AGILYSYS INC

In developing our share request for the 2024 Plan and analyzing the impact of utilizing equity as a means of compensation on our shareholders, we considered both our “overhang” and our “burn rate”.

Overhang is a measure of potential dilution which we define as (A) the sum of (i) the total number of shares underlying SSARs awards, (ii) the total number of shares underlying unvested awards of restricted shares and performance shares, (iii) the total number of shares underlying unvested awards of restricted stock units (“RSUs”) and (iv) the total number of shares available for future award grants, (B) divided by the number of shares of common stock outstanding plus the amounts described in clause (A). As of March 31, 2024, under the 2020 Plan, there were 1,297,339 shares underlying SSARs awards, 436,177 shares of unvested restricted stock (including unvested restricted stock subject to performance-based vesting), 56,547 shares underlying unvested RSUs and 266,675 shares available for future awards. As of March 31, 2024, there were 27,376,862 shares of common stock outstanding. Accordingly, our overhang at March 31, 2024 was 7.5%. For purposes of this calculation, we counted the shares subject to our performance-based awards using the target number of shares of common stock issuable under such awards. If the 3,000,000 shares proposed to be authorized for grant under the 2024 Plan are included in the calculation, our overhang on March 31, 2024 would have been 18.5%.

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Burn rate is a measure of the potential dilutive impact of our equity award program which we calculate by dividing the number of shares subject to equity awards granted during the fiscal year by the basic weighted average number of shares outstanding. Set forth below is a table that reflects our gross burn rate for the 2024, 2023 and 2022 fiscal years.

(A)

Awards granted represents the number of stock appreciation rights and full value awards (including restricted shares) granted during the time period.

(B)

Equal to the number of equity awards granted in the fiscal year divided by the basic weighted average number of common shares outstanding. For purposes of this calculation, we counted outstanding awards of restricted stock subject to performance-based vesting based on the target number of shares of common stock issuable under such awards.

The following table includes information regarding the outstanding awards and shares available for future issuance under the 2020 Plan as of March 31, 2024 (as if the 2024 Plan is not approved under this proposal):

(1)

The 2020 Plan does not feature a fungible share counting provision.

(2)

Upon shareholder approval of the 2024 Plan, these shares will no longer be available for grant under the 2020 Plan.

From March 31, 2024 and through the date of the Annual Meeting, the Company may have granted or may grant certain additional equity awards under the 2020 Plan; however, the number of authorized shares under the new 2024 Plan will be proportionately reduced for any awards granted under the 2020 Plan between March 31, 2024 through the date of the Annual Meeting at which the 2024 Plan is approved by shareholders. If the 2024 Plan is not approved by our shareholders, equity awards will continue to be available for issuance under the 2020 Plan until the 2020 Plan’s termination date, June 2, 2030.

In determining the number of shares to request for approval under the 2024 Plan, the Compensation Committee directed its compensation consultant to review current market practices in the use of equity compensation. The Compensation Committee also considered other material factors, including our recent share usage, anticipated hiring needs in the next three fiscal years, the potential dilution of the 2024 Plan (as noted in the figures above), our current stock price, recent experiences with respect to the value of equity awards expected by new hire candidates, and general guidance from the major proxy advisory firms that our shareholders might consider in evaluating the 2024 Plan. After reviewing this information, the Compensation Committee decided to request that our shareholders approve an initial share reserve of 3,000,000 shares for issuance under the 2024 Plan. We currently anticipate that the 2024 Plan share reserve will provide for grants in the ordinary course of business for up to 5 years. However, the proposed share reserve could last for a shorter or longer period of time, such as might be the case if we experience unexpected opportunities to grow the business beyond our current annual operating

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plan, if equity compensation practices within our compensation peer group change and require us to alter our current grant practices to remain competitive, or if our stock price changes materially.