10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended March 31, 2009
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For transition period from          to

Commission file number 0-5734

AGILYSYS, INC.

(Exact name of registrant as specified in its charter)

Ohio	34-0907152
State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)
28925 Fountain Parkway, Solon, Ohio (Address of principal executive offices)	44139 (Zip Code)

Registrant’s telephone number, including area code: (440) 519-8700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares, without par value	NASDAQ

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

The aggregate market value of Common Shares held by non-affiliates as of September 30, 2008 (the second fiscal quarter in which this Form 10-K relates) was $139,709,258 computed on the basis of the last reported sale price per share ($10.09) of such shares on the Nasdaq Stock Market LLC.

As of June 1, 2009, the Registrant had the following number of Common Shares outstanding: 22,639,773, of which 5,666,343 were held by affiliates.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on July 31, 2009 are incorporated by reference into Part III of this Form 10-K.

Except as otherwise stated, the information contained in this Annual Report on Form 10-K is as of March 31, 2009.

AGILYSYS, INC.
ANNUAL REPORT ON FORM 10-K
Year Ended March 31, 2009

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	Business		1
ITEM 1A.	Risk Factors		4
ITEM 1B.	Unresolved Staff Comments		9
ITEM 2.	Properties		9
ITEM 3.	Legal Proceedings		9
ITEM 4.	Submission of Matters to a Vote of Security Holders		9
ITEM 4A.	Executive Officers of the Registrant		10
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		12
ITEM 6.	Selected Financial Data		14
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk		31
ITEM 8.	Financial Statements and Supplementary Data		31
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		31
ITEM 9A.	Controls and Procedures		31
ITEM 9B.	Other Information		32
PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance		33
ITEM 11.	Executive Compensation		33
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		33
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence		33
ITEM 14.	Principal Accountant Fees and Services		33
PART IV
ITEM 15.	Exhibits, Financial Statement Schedules		33
SIGNATURES			34
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part I

Item 1.  Business.

Reference herein to any particular year or quarter refers to periods within the company’s fiscal year ended March 31. For example, 2009 refers to the fiscal year ended March 31, 2009.

Overview

Agilysys, Inc. (“Agilysys” or the “company”) is a leading provider of innovative IT solutions to corporate and public-sector customers, with special expertise in select markets, including retail and hospitality. The company develops technology solutions — including hardware, software and services — to help customers resolve their most complicated IT needs. The company possesses expertise in enterprise architecture and high availability, infrastructure optimization, storage and resource management, and business continuity, and provides industry-specific software, services and expertise to the retail and hospitality markets. Headquartered in Solon, Ohio, Agilysys operates extensively throughout North America, with additional sales offices in the United Kingdom and in Asia. Agilysys has three reportable segments: Hospitality Solutions Group (“HSG”), Retail Solutions Group (“RSG”), and Technology Solutions Group (“TSG”).

History and Significant Events

Agilysys was organized as an Ohio corporation in 1963. While originally focused on electronic components distribution, the company grew to become a leading distributor in both electronic components and enterprise computer systems products and solutions.

As of the fiscal year ended March 31, 2002, the company was structured into two divisions, the Computer Systems Division (“CSD”), which focused on the distribution and reselling of enterprise computer systems products and solutions, and the Industrial Electronics Division (“IED”), which focused on the distribution of electronic components. Each division represented, on average, approximately one-half of the company’s total revenues.

In 2002, the company conducted a review of strategic alternatives and developed a long-term strategic plan designed to increase the intrinsic value of the company. The company’s strategic transformation began with its divestiture of IED, to focus solely on the computer systems business. The sale of the electronic components business meant that the company was less dependent on the more cyclical markets in the components business. In addition, this allowed the company to invest more in the computer systems business, which offered greater potential for sustainable growth at higher levels of profitability. The remaining CSD business consisted of the KeyLink Systems Distribution Business (“KSG”) and the IT Solutions Business. KSG operated as a distributor of enterprise computing products selling to resellers, which then sold directly to end-user customers. The IT Solutions Business operated as a reseller providing enterprise servers, software, storage and services and sold directly to end-user customers. Overall, the company was a leading distributor and reseller of enterprise computer systems, software, storage and services from HP, IBM, Intel, Enterasys, Hitachi Data Systems, Oracle, EMC, and other leading manufacturers.

The proceeds from the sale of the electronic components distribution business, combined with cash generated from the company’s ongoing operations, were used to retire long-term debt and accelerate the growth of the company, both organically and through a series of acquisitions. The growth of the company has been supported by a series of acquisitions that strategically expanded the company’s range of solutions and markets served, including:

—  The September 2003 acquisition of Kyrus Corporation, a leading provider of retail store solutions and services with a focus on the supermarket, chain drug and general retail segments of the retail industry.

—  The February 2004 acquisition of Inter-American Data, Inc., a leading developer and provider of property management, materials management and document management software and related proprietary services to the hotel casino and destination resort segments of the hospitality industry.

—  The May 2005 acquisition of The CTS Corporations (“CTS”), a services organization specializing in IT storage solutions for large and medium-sized corporate and public-sector customers.

—  The December 2005 acquisition of a competitor’s operations in China. This provided Agilysys entry into the enterprise IT solutions market in Hong Kong and China serving large and medium-sized businesses in those growing markets.

—  The January 2007 acquisition of Visual One Systems Corporation (“Visual One”), which provided Agilysys with expertise around the marketing, development and sale of Microsoft^® Windows^®-based software for the hospitality industry, including additional applications in property management, condominium, golf course, spa, point-of-sale, and catering management. Visual One was integrated into the company’s existing hospitality solutions business.

In March 2007, the company completed its transformation with the sale of the assets and operations of KSG. This final event completed the Agilysys multi-year transformation to move closer to the customer and higher up the IT value scale, effectively positioning

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the company to focus on its higher-growth IT Solutions Business. As a result of the divestiture, the company freed itself from the increasing channel conflict and marketplace restrictions that existed in the business. The divestiture also provided the company with the financial flexibility to grow through the pursuit of additional acquisitions, including:

—  The April 2007 acquisition of Stack Computer (“Stack”), a technology integrator with a strong focus in high availability storage solutions. Stack has a significant relationship with EMC², and also does business with Cisco, Veritas, and other suppliers. Stack’s customers, primarily located on the west coast, include leading corporations in the financial services, healthcare, and manufacturing industries.

—  The June 2007 acquisition of InfoGenesis, Inc. (“InfoGenesis”), a solutions provider for the food and beverage markets serving casinos, hotels and resorts, cruise lines, stadiums and food service. An independent solution provider, InfoGenesis offers enterprise-class, point-of-sale solutions that provide end users an intuitive, secure and easy way to process customer transactions across multiple departments or locations, including comprehensive corporate and store reporting.

—  The July 2007 acquisition of Innovative Systems Design, Inc. (“Innovative”), an integrator and value-added reseller of servers, enterprise storage management products and professional services. Innovative is the largest U.S. commercial reseller of Sun Microsystems servers and storage products.

—  The February 2008 acquisition of Eatec Corporation (“Eatec”), which enhanced the company’s standing as a leading inventory and procurement solution provider to the hospitality and food service markets. Eatec’s customers include well-known restaurants, hotels, stadiums, and entertainment venues in North America and around the world as well as many public service institutions.

—  The April 2008 acquisition of Triangle Hospitality Solutions Limited (“Triangle”), a European reseller of point-of-sale software and solutions for InfoGenesis. The acquisition expanded Agilysys’ European footprint in the hospitality, stadium and arena markets.

Today, Agilysys offers diversified products and solutions from leading IT vendors such as HP, Sun, EMC, Oracle, and IBM. The company is a leading systems integrator of retail point-of-sale, self-service and wireless solutions with proprietary business consulting, implementation and hardware maintenance services. HSG offers property, activity, material, and inventory management software applications to automate functions for the hotel casino and destination resort segments of the hospitality industry. In addition, HSG provides Microsoft Windows-based software solutions as well as IBM servers and storage products.

During fiscal 2009, the company took aggressive action to reduce its cost structure and improve profitability. Specifically, the company executed the following restructuring actions over the past year:

—  restructured the go-to-market strategy for TSG’s professional services offering;

—  exited the Asian operations of TSG;

—  reduced corporate overhead and realigned executive management;

—  closed corporate offices in Boca Raton, Florida and relocated headquarters back to Solon, Ohio; and

—  realigned certain operational and administrative departments and streamlined certain processes to reduce costs and drive efficiencies.

Industry

According to information published in May 2009 by International Data Corporation (“IDC”), a leading provider of technology intelligence and market data, IT spending in the United States was estimated at $490 billion in calendar year 2008. The global IT market has been softening, according to IDC figures. In 2009, IDC projects hardware sales to decline by 16% in the United States and 3.6% globally, while software and services are projected to increase modestly at 4% and 3%, respectively. The recent slowdown in this market negatively affected the company’s revenues and results of operations for fiscal 2009.

The non-consumer IT industry consists of a supply chain made up of suppliers, distributors, resellers, and corporate and public-sector customers. Agilysys operates in the reseller category as a solution provider, as well as an independent software vendor (“ISV”) in the hospitality industry and system integrator in the retail industry.

In recent years, the role of solution providers in the industry has become more important as suppliers have shifted an increasing portion of their business away from direct sales, and many end-users are working more with solution providers to develop, implement and integrate comprehensive and increasingly complex solutions.

To ensure the efficient and cost-effective delivery of products and services to market, IT suppliers are increasingly outsourcing functions such as logistics, order management, sales and technical support. Solution providers play crucial roles in this outsourcing strategy by offering customers technically skilled and market-focused sales and services organizations. Certain solution providers, such as Agilysys, offer additional proprietary products and services that complement a total, customer-focused solution.

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Products and Services

Within the solutions segment in which Agilysys operates, product sets include enterprise servers, data storage hardware, systems infrastructure software, networking equipment and IT services related to implementation and support. IDC estimates United States spending in these product sets was $490 billion in calendar year 2008, and is not expected to return to an annual growth rate of 6% until calendar year 2012.

Total revenues from continuing operations for the company’s three specific product areas are as follows:

	For The Year Ended March 31
(In thousands)	2009		2008		2007
Hardware	$	508,704	$	562,314	$	328,435
Software		76,998		71,900		32,866
Services		145,018		125,954		92,439
Total	$	730,720	$	760,168	$	453,740

During 2009, 2008, and 2007, sales of the company’s three largest suppliers’ products and services accounted for 65%, 65%, and 69%, respectively, of the company’s sales volume. Sales of HP products and services accounted for 22%, 27%, and 49% of the company’s sales volumes in 2009, 2008, and 2007, respectively. Sales of IBM products and services accounted for 12%, 15%, and 20% in 2009, 2008, and 2007, respectively. Sales of Sun products and services through Innovative, which was purchased in July 2007, accounted for 31% and 23% of the sales volume in 2009 and 2008, respectively.

The loss of any of the top three suppliers or a combination of certain other suppliers could have a material adverse effect on the company’s business, results of operations and financial condition unless alternative products manufactured by others are available to the company. In addition, although the company believes that its relationships with suppliers are good, there can be no assurance that the company’s suppliers will continue to supply products on terms acceptable to the company. Through agreements with its suppliers, Agilysys is authorized to sell all or some of the suppliers’ products. The authorization with each supplier is subject to specific terms and conditions regarding such items as purchase discounts and supplier incentive programs including sales volume incentives and cooperative advertising reimbursements. A substantial portion of the company’s profitability results from these supplier incentive programs. These incentive programs are at the discretion of the supplier. From time to time, suppliers may terminate the right of the company to sell some or all of their products or change these terms and conditions or reduce or discontinue the incentives or programs offered. Any such termination or implementation of such changes could have a material adverse impact on the company’s results of operations.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in determining how to allocate resources and in assessing performance. Operating segments can be aggregated for segment reporting purposes so long as certain economic and operating aggregation criteria are met. With the divestiture of KSG in 2007, the continuing operations of the company represented one business segment that provided IT solutions to corporate and public-sector customers. In 2008, the company evaluated its business groups and developed a structure to support the company’s strategic direction as it has transformed to a pervasive solution provider largely in the North American IT market. With this transformation, the company now has three reportable segments: HSG, RSG, and TSG. See Note 13 to Consolidated Financial Statements titled, Business Segments, for a discussion of the company’s segment reporting.

Customers

Agilysys’ customers include large and medium-sized companies, divisions or departments of corporations in the Fortune 1000, and public-sector institutions. The company serves customers in a wide range of industries, including telecommunications, education, finance, government, healthcare, hospitality, manufacturing and retail. In 2009, Verizon Communications, Inc. represented approximately 22.7% of Agilysys’ total sales and 32.6% of TSG’s total sales. In 2008, Verizon Communications, Inc. represented approximately 11.7% of the company’s total sales and 16.3% of TSG’s total sales. No single customer accounted for more than 10% of Agilysys’ total sales or the total sales of any reporting business segment during 2007.

Uneven Sales Patterns and Seasonality

The company experiences a disproportionately large percentage of quarterly sales in the last month of its fiscal quarters. In addition, TSG experiences a seasonal increase in sales during its fiscal third quarter ending December 31st. Third quarter sales were 31%, 33%, and 33% of annual revenues for 2009, 2008, and 2007, respectively. Agilysys believes that this sales pattern is industry-wide. Although the company

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is unable to predict whether this uneven sales pattern will continue over the long term, the company anticipates that this trend will remain in the foreseeable future.

Backlog

The company historically has not had a significant backlog of orders. There was no significant backlog at March 31, 2009.

Competition

The reselling of innovative computer technology solutions is competitive, primarily with respect to price, but also with respect to service levels. The company faces competition with respect to developing and maintaining relationships with customers. Agilysys competes for customers with other solution providers and occasionally with some of its suppliers.

There are very few large, public enterprise product reseller companies in the IT solution provider market. As such, Agilysys’ competition is typically small or regional, privately held technology solution providers with $50 million to $200 million in revenues. The company competes with large companies such as Berbee Information Networks Corporation (a division of CDW Corporation), Forsythe Solutions Group, Inc., and Logicalis Group within TSG, and Micros Systems, Inc. and Radiant Systems, Inc. within HSG.

Employees

As of June 1, 2009, Agilysys had approximately 1,250 employees. The company is not a party to any collective bargaining agreements, has had no strikes or work stoppages and considers its employee relations to be excellent.

Markets

Agilysys sells its products principally in the United States and Canada and entered the China, Hong Kong and U.K. markets through acquisitions. Sales to customers outside of the United States and Canada are not a significant portion of the company’s sales. In January 2009, the company sold the stock of TSG’s operations in China and certain assets of TSG’s Hong Kong operations. However, HSG still continues to operate and grow in Asia, specifically in Hong Kong, Macau, and Singapore.

Access to Information

Agilysys’ annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these reports are available free of charge through its Internet site (http://www.agilysys.com) as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The information posted on the company’s Internet site is not incorporated into this Annual Report on Form 10-K. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Item 1A.  Risk Factors.

Our business could be materially adversely affected if we cannot successfully implement changes to our information technology to support a changed business.

Our current information systems environment was principally designed for the distribution business. We are in the process of converting legacy business information systems to a single Enterprise Resource Planning system. We committed significant resources to this conversion, which began in fiscal 2009 and is expected to be completed in fiscal 2010. This conversion is complex and while we are using a controlled project plan, we may not be able to successfully implement changes to and manage our internal systems, procedures and controls. If we are unable to successfully complete this implementation in an efficient or timely manner, it could materially adversely affect our business.

Our profitability is partly dependent upon restructuring and executing planned cost savings.

Recently, we initiated actions intended to reduce our cost structure and improve profitability. Specifically, we implemented the following restructuring actions over the past year:

—  restructured the go-to-market strategy for TSG’s professional services offering;

—  exited Asian operations of TSG;

—  reduced corporate overhead and realigned executive management;

—  closed corporate offices in Boca Raton, Florida and relocated corporate headquarters back to Solon, Ohio; and

—  realigned certain operational and administrative departments and streamlined certain processes to reduce costs and drive efficiencies.

If our cost reduction efforts are ineffective or our estimates of cost savings are inaccurate, our revenues and profitability could be negatively impacted. We may not be successful in achieving the operating efficiencies and operating cost reductions expected from these

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efforts, and may experience business disruptions associated with the restructuring and cost reduction activities. These efforts may not produce the full efficiency and cost reduction benefits that we expect. Further, such benefits may be realized later than expected, and the costs of implementing these measures may be greater than anticipated.

We are dependent on a single customer for a significant portion of our revenues.

In 2009 and 2008 more than 10% of our revenues were derived from Verizon Communications, Inc. (“Verizon”). If we were to lose Verizon as a customer, or if Verizon was to become insolvent or otherwise unable to pay for products and services, or was to become unwilling or unable to make payments in a timely manner, it could have a material adverse effect on the company’s business, results of operations, financial condition or liquidity. A further or extended economic downturn could reduce profitability and cash flow.

We are highly dependent on key suppliers and supplier programs.

We presently depend on a small number of key suppliers, including IBM, HP and Sun Microsystems. Our contracts with these suppliers vary in duration and are generally terminable by either party at will upon notice. The loss of any of these suppliers or a combination of certain other suppliers could have a material adverse effect on the company’s business, results of operations and financial condition. From time to time, a supplier may terminate the company’s right to sell some or all of a supplier’s products or change the terms and conditions of the supplier relationship or reduce or discontinue the incentives or programs offered. Any termination or the implementation of these changes could have a material negative impact on the company’s results of operations.

We are dependent on a long-term product procurement agreement with Arrow Electronics, Inc.

We have entered into a long-term product procurement agreement to purchase a wide variety of products totaling a minimum of $330 million per year until 2012 from Arrow Electronics, Inc. Our success will be dependent on competitive pricing, the availability of products on a timely basis and maintenance of certain service levels by Arrow.

Prolonged economic weakness causes a decline in spending for information technology, adversely affecting our financial results.

Our revenue and profitability depend on the overall demand for our products and services and continued growth in the use of technology in business by our customers, their customers, and suppliers. In challenging economic environments, our customers may reduce or defer their spending on new technologies. At the same time, many companies have already invested substantial resources in their current technological resources, and they may be reluctant or slow to adopt new approaches that could disrupt existing personnel, processes and infrastructures. Delays or reductions in demand for information technology by end users could have a material adverse effect on the demand for our products and services. In the last year, we have experienced weakening in the demand for our products and services. If the markets for our products and services continue to soften, our business, results of operations or financial condition could be materially adversely affected.

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls over financial reporting, we may not be able to report our financial results accurately or timely or detect fraud, which could have a material adverse effect on our business. While we believe that our plans to remediate our 2009 material weakness in internal controls over financial reporting, discussed in Item 9A of this report, will return us to the status of having adequate internal controls over financial reporting, we continue to be exposed to risks that those internal controls may be inadequate and we may have difficulty accurately reporting our financial results on a timely basis.

An effective internal control environment is necessary for the company to produce reliable financial reports and is an important part of its effort to prevent financial fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to report on, and our independent registered public accounting firm to attest to, the effectiveness of our internal control structure and procedures for financial reporting. We have an ongoing program to perform the system and process evaluation and testing necessary to comply with these requirements and to remediate internal control deficiencies and material weaknesses.

While management evaluates the effectiveness of the company’s internal controls on a regular basis, these controls may not always be effective. There are inherent limitations on the effectiveness of internal controls, including collusion, management override, and failure in human judgment. In addition, control procedures are designed to reduce rather than eliminate business risks. In the event that our chief executive officer, chief financial officer or independent registered public accounting firm determines that our internal controls over financial reporting are not effective as defined under Section 404, we may be unable to produce reliable financial reports or prevent fraud, which could materially adversely affect our business. In addition, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC or NASDAQ. Any such actions could affect investor perceptions of the company and result in an adverse reaction in the

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financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or limit our access to capital.

We make estimates and assumptions in connection with the preparation of the company’s Consolidated Financial Statements, and any changes to those estimates and assumptions could have a material adverse effect on our results of operations.

In connection with the preparation of the company’s Consolidated Financial Statements, we use certain estimates and assumptions based on historical experience and other factors. Our most critical accounting estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report and we describe other significant accounting policies in Note 1 to Consolidated Financial Statements titled, Operations and Summary of Significant Accounting Policies, which are included in Part II, Item 15 of this Annual Report. In addition, as discussed in Note 12 to Consolidated Financial Statements titled, Commitments and Contingencies, we make certain estimates under the provisions of SFAS No. 5 “Accounting for Contingencies,” including decisions related to provisions for legal proceedings and other contingencies. While we believe that these estimates and assumptions are reasonable under the circumstances, they are subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to be incorrect, it could have a material adverse effect on our results of operations.

The market for our products and services is affected by changing technology and if we fail to anticipate and adapt to such changes, our results of operations may suffer.

The markets in which the company competes are characterized by ongoing technological change, new product introductions, evolving industry standards and changing needs of customers. Our competitive position and future success will depend on our ability to anticipate and adapt to changes in technology and industry standards. If we fail to successfully manage the challenges of rapidly changing technology, the company’s results of operations could be materially adversely affected.

Our profitability could suffer if we are not able to maintain favorable pricing.

Our profitability is dependent on the rates we are able to charge for our services. If we are not able to maintain favorable pricing for our services, our profit margin and our profitability could suffer. The rates we are able to charge for our services are affected by a number of factors, including:

—  our customers’ perceptions of our ability to add value through our services;

—  competition;

—  introduction of new services or products by us or our competitors;

—  our competitors’ pricing policies;

—  our ability to charge higher prices where market demand or the value of our services justifies it;

—  our ability to accurately estimate, attain and sustain contract revenues, margins and cash flows over long contract periods;

—  procurement practices of our customers; and

—  general economic and political conditions.

Capital markets are currently experiencing a period of dislocation and instability, which has had and could continue to have a negative impact on our business and operations.

The general disruption in the U.S. capital markets has impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole. These conditions could persist for a prolonged period of time or worsen in the future. The resulting lack of available credit, lack of confidence in the financial sector, increased volatility in the financial markets and reduced business activity could materially and adversely affect our business, financial condition, results of operations and our ability to obtain and manage our liquidity. Any such developments could have a material adverse impact on our business, financial condition and results of operations.

Credit market developments may adversely affect our business and results of operations by reducing availability under our credit agreement.

In the current volatile state of the credit markets, there is risk that any lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their legal commitments and obligations under existing credit commitments, including but not limited to: extending credit up to the maximum permitted by a credit facility, allowing access to additional credit features and otherwise accessing capital and/or honoring loan commitments. On May 5, 2009, we entered into a new credit facility, as discussed in Item 7 of this Annual Report titled, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the subsection titled, “Liquidity and Capital Resources” and in Note 8 to Consolidated Financial Statements titled, Financing Arrangements. Although we do not intend to borrow in the near term, if our lender fails to honor its legal commitments under our credit facility, it could be difficult in

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the current environment to replace this facility on similar terms. The failure of the lender under the company’s credit facility may impact the company’s ability to borrow money to finance its operating activities.

Disruptions in the financial and credit markets may adversely impact the spending of our customers, which could adversely affect our business, results of operations and financial condition.

Demand for our products and services depends in large part upon the level of capital of our customers. Decreased customer spending could have a material adverse effect on the demand for our services and our business, results of operations and financial condition. In addition, the disruptions in the financial markets may also have an adverse impact on regional economies or the world economy, which could negatively impact the capital and maintenance expenditures of our customers. There can be no assurance that government responses to the disruptions on the financial markets will restore confidence, stabilize markets or increase liquidity and the availability of credit. These conditions may reduce the willingness or ability of our customers and prospective customers to commit funds to purchase our products and services, or their ability to pay for our products and services after purchase.

When we make acquisitions, we may not be able to successfully integrate them or attain the anticipated benefits.

As part of our operating history and growth strategy, we have acquired other businesses. In the future, we may continue to seek acquisition candidates in selected markets and from time to time engage in exploratory discussions with suitable candidates. We can provide no assurance that we will be able to identify and acquire targeted businesses or obtain financing for such acquisitions on satisfactory terms. The process of integrating acquired businesses into our operations may result in unforeseen difficulties and may require a disproportionate amount of resources and management attention. In particular, the integration of acquired technologies with our existing products could cause delays in the introduction of new products. In connection with future acquisitions, we may incur significant charges to earnings as a result of, among other things, the write-off of purchased research and development.

Future acquisitions may be financed through the issuance of common stock, which may dilute the ownership of our shareholders, or through the incurrence of additional indebtedness. Furthermore, we can provide no assurance that competition for acquisition candidates will not escalate, thereby increasing the costs of making acquisitions or making suitable acquisitions unattainable. Acquisitions involve numerous risks, including the following:

—  problems combining the acquired operations, technologies or products;

—  unanticipated costs or liabilities;

—  diversion of management’s attention;

—  adverse effects on existing business relationships with suppliers and customers;

—  risks associated with entering markets in which we have limited or no prior experience; and

—  potential loss of key employees, particularly those of the acquired organizations.

For example, until we actually assume operating control of the business assets and operations, it is difficult to ascertain with precision the actual value or the potential liabilities of our acquisitions. If we are unsuccessful in integrating our acquisitions, or if the integration is more difficult than anticipated, we may experience disruptions that could have a material adverse effect on our business or the acquisition. In addition, we may not realize all of the anticipated benefits from our acquisitions, which could result in an impairment of goodwill or other intangible assets.

Consolidation in the industries that we serve could adversely affect our business.

Customers that we serve may seek to achieve economies of scale and other synergies by combining with or acquiring other companies. If two or more of our current customers combine their operations, it may decrease the amount of work that we perform for these customers. If one of our current clients merges or consolidates with a company that relies on another provider for its consulting, systems integration and technology, or outsourcing services, we may lose work from that client or lose the opportunity to gain additional work. If two or more of our suppliers merge or consolidate operations, the increased market power of the larger company could also increase our product costs and place competitive pressures on us. Any of these possible results of industry consolidation could adversely affect our business.

We May Incur Additional Goodwill and Intangible Asset Impairment Charges that Adversely Affect Our Operating Results.

We review goodwill for impairment annually and more frequently if events and circumstances indicate that our goodwill and other indefinite-lived intangible assets may be impaired and that the carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for our overall business, significant negative

7

industry or economic trends, a significant decline in our stock price for a sustained period, and decreases in our market capitalization below the recorded amount of our net assets for a sustained period.

As a result of significant declines in macroeconomic conditions, there has been a decline in global equity valuations since April 2008 that impacted our market capitalization. Based upon the results of impairment tests performed during fiscal 2009, we concluded that a portion of our goodwill and identifiable intangible assets were impaired. As such, we recognized total non-cash impairment charges in the first, second, and fourth quarters of 2009 for goodwill and intangible assets of $231.9 million, not including $20.6 million that related to the CTS business acquired in May 2005 that was classified as restructuring charges, as of March 31, 2009. The impairment charge did not impact our consolidated cash flows, liquidity, or capital resources. See Note 1 to Consolidated Financial Statements titled, Operations and Summary of Significant Accounting Policies and the subsection titled, “Critical Accounting Policies, Estimates & Assumptions” in Item 7 titled, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) for further discussion of the impairment testing of goodwill and identifiable intangible assets.

A continued decline in general economic conditions or global equity valuations, could impact the judgments and assumptions about the fair value of our businesses and we could be required to record additional impairment charges in the future, which would impact our consolidated balance sheet, as well as our consolidated statement of operations. If we were required to recognize an additional impairment charge in the future, the charge would not impact our consolidated cash flows, current liquidity, or capital resources.

We are subject to litigation, which may be costly.

As a company that does business with many customers, employees and suppliers, we are subject to a variety of legal and regulatory actions, including, but not limited to, claims made by or against us relating to taxes, health and safety, employee benefit plans, employment discrimination, contract compliance, intellectual property rights, and intellectual property licenses. The results of such legal and regulatory actions are difficult to predict. Although we are not aware of any instances of non-compliance with laws, regulations, contracts, or agreements and we do not believe that any of our products and services infringe any property rights or licenses, we may incur significant legal expenses if any such claim were filed. If we are unsuccessful in defending a claim, it could have a material adverse effect on our business, financial condition, or results of operations.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations and the operations of our significant suppliers could be subject to power shortages, telecommunications failures, fires, extreme weather conditions, medical epidemics, and other natural or manmade disasters or business interruptions. The occurrence of any of these business disruptions could have a material adverse effect on our results of operations. While we maintain disaster recovery plans and insurance with coverages we believe to be adequate, claims may exceed insurance coverage limits, may not be covered by insurance, or insurance may not continue to be available on commercially reasonable terms.

We may be unable to hire enough qualified employees or we may lose key employees.

We rely on the continued service of our senior management, including our Chief Executive Officer, members of our executive team and other key employees and the hiring of new qualified employees. In the technology services industry, there is substantial and continuous competition for highly-skilled personnel. We also may experience increased compensation costs that are not offset by either improved productivity or higher prices. We may not be successful in recruiting new personnel and in retaining and motivating existing personnel. With rare exceptions, we do not have long-term employment or non-competition agreements with our employees. Members of our senior management team have left the company recently, and we cannot assure you that there will not be additional departures, which may be disruptive to our operations.

Part of our total compensation program includes share-based compensation. Share-based compensation is an important tool in attracting and retaining employees in our industry. If the market price of our stock declines or remains low, it may adversely affect our ability to retain or attract employees. In addition, because we expense all share-based compensation, we may in the future change our share-based and other compensation practices. Some of the changes we consider from time to time include the reduction in the number of employees granted options, a reduction in the number of options granted per employee and a change to alternative forms of share-based compensation. Any changes in our compensation practices or changes made by competitors could affect our ability to retain and motivate existing personnel and recruit new personnel.

As a publicly traded company, our stock price is subject to certain market trends that are out of our control and that may not reflect our actual intrinsic value.

We can experience short-term increases and declines in our stock price due to factors other than those specific to our business, such as economic news or other events generally affecting the trading markets. These fluctuations could favorably or unfavorably impact our

8

business, financial condition, or results of operations. Our ownership base has been and may continue to be concentrated in a few shareholders, which could increase the volatility of our stock price over time.

We may be required to adopt International Financial Reporting Standards (“IFRS”). The ultimate adoption of such standards could negatively impact our business, financial condition or results of operations.

Although not yet required, we could be required to adopt IFRS which is different from accounting principles generally accepted in the United States of America for our accounting and reporting standards. The implementation and adoption of new standards could favorably or unfavorably impact our business, financial condition, or results of operations.

Item 1B.  Unresolved Staff Comments.

None.

Item 2.  Properties.

The company’s principal corporate offices are located in a 100,000 square foot facility in Solon, Ohio. As of March 31, 2009, the company owned or leased a total of approximately 353,266 square feet of space for its continuing operations, of which approximately 332,307 square feet is devoted to product warehouse and sales offices. The company’s major leases contain renewal options for periods of up to 8 years. On December 2, 2008, the Boca Raton, Florida facility was closed and the company is looking for a tenant to sublease the facility. For information concerning the company’s rental obligations, see the discussion of contractual obligations under Item 7 contained in Part II, as well as Note 7 to Consolidated Financial Statements contained in Part IV, of this Annual Report on Form 10-K. The company believes that its product warehouse and office facilities are well maintained, are suitable and provide adequate space for the operations of the company.

The company’s materially important facilities as of March 31, 2009, are set forth in the table below:

Location	Type of facility	Approximate square footage	Segment	Leased or owned
Solon, Ohio	Warehouse and administrative offices	100,000	Corporate	Leased
Alpharetta, Georgia	Administrative offices	29,500	HSG	Leased
Las Vegas, Nevada	Administrative offices	26,665	HSG	Leased
Edison, New Jersey	Administrative offices	21,500	TSG	Leased
Taylors, South Carolina	Warehouse and administrative offices	77,500	RSG	Leased

Item 3.  Legal Proceedings.

In 2006, the company filed a lawsuit against the former shareholders of CTS, a company that was purchased by Agilysys in May 2005. In the lawsuit, Agilysys alleged that principals of CTS failed to disclose pertinent information during the acquisition, representing a material breach in the representations of the acquisition purchase agreement. On January 30, 2009, a jury ruled in favor of the company, finding the former shareholders of CTS liable for breach of contract, and awarded damages in the amount of $2.3 million. The jury also awarded to Agilysys its reasonable attorney’s fees in an amount to be determined at a later hearing. Judgment will be entered upon an award of attorney’s fees, at which time the parties have thirty days to file an appeal. No amounts have yet been accrued or received from the former shareholders of CTS or their insurance company.

Item 4.  Submission of Matters to a Vote of Security Holders.

The 2008 Annual Meeting of Shareholders of Agilysys, Inc. (“2008 Annual Meeting”) was held on March 26, 2009. The following Directors were re-elected to serve until the annual meeting in 2011:

Director	For	Against	Withheld
Thomas A. Commes	16,926,138	—	1,106,358
R. Andrew Cueva	17,799,059	—	233,437
Howard M. Knicely	16,982,761	—	1,049,735

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On March 11, 2009, the company and Ramius LLC and its affiliates entered into an agreement (the “Settlement Agreement”) to settle the proxy contest regarding the election of Directors at the company’s 2008 Annual Meeting. For information regarding the Settlement Agreement and the company’s expenses related to the solicitation, please refer to the company’s Schedule 14A filed with the SEC on March 17, 2009.

The term of office for the following Directors continued after the 2008 Annual Meeting: Martin F. Ellis, Keith M. Kolerus, Robert A. Lauer, Robert G. McCreary, III, John Mutch, and Steve Tepedino. Effective May 21, 2009, Steve Tepedino tendered his resignation from the company’s Board of Directors for professional reasons.

Also at the 2008 Annual Meeting, shareholders voted to ratify the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for the fiscal year ended March 31, 2009. Shareholders voted as follows:

For	Against	Abstentions	Broker Non-Votes
18,752,711	57,990	40,611		—

Item 4A.  Executive Officers of the Registrant.

The information provided below is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K. The following table sets forth the name, age, current position and principal occupation and employment during the past five years through June 1, 2009, of the company’s executive officers.

There is no relationship by blood, marriage or adoption among the listed officers. Mr. Ellis holds office until terminated as set forth in his employment agreement. All other executive officers serve until terminated.

Executive Officers of the Registrant

Name	Age		Current Position at June 1, 2009	Other Positions
Martin F. Ellis		44	President and Chief Executive Officer of the company since October 2008.	Executive Vice President, Treasurer and Chief Financial Officer from June 2005 to October 2008. Executive Vice President, Corporate Development and Investor Relations from July 2003 to June 2005. Prior to July 2003, Senior Vice President, Principal, and Head of Corporate Finance for Stern Stewart & Co.
Paul A. Civils		58	Senior Vice President and General Manager since November 2008.	Vice President and General Manager, Retail Solutions from October 2003 to November 2008. Prior to October 2003, Vice President, Retail Direct Sales for Kyrus Corporation.
John T. Dyer		34	Vice President and Controller since November 2008.	Director of Internal Audit from March 2007 to November 2008. Prior to 2004 and to March 2007, various progressive positions in finance, accounting, internal audit, and management with The Sherwin-Williams Company.

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Name	Age		Current Position at June 1, 2009	Other Positions
Kenneth J. Kossin, Jr.		44	Senior Vice President and Chief Financial Officer since October 2008.	Vice President and Controller from October 2005 to October 20, 2008. Assistant Controller from April 2004 to October 2005. Prior to April 2004, Director of General Accounting for Roadway, Express, Inc.
Anthony Mellina		53	Senior Vice President and General Manager since November 2008.	Senior Vice President, Sun Technology Solutions from October 2007 to November 2008. Prior to October 2007, Chief Executive Officer for Innovative Systems Design, Inc. from July 2003.
Tina Stehle		52	Senior Vice President and General Manager since November 2008.	Senior Vice President Hospitality Solutions from July 2007 to November 2008. Vice President and General Manager, Hospitality Solutions from August 2006 to July 2007. Vice President, Software Sales from February 2004 to August 2006. Prior to February 2004, Vice President of Software Services for Inter-American Data, Inc.
Curtis C. Stout		38	Vice President and Treasurer since November 2008.	Vice President, Corporate Development and Planning from April 2007 to November 2008. Director, Business Planning and Development from April 2004 to March 2007. From July 2000 to April 2004, various roles in corporate development.
Kathleen A. Weigand		50	General Counsel and Senior Vice President, Human Resources since March 2009.	Executive Vice President, General Counsel, and Secretary for U-Store It Trust from January 2006 to December 2008. Deputy General Counsel and Assistant Secretary for Eaton Corporation from 2003 to 2005. Prior to 2003, Vice President, Assistant General Counsel, and Assistant Secretary for TRW Inc.

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part II

Item 5.   Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities.

The company’s common shares, without par value, are traded on the NASDAQ Stock Market LLC. Common share prices are quoted daily under the symbol “AGYS.” The high and low market prices and dividends per share for the common shares for each quarter during the past two fiscal years are presented in the table below.

	Year ended March 31, 2009
	First quarter		Second quarter		Third quarter		Fourth quarter		Year
Dividends declared per common share		$0.03		$0.03		$0.03		$0.03		$0.12
Price range per common share		$9.65-$12.64		$10.09-$13.34		$2.09-$9.48		$3.26-$4.93		$2.09-$13.34
Closing price on last day of period		$11.34		$10.09		$4.29		$4.30		$4.30

	Year ended March 31, 2008
	First quarter		Second quarter		Third quarter		Fourth quarter		Year
Dividends declared per common share		$0.03		$0.03		$0.03		$0.03		$0.12
Price range per common share		$21.03-$23.45		$14.50-$23.46		$12.68-$18.53		$11.13-$15.30		$11.13-$23.46
Closing price on last day of period		$22.50		$16.90		$15.12		$11.60		$11.60

As of May 29, 2009, there were 22,639,773 common shares of the company outstanding, and there were 2,156 shareholders of record. However, the company believes that there is a larger number of beneficial holders of its common shares. The closing price of the common shares on May 29, 2009, was $6.46 per share.

The company pays cash dividends on common shares quarterly upon authorization by the Board of Directors. Regular payment dates have been the first day of August, November, February and May.

The company maintains a Dividend Reinvestment Plan whereby cash dividends and additional monthly cash investments up to a maximum of $5,000 per month may be invested in the company’s common shares at no commission cost.

The company adopted a Shareholder Rights Plan in 1999 that expired on May 10, 2009. For further information about the Shareholder Rights Plan, see Note 14 to Consolidated Financial Statements titled, Shareholders’ Equity and contained in Part IV hereof.

No repurchases of common shares were made by or on behalf of the Company during the fourth quarter of fiscal 2009.

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Shareholder Return Performance Presentation

The following chart compares the value of $100 invested in the company’s common shares, including reinvestment of dividends, with a similar investment in the Russell 2000 Index (the “Russell 2000”) and the companies listed in the SIC Code 5045-Computer and Computer Peripheral Equipment and Software (the company’s “Peer Group”) for the period March 31, 2004, through March 31, 2009:

Comparison of Cumulative Five Year Total Return

Indexed returns
			Fiscal years ending
Company Name / Index	Base period March 2004		March 2005		March 2006		March 2007		March 2008		March 2009
Agilysys, Inc.		100.00		168.11		129.71		195.42		101.56		38.45
Russell 2000		100.00		105.41		132.66		140.50		122.23		76.39
Peer Group		100.00		102.32		113.88		118.59		96.29		65.61

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Item 6.  Selected Financial Data.

The following selected consolidated financial and operating data was derived from the audited consolidated financial statements of the company and should be read in conjunction with the company’s Consolidated Financial Statements and Notes thereto, and Item 7 contained in part II of this Annual Report on Form 10-K.

	For the year ended March 31
(In thousands, except per share data)	2009			2008			2007			2006			2005
Operating results (a)(b)(c)(d)(e)
Net sales	$	730,720		$	760,168		$	453,740		$	463,375		$	377,029
Restructuring charges (credits)	$	40,801		$	(75	)	$	(2,531	)	$	5,337		$	515
Asset impairment charges	$	231,856		$	—		$	—		$	—		$	—
(Loss) income from continuing operations, net of taxes	$	(282,187	)	$	1,858		$	(9,927	)	$	(20,541	)	$	(25,118	)
(Loss) income from discontinued operations, net of taxes		(1,947	)		1,801			242,782			48,655			44,603
Net (loss) income	$	(284,134	)	$	3,659		$	232,855		$	28,114		$	19,485
Per share data (a)(b)(c)(d)(e)
(Loss) income from continuing operations — basic and diluted	$	(12.49	)	$	0.07		$	(0.32	)	$	(0.69	)	$	(0.89	)
(Loss) income from discontinued operations — basic and diluted		(0.09	)		0.06			7.91			1.63			1.58
Net income — basic and diluted	$	(12.58	)	$	0.13		$	7.59		$	0.94		$	0.69
Weighted-average shares outstanding
Basic		22,586,603			28,252,137			30,683,766			29,935,200			28,100,612
Diluted		22,586,603			28,766,112			30,683,766			29,935,200			28,100,612
Financial position
Total assets	$	374,436		$	695,871		$	893,716		$	760,940		$	818,492
Long-term obligations (f)	$	157		$	255		$	3		$	99		$	59,624
Mandatorily redeemable convertible trust preferred securities (g)	$	—		$	—		$	—		$	—		$	125,317
Total shareholders’ equity	$	192,717		$	479,465		$	626,844		$	385,176		$	332,451

(a)	In 2008, the company acquired Stack, InfoGenesis, Innovative and Eatec. Accordingly, the results of operations for these acquisitions are included in the accompanying consolidated financial statements since the acquisition date. See Note 2 to Consolidated Financial Statements titled, Acquisitions, for additional information.
(b)	In 2007, the company sold the assets and operations of KSG. The operating results of KSG are classified as discontinued operations for all periods presented. See Note 3 to Consolidated Financial Statements titled, Discontinued Operations, for additional information regarding the company’s sale of KSG’s assets and operations.
(c)	In 2007, the company included the operating results of Visual One in the results of operations from the date of acquisition. In 2006, the company included the results of operations of CTS from its date of acquisition.

