UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

o  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12

 

AGILYSYS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement)

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

AGILYSYS, INC.

 

28925 FOUNTAIN PARKWAY
SOLON, OHIO 44139

 

June 26, 2009

 

Dear Shareholder:

 

You are cordially invited to attend the Annual Meeting of Shareholders of Agilysys, Inc., that will be held at 8:30 a.m., local time, on Friday, July 31, 2009, at the Company’s headquarters at 28925 Fountain Parkway, Solon, Ohio 44139. Your Board of Directors and management look forward to greeting personally those shareholders able to attend.

 

The matters to be addressed at the Annual Meeting include the election of three Class C Directors and ratification of the appointment of Ernst & Young LLP by the Company as its independent registered public accounting firm.

 

It is important that your shares are represented and voted at the Annual Meeting, whether or not you plan to attend. 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

 

AGILYSYS, INC.

 

28925 FOUNTAIN PARKWAY
SOLON, OHIO 44139

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

The Annual Meeting of Shareholders of Agilysys Inc., will be held at the Company’s headquarters at 28925 Fountain Parkway, Solon, Ohio 44139, on Friday, July 31, 2009, at 8:00 a.m., local time, for the following purposes:

 

1. To elect three Class C members of the Board of Directors of the Company to hold office for a term expiring in 2012;

 

2. To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm; and

 

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

 

Only shareholders of record at the close of business on June 19, 2009 are entitled to notice of the Annual Meeting and to vote at the Annual Meeting.

 

By Order of the Board of Directors.

 

Lawrence N. Schultz

Secretary

 

June 26, 2009

 

 

 

Table of Contents

 

 

AGILYSYS, INC.

 

28925 FOUNTAIN PARKWAY
SOLON, OHIO 44139

 

PROXY STATEMENT

 

Annual Meeting of Shareholders to be held on July 31, 2009

 

The Proxy enclosed with this Proxy Statement is solicited by the Board of Directors of Agilysys, Inc. (the “Company”), and is to be used at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held on July 31, 2009, and any adjournments 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 Proxy by giving notice to the Company in writing at any time before the Proxy’s exercise or in the open meeting. Unless revoked, shares represented by a valid Proxy (in the form enclosed and properly signed) received in time for voting will be voted according to the directions given in the Proxy.

 

The holders of Common Shares of the Company (the only class of shares outstanding) can vote at the Annual Meeting. At the close of business on June 19, 2009 — the date fixed for purpose of determining which shareholders can vote — there were 22,710,051 Common Shares outstanding and entitled to vote at the Annual Meeting, each share being entitled to one vote. Under Ohio law and the Company’s Amended Code of Regulations, if a quorum is present at the Annual Meeting, the three nominees for election as Directors will be elected as Directors if they receive the greatest number of votes cast for the election of Directors at the Annual Meeting by the holders of Common Shares present in person or represented by Proxy and entitled to vote (“Proposal 1”). 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 Proposal 1. By Nasdaq Stock Market and SEC rules, appointment of the Company’s independent registered public accounting firm is the direct responsibility of the Company’s Audit Committee. The Company’s Board of Directors has determined, however, to seek shareholder ratification of that selection to provide shareholders an avenue to express their views on this important matter. If the affirmative vote of a majority of the shareholders voting fail to ratify the appointment by the Company of Ernst & Young LLP (“Proposal 2”), the Audit Committee will seek to understand the reasons for such failure and will take those views into account in this and future appointments. Even if the current selection is ratified by shareholders, the Audit Committee reserves to itself the right to appoint a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such change would be in the best interests of the Company and its shareholders.

 

If not less than 48 hours before the Annual Meeting commences, any shareholder gives written notice to the Chief Executive Officer or the Secretary of the Company that he, she or it wants the voting for the election of Directors to be cumulative, the shareholder giving notice or a representative of that 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 in this meeting times the number of the shareholder’s Common 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.

 

Why am I receiving this Proxy Statement?

 

This Proxy Statement contains information related to the solicitation of proxies for use at our 2009 annual meeting of shareholders (the “Annual Meeting”), to be held at 8:30 a.m., local time, on Friday, July 31, 2009 at the Company’s headquarters at 28925 Fountain Parkway, Solon, Ohio 44139, for the purposes stated in the Notice of Annual Meeting of Shareholders. This solicitation is made by Agilysys, Inc. on behalf of our Board of Directors. “We,” “our,” “us” and the “Company” refer to Agilysys, Inc, and its subsidiaries. This Proxy Statement, the enclosed proxy card and our 2009 Annual Report to Shareholders and Form 10-K are first being mailed and made available electronically on our website at www.agilysys.com to shareholders beginning on or about June 26, 2009.

 

Who is entitled to vote at the Annual Meeting?

 

Only holders of record of our Common Shares at the close of business on June 19, 2009, the record date for the Annual Meeting, are entitled to receive notice of and to vote at the Annual Meeting or any adjournment or postponement of the Annual Meeting. Our Common Shares are the only class of securities entitled to vote at the Annual Meeting.

 

What are the voting rights of shareholders?

 

Each Common Share outstanding on the record date entitles its holder to cast one vote on each matter to be voted upon.

 

Who can attend the Annual Meeting?

 

All holders of our Common Shares at the close of business on June 19, 2009, the record date for the Annual Meeting, 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 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 stock ownership as of June 19, 2009, or a legal proxy from your bank or broker.

 

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 June 19, 2009 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 22,710,051 Common Shares outstanding.

 

How do I vote my Common Shares that are held by my bank or broker?

 

If your Common Shares are held by a bank or broker, you should follow the voting instructions provided to you by the bank or broker. Although most banks and brokers offer voting by mail, telephone and on the Internet, availability and specific procedures will depend on their voting arrangements.

 

How do I vote?

 

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.

May I change my vote after I return my proxy card?

 

Yes. You may revoke a previously granted proxy at any time before it is exercised by submitting to our Secretary a notice of revocation or a duly executed proxy bearing a later date, or by attending the Annual Meeting and voting in person.

