Edgar Filing: AGILYSYS INC

Preliminary Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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Exchange Act of 1934 (Amendment No. )

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¨		Definitive Proxy Statement
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Agilysys, Inc.

(Name of Registrant as Specified In Its Charter)

n/a

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)


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	(4)	Proposed maximum aggregate value of transaction:
		The purchase price payable under the purchase agreement is $64 million, subject to a possible adjustment as set forth in the purchase agreement. Solely for purposes of calculating the filing fee, the registrant estimates a purchase price of $64 million.


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Preliminary Copy

LOGO

28925 FOUNTAIN PARKWAY, SOLON, OHIO 44139

June [ ], 2011

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of Agilysys, Inc., which will be held at 8:30 a.m., local time, on July 28, 2011, at our headquarters, 28925 Fountain Parkway, Solon, Ohio 44139. Your Board of Directors and management look forward to meeting with you.

At the Annual Meeting, we are seeking your authorization for an important transaction. We agreed to sell our Technology Solutions Group business segment (the “TSG Business”) to OnX Acquisition LLC and OnX Enterprise Solutions Limited, pursuant to a Stock and Asset Purchase Agreement, dated as of May 28, 2011. In accordance with the terms and conditions of the Purchase Agreement, we will sell the TSG Business for an aggregate purchase price of $64 million, subject to a possible working capital adjustment as set forth in the Purchase Agreement. The full text of the Purchase Agreement is included as Annex A to the Proxy Statement that accompanies this letter.

Additionally, at the Annual Meeting, we are seeking your approval on several important corporate governance matters, as well as several compensation matters, including two compensation plans. All of the matters to be addressed at the Annual Meeting are included in the Notice of Annual Meeting of Shareholders that follows this letter. As there are numerous, detailed matters for you to consider, we strongly encourage you to read the entire Proxy Statement and all of the Annexes to the Proxy Statement, including the Purchase Agreement, as the Purchase Agreement will be the legal governing document setting forth the terms of sale of the TSG Business.

After careful consideration, our Board of Directors unanimously determined that all of the matters proposed at the Annual Meeting are in the best interests of the Company and our shareholders; and, therefore, unanimously recommends that you vote “FOR” the authorization and approval of all matters included in the Notice of Annual Meeting of Shareholders. Certain shareholders have agreed to vote “FOR” the authorization of the sale of the TSG Business as discussed in the Proxy Statement.

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting, it is important that your shares are represented and voted at the Annual Meeting. In particular, several of the matters require the affirmative vote of the holders of two-thirds of our outstanding common shares for approval, including authorization of the sale of the TSG Business, and failure to vote on these matters will have the same effect as a vote “AGAINST” such matters. Accordingly, please sign, date, and mail the enclosed proxy card in the envelope provided at your earliest convenience.

Thank you for your cooperation and continued support.

Keith M. Kolerus

Chairman of the Board

LOGO

28925 FOUNTAIN PARKWAY, SOLON, OHIO 44139

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The Annual Meeting of Shareholders of Agilysys Inc. will be held at our headquarters, 28925 Fountain Parkway, Solon, Ohio 44139, on July 28, 2011, at 8:30 a.m., local time, for the following purposes:

To authorize the sale of the Company’s Technology Solutions Group business segment to OnX Acquisition LLC and OnX Enterprise Solutions Limited (together, the “Purchasers”) pursuant to the terms and conditions of the Stock and Asset Purchase Agreement dated as of May 28, 2011, by and among Agilysys, Inc., Agilysys Technology Solutions Group, LLC, and the Purchasers (Proposal 1);

To approve an amendment to the Company’s Amended Code of Regulations (“Regulations”) to reduce the required number of Directors to a minimum of three and maximum of nine (Proposal 2);

If Proposal 2 is approved, to approve an amendment to the Company’s Regulations to reduce the number of Board classes from three to two (Proposal 3);

If both Proposals 2 and 3 are approved, to elect one Director for a two-year term expiring at the 2013 Annual Meeting (Proposal 4);

If Proposal 3 is not voted on or is not approved, to elect three Directors to hold office for terms expiring at the 2014 Annual Meeting (Proposal 5);

To approve an amendment to the Company’s Amended Articles of Incorporation (“Articles”) to delete Article that states that amendments to the Regulations may only be authorized by shareholders (Proposal 6);

If Proposal 6 is approved, to approve an amendment to the Company’s Regulations to authorize the Board of Directors to amend the Regulations to the extent permitted by Ohio General Corporation Law (Proposal 7);

To vote, on a non-binding advisory basis, to approve executive compensation (Proposal 8);

To vote, on a non-binding advisory basis, on the frequency of future advisory votes on executive compensation (Proposal 9);

10.

To approve the Agilysys, Inc. 2011 Stock Incentive Plan (Proposal 10);

11.

To approve the Agilysys, Inc. Annual Incentive Plan (Proposal 11);

12.

To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm (Proposal 12);

13.

To approve adjournments or postponements of the Annual Meeting, if necessary, to permit the solicitation of additional proxies if there are not sufficient votes at the time of the Annual Meeting to establish a quorum or to approve the above proposals (Proposal 13); and

14.

To transact such other business as may properly come before the Annual Meeting or any adjournments thereof.

The foregoing matters are more fully described in the Proxy Statement accompanying this Notice. Only shareholders of record at the close of business on June 14, 2011 are entitled to notice of the Annual Meeting and to vote at the Annual Meeting.

By Order of the Board of Directors,

Kathleen A. Weigand

General Counsel, Secretary and

Senior Vice President – Human Resources

June [ ], 2011

IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE PROXY CARD AND MAIL IT PROMPTLY TO ENSURE REPRESENTATION OF YOUR SHARES AT THE ANNUAL MEETING.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on July 28, 2011: The Proxy Statement and 2011 Annual Report to Shareholders and Form 10-K for the fiscal year ended March 31, 2011 are available at www.agilysys.com.

TABLE OF CONTENTS


SUMMARY TERM SHEET			2

Parties to the TSG Sale (Page )			2

Agilysys, Inc.			2

OnX LLC and OnX Limited			2

The Annual Meeting (Page )			3

Date, Time and Place of the Annual Meeting (Page )			3

Purpose			3

Record Date, Voting and Quorum and Required Vote (Page )			3

Effect of Abstentions and Broker Non-Votes on Voting (Page )			4

Revocability of Proxies (Page )			4

The TSG Sale			4

The TSG Sale (Page )			4

Reasons for the TSG Sale (Page )			5

Voting Requirement and Recommendation of Our Board of Directors (Page )			5

Opinion of Our Financial Advisor (Page and Annex B)			5

Proceeds from the TSG Sale (Page )			6

Effects of the TSG Sale (Page )			6

Other Agreements and Transactions Related to the TSG Sale (Page )			6

Interests of Our Directors and Executive Officers in the TSG Sale (Page )			6

Dissenters’ Rights (Page )			6

Material U.S. Federal, State and Foreign Income Tax Consequences (Page )			7

Regulatory Matters (Page )			7

Purchase Agreement (Page and Annex A)			7

General (Page )			7

No Solicitation (Page )			7

Conditions to Completion of the TSG Sale (Page )			8

Termination of the Purchase Agreement and Termination Fees (Page )			8

QUESTIONS AND ANSWERS			9

The Annual Meeting			9

The TSG Sale			11

PROPOSAL 1 — TO AUTHORIZE THE SALE OF THE COMPANY’S TECHNOLOGY SOLUTIONS GROUP			13

Background of the TSG Sale			13

Reasons for the TSG Sale			17



Recommendation of Our Board of Directors			20

Opinion of Our Financial Advisor			21

Other Agreements and Transactions Related to the TSG Sale			26

Transition Services Agreement			26

Non-Compete Agreement			26

Post-Closing Business and Proceeds from the TSG Sale			26

Interests of our Directors and Executive Officers in the TSG Sale			27

Vesting of Equity Awards Under the 2006 Stock Incentive Plan			27

Bonus Payments to Executive Officers			28

Martin Ellis’ Change of Control and Non-Competition Agreements			28

Employment and Retention Agreements			28

Dissenters’ Rights			29

Accounting Treatment of the TSG Sale			31

Financing; Source and Amount of Funds			31

Material U.S. Federal, State and Foreign Income Tax Consequences			31

Regulatory Matters			31

FINANCIAL PROJECTIONS			31

SPECIAL RISK CONSIDERATIONS			33

Special Risk Considerations Regarding the Proposal to Sell the TSG Business			33

Special Risk Considerations Regarding the Remaining HSG and RSG Business Assuming the TSG Business is Sold			34

THE PURCHASE AGREEMENT			35

General			36

Closing			36

Representations and Warranties			36

Indemnifications			38

Covenants and Agreements			38

Conduct of TSG Business			38

No Solicitation			39

Access to Information			41

Further Assurances; Reasonable Best Efforts			41

Shareholder Authorization			42

Expenses; Transfer Taxes			42

Employee Matters			42

Names Following Closing			43



Additional Agreements			44

Conditions to Completion of the TSG Sale			44

Termination			45

Termination Fee			46

Amendment			46

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA			47

UNAUDITED PRO FORMA FINANCIAL STATEMENTS			48

NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS			54

UNAUDITED FINANCIAL STATEMENTS OF THE TSG BUSINESS			55

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS OF THE TSG BUSINESS			59

CORPORATE GOVERNANCE			69

Corporate Governance Guidelines			69

Code of Business Conduct			69

Director Independence			69

Director Attendance			70

Shareholder Communication with Directors			70

Committees of the Board			70

Board Leadership			73

Risk Oversight			73

Compensation Committee Interlocks and Insider Participation			73

DIRECTOR COMPENSATION			74

PROPOSAL 2 — AMENDMENT OF THE COMPANY’S REGULATIONS TO REDUCE THE NUMBER OF DIRECTORS			75

PROPOSAL 3 — AMENDMENT OF THE COMPANY’S REGULATIONS TO REDUCE THE NUMBER OF BOARD CLASSES FROM THREE TO TWO			77

PROPOSAL 4 — ELECTION OF ONE DIRECTOR			77

PROPOSAL 5 — ELECTION OF THREE DIRECTORS			78

DIRECTOR NOMINEES			78

CONTINUING DIRECTORS			79

PROPOSAL 6 — AMENDMENT OF THE COMPANY’S ARTICLES TO PERMIT THE BOARD TO AMEND THE REGULATIONS			81

PROPOSAL 7 — AMENDMENT OF THE COMPANY’S REGULATIONS TO AUTHORIZE THE BOARD TO AMEND THE REGULATIONS			82

BENEFICIAL OWNERSHIP OF COMMON SHARES			84

iii



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			87

COMPENSATION DISCUSSION AND ANALYSIS			87

Compensation Highlights			87

Compensation Philosophy, Objectives, and Structure			88

Compensation Key Considerations			89

Corporate Peer Group			91

Fiscal Year 2011 Compensation			92

Fiscal Year 2012 Leadership			98

Supplemental Compensation and Benefits			98

Change of Control and Employment			99

Additional Compensation Policies			100

COMPENSATION COMMITTEE REPORT			102

RELATIONSHIP WITH COMPENSATION COMMITTEE CONSULTANT			102

EXECUTIVE COMPENSATION			103

Summary Compensation Table			103

Grants of Plan-Based Awards			106

Outstanding Equity Awards			108

Option Exercises and Stock Vested			109

Retirement Benefits			110

Nonqualified Deferred Compensation Plan			110

Termination and Change of Control			111

PROPOSAL 8 — ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION			116

PROPOSAL 9 — ADVISORY VOTE REGARDING FREQUENCY OF ADVISORY VOTE REGARDING EXECUTIVE COMPENSATION			117

EQUITY COMPENSATION PLAN INFORMATION			118

PROPOSAL 10 — APPROVAL OF AGILYSYS, INC. 2011 STOCK INCENTIVE PLAN			119

Summary of the Stock Plan			119

New Stock Plan Benefits			123

Certain Federal Tax Consequences with Respect to Awards			123

PROPOSAL 11 — APPROVAL OF AGILYSYS, INC. ANNUAL INCENTIVE PLAN			124

Summary of the Incentive Plan			125

New Incentive Plan Benefits			126

AUDIT COMMITTEE REPORT			126

PROPOSAL 12 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			127



RELATED PERSON TRANSACTIONS			128

PROPOSAL 13 — TO APPROVE ADJOURNMENTS OR POSTPONEMENTS OF THE ANNUAL MEETING			129

OTHER MATTERS			129

PROXY SOLICITATION			129

SHAREHOLDER PROPOSALS			129

ADDITIONAL INFORMATION			130

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION			130

Annex A — Stock and Asset Purchase Agreement			A-1

Annex B — Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated			B-1

Annex C — Ohio Revised Code § 1701.85			C-1

Annex D — Agilysys, Inc. 2011 Stock Incentive Plan			D-1

Annex E — Agilysys, Inc. Annual Incentive Plan			E-1

LOGO

28925 FOUNTAIN PARKWAY, SOLON, OHIO 44139

PROXY STATEMENT

FOR THE ANNUAL MEETING OF SHAREHOLDERS

JULY 28, 2011

This Proxy Statement and the enclosed proxy card are being provided in connection with the solicitation by the Board of Directors of Agilysys, Inc. to be used at the Annual Meeting on July 28, 2011, and any adjournments or postponement of the Annual Meeting. The time, place, and purposes of the Annual Meeting are stated in the Notice of Annual Meeting of Shareholders that is provided with this Proxy Statement. Without affecting any vote previously taken, a shareholder may revoke his, her, or its vote by giving written notice to the Company’s Secretary at any time before the final vote on a matter is taken at the Annual Meeting. Unless revoked, common shares of the Company represented by a valid proxy card (or other valid form of proxy) received in time for voting will be voted according to the directions given on the proxy card.

This Proxy Statement, the enclosed proxy card, and our 2011 Annual Report to Shareholders and Form 10-K for the fiscal year ended March 31, 2011 (“2011 Annual Report”) are first being mailed to shareholders and made available electronically on our website at www.agilysys.com, under Investor Relations, beginning on or about June [ ], 2011. Our 2011 Annual Report is not incorporated into this Proxy Statement and shall not be considered proxy solicitation material. If you wish to have additional copies of our 2011 Annual Report, we will mail copies to you without charge. Requests may be sent to: Agilysys, Inc., Attn: Investor Relations, 28925 Fountain Parkway, Solon, Ohio 44139, or you may request copies through our website, under Investor Relations. These documents have been filed with the Securities and Exchange Commission and also may be accessed from its website at www.sec.gov.

Holders of our common shares can vote at the Annual Meeting. At the close of business on June 14, 2011, the record date fixed for purpose of determining which shareholders can vote at the Annual Meeting (the “Record Date”), there were 22,993,135 common shares outstanding and entitled to vote at the Annual Meeting. Each share is entitled to one vote. References within this Proxy Statement to our “common shares” or “shares” refer to our common shares, without par value, our only class of outstanding shares.

In this Proxy Statement the terms “Agilysys,” “Company,” “we,” “our,” “ours,” and “us” refer to Agilysys, Inc., an Ohio corporation, and its subsidiaries. The term “Agilysys LLC” refers to Agilysys Technology Solutions Group, LLC, a Delaware limited liability company and wholly owned subsidiary of Agilysys. The term “Purchase Agreement” refers to the Stock and Asset Purchase Agreement, dated as of May 28, 2011, by and between Agilysys, Agilysys LLC, OnX LLC and OnX Limited, and as it may be amended, restated, modified or superseded from time to time in accordance with its terms. The terms “TSG Business” or “TSG” refer to the Company’s Technology Solutions Group business segment as further described in the Purchase Agreement. The terms “HSG Business” or HSG refer to the Company’s Hospitality Solutions Group business segment and the terms “RSG Business” or RSG refer to the Company’s Retail Solutions Group business segment (together with HSG Business, “HSG and RSG Businesses”). The term “TSG Sale” refers to the proposed sale of the TSG Business pursuant to the Purchase Agreement. The term “OnX LLC” refers to OnX Acquisition LLC, a Delaware limited liability company. The term “OnX Limited” refers to OnX Enterprise Solutions Limited, an Ontario company. The terms “Purchaser” or “Purchasers” refer collectively to OnX LLC and OnX Limited (and also Marlin Equity Partners for purposes of discussing the “Background of the TSG Sale” and “Reasons for the TSG Sale” on pages [ ] and for purposes of the opinion of our financial advisor on pages [ ]). Each of Agilysys and Purchasers are sometimes referred to in this Proxy Statement as a “party,” or collectively as the “parties.”

SUMMARY TERM SHEET

(REGARDING THE TSG SALE)

This summary highlights selected information from this Proxy Statement about the TSG Sale (Proposal 1) and about the Annual Meeting. This summary may not contain all the information that is important to you regarding the TSG Sale or the Annual Meeting. You should carefully read the entire Proxy Statement and the other documents to which we have referred you. See “Additional Information” on page [ ]. Each item in this summary refers to the page of this Proxy Statement on which the applicable subject is discussed in more detail.

Parties to the TSG Sale

Agilysys, Inc.

Agilysys is a leading developer and marketer of proprietary enterprise software, services, and solutions to the hospitality and retail industries. The Company specializes in market-leading point-of-sale, property management, inventory and procurement, and mobile and wireless solutions that are designed to streamline operations, improve efficiency, and enhance the consumer’s experience. The Company serves casinos, resorts, hotels, food service venues, stadiums, cruise lines, grocery stores, convenience stores, and general and specialty retail businesses, and partners. Headquartered in Cleveland, Ohio, the Company operates extensively throughout North America, with additional sales and support offices in the United Kingdom, Singapore, and Hong Kong. We have agreed to sell our TSG Business pursuant to the Purchase Agreement. For more information please visit our website at www.agilysys.com. Our common shares are listed on The NASDAQ Global Select Market under the symbol “AGYS.” Our common shares will continue to be listed under the symbol “AGYS” whether or not the TSG Sale is consummated.

Agilysys is an Ohio corporation. Our principal executive office is located at 28925 Fountain Parkway, Solon, Ohio 44139. Our telephone number is (440) 519-8700.

OnX LLC and OnX Limited

OnX LLC, a newly formed Delaware limited liability company and a subsidiary of Marlin Equity Partners (“Marlin Equity”), was formed by Marlin Equity solely for the purpose of entering into the Purchase Agreement and consummating the transactions contemplated thereby. OnX LLC has not engaged in any business except for the activities incident to its formation and in connection with the transactions contemplated by the Purchase Agreement. OnX LLC’s principal executive office is located at 2121 Rosecrans Avenue, Suite 4325, El Segundo, CA 90245. Its telephone number is (310) 364-0100.

OnX Limited, an Ontario company and a portfolio company of Marlin Equity, is a leading IT solutions provider focused on designing and delivering mission critical data center solutions. OnX Limited offers a broad range of core solutions including specialized offerings in professional services, hardware and software solutions, managed services and digital services. OnX Limited was founded in 1983 and has been recognized as one of Canada’s 50 best managed companies for three consecutive years. OnX Limited’s principal executive office is located at 155 Commerce Valley Drive, E, Thornmill, Ontario L3T 7T2. Its telephone number is (905) 482-2292.

Marlin Equity is a leading private investment firm with over $1 billion of capital under management. The firm is focused on providing corporate parents, shareholders, and other stakeholders with tailored solutions that meet their business and liquidity needs. Marlin Equity primarily invests in businesses where its capital base, extensive network of operational resources, and industry relationships will strengthen a company’s operating and financial performance. Marlin Equity’s principal executive office is located at 2121 Rosecrans Avenue, Suite 4325, El Segundo, CA 90245. Its telephone number is (310) 364-0100.

The Annual Meeting

Date, Time and Place of the Annual Meeting (Page [ ])

The Annual Meeting will be held at 8:30 a.m., local time, on July 28, 2011, at our headquarters, 28925 Fountain Parkway, Solon, Ohio 44139.

Purpose (Page [ ])

You will be asked to consider and vote upon proposals to (i) authorize the TSG Sale (Proposal 1), (ii) approve amendments to our Articles and Regulations (Proposals 2, 3, 6 and 7), (iii) elect Directors (Proposals 4 and 5), (iv) approve an annual incentive plan and an equity incentive plan (Proposals 10 and 11), (v) approve, on a non-binding basis, our executive compensation and the frequency of future advisory votes on executive compensation (Proposals 8 and 9), and (vi) to ratify the appointment of our independent registered public accounting firm (Proposal 12). You may also be asked to approve any proposals to adjourn or postpone the Annual Meeting (Proposal 13), if necessary, to permit the solicitation of additional proxies if there are not sufficient votes at the time of the Annual Meeting to establish a quorum or to authorize the TSG Sale or any other proposal.

Record Date, Voting and Quorum and Required Vote (Page [ ])

You are entitled to vote at the Annual Meeting if you owned our common shares at the close of business on June 14, 2011, the Record Date for the Annual Meeting. You will have one vote for each common share that you owned on the Record Date. As of the Record Date, there were 22,993,135 common shares outstanding and entitled to vote. On all matters, each share has one vote.

A quorum of the holders of the outstanding common shares must be present for the Annual Meeting to be held. A quorum consists of the holders of record of a majority of shares entitled to vote at the Annual Meeting, present in person or represented by proxy. If a quorum is not present, the Annual Meeting will be adjourned or postponed until the holders of the number of votes required to constitute a quorum attend. If you submit a properly executed proxy card, even if you abstain from voting, your common shares will be counted for the purpose of determining whether a quorum is present at the Annual Meeting.

The affirmative vote of the holders of at least two-thirds of the issued and outstanding common shares of the Company is required to authorize or approve the (i) TSG Sale (Proposal 1), and (ii) amendments to our Articles and Regulations (Proposals 2, 3, 6 and 7). Additionally, approval of the reduction in number of Board classes (Proposal 3) requires the affirmative vote of a majority of disinterested shares voted.

Directors will be elected if they receive the greatest number of votes cast at the Annual Meeting by shareholders present and in person or represented by proxy and entitled to vote (Proposals 4 and 5).

The affirmative vote of the holders of shares representing a majority of the common shares present in person or represented by proxy and entitled to vote is required (i) to approve the non-binding vote on executive compensation (Proposal 8), (ii) to approve the annual incentive plan and equity incentive plan (Proposals 10 and 11), (iii) to ratify the appointment of our independent registered public accounting firm (Proposal 12), and (iv) to adjourn or postpone the Annual Meeting (Proposal 13), if necessary.

The option of one year, two years, or three years that receives the highest number of votes cast by shareholders present in person or represented by proxy and entitled to vote will be the frequency for the advisory vote on executive compensation selected by shareholders (Proposal 9).

More information about the vote required to authorize or approve each proposal is described in the discussion of each proposal and, for the TSG Sale, additional information is provided below in this Summary.

Effect of Abstentions and Broker Non-Votes on Voting (Page [ ])

Abstentions will have the same effect as a vote “AGAINST” all proposals, except the Director elections and the vote on the frequency vote for executive compensation, for which abstentions will have no effect.

Generally, a broker, bank, or other nominee may only vote the common stock that it holds in street name for you in accordance with your instructions. However, if your broker, bank or other nominee has not received your instructions, your broker, bank, or other nominee has the discretion to vote on certain matters that are considered routine. A “broker non-vote” occurs if your broker, bank, or other nominee cannot vote on a particular matter because your broker, bank, or other nominee has not received instructions from you and because the proposal is not routine. All of the proposals are non-routine except the proposals to (i) ratify the appointment of our independent registered public accounting firm (Proposal 12), and (ii) adjourn or postpone the Annual Meeting (Proposal 13), if necessary, to permit the solicitation of additional proxies for any proposal except the TSG Sale (for which such adjournment or postponement would be a non-routine proposal). For Proposals 1, 2, 3, 6 and 7 a broker non-vote is the same as a vote “AGAINST” each proposal. For Proposals 4, 5, 8, 9, 10, 11 and 13 a broker non-vote will have no effect.

