10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

OR

[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission file number 0-5734

AGILYSYS, INC.

(Exact name of registrant as specified in its charter)

Ohio	34-0907152
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
6065 Parkland Boulevard, Mayfield Heights, Ohio		44124
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (440) 720-8500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X] No [  ]

The number of shares of the registrant’s common stock outstanding as of October 29, 2004 was 32,260,338.

AGILYSYS, INC.

Index

Part I.	Financial Information
	Item 1	Financial Statements
		Condensed Consolidated Statements of Operations – Three and Six Months Ended September 30, 2004 and 2003 (Unaudited)
		Condensed Consolidated Balance Sheets – September 30, 2004 (Unaudited) and March 31, 2004
		Condensed Consolidated Statements of Cash Flows – Six Months Ended September 30, 2004 and 2003 (Unaudited)
		Notes to Condensed Consolidated Financial Statements – September 30, 2004 (Unaudited)
	Item 2	Management’s Discussion and Analysis of Results of Operations and Financial Condition
	Item 3	Quantitative and Qualitative Disclosures About Market Risk
	Item 4	Controls and Procedures
Part II.	Other Information
	Item 1	Legal Proceedings
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3	Defaults Upon Senior Securities
	Item 4	Submission of Matters to a Vote of Security Holders
	Item 5	Other Information
	Item 6	Exhibits and Reports on Form 8-K
Signatures
EX-3.1 Amended Code of Regulations
EX-10.1 Amended & Restated 2002 Stock Incentive Plan
EX-31.1 Certification
EX-31.2 Certification
EX-32.1 Certification
EX-32.2 Certification

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Six Months Ended
	September 30						September 30
(In Thousands, Except Share and Per Share Data)	2004			2003			2004			2003
Net Sales	$	364,410		$	292,683		$	751,082		$	572,276
Cost of Goods Sold		316,070			257,969			654,077			502,635
Gross Margin		48,340			34,714			97,005			69,641
Operating Expenses
Selling, General, and Administrative		39,228			31,728			78,178			63,374
Restructuring Charges		112			731			301			1,194
Operating Income		9,000			2,255			18,526			5,073
Other (Income) Expense
Other (Income) Expense, net		(187	)		(603	)		(426	)		(550	)
Interest Expense, net		880			2,335			2,169			4,798
Loss on Retirement of Debt		—			3,365			—			2,631
Income (Loss) Before Income Taxes		8,307			(2,842	)		16,783			(1,806	)
Provision for Income Taxes		3,119			(1,133	)		6,221			(719	)
Distributions on Mandatorily Redeemable Convertible Trust Preferred Securities, net of Tax		1,351			1,337			2,711			2,667
Income (Loss) from Continuing Operations		3,837			(3,046	)		7,851			(3,754	)
Loss from Discontinued Operations, net of Tax		96			333			260			1,082
Net Income (Loss)	$	3,741		$	(3,379	)	$	7,591		$	(4,836	)
Earnings (Loss) Per Share – Basic and Diluted
Income (Loss) from Continuing Operations	$	0.13		$	(0.11	)	$	0.28		$	(0.13	)
Loss from Discontinued Operations		—			(0.01	)		(0.01	)		(0.04	)
Net Income (Loss)	$	0.13		$	(0.12	)	$	0.27		$	(0.17	)
Weighted Average Shares Outstanding
Basic		28,056,172			27,440,618			28,035,555			27,745,375
Diluted		28,881,520			27,440,618			28,538,317			27,745,375
Cash Dividends Per Share	$	0.03		$	0.03		$	0.06		$	0.06

See accompanying notes to the unaudited condensed consolidated financial statements.

3

AGILYSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts at September 30, 2004 are Unaudited)

	September 30			March 31
(In Thousands, Except Share and Per Share Data)	2004			2004
ASSETS
Current Assets
Cash and Cash Equivalents	$	209,363		$	149,903
Accounts Receivable, net		250,371			295,272
Inventories, net		53,300			52,236
Deferred Income Taxes		16,455			9,255
Prepaid Expenses		2,169			2,234
Assets of Discontinued Operations		1,078			5,451
Total Current Assets		532,736			514,351
Goodwill and Intangible Assets		180,464			179,975
Investments		19,942			18,819
Other Assets		19,056			11,396
Property and Equipment, net		32,936			35,121
Total Assets	$	785,134		$	759,662
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts Payable	$	214,550		$	208,115
Accrued Liabilities		39,743			39,047
Liabilities of Discontinued Operations		3,630			4,006
Total Current Liabilities		257,923			251,168
Long-Term Debt		59,723			59,503
Deferred Income Taxes		12,764			4,426
Other Liabilities		10,236			10,150
Mandatorily Redeemable Convertible Trust Preferred Securities		125,425			125,425
Shareholders’ Equity
Common Stock, at $0.30 Stated Value; 32,248,989 and 32,115,614 Shares Outstanding, Including 3,589,940 Subscribed-for Shares and net of 53,273 Shares in Treasury at September 30, 2004 and March 31, 2004		9,593			9,553
Capital in Excess of Stated Value		127,453			126,070
Retained Earnings		225,578			219,594
Unearned Employee Benefits		(42,656	)		(42,325	)
Unearned Compensation on Restricted Stock		(1,581	)		(2,499	)
Accumulated Other Comprehensive Income (Loss)		676			(1,403	)
Total Shareholders’ Equity		319,063			308,990
Total Liabilities and Shareholders’ Equity	$	785,134		$	759,662

See accompanying notes to the unaudited condensed consolidated financial statements.

4

AGILYSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	September 30
(In Thousands)	2004			2003
Operating Activities:
Net Income (Loss)	$	7,591		$	(4,836	)
Loss from Discontinued Operations		260			1,082
Income (Loss) from Continuing Operations		7,851			(3,754	)
Adjustments to Reconcile Income (Loss) from Continuing Operations to Net Cash Provided by (Used for) Operating Activities (net of Effects from Business Acquisitions):
Gain on Buyback of Convertible Preferred Securities		—			(734	)
Gain on Sale of Investment		—			(906	)
Loss on Buyback of Senior Notes		—			3,365
Gain on Sale of Property and Equipment		(34	)		—
Depreciation		2,155			2,353
Amortization		2,782			2,869
Deferred Income Taxes		3,926			5,843
Other Non-Cash Items		—			779
Changes in Working Capital
Accounts Receivable		44,901			(44,042	)
Inventory		(1,064	)		108
Accounts Payable		6,435			13,656
Accrued Liabilities		(2,018	)		(9,517	)
Other Working Capital		65			(276	)
Other		(7,787	)		(437	)
Total Adjustments		49,361			(26,939	)
Net Cash Provided by (Used for) Operating Activities		57,212			(30,693	)
Investing Activities:
Acquisition of Business, net of Cash Acquired		—			(28,706	)
Proceeds from Sale of Property and Equipment		105			—
Purchases of Property and Equipment		(1,243	)		(272	)
Proceeds from Sale of Investment		—			3,309
Net Cash Used for Investing Activities		(1,138	)		(25,669	)
Financing Activities:
Buyback of Convertible Preferred Securities		—			(16,973	)
Buyback of Senior Notes		—			(32,962	)
Dividends Paid		(1,607	)		(1,698	)
Other		1,256			380
Net Cash Used for Financing Activities		(351	)		(51,253	)
Cash Flows Provided by (Used for) Continuing Operations		55,723			(107,615	)
Cash Flows Provided by Discontinued Operations		3,737			5,195
Net Increase (Decrease) in Cash		59,460			(102,420	)
Cash and Cash Equivalents at Beginning of Period		149,903			318,543
Cash and Cash Equivalents at End of Period	$	209,363		$	216,123

See accompanying notes to the unaudited condensed consolidated financial statements.

5

AGILYSYS, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)
(Table Amounts in Thousands, Except Per Share Data)

1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Agilysys, Inc. and its subsidiaries (the “Company”). Investments in affiliated companies are accounted for by the equity or cost method, as appropriate. All intercompany accounts have been eliminated.

The unaudited interim financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act. Certain information and footnote disclosures required to be included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

The condensed consolidated balance sheet as of September 30, 2004, as well as the condensed consolidated statements of operations and condensed consolidated statements of cash flows for the three and six-months ended September 30, 2004 and 2003 have been prepared by the Company without audit. The financial statements have been prepared on the same basis as those in the audited annual financial statements. In the opinion of management, all adjustments necessary to fairly present the results of operations, financial position, and cash flows have been made. Such adjustments were of a normal recurring nature. The results of operations for the three and six-months ended September 30, 2004 are not necessarily indicative of the operating results for the full fiscal year or any future period.

Significant Accounting Policies

A detailed description of the Company’s significant accounting policies can be found in the audited financial statements for the fiscal year ended March 31, 2004, included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission. There have been no material changes in the Company’s significant accounting policies and estimates from those disclosed therein.

Stock-Based Compensation

The Company applies the recognition and measurement provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” to account for employee stock compensation costs, which is referred to as the intrinsic value method. Since the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation cost is recognized for the Company’s stock option plans. The Company has adopted the disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.”

6

1. Basis of Presentation and Significant Accounting Policies – continued

The following table shows the effects on net income (loss) and earnings (loss) per share had compensation cost been measured on the fair value method pursuant to SFAS No. 123:

	Three Months Ended						Six Months Ended
	September 30						September 30
	2004			2003			2004			2003
Net income (loss), as reported	$	3,741		$	(3,379	)	$	7,591		$	(4,836	)
Compensation cost based on fair value method, net of tax		(292	)		(664	)		(584	)		(1,128	)
Pro forma net income (loss)	$	3,449		$	(4,043	)	$	7,007		$	(5,964	)
Earnings (loss) per share – basic
As reported	$	0.13		$	(0.12	)	$	0.27		$	(0.17	)
Pro forma		0.12			(0.15	)		0.25			(0.21	)
Earnings (loss) per share – diluted
As reported	$	0.13		$	(0.12	)	$	0.27		$	(0.17	)
Pro forma		0.12			(0.15	)		0.25			(0.21	)

Reclassifications

Certain prior year amounts have been reclassified to conform to the current presentation.

2. Recent Acquisitions

In accordance with SFAS No. 141, “Business Combinations,” the Company allocates the purchase price of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess purchase price over the fair values of the net assets acquired is recorded as goodwill. Last year, the Company acquired two businesses, Kyrus Corporation (“Kyrus”) and Inter-American Data, Inc. (“IAD”).

Kyrus Corporation

Kyrus was acquired on September 30, 2003. The results of Kyrus’ operations have been included in the Company’s consolidated financial statements since that date. Kyrus was an IBM Master Distributor and Premier Business Partner in retail sales solutions. The acquisition expands the Company’s operations to include a wide range of services and solutions, including hardware and software products and extensive professional services to customers in the retail industry. The purchase price was $29.6 million, offset by approximately $0.9 million of cash acquired, with approximately $26.6 million assigned to goodwill in fiscal 2004 based on the estimated fair vales of the net assets acquired.

During the six-months ended September 30, 2004, the Company finalized its purchase price allocation and made several adjustments to the fair value assigned to the net assets acquired. First, the Company recorded an additional $26,700 of costs that were directly associated with the Kyrus acquisition, resulting in an increase to goodwill. Second, the Company lowered the estimated fair value of certain liabilities assumed by approximately $0.3 million, resulting in a decrease to goodwill. Third, the Company recorded a liability of $1.2 million relating to state tax uncertainties existing at the date of acquisition, which increased goodwill.

7

2. Recent Acquisitions – continued

The Company anticipates recording additional liabilities for similar tax uncertainties in the foreseeable future; however such liabilities cannot be estimated with sufficient probability at this time. Any incremental liability recorded by the Company for state tax uncertainties that existed at the date of acquisition will increase goodwill.

In addition to the above, the Company also identified approximately $1.9 million of intangible assets acquired reducing goodwill. Of the intangible assets acquired, $1.7 million was assigned to customer relationships, which is being amortized over five years using an accelerated method; $210,000 was assigned to non-competition agreements, which is being amortized over six years using the straight-line method; and $30,000 was assigned to developed technology, which is being amortized over eight years using the straight-line method. It is not anticipated that such assets will have significant residual values.

Inter-American Data, Inc.

Inter-American Data, Inc. was acquired on February 17, 2004 during the fourth quarter of fiscal 2004. The results of IAD’s operations have been included in the Company’s consolidated financial statements since that date. IAD was a leading developer and provider of software and services to hotel casinos and major resorts in the United States. The acquisition provides significant opportunities for growth in the hospitality industry. The purchase price was $38.0 million, with approximately $35.7 million assigned to goodwill in fiscal 2004 based on the estimated fair values of assets acquired and liabilities assumed. During the six-months ended September 30, 2004, the Company recorded an additional liability of $151,000 assumed in the acquisition, with a corresponding increase to goodwill. The liability related to one-time involuntary termination costs for employees of IAD whose job functions were terminated during the integration of IAD. Termination benefits are expected to continue through the current fiscal year.

The Company is in the process of finalizing its assessment of the fair value of assets acquired and liabilities assumed, including whether there were any identifiable intangible assets in the transaction. Based on the progress of the assessment, it is likely that certain intangible assets will be identified and a portion of the purchase price will be allocated to the fair value of such intangible assets. Accordingly, the allocation of the purchase price is preliminary and subject to adjustment. The Company anticipates completing its assessment within 12 months of the date of acquisition.

3. Discontinued Operations

During fiscal 2003, the Company sold substantially all of the assets and liabilities of its Industrial Electronics Division (“IED”), which distributed semiconductors, interconnect, passive and electromechanical components, power supplies and embedded computer products in North America and Germany. In connection with the sale of IED, the Company discontinued the operations of Aprisa, Inc. (“Aprisa”), which was an internet-based start up corporation that created customized software for the electronic components market. The disposition of IED and discontinuance of Aprisa represented a disposal of a component of an entity as defined by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company continues to incur certain costs related to IED and Aprisa, which are reported in the condensed consolidated statement of operations as loss from discontinued operations.

8

3. Discontinued Operations – continued

For the three-months ended September 30, 2004 and 2003, the Company realized a loss from discontinued operations of $96,122 (net of $64,602 in income taxes) and $0.3 million (net of $0.2 million in income taxes), respectively. For the six-months ended September 30, 2004 and 2003, the Company realized a loss from discontinued operations of $259,931 (net of $166,675 in income taxes) and $1.1 million (net of $0.6 million in income taxes), respectively.