 

How are proxy card 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 all nominees for our Board of Directors named in this Proxy Statement, “FOR” the ratification of Ernst & Young LLP as our independent registered public accounting firm and, as recommended by our Board of Directors with regard to any other matters that properly come before the Annual Meeting, or, if no such recommendation is given, the persons designated as proxy holders on the proxy card will vote in their own discretion.

 

Who pays the costs of soliciting proxies?

 

We will pay the costs of soliciting proxies. We hired Georgeson Inc. to serve as proxy solicitors for us at a cost of $8,500. In addition to soliciting proxies by mail, our officers, trustees and other employees, without additional compensation, may solicit proxies personally or by other appropriate means. It is anticipated that banks, brokers, fiduciaries, custodians and nominees will forward proxy soliciting materials to their principals, and that we will reimburse such persons’ out-of-pocket expenses.

 

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

 

Preliminary voting results will be announced at the Annual Meeting. Final results will be published in the Company’s quarterly report on Form 10-Q for the first quarter of fiscal 2010.

 

How can I obtain the Company’s Annual Report and Form 10-K?

 

Our Annual Report to Shareholders and Form 10-K for the fiscal year ended March 31, 2009, is being mailed along with this Proxy Statement. These documents are also available electronically on our website at www.agilysys.com. Our 2009 Annual Report is not incorporated into this Proxy Statement and shall not be considered proxy solicitation material.

 

If you wish to have a copy of our Annual Report to Shareholders and Form 10-K for the fiscal year ended March 31, 2009, we will mail these documents to you without charge. Requests should be sent to: our Treasurer, Agilysys, Inc., 28925 Fountain Parkway, Solon, Ohio 44139. These materials have been filed with the Securities and Exchange Commission, or SEC, and may be accessed from the SEC’s homepage at www.sec.gov.

 

Why do the proxy materials contain information regarding the Internet availability of proxy materials?

 

Pursuant to rules adopted by the SEC, the Company will provide access to our proxy materials on the Internet. As described above, proxy materials for the Annual Meeting, including our Annual Report to Shareholders and this Proxy Statement, are now available on the Internet by accessing www.agilysys.com. While the Company elected to mail complete sets of the proxy materials for this year’s Annual Meeting, in the future, you may receive only a Notice of Internet Availability of Proxy Materials and you would then have to request to receive a printed set of the proxy materials.

 

Who should I contact if I have any questions?

 

If you have any questions about the Annual Meeting, these proxy materials or your ownership of our Common Shares, please contact our Treasurer by telephone at (440) 519.8700 or by fax at (440) 519.8619.

 

This Proxy Statement contains certain management expectations, that may constitute forward-looking information within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the Private Securities Reform Act of 1995. Forward-looking information speaks only as to the date of this Proxy Statement and may be identified by use of words such as “may,” “will,” “believes,” “anticipates,” “plans,” “expects,” “estimates,” “projects,” “targets,” “forecasts,” “continues,” “seeks,” or the negative of those terms or similar expressions. Many important factors could cause actual results to be materially different from those in forward-looking information including, without limitation, competitive factors, disruption of supplies, changes in market conditions, pending or future claims or litigation, or technology advances. No assurances can be provided as to the outcome of cost reductions, business strategies, future financial results, unanticipated downturns to our relationships with customers, unanticipated difficulties integrating acquisitions, new laws and government regulations, interest rate changes, and unanticipated deterioration in economic and financial conditions in the United States and around the world. The company does not undertake to update or revise any forward-looking information even if events make it clear that any projected results, actions, or impact, express or implied, will not be realized.

 

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

 

The following table shows the number of Common Shares beneficially owned as of May 31, 2009, unless otherwise indicated, by: (i) each current Director; (ii) all individuals serving as the chief executive officer or chief financial officer for Agilysys during the fiscal year ended March 31, 2009; (iii) the other three most highly compensated executive officers at March 31, 2009 whose total compensation exceeded $100,000 for the fiscal year ended March 31, 2009; (iv) two additional individuals who would have been included in the foregoing had they been serving as an executive officer of Agilysys at March 31, 2009 (together with the individuals covered by (ii) and (iii) above, the “Named Executive Officers”); (v) all Directors and our executive officers as a group; and (vi) each person who is known by us to beneficially own more than 5% of our Common Shares.

 

 

 

 

The following table provides certain information with respect to all of the Company’s equity compensation plans in effect as of March 31, 2009.

 

Equity Compensation Plan Information

 

 

At the Annual Meeting, shareholders will elect three Class C Directors for a term ending at the Annual Meeting in 2012. The Board of Directors’ nominees for election are James H. Dennedy, Martin F. Ellis and John Mutch. Messrs. Dennedy, Ellis and Mutch currently serve as Directors of the Company. Mr. Mutch was appointed by the Board of Directors to fill the vacancy created by the resignation of Mr. Charles F. Christ on March 11, 2009. Mr. Dennedy has been appointed by the Board to fill the vacancy created by the resignation of Steve Tepedino on May 21, 2009. Mr. Tepedino was previously appointed to fill the Class C vacancy created by the resignation of Ms. Eileen M. Rudden on March 11, 2009.

 

The proxyholders named in the accompanying proxy card, or their substitutes, will vote the Proxy at the Annual Meeting, or any adjournments of the Annual Meeting, for the election of the three Director nominees named above, unless, by marking the appropriate space on the proxy card, the shareholder withholds authority for the proxyholder to vote. Each of the nominees has indicated willingness to serve as a Director, if elected. The accompanying proxy card will not be voted for more than three Director nominees or for anyone other than the Company’s three Director nominees.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF ALL NOMINEES NAMED ABOVE. PROXY CARDS RECEIVED BY THE COMPANY WILL BE VOTED “FOR” THE ELECTION OF ALL NOMINEES NAMED ABOVE UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE IN THE PROXY.