If you wish to vote on any proposal to approve adjournments or postponements of the Annual Meeting (Proposal 13), you should provide instructions to your broker, bank or other nominee. If you do not provide instructions to your broker, bank or other nominee, your broker, bank, or other nominee generally will have the authority to vote on proposals such as the adjournment or postponement of meetings. However, your broker, bank, or other nominee will not be authorized to vote on any proposal to adjourn or postpone the meeting solely relating to the solicitation of proxies to authorize the TSG Sale.

Revocability of Proxies (Page [ ])

Any registered shareholder who executes and returns a proxy card may revoke the proxy at any time before it is voted in any one of the following ways:

•

Delivering to our principal offices (Attention: Secretary) a written instrument that revokes the proxy;

•

Submitting another properly completed proxy with a later date; or

•

Attending the Annual Meeting and voting in person.

Simply attending the Annual Meeting will not constitute revocation of a proxy. If you are not a registered shareholder and you instructed your broker to vote your shares, the above-described options for revoking your proxy do not apply and instead you must follow the directions provided by your broker to change your instructions.

The TSG Sale

The TSG Sale (Page [ ])

On May 27, 2011, our board of directors, at a meeting duly called and held, unanimously authorized the TSG Sale pursuant to the Purchase Agreement, a copy of which is included as Annex A to this Proxy Statement. Please read it carefully. Pursuant to the terms of the Purchase Agreement:

•

We agreed to sell the TSG Business to Purchasers; and

•

In exchange for the TSG Business, Purchasers agreed to make a cash payment to us in the amount of $64 million, subject to a possible working capital adjustment as set forth in the Purchase Agreement and more fully described below under “The Purchase Agreement — General” on page [ ].

If all necessary approvals have been obtained or waived, including shareholder authorization and any third party consents, we hope to complete the TSG Sale shortly after this Annual Meeting.

Reasons for the TSG Sale (Page [ ])

In evaluating the TSG Sale, our Board of Directors considered, among other things, its consultations with our management and external legal and financial advisors and various other factors. For the material factors considered by our Board of Directors in reaching its decision to authorize the TSG Sale, see “The TSG Sale — Reasons for the TSG Sale” on page [ ].

Voting Requirement and Recommendation of Our Board of Directors (Page [ ])

The proposal to authorize the TSG Sale requires the affirmative vote of the holders of two-thirds of the common shares outstanding as of the Record Date.

After careful consideration, our Board of Directors has unanimously:

•

Authorized the TSG Sale; and

•

Determined the TSG Sale to be in the best interests of the Company and our shareholders, and recommended to our shareholders that they authorize the TSG Sale and other transactions contemplated by the Purchase Agreement.

A shareholder group, consisting of MAK Capital Fund LP and Sunrise Partners Limited Partnership (the “MAK Shareholders”), entered into a voting agreement with OnX LLC, dated May 28, 2011 (the “Voting Agreement”), pursuant to which the MAK Shareholders agreed to vote in favor of the TSG Sale, subject to the limitations set forth in the Amended and Restated Voting Trust Agreement dated May 31, 2011, by and between MAK Capital and Computershare Trust Company, N.A. (the “Voting Trust Agreement”). The Voting Trust Agreement provides that, for a strategic transaction, including the TSG Sale, Computershare Trust Company must vote the MAK Shareholders’ shares that exceed 20% of the outstanding common shares in favor of, against, or abstaining from voting in the same proportion as all other shares voted by all shareholders (including MAK Capital’s shares that do not exceed the 20% threshold) (the “Voting Trust Agreement Limitations”). As of the Record Date, the MAK Shareholders held 7,056,934 shares, of which 4,598,627 shares will be voted to authorize the TSG Sale and 2,458,307 shares will be voted in the same proportion as all other shares voted by the shareholders, including the 4,598,627 shares.

Opinion of Our Financial Advisor (Page [ ] and Annex B)

In connection with the TSG Sale, Agilysys’ financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“BofA Merrill Lynch”), delivered a written opinion, dated May 27, 2011, to Agilysys’ Board of Directors as to the fairness, from a financial point of view and as of the date of the opinion, to Agilysys of the $64 million aggregate consideration to be received by Agilysys in the TSG Sale. The full text of BofA Merrill Lynch’s written opinion, dated May 27, 2011, to Agilysys’ Board of Directors, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached to this proxy statement as Annex B. BofA Merrill Lynch delivered its opinion to Agilysys’ Board of Directors for the benefit and use of Agilysys’ Board of Directors (in its capacity as such) in connection with and for purposes of its evaluation of the aggregate consideration from a financial point of view. BofA Merrill Lynch’s opinion did not address any other aspect of the TSG Sale and no opinion or view was expressed as to the relative merits of the TSG Sale in comparison to other strategies or transactions that might be available to Agilysys or with respect to TSG or in which Agilysys might engage or as to the underlying business decision of Agilysys to proceed with or effect the TSG Sale. BofA Merrill Lynch also expressed no opinion or recommendation as to how any shareholder should vote or act in connection with the TSG Sale or any related matter.

Proceeds from the TSG Sale (Page [ ])

We will use the proceeds of this sale to fund working capital needs and to make select investments in our higher-margin and higher-growth HSG and RSG Businesses and to return excess cash to shareholders as prudently as possible. While we may use a portion of the net cash proceeds from the TSG sale for future acquisitions complementary to our HSG and RSG Businesses, no specific acquisition targets have been identified. If we have adequate working capital and establish adequate cash reserves without using all of our cash, and if we are unable to identify suitable acquisition targets that are appropriately valued, we will consider alternate uses of any excess cash in order to enhance shareholder value.

Effects of the TSG Sale (Page [ ])

If the TSG Sale is authorized by our shareholders and the other conditions to the closing of the TSG Sale are satisfied or waived, Purchasers will acquire the TSG Business. We expect to focus exclusively on our HSG and RSG Businesses following the closing of the TSG Sale. If the TSG Sale is not authorized by the holders of two-thirds of our outstanding shares, then either we or Purchasers may terminate the Purchase Agreement and our Board of Directors, along with our management, will reassess our options in light of our long-term strategic goals.

Other Agreements and Transactions Related to the TSG Sale (Page [ ])

In addition to the Purchase Agreement, we intend to enter into a number of related agreements, including the following:

•

A transition services agreement with OnX LLC pursuant to which we will provide certain transitional, administrative and support services to OnX LLC on a short-term basis;

•

A non-compete agreement with OnX LLC pursuant to which we agreed not to directly or indirectly engage in the TSG business, and pursuant to which OnX LLC agreed, subject to certain limitations, to not engage, directly or indirectly, in business activities that would compete with our HSG and RSG Businesses.

Interests of Our Directors and Executive Officers in the TSG Sale (Page [ ])

In considering the recommendation of our Board of Directors to vote for the proposal to authorize the TSG Sale, you should be aware that some of our Directors and executive officers have personal interests in the TSG Sale that are, or may be, different from, or in addition to, your interests, including:

•

Certain equity awards granted under the 2006 Stock Incentive Plan vested upon announcement of the TSG Sale;

•

The Board of Directors approved certain bonus payments to be paid by the Company to executive officers in connection with the TSG Sale;

•

Severance payments may be made by the Company to certain executive officers if they are terminated following the closing of the TSG Sale; and

•

Retention payments to certain executive officers by the Company may be triggered by the TSG Sale.

All of our Directors and executive officers own common shares and/or options to purchase common shares, and to that extent, their interests in the TSG Sale are the same as that of other shareholders.

Dissenters’ Rights (Page [ ])

Under Ohio law, if you own Agilysys common shares and (i) do not vote to authorize the TSG Sale and (ii) deliver a written demand for payment of the fair cash value of your common shares not later than ten days

after the Annual Meeting, you will be entitled, if and when the TSG Sale is completed, to receive the fair cash value of your common shares. The right as an Agilysys shareholder to receive the fair cash value of the common shares, however, is contingent upon strict compliance by the dissenting shareholder with the procedures set forth in Ohio Revised Code Section 1701.85, a copy of which is attached to this Proxy Statement as Annex C. If you wish to submit a written demand for payment of the fair cash value of your common shares, you should deliver your demand no later than ten days after the Annual Meeting.

Merely voting against the authorization of the TSG Sale will not preserve your dissenters’ rights. Also, the submission of a proxy not marked “AGAINST” or “ABSTAIN” will result in the waiver of your dissenters’ rights. If you hold shares in the name of a broker or other nominee, you must instruct your nominee to take the steps necessary to enable you to demand payment of the fair cash value of your common shares.

You do not have dissenters’ rights on any other proposal to be acted on at the Annual Meeting.

Material U.S. Federal, State and Foreign Income Tax Consequences (Page [ ])

We do not expect to pay taxes on the proceeds from the TSG Sale. The TSG Sale will not result in any material U.S. federal income tax consequences to our shareholders. Agilysys shareholders that exercise dissenters’ rights are urged to consult their tax advisors regarding the tax treatment of any cash received upon the exercise of dissenters’ rights in connection with the TSG Sale.

Regulatory Matters (Page [ ])

The TSG Sale is not subject to review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or any other regulatory approvals.

Purchase Agreement (See Annex A)

General (Page [ ])

Pursuant to the Purchase Agreement, Purchasers agreed to pay us $64 million, subject to a possible working capital adjustment as set forth in the Purchase Agreement, for our TSG Business. The parties provided each other with customary representations and warranties as more fully set forth in the Purchase Agreement. In addition, we agreed to certain covenants, including interim operating covenants which place certain restrictions on the operation of the TSG Business until the TSG Sale closes. In addition, we agreed to enter into a non-competition agreement and a transition services agreement with OnX LLC in connection with the TSG Sale.

No Solicitation (Page [ ])

The Purchase Agreement restricts our ability to solicit or engage in discussions or negotiations with third parties regarding specified transactions involving the TSG Business. Notwithstanding these restrictions, under certain limited circumstances, our Board of Directors may respond to a competing transaction proposal made by a third party, change its recommendation with respect to the TSG Sale or terminate the Purchase Agreement and enter into an alternative agreement, if the proposal constitutes a superior proposal under the criteria and pursuant to the procedures set forth in the Purchase Agreement and after paying the termination fee of $2.25 million in the manner specified in the Purchase Agreement. In addition, pursuant to the Purchase Agreement, we may enter into discussions with third parties regarding a sale of the entire Company (i.e., a sale that includes both the TSG Business and the HSG and RSG Businesses).

Conditions to Completion of the TSG Sale (Page [ ])

Before we can complete the TSG Sale, a number of conditions must be satisfied. See and read carefully “The Purchase Agreement — Conditions to Completion of the TSG Sale” on page [ ]. Neither we nor Purchasers can provide any assurance that all of the conditions will be satisfied or waived or that the TSG Sale will occur, or the timing of the TSG Sale if it occurs.

Termination of the Purchase Agreement and Termination Fees (Page [ ])

The parties may terminate the Purchase Agreement at any time prior to the completion of the TSG Sale by mutual written consent, or either we or Purchasers may terminate the Purchase Agreement under certain specified circumstances. Upon termination of the Purchase Agreement under certain specified circumstances, we may be required to pay a termination fee of $2.25 million to OnX LLC or reimburse OnX LLC and its affiliates up to $1.25 million of their expenses.

QUESTIONS AND ANSWERS

The following briefly responds to some commonly asked questions about this Proxy Statement, the Annual Meeting and the TSG Sale (Proposal 1). These questions and answers may not address all questions that may be important to you as a shareholder. You should carefully read the entire Proxy Statement, including each Annex.

The Annual Meeting

Q:	Why am I receiving this Proxy Statement and Proxy Card?

You are receiving a Proxy Statement and proxy card because you owned common shares as of the Record Date. This Proxy Statement and proxy card are being furnished in connection with the solicitation by the Board of Directors of proxies to be used at the Annual Meeting (and any adjournment or postponement thereof) to be held at 8:30 a.m., local time, on July 28, 2011, at our headquarters at 28925 Fountain Parkway, Solon, Ohio 44139, for the purposes stated in the Notice of Annual Meeting of Shareholders. This Proxy Statement describes all the proposals to be considered at the Annual Meeting. The enclosed proxy card allows you to have your shares voted without attending the Annual Meeting.

Q:	Who may vote at the Annual Meeting?

A:	Holders of record of our common shares at the close of business on the Record Date are entitled to notice of and may vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting.

Q:	What are the voting rights of shareholders?

A:	Each common share outstanding on the Record Date entitles its holder to cast one vote on each matter to be voted upon.

Q:	Who can attend the Annual Meeting?

All holders of our common shares at the close of business on the Record Date, or their duly appointed proxies, are authorized to attend the Annual Meeting. Cameras, recording devices, and other electronic devices will not be permitted at the Annual Meeting. If you hold your common shares in “street name” (that is, through a bank, broker, or other nominee), you will need to bring a copy of the brokerage statement reflecting your share ownership as of the Record Date, or a legal proxy from your bank or broker.

Q:	What will constitute a quorum at the Annual Meeting?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the common shares outstanding at the close of business on the Record Date will constitute a quorum, permitting the shareholders to conduct business at the Annual Meeting. We will include abstentions and broker non-votes in the number of common shares present at the Annual Meeting for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner has not received instructions from the beneficial owner and does not have discretionary authority to vote the shares. As of the Record Date, there were 22,993,135 common shares outstanding.

Q:	What vote is necessary to pass each proposal?

Under Ohio law and our Regulations, if a quorum is present at the Annual Meeting, for Proposals 4 and 5 (the election of Directors) the nominees for election as Directors will be elected as Directors if they receive the greatest number of votes cast at the Annual Meeting by shareholders present in person or represented

by proxy and entitled to vote. Abstentions and broker non-votes will count as votes present for purposes of determining whether a quorum is present at the Annual Meeting. Abstentions and broker non-votes will have no effect on Proposals 4 and 5.

For Proposals 1, 2, 3 and 6 through 13, if a quorum is present, the affirmative vote needed to authorize or approve each proposal is set forth below in the respective discussion accompanying each proposal, including the effect of abstentions and broker non-votes. Each of these proposals, except for Proposal 12 and an adjournment proposal (Proposal 13) not related to the TSG Sale, is a non-routine proposal. If you hold your shares in street name and do not give your broker or nominee instruction as to how to vote your shares with respect these non-routine proposals, under applicable rules, your broker or nominee will not have discretionary authority to vote your shares, in which case such shares will be considered a broker non-vote.

Q:	Why are certain proposals contingent on other proposals?

If shareholders approve reducing the number of required Directors (Proposal 2), the Board can implement such reduction only if the number of Board classes also is reduced (Proposal 3), as Ohio law requires that no Board class contains less than three Directors. Therefore, if Proposal 2 is not approved, Proposal 3 will not be voted upon. Additionally, if Proposal 3 is voted upon, but not approved, it will be necessary to vote on Proposal 5 to elect three Directors to continue with three classes of Directors, as Proposal 4 only is applicable if the number of Directors and Board classes is reduced. Lastly, to amend our Regulations as set forth in Proposal 7, shareholders must first approve Proposal 6 to amend our Articles such that the nature of the amendment in Proposal 6 is permitted. If Proposal 6 is not approved, Proposal 7 will not be voted upon. Please see the chart on page [ ] under the discussion of Proposal 2 for more detail about the contingent nature of the proposals.

Q:	How do I vote?

If you are the record holder of common shares, you or your duly authorized agent may vote by completing and returning the accompanying proxy card, or you may attend the Annual Meeting and vote in person. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described above. Your vote will be counted even if you later decide not to attend.

Q:	What does it mean if I get more than one proxy card?

A:	If you have common shares that are registered differently or are in more than one account, you will receive more than one proxy card. Please follow the directions for voting on each of the proxy cards you receive to ensure that all of your shares are voted.

Q:	How do I vote my common shares if they are held by a bank or broker?

If your common shares are held by a bank or broker, or any other nominee, you must follow the voting instructions provided to you by the bank, broker, or nominee. Although most banks and brokers offer voting by mail, telephone, and on the Internet, availability and specific procedures will depend on their voting arrangements.

Q:	May I revoke or change my vote?

Yes. If you are the record holder of your common shares, you may revoke or change your vote at any time before the final vote on the matter is taken at the Annual Meeting by submitting to our Secretary a notice of revocation or a duly executed proxy card bearing a later date, or by attending the Annual Meeting and voting in person. If your shares are held by a bank, broker, or other nominee, you must contact the bank, broker, or nominee and follow their instructions for revoking or changing your vote.

Q:	How are votes counted?

If the accompanying proxy card is properly signed and returned to us, and not revoked, it will be voted as directed by you. Unless contrary instructions are given, the persons designated as proxy holders on the proxy card will vote “FOR” the election of the Board’s Director nominees in either Proposal 4 or 5, as set forth below in this Proxy Statement, and “FOR” Proposals 1 through 3, 6 through 8, and 10 through 13, and for a one-year frequency for Proposal 9. If any other business is properly brought before the Annual Meeting, your proxy gives discretionary authority to the proxy holders with respect to such business, and the proxy holders intend to vote the proxy as recommended by our Board with regard to any such business, or, if no such recommendation is given, the proxy holders will vote in their own discretion.

Q:	What happens if I cumulate my votes for the election of Directors?

If any shareholder gives written notice not less than 48 hours before the Annual Meeting commences to our Chief Executive Officer or Secretary that he, she, or it wants the voting for the election of Directors to be cumulative, the shareholder giving notice, or a representative of such shareholder, the Chairman, or the Secretary, will make an announcement about such notice at the start of the Annual Meeting. Cumulative voting means that each shareholder may cumulate his, her, or its voting power for the election of Directors by distributing a number of votes, determined by multiplying the number of Directors to be elected at the Annual Meeting times the number of such shareholder’s shares. The shareholder may distribute all of the votes to one individual Director nominee or distribute the votes among two or more Director nominees, as the shareholder chooses.

Q:	How can I determine the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. Within four business days following the Annual Meeting, final results, or preliminary results if final results are unknown, will be announced on a Form 8-K filed with the Securities and Exchange Commission (“SEC”). If preliminary results are announced, final results will be announced on a Form 8-K filed with the SEC within four business days after the final results are known.

Q:	Who should I contact if I have any questions?

A:	If you have any questions about the Annual Meeting or these proxy materials, please contact Investor Relations by telephone at (440) 519.8635, or by email at investorrelations@agilysys.com, or through our website, under Investor Relations.

The TSG Sale

Q:	What is the TSG Sale?

A:	The Purchase Agreement provides for the sale of the TSG Business to Purchasers for a cash payment of $64 million, subject to a possible working capital adjustment as set forth in the Purchase Agreement and more fully described below under “The Purchase Agreement – General” on page [ ].

Q:	Why are we asking for a shareholder vote?

A:	Ohio law requires that an Ohio corporation obtain authorization by its shareholders to sell all, or substantially all, of its assets. The TSG Sale may constitute the sale of substantially all our assets.

Q:	What is the purpose of the TSG Sale?

A:	The purpose of the TSG Sale is to enable us to focus all our resources on and enhance the value of our remaining businesses, the HSG and RSG Businesses, and to increase the funds we have available for reinvestment and for distribution to shareholders.

Q:	What are the estimated net cash proceeds from the TSG Sale?

We currently estimate the net cash proceeds from the TSG Sale to be approximately $60.2 after estimated transaction costs. The actual amount of net cash proceeds from the TSG Sale may vary from this estimate. This estimate does not include, and the actual amount of cash proceeds from the TSG Sale will be reduced by, among other things, up to $3 million of severance costs for non-continuing employees and up to $1.25 million of consulting fees related to transition services.

Q:	How does the Company plan to use the net cash proceeds from the TSG Sale?

Q:	When will the TSG Sale be consummated?

A:	If the shareholders authorize the TSG Sale, we expect to complete the TSG Sale promptly following our Annual Meeting.

Q:	Will the Company continue to be publicly traded following the TSG Sale? Will its NASDAQ ticker symbol change?

A:	The Company will continue to be a publicly traded company whether or not the TSG Sale closes and we will continue to be subject to the rules and regulations of the SEC and the NASDAQ Stock Market. Our NASDAQ ticker symbol will not change and will remain “AGYS”.

Q:	What vote of our shareholders is required to authorize the TSG Sale?

For us to complete the TSG Sale, shareholders holding at least two-thirds of the outstanding common shares at the close of business on the Record Date must vote “FOR” the proposal to authorize the TSG Sale. Your failure to return a proxy card or otherwise vote will have the legal effect of a vote “AGAINST” the authorization of the TSG Sale.

The MAK Shareholders have entered into a voting agreement with OnX LLC pursuant to which the MAK Shareholders have agreed to vote in favor of the TSG Sale, subject to the Voting Trust Agreement Limitations. As of the Record Date, the MAK Shareholders held 7,056,934 shares, of which 4,598,627 shares will be voted to authorize the TSG Sale and 2,458,307 shares will be voted in the same proportion as all other shares voted by the shareholders, including the 4,598,627 shares.

Q:	How does our Board of Directors recommend that I vote?

A:	Our Board of Directors unanimously recommends that you vote “FOR” the proposal to authorize the TSG Sale. See “The TSG Sale — Reasons for the TSG Sale” on page [ ].

Q:	How do the Company’s Directors intend to vote?

A:	All of our Directors have informed us that they intend to vote all of their shares “FOR” authorization of the TSG Sale.

Q:	Am I entitled to appraisal or dissenters’ rights in connection with the TSG Sale?

A:	Yes. Holders of our outstanding common shares may be entitled to seek relief as a dissenting shareholder under Ohio Revised Code Section 1701.85 in connection with the TSG Sale. See “The TSG Sale — Dissenters’ Rights” on page [ ].

Q:	What will happen if the TSG Sale is not authorized?

A:	If the TSG Sale is not authorized, we will not complete the TSG Sale. In that event, we expect to reassess our options in light of our long-term strategic goals. We also may be required to pay a termination fee equal to $2.25 million if the Purchase Agreement is terminated:

•

By us to approve a definitive agreement relating to a superior proposal;

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By OnX LLC because our Board of Directors withdraws or modifies its recommendation regarding the TSG Sale or approves, recommends or enters into a competing transaction or a contingent seller proposal;

•

Following public disclosure or direct delivery to our shareholders of a competing transaction, by OnX LLC or by us because either (i) the closing of the TSG Sale has not occurred by the outside date or (ii) the TSG Sale is not authorized by our shareholders; or

•

By OnX LLC or us because we are in breach of the no solicitation provisions under the Purchase Agreement and the TSG Sale is not authorized by our shareholders.

If the Purchase Agreement is terminated by us or OnX LLC because our shareholders fail to authorize the TSG Sale and the termination fee described above is not otherwise payable, then we shall reimburse OnX LLC and its affiliates up to $1.25 million of their reasonable out-of-pocket fees and expenses incurred in connection with or related to the authorization, preparation, investigation, negotiation, execution and performance of the Purchase Agreement and the transactions contemplated thereby.

PROPOSAL 1

TO AUTHORIZE THE SALE OF THE COMPANY’S TECHNOLOGY SOLUTIONS GROUP

BUSINESS SEGMENT TO ONX ACQUISITION LLC AND ONX ENTERPRISE SOLUTIONS LIMITED PURSUANT TO THE STOCK AND ASSET PURCHASE AGREEMENT

The following is a description of the material aspects of the TSG Sale, including background information relating to the proposed terms of the Purchase Agreement. You should carefully read this Proxy Statement and the other documents to which we refer, including the Purchase Agreement, for a complete understanding of the terms of the TSG Sale.

Background of the TSG Sale

We have been in the enterprise computer systems products and solutions business since the late 1980s. From 2003 through 2007, we made a series of acquisitions broadening our information technology offerings and positioning the Company as a leading source for technology solutions in enterprise infrastructure datacenter solutions as well as an innovative provider of solutions to the hospitality and retail industries. In 2007, we divested our computer systems distribution business to focus exclusively on being a leading provider of innovative IT solutions. In early 2008, we structured the company into three businesses, TSG, HSG, and RSG.