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(d)	In 2008, an impairment charge of $4.9 million was recognized on the company’s equity investment in Magirus AG (“Magirus”). In 2007, the company recognized an impairment charge of $5.9 million ($5.1 million after taxes) on its equity method investment in Magirus. See Note 6 to Consolidated Financial Statements titled, Investment in Magirus — Sold in November 2008, for further information regarding this investment.
(e)	In 2009 and 2008, discontinued operations primarily represents TSG’s China and Hong Kong operations and the resolution of certain contingencies. The company sold the stock of TSG’s China operations and certain assets of TSG’s Hong Kong operations in January 2009. In 2007 and 2006 discontinued operations primarily represents TSG’s China and Hong Kong operations and the company’s KSG business that was sold in 2007. In 2005, discontinued operations primarily represents the company’s KSG business and certain continuing occupancy costs related to the IED business that was sold in 2003.
(f)	The company’s Senior Notes matured in 2007. In 2006, the company’s Senior Notes were reclassified from long-term obligations to a current liability.
(g)	In 2006, the company completed the redemption of its 6.75% Mandatorily Redeemable Convertible Trust Preferred Securities (“Trust Preferred Securities”). Trust Preferred Securities with a carrying value of $105.4 million were redeemed for cash at a total expense of $109.0 million. In addition, Trust Preferred Securities with a carrying value of $19.9 million were converted into common shares of the company.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

In “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” (“MD&A”), management explains the general financial condition and results of operations for Agilysys, Inc. and its subsidiaries including:

—  what factors affect the company’s business;

—  what the company’s earnings and costs were;

—  why those earnings and costs were different from the year before;

—  where the earnings came from;

—  how the company’s financial condition was affected; and

—  where the cash will come from to fund future operations.

The MD&A analyzes changes in specific line items in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows and provides information that management believes is important to assessing and understanding the company’s consolidated financial condition and results of operations. The discussion should be read in conjunction with the Consolidated Financial Statements and related Notes that appear in Item 15 of this Annual Report on Form 10-K titled, “Financial Statements and Supplementary Data.” Information provided in the MD&A may include forward-looking statements that involve risks and uncertainties. Many factors could cause actual results to be materially different from those contained in the forward-looking statements. See “Forward-Looking Information” below and Item 1A “Risk Factors” in Part I of this Annual Report on Form 10-K for additional information concerning these items. Management believes that this information, discussion, and disclosure is important in making decisions about investing in the company.

Overview

Agilysys, Inc. (“Agilysys” or the “company”) is a leading provider of innovative IT solutions to corporate and public-sector customers, with special expertise in select markets, including retail and hospitality. The company uses technology — including hardware, software and services — to help customers resolve their most complicated IT needs. The company possesses expertise in enterprise architecture and high availability, infrastructure optimization, storage and resource management, and business continuity, and provides industry-specific software, services and expertise to the retail and hospitality markets. Headquartered in Solon, Ohio effective October 2008, Agilysys operates extensively throughout North America, with additional sales offices in the United Kingdom and Hong Kong. Agilysys has three reportable segments: Hospitality Solutions (“HSG”), Retail Solutions (“RSG”), and Technology Solutions (“TSG”). See Note 13 to Consolidated Financial Statements titled, Business Segments, which is included in Item 15, for additional discussion.

In July 2008, the company decided to exit TSG’s portion of the Hong Kong and China businesses. HSG continues to operate in Hong Kong. In January 2009, the company closed the sale of the stock of TSG’s China operations and certain assets of TSG’s Hong Kong operations, receiving proceeds of $1.4 million. As disclosed in previous filings, the company sold KSG in March 2007 and now operates solely as an IT solutions provider. The following long-term goals were established by the company with the divestiture of KSG:

—  Target gross margin in excess of 20% and earnings before interest, taxes, depreciation and amortization of 6% within three years.

—  While in the near term return on invested capital will be diluted due to acquisitions and legacy costs, the company continues to target long-term return on invested capital of 15%.

As a result of the decline in GDP growth, a weak macroeconomic environment, significant risk in the credit markets, and changes in demand for IT products, the company will not achieve its long-term revenue goals announced in early 2007, and is re-evaluating its long-term revenue goals and acquisition strategy. The company remains committed to its gross margin, earnings before interest, taxes, depreciation and amortization margins and target long-term return on invested capital goals. Given the current economic conditions, the company is focused on aligning cost structure with current and expected revenue levels, improving efficiencies, and increasing cash flows.

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Fiscal 2009 was a transitional year for the company, as the company’s headquarters were relocated back to Ohio and new leaders stepped into the company’s executive officer roles. In fiscal 2009, the company experienced a slowdown in sales as a result of the softening of the IT market in North America, with net sales decreasing 3.9% year-over-year. The decline in net sales was tempered by a contribution of $72.2 million in incremental sales during the year from recently acquired businesses. Gross margin as a percentage of sales increased 370 basis points year-over-year to 27.2% at March 31, 2009 versus 23.5% at March 31, 2008, which exceeded the company’s long-term goal of achieving gross margins in excess of 20% within three years.

For financial reporting purposes, the current and prior period operating results of KSG and TSG’s Hong Kong and China businesses have been classified within discontinued operations for all periods presented. Accordingly, the discussion and analysis presented below, including the comparison to prior periods, reflects the continuing business of Agilysys.

Results of Operations

2009 Compared with 2008

Net Sales and Operating Loss

	Year ended March 31				Increase (decrease)
(Dollars in thousands)	2009		2008		$		%
Net Sales
Product	$	585,702	$	634,214	$	(48,512)		(7.6)%
Service		145,018		125,954		19,064		15.1%
Total		730,720		760,168		(29,448)		(3.9)%
Cost of goods sold
Product		456,779		539,496		(82,717)		(15.3)%
Service		75,263		42,181		33,082		78.4%
Total		532,042		581,677		(49,635)		(8.5)%
Gross margin		198,678		178,491		20,187		11.3%
Gross margin percentage		27.2%		23.5%
Operating expenses
Selling, general, and administrative expenses		206,075		196,422		9,653		4.9%
Asset impairment charges		231,856		—		231,856		nm
Restructuring charges (credits)		40,801		(75)		40,876		nm
Operating loss	$	(280,054)	$	(17,856)	$	(262,198)		nm
Operating loss percentage		(38.3)%		(2.3)%

nm — not meaningful.

Net sales.  The $29.4 million decrease in net sales was driven by a decline in hardware revenues resulting from lower volumes. These lower volumes were attributable to a general decrease in IT spending as a result of weakening macroeconomic conditions, which particularly affected TSG. Hardware revenue decreased $53.6 million year-over-year. The decrease in hardware revenue was partially offset by increases of $5.1 million and $19.1 million in software and services revenues, respectively.

TSG’s sales decreased $36.7 million primarily due to lower hardware volumes, primarily due to lower hardware sales volumes. RSG’s sales decreased $7.6 million primarily due to a large single customer sale in 2008 that did not repeat in 2009. HSG’s sales increased $14.8 million driven by the incremental sales attributable to the InfoGenesis and Eatec acquisitions, which contributed $12.5 million and $4.6 million, respectively.

Gross margin.  The $20.2 million increase in gross margin was driven by a favorable product mix and vendor rebates. The decrease in product gross margin reflects the lower volumes of hardware sales combined with a higher proportion of proprietary software sales, which carry lower costs for the company, and a change in customer mix. The decrease in service gross margin reflects the integration of InfoGenesis, including conformity with HSG’s practices, as well as a change in the TSG service model as a result of the 2009 restructuring actions.

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TSG’s gross margin increased $5.2 million driven by the Innovative acquisition, which incrementally contributed $17.6 million. RSG’s gross margin increased $3.1 million, which is attributable to a favorable mix of service revenues. HSG’s gross margin increased $13.3 million primarily due to the InfoGenesis and Eatec acquisitions, which contributed $12.1 million and $3.3 million, respectively.

Operating Expenses.  The company’s operating expenses consist of selling, general, and administrative (“SG&A”) expenses, asset impairment charges, and restructuring charges (credits). SG&A expenses increased $9.7 million attributable to increases of $9.4 million, $1.3 million, and $2.6 million in HSG, RSG, and TSG, respectively, partially offset by a reduction in corporate SG&A expenses of $3.6 million. The increase in HSG’s operating expenses is primarily a result of the acquisitions of InfoGenesis, Eatec, and Triangle which contributed $2.4 million, $3.7 million, and $1.5 million in incremental expenses, respectively, with the remainder of the increase due to salaries and wages expenses for the segment’s organic business. The increase in RSG’s SG&A expenses is primarily related to an increase in salaries and wages expenses of $1.9 million. The increase in TSG’s operating expenses is primarily due to incremental expenses incurred with respect to Innovative, which was acquired in the second quarter of 2008. The reduction in corporate operating expenses is a direct result of the restructuring actions taken in 2009. From March 31, 2008 to March 31, 2009, the Company reduced it’s total workforce by approximately 9%. In addition, the Company suspended wage increases for fiscal 2010.

The company’s asset impairment charges consist of goodwill impairment charges of $229.5 million, not including goodwill impairment of $16.8 million and a $3.8 million in finite-lived intangible asset impairment charges classified within restructuring charges, and an indefinite-lived intangible asset impairment charge of $2.4 million. The goodwill and intangible asset impairment charges are discussed further in Note 4 to Consolidated Financial Statements titled, Restructuring Charges (Credits) and in Note 5 to Consolidated Financial Statements titled, Goodwill and Intangible Assets.

The company recorded restructuring charges of $40.8 million during 2009. The restructuring charges consist of $23.5 million recorded during the first two quarters of 2009 related to the professional services restructuring actions, $13.4 million recorded during the third quarter of 2009 related to the third quarter management restructuring actions and relocation of the company’s headquarters from Boca Raton, Florida to Solon, Ohio, and $3.9 million recorded during the fourth quarter of 2009 related to both the third and the fourth quarter management restructuring actions. The restructuring credits in 2008 resulted from an adjustment to previously accrued severance amounts and a write-off of certain leasehold improvements, net of adjustments related to actual and accrued sub-lease income and common area costs. The company’s restructuring actions in 2009 and 2008 are discussed further in the Restructuring Charges (Credits) subsection of this MD&A and in Note 4 to Consolidated Financial Statements titled, Restructuring Charges (Credits).

Other Expenses (Income)

	Year ended March 31						Favorable (unfavorable)
(Dollars in thousands)	2009			2008			$			%
Other expenses (income)
Other expenses (income), net	$	2,570		$	(6,566	)	$	(9,136	)		(139.1)%
Interest income		(524	)		(13,101	)		(12,577	)		(96.0)%
Interest expense		1,183			875			(308	)		(35.2)%
Total other expenses (income), net	$	3,229		$	(18,792	)	$	(22,021	)		(117.2)%

Other expenses (income), net.  In 2009, the $2.6 million in other expenses primarily included $3.0 million in impairment charges recorded for the company’s investment in The Reserve Fund’s Primary Fund. These impairment charges are discussed further in the subsection of this MD&A below titled, Investments, and in Note 1 to Consolidated Financial Statements titled, Operations and Summary of Significant Accounting Policies. In 2008, the $6.6 million in other income primarily included a $15.1 million gain on the sale of the Magirus investment, which was partially offset by the company’s share of Magirus’ annual operating losses of $6.2 million and an impairment charge of $4.9 million recorded to write down the company’s equity method investment in Magirus to fair value. Other income in 2008 also included $1.4 million gain the company recognized on the redemption of an investment in an affiliated company.

Interest income.  The $12.6 million unfavorable change in interest income was due to a lower average cash and cash equivalent balances in 2009 compared to 2008. The higher cash and cash equivalent balance in 2008 was driven by the sale of KSG for $485.0 million on March 31, 2007. However, the company’s cash and cash equivalent balance declined during 2008 and 2009, as the company used the cash to acquire businesses and purchase its common shares for treasury.

Interest expense.  Interest expense increased $0.3 million in 2009 compared to 2008 due to a non-cash charge for unamortized deferred financing fees recorded in the third quarter of 2009 as a result of the termination of the company’s then existent revolving credit facility, as discussed in Liquidity and Capital Resources below.

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Income Taxes

The company recorded an income tax benefit from continuing operations at an effective tax rate of 0.4% in 2009 compared with an income tax benefit at an effective rate of 381.1% in 2008. The effective tax rate for 2009 is lower than the statutory rate primarily due to the impairment of nondeductible goodwill and an increase in the valuation allowance for federal and state deferred tax assets. The effective tax rate for 2008 was higher than the statutory rate principally due to the reversal of the valuation allowance associated with Magirus, the settlement of an IRS audit, and other changes in liabilities related to state taxes that were partially offset by higher meals and entertainment expenses incurred in marketing the company’s products.

2008 Compared with 2007

Net Sales and Operating Loss

	Year ended March 31				Increase (decrease)
(Dollars in thousands)	2008		2007		$		%
Net Sales
Product	$	634,214	$	361,301	$	272,913		75.5%
Service		125,954		92,439		33,515		36.3%
Total		760,168		453,740		306,428		67.5%
Cost of goods sold
Product		539,496		310,329		229,167		73.8%
Service		42,181		24,662		17,519		71.0%
Total		581,677		334,991		246,686		73.6%
Gross margin		178,491		118,749		59,742		50.3%
Gross margin percentage		23.5%		26.2%
Operating expenses
Selling, general, and administrative expenses		196,422		129,611		66,811		51.5%
Restructuring credits		(75)		(2,531)		2,456		(97.0)%
Operating loss	$	(17,856)	$	(8,331)	$	(9,525)		114.3%
Operating loss percentage		(2.3)%		(1.8)%

Net sales.  The $306.4 million increase in net sales was largely driven by an increase in hardware revenue. Hardware revenue increased $233.9 million year-over-year. The increase in hardware revenue was principally due to higher revenues generated from the acquisitions which contributed $205.7 million. Innovative contributed $162.0 million of the $205.7 million.

TSG’s sales increased $222.9 million primarily due to the Innovative and Stack acquisitions, which contributed $175.3 million and $46.2 million, respectively. HSG’s sales increased $46.9 million primarily due to the InfoGenesis and Eatec acquisitions, which contributed $30.9 and $0.8 million respectively. RSG’s sales increased $37.0 million primarily due to sales volume increases.

Gross Margin.  The $59.7 million increase in gross margin was driven by the overall increase in sales. Changes in product mix, pricing under our procurement agreement with Arrow and margins of our acquisitions all contributed to the lower gross margin percentage.

TSG’s gross margin increased $32.5 million primarily due to the Innovative and Stack acquisitions, which contributed $35.6 million and $6.1 million, respectively. HSG’s gross margin increased $24.1 million primarily due to the InfoGenesis and Eatec acquisitions, which contributed $15.0 and $0.7 million, respectively. RSG’s gross margin increased $5.1 million, which can be directly attributable to the increase in sales.

Operating Expenses.  The company’s operating expenses consist of selling, general, and administrative (“SG&A”) expenses and restructuring credits. The $66.8 million increase in SG&A expenses was mainly driven by the following key factors: incremental operating expenses of $0.4 million, $23.3 million, $16.4 million, and $8.3 million related to the acquisitions of Eatec, Innovative, InfoGenesis, and Stack, respectively, outside services expense of $4.3 million, and rental expense of $2.6 million. The remaining increase in SG&A was principally due to higher stock-based compensation and benefits costs in 2008.

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Restructuring credits decreased $2.5 million during 2008. The decline was principally due to the $4.9 million reversal of the remaining restructuring liability that was initially recognized in 2003 for an unutilized leased facility. In connection with the sale of KSG, management determined that the company would utilize the formerly abandoned leased facility to house the majority of its remaining IT Solutions Business and corporate personnel. Accordingly, the reversal of the remaining restructuring liability was classified as a restructuring credit in the consolidated statement of operations in 2007. The 2007 restructuring credit was offset by a charge of approximately $1.7 million for the termination of a facility lease that was previously exited as part of a prior restructuring effort and a $0.5 million charge for one-time termination benefits resulting from a workforce reduction that was executed in connection with the sale of KSG.

Other (Income) Expenses

	Year ended March 31						Favorable (unfavorable)
(Dollars in thousands)	2008			2007			$		%
Other (income) expenses
Other (income) expense, net	$	(6,566	)	$	6,008		$	12,574		209.3%
Interest income		(13,101	)		(5,133	)		7,968		155.2%
Interest expense		875			2,656			1,781		67.1%
Total other (income) expense	$	(18,792	)	$	3,531		$	22,323		632.2%

Other (income) expense, net.  The $12.6 million favorable change in other (income) expense, net, was due to a $1.4 million gain recognized on the redemption of the company’s investment in an affiliated company in the first quarter of 2008. The company recognized a $1.4 million increase in foreign currency transaction gains during 2008 compared with 2007 due to changes in exchange rates. Additionally, there was a $9.8 million year-over-year increase in earnings from the company’s equity method investment that included a 2008 fourth quarter gain of $15.1 million as a result of the sale by Magirus the investment of a portion of its distribution business. In the fourth quarter of 2008, the company recognized a $4.9 million impairment charge to write down the company’s equity method investment to its fair value compared to a $5.9 million impairment charge for the write down of the company’s equity method investment to its estimated realizable value in 2007. The write-down was driven by changing market conditions and the equity method investee’s recent operating losses that indicated an other-than-temporary loss condition and the eventual sale of the investment in 2009.

Interest income.  The $8.0 million favorable change in interest income was due to higher average cash and cash equivalent balance in 2008 compared with 2007. The higher cash and cash equivalent balance was driven by the sale of KSG for $485.0 million on March 31, 2007. However, the company’s cash and cash equivalent balance has declined during 2008 as the company has used cash to acquire several businesses and purchase common shares for treasury.

Income Taxes

The company recorded an income tax benefit from continuing operations at an effective tax rate of 381.1% in 2008 compared with an income tax benefit at an effective rate of 14.3% in 2007. The increase in the effective tax rate is primarily attributable to the reversal of the valuation allowance associated with Magirus, the settlement of an IRS audit, and other changes in liabilities related to state taxes which were partially offset by higher meals and entertainment expenses incurred in marketing the company’s products.

Off-Balance Sheet Arrangements

The company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

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Contractual Obligations

The following table provides aggregate information regarding the company’s contractual obligations as of March 31, 2009.

	Payments due by fiscal year
			Less than		1 to 3			3 to 5			More than
(Dollars in thousands)	Total		1 year		Years			Years			5 years
Capital leases (1)	$	444	$	268	$	172		$	4		$	—
Operating leases (2)		18,675		4,986		6,157			3,700			3,832
SERP liability (3)		18,286		11,103		4,816			—			2,367
Other benefits (4)		980		881		—			—			99
Purchase obligations (5)		990,000		330,000		660,000			—			—
Restructuring liabilities (6)		9,927		7,901		1,663			363			—
Unrecognized tax positions (7)		5,651		1,200		—			—			—
Total contractual obligations	$	1,043,963	$	356,339	$	672,808	(8)	$	4,067	(8)	$	6,298	(8)

(1)	Additional information regarding the company’s capital lease obligations is contained in Note 7 to Consolidated Financial Statements titled, Financing Arrangements.
(2)	Lease obligations are presented net of contractually binding sub-lease arrangements. Additional information regarding the company’s operating lease obligations is contained in Note 7 to Consolidated Financial Statements titled, Lease Commitments.
(3)	On April 1, 2000, the company implemented a nonqualified defined benefit pension plan for certain of its executive officers, including its current CEO (the “SERP”). The SERP provides retirement benefits for the participants. The projected benefit obligation recognized by the company for this plan was $18.3 million at March 31, 2009. With the exception of the company’s current CEO, the remaining participants have separated from employment as of March 31, 2009. Therefore, the timing of the payments due has been determined based on the actual retirement date selected by the former executive, or, for the current CEO and others who were not eligible for retirement at the time of their separation, based on the normal retirement date as defined by the plan. See Note 9 to Consolidated Financial Statements titled, Additional Balance Sheet Information and Note 11 to Consolidated Financial Statements titled, Employee Benefit Plans, for additional information regarding the SERP.
(4)	The company entered into agreements with two former executives, providing each with additional years of service for purposes of calculating benefits under the SERP. Since these agreements were executed outside the SERP, the company recorded the benefit obligation attributable to the additional service awarded under these agreements as a separate liability. The projected benefit liability recognized by the company was approximately $1.0 million at March 31, 2009. Both former executives have separated from employment as of March 31, 2009. Therefore, the timing of the payments due has been determined based on the actual retirement date selected by one former executive and based on the normal retirement date as defined by the SERP for the other former executive.
(5)	In connection with the sale of KSG, the company entered into a product procurement agreement (“PPA”) with Arrow Electronics, Inc. Under the PPA, the company is required to purchase a minimum of $330 million worth of products each year through the fiscal year ending March 31, 2012, adjusted for product availability and other factors.
(6)	The company has recorded restructuring liabilities primarily related to the restructuring actions taken in 2009. See the section to the MD&A titled, Restructuring Charges (Credits), and Note 4 to Consolidated Financial Statements titled, Restructuring Charges (Credits), for additional information regarding these restructuring liabilities.
(7)	The company has accrued a liability for unrecognized positions at March 31, 2009 in accordance with the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”). See Note 10 to Consolidated Financial Statements titled, Income Taxes, for further information regarding unrecognized tax positions. The timing of certain potential cash outflows related to these unrecognized tax positions is not reasonably determinable and therefore are not scheduled.
(8)	The amount of total contractual obligations with maturities greater than one year is not reasonably determinable, as discussed in note (7) above.

The company anticipates that cash on hand, funds from continuing operations, and access to capital markets will provide adequate funds to finance capital spending and working capital needs and to service its obligations and other commitments arising during the foreseeable future.

Liquidity and Capital Resources

Overview

The company’s operating cash requirements consist primarily of working capital needs, operating expenses, capital expenditures and payments of principal and interest on indebtedness outstanding, which primarily consists of lease and rental obligations at March 31, 2009. The company believes that cash flow from operating activities, cash on hand, availability under the credit facility as discussed below, and access to capital markets will provide adequate funds to meet its short-and long-term liquidity requirements. Additional information regarding the company’s financing arrangements is provided in Note 8 to Consolidated Financial Statements titled, Financing Arrangements.

As of March 31, 2009 and 2008, the company’s total debt was approximately $0.4 million and $0.5 million, respectively, comprised of capital lease obligations in both periods.

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Revolving Credit Facility

As of January 20, 2009, the company terminated its $200 million unsecured credit facility with Bank of America, N.A. (as successor to LaSalle Bank National Association), as lead arranger, book runner and administrative agent, and certain other lenders party thereto (the “Credit Facility”). The Credit Facility included a $20 million sub-facility for letters of credit issued by Bank of America, N.A., or one of its affiliates, and a $20 million sub-facility for swingline loans, which are short-term loans generally used for working capital requirements. The Credit Facility was available to the company for refinancing debt existing at the time, providing for working capital requirements, capital expenditures and general corporate purposes of the company, including acquisitions. As of October 17, 2008, the company’s ability to borrow under its Credit Facility was suspended due to the company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended March 31, 2008, and other technical defaults. The company had not borrowed under the Credit Facility since it was entered into in October of 2005. The company decided to terminate the Credit Facility in January 2009. There were no penalties associated with early termination of the Credit Facility, however $0.4 million of deferred debt fees were immediately expensed during the third quarter as a result of the termination.

The company executed a Loan and Security Agreement dated May 5, 2009 (the “New Credit Facility”) with Bank of America, N.A., as agent for the lenders from time to time party thereto (“Lenders”). The company’s obligations under the New Credit Facility are secured by the company’s assets (as defined in the new Credit Facility). This New Credit Facility replaces the company’s previous credit facility, which was terminated on January 20, 2009. The company also maintained an unsecured inventory financing agreement (the “Floor Plan Financing Facility”) with International Business Machines. This Floor Plan Financing Facility was terminated on May 4, 2009, and the company will primarily fund working capital through open accounts payable provided by its trade vendors.

The May 5, 2009 New Credit Facility provides $50 million of credit (which may be increased to $75 million by a $25 million “accordion provision”) for borrowings and letters of credit and will mature May 5, 2012. The New Credit Facility establishes a borrowing base for availability of loans predicated on the level of the company’s accounts receivable meeting banking industry criteria. The aggregate unpaid principal amount of all borrowings, to the extent not previously repaid, is repayable at maturity. Borrowings also are repayable at such other earlier times as may be required under or permitted by the terms of the New Credit Facility. LIBOR Loans bear interest at LIBOR for the applicable interest period plus an applicable margin ranging from 3.0% to 3.5%. Base rate loans (as defined in the New Credit Facility) bear interest at the Base Rate (as defined in the New Credit Facility) plus an applicable margin ranging from 2.0% to 2.5%. Interest is payable on the first of each month in arrears. There is no premium or penalty for prepayment of borrowings under the New Credit Facility.

The New Credit Facility contains normal mandatory repayment provisions, representations, and warranties and covenants for a secured credit facility of this type. The New Credit Facility also contains customary events of default upon the occurrence of which, among other remedies, the Lenders may terminate their commitments and accelerate the maturity of indebtedness and other obligations under the New Credit Facility.

As of June 5, 2009, the company had no amounts outstanding under the New Credit Facility and $50.0 million was available for future borrowings. The company has no intention to borrow amounts under the New Credit Facility in the near term.

Cash Flow

	Year ended March 31						Increase (decrease)			Year ended March 31
(Dollars in thousands)	2009			2008			$			2007
Net Cash (used for) provided by continuing operations:
Operating activities	$	(86,078	)	$	(159,544	)	$	73,466		$	153,990
Investing activities		(5,440	)		(240,654	)		235,214			469,976
Financing activities		56,822			(137,391	)		194,213			(51,287	)
Effect of foreign currency fluctuations on cash		911			1,314			(403	)		(97	)
Cash flows used for (provided by) continuing operations		(33,785	)		(536,275	)		502,490			572,582
Net operating and investing cash flows provided by (used for) discontinued operations		94			1,995			(1,901	)		(115,388	)
Net (decrease) increase in cash and cash equivalents	$	(33,691	)	$	(534,280	)	$	500,589		$	457,194

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Cash flow (used for) provided by operating activities.  The $86.1 million in cash used for operating activities in 2009 included funds used for the $35.0 million payment of the Innovative earn-out that reduced accrued liabilities, a decrease in accounts payable of $74.5 million due to the establishment of the IBM floor plan financing agreement in February 2008, which was recorded as a financing activity, and was partially offset by a $14.9 million reduction in accounts receivable and other changes in working capital. The $159.5 million in cash used for operating activities in 2008 included $123.4 million used for federal income taxes paid primarily for the gain on the sale of KSG, with the remainder used for changes in working capital.

Cash flow (used for) provided by investing activities.  In 2009, the $5.4 million in cash used for investing activities primarily represents $5.2 million that was reclassified from cash equivalents to long-term investments for the company’s remaining claim on The Reserve Fund’s Primary Fund, $2.4 million paid for the acquisition of Triangle, and $7.1 million for the purchase of property, plant, and equipment, partially offset by $9.5 million received from the sale of the Magirus investment. The 2008 investing activities principally reflect the $236.2 million in cash (net of cash acquired) that the company paid for the acquisitions of Eatec, Innovative, InfoGenesis, and Stack. In 2007, cash provided by investing activities of $470.0 million was attributable to the $485.0 million in proceeds received from the sale of KSG, partially offset by $10.6 million paid for the acquisition of Visual One.

Cash flow provided by (used for) financing activities.  The $56.8 million in cash provided by financing activities in 2009 resulted from $59.6 million in proceeds related to the company’s floor plan financing agreement, partially offset by $2.7 million in dividends paid. The $137.4 million in cash used by financing activities in 2008 was principally driven by the $150.0 million repurchase of the company’s common shares and $3.4 million in dividends paid, partially offset by $14.6 million in proceeds related to the floor plan financing agreement and $1.4 million in proceeds from stock options exercised. The 2007 cash used for financing activities primarily was attributable to $59.6 million in principal payments under long term obligations, including $59.4 million related to retiring the company’s senior notes, partially offset by $10.1 million in proceeds from stock options exercised.

Critical Accounting Policies, Estimates & Assumptions

MD&A is based upon the company’s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company regularly evaluates its estimates, including those related to bad debts, inventories, investments, intangible assets, income taxes, restructuring and contingencies, litigation and supplier incentives. The company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

The company’s most significant accounting policies relate to the sale, purchase, and promotion of its products. The policies discussed below are considered by management to be critical to an understanding of the company’s consolidated financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. No significant adjustments to the company’s accounting policies were made in 2009. Specific risks for these critical accounting policies are described in the following paragraphs.

For all of these policies, management cautions that future events rarely develop exactly as forecasted, and the best estimates routinely require adjustment.

Revenue recognition.  The company derives revenue from three primary sources: server, storage and point of sale hardware, software, and services. Revenue is recorded in the period in which the goods are delivered or services are rendered and when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. The company reduces revenue for estimated discounts, sales incentives, estimated customer returns and other allowances. Discounts are offered based on the volume of products and services purchased by customers. Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold.

Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer’s final acceptance of the arrangement have been fulfilled. A majority of the company’s hardware sales involves shipment directly from its suppliers to the end-user customers. In such transactions, the company is responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and bears credit risk if the customer does not pay for the goods. As the principal contact with the customer, the company recognizes revenue and cost of goods sold when it is notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination.

The company offers proprietary software as well as remarketed software for sale to its customers. A majority of the company’s software sales do not require significant production, modification, or customization at the time of shipment (physically or electronically) to

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the customer. Substantially all of the company’s software license arrangements do not include acceptance provisions. As such, revenue from both proprietary and remarketed software sales is recognized when the software has been shipped. For software delivered electronically, delivery is considered to have occurred when the customer either takes possession of the software via downloading or has been provided with the requisite codes that allow for immediate access to the software based on the U.S Eastern time zone time stamp.

The company also offers proprietary and third-party services to its customers. Proprietary services generally include: consulting, installation, integration, training, and maintenance. Revenue relating to maintenance services is recognized evenly over the coverage period of the underlying agreement. Many of the company’s software arrangements include consulting services sold separately under consulting engagement contracts. When the arrangements qualify as service transactions as defined in AICPA Statement of Position No. 97-2 (“SOP 97-2”), “Software Revenue Recognition,” consulting revenues from these arrangements are accounted for separately from the software revenues. The significant factors considered in determining whether the revenues should be accounted for separately include the nature of the services (i.e., consideration of whether the services are essential to the functionality of the software), degree of risk, availability of services from other vendors, timing of payments, and the impact of milestones or other customer acceptance criteria on revenue realization. If there is significant uncertainty about the project completion or receipt of payment for consulting services, the revenues are deferred until the uncertainty is resolved.

For certain long-term proprietary service contracts with fixed or “not to exceed” fee arrangements, the company estimates proportional performance using the hours incurred as a percentage of total estimated hours to complete the project consistent with the percentage-of-completion method of accounting. Accordingly, revenue for these contracts is recognized based on the proportion of the work performed on the contract. If there is no sufficient basis to measure progress toward completion, the revenues are recognized when final customer acceptance is received. Adjustments to contract price and estimated service hours are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. The aggregate of billings on uncompleted contracts in excess of related costs is shown as a current asset.

If an arrangement does not qualify for separate accounting of the software and consulting services, then the software revenues are recognized together with the consulting services using the percentage-of-completion or completed contract method of accounting. Contract accounting is applied to arrangements that include: milestones or customer-specific acceptance criteria that may affect the collection of revenues, significant modification or customization of the software, or provisions that tie the payment for the software to the performance of consulting services.

In addition to proprietary services, the company offers third-party service contracts to its customers. In such instances, the supplier is the primary obligor in the transaction and the company bears credit risk in the event of nonpayment by the customer. Since the company is acting as an agent or broker with respect to such sales transactions, the company reports revenue only in the amount of the “commission” (equal to the selling price less the cost of sale) received rather than reporting revenue in the full amount of the selling price with separate reporting of the cost of sale.

Allowance for Doubtful Accounts.  The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk, as well as historical trends of the entire customer pool. If the financial condition of the company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk the company performs periodic credit evaluations of its customers.

Inventories.  Inventories are stated at the lower of cost or market, net of related reserves. The cost of inventory is computed using a weighted-average method. The company’s inventory is monitored to ensure appropriate valuation. Adjustments of inventories to lower of cost or market, if necessary, are based upon contractual provisions governing turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. The company provides a reserve for obsolescence, which is calculated based on several factors including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

Income Taxes.  Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. The carrying value of the company’s deferred tax assets is dependent upon the company’s ability to generate sufficient future taxable income in certain tax jurisdictions. Should the company determine that it is not able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets is expensed in the period such determination is made to an amount that is more likely than not to be realized. The company presently records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event that the company were to determine that it would be able to realize its deferred tax assets in the future in

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excess of its net recorded amount (including valuation allowance), an adjustment to the tax valuation allowance would decrease tax expense in the period such determination was made.

In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” (“FAS 109”). FIN 48 provides guidance for the accounting for uncertainty in income taxes recognized in our financial statements in accordance with FAS 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The evaluation of a tax position in accordance with FIN 48 is a two-step process. The first step is recognition: The determination of whether or not it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, management presumes that the position will be examined by the appropriate tax authority and that the tax authority will have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not threshold is measured to determine the amount of benefit to recognize in the financial statements. The measurement process requires the determination of the range of possible settlement amounts and the probability of achieving each of the possible settlements. The tax position is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet the more-likely-than-not threshold. Tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which the threshold is no longer met. In addition, FIN 48 requires the cumulative effect of adoption to be recorded as an adjustment to the opening balance of retained earnings. FIN 48 is effective for fiscal years beginning after December 15, 2006. The company adopted FIN 48 effective April 1, 2007, as required and recognized a cumulative effect of accounting change of approximately $2.9 million, which decreased beginning retained earnings in the accompanying Consolidated Statements of Shareholders’ Equity for the year ended March 31, 2008 and increased accrued liabilities in the accompanying Consolidated Balance Sheets as of March 31, 2008. The company’s income taxes and the impact of adopting FIN 48 are described further in Note 10 to Consolidated Financial Statements, Income Taxes.

Goodwill and Long-Lived Assets.  Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. Goodwill is subject to impairment testing at least annually. Goodwill is also subject to testing as necessary, if changes in circumstances or the occurrence of certain events indicate potential impairment. In assessing the recoverability of the company’s goodwill, identified intangibles, and other long-lived assets, significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets must be made, as well as the related estimated useful lives. The fair value of goodwill and long-lived assets is estimated using a discounted cash flow valuation model. If these estimates or their related assumptions change in the future as a result of changes in strategy or market conditions, the company may be required to record impairment charges for these assets in the period such determination was made.

Restructuring and Other Special Charges.  The company records reserves in connection with the reorganization of its ongoing business. The reserves principally include estimates related to employee separation costs and the consolidation and impairment of facilities that will no longer be used in continuing operations. Actual amounts could be different from those estimated. Determination of the asset impairments is discussed above in Goodwill and Long-Lived Assets. Facility reserves are calculated using a present value of future minimum lease payments, offset by an estimate for future sublease income provided by external brokers. Present value is calculated using a credit-adjusted risk-free rate with a maturity equivalent to the lease term.

Valuation of Accounts Payable.  The company’s accounts payable has been reduced by amounts claimed by vendors for amounts related to incentive programs. Amounts related to incentive programs are recorded as adjustments to cost of goods sold or operating expenses, depending on the nature of the program. There is a time delay between the submission of a claim by the company and confirmation of the claim by our vendors. Historically, the company’s estimated claims have approximated amounts agreed to by vendors.

Supplier Programs.  The company receives funds from suppliers for product sales incentives and marketing and training programs, which are generally recorded, net of direct costs, as adjustments to cost of goods sold or operating expenses according to the nature of the program. The product sales incentives are generally based on a particular quarter’s sales activity and are primarily formula-based. Some of these programs may extend over one or more quarterly reporting periods. The company accrues supplier sales incentives and other supplier incentives as earned based on sales of qualifying products or as services are provided in accordance with the terms of the related program. Actual supplier sales incentives may vary based on volume or other sales achievement levels, which could result in an increase or reduction in the estimated amounts previously accrued, and can, at times, result in significant earnings fluctuations on a quarterly basis.

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Recently Issued Accounting Pronouncements

In December 2008, the FASB issued Staff Position No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets” an amendment of SFAS 132(R) (“FSP FAS 132(R)-1”). This standard requires disclosure about an entity’s investment policies and strategies, the categories of plan assets, concentrations of credit risk and fair value measurements of plan assets. The standard is effective for fiscal years beginning after December 15, 2008, or fiscal 2010 for the company. The company is currently evaluating the impact, if any, that the adoption of FSP FAS 132(R)-1 will have on its financial position, results of operations, or cash flows.

In November 2008, the FASB’s Emerging Issues Task Force published Issue No. 08-6, Equity Method Investment Accounting Considerations (“EITF 08-06”). This issue addresses the impact that FAS 141(R) and FAS 160 might have on the accounting for equity method investments, including how the initial carrying value of an equity method investment should be determined, how it should be tested for impairment, and how changes in classification from equity method to cost method should be treated. EITF 08-06 is to be implemented prospectively and is effective for fiscal years beginning after December 15, 2008, or fiscal 2010 for the company. The standard will have an impact on the company only for acquisitions and investments in noncontrolling interests made after April 1, 2009. The company is currently evaluating the impact, if any, the adoption of EITF 08-06 will have on its financial position, results of operations, or cash flows.

In May 2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (“FAS 162”). FAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). FAS 162 directs the U.S. GAAP hierarchy to the entity, not the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with U.S. GAAP. FAS 162 is effective November 15, 2008. The adoption of FAS 162 did not have a significant impact on the company’s financial position, results of operations, or cash flows.

In April 2008, the FASB issued Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142, Goodwill and Other Intangible Assets. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within that fiscal year, or fiscal 2010 for the company. Early adoption is prohibited. FSP 142-3 applies prospectively to intangible assets acquired after adoption. The company does not expect the adoption of FSP FAS 142-3 to have a significant impact on its financial position, results of operations, or cash flows.

In December 2007, the FASB issued Statement No. 141(R), Business Combinations (“Statement 141(R)”). Statement 141(R) significantly changes the accounting for and reporting of business combination transactions. Statement 141(R) is effective for fiscal years beginning after December 15, 2008, or fiscal 2010 for the company. The standard will have an impact on the company only for acquisitions made after April 1, 2009. The company is currently evaluating the impact that Statement 141(R) will have on its financial position, results of operations and cash flows.

In December 2007, the FASB issued Statement No. 160, Accounting and Reporting for Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“Statement 160”). Statement 160 clarifies the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Statement 160 is effective for the first annual reporting period beginning after December 15, 2008, or fiscal 2010 for the company. The company is currently evaluating the impact that Statement 160 will have on its financial position, results of operations and cash flows.

Business Combinations

2009 Acquisition

Triangle Hospitality Solutions Limited

On April 9, 2008, the company acquired all of the shares of Triangle Hospitality Solutions Limited (“Triangle”), the UK-based reseller and specialist for the company’s InfoGenesis products and services for $2.7 million, comprised of $2.4 million in cash and $0.3 million of assumed liabilities. Accordingly, the results of operations for Triangle have been included in the accompanying Consolidated Financial Statements from that date forward. Triangle enhanced the company’s international presence and growth strategy in the UK, as well as solidified the company’s leading position in the hospitality and stadium and arena markets without increasing InfoGenesis’ ultimate customer base. Triangle added to the company’s hospitality solutions suite with the ability to offer customers the Triangle mPOS solution, which is a handheld point-of-sale solution which seamlessly integrates with InfoGenesis products. Based on management’s preliminary allocation of the acquisition cost to the net assets acquired (accounts receivable, inventory, and accounts payable), approximately $2.7 million was originally assigned to goodwill. Due to a purchase price adjustment during the third quarter of fiscal 2009 of $0.4 million,

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the goodwill attributed to the Triangle acquisition is $3.1 million at March 31, 2009. Goodwill resulting from the Triangle acquisition will be deductible for income tax purposes.

2008 Acquisitions

Eatec

On February 19, 2008, the company acquired all of the shares of Eatec Corporation (“Eatec”), a privately held developer and marketer of inventory and procurement software. Accordingly, the results of operations for Eatec have been included in the accompanying Consolidated Financial Statements from that date forward. Eatec’s software, EatecNetX (now called Eatec Solutions by Agilysys), is a recognized leading, open architecture-based, inventory and procurement management system. The software provides customers with the data and information necessary to enable them to increase sales, reduce product costs, improve back-office productivity and increase profitability. Eatec customers include well-known restaurants, hotels, stadiums and entertainment venues in North America and around the world as well as many public service institutions. The acquisition further enhances the company’s position as a leading inventory and procurement solution provider to the hospitality and foodservice markets. Eatec was acquired for a total cost of $25.0 million. Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $18.3 million was assigned to goodwill.

During the second quarter of 2009, management completed its purchase price allocation and assigned $6.2 million of the acquisition cost to identifiable intangible assets as follows: $1.4 million to non-compete agreements, which will be amortized between two and seven years; $2.2 million to customer relationships, which will be amortized over seven years; $1.8 million to developed technology, which will be amortized over five years; and $0.8 million to trade names, which has an indefinite life.

During the first, second and fourth quarters of 2009, goodwill impairment charges were taken relating to the Eatec acquisition in the amounts of $1.3 million, $14.4 million, and $3.4 million, respectively. As of March 31, 2009, $1.7 million remains on the company’s balance sheet in goodwill relating to the Eatec acquisition.

Innovative Systems Design, Inc.

On July 2, 2007, the company acquired all of the shares of Innovative Systems Design, Inc. (“Innovative”), the largest U.S. commercial reseller of Sun Microsystems servers and storage products. Accordingly, the results of operations for Innovative have been included in the accompanying Consolidated Financial Statements from that date forward. Innovative is an integrator and solution provider of servers, enterprise storage management products and professional services. The acquisition of Innovative establishes a new and significant relationship between Sun Microsystems and the company. Innovative was acquired for an initial cost of $108.6 million. Additionally, the company was required to pay an earn-out of two dollars for every dollar of earnings before interest, taxes, depreciation, and amortization, or EBITDA, greater than $50.0 million in cumulative EBITDA over the first two years after consummation of the acquisition. The earn-out was limited to a maximum payout of $90.0 million. As a result of existing and anticipated EBITDA, during the fourth quarter of 2008, the company recognized $35.0 million of the $90.0 million maximum earn-out, which was made in April 2008. In addition, due to certain changes in the sourcing of materials, the company amended its agreement with the Innovative shareholders whereby the maximum payout available to the Innovative shareholders was limited to $58.65 million, inclusive of the $35.0 million paid. The EBITDA target required for the shareholders to be eligible for an additional payout is now $67.5 million in cumulative EBITDA over the first two years after the close of the acquisition. No amounts have been accrued as of March 31, 2008, as it is not probable that any additional payout will be made.

During the fourth quarter of 2008, management completed its purchase price allocation and assigned $29.7 million of the acquisition cost to identifiable intangible assets as follows: $4.8 million to non-compete agreements, $5.5 million to customer relationships, and $19.4 million to supplier relationships which will be amortized over useful lives ranging from two to five years.

Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $97.8 million was assigned to goodwill. Goodwill resulting from the Innovative acquisition will be deductible for income tax purposes. During the fourth quarter of 2009, a goodwill impairment charge was taken relating to the Innovative acquisition for $74.5 million. As of March 31, 2009, $23.3 million remains on the company’s balance sheet as goodwill relating to the Innovative acquisition.

InfoGenesis

On June 18, 2007, the company acquired all of the shares of IG Management Company, Inc. and its wholly-owned subsidiaries, InfoGenesis and InfoGenesis Asia Limited (collectively, “InfoGenesis”), an independent software vendor and solution provider to the hospitality market. Accordingly, the results of operations for InfoGenesis have been included in the accompanying Consolidated Financial Statements from that date forward. InfoGenesis offers enterprise-class point-of-sale solutions that provide end users a highly intuitive, secure and easy way to process customer transactions across multiple departments or locations, including comprehensive corporate and store reporting. InfoGenesis has a significant presence in casinos, hotels and resorts, cruise lines, stadiums and foodservice. The acquisition provides the

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company a complementary offering that extends its reach into new segments of the hospitality market, broadens its customer base and increases its software application offerings. InfoGenesis was acquired for a total acquisition cost of $90.6 million.

InfoGenesis had intangible assets with a net book value of $15.9 million as of the acquisition date, which were included in the acquired net assets to determine goodwill. Intangible assets were assigned values as follows: $3.0 million to developed technology, which will be amortized between six months and three years; $4.5 million to customer relationships, which will be amortized between two and seven years; and $8.4 million to trade names, which have an indefinite life. Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $71.8 million was assigned to goodwill. Goodwill resulting from the InfoGenesis acquisition will not be deductible for income tax purposes. During the first, second, and fourth quarters of 2009, goodwill impairment charges were taken relating to the InfoGenesis acquisition in the amounts of $3.9 million, $57.4 million, and $3.8 million, respectively. As of March 31, 2009, $6.7 million remains on the company’s balance sheet as goodwill relating to the InfoGenesis acquisition.

Pro Forma Disclosure of Financial Information

The following table summarizes the company’s unaudited consolidated results of operations as if the InfoGenesis and Innovative acquisitions occurred on April 1:

	Year Ended March 31,
	2009			2008		2007
Net sales	$	730,720		$	841,101	$	729,851
(Loss) income from continuing operations	$	(282,187	)	$	7,068	$	4,556
Net (loss) income	$	(284,134	)	$	8,908	$	241,541
(Loss) earnings per share — basic income from continuing operations	$	(12.49	)	$	0.25	$	0.15
Net (loss) income	$	(12.58	)	$	0.32	$	7.87
(Loss) earnings per share — diluted income from continuing operations	$	(12.49	)	$	0.25	$	0.15
Net (loss) income	$	(12.58	)	$	0.31	$	7.87

Stack Computer, Inc.

On April 2, 2007, the company acquired all of the shares of Stack Computer, Inc. (“Stack”). Stack’s customers include leading corporations in the financial services, healthcare and manufacturing industries. Accordingly, the results of operations for Stack have been included in the accompanying Consolidated Financial Statements from that date forward. Stack also operates a highly sophisticated solution center, which is used to emulate customer IT environments, train staff and evaluate technology. The acquisition of Stack strategically provides the company with product solutions and services offerings that significantly enhance its existing storage and professional services business. Stack was acquired for a total acquisition cost of $25.2 million.

Management made an adjustment of $0.8 million to the fair value of acquired capital equipment and assigned $11.7 million of the acquisition cost to identifiable intangible assets as follows: $1.5 million to non-compete agreements, which will be amortized over five years using the straight-line amortization method; $1.3 million to customer relationships, which will be amortized over five years using an accelerated amortization method; and $8.9 million to supplier relationships, which will be amortized over ten years using an accelerated amortization method.

Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $13.3 million was assigned to goodwill. Goodwill resulting from the Stack acquisition is deductible for income tax purposes. During the first and second quarters of 2009, goodwill impairment charges were taken relating to the Stack acquisition in the amounts of $7.8 million and $2.1 million, respectively. As of March 31, 2009, $3.4 million remains on the company’s balance sheet as goodwill relating to the Stack acquisition.

2007 Acquisition

Visual One Systems Corporation

On January 23, 2007, the company acquired all the shares of Visual One, a leading developer and marketer of Microsoft^® Windows^®-based software for the hospitality industry. Accordingly, the results of operations for Visual One have been included in the accompanying Consolidated Financial Statements from that date forward. The acquisition provides the company additional expertise around the development, marketing and sale of software applications for the hospitality industry, including property management, condominium, golf course, spa, point-of-sale, and sales and catering management applications. Visual One’s customers include well-known North American

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and international full-service hotels, resorts, conference centers and condominiums of all sizes. The aggregate acquisition cost was $14.4 million.

During the second quarter of 2008, management assigned $4.9 million of the acquisition cost to identifiable intangible assets as follows: $3.8 million to developed technology, which will be amortized over six years using the straight-line method; $0.6 million to non-compete agreements, which will be amortized over eight years using the straight-line amortization method; and $0.5 million to customer relationships, which will be amortized over five years using an accelerated amortization method.

Based on management’s allocation of the acquisition cost to the net assets acquired, including identified intangible assets, approximately $9.4 million was assigned to goodwill. Goodwill resulting from the Visual One acquisition is not deductible for income tax purposes. During the first, second, and fourth quarters of 2009, goodwill impairment charges were taken relating to the Visual One acquisition in the amounts of $0.5 million, $7.5 million, and $0.5 million, respectively. As of March 31, 2009, $0.9 million remains on the company’s balance sheet as goodwill relating to the Visual One acquisition.

Discontinued Operations

China and Hong Kong Operations

In July, 2008, the company met the requirements of FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”) to classify TSG’s China and Hong Kong operations as held-for-sale and discontinued operations, and began exploring divestiture opportunities for these operations. Agilysys acquired TSG’s China and Hong Kong businesses in December 2005. During January 2009, the company sold the stock related to TSG’s China operations and certain assets of TSG’s Hong Kong operations, receiving proceeds of $1.4 million, which resulted in a pre-tax loss on the sale of discontinued operations of $0.8 million. The assets and liabilities of these operations are classified as discontinued operations on the company’s Consolidated Balance Sheets, and the operations are reported as discontinued operations for the periods presented in accordance with Statement 144. The remaining unsold assets and liabilities of TSG’s China and Hong Kong operations have been classified as discontinued operations on the company’s balance sheet as of March 31, 2009 and 2008.

Sale of Assets and Operations of KeyLink Systems Distribution Business

During 2007, the company sold the assets and operations of KSG for $485.0 million in cash, subject to a working capital adjustment. At March 31, 2007, the final working capital adjustment was $10.8 million. Through the sale of KSG, the company exited all distribution-related businesses and now exclusively sells directly to end-user customers. By monetizing the value of KSG, the company significantly increased its financial flexibility and has redeployed the proceeds to accelerate the growth of its ongoing business both organically and through acquisition. The sale of KSG represented a disposal of a component of an entity. As such, the operating results of KSG, along with the gain on sale, have been reported as a component of discontinued operations.

Restructuring Charges (Credits)

2009 Restructuring Activity

Fourth Quarter Management Restructuring.  During the fourth quarter of 2009, the company took additional steps to realign its cost and management structure. During the quarter, an additional four company vice presidents were terminated, as well as other support and sales personnel. These actions resulted in a restructuring charge of $3.7 million during the quarter, comprised mainly of termination benefits for the above-mentioned management changes. Also included in the restructuring charges was a non-cash charge for a curtailment loss of $1.2 million under the company’s SERP. These restructuring charges are included in the Corporate segment.

Third Quarter Management Restructuring.  During the third quarter of 2009, the company took steps to realign its cost and management structure. During October 2008, the company’s former Chairman, President and CEO announced his retirement, effective immediately. In addition, four company vice presidents were terminated, as well as other support personnel. The company also relocated its headquarters from Boca Raton, Florida, to Solon, Ohio, where the company has a facility with a large number of employees, and cancelled the lease on its financial interests in two airplanes. These actions resulted in a restructuring charge of $13.4 million as of December 31, 2008, comprised mainly of termination benefits for the above-mentioned management changes and the costs incurred to relocate the corporate headquarters. Also included in the restructuring charges was a non-cash charge for a curtailment loss of $4.5 million under the company’s SERP. An additional $0.2 million expense was incurred in the fourth quarter of 2009 as a result of an impairment to the leasehold improvements at the company’s former headquarters in Boca Raton. These restructuring charges are included in the Corporate segment.

First Quarter Professional Services Restructuring.  During the first quarter of 2009, the company performed a detailed review of the business to identify opportunities to improve operating efficiencies and reduce costs. As part of this cost reduction effort, management reorganized the professional services go-to-market strategy by consolidating its management and delivery groups. The company will continue to offer specific proprietary professional services, including identity management, security, and storage virtualization; however, it

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will increase the use of external business partners. The cost reduction resulted in a $2.5 million and $0.4 million charge for one-time termination benefits relating to a workforce reduction in the first and second quarters of 2009, respectively. The workforce reduction was comprised mainly of service delivery personnel. Payment of these one-time termination benefits was substantially complete in 2009. This restructuring also resulted in a $20.6 million impairment to goodwill and intangible assets in the first quarter of 2009, related to the company’s 2005 acquisition of CTS. The entire $23.5 million restructuring charge relates to TSG.

The three restructuring actions discussed above resulted in a $40.8 million restructuring charge for the year ended March 31, 2009.

2007 Restructuring Activity

During 2007, the company recorded a restructuring charge of approximately $0.5 million for one-time termination benefits resulting from a workforce reduction that was executed in connection with the sale of KSG. The workforce reduction was comprised mainly of corporate personnel. Payment of the one-time termination benefits was substantially complete in 2008.

Investments

The Reserve Fund’s Primary Fund

At September 30, 2008, the company had $36.2 million invested in The Reserve Fund’s Primary Fund. Due to liquidity issues associated with the bankruptcy of Lehman Brothers, Inc., The Primary Fund temporarily ceased honoring redemption requests, but the Board of Trustees of The Primary Fund subsequently voted to liquidate the assets of the fund and approved a distribution of cash to the investors. As of March 31, 2009, the company has received $31.0 million of the investment, with $5.2 million remaining in The Primary Fund. As a result of the delay in cash distribution, we have reclassified the remaining $5.2 million from cash and cash equivalents to investments in other non-current assets on the balance sheet, and, accordingly, have presented the reclassification as a cash outflow from investing activities in the consolidated statements of cash flows. In addition, as of March 31, 2009, the company estimated and recorded a loss on its investment in the fund. The loss was estimated as 8.3% of the company’s original investment in the fund, resulting in a $3.0 million charge to other expense. In April 2009, the company received an additional distribution of $1.6 million from The Primary Fund. The company is unable to estimate the timing of future distributions, which are expected to aggregate to approximately $0.6 million.

This investment is a financial instrument that falls within the scope of FASB Statement No. 157, Fair Value Measurements (“FAS 157”), and accordingly, was measured at its fair value of $2.2 million at March 31, 2009, which is net of the impairment charges recorded during 2009. FAS 157 classifies the inputs used to measure fair value into three levels as follows:

—  Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

—  Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and

—  Level 3: Unobservable inputs for the asset or liability.

The company’s investment in The Primary Fund was classified as a Level 2 financial instrument at March 31, 2009, as its fair value was determined using information other than quoted prices that is available on The Reserve Fund’s website.

Investment in Marketable Securities

The company invests in marketable securities to satisfy future obligations of its employee benefit plans. The marketable securities are held in a Rabbi Trust and are classified within “Other non-current assets” on the company’s Consolidated Balance Sheets. The company’s investment in marketable equity securities are held for an indefinite period and thus are classified as available for sale. The aggregate fair value of the securities was $37,000 and $0.1 million at March 31, 2009 and 2008, respectively. During 2009, sales proceeds and realized losses were $0.1 million and $24,000, respectively. During 2008, sale proceeds and realized gain were $6.1 million and $0.2 million, respectively. The company used the sale proceeds to fund corporate-owned life insurance policies.

Investment in Magirus — Sold in November 2008

In November 2008, the company sold its 20% ownership interest in Magirus, a privately owned European enterprise computer systems distributor headquartered in Stuttgart, Germany, for $2.3 million. In addition, the company received a dividend from Magirus (as a result of Magirus selling a portion of its distribution business in fiscal 2008) of $7.3 million in July 2008, resulting in $9.6 million of total proceeds received in fiscal 2009. The company adjusted the fair value of the investment as of March 31, 2008, to the net present value of the subsequent cash proceeds, resulting in fourth quarter 2008 charges of (i) a $5.5 million reversal of the cumulative currency translation adjustment in accordance with EITF 01-5, Application of FASB Statement No. 52 to an Investment Being Evaluated for Impairment That Will Be Disposed of, and (ii) an impairment charge of $4.9 million to write the held-for-sale investment to its fair value less cost to sell.

The company had decided to sell its 20% investment in Magirus prior to March 31, 2008, and met the qualifications to consider the asset as held for sale. As a result, the company reclassified its Magirus investment to investment held for sale at March 31, 2008 in accordance with FAS 144.

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Because of the company’s inability to obtain and include audited financial statements of Magirus for fiscal years ended March 31, 2008 and 2007 as required by Rule 3-09 of Regulation S-X, the SEC has stated that it will not permit effectiveness of any new securities registration statements or post-effective amendments, if any, until such time as the company files audited financial statements that reflect the disposition of Magirus and the company requests and the SEC grants relief to the company from the requirements of Rule 3-09. As part of this restriction, the company is not permitted to file any new securities registration statements that are intended to automatically go into effect when they are filed, nor can the company make offerings under effective registration statements or under Rules 505 and 506 of Regulation D where any purchasers of securities are not accredited investors under Rule 501(a) of Regulation D. These restrictions do not apply to the following: offerings or sales of securities upon the conversion of outstanding convertible securities or upon the exercise of outstanding warrants or rights; dividend or interest reinvestment plans; employee benefit plans, including stock option plans; transactions involving secondary offerings; or sales of securities under Rule 144.

On April 1, 2008, the company invoked FASB Interpretation No. 35, Criteria for Applying the Equity Method of Accounting for Investments in Common Stock (“FIN 35”), for its investment in Magirus. The invocation of FIN 35 required the company to account for its investment in Magirus via cost, rather than equity accounting. FIN 35 clarifies the criteria for applying the equity method of accounting for investments of 50% or less of the voting stock of an investee enterprise. The cost method was used by the company because management did not have the ability to exercise significant influence over Magirus, which is one of the presumptions in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, necessary to account for an investment in common stock under the equity method.

Investment in Affiliated Companies

During 2008, the investment in an affiliated company was redeemed by the affiliated company for $4.8 million in cash, resulting in a $1.4 million gain on redemption of the investment. The gain was classified within “other income (expense), net” in the consolidated statement of operations.

Stock Based Compensation

The company accounts for stock based compensation in accordance with the fair value recognition provisions of FASB Statement 123R, Share-Based Payment (“FAS 123R”), which was adopted on April 1, 2006. The company adopted the provisions of FAS 123R using the modified prospective application and, accordingly, results for prior periods have not been restated. Prior to April 1, 2006, the company accounted for stock based compensation in accordance with the intrinsic value method. As such, no stock based employee compensation cost was recognized by the company for stock option awards, as all options granted to employees had an exercise price equal to the market value of the underlying stock on the date of grant.

Compensation cost charged to operations relating to stock based compensation during 2009 was $0.5 million. This included $3.5 million in reversals of stock based compensation expense in 2009 due to actual forfeitures of non-vested shares and performance shares, and a change in the estimate of the forfeiture rate which was updated due to the management restructuring actions. As of March 31, 2009, total unrecognized stock based compensation expense related to unvested stock options was $0.5 million, which is expected to be recognized over a weighted-average period of 18 months. In addition, as of March 31, 2009, total unrecognized stock based compensation expense related to non-vested shares and performance shares was $0.1 million and $0.2 million, respectively, which is expected to be recognized over a weighted-average period of 12 months.

Risk Control and Effects of Foreign Currency and Inflation

The company extends credit based on customers’ financial condition and, generally, collateral is not required. Credit losses are provided for in the Consolidated Financial Statements when collections are in doubt.

The company sells internationally and enters into transactions denominated in foreign currencies. As a result, the company is subject to the variability that arises from exchange rate movements. The effects of foreign currency on operating results did not have a material impact on the company’s results of operations for the 2009, 2008 or 2007 fiscal years.

The company believes that inflation has had a nominal effect on its results of operations in fiscal 2009, 2008 and 2007 and does not expect inflation to be a significant factor in fiscal 2010.

Forward Looking Information

This Annual Report on Form 10-K contains certain management expectations, which may constitute forward-looking information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the Private Securities Reform Act of 1995. Forward-looking information speaks only as to the date of this presentation and may be identified by use of words such as “may,” “will,” “believes,” “anticipates,” “plans,” “expects,” “estimates,” “projects,” “targets,” “forecasts,” “continues,” “seeks,” or the negative of those terms or similar expressions. Many important factors could cause actual results to be materially different from those in forward-looking information including, without limitation, competitive factors, disruption of supplies, changes in market conditions, pending or future claims or litigation, or technology advances. No assurances can be provided as to the outcome of cost

30

reductions, business strategies, future financial results, unanticipated downturns to our relationships with customers, unanticipated difficulties integrating acquisitions, new laws and government regulations, interest rate changes, and unanticipated deterioration in economic and financial conditions in the United States and around the world. We do not undertake to update or revise any forward-looking information even if events make it clear that any projected results, actions, or impact, express or implied, will not be realized.

Other potential risks and uncertainties that may cause actual results to be materially different from those in forward-looking information are described in this Annual Report on Form 10-K filed with the SEC, under Item 1A, “Risk Factors.” Copies are available from the SEC or the Agilysys web site.

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.

The company has assets, liabilities and cash flows in foreign currencies creating foreign exchange risk. Systems are in place for continuous measurement and evaluation of foreign exchange exposures so that timely action can be taken when considered desirable. Reducing exposure to foreign currency fluctuations is an integral part of the company’s risk management program. Financial instruments in the form of forward exchange contracts are employed, when deemed necessary, as one of the methods to reduce such risk. There were no foreign currency exchange contracts executed by the company during 2009, 2008, or 2007.

As discussed within Liquidity and Capital Resources in the MD&A, on January 20, 2009, the company terminated its five-year $200 million revolving credit facility. At the time of the termination, there were no amounts outstanding under this credit facility. Therefore, the company did not have a revolving credit facility in place at March 31, 2009. There were no amounts outstanding under this credit facility in 2009, 2008, or 2007. On May 5, 2009, the company entered into a new $50 million revolving credit facility. While the company is exposed to interest rate risk from the floating-rate pricing mechanisms on its new revolving credit facility, it does not expect interest rate risk to have a significant impact on its business, financial condition, or results of operations during 2010.

Item 8.   Financial Statements and Supplementary Data.

The information required by this item is set forth in the Financial Statements and Supplementary Data contained in Part IV of this Annual Report on Form 10-K.

Item 9.   Change in and Disagreements With Accountants on Accounting and Financial Disclosures.

None.

Item 9A.   Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the material weakness related to the company’s hospitality and retail order processing operations, identified in 2008 has been remediated. In addition, the CEO and CFO concluded that our disclosure controls and procedures as of the end of the period covered by this report are not effective solely because of the material weakness relating to the company’s internal control over financial reporting as described below in “Management’s Report on Internal Controls Over Financial Reporting.” In light of the 2008 and 2009 material weaknesses, the company performed additional analysis and post-closing procedures to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Report on Internal Control Over Financial Reporting

The management of the company, under the supervision of the CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2009 based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management has concluded

31

that the company did not maintain effective internal control over financial reporting as of March 31, 2009, due to the material weakness discussed below.

Revenue Recognition Controls — The aggregation of several errors in the company’s revenue recognition cycle, primarily related to the set-up of specific customer terms and conditions, resulted in a material weakness in the operating effectiveness of revenue recognition controls.

Management has performed a review of the company’s internal control processes and procedures surrounding the revenue recognition cycle. As a result of this review, the company has taken and continues to implement the following steps to prevent future errors from occurring:

1. The company will conduct a comprehensive review of all existing customer terms and conditions compared to existing customer set-up within the customer database.

2. Implement enhanced process and controls around new customer set-up and customer maintenance.

3. Increase quarterly sales cut-off testing procedures to include a review of terms and conditions of customer sales contracts.

4. Implement quarterly physical inventory counts at specific company warehouses to account for and properly reverse revenue relating to the consolidation and storage of customer owned product.

5. Implement a more extensive analysis and enhance the reconciliation and review process related to revenue and cost of goods sold accounts.

Ernst & Young LLP, our independent registered public accounting firm, has issued their report regarding the company’s internal control over financial reporting as of March 31, 2009, which is included elsewhere herein.

Change in Internal Control over Financial Reporting

In 2009, control improvements were implemented in an effort to remediate the errors in the company’s hospitality and retail segments’ order processing operations that resulted in a material weakness in the operating effectiveness of revenue recognition controls as of March 31, 2008. These control improvements included:

1. Mandatory ongoing training for sales operations personnel including procedure and process review, as well as the awareness and significance of key controls.

2. Sales Operations Management review and approval process for all transactions greater than $100,000.

3. Comprehensive documentation checklist that is required to be completed prior to the processing of a sales transaction.

4. Enhanced monthly sales cut-off testing by the company’s Internal Audit Department to ensure the proper and timely processing of a transaction.

5. Sales Operations Management personnel restructuring.

Also during 2009, in an effort to remediate the material weakness that was reported in the third quarter of 2009, control improvements were implemented over the calculation of stock based compensation and the recognition of expense for a defined benefit plan curtailment. These control improvements included:

1. Perform a secondary quarterly review of stock compensation and defined benefit plan activity, and the related accounting.

2. Upon the termination or retirement of an executive employee, perform an additional revaluation of the accounting for such defined benefit plans to determine propriety of accounting and expense recognition.

As a result of these control improvements and other measures the company has taken to date, management believes that the material weaknesses reported as of March 31, 2008, and December 31, 2008, have been remediated as of March 31, 2009.

The company continues to integrate each acquired entity’s internal controls over financial reporting into the company’s own internal controls over financial reporting, and will continue to review and, if necessary, make changes to each acquired entity’s internal controls over financial reporting until such time as integration is complete. Other than the items described above, no changes in our internal control over financial reporting occurred during the company’s last quarter of 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, during the first quarter of 2010, the company began implementing the remedial measures related to the material weakness identified as of March 31, 2009, described above.

Item 9B.   Other Information.

None.

32

part III

Item 10.   Directors, Executive Officers and Corporate Governance.

Information required by this Item as to the Directors of the company, the Audit Committee and the procedures by which shareholders may recommend nominations appearing under the headings “Election of Directors” and “Corporate Governance and Related Matters” in the company’s Proxy Statement to be used in connection with the company’s 2009 Annual Meeting of Shareholders to be held on July 31, 2009 (the “2009 Proxy Statement”) is incorporated herein by reference. Information with respect to compliance with Section 16(a) of the Securities Exchange Act of 1934 by the company’s Directors, executive officers, and holders of more than five percent of the company’s equity securities will be set forth in the 2009 Proxy Statement under the heading “Section 16 (a) Beneficial Ownership Reporting Compliance.” Information required by this Item as to the executive officers of the company is included as Item 4A in Part I of this Annual Report on Form 10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K.

The company has adopted a code of ethics that applies to the Chief Executive Officer, Chief Financial Officer, and Controller known as the “Code of Ethics for Senior Financial Officers” as well as a code of business conduct that applies to all employees of the company known as the “Code of Business Conduct.” Each of these documents is available on the company’s website at http://www.agilysys.com.

Item 11.   Executive Compensation.

The information required by this Item is set forth in the company’s 2009 Proxy Statement under the headings, “Executive Compensation” and “Corporate Governance Related Matters,” which is incorporated herein by reference.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.

The information required by this Item is set forth in the company’s 2009 Proxy Statement under the headings “Share Ownership,” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

Item 13.   Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is set forth in the company’s 2009 Proxy Statement under the headings “Corporate Governance and Related Matters” and “Related Person Transactions,” which information is incorporated herein by reference.

Item 14.   Principal Accountant Fees and Services.

The information required by this Item is set forth in the company’s 2009 Proxy Statement under the heading “Independent Registered Public Accounting Firm,” which information is incorporated herein by reference.

part IV

Item 15.   Exhibits, Financial Statement Schedules.

(a)(1) Financial statements.  The following consolidated financial statements are included herein and are incorporated by reference in Part II, Item 8 of this Annual Report on Form 10-K:

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Consolidated Statements of Operations for the years ended March 31, 2009, 2008, and 2007

Consolidated Balance Sheets as of March 31, 2009 and 2008

Consolidated Statements of Cash Flows for the years ended March 31, 2009, 2008, and 2007

Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2009, 2008, and 2007

Notes to Consolidated Financial Statements

(a)(2) Financial statement schedule.  The following financial statement schedule is included herein and is incorporated by reference in Part II, Item 8 of this Annual Report on Form 10-K:

Schedule II — Valuation and Qualifying Accounts

All other schedules have been omitted since they are not applicable or the required information is included in the consolidated financial statements or notes thereto.

(a)(3) Exhibits.  Exhibits included herein and incorporated by reference are contained in the Exhibit Index of this Annual Report on Form 10-K.

33

signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Agilysys, Inc. has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio, on June 5, 2009.

AGILYSYS, INC.

/s/  Martin F. Ellis

Martin F. Ellis

President, Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities as of June 5, 2009.

Signature	Title
/s/  Martin F. Ellis Martin F. Ellis	President, Chief Executive Officer and Director (Principal Executive Officer)
/s/  Kenneth J. Kossin, Jr.  Kenneth J. Kossin, Jr.	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
/s/  Keith M. Kolerus Keith M. Kolerus	Chairman, Director
/s/  Thomas A. Commes Thomas A. Commes	Director
/s/  R. Andrew Cueva R. Andrew Cueva	Director
/s/  Howard V. Knicely Howard V. Knicely	Director
/s/  Robert A. Lauer Robert A. Lauer	Director
/s/  Robert G. McCreary, III Robert G. McCreary, III	Director
/s/  John Mutch John Mutch	Director

34

agilysys, inc. and subsidiaries

ANNUAL REPORT ON FORM 10-K

Year Ended March 31, 2009

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm		36
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm on Internal Control over Financial Reporting		37
Consolidated Statements of Operations for the years ended March 31, 2009, 2008 and 2007		38
Consolidated Balance Sheets as of March 31, 2009 and 2008		39
Consolidated Statements of Cash Flows for the years ended March 31, 2009, 2008 and 2007		40
Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2009, 2008 and 2007		41
Notes to Consolidated Financial Statements		42
Schedule II — Valuation and Qualifying Accounts for the years ended March 31, 2009, 2008 and 2007		75

35

report of ernst & young llp, independent registered public accounting firm

The Board of Directors and Shareholders

of Agilysys, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Agilysys, Inc. and subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of operations, cash flows and shareholders’ equity for each of the three years in the period ended March 31, 2009. We have also audited the accompanying financial statement schedule listed in the index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Agilysys, Inc. and subsidiaries at March 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Notes 1, 10 and 11 to Consolidated Financial Statements, on April 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes and on March 31, 2007, the Company adopted Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Agilysys, Inc.’s internal control over financial reporting as of March 31, 2009, based on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 8, 2009 expressed an adverse opinion thereon.

/s/  Ernst & Young LLP

Cleveland, Ohio

June 8, 2009

36

report of ernst & young llp, independent registered public accounting firm on internal control over financial reporting

The Board of Directors and Shareholders

of Agilysys, Inc. and Subsidiaries

We have audited Agilysys, Inc. and subsidiaries’ internal control over financial reporting as of March 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Agilysys, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The aggregation of several errors in the Company’s customer set-up process for terms and conditions over new product sales of the retail and hospitality segments resulted in a material weakness in the operating effectiveness of revenue recognition controls.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2009 consolidated financial statements, and this report does not affect our report dated June 8, 2009, on those financial statements. In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, Agilysys, Inc. and subsidiaries have not maintained effective internal control over financial reporting as of March 31, 2009, based on the COSO criteria.

We have also audited, in accordance with the Standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Agilysys, Inc. and Subsidiaries as of March 31, 2009 and 2008, and the related consolidated statements of operations shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2009 and our report dated June 8, 2009 expressed an unqualified opinion thereon.

/s/  Ernst & Young LLP

Cleveland, Ohio

June 8, 2009

37

agilysys, inc. and subsidiaries

Consolidated Statements of Operations

	Year Ended March 31
(In thousands, except share and per share data)	2009			2008			2007
Net sales:
Products	$	585,702		$	634,214		$	361,301
Services		145,018			125,954			92,439
Total net sales		730,720			760,168			453,740
Cost of goods sold:
Products		456,779			539,496			310,329
Services		75,263			42,181			24,662
Total cost of goods sold		532,042			581,677			334,991
Gross margin		198,678			178,491			118,749
Operating expenses
Selling, general, and administrative expenses		206,075			196,422			129,611
Asset impairment charges		231,856			—			—
Restructuring charges (credits)		40,801			(75	)		(2,531	)
Operating loss		(280,054	)		(17,856	)		(8,331	)
Other expenses (income)
Other expenses (income), net		2,570			(6,566	)		6,008
Interest income		(524	)		(13,101	)		(5,133	)
Interest expense		1,183			875			2,656
(Loss) income before income taxes		(283,283	)		936			(11,862	)
Benefit for income taxes		(1,096	)		(922	)		(1,935	)
(Loss) income from continuing operations		(282,187	)		1,858			(9,927	)
Discontinued operations
(Loss) income from operations of discontinued components, net of taxes		(1,464	)		1,801			47,053
(Loss) gain on disposal of discontinued component, net of taxes		(483	)		—			195,729
(Loss) income from discontinued operations		(1,947	)		1,801			242,782
Net (loss) income	$	(284,134	)	$	3,659		$	232,855
(Loss) earnings per share — basic and diluted
(Loss) income from continuing operations	$	(12.49	)	$	0.07		$	(0.32	)
(Loss) income from discontinued operations		(0.09	)		0.06			7.91
Net (loss) income	$	(12.58	)	$	0.13		$	7.59
Weighted average shares outstanding
Basic		22,586,603			28,252,137			30,683,766
Diluted		22,586,603			28,766,112			30,683,766

See accompanying notes to consolidated financial statements.

38

agilysys, inc. and subsidiaries

Consolidated Balance Sheets

	March 31
(In thousands, except share and per share data)	2009			2008
ASSETS
Current assets
Cash and cash equivalents	$	36,244		$	69,935
Accounts receivable, net of allowance of $3,005 in 2009 and $2,392 in 2008		152,276			166,900
Inventories, net of allowance of $2,411 in 2009 and $1,334 in 2008		27,216			25,408
Deferred income taxes — current, net		6,836			3,788
Prepaid expenses and other current assets		4,564			2,756
Income taxes receivable		3,539			4,960
Assets of discontinued operations — current		1,075			5,026
Total current assets		231,750			278,773
Goodwill		50,382			297,560
Intangible assets, net of amortization of $47,413 in 2009 and $27,456 in 2008		35,699			55,625
Investment in cost basis company — held for sale		—			9,549
Deferred income taxes — non-current, net		511			—
Other non-current assets		29,008			25,779
Assets of discontinued operations — non-current		56			1,013
Property and equipment
Building		—			57
Furniture and equipment		39,610			37,624
Software		38,124			37,514
Leasehold improvements		8,380			8,896
Project expenditures not yet in use		8,562			4,148
		94,676			88,239
Accumulated depreciation and amortization		67,646			60,667
Property and equipment, net		27,030			27,572
Total assets	$	374,436		$	695,871
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	22,367		$	96,199
Floor plan financing in default		74,159			14,552
Deferred revenue		18,709			16,232
Accrued liabilities		43,482			57,812
Long-term debt — current		238			305
Liabilities of discontinued operations — current		1,176			3,811
Total current liabilities		160,131			188,911
Other non-current liabilities		21,588			27,263
Liabilities of discontinued operations — non-current		—			232
Commitments and contingencies (see Note 12)
Shareholders’ equity
Common shares, without par value, at $0.30 stated value; 80,000,000 shares authorized; 31,523,218 shares issued; and 22,626,440 and 22,590,440 shares outstanding in 2009 and 2008, respectively		9,366			9,366
Capital in excess of stated value		(11,036	)		(11,469	)
Retained earnings		199,947			486,799
Treasury stock (8,896,778 in 2009 and 8,978,378 in 2008)		(2,670	)		(2,694	)
Accumulated other comprehensive loss		(2,890	)		(2,537	)
Total shareholders’ equity		192,717			479,465
Total liabilities and shareholders’ equity	$	374,436		$	695,871

See accompanying notes to consolidated financial statements.

39

agilysys, inc. and subsidiaries

Consolidated Statements of Cash Flows

	Year Ended March 31
(In thousands)	2009			2008			2007
Operating activities
Net (loss) income	$	(284,134	)	$	3,659		$	232,855
Add: Loss (income) from discontinued operations		1,947			(1,801	)		(242,782	)
(Loss) income from continuing operations		(282,187	)		1,858			(9,927	)
Adjustments to reconcile (loss) income from continuing operations to net cash (used for) provided by operating activities (net of effects from business acquisitions):
Impairment of goodwill and intangible assets		249,983			—			—
Impairment of investment in The Reserve Fund’s Primary Fund		3,001			—			—
Impairment of investment in cost basis company		—			4,921			5,892
(Gain) loss on cost investment		(56	)		(8,780	)		970
Gain on redemption of cost investment		—			(1,330	)		—
Loss on disposal of property and equipment		494			12			1,501
Depreciation		4,032			3,261			2,507
Amortization		23,651			20,552			6,283
Deferred income taxes		(7,035	)		(2,649	)		2,178
Stock based compensation		457			6,039			4,238
Excess tax benefit from exercise of stock options		—			(97	)		(1,854	)
Changes in working capital:
Accounts receivable		14,909			24,794			(988	)
Inventories		(1,763	)		(5,713	)		122
Accounts payable		(74,484	)		(53,144	)		30,136
Accrued liabilities		(17,845	)		(11,675	)		(11,286	)
Income taxes payable		14,483			(138,694	)		132,771
Other changes, net		(1,808	)		2,013			(1,316	)
Other non-cash adjustments, net		(11,910	)		(912	)		(7,237	)
Total adjustments		196,109			(161,402	)		163,917
Net cash (used for) provided by operating activities		(86,078	)		(159,544	)		153,990
Investing activities
Claim on The Reserve Fund’s Primary Fund		(5,268	)		—			—
Change in cash surrender value of company owned life insurance policies		(248	)		(439	)		269
Proceeds from redemption of cost basis investment		9,513			4,770			—
Proceeds from sale of marketable securities		—			—			1,147
Proceeds from sale of business		—			—			485,000
Acquisition of business, net of cash acquired		(2,381	)		(236,210	)		(10,613	)
Purchase of property and equipment		(7,056	)		(8,775	)		(6,250	)
Proceeds from escrow settlement		—			—			423
Net cash (used for) provided by investing activities		(5,440	)		(240,654	)		469,976
Financing activities
Floor plan financing agreement, net		59,607			14,552			—
Purchase of treasury shares		—			(149,999	)		—
Principal payment under long-term obligations		(67	)		(197	)		(59,567	)
Issuance of common shares		—			1,447			10,101
Excess tax benefit from exercise of stock options		—			213			1,854
Dividends paid		(2,718	)		(3,407	)		(3,675	)
Net cash provided by (used for) financing activities		56,822			(137,391	)		(51,287	)
Effect of exchange rate changes on cash		911			1,314			(97	)
Cash flows (used for) provided by continuing operations		(33,785	)		(536,275	)		572,582
Cash flows of discontinued operations
Operating cash flows		94			1,995			(115,315	)
Investing cash flows		—			—			(73	)
Net (decrease) increase in cash		(33,691	)		(534,280	)		457,194
Cash at beginning of year		69,935			604,215			147,021
Cash at end of year	$	36,244		$	69,935		$	604,215
Supplemental disclosures of cash flow information:
Cash payments for interest	$	74		$	618		$	3,135
Cash payments for income taxes, net of refunds received	$	339		$	140,450		$	22,978
Change in value of available-for-sale securities, net of taxes	$	(17	)	$	(169	)	$	86

See accompanying notes to consolidated financial statements.

40

agilysys, inc. and subsidiaries

Consolidated Statements of Shareholders’ Equity

							Stated		Capital in									Unearned			Accumulated
							value of		excess of									compensation			other
	Treasury			Common			common		stated			Treasury			Retained			on restricted			comprehensive
(In thousands, except per share data)	shares			shares			shares		value			shares			earnings			stock			income (loss)			Total
Balance at April 1, 2006		(54	)		30,527		$	9,093	$	113,972		$	(17	)	$	260,255		$	(168	)	$	2,041		$	385,176
Net income		—			—			—		—			—			232,855			—			—			232,855
Unrealized translation adjustment		—			—			—		—			—			—			—			(772	)		(772	)
Unrealized gain on securities net of $54 in taxes		—			—			—		—			—			—			—			86			86
Minimum pension liability, net of $477 in taxes		—			—			—		—			—			—			—			(753	)		(753	)
Total comprehensive income																									231,416
Reversal of unearned compensation in restricted stock award		—			—			—		(168	)		—			—			168			—			—
Adjustment to initially apply FASB Statement No. 158, net of $1,432 in taxes		—			—			—		—			—			—			—			(2,266	)		(2,266	)
Cash dividends ($0.12 per share)		—			—			—		—			—			(3,675	)		—			—			(3,675	)
Non-cash stock based compensation expense		—			—			—		4,232			—			—			—			—			4,232
Shares issued upon exercise of stock options		—			804			241		10,161			—			—			—			—			10,402
Nonvested shares issued from treasury shares		32			32			—		(10	)		10			—			—			—			—
Tax benefit related to exercise of stock options		—			—			—		1,854			—			—			—			—			1,854
Purchase of common shares for treasury		(13	)		(13	)		—		(291	)		(4	)		—			—			—			(295	)
Balance at March 31, 2007		(35	)		31,350		$	9,334	$	129,750		$	(11	)	$	489,435		$	—		$	(1,664	)	$	626,844
Net income		—			—			—		—			—			3,659			—			—			3,659
Unrealized translation adjustment		—			—			—		—			—			—			—			(1,503	)		(1,503	)
Unrealized loss on securities net of $8 in taxes		—			—			—		—			—			—			—			(169	)		(169	)
FASB Statement No. 158 net actuarial losses and prior service cost, net of $505 in taxes		—			—			—		—			—			—			—			799			799
Total comprehensive income																									2,786
Record cumulative effect — FIN 48		—			—			—		—			—			(2,888	)		—			—			(2,888	)
Cash dividends ($0.12 per share)		—			—			—		—			—			(3,407	)		—			—			(3,407	)
Non-cash stock based compensation expense		—			76			—		5,332			—			—			—			—			5,332
Shares issued upon exercise of stock options		—			110			32		1,414			—			—			—			—			1,446
Self tender offer — buyback of common shares for treasury		(8,975	)		—			—		(147,305	)		(2,693	)		—			—			—			(149,998	)
Self tender expenses		—			—			—		(1,570	)		—			—			—			—			(1,570	)
Nonvested shares issued from treasury shares		32			32			—		697			10			—			—			—			707
Tax benefit related to exercise of stock options		—			—			—		213			—			—			—			—			213
Balance at March 31, 2008		(8,978	)		31,568		$	9,366	$	(11,469	)	$	(2,694	)	$	486,799		$	—		$	(2,537	)	$	479,465
Net loss		—			—			—		—			—			(284,134	)		—			—			(284,134	)
Unrealized translation adjustment		—			—			—		—			—			—			—			(1,741	)		(1,741	)
Unrealized loss on securities net of $(7) in tax benefits		—			—			—		—			—			—			—			(17	)		(17	)
FASB Statement No. 158 net actuarial losses and prior service cost, net of $871 in taxes		—			—			—		—			—			—			—			1,405			1,405
Total comprehensive loss																									(284,487	)
Cash dividends ($0.12 per share)		—			—			—		—			—			(2,718	)		—			—			(2,718	)
Non-cash stock based compensation expense		—			(45	)		—		433			—			—			—			—			433
Nonvested shares issued from treasury shares		81			—			—		—			24			—			—			—			24
Balance at March 31, 2009		(8,897	)		31,523		$	9,366	$	(11,036	)	$	(2,670	)	$	199,947		$	—		$	(2,890	)	$	192,717

See accompanying notes to consolidated financial statements

41

agilysys, inc. and subsidiaries

Notes to Consolidated Financial Statements

(Table amounts in thousands, except per share data and Note 16)

1.

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations.  Agilysys, Inc. and its subsidiaries (the “company” or “Agilysys”) provides innovative IT solutions to corporate and public-sector customers with special expertise in select vertical markets, including retail, hospitality and technology solutions. The company operates extensively in North America and has sales offices in the United Kingdom and in Asia.

The company has three reportable segments: Hospitality Solutions Group (“HSG”), Retail Solutions Group (“RSG”), and Technology Solutions Group (“TSG”). Additional information regarding the company’s reportable segments is discussed in Note 13, Business Segments.

The company’s fiscal year ends on March 31. References to a particular year refer to the fiscal year ending in March of that year. For example, 2009 refers to the fiscal year ended March 31, 2009.

Principles of consolidation.  The consolidated financial statements include the accounts of the company. Investments in affiliated companies are accounted for by the equity or cost method, as appropriate. All inter-company accounts have been eliminated. Unless otherwise indicated, amounts in the Notes to Consolidated Financial Statements refer to continuing operations.

Use of estimates.  Preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates.

Foreign currency translation.  The financial statements of the company’s foreign operations are translated into U.S. dollars for financial reporting purposes. The assets and liabilities of foreign operations whose functional currencies are not in U.S. dollars are translated at the period-end exchange rates, while revenues and expenses are translated at weighted-average exchange rates during the fiscal year. The cumulative translation effects are reflected as a component of accumulated other comprehensive income (loss) within shareholders’ equity. Gains and losses on monetary transactions denominated in other than the functional currency of an operation are reflected in other income (expense). Foreign currency gains and losses from changes in exchange rates have not been material to the consolidated operating results of the company.

Related party transactions.  The Secretary of the company is also a partner in the law firm, Calfee, Halter & Griswold LLP (“Calfee”), which provides certain legal services to the company. Legal costs paid to Calfee by the company were $2.0 million for fiscal year 2009, $2.6 million for fiscal year 2008 and $1.0 million for fiscal year 2007.