The loss from discontinued operations for the three and six-months ended September 30, 2004 includes the results from sale of a distribution facility and adjacent land. Proceeds from the facility and land sales were approximately $3.3 million, resulting in a loss on sale of $0.3 million.

4. Restructuring Charges

Continuing Operations

In the fourth quarter of fiscal 2003, concurrent with the sale of IED, the Company announced it would restructure its remaining enterprise computer solutions business and facilities to reduce overhead and eliminate assets that were inconsistent with the Company’s strategic plan and were no longer required. In connection with this reorganization, the Company recorded restructuring charges totaling $20.7 million for the impairment of facilities and other assets no longer required as well as severance, incentives, and other employee benefit costs for personnel whose employment was involuntarily terminated. The charges were classified as restructuring charges in the consolidated statement of operations.

Severance, incentives, and other employee benefit costs were to be paid to approximately 110 personnel. Facilities costs represent the present value of qualifying exit costs, offset by an estimate for future sublease income for a vacant warehouse that represents excess capacity as a result of the sale of IED.

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

	Severance
	and Other
	Employee
	Costs			Facilities			Total
Balance at April 1, 2004	$	25		$	5,794		$	5,819
Accretion of lease obligations		—			110			110
Amounts paid		(25	)		(135	)		(160	)
Balance at June 30, 2004		—			5,769			5,769
Accretion of lease obligations		—			108			108
Amounts paid		—			(195	)		(195	)
Adjustments		—			(64	)		(64	)
Balance at September 30, 2004	$	—		$	5,618		$	5,618

Of the remaining $5.6 million reserve at September 30, 2004, approximately $0.4 million is expected to be paid during the remainder of fiscal 2005 for facilities obligations. Facilities obligations are expected to continue to 2017.

9

4. Restructuring Charges – continued

Discontinued Operations

In connection with the sale of IED in fiscal 2003, the Company recognized a restructuring charge of $28.7 million. The significant components of the charge were as follows: $5.9 million related to severance and other employee benefit costs to be paid to approximately 525 employees previously employed by IED and not hired by the acquiring company; $5.0 million related to facilities costs for approximately 30 vacated locations no longer required as a result of the sale that were determined as the present value of qualifying exit costs offset by an estimate for future sublease income; and $17.4 million related to the write down of assets to fair value that were abandoned or classified as “held for sale,” as a result of the disposition and discontinuance of IED and Aprisa, respectively.

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

	Severance
	and Other
	Employee
	Costs			Facilities			Other		Total
Balance at April 1, 2004	$	24		$	3,260		$	55	$	3,339
Accretion of lease obligations		—			29			—		29
Amounts paid		(24	)		(795	)		—		(819	)
Adjustments		—			(13	)		—		(13	)
Balance at June 30, 2004		—			2,481			55		2,536
Accretion of lease obligations		—			24			—		24
Amounts paid		—			(250	)		—		(250	)
Adjustments		—			80			—		80
Balance at September 30, 2004	$	—		$	2,335		$	55	$	2,390

Of the remaining $2.4 million reserve at September 30, 2004, approximately $0.5 million is expected to be paid during the remainder of fiscal 2005 for facilities obligations. Facilities obligations are expected to continue to 2010.

5. Goodwill and Intangible Assets

Goodwill

Changes in the carrying amount of goodwill during the six-months ended September 30, 2004 are summarized in the following table:

Balance at April 1, 2004	$	179,975
Goodwill adjustment – Kyrus (see Note 2)		(1,004	)
Goodwill adjustment – IAD (see Note 2)		151
Impact of foreign currency translation		36
Balance at September 30, 2004	$	179,158

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5. Goodwill and Intangible Assets – continued

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company does not amortize goodwill; rather, goodwill is tested for impairment on an annual basis, or more often if conditions exist which indicate potential impairment. The Company uses a measurement date of February 1 for its annual impairment test of goodwill. As of February 1, 2004, which was the latest annual impairment test performed, the Company concluded that the fair value of its reporting unit exceeded its carrying value, including goodwill. As such, step two of the goodwill impairment test was not necessary and no impairment loss was recognized. As of September 30, 2004, the Company was not aware of any circumstances or events requiring an interim impairment test of goodwill.

Intangible Assets

Following is a summary of the Company’s intangible assets at September 30, 2004:

	Gross				Net
	Carrying		Accumulated		Carrying
	Amount		Amortization		Amount
Customer relationships	$	1,700	$	595	$	1,105
Non-competition agreements		210		35		175
Developed technology		30		4		26
	$	1,940	$	634	$	1,306

Amortization expense for the three and six-months ended September 30, 2004 was $633,750. Estimated amortization expense for the entire fiscal year is approximately $1.0 million.

6. Mandatorily Redeemable Convertible Trust Preferred Securities

In 1998, Pioneer-Standard Financial Trust (the “Pioneer-Standard Trust”) issued 2,875,000 shares relating to $143.7 million of 6.75% Mandatorily Redeemable Convertible Trust Preferred Securities (the “Trust Preferred Securities”). The Pioneer-Standard Trust, a statutory business trust, is a wholly-owned consolidated subsidiary of the Company, with its sole asset being $148.2 million aggregate principal amount of 6.75% Junior Convertible Subordinated Debentures of Agilysys, Inc. due March 31, 2028 (the “Trust Debentures”). The Company has executed a guarantee with regard to the Trust Preferred Securities. The guarantee, when taken together with the Company’s obligations under the Trust Debentures, the indenture pursuant to which the Trust Debentures were issued and the applicable trust document, provide a full and unconditional guarantee of the Pioneer-Standard Trust’s obligations under the Trust Preferred Securities. The Trust Preferred Securities are non-voting (except in limited circumstances), pay quarterly distributions at an annual rate of 6.75%, carry a liquidation value of $50 per share and are convertible at the option of the holder into the Company’s Common Shares at any time prior to the close of business on March 31, 2028. As of March 31, 2004, the Trust Preferred Securities were redeemable at the option of the Company for a redemption price of 102.7% of par reduced annually by 0.675% to a minimum of $50 per Trust Preferred Security. The redemption price will be reduced to 100% of par by March 31, 2008.

11

6. Mandatorily Redeemable Convertible Trust Preferred Securities – continued

No Trust Preferred Securities were repurchased during the six-months ended September 30, 2004. During the same period last year, the Company repurchased 365,000 Trust Preferred Securities for a cash purchase price of approximately $17.0 million. The repurchased securities had a face value of approximately $18.3 million. The difference between the face value and cash paid, offset by the expensing of related deferred financing fees, resulted in a net gain of $0.7 million.

As of September 30, 2004, a total of 366,500 Trust Preferred Securities have been redeemed by the Company.

7. Contingencies

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

8. Comprehensive Income

The components of comprehensive income (loss), net of tax, for the three and six-months ended September 30, 2004 and 2003 are as follows:

	Three Months Ended					Six Months Ended
	September 30					September 30
	2004		2003			2004		2003
Net income (loss)	$	3,741	$	(3,379	)	$	7,591	$	(4,836	)
Other comprehensive income (loss):
Unrealized gain on equity securities		—		62			—		2,426
Foreign currency translation adjustment		1,112		(2,325	)		2,079		(93	)
Total other comprehensive income (loss)		1,112		(2,263	)		2,079		2,333
Comprehensive income (loss)	$	4,853	$	(5,642	)	$	9,670	$	(2,503	)

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9. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share:

	Three Months Ended					Six Months Ended
	September 30					September 30
	2004		2003			2004		2003
Numerator:
Income (loss) from continuing operations – basic	$	3,837	$	(3,046	)	$	7,851	$	(3,754	)
Distributions on convertible debt, net of tax		—		—			—		—
Income (loss) from continuing operations – diluted	$	3,837	$	(3,046	)	$	7,851	$	(3,754	)
Denominator:
Weighted average shares outstanding – basic		28,056		27,441			28,036		27,745
Effect of dilutive securities:
Stock options and unvested restricted stock		826		—			502		—
Convertible debt		—		—			—		—
Weighted average shares outstanding – diluted		28,882		27,441			28,538		27,745
Earnings (loss) per share from continuing operations – basic and diluted	$	0.13	$	(0.11	)	$	0.28	$	(0.13	)

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

For the three-months ended September 30, 2004 and 2003, options on 0.6 million and 3.0 million shares of common stock, respectively, were not included in computing diluted earnings (loss) per share nor were 8.0 million and 8.0 million shares issuable upon conversion of the Trust Preferred Securities, respectively, because their effects were antidilutive.

For the six-months ended September 30, 2004 and 2003, options on 1.7 million and 3.3 million shares of common stock, respectively, were not included in computing diluted earnings (loss) per share nor were 8.0 million and 8.1 million shares issuable upon conversion of the Trust Preferred Securities, respectively, because their effects were antidilutive.

13

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

AGILYSYS, INC.

Management’s Discussion and Analysis of
Results of Operations and Financial Condition

The following discussion should be read in conjunction with the condensed consolidated financial statements and the related notes that appear elsewhere in this document as well as the Company’s Annual Report on Form 10-K for the year ended March 31, 2004.

Overview

Agilysys, Inc. (the “Company”) is one of the foremost distributors and premier resellers of enterprise computer technology solutions. The Company sells complex servers, software, storage and services to resellers and corporate customers across a diverse set of industries. The Company also provides customer-centric software applications and services focused on the retail and hospitality markets. As an integrator of server, storage, software and services needs, the Company is able to partner with its customers to become a single solutions provider for enterprise computing requirements.

Net sales grew by 24.5% and 31.2% for the three and six-months ended September 30, 2004, respectively, compared with the same periods last year. The improvements in net sales were a continuation of first quarter results as the increase in information technology spending continued throughout the second quarter. In addition, the two business acquisitions made in fiscal 2004 have been successfully integrated into the Company’s business and have positively contributed to the overall increase in sales.

Net income increased to $3.7 million and $7.6 million for the three and six-months ended September 30, 2004, respectively, compared with a net loss of $3.4 million and $4.8 million for the comparable periods last year. The improvement in net income can be attributed to favorable market trends, continued efficiencies realized from recent restructuring efforts, lower interest expense resulting primarily from lower debt levels compared with last year and the lessening effects from the Company’s discontinued operations.

During the first half of fiscal 2005, the Company’s operating activities generated cash of $57 million. The favorable operating results experienced during the year have improved the Company’s financial flexibility to fund organic growth and to make acquisitions. Such results provide the ability to expand the number of customers and markets the Company serves, as well as the breadth of solutions offerings.

The following discussion of the Company’s results of operations and financial condition is intended to provide information that will assist in understanding the Company’s financial statements, including key changes in financial statement components and the primary factors that accounted for those changes.

14

Results of Operations

Three Months Ended September 30, 2004 Compared with September 30, 2003

Net Sales and Operating Income

	Three Months Ended September 30						Increase (Decrease)
(Dollars In Thousands)	2004			2003			$			%
Net sales	$	364,410		$	292,683		$	71,727			24.5	%
Cost of goods sold		316,070			257,969			58,101			22.5
Gross margin		48,340			34,714			13,626			39.3
Gross margin percentage		13.3	%		11.9	%
Operating expenses
Selling, general and administrative expenses		39,228			31,728			7,500			23.6
Restructuring expenses		112			731			(619	)		(84.7	)
Operating income	$	9,000		$	2,255		$	6,745			299.1	%
Operating income percentage		2.5	%		0.8	%

Net Sales

Net sales for the three-months ended September 30, 2004 increased $71.7 million, or 24.5%, compared with the same period last year. Sales generated from the Company’s two business acquisitions contributed $36.3 million, or approximately half of the overall increase. The two acquisitions were made on September 30, 2003 and February 17, 2004; thus, had not yet impacted prior year results. The remaining $35.4 million of the increase is predominantly attributed to higher sales from the Company’s distribution business. The Company experienced an increase in sales volume among principally all of its solutions offerings, reflecting the continuation of an improved information technology spending environment that has occurred over recent quarters.

The Company experienced the following sales increases by major product category when compared with the same period last year: hardware sales increased by approximately $49 million, or approximately 68% of the overall increase; software sales increased by approximately $13 million, or approximately 18% of the overall increase; services and other sales increased by approximately $10 million, or approximately 14% of the overall increase.

The increase in hardware sales is largely due to higher server and storage sales volume to small to medium-sized corporations through the Company’s distribution business. The increase in software sales was mainly due to higher sales of software through the Company’s distribution business as well as software sales generated from the two business acquisitions. The increase in service and other revenue was principally due to incremental solutions offerings from the two business acquisitions.

The Company anticipates net sales for the full year to increase approximately 20% to 25% compared with the prior fiscal year. In addition, the Company experiences a seasonal increase in sales during its fiscal third quarter ending in December. Accordingly, the results of operations for the three-months ended September 30, 2004 are not necessarily indicative of the operating results for the full fiscal year 2005.

Gross Margin

Gross margin increased $13.6 million compared with the same period last year, caused primarily by higher sales volumes. In addition, the Company’s two business acquisitions added approximately $9.6

15

million, or 20% of gross margin dollars reported in the quarter. Gross margin as a percent of net sales increased to 13.3% in the current quarter compared with 11.9% for the quarter ended September 30, 2003. The Company’s two business acquisitions had a favorable impact on gross margin percentage, accounting for all of the improvement compared with last year. Gross margin percentage, excluding business acquisitions, were comparable to prior year results.

A significant component of the Company’s gross margin is the realization and timing of incentive payments from its suppliers. Incentive programs are principally designed to reward sales performance and on average tend to rise as a percent of sales as the Company’s fiscal year progresses and it achieves predefined sales goals. The Company anticipates gross margin to be in the range of 12.8% to 13.1% of net sales for the entire fiscal year 2005.

Selling, General and Administrative Expenses

The Company experienced a $7.5 million increase in selling, general, and administrative (“SG&A”) expenses compared with last year. The increase was primarily related to the two acquisitions, which contributed approximately $7.1 million to the Company’s SG&A expenses in the current quarter. As a percentage of net sales, however, SG&A expenses remained consistent at 10.8% in the current and prior year periods. Restructuring activities to reduce certain overhead and other costs not in line with the Company’s strategic objectives have allowed the Company to maintain a consistent level of SG&A expenses despite increased sales and acquisition activity. SG&A expenses are expected to be approximately 9.5% of net sales for the entire fiscal year.