Our senior management and Board of Directors periodically review the performance of our TSG Business, HSG Business, and RSG Business and our strategies, opportunities, and objectives in the markets in which we operate. In conjunction with those reviews, we assess the short- and long-term prospects of our business

segments and our company as a whole. We evaluate opportunities to grow our businesses organically and also inorganically, by means of mergers, acquisitions, divestitures, asset sales, and strategic alliances with other companies. In that regard, during the summer of 2010, the Board of Directors determined to explore the range and feasibility of strategic alternatives regarding the TSG Business.

Also during the summer of 2010, a company with an information technology business, which we refer to as Company A, contacted Martin Ellis, the Company’s Chief Executive Officer at that time, about its interest in possibly acquiring 100% of the equity of Agilysys. Mr. Ellis brought Company A’s interest to the attention of the Board of Directors, which determined that it preferred to continue exploring potential strategic alternatives for the TSG Business.

On September 7, 2010, based solely on publicly available information, Company A submitted an unsolicited, non-binding indication of interest to acquire 100% of the capital stock of Agilysys for between $8.25 and $9.00 per share in cash.

Also on September 7, 2010, the Board of Directors established a Special Committee of Directors, comprised of Robert A. Lauer, Chairman, and R. Andrew Cueva, and James H. Dennedy, to support the Board of Directors in the execution of Agilysys’ strategic plan, to evaluate a range of potential alternatives to maximize shareholder value, and to provide recommendations to the Board of Directors on these matters. The Special Committee met almost every week from this date until the purchase agreement was signed with OnX on May 27, 2011. Keith Kolerus, Chairman of the Board of Directors, and Mr. Ellis participated in nearly all of these Special Committee meetings.

In late October 2010, Agilysys engaged BofA Merrill Lynch as Agilysys’ financial advisor in connection with a possible sale of the TSG Business or other business transaction with Agilysys.

On October 28, 2010, following a comprehensive strategic review by the Board of Directors, we determined the best way to unlock value for Agilysys shareholders was to monetize the value of the TSG Business and to use the proceeds to return value to shareholders and to focus on the growth of our HSG and RSG Businesses with their proprietary offerings in the higher-margin and higher-growth hospitality and retail markets. In that regard, the Board of Directors determined to evaluate the level of potential interest in the acquisition of the TSG Business in a structured manner, and instructed management, with the assistance of BofA Merrill Lynch, to commence a formal process with respect to the TSG Business.

In early December 2010, in accordance with the directives of our Board of Directors, BofA Merrill Lynch began contacting a number of information technology companies and private equity firms in order to determine whether any of those entities would be interested in acquiring the TSG Business. BofA Merrill Lynch was directed to contact those entities based on factors including perceived interest in the TSG Business, familiarity with the information technology and datacenter solutions industries, financial position and ability to consummate an acquisition of the TSG Business. A total of 38 parties were contacted, including eight strategic buyers and 30 financial buyers, including Purchaser. Initially, 12 of these parties, including one strategic buyer and 11 financial buyers, including Purchaser, executed confidentiality agreements. Each of these parties received certain preliminary, summary, non-public information regarding Agilysys and the TSG Business and was requested to provide a non-binding, preliminary indication of interest by January 24, 2011.

On January 20, 2011, Company A submitted a revised a non-binding indication of interest to acquire 100% of the capital stock of Agilysys for $9.50 per share in cash.

By January 26, 2011, seven parties, including one strategic buyer and six financial buyers, including Purchaser, submitted a preliminary indication of interest to acquire the TSG Business.

On January 26 and 27, 2011, the Board of Directors convened a regularly scheduled meeting and considered, among other items, the preliminary indications of interest received to date, including the non-binding indication of interest from Company A to acquire the whole Company. Management and our advisors also attended this

meeting. Management discussed the status of various bidders’ participation in the process. After extensive discussion, the Board of Directors determined to continue pursuing the sale of the TSG Business, and six of the parties that had submitted preliminary indications of interest for the TSG Business, including the strategic buyer and five of the financial buyers, including Purchaser, were invited to continue in the sale process. Each of these parties received certain additional non-public information regarding the TSG Business.

In addition, after January 26, 2011, three additional parties, including one additional strategic buyer and two additional financial buyers, signed confidentiality agreements and joined the sale process. Each of these parties received the summary non-public information regarding the TSG Business that previously had been distributed to the other potential bidders.

Throughout the remainder of January, February, and the early part of March 2011, the nine bidders remaining in the sale process, including Purchaser, continued their financial and legal due diligence review of the TSG Business, which included discussions and meetings with Agilysys’ management and review of certain additional non-public information made available in a virtual data room established by the Company for the sale process.

On March 4, 2011, one of the financial buyers included in the sale process for the TSG Business, which we refer to as Company B, submitted a non-binding indication of interest to acquire 100% of capital stock of Agilysys for $11.00 per share in cash, which the Special Committee discussed later that same day.

By March 10, 2011, eight parties, including two strategic buyers and six financial buyers, submitted revised, preliminary indications of interest.

The Board of Directors next convened a special meeting via teleconference on March 11, 2011, and considered, among other items, the eight preliminary indications of interest received to date to acquire the TSG Business and the proposal submitted by Company B on March 4, 2011 to acquire all of Agilysys. Management and BofA Merrill Lynch discussed the status of the various bidders’ participation in the process. After discussion, four parties that submitted the highest bids, including one strategic buyer and three financial buyers, including Purchaser, were invited to continue in the sale process.

On March 14, 2011, a final bid instruction letter was distributed to the four bidders that were invited to participate in the final round of bidding. These bidders were requested to submit final bids by April 1, 2011. These parties also continued, to varying degrees, their respective due diligence investigations of Agilysys and the TSG Business during this period. On March 15, 2011, a draft purchase agreement was made available to the bidders in the Company’s virtual data room.

Between April 1 and April 4, 2011, the three financial buyers invited to participate in the final round of the sale process, including Purchaser and a buyer we refer to as Bidder X, submitted written proposals to purchase the TSG Business. The only remaining strategic buyer in the sale process declined to make a final bid. In addition, two financial buyers that previously had been participating in the sale process but were not formally invited by the Board of Directors to participate in the final round of bidding submitted oral indications of interest at purchase prices below the highest proposal received.

On April 5, 2011, the Board of Directors met to consider the three final bids that had been submitted. Management updated the Board of Directors on the sale process since the March 11, 2011 board meeting and gave a general overview of the bids and discussions with the bidders. BofA Merrill Lynch also discussed with the Board of Directors financial terms of the bids and updated the Board of Directors on the status of discussions with each of the bidders.

After discussing the three bids, the Board of Directors determined that Bidder X’s bid was superior as the other two bids were at a lower cash price, the other two bidders had submitted more extensively marked up purchase agreements, and neither of the other two bidders had completed as much due diligence as Bidder X,

giving Bidder X a significant timing advantage. At the conclusion of the meeting, the Board of Directors determined to grant Bidder X exclusivity until April 29, 2011 to negotiate a definitive agreement and authorized management, with the assistance of Agilysys’ legal and financial advisors, to negotiate with Bidder X and its advisors to arrive at a final negotiated deal on terms generally consistent with the terms set forth in Bidder X’s draft purchase agreement.

Between April 11 and April 29, 2011, Agilysys, Bidder X and their respective legal advisors negotiated the terms of the stock purchase agreement. Management, with the assistance of BofA Merrill Lynch, and Bidder X negotiated various open business points, and Bidder X continued its due diligence review of Agilysys.

On April 26, 2011, the Board of Directors convened a regularly scheduled meeting and discussed the status of discussions with Bidder X. BofA Merrill Lynch informed the Board of Directors that Bidder X had substantially reduced its proposed purchase price and that Bidder X indicated it had done so in response to declining performance of the TSG Business due to lower vendor rebates, softer revenue and higher than expected incentive expense in the TSG Business. In addition, legal counsel summarized the current state of the purchase agreement, and the Board discussed various issues related to the use of proceeds from the sale of the TSG Business. At the conclusion of the meeting, the Board authorized management, with the assistance of BofA Merrill Lynch, to continue discussions with Bidder X to increase its proposed purchase price.

Between April 26 and April 29, 2011, management, with the assistance of BofA Merrill Lynch, negotiated with Bidder X regarding its proposed purchase price. Unable to arrive at an agreement as to the structure and certainty of its purchase price, Bidder X’s exclusivity expired on April 29, 2011.

On April 30, 2011, in accordance with the directives of the Board of Directors, representatives of BofA Merrill Lynch contacted representatives of Purchaser to reopen negotiations. Later that day, Agilysys sent to Purchaser the current draft of the transaction agreements, including the purchase agreement, that had been negotiated with Bidder X.

Between April 30 and May 2, 2011, management, with the assistance of BofA Merrill Lynch, had conversations with representatives of both Bidder X and Purchaser regarding their respective proposed purchase prices.

On May 3, 2011, the Special Committee met to receive an update regarding discussions with Bidder X and Purchaser. BofA Merrill Lynch discussed with the Special Committee the components of Bidder X’s and Purchaser’s respective proposals. Management also discussed the fact that Purchaser had a related business to that of TSG, and therefore had relationships with many of the same vendors that worked with TSG. In addition, management noted that Purchaser may need less transition services and for a shorter period than Bidder X. The Special Committee authorized management, with the assistance of BofA Merrill Lynch, to negotiate purchase prices with each of Bidder X and Purchaser.

Between May 3 and May 11, 2011, management had extensive discussions with representatives of Bidder X and Purchaser regarding price. In addition, during this period, each of Bidder X and Purchaser submitted a revised purchase agreement.

On May 11, 2011, the Special Committee met to receive an update from management and representatives of BofA Merrill Lynch regarding the price discussions with Bidder X and Purchaser since the May 3 Special Committee meeting. As part of its proposal, Purchaser requested exclusivity until May 23, 2011. Legal counsel summarized the open issues in each party’s proposed purchase agreement, and noted that the open issues in each contract, while different, did not give one party a significant competitive advantage over the other. Given that Bidder X had missed the deadline to submit a revised proposal and did not have certainty of financing, and given Purchaser’s significant movement on the purchase agreement and its commitment to expedite due diligence, the Special Committee authorized management to grant exclusivity to Purchaser until May 23.

Between May 11 and May 27, 2011, management, with the assistance of outside legal counsel, negotiated with representatives of Purchaser the terms of the Purchase Agreement, transition services agreement and non-competition agreement, and Purchaser completed its due diligence investigation of the TSG Business.

On May 27, 2011, our Board of Directors convened a meeting to discuss the proposed terms of the transaction and the proposed Purchase Agreement and related documents. Our senior management and legal and financial advisors also were present at this meeting. At the meeting, a representative of Jones Day updated our Board of Directors with respect to the resolution of the remaining open issues relating to the Purchase Agreement and the related documents. BofA Merrill Lynch reviewed with our Board of Directors its financial analysis of the $64 million aggregate consideration and delivered to our Board of Directors an oral opinion, confirmed by delivery of a written opinion dated May 27, 2011, to the effect that, as of such date and based upon and subject to the assumptions and limitations set forth in its opinion, such aggregate consideration was fair, from a financial point of view, to Agilysys. Our Board of Directors discussed the advantages and risks of the proposed transaction that are described in “Reasons for the TSG Sale” below. Following discussion, our Board of Directors unanimously determined that the TSG Sale and the Purchase Agreement were in the best interests of Agilysys and our shareholders, unanimously authorized the TSG Sale and approved the Purchase Agreement and recommended that our shareholders authorize the TSG Sale.

The Purchase Agreement was executed by Agilysys and Purchaser’s subsidiaries, OnX LLC and OnX Limited, on May 28, 2011.

On the morning of May 31, 2011, prior to commencement of trading on NASDAQ that day, Agilysys issued a press release announcing the execution of the Purchase Agreement and other matters.

Reasons for the TSG Sale

Our Board of Directors recommends authorizing the TSG Sale because we believe that separating the TSG Business from the HSG and RSG Businesses will enhance our potential to maximize value for our shareholders. We believe that focusing on our HSG and RSG Businesses will permit greater management focus on what we believe to be our greatest opportunity for growth and long-term shareholder value. Operating the HSG and RSG Businesses separately will realize their full potential while allowing the TSG Business to achieve its full potential in the private market.

Following the divestiture of the TSG Business, we expect to continue our growth as a leading developer and marketer of proprietary enterprise software, services, and solutions to the hospitality and retail industries. We believe that the hospitality and retail markets offer us the opportunity for continuing strong growth to further strengthen our position as a leader in these markets. Focusing solely on the HSG and RSG Businesses, we expect our annual revenues to be in excess of $200 million immediately. In total, the HSG and RSG Businesses comprise in excess of $60 million in recurring revenue — approximately $40 million from software maintenance contracts in the HSG Business and approximately $20 million in recurring revenue contracts in the RSG Business.

Streamlining the business through the sale of the TSG Business permits a strategic focus by management and the Board of Directors on our HSG and RSG Businesses. As competitive dynamics shaped and continue to influence our strategy, the differences between what the TSG Business requires and what our HSG and RSG Businesses require to sustain growth are growing further apart. Moreover, consistent financial performance has been elusive and well below expectations of our Board of Directors, management and analysts. We believe the sale of the TSG Business provides the most effective solution, allowing us to simplify the business model and reduce cost structure.

In addition, we received significant feedback over the last number of years from investors about our mix of businesses and how they are viewed in the eyes of the investment community. We currently trade at a

conglomerate discount, with our datacenter-focused solution provider business attracting a significantly different investor base than retail and hospitality software and services. Separating the businesses attracts the right investors to each business, unlocks value for shareholders, and provides clarity for customers and employees.

In evaluating the Purchase Agreement and the TSG Sale, our Board of Directors consulted with our senior management, outside legal counsel, and financial advisor. With respect to recommending that our shareholders authorize the TSG Sale in accordance with the applicable provisions of Ohio law, our Board of Directors consulted with our senior management and outside legal counsel. Our Board of Directors also consulted with outside legal counsel regarding its fiduciary duties, legal due diligence matters, and the terms of the Purchase Agreement and related agreements. Based on these consultations, and the factors discussed below, our Board of Directors concluded that the TSG Sale was in the best interests of the Company and our shareholders and recommended that our shareholders authorize the TSG Sale.

The factors that our Board of Directors considered in reaching its determination included, but were not limited to, the following:

•

The value and the consideration to be received by us pursuant to the Purchase Agreement, including the fact that we would receive an up-front payment without the placement of any funds in escrow;

•

The form of the consideration in the TSG Sale being cash, and the certainty of the value of such cash consideration compared to stock or other possible forms of consideration;

•

The ability to return a portion of the net proceeds from the TSG Sale to our shareholders;

•

Financial information concerning our TSG Business and our HSG and RSG Businesses (including, without limitation, information relating to the financial condition and prospects of our TSG Business and HSG and RSG Businesses), current industry, economic and market conditions relating to our TSG Business and our HSG and RSG Businesses;

•

The financial projections for our TSG Business set forth under “Financial Projections” on page [ ];

•

The decline in the TSG Business’ gross margin percentage, which was driven by lower product gross margins, which were affected by declines in gross margins, as a result of the reduction in vendor rebates;

•

The fact that the continued operation of the TSG Business together with the HSG and RSG Businesses could place certain restrictions on each business due to strategic, competitive, and operational considerations that may hinder their respective abilities to achieve their goals in the future;

•

The creation of a more focused business model and a clearer investment opportunity for our current and future shareholders and for our continuing employees who hold stock options and other equity in our Company;

•

The increased focus our management could place on our growing HSG and RSG Businesses following the TSG Sale;

•

The additional financial flexibility to continue to aggressively grow our HSG and RSG Businesses, both organically and through additional acquisitions;

•

The strategic review process undertaken by us, which included the retention of recognized legal and financial advisors and a solicitation and bid process, which ultimately resulted in the agreement with the Purchasers to acquire the TSG Business;

•

The alternatives available if we were not to sell the TSG Business to Purchaser, including independent pursuit of growth of the TSG Business, through acquisitions or otherwise, all of which involve meaningful risks and uncertainties and none of which, in the view of our Board of Directors, were as favorable to us and our shareholders as, nor more favorable to us and our shareholders than, the TSG Sale;

•

That the Purchase Agreement was agreed to only after a lengthy auction process pursuant to which a total of 38 potential purchasers were contacted, which included, for certain parties, management presentations, due diligence sessions, the submission of seven non-binding preliminary indications of interest and the submission of three final bids;

•

The fact we held discussions with several other potential acquirers, but none of those potential acquirers submitted written acquisition proposals that were as favorable to us as Purchaser’s proposal;

•

The Board of Directors’ and management’s evaluation of two unsolicited proposal to purchase the Company as a whole, which proposals the Board of Directors believed were not as favorable as selling the TSG Business and continuing to operate and grow the HSG and RSG Businesses, especially given each acquirer’s stated intention to sell the TSG Business if it acquired the whole Company, thereby capturing the value of the sale of the TSG Business for themselves;

•

The opinion and financial presentation of our financial advisor, BofA Merrill Lynch, dated May 27, 2011, to our Board of Directors as to the fairness, from a financial point of view and as of such date, to Agilysys of the $64 million aggregate consideration to be received by Agilysys in the TSG Sale, as more fully described below under the caption “The TSG Sale — Opinion of Our Financial Advisor” on page [ ];

•

The business reputation of Purchaser and its management, directors and shareholders and its financial resources which our Board of Directors believed supported the conclusion that a transaction with Purchaser could be completed relatively quickly and in an orderly manner;

•

The experience of Purchaser in successfully completing similar corporate carve-out transactions in a timely manner;

•

The impact of the TSG Sale on our customers, employees, and other business partners;

•

The fact that the Purchase Agreement affords our Board of Directors flexibility to consider, evaluate and accept superior proposals and alternative transactions in the period after signing and prior to the authorization of the TSG Sale by our shareholders in accordance with the terms of the Purchase Agreement; and

•

The reasonable likelihood of the consummation of the TSG Sale in light of the relatively limited conditions to Purchaser’s obligations to consummate the TSG Sale, including the fact that the consummation of the TSG Sale is not contingent on Purchaser’s ability to secure financing commitments.

Our Board of Directors also identified and considered a number of uncertainties, risks and potentially negative factors in its deliberations concerning the TSG Sale, including:

•

The possibility that the transactions contemplated by the Purchase Agreement, including the TSG Sale, might not be consummated, and the fact that if the TSG Sale is not consummated, (i) our Directors, executive officers, and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the transaction, (ii) we will have incurred significant transaction costs, and (iii) the potential negative market perception of our continuing business could potentially result in a loss of customers, business partners, channel partners and employees, any of which may have a material and adverse effect on our stock price and results of operations;

•

The effect of the public announcement of the TSG Sale, including effects on our sales, customer and channel partner relationships, operating results, stock price, our ability to attract and retain key management and sales and marketing personnel and technical support agents and the vesting of equity awards (regardless of consummation of the TSG Sale);

•

The resultant loss of sales and gross profit from the TSG Business;

•

The fact that, after the TSG Sale, we will be entirely dependent on the performance of our HSG and RSG Businesses;

•

The fact that by accepting Purchaser’s offer to purchase the TSG Business, we had to forego the two unsolicited proposals to purchase the Company as a whole;

•

Our obligations to provide services to the Purchasers for a period of time following the closing pursuant to the terms of the transition services agreement;

•

The restrictions on the conduct of the TSG Business prior to completion of the TSG Sale, requiring us to conduct the TSG Business only in the ordinary course, subject to specific limitations or OnX LLC’s consent, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the TSG Sale;

•

The restrictions on our Board of Directors’ ability to solicit or engage in discussions or negotiations with a third party regarding alternative transactions for the TSG Business, and the requirement that we pay OnX LLC a termination fee of $2.25 million or reimburse OnX LLC and its affiliates for up to $1.25 million in expenses in certain cases in the event of a termination of the Purchase Agreement;

•

The risk we will not be able to satisfy some or all of the conditions to the Purchasers’ obligations to consummate the TSG Sale;

•

The risk that we could be exposed to future indemnification payments for a breach or violation of the covenants contained in the Purchase Agreement;

•

The risk that unforeseen liabilities and expenses may be incurred that may limit the ultimate amount of net proceeds from the TSG Sale;

•

The significant costs involved in consummating the TSG Sale, including financial advisory fees, legal, accounting and other costs; and

•

The possibility of a payment to the Purchasers as a working capital adjustment.

After careful and due consideration, our Board of Directors unanimously concluded that overall, the risks, uncertainties, restrictions and potentially negative factors associated with the TSG Sale were outweighed by the potential benefits of the TSG Sale, and that many of these risks could be managed or mitigated prior to the consummation of the TSG Sale or were unlikely to have a material adverse effect on our Company.

The foregoing information and factors considered by our Board of Directors are not intended to be exhaustive but are believed to include all of the material factors considered by our Board of Directors. In view of the variety of factors and the amount of information considered, our Board of Directors did not find it practicable to, and did not, quantify, rank or otherwise assign relative weights to the specific factors it considered in authorizing the TSG Sale. In addition, individual members of our Board of Directors may have given different weights to different factors. Our Board of Directors considered all of these factors as a whole, and overall considered them to be favorable to and to support its determination.

Recommendation of Our Board of Directors

After careful consideration, our Board of Directors unanimously (i) authorized the TSG Sale and (ii) determined the TSG Sale to be in the best interests of the Company and our shareholders, and recommended to our shareholders that the TSG Sale and the other transactions contemplated by the Purchase Agreement be authorized by our shareholders.

The Board of Directors unanimously recommends a vote “FOR” the authorization of the TSG Sale.

Opinion of Our Financial Advisor

Agilysys retained BofA Merrill Lynch to act as Agilysys’ financial advisor in connection with the TSG Sale. On May 27, 2011, at a meeting of Agilysys’ Board of Directors held to evaluate the TSG Sale, BofA Merrill Lynch delivered to Agilysys’ Board of Directors an oral opinion, confirmed by delivery of a written opinion dated May 27, 2011, to the effect that, as of such date and based on and subject to various assumptions and limitations described in its opinion, the $64 million aggregate consideration to be received by Agilysys in the TSG Sale was fair, from a financial point of view, to Agilysys.

The full text of BofA Merrill Lynch’s written opinion, dated May 27, 2011, to Agilysys’ Board of Directors, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this Proxy Statement and is incorporated by reference herein in its entirety. The following summary of BofA Merrill Lynch’s opinion is qualified in its entirety by reference to the full text of the opinion. BofA Merrill Lynch delivered its opinion to Agilysys’ Board of Directors for the benefit and use of Agilysys’ Board of Directors (in its capacity as such) in connection with and for purposes of its evaluation of the aggregate consideration from a financial point of view. BofA Merrill Lynch’s opinion did not address any other aspect of the TSG Sale and no opinion or view was expressed as to the relative merits of the TSG Sale in comparison to other strategies or transactions that might be available to Agilysys or with respect to TSG or in which Agilysys might engage or as to the underlying business decision of Agilysys to proceed with or effect the TSG Sale. BofA Merrill Lynch also expressed no opinion or recommendation as to how any shareholder should vote or act in connection with the TSG Sale or any related matter.

In connection with its opinion, BofA Merrill Lynch, among other things:

•

Reviewed certain publicly available business and financial information relating to TSG;

•

Reviewed certain internal financial and operating information with respect to the business, operations and prospects of TSG furnished to or discussed with BofA Merrill Lynch by Agilysys’ management, including certain financial forecasts relating to TSG prepared by Agilysys’ management under two cases reflecting alternative assumptions as to the timing of the projected growth in TSG’s future financial performance, referred to as the TSG forecasts;

•

Discussed the past and current business, operations, financial condition, and prospects of TSG with members of Agilysys’ senior management;

•

Compared certain financial information of TSG with similar information of companies BofA Merrill Lynch deemed relevant;

•

Compared certain financial terms of the TSG Sale to financial terms of other transactions BofA Merrill Lynch deemed relevant;

•

Considered the results of BofA Merrill Lynch’s efforts on behalf of Agilysys to solicit, at Agilysys’ direction, indications of interest and definitive proposals from third parties with respect to a possible acquisition of TSG or any alternative transaction;

•

Reviewed a draft, dated May 27, 2011, of the stock and asset purchase agreement, referred to as the draft agreement; and

•

Performed such other analyses and studies and considered such other information and factors as BofA Merrill Lynch deemed appropriate.

