The timing of such expansion and the rate at which new sales personnel
become productive has in the past caused, and could in the future cause,
material fluctuations in the Company's quarterly operating results. As a result
of these and other factors, the Company believes that period-to-period
quarterly comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
The Company's future quarterly revenues are difficult to forecast in part
because the value chain management software market is an emerging market that
is subject to rapid change. Further, because the Company generally ships
software products within a short period after receipt of an order, it typically
does not have a material backlog of unfulfilled orders. Accordingly, license
revenues in any quarter are substantially dependent on orders booked and
shipped in that quarter and cannot be predicted with any degree of certainty.
In addition, the Company typically receives a significant portion of product
orders in the last two weeks of a quarter. Because a high percentage of the
Company's expenses, primarily personnel and facilities costs, are relatively
fixed, a small variation in the timing of software licensing transactions,
particularly at or near the end of any quarter, can cause significant
variations in operating results from quarter to quarter, and may result in
losses.
Due to the foregoing factors, it is possible that in future periods the
Company's revenues and thus its operating results may be below the expectations
of public market analysts and investors. In such event, the price of the
Company's Common Stock could be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Selected Quarterly Operating Results."
RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCTS
The market for the Company's software products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The Company's future success will depend upon
its ability to continue to enhance its current product line, to maintain and
extend compatibility with leading ERP systems and with widely used hardware and
operating system platforms, and to develop and introduce new products that keep
pace with technological developments, satisfy increasingly sophisticated
customer requirements and achieve market acceptance. The introduction of
products using new technologies and the emergence of new industry standards
could render the Company's existing products, and products currently under
development, obsolete and unmarketable. In addition, there are special risks
associated with products, such as the Demand Chain Voyager and Supply Chain
Voyager modules, that must comply with rapidly changing Internet standards. See
"Dependence on and Risks Associated with the Internet and Intranets." There can
be no assurance that the Company will be successful in developing and
marketing, on a timely and cost-effective basis, fully functional product
enhancements or new products that respond to technological advances by others,
or that its new products will achieve market acceptance. The Company's failure
to successfully develop and market
7
<PAGE>
product enhancements or new products could have a material adverse effect on
the Company's business, operating results and financial condition.
As a result of the complexities inherent in client/server computing
environments and the broad functionality and performance demanded by customers
for value chain management products, major new products and product
enhancements can require long development and testing periods. Software
products as complex as those offered by the Company often encounter
development delays and may contain undetected defects when introduced or when
new versions are released. There can be no assurance that the Company will not
encounter product development delays in the future or that, despite testing by
the Company, errors will not be found in new products or product enhancements
after commencement of commercial shipments, resulting in damage to the
Company's reputation, loss of revenue, loss of market share, delay in market
acceptance or warranty claims, any of which could have a material adverse
effect upon the Company's business, results of operations and financial
condition. Although the Company generally attempts to limit by contract its
exposure to incidental and consequential damages, if a court failed to enforce
the liability limiting provisions of the Company's contracts for any reason,
or if liabilities arose which were not effectively limited, the Company's
business, results of operations and financial condition could be materially
and adversely affected. See "Business--Research and Product Development."
DEPENDENCE ON EMERGING MARKET FOR VALUE CHAIN MANAGEMENT SOFTWARE
The Company currently derives, and expects to continue to derive,
substantially all of its revenues from licenses and services related to value
chain management software products. Although demand for these products has
grown in recent periods, the market for value chain management software is
still emerging. There can be no assurance that this market will continue to
grow or, even if it does grow, that businesses will purchase the Company's
products. The Company has spent, and intends to continue to spend,
considerable resources educating potential customers generally about value
chain management software solutions and specifically about the Company's
products. There can be no assurance, however, that such expenditures will
enable the Company to achieve any additional degree of market acceptance. If
the market for value chain management software fails to grow or grows more
slowly than the Company currently anticipates, the Company's business,
operating results and financial condition would be materially and adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Products and Services."
COMPETITION
The Company's products are targeted at emerging markets within the
application software market, which is intensely competitive and characterized
by rapid technological change. The Company's existing competitors are diverse
and offer a variety of solutions directed at various aspects of the value
chain, as well as the enterprise as a whole. In addition the Company faces
potential competition for the Logility Value Chain Solutions software from
(i) internal development efforts by corporate information technology
departments, (ii) smaller independent companies that have developed or are
attempting to develop value chain management software that competes with the
Company's software solution, and (iii) other business application software
vendors that may broaden their product offerings by internally developing, or
by acquiring or partnering with independent developers of, value chain
management software.
Many of the Company's competitors and potential competitors have longer
operating histories, significantly greater financial, technical, marketing and
other resources, greater name recognition and a larger installed base of
customers than the Company. In order to be successful in the future, the
Company must continue to respond promptly and effectively to technological
change and competitors' innovations. The Company's competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements or devote greater resources to the development, promotion and
sale of their products than the Company. The principal competitive factors
affecting the market for the Company's products include vendor and product
reputation; product architecture, functionality and features; costs; ease and
speed of implementation; return on investment; product quality, price and
performance; and level of support. There can be no assurance that the Company
will be able to compete successfully against current and future competitors,
and the failure to do so
8
<PAGE>
could have a material adverse effect upon the Company's business, operating
results and financial condition. See "Business--Competition."
MANAGEMENT OF GROWTH; RELIANCE ON MANAGEMENT AND KEY PERSONNEL
The Company's business has grown significantly in the last two fiscal years,
with total revenues increasing from $10.2 million in fiscal year ended April
30, 1995 to $21.8 million in fiscal year ended April 30, 1997. The Company's
recent expansion has resulted in substantial growth in the number of its
employees (from 81 at April 30, 1995, to 185 at July 31, 1997), the scope of
its operations and the geographic distribution of its operations and customers.
This recent growth has placed, and if such growth is maintained will continue
to place, a significant strain on the Company's management and operations.
Moreover, the Chief Financial Officer of the Company, James M. Modak, recently
joined the Company in August 1997. The Company's future operating results will
depend on the ability of its officers and other key employees to continue to
implement and improve its operational, customer support and financial control
systems, and to effectively expand, train and manage its employee base. There
can be no assurance that the Company will be able to manage any future growth
successfully, and any inability to do so could have a material adverse effect
on the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview."
The Company's future performance also depends in part upon the continued
service of key members of management, as well as sales, support, service,
marketing and product development personnel. The loss of one or more of the
Company's key personnel could have a material adverse effect on the Company's
business, operating results and financial condition. The Company believes its
future success will depend in part upon its ability to attract and retain
highly skilled management, sales, support, service, marketing and product
development personnel. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to retain its key employees or
that it will be successful in attracting, assimilating and retaining such
personnel in the future. Failure to attract and retain key personnel could have
a material adverse effect on the Company's business, operating results and
financial condition. See "Business--Employees" and "Management--Executive
Officers and Directors."
The Company does not have, and does not currently intend to obtain, key man
insurance on any of its executive management. There are generally no post-
employment restrictions on the right of executive management to compete with
the Company or solicit its customers or employees. The absence of key man
insurance and post-employment restrictions could adversely affect the Company's
business, operating results and financial condition, particularly if an
executive officer of the Company elected to terminate his or her employment and
become associated with a competitor of the Company. See "Management--Executive
Officers and Directors."
RELIANCE ON AND NEED TO DEVELOP AND ENHANCE RELATIONSHIPS WITH THIRD PARTIES
Prospective customers of the Company increasingly rely on consulting and
systems integration firms and third-party software and hardware vendors in
selecting and implementing value chain management software solutions.
Accordingly, the Company expects to rely in part on such third parties for
sales and lead generation and for implementation services. The Company has
formal and informal arrangements with a number of third-party software and
hardware vendors and consulting and systems integration firms to enhance its
marketing, sales, support, service and product development efforts as well as
software implementation services. Such firms include CAPS Logistics, Oracle,
PeopleSoft, Ross Systems, SAP, management consulting firms in the United
States, and local consulting and sales organizations in Europe and in the
Asia/Pacific region. Many of these firms have similar, and often more
established, relationships with the Company's competitors. Even when the
Company establishes such a relationship, the success of the relationship will
depend on a variety of factors, some of which will not be within the control of
the Company. Moreover, there can be no assurance that these firms, many of
which have significantly greater financial and marketing resources than the
Company, will not develop or market software products that compete with the
Company's products in the future or will not otherwise
9
<PAGE>
discontinue their relations with or support of the Company. The failure of the
Company to maintain its existing relationships, or to establish new
relationships in the future, for any reason, could have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Business--Sales and Marketing."
DEPENDENCE UPON SUCCESSFUL EXPANSION OF MARKETING, SALES, SUPPORT AND SERVICE
ORGANIZATIONS
Many of the personnel in the Company's marketing, sales, support and service
organizations have been employed by the Company for less than one year,
particularly those in the sales organization. The Company's future success
depends upon the successful expansion of these organizations and its ability to
establish indirect distribution channels, including resellers, systems solution
vendors, application software vendors and systems integrators. The Company
currently plans to continue to expand its direct sales force, to develop
additional indirect distribution channels and to expand its customer service
and support organizations. Although the Company believes that such initiatives
ultimately will improve the Company's operating results, to the extent related
expenditures are incurred and revenues do not correspondingly increase, the
Company's operating results will be materially and adversely affected. In
addition, the Company is currently shifting the organization of its sales force
from a geographic focus to a vertical market focus, and has recently
established a new sales organization for the Company's WarehousePRO software
product. There can be no assurance that these steps will be successful.
Further, competition for experienced and effective sales personnel in the
software industry has increased substantially and continues to increase, making
expansion of a sales organization more difficult and expensive. If the Company
is unable to expand its marketing, sales, support and service organizations or
develop additional distribution channels on a timely basis, the Company's
business, operating results and financial condition could be materially and
adversely affected. See "Business--Sales and Marketing."
INTERNATIONAL OPERATIONS
The Company derived approximately 12%, 20% and 12% of its total revenues from
international sales in fiscal years ended April 30, 1997, 1996 and 1995,
respectively. The Company believes that continued growth and profitability will
require increased sales in international markets. In order to successfully
expand international sales, the Company must establish additional foreign
operations and hire additional personnel, as well as expand its indirect sales
channels in markets outside North America. To the extent that the Company is
unable to do so in a timely and effective manner, the Company's growth, if any,
in international sales will be limited, and the Company's business, operating
results and financial condition could be materially adversely affected. In
addition, even if international operations are successfully expanded, there can
be no assurance that the Company will be able to maintain or increase
international market demand for its products or that such operations will be
profitable.
The Company's international operations are subject to risks inherent in
international business activities, including, in particular, management and
staffing of an organization spread over various countries, longer accounts
receivable payment cycles in certain countries, compliance with a variety of
foreign laws and regulations, unexpected changes in regulatory requirements,
overlap of different tax structures, foreign currency exchange rate
fluctuations and general economic and political conditions. To date, the
Company's revenues from international operations have primarily been
denominated in United States dollars. Other risks associated with international
operations include import and export licensing requirements, trade restrictions
and changes in tariff rates. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Sales and
Marketing."
INTEGRATION OF TRANSPORTATION MANAGEMENT, TRANSPORTATION PLANNING AND
WAREHOUSEPRO PRODUCTS
The Company acquired the Transportation Management, Transportation Planning
and WarehousePRO software products from American Software in August 1997. Prior
to such transfers, these products were not marketed or sold as part of Logility
Value Chain Solutions, but rather were marketed and sold through separate
organizations. To maximize the value of these additional products, the Company
intends to fully integrate them into its software solution suite. There can be
no assurance, however, that these integration efforts will be effective
10
<PAGE>
or that they will be implemented on a timely basis. Failure to successfully
integrate these products could have a material adverse effect on the Company's
business, operating results and financial condition. See "Business--Sales and
Marketing."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
In the future, the Company may be required to raise additional capital in
order to conduct its operations. Such capital may be raised through additional
public or private equity financings, borrowings and other available sources.
There can be no assurance that additional funding, if necessary, will be
available on favorable terms, if at all. In addition, for so long as American
Software desires to include the Company in its consolidated group for federal
income tax purposes, which requires that American Software retain at least 80%
of the total voting power and stock with a value of at least 80% of the total
value of the Company, the Company might be unable to raise capital through
equity financings. If adequate funds are not available, the Company may be
required to meet its working capital requirements with debt financing or to
curtail operations. To the extent that additional capital is raised through the
sale of equity or securities convertible into equity, the issuance of such
securities could result in dilution to the Company's then existing
stockholders. See "Relationship With American Software and Certain
Transactions," "--Continuing Reliance on American Software" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company relies on a combination of trade secrets, copyright and trademark
laws, nondisclosure and other contractual provisions and technical measures to
protect its proprietary rights in its products. The Company has not sought to
patent its software products and thus does not have the protection that patents
might provide. There can be no assurance that the protections relied upon by
the Company will be adequate to protect its proprietary rights. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties,
including customers, may attempt to reverse engineer or copy aspects of the
Company's products or to obtain and use information that the Company regards as
proprietary. In addition, the laws of certain foreign countries in which the
Company's products are or may be licensed do not protect the Company's products
and intellectual property rights to the same extent as the laws of the United
States. As a result, there can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology. Although the
Company believes that its products, trademarks and other proprietary rights do
not infringe upon the proprietary rights of third parties, there can be no
assurance that third parties will not assert infringement claims against the
Company. Defense of such claims, with or without merit, could be time-
consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all, which could have a material adverse effect upon the
Company's business, results of operations and financial condition. See
"Business--Proprietary Rights and Licenses."
Certain software used in the Company's products is licensed by the Company
from third parties. There can be no assurance that the Company will continue to
be able to resell this software under its licenses or, if any licensor
terminates its agreement with the Company, that the Company will be able to
develop or otherwise procure replacement software from another supplier on a
timely basis or on commercially reasonable terms. In addition, such third-party
software may contain errors that would be difficult for the Company to detect
and correct.
RELATIONSHIP WITH AMERICAN SOFTWARE
Upon completion of this offering, American Software will own approximately
84% of the Company's outstanding Common Stock (or approximately 82% if the
Underwriters' over-allotment option is exercised in full). As long as American
Software beneficially owns a majority of the outstanding Common Stock, American
Software will be able to determine, without the consent of the other
stockholders of the Company, the outcome
11
<PAGE>
of any corporate action requiring approval of the Company's stockholders,
including the election of the entire Board of Directors of the Company. In
addition, through its beneficial ownership of a majority of the Common Stock
and control of the Board of Directors, American Software will be able to
control the management and affairs of the Company, including all determinations
with respect to acquisitions, dispositions, mergers, and other business
combinations, borrowings, issuances of Common Stock or other equity securities
of the Company, the Company's dividend policy, and any change in control of the
Company. Further, the Amended and Restated Articles of Incorporation of the
Company (the "Articles") permit stockholder action by written consent if
approved by holders of a majority of the outstanding shares of Common Stock,
which currently would permit American Software to act without calling a meeting
of stockholders. See "Description of Capital Stock--Certain Provisions of
Articles and Bylaws."
The Company's relationship with American Software also is governed by various
agreements between the Company and American Software and certain of American
Software's other direct and indirect subsidiaries, including a Subsidiary
Formation Agreement, Services Agreement, Facilities Agreement, Tax Sharing
Agreement, Stock Option Agreement, Technology License Agreement, and Marketing
License Agreement, the material terms of which are summarized herein. Because
the Company was a wholly-owned subsidiary of American Software at the time
these agreements were executed, none of these arrangements have resulted from
arm's-length negotiations and, therefore, the costs charged or allocated to the
Company for services thereunder may be higher or lower than those that may be
charged by third parties. See "Relationship with American Software and Certain
Transactions."
The Articles provide that any agreement or arrangement between the Company
and American Software or an affiliate of American Software, or any amendment or
termination of any such agreement or arrangement, that is (i) approved by a
majority of the Company's directors who are not officers of either the Company
or American Software (or its affiliates) or directors of American Software (or
its affiliates) (the "Disinterested Directors"), or (ii) approved by the
holders of a majority of the Company's outstanding voting stock (not including
stock owned by American Software or an affiliate of American Software), or
(iii) consistent with arrangements, standards, protocols, or guidelines
approved by the Disinterested Directors of the Company, shall be deemed fair to
the Company and its shareholders, provided that no presumption shall arise that
such agreement or arrangement (or amendment or termination thereof) is not fair
to the Company and its shareholders solely by reason of the fact that the
approval procedures described in items (i) and (ii) above were not obtained.
The Articles also contain provisions allocating corporate opportunities between
American Software (and its affiliates) and the Company based primarily on the
relationship to the Company and American Software (or its affiliates) of the
individual to whom such opportunity is presented. In general, corporate
opportunities are allocated to the entity of which such individual is an
officer or for which the officer is acting when the opportunity is presented.
If at the time the opportunity is presented the individual is an officer acting
for both the Company and American Software, or if it is unclear for which
entity such individual is acting, the opportunity is allocated to American
Software. See "Relationship with American Software and Certain Transactions"
and "Description of Capital Stock."
Conflicts of interest may arise between the Company and American Software in
a number of areas relating to their past and ongoing relationships, including
the nature and quality of services rendered by the Company to American Software
and its affiliates or by American Software and its affiliates to the Company,
potential competitive business activities, shared administrative and finance
functions, shared facilities, tax and employment benefit matters, stock option
agreements, sales or distributions by American Software of all or any portion
of its ownership in the Company, and American Software's ability to control the
management and affairs of the Company. There can be no assurance that American
Software and the Company will be able to resolve potential conflicts or that,
if resolved, the Company would not receive more favorable resolution than if it
were dealing with an unaffiliated party. In addition, certain of the agreements
between the Company and American Software contain specific procedures for
resolving disputes between the Company and American Software with respect to
the subject matter of those agreements. There can be no assurance that more
favorable results to the Company would not be obtained under different
procedures.
12
<PAGE>
As long as American Software desires to include the Company as a member of
its consolidated group for federal income tax purposes (which requires that
American Software owns at least 80% of the total voting power and stock of the
Company with a value equal to at least 80% of the total value of the Company),
the Company will be constrained in its ability to issue stock pursuant to
equity compensation plans, raise equity capital, or issue Common Stock in
connection with acquisitions. For any period of time that the Company continues
to be a member of American Software's consolidated group, it will be jointly
and severally liable for the federal income tax liability of other members of
the consolidated group and for funding and termination liabilities applicable
to the consolidated group's tax-qualified employee benefit plans.
American Software could decide to sell or otherwise dispose of all or a
portion of its Common Stock at some future date, and there can be no assurance
that, in any transfer by American Software of a controlling interest in the
Company, any other holders of Common Stock will be allowed to participate in
such transaction or will realize any premium with respect to their shares of
Common Stock. Sales or distributions by American Software of substantial
amounts of Common Stock in the public market or to its shareholders could
adversely affect prevailing market prices for the Common Stock. See
"Relationship with American Software and Certain Transactions" and "Shares
Eligible for Future Sale."
DEPENDENCE ON AND RISKS ASSOCIATED WITH THE INTERNET AND INTRANETS
The Company believes that sales of Demand Chain Voyager and Supply Chain
Voyager will depend in large part upon the adoption of the Internet and
intranets for commerce and communications by businesses and other end-users.
The Internet and intranets are new and evolving, and there can be no assurance
of their widespread adoption for such purposes. Critical issues concerning the
Internet and intranets, including security, reliability, cost, ease of use and
access, and quality of service, remain unresolved at this time, inhibiting
adoption by many enterprises and other end-users. The failure of enterprises to
use the Internet and intranets could have a material adverse effect on the
Company's business, results of operations and financial condition.
SHARES ELIGIBLE FOR SALE AFTER THIS OFFERING
The 11,300,000 shares of Common Stock owned by American Software will become
eligible for resale under Rule 144 promulgated under the Securities Act
commencing in January 1998. In addition, so long as American Software is able
to elect a majority of the Company's Board of Directors, it will have the
ability to cause the Company at any time to register for resale all or a
portion of the Common Stock owned by American Software. American Software and
the Company have agreed not to sell or issue any shares of Common Stock for a
180-day period after the date of this Prospectus, other than (i) shares of
Common Stock to be sold to the Underwriters in this offering, (ii) the grant of
options to purchase shares of Common Stock pursuant to the 1997 Stock Plan and
the issuance of shares of Common Stock upon the exercise of any options, and
(iii) shares issued by the Company in connection with any acquisitions.
American Software may, in the future, elect to distribute its shares of
Common Stock to its shareholders. In that event, it is anticipated that such
shares thereafter would be freely tradeable by persons other than "affiliates"
of the Company, without restriction or registration under the Securities Act.
No assurance can be given that American Software will make any such
distribution, and American Software has advised the Company that it has no
present intention of doing so.
Any shares of Common Stock issued upon exercise of options granted under the
Company's 1997 Stock Plan and any shares of Common Stock issued in connection
with any acquisitions will be subject to a lock-up during the 180-day period
following the date hereof and will become available for future sale in the
public market at prescribed times. Alternatively, the Company may elect to
provide that any options to purchase shares of Common Stock will not vest
during such 180-day period. Montgomery Securities, on behalf of the
Underwriters may, in its sole discretion and at any time without notice,
release all or any portion of the shares subject to lock-up agreements. Sales
of a significant number of shares of Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock and affect the Company's
13
<PAGE>
ability to raise capital. See "Relationship with American Software and Certain
Transactions" and "Shares Eligible for Future Sale."
BROAD MANAGEMENT DISCRETION OVER USE OF PROCEEDS
The primary purposes of this offering are to increase the Company's equity
capital, create a public market for the Company's Common Stock and to
facilitate future access by the Company to public capital markets. A
significant portion of the anticipated net proceeds to the Company from this
offering have not been designated for specific uses. Accordingly, management of
the Company will have broad discretion with respect to the use of these funds.
A portion of the net proceeds of this offering may also be used to acquire or
invest in products, technologies or businesses that broaden or enhance the
Company's current product offerings. There are no current agreements or
negotiations with respect to any acquisitions, investments or other
transactions. See "Use of Proceeds."
ANTI-TAKEOVER PROVISIONS
The Articles and the Amended and Restated Bylaws of the Company (the
"Bylaws") contain certain provisions that, along with American Software's
beneficial ownership of a majority of the Common Stock and control of the Board
of Directors of the Company, may have the effect of discouraging, delaying, or
preventing a change in control of the Company or unsolicited acquisition
proposals that another holder of the Common Stock might consider favorable.
Such provisions include authorizing the issuance of "blank check" preferred
stock, providing for a Board of Directors with staggered, three-year terms,
requiring supermajority voting to effect certain amendments to the Articles and
Bylaws, restricting certain business combinations with interested shareholders,
limiting the persons who may call special meetings of shareholders, and
establishing advance notice requirements for nominations for election to the
Board of Directors or for proposing matters that can be acted upon at meetings
of shareholders. Certain provisions of Georgia law and the Company's 1997 Stock
Plan also may have the effect of discouraging, delaying, or preventing a change
in control of the Company or unsolicited acquisition proposals. See
"Management--1997 Stock Plan" and "Description of Capital Stock."
DILUTION
Purchasers of the Common Stock offered hereby will suffer an immediate and
substantial dilution in the net tangible book value per share of the Common
Stock of $10.32 from the assumed initial public offering price. See "Dilution."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined by negotiation between the
Company and the Representatives of the Underwriters. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. In the event that the Company fails to appoint two independent
directors within 90 days after this offering, Nasdaq could terminate the
listing of the Company's Common Stock on the Nasdaq National Market, which
would have a material adverse effect on the liquidity and trading price of the
Common Stock. See "Management."
The market price of the Company's Common Stock is likely to be highly
volatile and could be subject to substantial fluctuations in response to
quarterly variations in operating results, losses or additions of significant
customers, announcements of technological innovations or new products by the
Company or its competitors, changes in financial estimates by securities
analysts, or other events or factors, including the risk factors described
herein. In addition, the stock market has experienced significant price and
volume fluctuations that have particularly affected the market prices of equity
securities of many high technology companies and that
14
<PAGE>
often have been unrelated to the operating performance of such companies. In
the past, securities class action litigation has often been instituted against
such companies following periods of volatility in the market price of their
securities. Such litigation, if commenced, could result in substantial costs
and a diversion of management's attention and resources, which could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Underwriting."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future. The Company currently intends to retain its
earnings, if any, for the development of its business. See "Dividend Policy."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $23.7 million, assuming an
initial public offering price of $12.00 per share ($27.4 million if the
Underwriters' over-allotment option is exercised in full), after deducting the
estimated underwriting discount and offering expenses. The Company expects to
use the net proceeds from this offering for research and development, sales
and marketing, working capital and other general corporate purposes. However,
the Company has not allocated any specific portion of the net proceeds to such
purposes and management will have the ability to allocate such proceeds at its
discretion. From time to time in the ordinary course of business, the Company
evaluates the acquisition of products, businesses and technologies that
complement the Company's business, for which a portion of the net proceeds may
be used. Currently, however, the Company does not have any understandings,
commitments or agreements with respect to any such acquisitions. Pending use
of the net proceeds, the Company intends to invest such funds in short-term,
interest-bearing securities. See "Risk Factors--Broad Management Discretion
over Use of Proceeds."
DIVIDEND POLICY
The Company currently anticipates that it will retain all future earnings
for use in its business and does not anticipate that it will pay any cash
dividends in the foreseeable future. The payment of any future dividends will
be at the discretion of the Company's Board of Directors and will depend upon,
among other things, future earnings, operations, capital requirements and the
general financial condition of the Company, general business conditions and
contractual restrictions on payment of dividends, if any. See "Risk Factors--
Relationship with American Software."
16
<PAGE>
CAPITALIZATION
The following table sets forth as of April 30, 1997 (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
giving effect to the merger of Distribution Sciences, Inc. into the Company and
the contribution of the WarehousePro division to the Company by American
Software, and (iii) the pro forma capitalization as adjusted to give effect to
the sale of the shares of Common Stock offered hereby (at an assumed initial
public offering price of $12.00 per share and after deducting the estimated
underwriting discount and offering expenses) and the application of the net
proceeds therefrom. The table should be read in conjunction with the Company's
Combined Financial Statements and related Notes thereto appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
APRIL 30, 1997
------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS, EXEPT SHARE
DATA)
<S> <C> <C> <C>
Shareholder's equity:
Preferred stock; 2,000,000 shares authorized;
no shares issued.............................. $ -- $ -- $ --
Common stock, no par value; 20,000,000 shares
authorized; 11,300,000 shares issued and
outstanding as of April 30, 1997.............. -- -- --
Additional paid-in capital..................... 4,337 9,790 33,492
Divisional equity.............................. 5,453 -- --
Accumulated deficit............................ (3,122) (3,122) (3,122)
------- ------ ------
Total stockholder's equity.................... 6,668 6,668 30,370
------- ------ ------
Total capitalization.......................... $ 6,668 6,668 30,370
======= ====== ======
</TABLE>
17
<PAGE>
DILUTION
The pro forma net tangible book value (deficit) of the Company as of April
30, 1997 was approximately $(1,064,000), or $(0.09) per share. Pro forma net
tangible book value per share is determined by dividing the Company's net worth
(tangible assets less liabilities) by the number of shares of Common Stock
outstanding. After giving effect to the sale of the shares of Common Stock
offered by the Company hereby at an assumed initial offering price of $12.00
per share and after deducting the estimated underwriting discount and offering
expenses payable, the pro forma net tangible book value of the Company as of
April 30, 1997, would have been approximately $22,638,000, or $1.68 per share.
This represents an immediate increase in such pro forma net tangible book value
of $1.77 per share to the existing stockholder and an immediate dilution of
$10.32 per share to new investors purchasing shares in this offering. If the
initial public offering price is higher or lower, the dilution to new investors
will be greater or less, respectively. The following table illustrates the
dilution in net tangible book value per share to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $12.00
------
Pro forma net tangible book value (deficit) per share as of
April 30, 1997................................................ $(0.09)
------
Increase per share attributable to new investors............... 1.77
------
Pro forma, as adjusted, net tangible book value per share after
this offering................................................... 1.68
------
Dilution per share to new investors.............................. $10.32
======
</TABLE>
The following table summarizes, on a pro forma basis as of April 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the price paid per share by the existing
stockholder and by new investors purchasing shares in this offering, based on
an assumed initial public offering price of $12.00 per share (before deducting
the estimated underwriting discount and offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholder... 11,300,000 83.7% $ 9,790,000(1) 27.1% $ 0.87
New investors.......... 2,200,000 16.3 26,400,000 72.9 12.00
---------- ---- ----------- ----
Total................. 13,500,000 100% $36,190,000 100%
========== ==== =========== ====
</TABLE>
- --------
(1) Determined at the time of transfer from divisional equity to additional
paid-in capital, including pro forma amount for balance not yet transferred
as of April 30, 1997.
18
<PAGE>
SELECTED COMBINED FINANCIAL DATA
The selected combined financial data presented below as of and for the years
ended April 30, 1995, 1996 and 1997 are derived from combined financial
statements of the Company that have been audited by KPMG Peat Marwick LLP,
independent certified public accountants. The combined statements of operations
data for the years ended April 30, 1993 and 1994 and the combined balance sheet
data at April 30, 1993 and 1994 are derived from unaudited combined financial
statements that include, in the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information set forth therein. The combined financial
statements as of April 30, 1996 and 1997 and for each of the years in the
three-year period ended April 30, 1997 and the report thereon are included
elsewhere in this Prospectus. The selected combined financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's Combined
Financial Statements and Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30,
-------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
COMBINED STATEMENTS OF OPERATIONS
DATA:
Revenues:
Licenses........................ $ 4,330 $ 6,967 $ 5,767 $10,700 $12,359
Maintenance..................... 1,089 2,040 2,628 3,797 5,051
Services........................ 595 1,232 1,815 2,136 4,414
------- ------- ------- ------- -------
Total revenues................. 6,014 10,239 10,210 16,633 21,824
------- ------- ------- ------- -------
Cost of revenues:
Licenses........................ 1,200 2,097 2,184 4,016 3,970
Maintenance..................... 410 539 624 876 1,219
Services........................ 304 744 1,030 1,131 1,969
------- ------- ------- ------- -------
Total cost of revenues......... 1,914 3,380 3,838 6,023 7,158
------- ------- ------- ------- -------
Gross margin..................... 4,100 6,859 6,372 10,610 14,666
------- ------- ------- ------- -------
Operating expenses:
Research and development........ 1,208 1,369 1,168 1,452 3,484
Sales and marketing............. 2,398 4,249 6,295 9,892 10,628
General and administrative...... 606 1,529 2,155 2,140 2,508
------- ------- ------- ------- -------
Total operating expenses....... 4,212 7,147 9,618 13,484 16,620
------- ------- ------- ------- -------
Operating loss................... (112) (288) (3,246) (2,874) (1,954)
Income taxes..................... -- -- -- -- --
------- ------- ------- ------- -------
Net loss........................ $ (112) $ (288) $(3,246) $(2,874) $(1,954)
======= ======= ======= ======= =======
Net loss per common share........ $ (0.01) $ (0.03) $ (0.29) $ (0.25) $ (0.17)
======= ======= ======= ======= =======
Weighted-average common shares
outstanding..................... 11,300 11,300 11,300 11,300 11,300
<CAPTION>
APRIL 30,
-------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
COMBINED BALANCE SHEET DATA:
Cash and cash equivalents........ $ 49 $ 38 $ 66 $ 13 $ 732
Working capital.................. 526 2,023 (1,705) 1,223 557
Total assets..................... 7,674 10,455 10,081 14,170 16,367
Total stockholder's equity....... 5,840 7,319 6,302 7,224 6,668
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements. Actual results
could differ materially. See "Risk Factors."
OVERVIEW
Logility, Inc. ("Logility" or the "Company") develops, markets and supports
software applications that optimize the operating efficiencies of
manufacturers, suppliers, distributors, retailers and other organizations along
the "value chain." The Company's products have been licensed to more than 200
customers in a variety of industry segments including consumer packaged goods,
chemicals and pharmaceuticals, food and beverage, manufacturing and
telecommunications and utilities. The Company markets its products through
direct and indirect sales channels in North America and primarily through
indirect sales channels outside North America. Historically, the Company has
financed its operations through its parent, American Software, as well as
through cash generated from operations.
The Company until recently conducted its business and operations as three
separate business units of American Software: a supply chain planning software
group, a warehouse management software group and a transportation management
software group. Effective January 1997, American Software transferred
substantially all of the business, operations (including research and
development), assets and associated liabilities of its Supply Chain Planning
division to the Company. Effective August 1997, American Software transferred
to the Company the WarehousePRO software and substantially all associated
operations, assets and liabilities. Effective August 1997, American Software's
wholly-owned subsidiary, Distribution Sciences, Inc., was merged into the
Company, transferring its business, operations, assets and liabilities,
including the Transportation Planning and Transportation Management software,
to the Company. The Company's combined financial statements included herein
present the combined assets, liabilities and results of operations for the
three business units for all periods.
The Company's revenues are derived primarily from three sources: software
licenses, maintenance and services. Software licenses generally are based upon
the number of modules, servers, users and/or sites licensed. License revenues
are recognized at the time of product delivery, provided no significant future
obligations exist and collection is deemed probable. Maintenance agreements
typically are for a one- to three-year term and usually are entered into at the
time of the initial product license. Maintenance revenues are recognized
ratably over the term of the maintenance agreement. Services revenues consist
primarily of fees from software implementation, training, consulting and
customization services and are recognized as the services are rendered.
Certain software development costs related to completion of internally
developed products are capitalized in accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased or Otherwise Marketed." Research and development expenses are
charged against earnings during the design phase of a project. Certain research
and development expenditures are capitalized after technological feasibility of
the project has been established until the product is generally available to
the public. At general availability, the capitalized costs of the project are
amortized ratably based on the projected revenues associated with the related
software or on a straight-line basis over three years, whichever method results
in a higher level of amortization. In the fiscal years ended April 30, 1997,
1996 and 1995, the Company capitalized 45%, 71% and 66%, respectively, of total
research and development expenditures. Total research and development
expenditures in such years, which included both research and development
expenses and capitalized computer software development costs, were $6.3
million, $5.1 million and $3.4 million, respectively. Amortization of
capitalized computer software development costs was $2.8 million, $1.1 million
and $456,000 in fiscal years ended April 30, 1997, 1996 and 1995, respectively.
Certain costs related to the purchase of software that is intended for resale
are capitalized. In the fiscal years ended April 30, 1997, 1996 and 1995, the
Company capitalized $36,000, $574,000 and $255,000, respectively, of purchased
computer software. Purchased computer software costs are amortized using the
straight-line method
20
<PAGE>
over a period of three to five years. Amortization of purchased computer
software costs was $233,000, $1.2 million, and $1.1 million in fiscal years
ended April 30, 1997, 1996, and 1995, respectively. In addition, the Company
wrote off $1.2 million of purchased computer software costs during fiscal year
ended April 30, 1996, in connection with certain software that contained older
technology.
The combined financial statements included in this Prospectus have been
derived from American Software's consolidated financial statements and reflect
the revenues and costs (certain costs include allocations from American
Software) of the Company's products, as well as allocations from American
Software's selling, general and administrative expenses. Prior to fiscal year
ended April 30, 1997, the Supply Chain Planning division shared sales and
marketing activities with American Software and, for reporting purposes, sales
and marketing expenses for these periods were allocated to the Company on the
basis of its license revenues as a percentage of the total American Software
license revenues. Beginning in fiscal year ended April 30, 1997, selling
expenses were based on direct costs and also included commissions to American
Software based upon its sales of the Company's products at commissions of 30%
(50% for certain international licenses), while certain marketing expenses
continued to include an allocation from American Software. The Company and its
predecessor, the Supply Chain Planning division, directly incurs research and
development expenditures, while certain general and administrative expenses are
allocated from American Software based on estimated usage of personnel and
facilities and other indirect costs.
For the three years ended April 30, 1997, the WarehousePRO division shared
sales and marketing activities with American Software and, for reporting
purposes, sales and marketing expenses were allocated to the Company on the
basis of its license revenues as a percentage of the total American Software
license revenues. Beginning in the fiscal year ending April 30, 1998, selling
expenses are based on direct costs and also include commissions to American
Software based upon its sales of WarehousePro at commissions of 30% (50% for
certain international licenses). In addition, the WarehousePRO division
directly incurs research and development expenditures, while certain general
and administrative expenses are allocated from American Software based on
estimated usage of personnel and facilities and other indirect costs.
Distribution Sciences, Inc. has operated as a wholly-owned subsidiary of
American Software since its purchase in June 1992 and since that time it has
conducted its business separately.
Accordingly, the Company's combined financial statements may not reflect the
operating results of a stand-alone company and should not be relied upon as
indicative of future results. After this offering, the Company will continue to
be a subsidiary of American Software, but will operate as a separate business.
Effective August 1, 1997, American Software provides facilities and services
pursuant to a Services Agreement, Facilities Agreement, and a Marketing License
Agreement. These agreements provide the basis for allocation of shared expenses
and the reimbursement of direct expenses. See "Relationship with American
Software and Certain Transactions."
In accordance with the Company's Tax Sharing Agreement with American
Software, the Company computes a separate, stand-alone income tax provision and
settles balances due to or from American Software on this basis. All benefits
derived from deferred tax assets as defined in the Tax Sharing Agreement (which
include net operating loss and tax credit carryforwards) that arise prior to
this offering will be allocated to American Software. Accordingly, the Company
will not receive any benefit from the $5.8 million of gross deferred tax assets
calculated on a separate return basis at April 30, 1997. However, deferred tax
liabilities will be allocated to the Company (which gave rise to the Company's
net deferred tax liability of $2.8 million at April 30, 1997 and $2.8 million
at April 30, 1996). After this offering, to the extent the tax computation
produces a tax benefit for the Company, American Software will be required to
pay such amounts to the Company only if and when such benefit is realized by
American Software by the reduction in taxes payable with respect to the current
tax period. At April 30, 1997, American Software had net operating loss
carryforwards of approximately $20 million, which must be utilized by American
Software before the Company would receive payment for any currently generated
tax benefits.
21
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues of certain line items included in the Company's combined
statements of operations:
<TABLE>
<CAPTION>
YEARS
ENDED APRIL 30,
---------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Revenues:
License............................................. 56% 64% 57%
Maintenance......................................... 26 23 23
Services............................................ 18 13 20
----- ----- -----
Total revenues..................................... 100 100 100
----- ----- -----
Cost of revenues:
License............................................. 22 24 18
Maintenance......................................... 6 5 6
Services............................................ 10 7 9
----- ----- -----
Total cost of revenues............................. 38 36 33
----- ----- -----
Gross margin....................................... 62 64 67
Operating expenses:
Research and development............................ 11 9 16
Sales and marketing................................. 62 59 49
General and administrative.......................... 21 13 11
----- ----- -----
Total operating expenses........................... 94 81 76
----- ----- -----
Operating loss....................................... (32) (17) (9)
Income taxes......................................... -- -- --
----- ----- -----
Net loss........................................... (32)% (17)% (9)%
===== ===== =====
</TABLE>
FISCAL YEAR ENDED APRIL 30, 1997 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1996
REVENUES
Total revenues increased 31% to $21.8 million in fiscal year ended April 30,
1997 from $16.6 million in fiscal year ended April 30, 1996. This increase was
primarily attributable to the increased acceptance of the Company's supply
chain planning software products and associated services and maintenance
revenues generated by new licensees, and the introduction of WarehousePRO, the
Company's object-oriented warehouse management solution. International revenues
decreased 24% to $2.6 million in fiscal year ended April 30, 1997 from $3.4
million in fiscal year ended April 30, 1996. As a percentage of total revenues,
international revenues decreased to 12% from 20% during the same period. The
decrease resulted primarily from two substantial orders received in fiscal year
ended April 30, 1996. International revenues were derived primarily from
customers in Canada, Europe, Australia and Asia. The Company's international
revenues are primarily denominated in U.S. dollars.
License Revenues. License revenues increased 16% to $12.4 million in fiscal
year ended April 30, 1997 from $10.7 million in fiscal year ended April 30,
1996. The increase resulted primarily from an increase in revenues generated by
the Company's value chain planning solution, both from the sale of a greater
number of licenses and from price increases, coupled with the introduction of,
WarehousePRO in May 1996.
Maintenance Revenues. Maintenance revenue increased 33% to $5.1 million in
fiscal year ended April 30, 1997 from $3.8 million in fiscal year ended April
30, 1996. The increase resulted from a greater number of customers under
maintenance contracts.
Services Revenues. Services revenues increased 107% to $4.4 million in fiscal
year ended April 30, 1997 from $2.1 million in fiscal year ended April 30,
1996. The increase was attributable to a greater demand for services generated
primarily by increased sales of the Company's products, increased focus on
providing more services to its customers and an increase in the rates charged
for services provided.
22
<PAGE>
COST OF REVENUES
Cost of License Revenues. Cost of license revenues consists primarily of
amortization of capitalized computer software development costs and purchased
computer software costs, salaries and benefits and royalties paid to third-
party software vendors. Cost of license revenues remained flat at $4.0 million
in fiscal year ended April 30, 1997 versus April 30, 1996. Cost of license
revenues as a percentage of license revenues decreased to 32% from 38% during
the same period. Cost of license revenues in fiscal year ended April 30, 1996
included a write-off of $1.2 million of purchased computer software costs.
Amortization of capitalized software development costs and purchased computer
software costs increased to $3.1 million in fiscal year ended April 30, 1997
from $2.3 million in fiscal year ended April 30, 1996.
Cost of Maintenance Revenues. Cost of maintenance revenues consists
primarily of the salaries and benefits of professionals involved in customer
support and product enhancement activities. Cost of maintenance revenues
increased 39% to $1.2 million in fiscal year ended April 30, 1997 from
$876,000 in fiscal year ended April 30, 1996. The increase resulted from
higher costs related to personnel needed to support a growing maintenance
customer base. Cost of maintenance revenues as a percentage of maintenance
revenues remained relatively flat at 24% in fiscal year ended April 30, 1997
versus 23% in fiscal year ended April 30, 1996.
Cost of Services Revenues. Cost of services revenues consists primarily of
salaries, benefits, and travel expenses related to personnel performing
professional services. Cost of services revenues increased 74% to $2.0 million
in fiscal year ended April 30, 1997 from $1.1 million in fiscal year ended
April 30, 1996. Cost of services revenues increased primarily due to higher
costs related to personnel needed to provide systems implementation and
consulting services purchased by a growing customer base. Cost of services
revenues as a percentage of services revenues decreased to 45% from 53% during
the same period, due to a greater proportion of higher margin professional
services.
OPERATING EXPENSES
Research and Development. Research and development expenditures consist
primarily of salaries, benefits, and certain indirect costs of personnel
responsible for developing new products and enhancing existing ones. Total
research and development expenditures, which include both research and
development expenses and capitalized software development costs, increased 24%
to $6.3 million in fiscal year ended April 30, 1997 from $5.1 million in
fiscal year ended April 30, 1996 due to an increase in development personnel.
Research and development as a percentage of total revenues remained relatively
flat in both years. Capitalized software decreased 23% to $2.8 million in
fiscal year ended April 30, 1997 from $3.6 million in fiscal year ended
April 30, 1996. Capitalized software as a percentage of total research and
development expenditures decreased to 45% from 71% during the same period.
These decreases resulted primarily from the completion of the development and
subsequent commercial release of WarehousePRO in May 1996. As a result of the
above fluctuations, research and development expenses increased 133% to $3.5
million for fiscal year ended April 30, 1997 from $1.5 million for fiscal year
ended April 30, 1996.
Sales and Marketing. Sales and marketing expenses include salaries,
commissions, and travel for Company personnel, advertising programs and other
promotional activities. Sales and marketing expenses increased 7% to $10.6
million in fiscal year ended April 30, 1997 from $9.9 million in fiscal year
ended April 30, 1996. The increase primarily resulted from costs incurred with
the establishment of a direct sales force in fiscal year ended April 30, 1997.
Sales and marketing expenses as a percentage of total revenues decreased to
49% from 59% during the same period. The decrease resulted primarily from the
Company incurring direct commission rates on sales made by American Software
personnel in fiscal year ended April 30, 1997 which were lower than the amount
allocated to the Company by American Software for sales and marketing in
fiscal year ended April 30, 1996.
23
<PAGE>
General and Administrative. General and administrative expenses consist
primarily of salaries and benefits of administrative, executive and financial
personnel as well as facilities, legal, business insurance and accounting
expenses. General and administrative expenses increased 17% to $2.5 million in
fiscal year ended April 30, 1997 from $2.1 million in fiscal year ended April
30, 1996. The increase was primarily due to increased costs of allocated
personnel and related costs to support the growing revenue base. General and
administrative expenses as a percentage of total revenues decreased to 11% from
13% during the same period.
Income Taxes. The Company is included in the consolidated Federal income tax
return filed by American Software. The Company has not recorded any income
taxes in fiscal years ended April 30, 1997 or 1996 as a result of the operating
losses incurred since the Company's inception.
FISCAL YEAR ENDED APRIL 30, 1996 COMPARED TO FISCAL YEAR ENDED APRIL 30, 1995
REVENUES
Total revenues increased 63% to $16.6 million in fiscal year ended April 30,
1996 from $10.2 million in fiscal year ended April 30, 1995. This increase can
be attributed to increases in license, services and maintenance revenues
related to the introduction of a Windows version of the Company's value chain
planning solution in August 1995. International revenues increased 178% to $3.4
million in fiscal year ended April 30, 1996 from $1.2 million in fiscal year
ended April 30, 1995. As a percentage of total revenues, international revenues
increased to 20% in fiscal year ended April 30, 1996 from 12% in fiscal year
ended April 30, 1995. The increase resulted primarily from two substantial
orders received in fiscal year ended April 30, 1996.
License revenues. License revenues increased 86% to $10.7 million in fiscal
year ended April 30, 1996 from $5.8 million in fiscal year ended April 30,
1995. The increase was due to increased demand for the Company's planning
solution generated by the release of an enhanced Windows version of the value
chain planning solution in August 1995.
Maintenance Revenues. Maintenance revenues increased 44% to $3.8 million in
fiscal year ended April 30, 1996 from $2.6 million in fiscal year ended April
30, 1995. The increase was primarily due to a greater number of customers under
maintenance contracts.
Services Revenues. Services revenues increased 18% to $2.1 million in fiscal
year ended April 30, 1996 from $1.8 million in fiscal year ended April 30,
1995. The increase was attributable to a greater demand for services associated
with the growth in the Company's customer base.
COST OF REVENUES
Cost of License Revenues. Cost of license revenues increased 84% to $4.0
million in fiscal year ended April 30, 1996 from $2.2 million in fiscal year
ended April 30, 1995. The increase resulted primarily from a write-off of $1.2
million of purchased computer software costs related to an older version of the
Transportation Management module, together with higher third-party royalties
paid out with the release of the Windows version of the Company's planning
solution in fiscal year ended April 30, 1996. Cost of license revenues as a
percentage of license revenues remained constant at 38% during both periods.
Excluding the one-time charge in fiscal year ended April 30, 1996, cost of
license revenues as a percentage of license revenues decreased to 27% from 38%.
Cost of Maintenance Revenues. Cost of maintenance revenues increased 40% to
$876,000 in fiscal year ended April 30, 1996 from $624,000 in fiscal year ended
April 30, 1995. Cost of maintenance revenues as a percentage of maintenance
revenues remained relatively flat at 23% in fiscal year ended April 30, 1996
versus 24% in fiscal year ended April 30, 1995, as the cost of supporting
maintenance contracts kept pace with the growth in maintenance revenues.
24
<PAGE>
Cost of Services Revenues. Cost of services revenues increased 10% to $1.1
million in fiscal year ended April 30, 1996 from $1.0 million in fiscal year
ended April 30, 1995. The increase resulted from higher costs related to
additional personnel needed to support a growing services business. Cost of
services revenues as a percentage of services revenues decreased to 53% from
57% during the same period.
OPERATING EXPENSES
Research and Development. Total research and development expenditures
increased 49% to $5.1 million in fiscal year ended April 30, 1996 from $3.4
million in fiscal year ended April 30, 1995. The increase resulted from the
hiring of approximately 20 new research and development personnel focused on
developing enhanced features and additional functionality for the Company's
value chain management solution. Research and development expenditures as a
percentage of total revenues decreased to 30% in fiscal year ended April 30,
1996 from 33% in fiscal year ended April 30, 1995. These expenditures declined
as a percentage of revenues due to the increased operating leverage generated
from the Company's revenue growth. Capitalized software increased 62% to $3.6
million in fiscal year ended April 30, 1996 from $2.2 million in fiscal year
ended April 30, 1995, primarily as a result of increased development costs
related to the Company's WarehousePRO product line, which was not generally
available until May 1996. Capitalized software as a percentage of research and
development expenditures increased to 71% from 66% during the same period. As
a result of the above fluctuations, research and development expenses
increased 24% to $1.5 million for fiscal year ended April 30, 1996 from $1.2
million for 1995.
Sales and Marketing. Sales and marketing expenses increased 57% to $9.9
million in fiscal year ended April 30, 1996 from $6.3 million in fiscal year
ended April 30, 1995. This increase resulted from a greater allocation of
sales and marketing expenses from American Software due to the growth in the
Company's license revenues. Sales and marketing as a percentage of total
revenues decreased to 59% from 62% during the same period.
General and Administrative. General and administrative expenses were
relatively flat at $2.1 million in fiscal year ended April 30, 1996 versus
$2.2 million in fiscal year ended April 30, 1995. General and administrative
expenses as a percentage of total revenues decreased to 13% from 21% during
the same period, due to the growth in the Company's revenues.
Income Taxes. The Company is included in the consolidated Federal income tax
return filed by American Software. The Company has not recorded any income
taxes in fiscal years ended April 30, 1996 or 1995 as a result of the
operating losses incurred since the Company's inception.
25
<PAGE>
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth the unaudited quarterly results of operations
for each of the eight most recent fiscal quarters, as well as the percentage of
the Company's total revenue by each item. In management's opinion, this
unaudited quarterly information has been prepared on the same basis as the
annual combined financial statements and includes all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
information for the quarters presented when read in conjunction with the
audited combined financial statements and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License................ $2,993 $2,592 $2,699 $ 2,416 $2,686 $ 1,724 $4,360 $3,589
Maintenance............ 771 861 1,038 1,127 1,145 1,208 1,346 1,352
Services............... 569 560 451 556 961 957 946 1,550
------ ------ ------ ------- ------ ------- ------ ------
Total revenues........ 4,333 4,013 4,188 4,099 4,792 3,889 6,652 6,491
------ ------ ------ ------- ------ ------- ------ ------
Cost of revenues:
License................ 530 562 829 2,095 853 907 937 1,273
Maintenance............ 176 231 215 254 249 291 316 363
Services............... 289 297 257 288 462 463 417 627
------ ------ ------ ------- ------ ------- ------ ------
Total cost of
revenues............. 995 1,090 1,301 2,637 1,564 1,661 1,670 2,263
------ ------ ------ ------- ------ ------- ------ ------
Gross margin............ 3,338 2,923 2,887 1,462 3,228 2,228 4,982 4,228
------ ------ ------ ------- ------ ------- ------ ------
Operating expenses:
Research and
development........... 320 367 284 481 694 827 642 1,320
Sales and marketing.... 2,532 2,558 2,305 2,497 2,503 2,373 3,160 2,592
General and
administrative........ 407 434 607 692 528 572 716 693
------ ------ ------ ------- ------ ------- ------ ------
Total operating
expenses............. 3,259 3,359 3,196 3,670 3,725 3,772 4,518 4,605
------ ------ ------ ------- ------ ------- ------ ------
Operating income (loss). 79 (436) (309) (2,208) (497) (1,544) 464 (377)
Income taxes............ -- -- -- -- -- -- -- --
------ ------ ------ ------- ------ ------- ------ ------
Net income (loss)....... $ 79 $ (436) $ (309) $(2,208) $ (497) $(1,544) $ 464 $ (377)
====== ====== ====== ======= ====== ======= ====== ======
Net income (loss) per
common share........... $ .01 $ (.04) $ (.03) $ (.20) $ (.04) $ (.14) $ .04 $ (.03)
====== ====== ====== ======= ====== ======= ====== ======
Weighted average common
shares outstanding..... 11,300 11,300 11,300 11,300 11,300 11,300 11,300 11,300
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
JULY 31, OCT. 31, JAN. 31, APRIL 30, JULY 31, OCT. 31, JAN. 31, APRIL 30,
1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- -------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License................ 69.1% 64.6% 64.4% 58.9% 56.1% 44.3% 65.5% 55.3%
Maintenance............ 17.8 21.5 24.8 27.5 23.9 31.1 20.2 20.8
Services............... 13.1 13.9 10.8 13.6 20.0 24.6 14.3 23.9
------ ------ ------ ------- ------ ------- ------ ------
Total revenues........ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------- ------ ------- ------ ------
Cost of revenues:
License................ 12.2 14.0 19.8 51.1 17.8 23.3 14.1 19.6
Maintenance............ 4.1 5.8 5.1 6.2 5.2 7.5 4.7 5.6
Services............... 6.7 7.4 6.2 7 .0 9.6 11.9 6.3 9.7
------ ------ ------ ------- ------ ------- ------ ------
Total cost of reve-
nues................. 23.0 27.2 31.1 64.3 32.6 42.7 25.1 34.9
------ ------ ------ ------- ------ ------- ------ ------
Gross margin............ 77.0 72.8 68.9 35.7 67.4 57.3 74.9 65.1
------ ------ ------ ------- ------ ------- ------ ------
Operating expenses:
Research and develop-
ment.................. 7.4 9.2 6.8 11.7 14.5 21.3 9.6 20.3
Sales and marketing.... 58.4 63.7 55.0 61.0 52.3 61.0 47.5 39.9
General and administra-
tive.................. 9.4 10.8 14.5 16.9 11.0 14.7 10.8 10.7
------ ------ ------ ------- ------ ------- ------ ------
Total operating ex-
penses............... 75.2 83.7 76.3 89.6 77.8 97.0 67.9 70.9
------ ------ ------ ------- ------ ------- ------ ------
Operating income
(loss)................ 1.8 (10.9) (7.4) (53.9) (10.4) (39.7) 7.0 (5.8)
Income taxes........... -- -- -- -- -- -- -- --
------ ------ ------ ------- ------ ------- ------ ------
Net income (loss)...... 1.8% (10.9)% (7.4)% (53.9)% (10.4)% (39.7)% 7.0% (5.8)%
====== ====== ====== ======= ====== ======= ====== ======
</TABLE>
26
<PAGE>
The Company's results of operations have been, and in the future will be,
subject to significant quarterly fluctuations that may be caused by many
factors, including among others: the size and timing of orders for the
Company's products; the length of the sales cycle and implementation schedule
for the Company's products, and delays in the implementation process; customer
order deferrals in anticipation of new products and product enhancements;
introduction or enhancement of products by the Company or its competitors;
changes in pricing policy of the Company or its competitors; increased
competition; seasonality of revenues; technological changes in computer
systems and environments; quality control of products sold; readiness of the
market to deploy value chain management products; the Company's success in
expanding its sales, support, service and marketing organizations; personnel
changes; fluctuation in foreign currency exchange rates; mix of license,
maintenance and service revenues; and general economic conditions. These
uncertainties, combined with the fact that the value chain management software
market is an emerging market that is subject to rapid change, make the
estimation of revenues and results of operations on a quarterly basis
difficult and increase the potential margin for error in performance forecasts
derived from such estimates. As a result, the Company believes that period-to-
period comparisons of its results of operations are not necessarily meaningful
and should not be relied upon as an indication of future performance.
License revenues are difficult to forecast on a quarter-to-quarter basis as
no significant backlog exists at the end of any quarter. Revenues are
substantially dependent on deliveries related to new contracts executed in
that quarter. Additionally, orders for a significant portion of the Company's
license revenues are typically received in the last two weeks of a quarter.
See "Risk Factors--Significant Fluctuations in Quarterly Operating Results
and Seasonality; Potential Quarterly Losses."
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has received funding from American Software to
support its research and development efforts and to fund its growth. Following
the completion of this offering, the Company's principal sources of liquidity
will consist of cash and investments and cash generated from operations.
The Company's operating activities provided cash of $2.7 million during
fiscal year ended April 30, 1997, and used cash of $197,000 and $309,000
during the two fiscal years ended April 30, 1996 and 1995, respectively. The
cash provided by operations during fiscal year ended April 30, 1997 was
attributable to non-cash depreciation and amortization expense of $3.3
million, an increase in operating liabilities of $1.8 million and an increase
in deferred revenues of $933,000. These increases were partially offset by an
increase in accounts receivable of $1.2 million and a net loss from operations
of $2.0 million. The Company's use of cash for the year ended April 30, 1996
was primarily caused by an operating loss of $2.9 million and a net increase
in accounts receivable of $2.8 million. These uses of cash were offset by
depreciation and amortization of $2.4 million, a write-off of purchased
computer software costs of $1.2 million, and an increase in deferred revenues
of $1.7 million. The Company's use of cash for fiscal year ended April 30,
1995 was primarily caused by an operating loss of $3.2 million. This use of
cash was offset by depreciation and amortization of $1.6 million and a
decrease in accounts receivable of $1.4 million.
Cash used in investing activities was approximately $3.4 million in fiscal
year ended April 30, 1997, $4.6 million in fiscal year ended April 30, 1996
and $2.6 million in fiscal year ended April 30, 1995. The majority of the cash
was used for computer software development costs.
The Company believes that its sources of liquidity and capital resources
will be sufficient to satisfy its cash requirements for the next twelve
months. To the extent that such amounts are insufficient to finance the
Company's capital requirements, the Company will be required to raise
additional funds through equity or debt financing. No assurance can be given
that such financing will be available on terms acceptable to the Company. If
available, such financing may result in further dilution to the Company's
shareholders and higher interest expense.
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<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued SFAS 128,
Earnings per Share. SFAS 128 specifies modifications to the calculation of
earnings per share from those currently utilized by the Company. Under SFAS
128, "basic" earnings per share will be calculated based upon the weighted
average number of common shares actually outstanding, and "diluted" earnings
per share will be calculated based upon the weighted average number of common
shares and dilutive potential common shares. SFAS 128 is effective in the
Company's fourth quarter of fiscal year ending April 30, 1998 and the Company
intends that it will be adopted at that time. The Company believes that the
adoption of SFAS 128 will have no effect on the Company's financial position
or cash flows.
In February 1997, the Financial Accounting Standards Board issued SFAS 129,
Disclosure of Information about Capital Structure. SFAS 129 requires companies
to disclose descriptive information about securities that is not necessarily
related to the computation of earnings per share. It also requires disclosure
of information about the liquidation preference of preferred stock and
redeemable stock. SFAS 129 is effective for financial statements for periods
ending after December 15, 1997. The Company does not expect that SFAS 129 will
require significant revision of prior disclosures.
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
Reporting Comprehensive Income. SFAS 130 requires companies to display, with
the same prominence as other financial statements, the components of other
comprehensive income. SFAS 130 requires that an enterprise classify items of
other comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of the
balance sheet. SFAS 130 is effective for fiscal years beginning after December
15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company's financial
statements will include the disclosure of other comprehensive income in
accordance with the provisions of SFAS 130 beginning in the first quarter of
fiscal year ending April 30, 1999.
In June 1997, the Financial Accounting Standards Board issued SFAS 131,
Disclosures about Segments of an Enterprise and Related Information. SFAS 131
requires that an enterprise disclose certain information about operating
segments. SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. The Company will evaluate the need for such
disclosures at that time.
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BUSINESS
COMPANY OVERVIEW
Logility develops, markets and supports software applications that optimize
the operating efficiencies of manufacturers, suppliers, distributors,
retailers and other organizations along the value chain. The Company's
solution, Logility Value Chain Solutions, consists of an integrated software
suite that provides advanced collaborative planning and integrated logistics
capabilities that are designed to reduce inventory costs, improve forecast
accuracy, decrease order cycle times, optimize production scheduling,
streamline logistics operations, reduce transportation costs and improve
customer service. The Company's software solution is modular and scaleable to
meet the management requirements of complex processes involving tens of
thousands of products across multiple sites. In addition, it can be integrated
with existing software systems and a variety of client-server operating
environments and platforms.