Other (Income) Expense

	Three Months Ended September 30						Favorable (Unfavorable)
(In Thousands)	2004			2003			$			%
Other (income) expense:
Other (income) expense, net	$	(187	)	$	(603	)	$	(416	)		69.0	%
Interest expense, net		880			2,335			1,455			62.3
Loss on retirement of debt		—			3,365			3,365			100.0
Total other (income) expense, net	$	693		$	5,097		$	4,404			86.4	%

The 62.3% decrease in net interest expense is primarily attributable to lower average debt levels in the current quarter compared with prior year, as the interest rates applicable to the Company’s long-term debt are fixed. The Company’s average long-term debt was $59.6 million in the current quarter versus $116.8 million last year.

The Company repurchased $28.5 million of 9.5% Senior Notes in the second quarter last year for approximately $33 million. The premium paid in the repurchase, along with the write-off of deferred financing costs, resulted in the $3.4 million loss on the retirement of debt reported in the three-months ended September 30, 2004. No such repurchase occurred during the three-months ended September 30, 2004.

16

Income Tax Expense

The effective tax rate for continuing operations for the three-months ended September 30, 2004 was 37.6% versus 39.8% for the comparable quarter in the prior year. The decrease in the effective tax rate primarily reflects the recognition of State net operating loss carryforwards.

Six Months Ended September 30, 2004 Compared with September 30, 2003

Net Sales and Operating Income

	Six Months Ended						Increase
	September 30						(Decrease)
(Dollars In Thousands)	2004			2003			$			%
Net sales	$	751,082		$	572,276		$	178,806			31.2	%
Cost of goods sold		654,077			502,635			151,442			30.1
Gross margin		97,005			69,641			27,364			39.3
Gross margin percentage		12.9	%		12.2	%
Operating expenses
Selling, general and administrative expenses		78,178			63,374			14,804			23.4
Restructuring expenses		301			1,194			(893	)		(74.8	)
Operating income	$	18,526		$	5,073		$	13,453			265.2	%
Operating income percentage		2.5	%		0.9	%

Net Sales

Net sales for the six-months ended September 30, 2004 increased $178.8 million, or 31.2%, compared with last year. Sales generated from the Company’s two business acquisitions contributed $74.8 million, or approximately 40% of the overall increase. The remaining $104.0 million of the increase is attributed to sales from the Company’s distribution business. Overall, the Company experienced an increase in sales volume among predominantly all of its solutions offerings, reflecting the continuation of an improved information technology spending environment that has occurred over recent quarters.

The Company experienced the following sales increases by major product category when compared with the same period last year: hardware sales increased approximately $130 million, or 73% of the overall increase; software sales increased approximately $29 million, or 16% of the overall increase; services and other revenue increased approximately $20 million, or 11% of the overall increase.

The increase in hardware sales is largely due to higher sales volume of IBM and HP server and storage devices. The increase in software sales was mainly due to higher sales volume of software through the Company’s distribution business as well as software sales generated from the two business acquisitions. The increase in service and other revenue was principally due to incremental solutions offerings from the two business acquisitions.

The Company anticipates net sales for the full year to increase approximately 20% to 25% compared with prior fiscal year. In addition, the Company experiences a seasonal increase in sales during its fiscal third quarter ending in December. Accordingly, the results of operations for the six-months ended September 30, 2004 are not necessarily indicative of the operating results for the full fiscal year 2005.

Gross Margin

Gross margin increased $27.4 million compared with the same period last year. In addition, gross margin percentage increased to 12.9% versus 12.2% for the six-months ended September 30, 2003. The increase

17

in gross margin is largely attributed to the increase in sales volume compared with the comparable period last year. The improvement in gross margin percentage is due to the Company’s two business acquisitions, which contributed approximately $19.4 million, or 20%, of gross margin dollars reported in the current year.

A significant component of the Company’s gross margin is the realization and timing of incentive payments from its suppliers. Incentive programs are principally designed to reward sales performance and on average tend to rise as a percent of sales as the Company’s fiscal year progresses and it achieves predefined sales goals. The Company anticipates gross margin to be in the range of 12.8% to 13.1% of net sales for the entire fiscal year 2005.

Selling, General and Administrative Expenses

The Company experienced a $14.8 million, or 23.4%, increase in selling, general, and administrative (“SG&A”) expenses. The increase was directly related to the two acquisitions, which contributed $13.8 million to current year’s SG&A expenses. As a percentage of net sales, however, the Company’s SG&A expenses decreased to 10.4% compared with 11.1% for the same period last year. The improvement in this measure can largely be attributed to continued efficiencies gained from recent restructuring activities. SG&A expenses are expected to be approximately 9.5% of net sales for the entire fiscal year.

Other Income (Expense)

	Six Months Ended						Favorable
	September 30						(Unfavorable)
(In Thousands)	2004			2003			$			%
Other (income) expense:
Other (income) expense, net	$	(426	)	$	(550	)	$	(124	)		22.5	%
Interest expense, net		2,169			4,798			2,629			54.8
Loss on retirement of debt		—			2,631			2,631			100.0
Total other (income) expense, net	$	1,743		$	6,879		$	5,136			74.7	%

The 54.8% decrease in net interest expense is primarily attributable to lower average debt levels in the six months ended September 30, 2004 compared with prior year, as the interest rates applicable to the Company’s long-term debt are fixed. The Company’s average long-term debt was $59.6 million in the current year versus $116.8 million last year.

The Company repurchased $28.5 million of 9.5% Senior Notes and $18.3 million of Convertible Preferred Securities during the six-months ended September 30, 2003. The Senior Note repurchase resulted in a loss of $3.4 million and the repurchase of Convertible Preferred Securities resulted in a gain of $0.7 million, aggregating to a $2.6 million loss on retirement of debt reported for the six months ended September 30, 2003. No such repurchases occurred during the six-months ended September 30, 2004.

Income Tax Expense

The effective tax rate for continuing operations for the six-months ended September 30, 2004 was 37.1% versus 39.8% for the comparable period in the prior year. The decrease in the effective tax rate primarily reflects the recognition of State net operating loss carryforwards.

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Liquidity and Capital Resources

The Company’s operating cash requirements consist primarily of working capital requirements, scheduled payments of principal and interest on indebtedness outstanding and capital expenditures. The Company believes that cash flow from operating activities, cash on hand, available borrowings under its credit facility, and access to capital markets will provide adequate funds to meet its short and long-term liquidity requirements.

Total debt at September 30, 2004 was $185.4 million, compared with $185.2 million at March 31, 2004. The minor increase in the Company’s total debt reflects equipment acquisitions through capital leases made in the current year, offset by ongoing payment of capital lease obligations. The Company did not voluntarily repurchase Senior Notes or Convertible Preferred Securities during the six-months ended September 30, 2004. The Senior Notes and Convertible Preferred Securities are due in August 2006 and March 2028, respectively. In addition, there were no borrowings outstanding under the Company’s revolving credit facility at September 30, 2004, with unused availability of $100 million as of September 30, 2004. The Company was compliant with all quarterly financial covenants contained in its revolving credit facility and anticipates that it will continue to comply with such covenants in the foreseeable future.

The Company’s total debt consists primarily of Senior Notes and Convertible Preferred Securities. The principal amount of Senior Notes outstanding at September 30, 2004 was $59.4 million. The Senior Notes pay interest semi-annually at an annual rate of 9.5%. The indenture under which the Senior Notes were issued limits the creation of liens, sale and leaseback transactions, consolidations, mergers and transfers of all or substantially all of the Company’s assets, and indebtedness of the Company’s restricted subsidiaries. The Senior Notes are subject to mandatory repurchase by the Company at the option of the holders in the event of a change in control of the Company.

The carrying value of Convertible Preferred Securities at September 30, 2004 was $125.4 million. The Convertible Preferred Securities are non-voting (except in limited circumstances), pay quarterly distributions at an annual rate of 6.75%, carry a liquidation value of $50 per share and are convertible into the Company’s common shares at the option of the holder at any time prior to the close of business on March 31, 2028. The Convertible Preferred Securities are convertible into common shares at the rate of 3.1746 common shares for each Convertible Preferred Security (equivalent to a conversion price of $15.75 per common share).

The Company maintains a revolving credit agreement (“Revolver”), which provides the ability to borrow up to $100 million, limited to certain borrowing base calculations, and allows for increases under certain conditions up to $150 million during the life of the facility. Advances on the Revolver bear interest at various levels over LIBOR, and a facility fee is required, both of which are determined based on the Company’s leverage ratio. The Revolver does not contain a pre-payment penalty. There were no amounts outstanding under the Revolver at September 30, 2004.

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The following table presents cash flow results from operating activities, investing activities, and financing activities for the six-months ended September 30, 2004 and 2003:

	Six Months Ended
	September 30						Increase (Decrease)
(In Thousands)	2004			2003			$
Net cash provided by (used for) continuing operations:
Operating activities	$	57,212		$	(30,693	)	$	87,905
Investing activities		(1,138	)		(25,669	)		24,531
Financing activities		(351	)		(51,253	)		50,902
Cash flows provided by (used for) continuing operations		55,723			(107,615	)		163,338
Net cash provided by discontinued operations		3,737			5,195			(1,458	)
Net increase (decrease) in cash and cash equivalents	$	59,460		$	(102,420	)	$	161,880

Cash Flow from Operating Activities

Cash provided by operating activities improved $87.9 million during the six-months ended September 30, 2004 as compared to the corresponding period last year. The increase in operating cash flow is attributed to increased net earnings, improvements in customer payment patterns, and the timing of payments of accounts payable. Customer payment patterns have improved, in part, due to the Company’s focused initiatives in collection efforts as well as an increase in customers utilizing third-party financing which has resulted in shorter payment periods and, as a result, accounts receivable decreased approximately $44.9 million during the six-months ended September 30, 2004. Operating cash flow was also positively impacted by the timing of payments of accounts payable, as the balance of accounts payable increased $6.4 million versus the comparable period last year.

Cash Flow Used for Investing Activities

Cash used for investing activities for the six-months ended September 30, 2004 was for capital expenditures. In the comparable period last year, cash used for investing activities included the acquisition of Kyrus Corporation for approximately $28.7 million (net of cash acquired) in addition to cash payments for capital expenditures. These cash outflows were partially offset by proceeds of $3.3 million from the sale of the Company’s investment in Eurodis Electron PLC (“Eurodis”). The Company recognized a gain of approximately $1.0 million from the sale of its investment in Eurodis.

The estimated capital expenditures for the full 2005 fiscal year are expected to be approximately $2.0 million and primarily relate to information systems and facility projects.

Cash Flow from Financing Activities

During the six-months ended September 30, 2004, the Company paid dividends of approximately $1.6 million. Dividend payments were offset primarily by proceeds from the issuance of common stock under the Company’s stock-based compensation plans. During the six-months ended September 30, 2003, cash used for financing activities was mainly used for the repurchase of Convertible Preferred Securities for approximately $17.0 million, the repurchase of Senior Notes for approximately $33 million, and dividend payments of approximately $1.7 million.

Contractual Obligations

The Company has contractual obligations for long-term debt, capital leases and operating leases that were summarized in a table of contractual obligations in the Company’s Annual Report on Form 10-K for the

20

year ended March 31, 2004 (“Annual Report”). There have been no material changes to the contractual obligations summarized in the table included in the Annual Report outside the ordinary course of business.

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Recent Accounting Standards

A detailed description of the Company’s critical accounting policies as well as a description of recent accounting standards can be found in the Company’s Annual Report.

Forward-Looking Information

Portions of this report contain current management expectations, which may constitute forward-looking information. When used in this Management’s Discussion and Analysis of Results of Operations and Financial Condition and elsewhere throughout this Form 10-Q, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect management’s current opinions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those stated or implied.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof. Risks and uncertainties include, but are not limited to: competition, dependence on the IT market, softening in the computer network and platform market, rapidly changing technology and inventory obsolescence, dependence on key suppliers and supplier programs, risks and uncertainties involving acquisitions, instability in world financial markets, downward pressure on gross margins, the ability to meet financing obligations based on the impact of previously described factors and uneven patterns of quarterly sales.

The Company experiences a disproportionate percentage of quarterly sales in the last month of the fiscal quarters. This uneven sales pattern makes the prediction of revenues, earnings and working capital for each quarterly financial period difficult and increases the risk of unanticipated variations in quarterly results and financial condition. The Company believes that this sales pattern is industry-wide. Although the Company is unable to predict whether this uneven sales pattern will continue over the long term, the Company anticipates that this trend will remain the same in the foreseeable future.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting the Company, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of the Company’s Annual Report. There have been no material changes in the Company’s market risk exposures since March 31, 2004.

21

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, these officers have concluded that the corporation’s disclosure controls and procedures are effective for the purpose of ensuring that material information required to be in this quarterly report is made known to them by others on a timely basis.

Changes in Internal Controls

There has been no change in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

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

An annual meeting of shareholders was held on July 28, 2004. The following Directors were re-elected to serve until the annual meeting of shareholders in 2007:

Director	For		Against		Abstentions
Keith M. Kolerus		27,928,090		—		2,581,612
Robert A. Lauer		27,914,364		—		2,595,338
Robert G. McCreary, III		27,528,485		—		2,981,217

The term of office for the following Directors continued after the shareholders meeting: James L. Bayman, Thomas A. Commes, Howard V. Knicely, Charles F. Christ, Arthur Rhein, and Thomas C. Sullivan.

22

Also at the annual meeting, shareholders voted to amend the Company’s Amended Code of Regulations to provide for flexibility in setting the size of the Board of Directors, by the following vote:

For		Against		Abstentions		Broker Non-Votes
	24,052,019		3,631,718		308,257		2,517,708

Also at the annual meeting, shareholders voted to amend and restate the Company’s 2000 Stock Incentive Plan (the “Plan”) allowing for an additional 1,200,000 shares that may be issued under the Plan; limiting the use of common shares in a fiscal year; imposing a mandatory minimum ratable three-year vesting cycle on full-value awards (subject to satisfaction of performance objectives); permitting the granting of restricted share unit awards; providing for coverage of grants from the Plan to Directors; and other changes to enhance the ability of the Compensation Committee to fashion awards that will provide appropriate compensation within the anticipated requirements of anticipated changes in the accounting for stock-based compensation as well as other best practices, by the following vote:

For		Against		Abstentions		Broker Non-Votes
	21,472,982		5,966,979		552,033		2,517,708

Also at the annual meeting, shareholders voted to transact such other business as may properly come before the annual meeting or any adjournments thereof, by the following vote:

For		Against		Abstentions
	30,508,638		—		1,064

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1	Amended Code of Regulations, as amended, of the Company
10.1	Amended and Restated Agilysys 2002 Stock Incentive Plan
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

23

(b)	Reports on Form 8-K
	On July 8, 2004, the Company filed a Current Report on Form 8-K revising the Company’s Form 8-K dated October 30, 2003 by clarifying the use of a non-GAAP financial measure therein.
	On July 26, 2004, the Company filed a Current Report on Form 8-K announcing its first quarter results.