In arriving at its opinion, BofA Merrill Lynch assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with it and relied upon the assurances of the management of Agilysys that it was not aware of any facts or circumstances that would make such information or data inaccurate or misleading in any material respect. With respect to the TSG forecasts, BofA Merrill Lynch was advised by Agilysys, and

assumed, that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of Agilysys’ management as to the future financial performance of TSG under the alternative assumptions reflected in the TSG forecasts. In addition, BofA Merrill Lynch assumed, with Agilysys’ consent, that any adjustments to the aggregate consideration would not be material in any respect to BofA Merrill Lynch’s analyses or opinion.

BofA Merrill Lynch did not make and was not provided with any independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of TSG or any other entity, nor did BofA Merrill Lynch make any physical inspection of the properties or assets of TSG or any other entity. BofA Merrill Lynch did not evaluate the solvency or fair value of TSG or any other party to the TSG Sale under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. BofA Merrill Lynch assumed, at Agilysys’ direction, that the TSG Sale would be consummated in accordance with its terms, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the TSG Sale, no delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed that would have an adverse effect on TSG, Agilysys or the TSG Sale. BofA Merrill Lynch also assumed, at Agilysys’ direction, that the final executed stock and asset purchase agreement would not differ in any material respect from the draft agreement reviewed by BofA Merrill Lynch.

BofA Merrill Lynch expressed no view or opinion as to any terms or other aspects or implications of the TSG Sale (other than the $64 million aggregate consideration to the extent expressly specified in its opinion), including, without limitation, the form or structure of the TSG Sale, any adjustments to or allocation of the aggregate consideration among the assets of TSG or otherwise or any other agreement, arrangement or understanding entered into in connection with or related to the TSG Sale or otherwise. BofA Merrill Lynch’s opinion was limited to the fairness, from a financial point of view, to Agilysys of the aggregate consideration to be received by Agilysys in the TSG Sale and no opinion or view was expressed with respect to any consideration received in connection with the TSG Sale by the holders of any class of securities, creditors or other constituencies of any party. In addition, no opinion or view was expressed with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any compensation to any officers, directors or employees of any party to the TSG Sale, or class of such persons, relative to the aggregate consideration or otherwise.

BofA Merrill Lynch’s opinion was necessarily based on financial, economic, monetary, market, and other conditions and circumstances as in effect on, and the information made available to BofA Merrill Lynch as of, the date of its opinion. It should be understood that subsequent developments may affect BofA Merrill Lynch’s opinion, and BofA Merrill Lynch does not have any obligation to update, revise or reaffirm its opinion. The issuance of BofA Merrill Lynch’s opinion was approved by BofA Merrill Lynch’s Americas Fairness Opinion Review Committee. Except as described in this summary, Agilysys imposed no other limitations on the investigations made or procedures followed by BofA Merrill Lynch in rendering its opinion.

The following represents a brief summary of the material financial analyses presented by BofA Merrill Lynch to Agilysys’ Board of Directors in connection with its opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses performed by BofA Merrill Lynch, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses performed by BofA Merrill Lynch. Considering the data set forth in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses performed by BofA Merrill Lynch. For purposes of BofA Merrill Lynch’s financial analyses summarized below, BofA Merrill Lynch utilized internal financial forecasts relating to TSG prepared by Agilysys’ management under two cases, referred to as “management case 1” forecasts and “management case 2” forecasts, which management case 2 forecasts reflected a one-year delay in achieving the management case 1 forecasts.

Selected Companies Analysis. BofA Merrill Lynch reviewed financial information relating to TSG and publicly available financial and stock market information of the following four publicly traded companies that in whole or in part provide or resell information technology hardware, software and service solutions:

•

ePlus inc.

•

Insight Enterprises, Inc.

•

PC Connection, Inc.

•

Systemax Inc.

BofA Merrill Lynch, among other things, reviewed enterprise values of the selected companies, calculated as equity values based on closing stock prices on May 25, 2011, plus debt, preferred stock, and minority interest, less cash, cash equivalents, and short-term and long-term investments, as a multiple of latest 12 months and calendar year 2011 estimated earnings before interest, taxes, depreciation, and amortization, commonly referred to as EBITDA. BofA Merrill Lynch then applied a range of selected multiples of latest 12 months EBITDA derived from the selected companies to TSG’s actual latest 12 months (as of March 31, 2011) EBITDA based on internal estimates of Agilysys’ management and a range of selected multiples of calendar year 2011 estimated EBITDA derived from the selected companies to TSG’s fiscal year ending March 31, 2012 estimated EBITDA based both on the management case 1 forecasts and management case 2 forecasts prepared by Agilysys’ management. Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings, and other publicly available information. This analysis indicated the following approximate implied enterprise value reference ranges for TSG, as compared to the aggregate consideration:


Implied Enterprise Value Reference Ranges for TSG Based on:			Aggregate Consideration ($)
Latest 12 Months ($)	FY2012 Management Case 1 ($)	FY2012 Management Case 2 ($)	Aggregate Consideration ($)
23 million - 30 million	54 million - 72 million	37 million - 49 million	64 million

No company used in this analysis is identical to TSG. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading or other values of the companies to which TSG was compared.

Selected Transactions Analysis. BofA Merrill Lynch reviewed financial information relating to the following 14 selected transactions involving companies that in whole or in part provide or resell information technology hardware, software, and service solutions:


Acquiror		Target
• Applied Computer Solutions, Inc.		• ProSys Information Systems, Inc.
• Sirius Computer Solutions, Inc.		• MSI System Integrators
• PC Connection, Inc.		• VaiCom Technology
• Platinum Equity Capital Partners, L.P.		• Pomeroy IT Solutions, Inc.
• Bell Microproducts Inc.		• ProSys Information Systems, Inc.
• Kforce Inc.		• Bradson Corporation
• TeleTech Holdings, Inc.		• Direct Alliance Corporation
• Calence, Inc.		• Avnet Enterprise Solutions
• Logicalis, Inc.		• Avnet Partner Solutions
• Agilysys, Inc.		• The CTS Corporations
• Pomeroy IT Solutions, Inc.		• Alternative Resources Corp.
• Agilysys, Inc.		• Inter-American Data Inc.
• Agilysys, Inc.		• Kyrus Corporation
• CDW Corporation		• Micro Warehouse, Inc. (selected assets)

BofA Merrill Lynch, among other things, reviewed transaction values, calculated as the enterprise value implied for the target company based on the consideration payable in the selected transactions, as a multiple of the target company’s latest 12 months EBITDA. BofA Merrill Lynch then applied a range of selected multiples of latest 12 months EBITDA derived from the selected transactions to TSG’s latest 12 months (as of March 31, 2011) EBITDA. Financial data of the selected transactions were based on publicly available or other information at the time of announcement of the relevant transaction. Financial data of TSG were based on internal estimates of Agilysys’ management. This analysis indicated the following approximate implied enterprise value reference range for TSG, as compared to the aggregate consideration:

Implied Enterprise Value

Reference Range for TSG ($)

Aggregate

Consideration ($)

27 million - 40 million

64 million

No company, business, or transaction used in this analysis is identical to TSG or the TSG Sale. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition or other values of the companies, business segments, or transactions to which TSG and the TSG Sale were compared.

Discounted Cash Flow Analysis. BofA Merrill Lynch performed a discounted cash flow analysis of TSG to calculate the estimated present value as of March 31, 2011 of the standalone unlevered, after-tax free cash flows that TSG was forecasted to generate during fiscal years ending March 31, 2012 through 2015 based on the management case 1 forecasts and management case 2 forecasts for TSG prepared by Agilysys’ management. BofA Merrill Lynch calculated terminal values for TSG by applying a range of perpetuity growth rates of 1% to 3% to TSG’s fiscal year 2015 estimated free cash flow. The cash flows and terminal values were then discounted to present value as of March 31, 2011 using discount rates ranging from 19% to 21%. This analysis indicated the following approximate implied enterprise value reference range for TSG, as compared to the aggregate consideration:


Implied Enterprise Value Reference Ranges for TSG		Aggregate Consideration ($)
Management Case 1 ($)	Management Case 2 ($)	Aggregate Consideration ($)
63 million - 77 million	56 million - 69 million	64 million

Miscellaneous. As noted above, the discussion set forth above is a summary of the material financial analyses presented by BofA Merrill Lynch to Agilysys’ Board of Directors in connection with its opinion and is not a comprehensive description of all analyses undertaken or factors considered by BofA Merrill Lynch in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to partial analysis or summary description. BofA Merrill Lynch believes that the analyses summarized above must be considered as a whole. BofA Merrill Lynch further believes that selecting portions of its analyses considered or focusing on information presented in tabular format, without considering all analyses or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying BofA Merrill Lynch’s analyses and opinion. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that such analysis was given greater weight than any other analysis referred to in the summary.

In performing its analyses, BofA Merrill Lynch considered industry performance, general business and economic conditions, and other matters, many of which are beyond the control of Agilysys. The estimates of the future performance of TSG in or underlying BofA Merrill Lynch’s analyses are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than those estimates or those suggested by BofA Merrill Lynch’s analyses. These analyses were prepared solely as part of BofA Merrill

Lynch’s analysis of the fairness, from a financial point of view, to Agilysys of the aggregate consideration and were provided to Agilysys’ Board of Directors in connection with the delivery of BofA Merrill Lynch’s opinion. The analyses do not purport to be appraisals or to reflect the prices at which a company might actually be sold or the prices at which any securities have traded or may trade at any time in the future. Accordingly, the estimates used in, and the ranges of valuations resulting from, any particular analysis described above are inherently subject to substantial uncertainty and should not be taken to be BofA Merrill Lynch’s view of the actual values of TSG.

The type and amount of consideration payable in the TSG Sale was determined through negotiations between Agilysys and Purchaser, rather than by any financial advisor, and was approved by Agilysys’ Board of Directors. The decision to enter into the Purchase Agreement was solely that of Agilysys’ Board of Directors. As described above, BofA Merrill Lynch’s opinion and analyses were only one of many factors considered by Agilysys’ Board of Directors in its evaluation of the TSG Sale and should not be viewed as determinative of the views of Agilysys’ Board of Directors or management with respect to the TSG Sale or the aggregate consideration.

In connection with BofA Merrill Lynch’s services as Agilysys’ financial advisor, Agilysys agreed to pay BofA Merrill Lynch an aggregate fee of up to $3 million, a portion of which was payable in connection with the delivery of BofA Merrill Lynch’s opinion and up to $2.5 million of which is payable upon completion of the TSG Sale. Agilysys also agreed to reimburse BofA Merrill Lynch for its expenses, including fees and disbursements of BofA Merrill Lynch’s counsel, incurred in connection with BofA Merrill Lynch’s engagement and to indemnify BofA Merrill Lynch, any controlling person of BofA Merrill Lynch and each of their respective directors, officers, employees, agents, and affiliates against certain liabilities, including liabilities under the federal securities laws, arising out of BofA Merrill Lynch’s engagement.

BofA Merrill Lynch and its affiliates comprise a full service securities firm and commercial bank engaged in securities, commodities and derivatives trading, foreign exchange and other brokerage activities, and principal investing as well as providing investment, corporate and private banking, asset and investment management, financing and financial advisory services and other commercial services and products to a wide range of companies, governments and individuals. In the ordinary course of their businesses, BofA Merrill Lynch and its affiliates may invest on a principal basis or on behalf of customers or manage funds that invest, make or hold long or short positions, finance positions or trade or otherwise effect transactions in equity, debt or other securities or financial instruments (including derivatives, bank loans or other obligations) of Agilysys, Purchaser and certain of their respective affiliates.

BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking, and other financial services to Agilysys and has received or in the future may receive compensation for the rendering of these services, including (i) having acted or acting as a lender under certain credit facilities of Agilysys and (ii) having provided or providing certain cash and treasury management services to Agilysys.

In addition, BofA Merrill Lynch and its affiliates in the past have provided, currently are providing, and in the future may provide, investment banking, commercial banking, and other financial services to Purchaser and has received or in the future may receive compensation for the rendering of these services, including having provided or providing certain cash and treasury management services to Purchaser.

BofA Merrill Lynch is an internationally recognized investment banking firm that is regularly engaged in providing financial advisory services in connection with mergers and acquisitions. Agilysys selected BofA Merrill Lynch to act as Agilysys’ financial advisor in connection with the TSG Sale on the basis of BofA Merrill Lynch’s experience in similar transactions and its reputation in the investment community.

Other Agreements and Transactions Related to the TSG Sale

Transition Services Agreement

Pursuant to the Purchase Agreement, we agreed to enter into a transition services agreement with OnX LLC pursuant to which we shall provide certain transitional, administrative, and support services to OnX LLC for up to six months at no charge following the closing of the TSG Sale. In addition, we agreed to reimburse OnX LLC for up to $1.25 million of its consulting fees in connection with the transition.

Non-Compete Agreement

Pursuant to the Purchase Agreement, we agreed to enter into a non-compete agreement with OnX LLC pursuant to which we will agree, during the specified term, not to:

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Directly or indirectly engage in the TSG Business;

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Directly or indirectly solicit employees or, subject to certain exceptions, customers of Purchasers or the TSG Business or otherwise interfere in their relationships with OnX LLC; and

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Disclose any confidential information relating to the TSG Business other than to representatives or affiliates of Agilysys or of OnX LLC.

Pursuant to the Purchase Agreement, OnX LLC agreed to enter into a non-compete agreement with us pursuant to which OnX LLC will agree, during the specified term, not to:

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Directly or indirectly engage in business activities related to our HSG and RSG Businesses;

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Directly or indirectly solicit employees or, subject to certain exceptions, customers of Agilysys or our continuing business or otherwise interfere in their relationships with Agilysys; and

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Disclose any confidential information relating to our HSG and RSG Businesses other than to representatives or affiliates of Agilysys or of Purchasers.

Post-Closing Business and Proceeds from the TSG Sale

Upon the closing of the TSG Sale, our Board of Directors and management will focus their attention on our HSG and RSG Businesses, which will be our only remaining businesses after the TSG Sale is consummated. We will use the proceeds of the TSG Sale to fund our working capital needs, make select investments in the HSG and RSG Businesses, and return excess cash as prudently as possible to our shareholders. We will be able to focus more acutely on the growth of our HSG and RSG Businesses in the higher-margin and higher-growth hospitality and retail markets. We will also investigate possibilities for enhancing our HSG and RSG Businesses that may have been less available to us, due to competitive factors, resource issues, or otherwise, when we operated both the TSG Business and our HSG and RSG Businesses together. We may use a portion of the net cash proceeds from the TSG sale for future acquisitions complementary to our HSG and RSG Businesses. However, at this time, no specific acquisition targets have been identified.

In addition to the foregoing, to achieve our goal of growing our HSG and RSG Businesses, we will seek to reduce certain costs, including aligning our infrastructure and overhead to match our smaller size after the completion of the TSG Sale. We also expect to review our compensation structure. Our Board of Directors and management will work closely with our advisers to define and implement specific compensation strategies.

Interests of Our Directors and Executive Officers in the TSG Sale

In considering the recommendation of our Board of Directors with respect to the TSG Sale, our shareholders should be aware that some of our Directors and executive officers have personal interests in the TSG Sale that are, or may be, different from, or in addition to, your interests. Our Board of Directors was aware of the interests described below and considered them, among other matters, when authorizing the TSG Sale.

Vesting of Equity Awards Under the 2006 Stock Incentive Plan

Certain of our Directors and executive officers (including all of our Named Executive Officers, as defined on page [ ]) are participants in the 2006 Stock Incentive Plan, as amended and restated effective May 20, 2010 (the “Stock Incentive Plan”). Equity awards granted under the 2006 Stock Incentive Plan vest upon a change of control, which is defined to include the filing by the Company of a Form 8-K or proxy statement disclosing that a change of 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. The TSG Sale constituted a change of control under the Stock Incentive Plan upon filing the Form 8-K announcing the TSG Sale. As a result, the equity awards under the Stock Incentive Plan vested.

Restricted Shares. 56,011 outstanding unvested restricted shares held by executive officers vested upon announcement of the TSG Sale. This resulted in the recognition of stock compensation expense on an accelerated basis in the amount of approximately $0.2 million.

Stock Options. All outstanding stock options vested previously upon MAK Capital reaching an ownership level of 20% of the Company. This change of control trigger was modified effective May 22, 2009 to trigger at 33-1/3%, and no stock options have been granted since that date. The TSG Sale will have no further affect on outstanding stock options.

Stock-Settled Stock Appreciation Rights (“SSARs”). 370,939 outstanding SSARs vested on an accelerated basis. This resulted in the recognition of stock compensation expense on an accelerated basis in the amount of approximately $.8 million. These shares would otherwise have vested as follows:


		SSARs (#)
Vesting March 2012		214,936
Vesting March 2013		156,003

The following table summarizes the restricted shares and SSARs that vested upon the announcement of the TSG Sale and that are held by each of our Named Executive Officers, and all other executive officers as a group. No directors held restricted stock or SSARs.


	Restricted Shares Awards that Vested upon Announcement of the TSG Sale (#)		SSAR Awards that Vested upon Announcement of the TSG Sale (#)
Named Executive Officers:
Martin F. Ellis		13,329		149,667
Henry R. Bond		20,000		33,500
Kenneth J. Kossin (1)		0		0
Kathleen Weigand		9,055		48,201
Tina Stehle		4,213		36,368
Anthony Mellina		5,726		41,201

All Other Executive Officers as a Group (3 additional):		3,688		62,002

(1)

Kenneth J. Kossin separated from the Company effective November 10, 2010 and has no outstanding restricted shares, stock options or SSARs.

Bonus Payments to Executive Officers

In connection with the TSG Sale, our Board of Directors approved bonus payments to be paid to certain executive officers upon closing of the transaction, as follows:


Name		Amount ($)
Henry R. Bond		75,000
John Dyer		30,000
Anthony Mellina		55,000
Curtis Stout		75,000
Kathleen Weigand		75,000

Martin Ellis’ Change of Control and Non-Competition Agreements

Martin F. Ellis, who stepped down as our President and Chief Executive Officer on announcement of the transaction, has a Change of Control Agreement with the Company, pursuant to which he would receive severance benefits if he is terminated without cause or voluntarily terminates his employment for good reason within twelve months following a change of control. He would also be entitled to excise tax gross-up payments. Mr. Ellis also has a non-competition agreement with the Company. If he is terminated for cause or voluntarily terminates his employment without good reason, he would not receive severance payments, and he is subject to a two-year non-competition period. On May 28, 2011, concurrent with the announcement of the proposed TSG Sale, Mr. Ellis stepped down as President and Chief Executive Officer and will receive severance benefits pursuant to his Change of Control Agreement. Payment to Mr. Ellis under his Change of Control Agreement is discussed in detail under the caption “Termination and Change of Control” on page [ ].

Employment and Retention Agreements

All of our other Named Executive Officers have employment agreements with the Company, pursuant to which they will receive severance benefits if they are terminated without cause or voluntarily terminate their employment due to a change in position. Additionally, Henry R. Bond, our Senior Vice President and Chief Financial Officer, has a provision in his employment agreement which provides that if his employment is terminated without cause at any time following a change of control (as defined by Section 409(A) of the Internal Revenue Code) he will receive the benefits under his employment agreement. The TSG Sale will trigger a change of control under Section 409(A). The TSG Sale may trigger payments to these executive officers under the agreements as discussed in detail under the caption “Termination and Change of Control” on page [ ].

The Company appointed James H. Dennedy, a Director of the Company since June 2009, to serve as interim President and Chief Executive Officer of the Company for a one-year term, while continuing to serve as a Director. In connection with his appointment, the Company entered into an employment agreement with Mr. Dennedy whereby he will receive severance benefits if he is terminated without cause or there is a substantial change to his responsibilities or compensation prior to his one-year employment anniversary. While Mr. Dennedy’s appointment occurred concurrently with the announcement of the TSG Sale, his subsequent termination before the end of his one-year term would trigger severance payment obligations pursuant to his employment agreement.

Pursuant to a retention agreement between Kathleen A. Weigand, our General Counsel, Secretary and Senior Vice President — Human Resources, and the Company, if she continues her employment with the Company for twelve months after a change of control, or until released by a senior executive, if earlier, she will be paid $200,000. As a result, the TSG Sale may trigger payment to her under this agreement as discussed in detail under the caption “Termination and Change of Control” on page [ ].

Dissenters’ Rights

Under Ohio law, Agilysys shareholders are entitled to dissenters’ rights in connection with the TSG Sale. However, Agilysys shareholders are entitled to relief as dissenting shareholders under Ohio Revised Code Section 1701.85 only if they strictly comply with all of the procedural and other requirements of Section 1701.85, a copy of which has been attached as Annex C to this proxy statement. The following is a description of the material terms of Ohio Revised Code Section 1701.85.

Agilysys shareholders who wish to perfect their rights as dissenting shareholders in the event the TSG Sale is completed:

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Must be record holders of the common shares as to which the shareholders seek relief as of June 14, 2011, the Record Date. Because only shareholders of record on the Record Date may exercise dissenters’ rights, any person who beneficially owns common shares that are held of record by a broker, fiduciary, nominee or other holder and who desires to exercise dissenters’ rights must, in all cases, instruct the record holder of the common shares to satisfy all of the requirements outlined under Ohio Revised Code Section 1701.85;

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Must not vote their common shares in favor of the proposal to authorize the TSG Sale and the other transactions contemplated by the Purchase Agreement. Failing to vote (by neither returning a proxy card nor voting at the meeting) or abstaining from voting (by marking the appropriate box on the proxy card and not voting at the meeting) does not waive dissenting shareholders’ rights;

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Must deliver to Agilysys, not later than ten days after the Annual Meeting, a written demand for payment of the fair cash value of the common shares as to which the dissenting shareholder seeks relief. The written demand must state the name of the shareholder, the shareholder’s address, the number and class of shares as to which the shareholder seeks relief and the amount claimed as the fair value for those shares. Agilysys will not notify shareholders of the expiration of this ten-day period; and

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Must, if Agilysys so requests, submit their share certificates to Agilysys within 15 days from the date of the sending of such request for endorsement thereon by Agilysys that a demand for the cash value of the common shares has been made. This request is not an admission by Agilysys that any dissenting shareholder is entitled to relief. Agilysys will promptly return the share certificates to the dissenting shareholders. At the option of Agilysys, exercised by written notice sent to the dissenting shareholder within twenty days after the lapse of the fifteen-day period, dissenting shareholders who fail to deliver their certificate upon request from Agilysys may have their dissenting shareholders’ rights terminated, unless a court for good cause shown otherwise directs.

Voting against the proposal to authorize and approve the TSG Sale and the other transactions contemplated by the Purchase Agreement will not satisfy the requirements of a written demand for payment. Any written demand for payment should be mailed or delivered to Agilysys, Inc., 28925 Fountain Parkway, Solon, Ohio, 44139, Telephone: (440) 519-8700, Attention: Secretary. Because the written demand must be delivered to Agilysys within the ten-day period following the Annual Meeting, Agilysys recommends that a dissenting shareholder use certified or registered mail, return receipt requested, to confirm that the shareholder has made timely delivery.

If a dissenting shareholder and Agilysys have not come to an agreement on the fair cash value per Common Share, either may, within three months after the service of the written demand by the shareholder, file a complaint in the Court of Common Pleas of Cuyahoga County, Ohio for a determination of the fair cash value of the dissenting shares. As discussed below, if neither the dissenting shareholder nor Agilysys files or joins in such a complaint within three months, the rights of such dissenting shareholder will terminate. If the court finds that the shareholder is entitled to be paid the fair cash value of any common shares, the court may appoint one or more appraisers to receive evidence and to recommend a decision on the amount of the fair cash value.