The Company has licensed one or more modules of Logility Value Chain
Solutions to more than 200 companies worldwide, including Eastman Chemical,
FINA, Heineken USA, Newell, Pharmacia & Upjohn, Pfizer International, Reynolds
Metals, Sony Electronics, Timex and VF Corporation. The Company sells its
products through direct and indirect channels in the United States and Canada
and primarly through indirect channels outside North America. The Company
derived approximately 12% of its revenues in fiscal 1997 from international
sales.
INDUSTRY BACKGROUND
In response to global competitive pressures, companies are continually
seeking new ways to enhance the productivity of their enterprise business
systems and processes. Significant competitive advantages in the form of lower
costs and greater customer responsiveness can be realized by those companies
that effectively communicate, collaborate and integrate with their suppliers,
distributors, retailers, consumers and other parties within the "value chain."
Value chain management refers to the process of managing the complex network
of relationships that organizations maintain with trading partners to source,
manufacture and deliver goods and services to the customer. Value chain
management involves both the activities related to supplying products or
services as well as the sales and marketing activities that impact the demand
for goods and services, such as promotions, pricing and forecasting.
Today, several market trends are driving organizations to expand
collaboration with trading partners along the value chain. A general shift in
market power has forced manufacturers and distributors to become more
responsive to retailers and consumers, which has created a need for improved
planning capabilities. At the same time, competitive pressures are forcing
manufacturers to reduce costs, decrease order cycle times and improve
operating efficiencies. As a result, manufacturers are increasingly under
pressure to better manage the value chain, as they seek to improve
manufacturing efficiency and logistics operations while maintaining
flexibility and responsiveness to changing market conditions and customer
demands. These pressures are compounded by the increasing complexity and
globalization of the interactions among suppliers, manufacturers,
distributors, retailers and consumers.
Advances in communications and computing technology have enhanced the
ability of organizations along the value chain to integrate their processes
through collaborative information sharing and planning and to improve internal
operations through refined workflow management. These technology developments
include the proliferation of the client-server computing environment, the
introduction of data collection technology such as point of sale and radio
frequency devices, the growth of the WAN infrastructure and the emergence of
the Internet and corporate intranets. In addition, businesses are beginning to
extend their corporate intranets to establish dedicated links, or extranets,
with suppliers and customers. Corporations are increasingly taking advantage
of this technology and the general availability of more powerful software
applications to improve the effectiveness of their information gathering and
analysis processes, which in turn is leading to improved decision-making
capabilities.
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To manage and facilitate enhanced collaboration among the various
participants in the value chain, organizations are increasingly deploying value
chain management software solutions to address their planning and execution
requirements. The planning function involves the proactive use of information
to facilitate the delivery of the right products on time to the correct
location and at the lowest cost. The planning process focuses on demand
forecasting, inventory simulation, distribution, transportation and
manufacturing planning and scheduling. Planning software is designed to improve
forecast accuracy, optimize production scheduling, reduce inventory costs,
decrease order cycle times, reduce transportation costs, and improve customer
service. The execution function addresses procuring, manufacturing and
distributing products throughout the value chain. Within the execution
function, increasing focus is being placed by organizations on the effective
management of warehouse and transportation operations and the need for their
integration with planning systems and other enterprise software applications.
The market for value chain management solutions is relatively new and is
experiencing rapid growth. Industry sources estimate that the advanced planning
and scheduling market was $350 million in 1996, and is projected to grow at a
compound annual growth rate of 46% to more than $1.6 billion by 2000. The
warehouse management systems software market was approximately $270 million in
1996, and is projected to grow at a compound annual growth rate of 40% to more
than $1.4 billion by 2001.
Organizations increasingly are recognizing that an integrated value chain
management solution has a measurable impact on productivity and is critical in
addressing changing market requirements. An important element of managing the
value chain is the ability to incorporate the requirements of a diverse group
of constituents both within and outside the organization to create an
integrated, accurate consensus plan that can be synchronized with the
manufacturing, distribution, transportation and warehousing processes. In
general, existing value chain management solutions do not provide robust,
integrated, end-to-end solutions that address the needs of the entire value
chain and do not synchronize demand opportunities with supply constraints and
logistics operations.
In order to effectively manage and coordinate value chain activities,
companies require planning and execution software that provides for integrated
communication and collaboration among the various constituents along the value
chain. This enhanced collaboration synchronizes production plans with demand
forecasts, thereby minimizing bottlenecks that lead to production delays and
excess inventory. In addition, companies seek integrated planning and execution
systems that further optimize the flow of products to the customer through
enhanced transportation and warehouse management capabilities. Organizations
are also demanding solutions that are modular and scaleable to fit the changing
needs of the organization and that can be rapidly deployed.
LOGILITY VALUE CHAIN SOLUTIONS
The Company's integrated product line, Logility Value Chain Solutions, is a
value chain management software suite that enables manufacturers, distributors
and retailers to more effectively manage the activities along their respective
value chains.
The key benefits of the Company's software solution include the following:
Integrated End-to-End Value Chain Solution. The Company's Logility Value
Chain Solutions provides functionality that addresses both the flow of
information and the flow of products throughout the value chain. By
synchronizing its comprehensive planning software suite with its
transportation and warehouse management software solutions, the Company's
product suite can more efficiently and accurately coordinate the delivery
of products to the customer. This end-to-end approach allows maximum
synchronization of activities along the value chain.
Comprehensive Planning Solution. The Company's planning solution is
comprised of demand, inventory, manufacturing, replenishment and
transportation planning modules that balance demand opportunities with
supply constraints through the synchronization of information gathered from
value chain
30
<PAGE>
participants. A key component of the Company's planning solution is its
emphasis on addressing the full range of complex demand planning
requirements of its customers, including comprehensive forecasting
capabilities that take into account each user's unique perspective of the
value chain.
Advanced Collaborative Planning Functionality. The Company's products
allow for collaboration among the various levels within an organization and
among external constituents throughout the value chain. The architecture of
Logility Planning Solutions enables key constituents to participate in the
planning process, including marketing, sales, manufacturing, procurement,
logistics and transportation personnel, so that the requirements of all
groups are factored in to create one consensus plan. The Company's
collaborative planning functionality is further enhanced with the Company's
Demand Chain Voyager and Supply Chain Voyager modules, which leverage
Internet technology to facilitate information sharing directly with trading
partners.
Robust Warehouse Management Solution. The Company's integrated
WarehousePRO solution is designed to optimize operations within the
warehouse by improving inventory turnover, increasing inventory accuracy
and customer service and reducing inventory levels. The solution's object-
oriented design and user-configurable architecture allows for flexible and
rapid implementation. In addition, the solution features a comprehensive
library of industry best-practice workflows that can be configured by the
customer, thereby minimizing the need for custom programming.
Rapid Deployment. The Company's products utilize a modular design,
thereby streamlining implementation and allowing deployment in a relatively
short time frame. The comprehensive functionality of each module generally
permits customers to implement the solutions with nominal modifications. In
addition, the Company's software combines sophisticated techniques and
tools with an intuitive, Windows-based interface to reduce training
requirements and implementation tasks.
Open, Scaleable, Client-Server Architecture. Logility's software has been
designed to integrate with existing in-house and third-party software
applications and a variety of operating environments and platforms. The
software is scaleable to manage complex processes involving tens of
thousands of products across multiple sites.
STRATEGY
The Company's objective is to become the leading provider of value chain
management software solutions that are designed to enhance collaboration among
participants along the value chain and optimize the operations associated with
manufacturing and the distribution of products. The Company's strategy includes
the following key elements:
Leverage and Expand Installed Base of Customers. The Company currently
targets businesses in both the discrete and process manufacturing
industries, including consumer packaged goods, chemicals and
pharmaceuticals, food and beverage, and telecommunications and utilities.
The Company intends to continue to leverage its installed base of more than
200 customers to introduce additional functionality, product upgrades and
complementary modules. In addition, the Company intends to expand sales to
new customers in its existing vertical markets and to target additional
vertical markets.
Continue to Expand Sales and Marketing. The Company intends to continue
to pursue an increased share of the market for value chain management
software solutions by expanding its sales and marketing activities. The
Company intends to continue building a direct sales force that is focused
on selected vertical markets, such as chemicals and pharmaceuticals and
consumer packaged goods manufacturers.
Maintain Technology Leadership. The Company believes that it is a
technology leader in the field of value chain management software solutions
and intends to continue to provide innovative, advanced solutions to this
market. The Company believes that it was one of the earliest providers of
value chain planning software solutions on a client-server platform and on
Windows NT, and the first to introduce a value chain planning software
solution that operates over the Internet. The Company intends to continue
to develop and introduce new or enhanced products and keep pace with
technological developments and emerging industry standards.
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<PAGE>
Focus on Integrated Planning and Logistics Execution Solution. The
Company believes it is one of the few providers of integrated value chain
management software solutions addressing both demand and supply planning as
well as transportation and warehousing logistics requirements. The Company
is focused on providing the most comprehensive planning and execution
solution aimed at optimizing operations along the value chain. The Company
intends to continue to focus its development initiatives on enhancing its
end-to-end solution and introducing additional capabilities that complement
its integrated solution.
Increase Penetration of International Markets. In fiscal year ended April
30, 1997, the Company generated 12% of its total revenue from international
sales and has marketing relationships with a number of foreign
distributors. The Company intends to expand its international presence by
adding additional direct sales personnel to address international markets
and creating additional relationships with distributors in Europe, Latin
America and the Asia/Pacific region.
Leverage Strategic Relationships. The Company has a number of recent
marketing or product relationships with leading ERP providers, systems
integrators and systems consulting organizations, including Andersen
Consulting, CAPS Logistics, Deloitte & Touche, Oracle, PeopleSoft, Ross
Systems and SAP. The Company intends to utilize these and future
relationships with other service providers and hardware and software
vendors to enhance its sales and marketing efforts. The Company also
intends to leverage its relationship with American Software by selling
through its established distribution channels, targeting both existing and
new customers.
Continue to Focus on Providing High Quality Customer Service. Providing
high quality customer service is a critical element of the Company's
strategy. The Company intends to continue to invest in technology and
personnel to accommodate the needs of its growing customer base. The
Company is installing a new help desk solution to further enhance the
service function and expects to add additional service and support staff
going forward.
PRODUCTS
Logility Value Chain Solutions is an integrated suite of value chain
management solutions designed to synchronize demand opportunities with supply
constraints and logistics operations. The suite is comprised of two solution
groups: Logility Planning Solutions and Logility Execution Solutions, which in
turn are comprised of a series of integrated modules. These modules can be
implemented individually in certain cases, as well as in combinations or as a
full solution suite. Logility Value Chain Solutions supports multiple
communications protocols and is designed to operate with industry-standard open
technologies, including leading client-server environments, such as HP9000, IBM
RS/6000 and Intel-based servers running Windows NT. The Company's WarehousePRO
solution operates on the OS/2 platform and is designed to interface with a
broad range of operating systems and platforms. A Windows NT version is under
development and scheduled for general availability by the end of 1997. The
following table summarizes the Company's product line:
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<PAGE>
<TABLE>
<CAPTION>
SOLUTION GROUP MODULE FEATURES
- -------------------------------------------------------------------------------
<C> <C> <S>
LOGILITY PLANNING
SOLUTIONS Demand Planning . Item and group forecasting
. Self selecting forecast
models
. Personalized data views
. Item stratification
. Product life cycle
management with simulation
. Drag and drop data
manipulation
- -------------------------------------------------------------------------------
. Time-phased view of
Inventory Planning inventory
. Graphical simulations of
inventory trade-offs
. Views of dependent and
independent demand
. Inventory management
variables
- -------------------------------------------------------------------------------
Event Planning* . Promotion planning
. Self-learning capabilities
using artificial
intelligence
. Causal-based forecasting
. Promotion profitability
simulations
- -------------------------------------------------------------------------------
Demand Chain Voyager . Forecast retrieval and
modifications via the
Internet
. Tight integration with
Demand Planning
. Promotion planning
calendars
. Comprehensive security
features
. Collaborative planning
with trading partners
- -------------------------------------------------------------------------------
. Enterprise-wide capacity
Manufacturing Planning planning
. Plant-level scheduling
. Supports activity-based
costing
. Optimizes sourcing
decisions actual costs
. Interactive simulation
. Real-time, in memory model
- -------------------------------------------------------------------------------
. Supports continuous
Replenishment Planning replenishment strategies
. Constrained, time-phased
distribution
requirements planning
. Proactive action messages
. EDI integration
. Available to promise
methodologies
. Multi-site sourcing and
allocation
- -------------------------------------------------------------------------------
Transportation Planning . Load Control Center
. Shipment planning and
consolidation
. Freight rating and routing
. Carrier selection
- -------------------------------------------------------------------------------
Supply Chain Voyager . Replenishment ordering via
the Internet
. Tight integration with
Replenishment Planning
. Remote analysis of orders
. Comprehensive security
features
. Collaborative planning
with trading partners
- -------------------------------------------------------------------------------
LOGILITY EXECUTION Transportation
SOLUTIONS Management . Load tendering
. Shipment confirmation
. Freight audit and payment
control
. Shipment documentation and
tracking
- -------------------------------------------------------------------------------
. Object oriented
WarehousePRO architecture
. User configurable options
. Advanced workflow
technology
. Dynamic label and report
printing
. Integrated graphical user
interface
</TABLE>
*Under development. See "--Research and Product Development."
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<PAGE>
LOGILITY PLANNING SOLUTIONS
Logility Planning Solutions is designed to optimize demand opportunities with
supply constraints. The solution enables users to generate and analyze
information to effectively manage demand and respond to changes in the
marketplace while optimizing the utilization of production, distribution and
transportation assets. Demand Chain Voyager and Supply Chain Voyager enhance
the functionality of Logility Planning Solutions by utilizing the Internet to
extend planning capabilities to remote users and trading partners.
Demand Planning. The Demand Planning module reconciles demand history,
existing customer orders, point-of-sale data, market forecasts and other
information to generate a graphical representation of demand by item,
location, customer and/or group. Demand Planning has an automatic self-
correcting, self-selecting modeling process that utilizes a number of
advanced forecasting models to generate sales, marketing, logistics and
other forecasts. The system allows for user-override of certain modeling
parameters, such as quantities or percentages, to account for promotions,
supply constraints and other "what-if" scenarios.
Inventory Planning. The Inventory Planning module is designed to
determine the optimal balance between inventory and service levels. With
extensive simulation capabilities, Inventory Planning helps manufacturers
and distributors reduce inventory costs while meeting customer service
requirements at the individual stock keeping unit ("SKU") level. Built
around industry best-practices, Inventory Planning can enhance planning and
scheduling of inventory while taking into consideration replenishment
frequency and order size, seasonal build and manufacturing plans. Service
level targets and policies can be applied individually to every product
within an enterprise or uniformly throughout the various product lines.
Event Planning. The Company is developing an Event Planning module that
is currently scheduled for general availability by the end of 1997. The
Event Planning module will be a causal-based forecasting solution designed
to facilitate product life-cycle management and promotion planning, and
will provide forecasting capabilities to help determine the impact of
promotions, price changes or other events, enabling manufacturers to adjust
production to match changing demand. Event Planning will utilize advanced
forecasting algorithms based on neural network techniques that allow the
system to refine forecasting by incorporating the results of ongoing
promotions and other activities.
Demand Chain Voyager. Through the use of the Internet, the Demand Chain
Voyager module extends the reach of Demand Planning by allowing remote
users to view corporate forecasts and to input demand data in real-time.
Demand Chain Voyager provides an online, updated schedule of events
including promotions, product launches and holidays. In addition, it allows
for the revision of inventory goals and objectives such as service levels
and turns.
Manufacturing Planning. The Manufacturing Planning module is designed as
a constraint-based planning solution that balances manufacturing processes
and resources with demand priorities and corporate objectives.
Manufacturing Planning models the operations of a business by capturing
capacity constraints such as equipment capabilities, intermediate storage
limitations, shop floor calendars and raw material availability and
production constraints such as synchronization of multi-step operations,
product sequencing, production changeovers and inventory policies.
Manufacturing Planning enables collaborative decision-making by comparing
the feasibility and cost effectiveness of various scheduling strategies
through the use of simulation.
Replenishment Planning. The Replenishment Planning module addresses the
planning needs of an organization to determine the optimal balance between
customer service levels and inventory. Replenishment Planning takes into
account manufacturing constraints, inventory investment, desired service
levels, and current orders and commitments. Features of Replenishment
Planning include automatic detailed item planning to balance delivery loads
and orders, filtered order review, SKU change simulation, and constrained
distribution requirements planning. The benefits of Replenishment Planning
include, among others, faster inventory turns, optimized inventory levels
and the ability to allocate customer orders based
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<PAGE>
on user-defined priorities. Replenishment Planning provides support for
continuous replenishment strategies, such as Vendor Managed Inventory,
Quick Response and Efficient Consumer Response.
Transportation Planning. The Transportation Planning module synchronizes
transportation plans with demand, inventory, manufacturing and
replenishment strategies. Transportation Planning consolidates shipments
and determines the optimal transportation mode and carrier while providing
a list of alternatives. The solution includes a Load Control Center that
reviews all inbound, outbound and inter-facility shipments and provides an
integrated view of all orders requiring shipping decisions. The product is
designed to reduce freight costs, improve customer service levels and
increase responsiveness to customer requirements. A Windows NT version of
Transportation Planning is under development and is currently scheduled for
general availability by the end of 1997.
Supply Chain Voyager. The Supply Chain Voyager module operates over the
Internet and provides trading partners with enhanced functionality for
consumption monitoring and order review, approval and tracking. Consumption
monitoring facilitates the process of tracking inventory consumption at the
point of demand and comparing real-time inventory levels to inventory
targets. Order review, approval and tracking automatically generate
proposed replenishment orders and allow trading partners to track the
status of orders.
LOGILITY EXECUTION SOLUTIONS
Logility Execution Solutions is designed to enable users to effectively and
efficiently manage the flow of products through distribution centers and
warehouses and helps ensure that products are delivered to the right location
using the best transportation alternatives available. Integrated analysis
reporting is included to allow users to analyze cost and productivity across
the value chain, enabling companies to make real-time decisions about the
operations of their warehouses and the transport of products.
Transportation Management. Transportation Management facilitates the
timely execution of the optimized shipping plan developed by the
Transportation Planning module. Load tendering and shipment tracking are
included via Electronic Data Interchange ("EDI"), E-mail or automatic fax.
The freight audit and payment capabilities enable flexible reporting of
landed cost by shipment, customer or product group. The module is designed
to reduce freight costs, improve carrier utilization and provide
comprehensive freight management reporting. A Windows NT version of
Transportation Management is currently under development and is scheduled
for general availability by the end of 1997.
WarehousePRO. WarehousePRO incorporates advanced workflow technology,
industry-specific best practices and radio frequency data collection
terminals to optimize warehouse operations. The software's object-oriented
design allows users to define the properties of specific items, locations,
or processes, thereby reducing the need for custom programming. The
solution is highly flexible and can be reconfigured by the user to adapt to
changing business requirements. WarehousePRO features an extensive workflow
library of user-selected templates incorporating industry-specific best-
practice warehousing techniques. With built-in standard interfaces to major
radio frequency data collection systems, the software delivers more
accurate inventory accountability and improved warehouse efficiency.
WarehousePRO's performance analysis tools generate graphical reports that
illustrate productivity gains, warehouse efficiency and inventory controls,
enabling users to make real-time management decisions. A Windows NT version
of WarehousePRO is under development and is currently scheduled for general
availability by the end of 1997.
The price for the Company's products typically is determined based upon the
number of modules licensed and the number of servers, users and/or sites for
which the solution is designed. During fiscal year ended April 30, 1997,
license fees for a new customer generally ranged from $200,000 to $1,000,000.
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<PAGE>
CUSTOMERS
The Company primarily targets businesses in consumer packaged goods,
chemicals and pharmaceuticals, food and beverage, manufacturing and
telecommunications and utilities industries. As of July 31, 1997, one or more
of the Company's solutions had been licensed to more than 200 customers
worldwide. No single customer accounted for 10% or greater of the Company's
revenues in the three years ended April 30, 1997.
The following examples illustrate how certain customers have adopted and are
implementing the Company's solutions:
Heineken USA, a subsidiary of Heineken, NV, is the sole US importer for
the Heineken, Amstel and Murphy's brands of beer. With a network of more
than 400 independent distributors, Heineken USA was evaluating solutions
that could provide enhanced collaboration within its network. Specifically,
Heineken USA was looking to increase forecast accuracy and streamline
replenishment orders, thereby reducing order cycle times. After a
competitive sales process, Heineken USA selected Logility Planning
Solutions primarily for its ability to leverage the functionality of the
Internet in a cost-effective manner to allow for real-time collaboration
with its distributors. Heineken USA implemented the Demand Planning,
Inventory Planning and Replenishment Planning modules into its core ERP
system and connected its distribution network via the Internet utilizing
the Demand Chain Voyager and Supply Chain Voyager modules. Distributors are
now able to report sales and place replenishment orders on a customized
Heineken Web page based upon forecasts and replenishment recommendations
provided by Heineken USA. Although the system has only been operational
since January 1997, order cycle times have been reduced substantially,
resulting in improved customer satisfaction.
FINA Inc. is an integrated oil and chemical company that produces a
number of plastic products including polystyrene, polypropylene and
polyethylene. These plastics are sold to manufacturers who make various
products including medical devices, cutlery, toys, appliances, food
packaging, plastic bags and carpet. FINA was looking for an integrated
software solution to help improve forecasting, inventory management and
manufacturing planning. Because FINA maintains a multi-tiered distribution
system, it was important to have the right inventory at the right warehouse
at the right time. After a competitive evaluation, FINA selected the
Company's Demand Planning, Inventory Planning, Replenishment Planning, and
Manufacturing Planning modules. As a result of implementing Logility
Planning Solutions, FINA expects to optimize inventory, improve production
scheduling and increase customer service levels. Benefits achieved to date
include a significant reduction in the time needed to generate a production
schedule and to make decisions regarding inventory replenishments at
outside warehouses. FINA also is benefiting from the ability to review the
future effects of a time-phased inventory.
SALES AND MARKETING
The Company markets its products through direct and indirect sales channels
in the United States and Canada and primarily through indirect channels
outside North America. The Company conducts its principal sales and marketing
activities from corporate headquarters in Atlanta, Georgia, and has sales
and/or support offices in Boston, Chicago, Columbus, Dallas, Detroit,
Minneapolis, Newport Beach, Philadelphia, Raleigh, and Toronto, Canada. Sales
channels outside of North America are managed from a sales office in the
United Kingdom.
The Company has a number of joint-marketing relationships with business
application software vendors, including CAPS Logistics, PeopleSoft and Ross
Systems. In addition, the Company has entered into joint-marketing agreements
for its WarehousePRO software with radio frequency data collection
manufacturers, including Intermec and Symbol Technologies. The Company also
has a sales and marketing relationship with its parent, American Software. See
"Relationship with American Software and Certain Transactions." These
agreements promote the cross-marketing of the Company's products with the
products of these other vendors.
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<PAGE>
The Company has arrangements with independent distributors and resellers
throughout Europe and the Asia/Pacific region which distribute the Company's
product line in foreign countries. These vendors typically sell their own
consulting and systems integration services in conjunction with the licensing
of the Company's products.
As of July 31, 1997, the Company employed 66 sales and marketing personnel.
The Company intends to increase expenditures to expand its direct sales and
marketing organizations in the United States, Europe and the Asia/Pacific
region, as well as increase the name recognition of the Company and its
products.
To support its direct sales force, the Company conducts marketing programs
that include public relations, direct mail, advertising campaigns, trade shows,
product seminars, user group conferences and ongoing customer communication
programs.
CUSTOMER SERVICE AND SUPPORT
The Company believes that providing a high level of customer service and
technical support is essential to customer satisfaction and timely
implementation of the Logility Value Chain Solutions. As of July 31, 1997, the
Company had 59 employees in its customer service and support organization,
providing software maintenance and support, training and consulting services.
The Company provides the following services and support to its customers:
Implementation; Training Services. The Company offers its customers post-
delivery professional services consisting primarily of implementation and
training services, for which the Company charges separately on either an
hourly or daily basis. Customers that choose to purchase implementation
services receive assistance in integrating the Company's solution with
existing software applications and databases. Implementation of Logility
Value Chain Solutions typically requires three to twelve months, depending
on the complexity of a customer's existing system, the number of modules
purchased, and the training requirements.
Product Maintenance and Updates; Support Services. The Company provides
its customers with ongoing product support services. Support or maintenance
contracts typically are sold to customers for a one- to three-year term at
the time of the initial product license and may be renewed for additional
periods. Under these contracts, the Company provides telephone consulting,
product updates and releases of new versions of products previously
purchased by the customer, as well as error reporting and correction
services. The Company provides ongoing support and maintenance services on
a seven-days-a-week, 24-hours-a-day basis through telephone and electronic
mail, using a call logging and tracking system for quality assurance.
RESEARCH AND PRODUCT DEVELOPMENT
The Company has dedicated significant resources to the development of the
Logility Value Chain Solutions and its associated modules. The Company's
product development expenditures (including capitalized software costs) in
fiscal years ended April 30, 1997, 1996 and 1995 were $6.3 million, $5.1
million and $3.4 million, respectively. As of July 31, 1997, the Company had 53
employees devoted to product development. The Company intends to continue to
increase its investment in product development in future periods.
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<PAGE>
The Company believes that its future success depends in part upon its ability
to continue to enhance existing products, respond to changing customer
requirements, develop and introduce new or enhanced products and keep pace with
technological developments and emerging industry standards. The Company's
development efforts are focused on, but are not limited to, enhancing
operability of its products across distributed and changing heterogeneous
hardware platforms, operating systems and relational databases and the addition
of new functionality to existing products.
The Company is in the process of releasing version 5.0 of Logility Planning
Solutions. This version is based on an integrated object-oriented architecture
for maximum scaleability and messaging functionality that supports the
increasingly distributed nature of value chain planning. The product
incorporates advanced Microsoft technology, including ActiveX and DCOM. The
Event Planning module is currently under development and is currently scheduled
for general availability by the end of 1997. Windows NT versions of the
Company's Transportation Planning, Transportation Management and WarehousePRO
modules are currently under development and are currently scheduled for general
availability by the end of 1997. The Company has developed interfaces with
PeopleSoft's manufacturing application and has active interface development
initiatives with other leading ERP vendors, such as Oracle and SAP.
There can be no assurance that the Company will be successful in developing
these new or enhanced products or other new products on a timely basis, or that
such enhancements or new products, when introduced, will achieve market
acceptance or will adequately address the changing needs of the marketplace.
See "Risk Factors--Rapid Technological Change and New Products."
COMPETITION
The Company's products are targeted at emerging markets within the
application software market, which is intensely competitive and characterized
by rapid technological change. The Company's competitors are diverse and offer
a variety of solutions directed at various aspects of the value chain, as well
as the enterprise as a whole. The Company's existing competitors include
application software vendors, such as BDM, i2 Technologies, InterTrans
Logistics, Manugistics, Numetrix, Optum and Weseley Software. In addition, the
Company faces potential competition for the Logility Value Chain Solutions from
(i) internal development efforts by corporate information technology
departments, (ii) smaller independent companies that have developed or are
attempting to develop value chain management software that competes with the
Company's software solution, and (iii) other business application software
vendors that may broaden their product offerings by internally developing, or
by acquiring or partnering with independent developers of, value chain
management software.
In addition, the Company may face competition from other application software
vendors, including ERP vendors, that from time to time jointly market the
Company's products as a complement to their own systems. To the extent such
vendors develop or acquire systems with functionality comparable or superior to
Logility's products, their significant installed customer base, long-standing
customer relationships and ability to offer a broad solution could provide a
significant competitive advantage over the Company.
The Company also expects to face additional competition as other established
and emerging companies enter the market for value chain management software and
new products and technologies are introduced. In addition, current and
potential competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties, thereby increasing the
ability of their products to address the needs of the Company's prospective
customers. Accordingly, it is possible that new competitors or alliances among
current and new competitors may emerge and rapidly gain significant market
share. Increased competition could result in price reductions, fewer customer
orders, reduced gross margins and loss of market share.
Many of the Company's competitors and potential competitors have longer
operating histories, significantly greater financial, technical, marketing and
other resources, greater name recognition and a larger installed base of
customers than the Company. In order to be successful in the future, the
Company must continue to respond
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promptly and effectively to technological change and competitors' innovations.
The Company's competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products than the
Company. The principal competitive factors affecting the market for the
Company's products include vendor and product reputation; product architecture,
functionality and features; costs; ease and speed of implementation; return on
investment; product quality, price and performance; and level of support. See
"Risk Factors--Competition."
PROPRIETARY RIGHTS AND LICENSES
The Company's success and ability to compete is dependent in part upon its
proprietary technology. To protect its proprietary technology, the Company
relies on a combination of copyright, trade secret laws, confidentiality
procedures and contractual provisions, which may afford only limited
protection. In addition, effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries. Although the Company
relies on the limited protection afforded by such confidential and contractual
procedures and intellectual property laws, it also believes that factors such
as the technological and creative skills of its personnel, new product
developments, frequent product enhancements and reliable maintenance are also
essential to establishing and maintaining a technology leadership position. The
Company presently has no patents or patent applications pending. The source
code for the Company's proprietary software is protected both as a trade secret
and as a copyrighted work. The Company generally enters into confidentiality or
license agreements with its employees, consultants and customers, and generally
controls access to and distribution of its software, documentation and other
proprietary information.
The Company provides its software products to customers under non-exclusive
license agreements. As is customary in the software industry, in order to
protect its intellectual property rights, the Company does not sell or transfer
title to its products to its customers. Under the Company's current standard
form of license agreement, licensed software may be used solely for the
customer's internal operations. Although the license agreements place
restrictions on the use by the customer of the Company's products, there can be
no assurance that unauthorized use of the Company's products will not occur. In
addition, the Company has licensed the source code for its software to American
Software to enable American Software to perform warranty, maintenance and
support obligations, for which it is responsible under license agreements for
Logility products that were not assigned to the Company in connection with the
formation of the Company. See "Relationship with American Software and Certain
Transactions."
Despite the measures taken by the Company to protect its proprietary rights,
unauthorized parties may attempt to reverse engineer or copy aspects of the
Company's products or to obtain and use information that the Company regards as
proprietary. Policing unauthorized use of the Company's products is difficult.
In addition, litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a
material adverse effect on the Company's business, operating results and
financial condition.
In the future, the Company may increasingly be subject to claims of
intellectual property infringement as the number of products and competitors in
the Company's industry segment grows and the functionality of products in
different industry segments overlaps. Although the Company is not aware that
any of its products infringes upon the proprietary rights of third parties,
there can be no assurance that third parties will not claim infringement by the
Company with respect to current or future products. In addition, the Company
may initiate claims or litigation against third parties for infringement of the
Company's proprietary rights or to establish the validity of the Company's
proprietary rights. Any such claims against the Company, with or without merit,
as well as claims initiated by the Company against third parties, can be time
consuming and expensive to defend,
39
<PAGE>
prosecute or resolve. Moreover, an adverse outcome in litigation or similar
adversarial proceedings could subject the Company to significant liabilities to
third parties, require the expenditure of significant resources to develop non-
infringing technology, require a substantial amount of attention from
management, require disputed rights to be licensed from others or require the
Company to cease the marketing or use of certain products, any of which could
have a material adverse effect on the Company's business, operating results and
financial condition. To the extent the Company desires or is required to obtain
licenses to patents or proprietary rights of others, there can be no assurance
that any such licenses will be made available on terms acceptable to the
Company, if at all. See "Risk Factors--Dependence on Proprietary Technology."
The Company has resold and expects in the future to resell certain software
that it licenses from third parties for use in connection with the Company's
products. There can be no assurance that these third-party software licenses
will continue to be available to the Company on commercially reasonable terms,
if at all. The termination of any such licenses, or the failure of the third-
party licensors to adequately maintain or update their products, could result
in delay in the Company's ability to ship certain of its products while it
seeks to implement technology offered by alternative sources. Any required
replacement licenses could prove costly. Further, any such delay, to the extent
it becomes extended, could result in a material adverse effect on the Company's
results of operations.
EMPLOYEES
As of July 31, 1997, the Company had 185 full-time employees, consisting of
66 in sales and marketing, 53 in product development, 59 in customer support
and 7 in administration and finance. In addition, the Company shares a number
of administrative and finance personnel with American Software. See
"Relationship with American Software and Certain Transactions." None of the
Company's employees is represented by a labor union or is subject to a
collective bargaining agreement. The Company believes its employee relations
are good.
FACILITIES
The Company maintains its headquarters in Atlanta, Georgia. Some of the
Company's offices are occupied pursuant to the Facilities Agreement. The
Company believes its existing facilities are adequate for its current needs and
that suitable additional or substitute space will be available as needed on
commercially reasonable terms. See "Relationship with American Software and
Certain Transactions."
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Chairman of the Board of
James C. Edenfield......................... 62 Directors
Chief Executive Officer,
J. Michael Edenfield....................... 39 President and Director
Chief Financial Officer and
James M. Modak............................. 40 Senior Vice President
Vice President--Sales, North
Lawrence R. Olin........................... 45 America
Vice President--Customer
Donald L. Thomas........................... 50 Service
Vice President--Research and
Andrew G. White............................ 32 Development
</TABLE>
James C. Edenfield has served as Chairman of the Board of Directors of the
Company since January 1997. He is a co-founder of American Software, where he
has served as Chief Executive Officer and Director since 1971. Prior to
founding American Software, Mr. Edenfield held several executive positions at
and was a Director of Management Science America, Inc., an applications
software development and sales company. He holds a Bachelor of Industrial
Engineering degree from the Georgia Institute of Technology.
J. Michael Edenfield has served as a Director and as President and Chief
Executive Officer of the Company since January 1997. He also serves as
Executive Vice President and Chief Operating Officer of American Software,
positions he has held since June 1994. Mr. Edenfield intends to resign his
position as Chief Operating Officer of American Software upon the completion of
this offering. Prior to June 1994, Mr. Edenfield served in the following
positions with American Software USA, Inc.: Senior Vice President of North
American Sales and Marketing from July 1993 to June 1994, Senior Vice President
of North American Sales from August 1992 to July 1993, Group Vice President
from May 1991 to August 1992 and Regional Vice President from May 1987 to May
1991. Mr. Edenfield holds a Bachelor of Industrial Management degree from
Georgia Institute of Technology. Mr. Edenfield is the son of James C.
Edenfield, Chairman of the Board of Directors of the Company.
James M. Modak has served as Chief Financial Officer and Senior Vice
President of the Company since August 1997. From January 1996 to July 1997, Mr.
Modak served as Senior Vice President--Finance of Total System Services, Inc.,
a New York Stock Exchange-listed credit card processing company. From September
1993 to January 1996, Mr. Modak served as Senior Vice President--Financial
Analysis of First Financial Management Corp., a financial services processing
company. From February 1993 to August 1993 he was Chief Financial Officer of
Shop 'N Chek, a quality service provider for the retail industry. From July
1991 to February 1993, Mr. Modak was Senior Vice President--Controller of DF
Southeastern, Inc., a savings bank holding company. From 1979 to 1991 he was a
CPA with KPMG Peat Marwick. Mr. Modak is a Certified Public Accountant with a
Bachelor of Business Administration from the University of Notre Dame.
Lawrence R. Olin has served as Vice President, North American Sales of the
Company since January 1997. From November 1996 to January 1997, Mr. Olin served
as Vice President of Sales of the Supply Chain Planning division of American
Software USA, Inc. From August 1992 to November 1996, he was Group Vice
President of American Software USA, Inc. He holds a B.S. degree in Business
Administration from Lake Superior State University and an M.B.A. in Finance
from Central Michigan University.
Donald L. Thomas has served as Vice President, Customer Service of the
Company since January 1997. From October 1976 to January 1997, he served in a
variety of positions with American Software, most recently as Vice President,
Customer Service of the Supply Chain Planning division of American Software
USA, Inc. He holds a B.S. degree in Industrial Engineering from Auburn
University.
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<PAGE>
Andrew O. White has served as Vice President, Research and Development of the
Company since January 1997. From March 1992 to January 1997, Mr. White was
employed by American Software USA, Inc., most recently as the Vice President of
Research and Development. He holds a Bachelor of Arts (Honors) degree in
Economics from The Open University in the United Kingdom.
Each Director holds office until the next annual meeting of the stockholders
of the Company or until his successor is duly elected and qualified. At such
time as the Board of Directors is comprised of more than two directors,
however, directors will be assigned to classes and will serve staggered three-
year terms. Officers are chosen by, and serve at the discretion of, the Board
of Directors.
The Company currently intends to add three independent directors to the Board
of Directors within 30 days of the completion this offering, and to name two or
more of such independent directors as members of the Compensation Committee. In
addition, the Company intends to establish an Audit Committee, a majority of
the members of which will be independent directors. See "Risk Factors--No Prior
Public Market; Possible Volatility of Stock Price."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors currently acts as the Compensation
Committee, and reviews and approves compensation and benefits for the Company's
executive officers and administers the Company's 1997 Stock Plan. The Board is
currently comprised of James C. Edenfield and J. Michael Edenfield. James C.
Edenfield is Chief Executive Officer of American Software and J. Michael
Edenfield is Chief Executive Officer of the Company and Chief Operating Officer
of American Software. J. Michael Edenfield intends to resign his position as
Chief Operating Officer of American Software upon the completion of this
offering. The Board expects to appoint independent directors to the
Compensation Committee within 30 days following the date of this Prospectus.
See "Relationship with American Software and Certain Transactions."
EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued in fiscal
year ended April 30, 1997 by the Company's chief executive officer and its two
other most highly compensated executive officers who were serving as executive
officers and whose total annual salary and bonus exceeded $100,000 per year
during fiscal year ended April 30, 1997 (together, the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION(1) COMPENSATION
----------------- ------------
SECURITIES ALL OTHER
BASE UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (1) (2)
--------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
J. Michael Edenfield .............. $240,000 $102,735 30,000(3) $-0-
President and Chief Executive
Officer
Lawrence R. Olin................... $175,000 $ 84,281 -0- -0-
Vice President--Sales, North
America
Donald L. Thomas................... $137,000 $ 4,000 -0- -0-
Vice President--Customer Service
</TABLE>
- --------
(1) The Company was organized in January 1997, and the persons named in the
table above became executive officers of the Company at that time or
shortly thereafter. Reported in the table are the total amounts paid and
options granted to purchase shares of American Software to such persons for
their services in all capacities to American Software and its subsidiaries,
including the Company.
(2) The aggregate amount of perquisites and other personal benefits, securities
or property given to each Named Officer, valued on the basis of aggregate
incremental cost to American Software or the Company, was less than either
$50,000 or 10% of the total annual salary and bonus for that individual.
(3) Consists entirely of options granted in fiscal year ended April 30, 1997
under the American Software, Inc. Director and Officer Stock Option Plan.
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<PAGE>
STOCK OPTION GRANTS
The following table sets forth information with respect to options granted
during fiscal year ended April 30, 1997, by American Software under its
Director and Officer Stock Option Plan, to J. Michael Edenfield, who was the
only Named Officer who received option grants during that fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
PERCENT OF POTENTIAL
TOTAL REALIZED VALUE
OPTIONS AT ASSUMED MARKET VALUE
GRANTED TO ANNUAL RATES OF AT END OF 10
AMERICAN STOCK PRICE YEARS ASSUMING
SOFTWARE FAIR MARKET APPRECIATION FOR 5%/10% PER
NUMBER OF EMPLOYEES EXERCISE OR VALUE ON OPTION TERM(2) ANNUM
OPTIONS IN FISCAL BASE PRICE EXPIRATION DATE OF ------------------ COMPOUNDED
NAME GRANTED(1) YEAR (PER SHARE) DATE GRANT 5% 10% INCREASE
---- ---------- ---------- ----------- ---------- ----------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Michael Edenfield ... 30,000 4% $4.375 08/06/2006 $4.375 $82,650 / $209,250 $7.13 / $11.35
</TABLE>
- --------
(1) Such options may not be exercised earlier than one year after the date of
grant. Options vest ratably over a period of four years.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises are dependent on the future
performance of American Software's Class A Common Stock and overall market
conditions. The amounts reflected in this table may not necessarily be
achieved.
STOCK OPTION EXERCISES AND OUTSTANDING OPTIONS
The following table contains information, with respect to the Named
Officers, regarding options to purchase shares of American Software common
stock outstanding as of April 30, 1997. No stock options were exercised by the
Named Officers during fiscal year ended April 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------- ----------------------------
<S> <C> <C>
J. Michael Edenfield.... 65,969 / 95,031 $195,332 / $221,156
Lawrence R. Olin........ 56,000 / 56,000 168,000 / 168,000
Donald L. Thomas........ 23,750 / 31,250 67,950 / 83,850
</TABLE>
- --------
(1) The market price of American Software's Class A Common Stock on April 30,
1997 was $5.75.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Modak on July 24,
1997, pursuant to which he serves as Chief Financial Officer and Senior Vice
President of the Company. The agreement provides that Mr. Modak is entitled to
receive a base salary of $150,000 per year and is eligible to receive an
incentive bonus based upon the Company's completion of this offering, the
average price of the Company's common stock during a pre-determined period and
the revenue growth of the Company for the twelve-month period ending July 31,
1998. In addition, the agreement provides for Mr. Modak to receive an option
to purchase 35,000 shares of American Software common stock. The agreement
also provides for an option to purchase 10,000 shares of the Company's Common
Stock, to be granted under the 1997 Stock Plan. In the event there is a change
in the ownership of the Company, and if Mr. Modak's employment is terminated
by him or by the Company within six months of such change of control, Mr.
Modak will be entitled to receive severance compensation in an amount equal to
two years of his then-current salary.
None of the other executive officers of the Company has entered into an
employment agreement with the Company. Each of the other executive officers,
however, is entitled to incentive compensation based on certain individualized
fiscal 1998 performance standards.
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<PAGE>
1997 STOCK PLAN
The Company's 1997 Stock Plan (the "Stock Plan") was adopted by the Board of
Directors and approved by the sole stockholder of the Company in August 1997.
Up to 295,000 shares of Common Stock (subject to adjustment in the event of
stock splits and other similar events) may be issued pursuant to stock options
granted under the Stock Plan. Up to 300,000 stock appreciation right ("SAR")
units may be granted under the Stock Plan, each SAR unit being equivalent to
the appreciation in the market value of one share of Common Stock. The Company
will be required to recognize compensation expense over the vesting period of
any SAR's granted. No options or SARs are outstanding under the Stock Plan.
The Stock Plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), nonstatutory stock options and SARs (collectively, "Awards").
Officers, employees, directors, advisors and consultants of the Company and any
subsidiaries of the Company are eligible to be granted Awards under the Stock
Plan. Under present law, however, incentive stock options may only be granted
to employees.
Optionees receive the right to purchase a specified number of shares of
Common Stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. Options may be
granted at an exercise price that may be less than, equal to or greater than
the fair market value of the Common Stock on the date of grant. Under present
law, incentive stock options may not be granted at an exercise price less than
the fair market value of the Common Stock on the date of grant (or less than
110% of the fair market value in the case of incentive stock options granted to
optionees holding more than 10% of the voting power of the Company). The Stock
Plan permits the payment of the exercise price of options to be in the form of
cash, by surrender to the Company of shares of Common Stock or by any
combination of these two forms of payment.
Under the terms of the Stock Plan, each independent, nonemployee director
automatically receives an option to purchase 2,000 shares of the Company's
Common Stock upon his or her election to the Board. Each non-employee director
also automatically receives an option to purchase an additional 1,000 shares on
the last day of each fiscal quarter. The exercise price of each option will be
equal to the fair market value of the Company's Common Stock on the date it is
granted.
Approximately 185 persons are eligible to receive Awards under the Stock
Plan, including the Company's five executive officers. The granting of Awards
under the Stock Plan is discretionary.
The Stock Plan will be administered by the Board of Directors and by two
stock option committees to be appointed by the Board of Directors. A committee
to be composed of nonemployee directors, which also is expected to act as the
Compensation Committee, will be responsible for the administration and granting
of Awards granted to executive officers of the Company. The Stock Option
Committee of the Board of Directors, consisting of other directors of the
Company, will be responsible for the administration and granting of Awards to
other employees and eligible persons. To date, neither of such Committees has
been formed, pending the election of nonemployee directors to the Board of
Directors. The Board and the Stock Option Committee will have the authority to
adopt, amend and repeal the administrative rules, guidelines and practices
relating to the Stock Plan generally and to interpret the provisions thereof.
The Board of Directors, and the respective committees when they are
established, may amend, modify or terminate any outstanding Award and with
respect to new awards will determine (i) the number of shares of Common Stock
or units covered by options or SARs and the dates upon which such options or
SARs become exercisable, (ii) the exercise price of options and SARs, and (iii)
the duration of options and SARs.
The stock option agreements and stock appreciation rights agreements will
provide that in the event of a Change in Control (as defined in the Stock Plan)
of the Company, or a threatened Change in Control of the Company as determined
by the Board of Directors, outstanding Awards will automatically become fully
exercisable, subject to the right of the individual Award holder to accept a
substitute stock option or similar equity right from the surviving entity in
the Change of Control transaction.
44
<PAGE>
No Award may be made under the Stock Plan after August 2007, but Awards
previously granted may extend beyond that time. The Board of Directors may at
any time terminate the Stock Plan. Any such termination will not affect
outstanding options or SARs.
So long as the Company remains a majority-owned subsidiary of American
Software, officers and other employees of the Company will be eligible to
receive grants of stock options under stock option plans of American Software.
The grant of such options, if any, will be entirely within the discretion of
the respective committees of the American Software board of directors. James C.
Edenfield, a director of the Company, serves on a committee of the American
Software board which has authority over one of the American Software stock
option plans. See "Relationship with American Software and Certain
Transactions."
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
The Articles include provisions that limit the personal liability of the
Company's directors to the Company or its shareholders for monetary damages for
any action taken, or the failure to take any action, as a director of the
Company to the fullest extent permitted under the Georgia Business Corporation
Code (the "Georgia Code"). In accordance with the Georgia Code, however, the
Articles do not eliminate liability (i) for any appropriation, in violation of
a director's duties, of any business opportunity of the Company; (ii) for acts
or omissions that involve intentional misconduct or a knowing violation of law;
(iii) for unlawful payment of dividends or unlawful stock repurchases or
redemptions; or (iv) for any transaction for which a director derived an
improper personal benefit. In addition, the Articles and Bylaws provide that
the Company shall indemnify its directors and officers to the fullest extent
permitted under the Georgia Code, including those circumstances in which
indemnification would otherwise be discretionary, subject to certain
exceptions.
The Company will enter into Indemnification Agreements with each of its
directors and executive officers that provide the maximum indemnification
allowed to directors and executive officers under the Georgia Code, subject to
certain exceptions. In addition, as authorized by the Bylaws and Georgia Code,
the Indemnification Agreements will provide generally that the Company will
advance expenses incurred by directors and executive officers in any action or
proceeding as to which they may be entitled to indemnification, subject to
certain exceptions.
The indemnification provisions in the Company's Articles and Bylaws and the
Indemnification Agreements described above may permit indemnification of
directors and executive officers for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"). Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company 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, therefore, is unenforceable.
American Software currently maintains directors and officers liability
insurance for the benefit of its and the Company's directors and officers.
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<PAGE>
RELATIONSHIP WITH AMERICAN SOFTWARE AND CERTAIN TRANSACTIONS
Since January 1, 1994, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which the Company was or
is to be a party in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than five percent of the Common
Stock of the Company had or will have a direct or indirect material interest
other than (i) compensation agreements which are described, where required, in
"Management," and (ii) the transactions described below.
The descriptions of agreements set forth below are intended to be summaries
and, while material terms of the agreements are set forth herein, the
descriptions are qualified in their entirety by reference to the relevant
agreements filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
SERVICES AGREEMENT
The Company and American Software have entered into a Services Agreement
effective August 1, 1997 (the "Services Agreement") with respect to certain
services to be provided by American Software (or subsidiaries of American
Software) to the Company. The Services Agreement provides that such services
are provided in exchange for fees which (based on the current cost for such
services) management of the Company believes would not be substantially
different from fees that would be paid if such services were provided by
independent third parties. Such fees are payable monthly in arrears. The
Company may request an expansion of services, in which case the parties will
discuss, without obligation, the provision of such services and an appropriate
increase in charges for such services. Services are provided to the Company
based on a number of billing and allocation methodologies including: (i) a
"customary billing method," whereby specified services are provided to the
Company at costs comparable to those charged from time to time to other
businesses operated by American Software; (ii) a "pass-through billing method,"
whereby specified services are provided to the Company at the cost or expense
incurred by American Software; and (iii) a "cost-plus billing method," whereby
specified services are provided to the Company at the cost or expense incurred
by American Software to a third party, plus an additional specified fixed
percentage of such cost or expense.
The purpose of the Services Agreement is to ensure that American Software
continues to provide the Company with the range of services that American
Software provided to the Company prior to this offering. With respect to
matters covered by the Services Agreement, the relationship between American
Software and the Company is intended to continue in a manner generally
consistent with current practices. The services initially provided by American
Software to the Company under the Services Agreement include, among other
things, certain accounting, corporate development, professional services,
employee benefit plan administration, human resources and compensation, general
and administrative services, and risk management and tax services.
In addition to the identified services, American Software has agreed to allow
eligible employees of the Company to participate in certain of American
Software's employee benefit plans. In addition to a monthly services fee under
the Services Agreement, the Company will reimburse American Software for
American Software's costs (including any contributions and premium costs and
including third-party expenses and allocations of certain personnel expenses),
generally in accordance with past practice relating to the participation by the
Company's employees in any of American Software's benefit plans.
The Services Agreement has an initial term of three years and is renewed
automatically thereafter for successive one-year terms unless either the
Company or American Software elects not to renew its term. The Company may
terminate the Services Agreement with respect to one or more services,
following 60 days' notice to American Software, and American Software may
terminate the Services Agreement with respect to one or
46
<PAGE>
more services, following 120 days' notice to the Company. Additionally, the
Services Agreement is subject to early termination at any time by either the
Company or American Software upon 90 days' prior written notice if American
Software ceases to own shares of Common Stock representing more than 50% of the
voting power of the Common Stock of the Company.
Pursuant to the Services Agreement, the Company will indemnify American
Software against any damages that American Software may incur in connection
with its performance of services under the Services Agreement (other than those
arising from American Software's gross negligence or willful misconduct), and
American Software will indemnify the Company against any damages arising out of
American Software's gross negligence or willful misconduct in connection with
its rendering of services under the Services Agreement.
FACILITIES AGREEMENT
The Company and American Software have entered into a Facilities Agreement
effective August 1, 1997 (the "Facilities Agreement"), which provides that the
Company may occupy space located in certain facilities owned or leased by
American Software (or subsidiaries of American Software) in exchange for rental
fees. The Facilities Agreement obligates American Software, if so requested by
the Company, to continue to provide the Company with the same or comparable
facilities that American Software provided to the Company prior this offering.
With respect to matters covered by the Facilities Agreement, the relationship
between American Software and the Company is intended to continue in a manner
generally consistent with past practices.
The Facilities Agreement has an initial term of two years and is renewed
automatically thereafter for successive one-year terms unless either the
Company or American Software elects not to renew its term. The Facilities
Agreement may be terminated by the Company for any reason with respect to any
particular facility upon 90 days' written notice. The Facilities Agreement also
is subject to early termination by either the Company or American Software upon
180 days' written notice if American Software ceases to own shares of Common
Stock representing more than 50 percent of the voting power of the Common Stock
of the Company. The Company's lease of space at any facility under the
Facilities Agreement is limited by the term of the underlying lease between
American Software and a landlord with respect to any facility leased by
American Software and by the disposition by American Software of any facility
owned by American Software.
TAX SHARING AGREEMENT
The Company is, and immediately following the consummation of this offering
will continue to be, included in American Software's federal consolidated
income tax group, and the Company's federal income tax liability will be
included in the consolidated federal income tax liability of American Software
and its subsidiaries. In certain circumstances, the Company will also be
included with certain other subsidiaries of American Software in combined,
consolidated, or unitary income tax groups for federal, state and local tax
purposes. The Company and American Software have entered into a Tax Sharing
Agreement effective January 23, 1997 (the "Tax Sharing Agreement"). In
accordance with that agreement, the Company computes a separate, stand-alone
income tax provision and settles balances due to or from American Software on
this basis. All benefits derived from deferred tax assets as defined in the Tax
Sharing Agreement (which include net operating loss and tax credit
carryforwards) that arise prior to this offering will be allocated to American
Software. After this offering, to the extent the tax computation produces a tax
benefit for the Company, American Software will be required to pay such amounts
to the Company only if and when realized by American Software by the reduction
in taxes payable with respect to the current tax period. At April 30, 1997,
American Software had net operating loss carryforwards of approximately $20
million, which must be utilized by American Software before the Company would
receive payment for any currently generated tax benefits. Accordingly, there
can be no assurance that American Software will have future taxable income
sufficient to utilize any tax losses of the Company in whole or in part.
In determining the amount of tax sharing payments under the Tax Sharing
Agreement, American Software will prepare for the Company pro forma returns
with respect to federal and applicable state and local income taxes that
reflect the same positions and elections used by American Software in preparing
the returns for
47
<PAGE>
American Software's consolidated group and other applicable groups. American
Software will continue to have all the rights of a parent of a consolidated
group (and similar rights provided by applicable state and local law with
respect to a parent of a combined, consolidated, or unitary group), will be the
sole and exclusive agent for the Company in any and all matters relating to the
income, franchise, and similar tax liabilities of the Company, will have sole
and exclusive responsibility for the preparation and filing of consolidated
federal and consolidated or combined state income tax returns (or amended
returns), and will have the power, in its sole discretion, to contest or
compromise any asserted tax adjustment or deficiency and to file, litigate or
compromise any claim for refund on behalf of the Company. In addition, American
Software has undertaken to provide the aforementioned services with respect to
the Company's separate state and local returns and the Company's foreign
returns. Under the Tax Sharing Agreement, the Company will pay American
Software a fee intended to reimburse American Software for all direct and
indirect costs and expenses incurred with respect to the Company's share of the
overall costs and expense incurred by American Software with respect to tax-
related services.
In general, the Company will be included in American Software's consolidated
group for federal income tax purposes for so long as American Software
beneficially owns at least 80% of the total voting power and value of the
outstanding Common Stock. Each member of a consolidated group is jointly and
severally liable for the federal income tax liability of each other member of
the consolidated group. Accordingly, although the Tax Sharing Agreement
allocates tax liabilities between the Company and American Software during the
period in which the Company is included in American Software's consolidated
group, the Company could be liable in the event that any federal income tax
liability is incurred, but not discharged, by any other member of American
Software's consolidated group. See "Risk Factors--Relationship with American
Software."
STOCK OPTION AGREEMENT
The Company and American Software have entered into a Stock Option Agreement
pursuant to which the Company has granted to American Software a continuing
option (the "Stock Option"), transferable to any of American Software's
affiliates, to purchase, under certain circumstances, additional shares of
Common Stock and/or shares of Preferred Stock of the Company (if any shall be
issued and outstanding). The Stock Option may be exercised by American Software
simultaneously with the issuance of any equity security of the Company (other
than in connection with this offering or upon the exercise of the Underwriters'
over-allotment option), with respect to Common Stock, only to the extent
necessary to maintain its then-existing percentage of the total voting power
and value of the Company and, with respect to shares of Preferred Stock, to the
extent necessary to own eighty percent (80%) of each outstanding series of such
stock. The purchase price of the shares of Common Stock and/or Preferred Stock
purchased upon any exercise of the Stock Option, subject to certain exceptions,
shall be based on the market price at which the stock may be purchased by third
parties. The Stock Option expires (i) on the tenth anniversary date thereof
(subject to extensions, at American Software's option, for one or more
successive ten-year terms), or (ii) on the date on which American Software
makes a distribution to its shareholders of all or any portion of its Common
Stock, or (iii) on the date that the Company, with American Software's express
consent, issues, or enters into an agreement to issue, shares of Common Stock
(other than pursuant to the 1997 Stock Plan) such that, when issued and
combined with Common Stock authorized under the 1997 Stock Plan and all issued
and outstanding shares of Common Stock not held by American Software, exceeds
twenty percent (20%) of the issued and outstanding Common Stock.
TECHNOLOGY LICENSE AGREEMENT
The Company and American Software have entered into a Technology License
Agreement pursuant to which the Company has granted American Software a non-
exclusive, worldwide license to use, execute, reproduce, display, modify, and
prepare derivatives of the Logility Value Chain Solutions product line,
provided such license is limited to maintaining and supporting users that have
licensed Logility Value Chain Solutions products from American Software.
Pursuant to the Technology License Agreement, the Company and American Software
are required to disclose to one another any and all enhancements and
improvements which they may
48
<PAGE>
make or acquire in relation to a Logility Value Chain Solutions product,
subject to confidentiality requirements imposed by third parties. The term of
the Technology License Agreement is indefinite, although the Company may
terminate the Technology License Agreement for cause, and American Software may
terminate the Technology License Agreement at any time upon 60 days' notice to
the Company. Upon termination of the Technology License Agreement, all rights
to Logility Value Chain Solutions products licensed by the Company to American
Software revert to the Company, while all rights to enhancements and
improvements made by American Software to Logility Value Chain Solutions
products revert to American Software.
MARKETING LICENSE AGREEMENT
The Company and American Software USA, Inc. ("USA"), a wholly-owned
subsidiary of American Software, have entered into a Marketing License
Agreement pursuant to which USA has agreed to act as a non-exclusive marketing
representative of the Company for the solicitation of license agreements
relating to the Logility Value Chain Solutions product line. The Marketing
License Agreement provides for the payment to USA of a commission equal to 30%
(or 50% for affiliates of USA located in the United Kingdom and France if they
carry out installation and provide first-line support services) of the net
license revenue collected by the Company under license agreements for Logility
Value Chain Solutions with end-users who are also licensees of software
products of American Software which are secured and forwarded to the Company by
USA and accepted by the Company. Payments to USA are subject to a charge-back
or credit in favor of the Company equal to the amount previously paid to USA
with respect to amounts that are refunded to end-users. The Company has no
obligation to reimburse USA for expenses and costs incurred by it in the
performance of its duties under the Marketing License Agreement. The Marketing
License Agreement has a five-year term, although the Company may terminate the
Marketing License Agreement for cause, and either party may terminate the
Marketing License Agreement at any time upon 12 months' notice to the other
party.
SUBSIDIARY FORMATION AGREEMENT
The Company, American Software, and certain subsidiaries of American Software
have entered into a Subsidiary Formation Agreement which provides for the
transfer to the Company by American Software and such subsidiaries of American
Software of certain assets and the assumption by the Company of certain
liabilities relating to the former Supply Chain Planning division of American
Software. This Agreement subsequently was amended to include the WarehousePro
software and certain related operations, assets and liabilities.
49
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus, as
adjusted to reflect the sale of the shares by the Company pursuant to this
offering, by (a) each stockholder known by the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock, (b) each director of
the Company, (c) each of the executive officers, and (d) all directors and
executive officers as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole investment and voting power
with respect to such shares.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED AFTER
COMPLETION OF
OFFERING
---------------------
NAME AND ADDRESS(1) NUMBER PERCENT
------------------- ---------- -------
<S> <C> <C>
American Software...................................... 11,300,000 83.7%(2)
470 East Paces Ferry Road, N.E.
Atlanta, Georgia 30305
James C. Edenfield..................................... 11,300,000(3) 83.7%(2)
J. Michael Edenfield................................... -0- --
James M. Modak......................................... -0- --
Lawrence R. Olin....................................... -0- --
Donald L. Thomas....................................... -0- --
Andrew G. White........................................ -0- --
All directors and executive officers as a group (6
persons).............................................. 11,300,000 83.7%(2)
</TABLE>
- --------
(1) The address of each of these persons, is in care of the Company, 470 East
Paces Ferry Road, N.E., Atlanta, Georgia 30305.
