Lawson Software, Inc.

The estimates and assumptions used in valuing acquired assets and assumed liabilities related to an acquisition are inherently uncertain and may require adjustment.  In some cases, all the information required to estimate these fair values, allocate purchase price and measure goodwill may not be available on the acquisition date or as of the applicable reporting period.  In those instances, we provide provisional amounts when necessary in order to record the transaction.  These provisional amounts are to be adjusted and the allocation of purchase price finalized within a reasonable amount of time from the date of the acquisition; this is referred to as the measurement period and is not to exceed one year.  As information becomes available during the measurement period, we may update these provisional amounts and adjust the values of the assets acquired, liabilities assumed and recorded goodwill.  In addition, adjustments to our acquisition accounting during the measurement period may require us to revise prior period financial information when reissued in subsequent financial statements to reflect such adjustments. Revisions outside the measurement period are reflected in our results of operations in the period such adjustments are identified.

As a result of the verdict from the January 2011 trial, ePlus is seeking an injunction against Lawson. The court held an evidentiary hearing on the injunction issue on March 25, 2011.  On April 4, 2011, the court will hold oral arguments on the injunction issue. The court will decide on the injunction at the April 4th hearing or thereafter.  The court also invited briefing on a motion to stay any injunction it may enter, and on the issue of whether a bond should be posted if a stay is granted.  That motion will also be heard on April 4th.

To obtain an injunction, ePlus must convince the court that Lawson’s continued sale and service of RSS, Punchout and corresponding M3 e-Procurement will irreparably harm ePlus’ business. We will aggressively fight the injunction issue.  We contend that Lawson does not compete with ePlus’ products that are covered by these patents and there is no credible evidence of any irreparable harm.  We will also seek a stay or hold on an injunction, if any, that issues from the Federal District Court.  If a motion for stay is unsuccessful with the Federal District Court, we may seek a stay of the injunction from the United States Court of Appeals for the Federal Circuit pending appeal.  We also expect to seek post-trial relief overturning the adverse jury findings on infringement and validity, and appeal any adverse decisions on those issues.  Given the inherent unpredictability of litigation and the right of either party to appeal an unfavorable decision, we cannot at this time estimate the possible outcome of this lawsuit.  Because patent litigation is time consuming and costly to defend, we will continue to incur significant costs defending this case. In addition, in the event of an unfavorable outcome in this matter, it could have a material adverse effect on our future results of operations or cash flows.  If ePlus prevails in this lawsuit, we could by agreement or otherwise be required to pay a royalty to ePlus on the sale of certain products and services in the future, and if we could not reach agreement with ePlus on the amount or scope of that royalty, we would have to either stop the sale of those products and services or make modifications to avoid infringement and there is no assurance that those modifications will be readily possible.

Class Action Overtime Lawsuit.  As previously discussed in the quarterly reports filed on Form 10-Q for our fiscal quarters ended August 31, 2010 and November 30, 2010, on May 20, 2008, a putative class action lawsuit was filed against Lawson Software, Inc. in the United States District Court for the Southern District of New York on behalf of current and former business, systems, and technical consultants. The suit, Cruz, et. al., v. Lawson Software, Inc. et. al., alleged that we failed to pay overtime wages pursuant to the Fair Labor Standards Act (FLSA) and state law, and alleged violations of state record-keeping requirements. The suit also alleged certain violations of ERISA and unjust enrichment. Relief sought included back wages, corresponding 401(k) plan credits, liquidated damages, penalties, interest and attorneys’ fees.  We successfully moved the case from the United States District Court for the Southern District of New York to the District of Minnesota.  On November 12, 2010, the court heard oral arguments concerning two motions that had been filed by Lawson - a motion to de-certify the FLSA collective action and a motion for summary judgment.  On January 27, 2011, the court granted both the motion to decertify the FLSA collective action and the motion for summary judgment in favor of Lawson.  On February 28, 2011, the plaintiff’s counsel confirmed that there would be no appeal of this decision.   As a result, Lawson was found to have no payment obligations to the opt-in class members and the case is now over.

During the third quarter, we experienced improved customer demand for our software solutions in certain of our targeted markets while other markets were more challenging.  Within our S3 Industries segment, our healthcare vertical continued to show strong performance as we believe our healthcare clients, under continued pressure to reduce expenses, looked to invest in information technology to drive productivity improvements.  In the third quarter, we entered into five transactions greater than $1.0 million with healthcare clients. We also saw strong demand for our HCM product offerings and many of our larger transactions in the quarter included both HCM applications as well as traditional ERP solutions.  We anticipate this trend will continue and be reinforced with our acquisition of Enwisen.  Our public sector vertical did not have as strong of a quarter as many state and local governments are dealing with budgetary concerns and certain transactions have been deferred or delayed.  Within our M3 Industries segment, our manufacturing & distribution vertical experienced increased licensing activity and improved bookings for consulting services in the third quarter. This strong quarter for our manufacturing & distribution vertical was an improvement over recent quarters as this market has been and may continue to be negatively impacted by the slow and uncertain economic recovery.  Our APAC business unit also showed improved licensing activity compared to last year and both APAC and our consumer products vertical had strong service bookings.   Within our equipment service management & rental vertical, the primary focus has been on the implementation of existing projects.  Generally, licensing activity leads to the recognition of license fees revenue within six months of entry into license transactions, based on the timing of when we meet all revenue recognition requirements.  Bookings for our consulting services generally lead to the recognition of consulting revenues over two to 24 months, depending on the size and complexity of the project.

As previously reported in our Current Report on Form 8-K filed with the SEC on March 14, 2011, we received an unsolicited, non-binding proposal to acquire all of our outstanding common stock at a price of $11.25 per share in cash. We also reported that our board of directors had retained Barclays Capital, Inc. as our financial advisor to assist in evaluating the proposal, as well as other possible strategic alternatives and that we did not intend to comment further regarding the matter unless and until an agreement is reached, discussions have been terminated or the board concludes its strategic review.  There can be no assurance that a transaction will occur.  We will continue to conduct business in the ordinary course and pursue the sale of our products and services.  The developments described in that Form 8-K report may adversely impact our business and our revenues for the fourth quarter of fiscal 2011 and the near term.