The fair cash value per common share to which a dissenting shareholder is entitled under Section 1701.85 will be determined as of the day prior to the Annual Meeting. Fair cash value will be computed as the amount a willing seller and willing buyer would accept or pay if neither was compelled to sell or buy, excluding any appreciation or depreciation in market value resulting from the submission of the TSG Sale and the other transactions contemplated by the Purchase Agreement to the shareholders of Agilysys for authorization. The Ohio Supreme Court, in Armstrong v. Marathon Oil Company, 32 Ohio St. 3d 397 (1987), has held that fair cash value for publicly traded shares of a company with significant trading activity will be the market price for such shares on the date that the transaction is submitted to the shareholders or directors for final approval, as adjusted to exclude the impact of the transaction giving rise to the dissenters’ rights.

Notwithstanding the foregoing, the fair cash value may not exceed the amount specified in the shareholder’s written demand. The fair cash value of the common shares may be higher, the same as or lower than the market value of the common shares on the date of the TSG Sale. Shareholders also should note that investment banking opinions as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the TSG Sale, are not opinions as to, and do not otherwise address, fair value under Section 1701.85. The court will make a finding as to the fair cash value of a Common Share and render judgment against Agilysys for its payment with interest at such rate and from such date as the court considers equitable. The court will assess or apportion the costs of the proceedings as it considers equitable.

Payment of the fair cash value must be made within 30 days after the later of the final determination of such value or the closing date of the TSG Sale. Such payment shall be made only upon simultaneous surrender to Agilysys of the share certificates for which such payment is made.

The rights of any dissenting shareholder will terminate if:

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The dissenting shareholder has not complied with Section 1701.85, unless Agilysys, by its Board of Directors, waives this failure;

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Agilysys abandons or is finally enjoined or prevented from carrying out the TSG Sale, or the shareholders of Agilysys rescind their authorization of the TSG Sale;

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The dissenting shareholder withdraws his or her or its written demand with the consent of Agilysys, by its Board of Directors; or

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Agilysys and the dissenting shareholder have not agreed upon the fair cash value per Common Share and neither has timely filed or joined in a complaint in the Court of Common Pleas of Cuyahoga County, Ohio for a determination of the fair cash value of the shares.

From the time of the dissenting shareholder’s giving of the demand, all other rights with respect to such common shares, including voting, dividend and distribution rights, will be suspended until Agilysys purchases the common shares, or the right to receive fair cash value is otherwise terminated. If during the suspension, any cash dividend is paid on Agilysys common shares, an amount equal to such dividend which, except for the suspension, would have been payable upon such common shares will be paid to the holder of record as a credit upon the fair cash value of the common shares. Such rights will be reinstated should the right to receive fair cash value be terminated other than by the purchase of the common shares by Agilysys, and all distributions which, except for the suspension, would have been made will be made to the holder of record of the shares at the time of termination.

Because a proxy card which is signed and returned but does not contain voting instructions regarding the proposal to authorize the TSG Sale and the other transactions contemplated by the Purchase Agreement will be voted for such proposal, Agilysys shareholders who wish to exercise dissenters’ should not sign and return an unmarked proxy card.

Accounting Treatment of the TSG Sale

Under accounting principles generally accepted in the United States of America, upon shareholder authorization of the TSG Sale, we expect to reflect the results of operations of the TSG Business as discontinued operations, including the related anticipated gain on the sale, net of any applicable taxes, commencing with the quarter during which the TSG Sale is authorized by the shareholders. For further information, see the unaudited pro forma condensed financial information included in this proxy statement.

Financing; Source and Amount of Funds

The TSG Sale is not conditioned on Purchasers’ ability to obtain financing.

Material U.S. Federal, State and Foreign Income Tax Consequences

The TSG Sale will not result in any material U.S. federal income tax consequences to our shareholders. Agilysys shareholders that exercise dissenters’ rights are urged to consult their tax advisors regarding the tax treatment of any cash received upon the exercise of dissenters’ rights in connection with the TSG Sale. We do not expect to pay taxes on the proceeds from the TSG Sale. However, we may be subject to income taxes in foreign jurisdictions on the gain, if any, from the TSG Sale in jurisdictions where we maintain foreign subsidiaries. The TSG Sale also may result in Agilysys being subject to foreign, state or local sales, use or other taxes in jurisdictions in which Agilysys files tax returns or has assets.

Regulatory Matters

The TSG Sale is not subject to review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended or any other regulatory approvals.

However, at any time before or after the consummation of the TSG Sale, the Department of Justice or the Federal Trade Commission could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the TSG Sale or seeking divestiture of certain of our or Purchasers’ assets. Private parties and State Attorneys General may also bring legal actions under the antitrust laws.

There can be no assurance that a challenge to the TSG Sale on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

Required Vote and Recommendation

The affirmative vote of the holders of at least two-thirds of the issued and outstanding common shares of the Company will be required to authorize Proposal 1. The effect of an abstention or of a broker non-vote is the same as a vote “AGAINST” Proposal 1.

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 1. PROXY CARDS RECEIVED BY THE COMPANY WILL BE VOTED “FOR” PROPOSAL 1 UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE ON THE PROXY CARD.

FINANCIAL PROJECTIONS

Our management does not as a matter of course make public full year projections. However, in connection with the process to test the market for a potential sale of the TSG Business, our management provided certain TSG Business projections to potential acquirors, including Purchasers, which were based on our management’s projection of our future financial performance as of the date they were provided. The projections also were provided to our Board of Directors and financial advisor. We included below the material portions of these

projections, which we refer to as the Projections, to give our shareholders access to certain nonpublic information prepared for purposes of considering and evaluating the TSG Sale. The Projections were prepared by Agilysys’ management for internal use and to assist Purchasers and certain of the other bidders with their respective due diligence investigations of Agilysys, and were not prepared with a view toward public disclosure or compliance with published guidelines of the SEC or the American Institute of Certified Public Accountants regarding forward-looking information or generally accepted accounting principles.

Neither Agilysys’ independent registered public accounting firm, Ernst & Young LLP, nor any other independent accountants have compiled, examined, or performed any procedures with respect to the Projections, nor have they expressed any opinion or given any form of assurance on the projections or their achievability. The projections were prepared by management. Purchasers did not prepare the information in the table below, have no responsibility therefor, and may have varied some of the assumptions underlying such information for purposes of their analyses. Furthermore, the Projections:

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Necessarily make numerous assumptions, many of which are beyond the control of Agilysys and may not prove to be accurate;

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Except as indicated below, do not necessarily reflect revised prospects for Agilysys’ business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the projections were prepared;

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Are not necessarily indicative of current values or future performance, which may be significantly more favorable or less favorable than as set forth below; and

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Should not be regarded as a representation that they will be achieved.

We believe the assumptions our management used as a basis for the Projections were reasonable at the time such information was prepared, given the information our management had at the time.

The Projections are not a guarantee of performance. They involve significant risks, uncertainties and assumptions. The future financial results and shareholder value of Agilysys may materially differ from those expressed in the Projections due to factors that are beyond our ability to control or predict. We cannot assure you that the Projections will be realized or that the future financial results of the TSG Business will not materially vary from the Projections. We do not intend to update or revise the Projections.

The Projections are forward-looking statements. For information on factors which may cause our future financial results to materially vary, see “Cautionary Statement Concerning Forward-Looking Information” on page [ ], “Special Risk Considerations You Should Take Into Account In Deciding How To Vote On The Proposal To Sell the TSG Business” on page [ ], and the “Risk Factors” included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2010, which is incorporated herein by reference.

The Projections estimate profitability at the operating income level, including an allocation for general and administrative expenses but exclusive of interest income, other income and expenses, and income taxes. The Projections have also been prepared on a non-GAAP basis, which excludes stock-based compensation, restructuring charges, and amortization of intangible assets.

Agilysys’ management prepared the Projections under two cases, referred to as “management case 1” forecasts and “management case 2” forecasts, which management case 2 forecasts reflected a one-year delay in achieving the management case 1 forecasts. The financial projections included (in millions of dollars):


	Management Case 1 ($)		Management Case 2 ($)
	2012	2013	2012	2013
Revenue	530.0	572.4	501.9	530.0
Gross Profit	91.7	99.1	87.0	91.7
Operating Income	17.8	22.8	11.8	17.8

The foregoing financial projections are based upon numerous estimates and assumptions including, without limitation, the following:

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Continued positive trends in the markets in which the TSG Business participates;

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Continued development and expansion of the product offerings of the TSG Business;

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Continued business relationship with Verizon Communications, Inc., one of the largest customers of the TSG Business;

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Further penetration of the TSG Business’s growing markets, such as the finance, government, healthcare, telecommunications, and education industries.

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Movement up the value chain in enterprise architecture, infrastructure optimization and resource management, identity management and business continuity solutions offerings;

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Continued improvement of the TSG Business’s gross profit margins; and

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$3 million in estimated incremental standalone costs.

SPECIAL RISK CONSIDERATIONS YOU SHOULD TAKE INTO ACCOUNT IN DECIDING HOW TO VOTE ON THE PROPOSAL TO SELL THE TSG BUSINESS

You should carefully consider the special risk considerations described below as well as other information provided to you or referenced in this document in deciding how to vote on the proposal to sell the TSG Business. The special risk considerations described below are not the only ones facing us. For a discussion of additional risk considerations, we refer to you the documents we file from time to time with the Securities and Exchange Commission, particularly our 2011 Annual Report. Additional considerations not presently known to us or that we currently believe are immaterial may also adversely affect our business operations. If any of the following special risk considerations actually occur, our business, financial condition, or results of operations could be materially adversely affected, the value of our common shares could decline, and you may lose all or part of your investment.

Special Risk Considerations Regarding the Proposal to Sell the TSG Business

If we fail to complete the sale of the TSG Business, our business may be harmed.

We cannot assure you that the sale of our TSG Business will be completed. The completion of the sale of the TSG Business is subject to the satisfaction of a number of conditions, including, among others, the requirement that we obtain shareholder authorization of the TSG Sale. In addition, either party may terminate the agreement under certain circumstances as discussed under the caption under the captions “The Purchase Agreement — Termination” on page [ ] and “The Purchase Agreement — Termination Fee” on page [ ]. Furthermore, we cannot guarantee that we will be able to meet all of the closing conditions of the Purchase Agreement. If we are unable to meet all of the closing conditions, Purchasers are not obligated to purchase the TSG Business. If the TSG Sale is not authorized or does not close, our Board of Directors will be forced to evaluate other alternatives, which may be less favorable to us than the proposed sale of the TSG Business.

As a result of our announcement of the sale of our TSG Business, third parties may be unwilling to enter into material agreements with respect to our TSG Business. New or existing customers and business partners may prefer to enter into agreements with our competitors who have not expressed an intention to sell their business because customers and business partners may perceive that such new relationships are likely to be more stable. Employees working in the TSG Business may become concerned about the future of the business and lose focus or seek other employment. If we fail to complete the TSG Sale, the failure to maintain existing business relationships or enter into new ones could adversely affect our business, results of operations, and financial condition. In addition, if we fail to complete the proposed TSG Sale, we will retain and continue to operate the TSG Business. The resultant potential for loss or disaffection of employees or TSG Business customers would have a material, negative impact on the value of our TSG Business.

In addition, if the TSG Sale is not consummated, our Directors, executive officers and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the transaction and we will have incurred significant third party transaction costs, in each case, without any commensurate benefit, which may have a material and adverse effect on our share price and results of operations.

Use of proceeds from the TSG Sale may not yield a favorable return.

The purchase price for the assets of the TSG Business will be paid directly to our Company. Management could spend or invest the net proceeds from the sale of the TSG Business in ways with which our shareholders may not agree, including acquisitions. The investment of these proceeds may not yield a favorable return.

The Purchase Agreement may expose us to contingent liabilities.

Under the Purchase Agreement, we agreed to indemnify Purchasers for breaches or violations of any covenant or agreement made by us in the Purchase Agreement, for certain pre-closing and other liabilities related to the TSG Business, and for other matters. Significant indemnification claims by Purchasers could have a material adverse effect on our financial condition.

Special Risk Considerations Regarding the Remaining HSG and RSG Businesses Assuming the TSG Business is Sold

Our TSG Business has historically generated a substantial portion of our revenue. After its sale we will be a much smaller company, and in order to succeed as a smaller company after the sale, we will need to achieve profitability of our HSG and RSG Businesses.

We will be selling our entire TSG Business which has historically been the source of a substantial portion of our revenue. For the fiscal year ended March 31, 2011, our TSG Business segment accounted for $474 million of our total revenues of $675 million while our HSG and RSG Businesses accounted for only $201 million of our total revenues. We intend to return a substantial portion of the net proceeds from this transaction to our shareholders and invest any remaining portion of the net proceeds to grow our HSG and RSG Businesses. There is no guarantee that we will be able to achieve sustained growth or profitability in our HSG and RSG Businesses or in new business opportunities we may pursue.

Our profitability and growth will depend on the success of our remaining businesses, the HSG Business and RSG Business, which are subject to a variety of business risks and uncertainties.

Our HSG Business provides solutions to major hotels, casinos, cruise lines, sports/entertainment venues and managed food service operations. Our RSG Business provides software, hardware, services, and consulting for retailers of all sizes and specialties that streamline operations. Any evaluation of our HSG Business, our RSG Business and our prospects must be considered in light of the risks and uncertainties often encountered by similarly situated companies, including the ability to:

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Maintain our current relationships, and develop new relationships, with customers, channel partners and employees;

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Continue to grow our revenue and meet anticipated growth targets;

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Manage our expanding operations and implement and improve our operational, financial, and management controls;

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Adapt to industry consolidation;

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Successfully introduce new, and upgrade our existing, products and services for consumers;

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Respond to government regulations relating to our Consumer Business;

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Respond effectively to competition; and

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Attract and retain qualified management and employees.

If we are unable to address these risks, our business, results of operations and prospects could suffer.

We will be a very small public company with a large cash balance

Once the TSG Sale is completed, we will remain a publicly traded company and will continue to be subject to NASDAQ listing standards and SEC rules and regulations, including the Sarbanes-Oxley Act of 2002. While all public companies face the costs and burdens associated with being publicly traded, given the size of our hospitality- and retail-focused company, the costs and burden of being a public company will be a significant portion of our annual revenues. In addition, given our size and the fact that the sole focus of our business will be our HSG Business and RSG Business, our management will have an even greater expectation from shareholders and industry analysts to produce improved quarterly financial results for our HSG and RSG Businesses as compared to the periods prior to the TSG Sale when the diversity of our revenue streams could enable one of our segments to offset weakness in the other segment. After giving effect to the TSG Sale, on a pro forma basis, we would have had approximately $126 million in cash, cash equivalents and investments as of March 31, 2011. This might cause distractions for our management and our Board of Directors and might otherwise prevent us from executing on our strategy for our HSG and RSG Businesses to build long-term shareholder value.

We may make acquisitions in the HSG Business or RSG Business that may not prove successful.

We may not be able to identify suitable acquisition candidates at prices we consider appropriate. If we do identify an appropriate acquisition candidate, we may not be able to successfully and satisfactorily negotiate the terms of the acquisition. Our management may not be able to effectively implement our acquisition program and internal growth strategy simultaneously. The integration of acquisitions involves a number of risks and presents financial, managerial, and operational challenges. We may have difficulty, and may incur unanticipated expenses related to, integrating management and personnel from these acquired entities with our management and personnel. Our failure to identify, consummate, or integrate suitable acquisitions could adversely affect our HSG and RSG Businesses. We cannot readily predict the timing, size or success of our future acquisitions. Failure to successfully integrate recent acquisitions or future acquisitions could have a material adverse effect on our business, prospects, financial condition, and results of operations.

Economic or market factors could cause a decline in spending on 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 our customers’ businesses. 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 offered. In the last two years, 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.

THE PURCHASE AGREEMENT

The following is a summary of the material terms of the Purchase Agreement. While we believe that the following description covers the material terms of the Purchase Agreement, this summary does not purport to describe all the terms of the Purchase Agreement and is qualified by reference to the complete Purchase Agreement, which is attached as Annex A to this proxy statement. We urge you to read the Purchase Agreement carefully and in its entirety because it, and not the summary set forth in this proxy statement, is the legal document that governs the TSG Sale.

The terms of the Purchase Agreement are intended to govern the contractual rights and relationships, and allocate risks, between the parties in relation to the TSG Sale. The Purchase Agreement contains representations and warranties that Agilysys, on the one hand, and Purchasers, on the other hand, made to each other as of specific dates. The representations and warranties were negotiated between the parties with the principal purpose of setting forth their respective rights and obligations to consummate the TSG Sale and may be subject to important limitations and qualifications as set forth therein, including a contractual standard of materiality different from that generally applicable under federal securities laws. In addition, certain representations and warranties relate to information that is not known currently by either party and have been negotiated such that the risk that such representations or warranties are ultimately shown to not be true is allocated between the parties.

In addition, such representations and warranties are qualified by information in confidential disclosure schedules that Agilysys and Purchasers have exchanged in connection with signing the Purchase Agreement (the “Seller Disclosure Letter”). While Agilysys does not believe that the Seller Disclosure Letter contains information that the securities laws require to be publicly disclosed, the Seller Disclosure Letter does contain information that modifies, qualifies, and creates exceptions to the representations and warranties set forth in the attached Purchase Agreement. Accordingly, you should not rely on the representations and warranties as characterizations of the actual state of facts, since they are modified by the underlying Seller Disclosure Letter. The Seller Disclosure Letter contains certain information that has been included in our prior public disclosures, as well as additional non-public information. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in our public disclosures.

General

Under the terms of the Purchase Agreement, Purchasers agreed to purchase the TSG Business for an aggregate cash payment of $64 million to us, upon the closing of the TSG Sale, subject to adjustment based on final working capital. The transaction is structured as (i) a sale of the stock or equity of the following wholly owned subsidiaries of Agilysys to OnX LLC: (a) Agilysys LLC, (b) Agilysys Canada, Inc. and (c) Agilysys Europe Technology Solutions Limited (collectively, the “TSG Subsidiaries”); and (ii) a sale of certain assets of Agilysys LLC to OnX Limited. In connection with the transaction, certain assets of the TSG Business that are held by Agilysys, primarily employees, leases and vendor and customer contracts, will be transferred to one or more of the TSG Subsidiaries prior to closing the TSG Sale (the “Restructuring”).

Closing

Closing of the TSG Sale under the Purchase Agreement will occur on the second business day following the satisfaction or, to the extent permitted, waiver of all conditions to the obligations of the parties to consummate the transactions contemplated under the Purchase Agreement, including the authorization of the TSG Sale by the holders of two-thirds of our common shares outstanding on the Record Date, or at such other time as we and Purchasers may agree upon in writing.

Representations and Warranties

The Purchase Agreement contains a number of customary representations and warranties applicable to us, subject in some cases to customary qualifications, relating to, among other things, the following:

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Corporate organization, good standing and other corporate matters regarding us;

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Authorization, valid execution and delivery, and enforceability of the Purchase Agreement;

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Absence of conflicts or violations under charter documents, contracts and instruments of law;

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Valid ownership and transferability of the equity of the TSG Subsidiaries; and

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Required shareholder vote to authorize the transaction.

The Purchase Agreement also contains a number of customary representations and warranties applicable to the TSG Subsidiaries and the TSG Business, subject in some cases to customary qualifications, relating to, among other things, the following:

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Corporate organization, good standing and other corporate matters regarding the TSG Subsidiaries;

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The capital structure and equity securities of the TSG Subsidiaries;

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The absence of conflicts or violations under charter documents, contracts and instruments of law;

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The financial statements related to the TSG Business;

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Absence of certain changes related to the TSG Business;

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Absence of undisclosed liabilities;

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Title to personal property or other related assets of the TSG Subsidiaries;

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Title to real estate or valid leasehold interests of the TSG Subsidiaries;

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Intellectual property matters related to the TSG Business;

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Material contracts related to the TSG Business;

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Tax matters;

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Absence of legal proceedings or orders;

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Employee compensation and benefits matters;

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Labor and employee matters;

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Contracts with affiliates;

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Sufficiency of TSG Subsidiaries’ assets for the conduct of the TSG Business;

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Brokers’ or finders’ fees, and other fees with respect to the TSG Sale;

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Customers and suppliers to the TSG Business; and

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Bank accounts.

In addition, the Purchase Agreement contains a number of customary representations and warranties applicable to Purchasers, subject in some cases to customary qualifications, relating to, among other things, the following:

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Corporate organization, good standing, and other corporate matters of Purchasers;

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Authorization, valid execution and delivery, and enforceability of the Purchase Agreement;

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Absence of conflicts with conflicts or violations under Purchasers’ charter documents, contracts and instruments of law;

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Absence of legal proceedings;

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Purchase of the equity is in compliance with securities laws;

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Sufficiency of funds or financing to enable Purchasers to consummate the transactions contemplated under the Purchase Agreement; and

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Financial position of Purchasers after consummation of the TSG Sale.

Certain representations and warranties in the Purchase Agreement provide exceptions for items that are not reasonably likely to have a Seller Material Adverse Effect, a Purchaser Material Adverse Effect, or a Company Material Adverse Effect. For purposes of the Purchase Agreement:

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“Seller Material Adverse Effect” means a material adverse effect on the ability of Agilysys to perform its obligations under the Purchase Agreement or to consummate the TSG Sale and other transactions contemplated under the Purchase Agreement.

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“Purchaser Material Adverse Effect” means a material adverse effect on the respective abilities of Purchasers to perform their respective obligations under the Purchase Agreement or to consummate the TSG Sale and other transactions contemplated under the Purchase Agreement.

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“Company Material Adverse Effect” means a material adverse effect on the TSG Business as a whole, except for any effect resulting or arising from or relating to the following matters:

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Changes or developments in the general conditions in which the TSG Business operates (provided the effect resulting from such matters does not materially and disproportionately affect the TSG Business as a whole);

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Changes or developments in any conditions in the general economy in any of the geographic areas in which the TSG Business operates (provided the effect resulting from such matters does not materially and disproportionately affect the TSG Business as a whole);

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Changes or developments in political conditions, including acts of war (whether or not declared), armed hostilities and terrorism;

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Any conditions resulting from natural or manmade disasters or other Acts of God;

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Compliance by Agilysys or the TSG Subsidiaries with the covenants and agreements contained in the Purchase Agreement;

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Any action taken or omitted to be taken by or at the request or with the consent of Purchasers;

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The announcement of the Purchase Agreement or the other transactions contemplated by the Purchase Agreement;

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Fluctuations or other changes in currency exchange rates;

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Changes in any laws or accounting principles; or

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The failure of the TSG Business to meet internal projections for budgets for any period prior to, on or after the date of the Purchase Agreement.

Indemnification

After closing of the TSG Sale, we have agreed to indemnify and hold each of OnX LLC, the TSG Subsidiaries and their respective affiliates harmless from any loss arising out of (i) any misrepresentation by us of or inaccuracy in any of the representations and warranties with respect to (A) title to and transferability of the shares of the TSG Subsidiaries and (B) capital structure and equity securities of the TSG Subsidiaries, (ii) any fraud or intentional misrepresentation by us of any of the representations and warranties; (iii) breaches by us of any covenants or agreements made by us under the Purchase Agreement, (iv) any excluded liabilities under the Purchase Agreement, or (v) certain tax matters relating to the TSG Subsidiaries.

After closing of the TSG Sale, OnX LLC and the TSG Subsidiaries have agreed to indemnify and hold us and our affiliates harmless from or relating to any loss arising out of any breach of any covenants or agreements made by OnX LLC under the Purchase Agreement.

Covenants and Agreements

Conduct of TSG Business

We agreed that during the period from the date of the Purchase Agreement until the closing of the TSG Sale, subject to certain exceptions, we shall conduct the TSG Business in the usual, regular and ordinary course in substantially the same manner as previously conducted including without limitation with respect to invoicing, collection and payment of payables and receivables, to use reasonable best efforts to keep intact the respective businesses of the TSG Subsidiaries, keep available the services of the TSG Subsidiaries’ respective current employees and preserve the goodwill of the TSG Subsidiaries’ respective customers, suppliers, licensors, licensees, distributors and others with whom the TSG Subsidiaries’ deal.