 

For each of the current Director nominees and each of the other Directors who serve on the Board of Directors for the Company, the following table shows: name; principal job for the past five years and Directorships in other publicly-held corporations; the year during which service as a Director began or will begin; age; and when their service as a Director ends or will end.

 

 

In May 2006, the Board of Directors adopted Amended Corporate Governance Guidelines created and approved by the Nominating and Corporate Governance Committee. The Guidelines provide a sound framework to assist the Board in fulfilling its responsibilities to shareholders. Under these 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 Guidelines state that the Board and its Committees will exercise oversight in the areas of CEO and executive pay, Director nomination, corporate governance, succession planning, financial reporting, internal controls, and strategic and operational issues. The Guidelines also state Board policy on eligibility for the Board, including Director independence and qualifications for Board candidates, and Board policy describing events that require resignation from the Board. A complete copy of the Guidelines is available on the Company’s website at www.agilysys.com.

 

The NASDAQ listing standards provide that at least a majority of the members of the Board of Directors must be independent, i.e., free of any material relationship with the Company, other than his or her relationship as a Directors. The Company’s Corporate Governance Guidelines state that the Board should consist of a substantial majority of independent Directors. A Director is not independent if he or she fails to satisfy the standards for Director independence under the 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 an immediate family member of the Director and the Company or its management. The following Directors have been determined to be independent:

 

Thomas A. Commes
R. Andrew Cueva
James H. Dennedy
Howard V. Knicely
Keith M. Kolerus
Robert A. Lauer
Robert G. McCreary, III
John Mutch

 

Mr. Ellis is not considered to be independent because of his position as a President and Chief Executive Officer of the Company.

 

The Company has adopted a Code of Business Conduct that applies to all Directors, officers and employees of the Company. In addition, the Company has adopted a Code of Ethics for Senior Financial Executives that applies to the Chief Executive Officer, Chief Financial Officer, Treasurer and Controller of the Company and any person performing a similar function. The Code of Business Conduct and the Code of Ethics for Senior Financial Executives are available on the Company’s website at www.agilysys.com. The Company has in place a hotline, managed by an independent third party, that all employees can use to anonymously report potential violations of the Code of Business Conduct or the Code of Ethics for Senior Financial Executives.

 

The Board of Directors held twelve meetings during Fiscal 2009. During Fiscal 2009, no Director attended less than 75% of the aggregate of (i) the total number of meetings of the Board of Directors held during the period he served as a Director and (ii) the total number of meetings held by Committees of the Board on which he/she served, during the periods that he/she served. Independent Directors meet regularly in executive session at each Board meeting. Such executive sessions were previously chaired, on a rotating basis, by the Chairmen of the Audit, Compensation, and Nominating and Corporate Governance Committees. On October 20, 2008, the Board elected

Mr. Keith Kolerus as its independent chairman, replacing Mr. Arthur Rhein, who retired effective that same day. As a result, the Board will no longer require that the executive sessions be chaired on a rotating basis and instead will be chaired by Mr. Kolerus.

 

It is the policy of the Board that all of its members attend the Annual Meeting absent exceptional cause. All of the Directors were in attendance at the 2008 Annual Meeting.

 

Shareholders and others who wish to communicate with the Board of Directors as a whole, or with any individual Director, may do so by sending a written communication to such Director(s) in care of the Company at its headquarters’ address. The Company’s General Counsel will forward the communication to the Director(s) as instructed by the Director.

 

 

 

 

Audit Committee.  The Audit Committee held five meetings during the last fiscal year. The Audit Committee, established in accordance with Section 3(a)(58)(A) of the Exchange Act, reviews with the Company’s independent registered public accounting firm, the proposed scope of the Company’s annual audits and audit results, 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 and reviews any concerns identified by either the internal or external auditors. The Board of Directors has determined that all Audit Committee members are financially literate under the current NASDAQ listing standards. The Board has also determined that Thomas A. Commes qualifies as an “audit committee financial expert” under the rules adopted by the SEC under the Sarbanes-Oxley Act of 2002. In June 2008, the Board adopted an Amended and Restated Charter, which is available on the Company’s website at www.agilysys.com.

 

Compensation Committee.  The Compensation Committee held nine meetings during the last fiscal year. The purpose and mission of the Compensation Committee of the Board of Directors of the Company is to enhance shareholder value by ensuring the pay available to the Board of Directors, Chief Executive Officer and other executive officers enables the Company to attract and retain high-quality leadership and is consistent with the Company’s executive pay policy. As part of its responsibility in this regard, the Compensation Committee oversees the Company’s pay plans and policies, annually reviews and determines all pay (including base salary and the Company’s annual cash incentive, long-term stock incentive, retirement and perquisite plans and programs), administers the Company’s incentive programs (including establishing performance goals, determining the extent to which performance goals are achieved and calculating awards), administers the Company’s equity pay plans (including making grants to the Company’s executive officers) and regularly evaluates the effectiveness of the overall executive pay program. A more complete description of the Compensation Committee’s functions is found in the Compensation Committee’s charter, which is available on the Company’s website at www.agilysys.com.

The Company’s Law Department and Human Resources Department 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 the Company’s pay programs. In addition, the Compensation Committee has the authority to engage the services of outside advisers, experts and others to assist the Committee. In fiscal year 2009, the Compensation Committee relied on the services of Pearl Meyer & Partners, an executive pay consulting firm, to provide input to facilitate the Compensation Committee’s decision-making process regarding the executive pay programs for the executive officers. Specifically, the executive pay consulting firm:

 

 

While the Compensation Committee directly retains the executive pay consulting firm, in carrying out assignments the executive pay consulting firm also interacted with the Company’s executive officers when necessary and appropriate. Specifically, the executive pay consulting firm interacted with the Chief Executive Officer and Chief Human Resources Officer, who provided data and insight on the Company’s compensation programs and business strategies.