In connection with the move of our headquarters from Ohio to Florida and then back to Ohio during fiscal years 2007, 2008, and 2009, we provided relocation assistance to our executive officers who were required to relocate. This relocation assistance included costs related to temporary housing, commuting expenses, sales and broker commissions, moving expenses, costs to maintain the executive’s former residence while it was on the market and the loss, if any, associated with the sale of the executive’s former residence. For more information, refer to the Summary Compensation Table for fiscal year 2007, 2008, and 2009, in the company’s 2009 Proxy Statement under the heading, “Executive Compensation.”

All related party transactions with the company require the prior approval of or ratification by the company’s Audit Committee. The company, through its Nominating and Corporate Governance Committee, also makes a formal yearly inquiry of all of its officers and directors for purposes of disclosure of related person transactions, and any such newly revealed related person transactions are conveyed to the Audit Committee. All officers and directors are charged with updating this information with the company’s general counsel.

Segment reporting.  Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Operating segments may be aggregated for segment reporting purposes so long as certain aggregation criteria are met. With the divestiture of the company’s KeyLink Systems Distribution Business in 2007, the continuing operations of the company represented one business segment that provided IT solutions to corporate and public-sector customers. In 2008, the company evaluated its business groups and developed a structure to support the company’s strategic direction as it has transformed to a pervasive solution provider largely in the North American IT market. With this transformation, the company now has three reportable segments: HSG, RSG, and TSG. See Note 13 for a discussion of the company’s segment reporting.

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Revenue recognition.  The company derives revenue from three primary sources: server, storage and point of sale hardware, software, and services. Revenue is recorded in the period in which the goods are delivered or services are rendered and when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the sales price to the customer is fixed or determinable, and collectibility is reasonably assured. The company reduces revenue for estimated discounts, sales incentives, estimated customer returns and other allowances. Discounts are offered based on the volume of products and services purchased by customers. Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold.

Revenue for hardware sales is recognized when the product is shipped to the customer and when obligations that affect the customer’s final acceptance of the arrangement have been fulfilled. A majority of the company’s hardware sales involves shipment directly from its suppliers to the end-user customers. In such transactions, the company is responsible for negotiating price both with the supplier and the customer, payment to the supplier, establishing payment terms and product returns with the customer, and bears credit risk if the customer does not pay for the goods. As the principal contact with the customer, the company recognizes revenue and cost of goods sold when it is notified by the supplier that the product has been shipped. In certain limited instances, as shipping terms dictate, revenue is recognized upon receipt at the point of destination.

The company offers proprietary software as well as remarketed software for sale to its customers. A majority of the company’s software sales do not require significant production, modification, or customization at the time of shipment (physically or electronically) to the customer. Substantially all of the company’s software license arrangements do not include acceptance provisions. As such, revenue from both proprietary and remarketed software sales is recognized when the software has been shipped. For software delivered electronically, delivery is considered to have occurred when the customer either takes possession of the software via downloading or has been provided with the requisite codes that allow for immediate access to the software based on the U.S. Eastern time zone time stamp.

The company also offers proprietary and third-party services to its customers. Proprietary services generally include: consulting, installation, integration, training, and maintenance. Revenue relating to maintenance services is recognized evenly over the coverage period of the underlying agreement. Many of the company’s software arrangements include consulting services sold separately under consulting engagement contracts. When the arrangements qualify as service transactions as defined in AICPA Statement of Position No. 97-2 (“SOP 97-2”), “Software Revenue Recognition,” consulting revenues from these arrangements are accounted for separately from the software revenues. The significant factors considered in determining whether the revenues should be accounted for separately include the nature of the services (i.e., consideration of whether the services are essential to the functionality of the software), degree of risk, availability of services from other vendors, timing of payments, and the impact of milestones or other customer acceptance criteria on revenue realization. If there is significant uncertainty about the project completion or receipt of payment for consulting services, the revenues are deferred until the uncertainty is resolved.

For certain long-term proprietary service contracts with fixed or “not to exceed” fee arrangements, the company estimates proportional performance using the hours incurred as a percentage of total estimated hours to complete the project consistent with the percentage-of-completion method of accounting. Accordingly, revenue for these contracts is recognized based on the proportion of the work performed on the contract. If there is no sufficient basis to measure progress toward completion, the revenues are recognized when final customer acceptance is received. Adjustments to contract price and estimated service hours are made periodically, and losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. The aggregate of billings on uncompleted contracts in excess of related costs is shown as a current asset.

If an arrangement does not qualify for separate accounting of the software and consulting services, then the software revenues are recognized together with the consulting services using the percentage-of-completion or completed contract method of accounting. Contract accounting is applied to arrangements that include: milestones or customer-specific acceptance criteria that may affect the collection of revenues, significant modification or customization of the software, or provisions that tie the payment for the software to the performance of consulting services.

In addition to proprietary services, the company offers third-party service contracts to its customers. In such instances, the supplier is the primary obligor in the transaction and the company bears credit risk in the event of nonpayment by the customer. Since the company is acting as an agent or broker with respect to such sales transactions, the company reports revenue only in the amount of the “commission” (equal to the selling price less the cost of sale) received rather than reporting revenue in the full amount of the selling price with separate reporting of the cost of sale.

Stock-based compensation.  The company has a stock incentive plan under which it may grant non-qualified stock options, incentive stock options, time-vested restricted shares, performance-vested restricted shares, and performance shares. Shares issued pursuant to awards under the plan may be made out of treasury or authorized but unissued shares. The company also has an employee stock purchase plan.

43

The company records compensation cost related to stock options, restricted shares, and performance shares granted to certain employees and non-employee directors in accordance with the fair value recognition provisions of FASB Statement No. 123R, Share-Based Payment (“FAS 123R”). The company adopted FAS 123R effective April 1, 2006, using the modified prospective transition method. Under this transition method, compensation cost recognized since April 1, 2006 includes: (a) compensation cost for all share-based payments granted prior to, but not yet vested as of April 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FAS 123, and (b) compensation cost for all share-based payments granted subsequent to April 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123R. Cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for options exercised (excess tax benefits) are classified as financing cash flows in the Statement of Cash Flows, in accordance with the provisions of FAS 123R. As no stock options were exercised during the year ended March 31, 2009, no excess tax benefits were recognized in fiscal 2009.

Earnings per share.  Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period and adjusting income available to common shareholders for the assumed conversion of all potentially dilutive securities, as necessary. The dilutive common equivalent shares outstanding are computed by sequencing each series of issues of potential common shares from the most dilutive to the least dilutive. Diluted earnings per share is determined as the lowest earnings per incremental share in the sequence of potential common shares.

Comprehensive income (loss).  Comprehensive income (loss) is the total of net (loss) income plus all other changes in net assets arising from non-owner sources, which are referred to as other comprehensive income (loss). Changes in the components of accumulated other comprehensive income (loss) for 2007, 2008, and 2009 are as follows:

							FASB
							Statement No. 158
							net actuarial
	Foreign			Unrealized			gains,			Accumulated
	currency			gain (loss)			losses and			other
	translation			on			prior			comprehensive
	adjustment			securities			service cost			income (loss)
Balance at April 1, 2006	$	2,032		$	9		$	—		$	2,041
Change during 2007		(772	)		86			(3,019	)		(3,705	)
Balance at March 31, 2007		1,260			95			(3,019	)		(1,664	)
Change during 2008		(1,503	)		(169	)		799			(873	)
Balance at March 31, 2008		(243	)		(74	)		(2,220	)		(2,537	)
Change during 2009		(1,741	)		(17	)		1,405			(353	)
Balance at March 31, 2009	$	(1,984	)	$	(91	)	$	(815	)	$	(2,890	)

Fair value measurements.  The company’s financial instruments include cash and cash equivalents, the cash surrender value of company-owed life insurance policies, marketable securities, accounts receivable, accounts payable, floor plan financing, and short-term and long-term debt. The carrying value of these financial instruments approximates their fair values at March 31, 2009 and 2008 due to short-term maturities. Long-term debt is comprised of capital lease obligations, valued at the lesser of the minimum lease payment or the fair value of the underlying asset in accordance with FASB Statement No. 13, Accounting for Leases.

Cash and cash equivalents.  The company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Other highly liquid investments considered cash equivalents with no established maturity date are fully redeemable on demand (without penalty) with settlement of principal and accrued interest on the following business day after instruction to redeem. Such investments are readily convertible to cash with no penalty.

At September 30, 2008, the company had $36.2 million invested in The Reserve Fund’s Primary Fund. Due to liquidity issues associated with the bankruptcy of Lehman Brothers, Inc., The Primary Fund temporarily ceased honoring redemption requests, but the Board of Trustees of The Primary Fund subsequently voted to liquidate the assets of the fund and approved a distribution of cash to the investors. As of March 31, 2009, the company has received $31.0 million of the investment, with $5.2 million remaining in The Primary Fund. As a result of the delay in cash distribution, we have reclassified the remaining $5.2 million from cash and cash equivalents to investments in other non-current assets on the balance sheet, and, accordingly, have presented the reclassification as a cash outflow from investing activities in the consolidated statements of cash flows. In addition, as of March 31, 2009, the company estimated and recorded a

44

loss on its investment in the fund. The loss was estimated as 8.3% of the company’s original investment in the fund, resulting in a $3.0 million charge to other expense. In April 2009, the company received an additional distribution of $1.6 million from the Primary Fund. The company is unable to estimate the timing of future distributions, which are expected to aggregate to $0.6 million.

This investment is a financial instrument that falls within the scope of FASB Statement No. 157, Fair Value Measurements (“FAS 157”), and accordingly, was measured at its fair value of $2.2 million at March 31, 2009, which is net of the impairment charges recorded during 2009. FAS 157 classifies the inputs used to measure fair value into three levels as follows:

—  Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities;

—  Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and

—  Level 3: Unobservable inputs for the asset or liability.

The company’s investment in The Primary Fund was classified as a Level 2 financial instrument at March 31, 2009, as its fair value was determined using information other than quoted prices that is available on The Reserve Fund’s website.

Concentrations of credit risk.  Financial instruments that potentially subject the company to concentrations of credit risk consist principally of accounts receivable. Concentration of credit risk on accounts receivable is mitigated by the company’s large number of customers and their dispersion across many different industries and geographies. The company extends credit based on customers’ financial condition and, generally, collateral is not required. To further reduce credit risk associated with accounts receivable, the company also performs periodic credit evaluations of its customers. In addition, the company does not expect any party to fail to perform according to the terms of its contract.

In 2009, Verizon Communications, Inc. represented approximately 22.7% of Agilysys total sales and 32.6% of the TSG segment’s total sales. In 2008, Verizon Communications, Inc. represented approximately 11.7% of the company’s total sales and 16.3% of the TSG segment’s total sales. No single customer accounted for more than 10% of Agilysys total sales during 2007.

Allowance for doubtful accounts.  The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as historic trends of the entire customer pool. If the financial condition of the company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk the company performs frequent credit evaluations of its customers.

Inventories.  The company’s inventories are comprised of finished goods. Inventories are stated at the lower of cost or market, net of related reserves. The cost of inventory is computed using a weighted-average method. The company’s inventory is monitored to ensure appropriate valuation. Adjustments of inventories to the lower of cost or market, if necessary, are based upon contractual provisions such as turnover and assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional adjustments to inventory valuations may be required. The company provides a reserve for obsolescence, which is calculated based on several factors including an analysis of historical sales of products and the age of the inventory. Actual amounts could be different from those estimated.

Investment in marketable securities.  The company invests in marketable securities to satisfy future obligations of its employee benefit plans. The marketable securities are held in a Rabbi Trust. The company’s investment in marketable equity securities are held for an indefinite period and thus are classified as available for sale. The aggregate fair value of the securities at March 31, 2009, and 2008 were $37,000 and $0.1 million, respectively. Realized gains and losses are determined on the basis of specific identification. During 2009, securities with a fair value at the date of sale of $0.1 million were sold. The gross realized loss based on specific identification on such sales totaled $24,000. During 2008, sales proceeds and realized gain were $6.1 million and $0.2 million, respectively. The net adjustment to unrealized holding gains on available-for-sale securities in other comprehensive income totaled $23,000. At March 31, 2009, the gross unrealized loss on available-for-sale securities was $24,000 (before taxes).

Investments in affiliated companies.  The company may periodically enter into certain investments for the promotion of business and strategic objectives, and typically does not attempt to reduce or eliminate the inherent market risks on these investments. During 2008, the investment in an affiliated company was redeemed by the affiliated company for $4.8 million in cash, resulting in a $1.4 million gain on redemption of the investment. The gain was classified within “other income (expense), net” in the Consolidated Statements of Operations.

Intangible assets.  Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the estimated economic lives of the assets. Purchased intangible assets relating to customer relationships and supplier relationships are being amortized using an accelerated or straight-line method, which reflects the period the asset is expected to contribute to the future cash flows of the company. The company’s finite-lived intangible assets are being amortized over periods ranging from six months to ten years.

45

The company has an indefinite-lived intangible asset relating to purchased trade names. The indefinite-lived intangible asset is not amortized; rather, it is tested for impairment at least annually by comparing the carrying amount of the asset with the fair value. An impairment loss is recognized if the carrying amount is greater than fair value.

During the first quarter of 2009, management took actions to realign its cost structure. These actions included a $3.8 million impairment charge related to the company’s customer relationship intangible asset that was classified within restructuring charges. The restructuring actions are described further in Note 4, Restructuring Charges (Credits). Then, in connection with the annual goodwill impairment test performed as of February 1, 2009 (discussed below), the indefinite-lived intangible asset was evaluated for impairment, as required by FASB Statement No. 142, Goodwill and Other Intangible Assets (“FAS 142”). Based on this analysis, the company concluded that an impairment existed. As a result, in the fourth quarter of 2009, the company recorded an impairment charge of $2.4 million related to the indefinite-lived intangible asset.

Goodwill.  Goodwill represents the excess purchase price paid over the fair value of the net assets of acquired companies. Goodwill is subject to impairment testing at least annually. Goodwill is also subject to testing as necessary, if changes in circumstances or the occurrence of certain events indicate potential impairment. In the first quarter of 2009, impairment indicators arose with respect to the company’s goodwill. Therefore, during the first quarter of 2009, the company initiated a “step-two” analysis in accordance with FAS 142. The “step-two” analysis consists of comparing the fair value of each reporting unit (calculated using discounted cash flow analyses and weighted average costs of capital of 15.5% to 23.5%, depending on the risks of the various reporting units), to the implied goodwill of the unit, in accordance with FAS 142. As the “step-two” analysis was not complete, the company recognized an estimated impairment charge of $33.6 million as of June 30, 2008, pending completion of the analysis. This amount did not include $16.8 million in goodwill impairment related to CTS that was recorded to restructuring charges in the first quarter of 2009. The “step-two” analysis was updated and completed in the second quarter of 2009, resulting in the company recognizing an additional goodwill impairment charge of $112.0 million.

The company conducted its annual goodwill impairment test as of February 1, 2009 and updated the analyses performed in the first and second quarters of 2009. Based on the analysis, the company concluded that a further impairment of goodwill had occurred. As a result, the company recorded an additional impairment charge of $83.9 million in the fourth quarter of 2009. Total goodwill impairment charges recorded during 2009 were $229.5 million, not including the $16.8 million recorded as restructuring charges in the first quarter of 2009. There were no new impairment indicators at March 31, 2009.

Long-lived assets.  Property and equipment are recorded at cost. Major renewals and improvements are capitalized, as are interest costs on capital projects. Minor replacements, maintenance, repairs and reengineering costs are expensed as incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized.

Depreciation and amortization are provided in amounts sufficient to amortize the cost of the assets, including assets recorded under capital leases, which make up a negligible portion of total assets, over their estimated useful lives using the straight-line method. The estimated useful lives for depreciation and amortization are as follows: buildings and building improvements — 7 to 30 years; furniture — 7 to 10 years; equipment — 3 to 10 years; software — 3 to 10 years; and leasehold improvements over the shorter of the economic life or the lease term. Internal use software costs are expensed or capitalized depending on the project stage. Amounts capitalized are amortized over the estimated useful lives of the software, ranging from 3 to 10 years, beginning with the project’s completion. Capitalized project expenditures are not depreciated until the underlying assets are placed into service. Total depreciation expense on property and equipment was $4.0 million, $3.3 million and $2.5 million during 2009, 2008 and 2007, respectively. Total amortization expense on capitalized software was $3.1 million, $2.6 million, and $3.0 million during 2009, 2008, and 2007, respectively.

The company evaluates the recoverability of its long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets. As of March 31, 2009, the company concluded that no impairment indicators existed.

Valuation of accounts payable.  The company’s accounts payable has been reduced by amounts claimed to vendors for returns and other amounts related to incentive programs. Amounts related to incentive programs are recorded as adjustments to cost of goods sold or operating expenses, depending on the nature of the program. There is a time delay between the submission of a claim by the company and confirmation of the claim by our vendors. Historically, the company’s estimated claims have approximated amounts agreed to by vendors.

Supplier programs.  The company participates in certain programs provided by various suppliers that enable it to earn volume incentives. These incentives are generally earned by achieving quarterly sales targets. The amounts earned under these programs are recorded as a reduction of cost of sales when earned. In addition, the company receives incentives from suppliers related to cooperative

46

advertising allowances and other programs. These incentives generally relate to agreements with the suppliers and are recorded, when earned, as a reduction of cost of sales or advertising expense, as appropriate. All costs associated with advertising and promoting products are expensed in the year incurred. Cooperative reimbursements from suppliers, which are earned and available, are recorded in the period the related advertising expenditure is incurred.

Concentrations of supplier risk.  During 2009, 2008, and 2007, sales of the company’s three largest suppliers’ products and services accounted for 65%, 65%, and 69%, respectively, of the company’s sales volume. The company’s largest supplier, Sun, whose products are sold through Innovative, which was purchased in July 2007, accounted for 31% and 23% of the company’s sales volume in 2009 and 2008, respectively. Sales of products sourced through HP accounted for 22%, 27% and 49% of the company’s sales volume in 2009, 2008 and 2007, respectively. Sales of products sourced by IBM accounted for 12%, 15% and 20% of the company’s sales volume in 2009, 2008, and 2007, respectively. The loss of any of the top three suppliers or a combination of certain other suppliers could have a material adverse effect on the company’s business, results of operations and financial condition unless alternative products manufactured by others are available to the company. In addition, although the company believes that its relationships with suppliers are good, there can be no assurance that the company’s suppliers will continue to supply products on terms acceptable to the company.

Income taxes.  Income tax expense includes U.S. and foreign income taxes and is based on reported income before income taxes. Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Valuation allowances are recognized to reduce the deferred tax assets to an amount that is more likely than not to be realized. In determining whether it is more likely than not that deferred tax assets will be realized, the company considers such factors as (a) expectations of future taxable income, (b) expectations of material changes in the present relationship between income reported for financial and tax purposes, and (c) tax-planning strategies.

In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109,” (“FAS 109”). FIN 48 provides guidance for the accounting for uncertainty in income taxes recognized in our financial statements in accordance with FAS 109. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The evaluation of a tax position in accordance with FIN 48 is a two-step process. The first step is recognition: The determination of whether or not it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, management presumes that the position will be examined by the appropriate tax authority and that the tax authority will have full knowledge of all relevant information. The second step is measurement: A tax position that meets the more-likely-than-not threshold is measured to determine the amount of benefit to recognize in the financial statements. The measurement process requires the determination of the range of possible settlement amounts and the probability of achieving each of the possible settlements. The tax position is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet the more-likely-than-not threshold. Tax positions that previously failed to meet the more-likely-than-not threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which the threshold is no longer met. In addition, FIN 48 requires the cumulative effect of adoption to be recorded as an adjustment to the opening balance of retained earnings. FIN 48 is effective for fiscal years beginning after December 15, 2006. The company adopted FIN 48 effective April 1, 2007, as required and recognized a cumulative effect of accounting change of approximately $2.9 million, which decreased beginning retained earnings in the accompanying Consolidated Statements of Shareholders’ Equity for the year ended March 31, 2008 and increased accrued liabilities in the accompanying Consolidated Balance Sheets as of March 31, 2008. The company’s income taxes and the impact of adopting FIN 48 are described further in Note 10.

Non-cash investing activities.  During 2008, the company’s investment in an affiliated company was redeemed by the affiliated company for $4.8 million in cash, resulting in a $1.4 million gain on redemption of the investment. The gain was classified within “other income (expense), net” in the Consolidated Statements of Operations.

Recently adopted accounting standards.  In May 2008, the FASB issued Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles (“FAS 162”). FAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). FAS 162 directs the U.S. GAAP hierarchy to the entity, not the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with

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U.S. GAAP. FAS 162 is effective November 15, 2008. The adoption of FAS 162 did not have a significant impact on the company’s financial position, results of operations, or cash flows.

In March 2008, The FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (“FAS 161”). FAS 161 enhances the disclosures about an entity’s derivative and hedging activities. FAS 161 is effective for fiscal periods beginning after November 15, 2008. The company adopted FAS 161 on January 1, 2009, as required. The adoption of FAS 161 did not have a significant impact on the company’s financial position, results of operations and cash flows.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115 (“FAS 159”). FAS 159 allows measurement at fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses for that item will be reported in current earnings at each subsequent reporting date. FAS 159 also establishes presentation and disclosure requirements designed to draw comparison between the different measurement attributes the company elects for similar types of assets and liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. The company adopted FAS 159 on April 1, 2008, as required, but elected not to apply the fair value option to any of its financial instruments.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“FAS 157”). FAS 157 provides a single definition of fair value, a framework for measuring fair value, and expanded disclosures concerning fair value. Previously, different definitions of fair value were contained in various accounting pronouncements creating inconsistencies in measurement and disclosures. FAS 157 applies under those previously issued pronouncements that prescribe fair value as the relevant measure of value, except for FAS 123R and its related interpretations and pronouncements that require or permit measurement similar to fair value but are not intended to measure fair value. FAS 157 is effective for fiscal years beginning after November 15, 2007. The company adopted FAS 157 on April 1, 2008 for its financial assets, as required. See also the discussion above under the caption, Fair value measurements. The adoption of FAS 157 did not have a significant impact on the company’s financial position, results of operations, or cash flows.

In February 2008, the FASB issued Staff Position No. 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, which specifically excluded lease obligations accounted for under the provisions of FAS 13 from the scope of FAS 157. Also in February 2008, the FASB issued Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (“FSP FAS 157-2”), which delayed the effective date of FAS 157 with respect to nonfinancial assets and nonfinancial liabilities not remeasured at fair value on a recurring basis until fiscal years beginning after November 15, 2008, or fiscal 2010 for the company. Accordingly, the Company has not yet applied the requirements of FAS 157 to certain nonfinancial assets for which fair value measurements are determined only when there is an indication of potential impairment, primarily goodwill, intangible assets, non-financial assets and liabilities related to acquired businesses, and impairment and restructuring activities.

Recently issued accounting standards.  In December 2008, the FASB issued Staff Position No. 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets, an amendment of SFAS 132(R) (“FSP FAS 132(R)-1”). This standard requires disclosure about an entity’s investment policies and strategies, the categories of plan assets, concentrations of credit risk and fair value measurements of plan assets. The standard is effective for fiscal years beginning after December 15, 2008, or fiscal 2010 for the company. The company is currently evaluating the impact, if any, that the adoption of FSP FAS 132(R)-1 will have on its financial position, results of operations, or cash flows.

In November 2008, the FASB’s Emerging Issues Task Force published Issue No. 08-6, Equity Method Investment Accounting Considerations (“EITF 08-06”). This issue addresses the impact that FAS 141(R) and FAS 160 might have on the accounting for equity method investments, including how the initial carrying value of an equity method investment should be determined, how it should be tested for impairment, and how changes in classification from equity method to cost method should be treated. EITF 08-06 is to be implemented prospectively and is effective for fiscal years beginning after December 15, 2008, or fiscal 2010 for the company. The standard will have an impact on the company only for acquisitions and investments in noncontolling interests made after April 1, 2009. The company is currently evaluating the impact, if any, the adoption of EITF 08-06 will have on its financial position, results of operations, or cash flows.

In April 2008, the FASB issued Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142, Goodwill and Other Intangible Assets. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within that fiscal year, or fiscal 2010 for the company. Early adoption is prohibited. FSP 142-3 applies prospectively to intangible assets acquired after adoption. The company does not expect the adoption of FSP FAS 142-3 to have a significant impact on its financial position, results of operations, or cash flows.

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In December 2007, the FASB issued Statement No. 141(R), Business Combinations (“Statement 141(R)”). Statement 141(R) significantly changes the accounting for and reporting of business combination transactions. Statement 141(R) is effective for fiscal years beginning after December 15, 2008, or fiscal 2010 for the company. The standard will have an impact on the company only for acquisitions made after April 1, 2009. The company is currently evaluating the impact that Statement 141(R) will have on its financial position, results of operations and cash flows.

In December 2007, the FASB issued Statement No. 160, Accounting and Reporting for Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“Statement 160”). Statement 160 clarifies the classification of noncontrolling interests in consolidated statements of financial position and the accounting for and reporting of transactions between the reporting entity and holders of such noncontrolling interests. Statement 160 is effective for the first annual reporting period beginning after December 15, 2008, or fiscal 2010 for the company. The company is currently evaluating the impact that Statement 160 will have on its financial position, results of operations and cash flows.

Reclassifications.  Certain amounts in the prior periods’ consolidated financial statements have been reclassified to conform to the current period’s presentation, primarily to reflect the results of discontinued operations of the KeyLink Systems Distribution Business and the TSG business segment’s China and Hong Kong operations (see Note 3).

2.

RECENT ACQUISITIONS

2009 Acquisition

Triangle Hospitality Solutions Limited

On April 9, 2008, the company acquired all of the shares of Triangle Hospitality Solutions Limited (“Triangle”), the UK-based reseller and specialist for the company’s InfoGenesis products and services for $2.7 million, comprised of $2.4 million in cash and $0.3 million of assumed liabilities. Accordingly, the results of operations for Triangle have been included in these Consolidated Financial Statements from that date forward. Triangle enhanced the company’s international presence and growth strategy in the UK, as well as solidified the company’s leading position in the hospitality and stadium and arena markets without increasing InfoGenesis’ ultimate customer base. Triangle added to the company’s hospitality solutions suite with the ability to offer customers the Triangle mPOS solution, which is a handheld point-of-sale solution which seamlessly integrates with InfoGenesis products. Based on management’s preliminary allocation of the acquisition cost to the net assets acquired (accounts receivable, inventory, and accounts payable), approximately $2.7 million was originally assigned to goodwill. Due to a purchase price adjustment during the third quarter of fiscal 2009 of $0.4 million, the goodwill attributed to the Triangle acquisition is $3.1 million at March 31, 2009. Goodwill resulting from the Triangle acquisition will be deductible for income tax purposes.

2008 Acquisitions

Eatec

On February 19, 2008, the company acquired all of the shares of Eatec Corporation (“Eatec”), a privately held developer and marketer of inventory and procurement software. Accordingly, the results of operations for Eatec have been included in these Consolidated Financial Statements from that date forward. Eatec’s software, EatecNetX (now called Eatec Solutions by Agilysys), is a recognized leading, open architecture-based, inventory and procurement management system. The software provides customers with the data and information necessary to enable them to increase sales, reduce product costs, improve back-office productivity and increase profitability. Eatec customers include well-known restaurants, hotels, stadiums and entertainment venues in North America and around the world as well as many public service institutions. The acquisition further enhances the company’s position as a leading inventory and procurement solution provider to the hospitality and foodservice markets. Eatec was acquired for a total cost of $25.0 million. Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $18.3 million was assigned to goodwill.

During the second quarter of 2009, management completed its purchase price allocation and assigned $6.2 million of the acquisition cost to identifiable intangible assets as follows: $1.4 million to non-compete agreements, which will be amortized between two and seven years; $2.2 million to customer relationships, which will be amortized over seven years; $1.8 million to developed technology, which will be amortized over five years; and $0.8 million to trade names, which has an indefinite life.

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During the first, second and fourth quarters of 2009, goodwill impairment charges were taken relating to the Eatec acquisition in the amounts of $1.3 million, $14.4 million, and $3.4 million, respectively. As of March 31, 2009, $1.7 million remains on the company’s balance sheet in goodwill relating to the Eatec acquisition.

Innovative Systems Design, Inc.

On July 2, 2007, the company acquired all of the shares of Innovative Systems Design, Inc. (“Innovative”), the largest U.S. commercial reseller of Sun Microsystems servers and storage products. Accordingly, the results of operations for Innovative have been included in these Consolidated Financial Statements from that date forward. Innovative is an integrator and solution provider of servers, enterprise storage management products and professional services. The acquisition of Innovative establishes a new and significant relationship between Sun Microsystems and the company. Innovative was acquired for an initial cost of $108.6 million. Additionally, the company was required to pay an earn-out of two dollars for every dollar of earnings before interest, taxes, depreciation, and amortization, or EBITDA, greater than $50.0 million in cumulative EBITDA over the first two years after consummation of the acquisition. The earn-out was limited to a maximum payout of $90.0 million. As a result of existing and anticipated EBITDA, during the fourth quarter of 2008, the company recognized $35.0 million of the $90.0 million maximum earn-out, which was made in April 2008. In addition, due to certain changes in the sourcing of materials, the company amended its agreement with the Innovative shareholders whereby the maximum payout available to the Innovative shareholders was limited to $58.65 million, inclusive of the $35.0 million paid. The EBITDA target required for the shareholders to be eligible for an additional payout is now $67.5 million in cumulative EBITDA over the first two years after the close of the acquisition. No amounts have been accrued as of March 31, 2009, as it is not probable that any additional payout will be made.

During the fourth quarter of 2008, management completed its purchase price allocation and assigned $29.7 million of the acquisition cost to identifiable intangible assets as follows: $4.8 million to non-compete agreements, $5.5 million to customer relationships, and $19.4 million to supplier relationships that will be amortized over useful lives ranging from two to five years.

Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $97.8 million was assigned to goodwill. Goodwill resulting from the Innovative acquisition will be deductible for income tax purposes. During the fourth quarter of 2009, a goodwill impairment charge was taken relating to the Innovative acquisition for $74.5 million. As of March 31, 2009, $23.3 million remains on the company’s balance sheet as goodwill relating to the Innovative acquisition.

InfoGenesis

On June 18, 2007, the company acquired all of the shares of IG Management Company, Inc. and its wholly-owned subsidiaries, InfoGenesis and InfoGenesis Asia Limited (collectively, “InfoGenesis”), an independent software vendor and solution provider to the hospitality market. Accordingly, the results of operations for InfoGenesis have been included in these Consolidated Financial Statements from that date forward. InfoGenesis offers enterprise-class point-of-sale solutions that provide end users a highly intuitive, secure and easy way to process customer transactions across multiple departments or locations, including comprehensive corporate and store reporting. InfoGenesis has a significant presence in casinos, hotels and resorts, cruise lines, stadiums and foodservice. The acquisition provides the company a complementary offering that extends its reach into new segments of the hospitality market, broadens its customer base and increases its software application offerings. InfoGenesis was acquired for a total acquisition cost of $90.6 million.

InfoGenesis had intangible assets with a net book value of $15.9 million as of the acquisition date, which were included in the acquired net assets to determine goodwill. Intangible assets were assigned values as follows: $3.0 million to developed technology, which will be amortized between six months and three years; $4.5 million to customer relationships, which will be amortized between two and seven years; and $8.4 million to trade names, which have an indefinite life. Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $71.8 million was assigned to goodwill. Goodwill resulting from the InfoGenesis acquisition will not be deductible for income tax purposes. During the first, second, and fourth quarters of 2009, goodwill impairment charges were taken relating to the InfoGenesis acquisition in the amounts of $3.9 million, $57.4 million, and $3.8 million, respectively. As of March 31, 2009, $6.7 million remains on the company’s balance sheet as goodwill relating to the InfoGenesis acquisition.

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Pro Forma Disclosure of Financial Information

The following table summarizes the company’s unaudited consolidated results of operations as if the InfoGenesis and Innovative acquisitions occurred on April 1:

	Year Ended March 31
	2009			2008		2007
Net sales	$	730,720		$	841,101	$	729,851
(Loss) income from continuing operations	$	(282,187	)	$	7,068	$	4,556
Net (loss) income	$	(284,134	)	$	8,908	$	241,541
(Loss) earnings per share — basic income from continuing operations	$	(12.49	)	$	0.25	$	0.15
Net (loss) income	$	(12.58	)	$	0.32	$	7.87
(Loss) earnings per share — diluted income from continuing operations	$	(12.49	)	$	0.25	$	0.15
Net (loss) income	$	(12.58	)	$	0.31	$	7.87

Stack Computer, Inc.

On April 2, 2007, the company acquired all of the shares of Stack Computer, Inc. (“Stack”). Stack’s customers include leading corporations in the financial services, healthcare and manufacturing industries. Accordingly, the results of operations for Stack have been included in these Consolidated Financial Statements from that date forward. Stack also operates a highly sophisticated solution center, which is used to emulate customer IT environments, train staff and evaluate technology. The acquisition of Stack strategically provides the company with product solutions and services offerings that significantly enhance its existing storage and professional services business. Stack was acquired for a total acquisition cost of $25.2 million.

Management made an adjustment of $0.8 million to the fair value of acquired capital equipment and assigned $11.7 million of the acquisition cost to identifiable intangible assets as follows: $1.5 million to non-compete agreements, which will be amortized over five years using the straight-line amortization method; $1.3 million to customer relationships, which will be amortized over five years using an accelerated amortization method; and $8.9 million to supplier relationships, which will be amortized over ten years using an accelerated amortization method.

Based on management’s allocation of the acquisition cost to the net assets acquired, approximately $13.3 million was assigned to goodwill. Goodwill resulting from the Stack acquisition is deductible for income tax purposes. During the first and second quarters of 2009, goodwill impairment charges were taken relating to the Stack acquisition in the amounts of $7.8 million and $2.1 million, respectively. As of March 31, 2009, $3.4 million remains on the company’s balance sheet as goodwill relating to the Stack acquisition.

2007 Acquisition

Visual One Systems Corporation

On January 23, 2007, the company acquired all the shares of Visual One Systems Corporation (“Visual One”), a leading developer and marketer of Microsoft^® Windows^®-based software for the hospitality industry. Accordingly, the results of operations for Visual One have been included in these Consolidated Financial Statements from that date forward. The acquisition provides the company additional expertise around the development, marketing and sale of software applications for the hospitality industry, including property management, condominium, golf course, spa, point-of-sale, and sales and catering management applications. Visual One’s customers include well-known North American and international full-service hotels, resorts, conference centers and condominiums of all sizes. The aggregate acquisition cost was $14.4 million.

During the second quarter of 2008, management assigned $4.9 million of the acquisition cost to identifiable intangible assets as follows: $3.8 million to developed technology, which will be amortized over six years using the straight-line method; $0.6 million to non-compete agreements, which will be amortized over eight years using the straight-line amortization method; and $0.5 million to customer relationships, which will be amortized over five years using an accelerated amortization method.

Based on management’s allocation of the acquisition cost to the net assets acquired, including identified intangible assets, approximately $9.4 million was assigned to goodwill. Goodwill resulting from the Visual One acquisition is not deductible for income tax purposes. During the first, second, and fourth quarters of 2009, goodwill impairment charges were taken relating to the Visual One acquisition in the amounts of $0.5 million, $7.5 million, and $0.5 million, respectively. As of March 31, 2009, $0.9 million remains on the company’s balance sheet as goodwill relating to the Visual One acquisition.

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3.

DISCONTINUED OPERATIONS

China and Hong Kong Operations

In July, 2008, the company met the requirements of FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS 144”) to classify TSG’s China and Hong Kong operations as held-for-sale and discontinued operations, and began exploring divestiture opportunities for these operations. Agilysys acquired TSG’s China and Hong Kong businesses in December 2005. During January 2009, the company sold the stock related to TSG’s China operations, and certain assets of TSG’s Hong Kong operations, receiving proceeds of $1.4 million, which resulted in a pre-tax loss on the sale of discontinued operations of $0.8 million. Therefore, the assets and liabilities of these operations were classified as discontinued operations on the company’s Consolidated Balance Sheets, and the operations were reported as discontinued operations on the company’s Consolidated Statements of Operations for the periods presented in accordance with FAS 144.

Sale of Assets and Operations of KeyLink Systems Distribution Business

During 2007, the company sold the assets and operations of KSG for $485.0 million in cash, subject to a working capital adjustment. At March 31, 2007, the final working capital adjustment was $10.8 million. Through the sale of KSG, the company exited all distribution-related businesses and now exclusively sells directly to end-user customers. By monetizing the value of KSG, the company significantly increased its financial flexibility and has redeployed the proceeds to accelerate the growth of its ongoing business both organically and through acquisition. The sale of KSG represented a disposal of a component of an entity. As such, the operating results of KSG, along with the gain on sale, have been reported as a component of discontinued operations.

In connection with the sale of KSG, the company entered into a product procurement agreement (“PPA”) with Arrow Electronics, Inc. Under the PPA, the company is required to purchase a minimum of $330 million worth of products each year during the term of the agreement (5 years), adjusted for product availability and other factors.

The income from discontinued operations for the year ended March 31, 2007, includes KSG net sales of $1.3 billion, pre-tax income of $79.2 million and net income of $48.6 million.

Income from discontinued operations for the year ended March 31, 2008, consists primarily of the settlement of obligations and contingencies of KSG that existed as of the date the assets and operations of KSG were sold.

Components of Results of Discontinued Operations

For the years ended March 31, 2009, 2008, and 2007 the (loss) income from discontinued operations was comprised of the following:

	2009			2008			2007
Discontinued operations:
Income from operations of KSG	$	—		$	—		$	80,178
Resolution of contingencies		(1,620	)		4,664			—
Loss from operations of IED		(11	)		(8	)		(827	)
Loss from operations of the TSG’s China and Hong Kong businesses		(752	)		(1,178	)		(1,708	)
Loss on sale of TSG’s China and Hong Kong businesses		(787	)		—			—
Gain on sale of KSG		—			—			318,517
		(3,170	)		3,478			396,160
(Benefit) provision for income taxes		(1,223	)		1,677			153,378
(Loss) income from discontinued operations	$	(1,947	)	$	1,801		$	242,782

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4.

RESTRUCTURING CHARGES (CREDITS)

2009 Restructuring Activity

Fourth Quarter Management Restructuring.  During the fourth quarter of 2009, the company took additional steps to realign its cost and management structure. During the quarter, an additional four company vice presidents were terminated, as well as other support and sales personnel. These actions resulted in a restructuring charge of $3.7 million during the quarter, comprised mainly of termination benefits for the above-mentioned management changes. Also included in the restructuring charges was a non-cash charge for a curtailment loss of $1.2 million under the company’s Supplemental Executive Retirement Plan. These restructuring charges are included in the Corporate segment.

Third Quarter Management Restructuring.  During the third quarter of 2009, the company took steps to realign its cost and management structure. During October 2008, the company’s former Chairman, President and CEO announced his retirement, effective immediately. In addition, four company vice presidents were terminated, as well as other support personnel. The company also relocated its headquarters from Boca Raton, Florida, to Solon, Ohio, where the company has a facility with a large number of employees, and cancelled the lease on its financial interests in two airplanes. These actions resulted in a restructuring charge of $13.4 million as of December 31, 2008, comprised mainly of termination benefits for the above-mentioned management changes and the costs incurred to relocate the corporate headquarters. Also included in the restructuring charges was a non-cash charge for a curtailment loss of $4.5 million under the company’s Supplemental Executive Retirement Plan. An additional $0.2 million expense was incurred in the fourth quarter of 2009 as a result of an impairment to the Leasehold Improvements at the company’s former headquarters in Boca Raton, Florida. These restructuring charges are included in the Corporate segment.

First Quarter Professional Services Restructuring.  During the first quarter of 2009, the company performed a detailed review of the business to identify opportunities to improve operating efficiencies and reduce costs. As part of this cost reduction effort, management reorganized the professional services go-to-market strategy by consolidating its management and delivery groups. The company will continue to offer specific proprietary professional services, including identity management, security, and storage virtualization; however, it will increase the use of external business partners. The cost reduction resulted in a $2.5 million and $0.4 million charge for one-time termination benefits relating to a workforce reduction in the first and second quarters of 2009, respectively. The workforce reduction was comprised mainly of service delivery personnel. Payment of these one-time termination benefits was substantially complete in 2009. This restructuring also resulted in a $20.6 million impairment to goodwill and intangible assets in the first quarter of 2009, related to the company’s 2005 acquisition of The CTS Corporations (“CTS”). The entire $23.5 million restructuring charge relates to the TSG business segment.

The three restructuring actions discussed above resulted in a $40.8 million restructuring charge for the year ending March 31, 2009.

2007 Restructuring Activity

During 2007, the company recorded a restructuring charge of approximately $0.5 million for one-time termination benefits resulting from a workforce reduction that was executed in connection with the sale of KSG. The workforce reduction was comprised mainly of corporate personnel. Payment of the one-time termination benefits was substantially complete in 2008.

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Following is a reconciliation of the beginning and ending balances of the restructuring liability:

	Severance									Goodwill and
	and Other									Long Lived
	Employment						Other			Intangible			SERP
	Costs			Facilities			Expenses			Assets			Curtailment			Total
Balance at April 1, 2007	$	535		$	100		$	—		$	—		$	—		$	635
Accretion of lease obligations		—			7			—			—			—			7
Payments		(513	)		(70	)		—			—			—			(583	)
Adjustments		(21	)		6			—			—			—			(15	)
Balance at March 31, 2008	$	1		$	43		$	—		$	—		$	—		$	44
Additions		12,919			1,422			171			20,571			5,664			40,747
Accretion of lease obligations		—			54			—			—			—			54
Write off of intangibles		—			—			—			(20,571	)		—			(20,571	)
Curtailment of benefit plan obligations		—			—			—			—			(5,664	)		(5,664	)
Payments		(4,074	)		(477	)		(132	)		—			—			(4,683	)
Balance at March 31, 2009	$	8,846		$	1,042		$	39		$	—		$	—		$	9,927

Of the remaining $9.9 million liability at March 31, 2009, $7.6 million of severance and other employment costs are expected to be paid during 2010, $1.0 million is expected to be paid in 2011, and $0.3 million is expected to be paid in fiscal year 2012. Approximately $0.3 million is expected to be paid during 2010 for ongoing facility obligations. Facility obligations are expected to continue through 2014.