Without limiting the generality of the foregoing, except as expressly provided in the Purchase Agreement or as required by applicable law, without the prior written consent of OnX LLC, we shall not permit any of the TSG Subsidiaries to:

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Amend the organizational documents of the TSG Subsidiaries;

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(1) redeem, purchase or otherwise acquire, directly or indirectly, any shares of its capital stock, (2) issue, deliver or sell any shares of its capital stock or any option, warrant or right relating thereto or any securities convertible or exchangeable into or exercisable for any shares of its capital stock, (3) adjust, split, combine or reclassify its capital stock, (4) grant any right or option to acquire any shares of its capital stock, or enter into any contract, understanding or arrangement with respect to the sale, voting, registration or repurchase of its capital stock;

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Make, declare or pay any dividend or distribution on any shares of its capital stock;

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Adopt or amend in any material respect any employee plan (as defined in the Purchase Agreement);

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Grant to any executive officer or employee any increase in compensation or benefits, except as may be required under existing contracts and except for any increases for which we or our affiliates (other than the TSG Subsidiaries) shall be solely obligated;

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Hire any new employee, except for employees transferred in compliance with the Purchase Agreement;

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Incur or assume any indebtedness for borrowed money or guarantee any such indebtedness or, except in the ordinary course of business, incur or assume any other liabilities or obligations;

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Permit, allow or suffer any of its assets to become subjected to any liens;

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Make any change in any method of accounting or accounting practice or policy other than those required by GAAP or other applicable laws;

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Acquire by merging or consolidating with, or by purchasing the assets or equity interests of, or by any other manner, any business or any corporation, partnership, association or other business organization or division or otherwise acquire any material assets (other than inventory);

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Make or incur any capital expenditures that are not currently approved or budgeted and expressly disclosed to Purchasers and that, in the aggregate, are in excess of $100,000;

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Sell, lease, license or otherwise dispose of any of its assets in excess of $100,000, except inventory sold in the ordinary course of business and consistent with past practice;

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Subject to certain exceptions, (1) enter into any contract of a character that would constitute a material contract under the Purchase Agreement or be required to be disclosed to Purchasers pursuant to the terms of the Purchase Agreement, if such contract had been entered into prior to the date of the Purchase Agreement, or any contract (a) with Agilysys or any of our affiliates, (b) providing for exclusivity or otherwise restricting the ability of any Subsidiary to operate and compete in any field, product line, geographic area, or in any other manner, or (c) providing for “most favored nation” pricing, or (2) terminate, cancel or amend in any material respect any material contract, other than new customer or supplier contracts entered into in the ordinary course of business and in consultation with OnX LLC;

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Make or revoke any material tax election, settle or compromise and material tax claim, file any material amended return, if any of these actions could have an adverse effect on the tax liability of the TSG Subsidiaries;

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Make any loans advancements or capital contributions to, or investments in any third party, other than in the ordinary course of business consistent with past practice;

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Enter into any contracts with us or any of our affiliates; or

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Accelerate the collection of or discount any accounts receivable, delay the payment of accounts payable or defer expenses, reduce inventories or otherwise increase cash on hand, except in the ordinary course of business, consistent with past practice.

No Solicitation

The Purchase Agreement provides that, except as specifically provided for in the Purchase Agreement, we will not (and we will cause our subsidiaries, employees, officers, directors and agents not to):

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Solicit, initiate, entertain or knowingly encourage the submission of any proposal or offer from any third party relating to a competing transaction (as described below);

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Enter into any agreement with respect to a competing transaction; or

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Provide any non-public information regarding the TSG Subsidiaries or the TSG Business to any third party in connection with any competing transaction or engage in any negotiations or substantive discussions regarding any competing transaction.

However, prior to the receipt of shareholder authorization of the TSG Sale, in response to a proposal for a competing transaction that was not solicited by us, we may provide non-public information regarding the TSG Subsidiaries to any third party making the proposal for a competing transaction or engage in negotiations or substantive discussions with the third party regarding the competing transaction, in each case, if our Board of Directors determines in good faith (A) after consultation with its financial advisor and legal counsel, that such proposal for a competing transaction is, or is reasonably likely to lead to, a superior proposal (as described below), and (B) after consultation with legal counsel, that failing to take any such action would be inconsistent with the fiduciary duties of our Board of Directors.

We shall promptly (and in any event within 48 hours of receipt) advise OnX LLC orally and in writing of the receipt of any proposal for a competing transaction or contingent seller proposal and its material terms. In addition, we promptly shall advise OnX LLC orally and in writing of the commencement of any discussions with any third party or its representative regarding any proposal for a competing transaction or contingent seller proposal.

We agreed that our Board of Directors will not make a change of recommendation or approve or recommend any proposal for a competing transaction. Notwithstanding the foregoing, after the date of the Purchase Agreement but prior to the receipt of shareholder authorization for the TSG Sale:

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The Board of Directors may terminate the Purchase Agreement and cause the Company to enter into an agreement with respect to a superior proposal five business days after providing written notice to OnX LLC specifying the terms of the proposal, contemporaneously furnishing a copy of the relevant acquisition agreement or other relevant transaction documents and giving OnX LLC an opportunity to make an alternative proposal in response to a contingent seller proposal (as described below) or a proposal for a competing transaction that was not solicited by us and that our Board of Directors determines in good faith is or could reasonably lead to a superior proposal (provided that any amendment to the financial terms or any other material term of a competing proposal requires that we provide a new written notice to OnX LLC and give OnX LLC three additional business days plus the remaining days, if any, from the five business day period described above), if (i) we waive the standstill provisions applicable to OnX LLC in the confidentiality agreement (unless the superior proposal constitutes a competing transaction, in which case no such waiver is required), and (ii) prior to the expiration of the five business day period described above, OnX LLC does not make a proposal to adjust the terms and conditions of the Purchase Agreement that our Board of Directors determines in good faith (after consultation with the Company’s financial advisor and legal counsel) to be at least as favorable as the superior proposal after giving effect to, among other things, the payment of the termination fee;

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The Board of Directors may change its recommendation if (i) a material development or change in circumstances occurs or arises after the date of the Purchase Agreement that was not known by the Board of Directors as of the date of the Purchase Agreement, and the Board of Directors determines in good faith (after consultation with the Company’s legal counsel) that failing to make a change in recommendation in light of such material development or change in circumstances would be inconsistent with the directors’ fiduciary duties under applicable Law, and (ii) we provide OnX LLC five business days prior written notice of our Board of Directors’ intention to change its recommendation, specifying in reasonable detail the reasons and basis for such action.

The term “competing transaction” means any inquiry, proposal or offer (1) for a merger, consolidation, business combination or other similar transaction solely with respect to one or more of the TSG Subsidiaries or the TSG Business, (2) to acquire in any manner, directly or indirectly, substantially all the shares or other equity

interests of the TSG Subsidiaries or any resulting parent company of the TSG Subsidiaries (other than Agilysys), or (3) to acquire in any manner, directly or indirectly, assets of the TSG Subsidiaries representing substantially all of the consolidated assets solely of the TSG Subsidiaries.

The term “seller takeover proposal” means any inquiry, proposal or offer (1) for a merger, consolidation, business combination or similar transaction with Agilysys, (2) to acquire in any manner, directly or indirectly, more than 50% of the outstanding equity interests of Agilysys or (3) to acquire in any manner, directly or indirectly, assets of Agilysys or its subsidiaries representing more than 60% of the consolidated assets of Agilysys.

The term “contingent seller proposal” means a seller takeover proposal that is contingent upon termination of the Purchase Agreement.

The term “superior proposal” means a competing transaction or seller takeover proposal contingent upon termination of the Purchase Agreement that our Board of Directors determines in good faith, after consultation with counsel and its financial advisor, (1) is more favorable from a financial point of view to our shareholders than the transactions contemplated by the Purchase Agreement after taking into account the termination fee and any alternative proposal offered by OnX LLC, and (2) is reasonably likely to be completed on the terms proposed in a timely basis. If we terminate the Purchase Agreement and enter into an agreement with any third party with respect to a superior proposal, we will be required to pay the termination fee of $2.25 million. See “The Purchase Agreement — Termination Fee” on page [ ].

Access to Information

From the date of the Purchase Agreement until the closing of the TSG Sale, we agreed that, subject to certain limitations, we shall, and shall cause the TSG Subsidiaries to, (1) afford OnX LLC reasonable access, upon reasonable notice during normal business hours to all properties, books, contracts, tax returns and records of the TSG Subsidiaries, and (2) furnish promptly to OnX LLC at our expense, any information concerning the TSG Subsidiaries that OnX LLC may reasonably request.

Further Assurances; Reasonable Best Efforts

Subject to certain limitations, we, Agilysys LLC and Purchasers each agreed to use our reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things, necessary or desirable under applicable law to consummate, in the most expeditious manner practicable, the transactions contemplated by the Purchase Agreement, including:

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(1) prepare, as soon as practicable, all filings and other presentations in connection with seeking any required regulatory approval, exemption or other authorization from any governmental entity necessary to consummate the transactions contemplated by the Purchase Agreement; (2) prosecute such filings and other presentations with diligence; (3) oppose any objections to, appeals from or petitions to reconsider or reopen any such approval by third parties; (4) use reasonable best efforts to facilitate obtaining any final order or orders approving, or remove any impediment to, the transactions contemplated by the Purchase Agreement; and (5) use reasonable best efforts to furnish all information in connection with the approvals of or filings with regard to required regulatory approvals with any government entity; and

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Prior to and continuing one year after the closing of the TSG Sale, at the respective party’s own expense, obtain, and to cooperate in obtaining, all consents and waivers from third parties necessary or appropriate to permit consummation of the TSG Sale and the continuation of all contracts of the TSG Business without giving rise to any termination or right of termination.

Further, except as prohibited by any applicable representative of any applicable governmental authority, and subject to any applicable laws, we and Purchasers have agreed to:

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Promptly notify the other party of any material communication received from any antitrust authority, any state attorney general or any other governmental authority regarding any of the transactions contemplated by the Purchase Agreement or the TSG Sale, and of any understandings, undertakings or agreements (oral or written) proposed to be made or entered into with any governmental entity in connection with the transactions contemplated by the Purchase Agreement;

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Not participate independently in any meeting with any governmental authority in respect of any filings or inquiry in connection with the TSG Sale without giving the other party prior notice of the meeting and the opportunity to attend and participate; and

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Consult and cooperate with one another in connection with any information or proposals submitted in connection with proceedings under or relating to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, if required, in connection with the transactions contemplated by the TSG Sale.

Further, we agreed that, in the event we cannot obtain a consent required under the Purchase Agreement for the continuation of a TSG Business contract, we shall:

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Provide the benefits of the contract to OnX LLC and OnX LLC shall bear the burden thereunder as if such contract were transferred to OnX LLC;

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Enforce for the benefit of OnX LLC any and all rights against a third party to the contract, and OnX LLC shall perform the obligations thereunder; and

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As promptly as practicable, but no later than five business days after receipt, pay to OnX LLC all monies received by us or any of our affiliates under such contract, as long as OnX LLC is in compliance at the time of any such payment with any obligations under the arrangements discussed above.

Shareholder Authorization

We and OnX LLC each agreed to cooperate in the preparation and filing of this proxy statement with the SEC as soon as practicable following the date of the Purchase Agreement, to the extent specified in the Purchase Agreement.

We agreed to duly call, give notice of, convene and hold a meeting of our shareholders, as soon as practicable after the date of the Purchase Agreement, for the purpose of authorizing the TSG Sale. Subject to our Board of Directors withdrawing, qualifying or modifying its recommendation pursuant to and in accordance with specific provisions of the Purchase Agreement, Agilysys, through our Board of Directors, will recommend that our shareholders vote to authorize the TSG Sale at the Annual Meeting.

Expenses; Transfer Taxes

Except as otherwise set forth in the Purchase Agreement, all costs and expenses incurred in connection with the Purchase Agreement and transactions contemplated thereby shall be paid by the party incurring the expense, provided that if the transactions contemplated in the Purchase Agreement are consummated, the transaction expenses of Agilysys, the TSG Subsidiaries and their respective affiliates will be paid by Agilysys and not the TSG Subsidiaries. OnX LLC has agreed to bear the filing fee of the notification and report form, if any, required for the transactions contemplated pursuant to the HSR Act.

Employee Matters

Agilysys will be responsible for the first $3 million of severance pay obligations arising solely under employee plans (as defined in the purchase agreement) in effect on the date of the Purchase Agreement to any

terminated employee or retained employee in connection with the termination of such employee on or prior to the closing of the TSG Sale, and OnX LLC will be responsible for any severance pay obligations in excess of $3 million. Agilysys will be solely responsible for any liability or obligation arising under the WARN Act in connection with the termination of any retained employee, terminated employee and transferred employee on or prior to the closing of the TSG Sale.

From and after the closing of the TSG Sale, OnX LLC is free to cause one or more of the TSG Subsidiaries to determine any base salary, conditions to participation in employee benefit plans, programs, policies and arrangements and any bonus, incentive, commission or other variable compensation programs in its sole discretion.

OnX LLC may, in its sole discretion, establish as of the closing of the TSG Sale, one or more medical expense and/or dependent care flexible spending account plans. To the extent that OnX LLC establishes a flexible spending account plan that is comparable to a flexible spending account existing under one of our employee plans, such OnX LLC-established flexible spending account plan will recognize the elections that such TSG Business employees had in effect for purposes of calendar year 2011. In addition, any such flexible spending account plan established by OnX LLC will (i) assume the obligations of our applicable flexible spending account plans with respect to the TSG Business employees as of the closing of the TSG Sale and (ii) provide for the same level of medical expense and/or dependent care expense reimbursement account benefits as those provided under our flexible spending account plans through the end of the plan year in effect as of the closing of the TSG Sale. On the closing of the TSG Sale, to the extent OnX LLC establishes a flexible spending account plan, Agilysys will transfer to OnX LLC any amounts withheld or collected by Agilysys and its affiliates under the applicable flexible account plan from TSG Business employees during the plan year prior to the closing of the TSG Sale.

All TSG Business employees who are participants in Agilysys’ U.S. tax-qualified defined contribution plan (the “Seller 401(k) Plan”) will retain their accrued benefits (subject to the terms of the Seller 401(k) Plan, including the vesting provisions contained therein) under the Seller 401(k) Plan as of the closing of the TSG Sale, and the Seller 401(k) Plan shall retain sole liability for the payment of such benefits as and when such TSG Business employees become eligible under the Seller 401(k) Plan. In addition, prior to the closing of the TSG Sale, Agilysys will amend the Seller 401(k) Plan, to the extent necessary, (i) to allow for the direct rollover of any participant loans outstanding under the Seller 401(k) Plan with respect to accounts of the TSG Employees to a tax-qualified defined contribution plan established for the TSG Business employees by OnX LLC on or after the closing of the TSG Sale, and (ii) such that no participant loan with respect to accounts of the TSG Business employees will be placed into default during the period beginning on the date of the closing of the TSG Sale through the date any such loan is rolled over, on an in kind basis, into a tax-qualified defined contribution plan established by OnX LLC, as long as each such participant continues making loan repayments on a timely basis, in accordance with reasonable procedures acceptable to Agilysys during such period.

Names Following Closing

Subject to the terms of the Purchase Agreement, we have retained all right, title and interest in and to the Agilysys name. We exclusively own any other trademarks, logos of Agilysys or our affiliates, together with all variations, derivatives and acronyms thereof and all trademarks, service marks, domain names, trade names, trade dress, company names and other identifiers of source or goodwill containing, incorporating or associated with any of the foregoing, and the TSG Subsidiaries’ rights to use these retained names shall, subject to the terms of the Purchase Agreement, terminate as of the closing date of the TSG Sale. Subject to the terms of the Purchase Agreement, Purchasers shall amend or terminate any certificate of assumed name or “d/b/a filings” to eliminate its use of the retained names or similar name, and shall amend the TSG Subsidiaries’ organizational documents to change the names thereof to a name not including or similar to any retained name.

OnX LLC and its affiliates shall have the right to sell existing inventory and use existing packaging, labeling, containers, stationery, business forms, supplies, advertising and promotional materials and any similar materials bearing the retained names for 120 days following the closing of the TSG Sale, except that OnX LLC shall make clear to all other applicable parties that OnX LLC is the party entering into or conducting the contractual relationship and that personnel of OnX LLC or its affiliates shall not, and shall not have the authority to, hold themselves out as agents of Agilysys or any of our affiliates. OnX LLC agrees to use reasonable best efforts to minimize use of the retained names as soon as practicable and in any event within 120 days of closing the TSG Sale.

Additional Agreements

The Purchase Agreement contains additional agreements between us and Purchasers relating to, among other things:

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Consultations regarding public announcements;

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Notification of certain matters;

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Termination of intercompany agreements and debt;

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Treatment of bank accounts shared between us and the TSG Subsidiaries;

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Release of certain confidentiality obligations;

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Compliance by OnX LLC with provisions under the WARN Act or similar applicable law; and

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Allow, to the extent required, OnX LLC or its affiliates to make claims under third party liability insurance policies and any workers’ compensation insurance policies and/or workers’ compensation self-insurance programs sponsored by Agilysys or its affiliates.

Conditions to Completion of the TSG Sale

The obligations of us and Purchasers to complete the TSG Sale are subject to the satisfaction or waiver of the following conditions:

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Any required regulatory approvals shall have been obtained;

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The absence of any statute, rule, regulation, order, injunction or decree that has been enacted, entered, promulgated or enforced by any governmental authority that prohibits, or makes illegal the closing of the TSG Sale; and

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The receipt of our shareholder authorization.

In addition, the obligations of Purchasers to complete the TSG Sale are subject to the satisfaction by us or waiver by Purchasers of conditions, including the following:

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Our representations and warranties shall be true and correct in all material respects as of the date of the closing of the TSG Sale, except those representations and warranties which address matters only as of a particular date need only be true and correct as of such date;

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We shall have performed and complied in all material respects with each of the covenants, agreements and obligations we are required to perform under the Purchase Agreement;

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We and Agilysys LLC shall have delivered or cause to be delivered to OnX Limited or OnX LLC, as the case may be, all of the deliveries required of us and Agilysys LLC under the Purchase Agreement;

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Consummation of all of the transactions necessary to effect the Restructuring;

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The TSG Subsidiaries shall have no indebtedness for borrowed money outstanding as of the closing of the TSG Sale; and

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All liens on the subject shares and, other than permitted liens, on the TSG Business assets shall have been released prior to the closing of the TSG Sale.

In addition, our obligation to complete the TSG Sale is subject to the satisfaction by OnX LLC or waiver by us of conditions, including the following:

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OnX LLC’s representations and warranties shall be true and correct in all material respects as of the date of the closing of the TSG Sale, except those representations and warranties which address matters only as of a particular date need only be true and correct as of such date;

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OnX LLC shall have performed and complied in all material respects with each of the covenants, agreements and obligations Purchasers are required to perform under the Purchase Agreement; and

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OnX LLC and OnX Limited shall have delivered all of the deliveries required of each of them under the Purchase Agreement.

Termination

We and OnX LLC may by mutual written consent terminate the Purchase Agreement at any time prior to the completion of the TSG Sale.

In addition, either we or OnX LLC may, in writing, terminate the Purchase Agreement at any time prior to the effective time of the TSG Sale:

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If the TSG Sale has not been completed on or before November 30, 2011, referred to as the “outside date” (the outside date will be extended to December 30, 2011, without any action on the part of the parties to the Purchase Agreement (and such date will become the outside date), if on November 30, 2011 all conditions to the closing of the TSG Sale either have been fulfilled or are then capable of being fulfilled, except the governmental approval condition, the injunctions and restraints condition and the shareholder approval condition) provided that a party whose breach of any provision of the Purchase Agreement results in the failure of the TSG Sale to be consummated by the outside date will not be able to terminate under this provision; or

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If the authorization of the Purchase Agreement by our shareholders has not been obtained at the Annual Meeting or any adjournment thereof by reason of the failure to obtain the required vote.

We may terminate the Purchase Agreement, by written notice to OnX LLC, if:

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OnX LLC fails to perform or comply with any of its representations, warranties, agreement or covenants contained in the Purchase Agreement, which breach or failure to perform or comply would give rise to the failure of certain conditions to completion of the TSG Sale being satisfied and such breach or failure has not been waived by us; or

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Pursuant to the terms of the Purchase Agreement, and prior to the receipt of shareholder authorization, our Board of Directors has approved, and we have concurrently with such termination entered into, a definitive agreement with respect to a superior proposal.

OnX LLC may terminate the Purchase Agreement, by written notice to us, if:

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We fail to perform or comply with any of our representations, warranties, agreement or covenants contained in the Purchase Agreement, which breach or failure to perform or comply would give rise to the failure of certain conditions to completion of the TSG Sale being satisfied and such breach or failure has not been waived by OnX LLC; or

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We or our Board of Directors (or any committee of the Board of Directors) has (1) withdrawn or modified in a manner adverse to OnX LLC its recommendation in support of the TSG Sale, (2) approved, recommended or entered into any proposal for a competing transaction or a seller takeover proposal that is contingent upon our termination of the Purchase Agreement, or (3) formally resolved or publicly authorized or proposed to take any of the foregoing actions.

Termination Fee

We will be obligated to pay OnX LLC a termination fee equal to $2.25 million, by wire transfer of immediately available funds, if the Purchase Agreement is terminated:

•

By us to approve a definitive agreement relating to a superior proposal;

•

By OnX LLC because our Board of Directors (or any committee of the Board of Directors) withdraws or modifies its recommendation regarding the TSG Sale or approves, recommends or enters into a competing transaction or a contingent seller proposal;

•

Following public disclosure or direct delivery to our shareholders of a competing transaction, by OnX LLC or by us because either (1) the closing of the TSG Sale has not occurred by the outside date or (2) the TSG Sale is not authorized by our shareholders; or

•

By OnX LLC or us because we are in breach of the no solicitation provisions under the Purchase Agreement and the TSG Sale is not authorized by our shareholders.

Amendment

Subject to applicable law, the Purchase Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of our shareholders contemplated by the Purchase Agreement, by mutual written agreement of the parties, at any time prior to the closing of the TSG Sale; provided, however, that after our shareholders authorize the TSG Sale, no such amendment, modification or supplement shall alter or change (1) the purchase price, (2) the amount or kind of liabilities to be assumed by Purchasers pursuant to the Purchase Agreement, the TSG Sale or the other transactions contemplated thereby to any material extent; or (3) any other terms and conditions of the Purchase Agreement if such alterations or changes, alone or in the aggregate, would materially adversely affect Agilysys or any shareholder of Agilysys.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table sets forth selected historical consolidated financial data for the Company as of the dates and for the periods indicated. The consolidated financial data and the consolidated operations data for fiscal years 2007 through 2011 have been derived from our audited consolidated financial statements included in our filings on Form 10-K for each of the respective periods.