 

The Chief Executive Officer and the Chief Human Resources Officer attend Compensation Committee meetings when executive compensation, Company performance, and individual performance are discussed and evaluated by Compensation Committee members. The executive officers provide their thoughts and recommendations on executive pay issues during these meetings and also provide updates on financial performance, divestitures, mergers and acquisitions, industry status and other factors that may impact executive pay. 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 pay and approve all outcomes.

 

Nominating and Corporate Governance Committee.  The Nominating and Corporate Governance Committee held 12 meetings during the last fiscal year. The Nominating and Corporate Governance Committee assists the Board in finding and nominating qualified people for election to the Board, assessing and evaluating the Board’s effectiveness, and establishing, implementing and overseeing the Company’s governance programs and policies. In January 2005, the Board adopted an Amended and Restated Charter of the Nominating and Corporate Governance Committee, which is available on the Company’s website at www.agilysys.com.

 

The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of, and recommending to the Board of Directors, individuals to be nominated for membership on the Board of Directors. The Nominating and Corporate Governance Committee considers nominees using the criteria for the composition of the Board and the qualifications of members as outlined in the Company’s Corporate Governance Guidelines.

 

The Nominating and Corporate Governance Committee will consider shareholder recommendations for nominees for membership on the Board of Directors. Shareholders may make a nominee recommendation by sending the nomination to the Chairman of the Nominating and Corporate Governance Committee, at the Company’s headquarters address. The recommendation must include:

 

 

The Nominating and Corporate Governance Committee may request additional information from such candidate to assist in its evaluation. The Nominating and Corporate Governance Committee will evaluate any shareholder-recommended nominees in the same way it evaluates candidates recommended by other sources, as described above.

 

None of the members of the Compensation Committee during fiscal year 2009 or as of the date of this Proxy Statement is or has been an officer or employee of the Company, and no executive officer of the Company served on the compensation committee or board of any Company that employed any member of the Company’s Compensation Committee or Directors.

 

Overview

 

During fiscal 2009, Agilysys did not achieve its overall financial and shareholder performance goals. Specifically, overall corporate net sales, gross profit and EBITDA were well below expectations and, as a result, shareholder returns were also well below expectations. Accordingly, annual incentive payments to our Chief Executive Officer, Chief Financial Officer and our next three highest paid executive officers (collectively, the “Named Executive Officers”) were lower and most equity incentives had no value. In addition, any Common Shares owned outright by our executives also declined in value, in proportion to the losses sustained by our shareholders.

 

During fiscal 2009, we also had significant changes in our senior management team, particularly among the Named Executive Officers:

 

 

The overall impact of the above management changes was to streamline and reduce our overall management structure and shorten the lines of communication within the organization, which we believe will serve to enhance performance going forward. The above changes are reflected in the discussions below in this Compensation Discussions and Analysis and in the various compensation tables included in this Proxy Statement.

 

Our Compensation Committee adopted a pay philosophy, objectives and structure for the Named Executive Officers designed to achieve business goals and create long-term shareholder value. Following input from our executive compensation consultant, the Compensation Committee reaffirmed their compensation philosophy, objectives and structure this fiscal year.

 

Compensation Philosophy

 

 

Compensation Objectives

 

 

Compensation Structure

 

 

Annual Goal Setting

 

At the beginning of each fiscal year, written goals are established for our Named Executive Officers. These goals are tied to the Company’s financial, strategic and operational goals and include Company and business specific financial targets relating to net sales, gross margin, EBITDA and financial measures. For the Company’s fiscal 2009 executive compensation arrangements, EBITDA was defined as operating income plus depreciation and amortization, excluding restructuring charges and goodwill and intangible asset impairment charges.

 

Each Named Executive Officer’s goals are established with input from and are reviewed by our Compensation Committee. Our Chief Executive Officer evaluates the performance of and recommends the total compensation award for each Named Executive Officer, other than himself. Our Compensation Committee evaluates the performance of our Chief Executive Officer based on these established goals, and determines the appropriate amount of his compensation. Our Committee also reviews the performance of the Company’s other Named Executive Officers, taking into consideration the Chief Executive Officer’s recommendations, and determines their compensation based on that review.

 

External Benchmarking

 

For fiscal year 2009, we conducted a formal executive compensation study for Messrs. Ellis, Kossin and Stout that showed our current pay levels for Named Executive Officers are generally commensurate with the market median. The information was reviewed by our Compensation Committee in the context of our executive pay philosophy, objectives and current Named Executive Officer pay levels prior to making decisions regarding salary levels and approving target annual incentives and equity grants for fiscal year 2009. A formal compensation study was also conducted and used by the Compensation Committee and full board in setting fiscal 2009 Director pay. The study was completed using data from published salary surveys, including those issued by Pearl Meyer & Partners, Economic Research Institute, Mercer Human Resource Consulting and Watson Wyatt. Each survey has up to several hundred companies who contributed data and no single company was considered significant in any of the databases. In most cases, regression analysis relating revenues and salaries within similar industry groups was used to determine market median pay data.

 

Pay Mix

 

Our philosophy is to provide greater at-risk pay, in the form of annual and long-term incentives, to our more senior executives, while providing a relatively larger percentage of total pay in the form of salaries for less senior executives. Given the magnitude and nature of the management changes that took place among our Named Executive Officers in fiscal 2009, including mid-year promotional salary increases and special equity grants made upon the promotions, comparisons across executives are complex and difficult to analyze properly. However, our Compensation Committee adhered to the following general guidelines:

 

 

 

Taken together, the incentive components, which are at-risk pay, represent a significant portion of the direct pay for each Named Executive Officer. Our Chief Executive Officer has a larger overall incentive pay opportunity than other executives because he is believed to have a greater ability to influence financial and shareholder return performance. Our Named Executive Officers have greater opportunities for long-term equity-based incentive compensation than annual cash incentive compensation. As a result, greater emphasis is placed on long-term shareholder value creation than annual financial performance thereby minimizing excessive risk taking by our executives.