Components of Restructuring Charges (Credits)

Included in the Consolidated Statements of Operations is a $40.8 million restructuring charge for 2009, which is comprised of the following: $54,000 for accretion expense, $12.9 million for severance adjustments, $20.6 million for CTS goodwill and intangible asset impairment, $5.7 million related to SERP and additional service credits liability curtailments, $1.4 million related to the Boca Raton, Florida facility, and $0.1 million related to the management transition and the buyout of the airplane lease.

In 2008, the $75,000 restructuring credits were primarily comprised of accretion expense for lease obligations, credits related to the difference between actual and accrued sublease income and common area costs, and a credit for severance adjustments. In 2007, the $2.5 million restructuring credits were primarily comprised of a $4.9 million credit for the remainder of a restructuring liability recognized in 2003 for an abandoned facility, partially offset by $1.7 million in expense related to the termination of a lease agreement and $0.4 million in expense related to the write-off of leasehold improvements.

5.

GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill is tested for impairment annually, or upon identification of impairment indicators, at the reporting unit level. Statement 142 describes a reporting unit as an operating segment or one level below the operating segment (depending on whether certain criteria are met), as that term is used in FASB Statement 131, Disclosures About Segments of an Enterprise and Related Information. Goodwill has been allocated to the company’s reporting units that are anticipated to benefit from the synergies of the business combinations generating the underlying goodwill. As discussed in Note 13, the company has three operating segments and five reporting units.

The company conducts its annual goodwill impairment test on February 1, and did so in 2008 without a need to expand the impairment test to step-two of FAS 142. However, during fiscal 2009, indictors of potential impairment caused the company to conduct interim impairment tests. Those indicators included the following: a significant decrease in market capitalization, a decline in recent operating results, and a decline in the company’s business outlook primarily due to the macroeconomic environment. In accordance with FAS 142, the company completed step one of the impairment analysis and concluded that, as of June 30, 2008, the fair value of three of its

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reporting units was below their respective carrying values, including goodwill. The three reporting units that showed potential impairment were RSG, HSG, and Stack (a reporting unit within the TSG business segment). As such, step two of the impairment test was initiated in accordance with FAS 142. As of June 30, 2008, the step-two analysis had not been completed due to its time consuming nature. In accordance with paragraph 22 of FAS 142, the company recorded an estimate in the amount of $33.6 million as a non-cash goodwill impairment charge as of June 30, 2008. The step-two analysis was completed after updating the discounted cash flow analyses for changes occurring in the second quarter of 2009, resulting in an additional impairment charge of $112.0 million as of September 30, 2008. The annual goodwill impairment test was conducted as of February 1, 2009 and goodwill was determined to be impaired by an additional $83.9 million. In total, goodwill impairment charges recorded in 2009 were $229.5 million, excluding the $16.8 million classified as restructuring charges and discussed in Note 4, Restructuring Charges (Credits). The year-to-date goodwill impairment totals for each of the three reporting segments were $24.9 million for RSG, $120.1 million for HSG, and $84.5 million for TSG.

The changes in the carrying amount of goodwill for the years ended March 31, 2009 and 2008 are as follows:

	2009			2008
Beginning of year	$	297,560		$	93,197
Goodwill acquired — Triangle (see note 2)		3,051			—
Goodwill (adjustment) acquired — Eatec (see note 2)		(3,953	)		24,778
Goodwill acquired — Innovative (see note 2)		56			97,781
Goodwill acquired — InfoGenesis (see note 2)		138			71,662
Goodwill acquired — Stack (see note 2)		—			13,328
Goodwill adjustment — Visual One (see note 2)		—			(2,507	)
Goodwill impairment classified as discontinued operations — China		—			(586	)
Goodwill impairment classified as discontinued operations — Hong Kong		—			(274	)
Goodwill impairment classified as restructuring — CTS		(16,811	)		—
Goodwill impairment — Kyrus		(24,912	)		—
Goodwill impairment — IAD		(27,363	)		—
Goodwill impairment — Visual One		(8,524	)		—
Goodwill impairment — Stack		(9,881	)		—
Goodwill impairment — InfoGenesis		(65,065	)		—
Goodwill impairment — Innovative		(74,575	)		—
Goodwill impairment — Eatec		(19,135	)		—
Impact of foreign currency translation		(204	)		181
End of year	$	50,382		$	297,560

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Intangible Assets

The following table summarizes the company’s intangible assets at March 31, 2009, and 2008:

	2009							2008
	Gross					Net		Gross					Net
	carrying		Accumulated			carrying		carrying		Accumulated			carrying
	amount		amortization			amount		amount		amortization			amount
Amortized intangible assets:
Customer relationships	$	24,957	$	(18,341	)	$	6,616	$	26,526	$	(13,627	)	$	12,899
Supplier relationships		28,280		(19,094	)		9,186		28,280		(8,336	)		19,944
Non-competition agreements		9,610		(3,884	)		5,726		8,210		(2,015	)		6,195
Developed technology		10,085		(6,014	)		4,071		8,285		(3,398	)		4,887
Patented technology		80		(80	)		—		80		(80	)		—
		73,012		(47,413	)		25,599		71,381		(27,456	)		43,925
Unamortized intangible assets:
Trade names		10,100		N/A			10,100		11,700		N/A			11,700
Total intangible assets	$	83,112	$	(47,413	)	$	35,699	$	83,081	$	(27,456	)	$	55,625

Customer relationships are being amortized over estimated useful lives between two and seven years; non-competition agreements are being amortized over estimated useful lives between two and eight years; developed technology is being amortized over estimated useful lives between three and eight years; supplier relationships are being amortized over estimated useful lives between two and ten years.

During the first quarter of 2009, the company recorded a $3.8 million impairment charge related to TSG’s customer relationship intangible asset that was classified within restructuring charges. The restructuring actions are described further in Note 4, Restructuring Charges (Credits). In the fourth quarter of 2009, in connection with the annual goodwill impairment test performed as of February 1, 2009, the company concluded that an impairment of its indefinite-lived intangible asset existed. As a result, the company recorded an impairment charge of $2.4 million related to the indefinite-lived intangible asset, which related to HSG.

Amortization expense relating to intangible assets for the years ended March 31, 2009, 2008 and 2007 was $20.0 million, $17.7 million, and $3.1 million, respectively.

The estimated amortization expense relating to intangible assets for each of the five succeeding fiscal years is as follows:

	Amount
Year ending March 31
2010	$	8,392
2011		4,744
2012		4,512
2013		3,357
2014		2,134
Total estimated amortization expense for the next five years	$	23,139

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6.

INVESTMENT IN MAGIRUS — SOLD IN NOVEMBER 2008

In November 2008, the company sold its 20% ownership interest in Magirus AG (“Magirus”), a privately owned European enterprise computer systems distributor headquartered in Stuttgart, Germany, for $2.3 million. In addition, the company received a dividend from Magirus (as a result of Magirus selling a portion of its distribution business in fiscal 2008) of $7.3 million in July 2008, resulting in $9.6 million of total proceeds received in fiscal 2009. The company adjusted the fair value of the investment as of March 31, 2008, to the net present value of the subsequent cash proceeds, resulting in fourth quarter 2008 charges of (i) a $5.5 million reversal of the cumulative currency translation adjustment in accordance with EITF 01-5, Application of FASB Statement No. 52 to an Investment Being Evaluated for Impairment That Will Be Disposed of, and (ii) an impairment charge of $4.9 million to write the held-for-sale investment to its fair value less cost to sell.

The company had decided to sell its 20% investment in Magirus prior to March 31, 2008, and met the qualifications to consider the asset as held for sale. As a result, the company reclassified its Magirus investment to investment held for sale in accordance with Statement 144.

Because of the company’s inability to obtain and include audited financial statements of Magirus for fiscal years ended March 31, 2008 and 2007 as required by Rule 3-09 of Regulation S-X, the SEC has stated that it will not permit effectiveness of any new securities registration statements or post-effective amendments, if any, until such time as the company files audited financial statements that reflect the disposition of Magirus and the company requests and the SEC grants relief to the company from the requirements of Rule 3-09. As part of this restriction, the company is not permitted to file any new securities registration statements that are intended to automatically go into effect when they are filed, nor can the company make offerings under effective registration statements or under Rules 505 and 506 of Regulation D where any purchasers of securities are not accredited investors under Rule 501(a) of Regulation D. These restrictions do not apply to the following: offerings or sales of securities upon the conversion of outstanding convertible securities or upon the exercise of outstanding warrants or rights; dividend or interest reinvestment plans; employee benefit plans, including stock option plans; transactions involving secondary offerings; or sales of securities under Rule 144.

On April 1, 2008, the company invoked FASB Interpretation No. 35, Criteria for Applying the Equity Method of Accounting for Investments in Common Stock (“FIN 35”), for its investment in Magirus. The invocation of FIN 35 required the company to account for its investment in Magirus via cost, rather than equity accounting. FIN 35 clarifies the criteria for applying the equity method of accounting for investments of 50% or less of the voting stock of an investee enterprise. The cost method was used by the company because management did not have the ability to exercise significant influence over Magirus, which is one of the presumptions in APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock, necessary to account for an investment in common stock under the equity method.

7.

LEASE COMMITMENTS

Capital Leases

The company is the lessee of certain equipment under capital leases expiring in various years through 2013. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the lower of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense.

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Minimum future lease payments under capital leases as of March 31, 2009, for each of the next five years and in the aggregate are:

	Amount
Year ending March 31
2010	$	268
2011		101
2012		71
2013		4
2014		—
Total minimum lease payments	$	444
Less: amount representing interest		(49	)
Present value of minimum lease payments	$	395

Interest rates on capitalized leases vary from 7.3% to 14.4% and are imputed based on the lower of the company’s incremental borrowing rate at the inception of each lease or the lessor’s implicit rate of return.

Operating Leases

The company leases certain facilities and equipment under non-cancelable operating leases which expire at various dates through 2017. Certain facilities and equipment leases contain renewal options for periods up to ten years. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases.

The following is a schedule by year of future minimum rental payments required under operating leases, excluding real estate taxes and insurance, which have initial or remaining non-cancelable lease terms in excess of a year as of March 31, 2009:

	Amount
Year ending March 31
2010	$	4,986
2011		3,758
2012		2,399
2013		2,089
2014		1,611
Thereafter		3,832
Total minimum lease payments	$	18,675

Total minimum future rental payments have been reduced by $16,000 of sublease rentals estimated to be received in the future under non-cancelable subleases. Rental expense for all non-cancelable operating leases amounted to $8.0 million, $7.9 million, and $4.5 million for 2009, 2008, and 2007, respectively.

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8.

FINANCING ARRANGEMENTS

The following is a summary of long-term obligations at March 31, 2009, and 2008:

	2009			2008
IBM floor plan agreement	$	74,159		$	14,552
Capital lease obligations		395			560
		74,554			15,112
Less: current maturities of long-term obligations		(74,397	)		(14,857	)
	$	157		$	255

Revolving Credit Agreements

On January 20, 2009, the company terminated its $200 million unsecured credit facility with Bank of America, N.A. (as successor to LaSalle Bank National Association), as lead arranger, book runner and administrative agent, and certain other lenders party thereto (the “Credit Facility”). As of October 17, 2008, the company’s ability to borrow under this Credit Facility was suspended due to the company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended March 31, 2008, and other technical defaults. There were no amounts outstanding under this Credit Facility on the termination date and the company had never borrowed under the Credit Facility since it was entered into in October 2005. The company decided to terminate this Credit Facility to avoid paying additional fees associated with the facility. There were no penalties associated with the early termination of the Credit Facility, however $0.4 million of deferred financing fees were immediately expensed in the third quarter of 2009 as a result of the termination.

On May 5, 2009, the company executed a Loan and Security Agreement (the “New Credit Facility”) with Bank of America, N.A., as agent for the lenders from time to time party thereto, which replaced the previous Credit Facility that was terminated on January 20, 2009. The New Credit Facility provides $50 million of credit (which may be increased to $75 million by a $25 million “accordion provision”) for borrowings and letters of credit and will mature May 5, 2012. The company’s obligations under the New Credit Facility are secured by all of the company’s assets. The New Credit Facility establishes a borrowing base for availability of loans predicated on the level of the company’s accounts receivable meeting banking industry criteria. The aggregate unpaid principal amount of all borrowings, to the extent not previously repaid, is repayable at maturity. Borrowings also are repayable at such other earlier times as may be required under or permitted by the terms of the New Credit Facility. LIBOR Loans under this New Credit Facility bear interest at LIBOR for the applicable interest period plus an applicable margin ranging from 3.0% to 3.5%. Base rate loans (as defined in the New Credit Facility) bear interest at the Base Rate (as defined in the New Credit Facility) plus an applicable margin ranging from 2.0% to 2.5%. Interest is payable on the first of each month in arrears. There is no premium or penalty for prepayment of borrowings under the New Credit Facility.

The New Credit Facility contains normal mandatory repayment provisions, representations, and warranties and covenants for a secured credit facility of this type. The New Credit Facility also contains customary Events of Defaults upon the occurrence of which, among other remedies, the Lenders may terminate their commitments and accelerate the maturity of indebtedness and other obligations under the New Credit Facility.

As of June 5, 2009, the company had no amounts outstanding under the New Credit Facility and $50.0 million was available for future borrowings. The company has no intention to borrow amounts under the New Credit Facility in the near term.

IBM Floor Plan Agreement

On February 22, 2008, the company entered into the Fourth Amended and Restated Agreement for Inventory Financing (Unsecured) (“Inventory Financing Agreement”) with IBM Credit LLC, a wholly-owned subsidiary of International Business Machines Corporation (“IBM”). In addition to providing the Inventory Financing Agreement, IBM has engaged and may engage as a primary supplier to the company in the ordinary course of business. Under the Inventory Financing Agreement, the company may finance the purchase of products from authorized suppliers up to an aggregate outstanding amount of $145 million. The lender may, in its sole discretion,

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temporarily increase the amount of the credit line but in no event shall the amount of the credit line exceed $250 million. Financing charges will only accrue on amounts outstanding more than 75 days. The company was in default of its covenants as a result of its failure to timely file its Annual Report on Form 10-K for March 31, 2008, and other technical requirements. As a result of these defaults, IBM could lower or cancel the company’s credit line; however, the credit line remained open and fully available through February 1, 2009. On February 2, 2009, the company was informed that IBM has lowered the credit line from $150 million to $100 million due to the loss of a significant syndicate partner in the credit line. Other than the lowering of the credit line, there have been no changes and both parties continued to operate under the existing terms. The company entered into the IBM flooring arrangement in February 2008 to realize the benefit of extended payment terms. This Inventory Financing Agreement provided the company 75 days of interest-free financing, which was better than the trade accounts payable terms provided by the company’s vendors. Prior to February 2008, the company solely utilized trade accounts payable to finance working capital.

The company was in discussions with IBM regarding an increase or overline component to the inventory financing agreement, whether through establishing a new comprehensive financing agreement or due to the passage of time as credit market conditions improve. However, on May 4, 2009, the company decided to terminate its Inventory Financing Agreement with IBM and will primarily fund working capital through open accounts payable provided by its trade vendors, or the New Credit Facility discussed above. At the time of the termination, there was $60.9 million outstanding under this Inventory Financing Agreement that the company subsequently repaid using cash on hand.

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9.

ADDITIONAL BALANCE SHEET INFORMATION

Additional information related to the company’s Consolidated Balance Sheets is as follows:

	2009		2008
Other non-current assets:
Corporate-owned life insurance policies	$	26,172	$	25,024
Marketable securities		37		133
Investment in The Reserve Fund’s Primary Fund		638		—
Other		2,161		622
Total	$	29,008	$	25,779
Accrued liabilities:
Salaries, wages, and related benefits	$	9,575	$	13,424
Employee benefit plan obligations		12,113		—
Restructuring liabilities		7,901		365
Other taxes payable		5,016		3,981
Income taxes payable		855		—
Innovative earn-out		—		35,000
Innovative accrued unvouchered liabilities		5,675		3,398
Other		2,347		1,644
Total	$	43,482	$	57,812
Other non-current liabilities:
Employee benefit plan obligations	$	11,078	$	20,221
Income taxes payable		7,168		5,367
Restructuring liabilities		2,026		—
Long-term debt		157		255
Deferred income taxes		—		169
Other		1,159		1,251
Total	$	21,588	$	27,263

Other non-current assets in the table above includes the cash surrender value of certain corporate-owned life insurance policies. These policies are maintained to informally fund the company’s obligations with respect to the employee benefit plan obligations included within accrued liabilities and other non-current liabilities in the table above. The company adjusts the carrying value of these contracts to the cash surrender value (which is considered fair value) at the end of each reporting period. Such periodic adjustments are included in selling, general and administrative expenses within the accompanying Consolidated Statements of Operations. Additional information with respect to the company’s corporate-owned life insurance policies and employee benefit plan obligations is provided in Note 11, Employee Benefit Plans.

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10.

INCOME TAXES

The components of income (loss) before income taxes from continuing operations and income tax provision are as follows:

	2009			2008			2007
(Loss) income before income taxes
Domestic	$	(283,732	)	$	2,021		$	(12,991	)
Foreign		449			(1,085	)		1,129
Total	$	(283,283	)	$	936		$	(11,862	)
Provision for income taxes
Current
Federal	$	3,958		$	2,632		$	(4,583	)
State and local		1,813			(514	)		196
Foreign		168			(391	)		274
Total	$	5,939		$	1,727		$	(4,113	)
Deferred
Federal	$	(7,526	)	$	(2,571	)	$	2,563
State and local		491			(250	)		292
Foreign		—			172			(677	)
Total		(7,035	)		(2,649	)		2,178
Benefit for income taxes	$	(1,096	)	$	(922	)	$	(1,935	)

A reconciliation of the federal statutory rate to the company’s effective income tax rate for continuing operations is as follows:

	2009			2008			2007
Statutory rate		35.0	%		35.0	%		35.0	%
Provision (benefit) for state taxes		2.5			205.5			(2.3	)
Impact of foreign operations		(0.3	)		(12.7	)		—
Goodwill impairment		(16.7	)		—			—
Change in valuation allowance		(18.2	)		(113.5	)		4.5
(Settlement) adjustment of income tax audits		(0.3	)		339.8			5.2
Meals & entertainment		(0.3	)		(488.1	)		(3.9	)
Equity investment — Magirus		—			702.0			(17.1	)
Compensation		(0.5	)		(203.2	)		(5.0	)
Other		(0.8	)		(83.7	)		(2.1	)
Effective rate		0.4	%		381.1	%		14.3	%

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Deferred tax assets and liabilities as of March 31, 2009 and 2008 are as follows:

	2009			2008
Deferred tax assets:
Accrued liabilities	$	2,765		$	3,935
Allowance for doubtful accounts		1,039			852
Inventory valuation reserve		1,254			467
Restructuring reserve		3,568			121
Federal domestic net operating losses		—			107
Foreign net operating losses		435			502
Investment		—			365
State net operating losses		1,017			501
Deferred compensation		8,150			7,054
Deferred revenue		778			(23	)
Goodwill and other intangible assets		32,694			(8,914	)
Other		8,919			1,232
		60,619			6,199
Less: valuation allowance		(52,177	)		(999	)
Total	$	8,442		$	5,200
Deferred tax liabilities:
Property and equipment & software amortization	$	1,037		$	1,516
Other		58			65
Total		1,095			1,581
Total deferred tax assets	$	7,347		$	3,619

At March 31, 2009, the company’s Hong Kong subsidiary had $2.4 million of net operating loss carryforwards that can be carried forward indefinitely. At March 31, 2009, the company also had $34.6 million of state net operating loss carryforwards that expire, if unused, in years 2010 through 2026.

At March 31, 2009, the total valuation allowance against deferred tax assets of $52.2 million was mainly comprised of a valuation allowance of $51.8 million for federal and state deferred tax assets, and a valuation allowance of $0.4 million associated with deferred tax assets in Hong Kong that will not be realized. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, the company will need to generate future taxable income before the expiration of the deferred tax assets governed by the tax code. Based on the level of historical taxable income over the periods for which the deferred tax assets are deductible, management believes that it is more-likely-than-not that the company will not realize the benefits of these deductible differences.

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Effective April 1, 2007, the company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:

Balance at April 1, 2008	$	5,997
Additions:
Relating to positions taken during current year		260
Relating to positions taken during prior year		1,401
Reductions:
Relating to tax settlements		(964	)
Relating to positions taken during prior year		(588	)
Relating to lapse in statute		(353	)
Due to business acquisitions		(102	)
Balance at March 31, 2009	$	5,651

The company recognizes interest accrued on any unrecognized tax benefits as a component of income tax expense. Penalties are recognized as a component of selling, general and administrative expenses. As of March 31, 2009 and 2008, the company had approximately $2.0 million and $1.7 million of interest and penalties accrued, respectively.

As of March 31, 2009, the company has a liability of $5.7 million related to uncertain tax positions, the recognition of which would affect the company’s effective income tax rate.

The company anticipates the completion of state income tax audits in the next 12 months which could reduce the accrual for unrecognized tax benefits by $1.2 million. The company believes that, other than the changes noted above, it is impractical to determine the positions for which it is reasonably possible that the total of uncertain tax benefits will significantly increase or decrease in the next twelve months.

The company is currently under examination by the Internal Revenue Service (IRS) for the tax year ended March 31, 2007. The examination commenced in the fourth quarter of 2009. The company is currently being audited by multiple state taxing jurisdictions. In material jurisdictions, the company has tax years open back to and including 2000.

11.

EMPLOYEE BENEFIT PLANS

The company maintains profit-sharing and 401(k) plans for employees meeting certain service requirements. Generally, the plans allow eligible employees to contribute a portion of their compensation, with the company matching $1.00 for every $1.00 on the first 1% of the employee’s pre-tax contributions and $0.50 for every $1.00 up to the next 5% of the employee’s pre-tax contributions. The company may also make discretionary contributions each year for the benefit of all eligible employees under the plans. Total profit sharing and company matching contributions were $4.0 million, $3.2 million, and $3.0 million for 2009, 2008, and 2007, respectively.

The company also provides a non-qualified benefit equalization plan (“BEP”) covering certain employees, which provides for employee deferrals and company retirement deferrals so that the total retirement deferrals equal amounts that would have been contributed to the company’s 401(k) plan if it were not for limitations imposed by income tax regulations. The benefit obligation related to the BEP was $3.4 and $5.6 million at March 31, 2009 and 2008, respectively. Contribution expense for the BEP was $0.2 million, $0.1 million, and $0.4 million in 2009, 2008, and 2007, respectively.

The company also provides a supplemental executive retirement plan (“SERP”) for certain officers of the company. The SERP is a non-qualified plan designed to provide retirement benefits for the plan participants. The projected benefit obligation recognized by the company related to the SERP was $18.3 and $14.0 million at March 31, 2009 and 2008, respectively. At March 31, 2009, the benefit obligation recognized by the company represents the projected benefit obligation, in accordance with Statement of Financial Accounting

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Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans (“FAS 158”) adoption standards. The accumulated benefit obligation related to the SERP was $17.9 million and $12.5 million at March 31, 2009, and 2008, respectively. The annual expense for the SERP was $1.3 million, $1.3 million, and $1.1 million in 2009, 2008, and 2007, respectively.

In connection with the management restructuring actions taken in the third quarter of 2009, the company recorded non-cash curtailment charges of $4.5 million for the SERP, which are included within restructuring charges on the Consolidated Statements of Operations. The curtailment charges pertain to the retirement of the company’s former CEO and termination of certain officers. In connection with the management restructuring actions taken in the fourth quarter of 2009, the company recorded additional non-cash curtailment charges of $0.9 million and $0.3 million related to the SERP and the additional service credits liability curtailments, respectively, which are also included within restructuring charges on the Consolidated Statements of Operations. The 2009 fourth quarter charges relate to the termination of another officer. Total curtailment charges recorded as restructuring expenses for the SERP and the additional service liability curtailments in 2009 were $5.4 million and $0.3 million, respectively.

Certain participants in the SERP were eligible for early retirement under the terms of the SERP and have elected to receive lump sum distributions from the plan and the additional service credits liability in 2010. The company will fund the payments by taking loans against the cash surrender value of the life insurance policies that informally fund the SERP. Accordingly, the company has classified approximately $12.1 million of the projected benefit liability as a current accrued liability on the Consolidated Balance Sheets. Additional information related to the classification of the current and long-term portion of the SERP and additional service credits liability is presented in Note 9, Additional Balance Sheet Information.

In conjunction with the BEP and SERP, the company has invested in life insurance policies related to certain employees and marketable securities held in a Rabbi Trust to satisfy future obligations of the plans. The value of the policies was $23.4 million and $22.4 million at March 31, 2009, and 2008, respectively. The life insurance policies are valued at their cash surrender value and the marketable securities held in a Rabbi trust are valued at fair market value. At March 31, 2009, the marketable securities held in the Rabbi trust had a fair value of $37,000.

The following benefit payments are expected to be made to participants related to the SERP and additional service credits obligations:

2010	$	11,984
2011		2,384
2012		2,432
2013		—
2014		—
Thereafter		2,466
Total	$	19,266

Subsequent to March 31, 2009, the company took loans totaling $12.5 million against the cash surrender value of the corporate-owned life insurance policies. The proceeds were used and will be used to satisfy the SERP and additional service credits obligations related to two former executives who retired from the company during 2009. The company has no obligation to repay these loans and does not intend to repay them.

12.

COMMITMENTS AND CONTINGENCIES

The company is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. The company provides for costs related to these matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of these matters on the company’s future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters. While it is not possible to predict with certainty, management believes that the ultimate resolution of such individual or aggregated matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the company.

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In 2006, the company filed a lawsuit against the former shareholders of CTS, a company that was purchased by Agilysys in May 2005. In the lawsuit, Agilysys alleged that principals of CTS failed to disclose pertinent information during the acquisition, representing a material breach in the representations of the acquisition purchase agreement. On January 30, 2009, a jury ruled in favor of the company, finding the former shareholders of CTS liable for breach of contract, and awarded damages in the amount of $2.3 million. The jury also awarded to Agilysys its reasonable attorney’s fees in an amount to be determined at a later hearing. Judgment will be entered upon an award of attorney’s fees, at which time the parties have thirty days to file an appeal. No amounts have yet been accrued or received from the former shareholders of CTS or their insurance company.

As of March 31, 2009 and 2008, the company had minimum purchase commitments under a product procurement agreement with a supplier totaling $1.0 million and $1.3 million, respectively.

13.

BUSINESS SEGMENTS

Description of Business Segments

The company has three reportable business segments: Hospitality Solutions Group (“HSG”), Retail Solutions Group (“RSG”), and Technology Solutions Group (“TSG”). The reportable segments are each managed separately and are supported by various practices as well as company-wide functional departments. The segment information for 2007 that is provided below has been restated as a result of the 2008 change in the composition of the company’s reportable segments.

HSG is a leading technology provider to the hospitality industry, offering application software and services that streamline management of operations, property and inventory for customers in the gaming, hotel and resort, cruise lines, food management services, and sports and entertainment markets.

RSG is a leader in designing solutions that help make retailers more productive and provide their customers with an enhanced shopping experience. RSG solutions help improve operational efficiency, technology utilization, customer satisfaction and in-store profitability, including customized pricing, inventory and customer relationship management systems. The group also provides implementation plans and supplies the complete package of hardware needed to operate the systems, including servers, receipt printers, point-of-sale terminals and wireless devices for in-store use by the retailer’s store associates.

TSG is an aggregation of the company’s IBM, HP, and Sun reporting units due to the similarity of their economic and operating characteristics. During the fourth quarter of 2009, the Stack reporting unit was integrated into the HP reporting unit . TSG is a leading provider of HP, Sun, Oracle, IBM, and EMC² enterprise IT solutions for the complex needs of customers in a variety of industries — including education, finance, government, healthcare and telecommunications, among others. The solutions offered include enterprise architecture and high availability, infrastructure optimization, storage and resource management, identity management and business continuity.

Measurement of Segment Operating Results and Segment Assets

The company evaluates performance and allocates resources to its reportable segments based on operating income and “adjusted EBITDA,” which is defined as operating (loss) income plus depreciation and amortization expense. Certain costs and expenses arising from the company’s functional departments are not allocated to the reportable segments for performance evaluation purposes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies elsewhere in the footnotes to the consolidated financial statements.

As a result of the March 2007 divestiture of KSG and acquisitions, and due to the debt covenant and Inventory Financing Agreement definitions, the company believes that adjusted EBITDA is a meaningful measure to the users of the financial statements and has been a required measurement in the company’s prior debt agreements to reflect another measure of the company’s performance. Adjusted EBITDA differs from U.S. GAAP and should not be considered an alternative measure to operating cash flows as required by U.S. GAAP. Management has reconciled adjusted EBITDA to operating (loss) income in the following chart.

Intersegment sales are recorded at pre-determined amounts to allow for intercompany profit to be included in the operating results of the individual reportable segments. Such intercompany profit is eliminated for consolidated financial reporting purposes.

The company’s chief operating decision maker does not evaluate a measurement of segment assets when evaluating the performance of the company’s reportable segments. As such, financial information relating to segment assets is not provided in the financial information below.

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The following table presents segment profit and related information for each of the company’s reportable segments. As discussed in Note 1, Verizon Communications, Inc. represented approximately 32.6% and 16.3% of the TSG segment’s total sales in 2009 and 2008 respectively. No single customer accounted for more than 10% of a reporting business segment’s total sales in 2007. Please refer to Note 4 for further information on the TSG and Corporate restructuring charges, and Note 5 for the TSG, RSG, and HSG goodwill and intangible asset impairment charges:

	2009			2008			2007
Hospitality
Total revenue	$	99,826		$	85,103		$	37,875
Elimination of intersegment revenue		(190	)		(280	)		—
Revenue from external customers	$	99,636		$	84,823		$	37,875
Gross margin	$	60,505		$	47,193		$	23,082
		60.7%			55.6%			60.9%
Depreciation and Amortization	$	5,931		$	4,865		$	1,160
Operating (loss) income		(114,133	)		4,125			5,535
Adjusted EBITDA	$	(108,202	)	$	8,990		$	6,695
Goodwill and intangible asset impairment	$	122,488		$	—		$	—
Retail
Total revenue	$	122,478		$	130,223		$	93,064
Elimination of intersegment revenue		(319	)		(493	)		(288	)
Revenue from external customers	$	122,159		$	129,730		$	92,776
Gross margin	$	27,659		$	24,599		$	19,491
		22.6%			19.0%			21.0%
Depreciation and Amortization	$	129		$	376		$	503
Operating (loss) income		(17,055	)		5,692			2,559
Adjusted EBITDA	$	(16,926	)	$	6,068		$	3,062
Goodwill impairment	$	24,912		$	—		$	—
Technology
Total revenue	$	512,108		$	554,655		$	330,610
Elimination of intersegment revenue		(3,183	)		(9,040	)		(7,934	)
Revenue from external customers	$	508,925		$	545,615		$	322,676
Gross margin	$	108,085		$	102,843		$	70,341
		21.2%			18.8%			21.8%
Depreciation and Amortization	$	16,673		$	14,491		$	2,032
Operating (loss) income		(88,581	)		14,296			17,149
Adjusted EBITDA	$	(71,908	)	$	28,787		$	19,181
Goodwill impairment	$	84,456		$	—		$	—
Restructuring charge	$	23,573		$	—		$	—
Corporate/Other
Revenue from external customers	$	—		$	—		$	413
Gross margin	$	2,429		$	3,856		$	5,835
Depreciation and Amortization(1)	$	4,366		$	3,855		$	4,880
Operating loss		(60,285	)		(41,969	)		(33,574	)
Adjusted EBITDA	$	(55,919	)	$	(38,114	)	$	(28,694	)
Restructuring charge	$	17,228		$	(75	)	$	(2,531	)
Consolidated
Total revenue	$	734,412		$	769,981		$	461,962
Elimination of intersegment revenue		(3,692	)		(9,813	)		(8,222	)
Revenue from external customers	$	730,720		$	760,168		$	453,740
Gross margin	$	198,678		$	178,491		$	118,749
		27.2%			23.5%			26.2%
Depreciation and Amortization(1)	$	27,099		$	23,587		$	8,575
Operating loss		(280,054	)		(17,856	)		(8,331	)
Adjusted EBITDA	$	(252,955	)	$	5,731		$	244
Goodwill and intangible asset impairment	$	231,856		$	—		$	—
Restructuring charge	$	40,801		$	(75	)	$	(2,531	)

(1) Does not include the amortization of deferred financing fees totaling $584, $226, and $215 in 2009, 2008, and 2007, respectively, which related to the Corporate/Other segment.

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Enterprise-Wide Disclosures

The company’s assets are primarily located in the United States of America. Further, revenues attributable to customers outside the United States of America accounted for 4%, 5% and 8% of total revenues for 2009, 2008 and 2007, respectively. Total revenues for the company’s three specific product areas are as follows:

	For the year ended March 31,
	2009		2008		2007
Hardware	$	508,704	$	562,314	$	328,435
Software		76,998		71,900		32,866
Services		145,018		125,954		92,439
Total	$	730,720	$	760,168	$	453,740

14.

SHAREHOLDERS’ EQUITY

Capital Stock

Holders of the company’s common shares are entitled to one vote for each share held of record on all matters to be submitted to a vote of the shareholders. At March 31, 2009, and 2008, there were no shares of preferred stock outstanding.

Dividend Payments

Common share dividends were paid quarterly at the rate of $0.03 per share in 2009 and 2008 to shareholders of record.

Shareholder Rights Plan

In April 1999, the company’s Board of Directors approved a new Shareholder Rights Plan, which became effective upon expiration of the existing plan in May 1999. The Shareholder Rights Plan and the Rights expired on May 10, 2009. The following is a summary of the provisions of the Shareholder Rights Plan and the Rights prior to their expiration. A dividend of one Right per common share was distributed to shareholders of record as of May 10, 1999. Each Right, upon the occurrence of certain events, entitles the holder to buy from the company one-tenth of a common share at a price of $4.00, or $40.00 per whole share, subject to adjustment. The Rights may be exercised only if a person or group acquires 20% or more of the company’s common shares, or announces a tender offer for at least 20% of the company’s common shares. Each Right will entitle its holder (other than such acquiring person or members of such acquiring group) to purchase, at the Right’s then-current exercise price, a number of the company’s common shares having a market value of twice the Right’s then-exercise price. The Rights trade with the company’s common shares until the Rights become exercisable.

If the company is acquired in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right’s then-exercise price, a number of the acquiring company’s common shares (or other securities) having a market value at the time of twice the Right’s then-current exercise price. Prior to the acquisition by a person or group of beneficial ownership of 20% or more of the company’s Common Shares, the Rights are redeemable for $0.001 per Right at the option of the company’s Board of Directors.

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15.

(LOSS) EARNINGS PER SHARE

The following data show the amounts used in computing (loss) earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock.

	For the year ended March 31
	2009			2008		2007
Numerator:
(Loss) income from continuing operations — basic and diluted	$	(282,187	)	$	1,858	$	(9,927	)
(Loss) income from discontinued operations — basic and diluted		(1,947	)		1,801		242,782
Net (loss) income — basic and diluted	$	(284,134	)	$	3,659	$	232,855
Denominator:
Weighted average shares outstanding — basic		22,587			28,252		30,684
Effect of dilutive securities — stock options and unvested restricted stock		—			514		—
Weighted average shares outstanding — diluted		22,587			28,766		30,684
(Loss) earnings per share — basic and diluted:
(Loss) income from continuing operations — basic and diluted	$	(12.49	)	$	0.07	$	(0.32	)
(Loss) income from discontinued operations — basic and diluted		(0.09	)		0.06		7.91
Net (loss) income — basic and diluted	$	(12.58	)	$	0.13	$	7.59

Diluted earnings per share is computed by sequencing each series of potential issuance of common shares from the most dilutive to the least dilutive. Diluted earnings per share is determined as the lowest earnings or highest (loss) per incremental share in the sequence of potential common shares.

For the years ended March 31, 2009, 2008, and 2007, options on 2.8 million, 1.0 million, and 3.4 million shares of common stock, respectively, were not included in computing diluted earnings per share because their effects were anti-dilutive.

16.

STOCK-BASED COMPENSATION

The company has a shareholder-approved 2006 Stock Incentive Plan (the “Plan”). Under the Plan, the company may grant stock options, stock appreciation rights, restricted shares, restricted share units, and performance shares for up to 3.2 million shares of common stock. The maximum aggregate number of restricted shares, restricted share units and performance shares that may be granted under the Plan is 1.6 million. For stock option awards, the exercise price must be set at least equal to the closing market price of the company’s stock on the date of grant. The maximum term of option awards is 10 years from the date of grant. Stock option awards vest over a period established by the Compensation Committee of the Board of Directors. Stock appreciation rights may be granted in conjunction with, or independently from, a stock option granted under the Plan. Stock appreciation rights, granted in connection with a stock option, are exercisable only to the extent that the stock option to which it relates is exercisable and the stock appreciation rights terminate upon the termination or exercise of the related stock option. Restricted shares, restricted share units and performance shares may be issued at no cost or at a purchase price that may be below their fair market value, but which are subject to forfeiture and restrictions on their sale or other transfer. Performance share awards may be granted, where the right to receive shares in the future is conditioned upon the attainment of specified performance objectives and such other conditions, restrictions and contingencies. The company generally issues authorized but unissued shares to satisfy share option exercises.

As of March 31, 2009, there were no stock appreciation rights or restricted share units awarded from the Plan.

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Stock Options

The following table summarizes stock option activity during 2009, 2008, and 2007 for stock options awarded by the company under the stock incentive plan and prior plans.

	For the year ended March 31
	2009					2008					2007
				Weighted					Weighted					Weighted
				average					average					average
	Number of			exercise		Number of			exercise		Number of			exercise
	shares			price		shares			price		shares			price
Outstanding at April 1		3,526,910		$	14.24		3,394,748		$	13.61		3,289,999		$	12.84
Granted		783,500			4.92		280,000			22.21		997,500			15.72
Exercised		—			—		(108,038	)		13.38		(804,250	)		12.93
Cancelled/expired		(1,920,840	)		13.24		(11,800	)		14.57		(76,669	)		15.22
Forfeited		(232,405	)		15.31		(28,000	)		21.07		(11,832	)		15.85
Outstanding at March 31		2,157,165		$	11.63		3,526,910		$	14.24		3,394,748		$	13.63
Options exercisable at March 31		1,638,818		$	13.41		2,897,564		$	13.58		2,494,267		$	13.04

The fair market value of each option granted is estimated on the grant date using the Black-Scholes method. The following assumptions were made in estimating fair value of the stock option grants:

	For the year ended March 31
	2009		2008		2007
Dividend yield		0.7 — 1.2%		0.70%		0.70%
Risk-free interest rate		2.2 — 4.3%		4.90%		4.70%
Expected life		6.0 years		6.0 years		5.0 years
Expected volatility		43.1 — 73.4%		43.80%		44.30%

The dividend yield reflects the company’s historical dividend yield on the date of award. The risk-free interest rate is based on the yield of a zero-coupon U.S. Treasury bond whose maturity period equals the option’s expected term. The expected term reflects employee-specific future exercise expectations and historical exercise patterns, as appropriate. The expected volatility is based on historical volatility of the company’s common stock. The company’s ownership base has been and may continue to be concentrated in a few shareholders, which has increased and could continue to increase the volatility of the company’s stock price over time. The fair market values of options granted during the year ended March 31, 2009, were 246,000 options at $4.39, 7,500 options at $5.31, 285,000 options at $1.44, 175,000 options at $1.26, 25,000 options at $1.99, and 45,000 options at $2.28.

Compensation expense charged to operations during the year ended March 31, 2009, 2008, and 2007 relating to stock options was $0.5 million, $3.5 million, and $3.6 million, respectively. This included a $1.5 million reversal in stock option expense in 2009 due to a change in the estimate of the forfeiture rate which was updated due to the management restructuring actions. Since no options were exercised during the year ended March 31, 2009, no income tax benefit was recognized in operations during the year. As of March 31, 2009, total unrecognized stock based compensation expense related to non-vested stock options was $0.5 million, which is expected to be recognized over a weighted-average period of 18 months. No stock options were exercised during the year ended March 31, 2009.

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The following table summarizes the status of stock options outstanding at March 31, 2009.

	Options outstanding						Options exercisable
					Weighted				Weighted
			Weighted		average				average
			average		remaining				exercise
Exercise price range	Number		exercise price		contractual life		Number		price
$2.19 — $6.63		530,000	$	2.55		9.66		169,998	$	2.39
$6.63 — $8.29		12,500		7.00		0.02		12,500		7.00
$8.29 — $9.95		270,166		9.37		6.97		164,491		9.07
$9.95 — $11.61		30,000		11.17		2.32		30,000		11.17
$11.61 — $13.26		47,500		12.85		3.33		42,500		12.95
$13.26 — $14.92		385,500		13.79		4.30		385,500		13.79
$14.92 — $16.58		722,167		15.67		7.07		722,167		15.67
$16.58 — $22.21		159,332		22.21		7.33		111,662		22.21
		2,157,165	$	11.63		7.03		1,638,818	$	13.41

Non-vested Shares

Compensation expense related to non-vested share awards is recognized over the restriction period based upon the closing market price of the company’s shares on the grant date. Compensation expense charged to operations for non-vested share awards was $0.6 million $1.5 million, and $0.6 million for the year ended March 31, 2009, 2008 and 2007, respectively. A credit of $0.6 million was recognized in 2009 relating to employee terminations. As of March 31, 2009, there was $0.1 million of total unrecognized compensation cost related to non-vested share awards, which is expected to be recognized over a weighted-average period of 12 months. Dividends are not awarded to non-vested shares.

The following table summarizes non-vested share activity during the years ended March 31, 2009, 2008, and 2007 for restricted shares awarded by the company under the stock incentive plan and prior plans.

	2009			2008			2007
Outstanding at April 1		80,900			18,750			25,000
Granted		81,600			108,000			32,000
Vested		(104,900	)		(45,850	)		(38,250	)
Forfeited		(45,600	)		—			—
Outstanding at March 31		12,000			80,900			18,750

The fair market value of non-vested shares is determined based on the closing price of the company’s shares on the grant date.

Performance Shares

Net compensation cost charged to operations for performance share awards was a credit of $0.6 million and expense of $1.0 million for the years ended March 31, 2009 and 2008, respectively. A gross credit of $1.4 million was recognized in 2009 relating to employee terminations and the evaluation of performance goals. As of March 31, 2009, there was $0.2 million of total unrecognized compensation cost related to performance share awards, which is expected to be recognized over a weighted-average period of 12 months.