	For the year ended March 31
(In thousands, except per share data)	2011			2010			2009			2008			2007
Operating results (a)(b)(c)(d)
Net sales	$	675,470		$	634,320		$	720,957		$	760,168		$	453,740
Restructuring charges (credits)		1,195			823			40,801			(75	)		(2,531	)
Asset impairment charges		37,721			293			231,856			—			—
(Loss) income from continuing operations, net of taxes	$	(55,475	)	$	3,576		$	(282,187	)	$	1,858		$	(9,927	)
(Loss) income from discontinued operations, net of taxes		—			(29	)		(1,947	)		1,801			242,782

Net (loss) income	$	(55,475	)	$	3,547		$	(284,134	)	$	3,659		$	232,855

Per share data (a)(b)(c)(d)
Basic
(Loss) income from continuing operations	$	(2.44	)	$	0.16		$	(12.49	)	$	0.07		$	(0.32	)
(Loss) income from discontinued operations		—			—			(0.09	)		0.06			7.91

Net (loss) income	$	(2.44	)	$	0.16		$	(12.58	)	$	0.13		$	7.59

Diluted
(Loss) income from continuing operations	$	(2.44	)	$	0.15		$	(12.49	)	$	0.07		$	(0.32	)
(Loss) income from discontinued operations		—			—			(0.09	)		0.06			7.91

Net (loss) income	$	(2.44	)	$	0.15		$	(12.58	)	$	0.13		$	7.59

Cash dividends declared per common share	$	—		$	0.06		$	0.12		$	0.12		$	0.12

Weighted-average shares outstanding
Basic		22,785,192			22,626,586			22,586,603			28,252,137			30,683,766
Diluted		22,785,192			23,087,741			22,586,603			28,766,112			30,683,766

Financial position
Total assets	$	312,398		$	330,449		$	374,436		$	695,871		$	893,716
Long-term obligations (e)	$	1,461		$	384		$	157		$	255		$	3
Total shareholders’ equity	$	148,104		$	198,924		$	192,717		$	479,465		$	626,844

(a)

In fiscal year 2008, the Company acquired Stack Computer (“Stack”), InfoGenesis, Inc. (“InfoGenesis”), Innovative Systems Design, Inc. (“Innovative”), and Eatec Corporation (“Eatec”). In fiscal year 2009, the Company acquired Triangle Hospitality Solutions Limited (“Triangle”). Accordingly, the results of operations for these acquisitions are included in the Company’s audited consolidated financial statements since the acquisition date.

(b)

In fiscal years 2010, 2009, and 2008, discontinued operations primarily represent the TSG Business’ China and Hong Kong operations and the resolution of certain contingencies. The Company sold the stock of the TSG Business’ China operations and certain assets of the TSG Business’ Hong Kong operations in January 2009. In fiscal year 2007, discontinued operations primarily represent the TSG Business’ China and Hong Kong operations and the Company’s KeyLink System Distribution Business, which was sold in fiscal year 2007.

(c)	In fiscal year 2007, the Company included the operating results of Visual One Systems Corporation (“Visual One”), a company that was acquired in January 2007, in the results of operations from the date of acquisition.

(d)	In fiscal year 2008, an impairment charge of $4.9 million was recognized on the Company’s equity investment in Magirus AG (“Magirus”). In fiscal year 2007, the Company recognized an impairment charge of $5.9 million ($5.1 million after taxes) on its equity method investment in Magirus.

(e)	The Company’s long-term obligations consist of the non-current portion of capital lease obligations.

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS

The following unaudited condensed consolidated pro forma financial statements are based on the historical consolidated financial statements of Agilysys after giving effect to the TSG Sale, the receipt of net proceeds from the TSG Sale, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma consolidated financial statements.

The unaudited condensed consolidated pro forma statements of operations for the fiscal years ended March 31, 2011, 2010, and 2009 give effect to the TSG Sale and adjustments as if they had occurred on April 1, 2008 and carried forward through the latest period presented. The unaudited pro forma consolidated balance sheets as of March 31, 2011 and 2010 give effect to the TSG Sale and adjustments as if it occurred on the date of the balance sheet.

The unaudited condensed consolidated pro forma financial statements should be read in conjunction with the historical audited consolidated financial statements and notes thereto included in our 2011 Annual Report.

The unaudited condensed consolidated pro forma financial statements, including the notes thereto, are not necessarily indicative of what the actual financial results would have been had the TSG Sale taken place on the dates indicated and do not purport to indicate the results of future operations.

The pro forma adjustments are described in the accompanying notes and are based upon information and assumptions available at the time of filing this Proxy Statement.

The unaudited condensed consolidated pro forma financial statements are prepared in accordance with Article 11 of Regulation S-X.

Unaudited Condensed Consolidated Pro Forma Statement of Operations For the Fiscal Year Ended March 31, 2011


	As Reported			Sale of TSG Business				Pro-Forma Adjustments			RemainCo Pro-Forma
	(In thousands, except share and per share amounts)
Net sales	$	675,470		$	474,052		(a)	$	—		$	201,418
Cost of goods sold		517,779			392,000		(a)		—			125,779

Gross margin		157,691			82,052		(a)		—			75,639

Operating expenses:
Selling, general, and administrative expenses		173,211			76,236		(a)		119	(b)		96,856
Asset impairment charges		37,721			36,762		(a)		—			959
Restructuring charges		1,195			790		(a)		—			405

Operating (loss) income		(54,436	)		(31,736	)	(a)		(119)			(22,581	)

Other (income) expenses:
Other income, net		(2,320	)		(11	)	(a)		—			(2,309	)
Interest expense, net		1,171			—				—			1,171

(Loss) income before income taxes		(53,287	)		(31,725	)	(a)		(119)			(21,443	)
Income tax expense (benefit)		2,188			(626	)	(c)		—	(c)		2,814

(Loss) income from continuing operations	$	(55,475	)	$	(31,099	)	(a)	$	(119)		$	(24,257	)

Loss per share from continuing operations
Basic and diluted	$	(2.44	)								$	(1.07	)

Weighted average shares outstanding:
Basic and diluted		22,785,192										22,785,192

Unaudited Condensed Consolidated Pro Forma Statement of Operations For the Fiscal Year Ended March 31, 2010


	As Reported			Sale of TSG Business			Pro-Forma Adjustments				RemainCo Pro-Forma
	(In thousands, except share and per share amounts)
Net sales	$	634,320		$	440,887	(a)	$	—			$	193,433
Cost of goods sold		472,793			353,386	(a)		—				119,407

Gross margin		161,527			87,501	(a)		—				74,026

Operating expenses:
Selling, general, and administrative expenses		167,248			78,040	(a)		(260	)	(b)		89,468
Asset impairment charges		293			55	(a)		—				238
Restructuring charges		823			—	(a)		—				823

Operating (loss) income		(6,837	)		9,406	(a)		260				(16,503	)

Other (income) expenses:
Other income, net		(6,176	)		(274)	(a)		—				(5,902	)
Interest expense, net		939			—			—				939

(Loss) income before income taxes		(1,600	)		9,680	(a)		260				(11,540	)
Income tax (benefit) expense		(5,176	)		5,505	(c)		148		(c)		(10,829	)

Income (loss) from continuing operations	$	3,576		$	4,175	(a)	$	112			$	(711	)

Earnings (loss) per share from continuing operations
Basic	$	0.16									$	(0.03	)
Diluted	$	0.15									$	(0.03	)

Weighted average shares outstanding:
Basic		22,626,586										22,626,586
Diluted		23,087,742										22,626,586

Unaudited Condensed Consolidated Pro Forma Statement of Operations For the Fiscal Year Ended March 31, 2009


	As Reported			Sale of TSG Business					Pro-Forma Adjustments					RemainCo Pro-Forma
	(In thousands, except share and per share amounts)
Net sales	$	720,957		$	500,128		(a	)	$	—				$	230,592
Cost of goods sold		524,864			391,639		(a	)		—					142,988

Gross margin		196,093			108,489		(a	)		—					87,604

Operating expenses:
Selling, general, and administrative expenses		198,867			90,145		(a	)		(1,424	)	(b	)		110,146
Asset impairment charges		231,856			84,456		(a	)		—					147,400
Restructuring charges		40,801			23,573		(a	)		—					17,228

Operating (loss) income		(275,431	)		(89,685	)	(a	)		1,424					(187,170	)

Other (income) expenses:
Other expenses (income), net		7,180			(370	)	(a	)		—					7,550
Interest expense (income), net		672			(22	)				—					694

(Loss) income before income taxes		(283,283	)		(89,293	)	(a	)		1,424					(195,414	)
Income tax (benefit) expense		(1,096	)		3,931		(c	)		(61	)	(c	)		(4,966	)

(Loss) income from continuing operations	$	(282,187	)	$	(93,224	)	(a	)	$	1,485				$	(190,448	)

Loss per share from continuing operations
Basic and diluted	$	(12.49	)											$	(8.43	)

Weighted average shares outstanding:
Basic		22,586,603													22,586,603

Unaudited Condensed Consolidated Pro Forma Balance Sheet March 31, 2011


	Consolidated As Reported		Sale of TSG Business				Pro-Forma Adjustments				RemainCo Pro-Forma
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	74,354	$	4,214	(d	)	$	55,906	(e	)	$	126,046
Accounts receivable, net		123,666		91,719	(d	)						31,947
Inventories, net		20,632		9,711	(d	)						10,921
Prepaid expenses		3,063		334	(d	)						2,729
Other current assets		6,494		150	(d	)						6,344
Income taxes receivable		1,583		—								1,583

Total current assets		229,792		106,128								179,570

Goodwill		20,569		5,358	(d	)						15,211
Intangible assets, net		22,535		—								22,535
Other non-current assets		12,959		1,250	(d	)						11,709

Property and equipment, net		26,543		1,380	(d	)						25,163

Total assets	$	312,398	$	114,116							$	254,188

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	93,486	$	75,598	(d	)					$	17,888
Deferred revenue		27,914		3,919	(d	)						23,995
Accrued liabilities		23,887		9,402	(d	)						14,485
Income taxes payable		156		—								156
Deferred income taxes — current, net		77		—								77
Capital leases — current		1,267		150	(d	)						1,117

Total current liabilities		146,787		89,069								57,718

Deferred income taxes — non-current, net		3,894		—								3,894
Capital leases — non-current		1,461		441	(d	)						1,020
Other non-current liabilities		12,152		180	(d	)						11,972

Shareholders’ equity		148,104						31,480	(f	)		179,584

Total liabilities and shareholders’ equity	$	312,398	$	89,690							$	254,188

Unaudited Condensed Consolidated Pro Forma Balance Sheet March 31, 2010


	Consolidated As Reported		Sale of TSG Business				Pro-Forma Adjustments					RemainCo Pro-Forma
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	65,535	$	2,943	(d	)	$	55,906		(e	)	$	118,498
Accounts receivable, net		104,808		70,195	(d	)							34,613
Inventories, net		14,446		4,384	(d	)							10,062
Deferred income taxes — current		144		—									144
Prepaid expenses		4,399		1,878	(d	)							2,521
Other current assets		726		—									726
Income taxes receivable		10,394		—									10,394

Total current assets		200,452		79,400									176,958

Goodwill		50,418		35,409	(d	)							15,009
Intangible assets, net		32,510		8,755	(d	)							23,755
Deferred income taxes — non-current, net		899		—									899
Other non-current assets		18,175		1,580	(d	)							16,595

Property and equipment, net		27,995		657	(d	)							27,338

Total assets	$	330,449	$	125,801								$	260,554

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	70,171	$	53,123	(d	)						$	17,048
Deferred revenue		23,810		2,781	(d	)							21,029
Accrued liabilities		17,183		4,656	(d	)							12,527
Capital leases — current		311		—									311

Total current liabilities		111,475		60,560									50,915

Deferred income taxes — non-current, net		412		—									412
Capital leases — non-current		384		—									384
Other non-current liabilities		19,254		61	(d	)							19,193

Shareholders’ equity		198,924						(9,274	)	(f	)		189,650

Total liabilities and shareholders’ equity	$	330,449	$	60,621								$	260,554

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

PRO FORMA FINANCIAL STATEMENTS

The unaudited condensed consolidated pro forma statements of operations for the fiscal years ended March 31, 2011, 2010, and 2009 reflect the following adjustments:

(a)	Elimination of operating results of the TSG Business. These amounts represent the unaudited statements of operations for the TSG Business for the fiscal years ended March 31, 2011, 2010, and 2009.

(b)

Reflects corporate overhead allocations originally charged to the TSG Business in the operating results identified under (a) that would be recorded as an expense of the retained business; or amounts not charged to the TSG Business in the operating results identified under (a) that would be a recorded expense of the TSG Business.

(c)	Reflects the tax effect of the TSG Sale and pro forma adjustments calculated at the effective rates of a benefit of 2.0% for the fiscal year ended March 31, 2011 and expense of 56.9% and 4.4% for the fiscal years ended March 31, 2010 and 2009, respectively.

The unaudited pro forma condensed consolidated balance sheets as of March 31, 2011 and 2010 reflect the following adjustments:

(d)	Assets sold and liabilities assumed by Purchaser under the Purchase Agreement. These unaudited amounts represent the TSG Business assets and liabilities which will be sold to Purchaser as if the TSG Sale had occurred on March 31, 2011.

(e)

Reflects estimated proceeds to be received at the closing of the TSG Sale. The sale price of $64.0 million was reduced by $8.1 million of expenses for estimated transaction-related costs. The unaudited condensed consolidated pro forma statements of operations do not reflect the recognition of these expenses as they are non-recurring in nature; however, these expenses will be reflected in the Company’s historical financial statements when the TSG Sale is consummated. Additionally, there is potential for a working capital adjustment. Pursuant to the Purchase Agreement, if the net working capital balance at the time of closing is less than the target net working capital, as defined in the Purchase Agreement, then the purchase price will be adjusted downward in an amount equal to the deficiency.

(f)	Reflects the excess of the estimated proceeds identified under (e) over the following:

(i).

The net book value of the TSG Business net assets sold of $24.4 million and $65.2 million at March 31, 2011 and 2010, respectively.

(ii).

Estimated tax benefit of $9.8 million and $26.1 million, at March 31, 2011 and 2010, respectively, computed using a 40% statutory income tax rate. However, since Agilysys is in a net operating loss carryforward position, the full amount of the tax benefit would be offset by a valuation allowance, resulting in no income tax receivable or payable.

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE TSG BUSINESS

Agilysys has prepared the following unaudited consolidated financial statements to show the balance sheets, statements of operations and statements of cash flows of the TSG Business on a stand-alone basis. The unaudited consolidated financial statements represent the results of operations and financial position of the TSG Business, which include certain cost allocations and reflect the assets acquired and liabilities assumed as stipulated in the Purchase Agreement.

The following unaudited financial consolidated statements of the TSG Business are presented:

Unaudited consolidated balance sheets — March 31, 2011 and 2010

Unaudited consolidated statements of operations — fiscal years ended March 31, 2011, 2010, and 2009

Unaudited consolidated statements of cash flows — fiscal years ended March 31, 2011, 2010, and 2009

Notes to unaudited consolidated financial statements

The unaudited consolidated financial statements of the TSG Business should be read in conjunction with the related notes thereto included in this Proxy Statement.

The unaudited consolidated financial statements of the TSG Business, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with the audited historical financial statements and notes thereto included in the 2011 Annual Report.

The unaudited consolidated financial statements of the TSG Business are not necessarily indicative of what the actual financial results would have been had Agilysys operated the TSG Business as a separate entity.

THE TSG BUSINESS

UNAUDITED CONSOLIDATED BALANCE SHEETS


	March 31
	2011		2010
	(In thousands)
ASSETS
Current assets
Cash and cash equivalents	$	4,214	$	2,943
Accounts Receivable, net		91,719		70,195
Inventories, net		9,711		4,384
Prepaid expenses		334		1,878
Other current assets		150		—

Total current assets		106,128		79,400

Goodwill		5,358		35,409
Intangible assets, net		—		8,755
Other non-current assets		1,250		1,580

Property and equipment:
Furniture and equipment		5,237		2,906
Software		245		245
Leasehold improvements		916		448
Project expenditures not yet in use		3		—

		6,401		3,599
Less: accumulated depreciation and amortization		5,021		2,942

Property and equipment, net		1,380		657

Total assets	$	114,116	$	125,801

LIABILITIES AND DIVISION CONTROL ACCOUNT
Current liabilities
Accounts payable	$	75,598	$	53,123
Deferred revenue		3,919		2,781
Accrued liabilities		9,402		4,656
Capital lease obligations — current		150		—

Total current liabilities		89,069		60,560

Capital lease obligations — non-current		441		—
Other non-current liabilities		180		61

Division control account		24,426		65,180

Total liabilities and division control account	$	114,116	$	125,801

The accompanying notes are an integral part of these financial statements.

THE TSG BUSINESS

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


	Year Ended March 31
	2011			2010			2009
	(In thousands)

Net sales	$	474,052		$	440,887		$	500,128
Cost of goods sold		392,000			353,386			391,639

Gross margin		82,052			87,501			108,489

Selling, general and administrative expenses		76,236			78,040			90,145
Asset impairment charges		36,762			55			84,456
Restructuring charges		790			—			23,573

Operating (loss) income		(31,736	)		9,406			(89,685	)

Other income:
Other income, net		(11	)		(274	)		(370	)
Interest income, net		—			—			(22	)
(Loss) income before income taxes		(31,725	)		9,680			(89,293	)
Income tax (benefit) provision		(626	)		5,505			3,931

Net (loss) income	$	(31,099	)	$	4,175		$	(93,224	)

The accompanying notes are an integral part of these financial statements.

THE TSG BUSINESS

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended March 31
	2011			2010			2009
	(In thousands)
Operating activities:
Net (loss) income	$	(31,099	)	$	4,175		$	(93,224	)
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		783			638			1,008
Amortization		2,097			5,780			15,665
Goodwill and asset impairment charges		36,762			55			84,456
Non-cash restructuring charges		790			—			20,571
Changes in working capital:
Accounts receivable		(22,181	)		41,600			12,646
Inventory		(5,326	)		9,442			(7,395	)
Accounts payable		22,004			(34,531	)		6,611
Accrued liabilities		4,706			(53	)		(8,904	)
Other		1,511			(793	)		(1,924	)
Other non-cash items, net		791			337			(23	)

Total adjustments		41,937			22,475			122,711

Net cash provided by operating activities		10,838			26,650			29,487

Investing activities:
Capital expenditures		(914	)		(103	)		(50	)

Financing activities:
Principal payments under long term obligations		(39	)		—			—
Division control account activity, net		(9,189	)		(25,752	)		(32,152	)

Effect of exchange rate changes on cash		575			(914	)		384

Net change in cash		1,271			(119	)		(2,331	)
Cash at beginning of period		2,943			3,062			5,393

Cash at end of period	$	4,214		$	2,943		$	3,062

The accompanying notes are an integral part of these financial statements.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF THE TSG BUSINESS

1.	Basis of Presentation and Adjustments

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.

On May 28, 2011, Agilysys entered into the Purchase Agreement to sell the TSG Business to Purchasers for an aggregate purchase price of $64.0 million in cash, subject to a possible working capital adjustment and other terms and conditions set forth in the Purchase Agreement. The TSG Sale is subject to certain closing conditions, including Agilysys shareholder authorization.

The TSG Business is a leading provider of IBM, HP, Oracle, EMC², Hitachi Data Systems, and NetApp 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.

In fiscal 2009 and 2010, TSG was 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 fiscal 2009, the Stack reporting unit was integrated into the HP reporting unit. In fiscal 2011, along with the implementation of a new Oracle ERP system, the Company re-configured its former HP, IBM, and Sun reporting units into IBM, East, West, and Service Providers (which is primarily comprised of sales to telecommunication and cable company service providers) reporting units. The Company continued to aggregate the IBM, East, West, and Service Providers reporting units due to their similar economic and operating characteristics. Later in fiscal 2011, the Company streamlined its routine business review process and no longer provided financial information below the operating segment level to its chief operating decision maker (“CODM”). Therefore, during the fourth quarter of fiscal 2011, TSG is considered a single reporting unit as well as a single reportable segment.

Agilysys has prepared these unaudited financial statements to present the assets and liabilities of the TSG Business included in the TSG Sale as of March 31, 2011 and 2010, as well as the operating results and cash flows of the TSG Business for the fiscal years ended March 31, 2011 and 2010. In preparation of the statements of operations, revenues, and expenses directly relating to the TSG Business were included as well as an allocation of indirect overhead costs. Indirect overhead costs have been allocated based on number of employees, facility usage, and other applicable factors in estimating the proportion of indirect expenses to allocate to the TSG Business. Management believes that these allocations were made on a reasonable basis and approximate the incremental costs it would have incurred had the TSG Business been operating on a stand-alone basis. However, there has been no independent study or any attempt to obtain quotes from third parties to determine what the actual direct costs of obtaining such services would have been. The statements of cash flows have been derived based on analysis of the operating results of the TSG Business and changes in the assets and liabilities included in the TSG Sale. As the sold assets do not include the cash generated from the operating results of the portion of the TSG Business located in the United States, the statements of cash flows include a financing category titled “division control, net” to arrive at a zero change in cash.

2.	Summary of Significant Accounting Policies

The accompanying financial statements were prepared in accordance with U.S. generally accepted accounting principles. The following briefly describes the significant accounting policies used in the preparation of the financial statements of the TSG Business.

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.

Contingencies. The TSG Business is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business. The TSG Business 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 TSG Business’ 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 matters will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the TSG Business.

Revenue recognition. The TSG Business derives revenue from the sale of products (i.e., server and storage hardware and 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 TSG Business 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. Revenues are presented net of any applicable taxes collected and remitted to governmental agencies.

Revenue for hardware sales is generally 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 hardware sales involve shipment directly from suppliers to the end-user customers. In such transactions, the TSG Business 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 TSG Business 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 at the point of destination.

The TSG Business offers remarketed software for sale to its customers. Generally, 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 TSG Business’ software license arrangements do not include acceptance provisions. As such, revenue from remarketed software sales is generally 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 TSG Business 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. For certain long-term proprietary service contracts with fixed or “not to exceed” fee arrangements, the TSG Business 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.

In addition to proprietary services, the TSG Business offers third-party service contracts to its customers. In such instances, the supplier is the primary obligor in the transaction and the TSG Business bears credit risk in the event of nonpayment by the customer. Since the TSG Business is acting as an agent or broker with respect to such sales transactions, the TSG Business 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.

Cash and cash equivalents. The TSG Business 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.

Allowance for doubtful accounts. The TSG Business 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 TSG Business’ customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. To mitigate this credit risk, management of the TSG Business performs periodic credit evaluations of its customers. The allowance for doubtful accounts was $0.7 million and $0.4 million at March 31, 2011 and March 31, 2010, respectively.

Inventories. The TSG Business’ 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. Inventories are 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 of the TSG Business, additional adjustments to inventory valuations may be required. The TSG Business provides a reserve for obsolescence 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. The reserve for obsolete inventory was $0.2 million each at March 31, 2011 and March 31, 2010.

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. The TSG Business conducts its annual goodwill impairment test on February 1st of each fiscal year. As a result of the analysis performed on February 1, 2011, indicators of impairment arose with respect to the TSG Business’ goodwill. Therefore, the TSG Business initiated a “step-two” analysis to measure the amount of impairment loss by comparing the implied fair value of each reporting unit’s goodwill to its carrying value. The fair value of each reporting unit was calculated using discounted cash flow analyses and weighted average costs of capital of 16.0% to 19.5%, depending on the risks of the various reporting units. Based on the results of the “step-two” analysis, the TSG Business recorded goodwill impairment charges totaling $30.1 million, which were classified within “Asset impairment charges” in the TSG Business’ Unaudited Consolidated Statements of Operations.

As a result of the analysis performed on February 1, 2010, the TSG Business concluded that there was no impairment of the recorded goodwill or other indefinite-lived intangible assets. However, in the first quarter of fiscal 2009, impairment indicators arose with respect to the TSG Business’ goodwill. Therefore, during the first quarter of fiscal 2009, the TSG Business also initiated a “step-two” analysis. The fair value of each reporting unit was calculated using discounted cash flow analyses and a weighted average cost of capital of 12.1% based on the risk of the various reporting units. This “step-two” analysis was not complete as of June 30, 2008. Therefore, the TSG Business recognized an estimated impairment charge of $7.8 million as of June 30, 2008, pending completion of the analysis. This amount did not include $16.8 million in goodwill impairment related to the

acquisition of CTS Corporation (“CTS”) that was classified within “Restructuring charges” in the Unaudited Consolidated Statements of Operations in the first quarter of fiscal 2009. The “step-two” analysis was updated and completed in the second quarter of fiscal year 2009, resulting in the TSG Business recognizing an additional goodwill impairment charge of $2.1 million.