(2) As of the date of this Prospectus, American Software is the owner of 100%
of the outstanding Common Stock of the Company. See "Relationship With
American Software and Certain Transactions."
(3) Consists of shares held by American Software. Mr. Edenfield beneficially
owns 11.7% of the outstanding Class A Common Shares and 53.6% of the
outstanding Class B Common Shares of American Software. Accordingly, Mr.
Edenfield may be deemed to share beneficial ownership of the Common Stock
of the Company held by American Software.
50
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of (i) twenty million
(20,000,000) shares of Common Stock having no par value, of which 11,300,000
shares are outstanding as of the date hereof, and (ii) two million (2,000,000)
shares of Preferred Stock, of which no shares are outstanding as of the date
hereof. Of the 20,000,000 shares of Common Stock, 2,200,000 shares are being
offered hereby (not including over-allotment shares), and 11,300,000 shares
will be outstanding and held by American Software upon consummation of this
offering. A description of the material terms and provisions of the Articles
affecting the relative rights of holders of the Common Stock and the Preferred
Stock are set forth below. The description is intended as a summary and is
qualified in its entirety by reference to the form of the Articles filed as an
Exhibit to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote for each share of
Common Stock held of record on all matters submitted to a vote of the
shareholders. Holders of shares of Common Stock are not entitled to cumulate
their votes in the election of directors. Generally, all matters to be voted
on by shareholders must be approved by a majority (or, in the case of the
election of directors, by a plurality) of the votes entitled to be cast by all
shares of Common Stock, present in person or represented by proxy, subject to
any voting rights granted to holders of any Preferred Stock. Upon completion
of this offering and the addition of independent directors, the Board of
Directors will be divided into three classes serving staggered three-year
terms. Except as otherwise provided by law or expressly permitted in the
Articles, and subject to any voting rights granted to holders of any
outstanding Preferred Stock, amendments to the Articles must be approved by a
majority of the voting power of the Common Stock. Holders of shares of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor, subject to any
preferential dividend rights of holders of Preferred Stock.
In the event of any merger or consolidation of the Company with or into
another company in connection with which shares of Common Stock are converted
into or exchangeable for shares of stock, other securities, or property
(including cash), all holders of Common Stock will be entitled to receive the
same kind and amount of shares of stock and other securities and property
(including cash). In the event of a liquidation, dissolution, or winding up of
the Company, after payment in full of the amounts required to be paid to
holders of Preferred Stock, all holders of Common Stock are entitled to share
ratably in all assets available for distribution to holders of shares of
Common Stock. No shares of Common Stock are subject to redemption, have
preemptive rights to purchase additional shares of Common Stock, or have
rights of conversion to any other securities. The Company and American
Software, however, have entered into a Stock Option Agreement pursuant to
which the Company has granted to American Software a continuing option to
purchase, under certain circumstances, at market price, additional shares of
Common Stock or Preferred Stock to the extent necessary to maintain its then-
existing percentage of the total voting power and value of the Company and,
with respect to shares of Preferred Stock, to the extent necessary to own 80%
of each outstanding class of such stock. See "Relationship with American
Software and Certain Transactions--Stock Option Agreement."
There are no redemption or sinking fund provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are, and the shares of
Common Stock to be sold in this offering will be, when issued and paid for,
fully paid and non-assessable.
PREFERRED STOCK
Subject to certain limitations prescribed by law, the Board of Directors is
authorized, without shareholder approval, to issue from time to time up to an
aggregate of 2,000,000 shares of Preferred Stock in one or more series and to
fix the relative preferences, rights, voting powers, restrictions, limitations
and qualifications of the
51
<PAGE>
shares within each series, including the dividend rights, voting rights,
redemption and sinking fund provisions, liquidation preferences, conversion
rights, preemptive rights and number of shares constituting any series. An
issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could
adversely affect the voting and other rights of holders of Common Stock and,
under certain circumstances, could have the effect of delaying, deferring or
preventing the removal of existing management, or could make it more difficult
or costly for a third party to acquire, or otherwise could discourage a third
party from attempting to acquire, control of the Company. The Company has no
present plans to issue any shares of Preferred Stock.
CERTAIN PROVISIONS OF ARTICLES AND BYLAWS
The Articles provide that any person purchasing or acquiring an interest in
shares of capital stock of the Company, whether Common Stock or Preferred
Stock, is deemed to have consented to the provisions summarized below relating
to intercompany agreements, transactions with interested parties, and corporate
opportunities. The Articles of Incorporation of American Software do not
include comparable provisions relating to intercompany agreements, transactions
with interested parties, or corporate opportunities. For a general discussion
of anti-takeover provisions, see "Risks Factors--Anti-Takeover Provisions. "
TRANSACTIONS WITH INTERESTED PARTIES
The Articles provide that no contract, agreement, arrangement, or transaction
(or any amendment, modification, or termination thereof) between the Company
(which, for purposes of this paragraph, includes any corporation or other
entity in which the Company owns 50% or more of the outstanding voting stock)
and American Software (which, for purposes of this paragraph, includes any
corporation or other entity in which American Software owns 50% or more of the
outstanding voting stock) or any Related Entity (which, for purposes of this
paragraph, means a corporation or other entity in which one or more of the
directors of the Company have a direct or indirect financial interest), or
between the Company and any director or officer of the Company, American
Software or any Related Entity, will be void or voidable solely for the reason
that American Software, a Related Entity or any one or more of the officers or
directors of the Company, American Software or any Related Entity are a party
thereto, or solely because any such officers or directors are present at,
participate in or vote with respect to the authorization of such contract,
agreement, arrangement or transaction (or any amendment, modification, or
termination thereof). Further, the Articles provide that neither American
Software nor any officer or director thereof or of any Related Entity shall be
liable to the Company or its shareholders for breach of any fiduciary duty or
duty of loyalty or failure to act in (or not opposed to) the best interests of
the Company or the derivation of any improper personal benefit by reason of the
fact that American Software or an officer or director thereof or of such
Related Entity in good faith takes any action or exercises any rights or gives
or withholds any consent in connection with any agreement or contract between
the Company and American Software or such Related Entity. A vote cast or other
action taken by any person who is an officer, director or other representative
of American Software or such Related Entity, which vote is cast or action is
taken by such person in his or her capacity as a director of the Company, shall
constitute an action of, or exercise of a right by, or a consent of, American
Software or such Related Entity for the purpose of any such contract,
agreement, arrangement or transaction.
COMPETITION BY AMERICAN SOFTWARE WITH THE COMPANY
Corporate Opportunities. The Articles provide that except as American
Software may otherwise agree in writing, and except as expressly provided in
the Georgia Code, the Articles or the Bylaws, neither American Software nor any
subsidiary of American Software (other than the Company) shall have a duty to
refrain from (i) engaging in the same or similar business activities or lines
of business as the Company; (ii) doing business with any potential or actual
customer or supplier of the Company; or (iii) employing or otherwise engaging
any officer or employee of the Company. Subject to the foregoing, neither
American Software nor any subsidiary (other than the Company), officer or
director of American Software will be liable to the Company or its
52
<PAGE>
shareholders for breach of any fiduciary duty by reason of any of the
activities described in the preceding sentence by American Software or any
subsidiary (other than the Company), officer or director of American Software.
The Articles also provide that if American Software or any subsidiary of
American Software (other than the Company) acquires knowledge of a potential
transaction or a matter that may be a corporate opportunity both for American
Software or such subsidiary and for the Company, neither American Software nor
such subsidiary (nor the officers and directors of American Software or such
subsidiary) shall have a duty to communicate or offer such corporate
opportunity to the Company and shall not be liable to the Company or its
shareholders for breach of fiduciary duty as a shareholder of the Company or
controlling person of a shareholder by reason of the fact that American
Software or such subsidiary pursues or acquires such opportunity for itself,
directs such corporate opportunity to another person, or does not communicate
information regarding such corporate opportunity to the Company. The Articles
also contain provisions allocating corporate opportunities between American
Software (and its affiliates) and the Company based primarily on the
relationship to the Company and American Software (or its affiliate) of the
individual to whom such opportunity is presented. In general, corporate
opportunities are allocated to the entity of which such individual is an
officer or for which the officer is acting when the opportunity is presented.
If the individual is an officer acting for both the Company and American
Software or if it is unclear for which entity such individual is acting, the
opportunity is allocated to American Software. See "Relationship with American
Software and Certain Transactions."
The enforceability under the Georgia Code of the above-described provisions
of the Articles has not been established, and due to the absence of relevant
judicial authority, counsel to the Company is not able to deliver an opinion as
to the enforceability of such provisions. These provisions of the Articles,
assuming they are enforceable, eliminate certain rights that might have been
available to shareholders under Georgia law had such provisions not been
included in the Articles.
At the time of the consummation of this offering, certain of the directors
and/or officers of the Company also will be officers and employees of American
Software.
Actions Under Intercompany Agreements. The Articles also will limit the
liability of American Software and its subsidiaries (other than the Company)
for certain breaches of their fiduciary duties in connection with actions that
may be taken or not taken in good faith under the intercompany agreements. See
"Relationship with American Software and Certain Transactions."
ADVANCE NOTICE AND CONSENT PROVISIONS
The Bylaws provide for an advance notice procedure to be utilized for the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors as well as other shareholder proposals to
be considered at annual meetings of shareholders. In general, notice of intent
to nominate a director or raise matters at such meetings will have to be
received by the Company not less than 115 days nor more than 150 days prior to
the first anniversary of the preceding year's annual meeting, and must contain
certain information concerning the person to be nominated or the matters to be
brought before the meeting and concerning the shareholder submitting the
proposal. The Articles permit stockholders to act by written consent in lieu of
a stockholders meeting. Any action taken by consent is required to be reported
to the non-consenting stockholders within ten days after the action is taken.
See "Risk Factors--Relationship with American Software."
RESTRICTIONS ON CERTAIN BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
The Bylaws and Georgia Code provide that, subject to certain exceptions
specified therein, the Company shall not engage in any "business combination"
with any "interested shareholder" for a period of five years following the time
that such shareholder has become an interested shareholder, unless: (i) prior
to such date, the Board of Directors approved either the business combination
or the transaction which resulted in the shareholder
53
<PAGE>
becoming an interested shareholder; (ii) upon consummation of the transaction
which resulted in the shareholder becoming an interested shareholder, the
interested shareholder owned at least 90% of the Common Stock of the Company
outstanding at the time the transaction commenced (excluding certain shares);
or (iii) subsequent to becoming an interested shareholder, such shareholder
acquired additional shares resulting in the interested shareholder owning at
least 90% of the outstanding voting stock of the Company (excluding certain
shares), and the business combination was approved at an annual or special
meeting of the shareholders by the holders of a majority of the voting stock
entitled to vote thereon (excluding certain shares). An "interested
shareholder" means any person, other than the Company or its subsidiaries, that
is (x) the beneficial owner of ten percent or more of the voting power of the
outstanding voting shares of the Company; or (y) an affiliate of the Company
which, at any time within the two-year period immediately prior to the date in
question, was the beneficial owner of ten percent or more of the voting power
of the then outstanding voting shares of the Company. A "business combination"
is broadly defined to include business combinations of every type (including
share exchanges); sales or transfers of assets to an interested shareholder;
the issuance to an interested shareholder of shares which have an aggregate
market value of five percent of the total market value of all shares; plans of
liquidation or dissolution; and any recapitalization which directly or
indirectly increases the ownership of shares by the interested shareholder by
at least five percent.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Wachovia
Bank of North Carolina, N.A.
LISTING
The Company's Common Stock has been approved for quotation on the Nasdaq
National Market, upon completion of this offering, under the trading symbol
"LGTY." See "Risk Factors--No Prior Public Market; Possible Volatility of Stock
Price."
54
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely affect market prices prevailing from time to time.
Upon completion of this offering, the Company will have 13,500,000 shares of
Common Stock outstanding. Of these shares, the 2,200,000 shares sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act, except that any shares purchased by "affiliates" of
the Company, as that term is defined in Rule 144 under the Securities Act
("Affiliates"), may generally only be sold in compliance with the limitations
of Rule 144 described below. The remaining 11,300,000 shares of outstanding
Common Stock held by American Software are deemed "Restricted Shares" under
Rule 144 of the Securities Act and will be eligible for sale without
restriction or further registration pursuant to Rule 144 upon the expiration of
American Software's one-year holding period, expiring in January 1998, subject
to the volume, manner of sale and other limitations of Rule 144.
American Software may, in the future, elect to distribute to its shareholders
all of the shares of Common Stock that it holds, provided that such a
distribution would be treated as a tax-free distribution for federal income tax
purposes. American Software has no present plans or intention to make such a
distribution, however. Accordingly, there can be no assurance as to when, if
ever, such a distribution may occur. Any shares of Common Stock that would be
distributed in such a distribution are expected to be freely tradeable, without
restriction under the Securities Act, other than shares distributed to
"affiliates" of the Company. See "Risk Factors--Shares Eligible for Sale After
this Offering."
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least one year is entitled to sell, within any three-
month period, a number of such shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock, or the average weekly trading
volume in the Common Stock in the Nasdaq National Market during the four
calendar weeks preceding the date on which notice of such sale is filed under
Rule 144. In addition, under Rule 144(k), a person who is not an Affiliate and
has not been an Affiliate for at least three months prior to the sale, and who
has beneficially owned Restricted Shares for at least two years may resell such
shares without compliance with the foregoing requirements. In calculating the
one- and two-year holding periods described above, a holder of Restricted
Shares can include the holding periods of a prior owner who was not an
Affiliate.
The Company intends to register pursuant to a registration statement on Form
S-8 the 295,000 shares of Common Stock reserved for future issuance under the
Company's 1997 Stock Plan. Such shares of Common Stock (to the extent issued)
will be eligible for sale, subject to vesting and exercisability restrictions.
The Company expects to file such registration statement as soon as practicable
after the closing of this offering, and such registration statement is expected
to become effective upon filing. Shares covered by such registration statement
will thereupon be eligible for sale in the public markets. No options have yet
been granted under this Plan.
The Company and American Software have agreed not to offer, sell or otherwise
dispose of any shares of Common Stock for a period of 180 days after the date
of this Prospectus without the prior written consent of Montgomery Securities,
on behalf of the Underwriters, except that the Company may issue, and may grant
options to purchase shares of Common Stock under its 1997 Stock Plan, and
except for shares issued in connection with acquisitions. Any shares sold
pursuant to the exercise of stock options or pursuant to acquisitions during
such 180-day period would be subject to a lock-up through the end of that
period. Alternatively, the Company may elect to provide that any options to
purchase shares of Common Stock will not vest during such 180-day period.
Montgomery Securities, on behalf of the Underwriters may, in its sole
discretion and at any time without notice, release all or any portion of the
shares subject to lock-up agreements. See "Risk Factors--Shares Eligible for
Sale After this Offering."
55
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), represented by Montgomery
Securities and Cowen & Company (the "Representatives"), have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement, to
purchase from the Company the number of shares of Common Stock indicated below
opposite their respective names at the initial public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent, and that the Underwriters are
committed to purchase all of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Montgomery Securities.................................................
Cowen & Company.......................................................
---------
Total................................................................ 2,200,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters initially
propose to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow to
selected dealers a concession of not more than $ per share; and the
Underwriters may allow, and such dealers may re-allow, a concession of not more
than $ per share to certain other dealers. After the offering, the
offering price and other selling terms may be changed by the Representatives.
The Common Stock is offered subject to receipt and acceptance by the
Underwriters, and to certain other conditions, including the right to reject
orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during the
30-day period after the date of this Prospectus, to purchase up to a maximum of
330,000 additional shares of Common Stock to cover over-allotments, if any, at
the same price per share as the initial 2,200,000 shares to be purchased by the
Underwriters. To the extent the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase such
additional shares in approximately the same proportion as set forth in the
above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this offering.
The Company and American Software have agreed, subject to certain limited
exceptions, that they will not, without the prior written consent of Montgomery
Securities (which consent may be withheld in its sole discretion), directly or
indirectly, sell, offer, contract or grant any option to sell, pledge,
transfer, establish an open "put equivalent position" within the meaning of
Rule 16a-1(h) under the Exchange Act, or otherwise dispose or transfer of any
shares of Common Stock, options or warrants to acquire shares of Common Stock,
or securities exchangeable or exercisable for or convertible into shares of
Common Stock or publicly announce such party's intention to do any of the
foregoing, for a period of 180 days after the date of this Prospectus. The
Company may issue shares of Common Stock or options to purchase Common Stock
pursuant to the 1997 Plan or in connection with an acquisition if the holders
of such shares or options agree not to sell, offer, dispose of or otherwise
transfer any such shares or options during that period. Alternatively, the
Company may elect to provide that any options to purchase shares of Common
Stock will not vest during such 180-day period. Montgomery Securities, on
behalf of the Underwriters may, in its sole discretion and at any time without
notice, release all or any portion of the shares subject to lock-up agreements.
See "Shares Eligible for Future Sale."
56
<PAGE>
The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their controlling persons against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.
In connection with this offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock,
including over-allotment, stabilization, syndicate covering transactions and
imposition of penalty bids. In an over-allotment, the Underwriters would allot
more shares of Common Stock to their customers in the aggregate than are
available for purchase by the Underwriters under the Underwriting Agreement.
Stabilizing means the placing of any bid, or the effecting of any purchase, for
the purpose of pegging, fixing or maintaining the price of a security. In a
syndicate covering transaction, the Underwriters would place a bid or effect a
purchase to reduce a short position created in connection with this offering.
Pursuant to a penalty bid, Montgomery Securities, on behalf of the
Underwriters, would be able to reclaim a selling concession from an Underwriter
if shares of Common Stock originally sold by such Underwriter are purchased in
syndicate covering transactions. These transactions may result in the price of
the Common Stock being higher than the price that might otherwise prevail in
the open market. These transactions may be effected on the Nasdaq National
Market, in the over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.
The Representatives have advised the Company that the Underwriters will not
confirm sales to any accounts over which they exercise discretionary authority
in excess of 5% of the number of shares of Common Stock offered hereby.
Prior to this offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price will be determined through
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations are the history of, and prospects for, the
Company and the industry in which it competes, an assessment of the Company's
management, its past and present operations and financial performance, its past
and present earnings and the trend of such earnings, the prospects for future
earnings of the Company, the present state of the Company's development, the
general condition of the securities markets at the time of the offering, the
market prices of and demand for publicly traded common stocks of comparable
companies in recent periods and other factors deemed relevant.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Gambrell & Stolz, L.L.P., Atlanta,
Georgia. Certain legal matters in connection with this offering will be passed
upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts.
EXPERTS
The combined financial statements of Logility, Inc. as of April 30, 1996 and
1997 and for each of the years in the three-year period ended April 30, 1997,
have been included herein and in the Registration Statement in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include all
amendments, exhibits, schedules and supplements thereto) on Form S-1 under the
Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
57
<PAGE>
certain portions of which have been omitted in accordance with the rules and
regulations of the Commission, to which Registration Statement reference is
hereby made. Statements contained in this Prospectus as to the contents of any
contract, agreement or other document referred to herein are not necessarily
complete and, in each instance, reference is made to the copy of such contract,
agreement or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement and the exhibits and schedules thereto may be inspected
without charge at the public reference facilities of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Midwest Regional Office of the Commissioner located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and at 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of all or any part thereof may be
obtained from the Commission at prescribed rates. In addition, the Company is
required to file electronic versions of these documents with the Commission
through the Commissioner's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company intends to distribute to its stockholders annual reports
containing audited financial statements. The Company also intends to make
available to its stockholders, within 45 days after the end of each fiscal
quarter, reports for the first three quarters of each fiscal year containing
interim unaudited financial information.
58
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Combined Financial Statements:
Combined Balance Sheets as of April 30, 1996 and 1997.................... F-3
Combined Statements of Operations for the Years ended April 30, 1995,
1996, and 1997.......................................................... F-4
Combined Statements of Stockholder's Equity for the Years ended April 30,
1995, 1996, and 1997.................................................... F-5
Combined Statements of Cash Flows for the Years ended April 30, 1995,
1996, and 1997.......................................................... F-6
Notes to Combined Financial Statements................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Logility, Inc.:
We have audited the accompanying combined balance sheets of Logility, Inc.
(a wholly-owned subsidiary of American Software, Inc.) as of April 30, 1996
and 1997, and the related combined statements of operations, stockholder's
equity, and cash flows for each of the years in the three-year period ended
April 30, 1997. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Logility, Inc. as
of April 30, 1996 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended April 30, 1997, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
August 1, 1997, except as to note 10,
which is as of August 12, 1997
F-2
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
COMBINED BALANCE SHEETS
APRIL 30, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 1997 1997
------- ------ ---------
<S> <C> <C> <C>
PRO FORMA
ACTUAL (NOTE 1)
ASSETS
Current assets:
Cash and cash equivalents......................... $ 13 732
Trade accounts receivable, less allowance for
doubtful accounts of $330 and $421 in 1996 and
1997, respectively:
Billed.......................................... 3,756 3,843
Unbilled........................................ 1,576 2,737
Prepaid expenses and other current assets......... 35 147
------- ------
Total current assets........................... 5,380 7,459
Furniture and equipment, less accumulated deprecia-
tion.............................................. 529 876
Intangible assets, less accumulated amortization... 7,961 7,732
Other assets, net.................................. 300 300
------- ------
$14,170 16,367
======= ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................. $ 101 1,266
Accrued compensation and related costs............ 920 1,305
Deferred revenues................................. 2,953 3,886
Other current liabilities......................... 183 445
------- ------
Total current liabilities...................... 4,157 6,902
Deferred income taxes.............................. 2,789 2,797
------- ------
Total liabilities.............................. 6,946 9,699
------- ------
Stockholder's equity:
Preferred stock; 2,000,000 shares authorized; no
shares issued.................................... -- -- --
Common stock, no par value; 20,000,000 shares au-
thorized; 11,300,000 shares issued and outstand-
ing as of April 30, 1997......................... -- -- --
Additional paid-in capital........................ -- 4,337 9,790
Divisional equity................................. 10,362 5,453 --
Accumulated deficit............................... (3,138) (3,122) (3,122)
------- ------ ---------
Total stockholder's equity..................... 7,224 6,668 6,668
Commitments and contingencies......................
------- ------
$14,170 16,367
======= ======
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED APRIL 30, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
Revenues:
License.............................................. $ 5,767 10,700 12,359
Maintenance.......................................... 2,628 3,797 5,051
Services............................................. 1,815 2,136 4,414
------- ------ ------
Total revenues.................................... 10,210 16,633 21,824
------- ------ ------
Cost of revenues:
License.............................................. 2,184 4,016 3,970
Maintenance.......................................... 624 876 1,219
Services............................................. 1,030 1,131 1,969
------- ------ ------
Total cost of revenues............................ 3,838 6,023 7,158
------- ------ ------
Gross margin...................................... 6,372 10,610 14,666
------- ------ ------
Operating expenses:
Research and development............................. 1,168 1,452 3,484
Sales and marketing.................................. 6,295 9,892 10,628
General and administrative including provisions for
doubtful accounts of $710, $431 and $302 in 1995,
1996 and 1997, respectively......................... 2,155 2,140 2,508
------- ------ ------
Total operating expenses.......................... 9,618 13,484 16,620
------- ------ ------
Operating loss.................................... (3,246) (2,874) (1,954)
Income taxes.......................................... -- -- --
------- ------ ------
Net loss.......................................... $(3,246) (2,874) (1,954)
======= ====== ======
Net loss per common share............................. $ (0.29) (0.25) (0.17)
======= ====== ======
Weighted-average common shares outstanding............ 11,300 11,300 11,300
======= ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED APRIL 30, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN DIVISIONAL ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EQUITY DEFICIT EQUITY
------ ------ ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at April 30,
1994................... -- $ -- -- 8,285 (966) 7,319
Contribution from
American Software,
Inc.................... -- -- -- 2,229 -- 2,229
Net loss................ -- -- -- (2,742) (504) (3,246)
------ ----- ----- ------ ------ ------
Balance at April 30,
1995................... -- -- -- 7,772 (1,470) 6,302
Contribution from
American Software,
Inc.................... -- -- -- 3,796 -- 3,796
Net loss................ -- -- -- (1,206) (1,668) (2,874)
------ ----- ----- ------ ------ ------
Balance at April 30,
1996................... -- -- -- 10,362 (3,138) 7,224
Contribution from
American Software,
Inc.................... -- -- -- 2,114 -- 2,114
Issuance of common stock
in connection with
formation.............. 11,300 -- 5,053 (5,053) -- --
Dividend paid to
American Software,
Inc.................... -- -- (716) -- -- (716)
Net loss................ -- -- -- (1,970) 16 (1,954)
------ ----- ----- ------ ------ ------
Balance at April 30,
1997 (Actual).......... 11,300 $ -- 4,337 5,453 (3,122) 6,668
====== ===== ===== ====== ====== ======
Balance at April 30,
1997 (Pro Forma) (Note
1)..................... 11,300 $ -- 9,790 -- (3,122) 6,668
====== ===== ===== ====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED APRIL 30, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................. $(3,246) (2,874) (1,954)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 1,592 2,394 3,258
Write-off of purchased computer software costs..... -- 1,154 --
(Increase) decrease in assets:
Accounts receivable............................... 1,403 (2,794) (1,248)
Other assets...................................... (26) (289) (111)
Increase (decrease) in liabilities:
Accounts payable, accrued costs and other......... (93) 491 1,812
Deferred revenues................................. 61 1,721 933
------- ------ ------
Net cash provided by (used in) operating activi-
ties............................................ (309) (197) 2,690
------- ------ ------
Cash flows from investing activities:
Additions to capitalized computer software develop-
ment costs.......................................... (2,223) (3,611) (2,795)
Additions to purchased computer software costs....... (255) (574) (36)
Purchases of furniture and equipment................. (88) (422) (545)
------- ------ ------
Net cash used in investing activities............ (2,566) (4,607) (3,376)
------- ------ ------
Cash flows from financing activities:
Deferred income taxes resulting from Tax Sharing
Agreement........................................... 674 955 7
Contributions from American Software, Inc............ 2,229 3,796 2,114
Dividend paid to American Software, Inc.............. -- -- (716)
------- ------ ------
Net cash provided by financing activities........ 2,903 4,751 1,405
------- ------ ------
Net change in cash............................... 28 (53) 719
Cash and cash equivalents at beginning of year........ 38 66 13
------- ------ ------
Cash and cash equivalents at end of year.............. $ 66 13 732
======= ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Presentation
Logility, Inc. (the "Company") develops, markets, and supports an integrated
suite of client-server value chain management software products. This suite of
products is designed to manage the flow of information and products along the
entire value chain of an enterprise, from raw materials, manufacturing and
warehousing to final consumption. The Company's products and services are used
by customers within the United States and certain international markets.
The Company is headquartered in Atlanta, Georgia, and is a wholly owned
subsidiary of American Software, Inc. ("ASI"). The Company's operations
consist of the following divisions and subsidiary of ASI which have been
derived from ASI's consolidated financial statements: Supply Chain Planning
and WarehousePRO divisions of ASI; and Distribution Sciences Inc., a wholly
owned subsidiary of ASI. Effective January 23, 1997, in connection with the
purchase of 11,300,000 shares of the common stock of the Company, ASI formally
contributed its Supply Chain Planning division to the Company. Accordingly,
divisional equity was reduced by $5,053,000 and that same amount was
transferred to additional paid-in capital to reflect the contribution of the
Supply Chain Planning division to the Company.
The accompanying combined financial statements include the historical cost
of the assets and liabilities and the results of operations of the Company's
constituent businesses as reflected in ASI's consolidated financial
statements. The Supply Chain Planning and WarehousePRO divisions required
certain estimates and allocations which ASI believes approximates costs that
relate to the Company's operations. Balance sheet amounts were generally
derived based upon specific identification of assets and liabilities and
certain allocations relating to the Supply Chain Planning division and
WarehousePRO division. Since Distribution Sciences, Inc. was a separate
business, no allocations were necessary, other than income taxes.
Revenue Recognition
License. License revenues in connection with license agreements for standard
proprietary and tailored software are recognized upon delivery of the
software, providing collection is considered probable and no significant
obligations remain outstanding. Maintenance included in initial license
revenues is deferred and recognized ratably over the term of the agreement.
Maintenance. Maintenance fees are generally billed annually in advance and
the resulting revenues are recognized ratably over the term of the maintenance
agreement.
Services. Revenues derived from services primarily include consulting,
implementation, and training. Fees are billed under both time and materials
and fixed fee arrangements and are recognized as services are performed.
Deferred Revenues. Deferred revenues represent advance payments or billings
for software licenses, services, and maintenance billed in advance of the time
revenues are recognized.
F-7
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Cost of Revenues
Cost of revenues for licenses include amortization of capitalized computer
software development costs and purchased computer software costs, salaries and
benefits, and royalties paid to third party software vendors. Costs for
maintenance and services include the cost of personnel to conduct
implementations and customer support, consulting and other personnel-related
expenses.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Furniture and Equipment
Furniture and equipment are recorded at cost, less accumulated depreciation.
Depreciation of computer equipment and office furniture and equipment is
calculated using the straight-line method based upon an estimated useful life
of five years.
Intangible Assets
Capitalized Computer Software Development Costs. The Company capitalizes
certain computer software development costs in accordance with Statement of
Financial Accounting Standards No. 86, Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed. Costs incurred internally
to create a computer software product or to develop an enhancement to an
existing product are charged to expense when incurred as research and
development expense until technological feasibility for the respective product
is established. Thereafter, all software development costs are capitalized and
reported at the lower of unamortized cost or net realizable value.
Capitalization ceases when the product or enhancement is available for general
release to customers. The Company makes ongoing evaluations of the
recoverability of its capitalized software projects by comparing the amount
capitalized for each product to the estimated net realizable value of the
product. If such evaluations indicate that the unamortized software
development costs exceed the net realizable value, the Company writes off the
amount by which the unamortized software development costs exceed net
realizable value. Capitalized computer software development costs are being
amortized ratably based on the projected revenue associated with the related
software or on a straight-line basis over three years, whichever method
results in a higher level of amortization.
Purchased Computer Software Costs. Purchased computer software costs
represent the cost of acquiring computer software. Amortization of purchased
computer software costs is calculated using the straight-line method over
periods of three to five years.
F-8
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Total Expenditures, Amortization and Write-offs. Total expenditures for
capitalized computer software development costs, total research and
development expense, total amortization of capitalized computer software
development costs, total amortization of purchased computer software costs and
write-off of purchased computer software costs are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED APRIL
30,
------------------
1995 1996 1997
------ ----- -----
<S> <C> <C> <C>
Total capitalized computer software development costs....... $2,223 3,611 2,795
Total research and development expense...................... 1,168 1,452 3,484
------ ----- -----
Total research and development expense and capitalized
computer software development costs........................ $3,391 5,063 6,279
====== ===== =====
Total amortization of capitalized computer software
development costs.......................................... $ 456 1,129 2,828
====== ===== =====
Total amortization of purchased computer software costs..... $1,090 1,159 233
====== ===== =====
Write-off of purchased computer software costs as a result
of net realizable value test............................... $ -- 1,154 --
====== ===== =====
</TABLE>
Income Taxes
The Company accounts for income taxes using Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No. 109").
SFAS No. 109 requires an asset and liability method of accounting for income
taxes. Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under SFAS No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date. The Company's results of operations are
included in the consolidated Federal income tax return filed by ASI.
Loss Per Share
Net loss per common share has been computed based upon net loss applicable
to the common shareholder.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these combined financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from these estimates.
Fair Value of Financial Instruments
The Company uses financial instruments in the normal course of its business.
The carrying values of cash equivalents, trade accounts receivable, accounts
payable, accrued compensation costs, and deferred revenues approximate fair
value due to the short-term maturities of these assets and liabilities.
Stock Compensation Plans
The Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("SFAS No. 123"), which encourages
entities to recognize as compensation expense over the
F-9
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 allows entities to apply the provisions of
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees, and provide pro forma disclosures for employee stock
option grants made in fiscal year ended April 30, 1996 and future years as if
the fair-value-based method as defined in SFAS No. 123 had been applied. Under
APB Opinion No. 25, compensation expense is recorded on the date of grant if
the current market price of the underlying stock granted exceeds the exercise
price. The Company has elected to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosures under the provisions of SFAS No. 123.
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121,
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ("SFAS No. 121"). SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles held and used by a company be reviewed for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. SFAS No. 121 also
requires that long-lived assets and certain identifiable intangibles held for
sale, other than those related to discontinued operations, be reported at the
lower of carrying amount or fair value less costs to sell. The Company's
adoption of SFAS No. 121 did not have an impact on its combined financial
statements.
Pro Forma Balance Sheet
As a result of the merger of Distribution Sciences, Inc. into the Company
and ASI's contribution of the WarehousePRO division to the Company in August
1997, the pro forma balance sheet reflects the effect of the reclassification
of divisional equity to additional paid-in capital as though the above
described transactions occurred on April 30, 1997.
(2) RELATED PARTY TRANSACTIONS
ASI provides marketing services, employees, and office space to the Company,
allows the Company to participate in insurance coverage and benefit plans, and
provides certain other administrative services to the Company. The combined
statements of operations include the allocation of these expenses incurred by
ASI to the Company based on percentage of license fees, specific
identification, direct labor hours, head count, product license fees to total
license fees, and square footage of leased properties.
(3) FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following at April 30, 1996 and 1997:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
1996 1997
---- -----
<S> <C> <C>
Computer and communications equipment.............................. $704 1,172
Furniture and fixtures............................................. 44 121
---- -----
748 1,293
Less accumulated depreciation...................................... (219) (417)
---- -----
$529 876
==== =====
</TABLE>
F-10
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(4) INTANGIBLE ASSETS
Intangible assets consist of the following at April 30, 1996 and 1997:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
1996 1997
------ ------
<S> <C> <C>
Capitalized computer software development costs................. $8,948 11,743
Purchased computer software costs............................... 859 895
------ ------
9,807 12,638
Less accumulated amortization................................... (1,846) (4,906)
------ ------
$7,961 7,732
====== ======
</TABLE>
(5) INCOME TAXES
The Company is included in the consolidated Federal income tax return filed
by ASI; however, the Company has provided for income taxes as if it were
filing a separate income tax return.
The Company has not recorded any income tax expense (benefit) for the years
ended April 30, 1995, 1996, and 1997 because of cumulative operating losses
incurred since inception. The Company's effective tax rate differs from the
"expected" income tax benefit for those years calculated by applying the
Federal statutory rate of 34% to operating loss as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED APRIL
30,
--------------------
1995 1996 1997
------- ----- ----
<S> <C> <C> <C>
Computed "expected" income tax benefit................... $(1,104) (977) (664)
Increase (decrease) in income taxes resulting from:
State income taxes, net of Federal income tax effect.... (129) (114) (78)
Change in the beginning-of-year balance of the valuation
allowance for deferred tax assets...................... 1,135 1,069 719
Other, net.............................................. 98 22 23
------- ----- ----
$ -- -- --
======= ===== ====
</TABLE>
The significant components of deferred income tax benefit attributable to
operating loss for the years ended April 30, 1995, 1996, and 1997, are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED APRIL
30,
---------------------
1995 1996 1997
------- ------ ----
<S> <C> <C> <C>
Deferred income tax benefit............................. $(1,135) (1,069) (719)
Increase in beginning-of-the-year balance of the valua-
tion allowance for deferred tax assets................. 1,135 1,069 719
------- ------ ----
$ -- -- --
======= ====== ====
</TABLE>
F-11
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The income tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax liabilities
computed on a separate return basis and before consideration of the Company's
Tax Sharing Agreement with ASI at April 30, 1996 and 1997 are presented as
follows:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
APRIL 30,
--------------
1996 1997
------ ------
<S> <C> <C>
Deferred income tax assets:
Compensated absences and other expenses, due to accrual for
financial reporting purposes................................. $ 281 405
Accounts receivable, due to allowance for doubtful accounts... 125 160
Net operating loss carryforwards.............................. 4,635 5,203
------ ------
Total gross deferred income tax assets...................... 5,041 5,768
Less valuation allowance...................................... (2,252) (2,971)
------ ------
Net deferred income tax assets.............................. 2,789 2,797
------ ------
Deferred income tax liabilities:
Capitalized computer software development costs............... 2,774 2,782
Property and equipment, primarily due to differences in
depreciation................................................. 15 15
------ ------
Total gross deferred income tax liabilities................. 2,789 2,797
------ ------
Net deferred income tax asset (liability)................... $ -- --
====== ======
</TABLE>
In accordance with the Company's Tax Sharing Agreement with ASI, the Company
computes a separate, stand-alone income tax provision and settles balances due
to or from ASI on this basis. All benefits derived from deferred tax assets as
defined in the Tax Sharing Agreement (which include net operating loss and tax
credit carryforwards) that arise prior to the proposed initial public offering
will be allocated to ASI. Accordingly, the Company will not receive any
benefit from the $5,768,000 of gross deferred tax assets calculated on a
separate return basis at April 30, 1997. However, deferred tax liabilities
will be allocated to the Company (which gave rise to the Company's net
deferred tax liability of $2,789,000 at April 30, 1996 and $2,797,000 at April
30, 1997). After this offering, to the extent the tax computation produces a
tax benefit for the Company, ASI will be required to pay such amounts to the
Company only if and when realized by ASI by the reduction in income taxes
payable with respect to the current tax period. At April 30, 1997, ASI had net
operating loss carryforwards of approximately $20,000,000 which must be
utilized by ASI before the Company would receive payment for any currently
generated tax benefits.
(6) STOCKHOLDER'S EQUITY
Amendments to the Articles of Incorporation
On July 25, 1996, the Company was incorporated as Supply Chain Management,
Inc. with 1,000,000 authorized shares of common stock at no par value,
although no operations were conducted in the Company until January 23, 1997.
Effective November 25, 1996, the Company changed its name to Logility, Inc. On
January 21, 1997, the Company increased its authorized shares of common stock
to 20,000,000. All amounts included in these combined financial statements
have been restated to reflect these changes.
Stock Compensation
The Company has not issued any stock options; however, certain employees of
the Company received stock options of ASI. Under SFAS No. 123 ASI applies the
provisions of APB Opinion No. 25 and related
F-12
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
interpretations in accounting for its stock option plans. Accordingly, no
compensations cost has been recognized for ASI's stock option plans. Had
compensation cost for the Company's share of stock-based compensation plans
been determined consistent with SFAS No. 123, the Company's net loss and net
loss per common share would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
YEARS ENDED
APRIL 30,
---------------
1996 1997
------- ------
<S> <C> <C>
Net loss:
as reported.................................................. $(2,874) (1,954)
pro forma.................................................... (3,207) (2,759)
Net loss per common share:
as reported.................................................. $ (0.25) (0.17)
pro forma.................................................... (0.28) (.024)
</TABLE>
The fair value of each option grant was determined using the same
assumptions as those used by ASI and is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1997: dividend yield of 0%; expected
volatility of 211.9%; risk-free interest rates of 6.1%; and expected lives of
8 years.
(7) INTERNATIONAL REVENUES
International revenues were $1,210,000 or 12%, $3,366,000 or 20%, and
$2,574,000 or 12% of combined revenues for the years ended April 30, 1995,
1996 and 1997, respectively, and were derived primarily from customers in
Canada, Europe, Australia, and Asia. Included in international revenues for
1996 were revenues from the United Kingdom of $2,148,000 or 13% of combined
revenues.
(8) COMMITMENTS AND CONTINGENCIES
401(k) Profit Sharing Plan
The employees of the Company are offered the opportunity to participate in
the ASI 401(k) Profit Sharing Plan (the "401(k) Plan"), which is intended to
be a tax-qualified defined contribution plan under Section 401(k) of the
Internal Revenue Code. Under the 401(k) Plan, employees who have completed one
year of service are eligible to participate. Eligible employees may contribute
up to 15% of pretax income to the 401(k) Plan. Subject to certain limitations,
the Company may make a discretionary matching contribution at an amount
determined by the Board of Directors of the Company. The Company did not make
contributions for 1995, 1996 or 1997.
Lease Commitments
The Company occupies its principal office facilities under a facilities
agreement with ASI dated August 1, 1997, that is cancelable upon 90-day notice
by either party (see note 9). Amounts allocated to the Company for rent
expense for these facilities were $524,000 for each of the years ended
April 30, 1995, 1996 and 1997. In addition, the Company has a operating lease
for office space that expires in June 2000. Rent expense under this lease was
$112,000, $122,000 and $126,000 for the years ended April 30, 1995, 1996 and
1997, respectively.
F-13
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancelable operating leases (excludes
cancelable leases with ASI) are as follows (in thousands):
<TABLE>
<S> <C>
1998 $ 130
1999 134
2000 138
2001 22
</TABLE>
Contingencies
The Company is involved in various claims arising in the ordinary course of
business. In the opinion of management, the ultimate disposition of these
matters will not have a material adverse effect on the financial position or
results of operations of the Company.
(9)AGREEMENTS WITH ASI
Effective August 1, 1997 (except for the Tax Sharing Agreement, which was
effective January 23, 1997), the Company entered into certain contractual
arrangements with ASI related to the following:
TAX SHARING AGREEMENT--The terms of the Tax Sharing Agreement are described
in note 5.
SERVICES AGREEMENT--Commencing August 1, 1997, the Company began purchasing
(or selling) various services from (to) ASI based upon various cost
methodologies as described below:
<TABLE>
<CAPTION>
SERVICE COST METHODOLOGY
------- ----------------
<S> <C>
. General corporate services Apportioned based on apportionment
formula to all ASI subsidiaries
. Computing and communications Actual usage
. Professional services to customers Cost plus billing with the percentage
on behalf of the Company (services of costs and expenses to be negotiated
are available unless ASI
determines it is not economic or
otherwise feasible)
. Employee benefits services Apportioned based on apportionment
formula to all ASI subsidiaries
</TABLE>
FACILITIES AGREEMENT--The Company leases various properties from ASI for
specified square foot rates. The stated term of the agreement is for two
years; however, the lease may be terminated by either party after a 90-day
notice.
STOCK OPTION AGREEMENT--The Company has granted ASI an option to purchase
Company common stock to enable ASI to maintain the necessary ownership
percentage required to consolidate the Company in ASI's consolidated Federal
income tax return. The purchase price of the option is the average of the
closing price on each of the five business days immediately preceding the date
of payment.
TECHNOLOGY LICENSE AGREEMENT--The Company granted ASI a nonexclusive,
nontransferable, worldwide perpetual right and license to use, execute,
reproduce, display, etc., its Value Chain Planning and Execution Solutions
(which ASI had transferred to the Company) so that ASI may maintain and
support end-users of the software products. The license is fully paid and
royalty-free.
MARKETING LICENSE AGREEMENT--The Company utilizes ASI as a nonexclusive
marketing representative for licensing of its products and pays ASI 30% (50%
for certain international licenses) of net license fees for its
F-14
<PAGE>
LOGILITY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF AMERICAN SOFTWARE, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
services. The stated term of the agreement is for five years, but may be
terminated at either party's discretion upon 12 months notice.
(10) SUBSEQUENT EVENTS
Effective August 5, 1997, Distribution Sciences, Inc. was merged into the
Company. The merger was accounted for in a manner similar to a pooling of
interests. Effective August 1, 1997, ASI contributed its Warehouse PRO
division to the Company. In conjunction with these actions, divisional equity
will be eliminated and transferred to additional paid-in capital on the
effective date.
On August 7, 1997, the Company's Board of Directors has approved an 11,300-
for-one stock split effected in the form of a stock dividend. All references
to common stock and stock options in these combined financial statements have
been adjusted to reflect this stock split as if it had occurred prior to May
1, 1994.
Effective August 7, 1997, the Company adopted the Logility, Inc. 1997 Stock
Plan ("Stock Plan"). The Stock Plan provides for grants of incentive stock
options and nonqualified stock options to certain key employees and directors
of the Company. The Stock Plan also allows for stock appreciation rights in
lieu of or in addition to stock options. Options to purchase a maximum of
295,000 shares of common stock and a maximum of 300,000 units of Stock
Appreciation Rights ("SARs"), as defined, may be granted under the Stock Plan.
The options and SARs generally vest over a four-year period The terms of the
options generally will be for ten years, and the terms of the SARs generally
will be for five years.
On August 8, 1997 , the Company amended its articles of incorporation to
authorize 2,000,000 shares of preferred stock. The terms, rights, and
preferences of the preferred stock will be determined by the Board of
Directors.
On August 12, 1997, the Company filed with the Securities and Exchange
Commission to register and sell certain common stock.
F-15
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of any offer to buy any securi-
ties other than the shares of Common Stock to which it relates or an offer to,
or a solicitation of, any person in any jurisdiction where such offer or so-
licitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company or that the information
contained herein is current as of any time subsequent to the date hereof.
----------------
TABLE OF CONTENTS
----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 16
Dividend Policy........................................................... 16
Capitalization............................................................ 17
Dilution.................................................................. 18
Selected Combined Financial Data.......................................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 29
Management................................................................ 41
Relationship with American Software and Certain Transactions.............. 46
Principal Shareholders.................................................... 50
Description of Capital Stock.............................................. 51
Shares Eligible for Future Sale........................................... 55
Underwriting.............................................................. 56
Legal Matters............................................................. 57
Experts................................................................... 57
Additional Information.................................................... 57
Index to Combined Financial Statements.................................... F-1
</TABLE>
Until , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,200,000 SHARES
LOGO
[Logo of Logility Appears Here]
COMMON STOCK
----------------
PROSPECTUS
----------------
Montgomery Securities
Cowen & Company
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Estimated expenses (other than underwriting discounts and commissions) payable
in connection with the sale of Common Stock offered hereby are as follows:
<TABLE>
<S> <C>
SEC registration fee................................................ $ 9,967
NASD filing fees.................................................... 3,789
NASDAQ National market listing...................................... 50,000
Printing and engraving expenses..................................... *
Legal fees and expenses............................................. *
Accounting fees and expenses........................................ *
Blue Sky fees and expenses (including legal fees)................... *
Transfer agent and registrar fees and expenses...................... *
Miscellaneous....................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
* To be completed by amendment.
The Company will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted under the Georgia Business Corporation Code, the Company's
Amended and Restated Articles of Incorporation (the "Articles"), and the
Company's Amended and Restated Bylaws (the "Bylaws"), as well as certain
indemnification agreements between the Company and its directors and officers,
provide for mandatory indemnification of a director or officer of the Company
to the extent that such individual has been successful in the defense of a
proceeding to which such individual was a party because he or she was a
director or officer of the Company for expenses incurred by such individual in
connection with such proceeding. Additionally, a director or officer may be
indemnified for liabilities and expenses which the indemnified person incurred
in a proceeding if such individual acted in good faith (i) in his or her
capacity as a director or officer, in a manner reasonably believed to be in
the best interests of the Company, (ii) in all other cases, in a manner
reasonably believed to be not opposed to the best interests of the Company,
and (iii) with respect to a criminal proceeding, that the indemnified person
had no reasonable cause to believe his or her conduct was unlawful. Reference
is made to the Company's Articles and Bylaws filed as Exhibits 3.1 and 3.2,
respectively, and the form of Indemnification Agreement between the Company
and the Company's directors and executive officers filed as Exhibit 10.2.
The Articles also provide that any person purchasing or otherwise acquiring
an interest in a share of capital stock of the Company is deemed to have
consented to certain provisions in the Articles that (i) permit the officers
and directors of the Company and American Software, Inc. (together with
successors and certain affiliates of American Software, Inc., "American
Software") to allocate corporate opportunities to either the Company or
American Software as such officers and directors deem appropriate in
accordance with certain policies contained in the Articles, and that none of
the Company, American Software, and their respective officers and directors
shall be liable for any breach of fiduciary duty in connection therewith, and
(ii) eliminate the liability of American Software and its officer and
directors for engaging in business activities similar to those of the Company
and for actions taken in connection with agreements entered into between the
Company and American Software, in accordance with certain guidelines contained
in the Articles.
II-1
<PAGE>
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers, and controlling
persons of the Company against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Act"). Reference is made to
the form of Underwriting Agreement filed as Exhibit 1.1 hereto.
American Software maintains directors and officers liability insurance for
the benefit of its and the Company's directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company has not issued any unregistered securities except for the sale
of 1,000 shares of common stock (subsequently increased to 11,300,000 shares
as a result of a stock split) to its parent, American Software, Inc., in
connection with the organization of the Company on January 23, 1997. The
common stock issued to American Software, Inc. was issued in reliance upon the
exemption provided by Section 4(2) under the Act.
As consideration for the common stock issued on January 23, 1997, American
Software, Inc. contributed to the Company the software and other assets that
constitute the principal business of the Company, valued, for purposes of the
Company's combined financial statements, at approximately $5,000,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of the Company.
3.2 Amended and Restated By-Laws of the Company.
4.1* Specimen certificate representing the Common Stock.
5.1* Opinion of Gambrell & Stolz, L.L.P.
10.1 1997 Stock Plan and forms of agreement thereunder.
Form of Indemnification Agreement between the Company and the Company's
10.2 Directors and Officers.
10.3 Subsidiary Formation Agreement among the Company, American Software, and
certain subsidiaries of American Software, as amended.
10.4 Merger Agreement between the Company and Distribution Sciences, Inc.
10.5 Services Agreement between the Company and American Software.
10.6 Facilities Agreement between the Company and American Software.
10.7 Tax Sharing Agreement between the Company and American Software.
10.8 Stock Option Agreement between the Company and American Software.
Technology License Agreement between the Company and American Software,
10.9 as amended.
Marketing License Agreement between the Company and American Software,
10.10 as amended.
Employment Agreement and Offer Letter from the Company to James M.
10.11 Modak.
23.1* Consent of Gambrell & Stolz, L.L.P. (included in Exhibit 5.1).
23.2 Report on Schedule and Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
(b) Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in item 14 above, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit
II-2
<PAGE>
or proceeding), is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The Company hereby undertakes (i) to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser; (ii) that for purposes of
determining any liability under the Act, treat the information omitted from
the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4), or Rule 497(h) under the Act as
part of this registration statement as of the time it was declared effective;
and (iii) that for purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Atlanta, Georgia, on August 11,
1997.
LOGILITY, INC.
By: /s/ J. Michael Edenfield
----------------------
J. Michael Edenfield, President
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Logility, Inc., hereby
severally constitute and appoint J. Michael Edenfield and James M. Modak, and
each of them singly, our true and lawful attorneys, with full power to them
and each of them singly, to sign for us in our names in the capacities
indicated below, any registration statement related to this offering that is
to be effective upon filing pursuant to Rule 462(b) under the Securities Act
of 1933 (a "462(b) Registration Statement"), any and all amendments and
exhibits to this registration statement or any 462(b) Registration Statement,
and any and all applications and other documents to be filed with the
Securities and Exchange Commission pertaining to the registration of the
securities covered hereby or thereby, and generally to do all things in our
names and on our behalf in such capacities to enable Logility, Inc. to comply
with the provisions of the Securities Act of 1933 and all requirements of the
Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ J. Michael Edenfield Director and President August 11, 1997
_________________________________ (Principal Executive Officer)
J. Michael Edenfield
/s/ James C. Edenfield Director August 11, 1997
_________________________________
James C. Edenfield
/s/ James M. Modak Chief Financial Officer and August 11, 1997
_________________________________ Senior Vice President
James M. Modak (Principal Financial Officer)
/s/ David E. Weigand Controller August 11, 1997
_________________________________ (Principal Accounting Officer)
David E. Weigand
</TABLE>
II-4
<PAGE>
Schedule II
LOGILITY, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED APRIL 30, 1995, 1996 AND 1997
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
(IN THOUSANDS)
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED END OF
OF PERIOD TO EXPENSE DEDUCTIONS(1) PERIOD
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Year ended April 30, 1995........ $74 $710 $484 $300
1996.................... 300 431 401 330
1997.................... 330 302 211 421
</TABLE>
- --------
(1) Write-off of uncollectible accounts
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF LOGILITY, INC.
The following Amended and Restated Articles of Incorporation of Logility,
Inc. (the "Corporation"), a corporation organized and existing under the laws of
the State of Georgia, were duly approved and adopted by written consent of the
Sole Shareholder of the Corporation, upon the recommendation of the Board of
Directors of the Corporation, pursuant to Section 14-2-1003 of the Georgia
Business Corporation Code (as in effect from time to time, the "Code"), as of
the 7th day of August, 1997:
ARTICLE I
The name of the Corporation is LOGILITY, INC.
ARTICLE II
The total number of shares of stock which the Corporation has authority to
issue is Twenty-Two Million (22,000,000) shares, consisting of (i) Twenty
Million (20,000,000) shares of Common Stock, having no par value (hereinafter
referred to as the "Common Stock"), and Two Million (2,000,000) shares of
Preferred Stock (hereinafter referred to as the "Preferred Stock"). The
designations and the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the shares of each class of stock are as follows:
(a) Subject to all of the rights of the Preferred Stock as expressly
provided in subparagraph (b) below, the Code, or the Board of Directors pursuant
to this Article II, the Common Stock of the Corporation shall possess all such
rights and privileges as are afforded to capital stock by applicable law in the
absence of any express grant of rights or privileges in these Articles of
Incorporation, including, without limitation the following rights and
privileges:
(i) Dividends may be declared and paid or set apart for payment upon the
Common Stock out of any assets or funds of the Corporation legally available for
the payment of dividends;
(ii) The holders of the Common Stock shall have the right to vote for the
election of directors and on all other matters requiring shareholder action,
each share being entitled to one vote; and
(iii) Upon the voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, the net assets of the Corporation available for
distribution shall be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights and interests.
(b) Preferred Stock. The Preferred Stock may be issued from time to time
---------------
by the Board of Directors as shares of one or more series. The description of
shares of each series of Preferred Stock, including any preferences, conversion
and other rights, voting powers,
<PAGE>
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption shall be as set forth in resolutions adopted by the
Board of Directors, and Articles of Amendment shall be filed with the Georgia
Secretary of State as required by law to be filed with respect to the issuance
of such Preferred Stock, prior to the issuance of any shares of such series.
The Board of Directors is expressly authorized, at any time and from time to
time, by adopting a resolution or resolutions providing for the issuance of, or
providing for a change in the number of, shares of any particular series of
Preferred Stock and, if and to the extent from time to time required by law, by
filing Articles of Amendment which are effective without shareholder action to
increase or decrease the number of shares included in each series of Preferred
Stock, but not below the number of shares issued, and to set or change in any
one or more respects the designations, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms and conditions of redemption relating to the shares of each such series.
Notwithstanding the foregoing, the Board of Directors shall not be authorized to
change the rights of holders of the Common Stock of the Corporation to one vote
per share on all matters submitted for shareholder action. The authority of the
Board of Directors with respect to each series of Preferred Stock shall include,
without limitation, setting or changing the following:
(i) The annual dividend rate, if any, payable on shares of such series (or
the manner of determining the same), the times of payment, and the date from
which dividends shall be cumulative, if dividends are to be cumulative;
(ii) Whether the shares of such series shall be redeemable and, if so, the
redemption price and the terms and conditions of such redemption;
(iii) The obligation, if any, of the Corporation to redeem shares of such
series pursuant to a sinking fund;
(iv) Whether shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other series or class and, if so, the
terms and conditions of such conversion or exchange, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any;
(v) Whether the shares of such series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the extent of such voting
rights;
(vi) The rights of the shares of such series in the event of voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation; and
(vii) Any other relative rights, powers, preferences, qualifications,
limitations, or restrictions thereof relating to such series.
2
<PAGE>
The shares of the Preferred Stock of any one series shall be identical with each
other and in all respects, except as to the dates from and after which dividends
thereon shall accumulate, if cumulative.
ARTICLE III
In furtherance of, and not in limitation of, the powers conferred by the
Code, the Board of Directors is expressly authorized and empowered:
(i) To adopt, amend, or repeal the Bylaws of the Corporation; provided,
however, that the Bylaws adopted by the Board of Directors under the powers
hereby conferred may be amended or repealed by the Board of Directors or by the
shareholders having voting power with respect thereto; and
(ii) From time to time to determine whether and to what extent, and at what
times and places, and under what conditions and regulations, the accounts and
books of the Corporation, or any of them, shall be open to inspection of
shareholders; and except as so determined, or as expressly provided in the Code,
these Articles of Incorporation, the Bylaws, or any designation of Preferred
Stock made by the Board of Directors, no shareholder shall have any right to
inspect any account, book, or document of the Corporation. The Corporation may
in its Bylaws confer powers upon the Board of Directors in addition to the
foregoing and in addition to the powers and authorities expressly conferred upon
the Board of Directors by applicable law.
ARTICLE IV
(a) For purposes of these Articles of Incorporation, "ASI" shall mean
American Software, Inc., a Georgia corporation, all successors to ASI by way of
merger, consolidation, or sale of all or substantially all of its assets, and
all corporations, partnerships, joint ventures, associations, and other entities
(each an "ASI Affiliate") in which ASI Beneficially Owns (as defined in Article
VI), directly or indirectly, fifty percent (50%) or more of the outstanding
voting stock, voting power, or similar voting interest ("Voting Interest"),
which shall include, without limitation (as of the date hereof), American
Software USA, Inc., a Georgia corporation, American Software (UK), Ltd., an
entity existing under the laws of the United Kingdom, American Software France
S.A., an entity existing under the laws of France, American Software Asia
Pacific Pte. Ltd., an entity existing under the laws of Singapore, and American
Software (Japan) KK, an entity existing under the laws of Japan, but which shall
not include the Corporation or any ASI Affiliate in which the Corporation
Beneficially Owns, directly or indirectly, fifty percent (50%) or more of the
outstanding Voting Interest.
(b) In anticipation that:
(i) ASI will remain, for some period of time, a shareholder of the
Corporation;
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(ii) The Corporation and ASI may engage in the same or similar activities
or lines of business and may have an interest in the same or similar areas of
corporate opportunities;
(iii) There will be benefits to be derived by the Corporation through its
continued contractual, corporate, and business relations with ASI (including,
without limitation, service of officers of ASI as directors of the Corporation);
and
(iv) There will be benefits in providing guidelines for directors and
officers of ASI and of the Corporation with respect to the allocation of
corporate opportunities and other matters;
the provisions of this Article IV are set forth to regulate, define, and guide
the conduct of certain affairs of the Corporation as they may involve ASI and
its officers and directors, and the powers, rights, duties, and liabilities of
the Corporation and its officers, directors, and shareholders in connection
therewith.
(c) Except as ASI may otherwise agree in writing, and except as expressly
provided in the Code, these Articles of Incorporation, or the Bylaws, ASI shall
have the right, but shall have no obligation, to (i) engage in the same or
similar business activities or lines of business as the Corporation, (ii) do
business with any potential or actual customer or supplier of the Corporation,
and (iii) employ or otherwise engage any officer or employee of the Corporation.
Subject to the foregoing, neither ASI nor any officer or director thereof
(except as provided in subparagraph (d) below) shall be liable to the
Corporation or its shareholders for breach of any fiduciary duty by reason of
any of the activities described in the preceding sentence by ASI or by any such
Person.