 

Salary

 

We set salaries based on the executive’s position, individual performance and relation to pay levels in the competing market. We also take into account changes in salaries in the overall general market. Salaries are reviewed annually by our Compensation Committee at its first meeting after the fiscal year end, and changes in salary are based on the factors discussed above as well as input from our Chief Executive Officer. However, none of the factors are weighted according to any specific formula and new salaries are set based on the Compensation Committee’s discretion and judgment.

 

At its meeting in May 2008, our Compensation Committee did not increase the salary of any of our Named Executive Officers. In its meeting on November 13, 2008, our Compensation Committee discussed recommendations for the salary of Mr. Ellis, who was promoted to President and Chief Executive Officer; Mr. Kossin, who was promoted to Senior Vice President and Chief Financial Officer; and Mr. Stout, who was promoted to Vice President & Treasurer. In determining the salaries, the Compensation Committee applied the same compensation philosophy as described above, applying current data obtained from our executive pay consultant based on salary surveys and information from companies in the industry with revenue similar to that of the Company. In November 2008, our Compensation Committee agreed to new annual base salaries for each as follows: Mr. Ellis — $450,000; Mr. Kossin — $285,000; and Mr. Stout — $220,000.

 

Our Compensation Committee did not increase the salary of any of our Named Executive Officers for fiscal year 2010.

 

Annual Incentives

 

Annual incentives are designed to motivate executives to achieve key business goals and objectives. We expect that achieving these goals and objectives will result in the creation of shareholder value. In April 2008 (the beginning of fiscal year 2009), target annual incentives were set at a percentage of salary for each of the Named Executive Officers as follows:

 

 

In November 2008, our Compensation Committee discussed recommendations for the annual incentive targets for Messrs. Ellis, Kossin and Stout in the context of their recent promotions. The Board then approved revised annualized target incentives for fiscal 2009 for each as follows: Mr. Ellis — $337,500 (75% of salary), Mr. Kossin — $142,500 (50% of salary) and Mr. Stout - $80,000 (36% of salary). Actual targets for fiscal year

2009, taking into account the proration of the above targets given the mid-year promotions were $261,375, $91,458 and $62,500 for Messrs. Ellis, Kossin and Stout, respectively. Target corporate payouts for these three Named Executive Officers for the fiscal year 2009 annual incentive plan were based on overall corporate revenues of $902 million and EBITDA of $27 million. Each of these performance measures was weighted at 25% of the target amount, while subjective measures, primarily related to the overall evaluation of strategic alternatives for the Company and the development and implementation of a new management structure and organizational design, were weighted at 50%. In February 2009, our Compensation Committee determined that, primarily as a result of the Company’s decision to pursue strategic alternatives during fiscal year 2009, no payouts would be made to Messrs. Ellis, Kossin, Stout and Sayers under the formal fiscal year 2009 annual incentive plan. At the end of the fiscal year, the Committee would evaluate qualitative and subjective achievements and determine subjective bonus payouts, if any. The Committee also determined that Mr. Civils’ and Ms, Stehle’s payouts would remain subject to their formal fiscal year 2009 annual incentive plans. In addition, Mr. Kossin and Mr. Stout were paid a retention bonus of $100,000 each, which was put in place in 2008, at the time the Board approved the Company’s pursuit of strategic alternatives to ensure retention of key executives of the Company.

 

In April 2009, our Compensation Committee formally evaluated the Company’s organizational restructuring, governance and operating activities and the more than $25 million in cost savings initiatives since October 20, 2008. As a result of their evaluation, the Compensation Committee approved the following annual incentives payouts:

 

 

Mr. Civils’ and Ms. Stehle’s annual incentive plan for fiscal 2009 was based primarily on their business unit financial measures, and required achievement of 75% of the financial performance measures before incentives could be paid, while the maximum payout could be paid at 120% of financial performance.

 

Mr. Civils, the Senior Vice President and General Manager of the Retail Solutions Group (“RSG”), was compensated based on a target incentive amount of $135,000 (71% of salary), based on the following performance measures, objectives and weightings:

 

 

Actual results for each of the above- mentioned performance measures established for the 2009 fiscal year were as follows: (i) RSG Operating Income — $7,986,000; (ii) RSG Operating Income% — 6.5%; (iii) RSG Revenue — $124,159,000; (iv) Agilysys EBITDA — $19,702,000. Based on the actual results of the above-mentioned performance measures, objectives and weightings, Mr. Civils annual incentive payment was $124,336 for fiscal year 2009. The incentive payments paid to Mr. Civils are included in the Summary Compensation Table.

 

Ms. Stehle, the Senior Vice President and General Manager of the Hospitality Solutions Group (“HSG”), was compensated based on a target incentive amount of $114,583 (36% of salary), which was increased from $100,000 to reflect her increased responsibilities, based on the following performance measures, objectives and weightings:

 

 

Actual results for each of the above- mentioned performance measures established for the 2009 fiscal year were as follows: (i) HSG EBITDA — $14,286,000; (ii) HSG EBITDA% — 14.3%; (iii) HSG Revenue —

$99,636,000; (iv) Agilysys EBITDA — $19,702,000. Based on the actual results of the above-mentioned performance measures, objectives and weightings, Ms. Stehle’s annual incentive payment was $65,771 for fiscal year 2009. The incentive payments paid to Ms. Stehle are included in the Summary Compensation Table.

 

Messrs. Rhein and Coleman did not receive an annual incentive payment for fiscal year 2009.

 

At its meeting on April 29, 2009, the Compensation Committee did not increase the percentage of base salary represented by the annual target incentives reported above for any of the Named Executive Officers for fiscal year 2010. The performance measures, objectives and weighting for fiscal year 2010 for each of our Named Executive Officers are as follows:

 

 

We believe that disclosing the specific performance measures, which include EBITDA dollars and percentage, DSO, DDSO and MBO objectives to be used for determining annual bonuses would cause us competitive harm by potentially disrupting our customer relationships and providing competitors with insight into our business strategy, pricing margins, capabilities and current compensation for executive talent. As was the case in fiscal year 2009, we believe the performance levels used for fiscal year 2010 involve some difficulty at the threshold level, increased difficulty at the 100% target level, and significant difficulty at the maximum level, in each case relative to historical trends and future expectations at the time the levels were set.