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There were no performance shares issued in 2007. The following table summarizes performance share activity during year ended March 31, 2009 and 2008:

	2009			2008
Outstanding at April 1		152,000			—
Granted		—			152,000
Vested		—			—
Forfeited		(122,000	)		—
Outstanding at March 31		30,000			152,000

The company granted shares to certain executives of the company, the vesting of which is contingent upon meeting various company-wide performance goals. The performance shares contingently vest over three years. The fair value of the performance share grant is determined based on the closing market price of the company’s shares on the grant date and assumes that performance goals will be met. If such goals are not met, no compensation cost will be recognized and any compensation cost previously recognized during the vesting period will be reversed.

17.

CAPITAL STOCK

In August 2007, in fulfillment of the company’s previously disclosed intention to return capital to shareholders, the company announced a modified “Dutch Auction” tender offer for up to 6,000,000 of the company’s common shares. In September 2007, the company accepted for purchase 4,653,287 of the company’s common shares at a purchase price of $18.50 per share (considered a current market trading price), for a total cost of approximately $86.1 million, excluding related transaction costs. The tender offer was funded through cash on hand. The company uses the par value method to account for treasury stock. Accordingly, the treasury stock account is charged only for the aggregate stated value of the shares reacquired, or $0.30 per share. The capital in excess of stated value is charged for the difference between cost and stated value.

In September 2007, the company entered into a written trading plan that complies with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which provided for the purchase of up to 2,000,000 of the company’s common shares. In December 2007, the company announced it had completed the repurchase of the shares on the open market for a total cost of $30.4 million, excluding related transaction costs. Also in December 2007, the company entered into an additional Rule 10b5-1 plan that provided for the purchase of up to an additional 2,500,000 of the company’s common shares. The Board of Directors authorized a cash outlay of $150 million in the aggregate for the tender offer and purchases pursuant to Rule 10b5-1 plans, which also complied with the Credit Facility approval limit. By February 2008, 2,321,787 of the 2,500,000 shares were redeemed for a total cost of $33.5 million. The $150 million maximum cash outlay was achieved; therefore the purchase of common shares for treasury was completed.

18.

QUARTERLY RESULTS (UNAUDITED)

Because quarterly reporting of per share data is used independently for each reporting period, the sum of per share amounts for the four quarters in the fiscal year will not necessarily equal annual per share amounts. FASB Statement 128, Earnings Per Share, prohibits retroactive adjustment of quarterly per share amounts so that the sum of those amounts equals amounts for the full year.

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The company experiences a seasonal increase in sales during its fiscal third quarter ending in December. The company believes that this sales pattern is industry-wide. Although the company is unable to predict whether this uneven sales pattern will continue over the long-term, the company anticipates that this trend will remain the same in the foreseeable future.

	Year ended March 31, 2009
	First			Second			Third			Fourth
	quarter			quarter			quarter			quarter			Year
Net Sales	$	179,751		$	171,438		$	224,076		$	155,455		$	730,720
Gross margin		47,778			50,864			59,778			40,258			198,678
Asset impairment charges		33,623			112,020			—			86,213			231,856
Restructuring charges		23,063			510			13,357			3,871			40,801
Loss from continuing operations		(60,075	)		(105,277	)		(2,243	)		(114,592	)		(282,187	)
Income (loss) from discontinued operations		38			(1,312	)		(1,477	)		804			(1,947	)
Net loss	$	(60,037	)	$	(106,589	)	$	(3,720	)	$	(113,788	)	$	(284,134	)
Per share data:
Basic and diluted
Loss from continuing operations	$	(2.66	)	$	(4.66	)	$	(0.10	)	$	(5.07	)	$	(12.49	)
(Loss) income from discontinued operations		—			(0.06	)		(0.07	)		0.04			(0.09	)
Net Loss	$	(2.66	)	$	(4.72	)	$	(0.17	)	$	(5.03	)	$	(12.58	)

	Year ended March 31, 2008
	First			Second		Third			Fourth
	quarter			quarter		quarter			quarter			Year
Net Sales	$	125,635		$	193,269	$	247,912		$	193,352		$	760,168
Gross margin		31,949			42,351		57,319			46,872			178,491
Restructuring charges (credits)		26			5		(3	)		(103	)		(75	)
Impairment of investment in cost basis		—			—		—			4,921			4,921
Income (loss) from continuing operations		3,011			1,692		1,443			(4,288	)		1,858
(Loss) income from discontinued operations		(419	)		1,748		512			(40	)		1,801
Net income (loss)	$	2,592		$	3,440	$	1,955		$	(4,328	)	$	3,659
Per share data:
Basic and diluted
Income (loss) from continuing operations	$	0.09		$	0.05	$	0.06		$	(0.18	)	$	0.07
(Loss) income from discontinued operations		(0.01	)		0.06		0.02			—			0.06
Net income (loss)	$	0.08		$	0.11	$	0.08		$	(0.18	)	$	0.13

The 2008 third quarter includes amortization of Innovative’s Intangibles of $3.1 million.

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19.

SUBSEQUENT EVENTS (UNAUDITED)

As discussed in Note 8, Financing Arrangements, on May 4, 2009 the company terminated its Inventory Financing Agreement with IBM. In addition, on May 5, 2009, the company executed the New Credit Facility for $50 million with Bank of America, N.A.

As discussed in Note 11, Employee Benefit Plans, subsequent to March 31, 2009, the company took loans totaling $12.5 million against the cash surrender value of certain company-owned life insurance policies. The proceeds were used and will be used to satisfy the SERP and additional service credits obligations for two former executives of the company who retired during 2009. The company has no obligation to repay these loans and does not intend to repay them.

74

Schedule II — Valuation and Qualifying Accounts Years ended March 31, 2009, 2008 and 2007
(In thousands)

	Balance at		Charged to			Charged						Balance at
	beginning of		costs and			to other						end of
Classification	year		expenses			accounts			Deductions			year
2009
Allowance for doubtful accounts	$	2,392	$	2,452		$	—		$	(1,839	)	$	3,005
Inventory valuation reserve	$	1,334	$	1,361		$	—		$	(284	)	$	2,411
Restructuring reserves	$	44	$	40,801		$	—		$	(30,918	)	$	9,927
2008
Allowance for doubtful accounts	$	1,147	$	682		$	1,411	(a)	$	(848	)	$	2,392
Inventory valuation reserve	$	1,045	$	670		$	—		$	(381	)	$	1,334
Restructuring reserves	$	635	$	(8	)	$	—		$	(583	)	$	44
2007
Allowance for doubtful accounts	$	3,272	$	(1,547	)	$	—		$	(578	)	$	1,147
Inventory valuation reserve	$	1,617	$	(103	)	$	—		$	(469	)	$	1,045
Restructuring reserves	$	6,376	$	(4,665	)	$	—		$	(1,076	)	$	635

(a) The $1,411 represents allowance for doubtful accounts acquired in business combinations.

75

agilysys, inc.

Exhibit Index

Exhibit No.			Description
	2		Agreement and Plan of Merger by and among Agilysys, Inc., Agilysys NJ, Inc. and Innovative Systems Design, Inc., which is incorporated by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed June 1, 2007 (File No. 000-05734).
	3	(a)	Amended Articles of Incorporation of Pioneer-Standard Electronics, Inc., which is incorporated by reference to Exhibit 3.1 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003 (File No. 000-05734).
	3	(b)	Amended Code of Regulations, as amended, of Agilysys, Inc., which is incorporated by reference to Exhibit 3.1 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 (File No. 000-05734).
	*10	(a)	The company’s Executive Officer Annual Incentive Plan, which is incorporated herein by reference to Exhibit B to the company’s definitive Schedule 14A filed July 8, 2005 (File No. 000-05734).
	*10	(b)	Pioneer-Standard Electronics, Inc. 1999 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 10.5 to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-05734).
	*10	(c)	Pioneer-Standard Electronics, Inc. 1999 Restricted Stock Plan, which is incorporated herein by reference to Exhibit 10.6 to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-05734).
	*10	(d)	Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan, which is incorporated herein by reference to Exhibit 10(o) to the company’s Annual Report on Form 10-K for the year ended March 31, 2000 (File No. 000-05734).
	*10	(f)	Pioneer-Standard Electronics, Inc. Benefit Equalization Plan, which is incorporated herein by reference to Exhibit 10(p) to the company’s Annual Report on Form 10-K for the year ended March 31, 2000 (File No. 000-05734).
	*10	(g)	Form of Option Agreement between Pioneer-Standard Electronics, Inc. and the optionees under the Pioneer-Standard Electronics, Inc. 1999 Stock Option Plan for Outside Directors, which is incorporated herein by reference to Exhibit 10.7 to the company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 000-05734).
	*10	(h)	Employment agreement, effective April 24, 2000, between Pioneer-Standard Electronics, Inc. and Steven M. Billick, which is incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No. 000-05734).
	*10	(i)	Pioneer-Standard Electronics, Inc. Senior Executive Disability Plan, effective April 1, 2000, which is incorporated herein by reference to Exhibit 10(v) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734).
	*10	(j)	Non-Competition Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated herein by reference to Exhibit 10(w) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734).
	*10	(k)	Change of Control Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated herein by reference to Exhibit 10(x) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734).
	*10	(l)	Non-Competition Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated herein by reference to Exhibit 10(y) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734).

76

Exhibit No.			Description
	*10	(m)	Change of Control Agreement, dated as of February 25, 2000, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated herein by reference to Exhibit 10(z) to the company’s Annual Report on Form 10-K for the year ended March 31, 2001 (File No. 000-05734).
	*10	(n)	Amendment to the Pioneer-Standard Electronics, Inc. Supplemental Executive Retirement Plan dated January 29, 2002, which is incorporated herein by reference to Exhibit 10(x) to the company’s Annual Report on Form 10-K for the year ended March 31, 2002 (File No. 000-05734).
	*10	(o)	Employment agreement, effective April 1, 2002, between Pioneer-Standard Electronics, Inc. and Arthur Rhein which is incorporated herein by reference to Exhibit 10(aa) to the company’s Annual Report on Form 10-K for the year ended March 31, 2002 (File No. 000-05734).
	*10	(p)	Amended and Restated Employment Agreement between Agilysys, Inc. and Arthur Rhein, effective December 23, 2005, which is incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed December 30, 2005 (File No. 000-05734).
	*10	(q)	Letter dated December 23, 2005 from Charles F. Christ to Arthur Rhein, which is incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed December 30, 2005 (File No. 000-05734).
	*10	(r)	Amended and Restated Employment Agreement between Pioneer-Standard Electronics, Inc. and Arthur Rhein, effective April 1, 2003, which is incorporated by reference to Exhibit 10(cc) to the company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734).
	*10	(s)	Amendment No. 1 to Employment Agreement, between Pioneer-Standard Electronics, Inc. and Steven M. Billick, effective April 1, 2002, which is incorporated by reference to Exhibit 10(dd) to the company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734).
	*10	(t)	Amendment No. 1 to Change of Control Agreement and Non-Competition Agreement, dated as of January 30, 2003, between Pioneer-Standard Electronics, Inc. and Robert J. Bailey, which is incorporated by reference to Exhibit 10(ee) to the company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734).
	*10	(u)	Amendment No. 1 to Change of Control Agreement and Non-Competition Agreement, dated as of January 30, 2003, between Pioneer-Standard Electronics, Inc. and Peter J. Coleman, which is incorporated by reference to Exhibit 10(ff) to the company’s Annual Report on Form 10-K for the year ended March 31, 2003 (File No. 000-05734).
	*10	(v)	Employment Agreement dated June 30, 2003 between Martin F. Ellis and Pioneer-Standard Electronics (n/k/a Agilysys, Inc.), which is incorporated by reference to Exhibit 10(gg) to the company’s Annual Report on Form 10-K for the year ended March 31, 2004 (File No. 000-05734).
	*10	(w)	Change of Control Agreement dated June 30, 2003 by and between Martin F. Ellis and Pioneer-Standard Electronics (n/k/a Agilysys, Inc.), which is incorporated by reference to Exhibit 10(hh) to the company’s Annual Report on Form 10-K for the year ended March 31, 2004 (File No. 000-05734).
	*10	(x)	Forms of Amended and Restated Indemnification Agreement entered into by and between the company and each of its Directors and Executive Officers, which are incorporated herein by reference to Exhibit 99(b) to the company’s Annual Report on Form 10-K for the year ended March 31, 1994 (File No. 000-05734).

77

Exhibit No.			Description
	*10	(y)	Amendment No. 1 to Change of Control Agreement dated June 30, 2003 between Agilysys, Inc. and Martin F. Ellis, effective May 31, 2005, which is incorporated by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed June 6, 2005 (File No. 000-05734).
	*10	(z)	Non-Competition Agreement between Agilysys, Inc. and Martin F. Ellis, effective May 31, 2005, which is incorporated by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed June 6, 2005 (File No. 000-05734).
	10	(aa)	Asset Purchase Agreement between Agilysys, Inc. and its wholly-owned subsidiary, Agilysys Canada Inc., and Arrow Electronics, Inc. and its wholly-owned subsidiaries, Arrow Electronics Canada Ltd. And Support Net, Inc., which is incorporated by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed January 5, 2007 (File No. 000-05734)
	*10	(bb)	Amendment and Extension Agreement between Agilysys, Inc. and Arthur Rhein, effective January 28, 2008, which is incorporated by reference to Exhibit 10.1 of the company’s Current Report on Form 8-K filed January 30, 2008 (File No. 000-05734).
	*10	(cc)	Amended and Restated Earnout Agreement among Agilysys, Inc., Agilysys NJ, Inc. Innovative Systems Design, Inc. Anthony Mellina, David Vogelzang, and Frank G. Batula, dated as of April 10, 2008, which is incorporated herein by reference to Exhibit 10.1 to the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2008 (File No. 000-05734).
	*10	(dd)	Separation Agreement by and between Agilysys, Inc. and Arthur Rhein dated as of October 20, 2008, which is incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed October 24, 2008 (File No. 000-05734).
	*10	(ee)	Employment Agreement by and between Agilysys, Inc. and Kenneth J. Kossin effective April 1, 2008, which is incorporated herein by reference to Exhibit 99.1 to the company’s Current Report on Form 8-K filed November 19, 2008 (File No. 000-05734).
	*10	(ff)	Amendment to Change of Control Agreement and Non-Competition Agreement by and between Agilysys, Inc. and Robert J. Bailey dated December 17, 2008, which is incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed December 23, 2008 (File No. 000-05734).
	*10	(gg)	Amendment to Change of Control Agreement and Non-Competition Agreement by and between Agilysys, Inc. and Peter J. Coleman dated December 17, 2008, which is incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed December 23, 2008 (File No. 000-05734).
	*10	(hh)	Amendment to Change of Control Agreement and Non-Competition Agreement by and between Agilysys, Inc. and Martin F. Ellis dated December 31, 2008, which is incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed January 7, 2009 (File No. 000-05734).
	*10	(ii)	Amendment to Change of Control Agreement and Non-Competition Agreement by and between Agilysys, Inc. and Richard A. Sayers II dated December 31, 2008, which is incorporated herein by reference to Exhibit 10.2 to the company’s Current Report on Form 8-K filed January 7, 2009 (File No. 000-05734).
	*10	(jj)	Separation Agreement Amendment to Change of Control Agreement and Non-Competition Agreement by and between Agilysys, Inc. and Richard A. Sayers II effective March 15, 2009, which is incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed March 12, 2009 (File No. 000-05734).
	*10	(kk)	Settlement Agreement by and among Agilysys, Inc. and the Ramius Group dated March 11, 2009, which is incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K filed March 17, 2009 (File No. 000-05734).

78

Exhibit No.			Description
	10	(ll)	Loan and Security Agreement among Agilysys, Inc., Agilysys NV, LLC, Agilysys NJ, Inc. and Bank of America, N.A., as agent for the Lenders dated May 5, 2009, which is incorporated herein by reference to Exhibit 10.1 to the company’s current report on Form 8-K filed May 6, 2009 (File No. 000-05734).
	*10	(mm)	Employment Agreement by and between Agilysys, Inc. and Kathleen A. Weigand effective March 4, 2009.
	*10	(nn)	Retention Agreement by and between Agilysys, Inc. and Kathleen A. Weigand effective March 9, 2009.
	*10	(oo)	Agilysys, Inc. 2006 Stock Incentive Plan, Amended and Restated Effective May 22, 2009
	*10	(pp)	Agilysys, Inc. 2010 Performance Share Plan
	*10	(qq)	Form of Performance Restricted Stock Award Agreement Agilysys, Inc. 2006 Stock Incentive Plan
	*10	(rr)	Form of Stock Appreciation Right Agreement Agilysys, Inc. 2006 Stock Incentive Plan
	21		Subsidiaries of the Registrant.
	23		Consent of Independent Registered Public Accounting Firm.
	31	.1	Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
	31	.2	Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
	32	.1	Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
	32	.2	Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
	99	(a)	Certificate of Insurance Policy, effective November 1, 1997, between Chubb Group of Insurance Companies and Pioneer-Standard Electronics, Inc., which is incorporated herein by reference to Exhibit 99(a) to the company’s Annual Report on Form 10-K for the year ended March 31, 1998 (File No. 000-05734).

* Denotes a management contract or compensatory plan or arrangement.

79

EX-10.MM

Exhibit 10(mm)

EMPLOYMENT AGREEMENT

AGILYSYS, INC.

Employee Name: Kathleen Weigand
Position: General Counsel & SVP HR
Address: 1463 Reserve Drive
              Bath, Ohio 44333

Effective date: March 4, 2009

You are a valuable Agilysys employee, and we expect you to make a significant contribution to Agilysys’ success. As a result, Agilysys, Inc. (“Agilysys”) wishes to employ you during the following years under the terms of this agreement.

1. Employment Period. You will be employed by Agilysys for the period beginning with the Effective Date set forth above and ending with the Termination Date as defined in Paragraph 5, below (the “Employment Period”).

2. Position. You shall initially be employed in the position set forth above, with the duties and responsibilities customarily associated with that position. From time to time, Agilysys may determine that it is in Agilysys’ best interest to add to, subtract from, or otherwise change your duties and responsibilities, or change or eliminate your title.

3. Best Efforts. You shall devote all of your business time and attention to your duties as an employee of Agilysys. You shall use your best efforts, energies, and skills to advance the business of Agilysys, to further and improve its relations with suppliers, customers and others, and to keep available to Agilysys the services of its employees. You shall perform your duties in compliance with all laws and Agilysys’ published policies, including ethical standards set forth in the Code of Business Conduct.

4. Compensation. Your compensation will be pursuant to Agilysys’ standard programs in effect from time to time. Agilysys reserves the right, however, in its sole discretion, to impose salary reduction, and/or other cost reduction programs, which may reduce your targeted cash compensation (provided that any such program is not discriminatory and treats you the same as other Agilysys employees holding similar positions). You shall be eligible to participate in any and all employee benefit plans made available from time to time to Agilysys employees generally.

5. Termination. Your employment may be terminated for Cause by Agilysys, voluntarily by you, or without Cause by Agilysys. The last date of your employment as a result of termination for any of these reasons is the “Termination Date”.

A. Termination for Cause and Voluntary Termination. If your employment terminates for any of the following reasons: (a) your death, disability, or legal incompetence; (b) the issuance by Agilysys of a notice terminating your employment “for Cause” (which, for these purposes, means: (i) breach of any term of this agreement or any other duty to Agilysys; (ii) dishonesty, fraud, or failure to abide by the published ethical standards, conflict of interest, or other policies of Agilysys; (iii) your conviction for any felony crime, or for any other crime involving misappropriation of money or other property of Agilysys; (iv) misconduct, malfeasance or insubordination; or (v) gross failure to perform under this agreement (not including simply a failure to attain quantitative targets); or (c) you voluntarily resign your employment, then your salary will end on the Termination Date.

B. Termination Without Cause. If your employment is terminated by Agilysys for any reason other than those identified in Paragraph 5.A., above, then you will be paid a severance (“Severance Payments”)

equal to one (1) year regular base and target incentive salary (if applicable), which will be at the rate applicable to you at the time your employment terminates and will be paid during regular pay intervals during the one (1) year period (“Severance Period”). In case of termination without Cause, you will be eligible to continue to participate in applicable medical and dental coverage program(s) available to Agilysys employees for the duration of the Severance Period. You will not otherwise be eligible for severance under any Agilysys severance plan.

C. Change of Position. If Agilysys changes your position such that your responsibilities or compensation are substantially lessened, or if you are required to relocate to a facility more than 50 miles away from your current location (referred to collectively as a “Change of Position”), then you may, within 30 days of such Change of Position, give Agilysys written notice that you are terminating your employment for this reason. Such termination for Change of Position will be deemed a termination by Agilysys without Cause for purposes of this Agreement and you shall be entitled to the Severance Payments described in Paragraph 5.B., above.

D. Termination Following Change in Control. In the event of a Change of Control (as defined by Section 409A of the Internal Revenue Code of 1986, as amended) of the Agilysys, you will be paid a retention incentive in the amount of $200,000 at the successful completion of the retention period, which shall run from the legal date of a Change of Control until the earlier of (a) a period that is twelve (12) months from the date of the Change of Control or (b) your employment is terminated by the Company. The retention incentive will be paid to you within 30 days of the end of the retention period.

6. Confidential Information. During the course of your employment, you have learned, and will learn, various proprietary or confidential information of Agilysys and/or its related and affiliated companies (including the identity of customers and employees; vendor information; marketing information and strategies; sales training techniques and programs; product development and design; acquisition and divestiture opportunities and discussions; and data processing and management information systems, programs, and practices). You shall use such information only in connection with the performance of your duties to Agilysys and agree not to copy, disclose, or otherwise use such information or contest its confidential or proprietary nature. You agree to return any and all written documents containing such information to Agilysys upon termination of your employment.

7. Restrictive Covenants.

A. No Hiring. During the Employment Period and for 12 months thereafter, you agree not to employ or retain, have any other person or firm employ or retain, or otherwise participate in the employment or retention of any person who was an employee or consultant of Agilysys at any time during the 12 months preceding the end of the Employment Period.

B. Non-Competition. In the event that (i) Agilysys terminates your employment for Cause or (ii) you voluntarily terminate your employment with Agilysys for any reason other than Change of Position, you agree that for a period of 12 months after such termination you will not be employed by, own, manage, operate, or control, or participate, directly or indirectly, in the ownership, management, operation, or control of, or be connected with (whether as a director, officer, employee, partner, consultant, or otherwise), any business which competes with the business of Agilysys, including but not limited to the sale of information technology products and services, enterprise computer systems, and related consulting, integration, maintenance and professional services (the “Non-compete Obligation.”)

C. If Agilysys terminates your employment for any reason other than for Cause (or if you terminate your employment for reasons of Change of Position), then the above Non-Compete Obligation will not apply to you, unless Agilysys, at its option, elects to extend the Non-Compete Obligation to you for up to a twelve-month period (“Extended Non-Competition Period”), in which case Agilysys will pay your regular base and target incentive salary (if applicable), in accordance with regular payroll practices (the “Non-Competition Payments”), during the Extended Non-Compete Period.

Any Non-Competition Payments made to you will be in lieu of Severance Payments. To the extent the Non-Competition Period is shorter than the Severance Period applicable to you, if any, Severance Payments, if applicable to you, will be made to you for the duration of the remainder of the Severance Period after the end of the Non-Competition Period. All decisions as to (i) whether to extend to you the Non-Compete Obligation (and therefore, whether to make Non-Competition Payments to you); and (ii) the duration of any such Extended Non-Compete Period, shall be within the sole discretion of Agilysys, and will be communicated to you at the time of termination. The Non-Competition Payments described in this subparagraph apply only to termination of your employment by Agilysys for reasons other than for Cause, or if you terminate your employment for reasons of Change of Position.

It is understood and acknowledged that any Non-compete Obligation arising under Paragraph 7 shall be in addition to any other obligations on your part under this Agreement, including but not limited to the confidentiality and no-hiring provisions of Paragraphs 7.A. and 7.B., above.

8. Assignment of Inventions. You agree to promptly and fully disclose to Agilysys all ideas, inventions, discoveries, creations, designs, and other technology and rights (and any related improvements or modifications thereof), whether or not protectable under any form of legal protection afforded to intellectual property (collectively, “Innovations”), relating to any activities or proposed activities of the Agilysys and its affiliates, conceived or developed by you during your employment, whether or not conceived during regular business hours. Such Innovations shall be the sole property of Agilysys. To the extent possible, such Innovations shall be considered a Work Made for Hire under the U.S. Copyright Act. To the extent the Innovations may not be considered such a Work Made for Hire, you agree to automatically assign to Agilysys, at the time of creation of such Innovations, any right, title, or interest that you may have in such Innovations. You further agree that you will execute such written instruments, and perform any other tasks as may be necessary in the opinion of Agilysys to obtain a patent, register a copyright, or otherwise protect or enforce Agilysys’ rights in such Innovations.

9. Specific Performance and Injunctive Relief. You acknowledge that Agilysys will be irreparably damaged if the provisions of this agreement are not specifically enforced, that monetary damages will not provide an adequate remedy to Agilysys, and that Agilysys is entitled to an injunction (preliminary, temporary, or final) restraining any violation of this agreement (without any bond or other security being required), or any other appropriate decree of specific performance. Such remedies are not exclusive and shall be in addition to any other remedy which Agilysys may have.

10. Severability and Reformation. The provisions of Paragraphs 6 through 10 of this agreement constitute independent and separable covenants which shall survive termination or expiration of the Employment Period. Any paragraph, phrase, or other provision of this agreement that is determined by a court of competent jurisdiction to be overly broad in scope, duration, or area of applicability or in conflict with any applicable statute or rule shall be deemed, if possible, to be omitted from this agreement. The invalidity of any portion hereof shall not affect the validity of the remaining portions.

11. Assignment.

(a) This agreement is personal to you, and cannot be assigned by you to any other party.

(b) This agreement shall inure to the benefit of, and be binding upon and enforceable by Agilysys, and by its successors and assigns. This agreement may be assigned by Agilysys, without your consent, to a third party (“Assignee”) in connection with the sale or transfer of all or substantially all of Agilysys’ business, or any division or unit thereof, whether by way of sale of stock, sale of assets, merger or other transaction. Such assignment by Agilysys will not constitute nor be deemed a termination of your employment by Agilysys, and will not give rise to any rights under Paragraph 5 of this Agreement. After such assignment, any further rights which you have under this Agreement will be the responsibility of the Assignee.

12. General. This agreement constitutes our full understanding relating to your employment with Agilysys, and replaces and supersedes any and all agreements, contracts, representations or understandings with respect to your employment (collectively, “Prior Agreements”). This agreement is governed by and is

to be construed and enforced in accordance with the internal laws of the State of Ohio, without giving effect to principles of conflicts of law. In the event of a conflict between the terms hereof and the provisions of Agilysys’ Employee Handbook, the terms hereof shall control; otherwise, the provisions of the Employee Handbook shall remain applicable to your employment relationship. This agreement may not be superseded, amended, or modified except in a writing signed by both parties.

In witness whereof the parties have executed this agreement this 4^th day of March, 2009.

	AGILYSYS, INC.
/s/ Kathleen A. Weigand	By:	/s/ Martin F. Ellis
Kathleen A. Weigand	Martin F. Ellis,
	President & CEO

EX-10.NN

 Exhibit 10(nn)

2255 Glades Road, Suite 301E
Boca Raton, FL 33431

Tel. 561.999.8770
Fax 561.999.8765
www.agilysys.com

To:	Kathleen Weigand
From:	Martin Ellis
Date:	March 9, 2009
Subject:	Retention Agreement

As a key resource to Agilysys and a critical management member in the event of a change of control of the company, we are offering a retention incentive in the event of a change of control in the amount of $200,000.

This incentive will be paid at the successful completion of the retention period which runs from the legal date of a change of control of the company, as defined by Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), through a period that is twelve (12) months from the legal date of the change of control or until a release date determined by senior executives, whichever comes earlier. Notwithstanding the preceding, the retention incentive will be paid to you within 30 days of the end of the retention period, provided you do not resign from your employment during the retention period.

If you voluntarily terminate employment prior to; (i) the end of the retention period, or (ii) your release date, whichever comes earlier, you will not be eligible for any portion of your retention incentive.

The retention incentive is also contingent upon your performance and attendance remaining at an acceptable level during the retention period.

If you have any questions, or wish to discuss this in greater detail, please contact me at your earliest convenience. Please sign below, retain the original for your files and return a copy to me.

Agreed to and Accepted:

/s/ Kathleen Weigand	March 9, 2009
Kathleen Weigand	Date
/s/ Martin Ellis	March 9, 2009
Martin Ellis	Date

EX-10.OO

Exhibit 10(oo)

AGILYSYS, INC.

2006 STOCK INCENTIVE PLAN

As Amended and Restated Effective May 22, 2009

ARTICLE 1

GENERAL PURPOSE OF PLAN; DEFINITIONS

     1.1 Name and Purposes. The name of this Plan is the Agilysys, Inc. 2006 Stock Incentive Plan. The purpose of this Plan is to enable Agilysys, Inc. and its Affiliates to: (i) attract and retain skilled and qualified officers, employees, directors and consultants who are expected to contribute to the Company’s success by providing long-term incentive compensation opportunities competitive with those made available by other companies; (ii) motivate Participants to achieve the long-term success and growth of the Company; (iii) facilitate ownership of shares of the Company; and (iv) align the interests of the Participants with those of the Company’s Shareholders.

     1.2 Certain Definitions. Unless the context otherwise indicates, the following words used herein shall have the following meanings whenever used in this instrument:

     (a) “Affiliate” means (i) any entity that would be treated as an “affiliate” of the Company for purposes of Rule 12b-2 issued under the Exchange Act, and (ii) any corporation, partnership, joint venture or other entity, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Company as determined by the Board of Directors in its discretion. For certain purposes described elsewhere in this Plan (for example, with respect to ISOs), only entities described in relevant tax or other law are considered affiliated with the Company.

     (b) “Award” means any grant under this Plan of a Stock Option, Stock Appreciation Right, Restricted Share, Restricted Share Unit or Performance Share to any Plan Participant.

     (c) “Award Agreement” means a written agreement entered into between the Company and a Participant setting forth the terms and conditions of an Award granted to the Participant.

     (d) “Board of Directors” means the Board of Directors of the Company, as constituted from time to time.

     (e) “Cause” means a Participant’s termination of employment or directorship, as applicable, which shall have been the result of:

     (i) his conviction of any of the following offenses, provided that such offense results in material economic harm to the Company or any Affiliate or has a materially adverse effect on the operations, property or business relationships of the Company or an Affiliate: (A) misappropriation of money or other property of the Company or any Affiliate or (B) any felony;

     (ii) his failure, during his employment with the Company or any Affiliate, to devote his full time and undivided attention during normal business hours to the business and affairs of the Company or any Affiliate, except for reasonable vacations and for illness or incapacity; provided, however, that a Participant may, with the consent of the Company, serve as a director or member of an advisory committee of any organization involving no conflict of interest with the interests of the Company or its Affiliates, engage in charitable and community activities, and manage his personal affairs, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities of employment;

     (iii) his failure to substantially perform his employment duties with the Company or an Affiliate;

     (iv) his failure to substantially perform his duties as a Director; or

     (v) conduct that is in material competition with the Company or an Affiliate or conduct that breaches his duty of loyalty to the Company or an Affiliate or that is materially injurious to the Company or an Affiliate, monetarily or otherwise, which conduct may include, but is not limited to, (A) disclosing or misusing any confidential information pertaining to the Company or an Affiliate or (B) attempting, directly or indirectly, to induce any employee or agent of the Company or an Affiliate to be employed or perform services elsewhere.

The determination of whether any conduct, action or failure to act constitutes “Cause” shall be made by the Committee in its sole discretion.

     (f) “Code” means the Internal Revenue Code of 1986, as amended, and any lawful regulations or other guidance promulgated thereunder. Whenever reference is made to a specific Internal Revenue Code section, such reference shall be deemed to be a reference to any successor Internal Revenue Code section or sections with the same or similar purpose.

     (g) “Committee” means the entity administering this Plan as provided in Section 2.1.

     (h) “Company” means Agilysys, Inc., a corporation organized under the laws of the State of Ohio and, except for purposes of determining whether a Change in Control has occurred, any corporation or entity that is a successor to Agilysys, Inc. or substantially all of the assets of Agilysys, Inc. and that assumes the obligations of Agilysys, Inc. under this Plan by operation of law or otherwise.

     (i) “Date of Grant” means the date on which the Committee grants an Award or a future date that the Committee designates as the effective date of the Award at the time it grants the Award.

     (j) “Director” means a member of the Board of Directors.

     (k) “Disability” means a Participant’s physical or mental incapacity resulting from personal injury, disease, illness or other condition, which (i) prevents him from performing his duties for the Company or an Affiliate, as the same is determined by the Committee or its designee after reviewing any medical evidence or requiring any medical examinations which the Committee or its designee considers necessary to its determination; and (ii) results in his termination of employment or directorship, as applicable, with the Company or an Affiliate. Notwithstanding the foregoing, the Committee may, in its sole discretion, substitute a different definition for the term “Disability” to the extent provided herein or otherwise as appropriate.

     (l) “Early Retirement” means a Participant’s retirement from active employment or active directorship with the Company or an Affiliate on and after the later of attainment of age 55 or the completion of seven years of service.

     (m) “Eligible Director” is defined in Article 4.

     (n) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and any lawful regulations or other guidance promulgated thereunder. Whenever reference is made to a specific ERISA section, such reference shall be deemed to be a reference to any successor ERISA section or sections with the same or similar purpose.

     (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any lawful regulations or other guidance promulgated thereunder. Whenever reference is made to a specific Exchange Act section, such reference shall be deemed to be a reference to any successor Exchange Act section or sections with the same or similar purpose.

     (p) “Exercise Price” means the purchase price of a Share pursuant to a Stock Option.

     (q) “Fair Market Value” means the last closing price of a Share as reported on The Nasdaq Stock Market, or, if applicable, on another national securities exchange on which the Common Shares are principally traded, on the date for which the determination of Fair Market Value is made, or, if there are no sales of Common Shares on such date, then on the most recent immediately preceding date on which there were any sales of Common Shares. If the Common Shares are not, or cease to be, traded on The Nasdaq Stock Market or another national securities exchange, the “Fair Market Value” of Common Shares shall be determined pursuant to a reasonable valuation method prescribed by the Committee. Notwithstanding the foregoing, as of any date, the “Fair Market Value” of Common Shares shall be determined in a manner consistent with Section 409A of the Code and the guidance then-existing thereunder to the extent applicable. In addition, “Fair Market Value” with respect to ISOs and SARs related to ISOs shall be determined in accordance with Article 6 and the rules relevant for ISO qualification.

     (r) “Incentive Stock Option” and “ISO” mean a Stock Option that is identified as such and which is intended to meet the requirements of Section 422 of the Code.

     (s) “Non-Qualified Stock Option” and “NQSO” mean a Stock Option that either (i) is designated as a Non-Qualified Stock Option or (ii) otherwise is not an ISO.

     (t) “Normal Retirement” means retirement from active employment or active directorship with the Company or an Affiliate on or after attainment of age 65.

     (u) “Outside Director” means a Director who meets the definitions of the terms “outside director” set forth in Section 162(m) of the Code, “independent director” set forth in The Nasdaq Stock Market, Inc. rules, and “non-employee director” set forth in Rule 16b-3, or any successor definitions adopted for a similar purpose by the Internal Revenue Service, The Nasdaq Stock Market, Inc. and Securities and Exchange Commission, respectively, and similar requirements under any other applicable laws and regulations as well as satisfying the Company’s relevant corporate governance guidelines and any applicable Committee charter provision.

     (v) “Parent” means any corporation which qualifies as a “parent corporation” of the Company under Section 424(e) of the Code relating to incentive stock options and certain employee stock purchase plans.

     (w) “Participant” means an officer, employee, consultant or Director who has been granted an Award.

     (x) “Performance Based Compensation” is defined in Article 9.

     (y) “Performance Period” means the time period specified by the Committee during which any performance objective must be satisfied.

     (z) “Performance Shares” is defined in Article 9.

     (aa) “Plan” means this Agilysys, Inc. 2006 Stock Incentive Plan, as amended from time to time.

     (bb) “Restricted Share Units” is defined in Article 8.

     (cc) “Restricted Shares” is defined in Article 8.

     (dd) “Retirement” means Normal Retirement or Early Retirement.

     (ee) “Rule 16b-3” means Rule 16b-3 issued under the Exchange Act, as such rule may be amended from time to time. Whenever reference is made to Rule 16b-3, such reference shall be deemed to be a reference to any successor rule with the same or a similar purpose.

     (ff) “Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended, and any lawful regulations or other guidance promulgated thereunder. Whenever reference is made to a specific Sarbanes-Oxley Act section, such reference shall be deemed to be a reference to any successor Sarbanes-Oxley Act section or sections with the same or similar purpose.

     (gg) “Section 16 Person” means a person subject to potential liability under Section 16(b) of the Exchange Act with respect to transactions involving equity securities of the Company.

     (hh) “Section 162(m) Person” means, for any taxable year, a person who is a “covered employee” within the meaning of Section 
162(m)(3) of the Code and whose compensation, therefore, is subject to the tax deductibility limitations of Section 162(m) of the Code.

     (ii) “Share” or “Shares” mean one or more of the common shares, without par value, of the Company.

     (jj) “Shareholder” means an individual or entity that owns one or more Shares.

     (kk) “Stock Appreciation Rights” and “SARs” mean any right pursuant to an Award granted under Article 7.

     (ll) “Stock Option” means any right to purchase a specified number of Shares at a specified price which is granted pursuant to Article 5 and may be an Incentive Stock Option or a Non-Qualified Stock Option.

     (mm) “Stock Power” means a power of attorney executed by a Participant and delivered to the Company which authorizes the Company to transfer ownership of Restricted Shares, Performance Shares or Common Shares from the Participant to the Company or a third party.

     (nn) “Subsidiary” means any corporation which qualifies as a “subsidiary corporation” of the Company under Section 424(f) of the Code relating to incentive stock options and certain employee stock purchase plans.

     (oo) “Vested” means, regarding rights under this Plan, with respect to a Common Share, when the Common Share has been awarded; with respect to a Stock Option, that the time has been reached when the option to purchase Shares first becomes exercisable; with respect to a Stock Appreciation Right, when the Stock Appreciation Right first becomes exercisable for payment; with respect to Restricted Shares, when the Shares are no longer subject to forfeiture and restrictions on transferability; with respect to Restricted Share Units and Performance Shares, when the units or Shares are no longer subject to forfeiture and are convertible to Shares. The words “Vest” and “Vesting” have meanings correlative to the foregoing. The fact that an Award is Vested does not mean that it is free of restrictions which may be imposed by law, nor even that the Award may not be forfeited in certain circumstances under the Plan (for example, due to a termination of employment or directorship for Cause).

ARTICLE 2

ADMINISTRATION

     2.1 Authority and Duties of the Committee.

          (a) The Plan shall be administered by a Committee of at least three Directors who are appointed by the Board of Directors. Unless otherwise determined by the Board of Directors, the Compensation Committee shall serve as the Committee, and all of the members of the Committee shall be Outside Directors. Notwithstanding the requirement that the Committee consist exclusively of Outside Directors, no action or determination by the Committee or an individual then considered to be an Outside Director shall be deemed void because a member of the Committee or such individual fails to satisfy the requirements for being an Outside Director, except to the extent required by applicable law.

          (b) The Committee has the sole and exclusive power and authority to grant Awards pursuant to the terms of this Plan to officers, employees and Eligible Directors and consultants.

          (c) The Committee has the sole and exclusive power and authority, subject to any limitations specifically set forth in this Plan, to:

     (i) select the officers, employees and Eligible Directors and consultants to whom Awards are granted;

     (ii) determine the types of Awards granted and the timing of such Awards;

     (iii) determine the number of Shares to be covered by each Award granted hereunder;

     (iv) determine whether an Award is, or is intended to be, Performance Based Compensation within the meaning of Section 162(m) of the Code;

     (v) determine the other terms and conditions, not inconsistent with the terms of this Plan and any operative employment or other agreement, of any Award granted hereunder; such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Options or Stock Appreciation Rights may be exercised (which may be based on performance objectives), any Vesting, acceleration or waiver of forfeiture restrictions, any performance criteria (including any performance criteria as described in Section 162(m)(4)(C) of the Code) applicable to an Award, and any restriction or limitation regarding any Option or Stock Appreciation Right or the Common Shares relating thereto, based in each case on such factors as the Committee, in its sole discretion, shall determine;

     (vi) determine whether any conditions or objectives related to Awards have been met, including any such determination required for compliance with Section 162(m) of the Code;

     (vii) subsequently modify or waive any terms and conditions of Awards, not inconsistent with the terms of this Plan and any operative employment or other agreement;

     (viii) adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan as it deems advisable from time to time;

     (ix) promulgate such Award Agreements and other administrative forms as the Committee from time to time deems necessary or appropriate for administration of the Plan;

     (x) construe, interpret, administer and implement the terms and provisions of this Plan, any Award Agreements or other documents;

     (xi) make factual determinations with respect to the Plan and any Awards;

     (xii) correct any defect, supply any omission and reconcile any inconsistency in or between the Plan, any Award Agreements or other documents;

     (xiii) prescribe any legends to be affixed to certificates representing Shares or other interests granted or issued under the Plan; and

     (xiv) otherwise supervise the administration of this Plan.

          (d) All decisions made by the Committee pursuant to the provisions of this Plan are final and binding on all persons, including the Company, its Shareholders and Participants, but may be made by their terms subject to ratification or approval by, the Board of Directors, another committee of the Board of Directors or Shareholders.

     2.2 Delegation of Duties and Retention of Advisers. The Committee may delegate ministerial duties to any other person or persons, and it may employ attorneys, consultants, accountants or other professional advisers for purposes of Plan administration at the expense of the Company.

     2.3 Limitation of Liability. Members of the Board of Directors, members of the Committee and officers and employees of the Company or any Affiliate who are their designees acting under this Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross or willful misconduct in the performance of their duties hereunder.

ARTICLE 3

STOCK SUBJECT TO PLAN

     3.1 Total Shares Limitation. Subject to the provisions of this Article, the maximum number of Shares that may be issued pursuant to Awards granted under this Plan is 3,200,000, which may be treasury or authorized but unissued Shares.

     3.2 Other Limitations.

          (a) Option Limitation. The maximum number of Shares available with respect to all Stock Options (whether Incentive Stock Options or Non-Qualified Stock Options) granted under this Plan is 3,200,00 Shares. Therefore, Stock Options on up to 3,200,000 Shares may be granted as Incentive Stock Options.