24

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AGILYSYS, INC.
Date: November 8, 2004	/s/ Arthur Rhein
	Arthur Rhein
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)
Date: November 8, 2004	/s/ Steven M. Billick
	Steven M. Billick
	Executive Vice President, Treasurer and Chief Financial Officer
	(Principal Financial and Accounting Officer)

25

EX-3.1

                                                                     Exhibit 3.1

                                 AGILYSYS, INC.

                           AMENDED CODE OF REGULATIONS

                      ARTICLE I - MEETINGS OF SHAREHOLDERS

                                 Annual Meetings

            Section 1. The annual meeting of the shareholders of the Corporation
shall be held in the principal office of the Corporation or at such other place
within or without the State of Ohio as the Directors shall determine, at such
date and time during the month of June or July of each year as shall be
designated by the Board of Directors. If no other date is designated by the
Board of Directors, the annual meeting shall be held at 2:00 p.m. on the last
Thursday in June of each year, or if such date shall fall upon a legal holiday,
the annual meeting shall be held upon the next succeeding day which is not a
legal holiday, at the same hour. Upon due notice, there may also be considered
and acted upon at an annual meeting any matter which could properly be
considered and acted upon at a special meeting.

                                Special Meetings

            Section 2. Special meetings of the shareholders shall be called by
the Chairman of the Board; the President; the Secretary; pursuant to a
resolution of the Board of Directors; or upon the written request of two (2)
Directors, and shall be held at such times and places, within or outside of the
State of Ohio, as shall be specified in the call thereof.

                               Notice of Meetings

            Section 3. A written notice of each annual and special meeting,
stating the time, place and purposes thereof, shall be given to each shareholder
of record entitled to notice of the meeting in writing by personal delivery or
by mail not less than seven (7) days, and not more than sixty (60) days before
any such meeting, by or at the direction of the President, Chairman of the Board
or Secretary, directed to the last known address of each such shareholder
aforesaid as it appears on the records of the Corporation. All notices with
respect to any shares to which persons are jointly entitled may be given to that
one of such persons who is named first upon the books of the Corporation, and
notice so given shall be sufficient notice to all other persons jointly entitled
to said shares. Notice may be waived in writing by any shareholder either before
or after such meeting, and shall be waived by the attendance of any shareholder
at any such meeting without protesting, prior to or at the commencement of the
meeting, the lack of proper notice.



                                     Quorum

            Section 4. Except as otherwise provided by law, the Articles of
Incorporation, or these Regulations, a quorum at all meetings of shareholders
shall consist of the holders of record of a majority of shares entitled to vote
thereat, present in person or by proxy.

                                   Adjournment

            Section 5. If less than a quorum shall be in attendance at the time
for which any meeting of the shareholders shall have been called, the meeting
may be adjourned from time to time by a majority of the voting shares present in
person or by proxy and entitled to vote, without any notice other than by
announcement at the meeting of the time and place to which it adjourned, until a
quorum shall attend. At any adjourned meeting at which a quorum shall attend,
any business may be transacted which might have been transacted if the meeting
had been held as originally called.

                                     Proxies

            Section 6. Any person entitled to attend a shareholders' meeting, to
vote thereat, or to execute consents, waivers, or releases, may be represented
at such meeting or an adjourned meeting thereof and vote thereat, and execute
consents, waivers and releases, and exercise any of his other rights by proxy or
proxies appointed by a writing signed by such person, providing the writing has
been filed with the Secretary prior to the action to be taken.

                             ARTICLE II - DIRECTORS

                     Number, Classification, Term of Office

            Section 1. The Board of Directors shall be divided into three
classes to be known as Class A, Class B and Class C. The number of Directors in
each class may be fixed or changed by the Board of Directors of the Company;
provided, however, that the total number of Directors shall not be less than
nine (9) or more than eleven (11) members, and no class shall consist of less
than three (3) directors. Unless and until otherwise so fixed or changed, there
shall be three (3) Class A Directors, three (3) Class B Directors and three (3)
Class C Directors. One class of Directors shall be elected each year and the
Directors in each class shall hold office for a term of three years and until
their respective successors are elected and qualified. In case of any increase
in the authorized number of Directors of any class, any additional Directors
provided for and elected to such class shall hold office for a term which shall
coincide with the full term or the remainder of the term, as the case may be, of
such class.

                                 Annual Meetings

            Section 2. The Board of Directors shall meet immediately following
the adjournment of the annual meeting of shareholders at the place of the annual
shareholders' meeting or at such time and place as may be designated in writing
by a majority of all the Directors, for the purpose of electing officers or
otherwise, and no notice of such meeting need

                                        2



be given to the Directors in order legally to constitute the meeting; provided,
that a majority of the whole Board shall be present.

                                    Meetings

            Section 3. Meetings of the Board of Directors may be called by the
Chairman of the Board, the President (or in his absence by a Vice President) or
any two (2) Directors on written notice to each Director, given by personal
delivery or by mail, cablegram or telegram, at least two (2) days before the
time of such meeting. Notice of any such meeting may be waived by any Director,
however, before or after the meeting by writing and shall be deemed to be waived
by any Director who shall attend such meeting in person without protesting,
prior to or at the commencement of the meeting, the lack of proper notice. Any
meeting of the Board of Directors shall be a legal meeting without notice having
been given, if attended by all the members of the Board.

                                     Quorum

            Section 4. At all meetings of the Board of Directors, a majority of
the whole authorized number of Directors shall constitute a quorum for the
transaction of business, except that a majority of the Directors then in office
shall constitute a quorum for purposes of filling a vacancy in the Board.

                              Telephone Conferences

            Section 5. Meetings of the Board of Directors or any committee
thereof may be held through any communications equipment if all persons
participating can hear each other, and participation in such a meeting shall
constitute presence at such meeting.

                                   Resignation

            Section 6. Any Director may resign at any time by delivering a
signed written notice thereof to the Secretary of the Corporation, which
resignation shall take effect at the time of said delivery or at such other time
as may be specified in said notice.

                                     Removal

            Section 7. All the Directors or all the Directors of a particular
class or any individual Director may be removed from office, with or without
cause, by the vote of the holders of two-thirds of the voting power entitled to
elect Directors in place of those to be removed; provided, that unless all the
Directors or all the Directors of a particular class are to be removed, no
Director shall be removed without cause if the number of shares voted against
his removal would be sufficient to elect at least one Director if cumulatively
voted at an election of all the Directors, or all the Directors of a particular
class, as the case may be.

                                        3



                                    Vacancies

            Section 8. Vacancies in the Board of Directors, whether caused by
the death or resignation or removal of a Director, or by an increase in the
authorized number of Directors, or otherwise, may be filled for the unexpired
term by a vote of a majority of the remaining Directors, though less than a
majority of the whole authorized number of Directors.

                                Board Committees

            Section 9. (a) The Board of Directors may from time to time appoint
certain of its members (but not less than three (3)) to act as a Committee or
Committees of Directors, and, subject to the provisions of this Section, may
delegate to any such Committee any of the authority of the Board, however
conferred, other than that of filling vacancies among the Directors or in any
Committee of Directors. The Board of Directors may likewise appoint one or more
Directors as alternate members of any such Committee, who may take the place of
any absent member or members at any meeting of such Committee. Each such member
and each such alternate shall serve in such capacity at the pleasure of the
Board of Directors.

            (b) In particular, the Board of Directors may create an Executive
Committee in accordance with the provisions of this Section. if created, the
Executive Committee shall possess and may exercise all of the powers of the
Board in the management and control of the business of the Corporation during
the intervals between meetings of the Board subject to provisions of this
Section. The chairman of the Executive Committee shall be determined by the
Board of Directors from time to time. All action taken by the Executive
Committee shall be reported in writing to the Board of Directors at its first
meeting thereafter.

            (c) Each such Committee shall serve at the pleasure of the Board of
Directors, shall act only in the intervals between meetings of the Board and
shall be subject to the control and direction of the Board. Each Committee shall
keep regular minutes of its proceedings and shall report the same to the Board
when required.

            (d) An act or authorization of any act by any such Committee within
the authority delegated to it shall be effective for all purposes as the act or
authorization of the Board of Directors. In every case the affirmative vote of a
majority of its members at a meeting, or the written consent of all of the
members of any such Committee without a meeting, shall be necessary for the
taking or approval of any action.

            (e) Each such Committee may prescribe such rules as it shall
determine for calling and holding meetings and its method of procedure, subject
to the provisions of this Section and any rules prescribed by the Board of
Directors.

                                  Compensation

            Section 10. The compensation of the Directors shall be such as the
Board of Directors may from time to time determine. On resolution of the Board
of Directors, a fixed sum for expenses of attendance may be allowed for
attendance at each meeting. Members of the

                                        4



Executive Committee or other Committee of the Board may be allowed such
compensation and such expenses for attending committee meetings as the Board of
Directors may determine.

                             ARTICLE III - OFFICERS

                                   Composition

            Section 1. The officers of the Corporation shall include a Chairman
of the Board (who shall be a Director), a President, one or more Vice Presidents
(including a Financial Vice President), a Secretary, a Treasurer, and such other
officers as the Board of Directors may determine to be necessary or appropriate,
including, but not limited to, a Vice Chairman of the Board, a Controller, one
or more Executive Vice Presidents, one or more Assistant Secretaries, and one or
more Assistant Treasurers. The Board of Directors may also appoint such other
subordinate officers, employees and agents as it shall deem necessary, who shall
have such authority and shall perform such duties as from time to time shall be
prescribed by the Board.

                           Election and Term of Office

            Section 2. The said officers shall be elected by the Board of
Directors by a majority ballot and shall hold office for one (1) year and until
their respective successors are elected and qualified, but shall be subject to
the power of removal hereinafter provided.

                                     Removal

            Section 3. Any officer elected or appointed by the Board of
Directors may be removed at any time either with or without cause by the
affirmative vote of two-thirds of the Board of Directors. Any other officer or
employee of the Corporation may be removed at any time by vote of the Board of
Directors, or by any committee or superior officer upon whom such power of
removal may be conferred by the Board of Directors.

                                  Compensation

            Section 4. The compensation of the officers of the Corporation shall
be fixed from time to time by the Board of Directors.

                                      Bond

            Section 5. All or any of said officers shall, if the Board of
Directors so determines, furnish bonds for the faithful performance of their
duties in such amount or amounts as the Board of Directors may require, upon
terms, provisions and conditions and with surety or sureties to the satisfaction
of the said Board.

                                        5



                         ARTICLE IV - DUTIES OF OFFICERS

                            The Chairman of the Board

            Section 1. The Chairman of the Board shall preside at all meetings
of the Board of Directors. The Chairman of the Board or the President shall sign
the minutes of the shareholders' and Directors' meetings. The Chairman of the
Board shall perform the duties and exercise the powers of the President in case
of the President's disability or absence from the office of the Corporation. The
Chairman of the Board shall have such other powers and duties as may be
prescribed by the Board of Directors.

                                  The President

            Section 2. The President shall exercise, subject to the control of
the Board of Directors, general supervision over the affairs of the Corporation
and shall perform generally, subject to the control of the Board, all duties
customarily incident to the office and such other duties as may be assigned to
him from time to time by the Board of Directors. He shall see that all orders
and resolutions of the Board are carried into effect, subject, however, to the
right of the Board to delegate to any officer or officers of the Corporation
specific powers, other than those that may be by law conferred upon the
President. He shall sign all the certificates of stock, bonds, contracts, notes,
mortgages and other documents authorized by the Board of Directors and execute
for or in the name of the Corporation all endorsements, assignments, transfers,
share powers or other instruments of transfer of securities except in cases
where the execution thereof shall be expressly delegated by the Board or these
Regulations or by law to some other officer or agent of the Corporation. In case
of the disability or absence from office of the Chairman of the Board, the
President shall also perform the duties and exercise the powers of that office.
The President or Chairman of the Board shall sign the records of the
shareholders' and Directors' meetings.

                  Chief Executive and Chief Operating Officers

            Section 3. The Board of Directors may designate one or more persons
as either Chief Executive Officer or Chief Operating Officer or both and may
specify the duties, authority and responsibilities of each of said officers.

                                 Vice Presidents

            Section 4. The Vice President (or if there be more than one, the
Vice President designated by the Board of Directors) shall perform the duties
and exercise the powers of the President in case of his disability or absence
from the office of the Corporation and in case of the disability or absence from
the office of the Corporation of the Chairman of the Board. The signature of the
Corporation by any Vice President to any deed, contract or other instrument in
writing, purporting to be the act of the Corporation, shall be taken, received
and accepted as the authorized and binding act of the Corporation and with like
effect as if made by the President. The Financial Vice President shall be the
Chief Financial Officer of the Corporation. Any Vice President shall have such
further powers, and perform such further duties, as may be from time to time
granted or imposed by the Board of Directors.

                                        6



                                    Secretary

            Section 5. The Secretary shall attend all meetings of the Board and
all meetings of the shareholders held at the office of the Corporation, shall
keep minutes of all of the proceedings thereof, and shall record all votes and
the minutes of all of the proceedings in a book to be kept for that purpose. He
shall perform like duties for committees of the Corporation when so required. He
shall give, or cause to be given, notice of all meetings of the shareholders and
of the Board of Directors, and shall attest the seal of the Corporation when
required. The Secretary shall have custody of the seal of the Corporation, and
either he or the Treasurer shall attest the seal and see that it is affixed to
all authorized documents requiring a seal. The Secretary or the Treasurer shall
sign all certificates of shares in the Corporation and execute for or in the
name of the Corporation all endorsements, assignments, transfers, share powers
or other instruments of transfer of securities. The Secretary shall perform such
other duties usually incident to the office of Secretary, and such further
duties as shall from time to time be prescribed by the Board of Directors,
Chairman of the Board or President. At any meeting of the shareholders or Board
of Directors at which the Secretary is not present, a secretary pro tempore may
be appointed.

                               Assistant Secretary

            Section 6. In case of the Secretary's sickness, disability or
temporary absence from the office of the Corporation, one or more Assistant
Secretaries, if any, shall perform his duties. The Assistant Secretary or
Secretaries, if any, shall perform such further duties as from time to time may
be prescribed by the Board of Directors, Chairman of the Board, President or
Secretary.