(d) In the event that a director or officer of the Corporation who is also
a director or officer of ASI acquires knowledge of a potential transaction or
matter that may be a Corporate Opportunity for both the Corporation and ASI,
such director or officer of the Corporation (i) shall have fully satisfied and
fulfilled the fiduciary duty of such director or officer to the Corporation and
its shareholders with respect to such Corporate Opportunity, (ii) shall not be
liable to the Corporation or its shareholders for breach of any fiduciary duty
by reason of the fact that ASI pursues or acquires such Corporate Opportunity
for itself or directs the Corporate Opportunity to another Person or does not
communicate information regarding such Corporate Opportunity to the Corporation,
(iii) shall be deemed to have acted in good faith and in the best interest of
the Corporation, and (iv) shall be deemed not to have breached his or her duty
of loyalty to the Corporation and its shareholders, and not to have derived an
improper benefit therefrom, if such director or officer acts in a manner
consistent with the following policy:
(1) A Corporate Opportunity offered to any Person who is a director but not
an officer of the Corporation and who is also an officer (whether or not a
director) of ASI shall belong to ASI, unless such opportunity is expressly
offered to such Person primarily in his or her capacity as a director of the
Corporation, in which event such opportunity shall belong to the Corporation;
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(2) A Corporate Opportunity offered to any Person who is an officer
(whether or not a director) of the Corporation and who is also a director but
not an officer of ASI shall belong to the Corporation, unless such opportunity
is expressly offered to such Person primarily in his or her capacity as a
director of ASI, in which event such opportunity shall belong to ASI; and
(3) A Corporate Opportunity offered to any other Person who is either an
officer of both the Corporation and ASI or a director of both the Corporation
and ASI shall belong to ASI or the Corporation, as the case may be, if such
opportunity is expressly offered to such Person primarily in his or her capacity
as an officer or director of ASI or of the Corporation, respectively; otherwise,
such opportunity shall belong to ASI.
(e) Any Corporate Opportunity that belongs to ASI or to the Corporation
pursuant to the foregoing policy shall not be pursued by the other, or directed
by the other to another Person, unless and until ASI or the Corporation, as the
case may be, determines not to pursue the opportunity. Notwithstanding the
preceding sentence, if the party to whom the Corporate Opportunity belongs does
not within a reasonable period of time begin to pursue, or thereafter continue
to pursue, such opportunity diligently and in good faith, the other party may
then pursue such opportunity or direct it to another Person.
(f) Any Person purchasing or otherwise acquiring any interest in any shares
of stock of the Corporation shall be deemed to have notice of and consented to
the provisions of this Article IV.
(g) For purposes of this Article IV, "Corporate Opportunities" shall
consist of business opportunities which (i) the Corporation is financially able
to undertake, (ii) are, from their nature, in the line or lines of the
Corporation's business and are a practical advantage to it, and (iii) are ones
in which the Corporation has an interest or reasonable expectancy. In addition,
"Corporate Opportunities" shall not include any transaction in which the
Corporation or ASI is permitted to participate pursuant to (A) any agreement
between the Corporation and ASI in effect as of the time any equity security of
the Corporation is held of record by any Person other than ASI, as may be
amended thereafter with the approval of a majority of Disinterested Directors
(as defined in the Article VI) or (B) any subsequent agreement between the
Corporation and ASI approved by a majority of Disinterested Directors, it being
acknowledged that the rights of the Corporation under any such agreement shall
be deemed to be contractual rights and shall not be Corporate Opportunities of
the Corporation for any purpose; provided, however, that no presumption or
implication as to Corporate Opportunities relating to any transaction not
explicitly covered by such an agreement shall arise from the existence or
absence of any such agreement.
(h) For purposes of this Article IV, the "Corporation" shall mean the
Corporation and all corporations, partnerships, joint ventures, associations,
and other entities in which the Corporation Beneficially Owns, directly or
indirectly, fifty percent (50%) or more of the outstanding voting stock, voting
power, or similar voting interest.
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(i) If any contract, arrangement, or transaction between the Corporation
and ASI involves a Corporate Opportunity and is approved in accordance with the
procedures set forth in Article V, ASI and its officers and directors shall
also, for the purposes of this Article IV and other provisions of these Articles
of Incorporation, be deemed to have fully satisfied and fulfilled any fiduciary
duties they may have to the Corporation and its shareholders. Any such
contract, agreement, arrangement, or transaction involving a Corporate
Opportunity not so approved shall not by reason thereof result in the breach of
any fiduciary duty, but shall be governed by the other provisions of this
Article IV, these Articles of Incorporation, the Bylaws, the Code, and other
applicable law.
(j) For purposes of this Article IV, a director of the Corporation who is
Chairman of the Board of Directors of the Corporation or a committee thereof or
the Chief Executive Officer of the Corporation shall not be deemed to be an
officer of the Corporation by reason of holding such position (regardless of
whether such position is deemed an office of the Corporation under the Bylaws of
the Corporation), unless such Person is a full-time employee of the Corporation.
(k) Neither the alteration, amendment, or repeal of this Article IV, nor
the adoption of any provision inconsistent with this Article IV, shall eliminate
or reduce the effect of this Article IV in respect of any matter occurring, or
any cause of action, suit, or claim that, but for this Article IV, would accrue
or arise, prior to such alteration, amendment, repeal, or adoption.
ARTICLE V
(a) In anticipation that:
(i) ASI will remain, for some period of time, a shareholder of the
Corporation and have continued contractual, corporate, and business
relations with the Corporation;
(ii) The Corporation and ASI may enter into contracts or otherwise
transact business with each other, or the customers or suppliers of the
Corporation may enter into contracts or otherwise transact business with
ASI; and
(iii) The Corporation may from time to time enter into contractual,
corporate, or business relations with one or more of its directors, or one
or more corporations, partnerships, associations, or other organizations in
which one or more of its directors have a financial interest (collectively,
"Related Entities");
the provisions of this Article V are set forth to regulate and guide certain
contractual relations and other business relations of the Corporation as they
may involve ASI or its customers or suppliers, Related Entities, and their
respective officers and directors, and the powers, rights, duties, and
liabilities of the Corporation and its officers, directors, and shareholders in
connection therewith.
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(b) The provisions of this Article V are in addition to, and not in
limitation of, the provisions of the Code, the other provisions of these
Articles of Incorporation, and the provisions of the Bylaws of the Corporation.
Any contractual or other business relation which does comply with the procedures
set forth in this Article V shall not by reason thereof be deemed void or
voidable or result in any breach of any fiduciary duty to, or duty of loyalty
to, or failure to act in good faith or in the best interest of, the Corporation,
or the derivation of any improper personal benefit, but shall be governed by the
remaining provisions of these Articles of Incorporation, the Bylaws, the Code,
and other applicable law.
(c) No contract, agreement, arrangement, or transaction between the
Corporation and ASI or any customer or supplier thereof or any Related Entity or
between the Corporation and one or more officers or directors of the
Corporation, ASI, or Related Entity, or any amendment, modification, or
termination thereof, shall be void or voidable solely for the reason that ASI or
such customer or supplier, any Related Entity, or any one or more of the
officers or directors of the Corporation, ASI, or any Related Entity are parties
thereto, or solely because any such officers or directors are present at or
participate in the meeting of the Board of Directors or committee thereof which
authorizes such contract, agreement, arrangement, transaction, amendment,
modification, or termination (each, a "Transaction"), or solely because his or
their votes are counted for such purpose, and ASI, any Related Entity, and such
officers and directors (i) shall have fully satisfied and fulfilled any
fiduciary duty they may have to the Corporation and its shareholders with
respect thereto, (ii) shall not be liable to the Corporation or its shareholders
for any breach of any fiduciary duty they may have by reason of the entering
into, performance, or consummation of any such Transaction, (iii) shall be
deemed to have acted in good faith and in the best interest of the Corporation,
to the extent such standard is applicable to such Persons' conduct, and (iv)
shall be deemed not to have breached any duties of loyalty to the Corporation or
its shareholders they may have and not to have derived an improper benefit
therefrom, if:
(1) The material facts as to the Transaction are disclosed or are known to
the Board of Directors or the committee thereof that authorizes the Transaction
and the Board of Directors or such committee in good faith authorizes or
approves the Transaction by the affirmative vote of a majority of the
Disinterested Directors on the Board of Directors or such committee (even though
the Disinterested Directors may be less than a quorum);
(2) The material facts as to the Transaction are disclosed or are known to
the holders of voting stock entitled to vote thereon, and the Transaction is
specifically approved by vote of the holders of the majority of the then
outstanding voting stock not owned by ASI or such Related Entity, voting
together as a single class, as the case may be;
(3) Such Transaction is effected pursuant to, and consistent with, terms
and conditions specified in any arrangements, standards, protocols, or
guidelines (collectively, the "Guidelines") which are in good faith authorized
or approved, after disclosure or knowledge of the material facts related
thereto, by the affirmative vote of a majority of the Disinterested Directors or
the applicable committee thereof (even though the Disinterested Directors may be
less than a
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quorum) or by vote of the holders of the majority of the then outstanding voting
stock not owned by ASI or such Related Entity, voting together as a single
class, as the case may be (such authorization or approval of such Guidelines
constituting or being deemed to constitute authorization or approval of such
Transaction); or
(4) Such Transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the Board of Directors, a committee
thereof, or the shareholders of the Corporation.
In addition, each Transaction authorized, approved, or effected in such
Guidelines so authorized or approved, as described in Items (1), (2), or (3)
above, shall be deemed to be entirely fair to the Corporation and its
shareholders; provided, however, that if such authorization or approval is not
obtained, or such Transaction is not so effected, no presumption shall arise
that such Transaction or such Guidelines are not fair to the Corporation and its
shareholders.
(d) Directors of the Corporation who are also directors or officers of ASI
or any Related Entity may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or the Committee that authorizes or approves
any such Transaction or any such Guidelines. Voting stock owned by ASI and
Related Entities may be counted in determining the presence of a quorum at a
meeting of shareholders that authorizes or approves any such Transaction or any
such Guidelines.
(e) ASI shall not be liable to the Corporation or its shareholders for
breach of any fiduciary duty it may have solely by reason of the fact that ASI
takes any action or exercises any rights or gives or withholds any consent in
connection with any Transaction between ASI and the Corporation. No vote cast
or other action taken by any Person who is an officer, director, or other
representative of ASI, which vote is cast or action is taken by such Person in
his or her capacity as a director of the Corporation, shall constitute an action
of, or exercise of a right by, or a consent of, ASI for the purpose of any such
Transaction.
(f) Any Person purchasing or otherwise acquiring any interest in any shares
of stock of the Corporation shall be deemed to have notice of and to have
consented to the provisions of this Article V.
(g) For purposes of this Article V, any Transaction with any corporation,
partnership, joint venture, association, or other entity in which the
Corporation Beneficially Owns, directly or indirectly, fifty percent (50%) or
more of the outstanding voting stock, voting power, or similar voting interest,
or with any officer or director thereof, shall be deemed to be a Transaction
with the Corporation.
(h) Neither the alteration, amendment, or repeal of this Article V, nor the
adoption of any provision inconsistent with this Article V, shall eliminate or
reduce the effect of this Article V in respect of any matter occurring, or any
cause of action, suit, or claim, but for this Article V, would accrue or arise,
prior to such alteration, amendment, repeal, or adoption.
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ARTICLE VI
For purposes of these Articles of Incorporation:
(a) "Person" shall mean any individual, firm, corporation, or other entity.
(b) "Beneficial Owner," "Beneficially Own," "Beneficially Owned,"
"Beneficial Ownership," and words of similar import shall have the meaning
ascribed to such terms in Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on August 1, 1997.
(c) "Disinterested Directors" shall mean the directors of the Corporation
who are not officers of either ASI or the Corporation or directors of ASI.
ARTICLE VII
Subject to the rights of the holders of any series of Preferred Stock or
any other series or class of stock, as authorized by the Board of Directors,
under specified circumstances, any action required by law or by these Articles
of Incorporation or the Bylaws of the Corporation to be taken at a meeting of
the shareholders of the Corporation and any action which may be taken at a
meeting of the shareholders may be taken without a meeting if a written consent,
setting forth the action so taken, shall be signed by persons entitled to vote
at a meeting those shares having sufficient voting power to cast not less than
the minimum number (or numbers, in the case of voting by groups) of votes that
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote were present and voted. No such written consent shall
be effective unless the consenting shareholder has been furnished the same
material that would have been required to be sent to shareholders in a notice of
a meeting at which the proposed action would have been submitted to the
shareholders, or unless the consent includes an express waiver of the right to
receive the material. Notice of such action without a meeting by less than
unanimous written consent shall be given within ten (10) days of the taking of
such action to those shareholders of record on the date when the written consent
is first executed and whose shares were not represented on the written consent.
ARTICLE VIII
(a) A director of the Corporation shall not be liable to the Corporation or
its shareholders for monetary damages for any action taken, or any failure to
take any action, as a director, except that this provision shall not eliminate
or limit the liability of a director for (i) any appropriation, in violation of
his duties, of any business opportunity of the Corporation; (ii) acts or
omissions which involve intentional misconduct or a knowing violation of law;
(iii) the types of liabilities of a director imposed by Section 14-2-832 of the
Code; or (iv) any transaction from which the director derived an improper
personal benefit.
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(b) If at any time the Code is amended to authorize the further elimination
or limitation of the liability of a director, then the liability of the director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Code, as so amended, without further action by the
shareholders, unless the provisions of the Code, as amended require further
action by the shareholders.
(c) In discharging their duties and in determining what is believed to be
in the best interest of the Corporation, the directors of the Corporation may
consider all factors that they consider pertinent to the greatest extent
permitted under Section 14-2-202(b)(5) or other applicable provisions of the
Code.
(d) Any repeal or modification of the foregoing provisions of this Article
VIII shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the Corporation for or with
respect to any alleged act or omission of the director occurring prior to such a
repeal or modification.
ARTICLE IX
Each person who is or was a director or officer of the Corporation, and
each person who is or was a director or officer of the Corporation who at the
request of the Corporation is serving or has served as an officer, director,
partner, joint venturer, trustee, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
shall be indemnified by the Corporation against those expenses (including
attorneys' fees), judgments, fines, penalties and amounts paid in settlement
which are allowed to be paid or reimbursed by the Corporation under the laws of
the State of Georgia and which are actually and reasonably incurred in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, in which such person
may be involved by reason of his being or having been a director or officer of
this Corporation or of such other enterprises.
Notwithstanding anything contained herein to the contrary, this Article IX
is intended to provide indemnification to each director and officer of the
Corporation to the fullest extent authorized by the Code, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader rights
than said statute permitted the Corporation to provide prior thereto).
ARTICLE X
Except as may be expressly provided in these Articles of Incorporation, the
Corporation reserves the right at any time and from time to time to alter,
amend, or repeal any provision contained in these Articles of Incorporation, and
any other provisions authorized by the laws of the State of Georgia at the time
in force when the added or inserted, and in the manner now or hereafter
prescribed herein or under applicable law, and all rights, preferences, and
privileges of whatsoever nature conferred upon shareholders, directors, or any
other Persons whomsoever
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by and pursuant to these Articles of Incorporation (in their present form or as
hereafter amended) are granted subject to the right reserved in this Article X.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Corporation has executed these Amended and Restated Articles of Incorporation as
of the 7th day of August, 1997.
LOGILITY, INC.
By: /s/ J. Michael Edenfield
------------------------
Title: President
----------------------
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EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS OF LOGILITY, INC.
(EFFECTIVE AUGUST 7, 1997)
ARTICLE I
---------
OFFICES
Section 1. Registered Office and Agent. The corporation shall maintain a
--------- ---------------------------
registered office and shall have a registered agent whose business office is
identical with the registered office.
Section 2. Other Offices. In addition to its registered office, the
--------- -------------
corporation may have offices at any other place or places as the Board of
Directors may from time to time select or as the business of the corporation may
require or make desirable, whether within or without the State of Georgia.
ARTICLE II
----------
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the
--------- --------------
corporation shall be held at such date, place, and time as may be fixed from
time to time by resolution of the Board of Directors.
Section 2. Special Meetings. Except as otherwise required by applicable
--------- ----------------
law, and subject to the rights of the holders of any series of preferred stock
(the "Preferred Stock") or any other series or class of stock, to the extent
authorized by the Board of Directors, to elect additional directors under
specified circumstances, special meetings of shareholders of one or more classes
or series of the corporation's shares may be called at any time by the Board of
Directors, pursuant to a resolution adopted by a majority of the entire Board,
or by the Chairman of the Board; provided, however, that at any time the
Corporation has 100 or fewer shareholders of record, special meetings of
shareholders of one or more classes or series of the Corporation's shares may
also be called at the request of the holders of at least twenty-five percent
(25%) of all the votes entitled to be cast on any issue proposed to be
considered at the proposed meeting. Except as expressly provided in the
immediately preceding sentence, any power of the shareholders of the corporation
to call a special meeting is specifically denied. The business that may be
transacted at any special meeting of shareholders shall be limited to that
proposed in the notice of the special meeting given in accordance with Section 4
below (including related or incidental matters that may be necessary or
appropriate to effectuate the proposed business).
<PAGE>
Section 3. Place of Meetings. Annual or special meetings of shareholders
--------- -----------------
may be held at any location within or outside the State of Georgia designated
from time to time by resolution of the Board of Directors, or if the Board of
Directors does not specify a location, at the corporation's principal office.
Section 4. Notice of Meeting. In accordance with Article VIII, Section 6
--------- -----------------
and subject to waiver by a shareholder pursuant to Section 5 below, the
corporation shall give written or printed notice of the date, time, and place of
each annual and special shareholders' meeting, and, in the case of a special
meeting, a description of the purpose or purposes for which the meeting is
called, no fewer than 10 days nor more than 60 days before the meeting date to
each shareholder of record entitled to vote at the meeting. The notice of an
annual meeting need not include a description of the purpose or purposes for
which the meeting is called. The notice of any annual or special meeting also
may include, or be accompanied by, any additional statements, information, or
documents prescribed by law. Meetings of shareholders may be held without
notice if all shareholders entitled to vote are present, or if notice is waived
by those not present pursuant to Section 5 below. Any previously scheduled
meeting of the shareholders may be postponed by resolution of the Board of
Directors upon public notice given prior to the time previously scheduled for
such meeting of the shareholders.
Section 5. Waiver of Notice. A shareholder may waive any notice required
--------- ----------------
by the Georgia Business Corporation Code (the"Code"), the Articles of
Incorporation, or these Bylaws, before or after the date and time of the matter
to which the notice relates, by delivering to the corporation a written waiver
of notice (for inclusion in the minutes or filing with the corporate records)
signed by the shareholder entitled to the notice. Additionally, a shareholder's
attendance at the meeting (a) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting; and (b)
waives objection to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented. Unless
otherwise provided by these Bylaws or the Code, neither the business transacted
nor the purpose or purposes of the meeting need be specified in the waiver.
Section 6. Adjournments. At any meeting of the shareholders (including an
--------- ------------
adjourned meeting), the chairman of the meeting or a majority of shares present
and entitled to vote at a meeting (whether or not those shares constitute a
quorum pursuant to Section 7 below) may adjourn the meeting, to reconvene at a
specific time and place. The only business that may be transacted at any
reconvened meeting is business that could have been transacted at the meeting
that was adjourned, unless further notice of the adjourned meeting has been
given in compliance with the requirements for a special meeting that specifies
the additional purpose or purposes for which the meeting is called. If a
shareholders' meeting is adjourned to another date, time, or location, the
corporation shall give shareholders notice of the new date, time, or location of
the adjourned meeting, unless a quorum of shareholders was present at the
meeting and information regarding the adjournment was announced before the
meeting was adjourned; provided, however, that if a new record date is or must
be fixed in accordance with Article VI, Section 6, the
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corporation must give notice of the adjourned meeting to each shareholder of
record as of the new record date who is entitled to vote at the adjourned
meeting. Nothing contained in this Section 6 shall be deemed or otherwise
construed to limit any lawful authority of the chairman of a meeting to adjourn
the meeting.
Section 7. Quorum. Unless the Code, the Articles of Incorporation, or
--------- ------
these Bylaws provide otherwise, the presence, in person or by proxy, of at least
one-third (1/3) of the votes entitled to be cast on a matter shall constitute a
quorum for action on that matter, except that when specified business is to be
voted on by a class or series voting as a class, the presence, in person or by
proxy, of at least one-third (1/3) of the shares of such class or series shall
constitute a quorum for the transaction of such business. Once a share is
represented for any purpose at a meeting other than solely to object to holding
the meeting or transacting business at the meeting, the share shall be deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of the meeting, unless a new record date is or must be set for the
adjourned meeting pursuant to Section 6 hereof.
Section 8. Voting Procedures. Election of directors at all meetings of
--------- -----------------
the shareholders at which directors are to be elected shall be by written
ballot. Except as otherwise authorized by the Board of Directors with respect
to the right of the holders of any series of Preferred Stock or any other series
or class of stock to elect additional directors under specified circumstances,
directors shall be elected by a plurality of the votes cast by the holders of
the outstanding shares of the corporation entitled to vote generally in the
election of directors, present in person or by proxy. Except as otherwise
provided under the Code, the Articles of Incorporation, or these Bylaws, all
matters other than the election of directors properly submitted to the
shareholders at any meeting shall be decided by the affirmative vote of a
majority of the voting power of the shares present in person or represented by
proxy at the meeting and entitled to vote on the matter. The vote upon any
matter other than the election of directors shall be by ballot only if so
ordered by the chairman of the meeting.
Section 9. Voting of Shares. Unless the Articles of Incorporation, these
--------- ----------------
Bylaws, or the Code provides otherwise, each outstanding share of any class or
series having voting rights shall be entitled to one vote on each matter
submitted to a vote of shareholders.
Section 10. Proxies. A shareholder entitled to vote pursuant to Section 9
---------- -------
hereof may vote in person or by proxy pursuant to an appointment executed in
writing by the shareholder, by his or her attorney-in-fact, or as otherwise
permitted by law. An appointment of a proxy shall be valid for eleven (11)
months from the date of its execution, unless a longer or shorter period is
expressly stated in the proxy. If the validity of any proxy is questioned, it
must be submitted to the secretary of the shareholder's meeting for examination
or to a proxy officer or committee appointed by the person presiding at the
meeting at or before the time of the meeting. The secretary of the meeting, or,
if appointed, the proxy officer or committee, shall determine the validity or
invalidity of any proxy submitted, and reference in the minutes of the meeting
to the regularity of a proxy shall be received as prima facia evidence of the
facts stated for the purpose of establishing the presence of a quorum at the
meeting and for all other purposes.
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Section 11. Notice of Shareholder Business and Nominations.
---------- ----------------------------------------------
(a) Annual Meetings of Shareholders. Nominations of persons for election
-------------------------------
to the Board of Directors and the proposal of business to be considered by the
shareholders may be made at an annual meeting of the shareholders (i) pursuant
to the corporation's notice of meeting delivered pursuant to Section 4 above,
(ii) by or at the direction of the Board of Directors or the Chairman of the
Board, or (iii) by any shareholder of the corporation who is entitled to vote at
the meeting, who has complied with the notice procedures set forth in this
Section 11(a), and who is a shareholder of record at the time such notice is
delivered to the Secretary of the corporation. For nominations or other
business to be properly brought before an annual meeting by a shareholder
pursuant to item (iii) above, the shareholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
shareholder's notice must be delivered to the Secretary at the principal office
of the corporation not less than one hundred and fifteen (115) days nor more
than one hundred and fifty (150) days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that (A)
the date of the annual meeting is advanced by more than twenty (20) days, or
delayed by more than thirty (30) days, from such anniversary date, notice by the
shareholder to be timely must be so delivered not earlier than the one hundred
and fiftieth (150th) day prior to such annual meeting and not later than the
close of business on the later of (m) the one hundred and fifteenth (115th) day
prior to such annual meeting or (n) the tenth day following the day on which
public announcement of the date of such meeting is first made; and (B) the
number of directors to be elected to the Board of Directors is increased, and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board made by the corporation at least one
hundred thirty (130) days prior to the first anniversary of the preceding year's
initial meeting, a shareholder's notice required by this Section 11(a) shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary of
the corporation at its principal office not later than the close of business on
the tenth day following the day on which such public announcement is first made
by the corporation. For purposes of determining whether a shareholder's notice
shall have been delivered in a timely manner for the annual meeting of
shareholders in 1998, the "first anniversary of the preceding year's annual
meeting" shall be deemed to be August 20, 1998. In no event shall the
adjournment of an annual meeting commence a new time period for the giving of a
shareholder's notice as described above. Such shareholder's notice shall set
forth (x) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act''), and
Rule 14a-11 thereunder, including a sworn or certified statement from such
nominee evidencing such person's consent to being named in the proxy statement
as a nominee and to serving as a director if elected; (y) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting, and any material interest
in such business of such shareholder and the beneficial owner, if any, on whose
behalf the nomination or proposal is made; and (z) as to the shareholder giving
the notice and the beneficial owner, if any, on whose
4
<PAGE>
behalf the nomination or proposal is made, (1) the name and address of such
shareholder, as they appear on the corporation's books, and of such beneficial
owner, and (2) the class and number of shares of the corporation which are owned
beneficially and of record by such shareholder and such beneficial owner.
(b) Special Meetings of Shareholders. Only such business as shall have
---------------------------------
been brought before the special meeting of shareholders pursuant to the
corporation's notice of meeting pursuant to Section 4 above shall be conducted
at such meeting. Nominations of persons for election to the Board of Directors
may be made at a special meeting of shareholders at which directors are to be
elected (i) pursuant to the corporation's notice of meeting pursuant to Section
4 above, (ii) by or at the direction of the Board of Directors or the Chairman
of the Board, or (iii) by any shareholder of the corporation who is entitled to
vote at the meeting, who has complied with the notice procedures set forth in
paragraph (a) above, and who is a shareholder of record at the time such notice
is delivered to the Secretary of the corporation. Nominations by shareholders
of persons for election to the Board of Directors may be made at such a special
meeting of shareholders if the shareholder's notice, as required by paragraph
(a) above, shall be delivered to the Secretary at the principal office of the
corporation not earlier than the one hundred and fiftieth (150th) day prior to
such special meeting and not later than the close of business on the later of
(x) the one hundred and fifteenth (115th) day prior to such special meeting or
(y) the tenth day following the day on which public announcement is first made
of the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the adjournment of a
special meeting commence a new time period for the giving of a shareholder's
notice as described above.
(c) General.
-------
(1) Only persons who are nominated in accordance with the procedures set
forth in this Section 11 shall be eligible to serve as directors, and only such
business shall be conducted at a meeting of shareholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section 11. Except as otherwise provided in the Code, the Articles of
Incorporation, or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Section 11 and, if any proposed nomination or business is not in
compliance with this Section 11, to declare that such defective proposal or
nomination shall be disregarded.
(2) For purposes of this Section 11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press, or comparable national news service or in a document publicly filed by
the corporation with the Securities and Exchange Commission pursuant to Section
13, 14, or 15(d) of the Exchange Act.
(3) Notwithstanding anything to the contrary in this Section 11, a
shareholder also shall comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 11. Nothing contained in this
5
<PAGE>
Section 11 shall affect any rights of (i) shareholders to request inclusion of
proposals in the corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act, or (ii) the holders of any series of Preferred Stock, or any other
class or series of stock, to elect directors, if so authorized by the Board of
Directors.
Section 12. Inspectors of Election. The Board of Directors by resolution
---------- ----------------------
shall appoint, or shall authorize an officer of the corporation to appoint, one
or more inspectors, which inspector or inspectors may include individuals who
serve the corporation in other capacities, including, without limitation, as
officers, employees, agents, or representatives of the corporation, to act at
the meeting and make a written report thereof. One or more persons may be
designated as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate has been appointed to act, or if all inspectors or
alternates who have been appointed are unable to act, at a meeting of
shareholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath to execute faithfully the duties of inspector with
strict impartiality and according to the best of his or her ability.
Section 13. Opening and Closing the Polls. The chairman of the meeting
---------- -----------------------------
shall fix and announce at the meeting the date and time of the opening and
closing of the polls for each matter upon which the shareholders will vote at
the meeting.
Section 14. Presiding Officer. Except as otherwise provided in this
---------- -----------------
Section 14, the Chairman of the Board, and in his or her absence or disability
the President, shall preside at every shareholders' meeting (and any adjournment
thereof) as its chairman, if either of them is present and willing to serve. If
neither the Chairman of the Board nor the President is present and willing to
serve as chairman of the meeting, and if the Chairman of the Board has not
designated another person who is present and willing to serve, then a majority
of the corporation's directors present at the meeting shall be entitled to
designate a person to serve as chairman. If no director of the corporation is
present at the meeting or if a majority of the directors who are present cannot
be established, then a chairman of the meeting shall be selected by a majority
vote of the shares present at the meeting that would be entitled to vote in an
election of directors. The chairman of the meeting may designate other persons
to assist with the meeting.
Section 15. Conduct of the Meeting. At any meeting of shareholders, the
---------- ----------------------
chairman of the meeting shall be entitled to establish the rules of order
governing the conduct of business at the meeting.
Section 16. Restrictions on Certain Business Combinations with Interested
---------- -------------------------------------------------------------
Shareholders.
- ------------
(a) In accordance with Section 14-2-1133 of the Code, and effective upon
consummation of the initial public offering of its Common Stock, the corporation
shall be subject to Section 14-2-1132 of the Code. Accordingly, except as
otherwise provided in paragraph (b) below, the corporation shall not engage in
any "business combination" with any "interested
6
<PAGE>
shareholder" (as such terms are defined in Section 14-2-1131 of the Code) for a
period of five years following the time that such shareholder became an
interested shareholder, unless:
(i) prior to such date, the Board of Directors approved either the
business combination or the transaction which resulted in the shareholder
becoming an interested shareholder; or
(ii) in the transaction which resulted in the shareholder becoming an
interested shareholder, the interested shareholder became the beneficial owner
(as such term is defined in Section 14-2-1131 of the Code) of at least ninety
percent (90%) of the Common Stock of the corporation outstanding at the time the
transaction commenced, excluding, for purposes of determining the number of
shares outstanding, those shares owned by (x) persons who are directors or
officers of the corporation, their affiliates, or associates; (y) subsidiaries
of the corporation; and (z) any employee stock plan under which participants do
not have the right (as determined exclusively by reference to the terms of such
plan and any plan which is part of such plan) to determine confidentially the
extent to which shares held under such plan will be tendered in a tender or
exchange offer; or
(iii) subsequent to becoming an interested shareholder, such shareholder
acquired additional shares resulting in the interested shareholder being the
beneficial owner of at least ninety percent (90%) of the outstanding voting
stock of the corporation, excluding, for purposes of determining the number of
shares outstanding, those shares owned by the shareholders described in items
(x)-(z) in paragraph (ii) above, and the business combination was approved at an
annual or special meeting of the shareholders by the holders of a majority
voting stock entitled to vote thereon, excluding from said vote, for the purpose
of this paragraph only, the voting stock owned by the interested shareholder and
the shareholders described in items (x)-(z) in paragraph (ii) above.
(b) The restrictions contained in paragraph (a) above shall not apply if a
shareholder (i) inadvertently becomes an interested shareholder; (ii) as soon as
practicable divests sufficient shares so that the shareholder ceases to be an
interested shareholder; and (iii) would not, at any time within the five-year
period immediately prior to a business combination between the corporation and
such shareholder, have been an interested shareholder but for the inadvertent
acquisition.
(c) The effect of this Section 16 is to apply to the corporation all
requirements of Section 14-2-1131 et seq. of the Code; provided, however,
-- ---
nothing contained in this Section 16 shall be construed as (i) limiting in any
manner any other provision in these Bylaws or the Articles of Incorporation
regarding the approval of business combinations which are not otherwise
expressly prohibited by this Section 16; or (ii) altering in any manner the
rights of the corporation to adopt a bylaw pursuant to Section 14-2-1113 of the
Code. If at any time the Code is amended to authorize the further limitation of
business combinations by interested shareholders, then the ability of an
interested shareholder to enter into a business combination shall be limited to
the fullest extent permitted by the Code, as so amended, without further action
by the
7
<PAGE>
shareholders or directors of the Code, unless the provisions of the Code, as so
amended, require further action by the shareholders.
(d) This Section 16 may be repealed only by the affirmative vote of at
least two-thirds of the "continuing directors" (as such term is defined in
Section 14-2-1110 of the Code) and a majority of the votes entitled to be cast
by the holders or beneficial owners of the Common Stock of the corporation,
other than shares beneficially owned by an interested shareholder, in addition
to any other vote required by the Bylaws or the Articles of Incorporation to
amend these Bylaws. Any action to repeal this Section 16 in accordance with
this paragraph (d) shall not be effective until eighteen (18) months after the
shareholder vote to effect such repeal and shall not apply to any business
combination between the corporation and any person or entity which became an
interested shareholder of the corporation on or prior to such repeal.
ARTICLE III
-----------
BOARD OF DIRECTORS
Section 1. General Powers and Function. The business and affairs of the
--------- ---------------------------
corporation shall be managed by, or under the direction of, a governing board,
which is herein referred to as the "Board of Directors", the "Board", or
"directors"; the use of the phrase "entire Board" or "full Board" in these
Bylaws refers to the total number of directors which the corporation would have
if there were no vacancies. In addition to the powers and authorities expressly
conferred upon the Board of Directors by these Bylaws, the Board may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by law, the Articles of Incorporation, or these Bylaws required to be
exercised or done by the shareholders.
Section 2. Number, Tenure, and Qualifications. Subject to the rights of
--------- ----------------------------------
the holders of any series of Preferred Stock, or any other series or class of
stock, if so authorized by the Board of Directors, to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by a majority of the entire
Board, but shall consist of no more than twelve directors nor less than one
director. Commencing at such time as the entire Board shall consist of more
than two directors, the directors, other than those who may be elected by the
holders of any series of Preferred Stock or any other series or class of stock
(if so authorized by the Board of Directors to elect directors under specified
circumstances), shall be divided into three classes, as nearly equal in number
as possible. One class of directors shall be initially elected for a term
expiring at the annual meeting of shareholders to be held in 1998; another class
shall be initially elected for a term expiring at the annual meeting of
shareholders to be held in 1999; and another class shall be initially elected
for a term expiring at the annual meeting of shareholders to be held in 2000.
Members of each class shall hold office until their successors are elected and
qualified. At each annual meeting of the shareholders of the corporation,
commencing with the 1998 annual meeting, the successors of the class of
directors whose term expires at that meeting shall be elected by a plurality
vote of all votes cast at such meeting to hold office for a term expiring at the
annual meeting of shareholders held in the third year following the year of
their election.
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<PAGE>
If the number of directors shall be changed in accordance with this Section 2,
any increase or decrease in the number of directors shall be so apportioned
among the classes as to make all classes as nearly equal in number as possible.
Section 3. Removal. Subject to the rights of the holders of any series of
--------- -------
Preferred Stock or any other series or class of stock, as authorized by the
Board of Directors, to elect additional directors under specified circumstances,
any one or more directors or the entire Board of Directors may be removed from
office, at any time, but only for cause by the affirmative vote of the holders
of at least a majority of the voting power of the then outstanding shares of the
corporation entitled to vote generally in the election of directors, voting
together as a single class. Removal action may be taken only at a shareholders'
meeting for which notice of the removal action has been given. A removed
director's successor, if any, may be elected at the same meeting to serve the
unexpired term.
Section 4. Vacancies. Subject to the rights of the holders of any series
--------- ---------
of Preferred Stock or any other series or class of stock, as authorized by the
Board of Directors, to elect additional directors under specified circumstances,
and unless the Board of Directors otherwise determines, a vacancy occurring in
the Board of Directors may be filled for the unexpired term, and until such
successor director shall have been duly elected and qualified, by the
affirmative vote of a majority of the remaining directors, whether or not the
remaining directors constitute a quorum. A vacancy or vacancies in the Board of
Directors may result from the death, resignation, disqualification, or removal
of any director, or from an increase in the number of directors. No decrease in
the number of authorized directors constituting the entire Board shall shorten
the term of any incumbent director.
Section 5. Distributions and Share Dividends. Unless the Articles of
--------- ---------------------------------
Incorporation provide otherwise, the Board of Directors may from time to time in
its discretion authorize or declare distributions or share dividends in the
manner and upon the terms and conditions provided under the Code and the
Articles of Incorporation. For the purpose of determining shareholders entitled
to a distribution (other than one involving a purchase, redemption, or other
reacquisition of the corporation's shares) or a share dividend, the Board of
Directors may fix a date as the record date. If no record date is fixed by the
Board of Directors, the record date shall be determined in accordance with the
provisions of Article VI, Section 7.
Section 6. Compensation of Directors. Directors shall receive such fees
--------- -------------------------
and expenses as the Board of Directors shall from time to time prescribe.
Section 7. Committees.
--------- ----------
(a) Executive Committee. The Board of Directors may, by resolution,
-------------------
designate an Executive Committee which shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, with the exception of such powers and authority
as may be specifically reserved to the Board of Directors under the Code or by
resolution adopted by the Board of Directors. The Executive Committee
9
<PAGE>
shall consist of at least four members of the Board of Directors, including the
Chairman of the Board and the President. The Chairman of the Board, the
President, and one other member of the Executive Committee shall constitute a
quorum.
(b) Audit Committee. The Board of Directors may, by resolution, designate
---------------
an Audit Committee which shall from time to time review and make recommendations
to the Board of Directors with respect to the selection of independent auditors,
the fees to be paid to such auditors, the adequacy of the audit and accounting
procedures of the corporation, and such other matters as may be expressly
delegated to the Audit Committee by the Board of Directors. The Audit
Committee, upon request, shall meet separately or jointly with representatives
of the independent auditors and with the financial officers of the corporation.
The Audit Committee shall consist of at least two members of the Board of
Directors; provided, however, a majority of the members of the Audit Committee
shall not be employees or officers of the corporation. A majority of the
members of the Audit Committee shall constitute a quorum.
(c) Compensation Committee. The Board of Directors may, by resolution,
----------------------
designate a Compensation Committee which shall from time to time review and make
recommendations to the Board of Directors with respect to the management
remuneration policies of the corporation, including salary rates and fringe
benefits of elected officers, other remuneration plans such as incentive
compensation, deferred compensation, and stock option plans, directors'
compensation and benefits, and such other matters as may be specifically
delegated to the Compensation Committee by the Board of Directors. The
Compensation Committee shall consist of at least two members; provided, however,
none of the members of the Compensation Committee shall be employees or officers
of the corporation. A majority of the members of the Compensation Committee
shall constitute a quorum.
(d) Nominating Committee. The Board of Directors may, by resolution,
--------------------
designate a Nominating Committee which shall make recommendations to the Board
of Directors (i) concerning suitable candidates for election to the Board, (ii)
with respect to assignments to Board Committees, and (3) with respect to
promotions, changes, and succession among the senior management of the
corporation, and shall perform such other duties as may be specifically
delegated to the committee by the Board of Directors. The Nominating Committee
shall consist of at least two members; provided, however, none of the members of
the Nominating Committee shall be employees or officers of the corporation. A
majority of the members of the Nominating Committee shall constitute a quorum.
(e) Other Committees. The Board of Directors, or any Committee thereof so
----------------
authorized by the Board of Directors, may, from time to time, by resolution
passed by the Board or such Committee, designate one or more other Committees of
the Board. Each such Committee shall have such duties and shall exercise such
powers as are granted to it in the resolution designating the members thereof.
(f) Committee Procedure. Each Committee shall keep regular minutes of its
-------------------
meetings, which shall be reported to the Board of Directors, and shall fix its
own rules of procedure. Each
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<PAGE>
Committee may authorize the seal of the corporation to be affixed to all papers
which may require it. In the absence or disqualification of a member of any
Committee, the members of that Committee present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of such absent or disqualified member.
ARTICLE IV
----------
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings. A regular annual meeting of the Board of Directors
--------- --------
shall be held without notice (other than this Section 1) on the same date and at
the same place, as each annual meeting of the shareholders or on such other day,
at such other place, and at such time as the Board of Directors may determine.
In addition, the Board, by resolution from time to time may provide the time and
place for holding regular meetings without other notice than such resolution.
Special meetings of the Board may be called at any time at the request of the
Chairman of the Board, the President, or a majority of the entire Board. The
person or persons authorized to call special meetings of the Board may fix the
place and time of the meetings.
Section 2. Notice and Waiver. Unless waived in the manner set forth
--------- -----------------
below, notice of any special meeting of the Board of Directors shall be given to
each director in writing, by telegram, by facsimile transmission, or by
telephone communication in accordance with Article VIII, Section 6. Neither the
business to be transacted at, nor the purpose of, any meeting of the Board of
Directors need be specified in the notice of the meeting, except for amendments
to these Bylaws as provided in Article IX. Notice of a meeting shall be deemed
to have been given to any director in attendance at any prior meeting at which
the date, time, and place of the subsequent meeting was announced. A director
may waive any notice required by the Code, the Articles of Incorporation, or
these Bylaws before or after the date and time of the matter to which the notice
relates. Except as provided below, such waiver must be in writing, signed by
the director entitled to the notice, and delivered to the corporation for
inclusion in the minutes or filing with the corporate records. The attendance
of a director at any meeting shall constitute a waiver of notice of such meeting
and of any and all objections to the place or time of the meeting, or to the
manner in which it has been called or convened, except where a director states,
at the beginning of the meeting (or promptly upon his arrival), any such
objection or objections to the transaction of business and does not thereafter
vote for or assent to action taken at the meeting.
Section 3. Quorum. A whole number of directors equal to at least a
--------- ------
majority of the entire Board shall constitute a quorum for the transaction of
business. The directors present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
directors to leave less than a quorum.
Section 4. Voting. If a quorum is present when a vote is taken, the
--------- ------
affirmative vote of a majority of directors present is the act of the Board of
Directors unless the Code, the
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<PAGE>
Articles of Incorporation, or these Bylaws require the vote of a greater number
of directors. A director who is present at a meeting of the Board of Directors
or a committee of the Board of Directors when corporate action is taken is
deemed to have assented to the action taken unless (i) he or she objects at the
beginning of the meeting (or promptly upon his or her arrival) to holding it or
transacting business at the meeting; (ii) his or her dissent or abstention from
the action taken is entered into the minutes of the meeting; or (iii) he or she
delivers written notice of his or her dissent or abstention to the presiding
officer of the meeting before its adjournment or to the corporation immediately
after adjournment of the meeting. The right of dissent or abstention is not
available to a director who votes in favor of an action taken.
Section 5. Adjournments. A meeting of the Board of Directors, whether
--------- ------------
or not a quorum is present, may be adjourned by a majority of the directors
present to reconvene at a specific time and place. It shall not be necessary to
give notice to the directors of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned, in
which case notice shall be given to directors in the same manner as for a
special meeting. At any such reconvened meeting at which a quorum is present,
any business may be transacted that could have been transacted at the meeting
that was adjourned.
Section 6. Action Taken Without Meeting. Any action required or permitted
--------- ----------------------------
to be taken at any meeting of the Board of Directors may be taken without a
meeting if written consent or consents, setting forth the action so taken, shall
be signed by all the directors. Such consent shall have the same force and
effect as a unanimous vote of the Board of Directors and shall be filed with the
Secretary and recorded in the Minute Book of the corporation.
Section 7. Participation by Conference Telephone. The Board of Directors,
--------- -------------------------------------
or any committee designated by the Board of Directors, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment through which all persons participating in the meeting
can simultaneously hear and speak to each other, and participation in such
meeting pursuant to this Section 7 shall constitute presence in person at such
meeting.
ARTICLE V
---------
OFFICERS
Section 1. Elected Officers. The elected officers of the corporation
--------- ----------------
shall consist of (a) a Chairman of the Board, unless the Board of Directors
specifies that the Chairman of the Board shall not be an officer of the
corporation, (b) a President, (c) one or more Vice Presidents (including
Executive Vice Presidents and Senior Vice Presidents), (d) a Secretary, (e) a
Treasurer, and (f) such other officers as the Board of Directors from time to
time may deem proper. The Chairman of the Board (whether or not an officer of
the corporation) shall be chosen from the directors. The other officers of the
corporation may or may not be directors. Each officer chosen by the Board of
Directors shall have such powers and duties as generally pertain to his or her
respective office, subject to the specific provisions of this Article V. Such
officers also
12
<PAGE>
shall have such powers and duties as from time to time may be conferred by the
Board of Directors or any Committee thereof.
Section 2. Election and Term of Office. The elected officers of the
--------- ---------------------------
corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after each annual meeting of the
shareholders, or as soon thereafter as reasonably convenient. Subject to
Section 3 below, the officers shall hold their respective offices at the
pleasure of the Board of Directors, and any officer may be removed from office,
with or without cause, at any time by a vote of the majority of the Board of
Directors. Each officer shall hold office until his or her successor shall have
been duly elected and shall have qualified or until his death or removal or
until he or she shall resign. Removal will be without prejudice to the contract
rights, if any, of the person removed, but shall be effective notwithstanding
any damage claim that may result from infringement of such contract rights.
Section 3. Vacancies. In case any office becomes vacant by death,
--------- ---------
resignation, retirement, disqualification, removal from office, or any other
cause, the Board of Directors may abolish the office (except that of Chief
Executive Officer and Secretary) or elect an officer to fill such vacancy.
Section 4. Compensation. The compensation of the officers of the
--------- ------------
corporation shall be fixed, from time to time, by the Board of Directors.
Section 5. Chairman of the Board. The Chairman of the Board of Directors
--------- ---------------------
shall preside at all meetings of the Board of Directors and at all meetings of
the shareholders (unless another person is selected under Article II, Section 15
to act as chairman). He or she shall make reports to the Board of Directors and
the shareholders and shall have such other powers and perform such other duties
as may from time to time be conferred upon him or her, or required, by the Board
of Directors. The Board of Directors may specify in a resolution or resolutions
that the Chairman of the Board shall not be an officer of the corporation. The
offices of the Chairman of the Board and President may be filled by the same
individual.
Section 6. President. Unless otherwise specified by the Board of
--------- ---------
Directors, the President shall be the Chief Executive Officer of the
corporation, shall be responsible for the general management of the affairs of
the corporation, shall perform all duties incidental to his or her office which
may be required by law, and shall have such other powers and perform such other
duties as may from time to time be conferred upon him or her, or required, by
the Board of Directors. The President shall, in the absence of or because of
inability to act of the Chairman of the Board, perform all duties of the
Chairman of the Board and preside at all meetings of shareholders (subject to
Article II, Section 15 above) and of the Board of Directors. The President may
sign, alone or with the Secretary, or an Assistant Secretary, or any other
proper officer of the corporation authorized by the Board of Directors,
certificates, contracts, and other instruments of the corporation as authorized
by the Board of Directors. The President shall see that all orders and
resolutions of the Board of Directors and any Committee thereof are carried into
effect.
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Section 7. Vice Presidents. Each Vice President (including any Executive
--------- ---------------
Vice President or Senior Vice President) shall have such duties as may be
required of, or assigned to, him or her by the Board of Directors, the Chairman
of the Board, or the President.
Section 8. Secretary. It shall be the duty of the Secretary to keep a
--------- ---------
record of the proceedings of all meetings of the shareholders, directors, and
committees of directors, and to authenticate such records of the corporation; to
have custody of the corporate books, records, contracts, and other documents; to
notify the shareholders and directors of meetings, and all other notices which
may be required under law or as provided by these Bylaws; and to perform such
other duties as may be required of, or assigned to, him or her by the Chairman
of the Board, President, or Board of Directors. The Secretary may affix the
corporate seal to any lawfully executed documents requiring it, may attest the
signature of any officer of the corporation, and shall sign any instrument that
requires the Secretary's signature. Any or all of the duties of the Secretary
may be delegated to one or more Assistant Secretaries.
Section 9. Treasurer. Unless otherwise provided by resolution of the
--------- ---------
Board of Directors, the Treasurer shall keep, or cause to be kept, the financial
books and records of the corporation, and shall faithfully account for its
funds. He or she shall make such reports as may be necessary to keep the
Chairman of the Board, the President, and Board of Directors fully informed at
all times as to the financial condition of the corporation, and shall perform
such other duties as may be required of, or assigned to, him or her by the
Chairman of the Board, President, or Board of Directors. Any or all of the
duties of the Treasurer may be delegated to one or more Assistant Treasurers.
Section 10. Bonds. The Board of Directors may by resolution require any
---------- -----
or all of the officers, agents, or employees of the corporation to give bonds to
the corporation, with sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with any other conditions as may from time to time be required by the
Board of Directors.
ARTICLE VI
----------
STOCK
Section 1. Certificates of Stock. The interest of each shareholder in the
--------- ---------------------
corporation shall be evidenced by a certificate or certificates representing
shares of the stock of the corporation which shall be in such form as the Board
of Directors or the appropriate officer of the corporation may from time to time
prescribe; provided, however, the Board of Directors may by resolution provide
that some or all of any or all classes or series of the corporation's stock
shall be uncertificated shares. Shares of stock, if certificated, shall be
consecutively numbered, shall be in registered form, and shall indicate the date
of issue, the name of the corporation, that the corporation is organized under
the laws of the State of Georgia, the name of the shareholder, the number and
class of shares, and the designation of the series, if any, the certificates
represent. Each certificate shall be signed by any one of the Chairman of the
Board, if elected, the
14
<PAGE>
President, or Vice President and may be signed by the Secretary or an Assistant
Secretary; provided, however, that where the certificate is signed (either
manually or by facsimile) by a transfer agent or registered by a registrar, the
signatures of those officers may be facsimiles. The corporate seal need not be
affixed to the certificate unless required under the Code.
Section 2. Rights of Corporation With Respect to Registered Owners. Prior
--------- -------------------------------------------------------
to due presentation for transfer of registration of its shares of stock, the
corporation may treat the registered owner of the shares (or the beneficial
owner of the shares to the extent of any rights granted by a nominee certificate
on file with the corporation pursuant to any procedure that may be established
by the corporation in accordance with the Code) as the person exclusively
entitled to vote the shares, to receive any share dividend or distribution with
respect to the shares, and for all other purposes; and the corporation shall not
be bound to recognize any equitable or other claim to or interest in the shares
on the part of any other person, whether or not it shall have express or other
notice of such a claim or interest, except as otherwise provided by law.
Section 3. Transfer of Shares. Transfers of shares shall be made upon the
--------- ------------------
transfer books of the corporation kept by the corporation or at the office of
the transfer agent designated to transfer the shares, only upon direction of the
person named in the certificate, or by an attorney lawfully constituted in
writing. Before a new certificate is issued, the old certificate shall be
surrendered for cancellation or, in the case of a certificate alleged to have
been lost, stolen, or destroyed, the provisions of Section 5 hereof shall have
been complied with.
Section 4. Duty of Corporation to Register Transfer. Notwithstanding any
--------- ----------------------------------------
of the provisions of Section 3 hereof, the corporation is under a duty to
register the transfer of its shares only if:
(i) the share certificate is endorsed by the appropriate person or
persons;
(ii) reasonable assurance is given that the endorsement or affidavit is
genuine and effective;
(iii) the corporation has no duty to inquire into adverse claims or has
discharged any such duty;
(iv) any applicable law relating to the collection of taxes has been
complied with;
(v) the transfer is in fact rightful or is to a bona fide purchaser; and
(vi) the transfer is in compliance with applicable provisions of any
transfer restriction of which the corporation shall have notice.
Section 5. Lost, Stolen, or Destroyed Certificates. Any person claiming a
--------- ---------------------------------------
share certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of the fact in the manner as the Board of Directors may require and
shall, if the Board of Directors so requires,
15
<PAGE>
give the corporation a bond of indemnity in form and amount, and with one or
more sureties satisfactory to the Board of Directors, as the Board of Directors
may require, whereupon an appropriate new certificate may be issued in lieu of
the one alleged to have been lost, stolen, or destroyed.
Section 6. Record Date. For the purpose of determining shareholders (i)
--------- -----------
entitled to notice of, or to vote at, any meeting of shareholders or, if
necessary, any adjournment thereof, (ii) entitled to receive payment of any
distribution or dividend, or (iii) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may not
be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A determination of shareholders of record entitled to notice of, or to vote at,
a meeting of shareholders shall apply to any adjournment of the meeting, unless
the Board of Directors shall fix a new record date for the reconvened meeting;
which it must do if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.
Section 7. Record Date if None Fixed. If no record date is fixed as
--------- -------------------------
provided in Section 6, then the record date for any determination of
shareholders that may be proper or required by law shall be, as appropriate, the
date on which notice of a shareholders' meeting is mailed, the date on which the
Board of Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
ARTICLE VII
-----------
INDEMNIFICATION
Section 1. Definitions. As used in this Article, the term:
--------- -----------
(a) "Corporation" includes any domestic or foreign predecessor entity of a
corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" or "officer" means an individual who is or was a director or
officer, respectively, of the corporation or an individual who, while a director
or officer of the corporation, is or was serving at the corporation's request as
a director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other entity. A director or officer is considered to be serving an employee
benefit plan at the corporation's request if his or her duties to the
corporation also impose duties upon, or otherwise involve services by, the
director or officer to the plan or to participants in or beneficiaries of the
plan. Further, unless the context otherwise requires, "director" or "officer"
includes the estate or personal representative of a director or officer.
16
<PAGE>
(c) "Disinterested Director" means a director who at the time of a vote or
other action referred to in Section 4(b), Section 6, or Section 7(a) below is
not (i) a party to the proceeding, or (ii) an individual who is a party to a
proceeding having a familial, financial, professional, or employment
relationship with the director whose indemnification or advance for expenses is
the subject of the decision being made with respect to the proceeding, which
relationship would, in the circumstances, reasonably be expected to exert an
influence on the director's judgment when voting on the decision being made.
(d) "Expenses" includes counsel fees.
(e) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
(f) "Official Capacity" means (i) when used with respect to a director, the
office of director in the corporation; and (ii) when used with respect to an
officer, as contemplated in Section 8 below, the office in the corporation held
by the officer. Official capacity does not include service for any other
domestic or foreign corporation, or any partnership, joint venture, trust,
employee benefit plan, or other entity.
(g) "Party" means an individual who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(h) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, and whether formal or informal.
Section 2. Authority to Indemnify. Except as otherwise provided in this
--------- ----------------------
Section 2, the corporation may indemnify an individual who is a party to a
proceeding because he or she is or was a director against any liability incurred
with respect to the proceeding if:
(a) Such individual conducted himself or herself in good faith; and
(b) Such individual reasonably believed:
(i) In the case of conduct in his or her official capacity as
director of the corporation, that such conduct was in the best interests of the
corporation;
(ii) In all other cases, that such conduct was at least not opposed
to the best interests of the corporation; and
(iii) In the case of any criminal proceeding, that the individual had
no reasonable cause to believe such conduct was unlawful.
17
<PAGE>
A director's conduct with respect to an employee benefit plan for a purpose he
or she believed in good faith to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of item (ii)
of Paragraph (b) above. Further, the termination of a proceeding by judgment,
order, settlement, or conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the director did not meet the
standard of conduct described in this Section 2. The corporation may not
indemnify a director under this Section 2 in connection with a proceeding by or
in the right of the corporation, except for reasonable expenses incurred in
connection with the proceeding if it is determined that the director has met the
relevant standard of conduct under this Section 2, or in connection with any
other proceeding with respect to conduct for which the director was adjudged
liable on the basis that a personal benefit was improperly received by him or
her, whether or not involving action in his or her official capacity as a
director of the corporation.
Section 3. Mandatory Indemnification. The corporation shall indemnify a
--------- -------------------------
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which the director was a party because he or she was a
director of the corporation against the reasonable expenses incurred by the
director in connection with the proceeding.
Section 4. Advance for Expenses.
--------- --------------------
(a) Before the final disposition of a proceeding, the Corporation may
advance funds to pay for or reimburse the reasonable expenses incurred by a
director who is a party to that proceeding because he or she is a director if he
or she delivers to the corporation:
(i) A written affirmation of his or her good faith belief that he or
she has met the relevant standard of conduct described in Section 2 above (and
in Section 14-2-851 of the Code), or that the proceeding involves conduct for
which liability has been eliminated under a provision of the Articles of
Incorporation (as authorized by Section 14-2-202(b)(4) of the Code); and
(ii) His or her written undertaking to repay any funds advanced if it
is ultimately determined that the director is not entitled to indemnification
under the provisions of Part 5 of Article 8 of the Code or under these Bylaws.
This undertaking must be an unlimited general obligation of the director but
need not be secured and may be accepted by the corporation without reference to
the financial ability of the director to make repayment.
(b) Authorizations under this Section 4 shall be made:
(i) by the Board of Directors, (A) when there are two or more
disinterested directors, by a majority vote of all of the disinterested
directors (a majority of whom shall for such purpose constitute a quorum)
or by a majority of the members of a committee of two or more disinterested
directors appointed by such a vote; or (B) when there are fewer than two
disinterested directors, then by the affirmative vote of a majority of
directors present, in the presence of a quorum, unless the vote of a
greater number of directors is required for action by the board (in
accordance with Section 14-2-824(c) of
18
<PAGE>
the Code) and in which authorization directors who do not qualify as
disinterested directors may participate; or
(ii) by the shareholders, but the shares owned or voted under the
control of a director who at the time does not qualify as a disinterested
director with respect to the proceeding may not be voted on the
authorization.
Section 5. Court-Ordered Indemnification and Advances for Expenses.
--------- -------------------------------------------------------
(a) A director who is a party to a proceeding because he or she is a
director may apply for indemnification or advance for expenses to the court
conducting the proceeding or to another court of competent jurisdiction. After
receipt of an application and after giving any notice it considers necessary,
the court shall order indemnification or advance of expenses if it determines
(i) that the director is entitled to indemnification under this Article, or (ii)
in view of all of the relevant circumstances, that it is fair and reasonable to
indemnify or advance expenses to the director, even if the director has not met
the relevant standard of conduct in Section 2 above, failed to comply with the
procedure in Section 4 above, or was adjudged liable in a proceeding by or in
the right of the corporation, but if the director was adjudged so liable, the
indemnification shall be limited to reasonable expenses incurred in connection
with the proceeding.
(b) If the court determines that the director is entitled to
indemnification or advance for expenses, it may also order the corporation to
pay the director's reasonable expenses to obtain court-ordered indemnification
or advance for expenses.
Section 6. Procedure for Determination. The Corporation may not indemnify
--------- ---------------------------
a director under Section 2 above unless authorized under the terms of Section 2
above, and a determination has been made for a specific proceeding that
indemnification of the director is permissible in the circumstances because the
director has met the relevant standard of conduct set forth in Section 2 above.
The determination shall be made:
(a) if there are two or more disinterested directors, by the board of
directors by a majority vote of all of the disinterested directors (a majority
of whom shall for such purpose constitute a quorum) or by a majority of the
members of a committee of two or more disinterested directors appointed by such
a vote;
(b) by special legal counsel selected (i) in the manner described in
subparagraph (a) of this section, or (ii) if there are fewer than two
disinterested directors, selected by the Board of Directors (in which selection
directors who do not qualify as disinterested directors may participate); or
(c) by the shareholders, but shares owned or voted under the control of a
director who at the time does not qualify as a disinterested director may not be
voted on the determination.
19
<PAGE>
Authorization of indemnification or of an obligation to indemnify and the
evaluation as to the reasonableness of expenses shall be made in the same manner
as the determination that indemnification is permissible, except that if there
are fewer than two disinterested directors or if the determination is made by
special legal counsel, the authorization of indemnification and the evaluation
as to the reasonableness of expenses shall be made by those directors who could
select special legal counsel (when there are fewer than two disinterested
directors) under subparagraph (b) of this section.
Section 7. Authorization of Indemnification Exceeding Statutory Levels.
--------- -----------------------------------------------------------
(a) This section authorizes the corporation to indemnify or obligate itself
to indemnify a director made a party to a proceeding, including a proceeding
brought by or in the right of the Corporation, without regard to the limitations
contained in Part 5 of Article 8 of the Code, or of other provisions of this
Article VII, but the shares owned or voted under the control of a director who
at the time does not qualify as a disinterested director with respect to any
existing or threatened proceeding that would be covered by the authorization may
not be voted with respect to the authorization.
(b) The corporation shall not indemnify a director under subparagraph (a)
above for any liability incurred in a proceeding in which the director is
adjudged liable to the corporation or is subjected to injunctive relief in favor
of the corporation for: (1) any appropriation, in violation of the director's
duties, of any business opportunity of the corporation, (2) acts or omissions
which involve intentional misconduct or a knowing violation of law, (3) the
types of liability respecting improper corporate distributions (as specified
under Section 14-2-832 of the Code), or (4) any transaction from which the
director received an improper personal benefit. Before the corporation may
advance or reimburse expenses of a director prior to the final disposition of a
proceeding, as approved or authorized under this section, the director is to
furnish to the corporation a written affirmation of his or her good faith belief
that his or her conduct does not constitute behavior described in the preceding
sentence of this section and furnish to the corporation a written undertaking,
executed personally or on his or her behalf, to repay any funds advanced if it
is ultimately determined that the director is not entitled to indemnification
under this Section 7.