          (b) Full Value Share Limitation. The maximum number of Shares available with respect to all Restricted Share, Restricted Share Unit and Performance Share Awards granted under this Plan is 1,600,000 Shares.

          (c) Per Participant Biannual Limitation. The aggregate number of Shares underlying Awards granted under this Plan to any Participant in any two consecutive fiscal year period of the Company, regardless of whether such Awards are thereafter cancelled, terminated or forfeited, shall not exceed 1,600,000 Shares. The foregoing annual limitation is intended to include the grant of all Awards, including but not limited to, Awards representing Performance Based Compensation as described in Section 162(m)(4)(C) of the Code.

          (d) Overall Biannual Limitation. The aggregate number of Shares underlying Awards granted under this Plan in any two consecutive fiscal year period of the Company, shall not exceed the sum of (i) 1,600,000 Shares (disregarding any Shares underlying Awards cancelled, terminated or forfeited during the period) plus (ii) the aggregate number of Shares underlying Awards previously cancelled, terminated or forfeited.

     3.3 Awards Not Exercised and Other Special Share Counting Rules.

          (a) Awards Not Exercised. If any outstanding Award, or portion thereof, expires, or is terminated, cancelled or forfeited, the Shares that would otherwise be issuable with respect to the unexercised portion of such expired, terminated, cancelled or forfeited Award shall be available for subsequent Awards under this Plan.

          (b) Shares Tendered in Payment. If the Exercise Price of an Award is paid in Shares, the Shares received by the Company in connection therewith shall not be added to the maximum aggregate number of Shares which may be issued under Section 3.1 nor in any other manner become eligible for issuance under this Plan.

          (c) Shares Reserved for SARs. If an Award of SARs is made, the number of Shares deemed subject to the Award shall equal the number of SARs awarded and each SAR exercised shall be counted as using one Share for purposes of Sections 3.1 and 3.2 of this Plan even though fewer Shares actually are issued to the Participant upon exercise.

          (d) Taxes. Shares sold or withheld to satisfy a Participant’s withholding tax obligations upon the lapse of restrictions on Restricted Shares or the exercise of Options or SARs granted under the Plan or upon any other payment or issuance of Shares under the Plan shall not thereafter become available for issuance under the Plan.

     3.4 Dilution and Other Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, redesignation, reclassification, merger, consolidation, liquidation, split-up, reverse split, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Committee may, in such manner as it deems equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, (iii) the limitations set forth above and (iv) the purchase or Exercise Price or any performance objective with respect to any Award; provided, however, that the number of Shares or other securities covered by any Award or to which such Award relates is always a whole number. Notwithstanding the foregoing, the foregoing adjustments shall be made in compliance with: (i) Sections 422 and 424 of the Code with respect to ISOs and SARs related to ISOs; (ii) Treasury Department Regulation Section 1.424-1 (and any successor) with respect to NQSOs and SARs related to NQSOs, applied as if the NQSOs were ISOs; (iii) Section 409A of the Code, to the extent necessary to avoid its application or avoid adverse tax consequences thereunder; and (iv) Section 162(m) of the Code with respect to Awards granted to Section 162(m) Persons that are intended to be Performance Based Compensation, unless specifically determined otherwise by the Committee.

ARTICLE 4

PARTICIPANTS

     4.1 Eligibility. Officers, all other active common law employees of the Company or any of its Affiliates, Directors (each an “Eligible Director”) and consultants who are selected by the Committee in its sole discretion are eligible to participate in this Plan. (See Article 13 and Article 17 with respect to the Shareholder approval requirement.) For purposes of determining eligibility, officers and employees of Affiliates who are not also officers or employees of the Company must hold such status with an Affiliate that has the necessary relationship for the Award to be granted (for example, the Affiliate must be a Parent or Subsidiary if an ISO is to be granted). Furthermore, if an Award is to be made to an officer, the officer must have the status necessary to receive such Award (for example, the officer must be an employee if an ISO is to be granted).

     4.2 Award Agreements. Awards are contingent upon the Participant’s execution of a written Award Agreement in a form prescribed by the Committee. Execution of an Award Agreement shall constitute the Participant’s irrevocable agreement (for himself and for anyone claiming through him such as an heir) to, and acceptance of, the terms and conditions of the Award set forth in such agreement and of the terms and conditions of the Plan applicable to such Award, including, without limitation, any withholding tax requirement pursuant to Article 15. Award Agreements may differ from time to time and from Participant to Participant.

ARTICLE 5

STOCK OPTION AWARDS

     5.1 Option Grant. Each Stock Option granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written Award Agreement dated as of the Date of Grant and executed by the Company and by the appropriate Participant.

     5.2 Terms and Conditions of Grants. Stock Options granted under this Plan are subject to the following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies with respect to exercisability and/or with respect to the Shares acquired upon exercise as may be provided in the relevant Award Agreements evidencing the Stock Options, so long as such terms and conditions are not inconsistent with the terms of this Plan and any operative employment or other agreement, as the Committee deems desirable:

          (a) Exercise Price. Subject to Section 3.4, the Exercise Price will never be less than 100% of the Fair Market Value of the Shares on the Date of Grant. If a variable Exercise Price is specified at the time of grant, the Exercise Price may vary pursuant to a formula or other method established by the Committee; provided, however, that such formula or method will provide for a minimum Exercise Price equal to the Fair Market Value of the Shares on the Date of Grant. Except as otherwise provided in Section 3.4, no subsequent amendment of an outstanding Stock Option may reduce the Exercise Price to less than 100% of the Fair Market Value of the Shares on the Date of Grant. Nothing in this Section 5.2(a) shall be construed as limiting the Committee’s authority to grant premium price Stock Options which do not become exercisable until the Fair Market Value of the underlying Shares exceeds a specified percentage (for example, 110% of Fair Market Value on the Date of Grant for ISOs granted to a 10% or greater owner of the Company) of the Exercise Price; provided, however,that such percentage will never be less than 100%.

          (b) Option Term. Any unexercised portion of a Stock Option granted hereunder shall expire at the end of the stated term of the Stock Option. The Committee shall determine the term of each Stock Option at the time of grant, which term shall not exceed 10 years from the Date of Grant. The Committee may extend the term of a Stock Option, in its discretion, but not beyond the date immediately prior to the tenth anniversary of the original Date of Grant. If a definite term is not specified by the Committee at the time of grant, then the term is deemed to be 10 years. Nothing in this Section 5.2(b) shall be construed as limiting the Committee’s authority to grant Stock Options with a term shorter than 10 years.

          (c) Vesting. Stock Options, or portions thereof, shall be exercisable at such time or times as determined by the Committee in its discretion at or after grant. If the Committee provides that any Stock Option becomes Vested over a period of time, in full or in installments, the Committee may waive or accelerate such Vesting provisions at any time. (Also, see the Change in Control provisions in Article 11.)

          (d) Method of Exercise. Vested portions of any Stock Option may be exercised in whole or in part at any time during the option term by giving written notice of exercise to the Company specifying the number of Shares to be purchased. The notice must be given by or on behalf of a person entitled to exercise the Stock Option, accompanied by payment in full of the Exercise Price, along with any withholding tax pursuant to Article 15. The Exercise Price may be paid:

     (i) in cash in any manner satisfactory to the Committee;

     (ii) by tendering (by either actual delivery of Shares or by attestation) unrestricted Shares that are owned on the date of exercise by the person entitled to exercise the Stock Option having an aggregate Fair Market Value on the date of exercise equal to the Exercise Price applicable to such Stock Option exercise, and, with respect to the exercise of NQSOs, including Restricted Shares;

     (iii) by a combination of cash and unrestricted Shares that are owned on the date of exercise by the person entitled to exercise the Stock Option;

     (iv) by the Participant authorizing a broker to sell, on his behalf, the appropriate number of Shares otherwise issuable to the Participant upon the exercise of a Stock Option with the proceeds of sale applied to pay the Exercise Price and withholding tax; or

     (v) by another method permitted by law and affirmatively approved by the Committee which assures full and immediate payment or satisfaction of the Exercise Price.

          The Committee may suspend the use of any method of payment for any reason, in its sole discretion, including but not limited to concerns that the proposed method of payment will result in adverse financial accounting treatment for the Company, adverse tax treatment for the Company or a Participant or a violation of the Sarbanes-Oxley Act.

          If the Exercise Price of an NQSO is paid by tendering Restricted Shares, then the Shares received upon the exercise will contain identical restrictions as the Restricted Shares so tendered.

          Except as otherwise permitted by law and in the Committee’s sole discretion, withholding tax may be paid only by cash or through a same day sale transaction.

          (e) Issuance of Shares. The Company will issue or cause to be issued Shares as soon as practicable upon exercise of the Option. No Shares will be issued until full payment has been made. Until the issuance

          (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer

agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a Shareholder will exist with respect to the Shares, notwithstanding the exercise of the Option.

          (f) Type of Option. In general, a Stock Option Award Agreement will indicate whether the Stock Option is intended to be an ISO or a NQSO. Unless a Stock Option is designated as an ISO at the time of its grant, it shall be deemed to be an NQSO. ISOs are subject to the additional terms and conditions in Article 6.

          (g) Section 409A of the Code. Unless the Committee provides otherwise, Stock Options awarded under this Plan are intended to meet the requirements for exclusion from coverage under Section 409A of the Code dealing with nonqualified deferred compensation and all Stock Option Awards shall be construed and administered accordingly.

     5.3 Termination of Grants Prior to Expiration. Unless otherwise provided in the Award Agreement, or otherwise provided in an employment or other agreement entered into between the Participant and the Company and approved by the Committee, either before or after the Date of Grant, and subject to Article 6 with respect to ISOs, the following early termination provisions apply to all Stock Options:

          (a) Termination by Death. If a Participant’s employment or directorship with the Company or its Affiliates terminates by reason of his death, all Stock Options held by such Participant will immediately become Vested, but thereafter may only be exercised (by the legal representative of the Participant’s estate, or by the legatee or heir of the Participant pursuant to a will or the laws of descent and distribution) for a period of one year (or such other period as the Committee may specify at or after the time of grant) from the date of such death, or until the expiration of the original term of the Stock Option, whichever period is shorter.

          (b) Termination by Reason of Disability. If a Participant’s employment or directorship with the Company or its Affiliates terminates by reason of his Disability, all Stock Options held by such Participant will immediately become Vested, but thereafter may only be exercised for a period of one year (or such other period as the Committee may specify at or after the time of grant) from the date of such termination, or until the expiration of the original term of the Stock Option, whichever period is shorter. If the Participant dies within such one year period (or such other period as applicable), any unexercised Stock Option held by such Participant will thereafter be exercisable by the legal representative of the Participant’s estate, or by the legatee or heir of the Participant pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the one year period (or other period as applicable) or for a period of 12 months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its original stated expiration date.

          (c) Termination by Reason of Retirement. If a Participant’s employment or directorship with the Company or its Affiliates terminates by reason of his Retirement, all Stock Options held by such Participant immediately become Vested but thereafter may only be exercised for a period of two years (or such other period as the Committee may specify at or after the time of grant) from the date of such Retirement, or until the expiration of the original term of the Stock Option, whichever period is shorter. If the Participant dies within such two year period (or such other period as applicable), any unexercised Stock Option held by such Participant will thereafter be exercisable by the legal representative of the Participant’s estate, or by the legatee or heir of the Participant pursuant to a will or the laws of descent and distribution, for the greater of the remainder of the two year period (or such other period as applicable) or for a period of 12 months from the date of such death, but in no event shall any portion of the Stock Option be exercisable after its original stated expiration date.

          (d) Termination for Cause. If a Participant’s employment or directorship with the Company or its Affiliates is terminated for Cause, all Stock Options (or portions thereof) which have not been exercised, whether Vested or not, are automatically forfeited immediately upon termination.

          (e) Other Terminations. If a Participant’s employment or directorship with the Company or its Affiliates terminates, voluntarily or involuntarily, for any reason other than death, Disability, Retirement or for Cause, any Vested portions of Stock Options held by such Participant at the time of termination may be exercised by the Participant for a period of three months (or such other period as the Committee may specify at or after the time of grant) from the date of such termination or until the expiration of the original term of the Stock Option, whichever period is the shorter. No portion of any Stock Option which is not Vested at the time of such termination will thereafter become Vested.

          (f) Certain Committee Determinations. The Committee shall have authority to determine in each case whether an authorized leave of absence shall be deemed a termination of employment or directorship for purposes hereof, as well as the effect of a leave of absence on the vesting and exercisability of a Stock Option. Unless otherwise provided by the Committee, if an entity ceases to be an Affiliate of the Company or otherwise ceases to be qualified under the Plan or if all or substantially all of the assets of an Affiliate of the Company are conveyed (other than by encumbrance), such cessation or action, as the case may be, shall be deemed for purposes hereof to be a termination of the employment or directorship.

     5.4 Repricing Prohibited. Subject to the anti-dilution adjustment provisions contained in Section 3.4 hereof, without the prior approval of the Company’s Shareholders, evidenced by a majority of votes cast, neither the Committee nor the Board shall cause the cancellation, substitution or amendment of a Stock Option that would have the effect of reducing the exercise price of such a Stock Option previously granted under the Plan, or otherwise approve any modification to such a Stock Option that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by The Nasdaq Stock Market or such other stock market on which the Company’s Shares are traded.

ARTICLE 6

SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS

     6.1 Eligibility. Notwithstanding any other provision of this Plan to the contrary, an ISO may only be granted to full or part-time employees (including officers and Directors who are also employees) of the Company or of an Affiliate, provided that the Affiliate is a Parent or Subsidiary.

     6.2 Special ISO Rules.

          (a) Exercise Price. The Exercise Price fixed at the time of grant will not be less than 100% of the Fair Market Value of the Shares as of the Date of Grant. If a variable Exercise Price is specified at the time of grant, the Exercise Price may vary pursuant to a formula or other method established by the Committee which provides a floor not less than Fair Market Value as of the Date of Grant. Except as otherwise provided in Section 3.4 hereof, dealing with the effects of certain corporate transactions, no subsequent amendment of an outstanding Stock Option may reduce the Exercise Price to less than 100% of the Fair Market Value of the Shares as of the Date of Grant.

     (b) Term. No ISO may be exercisable on or after the tenth anniversary of the Date of Grant, and no ISO may be granted under this Plan on or after the tenth anniversary of the effective date of this Plan. (See the Plan effective date provisions in Article 17.)

     (c) Ten Percent Shareholder. No Participant may receive an ISO under this Plan if such Participant, at the time the Award is granted, owns (after application of the rules contained in Section 424(d) of the Code) equity securities possessing more than 10% of the total combined voting power of all classes of equity securities of the Company, its Parent or any Subsidiary, unless (i) the option price for such ISO is at least 110% of the Fair Market Value of the Shares as of the Date of Grant, and (ii) such ISO is not exercisable on or after the fifth anniversary of the Date of Grant.

     (d) Limitation on Grants. The aggregate Fair Market Value (determined with respect to each ISO at the time of grant) of the Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or any other plan adopted by the Company or its Parent or its Subsidiary) shall not exceed $100,000. If such aggregate Fair Market Value shall exceed $100,000, such number of ISOs as shall have an aggregate Fair Market Value equal to the amount in excess of $100,000 shall be treated as NQSOs. This limitation shall be applied by taking Stock Options into account in the order in which granted.

     (e) Non-Transferability. Notwithstanding any other provision herein to the contrary, no ISO granted hereunder (and, if applicable, related Stock Appreciation Right) may be transferred except by will or by the laws of descent and distribution, nor may such ISO (or related Stock Appreciation Right) be exercisable during a grantee’s lifetime other than by him (or his guardian or legal representative to the extent permitted by applicable law).

     (f) Termination of Employment. No ISO may be exercised more than three months following termination of employment for any reason (including Retirement) other than death or Disability, nor more than one year following termination of employment for the reason of death or Disability (as defined in Section 422 of the Code), or such option will no longer qualify as an ISO and shall thereafter be, and receive the tax treatment applicable to, an NQSO. For this purpose, a termination of employment is cessation of employment, under the rules applicable to ISOs, such that no employment relationship exists between the Participant and the Company, a Parent or a Subsidiary.

     (g) Fair Market Value. For purposes of any ISO granted hereunder (or, if applicable, any related Stock Appreciation Right), the Fair Market Value of Shares shall be determined in the manner required by Section 422 of the Code applicable to ISOs.

     6.3 Treatment as NQSO. Unless an Award Agreement for a Stock Option which is an ISO provides otherwise, it is intended that such Stock Option shall be treated as a Nonqualified Stock Option to the extent that certain requirements applicable to “incentive stock options” under the Code shall not be satisfied.

     6.4 Disqualifying Dispositions. If Shares acquired by exercise of an Incentive Stock Option are disposed of within two years following the Date of Grant or one year following the transfer of such shares to the Participant upon exercise, the Participant shall, promptly following such disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Company may reasonably require.

     6.5 Compliance with the Code. The foregoing limitations are designed to comply with the requirements of Section 422 of the Code dealing with the tax qualification of ISOs and shall be so interpreted. Furthermore, if Section 422 of the Code is amended or modified, then, to the extent permitted by law, this Plan shall be deemed automatically amended or modified to comply with amendments or modifications to such Section 422. Any ISO which fails to comply with Section 422 of the Code automatically shall be treated as an NQSO appropriately granted under this Plan provided it otherwise meets the Plan’s requirements for NQSOs.

ARTICLE 7

STOCK APPRECIATION RIGHTS

     7.1 SAR Grant and Agreement. Stock Appreciation Rights may be granted under this Plan, either independently or in conjunction with the grant of a Stock Option. Each SAR granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written Award Agreement dated as of the Date of Grant and executed by the Company and by the appropriate Participant.

     7.2 SARs Granted in Conjunction with Option. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under this Plan, either at the same time or after the grant of the Stock Option, and will be subject to the following terms and conditions:

     (a) Term. Each Stock Appreciation Right, or applicable portion thereof, granted with respect to a given Stock Option or portion thereof shall terminate and shall no longer be exercisable upon the termination or exercise of the related Stock Option, or applicable portion thereof.

     (b) Exercisability. A Stock Appreciation Right shall be exercisable only at such time or times and to the extent that the Stock Option to which it relates is Vested and exercisable in accordance with the provisions of Article 5 or otherwise as the Committee may determine at or after the time of grant.

     (c) Method of Exercise. A Stock Appreciation Right may be exercised by the surrender of the applicable portion of the related Stock Option. Stock Options which have been so surrendered, in whole or in part, are no longer exercisable to the extent the related Stock Appreciation Rights have been exercised and are deemed to have been exercised for the purpose of the limitation set forth in Article 3 on the number of Shares to be issued under this Plan, but only to the extent of the number of Shares actually issued under the Stock Appreciation Right at the time of exercise. Upon the exercise of a Stock Appreciation Right, subject to satisfaction of the withholding tax requirements pursuant to Article 15, the holder of the Stock Appreciation Right shall be entitled to receive Shares equal in value to the excess of the Fair Market Value of a Share on the exercise date over the Exercise Price per Share specified in the related Stock Option, multiplied by the number of Shares in respect of which the Stock Appreciation Right is exercised. At any time the Exercise Price per Share of the related Stock Option exceeds the Fair Market Value of one Share, the holder of the Stock Appreciation Right shall not be permitted to exercise such right.

     7.3 Independent SARs. Stock Appreciation Rights may be granted by the Committee without related Stock Options, and independent Stock Appreciation Rights will be subject to the following terms and conditions:

     (a) Term. Any unexercised portion of an independent Stock Appreciation Right granted hereunder shall expire at the end of the stated term of the Stock Appreciation Right. The Committee shall determine the term of each Stock Appreciation Right at the time of grant, which term shall not exceed 10 years from the Date of Grant. The Committee may extend the term of a Stock Appreciation Right, in its discretion, but not beyond the date immediately prior to the tenth anniversary of the original Date of Grant. If a definite term is not specified by the Committee at the time of grant, then the term is deemed to be ten years.

     (b) Exercise Price. Subject to Section 3.4, the base or Exercise Price of an independent Stock Appreciation Right shall never be less than 100% of the Fair Market Value of the Shares on the Date of Grant.

     (c) Exercisability. A Stock Appreciation Right shall be exercisable, in whole or in part, at such time or times as determined by the Committee at or after the time of grant.

     (d) Method of Exercise. A Stock Appreciation Right may be exercised in whole or in part during the term by giving written notice of exercise to the Company specifying the number of Shares in respect of which the Stock Appreciation Right is being exercised. The notice must be given by or on behalf of a person entitled to exercise the Stock Appreciation Right. Upon the exercise of a Stock Appreciation Right, subject to satisfaction of the withholding tax requirements pursuant to Article 15, the holder of the Stock Appreciation Right shall be entitled to receive Shares equal in value to the excess of the Fair Market Value of a Share on the exercise date over the Fair Market Value of a Share on the Date of Grant multiplied by the number of Stock Appreciation Rights being exercised. At any time the Fair Market Value of a Share on a proposed exercise date does not exceed the Fair Market Value of a Share on the Date of Grant, the holder of the Stock Appreciation Right shall not be permitted to exercise such right.

     (e) Early Termination Prior to Expiration. Unless otherwise provided in an employment or other agreement entered into between the holder of the Stock Appreciation Right and the Company and approved by the Committee, either before or after the Date of Grant, the early termination provisions set forth in Section 5.3 as applied to Non-Qualified Stock Options will apply to independent Stock Appreciation Rights.

     7.4 Other Terms and Conditions of SAR Grants. Stock Appreciation Rights are subject to such other terms and conditions, not inconsistent with the provisions of this Plan and any operative employment or other agreement, as are determined from time to time by the Committee.

     7.5 Repricing Prohibited. Subject to the anti-dilution adjustment provisions contained in Section 3.4 hereof, without the prior approval of the Company’s Shareholders, evidenced by a majority of votes cast, neither the Committee nor the Board shall cause the cancellation, substitution or amendment of a Stock Appreciation Right that would have the effect of reducing the base price of such a Stock Appreciation Right previously granted under the Plan, or otherwise approve any modification to such a Stock Appreciation Right that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by The Nasdaq Stock Market or other stock market on which the Company’s Shares are traded.

     7.6 Section 409A of the Code. Unless an Award Agreement approved by the Committee provides otherwise, Stock Appreciation Rights awarded under this Plan are intended to meet the requirements for exclusion from coverage under Section 409A of the Code dealing with nonqualified deferred compensation and all Stock Appreciation Rights Awards shall be construed and administered accordingly.

ARTICLE 8

RESTRICTED SHARE AND RESTRICTED SHARE UNIT AWARDS

     8.1 Restricted Share Grants and Agreements. Restricted Share Awards consist of Shares which are issued by the Company to a Participant at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value but which are subject to forfeiture and restrictions on their sale or other transfer by the Participant. Each Restricted Share Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written Award Agreement dated as of the Date of Grant and executed by the Company and by the Participant. The timing of Restricted Share Awards and the number of Shares to be issued (subject to Section 3.2) are to be determined by the Committee in its discretion.

     8.2 Terms and Conditions of Restricted Share Grants. Restricted Shares granted under this Plan are subject to the following terms and conditions, which, except as otherwise provided herein, need not be the same for each Participant, and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan and any operative employment or other agreement, as the Committee deems desirable:

     (a) Purchase Price. The Committee shall determine the prices, if any, at which Restricted Shares are to be issued to a Participant, which may vary from time to time and from Participant to Participant and which may be below the Fair Market Value of such Restricted Shares at the Date of Grant, including, without limitation, a price of zero.

     (b) Restrictions. All Restricted Shares issued under this Plan will be subject to such restrictions as the Committee may determine, which may include, without limitation, the following:

     (i) a prohibition against the sale, transfer, pledge or other encumbrance of the Restricted Shares, such prohibition to lapse at such time or times as the Committee determines (whether in installments, at the time of the death, Disability or Retirement of the holder of such shares, or otherwise, but subject to the Change in Control provisions in Article 11 unless otherwise provided by the Committee);

     (ii) a requirement that the Participant forfeit such Restricted Shares in the event of termination of the Participant’s employment or directorship with the Company or its Affiliates prior to Vesting;

     (iii) a prohibition against employment or retention of the Participant by any competitor of the Company or its Affiliates, or against dissemination by the Participant of any secret or confidential information belonging to the Company or an Affiliate or other forfeiture provisions relating to Cause;

     (iv) any applicable requirements arising under the Securities Act of 1933, as amended, other securities laws, the rules and regulations of The Nasdaq Stock Market or any other stock exchange or transaction reporting system upon which such Restricted Shares are then listed or quoted and any state laws, rules and regulations, including “blue sky” laws; and

     (v) such additional restrictions as are required to avoid the application of Section 409A of the Code thereto or to avoid adverse tax consequences under the Code or other taxing statutes and rules.

The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse. However, if the Committee determines that restrictions lapse upon the attainment of specified performance objectives, then the provisions of Sections 9.2 and 9.3 will apply (including, but not limited to, the enumerated performance objectives). If the Award Agreement for a Section 162(m) Person provides that such Award is intended to qualify as Performance Based Compensation, the provisions of Section 9.4(d) also will apply.

     (c) Delivery of Shares. Restricted Shares will be registered in the name of the Participant and deposited, together with a Stock Power, with the Company or its agent. Each such certificate will bear a legend in substantially the following form:

     “The transferability of this certificate and the Common Shares represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Agilysys, Inc. 2006 Stock Incentive Plan and an Award Agreement entered into between the registered owner and the Company. A copy of this Plan and Award Agreement are on file in the office of the Secretary of the Company.”

     At the end of any time period during which the Restricted Shares are subject to forfeiture and restrictions on transfer, such Shares remaining after any tax withholding has occurred pursuant to Article 15, will be delivered free of all restrictions (except for any pursuant to Section 14.2) to the Participant or other appropriate person and with the foregoing legend removed.

     (d) Forfeiture of Shares. If a Participant who holds Restricted Shares fails to satisfy the restrictions, Vesting requirements and other conditions relating to the Restricted Shares prior to the lapse, satisfaction or waiver of such restrictions and conditions, except as may otherwise be determined by the Committee, the Participant shall forfeit the Shares and transfer them back to the Company in exchange for a refund of any consideration paid by the Participant or such other amount which may be specifically set forth in the Award Agreement. A Participant shall execute and deliver to the Company one or more Stock Powers with respect to Restricted Shares granted to such Participant.

     (e) Voting and Other Rights. Except as otherwise required for compliance with Section 162(m) of the Code, other applicable law and the terms of the applicable Restricted Share agreement, during any period in which Restricted Shares are subject to forfeiture and restrictions on transfer, the Participant holding such Restricted Shares shall have all the rights of a Shareholder with respect to such Shares, including, without limitation, the right to vote such Shares and the right to receive any dividends paid with respect to such Shares.

     (f) Section 83(b) Election. If a Participant makes an election pursuant to Section 83(b) of the Code with respect to a Restricted Share Award, the Participant shall file, within 30 days following the Date of Grant, a copy of such election with the Company and with the Internal Revenue Service, in accordance with the regulations under Section 83(b) of the Code. The Committee may provide in an Award Agreement that the Restricted Share Award is conditioned upon the Participant’s making or refraining from making an election with respect to the Award under Section 83(b) of the Code.

     8.3 Restricted Share Unit Awards and Agreements. Restricted Share Unit Awards consist of Shares that will be issued to a Participant at a future time or times at no cost or at a purchase price determined by the Committee which may be below their Fair Market Value if continued employment, continued directorship and/or other terms and conditions specified by the Committee are satisfied. Each Restricted Share Unit Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written Award Agreement dated as of the Date of Grant and executed by the Company and the Plan Participant. The timing of Restricted Share Unit Awards and the number of Restricted Share Units to be awarded (subject to Section 3.2) are to be determined by the Committee in its sole discretion.

     8.4 Terms and Conditions of Restricted Share Unit Awards. Restricted Share Unit Awards are subject to the following terms and conditions, which, except as otherwise provided herein, need not be the same for each Participant, and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan and any operative employment or other agreement, as the Committee deems desirable:

          (a) Purchase Price. The Committee shall determine the prices, if any, at which Shares are to be issued to a Participant after Vesting of Restricted Share Units, which may vary from time to time and among Participants and which may be below the Fair Market Value of Shares at the Date of Grant, including, without limitation, a price of zero.

          (b) Restrictions. All Restricted Share Units awarded under this Plan will be subject to such restrictions as the Committee may determine, which may include, without limitation, the following:

     (i) a prohibition against the sale, transfer, pledge or other encumbrance of the Restricted Share Unit;

     (ii) a requirement that the Participant forfeit such Restricted Share Unit in the event of termination of the Participant’s employment or directorship with the Company or its Affiliates prior to Vesting;

     (iii) a prohibition against employment of the Participant by, or provision of services by the Participant to, any competitor of the Company or its Affiliates, or against dissemination by the Participant of any secret or confidential information belonging to the Company or an Affiliate or other forfeiture provisions relating to Cause;

     (iv) any applicable requirements arising under the Securities Act of 1933, as amended, other securities laws, the rules and regulations of The NASDAQ Stock Market or any other stock exchange or transaction reporting system upon which the Common Shares are then listed or quoted and any state laws, rules and interpretations, including “blue sky” laws; and

     (v) such additional restrictions as are required to avoid the application of Section 409A of the Code thereto or to avoid adverse tax consequences under the Code or other taxing statutes or rules.

The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse.

          (c) Performance Based Restrictions. The Committee may, in its sole discretion, provide restrictions that lapse upon the attainment of specified performance objectives. In such case, the provisions of Sections 9.2 and 9.3 will apply (including, but not limited to, the enumerated performance objectives). If the written Award Agreement for a Section 162(m) Person provides that such Award is intended to be Performance Based Compensation, the provisions of Section 9.4(d) also will apply.

          (d) Voting and Other Rights. A Participant holding Restricted Share Units shall not be deemed to be a Shareholder solely because of such units. Such Participant shall have no rights of a Shareholder with respect to such units; provided, however, that an Award Agreement may provide for payment of an amount of money (or Shares with a Fair Market Value equivalent to such amount) equal to the dividends paid from time to time on the number of Common Shares that would become payable upon vesting of a Restricted Share Unit Award.

     (e) Lapse of Restrictions. If a Participant who holds Restricted Share Units satisfies the restrictions and other conditions relating to the Restricted Share Units prior to the lapse or waiver of such restrictions and conditions, the Restricted Share Units shall be converted to, or replaced with, Shares which are free of all restrictions except for any restrictions pursuant to Section 14.2.

     (f) Forfeiture of Restricted Share Units. If a Participant who holds Restricted Share Units fails to satisfy the restrictions, Vesting requirements and other conditions relating to the Restricted Share Units prior to the lapse, satisfaction or waiver of such restrictions and conditions, except as may otherwise be determined by the Committee, the Participant shall forfeit the Restricted Share Units.

     (g) Termination. A Restricted Share Unit Award or unearned portion thereof will terminate without the issuance of Shares on the termination date specified on the Date of Grant or upon the termination of employment or directorship of the Participant during the Performance Period. If a Participant’s employment or directorship with the Company or its Affiliates terminates by reason of his death, Disability or Retirement, the Committee in its discretion at or after the Date of Grant may determine that the Participant (or the heir, legatee or legal representative of the Participant’s estate) will receive a distribution of Shares in an amount which is not more than the number of Shares which would have been earned by the Participant if 100% of the performance objectives for the current Performance Period had been achieved prorated based on the ratio of the number of months of active employment in the Performance Period to the total number of months in the Performance Period. However, with respect to Awards intended to be Performance Based Compensation (as described in Section 9.4(d)), distribution of the Shares shall not be made prior to attainment of the relevant performance objectives.

     (h) Section 409A of the Code. Unless an Award Agreement approved by the Committee provides otherwise, Restricted Share Units awarded under this Plan are intended to meet the requirements for exclusion from coverage under Section 409A of the Code or to otherwise avoid adverse tax consequences thereunder and all Restricted Share Unit Awards shall be construed and administered accordingly. The Committee reserves the right to substitute a definition of the term “Disability” which is derived from a statute or regulations (e.g., Section 409A(a)(2)(C) of the Code) for the definition of such term set forth in this Plan, as it deems necessary or appropriate in its sole discretion with respect to Restricted Share Unit Awards.

     8.5 Time Vesting of Restricted Share and Restricted Share Unit Awards. Restricted Shares or Restricted Share Units, or portions thereof, are exercisable at such time or times as determined by the Committee in its discretion at or after grant, subject to the restrictions on time Vesting set forth in this Section. If the Committee provides that any Restricted Shares or Restricted Share Unit Awards become Vested over time (with or without a performance component), the Committee may waive or accelerate such Vesting provisions at any time, subject to the restrictions on time Vesting set forth in this Section.

ARTICLE 9

PERFORMANCE SHARE AWARDS

     9.1 Performance Share Awards and Agreements. A Performance Share Award is a right to receive Shares in the future conditioned upon the attainment of specified performance objectives and such other conditions, restrictions and contingencies as the Committee may determine. Each Performance Share Award granted under this Plan will be evidenced by minutes of a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written Award Agreement dated as of the Date of Grant and executed by the Company and by the Plan Participant. The timing of Performance Share Awards and the number of Shares covered by each Award (subject to Section 3.2) are to be determined by the Committee in its discretion.

     9.2 Performance Objectives. At the time of grant of a Performance Share Award, the Committee will specify the performance objectives which, depending on the extent to which they are met, will determine

the number of Shares that will be distributed to the Participant. The Committee will also specify the Performance Period. With respect to awards to Section 162(m) Persons intended to be Performance Based Compensation, the Committee may use performance objectives based on one or more of the following (or substantially similar) criteria: cash generation, profit, revenue, market share, profit or return ratios, Shareholder returns and/or specific, objective and measurable non financial objectives, stock price, sales, earnings per share, return on equity, costs, earnings, capital adjusted pre-tax earnings (economic profit), net income, operating income (including but not limited to EBIT or EBITDA), performance profit (operating income minus an allocated charge approximating the Company’s cost of capital, before or after tax), gross margin, revenue, working capital, total assets, net assets, Shareholders’ equity and cash flow. Performance objectives may include or exclude extraordinary charges, losses from discontinued operations, restatements and accounting changes and other unplanned special charges such as restructuring expenses, acquisitions, acquisition expenses, including expenses related to goodwill and other intangible assets, stock offerings, stock repurchases and loan loss provisions, provided that in the case of an Award intended to qualify for the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is set forth in Section 162(m)(4)(C) of the Code, such inclusion or exclusion shall be made in compliance with Section 162(m) of the Code. The Committee may designate a single objective or objectives for performance measurement purposes. Performance measurement may be based on absolute Company, business unit or divisional performance and/or on performance as compared with that of other publicly-traded companies. The performance objectives and periods need not be the same for each Participant nor for each Award.

     9.3 Adjustment of Performance Objectives. The Committee may modify, amend or otherwise adjust the performance objectives specified for outstanding Performance Share Awards if it determines that an adjustment would be consistent with the objectives of this Plan and taking into account the interests of the Participants and the public Shareholders of the Company and such adjustment complies with the requirements of Section 162(m) of the Code for Section 162(m) Persons, to the extent applicable, unless the Committee indicates a contrary intention. The types of events which could cause an adjustment in the performance objectives include, without limitation, accounting changes which substantially affect the determination of performance objectives, changes in applicable laws or regulations which affect the performance objectives, and divisive corporate reorganizations, including spin-offs and other distributions of property or stock.

     9.4 Other Terms and Conditions. Performance Share Awards granted under this Plan are subject to the following terms and conditions and may contain such additional terms, conditions, restrictions and contingencies not inconsistent with the terms of this Plan and any operative employment or other agreement as the Committee deems desirable:

     (a) Delivery of Shares. As soon as practicable after the applicable Performance Period has ended, the Participant will receive a distribution of the number of Shares earned during the Performance Period, depending upon the extent to which the applicable performance objectives were achieved. Such Shares will be registered in the name of the Participant and will be free of all restrictions except for any restrictions pursuant to Section 14.2.

     (b) Termination. A Performance Share Award or unearned portion thereof will terminate without the issuance of Shares on the termination date specified at the time of grant or upon the termination of employment or directorship of the Participant during the Performance Period. If a Participant’s employment or directorship with the Company or its Affiliates terminates by reason of his death, Disability or Retirement (except with respect to Section 162(m) Persons), the Committee in its discretion at or after the time of grant may determine, notwithstanding any Vesting requirements under Section 9.4(a), that the Participant (or the heir, legatee or legal representative of the Participant’s estate) will receive a distribution of a portion of the Participant’s then-outstanding Performance Share Awards in an amount which is not more than the number of Shares which would have been earned by the Participant if 100% of the performance objectives for the current Performance Period had been achieved prorated based on the ratio of the number of months of active employment in the Performance Period to the total number of months in the Performance Period. However, with respect to Awards intended to be Performance Based Compensation (as described in Section 9.4(d)), distribution of the Shares shall not be made prior to attainment of the relevant performance objective.

     (c) Voting and Other Rights. Awards of Performance Shares do not provide the Participant with voting rights or rights to dividends prior to the Participant becoming the holder of record of Shares issued pursuant to an Award; provided, however, that an Award Agreement may provide for payment of an amount of money (or Shares with a Fair Market Value equivalent to such amount) equal to the dividends paid from time to time on the number of Common Shares that would become payable upon vesting of a Performance Share Award. Prior to the issuance of Shares, Performance Share Awards may not be sold, transferred, pledged, assigned or otherwise encumbered.

     (d) Performance-Based Compensation. The Committee may designate Performance Share Awards as being “remuneration payable solely on account of the attainment of one or more performance goals” as described in Section 162(m)(4)(C) of the Code. Such Awards shall be automatically amended or modified to comply with amendments to Section 162 of the Code to the extent applicable, unless the Committee indicates a contrary intention.

     9.5 Time Vesting of Performance Share Awards. Performance Share Awards, or portions thereof, are exercisable at such time or times as determined by the Committee in its discretion at or after grant, subject to the restrictions on time Vesting set forth in this Section. If the Committee provides that any Performance Shares become Vested over time (accelerated by a performance component), the Committee may waive or accelerate such Vesting provisions at any time, subject to the restrictions on time Vesting set forth in this Section.

     9.6 Special Limitations on Performance Share Awards. Unless an Award Agreement approved by the Committee provides otherwise, Performance Shares awarded under this Plan are intended to meet the requirements for exclusion from coverage under Section 409A of the Code or to otherwise avoid adverse tax consequences thereunder and all Performance Share Awards shall be construed and administered accordingly. The Committee reserves the right to substitute a definition of the term “Disability” which is derived from a statute or regulations (e.g., Section 409A(a)(2)(C) of the Code) for the definition of such term set forth in this Plan, as it deems necessary or appropriate in its sole discretion with respect to Performance Share Awards.

ARTICLE 10

TRANSFERS AND LEAVES OF ABSENCE

     10.1 Transfer of Participant. For purposes of this Plan, the transfer of a Participant among the Company and its Affiliates shall not be deemed to be a termination of employment except as required by Section 422 of the Code with respect to ISOs or other applicable law including Section 409A of the Code, if relevant.

     10.2 Effect of Leaves of Absence. For purposes of this Plan, the following leaves of absence are deemed not to be a termination of employment:

     (a) a leave of absence, approved in writing by the Company, for military service, sickness or any other purpose approved by the Company, if the period of such leave does not exceed 90 days;

     (b) a leave of absence in excess of 90 days, approved in writing by the Company, but only if the employee’s right to reemployment is guaranteed either by a statute or by contract, and provided that, in the case of any such leave of absence, the employee returns to work within 30 days after the end of such leave; and

     (c) any other absence determined by the Committee in its discretion not to constitute a termination of employment, to the extent such discretion is permitted by law including the applicable rules with respect to ISOs.

ARTICLE 11

EFFECT OF CHANGE IN CONTROL

     11.1 Change in Control Defined. “Change in Control” means the occurrence of any of the following:

     (a) all or substantially all of the assets of the Company are sold or transferred to another corporation or entity, or the Company is merged, consolidated or reorganized with or into another corporation or entity, with the result that upon conclusion of the transaction less than fifty-one percent (51%) of the outstanding securities entitled to vote generally in the election of Directors (“Voting Stock”) or other capital interests of the acquiring corporation or entity are owned, directly or indirectly, by the holders of Voting Stock of the Company generally prior to the transaction;

     (b) there is a report filed on Scheduled 13D or Scheduled 14D-1 (or any successor scheduled, form or report), each as promulgated pursuant to the Exchange Act disclosing that any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act),excluding the Company, any Affiliate, any employee benefit plan of the Company or an Affiliate, including the trustee of any such plan has become the beneficial owner (as the term “beneficial owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing thirty three and one-third percent (33-1/3%) or more of the combined voting power of the then-outstanding Voting Stock of the Company;

     (c) the Company shall file a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A thereunder (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or

     (d) the individuals who, at the beginning of any period of two (2) consecutive calendar years, constituted the Directors of the Company cease for any reason to constitute at least a majority thereof unless the nomination for election by the Company’s Shareholders of each new Director of the Company was approved by a vote of at least two-thirds (2/3) of the Directors of the Company still in office who were Directors of the Company at the beginning of any such period.

     11.2 Acceleration of Award. Except as otherwise provided in this Plan or an Award Agreement, immediately upon the occurrence of a Change in Control:

     (a) all outstanding Stock Options automatically become fully exercisable;

     (b) all Restricted Share Awards automatically become fully Vested;

     (c) all Restricted Share Unit Awards automatically become fully Vested (or, if such Restricted Share Unit Awards are subject to performance-based restrictions, shall become Vested on a pro-rated basis as described in Section 11.2(d) with respect to Performance Share Awards) and, to the extent Vested, convertible to Shares at the election of the holder;

     (d) all Participants holding Performance Share Awards become entitled to receive a partial payout in an amount which is the number of Shares which would have been earned by the Participant if 100% of the performance objectives for the current Performance Period had been achieved pro-rated based on the ratio of the number of months of active employment in the Performance Period to the total number of months in the Performance Period; and

     (e) Stock Appreciation Rights automatically become fully Vested and fully exercisable.

ARTICLE 12

TRANSFERABILITY OF AWARDS

     12.1 Awards Are Non-Transferable. Except as provided in Sections 12.2 and 12.3, Awards are non-transferable and any attempts to assign, pledge, hypothecate or otherwise alienate or encumber (whether by operation of law or otherwise) any Award shall be null and void.

     12.2 Inter-Vivos Exercise of Awards. During a Participant’s lifetime, Awards are exercisable only by the Participant or, as permitted by applicable law and notwithstanding Section 12.1 to the contrary, the Participant’s guardian or other legal representative.