                                    Treasurer

            Section 7. The Treasurer shall, subject to the direction of the
Board of Directors, have custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation. He shall deposit all moneys and other valuable effects in
the name of and to the credit of the Corporation, in such depositories as may be
designated by the Board of Directors. The Treasurer or the Secretary shall
attest the seal of the Corporation and see that it is affixed to all authorized
documents requiring a seal. The Treasurer or Secretary shall sign all
certificates for shares in the Corporation and execute for or in the name of the
Corporation all endorsements, assignments, transfers, share powers or other
instruments of transfer of securities. The Treasurer shall perform such other
duties usually incident to the office of Treasurer and such other duties as may
be prescribed by the Board of Directors, Chairman of the Board or President.

                               Assistant Treasurer

            Section 8. In case of the Treasurer's sickness, disability or
temporary absence from the office of the Corporation, one or more Assistant
Treasurers, if any, shall perform his duties. The Assistant Treasurer or
Treasurers, if any, shall perform such further duties as from time to time shall
be prescribed by the Board of Directors, Chairman of the Board, President or
Treasurer.

                                        7



                                   Controller

            Section 9. The Controller, if one is elected, shall be the Chief
Accounting Officer of the Corporation, and shall have such duties and
responsibilities as are normally incident to that office.

                                ARTICLE V - SEAL

            Section 1. The Seal of the Corporation shall be circular, with the
words and figures "SEAL, AGILYSYS, INC., OHIO," or words and figures of similar
import inscribed thereon.

                               ARTICLE VI - SHARES

                                  Certificates

            Section 1. Certificates evidencing the ownership of shares of the
Corporation shall be issued to those entitled to them by transfer or otherwise.
Each certificate for shares shall bear a distinguishing number, the signature of
the President and of the Secretary or the Treasurer, and such recitals as may be
required by law. The certificates for shares shall be of such tenor and design
as the Board of Directors from time to time may adopt.

                                    Transfers

            Section 2. The shares may be transferred on the books of the
Corporation by the registered holders thereof, or by their attorneys legally
constituted in writing or their legal representatives, by surrender of the
certificate or certificates therefor for cancellation and a written assignment
of the shares evidenced thereby. The Board of Directors may, from time to time,
appoint such Transfer Agents or Registrars of shares as it may deem advisable,
and may define their powers and duties. The Board of Directors shall have
authority to make such other rules and regulations as it deems expedient
concerning the issuance, registration and transfer of certificates for shares.

                            Substituted Certificates

            Section 3. The Board of Directors may order a new certificate or
certificates for shares to be issued in place of any certificate or certificates
alleged to have been lost, stolen or destroyed, but in every such case the owner
of the lost, stolen or destroyed certificate or certificates shall first make an
affirmation of that fact and cause to be given to the Corporation, if so
requested, a bond, with surety or sureties satisfactory to the Corporation in
such sum as said Board of Directors may in its discretion deem sufficient, as
indemnity against any loss or liability that the Corporation may incur by reason
of the issuance of such new certificates; provided, the Board of Directors may,
in its discretion, refuse to issue such new certificate save upon the order of
some court having jurisdiction in such matters.

                                        8



                            Closing of Transfer Books

            Section 4. The share transfer books of the Corporation may be closed
by order of the Board of Directors for a period not exceeding sixty (60) days
prior to any meeting of the shareholders, and for a period not exceeding sixty
(60) days prior to the payment of any dividend. The times during which the books
may be closed shall, from time to time, be fixed by the Board of Directors.

                              ARTICLE VII - NOTICES

                                 Notice by Mail

            Section 1. Whenever, under the provisions of these Regulations,
notice is permitted to be given to any shareholder or Director by mail, it may
be given by depositing the same in the post office or letter box, in a postpaid
sealed wrapper, addressed to the shareholder or Director, at such address as
appears on the books of the Corporation; and such notice shall be deemed to be
given at the time when the same shall be thus deposited in the mail.

                               Notice by Telegraph

            Section 2. Whenever, under the provisions of these Regulations,
notice is permitted to be given to any Director by telegraph, it may be given by
a prepaid telegram addressed to such Director at such address as appears on the
books of the Corporation, or in default of other address, at his place of
residence or usual place of business, last known to the Corporation, and such
notice shall be deemed to be given at the time such telegram shall be delivered
to the telegraph company for transmittal.

                         ARTICLE VIII - INDEMNIFICATION

            Section 1. Each person who is or was a Director, Officer, Employee
or Agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, Officer, Employee, Trustee or Agent of another
corporation, domestic or foreign, non-profit or for profit, partnership, joint
venture, trust or other enterprise, shall be indemnified by the Corporation as
follows:

            (a) If such person was or is a party or is threatened to be made a
      party to any threatened, pending or completed action, suit or proceeding,
      whether civil, criminal, administrative or investigative, other than an
      action by or in the right of the Corporation, by reason of his being or
      having been such Director, Officer, Trustee, Agent or Employee, such
      person shall be indemnified against expenses, including attorney's fees,
      judgments, fines and amounts paid in settlement actually and reasonably
      incurred by him in connection with such action, suit or proceeding if he
      acted in good faith and in a manner he reasonably believed to be in or not
      opposed to the best interests of the Corporation and, with respect to any
      criminal action or proceeding, he had no reasonable cause to believe his
      conduct was unlawful; provided the termination of any action, suit or
      proceeding by judgment, order, settlement or conviction, or upon a plea of
      nolo

                                        9



      contenders or its equivalent, shall not, of itself, create a presumption
      that the person did not act in good faith and in a manner he reasonably
      believed to be in or not opposed to the best interests of the Corporation,
      and with respect to any criminal action or proceeding shall also not
      create a presumption that the person had reasonable cause to believe that
      his conduct was unlawful; or

            (b) If such person was or is a party or is threatened to be made a
      party to any threatened, pending or completed action or suit by or in the
      right of the Corporation to procure a judgment in its favor by reason of
      his having been such Director, Officer, Trustee, Agent or Employee, such
      person shall be indemnified against expenses, including attorneys' fees,
      actually and reasonably incurred by him in connection with the defense or
      settlement of such action or suit if he acted in good faith and in a
      manner he reasonably believed to be in or not opposed to the best
      interests of the Corporation, except that no indemnification shall be made
      in respect of either (i) any claim, issue or matter to which such person
      is adjudged to be liable for negligence or misconduct in the performance
      of his duty to the Corporation unless, and only to the extent that, the
      Court of Common Pleas or the court in which such action or suit was
      brought determines upon application that, despite the adjudication of
      liability but in view of all the circumstances of the case, such person is
      fairly and reasonably entitled to indemnity for such expenses as the Court
      of Common Pleas or such other court shall deem proper or (ii) any action
      or suit involving a Director in which the only liability asserted against
      such director is pursuant to Section 1701.95 of the Ohio Revised Code.

            Section 2. To the extent that such a Director, Officer, Trustee,
Agent or Employee has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Paragraph (a) or (b) of Section 1
of this Article, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses, including attorney's fees, actually and
reasonably incurred by him in connection with the action, suit or proceeding.

            Section 3. In all cases in which the Director, Officer, Trustee,
Agent or Employee may be entitled to indemnification under Paragraphs (a) or (b)
of Section 1 of this Article, any indemnification, unless ordered by a court,
shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the Director, Officer, Trustee, Employee
or Agent is proper in the circumstances because he has met the standards of
conduct set forth in Paragraph (a) or (b) of Section I of this Article,
whichever is applicable. Such determination shall be made as follows:

            (a) By a majority vote of a quorum of the Corporation's Directors
      who were not and are not parties to or threatened with any such action,
      suit or proceeding; or

            (b) if such a quorum is not obtainable or if a majority of a quorum
      of disinterested Directors so directs, in a written opinion by independent
      legal counsel other than an attorney or a firm having associated with it
      an attorney who has been retained by or who has performed services for the
      Corporation or any person to be indemnified within the past five (5)
      years; or

            (c) By the shareholders; or

                                       10



            (d) By the Court of Common Pleas or the court in which such action,
      suit or proceeding was brought.

Any determination made by the disinterested Directors under Paragraph (a) or by
independent legal counsel under Paragraph (b) of Section 3 of this Article shall
be promptly communicated to the person who threatened or brought the action or
suit by or in the right of the Corporation, if the expenses for which
indemnification has been sought were incurred in an action or suit by or in the
right of the Corporation.

            Section 4. In the case of an action, suit or proceeding involving a
Director, unless the only liability asserted against such Director in a
proceeding referred to in paragraphs (a) or (b) of Section I of this Article is
pursuant to Section 1701.95 of the Ohio Revised Code, the Corporation shall pay
expenses, including attorney's fees, incurred by a Director in defending such an
action, suit or proceeding as they are incurred in advance of the final
disposition of such action, suit or proceeding, upon receipt of an undertaking
by or on behalf of the Director in which such Director agrees to both (i) repay
such amount if it is proven by clear and convincing evidence in a court of
competent jurisdiction that his action or failure to act involved an act or
omission undertaken with deliberate intent to cause injury to the Corporation or
undertaken with reckless disregard to the best interests of the Corporation, and
(ii) reasonably cooperate with the Corporation concerning the action, suit or
proceeding.

            Section 5. The Corporation may pay expenses, including attorney's
fees incurred in defending any action, suit or proceeding referred to in
Paragraph (a) or (b) of Section 1 of this Article as they are incurred in
advance of the final disposition of such action, suit or proceeding, as
authorized by the Directors in the specific case upon receipt of an undertaking
by or on behalf of the Trustee, Director, Officer, Employee or Agent to repay
such amount if it ultimately is determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article.

            Section 6. The rights of indemnification herein authorized shall be
severable, shall not be deemed exclusive of, and shall be in addition to, any
other rights granted to those seeking indemnification under the Articles of
Incorporation or any agreement, vote of shareholders or disinterested Directors,
or otherwise, both as to actions in the official capacity of the person seeking
indemnity, and as to actions in another capacity while holding such office and
shall continue as to a person who has ceased to be a Director, Officer, Trustee,
Agent or Employee and shall inure to the benefit of the heirs, executors and
administrators of such a person.

            Section 7. The Corporation may purchase and maintain insurance or
furnish similar protection, including but not limited to, trust funds, letters
of credit or self-insurance, on behalf of or for any person who is or was a
Director, Officer, Employee or Agent of the Corporation, or is or was serving at
the request of the Corporation as a Director, Officer, Trustee, Employee or
Agent of another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under this Article. Insurance may be
purchased from or maintained with a person in which the Corporation has a
financial interest.

                                       11



            Section 8. The Corporation's authority to indemnify persons pursuant
to paragraphs (a) and (b) of Section 1 of this Article does not limit the
payment of expenses as they are incurred, indemnification, insurance or other
protection that may be provided pursuant to Sections 5, 6, and 7 of this
Article; paragraphs (a) and (b) of Section I of this Article do not create any
obligation to repay or return payments made by the Corporation pursuant to
Sections 5, 6, or 7 or this Article.

            Section 9. As used in this Article, references to "Corporation"
include all constituent corporations in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a Director, Officer,
Employee or Agent of such a constituent corporation, or is or was serving at the
request of such constituent corporation as a Director, Officer, Trustee,
Employee or Agent of another corporation, domestic or foreign, nonprofit or for
profit, partnership, joint venture, trust or other enterprise shall stand in the
same position under this Article with respect to the new or surviving
corporation as he would if he had served the new or surviving corporation in the
same capacity.

            Section 10. The provisions of this Article shall apply to actions,
suits and proceedings, whether civil (including, but not limited to, actions by
or in the right of the Corporation), criminal, administrative or investigative,
commenced or threatened after the adoption of this Article, whether arising from
acts or omissions to act occurring before or after its adoption.

            Section 11. Notwithstanding the foregoing, the Corporation shall, to
the extent permitted by the Ohio Revised Code, as amended from time to time,
indemnify and reimburse all persons whom it may indemnify and reimburse pursuant
thereto. The indemnification provided for in this Article shall not be deemed
exclusive of any other rights to which those entitled to receive indemnification
or reimbursement hereunder may be entitled under the Articles of the
Corporation, agreement, vote of shareholders or disinterested directors or
otherwise.

                            ARTICLE IX - FISCAL YEAR

            The fiscal year of the Corporation shall be determined by the
Directors of the Corporation.

                             ARTICLE X - AMENDMENTS

            These Regulations may be amended or repealed or new Regulations
adopted at any meeting of shareholders by the affirmative vote of the holders of
record of shares entitling them to exercise two-thirds of the voting power of
the Corporation on such proposal, or may be adopted without a meeting by the
written consent of the holders of shares entitling them to exercise two-thirds
of the voting power on such proposal; provided, however, that if the Regulations
are amended or new Regulations are adopted at any meeting of shareholders,
notice of the proposed new Regulations, or the proposed amendment or repeal,
shall be included in the notice of such meeting, or if the Regulations are
amended or new Regulations are adopted without a meeting of the shareholders,
the Secretary of the Corporation shall mail a copy of the amendment or the new
Regulations to each shareholder who would have been entitled to vote thereon and
did not participate in the adoption thereof.

                                       12

EX-10.1

                                                                    EXHIBIT 10.1

                              AMENDED AND RESTATED

                                 AGILYSYS, INC.
                            2000 STOCK INCENTIVE PLAN

                                    ARTICLE 1

                      GENERAL PURPOSE OF PLAN; DEFINITIONS

      1.1 Name and Purposes. The name of this plan is the Amended and Restated
Agilysys, Inc. 2000 Stock Incentive Plan. The purpose of this Plan is to enable
Agilysys, Inc. and its Affiliates to (i) attract and retain skilled and
qualified officers, other employees, directors and consultants who are expected
to contribute to the Company's success by providing long-term incentive
compensation opportunities competitive with those made available by other
companies, (ii) motivate Plan participants to achieve the long-term success and
growth of the Company, (iii) facilitate ownership of shares of the Company and
(iv) align the interests of the Plan participants with those of the Company's
public Shareholders.

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

            (a) The word "Affiliate" means any corporation, partnership, joint
      venture or other entity, directly or indirectly, through one or more
      intermediaries, controlling, controlled by, or under common control with
      the Company as determined by the Board of Directors in its discretion.

            (b) The word "Award" means any grant under this Plan of a Stock
      Option, Stock Appreciation Right, Restricted Shares, Restricted Share
      Units or Performance Shares to any Plan participant.