The TSG Business conducted its annual goodwill impairment test as of February 1, 2009 and updated the analyses performed in the first and second quarters of fiscal year 2009. Based on the analysis, the TSG Business concluded that a further impairment of goodwill had occurred. As a result, the TSG Business recorded an additional impairment charge of $74.6 million in the fourth quarter of fiscal year 2009. Total goodwill impairment charges recorded during fiscal year 2009 were $84.5 million, not including the $16.8 million classified within restructuring charges in the first quarter of fiscal year 2009. Except for the impairment charges classified within restructuring charges, the goodwill impairment charges recorded during fiscal year 2009 were classified within “Asset impairment charges” in the Unaudited Consolidated Statements of Operations.

There were no new impairment indicators at March 31, 2011.

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 TSG Business. The TSG Business’ finite-lived intangible assets are being amortized over periods ranging from six months to ten years.

In conjunction with the annual goodwill impairment test on February 1, 2011, the Company concluded that certain of its intangible assets related to non-competition agreements, customer relationships, and supplier relationships within the TSG Business were fully impaired. As a result, the Company recorded impairment charges of $6.6 million related to these finite-lived intangible assets, which were classified within “Asset impairment charges” in the TSG Business’ Unaudited Consolidated Statements of Operations.

As a result of the annual impairment test performed on February 1, 2010, the Company concluded that there was no impairment of its finite-lived or indefinite-lived intangible assets. During the first quarter of fiscal year 2009, management took actions to realign its cost structure. These actions included a $3.8 million impairment charge related to the TSG Business’ customer relationship intangible asset that was classified within “Restructuring charges” in the Unaudited Consolidated Statements of Operations. The restructuring actions are described further in Note 4, Restructuring Charges.

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 project is completed. Total depreciation expense on property and equipment was $0.8 million $0.6 million, and $1.0 million for the fiscal years ended March 31, 2011, 2010, and 2009, respectively. Total amortization expense on capitalized software was minimal for the fiscal years ended March 31, 2011, 2010, and 2009.

The TSG Business 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. During the fourth quarter of fiscal year 2010, the TSG Business recorded asset impairment charges totaling $0.1 million, primarily related to capitalized property and equipment that management determined was no longer being used to operate the TSG Business. As of March 31, 2011, management concluded that no impairment indicators existed.

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

Supplier programs. The TSG Business 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 goods sold when earned. In addition, the TSG Business receives incentives from suppliers related to cooperative 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 goods sold 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. Advertising and product promotional expenses, net of cooperative reimbursements received, totaled $0.3 million, $0.2 million, and $0.1 million for the fiscal years ended March 31, 2011, 2010, and 2009, respectively.

Concentrations of supplier risk. For the fiscal years ended March 31, 2011, 2010, and 2009, sales of products and services from the TSG Business’ three largest original equipment manufacturers (“OEMs”) accounted for approximately 60%, 65%, and 80% of the TSG Business’ total sales volume, respectively. Sales of products and services sourced through Oracle accounted for 21%, 26%, and 40% of the TSG Business’ sales volume for the fiscal years ended March 31, 2011, 2010, and 2009, respectively. Sales of products and services sourced through HP accounted for 24%, 22%, and 23% of the TSG Business’ sales volume for the fiscal years ended March 31, 2011, 2010, and 2009, respectively. Sales of products and services sourced through IBM accounted for 15%, 16%, and 16% of the TSG Business’ sales volume for the fiscal years ended March 31, 2011, 2010, and 2009, respectively. The loss of any of the top three OEMs or a combination of certain other OEMs could have a material adverse effect on the TSG Business, its results of operations, and its financial condition unless alternative products manufactured by others are available to the TSG Business. In addition, although the TSG Business believes that its relationships with OEMs are good, there can be no assurance that the TSG Business’ OEMs will continue to supply products on terms acceptable to the TSG Business.

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

For the fiscal years ended March 31, 2011, 2010, and 2009, Verizon Communications, Inc. represented 32%, 39%, and 33% of the TSG Business’ total sales volume, respectively.

Income taxes. The TSG Business’ operating results historically have been included in Agilysys consolidated U.S. and state income tax returns. For presentation purposes in the unaudited statements of income, the statutory tax rates for Agilysys were used to estimate the amount of income tax expense of the TSG Business for each of the periods presented. As part of the Purchase Agreement, all deferred tax assets and liabilities will remain with Agilysys.

Fair value measurements. The TSG Business measures the fair value of financial assets and liabilities on a recurring or non-recurring basis. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. In determining fair value of financial assets and liabilities, the TSG Business uses various valuation techniques.

Recently issued accounting pronouncements. In October 2009, the FASB issued authoritative guidance on revenue arrangements with multiple deliverable elements (e.g., hardware with services), which is effective for the TSG Business on April 1, 2011 for new revenue arrangements or material modifications to existing arrangements. The guidance amends the criteria for separating consideration in arrangements with multiple deliverable elements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable based on: (1) vendor-specific objective evidence; (2) third-party evidence; or (3) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. In addition, this guidance significantly expands the required disclosures related to revenue arrangements with multiple deliverable elements. Entities may elect to adopt the guidance through either prospective application for revenue arrangements entered into, or materially modified, after the effective date, or through retrospective application to all revenue arrangements for all periods presented. Early adoption is permitted. The TSG Business does not believe that this guidance will have material impact on its financial position, results of operations, cash flows, or related disclosures.

In October 2009, the FASB issued authoritative guidance on revenue arrangements that include software elements, which is effective for the TSG Business on April 1, 2011. The guidance changes revenue recognition for tangible products containing software elements and non-software elements as follows: 1) the tangible product element is always excluded from the software revenue recognition guidance even when sold together with the software element; 2) the software element of the tangible product element is also excluded from the software revenue guidance when the software and non-software elements function together to deliver the product’s essential functionality; and 3) undelivered elements in a revenue arrangement related to the non-software element are also excluded from the software revenue recognition guidance. Entities must select the same transition method and same period for the adoption of both this guidance and the guidance on revenue arrangements with multiple deliverable elements. The TSG Business does not believe that this guidance will have a material impact on its financial position, results of operations, cash flows, or related disclosures.

Management of the TSG Business continually evaluates the potential impact, if any, on its financial position, results of operations, and cash flows, of all recent accounting pronouncements and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.

3.	Restructuring Charges

Canada Restructuring

During the fourth quarter of fiscal year 2011, the TSG Business took restructuring actions designed to consolidate its Canadian operations and achieve cost savings, including closing its office in Montreal, Quebec and terminating five employees. In connection with these restructuring actions, the TSG Business recorded $0.8 million in charges for severance costs. The lease for the Montreal, Quebec facility expired on April 14, 2011 and was not renewed. No significant additional charges are expected to be incurred with respect to these restructuring actions.

First and Second Quarters Fiscal Year 2009 Professional Services Restructuring

During the first and second quarters of fiscal year 2009, the TSG Business 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, resulting in a workforce reduction that was comprised mainly of service

personnel. The TSG Business 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. A total of $23.5 million in restructuring charges were recorded during fiscal year 2009 ($23.1 million and $0.4 million in the first and second quarters of fiscal year 2009, respectively) for these actions. The costs related to one-time termination benefits associated with the workforce reduction ($2.5 million and $0.4 million in the first and second quarters of fiscal year 2009, respectively), and goodwill and intangible asset impairment charges ($20.6 million in the first quarter of fiscal year 2009), which related to the TSG Business’ fiscal 2005 acquisition of CTS. Payment of these one-time termination benefits was complete in fiscal year 2009.

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


	Severance and Other Employment Costs			Goodwill and Finite Lived Intangible Assets			Total
Balance at April 1, 2008	$	—		$	—		$	—
Additions		3,002			20,571			23,573
Write off of intangible assets		—			(20,571	)		(20,571	)
Payments		(3,002	)		—			(3,002	)

Balance at April 1, 2009	$	—		$	—		$	—
Additions		—			—			—
Payments		—			—			—

Balance at April 1, 2010	$	—		$	—		$	—
Additions		790			—			790
Payments		—			—			—

Balance at March 31, 2011	$	790		$	—		$	790

Of the remaining $0.8 million liability at March 31, 2011, $0.7 million of severance and other employment costs are expected to be paid during fiscal year 2012 and $0.1 million is expected to be paid in fiscal year 2013.

4.	Goodwill and Intangible Assets

The TSG Business allocates the cost of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the cost over the fair value of the identified net assets acquired is recorded as goodwill.

Goodwill

The TSG Business tests goodwill for impairment at the reporting unit level upon identification of impairment indicators, or at least annually. A reporting unit is the operating segment or one level below the operating segment (depending on whether certain criteria are met). Goodwill was allocated to the TSG Business’ reporting units that are anticipated to benefit from the synergies of the business combinations generating the underlying goodwill.

The TSG Business conducted its annual goodwill impairment test on February 1, 2011. As a result of this analysis, the TSG Business concluded that impairment indicators existed. Those impairment indicators included a significant decrease in market capitalization and a decline in recent operating results. Therefore, the TSG Business initiated a “step-two” analysis to measure the amount of impairment loss by comparing the implied fair value of each reporting unit to its carrying value.

The calculation of the goodwill impairment in the “step-two” analysis includes hypothetically valuing all of the tangible and intangible assets of the impaired operating segments or reporting units as if the operating segments or reporting units had been acquired in a business combination. The GAAP definition of fair value is

the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value assumes the highest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible at the measurement date. Highest and best use is determined by market participants, even if the Company’s intended use of the asset is different.

Based on the results of the “step-two” analysis, the TSG Business recorded goodwill impairment charges totaling $30.1 million, which were classified within “Asset impairment charges” in the TSG Business’ Unaudited Statements of Income. The excess of the fair value over the carrying value of the TSG Business’ other reporting units ranged from 35% to 335%.

As a result of the annual goodwill impairment test conducted on February 1, 2010, the TSG Business concluded that there was no impairment of the recorded goodwill or other indefinite-lived intangible assets. During fiscal year 2009, indictors of potential impairment caused the TSG Business to conduct interim impairment tests in addition to its annual goodwill impairment test. Those indicators included the following: (1) a significant decrease in market capitalization; (2) a decline in recent operating results; and (3) a decline in the TSG Business’ future outlook primarily due to the macroeconomic environment during fiscal year 2009. Excluding the $16.8 million classified as restructuring charges, the TSG Business recorded goodwill impairment charges totaling $63.9 million in fiscal year 2009. The total fiscal year 2009 goodwill impairment charges related to the TSG Business were $84.5 million.

The changes in the carrying amount of goodwill for the fiscal years ended March 31, 2011 and 2010 are as follows:


Balance at April 1, 2010	$	119,864
Accumulated impairment losses as of April 1, 2010		(84,456	)

		35,408
Goodwill impairment losses		(30,109	)
Impact of foreign currency translation		59

Balance at March 31, 2011	$	5,358


Balance at April 1, 2009	$	119,642
Accumulated impairment losses as of April 1, 2009		(84,456	)

		35,186
Goodwill adjustment (see Note 2)		—
Impact of foreign currency translation		222

Balance at March 31, 2010	$	35,408

The accumulated goodwill impairment losses for the TSG Business as of March 31, 2011 were $114.6 million.

Intangible Assets

The following table summarizes the TSG Business’ intangible assets at March 31, 2011, and 2010:


	2011							2010
	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Amortized intangible assets:
Customer relationships	$	12,481	$	(12,481	)	$	—	$	12,481	$	(12,182	)	$	299
Supplier relationships		28,280		(28,280	)		—		28,280		(22,584	)		5,696
Non-competition agreements		6,700		(6,700	)		—		6,700		(3,940	)		2,760

Total intangible assets	$	47,461	$	(47,461	)	$	—	$	47,461	$	(38,706	)	$	8,755

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

In conjunction with the annual goodwill impairment test on February 1, 2011, the Company concluded that certain of its intangible assets related to non-competition agreements, customer relationships, and supplier relationships were fully impaired. As a result, the TSG Business recorded impairment charges of $6.6 million related to these finite-lived intangible assets, which were classified within “Asset impairment charges” in the TSG Business’ Unaudited Consolidated Statements of Operations.

The Company conducted its annual goodwill impairment tests on February 1, 2010 and 2009 and concluded that there was no impairment of the recorded indefinite-lived intangible asset amounts. However, during the first quarter of fiscal year 2009, the Company recorded a $3.8 million impairment charge related to a customer relationship intangible asset that was classified within “Restructuring charges” in the TSG Business’ Unaudited Consolidated Statements of Operations.

Amortization expense relating to intangible assets for the fiscal years ended March 31, 2011, 2010, and 2009 was $2.1 million, $5.7 million, and $15.6 million, respectively.

5.	Additional Balance Sheet Information

Additional information related to the TSG Business’ balance sheets is as follows:


	March 31
	2011		2010
	(In thousands)
Accrued liabilities:
Salaries and wages	$	5,431	$	3,514
Other taxes payable		2,316		800
Restructuring liabilities		790		—
Other		865		342

Total	$	9,402	$	4,656

6.	Lease Commitments

The TSG Business leases certain office and warehouse facilities and equipment under non-cancelable operating leases which expire at various dates through 2020. The following is a schedule by years 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 December 31, 2010:


Year Ended March 31	Amount
	(In thousands)
2012	$	1,386
2013		883
2014		777
2015		535
2016		303
Subsequent to 2016		1,514

Total minimum future payments	$	5,398

Rental expense for all non-cancelable operating leases amounted to $1.6 million, $1.7 million, and $1.5 million for the fiscal years ended March 31, 2011, 2010, and 2009, respectively.

7.	Employee Benefit Plans

Employees of the TSG Business meeting certain service requirements participated in the 401(k) Plan. Generally, the 401(k) Plan allows eligible employees to contribute a portion of their compensation, with Agilysys matching a percentage thereof. Agilysys may also make discretionary contributions each year for the benefit of all eligible employees under the 401(k) Plan. On September 7, 2009, Agilysys suspended profit-sharing and matching contributions to the 401(k) Plan. The matching contributions to the 401(k) Plan were reinstated effective January 1, 2011. Total profit-sharing and matching contributions to the 401(k) Plan for employees of the TSG Business were $0.4 million, $0.2 million, and $0.5 million for the fiscal years ended March 31, 2011, 2010, and 2009, respectively.

CORPORATE GOVERNANCE

Corporate Governance Guidelines

Our Corporate Governance Guidelines (the “Governance Guidelines”) adopted by the Board provide a sound framework to assist the Board in fulfilling its responsibilities to shareholders. Under the Governance Guidelines, the Board exercises its role in overseeing the Company by electing qualified and competent officers, and by monitoring the performance of the Company. The Governance Guidelines state that the Board and its Committees exercise oversight of executive officer compensation and Director compensation, succession planning, Director nominations, corporate governance, financial accounting and reporting, internal controls, strategic and operational issues, and compliance with laws and regulations. The Governance Guidelines also state Board policy regarding eligibility for the Board, including Director independence and qualifications for Board candidates, events that require resignation from the Board, service on other public company boards, and stock ownership guidelines. The Nominating and Corporate Governance Committee annually reviews the Governance Guidelines and makes recommendations for changes to the Board. The Governance Guidelines are available on our website at www.agilysys.com, under Investor Relations.

Code of Business Conduct

Our Code of Business Conduct adopted by the Board applies to all Directors, officers, and employees of the Company and incorporates additional ethics standards applicable to our Chief Executive Officer, Chief Financial Officer, and other senior financial officers of the Company, and any person performing a similar function. The Code of Business Conduct is reviewed annually by the Audit Committee, and recommendations for change are submitted to the Board for approval. The Code of Business Conduct is available on our website at www.agilysys.com, under Investor Relations.

The Company has in place a hotline available for use by all employees, as described in the Code of Business Conduct. Any employee can anonymously report potential violations of the Code of Business Conduct through the hotline, which is managed by an independent third party. Reported violations are promptly reported to and investigated by the Company. Reported violations are addressed by the Company and, if related to accounting, internal accounting controls, or auditing matters, the Audit Committee.

Director Independence

The NASDAQ listing standards provide that at least a majority of the members of the Board must be independent, meaning free of any material relationship with the Company, other than his or her relationship as a Director. The Governance Guidelines state that the Board should consist of a substantial majority of independent Directors. A Director is not independent if he fails to satisfy the standards for Director independence under NASDAQ listing standards, the rules of the SEC, and any other applicable laws, rules, and regulations. During the Board’s annual review of Director independence, the Board considers transactions, relationships, and arrangements, if any, between each Director or a Director’s immediate family members and the Company or its management.

In May 2011, the Board performed its annual Director independence review, and as a result of such review determined that each of Thomas A. Commes, R. Andrew Cueva, Howard V. Knicely, Keith M. Kolerus, Robert A. Lauer, Robert G. McCreary, III, and John Mutch qualify as independent Directors. In May 2011, Director James H. Dennedy was appointed as Interim President and Chief Executive Officer, replacing Mr. Ellis, who stepped down from his position. Please see the Compensation Discussion and Analysis discussion under “Fiscal Year 2012 Leadership” on page [ ] for more information about this transition. Mr. Dennedy qualified as an independent Director until his appointment, and he continues to serve on the Board as a non-independent Director. Mr. Ellis is not independent because of his service as President and Chief Executive Officer.

Director Attendance

The Board held nine meetings during fiscal year 2011, and no Director attended less than 75% of the aggregate of the total number of Board meetings and meetings held by Committees of the Board on which he served, held during the periods that he served as a Director, and the average attendance of all Directors for all Board and Committee meetings was 98.9%. Independent Directors meet regularly in executive session at Board and Committee meetings, and executive sessions are chaired by the Chairman of the Board at Board meetings and by the appropriate Committee Chairman at Committee meetings. It is the Board’s policy that all of its members attend the Annual Meeting absent exceptional cause. All of the Directors were in attendance at the 2010 Annual Meeting except Mr. Dennedy.

Shareholder Communication with Directors

Shareholders and others who wish to communicate with the Board as a whole, or with any individual Director, may do so by sending a written communication to such Director(s) in care of our Secretary at our headquarters address, and our Secretary will forward the communication to the specified Director(s).

Committees of the Board


Director	Audit	Compensation	Nominating and Corporate Governance	Special Committee
Thomas A. Commes (1)	Chairman		X
R. Andrew Cueva	X		X	X
James H. Dennedy (2)				X
Howard V. Knicely		Chairman	X
Keith M. Kolerus		X
Robert A. Lauer	X	X		Chairman
Robert G. McCreary, III	X		Chairman
John Mutch (1)		X

(1)

Qualify as Audit Committee Financial Experts.

(2)

Mr. Dennedy served as an independent Director on the Audit Committee until his appointment as Interim President and Chief Executive Officer.

Committee Charters

The Board adopted a charter for each Committee described below, and each Committee is responsible for the annual review of its respective charter. Charters for the Audit, Compensation, and Nominating and Corporate Governance Committees are available on our website at www.agilysys.com, under Investor Relations.

Audit Committee

The Audit Committee held four meetings during fiscal year 2011. The Audit Committee: reviews with our independent registered public accounting firm the proposed scope of our annual audits and audit results, as well as interim reviews of quarterly reports; reviews the adequacy of internal financial controls; reviews internal audit functions; is directly responsible for the appointment, determination of compensation, retention, and general oversight of the independent registered public accounting firm; reviews related person transactions; oversees the Company’s implementation of its Code of Business Conduct; and reviews any concerns identified by either the internal or external auditors. The Board determined that all Audit Committee members are financially literate and independent under NASDAQ listing standards for audit committee members. The Board also determined that Thomas A. Commes and John Mutch each qualify as an “audit committee financial expert” under SEC rules.

Compensation Committee

The Compensation Committee held eight meetings during fiscal year 2011. The purpose of the Compensation Committee is to enhance shareholder value by ensuring that pay available to the Board, Chief Executive Officer, and other executive officers enables us to attract and retain high-quality leadership and is consistent with our executive pay philosophy. As part of its responsibility, the Compensation Committee: oversees our pay plans and policies; annually reviews and determines all pay, including base salary, annual cash incentive, long-term stock incentive, and retirement and perquisite plans; administers our incentive programs, including establishing performance goals, determining the extent to which performance goals are achieved, and determining awards; administers our equity pay plans, including making grants to our executive officers; and regularly evaluates the effectiveness of the overall executive pay program and evaluates our incentive plans to determine if the plans’ measures or goals encourage inappropriate risk-taking by our employees. A more complete description of the Compensation Committee’s functions is found in the Compensation Committee Charter.

Our Law and Human Resources Departments support the Compensation Committee in its work and, in some cases, as a result of delegation of authority by the Compensation Committee, fulfill various functions in administering our pay programs. In addition, the Compensation Committee has the authority to engage the services of outside consultants and advisers to assist it. In fiscal year 2011, the Compensation Committee relied on the services of Pearl Meyer & Partners, LLC (“PM&P”), an executive pay consulting firm, to provide input to facilitate the Compensation Committee’s decision-making process regarding executive officer pay programs. PM&P provided input on executive pay levels among a peer group of companies and from published and private salary surveys. Additionally, in October 2010, the Compensation Committee retained Towers Watson as its compensation consultant, and Towers Watson provided input on risk assessment related to peer group consideration, risk assessment related to compensation plans, and new SEC mandates related to the Dodd-Frank Act of 2010.

While the Compensation Committee directly retained PM&P and Towers Watson, in carrying out their respective assignments each interacted with our Chief Executive Officer and our General Counsel, Secretary and Senior Vice President of Human Resources, who provided data and insight on our compensation programs and business strategies. These executive officers attend Compensation Committee meetings when executive compensation, Company performance, and individual performance are discussed and evaluated by Compensation Committee members, and they provide their thoughts and recommendations on executive pay issues during these meetings and provide updates on financial performance, industry status, and other factors that may impact executive compensation. Decisions regarding the Chief Executive Officer’s compensation were based solely on the Compensation Committee’s deliberations, while compensation decisions regarding other executive officers took into consideration recommendations from the Chief Executive Officer. Only Compensation Committee members make decisions on executive compensation and approve all outcomes.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee (“Nominating Committee”) held five meetings during fiscal year 2011. The Nominating Committee assists the Board in: finding and nominating qualified people for election to the Board; reviewing shareholder-recommended nominees; assessing and evaluating the Board’s effectiveness; and establishing, implementing, and overseeing our governance programs and policies.

The Nominating Committee is responsible for reviewing the qualifications of, and recommending to the Board, individuals to be nominated for membership on the Board. The Board adopted Governance Guidelines for Qualifications and Nomination of Director Candidates (“Nominating Guidelines”), and the Nominating Committee considers nominees using the criteria set forth in the Nominating Guidelines. At a minimum, a Director nominee must:

•

Be of proven integrity with a record of substantial achievement;

•

Have demonstrated ability and sound business judgment based on broad experience;

•

Be able and willing to devote the required amount of time to the Company’s affairs, including attendance at Board and Committee meetings;

•

Be analytical and constructive in the objective appraisal of management’s plans and programs;

•

Be committed to maximizing shareholder value and building a sound Company, long-term;

•

Be able to develop a professional working relationship with other Board members and contribute to the Board’s working relationship with senior management of the Company;

•

Be able to exercise independent and objective judgment and be free of any conflicts of interest with the Company; and

•

Be able to maintain the highest level of confidentiality.

The Nominating Committee considers the foregoing factors, among others, in identifying nominees; however, there is no policy requiring the Nominating Committee to consider the impact of any one factor by itself. The Nominating Committee also will consider the Board’s current and anticipated needs in terms of number, diversity, specific qualities, expertise, skills, experience, and background. In addition, the Corporate Governance Guidelines state that the Board should have a balanced membership, with diverse representation of relevant areas of experience, expertise, and backgrounds. The Nominating Committee seeks nominees that collectively will build a capable, responsive, and effective Board, prepared to address strategic, oversight, and governance challenges. The Nominating Committee believes that the backgrounds and qualifications of the Directors as a group should provide a significant mix of experience, knowledge, and abilities that will enable the Board to fulfill its responsibilities.

The Nominating Committee will consider shareholder recommendations for nominees for membership on the Board. Shareholders may make a nominee recommendation by sending the nomination to the Chairman of the Nominating Committee, to the attention of our Secretary at our headquarters. The recommendation must include (i) the name and address of the nomi