Section 8. Indemnification or Advance of Expenses for Officer of
--------- -----------------------------------------------------
Corporation; Indemnification or Advance of Expenses for Employees and Agents.
- ----------------------------------------------------------------------------
(a) The corporation may indemnify and advance expenses under this Article
VII to an officer of the corporation who is a party to a proceeding because he
or she is an officer of the corporation to the same extent as a director, as
provided in this Article VII. If an officer of the corporation is not a
director, or although the officer is also a director, because the sole basis on
which he or she is made a party to the proceeding is an act or omission solely
as an officer, the corporation may indemnify or advance expenses to such further
extent permitted by the laws of Georgia, except for liability arising out of
conduct that constitutes (i) appropriation, in violation of his or her duties as
an officer, of any business opportunity of the corporation, (ii) acts or
20
<PAGE>
omissions which involve intentional misconduct or a knowing violation of law,
(iii) the types of liability for improper corporate distributions (as specified
in Section 14-2-832 of the Code), or (iv) the receipt of an improper personal
benefit. An officer of the corporation who is not a director is entitled to
mandatory indemnification or advances for expenses under Section 5 above to the
same extent to which a director may be entitled to indemnification or advances
for expenses.
(b) The corporation shall indemnify and advance expenses to an employee or
agent of the corporation who is not a director to the fullest possible extent,
consistent with public policy and to the fullest extent permitted by the laws of
Georgia. The procedures for such indemnification or advance shall be consistent
with those for directors or officers of the corporation.
Section 9. Insurance. The corporation may purchase and maintain insurance
--------- ---------
on behalf of an individual who is or was a director, officer, employee, or agent
of the corporation, or who, while a director, officer, employee, or agent of the
corporation, serves at the corporation's request as a director, officer,
partner, trustee, employee or agent of another domestic or foreign corporation,
partnership, joint venture, trust, employee benefit plan or other entity against
liability asserted against or incurred by him or her in that capacity or arising
from his or her status as a director, officer, employee, or agent whether or not
the corporation would have power to indemnify or advance expenses to him or her
against the same liability under this Article.
Section 10. Prior Obligation to Indemnify or Advance Expenses. Pursuant
---------- -------------------------------------------------
to the provisions of Section 14-2-859 of the Code, the Corporation is authorized
to obligate itself in advance of the act or omission giving rise to a proceeding
to provide indemnification or advance funds to pay for or reimburse expenses of
a director, officer, employee, or agent to the fullest extent permitted by the
laws of Georgia. The corporation has power to pay or reimburse a director or
officer in connection with his or her appearance as a witness in a proceeding at
a time when he or she is not a party. Further, except to the extent limited in
Section 8 of this Article VII, this Article VII does not otherwise limit the
corporation's power to indemnify, advance expenses to, or provide or maintain
insurance on behalf of an employee or agent.
Section 11. Security. The corporation may designate certain of its assets
---------- --------
as collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article VII, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article VII, as the Board of Directors deems appropriate.
Section 12. Amendment. Any amendment to this Article VII that limits or
---------- ---------
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any party hereunder shall, as to such party, apply
only to proceedings based on actions, events, or omissions (collectively, "Post-
Amendment Events") occurring after such amendment and after delivery of notice
of such amendment to the party so affected. Any party shall, as to any
proceeding based on actions, events, or omissions occurring prior to the date of
receipt of such
21
<PAGE>
notice, be entitled to the right of indemnification, advancement of expenses,
and other rights under this Article VII to the same extent as if such provisions
had continues as part of the bylaws of the Corporation without such amendment.
This Section 12 cannot be altered, amended, or repealed in a manner effective as
to any party (except as to Post-Amendment Events) without the prior written
consent of such party.
Section 13. Agreements. The provisions of this Article VII shall be
---------- ----------
deemed to constitute an agreement between the corporation and each party
hereunder. In addition to the rights provided in this Article VII, the
corporation shall have the power, upon authorization by the Board of Directors,
to enter in to an agreement or agreements providing to any party indemnification
rights substantially similar to those provided in this Article VII.
Section 14. Report to Shareholders. If the corporation indemnifies or
---------- ----------------------
advances expenses to a party under any of Section 14-2-851 through 14-2-854 of
the Code in connection with a proceeding by or in the right of the corporation,
the corporation shall, to the extent required by Section 14-2-1621 of the Code
or any other applicable provision of the Code, report the indemnification or
advance in writing to the shareholders with or before the notice of the next
shareholders' meeting.
Section 15. Non-Exclusivity. Subject to any applicable limitation
---------- ---------------
imposed by the Code or the Articles of Incorporation, the indemnification and
advancement of expenses provided by or granted pursuant to this Article VII
shall not be exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any provision
of the Code, the Articles of Incorporation, or any bylaw, resolution, or
agreement specifically or in general terms approved or ratified by the
affirmative vote of holders of a majority of the shares entitled to be voted
thereon.
Section 16. Severability. In the event that any of the provisions of this
---------- ------------
Article VII (including any provision within a single section, subsection,
division, or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions of this
Article VII shall remain enforceable to the fullest extent permitted by law.
ARTICLE VIII
------------
MISCELLANEOUS
Section 1. Inspection of Books and Records. The Board of Directors shall
--------- -------------------------------
have the power to determine which accounts, books, and records of the
corporation shall be available for shareholders to inspect or copy, except those
books and records required by the Code to be made available upon compliance by a
shareholder of applicable requirements, and shall have power to fix reasonable
rules and regulations (including confidentiality restrictions and procedures)
not in conflict with applicable law for the inspection and copying of accounts,
books, and records which by law or determination of the Board of Directors are
made available. All such books and records shall be kept at the corporation's
principal office or at such other location either within
22
<PAGE>
or outside the State of Georgia, as may from time to time be designated by the
Board of Directors; without the prior approval of the Board of Directors in
their discretion, or unless otherwise provided by the Code, any shareholder
owning two percent (2%) or less of the total shares of the corporation then
outstanding shall have no right to inspect or copy the books and records of the
corporation.
Section 2. Fiscal Year. The Board of Directors is authorized to fix the
--------- -----------
fiscal year of the corporation and to change the same from time to time as it
deems appropriate.
Section 3. Corporate Seal. If the Board of Directors determines that
--------- --------------
there should be a corporate seal for the corporation, it shall be in the form as
the Board of Directors may from time to time determine. The Board of Directors
may authorize the use of one or more facsimile forms of the corporate seal. The
corporate seal need not be used unless its use is required by law, the Articles
of Incorporation, on these Bylaws.
Section 4. Notice.
--------- ------
(a) Whenever these Bylaws require notice to be given to any shareholder or
to any director, the notice may be given by mail, in person, by courier
delivery, by telephone, or by telecopier, telegraph, or similar electronic
means. Whenever notice is given to a shareholder or director by mail, the
notice shall be sent by depositing the notice in a post office or letter box in
a postage-prepaid, sealed envelope addressed to the shareholder or director at
his or her address as it appears on the books of the corporation. Unless
specifically indicated otherwise under the Code, the Articles of Incorporation,
or these Bylaws, any such written notice given by mail shall be effective: (i)
if given to shareholders, at the time the same is deposited in the United States
mail; and (ii) in all other cases, at the earliest of (x) when received or when
delivered, properly addressed, to the addressee's last known principal place of
business or residence, (y) three days after its deposit in the mail, as
evidenced by the postmark, if mailed with first-class postage prepaid and
correctly addressed, or (z) on the date shown on the return-receipt, if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee. Unless specifically indicated
otherwise under the Code, the Articles of Incorporation, or these Bylaws,
whenever notice is given to a shareholder or director by any means other than
mail, the notice shall be deemed given when received.
(b) In calculating time periods for notice, when a period of time measured
in days, weeks, months, years, or other measurement of time is prescribed for
the exercise of any privilege or the discharge of any duty, the first day shall
not be counted, but the last day shall be counted.
23
<PAGE>
ARTICLE IX
----------
AMENDMENT
Except as otherwise provided in Article II, Section 16(d), these Bylaws may
be amended, added to, rescinded, or replaced at any meeting of the Board of
Directors or of the shareholders, so long as notice of the proposed change was
given in the notice of the meeting and, in the case of a meeting of the Board of
Directors, in a notice given no less than twenty-four (24) hours prior to the
meeting.
24
<PAGE>
EXHIBIT 10.1
LOGILITY, INC.
1997 STOCK PLAN
---------------
Logility, Inc., a Georgia corporation (the "Company"), hereby establishes
the Logility, Inc. 1997 Stock Plan (the "Plan"), effective as of August 7, 1997,
the date on which this Plan was approved and adopted by the Board of Directors
and Shareholders of the Company.
1. Purpose. The purpose of the Plan is to attract and retain the best
-------
available talent and encourage the highest level of performance by officers,
employees, directors, advisors and consultants, and to provide them with
incentives to put forth maximum efforts for the success of the Company's
business in order to serve the best interests of the Company. Stock Options
granted under the Plan may be Incentive Stock Options or Nonqualified Stock
Options, as such terms are hereinafter defined. Participants in the Plan may
also receive Stock Appreciation Rights, as hereinafter defined, in lieu of or in
addition to Stock Options.
2. Definitions. The following terms, when used in the Plan with initial
-----------
capital letters, will have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934 as in effect from time
to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Change in Control" means the occurrence, prior to the expiration of a
Stock Option or Stock Appreciation Right, of any of the following events:
(i) the Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than two-thirds of the combined voting
power of the then-outstanding securities entitled to vote generally in the
election of directors ("Voting Stock") of such corporation or person immediately
after such transaction are held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such transaction;
(ii) the Company sells or otherwise transfers all or substantially all
of its assets to another corporation or other legal person, and as a result of
such sale or transfer less than two-thirds of the combined voting power of the
then-outstanding Voting Stock of such corporation or person immediately after
such sale or transfer
<PAGE>
is held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
(iii) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the Act,
disclosing that any person (as the term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Act) has become the direct or indirect beneficial owner
(as the term "beneficial owner" is defined under Rule 13d-3 or any successor
rule or regulation promulgated under the Act) of securities representing 50% or
more of the combined voting power of the then-outstanding Voting Stock of the
Company;
(iv) the Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Act disclosing in response to Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein) that
a change in control of the Company has occurred or will occur in the future
pursuant to any then-existing contract or transaction; or
(v) if, during any period of two consecutive years, individuals who at
the beginning of any such period constitute the directors of the Company cease
for any reason to constitute at least a majority thereof; provided, however,
that for purposes of this clause (v) each director who is first elected, or
first nominated for election by the Company's stockholders, by a vote of at
least two-thirds of the directors of the Company (or a committee thereof) then
still in office who were directors of the Company at the beginning of any such
period will be deemed to have been a director of the Company at the beginning of
such period; and provided further that this clause (v) shall not commence
applicability until such time as at least five directors are serving
concurrently on the Board, but shall apply thereafter regardless of the number
of directors.
Notwithstanding the foregoing provisions of clauses (iii) or (iv) above,
unless otherwise determined in a specific case by majority vote of the Board, a
"Change in Control" will not be deemed to have occurred for purposes of clause
(iii) or clause (iv) above (A) solely because (1) the Company, (2) a Subsidiary,
or (3) any Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) under the Act disclosing beneficial ownership by it of
shares of Voting Stock of the Company, whether in excess of 50% or otherwise, or
because the Company reports that a change in control of the Company has occurred
or will occur in the future by reason of such beneficial ownership or any
increase or decrease thereof; or (B) solely because of the distribution by
2
<PAGE>
American Software, Inc., a Georgia corporation ("ASI"), of all or any portion of
its Voting Stock of the Company to the Shareholders of ASI.
(d) "Code" means the Internal Revenue Code of 1986, as in effect from time
to time.
(e) "Committee" shall refer to either the Stock Option Committee or the
Special Stock Option Committee.
(f) "Common Stock" means the common stock of the Company or any security
into which such common stock may be changed by reason of any transaction or
event of the type described in Section 10.
(g) "Date of Grant" means the date specified by the Stock Option Committee
or the Special Stock Option Committee, as applicable, on which a grant of Stock
Options or Stock Appreciation Rights will become effective (which date will not
be earlier than the date on which such Committee takes action with respect
thereto).
(h) "Incentive Stock Option" means a Stock Option granted in accordance
with Section 422 of the Code.
(i) "Market Value per Share" means (i) for Stock Options granted prior to
the Company's registration of the Common Stock under the Securities Exchange Act
of 1934 ("1934 Act Registration"), the fair market value per share of the
Common Stock on the Date of Grant as determined by the Stock Option Committee or
the Special Stock Option Committee, as applicable, and (ii) with respect to
Stock Options granted after 1934 Act Registration, the average of the high and
low closing sale prices as reported on any national securities exchange or
automated quotation system on which the Common Stock is listed on the Date of
Grant if such date is a trading day and, if such date is not a trading day, on
the immediately preceding date which is a trading day.
(j) "Nonemployee Director" means a member of the Board who is not an
employee of the Company or any Subsidiary and who qualifies as a "disinterested
person" within the meaning of Rule 16b-3.
(k) "Nonqualified Stock Option" means a Stock Option other than an
Incentive Stock Option.
(l) "Option Price" means the purchase price per share payable on exercise
of a Stock Option.
3
<PAGE>
(m) "Participant" means a person who is selected by the Stock Option
Committee or the Special Stock Option Committee, as applicable, to receive Stock
Options or Stock Appreciation Rights and who is at that time (i) an executive
officer or other key employee of the Company or any Subsidiary, (ii) an advisor
or consultant to the Company or any Subsidiary, or (iii) a member of the Board.
(n) "Rule 16b-3" means Rule 16b-3 under Section 16 of the Act, as such Rule
is in effect from time to time.
(o) "Special Stock Option Committee" means (i) a committee that at all
times consists of at least two Nonemployee Directors and all of whose members
qualify as "outside directors" within the meaning of Section 162(m) of the Code.
(p) "Stock Appreciation Right" means the right of a Participant, without
payment to the Company (except for applicable withholding taxes), to receive the
excess of the Market Value per Share on the date on which a Stock Appreciation
Right is exercised over the Unit Exercise Price as provided in the stock
appreciation right agreement, multiplied by the number of Units exercised. A
Stock Appreciation Right may be exercised in whole or in part, and if exercised
in part the excess above the Unit Exercise Price is calculated only on those
Units as to which the Stock Appreciation Right is exercised.
(q) "Stock Option" means the right to purchase shares of Common Stock upon
exercise of an option granted pursuant to Section 4 or 5.
(r) "Stock Option Committee" means the Stock Option Committee appointed by
the Board. Prior to the appointment of such a committee, the Board shall be
deemed the Stock Option Committee.
(s) "Subsidiary" means any corporation, partnership, joint venture or other
entity in which the Company owns or controls, directly or indirectly, not less
than 50% of the total combined voting power or equity interests represented by
all classes of stock issued by such corporation, partnership, joint venture or
other entity.
(t) "10-Percent Shareholder" means any person who at the time of a Stock
Option grant owns capital stock of the Company possessing more than 10% of the
combined voting power of all classes of capital stock of the Company.
(u) "Units" means the number of shares of Common Stock covered by a Stock
Appreciation Right which, although not issued to the Participant, are used to
4
<PAGE>
measure, at any particular time, the amount payable to the Participant upon
exercise of the Stock Appreciation Right.
(v) "Unit Exercise Price" means the price set forth in a stock appreciation
right agreement executed pursuant to Sections 5 or 7 with which the Market Value
per Share is compared in order to determine the amount payable to the
Participant upon exercise of the Stock Appreciation Right.
3. Shares and Units Available Under Plan.
-------------------------------------
(a) The shares of Common Stock which may be issued under the Plan will not
exceed in the aggregate __________ shares, subject to adjustment as provided in
Section 10. Such shares may be shares of original issuance or treasury shares
or a combination of the foregoing. Any shares of Common Stock that are subject
to Stock Options that are terminated, expire unexercised, are forfeited or are
surrendered will again be available for issuance under the Plan.
(b) The Units on which Stock Appreciation Rights may be based will not
exceed in the aggregate __________ Units, subject to adjustment as provided in
Section 10. Any Units on which Stock Appreciation Rights are based will again
be available for the granting of Stock Appreciation Rights under Section 6 if
the Stock Appreciation Rights that were based on those Units are terminated,
expire unexercised, are forfeited or are surrendered.
4. Stock Options for Participants - Nonexempt Grants. The Stock Option
-------------------------------------------------
Committee may from time to time authorize grants to any Participant of options
to purchase shares of Common Stock upon such terms and conditions as such
committee may determine in accordance with the provisions set forth below.
Grants made by the Stock Option Committee pursuant to this Section 4 are not
intended to comply with or otherwise satisfy the requirements of Rule 16b-3.
(a) Each grant will specify the number of shares of Common Stock to which
it pertains.
(b) Each grant will specify the Option Price, which, in the case of an
Incentive Stock Option, will be not less than 100% of the Market Value per Share
on the Date of Grant or, in the case of an Incentive Stock Option granted to a
10% Shareholder, not less than 110% of the Market Value per Share on the Date of
Grant.
(c) Each grant will specify whether the Stock Option is intended to be an
Incentive Stock Option or a Nonqualified Stock Option.
5
<PAGE>
(d) Each grant may specify whether the Option Price will be payable (i) in
cash or by check acceptable to the Company, (ii) by the transfer to the Company
of shares of Common Stock owned by the Participant for at least six months (or,
with the consent of the Committee, for less than six months) having an aggregate
fair market value per share at the date of exercise equal to the aggregate
Option Price, or (iii) by a combination of such methods of payment; provided,
however, that the payment method described in clause (ii) will not be available
at any time that the Company is prohibited from purchasing or acquiring such
shares of Common Stock. In the absence of any such specification, only the
payment method in clause (i) shall be permitted. Any grant may provide for
deferred payment of the Option Price from the proceeds of sale through a bank or
broker of some or all of the shares to which such exercise relates.
(e) Successive grants may be made to the same Participant whether or not
any Stock Options previously granted to such Participant remain unexercised.
(f) Each grant will specify the term of the Stock Option, which in the case
of an Incentive Stock Option granted to a 10% Shareholder shall not be greater
than five years and for all other Stock Options shall not be greater than ten
years.
(g) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary and/or
any other conditions to be satisfied before the Stock Option or installments
thereof will become exercisable, and any grant may provide, or may be amended to
provide for the earlier exercise of the Stock Option in the event of a Change in
Control.
(h) Each Stock Option granted pursuant to this Section 4 will be subject to
the transfer restrictions set forth in Section 9.
(i) Each grant will be evidenced by a stock option agreement executed on
behalf of the Company by the Chief Executive Officer or Chief Financial Officer
(or another officer designated by the Board of Directors or by the Stock Option
Committee) and delivered to the Participant and containing such further terms
and provisions, consistent with the Plan, as the Committee may approve.
5. Stock Options for Participants - Exempt Grants. The Special Stock
----------------------------------------------
Option Committee may from time to time authorize grants to any Participant of
options to purchase shares of Common Stock upon such terms and conditions as it
may determine in accordance with the provisions set forth below. Grants made by
the Special Stock Option Committee pursuant to this Section 5 are intended to
comply with and otherwise satisfy the requirements of Rule 16b-3. To the extent
that (i) any provision of the Plan applicable to a Stock Option granted pursuant
to this Section 5, or (ii) any act of the Board, Stock Option Committee or
6
<PAGE>
Special Stock Option Committee would cause such Stock Option to fail to satisfy
or comply with any requirements of Rule 16b-3, such provision or act will be
deemed null and void for purposes of such Stock Option.
(a) Each grant will specify the number of shares of Common Stock to which
it pertains.
(b) Each grant will specify the Option Price, which, in the case of an
Incentive Stock Option, will be not less than 100% of the Market Value per Share
on the Date of Grant or, in the case of an Incentive Stock Option granted to a
10% Shareholder, not less than 110% of the Market Value per Share on the Date of
Grant.
(c) Each grant will specify whether the Stock Option is intended to be an
Incentive Stock Option or a Nonqualified Stock Option.
(d) Each grant will specify whether the Option Price will be payable (i) in
cash or by check acceptable to the Company, (ii) by the transfer to the Company
of shares of Common Stock owned by the Participant for at least six months (or,
with the consent of the Special Stock Option Committee, for less than six
months) having an aggregate fair market value per share at the date of exercise
equal to the aggregate Option Price, or (iii) by a combination of such methods
of payment; provided, however, that the payment method described in clause (ii)
will not be available at any time that the Company is prohibited from purchasing
or acquiring such shares of Common Stock. In the absence of any such
specification, only the payment method in clause (i) shall be permitted. Any
grant may provide for deferred payment of the Option Price from the proceeds of
sale through a bank or broker of some or all of the shares to which such
exercise relates.
(e) Successive grants may be made to the same Participant whether or not
any Stock Options previously granted to such Participant remain unexercised.
(f) Each grant will specify the term of the Stock Options, which in the
case of an Incentive Stock Option granted to a 10% Shareholder shall not be
greater than five years and for all other Incentive Stock Options shall not be
greater than ten years.
(g) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary and/or
any other conditions to be satisfied before the stock Options or installments
thereof will become exercisable, and any grant may provide, or may be amended to
provide for the earlier exercise of the Stock Options in the event of a Change
in Control.
7
<PAGE>
(h) Each Stock Option granted pursuant to this Section 5 will be subject to
the transfer restrictions set forth in Section 9.
(i) Each grant will be evidenced by a stock option agreement executed on
behalf of the Company by the Chief Executive Officer or Chief Financial Officer
(or another officer designated by the Board of Directors or by the Special Stock
Option Committee) and delivered to the Participant and containing such further
terms and provisions, consistent with the Plan, as the Special Stock Option
Committee may approve.
6. Stock Appreciation Rights - Nonexempt Grants. The Stock Option
--------------------------------------------
Committee may from time to time authorize grants of Stock Appreciation Rights to
any Participant upon such terms and conditions as such Committee may determine
in accordance with the provisions set forth below. Grants made pursuant to this
Section 6 are not intended to comply with or otherwise satisfy the requirements
of Rule 16b-3.
(a) Each grant will specify the number of Units to which it pertains.
(b) Each grant will specify the Unit Exercise Price, which will be not less
than 100% of the Market Value per Share on the Date of Grant.
(c) Successive grants may be made to the same Participant whether or not
any Stock Appreciation Rights previously granted to such Participant remain
unexercised.
(d) Each grant will specify the term of the Stock Appreciation Rights,
which shall not be greater than five years.
(e) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary and/or
any other conditions to be satisfied before the Stock Appreciation Rights or
installments thereof will become exercisable, and any grant may provide, or may
be amended to provide for the earlier exercise of the Stock Appreciation Rights
in the event of a Change in Control.
(f) Each Stock Appreciation Right granted pursuant to this Section 6 will
be subject to the transfer restrictions set forth in Section 9.
(g) Each grant will be evidenced by a stock appreciation right agreement
executed on behalf of the Company by the Chief Executive Officer or Chief
Financial Officer (or another officer designated by the Board of Directors or
the Stock Option Committee) and delivered to the Participant and containing such
further terms and provisions, consistent with the Plan, as the Committee may
approve.
8
<PAGE>
7. Stock Appreciation Rights - Exempt Grants. The Special Stock Option
-----------------------------------------
Committee may from time to time authorize grants of Stock Appreciation Rights to
any Participant upon such terms and conditions as such Committee may determine
in accordance with the provisions set forth below. Grants made pursuant to this
Section 7 are intended to comply with and otherwise satisfy the requirements of
Rule 16b-3. To the extent that (i) any provision of the Plan applicable to a
Stock Appreciation Right granted pursuant to this Section 7, or (ii) any act of
the Board, Stock Option Committee or Special Stock Option Committee would cause
such Stock Appreciation Right to fail to satisfy or comply with any requirements
of Rule 16b-3, such provision or act will be deemed null and void for purposes
of such Stock Appreciation Right.
(a) Each grant will specify the number of Units to which it pertains.
(b) Each grant will specify the Unit Exercise Price, which will be not less
than 100% of the Market Value per Share on the Date of Grant.
(c) Successive grants may be made to the same Participant whether or not
any Stock Appreciation Rights previously granted to such Participant remain
unexercised.
(d) Each grant will specify the term of the Stock Appreciation Rights,
which shall not be greater than five years.
(e) Each grant will specify the required period or periods (if any) of
continuous service by the Participant with the Company or any Subsidiary and/or
any other conditions to be satisfied before the Stock Appreciation Rights or
installments thereof will become exercisable, and any grant may provide, or may
be amended to provide for the earlier exercise of the Stock Appreciation Rights
in the event of a Change in Control.
(f) Each Stock Appreciation Right granted pursuant to this Section 7 will
be subject to the transfer restrictions set forth in Section 9.
(g) Each grant will be evidenced by a stock appreciation right agreement
executed on behalf of the Company by the Chief Executive Officer or Chief
Financial Officer (or another officer designated by the Board of Directors or by
the Special Stock Option Committee) and delivered to the Participant and
containing such further terms and provisions, consistent with the Plan, as the
Committee may approve.
8. Stock Options for Nonemployee Directors. This Section 8 shall become
---------------------------------------
activated and shall be effective immediately following the close of the initial
public offering of the Common Stock by the Company (the "IPO"). Thereafter, each
9
<PAGE>
Nonemployee Director in office at that time will be granted a Stock Option as of
the first business day following the close of the IPO, and each Nonemployee
Director thereafter newly elected or appointed to the Board will be granted a
Nonqualified Stock Option effective upon his or her initial election or other
appointment to the Board, to purchase 2000 shares of Common Stock. Each
Nonemployee Director will also be granted an additional Nonqualified Stock
Option to purchase 1000 shares of Common Stock as of the last day of each fiscal
quarter following his or her initial option grant under this Section 8,
beginning on the last day of the first complete fiscal quarter following such
date, provided that such individual has served continually as a Nonemployee
Director through the close of business on such date. Each grant will specify the
Option Price, which will not be less than 100% of the Market Value on the Date
of Grant. All Stock Options granted pursuant to this Section 8 will contain the
terms and conditions set forth in paragraphs (a), (d), (e), (f), (g), (h) and
(i) of Section 4. Stock Options granted pursuant to this Section 8 are intended
to comply with and otherwise satisfy the requirements of Rule 16b-3.
To the extent that (i) any provision of the Plan applicable to a Stock Option
granted pursuant to this Section 8, or (ii) any act of the Board, Stock Option
Committee or Special Stock Option Committee would cause such Stock Option to
fail to satisfy or comply with any requirements of Rule 16b-3, such provision or
act will be deemed null and void for purposes of such Stock Option.
9. Transferability. Except as otherwise expressly provided in the
---------------
agreement evidencing a Stock Option or a Stock Appreciation Right, or in any
amendment to such agreement, no Stock Option or Stock Appreciation Right will be
transferable by a Participant other than by will or the laws of descent and
distribution, and during the lifetime of the Participant may be exercised only
by the Participant.
10. Adjustments. The Board or the Stock Option Committee, with respect to
-----------
Stock Options granted under Section 4 or Stock Appreciation Rights granted under
Section 6, and the Board or the Special Stock Option Committee, with respect to
Stock Options granted under Section 5 or Stock Appreciation Rights granted under
Section 7, may make or provide for such adjustments in the maximum number of
shares of Common Stock or Units specified in Section 3, in the number of shares
of Common Stock or Units covered by outstanding Stock Options or Stock
Appreciation Rights granted hereunder, in the Option Price or Unit Exercise
Price, applicable to any such Stock Options or Stock Appreciation Rights and/or
in the kind of shares or Units covered thereby (including shares of another
issuer), as the Board or such Committee in its sole discretion, exercised in
good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants that otherwise would result from any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Company, merger, consolidation, spin-off,
reorganization, partial or complete liquidation, issuance of rights or warrants
to purchase securities or any other corporate transaction or event having an
effect similar to any of the foregoing. Any fractional shares resulting from
the foregoing adjustments will be eliminated with respect to Stock Options, but
not with respect to Stock Appreciation Rights.
10
<PAGE>
11. Withholding of Taxes. To the extent that the Company is required to
--------------------
withhold federal, state, local or foreign taxes in connection with any benefit
realized by a Participant under the Plan, or is requested by any Participant to
withhold additional amounts with respect to such taxes, and the amounts
available to the Company for such withholding are insufficient, it will be a
condition to the realization of such benefit that the Participant make
arrangements satisfactory to the Company for payment of the balance of such
taxes required or requested to be withheld. In addition, if permitted by the
Stock Option Committee, with respect to Stock Options granted under Section 4,
or by the Special Stock Option Committee, with respect to Stock Options granted
under Section 5, an optionee may elect to have any withholding obligation of the
Company satisfied with shares of Common Stock that would otherwise be
transferred to the optionee on exercise of the Stock Option.
12. Administration of the Plan.
--------------------------
(a) The Plan will be administered by the Stock Option Committee with
respect to Stock Options granted under Section 4 and with respect to Stock
Appreciation Rights granted under Section 6 and by the Special Stock Option
Committee with respect to Stock Options granted under Section 5 and with respect
to Stock Appreciation Rights granted under Section 7. For purposes of any
action taken by the Stock Option Committee or the Special Stock Option
Committee, whichever is applicable, a majority of the members will constitute a
quorum, and the action of the members present at any meeting at which a quorum
is present, or acts unanimously approved in writing, will be the acts of such
Committee. The Board of Directors as a whole shall administer the Plan with
respect to Stock Options granted under Section 8.
(b) Subject to the allocation of administrative responsibilities set forth
in Section 12(a), the Stock Option Committee and the Special Stock Option
Committee have the full authority and discretion to administer the Plan and to
take any action that is necessary or advisable in connection with the
administration of the Plan, including without limitation the authority and
discretion to interpret and construe any provision of the Plan or of any
agreement, notification or document evidencing the grant of a Stock Option or
Stock Appreciation Right. The interpretation and construction by the Stock
Option Committee, the Special Stock Option Committee or the Board of Directors,
as applicable, of any such provision and any determination by the respective
Committee pursuant to any provision of the Plan or of any such agreement,
notification or document will be final and conclusive. No member of the Board
or of either Committee will be liable for any such action or determination made
in good faith.
(c) Notwithstanding the provisions of Section 12(b), if any authority,
discretion or responsibility granted to the Special Stock Option Committee under
the Plan would, if exercised or discharged by the Special Stock Option
11
<PAGE>
Committee, cause the provisions of Section 5 or any Stock Option granted under
Section 5 to fail to satisfy the requirements of Rule 16b-3, such authority,
discretion or responsibility may be exercised by the Board to the same extent
and with the same effect as if exercised by the Special Stock Option Committee;
provided, however, that such act of the Board will not cause the provisions of
Sections 5 or 7, any Stock Option granted under Section 5 or any Stock
Appreciation Right granted under Section 7 to fail to satisfy the requirements
of Rule 16b-3 or cause any member of the Special Stock Option Committee to cease
to be a disinterested administrator for purposes of Rule 16b-3.
13. Amendments, Etc.
---------------
(a) The Stock Option Committee, or the Special Stock Option Committee, as
applicable, or the Board of Directors as to grants under Section 8, may, without
the consent of the Participant, amend any agreement evidencing a Stock Option or
Stock Appreciation Right granted under the Plan, or otherwise take action, to
accelerate the time or times at which the Stock Option or Stock Appreciation
Right may be exercised, to extend the expiration date of such Stock Option or
Stock Appreciation Right, to waive any other condition or restriction applicable
to such Participant or to the exercise of such Stock Option or Stock
Appreciation Right, to reduce the exercise price of such Stock Option or Stock
Appreciation Right, to amend the definition of a Change in Control to expand the
events that would constitute a Change in Control, even if such definition may be
different from that contained in the Plan, and may amend any such agreement in
any other respect with the consent of the Participant.
(b) The Plan may be amended from time to time by the Stock Option Committee
or the Board but may not be amended without further approval by the shareholders
of the Company if such Plan amendment would result in any grant or other
transaction with respect to Stock Options under Section 5 or Stock Appreciation
Rights under Section 7 no longer satisfying the requirements of Rule 16b-3. In
the event any law, or any rule or regulation issued or promulgated by the
Internal Revenue Service, the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc., any stock exchange upon which the
Common Stock is listed for trading, or any other governmental or quasi-
governmental agency having jurisdiction over the Company, the Common Stock or
the Plan requires the Plan to be amended, or in the event Rule 16b-3 is amended
or supplemented (e.g., by addition of alternative rules) or any of the rules
----
under Section 16 of the Act are amended or supplemented, in either event to
permit the Company to remove or lessen any restrictions on or with respect to
Stock Options or Stock Appreciation Rights, the Board of Directors reserves the
right to amend the Plan to the extent of any such requirement, amendment or
supplement, and all Stock Options or Stock Appreciation Rights then outstanding
will be subject to such amendment.
12
<PAGE>
(c) The Plan may be terminated at any time by action of the Board, but in
any event will terminate on the tenth anniversary of the effective date of the
Plan. The termination of the Plan will not adversely affect the terms of any
outstanding Stock Option or Stock Appreciation Right.
(d) The Plan will not confer upon any Participant any right with respect to
continuance of employment or other service with the Company or any Subsidiary,
nor will it interfere in any way with any right the Company or any Subsidiary
would otherwise have to terminate a Participant's employment or other service at
any time.
LOGILITY, INC.
By:/s/ J. Michael Edenfield
------------------------
Name: J. Michael Edenfield
Title: President
13
<PAGE>
LOGILITY, INC.
1997 STOCK PLAN
---------------
STOCK OPTION AGREEMENT
----------------------
This Stock Option Agreement (the "Agreement") is entered into by and
between Logility, Inc., a Georgia corporation (the "Company"), and
__________________________________________________________ (the "Participant").
The Company and the Participant agree as follows:
1. Grant of Stock Option.
---------------------
(a) Pursuant to a duly adopted resolution of the appropriate stock
option committee on _______________, _______ (the "Date of Grant"), the Company
hereby grants to the Participant, upon the terms and conditions set forth below
and subject to the terms and conditions of the Company's 1997 Stock Plan (the
"Plan"), an option (the "Stock Option") to purchase from the Company a total of
________________ shares of the Company's common stock, no par value ("Common
Stock"), at an exercise price per share equal to $______________ (the "Option
Price"). Any terms used in this Agreement having initial capital letters but not
defined herein shall have the same meanings as in the Plan, the provisions of
which are incorporated into this Agreement by reference. The Participant
acknowledges receipt of a copy of the Plan.
(b) The Stock Option is intended to be an Incentive Stock Option. [The
Stock Option is intended to be a Nonqualified Stock Option.]
2. Time of Exercise. The Stock Option may be exercised, in whole or in
----------------
part, according to the following schedule:
Percentage
Exercisable Periods
----------- -------
0% Immediately
25% On the first anniversary of the Date of Grant
50% On the second anniversary of the Date of Grant
75% On the third anniversary of the Date of Grant
100% On the fourth anniversary of the Date of Grant
The unexercised portion of the Stock Option from one annual period may be
carried over to a subsequent annual period or periods, and the right of the
Participant to exercise the Stock Option as to such unexercised portion will
continue for the entire term described in Section 3 below. In no
14
<PAGE>
event may the Stock Option be exercised in whole or in part, however, after the
expiration of such term.
3. Term. The Stock Option will expire and all rights under this
----
Agreement will terminate on the __________ anniversary of the Date of Grant.
4. Restriction on Exercise. The Stock Option:
-----------------------
(a) may be exercised only with respect to full shares and no fractional
shares of Common Stock will be issued upon exercise of the Stock Option; and
(b) may be exercised in whole or in part, but no certificates representing
shares subject to the Stock Option will be delivered if any requisite
registration with, clearance by, or consent, approval or authorization of, any
governmental authority of any kind having jurisdiction over the exercise of the
Stock Option, or issuance of securities upon such exercise, has not been
obtained.
5. Manner of Exercise. The Stock Option may be exercised by written
------------------
notice to the Company of the number of shares being purchased and the Option
Price to be paid, accompanied by full payment of the Option Price (a) in cash or
by check acceptable to the Company, (b) by the transfer to the Company of shares
of Common Stock owned by the Participant for at least six months and having an
aggregate fair market value per share at the date of exercise equal to the
aggregate Option Price, (c) with the consent of the applicable stock option
committee, by authorizing the Company to withhold a number of shares of Common
Stock otherwise issuable to the Participant having an aggregate fair market
value per share on the date of exercise equal to the aggregate Option Price or
(d) by a combination of any of the foregoing (provided that the payment methods
described in clauses (b) and (c) will not be available at any time that the
Company is prohibited from purchasing or acquiring such shares of Common Stock);
provided that payment of the Option Price may also be made by deferred payment
for the proceeds of sale through a bank or broker of some or all of the shares
to which the exercise relates. Any federal, state or local taxes required to be
paid or withheld at the time of exercise will be paid or withheld in full prior
to any delivery of shares upon exercise.
6. Non-Transferability of Stock Options. The Stock Option is not
------------------------------------
assignable or transferable by the Participant other than by will or the laws of
descent and distribution.
7. Rights as Stockholder. Neither the Participant nor any of the
---------------------
Participant's beneficiaries will be deemed to have any rights as a stockholder
with respect to any shares of Common Stock covered by the Stock Option until the
issuance of a certificate to the Participant or such beneficiaries for such
shares.
15
<PAGE>
8. Adjustments. The number of shares of Common Stock covered by the
-----------
Stock Option evidenced by this Agreement, and the Option Price thereof, will be
subject to adjustment as provided in the Plan. No adjustment will be made for
dividends or other rights for which the record date is prior to the issuance of
the certificate or certificates representing the shares issued pursuant to the
Stock Option.
9. Rights in Event of Death or Termination of Employment as a Result of
--------------------------------------------------------------------
Disability of Participant. If the Participant dies or terminates employment as
- -------------------------
a result of disability prior to termination of the Participant's rights to
exercise the Stock Option, any unexercised portion of the Stock Option will
continue to vest in accordance with Section 2 and will be exercisable, subject
to all conditions of the Plan and this Agreement, for a period of one year from
the date of the Participant's death or termination of employment as a result of
disability. In the event of the death of the Participant, the Stock Option may
be exercised by the Participant's estate or a person who acquired the right to
exercise the Stock Option by bequest or inheritance or by reason of the death of
the Participant. For purposes of this Section, the Board or a committee of the
Board with authority to address this issue, will have reasonable discretion,
based upon medical consultation, to determine whether termination of a
Participant's employment has occurred "as a result of disability." In no event
may the Stock Option be exercised after the expiration date set forth in
Section 3.
10. Rights in Event of Termination of Employment Other Than as a Result of
----------------------------------------------------------------------
Death or Disability. With respect to a Participant who is an employee of the
- -------------------
Company or any Subsidiary on the Date of Grant, if the Participant ceases to be
employed by the Company or any Subsidiary, other than as a result of death or
disability, prior to the termination of the Participant's rights to exercise
the Stock Option, the Stock Option will cease to vest in accordance with Section
2 on the date following the last day on which the Participant is entitled to
receive any compensation, including but not limited to severance or termination
payments, from the Company. To the extent the Stock Option was exercisable on
such date, and only to such extent, the Stock Option will be exercisable through
the 90th day following such date. In no event may the Stock Option be exercised
after the expiration date set forth in Section 3.
11. Exercisability upon Change in Control.
-------------------------------------
(a) Notwithstanding the vesting schedule in Section 2, in the event of a
Change in Control, as hereinafter defined, or a threatened Change in Control,
any unexercised portion of the Stock Option, including that portion not yet
vested, shall become immediately exercisable. Whether a Change in Control is
threatened will be determined solely by the Board. Nothing herein shall prevent
the assumption of the Stock Option or substitution therefor of a new stock
option by the surviving corporation in a merger if agreed to by the Participant.
16
<PAGE>
(b) For purposes of Section 11(a), the term "Change in Control" shall have
the meaning assigned to that term in the Plan, subject to amendment as provided
in Section 13(a) of the Plan.
12. Stock Purchased for Investment. Unless the shares are covered by a
------------------------------
then current and effective registration statement under the Securities Act of
1933, as then in effect, the Participant, by accepting the Stock Option,
represents, warrants, covenants and agrees on behalf of the Participant and the
Participant's transferees that all shares of Common Stock purchased upon the
exercise of the Stock Option will be acquired for investment and not for resale
or distribution, and that upon each exercise of any portion of the Stock Option,
the person entitled to exercise the same will furnish evidence satisfactory to
the Company (including a written and signed representation) to the effect that
the shares are being acquired in good faith for investment and not for resale or
distribution. The Participant agrees to furnish or execute such documents as
the Company in its sole discretion deems necessary to (a) evidence such exercise
of the Stock Option, (b) determine whether a registration is then required under
the Securities Act of 1933, as then in effect, and (c) comply with or satisfy
the requirements of the Securities Act of 1933, or any other federal, state or
local law, as then in effect.
13. Notices. Each notice relating to this Agreement will be in writing
-------
and delivered in person or by certified mail to the proper address. Each notice
will be deemed to have been given on the date it is received. Each notice to
the Company will be addressed to its principal office, now 470 East Paces Ferry
Road, N.E., Atlanta, Georgia 30305, attention of the Secretary. Each notice to
the Participant or other person or persons then entitled to exercise the Stock
Option will be addressed to the Participant or such other person or persons at
the Participant's address specified below. Anyone to whom a notice may be given
under this Agreement may designate a new address by notice to that effect.
14. Employment. This Agreement does not confer upon the Participant any
----------
right to be employed or to continue in the employ of the Company or any
Subsidiary, nor does it in any way interfere with the right of the Company or
any Subsidiary to terminate the employment of the Participant at any time.
15. No Obligation to Exercise Stock Option. This Agreement does not
--------------------------------------
impose any obligation upon the Participant to exercise the Stock Option.
16. Amendments. The Board or any stock option committee established by
----------
the Board under the Plan may, without the consent of the Participant, amend this
Agreement, or otherwise take action, to accelerate the time or times at which
the Stock Option may be exercised, to extend the term described in Section 3, to
waive any other condition or restriction applicable to the Stock Option or to
the Exercise of the Stock Option, to reduce the Option Price and to make any
other
17
<PAGE>
change permitted to be made under the Plan without the consent of the
Participant; and may amend the Agreement in any other respect with the consent
of the Participant.
17. Governing Law. This Agreement is intended to be performed in the
-------------
State of Georgia and will be construed and enforced in accordance with and
governed by the laws of such State.
18. Entire Agreement. This Agreement, together with the Plan, constitutes
----------------
the entire agreement of the Company and the Participant and supersedes all prior
contracts, agreements, arrangements, communications, discussions and
representations, whether oral or written, with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Company and the Participant have executed this
Agreement as of the __________ day of _______________________, ________.
LOGILITY, INC.
By:
-------------------------------
Title:
----------------------------
PARTICIPANT:
----------------------------------
Signature
----------------------------------
Print Name
Social Security Number:
-----------
Address for Notice:
----------------------------------
----------------------------------
18
<PAGE>
LOGILITY, INC.
1997 STOCK PLAN
---------------
STOCK APPRECIATION RIGHT AGREEMENT
----------------------------------
This Stock Appreciation Right Agreement (the "Agreement") is entered into
by and between Logility, Inc., a Georgia corporation (the "Company"), and
(the "Participant"). The Company and the
- ------------------------------------
Participant agree as follows:
1. Grant of Stock Appreciation Right.
---------------------------------
(a) Pursuant to a duly adopted resolution of the appropriate stock option
committee on _______________, ______ (the "Date of Grant"), the Company hereby
grants to the Participant, upon the terms and conditions set forth below and
subject to the terms and conditions of the Company's 1997 Stock Plan (the
"Plan"), a stock appreciation right (the "Stock Appreciation Right") to receive
the excess of the Market Value per Share, as defined in the Plan, on the date on
which the Stock Appreciation Right is exercised, over the Unit Exercise Price as
set forth below, multiplied by the number of Units exercised. Any terms used in
this Agreement having initial capital letters but not defined herein shall have
the same meanings as in the Plan, the provisions of which are incorporated into
this Agreement by reference. The Participant acknowledges receipt of a copy of
the Plan.
(b) The specific grant terms of the Stock Appreciation Right are as
follows:
(i) Number of Units: _________
(ii) Unit Exercise Price: _________
2. Time of Exercise. The Stock Appreciation Right may be exercised, in
----------------
whole or in part, according to the following schedule:
Percentage
Exercisable Periods
----------- -------
0% Immediately
25% On the first anniversary of the Date of Grant
50% On the second anniversary of the Date of Grant
75% On the third anniversary of the Date of Grant
100% On the fourth anniversary of the Date of Grant
19
<PAGE>
The unexercised portion of the Stock Appreciation Right from one annual
period may be carried over to a subsequent annual period or periods, and the
right of the Participant to exercise the Stock Appreciation Right as to such
unexercised portion will continue for the entire term described in Section 3
below. In no event may the Stock Appreciation Right be exercised in whole or in
part, however, after the expiration of such term.
3. Term. The Stock Appreciation Right will expire and all rights under
----
this Agreement will terminate on the __________ anniversary of the Date of
Grant.
4. Restriction on Exercise. The Stock Appreciation Right:
-----------------------
(a) may be exercised only with respect to full Units; and
(b) may be exercised in whole or in part.
5. Manner of Exercise. Except as set forth in Section 9, the Stock
------------------
Appreciation Right may be exercised by written notice to the Company of the
number of Units being exercised. Any federal, state or local taxes required to
be withheld at the time of exercise will be withheld in full upon exercise.
6. Non-Transferability of Stock Appreciation Rights. This Stock
------------------------------------------------
Appreciation Right is not assignable or transferable by the Participant other
than by will or the laws of descent and distribution.
7. Rights as Stockholder. Neither the Participant nor any of the
---------------------
Participant's beneficiaries will be deemed to have any rights as a stockholder
with respect to any Units covered by the Stock Appreciation Right.
8. Adjustments. The number of Units covered by the Stock Appreciation
-----------
Right granted under this Agreement, and the Unit Exercise Price thereof, will be
subject to adjustment as provided in the Plan. No adjustment will be made for
dividends or other rights for which the record date is prior to the exercise of
the Stock Appreciation Right.
9. Automatic Exercise Upon Termination of Employment. If the Participant
-------------------------------------------------
dies, terminates employment as a result of disability or otherwise terminates
employment, voluntarily or involuntarily, for any reason whatsoever, prior to
termination of the Participant's rights to exercise the Stock Appreciation
Right, any exercisable portion, and only the exercisable portion, of the Stock
Appreciation Right that has not yet been exercised shall be deemed to have been
exercised automatically, effective the date of the Participant's death or
termination of employment, as if exercised by written notice on that date under
Section 5.
20
<PAGE>
10. Exercisability upon Change in Control.
-------------------------------------
(a) Notwithstanding the vesting schedule in Section 2, in the event of a
Change in Control, as hereinafter defined, or a threatened Change in Control,
any unexercised portion of the Stock Appreciation Right, including that portion
not yet vested, shall become immediately exercisable. Whether a Change in
Control is threatened will be determined solely by the Board. Nothing herein
shall prevent the assumption of the Stock Appreciation Right or substitution
therefor of a new stock appreciation right or stock option by the surviving
corporation in a merger if agreed to by the Participant.
(b) For purposes of Section 10(a), the term "Change in Control" shall have
the meaning assigned to that term in the Plan, subject to amendment as provided
in Section 13(a) of the Plan.
11. Notices. Each notice relating to this Agreement will be in writing
-------
and delivered in person or by certified mail to the proper address. Each notice
will be deemed to have been given on the date it is received. Each notice to
the Company will be addressed to its principal office, now 470 East Paces Ferry
Road, N.E., Atlanta, Georgia 30305, attention of the Secretary. Each notice to
the Participant or other person or persons then entitled to exercise the Stock
Appreciation Right will be addressed to the Participant or such other person or
persons at the Participant's address specified below. Anyone to whom a notice
may be given under this Agreement may designate a new address by notice to that
effect.
12. Employment. This Agreement does not confer upon the Participant any
----------
right to be employed or to continue in the employ of the Company or any
Subsidiary, nor does it in any way interfere with the right of the Company or
any Subsidiary to terminate the employment of the Participant at any time.
13. Amendments. The Board or any stock option committee established by
----------
the Board under the Plan may, without the consent of the Participant, amend this
Agreement, or otherwise take action, to accelerate the time or times at which
the Stock Appreciation Right may be exercised, to extend the term described in
Section 3, to waive any other condition or restriction applicable to the Stock
Appreciation Right or to the Exercise of the Stock Appreciation Right, to reduce
the Unit Exercise Price and to make any other change permitted to be made under
the Plan without the consent of the Participant; and may amend the Agreement in
any other respect with the consent of the Participant.
14. Governing Law. This Agreement is intended to be performed in the
-------------
State of Georgia and will be construed and enforced in accordance with and
21
<PAGE>
governed by the laws of such State.
15. Entire Agreement. This Agreement, together with the Plan, constitutes
----------------
the entire agreement of the Company and the Participant and supersedes all prior
contracts, agreements, arrangements, communications, discussions and
representations, whether oral or written, with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the Company and the Participant have executed this
Agreement as of the ________ day of _____________________, ________.
LOGILITY, INC.
By:
------------------------------
Title:
---------------------------
PARTICIPANT:
----------------------------------
Signature
----------------------------------
Print Name
Social Security Number:
-------------
Address for Notice:
---------------------------------
---------------------------------
22
<PAGE>
EXHIBIT 10.2
INDEMNITY AGREEMENT
This Agreement is made as of the _____ day of _______________, 1997, by and
between LOGILITY, INC., a Georgia corporation (the "Corporation"), and _________
__________________ ("Indemnitee"), a resident of the State of ________________.
W I T N E S S E T H:
WHEREAS, the Corporation desires to retain and attract as directors and
officers the most capable persons available; and
WHEREAS, service as a director or officer of a corporation, particularly a
corporation the securities of which are or are to be publicly held, may subject
such individual to substantial litigation and other risks; and
WHEREAS, it is the express policy of the Corporation to provide its
directors and officers with the maximum indemnification protection permitted
under Georgia law; and
WHEREAS, in spite of the broad indemnification protection provided for
under the Corporation's Articles of Incorporation and By-laws, Indemnitee is
unwilling to serve as a director and/or officer without the provision of further
indemnification rights, and to induce Indemnitee to serve in such capacity, the
Corporation desires to afford to Indemnitee indemnification protection to the
fullest extent permitted under the laws of Georgia.
NOW, THEREFORE, for and in consideration of the premises, agreements and
covenants contained herein, the services provided by Indemnitee as a director
and/or officer of the Corporation, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Agreement to Serve. Indemnitee agrees to serve or continue to serve
------------------
as a director and/or officer of the Corporation until his or her death,
resignation, disqualification, or removal from office, or the election or
appointment and qualification of his or her successor, whichever shall first
occur.
2. Definitions. As used in this Agreement:
-----------
(a) The term "Code" means the Georgia Business Corporation Code, as in
effect from time to time.
(b) The term "Proceeding" includes any threatened, pending or
completed investigation, claim, action, suit or proceeding, whether of a
civil, criminal, administrative, arbitrative, or investigative nature
(including, without limitation, any
<PAGE>
action, suit or proceeding by or in the right of the Corporation to procure
a judgment in its favor), whether formal or informal, in which Indemnitee
may be or may have been or may be threatened to be made to become involved
in any manner (including, without limitation, as a party or a witness) by
reason of the fact that Indemnitee is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Board of Directors or an officer of the Corporation as a director, officer,
partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or
other enterprise (whether or not for profit), or by reason of anything
actually or allegedly done or not done by Indemnitee in any such capacity,
whether or not Indemnitee is serving in such capacity at the time any
liability or expense is incurred for which indemnification or reimbursement
can be provided under this Agreement.
(c) The term "Expenses" includes, without limitation, counsel fees and
disbursements and all other costs, expenses, and obligations actually and
reasonably incurred by Indemnitee in connection with (i) investigating,
defending, being a witness in or otherwise participating in, or preparing
to defend, be a witness in or participate in, any Proceeding, (ii)
establishing a right to indemnification under Section 6 of this Agreement
or (iii) obtaining recovery under any directors' and officers' liability or
similar insurance policy or policies purchased or maintained at any time by
the Corporation.
(d) The term "fines" includes any excise tax assessed with respect to
any employee benefit plan
3. Indemnity in Third-Party Proceedings. The Corporation shall indemnify
------------------------------------
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee
was, is, or is threatened to be made to become involved in any manner, including
without limitation as a party or witness, in any Proceeding against any and all
Expenses and any and all judgments, fines, and penalties entered or assessed
against Indemnitee, and any and all amounts reasonably paid or payable in
settlement by Indemnitee, incurred with respect to such Proceeding, but only if
(a) Indemnitee acted in good faith; and
(b) Indemnitee reasonably believed:
(i) in the case of conduct in his or her official capacity, that
such conduct was in the best interests of the Corporation;
(ii) in all other cases, that such conduct was at least not
opposed to the best interests of the Corporation; and
-2-
<PAGE>
(iii) in the case of a Proceeding of a criminal nature, in
addition, that Indemnitee had no reasonable cause to believe that his
or her conduct was unlawful.
Indemnitee's conduct with respect to an employee benefit plan for a purpose he
or she believed in good faith to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of item (ii)
of subsection (b) above. Further, the termination of a proceeding by judgment,
order, settlement, or conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, be determinative that Indemnitee did not meet
the standard of conduct described in this Section 3. Notwithstanding anything
to the contrary in this Section 3, the Corporation shall not indemnify
Indemnitee under this Section 3 in connection with (A) a Proceeding by or in the
right of the Corporation, except for reasonable expenses incurred in connection
with the Proceeding if it is determined that Indemnitee has met the relevant
standard of conduct under this Section 3, or (B) any other Proceeding with
respect to conduct for which Indemnitee was adjudged liable on the basis that a
personal benefit was improperly received by him or her, whether or not involving
action in his or her official capacity as a director and/or officer of the
Corporation.
4. Indemnification of Expenses of Successful Party; No Adverse
-----------------------------------------------------------
Presumption. Notwithstanding any other provisions of this Agreement, to the
- -----------
extent that Indemnitee has been successful on the merits or otherwise, in
defense of any Proceeding or in defense of any claim, issue or matter therein,
including the dismissal of an action without prejudice, Indemnitee shall be
indemnified against all Expenses incurred in connection therewith. The
termination of any Proceeding by judgment, order of court, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption for purposes of any provision of this Agreement
that Indemnitee did not act in good faith, in a manner which he or she
reasonably believed to be in the best interests of the Corporation, or with
respect to any Proceeding of a criminal nature, that such person had reasonable
cause to believe that his or her conduct was unlawful.
5. Advances of Expenses.
--------------------
(a) Before the final disposition of any Proceeding, the Corporation
shall advance funds to pay for or reimburse the reasonable expenses
incurred by Indemnitee, if Indemnitee is a party to that Proceeding because
he or she is a director and/or officer of the Corporation, if Indemnitee
delivers to the Corporation:
(i) A written affirmation of his or her good faith belief that he or
she has met the relevant standard of conduct described in Section 3
above (and in Section 14-2-851 of the Code), or that the Proceeding
involves conduct for which liability has been eliminated under a
provision of the Articles of Incorporation of the Corporation (as
authorized by Section 14-2-202(b)(4) of the Code); and
-3-
<PAGE>
(ii) Indemnitee's written undertaking to repay any funds advanced if
it is ultimately determined that Indemnitee is not entitled to
indemnification under the provisions of Part 5 of Article 8 of the
Code or under these Bylaws. No security for the performance of any
such undertaking shall be required, and any such undertaking shall be
accepted by the Corporation without regard to the financial capacity
of Indemnitee to perform his or her obligations thereunder.
(b) Authorizations under subsection (a) above shall be made:
(i) by the Board of Directors,
(A) when there are two or more Disinterested Directors (as such
term is defined in the Code), by a majority vote of all of the
Disinterested Directors (a majority of whom shall for such
purpose constitute a quorum) or by a majority of the members of a
committee of two or more Disinterested Directors appointed by
such a vote; or
(B) when there are fewer than two Disinterested Directors, then
by the affirmative vote of a majority of directors present, in
the presence of a quorum, unless the vote of a greater number of
directors is required for action by the board (in accordance with
Section 14-2-824(c) of the Code) and in which authorization
directors who do not qualify as Disinterested Directors may
participate; or
(ii) by the shareholders, but the shares owned or voted under the
control of Indemnitee may not be voted on the authorization.
6. Right of Indemnitee to Indemnification Upon Application; Procedure
------------------------------------------------------------------
Upon Application. Without limiting the obligation of the Corporation to
- ----------------
promptly make payments in respect of Expenses in accordance with Section 5, any
indemnification under Sections 3 and 4 shall be made no later than 45 days after
receipt by the Corporation of the written request of Indemnitee, provided a
determination has been made for a specific Proceeding that indemnification of
Indemnitee is permissible under the circumstances because Indemnitee has met the
relevant standard of conduct set forth in Section 3 or 4, as the case may be.
Such determination shall be made within said 45-day period:
(a) if there are two or more Disinterested Directors, by the Board of
Directors by a majority vote of all of the Disinterested Directors (a
majority of whom shall for such purpose constitute a quorum) or by a
majority of the members of a committee of two or more Disinterested
Directors appointed by such a vote;
(b) by special legal counsel selected (i) in the manner described in
subsection (a) of this Section or, (ii) if there are fewer than two
Disinterested Directors, selected by the
-4-
<PAGE>
Board of Directors (in which selection directors who do not qualify as
Disinterested Directors may participate); or
(c) by the shareholders, but shares owned or voted under the control
of Indemnitee may not be voted on the determination.
The right to indemnification or advances as provided by this Agreement shall be
enforceable by Indemnitee in any court of competent jurisdiction. The burden of
proving that indemnification is not appropriate shall be on the Corporation.
Indemnitee's Expenses incurred in connection with successfully establishing his
or her right to indemnification, in whole or in part, in any such Proceeding
shall also be indemnified by the Corporation.
7. Indemnification Hereunder Not Exclusive. The indemnification provided
---------------------------------------
by this Agreement shall not be deemed exclusive of any other rights to which
Indemnitee may be entitled under the Code or the Articles of Incorporation or
Bylaws of the Corporation, any other agreement, any vote of stockholders or
Disinterested Directors, or otherwise, either as to action in his or her
official capacity or as to action in any other capacity. To the extent that
Indemnitee otherwise would have any greater right to indemnification under any
provision of the Code or the Articles of Incorporation or Bylaws of the
Corporation as in effect on the date hereof, Indemnitee will be deemed to have
such greater right hereunder, and, to the extent that any change is made to the
Code (whether by legislative action or judicial decision) or the Articles of
Incorporation or Bylaws of the Corporation, which permits any greater right to
indemnification than that provided under this Agreement as of the date hereof,
Indemnitee will be deemed to have such greater right thereunder. The
Corporation will not adopt any amendment to the Articles of Incorporation or
Bylaws of the Corporation, the effect of which would be to deny, diminish or
encumber Indemnitee's right to indemnification under the Code or the Articles of
Incorporation or Bylaws of the Corporation, or otherwise, as applied to anything
actually or allegedly done or failed to be done in whole or in part prior to the
date upon which the amendment was approved by the Corporation's Board of
Directors, its shareholders, or both, as the case may be.
The rights to indemnification and advancement of expenses under this
Agreement shall continue as to Indemnitee even though he or she may have ceased
to be a director and/or officer, or to serve in any capacity for or on behalf of
the Corporation or any other enterprise, and shall inure to the benefit of the
heirs, executors, administrators or estate of Indemnitee.
