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Tax Indemnification Agreement - Manhattan Associates Inc.

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        MANHATTAN ASSOCIATES, INC./MANHATTAN ASSOCIATES LLC SHAREHOLDER

                         TAX INDEMNIFICATION AGREEMENT

     This TAX INDEMNIFICATION AGREEMENT, dated as of the 27th day of February,
1998, is entered into by MANHATTAN ASSOCIATES, INC., a Georgia corporation (the
"Company") and ______________________ (the "Shareholder").


                                    RECITALS

     WHEREAS, the Shareholder holds outstanding Shares of Manhattan Associates,
     LLC, a Georgia limited liability company ("Manhattan LLC"), as such term is
     defined in the Operating Agreement of the Company, as amended (the
     "Shares"); and

     WHEREAS, Manhattan LLC is now contemplating restructuring from a limited
     liability company into a C corporation by an exchange of the Shares for
     shares of Voting Common Stock, no par value (the "Common Stock") of the
     Company; and

     WHEREAS, after the restructuring, the Company is also contemplating
     offering and selling shares of such Common Stock to the public (the "Public
     Offering"); and

     WHEREAS, the parties hereto wish to set forth their agreement with respect
     to certain adjustments to the federal and state income tax liability of the
     Shareholder and the Company attributable to Tax Items of Manhattan LLC that
     pass through to the Shareholder under the provisions of federal or state
     law for the period during which Manhattan LLC is a limited liability
     company;

     NOW, THEREFORE, for value received, the parties agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

     For purposes of this Agreement the following definitions shall apply:

     (a) "Adjustment" shall mean any proposed or final change in any Tax
          ----------                                                    
liability initiated by any of the Shareholders, the Company, Manhattan LLC, or
the IRS, state or local taxing authority, or any other relevant taxing
authority.

     (b) "Code" shall mean the Internal Revenue Code of 1986, as amended and in
          ----                                                                 
effect for the taxable period in question.

     (c) "Company Tax Benefit" shall mean a reduction in the Income Tax
          -------------------                                          
liability of the Company for any taxable period beginning after the date of the
Transaction.  The Company shall be deemed to have received or realized a Company
Tax Benefit from a Tax Item  in a taxable
<PAGE>
 
period only if and to the extent that the Company's Income Tax liability for
such period is less than it would have been if such liability were determined
without regard to such Tax Item.  The Company shall be deemed to have realized
or received a Company Tax Benefit with respect to a carryover is used to produce
a Company Tax Benefit.

     (d) "Final Determination" shall mean the final resolution of any Tax
          -------------------                                            
liability (including all related interest and penalties) for a taxable period.
A Final Determination shall result from the first to occur of:

          (i) the expiration of 30 days after IRS acceptance of a Waiver of
Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of
Overassessment on Federal Revenue Form 870 or 870-AD (or any successor
comparable form or the expiration of a comparable period with respect to any
comparable agreement or form under the laws of other jurisdictions), unless,
within such period, the taxpayer gives notice to the other party of the
taxpayer's intention to attempt to recover all or part of any amount paid
pursuant to the Waiver by the filing of a timely claim for refund;

          (ii) a decision, judgment, decree, or other order by a court of
competent jurisdiction that is not subject to further judicial review (by appeal
or otherwise) and has become final;

          (iii)  the execution of a closing agreement under section 7121 of the
Code or the acceptance by the IRS or its counsel of an offer in compromise under
section 7122 of the Code, or comparable agreements under the laws of other
jurisdictions;

          (iv) the expiration of the time for filing a claim for refund or for
instituting suit in respect of a claim for refund disallowed in whole or part by
the IRS or other relevant taxing authority;

          (v) any other final disposition of the tax liability for such period
by reason of the expiration of the applicable statute of limitations; or

          (vi) any other event that the parties agree is a final and irrevocable
determination of the liability at issue.

     (e) "Income Tax" shall mean federal income taxes and state and local taxes
          ----------                                                           
imposed upon, or measured by, income.  Income Tax includes interest, penalties,
and other additions to tax.

     (f) "IRS" shall mean the United States Internal Revenue Service or any
          ---                                                              
successor, including, but not limited to, its agents, representatives, and
attorneys.

     (g) "Tax" shall mean any federal, state, local or foreign income, gross
          ---                                                               
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code (S) 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, 

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<PAGE>
 
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto, whether disputed or not.

     (h) "Tax Benefit" shall mean a reduction in the personal Income Tax
          -----------                                                   
liability of the Shareholder (as a result of Tax Items of Manhattan LLC and all
other Tax Items reflected on the Shareholder's tax return) for any taxable
period.  The Shareholder shall be deemed to have realized or received a Tax
Benefit from a Tax Item in a taxable period only if and to the extent that the
Shareholder's personal Income Tax liability for such period is less than it
would have been if such liability were determined without regard to such Tax
Item.  The Shareholder shall be deemed to have realized or received a Tax
Benefit with respect to a carryover only if, when, and to the extent the
carryover is used to produce a Tax Benefit.

