Share-based Compensation

We may grant non-qualified stock options, incentive stock options, stock-settled stock appreciation rights, restricted shares, and restricted share units for up to 3.0 million common shares under our 2011 Stock Incentive Plan (“the 2011 Plan”). The maximum number of shares subject to stock options or SSARs that may be granted to an individual in a calendar year is 800,000 shares, and the maximum number of shares subject to restricted shares or restricted share units that may be granted to an individual in a calendar year is 400,000 shares. The maximum aggregate number of restricted shares or restricted share units that may be granted under the 2011 Plan is 1.0 million.

We have a shareholder-approved 2006 Stock Incentive Plan (the “2006 Plan”), as well as, a 2000 Stock Option Plan for Outside Directors and a 2000 Stock Incentive Plan that still have vested awards outstanding. Awards are no longer being granted from these incentive plans.

We may distribute authorized but unissued shares or treasury shares to satisfy share option and appreciation right exercises or restricted share and performance share awards.

We record compensation expense related to stock options, stock-settled stock appreciation rights, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date. The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date. The fair value of stock option and stock-settled appreciation right awards is estimated on the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of our common shares.

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Condensed Consolidated Statements of Operations for the three and nine months ended December 31, 2012 and 2011:



	Three months ended				Nine months ended
	December 31,				December 31,
(In thousands)	2012		2011		2012		2011
Product development	$	145	$	37	$	367	$	208
Sales and marketing	44		34		101		194
General and administrative	254		290		806		1,948
Total share-based compensation expense	$	443	$	361	$	1,274	$	2,350

Stock Options

The following table summarizes the activity during the nine months ended December 31, 2012 for stock options awarded under the 2006 Plan:



	Number of Options		Weighted- Average Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
(In thousands, except share and per share data)			(per share)		(in years)
Outstanding at April 1, 2012	971,001		$	13.52
Granted	—		—
Exercised	(66,667	)	2.51
Cancelled/expired	(134,834	)	14.55
Outstanding and exercisable at December 31, 2012	769,500		$	14.30	3.2	$	234

A total of 46,519 shares, net of 11,660 shares withheld to cover the applicable exercise price of the award and 8,488 shares withheld to cover the employee's minimum applicable income taxes, were issued from treasury shares to settle stock options exercised during the first nine months of fiscal 2013.

Stock-Settled Stock Appreciation Rights

Stock-Settled Appreciation Rights (“SSARs”) are rights granted to an employee to receive value equal to the difference in the price of our common shares on the date of the grant and on the date of exercise. This value is settled in common shares of Agilysys.

The following table summarizes the activity during the nine months ended December 31, 2012 for SSARs awarded under the 2011 and the 2006 Plan:



	Number of Rights		Weighted- Average Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
(In thousands, except share and per share data)			(per right)		(in years)
Outstanding at April 1, 2012	606,834		$	6.91
Granted	318,607		7.52
Exercised	(138,207	)	6.56
Forfeited	(66,561	)	7.43
Outstanding at December 31, 2012	720,673		$	7.20	7.2	$	854
Exercisable at December 31, 2012	305,499		$	6.68	4.4	$	517

As of December 31, 2012, total unrecognized stock based compensation expense related to non-vested SSARs was $1.2 million, which is expected to be recognized over a weighted-average vesting period of 2.0 years.

A total of 19,035 shares, net of 9,236 shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the nine months ended December 31, 2012. The shares withheld were returned to treasury shares.

Restricted Shares

We granted shares to certain of our Directors, executives and key employees under the 2011 Plan, the vesting of which is service-based. The following table summarizes the activity during the nine months ended December 31, 2012 for restricted shares awarded under the 2011 Plan:



	Number of Shares		Weighted- Average Grant- Date Fair Value
			(per share)
Outstanding at April 1, 2012	48,558		$	7.80
Granted	190,376		7.80
Vested	(7,000	)	7.42
Forfeited	(12,743	)	7.42
Outstanding at December 31, 2012	219,191		$	7.84

The weighted-average grant date fair value of the restricted shares is determined based upon the closing price of our common shares on the grant date. Compensation expense related to restricted share awards is recognized ratably over the restriction period based upon the closing market price of our common shares on the grant date. As of December 31, 2012, total unrecognized stock based compensation expense related to non-vested restricted stock was $1.0 million, which is expected to be recognized over a weighted-average vesting period of 1.9 years. We do not include restricted stock in the calculation of earnings per share until the shares are vested.

Performance Shares

In the first nine months of fiscal 2013, we granted shares to certain of our key employees under the 2011 Plan, the vesting of which is contingent upon meeting various company-wide performance goals within a two-year period.

The following table summarizes the activity during the nine months ended December 31, 2012 for performance shares awarded under the 2011 Plan:



	Number of Shares		Weighted- Average Grant- Date Fair Value
			(per share)
Outstanding at April 1, 2012	$	—	$	—
Granted	17,728		8.64
Outstanding at December 31, 2012	$	17,728	$	8.64

The weighted-average grant date fair value of the performance shares is determined based upon the closing price of our common shares on the grant date and assumed that performance goals would be met at target. Compensation expense related to performance share awards is recognized ratably over the vesting period based upon the closing market price of our common shares on the grant date. As of December 31, 2012, total unrecognized stock based compensation expense related to non-vested performance shares was $0.1 million, which is expected to be recognized over a weighted-average vesting period of 1.4 years.