8. Partial Indemnification. In the event that Indemnitee is entitled
-----------------------
under any provision of this Agreement to indemnification by the Corporation for
a portion, but less than the entire amount of any Expenses, judgments, fines,
penalties or amounts paid or payable in settlement, the Corporation shall fully
indemnify Indemnitee in accordance with the applicable provisions of this
Agreement for such portion of such Expenses, judgments, fines, penalties, or
amounts paid in settlement.
-5-
<PAGE>
9. Liability Insurance and Funding. To the extent the Corporation
-------------------------------
purchases or maintains any insurance policy or policies providing directors' and
officers' liability or similar insurance, Indemnitee shall be covered by such
policy or policies, in accordance with its or their terms, to the maximum extent
of the coverage available for any director of officer of the Corporation.
Indemnitee's Expenses in connection with successfully obtaining any recovery
under any such directors' and officers' liability insurance or similar policy
shall also be indemnified by the Corporation. The Corporation may, but shall
not be required to, create a trust fund, grant a security interest, or use other
means (including, without limitation, procuring one or more letters of credit)
to ensure the payment of such amounts as may be necessary to satisfy its
obligations to provide indemnification and advance Expenses pursuant to this
Agreement.
10. Subrogation. In the event that the Corporation provides any
-----------
indemnification or makes any payment to Indemnitee in respect of any matter in
respect of which indemnification or the advancement of expenses is provided for
herein (regardless of whether such indemnification or payment is provided or
made under the provisions of this Agreement, the Code, Articles of
Incorporation, or Bylaws of the Corporation, or otherwise), the Corporation
shall be subrogated to the extent of such indemnification or other payment to
all of the related rights of recovery of Indemnitee against other persons or
entities. Indemnitee shall execute all papers reasonably required and shall do
everything that may be reasonably necessary to secure such rights and enable the
Corporation effectively to bring suit to enforce such rights (with all of
Indemnitee's Expenses to be reimbursed by or, at the option of Indemnitee,
advanced by the Corporation).
11. No Duplication of Payments. The Corporation shall not be obligated
--------------------------
under this Agreement to provide any indemnification or make any payment to which
Indemnitee is otherwise entitled hereunder to the extent, but only to the
extent, that such indemnification or payment hereunder would be duplicative of
any amount actually received by Indemnitee pursuant to any insurance policy, the
Code or the Articles of Incorporation or Bylaws of the Corporation, or
otherwise.
12. Saving Clause. If any provision of this Agreement or the application
-------------
of any provision hereof to any circumstance is held to be illegal, invalid, or
otherwise unenforceable, the remainder of this Agreement and the application of
such provision to any other circumstance shall not be affected, and the
provision so held to be illegal, invalid, or otherwise unenforceable shall be
reformed to the extent (but only to the extent) necessary to make it legal,
valid, and enforceable.
13. Notice. Indemnitee shall give to the Corporation notice in writing as
------
soon as practicable of any claim made against him or her for which
indemnification will or could be sought under this Agreement; provided, however,
that any failure to give such notice to the Corporation will relieve the
Corporation from its obligations hereunder only if, and to the extent that, such
failure results in the forfeiture of substantial rights and defenses. Notice to
the Corporation shall be directed to the Corporation (to the attention of the
President) at its principal
-6-
<PAGE>
executive office or such other address as the Corporation shall designate in
writing to Indemnitee. Notice shall be deemed received when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally
confirmed), or three calendar days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid, or one
business day after having been sent for next-day delivery by a nationally
recognized overnight courier. In addition, Indemnitee shall give the
Corporation such information and cooperation as it may reasonably require.
14. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute one and the same instrument.
15. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of Georgia, without giving effect to the
principles of conflicts of law thereof.
16. Successors. This Agreement shall be binding upon the Corporation and
----------
its successors, including without limitation any person acquiring directly or
indirectly all or substantially all of the business or assets of the Corporation
whether by purchase, merger, consolidation, reorganization or otherwise (and
such successor will thereafter be deemed the "Corporation" for purposes of this
Agreement), but will not otherwise be assignable, transferable or delegatable by
the Corporation. The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization, or otherwise) to
all or substantially all of the business or assets of the Corporation, to assume
and agree in writing to perform this Agreement, expressly for the benefit of
Indemnitee, in the same manner and to the same extent the Corporation would be
required to perform if no such succession had taken place.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and sealed as of the date and year first above written.
LOGILITY, INC.
By:___________________________________
Title:__________________________________
[SEAL]
INDEMNITEE:
________________________________[SEAL]
-7-
<PAGE>
EXHIBIT 10.3
SUBSIDIARY FORMATION AGREEMENT
------------------------------
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
<PAGE>
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 nonpatentable and whether or not reduced to
practice, know-how, manufacturing and product processes and techniques, research
and development information, copyrightable 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 embodiments 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 choses 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.
2
<PAGE>
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."
4. 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 and marketable title to the Logility Assets and put Logility in
actual possession and operating control of the Business of Logility.
5. Representations of the ASI Entities. The ASI Entities hereby represent
-----------------------------------
and warrant to Logility as of the Effective Date that:
5.1 Corporate Existence and Power. Each of the ASI Entities is a
-----------------------------
corporation or other limited liability entity duly organized, validly existing,
and in good standing under the laws of its respective jurisdiction of
incorporation.
5.2 Corporate Authorizations. The execution, delivery and performance of
------------------------
this Agreement by each of the ASI Entities and the consummation of the
transactions contemplated hereby by each of the ASI Entities are within its
respective corporate powers and have been duly authorized by all necessary
corporate action of the part of each of the ASI Entities. This Agreement
constitutes the valid and binding agreement of each of the ASI Entities,
enforceable against each of the ASI Entities in accordance with its terms.
5.3 Title to the Logility Assets. Each ASI Entity has and is transferring
----------------------------
to Logility good and marketable title to all of the Logility Assets to be
transferred by it under this Agreement,
3
<PAGE>
free and clear of all mortgages, liens, pledges, security interests, charges,
claims, restrictions, and other encumbrances or defects of title of any nature.
5.4 Intellectual Property Rights. The Intellectual Property constitutes
----------------------------
all rights and technology necessary to conduct the Business of Logility.
6. Employees. Logility will offer employment to such employees of the ASI
---------
Entities as the officers of the ASI Entities and Logility deem appropriate. The
compensation levels, benefit programs, and terms and conditions of employment
offered to such employees shall be determined by Logility in accordance with
Logility's plans for the operation of the Business of Logility. Logility shall
adopt and provide for its employees such insurance plans, benefit plans,
vacation and severance policies, and other benefits as are appropriate, in
Logility's judgment, and shall not be required to adopt or assume any of the
plans, policies, or agreements of any of the ASI Entities other than those which
Logility elects to assume.
7. Consent of Third Parties. This Agreement shall not constitute an
------------------------
agreement to assign to Logility any interest in any instrument, contract, lease,
permit, or other agreement or arrangement or any claim, right, or benefit
arising thereunder or resulting therefrom, if an assignment or agreement to
assign without the consent of a third party would constitute a breach or a
violation thereof or affect adversely the rights of any of the ASI Entities or
Logility thereunder. If a consent of a third party that is required in order to
assign any such interest is not obtained prior to the Closing Date, or if an
attempted assignment would be ineffective or would adversely affect the ability
of any of the ASI Entities to convey its interest to Logility, the ASI Entities
will cooperate with Logility in any lawful and reasonable arrangement to provide
that Logility shall receive the interest and economic benefit of the ASI
Entities in the benefits under any such instrument, contract, lease, permit, or
other agreement or arrangement, including performance by the ASI Entities as
agents, except where prohibited by law; and any transfer or assignment to
Logility or by any of the ASI Entities of any interest under any such
instrument, contract, lease, permit, or other agreement or arrangement that
requires the consent of a third party shall be made subject to such consent or
approval being obtained.
8. Indemnification. Logility hereby agrees to indemnify the ASI Entities
---------------
from and against any and all claims, demands, or actions arising out of any of
the Assumed Liabilities, unless any such claim, demand, or action arose out of
the negligent or willful act of any ASI Entity or any breach of an ASI Entity's
obligations hereunder or under any Assumed Liability.
.
9. Further Assurances. From time to time, upon request by either party and
------------------
without further consideration, the parties shall execute and deliver such
further instruments and take such further actions as may be reasonably required
in order to carry out the purposes and intents of this Agreement.
4
<PAGE>
WHEREFORE, the parties hereto have caused this Agreement to be executed and
delivered as of the date first above written.
ASI ENTITIES:
BY: /s/ James C. Edenfield
--------------------------------
JAMES C. EDENFIELD, PRESIDENT OF AMERICAN
SOFTWARE, INC., PRESIDENT OF AMERICAN
SOFTWARE USA, INC., DIRECTOR OF AMERICAN
SOFTWARE (UK), LTD., DIRECTOR OF AMERICAN
SOFTWARE FRANCE S.A., DIRECTOR OF
AMERICAN SOFTWARE ASIA PACIFIC PTE. LTD.,
DIRECTOR OF AMERICAN SOFTWARE (JAPAN) KK,
DIRECTOR OF AMERICAN SOFTWARE (AUSTRALIA)
PTY. LTD.
LOGILITY, INC.
BY: /s/ J. Michael Edenfield
---------------------------------
J. MICHAEL EDENFIELD, PRESIDENT
5
<PAGE>
EXHIBIT A
---------
All ASI's Supply Chain Planning client server modules, including, but
not limited to:
. Demand Planning
. Inventory Planning
. Event Planning
. Replenishment Planning
. Manufacturing Planning
. Demand Chain Voyager
. Supply Chain Voyager
6
<PAGE>
EXHIBIT D
---------
STATE OF GEORGIA
COUNTY OF FULTON
BILL OF SALE
------------
KNOW ALL MEN BY THESE PRESENTS:
FOR AND IN CONSIDERATION of Ten and No/100 Dollars ($10.00) and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned AMERICAN SOFTWARE, INC., a Georgia corporation,
AMERICAN SOFTWARE USA, INC., a Georgia corporation, AMERICAN SOFTWARE (UK) LTD.,
an entity existing under the laws of the United Kingdom, AMERICAN SOFTWARE
FRANCE S.A., an entity existing under the laws of France, AMERICAN SOFTWARE ASIA
PACIFIC PTE. LTD., an entity existing under the laws of Singapore, AMERICAN
SOFTWARE (JAPAN) KK, an entity existing under the laws of Japan, and AMERICAN
SOFTWARE (AUSTRALIA) PTY. LTD., an entity existing under the laws of Australia
(collectively, "Sellers"), hereby do sell, transfer, assign, bargain, convey and
deliver unto LOGILITY, INC., a Georgia corporation ("Buyer"), its successors and
assigns, all of Sellers' right, title and interest in and to all of the
"Logility Assets", as such term is defined in that certain Subsidiary Formation
Agreement between Sellers and Buyer, dated January 23, 1997 (the "Subsidiary
Formation Agreement"), the terms and provisions of which are incorporated herein
by reference.
Sellers, on behalf of their successors, successors-in-title and assigns,
represent, warrant and agree that they are the true, lawful and sole owners of
the Logility Assets hereby sold, transferred, assigned, bargained, conveyed and
delivered, subject to no security interests, liens, restrictions, encumbrances,
leases, easements or claims or rights of any third parties whatsoever; that they
have the full, complete and lawful right, power and authority to execute this
Bill of Sale and to so contribute, transfer, assign, bargain, convey and deliver
the Logility Assets; that the right, title and interest in the Logility Assets
hereby sold, transferred, assigned, bargained, conveyed and delivered constitute
good and marketable title to the Logility Assets, free and clear of all security
interests, liens, restrictions, encumbrances, leases, easements and claims or
rights of third parties of every kind and nature whatsoever; and that no other
person, firm, corporation or entity of any kind has any claim to or interest in
the Logility Assets.
TO HAVE AND TO HOLD the Logility Assets unto the Buyer, its successors,
successors-in-title and assigns to their use and benefit forever.
7
<PAGE>
Sellers will from time to time and at all reasonable times hereafter, upon
every request of the Buyer, do, execute, acknowledge and deliver or cause to be
done, executed, acknowledged and delivered all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances as may be
required by Buyer in order to more effectively carry out the intent of this Bill
of Sale and to transfer the Logility Assets to Buyer.
Notwithstanding any other language contained in this Bill of Sale, the
representations, warranties and covenants of Sellers contained in the Subsidiary
Formation Agreement, relating to the Logility Assets, are incorporated herein by
reference. If there is any conflict as to the terms of this Bill of Sale and
the Subsidiary Agreement, the terms of the Subsidiary Agreement shall prevail.
IN WITNESS WHEREOF, Sellers have caused this Bill of Sale to be executed by
their duly authorized officers this 23rd day of January, 1997.
ASI ENTITIES:
------------
BY: /s/
--------------------------------------------------
JAMES C. EDENFIELD, PRESIDENT OF AMERICAN SOFTWARE,
INC., PRESIDENT OF AMERICAN SOFTWARE USA, INC.,
DIRECTOR OF AMERICAN SOFTWARE (UK), LTD., DIRECTOR OF
AMERICAN SOFTWARE FRANCE S.A., DIRECTOR OF AMERICAN
SOFTWARE ASIA PACIFIC PTE. LTD., DIRECTOR OF AMERICAN
SOFTWARE (JAPAN) KK, DIRECTOR OF AMERICAN SOFTWARE
(AUSTRALIA) PTY. LTD.
8
<PAGE>
AMENDMENT TO
SUBSIDIARY FORMATION AGREEMENT
------------------------------
This Amendment to Subsidiary Formation Agreement (the "Amendment") is
made and entered into as of the 1st day of August, 1997 (the "WarehousePRO
Effective Date") 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
collectively referred to herein as the "ASI Entities"), and LOGILITY, INC., a
Georgia corporation ("Logility").
WHEREAS, the ASI Entities and Logility have made and entered into that
certain Subsidiary Formation Agreement (the "Agreement"), dated as of January
23, 1997, whereby the ASI Entities have transferred and assigned to Logility,
and Logility has acquired and assumed, certain assets and liabilities of the ASI
Entities relating to the Business of Logility (as such term is defined in the
Agreement); and
WHEREAS, ASI Entities now desire to transfer and assign to Logility, and
Logility desires to acquire and assume, as of the WarehousePRO Effective Date,
certain assets and liabilities of the ASI Entities relating to the WarehousePRO
warehouse management software system ("WarehousePRO System"), and the ASI
Entities and Logility desire to amend the Agreement to provide that the Business
of Logility, and certain rights and obligations of the parties with regard
thereto, shall expressly include the WarehousePRO System.
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 to amend the Agreement,
effective as of the WarehousePRO Effective Date as follows:
1. The term "Business of Logility", as set forth in Paragraph 1(b) of the
Agreement, is hereby amended to include the business and operations of the ASI
Entities, as currently conducted and proposed to be conducted, in connection
with the WarehousePRO System, and all activities associated therewith.
2. The term "Logility Assets", as set forth in Paragraph 1(e) of the
Agreement, shall include all of the assets used or useful in and to the
WarehousePRO System, 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
9
<PAGE>
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 choses 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-A 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-A attached hereto.
-------------
3. Transfer of WarehousePRO System to Logility. The ASI Entities hereby
-------------------------------------------
assign, transfer, convey, and deliver to Logility the WarehousePRO System. In
consideration for the conveyance of the WarehousePRO System, Logility shall
assume and agree to pay, perform, and discharge all debts, obligations,
contracts, and liabilities of the ASI Entities under the Contracts related to
the WarehousePRO System as of the WarehousePRO Effective Date, together with
such other contracts, agreements, leases, licenses, commitments, sales and
purchase orders, and other instruments relating to the Business of Logility, as
such term is amended hereby, as may be agreed upon from time to time by the
parties. All such liabilities shall hereinafter be included in the term
"Assumed Liabilities", as defined in Paragraph 3 of the Agreement.
4. Instruments of Conveyance and Transfer. Concurrently with the
--------------------------------------
execution of this Agreement, the ASI Entities have executed and delivered to
Logility a Bill of Sale in the form of Exhibit A-1 attached hereto.
-----------
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 and marketable title to the WarehousePRO
System and put Logility in actual possession and operating control of the
Business of Logility, as such term is amended hereby.
5. Representations of the ASI Entities. The ASI Entities hereby affirm
-----------------------------------
that all representations and warranties made to Logility in the Agreement are
true as of the WarehousePRO Effective Date with regard to the WarehousePRO
System.
6. Consent of Third Parties. This Agreement shall not constitute an
------------------------
agreement to assign to Logility any interest in any instrument, contract, lease,
permit, or other agreement or arrangement or any claim, right, or benefit
arising thereunder or resulting therefrom, if an assignment or agreement to
assign without the consent of a third party would constitute a breach or a
violation thereof or affect adversely the rights of any of the ASI Entities or
Logility thereunder. If an attempted assignment would be ineffective or would
adversely affect the ability of any of the ASI Entities to convey its interest
to Logility, the ASI Entities will cooperate with Logility in any lawful and
reasonable arrangement to provide that Logility shall receive the interest and
economic benefit
10
<PAGE>
of the ASI Entities in the benefits under any such instrument, contract, lease,
permit, or other agreement or arrangement, including performance by the ASI
Entities as agents, except where prohibited by law; and any transfer or
assignment to Logility or by any of the ASI Entities of any interest under any
such instrument, contract, lease, permit, or other agreement or arrangement that
requires the consent of a third party shall be made subject to such consent or
approval being obtained.
7. Further Assurances. From time to time, upon request by either party and
------------------
without further consideration, the parties shall execute and deliver such
further instruments and take such further actions as may be reasonably required
in order to carry out the purposes and intents of this Agreement.
8. Indemnification. Logility hereby agrees to indemnify the ASI Entities
---------------
from and against any and all claims, demands, or actions arising out of any of
the Assumed Liabilities, as such term is amended hereby, unless any such claim,
demand, or action arose out of the negligent or willful act of any ASI Entity or
any breach of an ASI Entity's obligations hereunder or under any Assumed
Liability, as such term is amended hereby.
9. Ratification of Agreement; Past Acts. Except as expressly modified by
------------------------------------
this Amendment, the terms and conditions of the Agreement are hereby ratified
and affirmed. Additionally, Logility hereby ratifies and affirms any actions
taken by Logility with regard to the WarehousePRO System prior to the
WarehousePRO Effective Date as if such actions were taken as of the WarehousePRO
Effective Date.
WHEREFORE, the parties hereto have caused this Amendment to be executed and
delivered as of the date first above written.
ASI ENTITIES:
BY: /s/ James C. Edenfield
------------------------------------------
JAMES C. EDENFIELD, PRESIDENT OF AMERICAN
SOFTWARE, INC., PRESIDENT OF AMERICAN SOFTWARE
USA, INC., DIRECTOR OF AMERICAN SOFTWARE (UK),
LTD., DIRECTOR OF AMERICAN SOFTWARE FRANCE S.A.,
DIRECTOR OF AMERICAN SOFTWARE ASIA PACIFIC PTE.
LTD., DIRECTOR OF AMERICAN SOFTWARE (JAPAN) KK,
DIRECTOR OF AMERICAN SOFTWARE (AUSTRALIA) PTY.
LTD.
LOGILITY, INC.
BY: /s/ J. Michael Edenfield
------------------------------------------
J. MICHAEL EDENFIELD, PRESIDENT
11
<PAGE>
EXHIBIT A-1
STATE OF GEORGIA
COUNTY OF FULTON
BILL OF SALE
------------
KNOW ALL MEN BY THESE PRESENTS:
FOR AND IN CONSIDERATION of Ten and No/100 Dollars ($10.00) and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned AMERICAN SOFTWARE, INC., a Georgia corporation,
AMERICAN SOFTWARE USA, INC., a Georgia corporation, AMERICAN SOFTWARE (UK) LTD.,
an entity existing under the laws of the United Kingdom, AMERICAN SOFTWARE
FRANCE S.A., an entity existing under the laws of France, AMERICAN SOFTWARE ASIA
PACIFIC PTE. LTD., an entity existing under the laws of Singapore, AMERICAN
SOFTWARE (JAPAN) KK, an entity existing under the laws of Japan, and AMERICAN
SOFTWARE (AUSTRALIA) PTY. LTD., an entity existing under the laws of Australia
(collectively, "Sellers"), hereby do sell, transfer, assign, bargain, convey and
deliver unto LOGILITY, INC., a Georgia corporation ("Buyer"), its successors and
assigns, all of Sellers' right, title and interest in and to all of the
"Logility Assets", as such term is defined in that certain Subsidiary Formation
Agreement between Sellers and Buyer, dated January 23, 1997, as amended by that
certain Amendment to Subsidiary Formation Agreement, dated of even date herewith
(the "Subsidiary Formation Agreement"), the terms and provisions of which are
incorporated herein by reference.
Sellers, on behalf of their successors, successors-in-title and assigns,
represent, warrant and agree that they are the true, lawful and sole owners of
the Logility Assets hereby sold, transferred, assigned, bargained, conveyed and
delivered, subject to no security interests, liens, restrictions, encumbrances,
leases, easements or claims or rights of any third parties whatsoever; that they
have the full, complete and lawful right, power and authority to execute this
Bill of Sale and to so contribute, transfer, assign, bargain, convey and deliver
the Logility Assets; that the right, title and interest in the Logility Assets
hereby sold, transferred, assigned, bargained, conveyed and delivered constitute
good and marketable title to the Logility Assets, free and clear of all security
interests, liens, restrictions, encumbrances, leases, easements and claims or
rights of third parties of every kind and nature whatsoever; and that no other
person, firm, corporation or entity of any kind has any claim to or interest in
the Logility Assets.
TO HAVE AND TO HOLD the Logility Assets unto the Buyer, its successors,
successors-in-title and assigns to their use and benefit forever.
Sellers will from time to time and at all reasonable times hereafter, upon
every request of the Buyer, do, execute, acknowledge and deliver or cause to be
done, executed, acknowledged and delivered all such further acts, deeds,
12
<PAGE>
assignments, transfers, conveyances, powers of attorney and assurances as may be
required by Buyer in order to more effectively carry out the intent of this Bill
of Sale and to transfer the Logility Assets to Buyer.
Notwithstanding any other language contained in this Bill of Sale, the
representations, warranties and covenants of Sellers contained in the Subsidiary
Formation Agreement, relating to the Logility Assets, are incorporated herein by
reference. If there is any conflict as to the terms of this Bill of Sale and
the Subsidiary Agreement, the terms of the Subsidiary Agreement shall prevail.
IN WITNESS WHEREOF, Sellers have caused this Bill of Sale to be executed by
their duly authorized officers this 1st day of August, 1997.
ASI ENTITIES:
------------
BY: /S/
-----------------------------
JAMES C. EDENFIELD, PRESIDENT OF AMERICAN
SOFTWARE, INC., PRESIDENT OF AMERICAN
SOFTWARE USA, INC., DIRECTOR OF AMERICAN
SOFTWARE (UK), LTD., DIRECTOR OF AMERICAN
SOFTWARE FRANCE S.A., DIRECTOR OF AMERICAN
SOFTWARE ASIA PACIFIC PTE. LTD, DIRECTOR
OF AMERICAN SOFTWARE (JAPAN) KK, DIRECTOR
OF AMERICAN SOFTWARE (AUSTRALIA) PTY. LTD.
13
<PAGE>
EXHIBIT 10.4
AGREEMENT AND PLAN OF MERGER OF
DISTRIBUTION SCIENCES, INC.
WITH AND INTO
LOGILITY, INC.
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of the 5th day of August, 1997 by and between LOGILITY, INC., a Georgia
corporation ("Logility"), and DISTRIBUTION SCIENCES, INC., a Georgia corporation
("DSI") (Logility and DSI being hereinafter sometimes collectively referred to
as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, Logility is a corporation organized under the laws of the State
of Georgia with its principal office located at 470 East Paces Ferry Road,
Atlanta, Georgia 30305;
WHEREAS, Logility has authorized capital stock consisting of 20,000,000
shares of common stock, having no par value (the "Logility Common Stock"), of
which 1,000 shares are issued and outstanding;
WHEREAS, DSI is a corporation organized under the laws of the State of
Georgia with its principal office located at 470 East Paces Ferry Road, Atlanta,
Georgia 30305;
WHEREAS, DSI has authorized capital stock consisting of 10,000 shares of
common stock, $ .10 par value (the "DSI Common Stock"), of which 500 shares are
issued and outstanding;
WHEREAS, the laws of the State of Georgia permit a merger of the
Constituent Corporations;
WHEREAS, all of the issued and outstanding shares of DSI are held by
American Software USA, Inc., a Georgia corporation ("USA");
WHEREAS, all of the issued and outstanding shares of USA and of Logility
are held by American Software, Inc., a Georgia corporation ("ASI"); and
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have determined that it is advisable and for the benefit of each of the
Constituent Corporations and of USA and ASI that DSI be merged with and into
Logility on the terms and conditions hereinafter set forth, and by resolutions
duly adopted have adopted the terms and conditions of this Agreement; and
directed that the proposed merger be submitted to USA and ASI, as the sole
shareholders of DSI and Logility, respectively, and recommended to each such
shareholder approval of the terms and conditions hereinafter set forth.
<PAGE>
NOW, THEREFORE, for and in consideration of the premises and of the
mutual agreements, promises and covenants contained herein, it is agreed by and
between the parties hereto, subject to the conditions hereinafter set forth and
in accordance with the Georgia Business Corporation Code (the "Code"), that DSI
shall be and hereby is, at the Effective Date (as hereinafter defined), merged
with and into Logility (with Logility subsequent to such merger being
hereinafter sometimes referred to as the "Surviving Corporation"), with the
corporate existence of the Surviving Corporation to be continued under the name
"Logility, Inc.", and that the terms and conditions of the merger hereby agreed
upon, the mode of carrying the same into effect, and the manner of converting
shares are and shall be as follows:
Section 1
Merger
1.1. On the Effective Date, DSI shall be merged with and into Logility,
Logility shall continue in existence and the merger shall in all respects have
the effect provided for in Section 14-2-1106 of the Georgia Business Corporation
Code.
1.2. Without limiting the foregoing, on and after the Effective Date, the
separate existence of DSI shall cease, and, in accordance with the terms of this
Agreement, the title to all real estate and other property owned by each of the
Constituent Corporations shall be vested in the Surviving Corporation without
reversion or impairment (including but not limited to the rights of DSI under
those contracts listed on Schedule 1 attached hereto); the Surviving Corporation
shall have all liabilities of each of the Constituent Corporations; and any
proceeding pending against any Constituent Corporation may be continued as if
the merger did not occur or the Surviving Corporation may be substituted in its
place.
1.3. Prior to and from and after the Effective Date, the Constituent
Corporations shall take all such actions as shall be necessary or appropriate in
order to effectuate the merger. If at any time the Surviving Corporation shall
consider or be advised that any further assignments or assurances in law or any
other actions are necessary, appropriate, or desirable to vest in the Surviving
Corporation, according to the terms hereof, the title to any property or rights
of DSI, the last acting officers of DSI, or the corresponding officers of the
Surviving Corporation, shall and will execute and make all such proper
assignments and assurances and take all action necessary and proper to vest
title in such property or rights in the Surviving Corporation, and otherwise to
carry out the purposes of this Agreement.
Section 2
Terms of Transaction
Upon the Effective Date:
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(a) Given the sole ownership of USA and Logility by ASI, ASI deems it
advisable that each share of DSI Common Stock issued and outstanding immediately
prior to the Effective Date (all of which are owned by USA) shall, by virtue of
the merger and without any action on the part of the holder thereof, thereupon
be cancelled rather than converted into shares of Logility common stock so that
sole ownership of Logility remains in ASI, as parent of both USA and Logility.
(b) Each share of Logility Common Stock outstanding and owned of record
by the ASI immediately prior to the Effective Date shall continue to represent
one issued share of Common Stock of Logility, the Surviving Corporation.
Section 3
Directors and Officers
The persons who are directors and officers of Logility immediately prior
to the Effective Date shall continue as the directors and officers of the
Surviving Corporation and shall continue to hold office as provided in the
bylaws of the Surviving Corporation.
Section 4
Articles of Incorporation and Bylaws
4.1. From and after the Effective Date, the Articles of Incorporation of
Logility, as in effect at such date, shall be the Articles of Incorporation of
the Surviving Corporation and shall continue in effect until the same shall be
altered, amended, or repealed as therein provided or as provided by law.
4.2. From and after the Effective Date, the bylaws of Logility, in effect
at such date, shall be the bylaws of the Surviving Corporation and shall
continue in effect until the same shall be altered, amended, or repealed as
therein provided or as provided by law.
Section 5
Shareholder Approval; Effectiveness of Merger
This Agreement is hereby submitted for approval to each of ASI and USA,
as the sole shareholders of each of Logility and DSI, respectively, as provided
by the Code. Subject to the requisite consent of ASI and USA, a Certificate of
Merger incorporating the terms of this Agreement, shall be filed and recorded in
accordance with the laws of the State of Georgia as soon as practicable after
the approval by ASI and USA. The Board of Directors and the officers of the
Constituent Corporations are authorized, empowered and directed to do any and
all acts and things, and to make, execute, deliver, file, and record any and all
instruments, papers, and documents which shall be or become necessary, proper,
or convenient to carry out or put into
<PAGE>
effect any of the provisions of this Agreement or of the merger herein provided
for. The merger shall become effective on the date on which a Certificate of
Merger referencing this Agreement is filed by the Secretary of State of Georgia
(said date is herein referred to as the "Effective Date").
Section 6
Miscellaneous
6.1. This Agreement may be executed in counterparts, each of which when
so executed shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
6.2. This Agreement and the legal relations between the parties hereto
shall be governed by and construed in accordance with the laws of the State of
Georgia.
IN WITNESS WHEREOF, the Constituent Corporations have each caused this
Agreement to be executed, their respective corporate seals to be affixed and the
foregoing attested, all by their respective duly authorized officers, as of the
date hereinabove first written.
LOGILITY, INC.
By: /s/
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Its:
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Attest:
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Its:
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[SEAL]
[SIGNATURES CONTINUED ON NEXT PAGE]
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DISTRIBUTION SCIENCES, INC.
By: /s/
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Its:
-------------------------------
Attest:
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Its:
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[SEAL]
Approved and Consented to by:
American Software, Inc. as sole shareholder of Logility, Inc.
By: /s/
---------------------------------
Its:
---------------------------------
Attest:
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Its:
---------------------------------
[SEAL]
American Software USA, Inc. as sole shareholder of Distribution Sciences, Inc.
By: /s/
---------------------------------
Its:
---------------------------------
Attest:
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Its:
---------------------------------
[SEAL]
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EXHIBIT 10.5
SERVICES AGREEMENT
THIS SERVICES AGREEMENT is made and entered into as of the 1st day of
August, 1997, by and between AMERICAN SOFTWARE, INC., a Georgia corporation
("ASI"), and LOGILITY, INC., a Georgia corporation ("Logility").
WITNESSETH:
WHEREAS, Logility and certain ASI Entities (as defined below) have entered
into that certain Subsidiary Formation Agreement, dated of even date herewith,
pursuant to which those ASI Entities have agreed to transfer and assign to
Logility, and Logility has agreed to acquire and assume from those ASI Entities,
certain tangible and intangible property and assets of those ASI Entities
relating to the Business of Logility (as such term is defined in the Subsidiary
Formation Agreement);
WHEREAS, the ASI Entities have the resources, staff, and expertise to
support Logility in the Business of Logility until such time as Logility has the
internal staff and expertise necessary to operate independently; and
WHEREAS, on the terms and subject to the conditions set forth herein,
Logility desires to retain the ASI Entities as independent contractors to
provide, directly or indirectly, certain administrative, financial, management,
and other services to Logility and the Logility Subsidiaries (as defined below);
and
WHEREAS, on the terms and subject to the conditions set forth herein, ASI
desires to provide, directly or indirectly, such services to Logility and its
Subsidiaries.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, ASI and Logility, for themselves,
and their respective successors and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. As used in this Agreement, the following terms will have
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the following meanings:
(a) "Actions" has the meaning ascribed thereto in Section 4.04.
(b) "Agreement" means this Services Agreement as it may be amended and
supplemented from time to time in accordance with the terms hereof.
(c) "ASI" has the meaning ascribed thereto in the preamble hereto.
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(d) "ASI Entities" means ASI and its Subsidiaries (excluding the Logility
Entities, unless otherwise required by the context), and an "ASI Entity" shall
mean any of the ASI Entities.
(e) "ASI Indemnified Person" has the meaning ascribed thereto in Section
4.03.
(f) "ASI Plans" has the meaning ascribed thereto in Section 3.05.
(g) "Benefit Billing" has the meaning ascribed thereto in Section 3.01.
(h) "Benefits Services" has the meaning ascribed thereto in Section 3.05.
(i) "Closing Date" means the date of the closing of the initial sale of
Common Stock in the Initial Public Offering.
(j) "Common Stock" means the issued and outstanding shares of Common Stock,
having no par value, of Logility, and any other class of Logility capital stock
representing the right to vote generally for the election of directors.
(k) "Confidential Information" has the meaning ascribed thereto in Section
7.08.
(l) "Cost Plus Billing" has the meaning ascribed thereto in Section 3.01.
(m) "Customary Billing" has the meaning ascribed thereto in Section 3.01.
(n) "Employee Welfare Plans" has the meaning ascribed thereto in Section
4.02.
(o) "ERISA" means the Employee Retirement Income Security Act of 1974 and
the regulations promulgated and rulings issued thereunder, as amended from time
to time.
(p) "Initial Public Offering" means the issuance of shares of Common Stock
to the public in an offering registered under the Securities Act of 1933, as
amended.
(q) "Logility" has the meaning ascribed thereto in the preamble hereto.
(r) "Logility Entities" means Logility and its Subsidiaries (if and when
any), and a "Logility Entity" shall mean any of the Logility Entities.
(s) "Logility Indemnified Person" has the meaning ascribed thereto in
Section 4.05.
(t) "Pass-Through Billing" has the meaning ascribed thereto in Section
3.01.
(u) "Payment Date" has the meaning ascribed thereto in Section 3.06(b).
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(v) "Person" means any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, government (and
any department or agency thereof), or other entity.
(w) "Schedule I" means the first schedule attached hereto which lists the
Services (other than Services relating to certain commercial services and to
employee plan and benefit matters) to be provided by ASI to Logility and sets
forth the related billing methodology.
(x) "Schedule II" means the second schedule attached hereto which describes
certain commercial services that may be provided by ASI to Logility and sets
forth the related billing methodology.
(y) "Schedule III" means the third schedule attached hereto which lists the
Services relating to employee plans and benefit arrangements to be provided by
ASI to Logility and sets forth the related billing methodology.
(z) "Schedules" has the meaning ascribed thereto in Section 3.01.
(aa) "Service Costs" has the meaning ascribed thereto in Section 3.01.
(bb) "Services" has the meaning ascribed thereto in Section 2.01.
(cc) "Subsidiary" means, as to any Person, any corporation, association,
partnership, joint venture, or other business entity of which more than 50% of
the voting capital stock or other voting ownership interests is owned or
controlled directly or indirectly by such Person or by one or more of the
Subsidiaries of such Person or by a combination thereof. Subsidiary, when used
with respect to ASI or Logility, shall also include any other entity affiliated
with ASI and Logility, as the case may be, that ASI and Logility may hereafter
agree in writing shall be treated as a "Subsidiary" for the purposes of this
Agreement.
1.02. Internal References. Unless the context indicates otherwise, references
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to Articles, Sections, and paragraphs shall refer to the corresponding
articles, sections, and paragraphs in this Agreement, and references to the
parties shall mean the parties to this Agreement.
ARTICLE II
PURCHASE AND SALE OF SERVICES
Section 2.01. Purchase and Sale of Services.
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(a) On the terms and subject to the conditions of this Agreement and in
consideration of the Service Costs, ASI agrees to provide to Logility, or to
procure for the provision to Logility, and Logility agrees to purchase from ASI,
the services described in Schedules I, II, and III (the "Services"). Unless
otherwise specifically agreed by ASI and Logility, the Services to be provided
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or procured by ASI hereunder shall be substantially similar in scope, quality,
and nature to those provided to, or procured on behalf of, Logility prior to the
Closing Date.
(b) It is understood that (i) the Services to be provided to Logility under
this Agreement will, at Logility's request, be provided to Subsidiaries of
Logility, and (ii) ASI may satisfy its obligation to provide or procure Services
hereunder by causing one or more of its Subsidiaries to provide or procure such
Services. With respect to Services provided to, or procured on behalf of, any
Subsidiary of Logility, Logility agrees to pay on behalf of such Subsidiary all
amounts payable by or in respect of such Services.
Section 2.02. Additional Services. In addition to the Services to be provided
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or procured by ASI pursuant to Section 2.01, ASI from time to time may provide
additional services (including services not provided by ASI to Logility prior to
the Closing Date) to Logility; provided that the scope of any such services, as
well as the term, costs, and other terms and conditions applicable to such
services, shall be as mutually agreed in writing by ASI and Logility. Upon such
agreement, all such services shall be included in the term "Services" for
purposes of this Agreement.
ARTICLE III
SERVICE COSTS; OTHER CHARGES
Section 3.01. Service Costs Generally.
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(a) Schedules I, II, and III hereto (collectively, the "Schedules")
indicate, with respect to each Service listed therein, whether the costs to be
charged to Logility for such Service or program are determined by (i) the
customary billing method ("Customary Billing"), (ii) the pass-through billing
method ("Pass-Through Billing"), (iii) the cost-plus-fixed-fee billing method
("Cost Plus Billing"), or (iv) a calculation of certain costs relating to
employee benefit plans and benefit arrangements ("Benefit Billing"). The
Customary Billing, Pass-Through Billing, Cost Plus Billing, and Benefit Billing
methods applicable to the Services provided to Logility are collectively
referred to herein as the "Service Costs". Logility agrees to pay to ASI in the
manner set forth in Section 3.06 the Service Costs applicable to each of the
Services provided by ASI.
(b) As provided herein, ASI shall permit eligible Logility employees to
participate in certain of the ASI Plans. In addition to reimbursing ASI for the
Services as set forth herein, Logility shall reimburse ASI for ASI's costs
(including any contributions and premium costs and including certain third-party
expenses and allocations of certain ASI personnel expenses), subject to Section
3.05 hereof, relating to participation by Logility employees in the ASI Plans.
It is the express intent of the parties that Service Costs relating to the
administration of Logility employee plans and the performance of related
Services will not exceed reasonable compensation for such Services as defined in
29 CFR (S) 2550.408c-2.
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Section 3.02. Customary Billing. The costs of Services determined by the
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Customary Billing method shall be comparable to the costs for comparable
services charged from time to time to other businesses and Subsidiaries operated
by an ASI Entity.
Section 3.03. Pass-Through Billing. The costs of Services determined by the
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Pass-Through Billing method shall be equal to the third-party costs and expenses
incurred by any ASI Entity on behalf of any Logility Entity. If an ASI Entity
incurs costs or expenses on behalf of any Logility Entity as well as other
businesses operated by such ASI Entity, the ASI Entity will allocate any such
costs or expenses in good faith between the various businesses on behalf of
which such costs or expenses were incurred as such ASI Entity shall determine in
the exercise of its reasonable judgment. ASI shall apply usual and customary
accounting conventions in making such allocations, and ASI or its agents shall
keep and maintain such books and records as may be reasonably necessary to make
such allocations. ASI shall make copies of such books and records available to
Logility upon request and with reasonable notice.
Section 3.04. Cost Plus Billing. The costs of Services determined by the Cost
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Plus Billing method, as set forth on Schedule II, shall be equal to the costs
and expenses incurred by any ASI Entity on behalf of any Logility Entity, plus a
fixed percentage of such costs and expenses to be negotiated by the parties in
good faith. If an ASI Entity incurs costs or expenses on behalf of any Logility
Entity as well as other businesses operated by such ASI Entity, the ASI Entity
will allocate any such costs or expenses in good faith between the various
businesses on behalf of which such costs or expenses were incurred as the ASI
Entity shall determine in the exercise of its reasonable judgment. ASI shall
apply usual and customary accounting conventions in making such allocations, and
ASI or its agents shall keep and maintain such books and records as may be
reasonably necessary to make such allocations. ASI shall make copies of such
books and records available to Logility upon request and with reasonable notice.
Section 3.05. Benefit Billing.
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(a) Prior to the Closing Date, certain employees of Logility participated
in certain benefit plans sponsored by ASI. On and after the Closing Date,
Logility employees shall continue to be eligible to participate in certain ASI
Plans, as specified by ASI prior to the Closing Date ("ASI Plans"), subject to
the terms of the governing plan documents as interpreted by the appropriate plan
fiduciaries. On and after the Closing Date, subject to regulatory requirements
and the provisions of Section 4.01 hereof, ASI will continue to provide Benefits
Services to and in respect of Logility employees with reference to such ASI
Plans as it administered them prior to the Closing Date.
(b) The costs payable by Logility for Services relating to employee plans
and benefit arrangements ("Benefits Services") may be charged on the basis of
Customary Billing, Pass-Through Billing, or Benefit Billing. In addition, the
costs associated with certain plans and programs identified in Schedule III will
be paid principally through employee payroll deductions for such plans and
programs. Benefit Services consist of those categories of Services which are
more fully described on Schedule III attached hereto.
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(c) Each party to this Agreement may request changes in the applicable
terms of, or services relating to, ASI Plans. approval of which shall not be
unreasonably withheld; provided, however, that approval of changes in the terms
of any ASI Plans shall be in the sole discretion of ASI.
(d) ASI and Logility agree to cooperate fully with each other in the
administration and coordination of regulatory and administrative requirements
associated with ASI Plans. Such coordination, upon request, will include,
without limitation, the following: sharing payroll data for determination of
highly compensated employees, providing census information (including accrued
benefits) for purposes of running discrimination tests, providing actuarial
reports for purposes of determining the funded status of any plan, review and
coordination of insurance and other independent third party contracts, and
providing for review of all summary plan descriptions, requests for
determination letters, insurance contracts, Forms 5500, financial statement
disclosures and plan documents.
Section 3.06. Invoicing and Settlement of Costs.
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(a) ASI will invoice Logility for the Service Costs on a monthly basis, in
arrears, either directly or through an intracompany billing system, in a manner
substantially consistent with the billing practices used in connection with
services provided to the Logility Entities prior to the Closing Date (except as
otherwise agreed). In connection with the invoicing described in this Section
3.06(a), ASI will provide to Logility the same billing data and level of detail
as it customarily provides to other businesses and Subsidiaries operated by ASI
and such other data as may be reasonably requested by Logility.
(b) Logility agrees to pay within thirty (30) days after each date on which
ASI invoices Logility for the Service Costs (each, a "Payment Date"), at ASI's
option upon reasonable notice to Logility, through ASI's intracompany billing
system, cash management systems, or, if requested by ASI, by wire transfer of
immediately available funds payable to the order of ASI, and in any event
without set off, defense, or demand, all amounts invoiced by ASI pursuant to
paragraph (a) above during the preceding calendar month (or since the Closing
Date. in the case of the first Payment Date). If Logility fails to pay any
monthly payment within thirty (30) days of the relevant Payment Date, Logility
shall be obligated to pay, in addition to the amount due on such Payment Date,
simple interest on such amount at a rate of one percent (1%) per month.
(c) Except as otherwise provided in the Schedules or agreed in writing by
the parties, Logility shall take such action as is necessary to establish bank
accounts (to be funded by Logility) or to otherwise fund all wage and salary
payments to Logility employees and to fund all medical, retirement, and other
benefit claims payable to or on behalf of Logility employees and their
dependents to the extent not covered by third party insurance. Payroll services
and benefit claims processing activities performed by ASI or ASI's
subcontractors shall be coordinated to facilitate payments. Following prior
written notice of not less than fifteen (15) business days, ASI shall be
relieved of any obligation to deliver benefit and payroll services under this
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Agreement to the extent that such bank accounts or other funding arrangements
are not established at the time drafts are presented for payment, or at any time
when there are insufficient funds in the relevant account or such other
arrangements fail to satisfy a properly presented claim.
Section 3.07. Amended Schedules. ASI may, from time to time, prepare and
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deliver to Logility revised versions of any or all Schedules, setting forth with
respect to the Services described in such Schedules, any proposed changes in
billing methodology and, to the extent available, the Service Costs estimated to
be payable for such Services pursuant to such revised Schedules. Except as
otherwise provided in Article V, or as Logility and ASI may otherwise agree, and
except as specifically described in this Agreement (including the Schedules),
ASI may not change the method of allocating and charging the Service Cost of any
Service provided to Logility unless Logility is notified in writing not less
than ninety (90) days in advance of implementing such revised method.
ARTICLE IV
THE SERVICES
Section 4.01. Standard of Care. Except as otherwise agreed with Logility or as
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described in this Agreement, and provided that ASI is not restricted by contract
with third parties or by applicable law, ASI agrees that the nature, quality,
and standard of care applicable to the delivery of the Services hereunder will
be substantially the same as that of the Services which ASI provides from time
to time throughout its businesses; provided that in no event shall such standard
of care be less than the standard of care that ASI has customarily provided to
Logility with respect to the relevant Service prior to the Closing Date. ASI
shall use its reasonable efforts to ensure that the nature and quality of
Services provided to Logility employees, either by ASI directly or through
administrators under contract, shall be undifferentiated as compared with the
same services provided to or on behalf of ASI employees under ASI Plans.
Section 4.02. Delegation. Subject to Section 4.01 above, Logility hereby
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delegates to ASI final, binding, and exclusive authority, responsibility, and
discretion to interpret and construe the provisions of employee welfare benefit
plans in which Logility has elected to participate and which are administered by
ASI under this Agreement (collectively, the "Employee Welfare Plans"). ASI may
further delegate such authority to plan administrators to:
(i)provide administrative and other services;
(ii)reach factually supported conclusions consistent with the terms of the
Employee Welfare Plans;
(iii)make a full and fair review of each claim, denial, and decision
related to the provision of benefits provided or arranged for under the Employee
Welfare Plans, pursuant to the requirements of ERISA, if within sixty (60) days
after receipt of the notice of denial, a claimant requests in writing a review
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for reconsideration of such decisions. The administrator shall notify the
claimant in writing of its decision on review. Such notice shall satisfy all
ERISA requirements relating thereto; and
(iv)notify the claimant in writing of its decision on review.
Section 4.03. Limitation of Liability. Logility agrees that none of the ASI
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Entities and their respective directors, officers, agents, and employees (each,
an "ASI Indemnified Person") shall have any liability, whether direct or
indirect, in contract or tort or otherwise, to any Logility Entity for or in
connection with the Services rendered or to be rendered by any ASI Indemnified
Person pursuant to this Agreement, the transactions contemplated hereby, or any
ASI Indemnified Person's actions or inactions in connection with any such
Services or transactions, except for damages which have resulted from such ASI
Indemnified Person's gross negligence or willful misconduct in connection with
any such Services, actions, or inactions.
Section 4.04. Indemnification of ASI Indemnified Persons by Logility. Logility
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agrees to indemnify and hold harmless each ASI Indemnified Person from and
against any damages, and to reimburse each ASI Indemnified Person for all
reasonable expenses as they are incurred in investigating, preparing, pursuing,
or defending any claim, action, proceeding, or investigation, whether or not in
connection with pending or threatened litigation and whether or not any ASI
Indemnified Person is a party (collectively, "Actions"), arising out of or in
connection with Services rendered or to be rendered by any ASI Indemnified
Person pursuant to this Agreement, the transactions contemplated hereby, or any
ASI Indemnified Person's actions or inactions in connection with any such
Services or transactions; provided that Logility will not be responsible for any
damages of any ASI Indemnified Person that have resulted from such ASI
Indemnified Person's gross negligence or willful misconduct in connection with
any of the Services, actions, or inactions referred to above.
Section 4.05. Indemnification of Logility Indemnified Persons by ASI. ASI
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agrees to indemnify and hold harmless each Logility Entity and its respective
directors, officers, agents, and employees (each, a "Logility Indemnified
Person") from and against any damages, and will reimburse each Logility
Indemnified Person for all reasonable expenses as they are incurred in
investigating, preparing, pursuing, or defending any Action, arising out of the
gross negligence or willful misconduct of any ASI Indemnified Person in
connection with the Services rendered or to be rendered pursuant to this
Agreement.
Section 4.06. Further Indemnification. To the extent that any other Person has
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agreed to indemnify any ASI Indemnified Person or to hold an ASI Indemnified
Person harmless and such Person provides services to ASI or any affiliate of ASI
relating directly or indirectly to any employee plan or benefit arrangement for
which Benefit Services are provided under this Agreement, ASI will exercise
reasonable efforts to (i) make such agreement applicable to any Logility
Indemnified Person so that each Logility Indemnified Person is held harmless or
indemnified to the same extent as any ASI Indemnified Person, or (ii) otherwise
make available to each Logility Indemnified Person the benefits of such
agreement.
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Section 4.07. Reports. ASI shall provide or shall cause to be provided to
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Logility with data or reports requested by Logility relating to (i) benefits
paid to or on behalf of Logility employees under ASI Plans, including but not
limited to financial statements, claims history, and census information, and
(ii) other information relating to the Services that is required to satisfy any
reporting or disclosure requirement of ERISA or the Code. ASI will provide such
information within a reasonable period of time after it is requested. The costs
for reports which are substantially similar to reports prepared by ASI or on
behalf of ASI generally for its businesses shall be billed as part of the
Benefit Costs. The cost for additional reports shall be billed as incremental
costs in accordance with Section 3.06.
ARTICLE V
ADDITIONAL AGREEMENT
Section 5.01. Notice. Unless otherwise agreed in writing by the parties,
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Logility agrees to provide ASI with at least sixty (60) days prior written
notice of any material change in the eligible Logility employees and retirees
covered by ASI Plans, and any change in the scope of Services to be provided by
ASI with respect thereto. Notwithstanding the preceding sentence, if Logility
provides ASI with less than sixty (60) days notice of any such change and ASI is
nonetheless able, with reasonable efforts, to effectuate such change with such
shorter notice, than ASI shall implement the requested change.
ARTICLE VI
TERM AND TERMINATION
Section 6.01. Term. Except as otherwise provided in this Article VI or in
----
Section 7.05, or as otherwise agreed in writing by the parties, this Agreement
shall have an initial term of three years from the Closing Date, and will be
renewed automatically thereafter for successive one-year terms unless either
Logility or ASI elects not to renew this Agreement upon not less than one
hundred and eighty (180) days' written notice.
Section 6.02. Termination.
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(a) Logility may from time to time terminate this Agreement with respect to
one or more of the Services upon giving at least sixty (60) days' prior notice
to ASI.
(b) ASI may from time to time terminate this Agreement with respect to one
or more of the Services upon giving at least one hundred twenty (120) days'
prior notice to Logility.
(c) This Agreement will be subject to termination by either Logility or ASI
upon ninety (90) days' written notice if ASI ceases to own shares of Common
Stock representing more than fifty (50%) of the voting power of the Common Stock
of Logility.
(d) Notwithstanding anything to the contrary in this Section 6.02, ASI may,
at its option, immediately terminate this Agreement as it relates to any given
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Service if ASI would otherwise not be required to provide such Service with
respect to any employee benefit plan or program that is substantially similar to
a corresponding plan or program of ASI (as such plans and programs of ASI exist
from time to time) or if the method of delivering such Service would no longer
be substantially similar to the manner in which such Service was delivered to
the Logility Entities, as such delivery may change from time to time. ASI shall
give Logility as much advance notice as is reasonably possible in connection
with any planned early termination of a Service with respect to any employee
benefit plan or program.
(e) Notwithstanding anything to the contrary in this Schedule 6.02, ASI may
terminate any affected Service at any time if Logility shall have failed to
perform any of its material obligations under this Agreement relating to any
such Service, ASI has notified Logility in writing of such failure, and such
failure shall have continued for a period of sixty (60) days after receipt of
Logility of notice of such failure.
(f) Notwithstanding anything to the contrary in this Section 6.02, Logility
may terminate any affected Service at any time if ASI shall have failed to
perform any of its material obligations under this Agreement relating to any
such Service, Logility has notified ASI in writing of such failure, and such
failure shall have continued for a period of sixty (60) days after receipt by
ASI of notice of such failure.
(g) Notwithstanding anything to the contrary in this Section 6.02, either
ASI or Logility may terminate coverage of Logility under ASI's umbrella
liability, property, casualty or fiduciary insurance policies (as more fully
described in Schedule I) at any time on ninety (90) days written notice prior to
the anniversary day of the policy; provided that a replacement policy,
acceptable to ASI, is entered into by Logility.
Section 6.03. Effect of Termination.
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(a) Other than as required by law, upon termination of any Service pursuant
to Section 6.02, and upon expiration of the term of this Agreement, without
renewal, in accordance with Section 6.01, ASI will have no further obligation to
provide the terminated Service (or any Service, in the case of termination of
this Agreement), and Logility will have no obligation to pay any fees relating
to such Services or make any other payments hereunder; provided that
notwithstanding such termination, (i) Logility shall remain liable to ASI for
fees owed and payable in respect of Services provided prior to the effective
date of the termination; (ii) ASI shall continue to charge Logility for
administrative and program costs relating to benefits paid after but incurred
prior to the termination of any Service and other services required to be
provided after the termination of such Service and Logility shall be obligated
to pay such expenses in accordance with the terms of this Agreement, and (iii)
the provisions of Articles IV, V, VI and VII shall survive any such termination.
All program and administrative costs attributable to Logility employees for ASI
Plans that relate to any period after the effective date of any such termination
shall be for the account of Logility.
10
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(b) Following termination of this Agreement with respect to any Service,
ASI and Logility agree to cooperate in providing for an orderly transition of
such Service to Logility or to a successor service provider. Without limiting
the foregoing, ASI agrees to (i) provide, within ninety (90) days of the
termination, copies in a format designated by ASI of all records relating
directly or indirectly to benefit determinations of Logility employees,
including but not limited to compensation and service records, correspondence,
plan interpretive policies, plan procedures, administration guidelines, minutes,
or any data or records required to be maintained by law, and (ii) work with
Logility in developing a transition schedule.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Other Agreements. In addition to the services described herein,
----------------
ASI is providing Logility with certain additional services pursuant to a
Facilities Agreement and a Tax Sharing Agreement.
Section 7.02. Future Litigation and Other Proceedings. In the event that a
---------------------------------------
Logility Entity (or any of its officers or directors) or an ASI Entity (or any
of its officers or directors) at any time after the date hereof initiates or
becomes subject to any litigation or other proceedings before any governmental
authority or arbitration panel with respect to which the parties have no prior
agreements (as to indemnification or otherwise), the party (and its officers and
directors) that has not initiated and is not subject to such litigation or other
proceedings shall comply, at the other party's expense, with any reasonable
requests by the other party for assistance in connection with such litigation or
other proceedings (including by way of provision of information and making
available of employees as witnesses). In the event that a Logility Entity (or
any of its officers or directors) and an ASI Entity (or any of its officers and
directors) at any time after the date hereof initiate or become subject to any
litigation or other proceedings before any governmental authority or arbitration
panel with respect to which the parties have no prior agreements (as to
indemnification or otherwise), each party (and its officers and directors)
shall, at its own expense, coordinate its strategies and actions with respect to
such litigation or other proceedings to the extent such coordination would not
be detrimental to its respective interests and shall comply, at the expense of
the requesting party, with any reasonable requests of the other party for
assistance in connection therewith (including by way of provision of information
and making available of employees as witnesses).
Section 7.03. No Agency. Nothing in this Agreement shall constitute or be
---------
deemed to constitute a partnership or joint venture between the parties hereto
or, except to the extent provided in Section 4.02, constitute or be deemed to
constitute any party as the agent or employee of the other party for any purpose
whatsoever and neither party shall have authority or power to bind the other or
to contract in the name of, or create a liability against, the other in any way
or for any purpose.
Section 7.04. Subcontractors. ASI may hire or engage one or more
--------------
subcontractors to perform all or any of its obligations under this Agreement,
11
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provided that, subject to Section 4.03, ASI will in all cases remain primarily
responsible for all obligations undertaken by it in this Agreement with respect
to the scope, quality and nature of the Services provided to Logility.
Section 7.05. Force Majeure.
-------------
(a) For purposes of this Section, "force majeure" means an event beyond the
control of either party, which by its nature could not have been foreseen by
such party, or, if it could have been foreseen, was unavoidable, and includes
without limitation, acts of God, storms, floods, riots, fires, sabotage, civil
commotion or civil unrest, interference by civil or military authorities, acts
of war (declared or undeclared) and failure of energy sources.
(b) Neither party shall be under any liability for failure to fulfill any
obligation under this Agreement, so long as and to the extent to which the
fulfillment of such obligation is prevented, frustrated, hindered, or delayed as
a consequence of circumstances of force majeure, provided always that such party
shall have exercised all due diligence to minimize to the greatest extent
possible the effect of force majeure on its obligations hereunder.
(c) Promptly on becoming aware of force majeure causing a delay in
performance or preventing performance of any obligations imposed by this
Agreement (and termination of such delay), the party affected shall give written
notice to the other party giving details of the same, including particulars of
the actual and, if applicable, any estimated continuing effects of such force
majeure on the obligations of the party whose performance is prevented or
delayed. If such notice shall have been duly given, and actual delay resulting
from such force majeure shall be deemed not to be a breach of this Agreement,
and the period for performance of the obligation to which it relates shall be
extended accordingly, provided that if force majeure results in the performance
of a party being delayed by more than sixty (60) days, the other party shall
have the right to terminate this Agreement with respect to any Service effected
by such delay forthwith by written notice.
Section 7.06. Entire Agreement. This Agreement (including the Schedules
----------------
constituting a part of this Agreement) and any other writing signed by the
parties that specifically references this Agreement constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter hereof. This
Agreement is not intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
Section 7.07. Information. Subject to applicable law and privileges, each
-----------
party hereto covenants and agrees to provide the other party with all
information regarding itself and transactions under this Agreement that the
other party reasonably believes are required to comply with all applicable
federal, state, county and local laws, ordinances, regulations and codes,
including, but not limited to, securities laws and regulations.
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Section 7.08. Confidential Information. Logility and ASI hereby covenant and
------------------------
agree to hold in trust and confidence all Confidential Information relating to
the other party. "Confidential Information" shall mean all information disclosed
or obtained by either party to the other as a result of the relationship between
the parties existing by virtue of this or any other agreement of the parties,
whether orally, visually, in writing or in any other tangible form, and
includes, but is not limited to, economic and business data, business plans, and
the like, but shall not include (i) information which becomes generally
available other than by release in violation of the provisions of this Section
7.08, (ii) information which becomes available on a nonconfidential basis to a
party from a source other than the other party to this Agreement provided the
party in question reasonably believes that such source is not or was not bound
to hold such information confidential, (iii) information acquired or developed
independently by a party without violating this Section 7.08 or any other
confidentiality agreement with the other party and (iv) information that any
party hereto reasonably believes it is required to disclose by law, provided
that it first notifies the other party hereto of such requirement and allows
such party a reasonable opportunity to seek a protective order or other
appropriate remedy to prevent such disclosure. Without prejudice to the rights
and remedies of either party to this Agreement, a party disclosing any
Confidential Information to the other party in accordance with the provisions of
this Agreement shall be entitled to equitable relief by way of an injunction if
the other party hereto breaches or threatens to breach any provision of this
Section 7.08.
Section 7.09. Notices. Any notice, instruction, direction or demand under the
-------
terms of this Agreement required to be in writing will be duly given upon
delivery, if delivered by hand, facsimile transmission, intercompany mail, or
mail, to the following addresses:
(a) If to Logility, to:
Logility, Inc.
470 East Paces Ferry Road
Atlanta, Georgia 30305
Attention: Chief Financial Officer
Fax: 404/264-5394
(b) If to ASI, to:
American Software, Inc.
470 East Paces Ferry Road
Atlanta, Georgia 30305
Attention: Controller
Fax: 404/264-5813
or to such other addresses or facsimile numbers as may be specified by like
notice to the other parties.
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Section 7.10. Governing Law. This Agreement shall be construed in accordance
-------------
with and governed by the laws of the State of Georgia.