            (c) The words "Board of Directors" mean the Board of Directors of
      the Company, as constituted from time to time.

            (d) The word "Cause" means a participant's termination of employment
      or directorship, as applicable, shall have been the result of:

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

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

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



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

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

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

            (e) The word "Code" means the Internal Revenue Code of 1986, as
      amended, and any lawful regulations or pronouncements promulgated
      thereunder. Whenever reference is made to a specific Code section, such
      reference shall be deemed to be a reference to any successor Code section
      or sections with the same or similar purpose.

            (f) The word "Committee" means the entity administering this Plan as
      provided in Section 2.1 hereof or, if none has been appointed, then the
      Board of Directors as a whole.

            (g) The words "Common Shares" mean the Common Shares, without par
      value, of the Company.

            (h) The word "Company" means Agilysys, Inc., a corporation organized
      under the laws of the State of Ohio or any successor corporation or entity
      that assumes the obligations of Agilysys, Inc. under this Plan by
      operation of law or otherwise. Prior to September 15, 2003, the word
      "Company" means Pioneer-Standard Electronics, Inc.

            (i) The words "Date of Grant" mean the date on which the Committee
      grants an Award or a future date that the Committee designates at the time
      of the Award.

            (j) The word "Director" means a member of the Board of Directors.

            (k) The word "Disability" means a participant's physical or mental
      incapacity resulting from personal injury, disease, illness or other
      condition, which (i) prevents him or her from performing his or her duties
      for the Company or an Affiliate, as the same is determined by the
      Committee or its designee after reviewing any medical evidence or
      requiring any medical examinations which the Committee or its designee
      considers necessary to its determination; and (ii) results in his or her
      termination of employment or directorship, as applicable, with the Company
      or an Affiliate.

            (l) The words "Early Retirement" mean a participant's retirement
      from active employment with the Company or an Affiliate on and after the
      later of attainment of age 55 or the completion of seven years of service.

            (m) The words "Eligible Director" mean a Director of the Company who
      is entitled to participate in the Plan pursuant to Section 4.1.

            (n) The acronym "ERISA" means the Employee Retirement Income
      Security Act of 1974, as amended and any lawful regulations or
      pronouncements promulgated thereunder. Whenever reference is made to a
      specific ERISA section, such reference shall be deemed to be a reference
      to any successor, ERISA Section or Sections with the same or similar
      purpose.



            (o) The words "Exchange Act" mean the Securities Exchange Act of
      1934, as amended, and any lawful regulations or pronouncements promulgated
      thereunder.

            (p) The words "Exercise Price" mean the purchase price of a Share
      covered by a Stock Option.

            (q) The words "Fair Market Value" mean the last closing price of a
      Share as reported on The Nasdaq Stock Market, or, if applicable, on
      another national securities exchange on which the Common Shares are
      principally traded, on the date for which the determination of fair market
      value is made, or, if there are no sales of Common Shares on such date,
      then on the most recent immediately preceding date on which there were any
      sales of Common Shares. If the Common Shares are not or cease to be traded
      on The Nasdaq Stock Market or another national securities exchange, the
      "Fair Market Value" of Common Shares shall be determined in the manner
      prescribed by the Committee.

            (r) The words "Incentive Stock Option" and the acronym "ISO" mean a
      Stock Option that is clearly identified as such and which meets the
      requirements of Section 422 of the Code, or any successor provision, and
      therefore qualifies for favorable tax treatment.

            (s) The words "Non-Qualified Stock Option" and the acronym "NQSO"
      mean a Stock Option that does not meet the requirements of Section 422 of
      the Code and which is governed by Section 83 of the Code, or a Stock
      Option that does not meet the requirements of Section 422 of the Code, but
      which is clearly identified as a Non-Qualified Stock Option and therefore
      is governed by Section 83 of the Code.

            (t) The words "Normal Retirement" mean retirement from active
      employment with the Company or an Affiliate on or after the age of 65.

            (u) The words "Outside Director" mean a Director who meets the
      definitions of the terms "outside director" set forth in Section 162(m) of
      the Code, "independent director" set forth in The Nasdaq Stock Market,
      Inc. rules, and "non-employee director" set forth in Rule 16b-3 under the
      Exchange Act, or any successor definitions adopted by the Internal Revenue
      Service, The Nasdaq Stock Market, Inc. and Securities and Exchange
      Commission, respectively, and similar requirements under any other
      applicable laws and regulations.

            (v) The word "Parent" means any corporation which qualifies as a
      "parent corporation" of the Company under Section 424(e) of the Code.

            (w) The words "Performance Shares" are defined in Article 9.

            (x) The word "Plan" means this Amended and Restated Agilysys, Inc.
      2000 Stock Incentive Plan, as amended from time to time and, where the
      context requires, the Pioneer-Standard Electronics, Inc. 2000 Stock
      Incentive Plan, as amended.

            (y) The acronym "QDRO" means a qualified domestic relations order as
      defined by the Code.

            (z) The words "Reload Option" are defined in Section 5.3.

            (aa) The word "Retirement" means Normal Retirement or Early
      Retirement.

            (bb) The words "Restricted Shares" are defined in Article 8.

            (cc) The words "Restricted Share Units" are defined in Article 8.



            (dd) The word "Share" or "Shares" means one or more of the Common
      Shares.

            (ee) The word "Shareholder" means an individual or entity that owns
      one or more Shares.

            (ff) The words "Stock Appreciation Rights" and the acronym "SAR"
      mean any right pursuant to an Award granted under Article 7.

            (gg) The words "Stock Option" mean any right to purchase a specified
      number of Shares at a specified price which is granted pursuant to Article
      5 herein and may be an Incentive Stock Option, a Non-Qualified Stock
      Option or a Reload Option.

            (hh) The words "Stock Power" mean a power of attorney executed by a
      participant and delivered to the Company which authorizes the Company to
      transfer ownership of Restricted Shares, Performance Shares or Shares from
      the participant to the Company or a third party.

            (ii) The word "Subsidiary" means any corporation which qualifies as
      a "subsidiary corporation" of the Company under Section 424(f) of the
      Code.

            (jj) The word "Vested" means that the time has been reached, with
      respect to Stock Options, when the option to purchase Shares first becomes
      exercisable; with respect to Stock Appreciation Rights, when the Stock
      Appreciation Right first becomes exercisable for payment, with respect to
      Restricted Shares, when the Shares are no longer subject to forfeiture and
      restrictions on transferability, with respect to Restricted Share Units
      and Performance Shares, when the units are no longer subject to forfeiture
      and are convertible to Shares. The words "Vest" and "Vesting" have
      meanings correlative to the foregoing.

                                    ARTICLE 2

                                 ADMINISTRATION

      2.1. Authority and Duties of the Committee.

            (a) The Plan shall be administered by a Committee of not less than
      three Directors who are appointed by the Board of Directors and serve at
      its pleasure. Unless otherwise determined by the Board of Directors, the
      Compensation Committee shall serve as the Committee, and all of the
      members of the Committee shall be Outside Directors. Notwithstanding the
      requirement that the Committee consist exclusively of Outside Directors,
      no action or determination by the Committee or an individual considered to
      be an Outside Director shall be deemed void because a member of the
      Committee or such individual fails to satisfy the requirements for being
      an Outside Director, except to the extent required by applicable law.

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

            (c) In particular, the Committee has the authority, subject to any
      limitations specifically set forth in this Plan, to:

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

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



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

                  (iv) determine the other terms and conditions, not
            inconsistent with the terms of this Plan and any operative
            employment or other agreement, of any Award granted hereunder; such
            terms and conditions include, but are not limited to, the exercise
            price, the time or times when Options or Stock Appreciation Rights
            may be exercised (which may be based on performance objectives), any
            vesting, acceleration or waiver of forfeiture restrictions, any
            performance criteria (including any performance criteria as
            described in Section 162(m)(4)(C) of the Code) applicable to an
            Award,

            and any restriction or limitation regarding any Option or Stock
            Appreciation Right or the Common Shares relating thereto, based in
            each case on such factors as the Committee, in its sole discretion,
            shall determine;

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

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

                  (vii) determine whether, to what extent and under what
            circumstances, Shares and other amounts payable with respect to any
            Award are deferred either automatically or at the election of the
            participant;

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

                  (ix) promulgate such administrative forms as they from time to
            time deem necessary or appropriate for administration of the Plan;

                  (x) construe, interpret and implement the terms and provisions
            of this Plan, any Award and any related agreements;

                  (xi) correct any defect, supply any omission and reconcile any
            inconsistency in or between the Plan, any Award and any related
            agreements; and

                  (xii) otherwise supervise the administration of this Plan.

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

      2.2 Delegation of Authority. The Committee may delegate its powers and
duties under this Plan to the Chief Executive Officer of the Company, subject to
applicable law and such terms, conditions and limitations as the Committee may
establish in its sole discretion; provided, however, that the Committee may not
delegate its powers and duties under this Plan with regard to Awards to the
Company's executive officers or any participant who is a "covered employee" as
defined in Section 162(m) of the Code or a Director. The Company shall furnish
the Committee with such clerical and other assistance as is necessary for the
performance of the Committee's duties under the Plan. In addition, the Committee
may delegate ministerial duties to any other person or persons, and it may
employ attorneys, consultants, accountants or other professional advisers.



                                    ARTICLE 3

                              STOCK SUBJECT TO PLAN

      3.1 Total Shares Limitation. Subject to the provisions of this Article 3,
the maximum number of Shares that may be issued pursuant to Awards granted under
this Plan is 3,200,000, which may be newly-issued Shares or Shares that have
been reacquired in the open market or in private transactions.

      3.2 Other Limitations.

      (a) ISO Limitations. The maximum number of Shares available with respect
to all Stock Options granted under this Plan that may be Incentive Stock Options
is 3,200,000 Shares.

      (b) Stock Award Limitation. The maximum number of Shares available with
respect to all Restricted Share, Restricted Share Unit and Performance Share
Awards granted under this Plan is 3,200,000 Shares.

      (c) Participant Limitation. The aggregate number of Shares underlying
Awards granted under this Plan to any one participant in any fiscal year,
regardless of whether such Awards are thereafter canceled, forfeited or
terminated, shall not exceed 600,000 Shares. The foregoing annual limitation is
intended to include the grant of all Awards, including but not limited to,
Awards representing "performance-based compensation" as described in Section
162(m)(4)(C) of the Code.

      (d) Annual Limitation. The aggregate number of Shares underlying Awards in
any fiscal year, regardless of whether such Awards are thereafter expired,
canceled, forfeited or terminated, shall not exceed 600,000 Shares. The
foregoing annual limitation is intended to include the grant of all Awards,
including but not limited to, Awards representing "performance-based
compensation" as described in Section 162(m)(4)(C) of the Code.

      (e) Full-Value Share Annual Limitation. The aggregate number of Shares
underlying Awards of Restricted Shares, Restricted Share Units and Performance
Shares in any fiscal year, regardless of whether such Awards are thereafter
expired, canceled, forfeited or terminated, shall not exceed 300,000 Shares. The
foregoing annual limitation is intended to include the grant of all Awards,
including but not limited to, Awards representing "performance-based
compensation" as described in Section 162(m)(4)(C) of the Code.

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

      3.4 Dilution and Other Adjustments. In the event that the Committee
determines that any dividend or other distribution (whether in the form of cash,
Shares, other securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this Plan, then the
Committee may, in such manner as it deems equitable, adjust any or all of (i)
the number and type of Shares (or other securities or other property) which
thereafter may be made the subject of Awards, (ii) the number and type of Shares
(or other securities or other property) subject to outstanding Awards, (iii) the
limitations set forth above and (iv) the purchase or exercise price or any
performance objective with respect to any Award; provided, however, that the
number of Shares or other securities covered by any Award or to which such Award
relates is always a whole number. Notwithstanding the foregoing, the foregoing
adjustments shall be made in compliance with: (i) Sections 422 and 424 of the
Code with respect to ISOs and (ii) Section 162(m) of the Code with respect to
Performance Share Awards unless specifically determined otherwise by the
Committee.



                                    ARTICLE 4

                                  PARTICIPANTS

      4.1 Eligibility. Officers, all other regular active employees of the
Company or any of its Affiliates, Eligible Directors and consultants to the
Company or any of its Affiliates are eligible to participate in this Plan. The
Plan participants shall be selected from time to time by the Committee in its
sole discretion, or, with respect to employees other than executive officers or
participants who are "covered employees" as defined in Section 162(m) of the
Code, by the Chief Executive Officer in his sole discretion with proper
delegation from the Committee. (See Article 13 and Article 16 hereof with
respect to the Shareholder approval requirement.)

                                    ARTICLE 5

                               STOCK OPTION AWARDS

      5.1 Option Grant. Each Stock Option granted under this Plan (or delegation
of authority to the Chief Executive Officer to grant Stock Options) will be
evidenced by minutes of a meeting, or by a unanimous written consent without a
meeting, of the Committee and by a written agreement dated as of the Date of
Grant and executed by the Company and by the Plan participant.

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

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

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

            (c) Vesting. Stock Options, or portions thereof, are exercisable at
      such time or times as determined by the Committee in its discretion at or
      after grant. If the Committee provides that any Stock Option becomes
      Vested over a period of time, in full or in installments, the Committee
      may waive or accelerate such Vesting provisions at any time. If no other
      Vesting provision is specified by the Committee at the time of grant, then
      the Stock Option is deemed to Vest in three installments (as equal as
      possible to the whole Share) on the first, second and third anniversaries
      of the Date of Grant. (Also see the Change in Control provisions in
      Article 11.)

            (d) Method of Exercise. Vested portions of any Stock Option may be
      exercised in whole or in part at any time during the option term by giving
      written notice of exercise to the Company specifying the number of Shares
      to be purchased. The notice must be given by or on behalf of a person
      entitled to exercise the Stock Option, accompanied by payment in full of
      the Exercise Price, along with any required tax withholding pursuant to
      Section 15.3 hereof. Subject to the approval of the Committee, the
      Exercise Price may be paid:



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

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

                  (iii) by a combination of cash and Shares;

                  (iv) by authorizing a broker to sell, on behalf of the
            participant, the appropriate number of Shares otherwise issuable to
            the participant upon the exercise of a Stock Option with the
            proceeds of sale applied to pay the Exercise Price and tax
            withholding, provided that the Company has implemented such a
            broker-handled same day sale program; or

                  (v) by another method permitted by law which assures full and
            immediate payment of the Exercise Price.