 

Long-Term Equity Incentives

 

We use our 2006 Stock Incentive Plan (the “2006 Equity Plan”) to grant various types of stock-based, or equity incentives, including stock options, stock-settled stock appreciation rights, restricted stock and restricted stock units, performance shares and units, and other equity-based and cash awards. The range of equity awards provides us the flexibility to address specific pay objectives for our executive officers, including motivating the creation of shareholder value and retaining and attracting executives and other employees.

 

At its meeting in May 2008, the Compensation Committee agreed to give Mr. Kossin — 17,500 stock options, Mr. Stout — 12,500 stock options, Mr. Civils — 12,000 stock options, and Ms. Stehle — 12,000 stock options at an exercise price of $9.82 per share (the closing market price of the Company’s Common Shares on that day).

Our Compensation Committee did not grant any equity incentives to Messrs. Rhein, Ellis, Coleman and Sayers in fiscal year 2009, given the large, three-year grants of performance shares and restricted stock made in fiscal year 2008. These grants were designed to eliminate the need to make any equity incentive grants to the Named Executive Officers until May 2010. Given the recent terminations of Messrs. Rhein, Coleman and Sayers, none of the performance shares granted to them will be earned and, in addition, they forfeited most of the restricted shares they received in 2007. The Company’s financial performance will likely result in no performance shares being earned from this plan by Mr. Ellis, although the final outcome will not be known until the end of fiscal year 2010.

 

In its meeting in November 2008, our Compensation Committee discussed recommendations for equity awards for Messrs. Ellis, Kossin, Civils, Mr. Stout and Ms. Stehle in the context of their recent promotions. Our Compensation Committee granted Mr. Ellis 150,000 stock options, Mr. Kossin 45,000 stock options and Mr. Civils, Mr. Stout and Ms. Stehle, 40,000 stock options, at a grant price of $2.51 per share (the closing market price of the Company’s Common Shares on that day), and the following day, the Board approved a grant of 150,000 stock options to Mr. Ellis at a grant price of $2.19 per share (the closing market price of the Company’s Common Shares on that day.)

 

In May 2009, our Compensation Committee considered and approved a new equity plan, pursuant to the Company’s shareholder approved 2006 Stock Incentive Plan, consisting of a combination of stock-settled stock appreciation rights (“SSARs”) and performance shares (collectively, the “FY10 Equity Plan”) and awarded the following grants to the Named Executive Officers.

 

 

The SSARs were granted at $6.83 per share (the closing price of the Company’s Common Shares on the grant date), have a seven-year term and vest at the rate of 33% on March 31, 2010 and 2011, and 34% on March 31, 2012. The SSARs are settled in stock upon exercise.

 

Recipients will earn the performance shares based on increases in EBITDA, defined as operating income, plus depreciation and amortization, above a pre-set threshold during fiscal 2010, taking into account investments in capital expenditures and any change in accounts receivable. All of Messrs. Ellis’, Kossin’s and Stout’s performance shares are earned based on gains in Agilysys EBITDA, while 2/3 of Mr. Civils’ and Ms. Stehle’s performance shares are earned based on their individual business unit increase in EBITDA with the remaining 1/3 earned based on gains in Agilysys EBITDA increases. Participants can earn up to 175% of the performance shares granted depending on the level of additional EBITDA achieved during fiscal 2010.

 

At the end of fiscal 2010, any performance shares earned will vest at the rate of 34% on the date of the Form 10-K filing for the fiscal year ended March 31, 2010, and 33% on March 31, 2011 and March 31, 2012. Any performance shares not earned in fiscal year 2010 will be forfeited by the participants.

 

Our Compensation Committee believes that ongoing increases in EBITDA, net of additional capital employed, will drive shareholder returns over the long-term. The grants of SSARs are designed to provide an instrument that provides gains to recipients based on the actual returns realized by shareholders over the long term.

 

Deferred Compensation Plans

 

We allow our Named Executive Officers to defer pay into a nonqualified deferred compensation plan, which we call the Benefit Equalization Plan (the “BEP”). We established the BEP to provide our executives with the ability to contribute amounts for retirement and to receive Company profit sharing contributions and 401(k) matches in excess of the contribution amounts allowed under our tax-qualified Section 401(k) Plan. We limit participation in the BEP to a select group of senior management and other highly-paid employees, including the Named Executive

Officers. The BEP is an unfunded plan and Company-owned life insurance is purchased as a source of funds to pay the benefits from the BEP.

 

The Nonqualified Deferred Compensation Table provides additional information on specific deferrals of pay, our matching of these deferrals, if any, and balances in the BEP for each executive officer. In addition, the discussion appearing in the Nonqualified Deferred Compensation Plan section, below, describes the BEP in more detail.

 

Retirement Benefits

 

We started our Supplemental Executive Retirement Plan (the “SERP”) during fiscal year 2000 to provide cash retirement benefits to a select group of key management employees including the Named Executive Officers. Certain tax laws limit the retirement benefits that highly-paid executives can receive from a “qualified” retirement plan and the SERP is designed to provide retirement benefits that are not subject to these limits. In addition, the SERP provides a tool to help us competitively recruit and retain executive officers.

 

The SERP provides cash benefits on an annual amount not to exceed 50% of the executive’s final average annual earnings, including both salary and annual incentives. The cash benefit amount is reduced by other Company-funded retirement benefits, such as the match provided in the Section 401(k) Plan, profit sharing amounts, and other Company contributions to the BEP, as well as 50% of Social Security retirement benefits. The value of accrued benefits for each executive officer is found in the Pension Benefits Table and the SERP is discussed in more detail in the footnotes and the discussion appearing with that table.