Section 7.11. Severability. If any provision of this Agreement shall be
------------
invalid or unenforceable, such invalidity or unenforceability shall not render
the entire Agreement invalid. Rather, the Agreement shall be construed as if
not containing the particular invalid or unenforceable provision, and the rights
and obligations of each party shall be construed and unforced accordingly.
Section 7.12. Amendment. This Agreement may only be amended by a written
---------
agreement executed by both parties hereto.
Section 7.13. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one agreement.
Section 7.14. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. The foregoing notwithstanding, and except as provided in
Section 7.04, neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other party.
Section 7.15. Dispute Resolution. In the event that any dispute arises between
------------------
Logility and ASI in connection with this Agreement, the representatives of each
party responsible for the subject matter of such dispute shall use good faith
efforts to resolve such dispute promptly. In the event that such dispute cannot
be resolved by the parties' representatives, the matter shall be submitted to
the parties' respective Chief Executive Officers ("CEOs") for resolution. In the
event that the CEOs cannot reach resolution of the issue (an "Unresolved
Dispute"), then the Unresolved Dispute shall be settled at the election of
either party, by final and binding independent arbitration. All arbitrations
pursuant to this Agreement shall be conducted before the American Arbitration
Association ("AAA") in Atlanta, Georgia, U.S.A., and shall be carried out in
accordance with the Commercial Arbitration Rules of the AAA then in effect (the
"Rules") and the provisions of this Agreement. Logility and ASI shall each
select one arbitrator and a third arbitrator will be selected unanimously by the
arbitrators selected by Logility and ASI. If the two arbitrators selected by
Logility and ASI are unable to select the third arbitrator within ten (10) days
of the appointment of the two arbitrators, the parties consent to the selection
of the third arbitrator by the AAA administrator. The award of the arbitrators
may be enforced by any court having jurisdiction over the parties.
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives as of the date and year first above
written.
AMERICAN SOFTWARE, INC.
BY: /s/ James C. Edenfield
----------------------------------------
NAME: JAMES C. EDENFIELD
TITLE: PRESIDENT
LOGILITY, INC.
BY: /s/ J. Michael Edenfield
----------------------------------------
NAME: J. MICHAEL EDENFIELD
TITLE: PRESIDENT
15
<PAGE>
Services Agreement - Schedule I
General Corporate Services
SERVICE
PART I -- CORPORATE AND SHARED SERVICES.
A. The "Customary Billing" methodology, based on ASI's internal apportionment
formulas, shall be used for each of the following services:
- Travel administration;
- Property administration;
- Office of the Chief Information Officer;
- Transaction processing and accounting;
- Money and banking and other treasury services;
- Corporate Controller's Headquarters (financial planning and analysis);
- Human resource services--baseline, corporate, shared, and transition
services;
- Company-wide and executive training, development, and administration;
- Corporate general and administrative purchasing and "core group"
purchasing;
- Environmental health and safety;
- Trade (import/export and shipping services);
- Corporate security;
- Credit and collection; and
- Insurance Policies (including liability, property, and casualty).
A. The "Pass-Through" methodology, based on ASI's internal apportionment
formulas, shall be used for each of the following services, unless and until
such third-party costs may be billed directly to Logility:
- Tax return preparation
16
<PAGE>
PART II -- COMPUTING AND COMMUNICATIONS SERVICES. The Customary Billing
methodology, based on actual usage, shall be used for each of the following
services:
- Global data processing;
- Voice/data transmission services;
- Timesharing (computer resources);
- Personal computer and work station (maintenance and repair services);
- Contract administration; and
- Global telecommunications and network services.
17
<PAGE>
Services Agreement - Schedule II
Professional Services
Professional services to be provided under this Agreement shall include any
professional or other commercial services that ASI provides from time to time to
third parties on a fee basis, in each case as requested by Logility to be
provided by ASI, unless ASI determines in its reasonable discretion that the
provision of such requested services would not be economic or would be otherwise
unfeasible. All such services shall be provided in accordance with the Cost
Plus Billing method, with the percentage of costs and expenses to be negotiated
by the parties in good faith.
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<PAGE>
Services Agreement - Schedule III
Benefits Services
SERVICE BILLING
METHODOLOGY
The Customary Billing methodology, based on
apportioned customary ASI "Fringe Rate"
allocations, (except as noted) shall be used for
each of the following services:
MEDICAL/DENTAL PROGRAMS
Benefits/Claims
- Claims costs for Logility Employees Customary Billing
participating in ASI Plans and programs
Administration
- Administration of Logility plans and programs: Customary Billing
- maintenance of eligibility files upon Logility's
notification of status changes
- claim adjudication under the terms of applicable plans
- maintenance of toll-free telephone lines for inquiries, etc.
- support services (internal and external, including COBRA)
Participant Contributions
- Participant contributions for deductions above Payroll Deduction
plans or direct bill to employees/retirees
OTHER BENEFIT PLANS
Life Insurance (including Accidental Customary Billing
Death and Dismemberment)
Savings/Retirement Plans
- Company match/retirement contribution Customary Billing
- Participant Contributions Payroll Deduction
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Long-Term Disability Plans
- Employer contributions Customary Billing
- Employee contributions Payroll Deduction
Other Benefit Support Services
- Audit, legal, actuarial fees and related Customary Billing
recoveries
- Payroll support of benefits administration Customary Billing
(insurance. savings, other benefit plans
and statutory requirements)
Payroll Services Customary Billing
20
<PAGE>
EXHIBIT 10.6
FACILITIES AGREEMENT
THIS FACILITIES AGREEMENT (this "Agreement"), dated as of the 1st day of
August, 1997 (the "Effective Date"), is made and entered into by and between
AMERICAN SOFTWARE, INC., a Georgia corporation ("ASI"), and LOGILITY, INC., a
Georgia corporation ("Logility"). The terms "Logility" and "ASI" shall include
any subsidiary of Logility and ASI, respectively.
W I T N E S S E T H :
WHEREAS, ASI and Logility have entered into that certain Subsidiary
Formation Agreement, dated of even date herewith, pursuant to which ASI has
agreed to sell to Logility, and Logility has agreed to purchase from ASI,
certain tangible and intangible property and assets of ASI relating to the
business and operations of the Supply Chain Planning products division of ASI;
WHEREAS, ASI desires to provide to Logility, and Logility desires to
accept, the right to use, in some cases in common with ASI, certain office
facilities owned or leased, as applicable, by ASI as identified on Schedule I
hereto (the "Facilities", and together with the non-exclusive right to use
walkways, parking areas, and other common areas appurtenant to the Facilities,
the "Premises") on the terms and conditions set forth in this Agreement; and
WHEREAS, the parties understand that certain of the Facilities are
currently, and will continue to be, occupied and used by ASI for the conduct of
ASI's business and that the joint use of the Facilities as contemplated by this
Agreement will require mutual cooperation and accommodation by ASI and Logility.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein contained, the sufficiency of which is hereby acknowledged,
ASI and Logility agree as follows:
1. Premises and Term.
-----------------
1.1. Subject to all of the terms and conditions hereof, ASI hereby
provides to Logility, and Logility hereby accepts from ASI, (i) the exclusive
right to use each of the Premises identified in Schedule I as exclusive to
Logility, and (ii) the non-exclusive right to use in common with ASI each of the
Premises identified in Schedule I as non-exclusive. In addition to the Premises
identified in Schedule I, ASI may from time to time, provide Logility the right
to use additional office facilities; provided, that the use of such facilities,
as well as the other terms and conditions applicable to Logility's use thereof,
shall be as mutually agreed in writing by ASI and Logility. Upon such
agreement, all such office facilities shall be included in the term "Premises"
for purposes of this Agreement.
<PAGE>
1.2. The term of this Agreement (the "Initial Term") shall be for a period
of two years commencing on the Effective Date, and ending on midnight of the
date immediately preceding the second anniversary of the Effective Date (the
"Expiration Date"), unless sooner terminated as hereinafter provided; provided,
however, notwithstanding anything to the contrary in this Section 1, this
Agreement may be terminated prior to the Expiration Date, as may be hereinafter
extended, in accordance with Section 8 below.
1.3. Unless this Agreement has been sooner terminated pursuant to Section
8 below, and provided Logility is not then in default under the terms of this
Agreement, the Initial Term shall be automatically extended for additional
successive period(s) of one year each (each such period, a "Renewal Term" and,
together with the Initial Term, the "Term"), beginning on the date immediately
following the Expiration Date of the Initial Term or Renewal Term then in
effect, upon the same terms, conditions, covenants and provisions as are
provided in this Agreement.
2. Right to Use the Premises.
-------------------------
2.1. As of the Effective Date, Logility's right to use the Premises shall
constitute:
(i) with regard to those Premises identified in Schedule I as exclusive to
Logility, an exclusive right to use each entire Premises as it may exist from
time to time; and
(ii) with regard to those Premises identified in Schedule I as non-exclusive, a
non-exclusive right to use, in common with ASI, each entire Premises as it may
exist from time to time, other those areas identified from time to time by
agreement of ASI and Logility to be restricted for the exclusive use of one of
the parties hereto. The foregoing notwithstanding, upon request by either
party, ASI and Logility shall negotiate in good faith a reconfiguration of any
given Premises in order to restrict access to portions of such Premises for
either party's exclusive use, including, without limitation, building partitions
and establishing separate access, in accordance with Section 4 below. If the
parties are unable to agree upon a mutually satisfactory reconfiguration of a
given Premises, then Logility shall promptly vacate such Premises, and Schedule
I hereto shall be amended to delete the affected Premises from the terms of this
Agreement.
2.2. Notwithstanding anything to the contrary contained this Agreement,
ASI shall in any event be entitled to enter upon any part of any Premises
(including, without limitation, Premises identified as exclusive to Logility or
areas in non-exclusive Premises restricted for the exclusive use of Logility
pursuant to Section 2.1(ii)), at any time and from time to time, without the
prior consent of Logility, (i) as necessary or appropriate for the performance
of ASI's obligations under this Agreement or any underlying lease, (ii) for
purposes of inspecting the Premises for compliance with Logility's obligations
under this Agreement, (iii) to show any Premises to a prospective purchaser or
mortgagor, (iv) to make alterations, additions, repairs, or improvements to any
Premises pursuant to Section 4.3, or (v) in case of an emergency.
2
<PAGE>
3. Payment for Premises.
--------------------
3.1. Logility shall make monthly payments to ASI for each Premises as
follows:
(i) with regard to the office facilities utilized exclusively by Logility
(each, an "Atlanta Premises") in the buildings identified in Schedule II hereto
(each, an "Atlanta Facility"), Logility shall pay to ASI (I) base rent based on
an annual rate of $17.00 per rentable square foot of each Atlanta Premises, plus
(II) Logility's Percentage Share of the increase in Operating Costs with respect
to each Atlanta Facility in which an Atlanta Premises is located during each
fiscal year of ASI throughout the Term above the Operating Costs with respect to
such Atlanta Facility during the 1997 fiscal year of ASI; and
(ii) with regard to each Premises other than the Atlanta Premises, Logility
shall pay to ASI an amount equal to Logility's Percentage Share of the Operating
Costs with respect to the Facility at which such Premises is located during each
fiscal year of ASI throughout the Term. In the event additional Premises are
provided by ASI to Logility pursuant to Section 1.1, then, except as provided in
item (i) above or unless otherwise expressly agreed by the parties, Logility's
monthly payments to ASI for such occupancy shall be determined in accordance
with this item (ii).
3.2 Payments to be made to ASI under Section 3.1 shall be made, in
arrears, and without offset, demand, or defense, on or before the fifth (5th)
day of each month throughout the Term with respect to each Premises, and each
such payment shall be delivered to the location designated by ASI from time to
time for each Premises (or if no location is so designated, to the address for
notices in this Agreement) and in the local currency of the country in which
such Premises is located. In the event any payment due to ASI under this
Agreement is not received by ASI within five (5) days of the date when due,
Logility shall make an additional payment to ASI equal to five percent (5%) of
said overdue payment at the time of and in addition to the payment as a late
payment charge. If the first or last month of the Term is a partial month, the
monthly charge shall be prorated based upon the actual number of days in such
partial month.
3.3 For purposes of this Section 3, the following terms shall have the
meanings herein specified:
(i) "Operating Costs" means any and all costs, expenses, and disbursements of
every kind and character which ASI shall incur, pay, or become obligated to pay
in connection with the ownership (or lease, as appropriate), management,
operation, maintenance, or occupancy of a Facility (including, but not limited
to, depreciation of such Facility if such Facility is owned by ASI), the intent
being that this Agreement shall create a "net, net, net" lease for each
Premises.
3
<PAGE>
(ii) "Logility's Percentage Share" means:
(A) with regard to each Atlanta Premises, the quotient (expressed as a
percentage) obtained by dividing the rentable square feet of such Atlanta
Premises by the rentable square feet of the Atlanta Facility in which such
Atlanta Premises is located, and multiplying such quotient by 100. In the
event, Logility's Percentage Share is changed during a fiscal year of ASI by
reason of a change in the rentable square feet of an Atlanta Premises (by
agreement of ASI and Logility) or the rentable square feet of an Atlanta
Facility, Logility's Percentage Share shall thereafter mean the result obtained
by using the revised net rentable square feet in the foregoing formula, and
Logility's Percentage Share shall be determined on the basis of the number of
days during such fiscal year at each percentage share and shall take effect
immediately upon written notice thereof from ASI to Logility; and
(B) with regard to each Premises other than an Atlanta Premises, the
quotient (expressed as a percentage) obtained by dividing the number of Logility
employees based at such Premises by the sum of all ASI employees and Logility
employees based at such Premises. In the event, Logility's Percentage Share is
changed during a fiscal year of ASI by reason of a change in the number of
Logility employees based at a Premises or a change in the number of ASI
employees based at such Premises (in each event determined as of the last day of
each fiscal quarter of ASI throughout the Term), Logility's Percentage Share
shall thereafter mean the result obtained by using the revised net number of
Logility employees based at such Premises in the foregoing formula, and
Logility's Percentage Share shall be determined on the basis of the number of
days during such fiscal year at each percentage share and shall take effect
immediately upon written notice thereof from ASI to Logility.
4. Use.
---
4.1. Logility specifically agrees that its right to use each of the
Premises is limited to each of the Premises in its existing condition "as-is"
and "where-is" and acknowledges that, in entering into this Agreement, Logility
does not rely on, and ASI does not make, any express or implied representations
or warranties as to any matters including, without limitation, any
characteristics of any of the Premises, the suitability of any of the Premises
for Logility's intended use, or the compliance or noncompliance of the Premises
or any use thereof with any Applicable Laws or underlying leases. As used in
this Agreement, the term "Applicable Laws" means all applicable laws, codes,
ordinances, rules, and regulations of all foreign, federal, state, county,
municipal, or other governmental authorities or instrumentalities. Logility has
inspected each Premises and has found it to be in satisfactory condition.
4.2. Logility shall not make any alterations or improvements to any of the
Premises whatsoever, including without limitation, placing any sign or
identification of any kind whatsoever in or on any of the Premises, without the
prior written consent of ASI, which consent shall not be unreasonably withheld;
provided, however, ASI may withhold its consent in its sole discretion to any
4
<PAGE>
alteration or improvement which is structural in nature or inconsistent with the
existing interior decor of a Premises. Failure of ASI's landlord to consent to
or approve an alteration or improvement, where required by an underlying lease,
shall be reasonable grounds for ASI to withhold consent under this Section.
4.3. ASI reserves the right, at any time, and from time to time, to make
alterations or improvements to, or to decrease the size or area of all or any
part of, any Premises identified in Schedule I as non-exclusive, provided that
any such alteration or improvement shall not materially and adversely affect
Logility's use of such Premises and provided any alteration or improvement to
any Premises which would materially affect Logility's use of such Premises shall
not be made without reasonable notice to Logility.
4.4. Logility shall use each of the Premises only for general office and
related incidental purposes for which it has historically been used by the
Logility division of ASI and for no other use or purpose whatsoever. In no
event shall Logility use or permit the use of any of the Premises for any
purpose or use that is (i) inconsistent with or interferes in any way with the
conduct of other business operations in any of the Premises, or (ii) in
violation of any provision of an underlying lease.
4.5. Logility shall be responsible for and shall supervise and control
all of its officers, agents, employees, licensees, contractors, customers, and
other invitees (collectively, "Personnel") so as to assure compliance with all
of the terms and conditions of this Agreement. Logility shall comply with all
present and future security measures implemented by ASI (or the Landlord of any
Premises leased by ASI) in each of the Premises, including, without limitation,
prohibitions on access to certain areas in Premises to competitors of ASI.
Without limitation of the foregoing, Logility shall ensure that (i) no Personnel
enter areas within any Premises restricted for the exclusive use by ASI, except
with prior written consent from an authorized representative of ASI, (ii) all
Personnel comply with all Applicable Laws and each underlying lease, and (iii)
no Personnel conduct any illegal activities or activities resulting in any
nuisance or which may constitute harassment of any kind. All Personnel shall be
clearly identified as affiliated with Logility and, if requested, Logility shall
require each person to comply with any applicable dress code and wear
appropriate name badges or other easily visible identification approved by ASI
at all times while on any of the Premises.
5. Maintenance; Compliance with Laws, Rules and Regulations; Hazardous
-------------------------------------------------------------------
Materials.
- ---------
5.1. Logility shall not permit or suffer any material injury, waste, or
nuisance in or to any of the Premises, and Logility shall be responsible for
maintaining in a clean, safe, and sanitary condition each of the Premises
identified in Schedule I as exclusive to Logility. Logility shall not make any
repairs to any of the Premises, without the prior written consent of ASI, which
consent may be withheld in ASI's sole discretion. If ASI determines that it is
necessary to repair any damage attributable to Logility or its Personnel,
Logility shall reimburse ASI for the cost of all such repairs within thirty (30)
days of receipt by Logility of an invoice therefor from ASI.
5
<PAGE>
5.2. Logility, at Logility's sole cost and expense, shall comply in all
material respects with all Applicable Laws relating to Logility's use of each of
the Premises; provided that if structural or capital improvements are required
at any Premises in order to comply with any Applicable Law, either ASI or
Logility may terminate this Agreement with respect to any such Premises.
Notwithstanding the foregoing, Logility shall not make any physical change to
any Premises in order to comply with an Applicable Law without the prior written
consent of ASI, which consent may be withheld in ASI's sole discretion. If ASI
consents to any changes, at ASI's election (but not obligation), ASI may make
such changes, in which event Logility shall, within thirty (30) days of receipt
by Logility of an invoice therefor from ASI, reimburse ASI for all actual costs
and expenses incurred by ASI in making such changes. Failure of ASI's landlord
to consent to or approve any physical change to a Premises, where required by an
underlying lease, shall be reasonable grounds for ASI to withhold consent under
this Section.
5.3. Logility shall comply with the requirements of ASI's property,
liability, and workers compensation insurance carriers and all rules and
regulations of the Premises as are established from time to time by ASI (or
ASI's landlord if the Premises is leased by ASI), including, without limitation,
all security procedures and requirements for each Premises.
5.4. This Agreement is expressly subordinate to, and subject to the terms
of, any underlying lease for any of the Premises, and, accordingly, Logility
shall comply with all provisions of any underlying lease for any of the Premises
that are leased by ASI. Either party may request that the other party enter into
a specific sublease or similar arrangement with respect to any Premises and,
subject to the consent of the primary landlord for any leased Premises, the
parties shall negotiate in good faith such a sublease or other arrangement on
terms customary for the location of the Premises and consistent with the terms
of this Agreement. At the request of ASI, Logility shall use diligent efforts
to satisfy the requirements of any underlying lease with respect to Logility's
use of any Premises, including, but not limited to, executing and delivering
such documents and taking such other actions as reasonably may be required by
the landlord under the terms of any underlying lease (including terminating this
Agreement with respect to the Premises and vacating the Premises, provided that
ASI and Logility will cooperate in good faith to vacate in a manner so as to
minimize any disruption of Logility's business and any cost to Logility) or to
prevent or cure a default under any underlying lease, as well as any other
actions reasonably requested by ASI with respect thereto. With respect to each
Premises which is subject to an underlying lease, this Agreement is expressly
made contingent upon consent by the landlord of such Premises, if required by
the terms of the underlying lease, to the use and occupancy by Logility of such
Premises in accordance with the terms of this Agreement; provided, however, that
a landlord's refusal to consent to this Agreement with regard to a particular
Premises shall in no event affect Logility's or ASI's obligations hereunder with
regard to any other Premises, although Schedule I hereto shall be amended to
delete the affected Premises from the terms of this Agreement.
5.5. Logility shall not cause or permit any Hazardous Material to be used,
stored, discharged, released, or disposed of in, from, under, or about any of
the Premises in violation of any Applicable Law. As used herein, the term
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"Hazardous Material" means any substance or material which has been determined
by any applicable foreign, federal, state, county, municipal, or other
governmental authority to be capable of posing a risk of injury to health or
safety or damage to the environment. Logility shall not undertake any hazardous
or other activity at any of the Premises which could result in an increase in
ASI's or any landlord's insurance premiums.
6. Insurance; Condemnation.
-----------------------
6.1. At all times during Logility's use of any of the Premises under this
Agreement, Logility shall procure at its cost and expense and keep in effect
comprehensive general liability insurance, including contractual liability with
a combined single limit of liability of not less than one million dollars
($1,000,000), or such greater amount as may be required under any underlying
lease, in accordance with the following requirements:
6.1.1. Such coverage shall be in a commercial or comprehensive general
liability form with at least the following coverages: (i) including employees as
additional insureds, and (ii) providing for blanket contractual coverage, broad
form property damage coverage and products and completed operations coverage.
Such coverage may be provided by a combination of primary and umbrella liability
coverage.
6.1.2. Such insurance shall be issued by financially reputable insurance
companies reasonably acceptable to ASI, shall name ASI and any landlord under
any underlying lease as additional insureds, shall include contractual liability
coverage insuring the liability assumed hereunder by Logility, shall provide
that it is primary insurance and not excess over or contributory with any other
valid, existing, and applicable insurance covering the same loss carried by ASI
or any other party, shall provide for severability of interests, shall further
provide that an act or omission of one of the named insureds which would void or
otherwise reduce coverage shall not reduce or void the coverage as to any
insured, shall afford coverage for all claims based on acts, omissions, injury,
or damage which occurred or arose (or the onset of which occurred or arose) in
whole or in part during the policy period, and shall provide that ASI and any
landlord under an underlying lease will receive at least thirty (30) days'
written notice from the insurer prior to any cancellation or change of coverage.
6.2. Logility shall maintain Workers Compensation Insurance in the amounts
and coverages required under workers compensation, disability, and similar
employee benefit laws applicable to the state or country where each of the
Premises is located and Employer's Liability Insurance, with limits customary to
the state or country where each of the Premises is located.
6.3. Logility shall maintain automobile liability insurance in the amounts
and coverages required by the state or country where each of the Premises is
located, with limits customary to the state or country where each of the
Premises is located, for bodily injury and property damage combined. Coverage
shall include owned (if any), leased (if any), and non-owned, hired automobiles.
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6.4. Logility shall bear all risk to its property at each of the Premises
and may maintain at its sole expense such fire and other property insurance on
the property of Logility in each Premises as it deems desirable for its
protection. If any of the Premises shall be damaged or destroyed by fire or any
other casualty howsoever caused or by any other cause whatsoever, Logility
agrees to give prompt notice thereof to ASI. ASI shall have no obligation to
Logility whatsoever to repair any damage done to any of the Premises or replace
any property of Logility located therein. If a casualty occurs such that the
underlying lease with respect to any Premises is terminated by ASI or the
landlord, or ASI otherwise elects to cease using any of the Premises as a result
of the casualty, the provisions of Section 8.1 below shall apply, and this
Agreement shall terminate with respect to such Premises. If a casualty occurs
such that Logility's use of a Premises is materially adversely affected and the
damage is not repaired within ninety (90) days, Logility shall have the right to
terminate this Agreement with respect to such Premises by written notice to ASI
within thirty (30) days thereafter. If a casualty occurs that results in a
permanent damage or destruction to the Premises which does not rise to the level
described in the preceding sentence, the amount payable by Logility under
Section 3 shall be proportionately reduced for that portion of the Premises
damaged or destroyed.
6.5. If all or any part of any of the Premises or any material portion of
any Premises shall be taken as a result of the exercise of the power of eminent
domain or any transfer in lieu thereof, this Agreement shall terminate as to the
property so taken as of the date of taking, and, in the case of a partial
taking, either ASI or Logility shall have the right to terminate this Agreement
with respect to such Premises by written notice to the other within thirty (30)
days after such date.
6.5.1. In the event of any taking, ASI (subject to the rights of the
landlord under any underlying lease) shall be entitled to any and all
compensation, damages, income, rent, awards, and interest whatsoever which may
be paid or made in connection therewith, and Logility shall have no claim
against ASI for the value of any unexpired term of this Agreement or otherwise;
provided that ASI shall have no claim to any portion of the award that is
specifically allocable to Logility's personal property, relocation expenses, or
the interruption of or damage to Logility's business.
6.5.2. In the event of a partial taking that does not result in a
termination of this Agreement, the amount payable by Logility under Section 3
shall be proportionately reduced for that portion of the Premises taken.
7. Utilities and Services. During the use by Logility of any Premises in
----------------------
accordance with this Agreement; (a) if ASI owns the Premises, subject to force
majeure (including any cause beyond ASI's commercially reasonable control), ASI
shall furnish to Logility such services and utilities as are furnished currently
at each such Premises, each in such amounts, on average, as have been
customarily furnished to equivalent space in the respective Premises; and (b) if
ASI leases the Premises, ASI shall use reasonable efforts to cause the landlord
of such leased Premises to furnish to or for the benefit of the Premises the
services and utilities that the landlord is obligated to provide under the
underlying lease, it being understood and agreed that under no circumstances
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shall ASI be required to make any improvements to the respective Premises or the
systems located therein or provide any greater services to the applicable
Premises than the greater of such services as (i) are currently furnished or
(ii) ASI reasonably determines from time to time to be necessary or appropriate
for the conduct of ASI's business in the respective Premises.
8. Termination.
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8.1. Notwithstanding anything in this Agreement to the contrary, the Term
shall in any event terminate with respect to any given Premises (without
affecting the parties' rights and obligations with regard to any other Premises)
on the date of (i) the expiration or termination for any reason of the
underlying lease for such Premises, if such Premises is leased by ASI, or (ii)
the sale, abandonment, or vacation of any such Premises, if such Premises is
owned by ASI. ASI shall give Logility as much advance notice as is reasonably
practicable in connection with any planned early termination of the underlying
lease of any of the leased Premises or the sale, abandonment, or vacation by ASI
of any of the owned Premises. Logility agrees to take all reasonable actions to
accommodate ASI's real estate objectives, including, without limitation,
promptly vacating the Premises where ASI plans to terminate the underlying lease
or operations at a particular Premises. In the event of any such termination of
this Agreement by ASI with respect to any such Premises, (i) Logility's
obligations to make payments to ASI pursuant to Section 3 hereof with respect to
such Premises shall cease as of the effective date of termination, and (ii)
Schedule I hereto shall be amended to delete the affected Premises from the
terms of this Agreement.
8.2. Either party shall have the right to terminate this Agreement with
respect to any given Premises (without affecting the parties' rights and
obligations with regard to any other Premises) for any reason before the end of
the Term, such termination to be effective ninety (90) days after written notice
of termination from the terminating party to the other party. In the event of
any such termination of this Agreement by Logility with respect to any such
Premises, Logility's obligations to make payments to ASI pursuant to Section 3
hereof with respect to such Premises shall cease as the last day of the month in
which the effective date of termination shall occur. In the event of any such
termination of this Agreement by ASI with respect to any such Premises,
Logility's obligations to make payments to ASI pursuant to Section 3 hereof with
respect to such Premises shall cease as of the effective date of termination.
In either event, Schedule I hereto shall be amended to delete the affected
Premises from the terms of this Agreement.
8.3. This Agreement will be subject to early termination by either
Logility or ASI upon one hundred eighty (180) days written notice if ASI ceases
to own shares of Common Stock representing more than 50% of the combined voting
power of the capital stock of Logility.
8.4. If either Logility or ASI shall default in the performance or
observance of any material term, covenant, condition, or agreement contained in
this Agreement, and such condition continues for more than thirty (30) days
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after written notice thereof to the defaulting party (unless a shorter cure
period is provided elsewhere in this Agreement), the other party may terminate
this Agreement immediately upon notice to the defaulting party; provided,
however, if such default by its nature cannot be cured within thirty (30) days,
then the defaulting party shall have such greater period of time to cure such
default as is reasonably necessary, so long as the cure is commenced within the
thirty (30) day period and is thereafter diligently prosecuted to completion.
In no event, however, shall any cure period provided under this Section 8.4
exceed whatever cure period may exist under the underlying lease for ASI to
prevent or cure a default. Upon such termination, Logility shall immediately
vacate and surrender the affected Premises to ASI in accordance with Section
8.6. In addition to the rights of termination under this Section 8.4, ASI shall
be entitled to exercise all other rights and remedies under this Agreement and
under Applicable Laws (which shall he cumulative and not exclusive),
specifically including, without limitation, the right to summary dispossession
of Logility.
8.5. ASI shall be entitled to perform any obligation of Logility under
this Agreement, the performance of which is not commenced within five (5)
business days after notice from ASI or which obligation is not thereafter
diligently prosecuted to completion, and in such event Logility shall reimburse
ASI for all actual costs and expenses incurred by ASI in performing such
obligation.
8.6. Upon the expiration or termination of this Agreement for whatever
reason with respect to any of the Premises, Logility shall surrender to ASI the
applicable Premises, together with all keys for such Premises, in good order and
repair, reasonable wear and tear associated with normal office use excepted, in
broom-clean condition, free and clear of all occupancies, liens, and
encumbrances, and Logility shall remove all of its personal property therefrom.
8.6.1. Any items of Logility's personal property remaining on any Premises
after the expiration or sooner termination of this Agreement with respect to
such Premises, may, at the option of ASI, be deemed abandoned, and, in such
case, may either be retained by ASI as its property or disposed of, without
accountability, at Logility's expense in such manner as ASI may see fit.
8.6.2. Logility shall not hold over beyond the expiration or sooner
termination of this Agreement with respect to any Premises without the express
written consent of ASI.
8.7. The failure of either party hereto to insist on any one or more
circumstances upon the strict performance of any term, covenant, condition, or
agreement under this Agreement, or to exercise any right herein contained, shall
not be construed as a waiver or relinquishment in the future of such term,
covenant, condition, agreement, or right, but the same shall remain in full
force and effect unless the contrary is expressed in writing by the party
waiving or relinquishing same. No payment by Logility or acceptance by ASI of a
lesser amount than shall be due by Logility to ASI hereunder shall be deemed to
be anything but payment on account, and the acceptance by ASI of such lesser
amount, whether by check with an endorsement or statement thereon, or by an
accompanying letter stating that said lesser amount is payment in full, shall
not be deemed an accord and satisfaction, and ASI may accept such payments
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<PAGE>
without prejudice to ASI's rights to recover the balance due or pursue any of
ASI's other remedies hereunder.
8.8 Logility's obligations under this Section 8 shall survive the
expiration or termination of this Agreement.
9. Release; Indemnity.
------------------
9.1. Logility acknowledges and agrees that, anything set forth in this
Agreement to the contrary notwithstanding, ASI shall not be responsible for or
liable to Logility, and Logility hereby waives and releases, to the fullest
extent permitted by Applicable Laws, all claims against ASI for any injury,
loss, or damage to any person or property in or about the Premises by or from
any cause whatsoever including, without limitation, acts or omissions of persons
using adjoining premises or any part of the Premises or areas in the vicinity of
the Premises; theft; burst, stopped, or leaking water, gas, sewer or steam
pipes; or interruption or failure of utility or other services for, or existence
of, gas, fire, oil, or electricity in, on or about the Premises. Further
notwithstanding anything to the contrary set forth in this Agreement, in no
event shall ASI be liable for any consequential damages, including without
limitation, lost profits, lost opportunity or interference with Logility's
business, arising out of a breach of this Agreement.
9.2. Logility agrees to indemnify, protect, and defend ASI against and
save and hold ASI harmless from, any and all losses, costs, liabilities, claims,
damages, and expenses, including, without limitation, reasonable attorneys' fees
and expenses, incurred in connection with any injury, loss, or damage to any
person or property arising from the use or occupancy or manner of use or
occupancy of any of the Premises by, or any breach of an underlying lease for
any leased Premises, arising out of the act or omission of, Logility or
Logility's Personnel. This Section 9.2 shall survive expiration or sooner
termination of this Agreement.
10. Miscellaneous.
-------------
10.1. For purposes of this Agreement, the term "subsidiary" means any
corporation, association, partnership, joint venture, or other business entity
of which more than 50% of the voting capital stock or other voting ownership
interests is owned or controlled directly or indirectly by Logility or ASI, as
the case may be, or by one or more of the subsidiaries of Logility or ASI, as
the case may be, or by a combination thereof. A subsidiary, when used with
respect to ASI or Logility, shall also include any other entity affiliated with
ASI or Logility, as the case may be, that ASI and Logility may hereafter agree
in writing shall be treated as a "subsidiary" for purposes of this Agreement.
10.2. This Agreement may not be amended except by an instrument in
writing, executed by ASI and Logility.
10.3. Logility's rights under this Agreement are personal to Logility, and
Logility shall not assign, sublet, or otherwise transfer any right or interest
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under this Agreement to any other party. Subject to the foregoing, this
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of, and be enforceable by, the parties hereto and their respective
heirs, administrators, executors, successors, and permitted assigns.
10.4. This Agreement constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings or representations pertaining to
the subject matter hereof.
10.5. Whenever this Agreement requires or permits consent, notice, or
agreement by or on behalf of any party hereto, such consent, notice, or
agreement shall be given in writing. Any consent, notice, or agreement
hereunder by either party shall be given in writing and shall be sufficient in
all respects if (i) delivered personally, (ii) mailed by registered or certified
mail, return receipt requested and postage prepaid, (iii) sent via a nationally
recognized overnight courier service, or (iv) sent via facsimile confined in
writing to the recipient in each case to the other party at its address set
forth below or at such other address designated by notice in the manner provided
in this subparagraph. Such notice shall be deemed to have been received upon
the date of actual delivery if personally delivered or, in the case of mailing,
five (5) business days after deposit in the mail, or, in the case of overnight
courier, one business day after delivered to such courier, or, in the case of
facsimile transmission, when confirmed by the facsimile machine report.
(a) If to ASI to:
American Software, Inc.
470 East Paces Ferry Road
Atlanta, Georgia 30305
Attention: Controller
Fax: 404/264-5813
(b) If to Logility, to:
Logility, Inc.
470 East Paces Ferry Road
Atlanta, Georgia 30305
Attention: Chief Financial Officer
Fax: 404/264-5394
10.6. This Agreement shall be governed by, and construed and enforced in
accordance with the laws of the State of Georgia, without regard for the
conflict of laws provisions thereof
10.7. If a jurisdiction outside the United States in which a Premises is
located requires that this Agreement be registered or filed with any
governmental office in order for this Agreement to be enforceable by or against
either party in that jurisdiction, the parties shall cooperate with such filing
or registration, provided that the registration or filing will not give rise to
a default under an underlying lease or unreasonably increase the likelihood of
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<PAGE>
an exercise of remedies for default under an underlying lease or create a cloud
on title to any Premises.
10.8 In the event that any dispute arises between Logility and ASI in
connection with this Agreement, the representatives of each party responsible
for the subject matter of such dispute shall use good faith efforts to resolve
such dispute promptly. In the event that such dispute cannot be resolved by the
parties' representatives, the matter shall be submitted to the parties'
respective Chief Executive Officers ("CEOs") for resolution. In the event that
the CEOs cannot reach resolution of the issue (an "Unresolved Dispute"), then
the Unresolved Dispute shall be settled at the election of either party, by
final and binding independent arbitration. All arbitrations pursuant to this
Agreement shall be conducted before the American Arbitration Association ("AAA")
in Atlanta, Georgia, U.S.A., and shall be carried out in accordance with the
Commercial Arbitration Rules of the AAA then in effect (the "Rules") and the
provisions of this Agreement. Logility and ASI shall each select one arbitrator
and a third arbitrator will be selected unanimously by the arbitrators selected
by Logility and ASI. If the two arbitrators selected by Logility and ASI are
unable to select the third arbitrator within ten (10) days of the appointment of
the two arbitrators, the parties consent to the selection of the third
arbitrator by the AAA administrator. The award of the arbitrators may be
enforced by any court having jurisdiction over the parties.
IN WITNESS WHEREOF, this Facilities Agreement has been duly executed and
delivered by the duly authorized officers of ASI and Logility as of the date and
year first above written.
AMERICAN SOFTWARE, INC. LOGILITY, INC.
By: /s/ James C. Edenfield By: /s/ J. Michael Edenfield
----------------------------- -------------------------------
Name: James C. Edenfield Name: J. Michael Edenfield
Title: President Title: President
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SCHEDULE I
----------
PREMISES AT WHICH LOGILITY IS ENTITLED TO EXCLUSIVE USE:
5820 Stoneridge Mall Road
Pleasanton, CA 94588
150 Fayetteville Street, Suite 1700
Raleigh, NC 27601
100 West Big Beaver
Troy, MI 48084
25 Corporate Drive
500 Burlington Centre
Burlington, Mass
PREMISES AT WHICH LOGILITY IS ENTITLED TO NON-EXCLUSIVE USE:
470 East Paces Ferry Road
Atlanta, GA 30305
7500 Flying Cloud
Eden Prairie, Minn
5605 North MacArthur Boulevard, Suite 850
Irving, Texas 75038
5000 Birch Street, Suite 5600
Newport Beach, CA 92660
6133 North River Road, Suite 680
Rosemont, ILL
St. George's Business Centre
Brooklands Road
1st Floor, Unit C
Weybridge Surrey, England
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SCHEDULE II
-----------
[ATLANTA FACILITIES]
470 East Paces Ferry Road
Atlanta, GA 30305
443 East Paces Ferry Road
Atlanta, GA 30305
480 East Paces Ferry Road
Atlanta, GA 30305
3110 Maple Drive
Atlanta, GA 30305
3116 Maple Drive
Atlanta, Georgia 30305
3120 Maple Drive
Atlanta, GA 30305
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<PAGE>
EXHIBIT 10.7
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT ("Agreement") is made and entered into as of the
23rd day of January, 1997 by and between AMERICAN SOFTWARE, INC., a Georgia
corporation ("ASI"), and LOGILITY, INC., a Georgia corporation ("Logility").
WITNESSETH:
WHEREAS, ASI is the common parent corporation of an affiliated group of
corporations within the meaning of Section 1504(a) of the Code (as hereinafter
defined);
WHEREAS, ASI beneficially owns all of the issued and outstanding Common
Stock of Logility, and Logility is a member of ASI's consolidated group for
federal income tax purposes;
WHEREAS, the parties are contemplating the possibility that Logility will
issue shares of its Common Stock to the public in an initial public offering
registered under the Securities Act of 1933, as amended;
WHEREAS, the ASI Group (as hereinafter defined) has filed and intends to
file consolidated federal income tax returns as permitted by Section 1501 of the
Code, and Logility and certain members of the ASI Sub-Group (as hereinafter
defined) have filed and intend to file returns relating to Combined State Taxes
(as hereinafter defined);
WHEREAS, Logility desires to engage ASI to provide certain services, and
ASI desires to provide certain services, relating to federal, state, local, and
foreign taxes; and
WHEREAS, ASI and Logility desire to agree upon a method for determining the
financial consequences to each party and their subsidiaries resulting from the
filing of consolidated federal income tax returns and the filing of returns
relating to Combined State Taxes.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, ASI and Logility, for themselves,
and their respective successors and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the terms set forth
-----------
below shall have the following meanings, in addition to the terms defined
elsewhere in this Agreement:
<PAGE>
(a) "ASI Group" shall mean, at any time, ASI and each direct and indirect
corporate subsidiary eligible to join with ASI in the filing of a consolidated
federal income tax return.
(b) "ASI Sub-Group" shall mean, at any time, ASI and each of its direct and
indirect corporate subsidiaries other than those subsidiaries that are members
of the Logility Group.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(d) "Combined State Tax" shall mean, with respect to each state or local
taxing jurisdiction, any income, franchise, or similar tax payable to such state
or local taxing jurisdiction in which a member of the Logility Group files tax
returns with a member of the ASI Sub-Group, on a consolidated, combined, or
unitary basis for purposes of such income of franchise tax.
(e) "Deconsolidation" shall mean any event pursuant to which Logility
ceases to be a subsidiary corporation includible in a consolidated tax return of
the ASI Group for Federal Tax purposes.
(f) "Effective Date" has the meaning ascribed to it in Section 4.9.
(g) "Federal Tax" shall mean any tax imposed under Subtitle A of the Code.
(h) "Final Determination" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313(a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to taxes other than
Federal Taxes, any final determination of liability in respect of a tax that,
under applicable law, is not subject to further appeal, review, or modification
through proceedings or otherwise, (ii) any final disposition of a tax issue by
reason of the expiration of a statute of limitations, or (iii) the payment of
tax by ASI with respect to any item disallowed or adjusted by any taxing
authority where ASI determines in good faith that no action should be taken to
recoup such payment.
(i) "Initial Public Offering" shall mean 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.
(j) "Logility Combined State Tax Liability" shall mean, with respect to any
taxable year and any jurisdiction, an amount of Combined State Taxes determined
in accordance with the principles set forth in the definition of Logility
Federal Tax Liability; provided, however, that the total amount of the Logility
Combined State Tax Liability shall also include, to the extent not included
after application of the principles set forth in the definition of Logility
Federal Tax Liability, any actual income, franchise, or similar state or local
tax liability (a "State Liability") owed in a jurisdiction (a "Combined
Jurisdiction") in which a member of the Logility Group files tax returns with a
member of the ASI Sub-Group, on a consolidated, combined, or unitary basis, to
the
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extent the Combined State Tax liability exceeds the amount of such liability
that would have been owed had no member of the Logility Group been included in
such returns.
(k) "Logility Federal Tax Liability" shall mean, with respect to any
taxable year, the sum of the Logility Group's Federal Tax liability and any
interest, penalties and other additions to such taxes for such taxable year,
computed as if the Logility Group were not and never were part of the ASI Group,
but rather were a separate affiliated group of corporations filing a
consolidated federal income tax return pursuant to Section 1501 of the Code;
provided, however, that transactions with members of the ASI Sub-Group shall be
reflected according to the provisions of the consolidated return regulations
promulgated under the Code governing intercompany transactions, and that
Deconsolidation will trigger any deferred amounts, excess loss accounts, or
similar items. Such computation shall be made (A) without regard to the income,
deductions (including net operating loss and capital loss deductions), and
credits in any year of any member of the ASI Group that is not a member of the
Logility Group, (B) by taking account of all Tax Assets of the Logility Group
other than any Tax Asset that produces a Tax Savings to ASI in accordance with
Section 2.1(c)(iii), (C) as though the highest rate of tax specified in
subsection (b) of Section 11 of the Code (for any other similar rates applicable
to specific types of income) were the only rate set forth in that subsection,
and with other similar adjustments as described in Section 1561 of the Code, (D)
reflecting the positions, elections, and accounting methods used by ASI in
preparing the consolidated federal income tax return for the ASI Group, and (E)
by not permitting the Logility Group any compensation deductions arising in
respect of the issuance by ASI of ASI stock to any employee of the Logility
Group.
(l) "Logility Group" shall mean, at any time, Logility and any direct or
indirect corporate subsidiaries of Logility that would be eligible to join with
Logility, with respect to Federal Taxes, in the filing of a consolidated federal
income tax return and, with respect to Combined State Taxes, in the filing of a
consolidated, combined, or unitary income or franchise tax return if Logility
were not consolidated, combined, or filing on a unitary basis with any member of
the ASI Sub-Group.
(m) "Post-Deconsolidation Tax Period" means (i) any tax period, or portion
thereof, beginning and ending after the date of Deconsolidation, and (ii) with
respect to a tax period that begins before and ends after the date of
Deconsolidation, such portion of the tax period that commences on the day
immediately after the date of Deconsolidation.
(n) "Pre-Deconsolidation Tax Period" means (i) any tax period, or portion
thereof, beginning and ending before or on the date of Deconsolidation, and (ii)
with respect to a period that begins before and ends after the date of
Deconsolidation, such portion of the tax period ending on and including the date
of Deconsolidation.
(o) "Tax Asset" means 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);
provided, however, the term "Tax Asset" shall not include any loss, deduction,
credit or other
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<PAGE>
tax attribute related to the Business of Logility (as such term is defined in
that certain Subsidiary Formation Agreement between certain members of the ASI
Group and Logility, dated of even date herewith), from a tax period (or portion
thereof) ending on or before the closing date of the Initial Public Offering.
(p) "Tax Savings" means the actual amount of reduction in taxes payable
(including refunds actually received) to a taxing authority with respect to the
then current tax period as a result of a Tax Asset as compared to the taxes that
would have been payable to a taxing authority for that tax period in the absence
of such Tax Asset; provided, however, Tax Savings shall not include any
reduction in alternative minimum tax.
1.2 Internal References. Unless the context indicates otherwise,
-------------------
references to Articles, Sections, and paragraphs shall refer to the
corresponding articles, sections, and paragraphs in this Agreement and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
TAX SHARING
2.1 Tax Sharing.
-----------
(a) General. For each taxable year of the ASI Group during which income,
-------
loss, or credit against tax of the Logility Group is includible in the
consolidated Federal Tax return of the ASI Group, Logility shall pay to ASI an
amount equal to the Logility Federal Tax Liability, and for each taxable period
during which income, loss, or credit against tax of any member of the Logility
Group is includible in a return relating to a Combined State Tax, Logility shall
pay to ASI an amount equal to the Logility Combined State Tax Liability for such
taxable period, each as shown on the Pro Forma Returns (as defined in paragraph
(c) below).
(b) Estimated Payments. For each taxable period, ASI may determine the
------------------
amount of the estimated tax installment of the Logility Federal Tax Liability
(corresponding to ASI's estimated Federal Tax installment), as determined under
the principles of Section 2.1(a). If ASI makes such a determination, Logility
shall, within ten (10) business days of the statutorily mandated payment date,
pay to ASI the amount so determined. For each taxable period, ASI may determine
under provisions of applicable law the amount of the estimated tax installment
of the Logility Combined State Tax Liability (corresponding to the relevant
estimated Combined State Tax installment), as determined under the principles of
Section 2.1(a). If ASI makes such a determination, Logility shall, within ten
(10) business days of the statutorily mandated payment date, pay to ASI the
amount so determined.
(c) Payment of Taxes at Year-End.
----------------------------
(i) Within thirty (30) days after the date the ASI Group's consolidated
Federal Tax return is filed, ASI shall make available to Logility a pro forma
Federal Tax return (a "Pro Forma Federal Return") of the Logility Group
4
<PAGE>
reflecting the Logility Federal Tax Liability. Within thirty (30) days after the
date the last Combined State Tax return is filed for the fiscal year to which
such returns relate, ASI shall make available to Logility the relevant pro forma
Combined State Tax Returns (each a "Pro Forma Combined State Return" and
together with the Pro Forma Federal Returns, the "Pro Forma Returns") of the
Logility Group reflecting the relevant Logility Combined State Tax Liability.
The Pro Forma Returns shall be prepared in good faith in a manner generally
consistent with past practice.
(ii) Within ten (10) business days of the statutorily mandated payment
date, Logility shall pay to ASI, or ASI shall pay to Logility, as appropriate,
an amount equal to the difference, if any, between the Logility Federal Tax
Liability reflected on the Pro Forma Federal Return for such year and the
aggregate amount of the estimated installments of the Logility Federal Tax
Liability for such year made pursuant to Section 2.1(b). Within ten (10)
business days of the statutorily mandated payment date, Logility shall pay to
ASI, or ASI shall pay to Logility, as appropriate, an amount equal to the
difference, if any, between the Logility Combined State Tax Liability reflected
on the relevant Pro Forma Combined State Tax Return and the aggregate amount of
the estimated installments paid with respect to the corresponding Logility
Combined State Tax Liability pursuant to Section 2.1(b).
(iii) If, under applicable law and consistent with this Agreement, the ASI
Sub-Group avails itself of a Tax Asset of the Logility Group, ASI shall pay to
Logility an amount equal to the Tax Saving attributable to such Tax Asset, if
and when realized by ASI. The parties agree that all net operating losses and
net capital losses of the ASI Group shall be taken into account by ASI in the
order in which such net operating losses and net capital losses have arisen; all
other Tax Assets of the Logility Group shall be taken into account by ASI in the
above-described manner, subject, however, to the ordering rules then in effect
under the Code.
(iv) In the event that ASI makes a cash deposit with a taxing authority in
order to stop the running of interest or makes a payment of tax and
correspondingly takes action to recoup such payment (such as suing for a
refund), Logility shall pay to ASI an amount equal to Logility's share of the
amount so deposited or paid (calculated in a manner consistent with the
determinations provided in this Article 2). Upon receipt by ASI of a refund of
any amounts paid by it in respect of which Logility shall have advanced an
amount hereunder, ASI shall pay to Logility the amount of such refund, together
with any interest received by it on such refund. If and to the extent that any
claim for refund or contest based thereupon shall be unsuccessful, the payment
by Logility under this Section 2.1(c)(iv) may be credited by ASI toward any of
Logility's obligations under this Section 2.1.
(d) Treatment of Adjustments. If any adjustment is made in a Federal Tax
------------------------
return of the ASI Group or in a return relating to a Combined State Tax Return
of the ASI Group, after the filing thereof, in which income or loss of the
Logility Group (or any member thereof) is included, then at the time of a Final
Determination of the adjustment Logility shall pay to ASI, or ASI shall pay to
Logility, as the case may be, the difference between all payments actually made
under Section 2.1 with respect to the taxable year or period covered by such tax
return and all payments that would have been made under Section 2.1 taking such
adjustment into account together
5
<PAGE>
with any penalties actually paid and interest for each day until the date of
Final Determination calculated at the rate determined, in the case of a payment
by Logility, under Section 6621(a)(2) of the Code and, in the case of a payment
by ASI, under Section 6621(a)(1) of the Code.
(e) Preparation of Returns and Contests. So long as the ASI Group elects
-----------------------------------
to file (i) consolidated Federal Tax returns as permitted by Section 1501 of the
Code or (ii) any Combined State Tax return as permitted by applicable state law,
Logility shall consent to the filing of such returns by ASI. ASI shall prepare
and file such returns and any other returns, documents, or statements required
to be filed with the Internal Revenue Service with respect to the determination
of the Federal Tax liability of the ASI Group and with the appropriate taxing
authorities with respect to the determination of a Combined State Tax liability.
With respect to such return preparation, ASI shall act in good faith with regard
to all members included in an applicable return. ASI shall have the right with
respect to any consolidated Federal Tax return or return relating to a Combined
State Tax that it has filed or will file to determine in good faith (i) the
manner in which such returns, documents or statements shall be prepared and
filed, including, without limitation, the manner in which any item of income,
gain, loss, deduction or credit shall be reported, (ii) whether any extensions
should be requested, and (iii) the elections that will be made by any member of
the ASI Group. In addition, ASI shall have the right, in good faith, to (i)
contest, compromise, or settle any adjustment or deficiency proposed, or as a
result of any audit of any Federal Tax return or return relating to a Combined
State Tax, (ii) file, prosecute, compromise or settle any claim for refund, and
(iii) determine whether any refunds shall be received by way of refund or
credited against tax liabilities. In addition, ASI shall prepare and file
ruling requests, and take all other actions on behalf of any member of the ASI
Group that it deems appropriate in providing tax services to the members of the
ASI Group. ASI shall, to the extent such information is available, advise
Logility of any significant Logility tax issue being contested by the federal,
state, local or other relevant taxing authorities, and shall keep Logility
informed with respect to any contest, compromise or settlement thereof.
(f) Foreign Tax Returns. Logility shall not be required to consent to the
-------------------
filing of any foreign tax return to be filed on a combined, consolidated, or
unitary basis with the ASI Sub-Group unless and until this Agreement is modified
to take into account the allocation of such foreign tax liability between the
ASI Sub-Group and the Logility Group. The allocation of such foreign tax
liability shall be in accordance with the principles set forth in this
Agreement.
2.2 Reimbursement for Certain Services. ASI shall provide services in
----------------------------------
connection with this Agreement, including, but not limited to, (i) those
services relating to the preparation of returns (including Pro Forma Returns)
described in paragraph 2.1(b) above, and (ii) services relating to the other
activities described in paragraph 2.1(e) above. As compensation for these
services, Logility shall pay ASI a fee calculated on a basis such that ASI is
reimbursed for all direct and indirect costs and expenses incurred with respect
to Logility's share of the overall costs and expenses incurred by ASI with
respect to tax-related services. ASI shall calculate and invoice Logility for
the fee payable, and Logility will pay the invoiced amount in a manner
consistent with the invoice and payment
6
<PAGE>
procedures provided for in that certain Services Agreement, between ASI, certain
members of the ASI Sub-Group, and Logility, dated of even date herewith.
2.3 Additional Services. ASI will provide the tax services described in
-------------------
this Article II with respect to all of the state, local and foreign taxes of
any members of the Logility Group that do not relate to consolidated Federal
Taxes or Combined State Taxes. ASI will provide these services in a manner
consistent with the principles contained in Article II and will be compensated
in the same manner as described in Section 2.2.
ARTICLE III
POST-DECONSOLIDATION
3.1. Additional Rights and Liabilities Post-Deconsolidation.
------------------------------------------------------
(a) Restrictions on Changes. Logility covenants that on or after a
-----------------------
Deconsolidation it will not, nor will it cause or permit any member of the
Logility Group to make or change any tax election, change any accounting method,
amend any tax return or take any tax position on any tax return, take any other
action, omit to take any action, or enter into any transaction that results in
any in tax liability or reduction of any Tax Asset of the ASI Group or any
member thereof (immediately after the Deconsolidation) in respect of any Pre-
Deconsolidation Tax Period, without first obtaining the written consent of an
authorized representative of ASI.
(b) Option to Reattribute Assets and Allocate Items. In the event of a
-----------------------------------------------
Deconsolidation, ASI may, at its option, elect, and Logility shall join ASI in
electing (if necessary), (i) to reattribute to itself certain Tax Assets of the
Logility Group pursuant to Treasury Regulations Section 1.1502-20(g) and, if ASI
makes such election, Logility shall comply with the requirements of Treasury
Regulations Section 1.1502-20(g)(5)), and (ii) to ratably allocate items (other
than extraordinary items) of the Logility Group in accordance with relevant
provisions of the Treasury Regulations Section 1.1502-76.
(c) Payment of Tax Savings. ASI agrees to pay to Logility the Tax Savings
----------------------
received by the ASI Group from the use in any Post-Deconsolidation Tax Period of
a carryover of any Tax Asset of the Logility Group from a Pre-Deconsolidation
Tax Period, if and when such Tax Savings are realized. The parties agree that
all net operating losses and net capital losses of the ASI Group shall be taken
into account by ASI in the order in which such net operating losses and net
capital losses have arisen; all other Tax Assets of the Logility Group shall be
taken into account by ASI in the above-described manner, subject, however, to
the ordering rules then in effect under the Code.
(d) Effect of Final Determination. Any amounts owed by ASI to Logility
-----------------------------
pursuant to Section 3.1(c) shall be paid within 90 days of the filing of the
applicable tax return for the taxable year in which such Tax Savings are
realized. If, subsequent to the payment by ASI to Logility of any such amount,
there shall be (i) a Final Determination which results in a disallowance or a
reduction of any Tax Asset of Logility or (ii) a reduction in the amount of the
Tax Savings realized by the ASI
7
<PAGE>
Group as a result of any other Tax Asset of ASI that arises in a Post-
Deconsolidation Tax Period, Logility shall repay to ASI, within 90 days of such
event described in (i) or (ii) (an "Event" or, collectively, the "Events") any
amount which would not have been payable to Logility pursuant to this Section
3.1 had the amount of the Tax Savings calculated in Section 3.1(c) been
determined in light of the Events. Logility shall hold ASI harmless for any
penalty or interest payable by any member of the ASI Group, as a result of any
Event. Any such amount shall be paid by Logility to ASI within 90 days of the
payment by ASI or any member of the ASI Group of any such interest or penalty.
Nothing in this Agreement shall require ASI to file a claim for refund of
Federal Taxes or Combined State Taxes which ASI, in its sole discretion,
determines lacks substantial authority, as defined in the Code and the
regulations thereunder.
ARTICLE IV
MISCELLANEOUS
4.1. Limitation of Liability. Neither ASI nor Logility shall be liable to
-----------------------
the other for any special, indirect, incidental, or consequential damages of the
other arising in connection with this Agreement; provided, however, that in the
event that (i) the Internal Revenue Service (or other competent taxing
authority) asserts a tax liability directly against Logility or any member of
the Logility Group, pursuant to its authority under Treasury Regulation Section
1.1502-6 (or other similar provision of foreign, state, or local law), (ii)
Logility has made all payments and performed all of its obligations otherwise
required of it under this Agreement with respect to such liability or otherwise,
and (iii) ASI was given the opportunity to consent, settle, or compromise such
liability pursuant to Section 2.1(e) of this Agreement, ASI shall indemnify
Logility for actual payments made after a Final Determination with respect to
such liability to the extent that such payments exceed Logility's share of such
liability (calculated in a manner that avoids double-counting under this
Agreement), which share shall be determined in accordance with Article II of
this Agreement.
4.2. Subsidiaries.
------------
(a) Performance. ASI agrees and acknowledges that ASI shall be responsible
-----------
for the performance of the obligations of each member of the ASI Sub-Group
hereunder applicable to such subsidiary. Logility agrees and acknowledges that
Logility shall be responsible for the performance by each member of the Logility
Group of the obligations hereunder applicable to such member.
(b) Application to Present and Future Subsidiaries. This Agreement is
----------------------------------------------
being entered into by ASI and Logility on behalf of themselves and each member
of the ASI Sub-Group and the Logility Group, respectively. This Agreement shall
constitute a direct obligation of each such member and shall be deemed to have
been readopted and affirmed on behalf of any corporation which becomes a member
of the ASI Sub-Group or the Logility Group in the future. ASI shall cause each
member of the ASI Group, and Logility shall cause each member of the Logility
Group, to comply fully with the terms of this Agreement. Each party shall, upon
8
<PAGE>
the written request of the other, cause any of their respective group members to
execute and deliver a counterpart of this Agreement.
4.3. Cooperation. ASI and Logility shall cooperate fully in the
-----------
implementation of this Agreement, including but not limited to, providing
promptly to the requesting party such assistance and documentation as may be
reasonably requested by such party in connection with any of the activities
described in Article II or Article III. In addition, ASI and Logility shall
retain all relevant tax records for relevant open periods in accordance with
past practice.
4.4. Agent. Each member of the Logility Group hereby irrevocably appoints
-----
ASI as its agent and attorney-in-fact to take any action as ASI may deem
necessary or appropriate to effect Section 2.1 including, without limitation,
those actions specified in Treasury Regulation Section 1.1502-77(a).
4.5. Amendments. This Agreement may not be amended or terminated orally,
----------
but only by a writing duly executed by or on behalf of the parties hereto. Any
such amendment shall be validly and sufficiently authorized for purposes of this
Agreement if it is signed on behalf of ASI and Logility by any of their
respective presidents or vice presidents.
4.6. Term. Subject to Article III, and unless sooner terminated by
----
written agreement of the parties hereto, this Agreement shall expire upon the
date of Deconsolidation with respect to all Post-Deconsolidation periods;
provided, however, that all rights and obligations arising hereunder with
respect to a Pre-Deconsolidation Tax Period shall survive until they are fully
effectuated or performed and, provided, further, that notwithstanding anything
in this Agreement to the contrary, all rights and obligations arising hereunder
with respect to a Post-Deconsolidation Tax Period shall remain in effect and its
provisions shall survive for the full period of all applicable statutes of
limitation (giving effect to any extension, waiver, or mitigation thereof).