                  The Committee may withhold its approval for any method of
            payment for any reason, in its sole discretion, including but not
            limited to concerns that the proposed method of payment will result
            in adverse financial accounting treatment or adverse tax treatment
            for the Company.

                  If the Exercise Price of a NQSO is paid by tendering
            Restricted Shares, then the Shares received upon the exercise will
            contain identical restrictions as the Restricted Shares so tendered.
            Except as otherwise provided by law and in the Committee's sole
            discretion, required tax withholding may be paid only by cash or
            through a same day sale transaction.

            (e) Issuance of Shares. The Company will issue or cause to be issued
      such Shares promptly upon exercise of the Option. No Shares will be issued
      until full payment has been made. Until the issuance (as evidenced by the
      appropriate entry on the books of the Company or of a duly authorized
      transfer agent of the Company) of the stock certificate evidencing such
      Shares, no right to vote or receive dividends or any other rights as a
      Shareholder will exist with respect to the Shares, notwithstanding the
      exercise of the Option.

            (f) Form. Unless the grant of a Stock Option is designated at the
      time of grant as an ISO, it is deemed to be an NQSO. ISOs are also subject
      to the terms and conditions stated in Article 6 hereof.

      5.3 Grant of Reload Options. If the Committee so provides in its
discretion at or after grant, an optionee who exercises all or part of a
Non-Qualified Stock Option by payment of the Exercise Price with previously
owned Shares will be granted an additional Stock Option (a "Reload Option") for
a number of Shares equal to the number of Shares tendered in the exercise of the
original Stock Option. Each Reload Option will have a Date of Grant which is the
date as of which the original Stock Option to which it applies is exercised and
will become Vested on the six-month anniversary of the Date of Grant of the
Reload Option. The Reload Option will have the same expiration and all other
terms and conditions as the original Stock

Option to which it applies, except that the Exercise Price will be equal to at
least 100% of the Fair Market Value as of the Date of Grant of the Reload
Option.

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



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

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

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

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

            (e) Other Termination. If an optionee's employment or directorship
      with the Company or its Affiliates terminates, voluntarily or
      involuntarily, for any reason other than death, Disability, Retirement or
      for Cause, any Vested portions of Stock Options held by such optionee at
      the time of termination may be exercised by the optionee for a period of
      three months (or such other period as the Committee may specify at or
      after the time of grant) from the date of such termination or until the
      expiration of the

      original term of the Stock Option, whichever period is the shorter. No
      portion of any Stock Option which is not Vested at the time of such
      termination will thereafter become Vested.

                                    ARTICLE 6

               SPECIAL RULES APPLICABLE TO INCENTIVE STOCK OPTIONS

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

      6.2 Special ISO Rules.



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

            (b) Term. No ISO may be exercisable on or after the tenth
      anniversary of the Date of Grant, and no ISO may be granted under this
      Plan on or after the tenth anniversary of the effective date of this Plan.
      (See Section 16.1 hereof.)

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

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

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

            (f) Termination of Employment. No ISO may be exercised more than
      three months following termination of employment for any reason (including
      Retirement) other than death or disability, nor more than one year
      following termination of employment for the reason of death or disability
      (as defined in Section 422 of the Code), or such option will no longer
      qualify as an ISO and shall thereafter be, and

      receive the tax treatment applicable to, an NQSO. For this purpose, a
      termination of employment is cessation of employment with the Company, a
      Parent or a Subsidiary.

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

      6.3 Subject to Code Amendments. The foregoing limitations are designed to
comply with the requirements of Section 422 of the Code and shall be
automatically amended or modified to comply with amendments or modifications to
Section 422 or any successor provisions. Any ISO which fails to comply with
Section 422 of the Code is automatically treated as a NQSO appropriately granted
under this Plan provided it otherwise meets the Plan's requirements for NQSOs.



                                    ARTICLE 7

                            STOCK APPRECIATION RIGHTS

      7.1 SAR Grant and Agreement. Stock Appreciation Rights may be granted
under this Plan, either independently or in conjunction with the grant of a
Stock Option. Each SAR granted under this Plan (or delegation of authority to
the Chief Executive Officer to grant SARs) will be evidenced by minutes of a
meeting, or by a unanimous written consent without a meeting, of the Committee
and by a written agreement dated as of the Date of Grant and executed by the
Company and by the Plan participant.

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

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

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

            (c) Method of Exercise. A Stock Appreciation Right may be exercised
      by the surrender of the applicable portion of the related Stock Option.
      Stock Options which have been so surrendered, in whole or in part, are no
      longer exercisable to the extent the related Stock Appreciation Rights
      have been exercised and are deemed to have been exercised for the purpose
      of the limitation set forth in Article 3 hereof on the number of Shares to
      be issued under this Plan, but only to the extent of the number of Shares
      actually issued under the Stock Appreciation Right at the time of
      exercise. Upon the exercise of a Stock Appreciation Right, subject to
      satisfaction of tax withholding requirements pursuant to Section 15.3, the
      holder of the Stock Appreciation Right is entitled to receive up to, but
      not more than, an amount in cash or Shares equal in value to the excess of
      the Fair Market Value of one Share over the Exercise Price per Share
      specified in the related Stock Option, multiplied by the number of Shares
      in respect of which the Stock Appreciation Right is exercised, with the
      Committee having the right in its discretion to determine the form of
      payment. At any time the Exercise Price per Share of the related Stock
      Option does not exceed the Fair Market Value of one Share, the holder of
      the Stock Appreciation Right shall not be permitted to exercise such
      right.

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

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

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

            (c) Method of Exercise. A Stock Appreciation Right may be exercised
      in whole or in part during the term by



      giving written notice of exercise to the Company specifying the number of
      Shares in respect of which the Stock Appreciation Right is being
      exercised. The notice must be given by or on behalf of a person entitled
      to exercise the Stock Appreciation Right. Upon the exercise of a Stock
      Appreciation Right, subject to satisfaction of tax withholding
      requirements pursuant to Section 15.3, the holder of the Stock
      Appreciation Right is entitled to receive an amount in cash or Shares
      equal in value to the excess of the Fair Market Value of a Share on the
      exercise date over the Fair Market Value of a Share on the Date of Grant
      multiplied by the number of Stock Appreciation Rights being exercised,
      with the Committee having the right in its discretion to determine the
      form of payment. At any time the Fair Market Value of a Share on a
      proposed exercise date does not exceed the Fair Market Value of a Share on
      the Date of Grant, the holder of the Stock Appreciation Right shall not be
      permitted to exercise such right.

            (d) Early Termination Prior to Expiration. Unless otherwise provided
      in an employment or other agreement entered into between the holder of the
      Stock Appreciation Right and the Company and approved by the Committee,
      either before or after the Date of Grant, or otherwise specified at or
      after the Date of Grant, the early termination provisions set forth in
      Section 5.4 as applied to Non-Qualified Stock Options will apply to
      independent Stock Appreciation Rights.

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

                                    ARTICLE 8

                RESTRICTED SHARE AND RESTRICTED SHARE UNIT AWARDS

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

the Committee in its discretion. By accepting a grant of Restricted Shares, the
participant agrees to remit to the Company when due any required tax withholding
as provided in Section 15.3 hereof.

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

            (a) Purchase Price. The Committee shall determine the prices, if
      any, at which Restricted Shares are to be issued to a participant, which
      may vary from time to time and among participants and which may be below
      the Fair Market Value of such Shares at the Date of Grant.

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

                  (i) a prohibition against the sale, transfer, pledge or other
            encumbrance of the Restricted Shares, such prohibition to lapse at
            such time or times as the Committee determines (whether in
            installments, at the time of



            the death, Disability or Retirement of the holder of such shares, or
            otherwise, but subject to the Change in Control provisions in
            Article 11);

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

                  (iii) a prohibition against employment or retention of the
            participant by any competitor of the Company or its Affiliates, or
            against dissemination by the participant of any secret or
            confidential information belonging to the Company or an Affiliate;
            and

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

            The Committee may at any time waive such restrictions or accelerate
      the date or dates on which the restrictions will lapse. However, if the
      Committee determines that restrictions lapse upon the attainment of
      specified performance objectives, then the provisions of Sections 9.2 and
      9.3 will apply (including, but not limited to, the enumerated performance
      objectives). If the written agreement governing an award provides that
      such Award is intended to be "performance-based compensation," the
      provisions of Section 9.4(d) will also apply.

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

            "The transferability of this certificate and the Common Shares
      represented by it are subject to the terms and conditions (including
      conditions of forfeiture) contained in the 2000 Stock Incentive Plan of
      the Company, and an agreement entered into between the registered owner
      and the Company. A copy of this Plan and agreement are on file in the
      office of the Secretary of the Company."

            At the end of any time period during which the Restricted Shares are
      subject to forfeiture and restrictions on transfer, such Shares will be
      delivered free of all restrictions (except for any pursuant to Section
      14.2 hereof) to the participant and with the foregoing legend removed.

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

            (e) Voting and Other Rights. Except to the extent prohibited by
      Section 162(m) of the Code and the terms of the applicable Restricted
      Share Agreement, during any period in which Restricted Shares are subject
      to forfeiture and restrictions on transfer, the participant holding such
      Restricted Shares shall have all the rights of a Shareholder with respect
      to such Shares, including, without limitation, the right to vote such
      Shares and the right to receive any dividends paid with respect to such
      Shares.

      8.3 Restricted Share Unit Awards and Agreements. Restricted Share Unit
Awards consist of Shares that will be issued to a participant at a future time
or times at no cost or at a purchase price determined by the Committee which may
be below their Fair Market Value if continued employment, continued directorship
and/or other terms



and conditions specified by the Committee are satisfied. Each Restricted Share
Unit Award granted under this Plan (or delegation of authority to the Chief
Executive Officer to make Restricted Share Unit Awards) will be evidenced by
minutes of a meeting, or by a unanimous written consent without a meeting, of
the Committee and by a written agreement dated as of the Date of Grant and
executed by the Company and the Plan participant. The timing of Restricted Share
Unit Awards and the number of Restricted Share Units to be awarded (subject to
Section 3.2 hereof) are to be determined by the Committee in its sole
discretion. By accepting a Restricted Share Unit Award, the participant agrees
to remit to the Company when due any required tax withholding as provided in
Section 15.3 hereof.

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

            (a) Purchase Price. The Committee shall determine the prices, if
      any, at which Shares are to be issued to a participant after Vesting of
      Restricted Stock Units, which may vary from time to time and among
      participants and which may be below the Fair Market Value of Shares at the
      Date of Grant.

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

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

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

                  (iii) a prohibition against employment of the participant by,
            or provision of services by the participant to, any competitor of
            the Company or its Affiliates, or against dissemination by the
            participant of any secret or confidential information belonging to
            the Company or an Affiliate; and

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

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

            (c) Performance-Based Restrictions. The Committee may, in its sole
      discretion, provide restrictions that lapse upon the attainment of
      specified performance objectives. In such case, the provisions of Sections
      9.2 and 9.3 will apply (including, but not limited to, the enumerated
      performance objectives). If the written agreement governing an Award
      provides that such Award is intended to be "performance-based
      compensation," the provisions of Section 9.4(d) will also apply.

            (d) Voting and Other Rights. A participant holding Restricted Share
      Units shall not be deemed to be a Shareholder solely because of such
      units. Such participant shall have no rights of a Shareholder with respect
      to such units.

            (e) Lapse of Restrictions. If a participant who holds Restricted
      Share Units satisfies the restrictions and other



      conditions relating to the Restricted Share Units prior to the lapse or
      waiver of such restrictions and conditions, the Restricted Share Units
      shall be converted to, or replaced with, Shares which are free of all
      restrictions except for any pursuant to Section 14.2 hereof.
      Notwithstanding the foregoing, the Committee may, in lieu of the
      conversion and distribution of the Restricted Share Units, establish
      procedures to permit deferral of Restricted Stock Units of participants
      who are highly compensated employees or members of a select group of
      management in accordance with the terms of a deferred compensation plan
      sponsored by the Company.

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

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

      8.5 Time Vesting of Restricted Share and Restricted Share Unit Awards.
Restricted Shares or Restricted Share Units, or portions thereof, are
exercisable at such time or times as determined by the Committee in its
discretion at or after grant, subject to the restrictions on time Vesting set
forth in this Section. If the Committee provides that any Restricted Shares or
Restricted Share Unit Awards become Vested over time (with or without a
performance component), the Committee may waive or accelerate such Vesting
provisions at any time, subject to the restrictions on time Vesting set forth in
this Section. Subject to the acceleration of Vesting due to satisfaction of
performance criteria or the occurrence of stated events (specifically including
a Change in Control), a Restricted Share or Restricted Share Unit Award with a
Date of Grant on or after July 28, 2004 shall not Vest more rapidly than in
three installments (as equal as possible to the whole Share) on the first,
second and third anniversaries of the Date of Grant; provided that for
convenience the Committee may provide that Awards made in a fiscal year Vest on
the first, second and third anniversaries of the first day of the fiscal year in
which the Date of Grant occurs.

                                    ARTICLE 9

                            PERFORMANCE SHARE AWARDS

      9.1 Performance Share Awards and Agreements. A Performance Share Award is
a right to receive Shares in the future conditioned upon the attainment of
specified performance objectives and such other conditions, restrictions and
contingencies as the Committee may determine. Each Performance Share Award
granted under this Plan (or delegation of authority to the Chief Executive
Officer to make Performance Share Awards) will be evidenced by minutes of a
meeting, or by a unanimous written consent without a meeting, of the Committee
and by a written agreement dated as of the Date of Grant and executed by the
Company and by the Plan participant. The timing of Performance Share Awards and
the number of Shares covered by each Award (subject to Section 3.2 hereof) are
to be determined by the Committee in its discretion. By accepting a grant of
Performance Shares, the participant agrees to remit to the Company when due any
required tax withholding as provided in Section 15.3 hereof.



      9.2 Performance Objectives. At the time of grant of a Performance Share
Award, the Committee will specify the performance objectives which, depending on
the extent to which they are met, will determine the number of Shares that will
be distributed to the participant. The Committee will also specify the time
period or periods (the "Performance Period") during which the performance
objectives must be met. The performance objectives and periods need not be the
same for each participant nor for each Award. The Committee may use performance
objectives based on one or more of the following targets: cash generation,
profit, revenue, market share, profit or return ratios, Shareholder returns
and/or specific, objective and measurable non-financial objectives. The
Committee may designate a single goal criterion or multiple goal criteria for
performance measurement purposes, with the measurement based on absolute Company
or business unit performance and/or on performance as compared with that of
other publicly-traded companies.