 

Other Compensation — Executive Benefits & Perquisites

 

We provide a program of executive benefits and perquisites to our Named Executive Officers including, but not limited to, additional life and long-term disability insurance plans, contributions to Company benefit plans, automobile allowance, attendance by guests at supplier events and club dues. In addition, Mr. Ellis was eligible for relocation assistance for expenses incurred for his relocation from Florida to Ohio. These executive benefits and perquisites are described in more detail in the Summary Compensation Table and related footnotes. We believe these benefit and perquisite programs enhance part of an overall competitive package that serves to attract and retain executive officers.

 

Our executive officers are parties to various employment, change of control and non-competition agreements as follows:

 

 

The above agreements provide for severance payments which are payable in the event of termination of the executive’s employment by us without cause. In addition, should a change of control of the Company occur and the executive is terminated without cause related to the change of control or if the executive resigns for Good Reason, as

defined in the agreements, the executive will receive severance payments for a specified time period. Since each of the executives named above, with the exception of Messrs. Ellis, Kossin, Civils, and Ms. Stehle, retired or was terminated in fiscal year 2009, the change of control provisions no longer apply for those executives. The major termination and change of control provisions of the agreements are summarized below as of fiscal year ended March 31, 2009 for each executive and are covered in more detail in both the Termination and Change of Control Table and the related discussion, below.

 

Mr. Rhein

 

 

On October 20, 2008, we entered into a Separation Agreement with Mr. Rhein as a result of his retirement as the Company’s Chairman, President and Chief Executive Officer. Mr. Rhein’s Separation Agreement provides that the Company will pay and provide Mr. Rhein with the rights, obligations, payments and benefits as provided by the Employment Agreement, as amended and extended by the Extension Agreement, in the event of a Protected Termination (within the meaning of the Employment Agreement). In connection with his Separation Agreement, Mr. Rhein and the Company released all claims against each other. Pursuant to the terms of his Employment Agreement, Mr. Rhein received his base salary through October 20, 2008 and received severance payments equal to 24 months salary and target annual incentives. In addition, Mr. Rhein is entitled to the payments and benefits provided for under the relevant plans and arrangements of the Company, and the Company must continue Mr. Rhein’s group benefits, executive benefits and most perquisites for a period of two years.

 

Messrs. Ellis, Coleman and Sayers

 

 

On October 21, 2008, we terminated the employment of Mr. Coleman without cause. Mr. Coleman will receive all rights, payments and benefits available to him under his Non-Competition Agreement as described above for twenty-four months (the “Coleman Severance Period”). Under an amendment to Mr. Coleman’s Non-Competition Agreement and Change of Control Agreement, dated December 17, 2008, he agreed not to compete with us for a period of twenty-four months from the date of termination of his employment.

 

On March 15, 2009, we terminated the employment of Mr. Sayers without cause. Mr. Sayers will receive all rights, payments and benefits available to him under his Non-Competition Agreement as described above for twenty-four months. Under an amendment to Mr. Sayers Non-Competition Agreement and Change of Control Agreement, dated March 11, 2009, Mr. Sayers agreed not to compete with us for a period of twenty-four months from the date of termination of his employment.

 

Messrs. Kossin, Civils and Stout and Ms. Stehle

 

 

In his role as our President and Chief Executive Officer, Mr. Ellis will continue his employment under the current terms of his Non-Competition Agreement and Change of Control Agreement.

 

We believe the terms described in the above summary provisions are competitive. In addition, we believe the various agreements serve the dual purpose of helping to attract and retain key executive officers and help us to compete with other companies for executive talent.

 

Adjustment or Recovery of Awards

 

We do not maintain any specific plans or policies that provide for the adjustment or recovery of pay-related awards if certain performance levels are modified as a result of any requirement to restate our financials. However, under Section 304 of the Sarbanes-Oxley Act, if we are required to restate our financials due to material noncompliance with any financial reporting requirements as a result of misconduct, our Chief Executive Officer and Chief Financial Officer must reimburse us for (1) any bonus or other incentive-based or equity-based compensation received during the 12 months following the first public issuance of the non-complying document, and (2) any profits realized from the sale of our securities during those 12 months.

 

Consideration of Prior Amounts Realized

 

We do not consider prior pay outcomes, including stock compensation gains, in setting future pay levels. The Compensation Committee believes this approach furthers our philosophy of rewarding future financial and shareholder performance.

 

Stock Ownership Guidelines

 

To underscore the importance of strong alignment between the interests of management and shareholders, the Board has approved revised Stock Ownership Guidelines for Directors and Executives at its April 29, 2009 meeting. Agilysys Director and executive compensation is designed to provide a significant opportunity to tie individual rewards to long-term Company performance. The objective of the Agilysys Stock Ownership Guidelines is to support this overall philosophy of alignment and to send a positive message to our shareholders, customers, suppliers, employees and other “stakeholders” of our commitment to shareholder value.

Each Director and executive officer is expected to acquire and maintain minimum ownership in Agilysys stock of either: a) a multiple of base salary or Director annual retainer; or b) the number of shares listed below at a market value equal to the following:

 

 

Stock ownership that will be included toward attainment of the guidelines:

 

 

Stock ownership that is not included toward attainment of the guidelines:

 

 

Directors and executives are expected to attain their target ownership levels within two and four years from the later of the effective date of this policy or becoming a Director or an executive, and remain at or above that level until retirement. Annually, the Board shall review progress toward achieving these ownership levels. Director and executives who have not attained the specified ownership guidelines will be required to hold 75% of shares acquired upon exercise of stock options and SSARs or vesting of performance or restricted shares until they meet their target ownership level. If ownership guidelines are not met within two and four years, our Compensation Committee has the right to payout annual incentives in the form of Agilysys stock until ownership guidelines are achieved by the executive.