     (i) "Tax Item" shall mean any item of income, gain, loss, deduction,
          --------                                                       
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable by the Shareholder or by the Company.

     (j) "Transaction" shall mean the transactions contemplated by and described
          -----------                                                           
in the Contribution Agreement.

                                   ARTICLE II

                       INDEMNIFICATION FOR CERTAIN TAXES

     (a) The Shareholder shall pay to the Company an amount equal to any Tax
Benefit actually realized or received arising from an Adjustment with respect to
a Tax Item of the Company for any taxable period in which Manhattan LLC was
taxable as a limited liability company.

     (b) The Shareholder represents and warrants to the Company that:

          (i) None of the Company or Manhattan LLC will incur any Taxes as a
result of the Transaction;

          (ii) If subsequent to the Transaction one or more of Manhattan LLC,
Pegasys Systems, Inc. ("Pegasys") and/or PAC is liquidated or otherwise ceases
to exist for tax purposes, none of the Company, Manhattan LLC, Pegasys or PAC
will incur any Taxes as a result of any such entity liquidating or otherwise
ceasing to exist (other than any Taxes that would be imposed without regard to
the Transaction or such liquidation or such entity ceasing to exist);

          (iii)  Since its inception through the date of the Transaction,
Manhattan LLC has been an association taxable as a partnership for all federal
and applicable state income tax purposes.

     With respect to representations (i) and (ii) above, the Shareholder will
indemnify and hold harmless the Company from any liability for Taxes, costs and
expenses, including 

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<PAGE>
 
reasonable attorneys fees, arising from any breach of the Shareholder's
representations and warranties set forth therein. With respect to
representations and warranties (iii) above, the Shareholder will indemnify and
hold harmless the Company from any liability for Income Taxes, costs and
expenses including reasonable attorney fees, arising from any breach of the
Shareholder's representations and warranties.

     The Shareholder's obligation under this subsection (b) shall be limited to
the total distributions from Manhattan LLC received by Shareholder at any time
prior to or in connection with the Transaction, reduced by any taxes (net of any
refunds) imposed on the Shareholder with respect to his distributive share of
income and gains of Manhattan LLC.

     (c) The Company shall pay and indemnify the Shareholder for any limited
liability company Tax Liability arising from an Adjustment with respect to a Tax
Item of Manhattan LLC.

     (d) Any payment required under this Article shall be made by the earliest
of (1) 20 days after the Shareholder receives a refund or credit, (2) 20 days
after a Final Determination with respect to such tax, (3) with respect to a
carryover, 20 days after the Shareholder files a tax return on which the
carryover produces a Tax Benefit, or (4) 20 days after the determination by the
parties or pursuant to Article IV that such payment is due.  All obligations of
indemnification hereunder shall be net of any Tax Benefit realized to the
Shareholder or Company Tax Benefit realized by the Company, as appropriate.

                                  ARTICLE III

                    COOPERATION AND EXCHANGE OF INFORMATION

     Whenever the Shareholder or the Company becomes aware of an issue which
either party believes could give rise to payment or indemnification from the
other party under Article II, the Shareholder or the Company (as the case may
be) shall promptly give notice of the issue to the other party.  The indemnitor
and its representatives, at the indemnitor's expense, shall be entitled to
participate in all conferences, meetings or proceedings with the IRS or other
taxing authority with respect to the issue.

     The parties agree to consult and cooperate with each other in the
negotiation and settlement or litigation of any Adjustment that may give rise to
any payment or an indemnification payment under this Agreement.  All decisions
with respect to such negotiation and settlement or litigation shall be made by
the parties after full and good faith consultation.

     If a party who will be required to make an indemnification payment (the
"Indemnifying Party") proposes to accept a settlement offered by the relevant
taxing authority with respect to an issue for one or more taxable years, but the
party who will be entitled to receive the payment (the "Indemnified Party")
disagrees with the proposed settlement, then the Indemnifying Party may pay to
the Indemnified Party the amount that would be due under this Agreement pursuant
to such settlement and, in that event, the Indemnifying Party shall have no
further responsibility for amounts attributable to that issue for the taxable
years involved.

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<PAGE>
 
                                   ARTICLE IV

                                    DISPUTES

     If the parties are, after negotiation in good faith, unable to agree upon
the appropriate calculation of amounts due under this Agreement, the controversy
shall be settled by Arthur Andersen, LLP (the "Accounting Firm").

     The decision of the Accounting Firm shall be final, and each of the Company
and the Shareholder agree immediately to pay to the other any amount due under
this Agreement pursuant to such decision.  The expenses of the Accounting Firm
shall be borne one-half by the Company and one-half by the Shareholder unless
the Accounting Firm specifies otherwise.