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

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

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

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

            (c) Voting and Other Rights. Awards of Performance Shares do not
      provide the participant with voting rights or rights to dividends prior to
      the participant becoming the holder of record of Shares issued pursuant to
      an Award. Prior to the issuance of Shares, Performance Share Awards may
      not be sold, transferred, pledged, assigned or otherwise encumbered.

            (d) Performance-Based Compensation. Performance Share Awards are
      generally designed to be



      "remuneration payable solely on account of the attainment of one or more
      performance goals" as described in Section 162(m)(4)(C) of the Code, and
      shall be automatically amended or modified to comply with amendments to
      Section 162 of the Code to the extent applicable, unless the Committee
      indicates a contrary intention.

      9.5 Time Vesting of Performance Share Awards. Performance Share Awards, or
portions thereof, are exercisable at such time or times as determined by the
Committee in its discretion at or after grant, subject to the restrictions on
time Vesting set forth in this Section. If the Committee provides that any
Performance Shares become Vested over time (accelerated by a performance
component), the Committee may waive or accelerate such Vesting provisions at any
time, subject to the restrictions on time Vesting set forth in this Section.
Subject to the acceleration of Vesting due to satisfaction of performance
criteria or the occurrence of stated events (specifically including a Change in
Control), a Performance Share Unit Award with a Date of Grant on or after July
28, 2004 shall not Vest more rapidly than in three installments (as equal as
possible to the whole Share) on the first, second and third anniversaries of the
Date of Grant; provided that for convenience the Committee may provide that
Awards made in a fiscal year Vest on the first, second and third anniversaries
of the first day of the fiscal year in which the Date of Grant occurs.

                                   ARTICLE 10

                         TRANSFERS AND LEAVES OF ABSENCE

      10.1 Transfer of Participant. For purposes of this Plan, except as
provided in Section 6.2(f) with respect to Incentive Stock Options, the transfer
of a participant among the Company and its Affiliates is deemed not to be a
termination of employment.

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

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

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

            (c) any other absence determined by the Committee in its discretion
      not to constitute a break in service.

                                   ARTICLE 11

                           EFFECT OF CHANGE IN CONTROL

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

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



            (b) there is a report filed on Schedule 13D or Schedule 14D-1 (or
      any successor schedule, form or report), each as promulgated pursuant to
      the Exchange Act disclosing that any person (as the term "person" is used
      in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), excluding
      the Company, any Affiliate, any employee benefit plan of the Company or an
      Affiliate, including the trustee of any such plan, or The Agilysys Benefit
      Trust) has become the beneficial owner (as the term "beneficial owner" is
      defined under Rule 13d-3 or any successor rule or regulation promulgated
      under the Exchange Act) of securities representing twenty percent (20%) or
      more of the combined voting power of the then-outstanding Voting Stock of
      the Company;

            (c) the Company shall file a report or proxy statement with the
      Securities and Exchange Commission pursuant to the Exchange Act disclosing
      in response to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A
      thereunder (or any successor schedule, form or report or item therein)
      that a

      change in control of the Company has or may have occurred or will or may
      occur in the future pursuant to any then-existing contract or transaction;
      or

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

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

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

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

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

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

      Notwithstanding the foregoing, the Committee will retain the right to
revoke the automatic acceleration of Vesting in connection with any business
combination if the acceleration will cause the use of pooling of interests
accounting to be disallowed and such accounting is determined to be in the best
interests of the company.



                                   ARTICLE 12

                            TRANSFERABILITY OF AWARDS

      12.1 Awards Deemed Non-Transferable. Other than as permitted pursuant to
Section 12.2, Awards are non-transferable. Other than as permitted pursuant to
Section 12.2, Awards may not be transferred other than by will or by the laws of
descent and distribution. Other than as permitted pursuant to Section 12.2,
Awards are exercisable during a participant's lifetime only by the participant
or, as permitted by applicable law, the participant's guardian or other legal
representative. Other than as permitted pursuant to Section 12.2, no Award may
be assigned, pledged, hypothecated or otherwise alienated or encumbered (whether
by operation of law or otherwise) and any attempts to do so are null and void.

      12.2 Limited Transferability of Certain Awards. The Committee, in its
discretion, may allow at or after the time of grant the transferability of
Awards which are Vested, provided that the permitted transfer is made (a)
pursuant to a QDRO or other applicable domestic relations order to the extent
permitted by law; (b) if the Award is an Incentive Stock Option, the transfer is
consistent with Section 422 of the Code; (c) to the Company (for example in the
case of forfeiture of Restricted Shares), an Affiliate or a person acting as the
agent of the foregoing or which is otherwise determined by the Committee to be
in the interests of the

Company; or (d) by the participant for no consideration to Immediate Family
Members or to a bona fide trust, partnership or other entity controlled by and
for the benefit of one or more Immediate Family Members. "Immediate Family
Members" means the participant's spouse, children, stepchildren, parents,
stepparents, siblings (including half brothers and sisters), in-laws and other
individuals who have a relationship to the participant arising because of a
legal adoption. No transfer may be made to the extent that transferability would
cause Form S-8 or any successor form thereto not to be available to register
Shares related to an Award. The Committee in its discretion may impose
additional terms and conditions upon transferability.

                                   ARTICLE 13

                          AMENDMENT AND DISCONTINUATION

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

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

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

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

      13.3 Effect of Non-Approval of this Plan. This Amended and Restated Plan
shall cease to be operative if it is not approved by a majority of the
outstanding Shares present (in person, telephonically, electronically, by proxy
or its equivalent or as otherwise permitted by the Company's governing
documents) and entitled to vote at a meeting of Shareholders of the Company. The
terms of the Plan prior to amendment and restatement shall automatically and



retroactively govern all rights and obligations hereunder. Notwithstanding any
Plan provision to the contrary, in the event of such a cessation, any Awards
under the Plan which would not be permitted under the terms of the
Pioneer-Standard, Inc. 2000 Stock Incentive Plan as in effect prior to the
effective date of this amendment and restatement shall be revoked and this
Amended and Restated Plan shall be deemed null and void ab initio. In the event
of such a cessation, the Company, the Board of Directors and the Committee shall
not be liable for any such Awards under this Plan. In the event of such a
cessation, any Awards under the Plan with a Date of Grant prior to the effective
date of this amendment and restatement (April 28, 2004) will remain in full
force and effect.

                                   ARTICLE 14

                               SHARE CERTIFICATES

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

            (a) payment in full for the Shares and for any required tax
      withholding (See Section 15.3 hereof);

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

            (c) admission of such Shares to listing on The Nasdaq Stock Market
      or any stock exchange on which the Shares are listed;

            (d) in the event the Shares are not registered under the Securities
      Act of 1933, qualification as a private placement under said Act;

            (e) obtaining of any approval or other clearance from any Federal or
      state governmental agency which the Committee in its discretion determines
      to be necessary or advisable; and

            (f) the Committee is fully satisfied that the issuance and delivery
      of Shares under this Plan is in compliance with applicable Federal, state
      or local law, rule, regulation or ordinance or any rule or regulation of
      any other regulating body, for which the Committee may seek approval of
      counsel for the Company.

      14.2 Applicable Restrictions on Shares. Shares issued with respect to
Awards may be subject to such stock transfer orders and other restrictions as
the Committee may determine necessary or advisable under any applicable Federal
or state securities law rules, regulations and other requirements, the rules,
regulations and other requirements of The Nasdaq Stock Market or any stock
exchange upon which the Shares are then-listed, and any other applicable Federal
or state law and will include any restrictive legends the Committee may deem
appropriate to include.

      14.3 Book Entry. In lieu of the issuance of stock certificates evidencing
Shares, the Company may use a "book entry" system in which a computerized or
manual entry is made in the records of the Company to evidence the issuance of
such Shares. Such Company records are, absent manifest error, binding on all
parties.



                                   ARTICLE 15

                               GENERAL PROVISIONS

      15.1 No Implied Rights to Awards, Employment or Directorship. No potential
participant has any claim or right to be granted an Award under this Plan, and
there is no obligation of uniformity of treatment of participants under this
Plan. Neither this Plan nor any Award thereunder shall be construed as giving
any individual any right to continued employment or continued directorship with
the Company or any Affiliate. The Plan does not constitute a contract of
employment, and the Company and each Affiliate expressly reserve the right at
any time to terminate employees free from liability, or any claim, under this
Plan, except as may be specifically provided in this Plan or in an Award
agreement.

      15.2 Other Compensation Plans. Nothing contained in this Plan prevents the
Board of Directors from adopting other or additional compensation arrangements,
subject to Shareholder approval if such approval is required, and such
arrangements may be either generally applicable or applicable only in specific
cases.

      15.3 Withholding. Each participant must, no later than the date as of
which the value of an Award first becomes includible in the gross income of the
participant for income tax purposes, pay to the Company, or make arrangements
satisfactory to the Company regarding payment of, any Federal, state or local
taxes of any kind required by law or other amounts to be withheld with respect
to the Award. The obligations of the Company under this Plan are conditioned on
such payment, and the Company, to the extent permitted by law, has the right to
deduct any such taxes or other amounts from any payment of any kind otherwise
due to a participant, with or without such participant's consent.

      15.4 Rule 16b-3 Compliance. The Plan is intended to comply with all
applicable conditions of Rule 16b-3 of the Exchange Act, as such rule may be
amended from time to time. All transactions involving any participant subject to
Section 16(a) shall be subject to the conditions set forth in Rule 16b-3,
regardless of whether such conditions are expressly set forth in this Plan. Any
provision of this Plan that is contrary to Rule 16b-3 does not apply to such
participants.

      15.5 Code Section 162(m) Compliance. The Plan is intended to comply with
all applicable requirements of Section 162(m) of the Code with respect to
"performance-based compensation." Unless the Committee shall otherwise
determine, all transactions involving any participant the deductibility of whose
compensation is subject to Section 162(m) of the Code shall be subject to such
requirements, regardless of whether such requirements are expressly set forth in
this Plan. Unless the Committee shall otherwise determine, any provision of this
Plan that is contrary to such requirements does not apply to such participants.

      15.6 Deferrals. The Committee may unilaterally postpone the exercising of
Awards, the issuance or delivery of Shares under any Award or any action
permitted under this Plan to prevent the Company or any Affiliate from being
denied a Federal income tax deduction with respect to any Award other than an
Incentive Stock Option. The Committee, in its discretion, may permit a
participant to defer receipt of the payment of cash or the delivery of Shares
that would otherwise be delivered to a participant under this Plan. Any deferral
elections are subject to such rules and procedures as the Committee may
determine.

      15.7 Successors. All obligations of the Company with respect to Awards
granted under this Plan are binding on any successor to the Company, whether as
a result of a direct or indirect purchase, merger, consolidation or otherwise of
all or substantially all of the business and/or assets of the Company.

      15.8 Severability. In the event any provision of this Plan, or the
application thereof to any person or circumstances, is held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
parts of this Plan, or other applications, and this Plan is to be construed and
enforced as if the illegal or invalid provision had not been included.



      15.9 Governing Law. To the extent not preempted by Federal law, this Plan
and all Award agreements pursuant thereto are construed in accordance with and
governed by the laws of the State of Ohio. This Plan is not intended to be
governed by ERISA and shall be so construed and administered.

      15.10 Tax Information. To the extent required by law, the Company shall
furnish the participant with tax reporting and related information.

                                   ARTICLE 16

                                 EFFECTIVE DATES

      16.1 Effective Date. The original effective date of this Plan was April
27, 2000.

      16.2 Plan Amendment and Restatement. Subject to the approval of the
Shareholders of the Company at the Annual Meeting of Shareholders held in 2004,
the effective date of this Amended and Restated Agilysys, Inc. 2000 Stock
Incentive Plan is the date of its adoption by the Board of Directors on April
28, 2004. To the extent that Awards are made under this Amendment and
Restatement prior to its approval by Shareholders, they shall be contingent upon
Shareholder approval of this Amendment and Restatement.

EX-31.1

                                                                    EXHIBIT 31.1

                  CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

I, Arthur Rhein, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Agilysys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      a) Designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the registrant, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;

      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

      c) Disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the registrant's
      most recent fiscal quarter that has materially affected or is reasonably
      likely to materially affect the registrant's internal control over
      financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a) All significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.

Dated: November 8, 2004

                             By:               /s/ ARTHUR RHEIN
                                 -----------------------------------------------
                                                  Arthur Rhein
                                 Chairman, President and Chief Executive Officer

EX-31.2

                                                                    EXHIBIT 31.2

                  CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

I, Steven M. Billick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Agilysys, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      a) Designed such disclosure controls and procedures, or caused such
      disclosure controls and procedures to be designed under our supervision,
      to ensure that material information relating to the registrant, including
      its consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;

      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of
      the period covered by this report based on such evaluation; and

      c) Disclosed in this report any change in the registrant's internal
      control over financial reporting that occurred during the registrant's
      most recent fiscal quarter that has materially affected or is reasonably
      likely to materially affect the registrant's internal control over
      financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

      a) All significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant's ability to record,
      process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant's internal control
      over financial reporting.

Dated: November 8, 2004

                            By:              /s/ STEVEN M. BILLICK
                                -----------------------------------------------
                                               Steven M. Billick
                                 Executive Vice President, Treasurer and Chief
                                             Financial Officer

EX-32.1

                                                                    EXHIBIT 32.1

                                  CERTIFICATION

I, Arthur Rhein, Chairman, President and Chief Executive Officer of Agilysys,
Inc. (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, 18 U.S.C. Section 1350, that:

1.    The Quarterly Report on Form 10-Q of the Company for the quarter ended
      September 30, 2004 (the "Report") fully complies with the requirements of
      Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

2.    The information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.

Dated: November 8, 2004

                            By:                /s/ ARTHUR RHEIN
                                -----------------------------------------------
                                                Arthur Rhein
                                Chairman, President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.

EX-32.2

                                                                    EXHIBIT 32.2

                                  CERTIFICATION

I, Steven M. Billick, Executive Vice President, Treasurer and Chief Financial
Officer of Agilysys, Inc. (the "Company"), certify, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

3.    The Quarterly Report on Form 10-Q of the Company for the quarter ended
      September 30, 2004 (the "Report") fully complies with the requirements of
      Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

4.    The information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.

Dated: November 8, 2004

                            By:             /s/ STEVEN M. BILLICK
                                -----------------------------------------------
                                                Steven M. Billick
                                 Executive Vice President, Treasurer and Chief
                                             Financial Officer

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.