 

Impact of Tax and Accounting Considerations

 

In general, we consider the various tax and accounting implications of the pay mechanisms that we use to provide pay to our executive officers. We analyze the accounting cost associated with long-term incentive grants when determining the grant amounts for executive officers. Section 162(m) of the Internal Revenue Code generally prohibits any publicly held corporation from taking a federal income tax deduction for pay to the chief executive officer and the next four highest compensated officers in excess of $1 million in any taxable year. Exceptions are made for certain qualified performance-based pay. It is our objective to maximize the effectiveness of our executive pay plans in this regard. The pay instruments we use, including salaries, annual incentives and stock options, are tax deductible to the extent that they are performance based or less than $1 million for each named executive officer in a given year.

 

We completed our compliance with Internal Revenue Code Section 409A by December 31, 2008, as required by IRS notice 2007-86. Section 409A relates to deferred pay and amounts included in gross income. Changes were made to the SERP, BEP and the employment/change of control/non-competition agreements with our executive officers if necessary, to achieve compliance with Section 409A.

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company’s management. Based on that review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be incorporated into the Company’s Annual Report on Form 10-K and this Proxy Statement.

 

The Compensation Committee of the Board of Directors

 

Howard V. Knicely, Chairman
Keith M. Kolerus
Robert A. Lauer
John Mutch

 

The above Compensation Committee Report does not constitute soliciting material and should not be deemed filed with the Securities and Exchange Commission or subject to Regulation 14A or 14C (other than as provided in Item 407 of Regulation S-K) or to the liabilities of Section 18 of the Exchange Act, and is not to be deemed incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act whether made before or after this Proxy Statement, except to the extent that the Company specifically requests that the information in this Compensation Committee Report be treated as soliciting material or specifically incorporates this Compensation Committee Report by reference into a document filed under the Securities Act or the Exchange Act.

 

Summary Compensation

 

The following table and related notes provide information about the compensation for the Named Executive Officers:

 

 

 

 

 

 

 

 

 

 

Employment Agreement with Mr. Rhein.  On December 23, 2005, we entered into the Amended and Restated Employment Agreement with Mr. Rhein (the “Employment Agreement”), beginning on December 23, 2005 (“Effective Date”), and ending on March 31, 2009. On January 28, 2008, we entered into the Extension Agreement, whereby we modified certain of the terms of the Employment Agreement to be effective on April 1, 2009, and extended the ending date to March 31, 2010. The period between April 1, 2009 and March 31, 2010 is referred to as the “Extension Term.”

 

The Employment Agreement provided that Mr. Rhein would receive an annual salary of $725,000 effective April 1, 2006. Mr. Rhein’s salary was subject to annual review at the beginning of each fiscal year, commencing with fiscal year 2008, by the Compensation Committee or the Board. Mr. Rhein’s annual salary could have been increased, but not decreased as the Compensation Committee, or the Board, determined. The Extension Agreement provided that Mr. Rhein’s base compensation rate for the final year of his employment would be the same as the base compensation rate paid to him during the prior year ending March 31, 2009. Mr. Rhein’s annual salary did not increase during the remainder of the employment term. Under the Employment Agreement, Mr. Rhein was eligible to participate in other benefit plans, including, but not limited to, our 401(k) Plan, our plans for providing severance benefits to our executive officers, 2000 Stock Incentive Plan and 2006 Equity Plan, SERP, BEP, short-and long-term disability plans, group term life insurance plan (including life insurance protection in an amount not less than 200% of his earnings as reported on IRS Form W-2 for the prior calendar year), medical plan, dental plan, and any other plans or programs we may have adopted from time to time and in which our executive officers, or employees in general, are eligible to participate. Mr. Rhein’s target annual incentive was 100% of salary, with a range from 0% to 250% of his salary. The Extension Agreement provided that Mr. Rhein would have received all benefits, perquisites and would participate in all plans as provided for in the Employment Agreement, including participation in the Annual Incentive Plan.

 

In connection with entering into the Employment Agreement, the Compensation Committee delivered a letter to Mr. Rhein (the “Rhein Letter Agreement”) under which Mr. Rhein received a stock option grant of 250,000 Common Shares on April 3, 2006 (the first business day after April 1, 2006) and a second stock option grant of 250,000 Common Shares on July 28, 2006, the date our shareholders approved the 2006 Equity Plan, with respective exercise prices equal to fair market value on the dates of grant. These grants would become exercisable during his continued employment at a rate of 10% on March 31, 2007, an additional 30% on March 31, 2008, and a final 60% on March 31, 2009. The Rhein Letter Agreement further provided that vesting of such options would not be accelerated due to Mr. Rhein’s retirement or termination for Good Reason (as such term is defined in the

Employment Agreement). In connection with Mr. Rhein’s retirement in October 2008, the Company entered into a Separation Agreement with Mr. Rhein, dated October 20, 2008, which provided that the Company would treat Mr. Rhein’s retirement effectively as a termination without cause. Therefore, the vesting of the above options accelerated and are fully exercisable until their expiration in 2016.

 

Under the Extension Agreement, Mr. Rhein would have received 70,000 restricted Common Shares on April 1, 2009, vesting on March 31, 2010, based solely on the performance vesting terms applicable to “EVP LTIP Awards” as authorized and approved by the Compensation Committee in its meeting of June 29, 2007. However, Mr. Rhein forfeited these Common Shares upon his retirement.

 

For a discussion of additional terms or the employment arrangements with Messrs. Rhein, Coleman and Sayers, including post-termination and change-of-control payments and restrictive covenants, see the section titled “Termination and Change of Control,” below.

 

Grants of Plan-Based Awards

 

The following table and related notes and discussion summarize grants of equity and non-equity incentive compensation awards to our Named Executive Officers for fiscal year 2009.

 

 

 

 

The following table and related notes and discussion summarize certain information with respect to outstanding equity awards held by the Named Executive Officers as of March 31, 2009.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR 2009 YEAR-END