     12.3 Limited Transferability of Certain Awards. Notwithstanding Section 12.1 to the contrary, Awards may be transferred by will and by the laws of descent and distribution. Moreover, the Committee, in its discretion, may allow at or after the time of grant the transferability of Awards which are Vested, provided that the permitted transfer is made (a) if the Award is an Incentive Stock Option, the transfer is consistent with Section 422 of the Code; (b) to the Company (for example in the case of forfeiture of Restricted Shares), an Affiliate or a person acting as the agent of the foregoing or which is otherwise determined by the Committee to be in the interests of the Company; or (c) by the Participant for no consideration to Immediate Family Members or to a bona fide trust, partnership or other entity controlled by and for the benefit of one or more Immediate Family Members. “Immediate Family Members” means the Participant’s spouse, children, stepchildren, parents, stepparents, siblings (including half brothers and sisters), in-laws and other individuals who have a relationship to the Participant arising because of a legal adoption. No transfer may be made to the extent that transferability would cause Form S-8 or any successor form thereto not to be available to register Shares related to an Award. The Committee in its discretion may impose additional terms and conditions upon transferability. Transfers are subject to prior Committee approval (except as provided in Section 12.3(b)) or they are null and void.

ARTICLE 13

AMENDMENT AND DISCONTINUATION

     13.1 Amendment or Discontinuation of this Plan. The Board of Directors may amend, alter, or discontinue this Plan at any time, provided that no amendment, alteration, or discontinuance may be made:

     (a) which would materially and adversely affect the rights of a Participant under any Award granted prior to the date such action is adopted by the Board of Directors without the Participant’s written consent thereto; and

     (b) without Shareholder approval, if Shareholder approval is required under applicable laws, regulations or exchange requirements (including Section 422 of the Code with respect to ISOs, and for the purpose of qualification as Performance Based Compensation under Section 162(m) of the Code).

Notwithstanding the foregoing, this Plan may be amended without Participants’ consent to: (i) comply with any law; (ii) preserve any intended favorable tax effects for the Company, the Plan or Participants; or (iii) avoid any unintended unfavorable tax effects for the Company, the Plan or Participants.

     13.2 Amendment of Grants. The Committee may amend, prospectively or retroactively, the terms of any outstanding Award, provided that no such amendment may be inconsistent with the terms of this Plan (specifically including the prohibition on granting Stock Options with an Exercise Price less than 100% of the Fair Market Value of the Common Shares on the Date of Grant) or would materially and adversely affect the rights of any holder without his written consent.

ARTICLE 14

SHARE CERTIFICATES

     14.1 Delivery of Share Certificates. The Company is not required to issue or deliver any certificates for Shares issuable with respect to Awards under this Plan prior to the fulfillment of all of the following conditions, to the extent applicable:

     (a) payment in full for the Shares and for any withholding tax (See Article 15);

     (b) completion of any registration or other qualification of such Shares under any Federal or state laws or under the rulings or regulations of the Securities and Exchange Commission or any other regulating body which the Committee in its discretion deems necessary or advisable;

     (c) admission of such Shares to listing on The Nasdaq Stock Market or any stock exchange on which the Shares are listed;

     (d) in the event the Shares are not registered under the Securities Act of 1933, qualification as a private placement under said Act;

     (e) obtaining of any approval or other clearance from any Federal or state governmental agency which the Committee in its discretion determines to be necessary or advisable; and

     (f) the Committee is fully satisfied that the issuance and delivery of Shares under this Plan is in compliance with applicable Federal, state or local law, rule, regulation or ordinance or any rule or regulation of any other regulating body, for which the Committee may seek approval of counsel for the Company.

     14.2 Applicable Restrictions on Shares. Shares issued with respect to Awards may be subject to such stock transfer orders and other restrictions as the Committee may determine necessary or advisable under any applicable Federal or state securities law rules, regulations and other requirements, the rules, regulations and other requirements of The Nasdaq Stock Market or any stock exchange upon which the Shares are then listed, and any other applicable Federal or state law and will include any restrictive legends the Committee may deem appropriate to include.

     14.3 Book Entry. In lieu of the issuance of stock certificates evidencing Shares, the Company may use a “book entry” system in which a computerized or manual entry is made in the records of the Company to evidence the issuance of such Shares. Such Company records are, absent manifest error, binding on all parties.

ARTICLE 15

SATISFACTION OF WITHHOLDING TAX LIABILITIES

     15.1 In General. The Committee shall cause the Company to withhold any taxes which it determines it is required by law or required by the terms of this Plan to withhold in connection with any payments incident to this Plan, unless the Participant shall make an irrevocable written election delivered to the General Counsel of the Company, during a trading window period prior to the date any taxes become due and owing to pay any such taxes in cash and shall have delivered to the Company a sum equal to the required withholding as specified by the Company on or before the date such taxes are due and owing. The Participant or other recipient shall provide the Committee with such Stock Powers and additional information or documentation as may be necessary for the Committee to discharge its obligations under this Section.

     15.2 Withholding from Share Distributions. Unless the Participant shall have made an election to pay taxes in cash and shall have provided the Company with the required payments as set forth in Section 15.1, with respect to a distribution in Shares pursuant to Restricted Share, Restricted Share Unit and Performance Share Awards under the Plan, the Committee shall cause the Company to sell the fewest number of such Shares for the proceeds of such sale to equal (or exceed by not more than that actual sale price of a single Share) the Participant’s or other recipient’s withholding tax liability, as set forth in Section 15.1, resulting from such distribution. The Committee shall withhold the proceeds of such sale for purposes of satisfying such withholding tax liability. In the event that a distribution in Shares does not result in any withholding tax liability as a result of the Participant’s election to be taxed at an earlier date or for any other reason, the Company shall not be required to sell any Shares distributed to the Participant.

     15.3 Delivery of Withholding Proceeds. The Committee shall cause the Company to deliver cash received from a Participant or the withholding proceeds to the Internal Revenue Service and/or other taxing authority in satisfaction of a Participant’s or other recipient’s tax liability arising from a payment.

ARTICLE 16

GENERAL PROVISIONS

     16.1 No Implied Rights to Awards, Employment or Directorship. No one has any claim or right to be granted an Award under this Plan, and there is no obligation of uniformity of treatment of Participants under this Plan. Neither this Plan nor any Award thereunder shall be construed as giving any individual any right to continued employment or continued directorship with the Company or any Affiliate. The Plan does not constitute a contract of employment or directorship, and the Company and each Affiliate expressly reserve the right at any time to terminate employees free from liability, or any claim, under this Plan, except as may be specifically provided in this Plan or in an Award Agreement.

     16.2 Other Compensation Plans. Nothing contained in this Plan prevents the Board of Directors from adopting other or additional compensation arrangements, subject to Shareholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.

     16.3 Rule 16b-3 Compliance. This Plan is intended to comply with all applicable conditions of Rule 16b-3. All transactions involving any Participant subject to Section 16(a) shall be subject to the conditions set forth in Rule 16b-3, regardless of whether such conditions are expressly set forth in this Plan. Any provision of this Plan that is contrary to Rule 16b-3 does not apply to such Participants.

     16.4 Code Section 162(m) Compliance. This Plan is intended to comply with all applicable requirements of Section 162(m) of the Code with respect to Performance Based Compensation for Participants who are Section 162(m) Persons. Unless the Committee expressly determines otherwise, any provision of this Plan that is contrary to such requirements does not apply to such Participants.

     16.5 Successors. All obligations of the Company with respect to Awards granted under this Plan are binding on any successor to the Company, whether as a result of a direct or indirect purchase, merger, consolidation or otherwise of all or substantially all of the 16.6 Severability. In the event any provision of this Plan, or the application thereof to any person or circumstances, is held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, or other applications, and this Plan is to be construed and enforced as if the illegal or invalid provision had not been included. business and/or assets of the Company.

     16.7 Governing Law. To the extent not preempted by Federal law, this Plan and all Award Agreements pursuant thereto are construed in accordance with and governed by the laws of the State of Ohio. This Plan is not intended to be governed by ERISA and shall be so construed and administered.

ARTICLE 17

EFFECTIVE DATE

     17.1 Effective Date. The effective date of this Agilysys, Inc. 2006 Stock Incentive Plan is the date on which the Shareholders of the Company approve it at a duly held Shareholder’s meeting.

EX-10.PP

Exhibit 10(pp)

AGILYSYS, INC.
2010 PERFORMANCE SHARE PLAN

          1. Name; Purpose; Authority. The name of the Plan is the Agilysys, Inc. 2010 Performance Share Plan (the “Plan”). The purposes of the Plan are to: (1) reinforce a sense of urgency to improve performance; (2) pay for improvements in performance; (3) increase executive ownership in the Company; and (4) increase alignment of executive and shareholder interests. This Plan was adopted pursuant to the authority of the Compensation Committee under Article 2 of the 2006 Stock Incentive Plan (the “2006 Plan”). The terms and conditions of the 2006 Plan shall apply to awards made pursuant to this Plan.

          2. Definitions. Unless the context indicates otherwise, the following words shall have the meanings set forth below wherever used in this Plan:

a.	“Acquisition Adjustments” means subtraction of the acquisition’s EBITDA for the portion of the prior fiscal year that corresponds with the portion of the fiscal year the acquisition was owned or controlled by the Company in fiscal year 2010.
b.	“Accounts Receivable” means March 31, 2010 net accounts receivable less March 31, 2009 net accounts receivable, both as reported in the Agilysys Form 10-K.
c.	“Award” means any grant under this Plan of a fixed number of Performance Shares.
d.	“Business Unit” refers to each of the Technology Solutions Group, the Hospitality Solutions Group and the Retail Solutions Group.
e.	“Business Payout Percentage” means 67%.
f.	“Capital Expenditures” equals the capital expenditures as reported in the Company’s Statement of Cash Flows for the fiscal year ended 2010 including implementation costs for the Oracle ERP System and costs associated with the development of Guest 360.
g.	“Corporate Payout Percentage” means 33%.
h.	“Compensation Committee Adjustments” means such adjustments as reasonably acceptable to the Compensation Committee.
i.	“Disposition Adjustments” means subtraction of the disposition’s budgeted EBITDA for the portion of the 2010 fiscal year that the disposition was not owned or controlled by the Company.
j.	“Earned Shares” means the number of Performance Shares earned pursuant to the calculation set forth in paragraph 5 below; provided that, in no event shall the number of Earned Shares exceed 175% of the Award. Any shares that do not become Earned Shares shall be forfeited and the Participant shall have no further interest therein of any kind whatsoever.
k.	“EBITDA” equals earnings before interest, taxes, depreciation, amortization, restructuring expenses, and write offs of intangibles and goodwill, as reported in the Agilysys Form 10-K for the fiscal year.
l.	“Performance Period” means the fiscal year ended March 31, 2010.

m.	“Performance Share” means an Earned Share subject to forfeiture and restrictions on sale and transfer by the Participant, but which will become vested and free of such restrictions upon, and to the extent of, the satisfaction of the Restriction Period.
n.	“Reported EBITDA” equals earnings before interest, taxes, depreciation, amortization, restructuring expenses, and write offs of intangibles and goodwill, as reported in the Agilysys Form 10-K for the fiscal year ended March 31, 2010.
o.	“Sharing Percentage” equals the amounts set forth in Exhibit A.
p.	“Target LTI” equals the amounts set forth in Exhibit A.
q.	“Threshold EBITDA” equals the amounts set forth in Exhibit A.
r.	“Valuation Multiple” equals 8.

All capitalized terms, unless otherwise defined, shall have the meanings ascribed to them under the 2006 Plan or the Grant Agreements issued pursuant to this Plan.

          3. Awards. Participants will be awarded a target number of shares that will become Earned Shares based on achievement of EBITDA performance as calculated in accordance with the formula set forth in Section 5 of this Plan.

          4. Corporate and Business Unit Performance Payout. The total number of Performance Shares earned for Participants working at the corporate headquarters will be determined using the Consolidated Agilysys numbers reflected in the Sharing Percentage, Target LTI and Threshold EBITDA tables (collectively, the “Performance Tables”) above. The total number of Performance Shares earned for Participants working at one of the Company’s three business segments — Technology Solutions, Hospitality Solutions or Retail Solutions will be determined by adding the sum of: (i) the Performance Shares earned using Performance Tables above for the respective segment times 67 percent; and (ii) the Performance Shares earned using the Performance Tables for Consolidated Agilysys times 33 percent. In no event will a Participant’s Earned Shares exceed 175% of the Participant’s Award.

          5. Sample Calculation. Reference is made to the sample Plan calculation set forth in Exhibit B for an example of how Earned Shares are calculated.

          6. Performance Shares. The Performance Shares awarded pursuant to this Plan are intended to be “remuneration payable solely on account of the attainment of one or more performance goals” within the meaning of Code Section 162(m)(4)(C) and shall be administered and interpreted accordingly.

          7. Internal Revenue Code Section 409A. This Agreement, Award and the compensation and benefits hereunder are intended to meet the requirements for exemption from coverage under Code Section 409A for restricted property set forth in Treasury Regulation Section 1.409A-1(b)(6), as well as any other such applicable exemption, and shall be construed and administered accordingly. If the Company determines that any compensation or benefits awarded or payable under this Agreement may be subject to taxation under Code Section 409A, the Company shall, after consultation with the Participant, have the authority to adopt, prospectively or retroactively, such amendments to this Agreement or to take any other actions it determines necessary or appropriate to exempt the compensation and benefits payable under this Agreement from Code Section 409A or meet the requirements of Code Section 409A. In no event, however, shall this Section or any other provisions of the Plan or this Agreement be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or awards or payments under, this Agreement and the Company shall have no responsibility for tax consequences of any kind to the Participant (or any other person or entity), whether or not such consequences are contemplated at the time of entry into this Agreement, resulting from the terms or operation of this Agreement.

          8. Internal Revenue Code Section 162(m). This Plan is intended to comply with all applicable requirements of Section 162(m) of the Code with respect to Performance Based Compensation for Participants who are Section 162(m) Persons.

          9. Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.

          10. Amendment. The Committee may amend, alter or discontinue this Plan at any time, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect the rights of the Participant without the Participant’s written consent. Notwithstanding the foregoing, the Company may, after consulting with the Participant, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.

          11. Captions. The captions of specific provisions of this Plan are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision.

          12. Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.

          13. Severability. In the event of the invalidity of any part or provision of this Plan, such invalidity will not affect the enforceability of any other part or provision of this Plan.

EX-10.QQ

Exhibit 10(qq)

PERFORMANCE RESTRICTED STOCK AWARD AGREEMENT
AGILYSYS, INC.
2006 STOCK INCENTIVE PLAN

          THIS PERFORMANCE RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is entered into as of the 22nd day of May, 2009 (the “Grant Date”) by and between Agilysys, Inc., an Ohio corporation (the “Company”), and                      (the “Participant”).

W I T N E S S E T H:

          WHEREAS, the Company has previously adopted, and the Shareholders of the Company have approved, the Agilysys, Inc. 2006 Stock Incentive Plan (the “Plan”);

          WHEREAS, the Compensation Committee desires to award Performance Restricted Stock to certain key employees, including the Participant, under the Plan; and

          WHEREAS, the Compensation Committee awarded Performance Restricted Stock to certain key employees, including the Participant, at its meeting on May 22, 2009, subject to the terms and conditions of Award Agreements;

          NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants herein contained, the Participant and the Company agree as follows:

     1. Definitions. Unless the context indicates otherwise, the following words shall have the following meanings wherever used in this Agreement:

a.	“Earned Shares” means the number of Performance Restricted Shares earned as calculated in accordance with the formula set forth in the Plan. Any shares that do not become Earned Shares shall be forfeited and the Participant shall have no further interest therein of any kind whatsoever.
b.	“Performance Period” means the 2010 fiscal year ending March 31, 2010.
c.	“Restriction Period” means a period of two fiscal years beyond the end of the Performance Period.
d.	“Restricted Share” means an Earned Share subject to forfeiture and restrictions on sale and transfer by the Participant, but which will become vested and free of such restrictions upon, and to the extent of, the satisfaction of the Restriction Period.

All capitalized terms, unless otherwise defined, shall have the meanings ascribed to them under the Plan.

     2. Award. As of the Grant Date, upon the terms and conditions set forth in this Agreement, the Company hereby grants to the Participant an award (the “Award”) of                      (          ) Restricted Shares (the “Performance Restricted Stock”). The Award is intended to be “remuneration payable solely on account of the attainment of one or more performance goals” within the meaning of Code Section 162(m)(4)(C) and shall be administered and interpreted accordingly. Furthermore, the Award is made in accordance with, and subject to, all the terms, conditions and restrictions of the Plan, which is hereby incorporated by reference in its entirety. The Participant irrevocably agrees to, and accepts, the terms, conditions and restrictions of the Plan and this Agreement on his own behalf and on behalf of any beneficiaries, heirs, legatees, guardians, representatives, successors and assigns. In the event of a conflict between the Plan and this Agreement, the Plan will control.

3. Terms of Award.

a.	Escrow of Shares. A certificate representing the Performance Restricted Stock subject to the Award shall be issued in the name of the Participant and shall be escrowed with the transfer agent of the Company (the “Escrow Agent”) subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement.
b.	Restrictions. The Participant shall not have the right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden, alienate, encumber or charge any Performance Restricted Stock (including any Shares issued as the result of the investment of cash dividends attributable to the Performance Restricted Stock) or any interest therein in any manner whatsoever, and the Company shall not be required to transfer on its books any such Performance Restricted Stock which shall have been sold, assigned, transferred, conveyed, disposed of, pledged, hypothecated, burdened, alienated, encumbered or charged in violation of this Agreement.
c.	Vesting. Except as otherwise provided in Section 3(e)(1), the Earned Shares will vest in increments based on the Participant’s continuous employment with the Company or any Affiliate through the dates set forth below (“Vesting Date”). Once vested pursuant to the terms of this Agreement, the Earned Shares shall be deemed Vested Shares.

Vesting Date	% of Earned Shares Vested
Date of Form 10-K filing for the fiscal year ended 3.31.2010		33	%
3.31.2011		33	%
3.31.2012		34	%

d.

Vested Shares — Removal of Restrictions; Payment. As soon as practicable after each vesting date noted in Section 3(c), the Company shall cause to be delivered to the Participant (or, in the event of death, his beneficiary, heir, legatee, successor or assign) certificates for any Vested Shares, together with certificates representing any Shares issued as a result of the investment of cash dividends attributable to such Shares pursuant to Section 3(f), to which the Participant is entitled free and clear of any restrictions (except any applicable securities law restrictions or restrictions imposed on Shares generally).

e.

Termination of Employment.

(1) Death or Disability. If the Participant’s employment with the Company and its Affiliates terminates due to his death or Disability prior to the last day of the Performance Period, the Participant, the Participant’s designated beneficiary or beneficiaries (as the Participant provides on the form attached as Exhibit B) or the Participant’s estate, as the Committee deems appropriate, shall be entitled to a pro-rated number of Shares calculated by multiplying (A) by (B) where:

(A)	is the number of Earned Shares, if any, as calculated in accordance with the Plan had he continued in employment through the end of the Performance Period plus any Shares attributable to the investment of the cash dividends of such Shares pursuant to Section 3(f); and
(B)	is the number of months that the Participant was employed by the Company and its Affiliates during the Performance Period divided by the number of months in the Performance Period (rounding up to the nearest whole number).

The Committee shall determine in its sole and exclusive discretion whether the Participant’s employment has terminated because of his Disability. The delivery of Shares reflecting the pro-rated award shall occur (if at all) at the same time as the delivery specified in Section 3(d).

(2)

Reasons Other Than Death or Disability. Except as otherwise provided in Section 4, if the Committee determines in its sole and exclusive discretion that the Participant’s employment terminated prior to the end of the Performance Period for reasons other than those described in Section 3(e)(1), the Performance Restricted Stock, and any Shares issued as a result of cash dividends attributable thereto, will be absolutely forfeited and the Participant and all persons who might claim through him will have no further interests under this Agreement of any kind whatsoever.

f. Voting Rights and Dividends. The Participant shall have all of the voting rights attributable to the Performance Restricted Stock issued pursuant to this Agreement. Cash dividends declared and paid by the Company with respect to the Performance Restricted Stock shall not be paid to the Participant. Rather, those cash dividends shall be invested in Shares which shall be subject to the vesting provisions of Section 3(c). By executing this Agreement, the Participant irrevocably consents to: (i) the Company’s withholding of the payment of those dividends; and (ii) the investment of those dividends in Shares issued in the name of the Participant and held in escrow by the Escrow Agent subject to removal of the restrictions or forfeiture pursuant to the terms of this Agreement.

     4. Change in Control. Upon a Change in Control prior to the end of the Performance Period and while the Participant remains in active employment with the Company or its Affiliates:

a.	shares awarded shall be deemed to have been Earned Shares in an amount equal to the greater of: (i) the number of shares awarded; and (ii) the number of shares that would have been Earned Shares assuming the calculation set forth in Paragraph 5 of the Grant Agreement is made as of the end of the month end prior to the occurrence of a Change in Control; and
b.	notwithstanding Section 3, the Participant shall be fully Vested in, and the restrictions imposed hereunder shall lapse with respect to, the Performance Restricted Stock; and
c.	certificates for the appropriate number of Shares determined in accordance with Section 4(a) shall be delivered to the Participant without any restrictive legends (except those required by applicable securities law or reflecting restrictions applicable to Shares generally) not later than 30 days after the date of the Change in Control.

     5. Effect of Corporate Reorganization or Other Changes Affecting Number or Kind of Shares. The provisions of this Agreement will be applicable to the Performance Restricted Stock, Shares or other securities, if any, which may be acquired by the Participant related to the Performance Restricted Stock as a result of a liquidation, recapitalization, reorganization, redesignation or reclassification, split-up, reverse split, merger, consolidation, dividend, combination or exchange of Performance Restricted Stock or Shares, exchange for other securities, a sale of all or substantially all assets or the like. The Committee may appropriately adjust the number and kind of Performance Restricted Stock, Shares or other securities described in this Agreement to reflect such a change.

     6. Nontransferability of Shares. Upon the acquisition of any Shares pursuant to this Agreement, if the Shares have not been registered under the Securities Act of 1933, as amended (the “Act”), they may not be sold, transferred or otherwise disposed of unless a registration statement under the Act with respect to the Shares has become effective or unless the Participant establishes to the satisfaction of the Company that an exemption from such registration is available. In addition, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or this Agreement.

     7. Stock Powers. The Participant hereby agrees to execute and deliver to the Escrow Agent an irrevocable stock power or powers (endorsed in blank), in the form attached as Exhibit B, covering the Performance Restricted Stock, Shares and any securities issued as a result of the investment of cash dividends attributable to the Performance Restricted Stock, and authorizes the deliverable under this Agreement.

     8. Internal Revenue Code Section 409A. This Agreement, Award and the compensation and benefits hereunder are intended to meet the requirements for exemption from coverage under Code Section 409A for restricted property set forth in Treasury Regulation Section 1.409A-1(b)(6), as well as

any other such applicable exemption, and shall be construed and administered accordingly. If the Company determines that any compensation or benefits awarded or payable under this Agreement may be subject to taxation under Code Section 409A, the Company shall, after consultation with the Participant, have the authority to adopt, prospectively or retroactively, such amendments to this Agreement or to take any other actions it determines necessary or appropriate to exempt the compensation and benefits payable under this Agreement from Code Section 409A or meet the requirements of Code Section 409A. In no event, however, shall this Section or any other provisions of the Plan or this Agreement be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or awards or payments under, this Agreement and the Company shall have no responsibility for tax consequences of any kind to the Participant (or any other person or entity), whether or not such consequences are contemplated at the time of entry into this Agreement, resulting from the terms or operation of this Agreement.

     9. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed to grant or confer on the Participant any right to remain an employee of the Company or its Affiliates, or to be employed in any particular position therewith. The Plan and this Agreement do not constitute a contract of employment, and the Company and each Affiliate expressly reserves the right, at any time, to terminate the Participant’s employment free from liability, or any claim, under the Plan and this Agreement, except as may be specifically provided therein.

     10. Notices. All notices or other communications relating to the Plan and this Agreement as it relates to the Participant shall be in writing, shall be deemed to have been made if personally delivered in return for a receipt or, if mailed, by regular U.S. mail, postage prepaid, by the Company to the Participant at the address of the Participant then on file with the Company. The Participant is responsible for notifying the Company of a change in his address.

     11. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective beneficiaries, heirs, legatees, successors and assigns, except as may be limited by the Plan.

     12. Governing Law. Except as may otherwise be provided in the Plan, this Agreement will be governed by, construed and enforced in accordance with the internal laws of the State of Ohio without giving effect to its conflict of laws principles.

     13. Tax Withholding. Unless the participant at his or her election shall pay 10% of the minimum withholding tax liability resulting from any distribution, the Committee shall cause the Company to sell the fewest number of Shares for the proceeds of such sale to equal (or exceed by not more than the actual sale price of a single Share) the Participant’s or other recipient’s tax liability, the Company will deliver the proceeds of any sale to the appropriate taxing authorities in satisfaction of such tax liability.

     14. Amendment. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement. However, no such action may be inconsistent with the terms of the Plan or materially and adversely affect the rights of the Participant without the Participant’s written consent. Notwithstanding the foregoing, the Company may, after consulting with the Participant, unilaterally amend this Agreement to comply with law, preserve favorable tax effects or avoid unfavorable tax effects for either of the parties.

     15. Further Action. The Participant and the Company agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

     16. Captions. The captions of specific provisions of this Agreement are for convenience and reference only, and in no way define, describe, extend or limit the scope of this Agreement or the intent of any provision.

     17. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original for all purposes.

     18. Entire Agreement. This Agreement, together with the Plan, constitutes the entire agreement of the parties with respect to its subject matter.

     19. Successors and Legal Representatives. This Agreement will bind and inure to the benefit of the Company and the Participant and their respective beneficiaries, heirs, legatees, executors, administrators, estates, successors, assigns, legal representatives, guardians and caretakers.

     20. Effect of Waiver. Any waiver of any term, condition or breach thereof will not be a waiver of any other term or condition or of the same term or condition for the future, or of any subsequent breach.

     21. Severability. In the event of the invalidity of any part or provision of this Agreement, such invalidity will not affect the enforceability of any other part or provision of this Agreement.

     22. Incapacity. If the Committee determines that the Participant is incompetent by reason of physical or mental disability or a person incapable of handling his or her property, the Committee may deal directly with or direct any delivery of Vested Shares to the guardian, legal representative or person having the care and custody of the incompetent or incapable person. The Committee may require proof of incompetence, incapacity or guardianship, as it may deem appropriate before the delivery of Vested Shares. In the event of such a delivery of Vested Shares, the Committee will have no obligation thereafter to monitor or follow the recipient to determine whether the Vested Shares are held or disposed of for the benefit of the Participant. The delivery of Vested Shares pursuant to this Section shall completely discharge the Company’s obligations under this Agreement.

     23. No Further Liability. The liability of the Company, its Affiliates and the Committee under or in connection with this Agreement is limited to the obligations set forth herein and no terms or provisions of this Agreement shall be construed to impose any liability on the Company, its Affiliates, the Committee or their directors and employees in favor of any person or entity with respect to any loss, cost, tax or expense which the person or entity may incur in connection with or arising from any transaction related to this Agreement. No third party beneficiaries are intended.

     24. Termination of Agreement. This Agreement will terminate on the earliest of: (a) the last day of the Performance Period if Threshold EBITDA is not achieved; (b) the date of termination of the Participant’s Employment for reasons referenced in Section 3(e)(2) prior to the last day of the Performance Period; or (c) the date that Vested Shares are delivered to the Participant (or his heir, legatee, successor or assign) pursuant to Sections 6 or 7 of this Agreement. Any terms or conditions of this Agreement that the Company determines are reasonably necessary to effectuate its purposes will survive the termination of this Agreement.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year written below.

	“Company”
Date:
	Martin F. Ellis
	President & CEO
	“Participant”
Date:

EXHIBIT A

IRREVOCABLE STOCK POWER

     KNOW ALL MEN BY THESE PRESENTS that for value received, the undersigned,                      (the “Transferor”), does hereby transfer to Agilysys, Inc., or its successor in interest (the “Transferee”),                      common shares, without par value, of Agilysys, Inc., an Ohio corporation (the “Corporation”), and does hereby appoint the Transferee his true and lawful attorney, irrevocable for himself and in his name and stead, to assign, transfer and set over, all or any part of the shares of stock hereby transferred to the Transferee, and for that purpose, to make and execute all necessary acts of assignment and transfer, and one or more persons to substitute with like full power, hereby ratifying and confirming all that his said attorney, or substitute or substitutes will lawfully do by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand as of the       day of                     , 2009.

TRANSFEROR

EXHIBIT B

AGILYSYS, INC.
2006 STOCK INCENTIVE PLAN

Designation of Beneficiary

     To: Agilysys, Inc. (the “Company”)

I,                     , as a participant in the 2006 Stock Incentive Plan and signatory of the accompanying Performance Restricted Stock Award Agreement (the “Agreement”), hereby designate as beneficiary to receive Shares payable pursuant to the Agreement in the event of my death:

			Interest
			(any partial
			shares resulting
			from a
			designation will
Class	Name(s)	Relationship	be eliminated)
Primary Beneficiary(ies)
1st Contingent Beneficiary(ies)
2nd Contingent Beneficiary(ies)

This designation cancels and supersedes any Designation of Beneficiary previously made by me with respect to the Agreement and the right to receive Shares thereunder. I further reserve the privilege of changing the above designated Beneficiary(ies) at any time or times without the consent of any such Beneficiary(ies).

ACKNOWLEDGEMENT

By execution of this Designation of Beneficiary, I acknowledge that this designation is made upon the following terms and conditions:

1.	For purposes of this Designation of Beneficiary, no person shall be deemed to have survived the Participant if that person dies within thirty (30) days of the Participant’s death.
2.	Beneficiary(ies) shall mean the Primary Beneficiary(ies) which survive the Participant by at least thirty (30) days, and shall mean the 1st Contingent Beneficiary(ies) if no Primary Beneficiary(ies) survive the Participant by at least thirty (30) days, and shall mean the 2nd Contingent Beneficiary(ies) if no Primary Beneficiary(ies) or 1st Contingent Beneficiaries survive the Participant by at least thirty (30) days.
3.	If more than one Beneficiary is named within the same class, payment shall be made equally to such Beneficiaries unless otherwise provided above. If any such Beneficiary(ies) die prior to payment, payment shall be made to the legal heirs of such deceased Beneficiary.

Dated:
By:
	[Name]

EX-10.RR

Exhibit 10(rr)

To:
	(Name of Recipient)

     There hereby is granted to you, as an officer or employee of Agilysys, Inc. (the “Company”) or a Subsidiary of the Company, a stock-settled stock appreciation right (the “SSAR”) to purchase            Company Common Shares, without par value (the “Shares”), at a price of $___ per share (the “Exercise Price”). This SSAR is granted to you pursuant to the Agilysys, Inc. 2006 Stock Incentive Plan, as amended from time to time, (the “Plan”) and is subject to the terms and conditions set forth in the Agreement below.

Date of Grant:                     

     Please be sure to consult with your tax or legal advisors before exercising any SSARs hereunder. Please acknowledge your acceptance of the terms of this SSAR by signing on the reverse side.

AGILYSYS, INC.

By:
	Martin F. Ellis
	President and Chief Executive Officer

STOCK APPRECIATION RIGHT AGREEMENT

     THIS AGREEMENT is entered into as of the date of grant set forth above by and between the Company and the Recipient named above. Terms not defined herein have the meanings ascribed to such terms in the Plan.

1. Grant of SSAR. Effective as of the date of grant set forth above, the Company grants to the Recipient, upon the terms and subject to the conditions set forth hereinafter, the right to gains above the Exercise Price on the number of Shares set forth above.

2. Term. The term of the SSAR shall be for a period of seven (7) years from the date of grant, and the SSAR shall expire at the close of regular business hours at the Company’s principal office on the last day of the term of the SSAR, or, if earlier, on the applicable expiration date provided for in sections 4 and 5 hereof.

3. Vesting. Except as otherwise provided herein, the SSAR shall become exercisable with respect to the number of Shares indicated as of the date indicated opposite such number below:

Number of Shares	Date as of
As to Which SSAR	Which SSAR
May be Exercised	May be Exercised

4. Exercisability. To the extent that the SSAR has become exercisable with respect to a number of Shares, as provided herein, the SSAR may thereafter be exercised by the Recipient either as to all or any part of such Shares at any time or from time-to-time prior to expiration or other termination of the SSAR. Except as provided in sections 4 and 5 hereof, the SSAR may not be exercised at any time unless the Recipient shall be an employee of the Company or a Subsidiary (an “Employee”) at such time. So long as the Recipient shall continue to be an Employee, the SSAR shall not be affected by (a) any temporary leave of absence approved in writing by the Company or one of its Subsidiaries, or (b) any change of duties or position (including transfer to or from a Subsidiary).

     If the Recipient ceases to be an Employee by reason of his Retirement, the SSAR shall be deemed Vested with respect to all Shares then subject to the SSAR, and the Recipient’s right to exercise the SSAR shall terminate upon the last day of the term of the SSAR.

     If the Recipient ceases to be an Employee due to his Disability, the SSAR shall be deemed Vested with respect to all Shares then subject to the SSAR, and the Recipient’s right to exercise the SSAR shall terminate upon

the earlier of the date that is one (1) year from the date of such cessation of employment or the last day of the term of the SSAR.

     If the Recipient ceases to be an Employee by reason of his termination for Cause, this SSAR shall terminate immediately upon such termination.

     If the Recipient ceases to be an Employee for any reason other than his death, Disability, Retirement, or termination for Cause, the SSAR may be exercised only to the extent of the exercise rights, if any, which had accrued as of the date of such cessation pursuant to section 3 hereof and which have not theretofore been exercised; provided, however, that upon written request, the Committee may in its absolute discretion determine (but shall be under no obligation to determine) that such accrued exercise rights shall be deemed to include additional Shares covered by the SSAR. Upon any such cessation of employment, such accrued exercise rights shall in any event terminate upon the earlier of the date that is ninety (90) days from the date of such cessation of employment or the last day of the term of the SSAR.

     Nothing contained in this Agreement shall confer upon the Recipient any right to continue in the employ of the Company or any of its Subsidiaries, or to limit or interfere in any way with the right of the Company or any such Subsidiary to terminate his employment at any time, with or without Cause.

5. Death of Recipient. If the Recipient dies while an Employee, such person or persons as shall have acquired, by will or by the laws of descent and distribution, the right to exercise the SSAR (the “Personal Representative”) shall be entitled to exercise the SSAR as to all of the Shares then subject to the SSAR. Such exercise rights shall terminate upon the earlier of the date one (1) year from the date of the Recipient’s death or the last day of the term of the SSAR. If the Recipient dies during the two (2) year period following his date of Retirement, the Personal Representative shall be entitled to exercise the SSAR, and such SSAR shall remain exercisable until the later of the last day of such two (2) year period or one (1) year from the date of the Recipient’s death, but in no event shall the SSAR be exercisable after the last day of the term of the SSAR. If the Recipient dies during the one (1) year period commencing on the date of his termination due to his Disability, the Personal Representative shall be entitled to exercise the SSAR, and such SSAR shall remain exercisable until one (1) year from the date of such death, but in no event shall the SSAR be exercisable after the last day of the term of the SSAR.

6. Vesting Acceleration and Waiver of Terms and Conditions. Upon a Change in Control, this SSAR shall become fully exercisable as to all Shares then subject to the SSAR. The Committee also has the power and authority to waive or accelerate the vesting provisions of the SSAR, or to waive or modify

the other terms and conditions of and restrictions and limitations on the SSAR, provided such waiver or modification is not inconsistent with the terms of the Plan and any operative employment agreement.

     Method of Exercise. The SSAR may be exercised by delivery to the Secretary or Assistant Secretary of the Company at its principal office, 28925 Fountain Parkway, Solon, Ohio 44139, of a completed Notice of Exercise of SSAR (obtainable from the Secretary or Assistant Secretary of the Company) by or on behalf of the person entitled to exercise the SSAR, setting forth the number of Shares with respect to which the SSAR. The SSAR will be settled in shares of the Company’s Common Stock, net of the Exercise Price and any required tax withholding.

7. Issuance of Shares. Upon receipt by the Company prior to expiration of the SSAR of a duly completed Notice of Exercise of SSAR and, with respect to any SSAR exercised by any person other than the Recipient, by proof satisfactory to the Committee of the right of such person to exercise the SSAR, and subject to section 9 hereof, the Company shall deliver to the Recipient the net number of Shares derived after accounting for the Exercise Price and any required tax withholding. The Recipient or such other person exercising the SSAR shall not have any of the rights of a shareholder with respect to the Shares covered by the SSAR until such Shares are delivered to the Recipient or such other person exercising the SSAR.

8. Regulatory Compliance. The Recipient hereby agrees that the Company shall not be obligated to issue any Shares upon exercise of the SSAR if such issuance would cause the Company to violate any federal or state law or any rule, regulation, order or consent decree of any regulatory authority (including without limitation the Securities and Exchange Commission and The Nasdaq Stock Market) having jurisdiction over the affairs of the Company. The Recipient agrees that the Recipient will provide the Company with such information as is reasonably requested by the Company or its counsel to determine whether the issuance of Shares complies with the provisions of this section.

9. Investment Representation of Recipient.

     (a) The Recipient represents to the Company that the Recipient understands that, unless at the time of exercise of the SSAR a registration statement under the Securities Act of 1933, as amended, is in effect covering the Shares, as a condition to the exercise of the SSAR the Company may require the Recipient to represent that the Recipient is acquiring the Shares for the Recipient’s own account only and not with a view to, or for sale in connection with, any distribution of the Shares.

     (b) The Recipient understands and agrees that the certificate or certificates representing any Shares acquired hereunder may bear an appropriate legend relating to registration and resale under federal and state securities laws.

10. Notification of Disposition of Shares. The Recipient agrees that if he or she should dispose of any Shares acquired upon the exercise of this SSAR, including a disposition by sale, exchange, gift or transfer of legal title, within two (2) years after the date such SSAR was granted to the Recipient or within one (1) year after the transfer of such Shares to the Recipient upon the exercise of such SSAR, the Recipient shall notify the Company within three (3) days after such disposition.

11. Binding Agreement; Transferability. This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company and the heirs, estate and Personal Representatives of the Recipient. The SSAR shall not be transferable other than by will or the laws of descent and distribution, and the SSAR may be exercised during the lifetime of the

Recipient only by the Recipient (or such other person as may be permitted to exercise an SSAR on behalf of the Recipient).

12. Plan Controls. This Agreement is subject to all of the terms, conditions, and provisions of the Plan as amended from time-to-time, and to such rules, regulations, and interpretations of the Plan as may be adopted by the Committee and in effect from time-to-time. In the event and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed above on its behalf by the executive officer thereunto duly authorized, and the Recipient has hereunto below set his hand, all as of the day and year first above written.

(Signature of Recipient)

EX-21

Exhibit 21

SUBSIDIARIES OF AGILYSYS, INC.

	State or
	jurisdiction of
	organization or
Subsidiaries of Agilysys, Inc.	incorporation
Agilysys, Inc.		Ohio
Agilysys Canada Inc.		Ontario
Agilysys NV, LLC		Delaware
Agilysys HK Limited		Hong Kong
Agilysys MC Limited		Macau
Agilysys (Europe) Limited		England and Wales
Agilysys NJ, Inc.		New Jersey
Agilysys Singapore Pte. Ltd.		Singapore
Triangle Hospitality Solutions Limited		England

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements of our reports dated June 8, 2009, with respect to the consolidated financial statements and schedule of Agilysys, Inc. and Subsidiaries, and the effectiveness of internal control over financial reporting of Agilysys, Inc. and Subsidiaries included in this Annual Report (Form 10-K) for the year ended March 31, 2009:

—  Registration Statement (Form S-8 No. 333-143994) pertaining to the Agilysys, Inc. 2006 Stock Incentive Plan

—  Registration Statement (Forms S-8 No. 333-64164 and 33-106267) pertaining to the 2000 Stock Option Plan for Outside Directors and 2000 Stock Incentive Plan, as amended, of Agilysys, Inc.

—  Registration Statement (Form S-8 No. 333-07143) pertaining to the 1995 Stock Option Plan for Outside Directors of Agilysys, Inc.

—  Registration Statement (Forms S-8 No. 33-46004 and 33-53329) pertaining to the 1991 Incentive Stock Option Plan of Agilysys, Inc.

—  Registration Statement (Form S-8 No. 333-40750) pertaining to the Retirement Plan of Agilysys, Inc.

/s/  Ernst & Young LLP

Cleveland, Ohio

June 8, 2009

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Martin F. Ellis, certify that:

1. I have reviewed this Annual Report on Form 10-K of Agilysys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 8, 2009

By:  /s/  Martin F. Ellis

Martin F. Ellis

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

I, Kenneth J. Kossin, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Agilysys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 8, 2009

By:  /s/  Kenneth J. Kossin, Jr.

Kenneth J. Kossin, Jr.

Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

I, Martin F. Ellis, President and Chief Executive Officer of Agilysys, Inc. (the “company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of the company for the annual period ended March 31, 2009 as filed with the Securities and Exchange Commission (the “Report”) fully complies (1) with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

Dated: June 8, 2009

By:  /s/  Martin F. Ellis

Martin F. Ellis

President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the company and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.

(1) As explained more fully in this Annual Report on Form 10-K, the Annual Report does not include, as required by the Rule 3-09 of Regulation S-X , the separate financial statements of Magirus AG, a privately owned German company in which the company formerly held a 20% equity interest until the company disposed of such interest on November 15, 2008.

EX-32.2

Exhibit 32.2

Certification

I, Kenneth J. Kossin, Jr., Senior Vice President and Chief Financial Officer of Agilysys, Inc. (the “company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Annual Report on Form 10-K of the company for the annual period ended March 31, 2009 as filed with the Securities and Exchange Commission (the “Report”) fully complies (1) with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company.

Dated: June 8, 2009

By:  /s/  Kenneth J. Kossin Jr.

Kenneth J. Kossin, Jr.

Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the company and will be retained by the company and furnished to the Securities and Exchange Commission or its staff upon request.

(1) As explained more fully in this Annual Report on Form 10-K, the Annual Report does not include, as required by the Rule 3-09 of Regulation S-X , the separate financial statements of Magirus AG, a privately owned German company in which the company formerly held a 20% equity interest until the company disposed of such interest on November 15, 2008.