4.7. Resolution of Disputes. Any disputes between the parties concerning
----------------------
the calculation of amounts, allocation, or attribution of costs, or any Tax
Asset or Tax Savings, or similar accounting matters shall be resolved in
accordance with ASI's interpretation of this Agreement, unless Logility shall
provide ASI with an opinion of a nationally recognized public accounting firm to
the effect that such interpretation is unreasonable. If such opinion takes the
position that ASI's interpretation of this Agreement is unreasonable, and the
parties, conferring in good faith, cannot thereafter successfully resolve such
dispute in a timely manner, then either party may submit the matter to binding
arbitration in accordance with the Rules of Commercial Arbitration of the
American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Such
arbitration shall occur in Atlanta, Georgia, unless the otherwise agreed by the
parties. The arbitrator(s) may, in such proceeding, award attorney's fees and
costs to the prevailing party.
4.8. Interest. Interest required to be paid by ASI to Logility or by
--------
Logility to ASI, as the case may be, under this Agreement shall unless otherwise
9
<PAGE>
specified, be computed at the rate and in the manner provided in the Code (or
comparable foreign, state, or local law) for interest on overpayments and
underpayments respectively, of federal, state, local, or foreign tax (as the
case may be) for the relevant period. Any payments required pursuant to this
Agreement which are not made within the time period specified in this Agreement
shall bear interest at the rate specified above for underpayments of federal
income tax plus three percent (3%).
4.9. Effective Date. This Agreement shall be effective as of January 23,
--------------
1997 (the "Effective Date"), shall govern all open taxable periods, and shall
supersede all prior agreements as to the allocation of federal income tax
liability between the parties to this Agreement for all such open taxable years
and for all subsequent taxable years.
4.10. Severability. If any provision of this Agreement or the application
------------
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid, illegal, or unenforceable to any
extent, the remainder of this Agreement or such provision or the application of
such provision to such party or circumstances, other than those to which it is
so determined to be invalid, illegal, or unenforceable, shall remain in full
force and effect to the fullest extent permitted by law and shall not be
affected thereby, unless such a construction would be unreasonable.
4.11. Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing, shall be deemed duly given upon actual receipt,
and shall be delivered (a) in person, (b) by registered or certified mail,
postage prepaid, return receipt requested, or (c) by facsimile or other
generally accepted means of electronic transmission (provided that a copy of any
notice delivered pursuant to this clause (c) shall also be sent pursuant to
clause (a) or (b)), addressed as follows:
(a) If to ASI to:
American Software, Inc.
470 East Paces Ferry Road
Atlanta, Georgia 30305
Attention: Controller
Fax: 404/264-5813
(b) If to Logility, to:
Logility, Inc.
470 East Paces Ferry Road
Atlanta, Georgia 30305
Attention: Chief Financial Officer
Fax: 404/264-5394
or to such other addresses or telecopy numbers as may be specified by like
notice to the other parties.
10
<PAGE>
4.12. Expenses. Unless otherwise expressly provided in this Agreement,
--------
each party shall bear any and all expenses that arise from its respective
obligations under this Agreement.
4.13. Further Assurances. ASI and Logility shall execute, acknowledge,
------------------
and deliver, or cause to be executed, acknowledged, and delivered, such
instruments and take such other actions as may be necessary or advisable to
carry out their obligations under this Agreement and under any exhibit,
document, or other instrument delivered pursuant hereto.
4.14. Entire Agreement. This Agreement constitutes the entire
----------------
understanding of the parties hereto with respect to the subject matter hereof.
4.15. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of any successor, by merger, acquisition of assets, or otherwise, to any
of the parties hereto (including but not limited to any successor of ASI and
Logility succeeding to the tax attributes of such party under Section 381 of the
Code), to the same extent as if such successor had been an original party
hereto.
4.16. Authorization, etc. Each of the parties hereto hereby represents
------------------
and warrants that it has the power and authority to execute, deliver, and
perform this Agreement, that this Agreement has been duly authorized by all
necessary corporate action on the part of such party, that this Agreement
constitutes a legal, valid and binding obligation of each such party, and that
the execution, delivery and performance of this Agreement by such party does not
contravene or conflict with any provision of law or of its charter or bylaws or
any agreement instrument or order binding on such party.
4.17. Section Captions. Section captions used in this Agreement are for
----------------
convenience and reference only and shall not affect the construction of this
Agreement.
4.18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Georgia.
4.19. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this agreement to
be executed by a duly authorized officer as of the date first above written.
AMERICAN SOFTWARE, INC. LOGILITY, INC.
By: /s/ James C. Edenfield By: /s/ J. Michael Edenfield
----------------------------- --------------------------------
Name: James C. Edenfield Name: J. Michael Edenfield
Title: President Title: President
11
<PAGE>
EXHIBIT 10.8
STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") is made and entered into as
of the 7th day of August, 1997 by and between Logility, Inc., a Georgia
corporation (the "Company"), and American Software, Inc., a Georgia corporation
(the "Holder").
W I T N E S S E T H:
WHEREAS, the Company is a wholly-owned subsidiary of the Holder;
WHEREAS, upon the completion of an initial public offering of up to
_____________ shares of common stock, no par value ("Common Stock"), of the
Company (the "Initial Public Offering"), the Company will cease to be a wholly-
owned subsidiary of the Holder;
WHEREAS, pursuant to the Company's 1997 Stock Plan (the "Plan"), the
Company may from time to time grant to certain of its directors and employees
options to purchase shares of Common Stock from the Company; and
WHEREAS, notwithstanding the grant of such options by the Company, the
Holder desires to maintain sufficient equity ownership in the Company to allow
the Company to qualify as a member of the Holder's affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Holder, for
themselves, and their respective successors and assigns, hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Holder an option
---------------
(the "Option"), exercisable at any time or from time to time prior to the
Expiration Date (as defined below), to purchase from the Company such number of
shares of Common Stock (and/or preferred stock of the Company if any shall be
issued and outstanding), as the Holder may determine in its sole judgment to be
appropriate to ensure that the Holder may continue to include the Company, as
well as any subsidiaries of the Company that may hereafter be formed, in the
Holder's consolidated federal income tax returns (in accordance with Section
1504 of the Code), or any successor or additional section dealing with the
inclusion of any entity within an affiliated group for purposes of filing a
consolidated return, regardless of the circumstances which may give rise to such
determination by the Holder. The Option shall expire and cease to be
exercisable upon the earlier of (a) the tenth anniversary of the date hereof
(subject to extensions for one or more successive ten-year terms, at the
Holder's option, upon delivery by the Holder to the Company of a written
notice(s) to that effect), or (b) the date on which either (i) the Holder makes
a distribution to its shareholders of all or any portion of its shares of Common
Stock, or (ii) the Company, with the express written consent of the Holder,
issues or enters into an agreement to issue shares of Common Stock other than
pursuant to the Plan such that those shares, when issued and when combined with
the Common Stock authorized
<PAGE>
under the Plan and issued and outstanding shares of Common Stock not held by
Holder, exceed 20% of the issued and outstanding shares of Common Stock. The
date of such expiration is referred to herein as the "Expiration Date."
2. Purchase Price. The per-share purchase price for any shares
--------------
purchased pursuant to the Option shall be the average of the closing price, on
each of the five business days immediately preceding the date of payment of such
purchase price, for shares of Common Stock (or, to the extent applicable,
preferred stock of the Company) on the principal national securities exchange or
automated interdealer quotation system on which such shares are traded, such as
NASDAQ, as published in the Wall Street Journal, or if such sale prices are
-------------------
unavailable or such shares are not so traded, the purchase price for such shares
shall be their fair market value as determined in accordance with procedures
reasonably satisfactory to the Company and the Holder, which determination shall
be conclusive.
3. Exercise of Option; Closing. The Holder may, at any time or from time
---------------------------
to time prior to the Expiration Date, exercise the Option by delivering to the
Company a written notice (an "Exercise Notice") to such effect specifying the
number of shares of Common Stock and/or preferred stock of the Company that the
Holder has determined to purchase. Except to the extent that the parties may
otherwise agree, the closing of the purchase and sale of the shares specified in
any Exercise Notice shall occur at the principal executive offices of the
Company on the third business day following the date on which such Exercise
Notice is delivered to the Company, or such other day as agreed upon by the
Company and the Holder. At closing, the Holder shall deliver to the Company the
purchase price in immediately available funds, and the Company shall deliver to
the Holder one or more certificates representing the shares specified in the
Exercise Notice, registered in the name of the Holder, against delivery by the
Holder to the Company of the aggregate purchase price therefor. Notwithstanding
anything to the contrary herein contained, in the event that any shares of
Common Stock are issued upon the exercise of any option granted under the Plan
(the "Plan Option") and such issuance would otherwise prevent the Holder from
continuing to include the Company in the Holder's consolidated federal income
tax return, the Option shall automatically be deemed to have been exercised in
respect to a number of shares of Common Stock equal to four times the number of
shares of Common Stock issued upon the exercise of the Plan Option (unless the
Holder shall have theretofore notified the Company in writing that the Holder
shall have terminated the foregoing automatic exercise feature of the Option),
and the closing of the purchase and sale of the shares of Common Stock subject
to such automatic exercise of the Option (the "Automatic Exercise Shares") shall
occur (or shall be deemed to have occurred) concurrently with the issuance of
shares of Common Stock pursuant to the Plan Option. In the event that it shall
have been impractical to effect the deliveries contemplated by the second
preceding sentence at the time that the closing of the purchase and sale of the
Automatic Exercise Shares shall have been deemed to have occurred, such
deliveries shall be made as promptly as practicable thereafter; provided,
--------
however, that such Automatic Exercise Shares shall nonetheless be deemed to have
- -------
been issued to the Holder concurrently with the issuance of shares of Common
Stock pursuant to the Plan Option, and legal title to funds of the Holder (which
shall be held in trust by the Holder for the benefit of the Company pending the
delivery thereof to the Company) in an amount equal to the aggregate purchase
price for
2
<PAGE>
the Automatic Exercise Shares shall be deemed to have concurrently passed to the
Company in consideration of such issuance of the Automatic Exercise Shares.
4. Representations and Warranties; Corporate Action. The Company hereby
------------------------------------------------
represents and warrants to the Holder that all shares of Common Stock (or, to
the extent applicable, preferred stock) issued to the Holder upon any exercise
of the Option shall, upon issuance thereof as provided herein against payment of
the purchase price therefor as provided herein, be duly authorized, validly
issued, fully paid and nonassessable, and hereby undertakes (i) to cause any and
all corporate and other actions required in connection therewith to be taken in
a timely manner and (ii) not to take any action that would prevent the foregoing
representations and warranties from being true and correct.
5. Miscellaneous.
-------------
(a) Effectiveness. This Agreement shall become effective on the date on
-------------
which the purchase and sale of shares of Common Stock pursuant to the Initial
Public Offering first occurs.
(b) Entire Agreement; Amendment; Assignment. This Agreement constitutes
---------------------------------------
the entire agreement between the parties with respect to the subject matter
hereof and may not be amended except by an instrument signed by the parties
hereto. This Agreement may not be assigned by either party hereto to any other
person, except that the Holder may assign this Agreement to any of its
affiliates.
(c) Further Assurances. From time to time, upon request by either party and
------------------
without further consideration, the parties shall execute and deliver such
further instruments and take such further actions as may be reasonably required
in order to carry out the purposes and intents of this Agreement.
(d) Notices. All notices given in connection with this Agreement shall be
-------
in writing. Service of such notices shall be deemed complete (i) if hand
delivered, on the date of delivery, (ii) if by mail, on the fourth business day
following the day of deposit in the United States mail, by certified or
registered mail, first-class postage prepaid, or (iii) if sent by Federal
Express or equivalent courier service, on the next business day. Such notices
shall be addressed to the parties at the following addresses or at such other
address for a party as shall be specified by like notice (except that notices of
change of address shall be effective upon receipt):
If to the Holder: American Software, Inc.
470 East Paces Ferry Road, N.E.
Atlanta, Georgia 30305
Attn: Controller
Facsimile No.: 404/264-5813
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If to the Company: Logility, Inc.
470 East Paces Ferry Road, N.E.
Atlanta, Georgia 30305
Attn: Chief Financial Officer
Facsimile No.: 404/264-5394
(e) Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the State of Georgia, without giving effect to the
principles of conflict of laws of such State.
IN WITNESS WHEREOF, the Company and the Holder have caused this Agreement
to be executed and sealed on the date first above written.
LOGILITY, INC.
By: /s/ J. Michael Edenfield
--------------------------------------
Its: President
--------------------------------------
[CORPORATE SEAL]
AMERICAN SOFTWARE, INC.
By : /s/ James C. Edenfield
-------------------------------------
Its: President
-------------------------------------
[CORPORATE SEAL]
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EXHIBIT 10.9
TECHNOLOGY LICENSE AGREEMENT
LOGILITY, INC. - AMERICAN SOFTWARE, INC.
THIS TECHNOLOGY LICENSE AGREEMENT (the "Agreement") is made as of August 1,
1997, by and between LOGILITY, INC., a Georgia corporation ("Logility") and
AMERICAN SOFTWARE, INC., a Georgia corporation, for itself and its Affiliate
companies (hereinafter collectively, "American Software").
WHEREAS, Logility is the owner of certain technology related to Logility's
Value Chain Planning and Execution Solutions software products, and American
Software desires a license to use such technology in order to maintain and
support end-users of such software products, and Logility is willing to grant
such a license to American Software, upon the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the foregoing premises, the mutual
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Logility and American
Software hereby agree as follows:
1. DEFINITIONS. All capitalized terms used herein and not otherwise
defined shall have the following meanings:
"AFFILIATE" of a person shall mean a Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by
or is under common control with such person. "Control" (and, with
correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession of the power to direct or cause the
direction of the management and policies of such person, whether through
the ownership of voting stock, by contract or otherwise. In the case of a
corporation, "control" shall mean, among other things, the direct or
indirect ownership of more than 50% of its outstanding voting stock. For
purposes of this Agreement, American Software shall not be deemed an
Affiliate of Logility, and Logility shall not be deemed an Affiliate of
American Software.
"END-USER" shall mean a Person that licenses or has licensed one or
more Products from American Software.
"IMPROVEMENTS" shall have the meaning ascribed to such term in Section
2.3 hereof.
"PERSON" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust, limited
liability company or other entity.
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"PRODUCTS" shall mean, collectively, all Logility's Value Chain
Planning and Execution Solutions, including WarehousePRO, Transportation
Management, and Transportation Planning software products now or hereafter
owned by Logility.
"PROPRIETARY RIGHTS" shall mean all patent rights, copyrights, trade
secret rights, trademarks and similar rights.
"SOFTWARE TECHNOLOGY" shall mean all Technology used in connection
with the Products.
"TECHNOLOGY" shall mean public and nonpublic technical or other
information, inventions, trade secrets, know-how, processes, formulations,
concepts, ideas, data and testing results, experimental methods, and any
other written, printed or electronically stored materials.
"THIRD PARTY" shall mean any Person other than Logility, American
Software or an Affiliate of Logility or American Software.
2. GRANT OF LICENSES.
2.1. GRANT OF ROYALTY-FREE LICENSE. Subject to the terms and
conditions of this Agreement, Logility hereby grants to American Software a non-
exclusive, non-transferable (subject to Sections 2.2, 2.3 and 7.9) worldwide,
perpetual right and license under its Proprietary Rights to use, execute,
reproduce, display, modify and prepare Derivative Works of, the Products for the
limited purpose of maintaining and supporting End-Users of the Products. The
foregoing license shall be fully paid and royalty-free.
2.2. SUBLICENSE RIGHTS.
2.2.1. Subject to the terms and conditions of this Agreement,
American Software shall have the right to grant sublicenses of the rights
granted under Section 2.1 hereof to End-Users of the Products for the limited
purpose of maintaining and supporting such End-Users' use of the Products.
2.3 IMPROVEMENTS.
2.3.1 American Software and Logility shall each promptly
disclose to the other any and all enhancements and improvements which they make
or acquire in relation to the Products or, derivatives thereof ("Improvements");
provided, however, that the foregoing shall not require either party to disclose
to the other any Improvement which it makes specifically for a Third Party and
which such party is restricted from disclosing to the other party pursuant to
the terms of its agreement with the Third Party.
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2.3.2 Subject to the terms and conditions of this Agreement,
American Software hereby grants to Logility in respect of Improvements made by
American Software, and Logility hereby grants to American Software in respect of
Improvements made by Logility, a non-exclusive, non-transferable, fully paid,
worldwide, perpetual right and license under their respective Proprietary
Rights, to use, execute, reproduce, display, modify and prepare Derivative Works
of said Improvements.
2.3.3 Subject to the terms and conditions of this Agreement,
each party shall have the right to grant sublicenses of the rights granted to it
under Section 2.3.2 hereof to (i) its respective Affiliates, and (ii) End-Users
of Products incorporating the Improvements without prior permission of the other
party.
3. TERM AND TERMINATION.
3.1 TERM. This Agreement shall be effective as of the Effective
Date and shall continue in full force and effect indefinitely, unless terminated
earlier as provided in Section 3.2 hereof.
3.2 EARLY TERMINATION.
3.2.1 EARLY TERMINATION BY LOGILITY. Logility shall have the
right to terminate this Agreement upon written notice of termination to American
Software in the event that:
(a) At any time, American Software or its Affiliates fail to perform
or observe, or otherwise breach any of American Software's material obligations
under this Agreement, and such failure or breach continues unremedied for a
period of ninety (90) days after receipt by American Software of written notice
thereof from Logility or, in the event that such failure or breach is not
capable of cure within ninety (90) days, for such longer period of time as
American Software is vigorously pursuing such cure in good faith; or
(b) American Software shall either (i) seek the liquidation,
reorganization, dissolution or winding-up of itself or the composition or
readjustment of its debts, (ii) apply for or consent to the appointment of, or
the taking possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its assets, (iii) make a general assignment
for the benefit of its creditors, (iv) commence a voluntary case under the
bankruptcy code, (v) file a petition seeking to take advantage of any other law
relating to bankruptcy, reorganization, winding-up or composition or
readjustment of debts, or (vi) adopt any resolution of its board of directors or
stockholders for the purpose of effecting any of the foregoing.
3.2.2 EARLY TERMINATION BY AMERICAN SOFTWARE. American
Software shall have the right to terminate this Agreement, with or without
cause, at any time on sixty (60) days' prior written notice to Logility.
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3.3 EFFECTS OF TERMINATION.
3.3.1 If either party terminates this Agreement pursuant to
Section 3.2. hereof:
(a) all rights to the Technology, Products and Improvements
licensed by Logility to American Software hereunder shall revert solely to
Logility, and all rights to American Software's Improvements licensed by
American Software to Logility hereunder shall revert solely to American
Software;
(b) any sublicense by either party to End-Users previously
granted shall survive such termination;
(c) any sublicense of American Software's rights hereunder that
has been granted to an Affiliate may be terminated or maintained directly
between Logility and the Affiliate, as Logility shall elect in its sole
discretion; and
(d) each party's obligations, liabilities and indemnities
hereunder in respect of the Products previously sold by such party, its
Affiliates or permitted sublicensees shall survive termination.
4. CONFIDENTIALITY
4.1. American Software and Logility each agrees that all Technology,
Improvements and other technical, business, and financial information it obtains
from the other party ("Proprietary Information") is the confidential property of
the disclosing party. Except as expressly allowed herein, each party will hold
the Proprietary Information of the other party in confidence and shall not use
or disclose such Proprietary Information. However, the foregoing confidentiality
obligation shall not apply to information which the receiving party can
document:
(a) is or has become readily publicly available without
restriction through no fault of the receiving party or its employees or
agents;
(b) is received without restriction from a third party lawfully
in possession of such information and lawfully empowered to disclose such
information;
(c) was rightfully in the possession of the receiving party
without restriction prior to its disclosure by the other party; or
(d) was independently developed by employees or consultants of
the receiving party without access to the Proprietary Information of the
other party.
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4.2. American Software and Logility each agrees that there is no
adequate remedy at law for a breach of Section 4.1 above and that such a breach
would irreparably harm the other and that the other party is entitled to
equitable relief (including, without limitations, injunctions) with respect to
any such breach or potential breach, in addition to any other remedies.
5. REPRESENTATIONS, WARRANTIES AND INDEMNITIES.
5.1. Logility represents and warrants to American Software that it
has the full power and authority to enter into this Agreement and grant all
licenses granted to American Software hereunder in respect of the Software
Technology and the Products.
5.2. American Software represents and warrants to Logility that it
has full power and authority to enter into this Agreement and will carry on its
obligations hereunder promptly and in good faith.
5.3. American Software and Logility each warrants to the other that
it shall have adequate rights and authority to license to the other any and all
Improvements described in Section 2.3 that it makes or acquires.
5.4 EXCEPT AS EXPRESSLY PROVIDED IN SECTIONS 5.1 AND 5.3 HEREOF,
LOGILITY MAKES NO WARRANTY WITH RESPECT TO ANY TECHNOLOGY, PRODUCT, SERVICE,
RIGHT OR OTHER SUBJECT MATTER OF THIS AGREEMENT, AND HEREBY DISCLAIMS WARRANTIES
OF MERCHANT-ABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING.
5.5. American Software and Logility shall each (the "Indemnifying
Party") indemnify the other (the "Indemnified Party") from awarded damages,
settlements, costs, (including but not limited to reasonable fees and
disbursements of counsel incurred by an Indemnified Party in any action or
proceeding between the Indemnified Party and the Indemnifying Party or between
an Indemnified Party and any third party or otherwise) and other out-of-pocket
expenses incurred in connection with a claim against the Indemnified Party based
on or relating to (i) any action or omission of the Indemnifying Party or its
agents or employees related to the obligations of the Indemnifying Party under
this Agreement, or (ii) any breach by the Indemnifying Party of its
representations and warranties hereunder; provided, however, that the foregoing
shall not apply (a) if the claim is found to be based upon the negligence,
recklessness or willful action or inaction of the Indemnified Party, or (b) if
the Indemnified Party fails to give the Indemnifying Party prompt notice of any
claim it receives and such failure materially prejudices the Indemnifying Party,
or (c) solely to the extent of the indemnification for reasonable legal fees and
disbursements of counsel of the Indemnified Party, unless the Indemnifying Party
is given the opportunity to control the defense of such action, or (d) unless
the Indemnifying Party is given the opportunity to approve any settlement, which
approval shall
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not be unreasonably withheld; and provided further that, except in the event of
a material conflict of interest, the Indemnifying Party shall not be liable for
separate attorney's fees of the Indemnified Party after assuming control of the
defense or settlement.
6. INCIDENTAL AND CONSEQUENTIAL DAMAGES. NEITHER PARTY WILL BE LIABLE
------------------------------------
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR ANY
INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY SUBJECT MATTER OF THIS
AGREEMENT.
7. GENERAL
7.1. In the event that any provision of this Agreement shall be
rendered invalid or otherwise unenforceable by any competent or judicial
government authority, such invalidity or unenforceability shall not effect the
validity or enforceability of any other provision of this Agreement, and the
invalid provision shall be deemed amended to the fullest extent allowable by
applicable law to effect the purposes of said provision.
7.2 Logility and American Software shall each be excused for any
failure or delay in performing any of their respective obligations under this
Agreement, if such delay or failure is caused by any act of God, accident,
explosion, fire, storm, riot, embargo, war, failure or delay of transportation,
shortage of or inability to obtain supplies, equipment, fuel or labor or any
other circumstance or event beyond the reasonable control of the party relying
upon such circumstance or event.
7.3. American Software and Logility each hereby agrees to comply with
all export laws and restrictions and regulations of the Department of Commerce
or other United States or foreign agency or authority, and not to knowingly
export, or allow the export or re-export of any Product, Technology or
Improvement, or any derivatives thereof in violation of any such restrictions,
laws or regulations, or, without all required licenses and authorizations, to
Afghanistan, the People's Republic of China or any Group Q, S, W, Y or Z country
specified in the then current Supplement No. I to Section 770 of the U.S. Export
Administration Regulations (or any successor supplement or regulations).
7.4. This Agreement and the Subsidiary Formation Agreement set forth
the entire agreement and understanding between the parties as to the subject
matter hereof and merges all prior understandings, discussions and negotiations
between them. Neither of the parties shall be bound by any conditions,
modifications, definitions, warranties, understandings or representations with
respect to such subject matter other than as expressly provided for herein
unless set forth in writing and signed by a proper and duly authorized
representative of each party to be bound thereby.
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7.5. All notices in connection with this Agreement shall be in
writing and shall be sent to the address given below or to such other address as
the parties may hereafter specify and shall be deemed given when received.
If to American Software: American Software, Inc.
470 East Paces Ferry Road, N.E.
Atlanta, Georgia 30305
Attention: Controller
If to Logility: Logility, Inc.
470 East Paces Ferry Road, N.E.
Atlanta, Georgia 30305
Attention: Chief Financial Officer
7.6. This Agreement shall be considered as having been entered into
in the State of Georgia and shall be construed and interpreted in accordance
with the laws of the State of Georgia.
7.7 Dispute Resolution.
7.7.1 In the event that any dispute arises between American
Software and Logility in connection with this Agreement, the representatives of
each party responsible for the subject matter of such dispute shall use good
faith efforts to resolve such dispute promptly. In the event that such dispute
cannot be resolved by the parties' representatives, the matter shall be
submitted to the parties' respective Chief Executive officers ("CEOs") for
resolution. In the event that the CEOs cannot reach resolution of the issue (an
"Unresolved Dispute"), then the matter shall be settled by binding arbitration
in accordance with the provisions of Section 7.7.2. hereof.
7.7.2 Any Unresolved Dispute, after the completion of the steps
set forth above, shall be settled at the election of either party, by final and
binding independent arbitration. All arbitrations pursuant to this Agreement
shall be conducted before the American Arbitration Association ("AAA") in
Atlanta, Georgia, U.S.A., and shall be carried out in accordance with the
Commercial Arbitration Rules of the AAA then in effect (the "Rules") and the
provisions of this Agreement. American Software and Logility shall each select
one arbitrator and a third arbitrator will be selected unanimously by the two
arbitrators selected by American Software and Logility. If the two arbitrators
selected by American Software and Logility are unable to select the third
arbitrator within ten (10) days of the appointment of the two arbitrators, the
parties consent to the selection of the third arbitrator by the AAA
administrator.
7.8 No waiver by either party, whether expressed or implied, of any
provision of this Agreement, or of any breach or default, shall constitute a
continuing waiver of such provision or of any other provision of this Agreement.
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7.9. This Agreement and the rights and obligations of the parties
under this Agreement may only be assigned or transferred with the prior written
consent of the other party, except with respect to assignments to an acquiror of
all or substantially all the assets, business or stock of a party.
7.10. Each of American Software and Logility hereby agrees to duly
execute and deliver, or cause to be duly executed and delivered, such further
instruments and to do and cause to be done such further acts and things,
including, without limitation, the filing of such additional assignments,
agreements, documents and instruments, that may be necessary or as the other
party hereto may at any time and from time to time reasonably request in
connection with this Agreement or to carry out more effectively the provisions
and purposes of, or to better assure and confirm unto such other party, its
rights and remedies under this Agreement.
7.11 The terms and provisions of this Agreement shall inure to the
benefit of, and be binding upon, American Software, Logility and their
respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
AMERICAN SOFTWARE, INC.
By: /s/ James C. Edenfield
---------------------------------
Name: James C. Edenfield
Title: President
LOGILITY, INC.
By: /s/ J. Michael Edenfield
----------------------------------
Name: J. Michael Edenfield
Title: President
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EXHIBIT 10.10
MARKETING LICENSE AGREEMENT
LOGILITY, INC. - AMERICAN SOFTWARE USA, INC.
THIS MARKETING LICENSE AGREEMENT (this "Agreement") is entered into by and
between LOGILITY, INC., a Georgia corporation (hereinafter "Logility"), and
AMERICAN SOFTWARE USA, INC., a Georgia corporation, for itself and its affiliate
companies (hereinafter collectively referred to as "American Software"), and
shall be effective as of the 1st day of August, 1997 (the "Effective Date").
WITNESSETH:
WHEREAS, Logility is the owner of certain computer programs defined herein
as the "Products," which Products were previously owned by American Software;
and
WHEREAS, American Software is in the business of distributing and
supporting computer programs to its customers and prospects and has prior to the
date of this Agreement marketed and supported the Products; and
WHEREAS, American Software has special knowledge concerning the business
needs of its customers and prospects; and
WHEREAS, Logility wishes to appoint American Software as its non-exclusive
marketing representative for the Products and authorize American Software to
provide certain services relating to such marketing efforts; and
WHEREAS, American Software is willing to accept such appointment and to
undertake to provide such services under the terms of this Agreement;
NOW, THEREFORE, the parties agree as follows:
1. SCOPE. The Products covered by this Agreement are listed on Exhibit A
hereto and consist of computer programs and associated end-user documentation
offered generally to end-users by Logility under the terms and conditions of its
standard license agreement. Additional software applications may be added to the
list of Products with the mutual consent of the parties. Logility also offers
enhancement and error-correction services with respect to the Products under the
terms and conditions of said agreement. Logility reserves the right to change
such agreement at any time.
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2. APPOINTMENT OF AMERICAN SOFTWARE. Subject to the terms and conditions
hereof, Logility hereby designates and appoints American Software for the term
of this Agreement, as a non-exclusive representative for the solicitation of
license agreements relating to the Products from prospective end-users who are
also licensees of other software systems licensed by American Software. American
Software hereby accepts such designation and appointment. For purposes of this
Agreement the term "affiliate" shall mean any entity that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such other entity. In the case of a corporation,
control shall mean, among other things, the direct or indirect ownership of more
than fifty percent (50%) of its outstanding voting stock. The foregoing
notwithstanding, however, for the purpose of this Agreement, Logility shall not
be deemed to be an affiliate of American Software, and American Software shall
not be deemed an affiliate of Logility.
3. DUTIES OF AMERICAN SOFTWARE.
3.1 American Software agrees, for the term of this Agreement, that it
shall promote and market the Products to prospective end-users who are also
licensees of software systems licensed by American Software by:
1.Identifying prospects that may benefit from use of the Products in
conjunction with other systems licensed by American Software.
2.Contacting such prospects and conducting presentations of the Products.
3.Performing demonstrations of the Products to prospective end-users either
on the premises of such end-users or at American Software's facilities.
4.Negotiating and obtaining the prospects' execution of license agreements
and service agreements.
5.Forwarding executed license agreements and service agreements to Logility
for Logility's evaluation and acceptance.
6.Serving as a point of contact for necessary communications between end-
users and Logility with respect to the Products.
3.2 American Software shall prepare and submit to Logility monthly a
complete and accurate written report of its activities hereunder, including,
without limitation, the following:
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1. A description of all promotional and marketing activities undertaken
during the preceding month setting forth the identity and addresses of
prospective end-users.
2. A summary of the nature of contacts made with such end-users and
American Software's assessment of the results of such contacts.
3. A listing by identity and date of all license agreements executed by
prospective end-users and forwarded to Logility as a result of
American Software's activities.
4. DEMONSTRATION RIGHTS. Logility hereby grants to American Software a
nonexclusive, nontransferable license to use during the term of this Agreement a
reasonable number of "Demonstration Copies" of each Product for purposes of
demonstrating the Product to prospective end-users in connection with the
marketing activities. American Software shall use the Demonstration Copies for
making demonstrations to prospective end-users (1) on computer systems owned or
leased by American Software or (2) on the computer system of a prospective end-
user. In each case, American Software shall (1) control and limit the use of
Products for the specific purpose authorized; (2) accompany the prospective end-
user at all times that the Product is installed at the site of such prospective
end-user; and (3) upon completion of the demonstration, remove the Product from
such end-user's computer and cause the deletion of all portions of the Product
from computer files in which it resided. American Software acknowledges that the
Products, including any intellectual property rights pertaining thereto, are
owned by Logility and represent or contain valuable copyrights and trade secrets
of Logility. American Software shall not attempt to reverse-engineer or
decompile the machine-readable code in which the programs are delivered.
American Software shall protect the Products from unauthorized copying,
dissemination, or disclosure and from other unauthorized use.
5. LICENSE AGREEMENTS
5.1 American Software shall have the authority to solicit the signature of
end-users on Logility's standard form of license agreement, as such agreement
may be revised from time to time by Logility and furnished to American Software,
and such other license agreements as the American Software and Logility may
mutually agree. Additionally, upon request by an end-user, American Software
may solicit the signature of such end-user on American Software's standard form
of license agreement as such agreement may be revised from time to time by
American Software, provided, however, such license agreement if accepted by
Logility, shall be promptly assigned by American Software to Logility.
Notwithstanding anything to the contrary in this Agreement, American Software
shall not execute or accept on behalf of Logility any agreement solicited from
an end-user under this Section 5.1, and American Software shall inform all end-
users that any license agreement solicited under this Section 5.1 must be
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forwarded to Logility for consideration, acceptance, and execution by Logility
in order for such agreement to be binding on Logility.
5.2 Notwithstanding anything to the contrary contained in this Agreement,
American Software has and shall exercise no authority to (i) make any
alterations in Logility's standard form of license agreement; (ii) make
statements or representations concerning the Products that exceed or are
inconsistent with the marketing materials and technical specifications provided
to American Software by Logility; or (iii) bind Logility to any undertaking or
performance with respect to the Products.
6. ANCILLARY SERVICES
6.1 American Software may also provide to end-users appropriate ancillary
services in support of the Products. Such services include, without limitation,
the following:
1.Assistance with installation of the Products on end-users' computers.
2.Technical training of end-users' personnel.
3.Implementation and consulting support services to end-users with respect
to the functions and operation of the Products.
6.2 The terms, conditions, and charges for such ancillary services shall
be established by American Software directly with end-users. American Software
shall inform each end-user (1) that Logility's obligations are limited to those
contained in the license agreement, (2) that any services of American Software
are offered on American Software's own accounts, and (3) that American Software
is solely responsible for such ancillary services.
6.3 Upon the request by American Software, and subject to Section 6.2,
Logility may provide to American Software (or to an end-user on behalf of
American Software) the ancillary services described in Section 6.1 in support of
the Products. All such ancillary services shall be provided to American
Software (or to an end-user on behalf of American Software) at rates agreed upon
from time to time by American Software and Logility, provided such rates shall
in no event exceed Logility's published rate schedule, as in effect at the time
such services are rendered by Logility. The parties acknowledge and agree that
American Software, and not the end-user shall be responsible for payment to
Logility for services provided under this Section 6.3, provided that Logility
shall not be entitled to payment from American Software unless and until (and
only to the extent that) American Software receives payment for such services
from an end-user.
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7. UNDERTAKING OF LOGILITY. Logility shall
1.Promote the Products as it deems appropriate with international and local
advertising.
2.Provide to American Software's employees technical training with respect
to the Products. Logility shall provide such training at its own cost,
but American Software shall be responsible for travel and living expenses
incurred by its employees.
3.Provide reasonable quantities of marketing materials, including
descriptive brochures and promotional materials suitable for unrestricted
distribution.
4.Evaluate the qualifications of prospective end-users who have executed
license agreements and service agreements forwarded to Logility by
American Software. Logility reserves the right, in its discretion, to
reject license agreements and service agreements executed by prospective
end-users.
5.Perform all obligations of Logility under accepted license agreements,
including shipment or delivery to end-users of copies of the computer
programs, documentation, error-correction materials, and updates that
constitute the Products.
6.Invoice and collect amounts payable under each license agreement accepted
by Logility.
8. COMPENSATION
8.1 (A) American Software shall receive a commission equal to thirty
percent (30%) of the net license fee revenue actually collected by Logility
under license agreements for Products with users who are also licensees of
software products of American Software which are secured and forwarded to
Logility by American Software and accepted by Logility.
(B) Those affiliates of American Software USA, Inc., who are located
in the United Kingdom (American Software UK, Ltd.) and in France (American
Software (France) SA) shall receive a commission equal to fifty percent (50%) of
the net license fee revenue actually collected by Logility under license
agreements for Products which they have secured and which have been accepted by
Logility, provided that such affiliates also carry out the installation of the
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Products licensed and provide first-line support services during the warranty
period and any term of Product support services provided to such license
agreements.
The term "net license fee revenue" means the actual license fee revenue
received by Logility less royalties, commissions or similar payments due third
parties in connection with the licensing of Products. Payment of compensation to
American Software shall be made by Logility within thirty (30) days after
receipt of payment from end-user. Cash payment shall be accompanied by a
detailed accounting of the basis for such payment, identifying the source and
amount of applicable revenues received by Logility. "Net license fee revenue"
shall not include maintenance or service fees paid to Logility by end-users.
8.2 Amounts payable to American Software shall be subject to a charge-back
or credit in favor of Logility in the amount previously paid American Software
with respect to amounts that are refunded to end-users. American Software agrees
to cooperate with Logility and aid in the collection of accounts receivable
under license agreements forwarded to Logility by American Software.
8.3 American Software shall be responsible for its own expenses and costs
under this Agreement, and Logility shall have no obligation to reimburse
American Software for any expenses or costs incurred by American Software in the
performance of its duties hereunder.
9. TERM AND TERMINATION
9.1 The term of this Agreement shall commence upon the Effective Date and
shall continue for five (5) years thereafter unless sooner terminated in
accordance with the provisions hereof. This Agreement may be thereafter extended
only by written instrument executed by both parties.
9.2 Logility may terminate this Agreement upon written notice to American
Software in the event of the breach of any material obligation hereunder by
American Software that is not cured by American Software after receipt from
Logility of thirty (30) days' written notice calling attention to such breach
and demanding cure thereof. In the event of such termination for cause,
Logility's sole obligation to American Software shall be to pay compensation
accrued for net revenues collected on covered license agreements accepted by
Logility prior to the date of termination.
9.3 Either party may terminate this Agreement for such party's own
convenience and at such party's discretion upon twelve (12) months' prior
written notice to the other party.
6
<PAGE>
9.4 Upon termination of this Agreement for any reason, American Software
shall within thirty (30) days of such termination destroy or return to Logility
all Demonstration Copies of the Products, and all copies of related marketing
materials. American Software shall further provide to Logility copies of
American Software's prospect files.
10. INDEMNITIES
10.1 Logility hereby agrees to indemnify American Software from and against
any and all claims, demands, or actions arising out of any material breach by
Logility of any of the terms and conditions of any license agreement with an
end-user secured by American Software hereunder or any breach of Logility's
obligations hereunder.
10.2 American Software hereby agrees to indemnify Logility from and
against any and all claims, demands, or actions arising out of American
Software's activities or performance outside the express authorization provided
American Software under this Agreement or any breach of American Software's
obligations hereunder.
10.3 The indemnities contained in this Section 10 shall be conditioned
upon the indemnifying party's receiving (1) prompt written notice of any claims,
demands, or actions for which indemnity is sought; (2) cooperation in the
defense by the party seeking indemnity; and (3) control of the defense and/or
settlement of such claim, demand, or action as to which indemnity is sought.
11. LIMITATIONS OF LIABILITY. In no event shall either party hereto be
entitled to special, indirect, or consequential damages, including lost profits,
for breach of this Agreement. Remedies shall be limited to claims for amounts
due hereunder or for indemnification as provided for herein. However, the
foregoing limitation of remedies shall not apply to any action by Logility for
infringement by American Software; any action based on or with respect to
unauthorized publication, disclosure, or use of confidential information or
trade secrets of Logility; or any action based on Logility's rights in
copyrights, trademarks, or trade secrets or other proprietary rights in the
Products.
12. TRADEMARKS. Except for purposes of identification of Products, no
right, title, interest, or license in or to any trademark or service mark of
Logility is granted to American Software under this Agreement. American Software
may on its business cards, stationery and marketing materials state that
American Software is an authorized agent of Logility for the licensing of the
Products.
13. STATUS OF AMERICAN SOFTWARE'S PERSONNEL. The parties to this
Agreement are and shall remain independent contractors, and nothing herein shall
be construed to create a partnership, or joint venture, between Logility and
7
<PAGE>
American Software. American Software shall be responsible for the wages, hours,
and conditions of employment of American Software's personnel during the term of
and under this Agreement. Nothing herein shall be construed as implying that
employees of American Software are employees of Logility.
14. NOTICES. All notices, demands, or consents required or permitted
under this Agreement shall be in writing and shall be delivered personally or
sent by certified or registered mail to the appropriate party at the address set
forth below, or at such other address as shall be given by either party to the
other in writing:
Logility, Inc. American Software USA, Inc.
470 East Paces Ferry Road, N.E. 470 East Paces Ferry Road, N.E.
Atlanta, Georgia 30305 Atlanta, Georgia 30305
Attn: Chief Financial Officer Attn: Controller
15. CHOICE OF LAW. This Agreement shall be deemed to be made in the
State of Georgia and in all respects shall be interpreted, construed, and
governed by and in accordance with the laws of the State of Georgia.
16. WAIVER OF RIGHTS. The waiver by either party of any term or provision
of this Agreement shall not be deemed to constitute a continuing waiver thereof
nor of any further or additional rights such party may hold under this
Agreement.
17. NO ASSIGNMENT; ENFORCEABILITY. This Agreement is personal to American
Software and is not assignable without the prior written consent of Logility.
Any attempt to assign, transfer, or subcontract any of the rights, duties, or
obligations of this Agreement without such consent is void.
18. DISPUTE RESOLUTION
18.1 In the event that any dispute arises between Logility and American
Software in connection with this Agreement, the representatives of each party
responsible for the subject matter of such dispute shall use good faith efforts
to resolve such dispute promptly. In the event that such dispute cannot be
resolved by the parties' representatives, the matter shall be submitted to the
parties' respective Chief Executive Officers ("CEOs") for resolution. In the
event that the CEOs cannot reach resolution of the issue (an "Unresolved
Dispute"), then the matter shall be settled by binding arbitration in accordance
with the provisions of Section 18.2 hereof.
18.2 Any Unresolved Dispute, after the completion of the steps set forth
above, shall be settled at the election of either party, by final and binding
independent arbitration. All arbitrations pursuant to this Agreement shall be
8
<PAGE>
conducted before the American Arbitration Association ("AAA") in Atlanta,
Georgia, U.S.A., and shall be carried out in accordance with the Commercial
Arbitration Rules of the AAA then in effect (the "Rules") and the provisions of
this Agreement. Logility and American Software shall each select one arbitrator
and a third arbitrator will be selected unanimously by the arbitrators selected
by Logility and American Software. If the two arbitrators selected by Logility
and American Software are unable to select the third arbitrator within ten (10)
days of the appointment of the two arbitrators, the parties consent to the
selection of the third arbitrator by the AAA administrator. The award of the
arbitrators may be enforced by any court having jurisdiction over the parties.
19. EXPORT RESTRICTIONS
Logility and American Software each hereby agrees to comply with all export
laws and restrictions and regulations of the Department of Commerce or other
United States agency or authority, and not to knowingly export, or allow the
export or re-export of any Product, or any derivatives thereof, in violation of
any such restrictions, laws or regulations, or, without all required licenses
and authorizations, to Afghanistan, the People's Republic of China or any Group
Q, S, W, Y or Z country specified in the then current Supplement No. 1 to
Section 770 of the U.S. Export Administration Regulations (or any successor
supplement or regulations).
20. GENERAL
20.1 In the event that any provision of this Agreement shall be rendered
invalid or otherwise unenforceable by any competent judicial or government
authority, such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision of this Agreement and the invalid
provision shall be deemed amended to the fullest extent allowable by applicable
law to effect the purposes of said provision.
20.2 Logility and American Software shall each be excused for any failure
or delay in performing any of their respective obligations under this Agreement,
if such delay or failure is caused by any act of God, any accident, explosion,
fire, storm, riot, embargo, war, any failure or delay of transportation,
shortage of or inability to obtain supplies, equipment, fuel or labor or any
other circumstance or event beyond the reasonable control of the party relying
upon such circumstance or event.
20.3 The parties agree that this Agreement is the complete and exclusive
statement thereof between the parties and that it supersedes and merges all
prior proposals and understandings and all other agreements, whether oral or
written, between the parties relating to the subject matter hereof. This
Agreement may not be modified or altered except by a written instrument duly
executed by the parties hereto.
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as set forth below.
AMERICAN SOFTWARE USA, INC.
BY: /s/ James C. Edenfield
_______________________________
NAME: JAMES C. EDENFIELD
TITLE: PRESIDENT
LOGILITY, INC.
BY: /s/ J. Michael Edenfield
_______________________________
NAME: J. MICHAEL EDENFIELD
TITLE: PRESIDENT
10
<PAGE>
EXHIBIT A
The Products:
All Logility's Value Chain Planning and Execution Solutions products,
including, but not limited to:
. Demand Planning
. Inventory Planning
. Event Planning
. Replenishment Planning
. Manufacturing Planning
. Demand Chain Voyager
. Supply Chain Voyager
. Warehouse Management
. Transportation Management
. Transportation Planning
11
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is a legally binding contract between Logility, Inc.,
its affiliates, and its subsidiaries (collectively "Company"), as employer, and
James Modak as a key employee of Company. This Agreement is intended to
- -----------
protect important interests of Company, particularly valuable technology and
business interests that Company has acquired over the years. In addition, this
Agreement is intended to provide a way for the Company to prevent unfair
competition in its industry. It is hoped that in the long run the terms of this
Agreement will be a benefit, rather than a burden, to all personnel by promoting
the welfare and success of Company as a leader in its industry and in its
community.
The Company believes that the terms of this Agreement are fair and
reasonable. Many of these terms merely restate or clarify policies and legal
obligations that are already in effect. Certain other terms are new,
particularly the restrictive covenants contained in Sections 5 and 6 hereof.
The continuance of your employment and the willingness of Company to grant you
access to its trade secrets, and business information are contingent upon your
entering into this Agreement.
This Agreement does not replace or alter any written policies of
agreements already in effect. Nothing in this Agreement should be construed as a
guarantee that your employment will continue for any specific period of time.
Unless otherwise agreed in writing, either party may terminate employment at any
time without cause, and Company reserves the right to change the terms of
compensation or to reassign employees to any area at any time.
Section 1
SCOPE OF DUTIES
1.1 While I am employed by Company, I will devote my full business
time, attention, skill, and effort exclusively to the performance of the duties
that Company may assign to me from time to time. During my employment, I will
not engage in any activities or render any services of a business or commercial
nature for anyone other than Company, unless I have obtained advance approval in
writing from the President of the Company or his designee pursuant to a written
appointment.
Section 2
OWNERSHIP OF INVENTIONS AND OTHER DEVELOPMENTS
2.1 Company shall be entitled to own and control all proprietary
technology and all financial, operating, and training idea, processes, and
materials, including works of expression and all copyrights in such works, that
are developed, written, or conceived of by me during employment to the extent
that they relate to Company's current or potential business. Accordingly, I
will disclose, deliver, and assign to Company all such patentable inventions,
discoveries, and improvements; trade secrets; and all work subject to copyright,
and I agree to execute all documents, patent applications, and arrangements
necessary to further document such ownership and/or assignment and to take
whatever other steps may be needed to give Company the full benefit of them.
1
<PAGE>
I specifically agree that all copyrightable materials generated or developed
and covered by this Agreement, including but not limited to computer programs
and documentation, shall be considered works made for hire under the copyright
laws of the United States and that they shall, upon creation, be owned
exclusively by Company.. To the extent that any such materials, under
applicable law, may not be considered works made for hire, I hereby assign to
Company the ownership of all copyrights in such materials, without the necessity
of any further consideration, and Company shall be entitled to register and hold
in its own name all copyrights in respect of such materials
Section 3
CONFIDENTIALITY OF TRADE SECRETS AND BUSINESS INFORMATION
3.1 I acknowledge that during the course of my employment I may
obtain access to trade secrets and confidential information, knowledge or data
concerning the business of the Company. Under the law, a trade secret is a type
of intangible property, and its theft is a crime in most states. A trade secret
generally consists of valuable, secret information or ideas that Company
collects or uses in order to keep its competitive edge. Examples of trade
secrets are system designs, program materials (including source and object code
and system and user documentation), operating processes, equipment design,
product specifications, and any other proprietary technology. Confidential
information, which Company also treats as proprietary, consists of all other
competitively sensitive information kept in confidence by Company. Examples of
confidential information are selling and pricing information and procedures,
customer lists, business and marketing plans, and internal financial statements.
3.2 I agree not to use or disclose any trade secrets of Company at
any time except as necessary to perform my duties for Company. I also agree not
to use or disclose any confidential business information until 10 years after
the termination of my employment, except as necessary to perform my duties for
Company. I further agree that my obligation not to use or disclose trade
secrets or confidential information also extends to such types of information
of customers, prospective customers, vendors, suppliers or agents of the
Company, or other third parties, who may have disclosed such information to the
Company or me in he course of the business of the Company. These restrictions
do not apply to any information generally available to the public or any
information properly obtained from a completely independent source.
Section 4
TERMINATION OF EMPLOYMENT
4.1 At the time my employment is terminated, I will participate in an
exit interview conducted by a designated Company official for the purpose of
finalizing any remaining issues and assuring a proper transition.
2
<PAGE>
4.2 On or before the termination of my employment, I will return all
records, materials, and other physical objects relating to my employment,
including documents, papers, computer software, and passwords and other
identification materials. This obligation applies to all materials relating to
the affairs of Company or any of its customers, prospective customers, vendors,
suppliers, or agents that may be in my possession or control.
Section 5
PROHIBITION AGAINST COMPETITIVE ACTIVITIES AFTER EMPLOYMENT
5.1 FOR A PERIOD OF ONE YEAR FOLLOWING THE TERMINATION OF MY
EMPLOYMENT WITH COMPANY, I WILL NOT ENGAGE, EITHER ON MY OWN BEHALF OR ON BEHALF
OF ANY OTHER PERSON OR ENTITY, IN ANY OF THE PROHIBITED ACTIVITIES SPECIFIED IN
EXHIBIT A ANYWHERE IN THE GEOGRAPHIC TERRITORY SPECIFIED IN EXHIBIT A.
5.2 Company has made every effort to limit the terms of this
obligation to what is absolutely necessary to protect its interest, even though
it is facing intense, worldwide competition in a large and diverse industry.
5.3 This obligation shall apply regardless of whether employment is
terminated with or without cause.
5.4 FOR A PERIOD OF ONE YEAR FOLLOWING THE TERMINATION OF MY
EMPLOYMENT WITH COMPANY I AGREE TO NOTIFY COMPANY IN WRITING EACH TIME I ACCEPT
ANY NEW JOB FOLLOWING THE TERMINATION OF MY EMPLOYMENT. DISCLOSING THE NAME OF
MY NEW EMPLOYER AND THE NATURE OF MY NEW JOB. I AGREE THAT COMPANY MAY CONTACT
MY NEW EMPLOYER WHENEVER I ACCEPT A NEW JOB, TO MAKE SURE THAT I AN IN
COMPLIANCE WITH THE TERMS OF THIS AGREEMENT.
Section 6
PROHIBITION AGAINST UNFAIR RECRUITING PRACTICES
6.1 I agree to notify my supervisor if I am contacted by a customer
or competitor of Company for the purpose of having me accept a job involving
Prohibited Activities as specified in Exhibit A anywhere in the Geographic
Territory specified in Exhibit A at any time during my employment with Company
and for a period of one year thereafter.
6.2 During my employment with the Company and for two years
afterwards, I will not directly or indirectly solicit, recruit or hire nor aid
others in soliciting or hiring any other people who are then employees of
Company, for the purpose of encouraging them to join in any other business
activity of enterprise whatsoever.
3
<PAGE>
Section 7
OTHER TERMS
7.1 The terms of this Agreement shall survive termination of
employment.
7.2 If any provision or part thereof of this Agreement is found by a
court to be unenforceable, all other provisions or parts thereof shall
nevertheless remain enforceable to the fullest extent possible.
7.3 Irreparable harm should be presumed if this Agreement is breached
in any way. Damages would be difficult if not impossible to ascertain, and the
faithful observance of all terms of this Agreement an essential condition to
employment with Company. Furthermore, this Agreement is intended to protect the
proprietary rights of Company and certain third parties in important ways, and
even the threat of any misuse of the technology of Company or such third parties
would be extremely harmful because of the importance of that technology. In
light of these considerations, I agree that a court of competent jurisdiction
should immediately enjoin any breach of this Agreement, upon Company's request,
and Company is released from the requirements of posting any bond in connection
with temporary or interlocutory injunctive relief, to the extent permitted by
law.
This Agreement shall be governed by and enforced under the laws of the
State of Georgia.
4
<PAGE>
I ACKNOWLEDGE THAT, BEFORE SIGNING THIS AGREEMENT, I WAS GIVEN AN OPPORTUNITY TO
READ IT, EVALUATE IT, AND DISCUSS IT WITH MY PERSONAL ADVISORS AND WITH
REPRESENTATIVES OF EMPLOYER.
EMPLOYEE:
/s/ JAMES M. MODAK
- ---------------------------------------------------
SIGNATURE
JAMES M. MODAK
- ---------------------------------------------------
NAME (TYPE OR PRINT)
SOCIAL SECURITY NO.
--------------------------------
ADDRESS:
-------------------------------------------
-------------------------------------------
DATE: JULY 24, 1997
-------------------------------------------
ACCEPTED:
LOGILITY, INC.
/s/ J. MICHAEL EDENFIELD
- -------------------------------------------
- -------------------------------------------
ITS REPRESENTATIVE
J. MICHAEL EDENFIELD
PRESIDENT & CHIEF EXECUTIVE OFFICER
5
<PAGE>
EXHIBIT A
I will not provide computer software installation, consulting,
training, testing, implementation, programming, maintenance or modification
services directly on or affecting any computer software product supplied to any
third party by Logility, Inc., anywhere in the United States of America.
/s/ James M. Modak
------------------------------------------
Signature
James M. Modak
------------------------------------------
Name (Type or Print)
6
<PAGE>
J. Michael Edenfield
President and
Chief Executive Officer
July 21, 1997
Mr. James M. Modak
6953 Wethersfield Road
Columbus, GA 31904-3317
Dear Jim:
This letter will confirm our recent discussions concerning employment
opportunities with Logility, Inc. I trust you will find all the points
discussed below to be consistent with our prior discussions. This job offer is
contingent upon satisfactory background and reference checks and the execution
of the employment agreement. This offer will remain open for seven days after
receipt of this letter.
POSITION
Your title will be that of Chief Financial Officer, Senior Vice-President,
Logility, Inc. We would like you to assume your responsibilities on or about
August 4, 1997. You will report to Mike Edenfield, President and Chief
Executive Officer, Logility, Inc.
COMPENSATION
Your compensation plan will consist of two segments: a monthly salary and an
Incentive Bonus Opportunity.
A. Your monthly salary will be $12,500.00.
B. The Incentive Bonus Opportunity portion of your compensation plan will be
$48,000.00 This assumes all objectives for the various components of the
incentive opportunity are met. Please refer to the following regarding your
bonus opportunity:
I. You will receive a $12,000.00 bonus upon Logility, Inc. going public.
II. You are eligible for an additional $36,000.00 at plan if the
following is met:
a) The average daily closing price of Logility, Inc. stock for the
30 day period commencing 15 days prior to August 4, 1998 is:
1. (Equal to or greater than) 120% of the IPO Price = $6,000.00
2. (Greater than) 120% of the IPO Price then in addition to 1
above, you will receive a variable pro-rated amount of
$12,000.00 at 160% of the IPO Price. For example, at 140% the
pro-rated amount will equal $6,000.00 At 180%, the pro-rated
amount will equal $18,000.00
7
<PAGE>
James Modak
Page 2
July 21, 1997
b) Revenue Growth:
1. If for the 4 quarter period ending July 31, 1998 revenue
growth (equal to or greater than) 30% = $6,000.00
2. Revenue growth (greater than) 30% then in addition to 1
above, you will receive a variable pro-rated amount of
$12,000.00 at 60% growth. For example, at 40% growth the
pro-rated amount will equal $4,000.00; at 80% the pro-rated
amount will equal $20,000.00
TRAVEL EXPENSES
The Company will reimburse you for reasonable travel and living expenses
incurred in the performance of your duties. The Company will pay US$.28 per
mile for all Company related travel via your personal automobile. In addition,
the Company will pay normal business operating costs for a cellular
telephone. The Company will pay all reasonable office expenses which are
authorized and approved in advance
FRINGE BENEFITS
Upon your first day of employment you will be granted 35,000 shares of American
Software stock options at the best market price during the month of your hire.
These options will be exercisable per American Software's existing stock option
plan. In addition, upon the creation of Logility's stock option plan, you will
receive 10,000 shares of Logility stock options. You shall be eligible for
Logility, Inc.'s various standard insurance plans and the 401(k) Profit Sharing
Plan in accordance with the policies therein. An insurance benefits summary is
enclosed for your review. In addition, Logility, Inc. will provide you with a
relocation package that will enable you to move from Columbus, GA to Atlanta,
GA. The relocation plan is detailed in Attachment #1. If you have any questions
regarding the employment offer in general, please call me or Kevvon Burdette at
404/264-5205. If you have any questions regarding the various insurance, 401(k),
vacation/sick leave policies, or other corporate benefits, please call Carla
Maldonado at 404/238-8997.
MISCELLANEOUS
In the event there is a change of control in the ownership of Logility, Inc.,
then if you or the Company terminates your employment within (6) months of such
change of control, you will receive two years of the then current salary.
You have stated to us that "I have not entered into any agreement with my
current and/or previous employer(s) which would preclude my entering into
employment with Logility, Inc. and effectively carrying out my assigned job
responsibilities." A copy of our standard Employment Agreement is enclosed for
your review and signature.
8
<PAGE>
James Modak
Page 3
July 21, 1997
Please indicate your agreement by signing below and returning a signed copy to
Kevvon Burdette, Director of Corporate Recruiting, along with the Employment
Agreement form, the Immigration Reform and Control Act form, the Confidential
Information of Others form and the Employment Application. Please be advised
that this job offer is not valid unless the employment agreement is signed.
Again, we at Logility, Inc. look forward to a long and successful relationship.
Very truly yours,
J. Michael Edenfield
President and
Chief Executive Officer
Accepted:
/s/ James M. Modak
________________________________________
James M. Modak
Enclosures:
Employment Agreement with Exhibit A
Immigration and Naturalization Service Employment Eligibility Verification
Form
Confidential Information of Others Form
Summary of insurance benefits
Employment Application
Attachment #1
9
<PAGE>
EXHIBIT 23.2
CONSENT AND REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Logility, Inc.:
The audits referred to in our report dated August 1, 1997, except as to note 10,
which is as of August 12, 1997, included the related combined financial
statement schedule for each of the years in the three-year period ended April
30, 1997, included in the registration statement. This combined financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this combined financial statement
schedule based on our audits. In our opinion,such combined financial statement
schedule when considered in relation to the basic combined financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
We consent to the use of our reports included herein and to the references to
our firm under the headings "Selected Combined Financial Data" and "Experts" in
the prospectus.
KPMG Peat Marwick LLP
Atlanta, Georgia
August 12, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LOGILITY,
INC. COMBINED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> APR-30-1996 APR-30-1997
<PERIOD-START> MAY-01-1995 MAY-01-1996
<PERIOD-END> APR-30-1996 APR-30-1997
<CASH> 13 732
<SECURITIES> 0 0
<RECEIVABLES> 5,662 7,001
<ALLOWANCES> 330 421
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,380 7,459
<PP&E> 748 1,293
<DEPRECIATION> 219 417
<TOTAL-ASSETS> 14,170 16,367
<CURRENT-LIABILITIES> 4,157 6,902
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 7,224 6,668
<TOTAL-LIABILITY-AND-EQUITY> 14,170 16,367
<SALES> 0 0
<TOTAL-REVENUES> 16,633 21,824
<CGS> 0 0
<TOTAL-COSTS> 6,023 7,158
<OTHER-EXPENSES> 13,484 16,620
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (2,874) (1,954)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,874) (1,954)
<EPS-PRIMARY> (0.25) (0.17)
<EPS-DILUTED> (0.25) (0.17)
</TABLE>