     Any dispute arising between the parties with reference to the legal
interpretation of this Agreement or their rights hereunder shall, upon written
request of either party, be submitted to three arbitrators, one to be chosen by
each party, and the third by the two so chosen.  Each party shall submit its
case to its arbitrator within thirty days of the appointment of the third
arbitrator.  The decision in writing of any two arbitrators, when filed with the
parties hereto, shall be final and binding on both parties.  Judgment may be
entered upon the final decision of the arbitrators in any court having
jurisdiction.  Each party shall bear the expense of its own arbitrator and shall
jointly and equally bear with the other party the expense of the third
arbitrator and of the arbitration.

                                   ARTICLE V

                                 MISCELLANEOUS

     Section 5.1  Term of Agreement.  This Agreement shall become effective as
                  -----------------                                           
of the date of its execution and shall continue in full force and effect
indefinitely, except that this Agreement shall be void and of no effect if the
Transaction is not consummated before September 1, 1998.

     Section 5.2  Severability.  If any term of this Agreement is held by a
                  ------------                                             
court of competent jurisdiction to be unenforceable, the remainder of the terms
set forth herein shall remain in full force and effect and shall in no way be
impaired.  In the event that any term is held to be unenforceable, the parties
shall use their best efforts to find an alternative means to achieve the same or
substantially the same result as that contemplated by such term.

     Section 5.3  Assignment.  Except by operation of law or in connection with
                  ----------                                                   
the sale of all or substantially all the assets of a party, this Agreement shall
not be assignable, in whole or in part, directly or indirectly, by the
Shareholder without the written consent of the Company or by the Company without
the written consent of the Shareholder.  Any attempt to assign any right or
obligations arising under this Agreement without such consent shall be void.
However, the provisions of this Agreement shall be binding upon inure to the
benefit of, and be enforceable by the parties and their respective successors
and permitted assigns, including, but not limited to, Manhattan Associates,
Inc., a Georgia corporation as the successor of Manhattan LLC.

                                      -5-
<PAGE>
 
     Section 5.4  Further Assurances.  Subject to the provisions of this
                  ------------------                                    
Agreement, the parties shall acknowledge such other instruments and documents,
and take all other actions, as may be reasonably required in order to effectuate
the purposes of this Agreement.

     Section 5.5  Parties in Interest.  Except as herein otherwise specifically
                  -------------------                                          
provided, nothing in this Agreement expressed or implied is intended to confer
any right or benefit upon any person, firm, or corporation other than the
parties and their respective successors and permitted assigns.

     Section 5.6  Waivers, Etc.  No failure or delay on the part of the parties
                  ------------                                                 
in exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  No modification or waiver of any provision of this Agreement
nor consent to any departure by the parties therefrom shall in any event be
effective unless it shall be in writing, and then such waiver or consent shall
be effective only in the specific instance and for the purpose which given.

     Section 5.7  Set-off.  All payments to be made by any party under this
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Agreement shall be made without set-off, counterclaim, or withholding, all of
which are expressly waived.

     Section 5.8  Change of Law.  If, due to any change in applicable law or
                  -------------                                             
regulations or the interpretation thereof by any court or other governing body
having jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement shall be impracticable or impossible, the parties
shall use their best efforts to find an alternative means to achieve the same or
substantially the same results as are contemplated by such provision.

     Section 5.9.  Headings.  Descriptive headings are for convenience only and
                   --------                                                    
shall not control or affect the meaning of any provision of this Agreement.

     Section 5.10  Counterparts.  For the convenience of the parties, any number
                   ------------                                                 
of counterparts of this Agreement may be executed by the parties and each
executed counterpart shall be an original instrument.

     Section 5.11  Notices.  All notices provided for in this Agreement shall be
                   -------                                                      
validly given if in writing and delivered personally or sent by registered mail,
postage prepaid

     if to the Company, at

        Manhattan Associates, Inc.
        2300 Windy Ridge Parkway
        Suite 700
        Atlanta, Georgia  30339
        Attn:  President

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<PAGE>
 
     copy to:

        David K. Dabbiere, Esq.
        General Counsel
        Manhattan Associates, LLC
        2300 Windy Ridge Parkway
        Suite 700
        Atlanta, Georgia  30339

     if to the Shareholder, to:

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

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

     ------------------------------
 
or to such other addresses as any party may, from time to time, designate in a
written notice given in a like manner.  Notice given by mail shall be deemed
delivered five calendar days after the date mailed.

     Section 5.12  Governing Law.  This Agreement shall be governed by the
                   -------------                                          
domestic substantive laws of Georgia without regard to any choice or conflict of
laws rule or provision that would cause the application of the domestic
substantive laws of any other jurisdiction.

     Section 5.13  No Double Recovery.  The total recovery received by the
                   ------------------                                     
Company pursuant to this Agreement and any of the other Tax Indemnification
Agreements between the Company and any former, present or future shareholder of
Manhattan LLC with respect to a Final Determination shall not exceed the total
Taxes, costs and expenses arising from such Final Determination.

     IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the day and year first written above.


MANHATTAN ASSOCIATES, INC.:                     SHAREHOLDER:
 
 
By: /s/ Alan J. Dabbiere
    -------------------------------
    Alan J. Dabbiere, President                                          (SEAL)
                                                -------------------------

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